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Affirm's (AFRM) Q4 Earnings Miss on High Costs, Revenues Jump

·4 min read

Affirm Holdings, Inc. AFRM reported a fourth-quarter fiscal 2022 adjusted loss of 65 cents per share, which missed the Zacks Consensus Estimate by 44.4%. The bottom line also deteriorated from a loss of 46 cents per share a year ago. Increased operating costs affected the company’s bottom line in the quarter under review.

Net revenues improved 39.1% year over year to $364.1 million. The top line beat the consensus mark by 2.7%. The strong revenues were supported by higher transactions, servicing income and merchant growth.

Affirm Holdings, Inc. Price, Consensus and EPS Surprise

Affirm Holdings, Inc. Price, Consensus and EPS Surprise
Affirm Holdings, Inc. Price, Consensus and EPS Surprise

Affirm Holdings, Inc. price-consensus-eps-surprise-chart | Affirm Holdings, Inc. Quote

Q4 Performance

Active merchants increased to 235,000 from 29,000 while GMV increased 77% to $4.4 billion. Total transactions were recorded at 12 million, up 139% from the year-ago quarter.

Servicing income of $21.5 million was up from $7.5 million a year ago and beat the Zacks Consensus Estimate of $19.2 million. Interest income of $137.6 million was up from $103.8 million and beat the Zacks Consensus Estimate of $151.4 million.

Merchant network revenues of $118.1 million were higher than $88.7 million in the prior-year quarter but missed the Zacks Consensus Estimate of $140.3 million. Virtual card network revenues of $31.6 million were up from $19.3 million but missed the consensus mark of $30.7 million.

Total operating expenses of $641.4 million escalated from $376 million a year ago, primarily due to higher technology and data analytics, sales and marketing, and processing and servicing costs. Meanwhile, loss on loan purchase commitment declined to $40.3 million in the quarter under review from $51 million a year ago.

Net loss of $186.4 million widened from $123.4 million in the year-ago quarter.

Adjusted operating margin was at negative 8%. In the prior-year period the adjusted operating margin was at 5.4%.

Financial Position (as of Jun 30, 2022)

AFRM exited the fourth-quarter fiscal 2022 with cash and cash equivalents of $1,255.2 million, which declined from $1,466.6 million a year ago. Total assets of $6,973.8 million fell from $4,867 million.

At the fourth-quarter end, the company had $4,078.2 million in long-term debt, up from $1.907.4 million a year ago. Total stockholders’ equity was at $2,618.3 million at June-quarter end.

Net cash used in operating activities was $10.7 million, down from $15.7 million a year ago.

FY2023 Guidance

Affirm expects the fiscal year 2023 GMV within $20.5-$22 billion. Revenues are expected within the range of $1,625-$1,725 million. Transaction costs are likely to be in the range of $865-$915 million. The adjusted operating margin is likely to be within negative 6.5-4.5%. AFRM, which currently has a Zacks Rank #3 (Hold), expects weighted average shares outstanding at fiscal 2023-end to be at 298 million.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

How Other Stocks Performed

Here are some companies from the Business Services space that have reported earnings for the June quarter: Mastercard Incorporated MA, Visa Inc. V and The Western Union Company WU.

Mastercard reported second-quarter 2022 adjusted earnings of $2.56 per share, which beat the Zacks Consensus Estimate by 8.5%. The quarterly results were driven by improved consumer spending, solid cross-border volume growth, higher gross dollar volume (GDV) and increased switched transactions.

Visa reported fiscal third-quarter 2022 earnings of $1.98 per share, which outpaced the Zacks Consensus Estimate by 13.8%. The quarterly results were aided by continued growth in payments volume, cross-border volume and processed transactions.

Western Union reported second-quarter 2022 earnings per share of 51 cents, which outpaced the Zacks Consensus Estimate by 24.4%. WU’s earnings gained momentum from an improved operating margin and reduced share count.


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