Buy now pay later platform Affirm held its first earnings call as a public company Thursday (Feb. 11), presenting solid metrics for 2020 and a case for its continued growth in 2021. However, the pace of that growth was called into question as the company expected third-quarter gross merchandise volume (GMV) to decline to between $1.80 billion and $1.85 billion, compared to the $2.1 billion reported for the previous quarter. That revision sent its shares down 8.7 percent in after-hours trading.
Affirm was presenting the second quarter of its first full fiscal year. By the numbers, GMV for the second quarter of fiscal 2021 was $2.1 billion, an increase of 55 compared to the second quarter of its 2020 fiscal year. Active consumers came in at 4.5 million, an increase of 52 percent and transactions per active consumer stood at 2.2 an increase of 7 percent. CEO Max Levchin told the company’s earnings call that he saw the results as a prelude to continued expansion, perhaps into everyday purchases, in 2021.
“We believe we can address, not only the $600 billion of eCommerce spent in the U.S., but the $7.6 trillion of card spend processed online and offline at merchants in the United States,” Levchin said. “We have successfully demonstrated how our solutions can enable and accelerate commerce for larger, more considered purchases. A key principle of our next phase of growth is to expand into higher frequency purchases by investing in our split pay product, ramping up our partnership with Shopify and making strategic investments in marketing.”
The Shopify partnership mentioned by Levchin was initiated in July of 2020 when the company announced it would power Shopify’s Shop Pay Installments solution. He said Affirm was currently in beta with more than 100 of Shopify’s merchants.
Outside of the officially reported numbers, Levchin added some color to the company’s recent success. For example, for Q2, 1.2 million transactions originated from Affirm properties, twice as many as 2019. Approximately one-third of Affirm’s overall transaction volume for the year occurred in Q2. Sixty-seven percent of all 2020 purchases were made by repeat users. And the company’s delinquency rate dropped 63 percent year-over-year. The biggest share of the company’s business went to the fitness and outdoor segment, followed by home furnishings. The fitness segment begs the issue of Peloton sales, which made up 28 percent of the quarter ending June 30, 2020. The company did not specify the percentage for Q2, but it did say that some of Peloton’s sales will be accounted for during its third quarter due to a change in Peloton’s payment processes.
Levchin also touched on one of the advantages he said Affirm provides to its retailers: data. “Not only do we enable merchants to address affordability and increase their customers’ purchasing power,” he said. “We also provide them with valuable, high-quality data that they cannot get elsewhere. This includes item-level data, repayment data, consumer behavior data, repeat purchase data and more. These insights can be used to more efficiently target customers tailored promotions and achieve a greater return on marketing spent.”
And while Levchin teased upcoming new product offerings, including the recent acquisition of PayBright, he told analysts he was most concerned about removing friction from the BNPL process in particular and the purchase process in general.
“We want to make sure is that when a consumer comes up for a transaction in shopping settlements powered by a firm they don’t have an experience that makes them think ‘maybe I’ll pull up my debit card instead next time because this was not smooth enough or wasn’t as simple or simple as I thought it would be,’” he said. “And so we’re very, very focused on that and it will take time. I don’t want to over-promise here. We want the experience of using trumping installments. We want it to be ideally the highest converting, smoothest experience for customers.”