Why Affirm’s shares are taking a hit and what the sale means for the startup market BNPL – Techdoxx

Deepak Gupta February 11, 2022
Updated 2022/02/11 at 7:04 PM

The number of startups build buy now pay later (BNPL) services is over. This year alone, we’ve seen French startup BNPL Alma raise a $130 million equity round, BillEase raise $11 million for BNPL in the Philippines, Lipa Later raise $12 million for the same effort in Kenya, and ThankUCash raise $12 million. 5.3 million for fintech infrastructure in Africa which appears to include BNPL services.

There have been other funding events and product launches, but this is enough of a sample for us to understand that private market investors around the world are investing in consumer payment and credit capabilities, even after operators in the Affirm sector went public and Klarna has grown to massive scale with global reach. The $29 billion Block-Afterpay deal was also good for initial BNPL volume, we calculated.

Until some recent turmoil, there were good reasons to regard BNPL’s startup investments as sensible bets. After all, public market investors pushed Affirm’s stock to over $175 a share in late 2021 from an IPO price of $49 a share. And Klarna has raised $639 million at a valuation of nearly $46 billion in mid-2021. With momentum like that, why not activate a range of BNPL services targeting specific geographies around the world?


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All the heat and indifference of the above paragraph comes with one big caveat, namely that Affirm’s value has eroded sharply in public markets. After trading to just over $81 a share this week, an initial tweet containing earnings data caused Affirm’s shares to fall sharply yesterday. The company’s full results and earnings failed to stem the bleeding. Excluding yesterday’s declines of more than 20%, Affirm’s shares are down another 15% today at the time of writing, at just $49.70 a share.

That’s a lot more than the company’s IPO price. Unfortunately, we don’t have any fourth-quarter data from Klarna to compare; the company recently shared its third quarter data. So we’ll have to try to undo the change in the value of Affirm by itself. What we need to understand is why Affirm’s earnings were so damaging to its value and whether other companies are at similar risk. More simply: Should the myriad of well-funded BNPL startups see Affirm’s downfall as a warning about their own efforts, or something more company-specific for US fintech?

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Affirm the Q4 calendar

Affirm’s corporate calendar is the same as Microsoft’s, it seems, with its Q4 2021 calendar being the second quarter of its fiscal year 2022. This means that some of the language below will be a little tortured as we discuss periods of time. There’s not much we can do about it, frankly; the world of finance is not really ready for us to enjoy smooth phrases. Forward.

In its second fiscal quarter of 2022, Affirm reported GMV of US$4.5 billion (+115% YoY), revenue of US$361.0 million (+77% YoY), revenue minus transaction costs of US$183.6 million (+93% Y/Y), operating loss of $196.2 million (+632% Y/Y), and an adjusted operating loss of $7.9 million, a few million worse than the adjusted operating loss of $3, 1 million from the second fiscal quarter of 2021.

Helping to drive rapid GMV and revenue gains were Affirm’s new deals with Amazon and Shopify.

There’s good and bad there. GMV growth was strong, revenue growth solid and revenue ex-transaction costs even better. Even more, Affirm crushed revenue expectations, which were US$ 328.8 million in the quarter. So what went wrong?

Orientation, take rate

For the third fiscal quarter of 2022, or calendar for the first quarter of 2022, according to our calculations, Affirm forecasts revenues of $325 million to $335 million. Barrons has Wall Street expectations of $335.5 million for the current quarter, so the company’s guidance is a benchmark error.

There were other data points that were less than exciting for investors. Take a look at the following chart from Affirm’s set of investor materials:

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