Affirm Holdings (Nasdaq: AFRM) reported fiscal first-quarter results that exceeded Wall Street estimates on the top-line. Shares were initially higher by as much as 15% but gave up these gains in the following sessions. Overall, Affirm is up more than 200% since it made its debut in January of this year. Most of these gains have come in the last few months as the business has started to accelerate.
Affirm has been one of the best-performing stocks in the market as the consumer finance company has made partnerships with many of the leading, e-commerce companies including Amazon.com (Nasdaq: AMZN) and Shopify (Nasdaq: SHOP). These e-commerce behemoths are eager to make deals with these companies, because Affirm's "buy now, pay later" leads to increased conversions, while Affirm handles the credit risk.
Inside the Numbers
In its fiscal Q1, Affirm reported an adjusted operating loss of $45.1 million that exceeded estimates of a $7.9 million loss. Revenue increased by 55% to reach $269.4 million, above estimates of $248.7 million.
Affirm's gross merchandise volume increased by 84% to $2.7 billion which was above expectations of $2.4 billion in GMV. Total users of Affirm's product reached 8.7 million, a 124% increase from last year.
Next quarter, Affirm is forecasting revenue of $325 million which topped expectations of $296 million. Currently, Affirm is the leader in the 'buy now, pay later' installment payment services which has been exploding in popularity and seems to be ideal for consumers who have healthy household finances in terms of credit card debt and loan servicing payments.
A big driver of growth this quarter and for the rest of the year is its deal with Amazon, where it will be the only provider of these financing services until January 2023. Affirm will also be integrated into Amazon Pay's digital wallet for U.S. customers.
The company has 102,000 merchants using its product, an increase from 6,500 a year earlier. Most of its revenue comes from transaction fees paid by online retailers while another portion comes from interest income. Typically, Affirm will split up an item's cost into 3 or 4 equal installments over 2 months or less. Some larger-ticket items can be spread out over 60 months.
It tends to increase conversions as some customers look at the lower installment payment rather than the total cost. Affirm's merchant base reached 102,000 as of Sept. 30, up from 6,500 a year earlier.