Q1’24 affirms Affirm’s upswing in BNPL

Q1'24 affirms Affirm's upswing in BNPL

"We take underwriting as the single most important thing we cannot make a mistake on. And we obsess over it," said co-founder & CEO Max Levchin.

by SARA KHAIRI

Affirm reported its quarterly results for the three months ended September 2023.

• GMV of $5.6 billion, up 28% YoY and 2% QoQ
• Total Revenue was $497 million, up 37% YoY
• Average order value declined 10% YoY and 6% QoQ  and came in at $299 for the quarter, vs. $317 a quarter prior
• Active consumers grew to 16.9 million, up 15% YoY and 2% QoQ

The BNPL provider outperformed GMV growth attributed to diverse strategies that likely played out very well including a string of notable enterprise partnerships.

Affirm's partnership with Shopify that initiated in 2020 and locked in Affirm as the exclusive pay-over-time provider for Shop Pay Installments in the U.S. generated accelerated Shopify volume in the recent quarter. Moreover, the Affirm card saw increased growth that contributed to the overall increased GMV figures among other factors. The card allows consumers to choose to pay for purchases over time or right away. 400k cards were active at the end of September, up from 300k as of mid-August and the Card GMV increased to $224 million, from $129 million the quarter prior. Growth in the card segment was primarily driven by a simple mindset to fix a mistake or unblock a comprehension detail that eventually led to spikes in volume, according to co-founder and CEO, Max Levchin.

"One of my many nighttime jobs is to read consumer feedback that comes to me directly from the card and it's now a very steady stream of content," he added.

Most recently, Amazon partnered with Affirm to offer buy now, pay later (BNPL) solutions to sole proprietors or exclusive owners of small businesses who make purchases on Amazon Business, its B2B e-commerce platform. Earlier Amazon Pay tapped Affirm to offer BNPL options to consumers; this time, however, the extended partnership marks the debut of Affirm’s B2B pay-over-time solution, also making it the first US pay-later provider for Amazon Business. Although it's a new business for Affirm, it's "certainly not a one-off".

Going forward the firm intends to focus on continuing to invest in risk management, technology, and product development.

Analyst Take: "AFRM stock has been a rare success in fintech in 2023, and F1Q is no different. Key positives include GMV of $5.6bn, above the high-end of the guide. Revenue less transaction costs (RLTC) at $212mn was also comfortably above the high end of the guide ($190mn). All these good things are complemented by raising the FY GMV guide, as well as adjusted operating margin by 300bps," said Dan Dolev, senior equity analyst at Mizuho Group.

Tearsheet Take: Affirm's financial results are a ray of sunshine in the firm's gloomy picture painted by clouded profitability over past quarters. After a bleak Q2 (ended December 2022), Affirm kicked off Q3 by laying off 19% of its staff and pulling back on its cryptocurrency business. Among other factors, these hard knocks were attributed to a slump in a large portion of revenue coming from a single merchant partner, Peloton. Affirm stock further took a hit after the launch of Apple Pay Later, which threatens established BNPL players including PayPal. 

Affirm’s slew of notable subsequent partnerships with Amazon, Worldpay, and Booking.com indicate that the BNPL provider has been looking for other ways to make up lost ground. It appears back-to-back enterprise collaborations in conjunction with collective strategies are eventually winning out keeping the firm on course.

Market recap

Publicly traded financial and financial technology stocks saw a week of significant gains reflecting strong Q3 earnings

MoneyLion (ML) - up 20% to $27.96 per share

• MoneyLion reported Q3 earnings on Tuesday.
• The results beat expectations. Gross profit increased by 36% to $66.7 million compared to the same period in 2022, whereas, revenue came in at $110 million, marking a 24% increase YoY.

Affirm (AFRM) - up 18% to $24.86 per share

• Shares of Affirm Holdings surged following the earnings report that beat analysts' estimates.
• The BNPL provider reported higher-than-expected revenue and a narrower loss than a year earlier.

Editor's picks

Tweet of the week

Just look at the charts

1. Affirm Card quarterly GMV increased to $224 million, up from $8 million in Q1’23

Source: Affirm

2. MoneyLion's Q3 revenue came in at $110 million, up 24% YoY

Source: MoneyLion

This week's reads

Affirm ventures into B2B BNPL with Amazon Business

Tearsheet

Amazon and Affirm have joined forces to offer BNPL solutions to sole proprietors or exclusive owners of small businesses who make purchases on Amazon Business. The expanded collaboration is a step toward increased distribution for the BNPL provider given it capitalizes on Amazon’s ecosystem approach.

Powell says Fed is ‘not confident’ it has done enough to bring inflation down

CNBC

Fed Chair Jerome Powell said he and his colleagues remain steadfast in getting policy in line with their 2% inflation goal, but “we are not confident that we have achieved such a stance.” He stressed the Fed nevertheless can be cautious as the risks between doing too much and too little have come into closer balance.

Goldman Sachs seeks new issuer for GM credit card amid consumer business exit

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