Affirm Holdings Inc. shares plunged 18% in extended trading Wednesday after the buy-now-pay-later company fell short with its results and outlook, while announcing plans to lay off 19% of its staff.
The company generated a fiscal second-quarter net loss of $315 million, or $1.10 cents a share, compared with $158 million, or 57 cents a share, in the year-prior quarter. Analysts tracked by FactSet were expecting a 95-cent loss per share on a GAAP basis.
revenue rose to $400 million from $361 million a year ago, while analysts were modeling $416 million.
“A key operational misstep contributing to these results is that we began increasing prices for our merchants and consumers later in the year than we should have, and this process has taken us longer than we anticipated,” Chief Executive Max Levchin said in Affirm’s shareholder letter. “This had a negative impact on both our ability to approve more consumers and improve our margin.”
Levchin added in the shareholder letter that its “pricing initiatives are now starting to produce results,” which is expected to be a tailwind to gross merchandise volume, “but we learned a valuable (and expensive) lesson in network management.”
The company recorded $5.7 billion in GMV, up from $4.5 billion a year before, whereas the FactSet consensus was for $5.8 billion. GMV represents the dollar amount of transactions done through Affirm’s platform.
“While the Affirm network is healthy and growing, our ambition for it is to be more profitable and to grow significantly faster,” Levchin said in the shareholder letter.
He admitted that Affirm grew too quickly for the current reality, and it’s now “delaying projects with less certain revenue timelines,” “sunsetting” certain projects like a crypto initiative, and refocusing on its core areas.
Affirm had 2,552 employees as of June 30, 2022, according to its latest 10-K filing.
“We will emerge from this moment a tougher, leaner team, while remaining unwaveringly true to our mission of improving lives through honest financial products,” Levchin said.
For the fiscal third quarter, Affirm executives expects $4.4 billion to $4.5 billion in GMV, along with $360 million to $380 million in revenue. The FactSet consensus is for $5.28 billion in GMV and $418 million in revenue.