Affirm Stock Falls on First Earnings Release as a Public Company

Freshly public fintech company Affirm (NASDAQ: AFRM) reported fiscal third quarter earnings on Tuesday, and investors were not impressed. The stock was down as much as 18% in early trading but has since recovered and is down only 7% as of 12:30 p.m. EST. 

Here’s what investors need to know about Affirm’s first earnings release as a public company.

Affirm’s Headline Results

Revenue in the fiscal third quarter increased 67% to $230.7 million, which was ahead of the consensus estimate of $198.2 million in sales. Gross merchandise volume (GMV) soared by 83% to reach $2.3 billion. When excluding the impact of Peloton (NASDAQ: PTON), which recently announced a major recall of its Tread and Tread+ products, Affirm’s GMV jumped 100%.

That all resulted in a net loss of $247.2 million, or $1.06 per share. Wall Street analysts were modeling for $0.31 per share in red ink. Affirm recognized a $131.8 million increase in stock-based compensation expense related to its IPO, which is common for companies after they go public.

The number of active merchants on Affirm’s platform more than doubled to 12,000 while active consumers increased by 60% to 5.4 million. Average transactions per active consumer was 2.3.

What Else Happened This Quarter

Affirm has recently started to expand its partnership with e-commerce powerhouse Shopify (NYSE: SHOP). That partnership was initially announced last summer and allows Shopify merchants to leverage Affirm’s buy-now-pay-later (BNPL) offerings. Over 10,000 Shopify merchants now have access to Affirm’s platform and all merchants will be able to use Affirm by the end of June.

Peloton is one of Affirm’s most prominent partners, and the connected fitness leader announced a voluntary recall last week following safety concerns for its Tread and Tread+ products. Affirm recorded a $3.5 million reduction in revenue during the quarter associated with the recall.

Affirm has now closed its $300 million acquisition of Returnly, which was announced last month. That deal will help the company streamline the return process and improve the post-purchase customer experience.

Looking Ahead

Affirm noted that it is already seeing a strong rebound in certain categories such as travel and ticketing thanks to pent-up demand. GMV in that category grew by over 50% year-over-year and almost tripled on a sequential basis. 

“We are encouraged by this momentum and believe that the strengthening economy will provide another tailwind for Affirm,” CEO Max Levchin said on the conference call with analysts. “Americans have significant spending power coming out of the pandemic after paying down a record $83 billion in credit card debt and amassing $1.7 trillion in savings in 2020.”

Guidance for the fiscal fourth quarter calls for GMV in the range of $2.2 billion to $2.25 billion, which should result in $215 million to $225 million in sales. That should bring GMV for fiscal 2021 from $8.01 billion to $8.06 billion, with fiscal 2021 sales of $824 million to $834 million. The outlook includes estimated impacts related to the aforementioned Peloton recall.

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Evan Niu, CFA has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Millennial Money is part of The Motley Fool network. Millennial Money has a disclosure policy.

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