Affirm Holdings Inc. shares plunged after the buy now, pay later company reported a bigger-than-expected loss in the fiscal second quarter and said it would cut 19% of its staff as part of a restructuring.
(Bloomberg) — Affirm Holdings Inc. shares plunged after the buy now, pay later company reported a bigger-than-expected loss in the fiscal second quarter and said it would cut 19% of its staff as part of a restructuring.
The net loss in the three months through December was $322.4 million, deeper than the $293.2 million estimate of 14 analysts in a Bloomberg survey. The company reported a loss of $251.3 million the prior quarter. The San Francisco-based company plans to reduce its workforce by about 500 people and incur as much as $39 million of restructuring costs.
“I am confident that by becoming leaner, Affirm is emerging as a stronger company, better prepared to capitalize on our opportunities,” Chief Executive Officer Max Levchin, who also co-founded PayPal Holdings Inc., said Wednesday in a shareholder letter. “In the near term, we remain focused on delivering strong credit performance, maintaining attractive unit economics and building products that consumers and merchants want and need.”
The buy now, pay later industry has struggled as households cut back on spending in the face of inflationary pressures, as compared with the pandemic-induced frenzy that buoyed the rise of such companies. Government regulators have also called for additional oversight of the industry to give consumers greater protections.
The shares slumped 21% to $12.62 at 11:17 a.m. in New York. They’ve declined 83% in the past 12 months.
Affirm again pulled back on its outlook for the 2023 fiscal year, predicting revenue of $1.48 billion to $1.55 billion, down from a forecast of $1.6 billion to $1.68 billion given in November.
The company also said that it decided last month to move away from working with Cross River Bank, which is well-known for backing financial-technology firms.
“In January 2023, we made the strategic decision to begin reducing the volume of loans originated by Cross River Bank on our platform while at the same time continuing our ongoing work to identify and engage new originating bank partners,” the company said in a quarterly regulatory filing. “Consequently, as of Jan. 31, 2023, a majority of the loans facilitated through our platform are originated by Celtic Bank.”
Affirm said it will now be more reliant on Celtic Bank unless it’s able to sign on new lending partners — a process that “is inherently uncertain, and there can be no assurances as to when we will be able to complete that process, if at all,” the company said in the filing.
(Updates with quote and forecast beginning in third paragraph.)
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