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Affirm Holdings Q4 Loss Narrows Y/Y, GMV Outlook Raised
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Affirm Holdings, Inc. (AFRM - Free Report) posted better-than-expected fourth-quarter fiscal 2024 results, which were driven by improved servicing income and card network revenues coupled with a higher volume of transactions and a better level of Gross Merchandise Volume (GMV). 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 fiscal fourth-quarter loss of 14 cents per share, which was narrower than the Zacks Consensus Estimate of a loss of 45 cents per share and the prior-year quarter’s loss of 69 cents per share.
Total net revenues amounted to $659.2 million (exceeded management’s expectation of $585-$605 million), which surged 47.8% year over year. The top line surpassed the consensus mark by 10%.
Affirm Holdings, Inc. Price, Consensus and EPS Surprise
Active merchants of Affirm Holdings increased 19% year over year to 303,000 as of June 30, 2024. The GMV of $7.2 billion climbed 31% year over year on the back of strength in general merchandise and, travel and ticketing categories. The metric crossed management’s expected range of $6.75-$6.95 billion and also came higher than the Zacks Consensus Estimate of $6.9 billion.
Total transactions of 24.7 million soared 42% year over year on the back of a significant rise in repeat customer transactions.
Servicing income improved 18.9% year over year to $27.6 million, which beat the consensus mark of $25.4 million. The uptick can be attributed to growth in net servicing fee revenues. Interest income of $337.6 million surged 57% year over year, higher than the consensus mark of $325.7 million.
Merchant network revenues totaled $181 million, which grew 28% year over year and beat the Zacks Consensus Estimate of $166.6 million. The metric gained from a growing GMV. Card network revenues rose 26.2% year over year to $43 million, attributable to the higher usage of Affirm and single-use virtual debit cards. The metric beat the consensus mark of $37.5 million.
Total operating expenses of $732.6 million increased 6.2% year over year due to higher loss on loan purchase commitment, funding costs, and processing and servicing expenses. Provision for credit losses escalated 24.5% to $117.6 million. Nevertheless, technology and data analytics, sales and marketing, and general and administrative expenses decreased 18.4%, 6.8% and 3.2%, respectively, on a year-over-year basis.
Affirm Holdings generated an adjusted operating income of $150 million. It had an adjusted operating income of $15 million in the prior-year quarter. Adjusted operating margin was 23%, which exceeded management’s estimated range of 15-17%. The metric was at 3% in the year-ago quarter. Net loss of $45.1 million was narrower than the prior-year quarter’s loss of $206 million.
Financial Position of Affirm Holdings (as of June 30, 2024)
Affirm Holdings exited the fiscal fourth quarter with cash and cash equivalents of $1 billion, which climbed 13.6% from the fiscal 2023-end figure. Total assets of $9.5 billion rose 16.7% from the fiscal 2023-end.
Funding debt amounted to $1.84 billion, which rose 4.1% from the figure as of June 30, 2023. Total stockholders’ equity of $2.7 billion grew 7.8% from the fiscal 2023-end figure.
AFRM generated $68.8 million of net cash from operations during the June quarter while it used generated cash from operations of $43.8 million in the prior-year quarter.
1Q25 Guidance
Affirm Holdings forecasts first-quarter fiscal 2025 GMV to be in the range of $7.1-$7.4 billion. Revenues are anticipated to be within the range of $640-$670 million. Transaction costs are estimated between $375 million and $390 million. The weighted average shares outstanding are expected to be 319 million. It projects the adjusted operating margin to be within 14-16%.
Fiscal 2025 View
Management anticipates a GMV of more than $33.5 billion in fiscal 2025. Revenues, as a percentage of GMV, were projected to expand 10 basis points from the fiscal 2024 figure. Adjusted operating margin was estimated to be higher than 18.4%. Weighted average shares outstanding were estimated at 323 million.
Here are some companies from the broader Business Services space that have already reported earnings this season.
Visa Inc. (V - Free Report) reported strong third-quarter fiscal 2024 earnings, which benefited from expanding processed transactions and cross-border volume. Its earnings per share of $2.42 outpaced the Zacks Consensus Estimate by a penny. The bottom line rose 12% year over year.
Concerns regarding cooling consumer spending growth, especially in high-ticket and discretionary items, are likely to keep the stock under pressure.
American Express Company (AXP - Free Report) posted robust second-quarter 2024 earnings, driven by rising net interest income and growth in the customer base of Millennials and Gen-Z, driving growth in the U.S. Consumer Services Billed business.
The company’s second-quarter earnings per share of $3.49 beat the Zacks Consensus Estimate by 8.4%. The bottom line climbed 20.8% year over year.
FirstCash Holdings, Inc. (FCFS - Free Report) reported adjusted earnings of $1.37 per share, which beat the consensus mark of $1.36. Over the last four quarters, it beat earnings estimates each time, with an average surprise of 8.1%.
FirstCash posted revenues of $831 million in the reported quarter. The Zacks Consensus Estimate for earnings for the next quarter suggests 2.6% year-over-year growth.
