Affirm Cuts 19% of Its Workforce As Heightened Interest Rates Buffet Its Results

The buy now, pay later trend has lifted a wide range of companies specializing in these online and point-of-sale installment-payment products, not least Affirm Holdings Inc. But late on Wednesday the 11-year-old company reported subpar results for its December quarter and announced it is dismissing 19% of its workforce.

The performance hit Affirm’s stock, which was trading down nearly 10% from a week ago, at $16.02 per share early Thursday. In a sobering public letter to Affirm shareholders, chief executive Max Levchin warned there will likely be more bad news to come. “There will certainly be short-term disruption as we settle into a new operating rhythm,” he said in the letter, in which he assumed blame for his company’s results and lamented the staff reduction.

One of the largest and most technologically oriented of BNPL providers, Affirm was buffeted during the quarter by steadily rising interest rates as the Federal Reserve tightened the money supply to combat inflation. “Everything changed in mid-2022,” Levchin said in his letter. “Over the last three quarters, the Fed increased its benchmark rate at an unprecedented pace. This has already dampened consumer spending and increased Affirm’s cost of borrowing dramatically.”

But in a move unusual for corporate chieftains, Levchin left no doubt who was ultimately responsible for the company’s missteps. “The root cause of where we are today is that I acted too slowly as these macroeconomic changes unfolded,” he said in the letter.

The company did not release an absolute figure for the number of employees who are being let go, but based on a workforce of more than 2,550 last summer, as reported by macrotrends.com, the number would come to nearly 500. “Growing rapidly over the last few years, and especially through the pandemic, we consciously hired ahead of the revenue required to support the size of the team,” Levchin said in his letter.

Last fall, Affirm projected it would achieve profitable operating income this year. Information was not immediately available whether or how the latest-quarter results might change that outlook.

For the quarter, Affirm posted a $315-million net loss, up from $158 million in the September quarter. While revenues climbed 11% year-over-year to $400 million, equity analysts were expecting $416 million.

Levchin admitted some of Affirm’s numbers fell short of company forecasts. “We posted mixed results,” he said in his letter, referring to what Affirm’s forecast had been for the quarter. “Revenue was in-line with our expectations, and adjusted operating income came in better than expected, while gross merchandise volume … and revenue less transaction costs … were below our outlook.”

Affirm’s gross merchandise volume for the quarter totaled $5.66 billion, up 27% year-over-year, while revenue less transaction costs came to $144 million, down 21%. Active users on the platform totaled 15.6 million, a 39% increase.