Fintech
Claims to hit it out of the park with their earnings
Affirm the earnings reported this morning before the bell and, in the words of CEO Max Levchin on X, “In the language of our times, we have killed.” Yes, it was a banner quarter, continuing the fintech sector’s excellent earnings streak so far this earnings season. Keep in mind that these were Affirm’s earnings in the third quarter of 2024. as their fiscal year runs from July 1st to June 30th.
Solid growth and strategic innovations fuel progress
Affirm’s third fiscal quarter of 2024 marked another period of strong performance, setting a new benchmark for the company’s operational and financial metrics. As fintech continues to evolve at a rapid pace, Affirm’s latest findings provide valuable insights for fintech executives. Here’s a breakdown of Affirm’s third-quarter key results letter from shareholders.
Continued growth in gross merchandise volume (GMV)
Affirm reported robust 36% year-over-year growth in GMV, totaling $6.3 billion. This growth is not only a testament to Affirm’s expanding market presence, but also reflects the effective engagement strategies the company has implemented across its key commerce and platform partners. The diversity of product categories contributing to this growth, particularly general goods, travel and ticketing, highlights Affirm’s strong adaptability to consumer demands and market trends.
Improvements in core products and services
A highlight of the quarter was the improvement of core products such as the AI assistant created by Affirm, which improved customer support efficiency, with more than 60% of customer interactions resolved without human intervention. Additionally, the introduction of an embeddable version of the Purchasing Power feature marks a strategic move to improve end-to-end checkout conversions through deeper in-store integration.
Revenue trend and profitability
Affirm’s revenue saw a substantial increase, growing 51% year over year to $576 million. This increase was largely driven by a significant increase in interest income, reflecting the successful implementation of pricing initiatives, and an increase in the balance of loans held for investment. Revenue Less Transaction Costs (RLTC) also grew impressively by 38% to $231 million, with RLTC as a percentage of GMV increasing slightly, indicating improved profitability and efficient cost management.
Strategic focus on the affirmation card
The Affirm Card has been a focal point of the company’s strategy to capture a larger share of its users’ average annual spending. With active cardholders surpassing the one million mark post-quarter, the product continues to show strong user engagement and strong spending in new categories such as dining and home improvement. This expansion by Affirm into traditionally unaddressed categories underscores its strategic intent to broaden market reach and utility.
Operational efficiency and adjusted operating profit
Affirm reported a substantial improvement in operating profit, significantly reducing its operating loss compared to the previous year. Adjusted operating profit came in at $79 million, a sharp contrast to the prior year’s loss, highlighting effective cost management and operational efficiency improvements. Reduced spending on technology and data analytics, along with savings from restructuring efforts, played a crucial role in this turnaround.
Looking forward
As Affirm moves forward, the company remains well-positioned to benefit from its strategic initiatives and strong platform. With a focus on expanding its technological capabilities and enhancing its product offerings, Affirm is poised to continue its trajectory of growth and market penetration. Integrating artificial intelligence and advanced analytics into its services will likely strengthen its competitive advantage and attract a broader consumer base.
Final thoughts
Affirm’s fiscal third quarter results reflect a company that is not only growing in terms of numbers, but also making strides in terms of operational efficiency and product innovation. For industry leaders and executives, understanding Affirm’s strategic maneuvers, particularly in product integration and technology enhancements, offers valuable lessons for sustaining growth and adapting to the dynamic fintech environment. As Affirm prepares for the challenges and opportunities ahead, its trajectory offers a promising outlook for stakeholders invested in the evolving financial technology landscape.