Affirm: Delinquency Rates Flat; Affirm Card Generates $397M in GMV

Buy the rumor, goes the old Wall Street saying, sell the news.

And that may have been what happened with Affirm’s stock Thursday evening after the market closed, when investors sent the shares down 11% on the heels of a massive runup into earnings that saw shares close 10% higher in the official trading session.

It may be the case, too, that investors wanted to see more torque in the forward guidance, as management said that, per the shareholder letter penned by CEO Max Levchin accompanying fiscal send quarter earnings that “given the overall seasonality of our business, we expect Affirm Card GMV [gross merchandise volume] and user additions to begin reflecting normal seasonality, which may impact quarter-on-quarter GMV growth rates versus the seasonally strong December quarter.” 

Guidance reflects GMV expected for the third quarter of the current fiscal year to stand at about $5.8 billion to $6 billion and revenues of $530 million to $550 million, where those numbers had been a respective $7.5 billion and $591 million in the most recent fiscal quarter.

The December quarter stats themselves show that GMV was up 32% and that active Affirm Card consumers were more than 700,000 at year end. The company said that Affirm Card volume was $397 million in the latest period, boosting direct to consumer results and that 30% of GMV in the fiscal second quarter. The firm’s Card segment logged a sizable increase from $11 million in GMV and less than 50,000 active customers in the prior year.

Delinquencies were flat year over year and credit performance is returning to pre-pandemic levels, Levchin said in the letter.

Transaction Growth

Supplemental materials show that transactions per active consumer were up 25% to 4.4.  

During the conference call with analysts, Levchin noted that general merchandise, as a category, has seen growth (up 40%), and travel and ticketing spending via buy now, pay later (BNPL) has slowed to 10% growth, as the latter tends to be affected by seasonality.

“It’s not unusual for that to be a category that spikes in and around holiday season. There’s a lot of holiday shopping that’s done in those channels,” he said.

“We’ve generally been gaining wallet share, although the stories are different category to category and in some cases, merchant to merchant,” Levchin said.

Asked about the potential of Direct Deposit onto the company’s cards and/or app, Levchin said that initial reception has been positive and that repeat transactions have been significant for cardholders and especially account holders.

And any slowdown implied by forward guidance of GMV of at least $25.3 billion for the full fiscal year, Levchin said, represents “a floor … and we’ve not given even a range or ceiling we’d expect … there’s nothing in our business that would suggest that we’re slowing down right now.”

And, asked later on the call about rewards, Levchin said, “We have reward programs in mind that give people reasons to use the card for all transactions, not just considered purchases. There’s plenty to do with tighter integration between Affirm Card and Affirm account. … There’s just a long roadmap of things to do there, both on the frequency of use basis, as well as modalities. … We have a lot more growth to enable there when we see that it’s the right time to do it.”