News

Affirm Holdings, Inc. AFRM posted better-than-expected third-quarter fiscal 2024 results, which were driven by an expanding Gross Merchandise Volume (“GMV”), improved servicing income and card network revenues coupled with a higher volume of transactions. The results were partly offset by an escalating expense level, which was primarily due to a significant increase in provision for credit losses.

AFRM incurred a third-quarter loss of 43 cents per share, which was narrower than the Zacks Consensus Estimate of a loss of 70 cents per share and the prior-year quarter’s loss of 69 cents per share.

Total net revenues amounted to $576.2 million (exceeded management’s expectation of $530-$550 million), which surged 51% year over year. The top line surpassed the consensus mark by 5.1%.

Affirm Holdings, Inc. Price, Consensus and EPS Surprise

Q3 Performance

Active merchants of Affirm advanced 19% year over year to 292,000 as of Mar 31, 2024. The GMV of $6.3 billion climbed 36% year over year on the back of strength in general merchandise and, travel and ticketing categories. The metric crossed management’s expected range of $5.8-$6 billion and also came higher than the Zacks Consensus Estimate of $6 billion.

Total transactions of 21.5 million soared 50% year over year on the back of a significant rise in repeat customer transactions.

Servicing income improved 18% year over year to $25.3 million, which beat the consensus mark of $23.9 million. The uptick can be attributed to growth in net servicing fee revenues. Interest income of $315.7 million surged 77% year over year, higher than the consensus mark of $301.9 million.

Merchant network revenues totaled $159.3 million, which grew 34% year over year and beat the Zacks Consensus Estimate of $147.2 million. The metric gained from a growing GMV. Card network revenues rose 21% year over year to $35.7 million, attributable to the higher usage of Affirm and single-use virtual debit cards. Yet, it fell short of the consensus mark of $36.3 million.

Total operating expenses of $736.9 million increased 7% year over year due to higher loss on loan purchase commitment, funding costs, and processing and servicing expenses. Provision for credit losses escalated 84% to $122.4 million. Nevertheless, technology and data analytics, sales and marketing, and general and administrative expenses decreased 23%, 6% and 8%, respectively, on a year-over-year basis. Restructuring and other costs dropped 85% year over year.

Affirm generated an adjusted operating income of $78.5 million. It had incurred an adjusted operating loss of $6.4 million in the prior-year quarter. Adjusted operating margin was 13.6%, which exceeded management’s estimated range of 6-8%. The metric was at a negative 1.7% in the year-ago quarter. Net loss of $133.9 million came narrower than the prior-year quarter’s loss of $205.7 million.

Financial Position (as of Mar 31, 2024)

Affirm exited the third quarter with cash and cash equivalents of $1.3 billion, which climbed 42.7% from the fiscal 2023-end figure. Total assets of $9.2 billion rose 12.8% from the level at fiscal 2023 end.

Funding debt amounted to $1.6 billion, which declined 8.6% from the figure as of Jun 30, 2023. Total stockholders’ equity of $2.6 billion grew 3.5% from the fiscal 2023-end figure.

AFRM generated $208.2 million of net cash from operations during the March quarter while it used cash in operations of $54.3 million in the prior-year quarter.

4Q24 Guidance

Affirm forecasts fourth-quarter fiscal 2024 GMV to be in the range of $6.75-$6.95 billion. Revenues are anticipated to be within the range of $585-$605 million. Transaction costs are estimated between $335 million and $345 million. The weighted average shares outstanding are expected to be 316 million. It projects the adjusted operating margin to be within 15-17%.

Fiscal 2024 View

Earlier, management anticipated GMV of more than $25.25 billion in fiscal 2024. Revenues, as a percentage of GMV, were projected to expand 65 basis points from the fiscal 2023 figure. Adjusted operating margin was estimated to be higher than 11%. Weighted average shares outstanding were estimated at 311 million.

Zacks Rank

Affirm currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Other Business Services Sector Releases

Of the Business Services sector players that have already released March-quarter results so far, the bottom-line results of Mastercard Incorporated MA, Visa Inc. V and Global Payments Inc. GPN beat the respective Zacks Consensus Estimate.

Mastercard reported first-quarter 2024 adjusted earnings of $3.31 per share, which outpaced the Zacks Consensus Estimate by 2.8%. The bottom line climbed 18% year over year. Net revenues of the leading technology company in the global payments industry amounted to $6.3 billion, which improved 10% year over year. The top line beat the consensus mark by 0.4%.

Gross dollar volume rose 10% on a local-currency basis to $2.3 trillion. Cross-border volumes (a key measure that tracks spending on cards beyond the issuing country) advanced 18% on a local currency basis. Switched transactions were 36.7 billion. The figure grew 13% year over year. Value-added services and solutions net revenues of $2.4 billion improved 16% year over year. Payment network rebates and incentives escalated 20%. Mastercard’s clients issued 3.4 billion Mastercard and Maestro-branded cards as of Mar 31, 2024.

Visa’s second-quarter fiscal 2024 earnings per share (EPS) of $2.51 outpaced the Zacks Consensus Estimate of $2.43 by 3.3%. The bottom line rose 20% year over year. Also, net revenues improved 10% to $8.8 billion. The top line beat the consensus mark by 2.1%. Visa's payments volume increased 8% year over year on a constant-dollar basis. Processed transactions (implying transactions processed by Visa) grew 11% to 55.5 billion.

On a constant-dollar basis, the cross-border volume of Visa climbed 16% year over year. Excluding transactions within Europe, its cross-border volume also rose 16% year over year on a constant-dollar basis. Service revenues of $4 billion grew 7% in the March quarter. Data processing revenues climbed 12% year over year to almost $4.3 billion. International transaction revenues amounted to almost $3 billion, which improved 9% year over year. Client incentives (a contra-revenue item) escalated 12% to $3.3 billion.

Global Payments reported first-quarter 2024 adjusted EPS of $2.59, which beat the Zacks Consensus Estimate by 7.5%. The bottom line rose 21.6% year over year. Adjusted net revenues improved 6.6% to $2.18 billion. The top line surpassed the consensus mark of $2.17 billion. Adjusted operating income of $949.6 million advanced 7.6% year over year.

Adjusted operating margin improved 40 basis points year over year to 43.5%. The Merchant Solutions segment recorded adjusted revenues of $1.68 billion, which rose 15.6% year over year. The unit’s adjusted operating income advanced 14.8% to $790.4 million and beat our estimate of $782.7 million. Meanwhile, the Issuer Solutions unit’s adjusted revenues were $515.6 million, which grew 5.2% year over year. Adjusted operating income improved 12.2% to $241.4 million.

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