Affirm shares rise 34% after gains “put to bed some permanent bear issues”

Shares of Affirm Holdings Inc. rose in after-hours trading on Thursday after the company bought now, paid later, saw revenue decline and tried to reassure investors of its positioning in decline.

Come to Affirm
AFRM,
+ 23.31%

rose to $ 354.8 million in the third fiscal quarter from $ 231 million a year earlier, while analysts forecast $ 344 million.

Affirm handled $ 3.9 billion in gross goods (GMV) in the quarter, up 73 percent from a year earlier. Analysts forecast $ 3.85 billion.

“Our strong performance demonstrates our ability to stimulate growth with an attractive unit economy, despite volatile market conditions,” Chief Financial Officer Michael Linford said in a statement.

Shares of Affirm rose 34% in after-hours trading on Thursday, after gaining 23% in the regular session on Thursday.

“After much concern, the very strong results of F3Q should offer a big sigh of relief,” wrote Dan Dolev of Mizuho in a note to customers.

Amid recent market turmoil, fintech names have been hit particularly hard and Affirm shares have fallen about 61% in the past three months, partly due to fears about the fate of the credit-oriented business in a downturn.

CEO Max Levchin seems to have addressed these fears during a conversation about the company’s profits.

Because Affirm does not charge late or revolving fees, “we have a structural incentive to refuse a transaction that we think is a bad financial decision for you because approving it is guaranteed to be a bad financial decision for us,” he said.

Levchin also called for the “very short weighted average life” of the Affirm loans, which he said were about five months. This means that “with the change of the economic cycle, the loans we have given in the past will have a rapidly decreasing impact on the future financial results of Affirm,” he continued.

Affirm expects that people will be even more interested in the idea of ​​paying for items over time without receiving late fees, but Levchin said that while the company intends to “improve people’s lives”, it also it only aims to extend the loan that we believe can and will be repaid. ”

Linford added that Affirm felt “really, really good” about its position on capital commitments.

“We have seen the overall change in the macro market, so it is changing exchange rates, changing the spread, but the asset below it, the asset we are creating, continues to be something that all our capital partners understand and appreciate,” he told Call.

Barclays analyst Ramsey El-Assal commented on some of the comments on Affirm’s funding in a note after the report.

“They cite more than $ 10.1 billion in funding capacity at the time of the call (May 12) and recently received an AAA rating on some of the securitized debt,” he wrote. Although El-Assal noted that Affirm acknowledged that rising interest rates could ultimately affect funding costs, he stressed management’s assertion that “it is a mistake to think of this as a full flow on a linear basis. “.

Confirm that “put some permanent bear topics to bed,” El-Assal said in a statement.

For the June quarter, Affirm expects $ 3.95 billion to $ 4.05 billion at GMV, while analysts expected $ 3.97 billion. The company also expects revenue of $ 345 million to $ 355 million for the June quarter, while FactSet’s consensus was $ 352 million.

Levchin added during the call that “Affirm’s plan is to achieve sustainable profitability on an adjusted basis by the end of the next fiscal year.”

The company’s discussion of long-term goals after the current quarter seems to be in line with Wall Street, El-Assal suggested.

“It is important that management has indicated that the company will reach a return on profitability by July 2023, which is earlier than investors expected, we believe, and also said that there will be no need to issue equity “before the company reaches profitability,” he wrote in a note to customers.

In the last quarter, the company reported a net loss of $ 54.7 million, or 19 cents per share, compared to a loss of $ 287 million, or $ 1.23 per share, in the previous period. Analysts tracked by FactSet expected a loss of 46 cents per share.

In addition, the company said in a statement on its profits that it has reached a multi-year extension of its Shopify Inc.
SHOP
+ 10.96%

partnership, which means that Affirm will be the exclusive provider of “payment over time” technology for the US Shop Pay Investments product.

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