Affirm Holdings, Inc. (NASDAQ:AFRM) has seen an 8.6% decrease in its stock price since announcing its second-quarter fiscal 2024 results on February 8th. The company’s quarterly performance was impacted by higher expenses, primarily driven by increased loss on loan purchase commitment, provision for credit losses, funding costs, and processing and servicing expenses. Despite this setback, the negative impact was partially mitigated by improved servicing income, network revenues, and a rise in transaction volume, indicating greater utilization of AFRM’s cards.
Adjusted earnings stood at 4 cents per share, falling short of the Zacks Consensus Estimate by 50%. This compares to a loss of $1.10 per share reported in the same quarter last year. Net revenues climbed 48% yearly to $591.1 million, surpassing management’s expectations and beating the consensus mark.
Q2 Performance Highlights
The number of active merchants increased by 15% year over year to 279,000, while Gross Merchandise Volume (GMV) grew by 32% to $7.5 billion, exceeding management’s anticipated range. Total transactions surged by 42% year over year, driven by a significant increase in repeat customer transactions. Servicing income improved by 4% year over year to $22.4 million, and interest income soared by 86% to $288.3 million. Merchant network revenues and card network revenues also saw significant growth.
On the expense side, total operating expenses increased slightly by 1% year over year to $763.3 million, primarily due to higher loss on loan purchase commitment and increased funding and processing expenses. Provision for credit losses also rose by 13% year over year to $120.9 million.
Financial Position and Guidance
As of December 31, 2023, Affirm held cash and cash equivalents of $1 billion, with total assets reaching $9.1 billion. Funding debt increased to $1.9 billion, while total stockholders’ equity rose to $2.6 billion. Operating cash flows for the six months ending December 31, 2023, increased significantly compared to last year.
For the third quarter of fiscal 2024, Affirm expects GMV to be between $5.8 billion and $6 billion, with revenues estimated to range from $530 million to $550 million. Looking ahead to fiscal year 2024, the company anticipates GMV of over $25.25 billion, representing a more than 25% improvement from fiscal 2023. Adjusted operating margin is forecasted to exceed 11%.
In summary, while Affirm’s Q2 earnings fell short of expectations, the company remains optimistic about its future performance and focuses on growth and expansion in the fiscal year ahead.
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