In a remarkable turn of events, Affirm Holdings Inc., the prominent buy-now-pay-later (BNPL) loan provider, experienced a surge in shares, climbing more than 15% after the announcement of its fiscal second-quarter results. Analysts and investors were keenly watching to assess the company’s performance against their estimates, and the results did not disappoint. As Affirm continues to carve out a significant niche in the lucrative BNPL market, its recent financial achievements shed light on the effectiveness of its strategy and overall business model.
Affirm reported earnings per share (EPS) of 23 cents, significantly beating the expected loss of 15 cents per share. This unexpected profitability painted a promising picture of the company’s operational health, contrasting starkly with analysts’ pessimism. Moreover, the total revenue reached $866 million, markedly higher than the anticipated $807 million. This surge can be attributed to a 35% increase in gross merchandise volume (GMV) year-over-year, culminating in a total of $10.1 billion. Analysts had estimated GMV to fall below this threshold, showcasing Affirm’s robust transaction capabilities and a growing consumer base.
Another vital indicator of financial strength came in the form of revenue less transaction costs (RLTC). This figure leapt by 73% to reach $419 million, with RLTC margin clocking in at 4.1%, surpassing expectations for long-term performance which typically range between 3% and 4%. This showcases strong unit economics, as revenue growth outpaced GMV growth, a sign of sustainable operational improvements.
Strategic Growth and Robust Partnerships
Beyond the impressive financials, Affirm has maintained its growth trajectory by focusing on fostering strategic partnerships with major players, such as Apple, Amazon, and Shopify. These partnerships not only broaden the consumer base but also enhance brand visibility and trust. For instance, a significant development in June revealed plans for U.S. Apple Pay users to seamlessly apply for loans via Affirm. This initiative reflects innovative thinking at the corporate level, aiming to integrate their services into daily transactions for a seamless user experience.
Additionally, the increasing popularity of Affirm’s consumer card contributes to the firm’s overarching growth strategy. The card has attracted over 1.7 million active users—an astonishing 136% increase from the previous year—demonstrating its effectiveness in driving consumer engagement and usage.
During the earnings call, Chief Financial Officer Rob O’Hare highlighted a pivotal factor behind the robust financial performance: a $60 million gain from the strategic repurchase of convertible debt at a discount in December. However, he was keen to emphasize that fundamental business growth, rather than one-off gains, underpinned Affirm’s strong results. The ongoing commitment to improving adjusted operating income displays the company’s strategy to focus on sustainable and long-term profitability while transitioning toward a GAAP profitability goal by the end of its fiscal fourth quarter in 2025.
The anticipated revenue forecast for the upcoming quarter reveals a target range between $755 million and $785 million, with a midpoint of $770 million, slightly higher than the average analyst estimate of $772 million. This guidance signals management’s confidence in its operational strategy aimed at driving growth while managing costs effectively.
The strong results of Affirm in the second quarter underscore both resilience and adaptability in a competitive landscape. With a growing user base and successful partnerships, the company is well-positioned to capitalize on the expanding BNPL market. Furthermore, with a clear roadmap towards profitability and continued strategic investments, Affirm is likely on a trajectory that not only meets but possibly exceeds the expectations of investors and industry analysts alike. As consumer interest in flexible payment options remains steady, Affirm’s innovative offerings will undoubtedly continue to attract attention as the company pushes forward into the future.