Confirm stock drop. The company is cutting 19% of jobs after the loss of income.
Affirm Holdings, a buy-now-pay-later fintech, is cutting 19% of its workforce after missing expectations for both its fiscal second quarter and its immediate outlook.
Founder and CEO Max Levchin said he was “deeply sorry” for those affected by the job cuts. In a letter posted on Affirm’s website, he said the company’s decision to grow rapidly during the pandemic and its slow response to macroeconomic challenges that drove up costs “mean we’ve built a much larger team than we can reasonably expect to support.”
Shares fell more than 19% in after-hours trading on Wednesday. For the second quarter of 2023, Affirm (ticker: AFRM) reported a loss of $1.10 per share, while analysts had been looking for a loss of 95 cents per share.
Although gross sales volume increased 27%, active consumers rose 39% and transactions per active consumer increased 38%, Affirm posted an operating income loss of $360 million in the second quarter, or a loss of $62 million on an adjusted basis.
Quarterly revenue of $400 million was up 11% from the same quarter in fiscal 2022, but less than the $416 million analysts expected.
Advertisement – Scroll to continue
Affirm’s shares fell nearly 79% over the past 12 months, but had risen 66% so far this year.
Levchin said boom-time Affirm deliberately hired before it had the necessary revenue to support its workers, because “the product opportunity in front of Affirm was too compelling to ignore, and the revenue growth we posted gave us confidence in this strategy.”
But he said that all changed in the middle of last year, after the Federal Reserve’s aggressive rate hikes to tame inflation cut consumer spending and raised Affirm’s borrowing costs “dramatically.” “The root cause of where we are today is that I acted too slowly as these macroeconomic challenges unfolded,” Levchin said.
Advertisement – Scroll to continue
To reduce operating costs, Affirm is scaling back the size of our teams to where they were between 6 and 12 months ago, he said.
The company’s agreement with Amazon.com ( AMZN ) to be its exclusive provider of buy-now, pay-later services on the website expired on January 31. Although Affirm will continue to offer its services on Amazon’s website through 2025, the end of exclusivity deal raised concerns about competition from rivals such as PayPal ( PYPL ) and Block ( SQ ).
Affirm’s guidance for the third quarter and full 2023 was also weak. Revenue for the third quarter is forecast to be $360 million to $380 million, short of analysts’ expectations of $418 million. Gross merchandise value for the quarter is estimated at $4.4 billion to $4.5 billion, less than the $5.27 billion expected.
Advertisement – Scroll to continue
For the full fiscal year 2023, revenue is estimated at $1.475 billion to $1.55 billion, while analysts were forecasting $1.639 billion. And gross merchandise value is estimated at $19 billion to $20 billion, less than the expected $21.12 billion.
American employees who are laid off will receive a minimum of 15 weeks of base pay, plus one additional week per year of employment, plus a health grant of $5,000 to cover six months of health care.
Write to Janet H. Cho at [email protected]