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Affirm Holdings Q4 Loss Narrows Y/Y, GMV Outlook Raised
Affirm Holdings, Inc. (AFRM - Free Report) posted better-than-expected fourth-quarter fiscal 2024 results, which were driven by improved servicing income and card network revenues coupled with a higher volume of transactions and a better level of Gross Merchandise Volume (GMV). 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 fiscal fourth-quarter loss of 14 cents per share, which was narrower than the Zacks Consensus Estimate of a loss of 45 cents per share and the prior-year quarter’s loss of 69 cents per share.
Total net revenues amounted to $659.2 million (exceeded management’s expectation of $585-$605 million), which surged 47.8% year over year. The top line surpassed the consensus mark by 10%.
Affirm Holdings, Inc. Price, Consensus and EPS Surprise
Affirm Holdings, Inc. price-consensus-eps-surprise-chart | Affirm Holdings, Inc. Quote
Q4 Performance of Affirm Holdings
Active merchants of Affirm Holdings increased 19% year over year to 303,000 as of June 30, 2024. The GMV of $7.2 billion climbed 31% year over year on the back of strength in general merchandise and, travel and ticketing categories. The metric crossed management’s expected range of $6.75-$6.95 billion and also came higher than the Zacks Consensus Estimate of $6.9 billion.
Total transactions of 24.7 million soared 42% year over year on the back of a significant rise in repeat customer transactions.
Servicing income improved 18.9% year over year to $27.6 million, which beat the consensus mark of $25.4 million. The uptick can be attributed to growth in net servicing fee revenues. Interest income of $337.6 million surged 57% year over year, higher than the consensus mark of $325.7 million.
Merchant network revenues totaled $181 million, which grew 28% year over year and beat the Zacks Consensus Estimate of $166.6 million. The metric gained from a growing GMV. Card network revenues rose 26.2% year over year to $43 million, attributable to the higher usage of Affirm and single-use virtual debit cards. The metric beat the consensus mark of $37.5 million.
Total operating expenses of $732.6 million increased 6.2% year over year due to higher loss on loan purchase commitment, funding costs, and processing and servicing expenses. Provision for credit losses escalated 24.5% to $117.6 million. Nevertheless, technology and data analytics, sales and marketing, and general and administrative expenses decreased 18.4%, 6.8% and 3.2%, respectively, on a year-over-year basis.
Affirm Holdings generated an adjusted operating income of $150 million. It had an adjusted operating income of $15 million in the prior-year quarter. Adjusted operating margin was 23%, which exceeded management’s estimated range of 15-17%. The metric was at 3% in the year-ago quarter. Net loss of $45.1 million was narrower than the prior-year quarter’s loss of $206 million.
Financial Position of Affirm Holdings (as of June 30, 2024)
Affirm Holdings exited the fiscal fourth quarter with cash and cash equivalents of $1 billion, which climbed 13.6% from the fiscal 2023-end figure. Total assets of $9.5 billion rose 16.7% from the fiscal 2023-end.
Funding debt amounted to $1.84 billion, which rose 4.1% from the figure as of June 30, 2023. Total stockholders’ equity of $2.7 billion grew 7.8% from the fiscal 2023-end figure.
AFRM generated $68.8 million of net cash from operations during the June quarter while it used generated cash from operations of $43.8 million in the prior-year quarter.
1Q25 Guidance
Affirm Holdings forecasts first-quarter fiscal 2025 GMV to be in the range of $7.1-$7.4 billion. Revenues are anticipated to be within the range of $640-$670 million. Transaction costs are estimated between $375 million and $390 million. The weighted average shares outstanding are expected to be 319 million. It projects the adjusted operating margin to be within 14-16%.
Fiscal 2025 View
Management anticipates a GMV of more than $33.5 billion in fiscal 2025. Revenues, as a percentage of GMV, were projected to expand 10 basis points from the fiscal 2024 figure. Adjusted operating margin was estimated to be higher than 18.4%. Weighted average shares outstanding were estimated at 323 million.
Affirm Holdings Zacks Rank
Affirm Holdings currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other Players
Here are some companies from the broader Business Services space that have already reported earnings this season.
Visa Inc. (V - Free Report) reported strong third-quarter fiscal 2024 earnings, which benefited from expanding processed transactions and cross-border volume. Its earnings per share of $2.42 outpaced the Zacks Consensus Estimate by a penny. The bottom line rose 12% year over year.
Concerns regarding cooling consumer spending growth, especially in high-ticket and discretionary items, are likely to keep the stock under pressure.
American Express Company (AXP - Free Report) posted robust second-quarter 2024 earnings, driven by rising net interest income and growth in the customer base of Millennials and Gen-Z, driving growth in the U.S. Consumer Services Billed business.
The company’s second-quarter earnings per share of $3.49 beat the Zacks Consensus Estimate by 8.4%. The bottom line climbed 20.8% year over year.
FirstCash Holdings, Inc. (FCFS - Free Report) reported adjusted earnings of $1.37 per share, which beat the consensus mark of $1.36. Over the last four quarters, it beat earnings estimates each time, with an average surprise of 8.1%.
FirstCash posted revenues of $831 million in the reported quarter. The Zacks Consensus Estimate for earnings for the next quarter suggests 2.6% year-over-year growth.