Affirm Holdings has recently showcased a remarkable fiscal second-quarter performance that has captured the market’s attention. Following the release of its results, Affirm’s stock surged over 15% in extended trading, highlighting investor confidence in the company’s evolving trajectory. As one of the frontrunners in the buy now, pay later (BNPL) sector, Affirm has managed to not only meet but surpass expectations across various financial metrics, signaling a positive momentum that could redefine its future.
At the heart of Affirm’s financial growth is the impressive earnings per share (EPS) reported at 23 cents, contrasting sharply with analysts’ projections of a loss at 15 cents. Such a deviation underscores the company’s robust operational foundation and strategic initiatives. The revenue figures for the quarter were equally striking, amounting to $866 million, substantially exceeding the anticipated $807 million. This 47% year-over-year increase from $591 million indicates that Affirm is not just surviving but thriving in a competitive landscape.
The gross merchandise volume (GMV) rose to $10.1 billion, a 35% growth compared to the previous year and surpassing the forecast of $9.64 billion. GMV is a critical metric in this industry, representing the total value of transactions facilitated by Affirm. The ability to cross the $10 billion threshold for GMV adds a new layer of credibility to the company’s operational model, reinforcing its position as a key player in the BNPL market.
A noteworthy aspect of Affirm’s financials is the relationship between revenue growth and GMV. Typically, when revenue grows at a rate that outstrips GMV, it indicates strong unit economics and operational efficiency. Affirm’s revenue less transaction costs (RLTC) surged by 73% to reach $419 million, with an impressive RLTC margin of 4.1%, exceeding the long-term target range of 3% to 4%. This is a crucial indicator for investors looking for signals of a sustainable business model.
While some of this success can be attributed to a one-off $60 million gain from convertible debt repurchase, CFO Rob O’Hare emphasized that the core business fundamentals were the primary drivers of profitability. The adjusted operating income, cited as a significant profitability measure, is notably in line with Affirm’s strategic guidance, further cementing its pathway toward fiscal health.
Looking ahead, Affirm remains optimistic about its revenue forecast for the upcoming quarter, projecting figures between $755 million and $785 million, with an expected midpoint of $770 million. This forecast aligns closely with analysts’ average estimate of $772 million, reinforcing confidence in the company’s growth trajectory. Moreover, Affirm has reiterated its commitment to achieving GAAP profitability by the end of its fiscal fourth quarter in 2025 – a target that, if realized, would significantly bolster investor confidence.
A notable highlight from the earnings call was the impressive growth in Affirm’s active consumer base, which swelled 23% to reach 21 million. The Affirm Card, a flagship product aimed at enhancing user engagement, boasts 1.7 million active users, reflecting a staggering 136% year-over-year increase in user adoption and corresponding volume.
Affirm’s collaboration with giants such as Apple, Amazon, and Shopify has undoubtedly played a pivotal role in driving its growth. A particularly impactful development is the integration with Apple Pay, which allows users of iPhones and iPads to apply for Affirm loans seamlessly. This move positions Affirm advantageously within the competitive landscape, aligning it with prominent brands that attract millions of consumers.
The quarter also saw an uptick in the offering of 0% interest loans—a strategic maneuver whereby merchants, and occasionally manufacturers, subsidize borrowing costs to incentivize customer purchases. As noted by Libor Michalek, President of Affirm, such promotions become increasingly essential, especially as businesses gear up for intensive sales periods during the calendar year’s fourth quarter.
Affirm’s fiscal second-quarter results demonstrate a fascinating blend of operational success and strategic growth. The impressive financial metrics coupled with an expanding consumer base signal a bright future for the fintech company. As the BNPL space continues to evolve, Affirm appears well-positioned to capitalize on emerging trends and consumer behaviors, potentially reshaping the industry’s landscape. With a steadfast commitment to profitability and a focus on strengthening consumer ties, the company is on a promising ascent that stakeholders will keenly watch in the coming months.