10-QPeriod: Q2 FY2023

Affirm Holdings, Inc. Quarterly Report for Q2 Ended Dec 31, 2022

Filed February 8, 2023For Securities:AFRM

Summary

Affirm Holdings, Inc. reported solid top-line growth in the second quarter of fiscal year 2023, with total revenue increasing by 11% year-over-year to $399.6 million, driven by a 27% rise in Gross Merchandise Volume (GMV) to $5.7 billion. This growth was fueled by an expanding merchant base and increasing consumer engagement, as evidenced by a 39% increase in active consumers to 15.6 million and a 38% rise in transactions per active consumer. Despite revenue growth, the company continued to experience significant net losses, amounting to $322.4 million for the quarter, a substantial increase from the $159.7 million loss in the prior year's comparable period. This widened loss is primarily attributable to increased operating expenses, particularly in technology and data analytics, sales and marketing, and a significant rise in the provision for credit losses and funding costs, reflecting higher interest rates and loan volume. The company also announced a restructuring plan on February 8, 2023, involving a reduction of approximately 19% of its workforce (around 500 employees) and expects to incur $35-$39 million in associated costs. This move is aimed at managing operating expenses in response to macroeconomic conditions and business prioritization. Affirm has also completed the acquisition of Butter Holdings Ltd., a UK-based BNPL company, in early February 2023, though the accounting for this acquisition is still pending. While Affirm is demonstrating strong growth in customer and merchant adoption, continued profitability remains a key concern for investors, exacerbated by rising operational costs and credit loss provisions.

Financial Highlights

38 data points
Beta

Revenue

$399.56M

Net Income

-$322.44M

-80.7% Net Margin

EPS (Diluted)

$-1.10

Total Assets

$7.80B

Cash & Equivalents

$1.44B

Free Cash Flow

-$62.80M

Financial Statements
Beta
Revenue$399.56M
Operating Expenses$759.09M
Operating Income-$359.53M
Interest Expense$43.75M
Net Income-$322.44M
EPS (Basic)$-1.10
EPS (Diluted)$-1.10
Shares Outstanding (Basic)293.68M
Shares Outstanding (Diluted)293.68M

Key Highlights

  • 1Total revenue increased by 11% year-over-year to $399.6 million.
  • 2Gross Merchandise Volume (GMV) grew by 27% to $5.7 billion, indicating strong platform activity.
  • 3Active consumers increased by 39% to 15.6 million, and transactions per active consumer rose by 38% to 3.5.
  • 4Net loss widened significantly to $322.4 million, compared to a loss of $159.7 million in the prior year's quarter.
  • 5Operating expenses increased by 36% year-over-year, driven by higher technology, sales & marketing, and credit loss provisions.
  • 6Affirm announced a significant restructuring plan, including a workforce reduction of approximately 19%.
  • 7The company completed the acquisition of Butter Holdings Ltd. in early February 2023.

Frequently Asked Questions

The significant increase in net loss to $322.4 million was primarily driven by a substantial rise in operating expenses. Key contributors include increased spending on technology and data analytics, sales and marketing, higher funding costs due to rising interest rates and increased loan volume, and a significantly higher provision for credit losses, reflecting a more cautious outlook on credit quality given economic conditions.

Affirm is implementing a restructuring plan that includes reducing its workforce by approximately 500 employees (about 19% of its staff). This plan is designed to manage operating expenses in response to the current macroeconomic environment and ongoing business prioritization efforts. The company expects to incur $35-$39 million in restructuring costs.

Affirm completed the acquisition of Butter Holdings Ltd., a UK-based BNPL company, on February 1, 2023. However, the initial accounting for this business combination is still in progress due to the recency of the acquisition, and its full financial impact will be clearer once those accounting procedures are finalized.

While not a direct revenue driver in this specific quarter, GMV related to loans facilitated for Amazon purchases represented approximately 23% and 20% of total GMV for the three and six months ended December 31, 2022, respectively. The increase in GMV from Amazon compared to the prior year is primarily due to Affirm being available as a payment option for Amazon consumers for a longer duration in the current fiscal year.