Affirm Holdings Inc. Q4 Fiscal 2024 Review

Affirm Holdings Inc. (ticker: NASDAQ: AFRM), a leader in the Buy Now Pay Later (BNPL) sector, has reported a robust fourth quarter for the fiscal year 2024, characterized by growth and profitability.

The company announced key leadership changes, with CFO Michael Linford expanding his role to Chief Operating Officer and Rob O’Hare set to step in as the new CFO by the end of the fiscal year. Affirm provided guidance for fiscal 2025, indicating a strategy to manage credit outcomes conservatively while aiming to surpass floor targets.

A potential decline in interest rates is viewed as an opportunity for the company to improve approval rates and user engagement through its real-time pricing model. Affirm also expects to maintain a stable RLTC (Revenue Less Transaction Costs) rate and sees the mix of business, credit outcomes, and capital market execution as crucial for performance in the coming year.

Key Takeaways

• Affirm Holdings Inc. closes fiscal year 2024 on a high note with significant growth and profitability.
• Leadership evolution introduced, with Michael Linford becoming COO and Rob O’Hare joining as CFO.
• Fiscal 2025 guidance focuses on surpassing conservative credit outcome targets.
• The company is prepared for a potential fall in interest rates, which could benefit approval rates and user activity.
• Affirm anticipates a stable RLTC rate and identifies key performance factors for 2025.
• Repeat users and transactions are on the rise, indicating a positive trend in volume.
• The Affirm card’s growth and monetization potential are emphasized, with plans to expand features.

Company Outlook

• Affirm aims to drive growth by increasing annual spend per Affirm card and active cards.
• The company is expanding access to attractive capital sources and sees opportunities for further expansion.
• A 10 basis point expansion in the RLTC percent of GMV is expected compared to the previous year.

Bearish Highlights

• The company acknowledges the complexity of underwriting and the competitive effort required in signing up merchants, especially with new entrants like Apple (NASDAQ: AAPL) in the BNPL space.

Bullish Highlights

• Affirm is leveraging machine learning for underwriting and has a strong sales team working on merchant acquisition.
• The company is introducing more features within the Affirm Card to cater to diverse consumer needs.
• Continued investment in team expansion is planned to support growth.

Misses

• No specific misses were discussed during the earnings call.

Q&A Highlights

• The company’s decision-making process is not directly impacted by the current rate curve.
• Funding costs affect the average cost of funding, but there is potential for margin expansion.
• Affirm is not currently pursuing becoming a bank but is focused on achieving GAAP profitability.

Max Levchin, CEO of Affirm Holdings, expressed confidence in the company’s strategic direction and offerings. He highlighted the importance of their underwriting expertise and the ongoing development of the Affirm Card. Levchin clarified that their goal is to maintain unit economics within a specific range regardless of the sales channel and that GAAP profitability is a key objective. Anticipation for further announcements on financial metrics was also mentioned.

InvestingPro Insights

Affirm Holdings Inc. (ticker: AFRM) has shown dynamic performance over the past year, with significant stock price movements and a strong return. Here are some insights based on InvestingPro data for investors:
– Affirm showed a 40.05% revenue growth over the last twelve months as of Q3 2024 and a quarterly revenue growth of 51.23% in Q3 2024, indicating a strong upward sales trajectory.
– Despite gains, the company’s negative P/E ratio of -14 and adjusted P/E ratio of -13.2, reflect ongoing unprofitability, with analysts not anticipating profitability this year.
– The stock price has experienced considerable volatility, and while Affirm has delivered a high return over the last year (64.91%), the absence of dividend payouts is crucial for income-focused investors.
– Affirm’s liquid assets exceed short-term obligations, indicating positive liquidity and the ability to meet immediate financial commitments.
– More tips and insights on Affirm’s financial health are available at InvestingPro.

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