Affirm Holdings, Inc. AFRM posted better-than-expected first-quarter fiscal 2024 results, which were driven by higher card network revenues and servicing income. Higher transactions coupled with robust repeat customers also boosted the results. However, 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 first-quarter loss of 31 cents per share, which was narrower than the Zacks Consensus Estimate of a loss of 36 cents per share. The metric remained flat year over year.

Total net revenues amounted to $698.5 million (exceeded management’s expectation of $640-$670 million), which surged 40.7% year over year. The top line surpassed the consensus mark by 5.6%.

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Affirm Holdings, Inc. Price, Consensus and EPS Surprise

Affirm Holdings, Inc. price-consensus-eps-surprise-chart | Affirm Holdings, Inc. Quote

Q1 Performance of Affirm Holdings

Active merchants of Affirm Holdings increased 21.4% year over year to 323,000 as of Sept. 30, 2024. The GMV of $7.6 billion increased 35.7% year over year on the back of strength in general merchandise and travel and ticketing categories. The metric crossed management’s expected range of $7.1-$7.4 billion and came higher than the Zacks Consensus Estimate of $7.3 billion.

Total transactions of 27.2 million soared 45% year over year on the back of a significant rise in repeat customer transactions.

Servicing income improved 28.9% year over year to $26 million, which missed the consensus mark of $29.3 million. The uptick can be attributed to growth in the off-balance sheet platform portfolio. Interest income of $377.1 million surged 44% year over year, higher than the consensus mark of $348 million.

Merchant network revenues totaled $184.3 million, which grew 26.3% year over year but missed the Zacks Consensus Estimate of $194 million. The metric gained from a growing GMV.  Card network revenues rose 41.8% year over year to $47.5 million, attributable to the higher usage of Affirm and single-use virtual debit cards. The metric beat the consensus mark of $42.9 million.

Total operating expenses of $831.1 million increased 17.7% year over year due to higher loss on loan purchase commitment, funding costs, and processing and servicing expenses. Provision for credit losses escalated 60.3% to $159.8 million. Nevertheless, sales and marketing and general and administrative expenses decreased 1.1% and 1.3%, respectively, on a year-over-year basis.

Affirm Holdings generated an adjusted operating income of $130 million. It had an adjusted operating income of $60 million in the prior-year quarter. Adjusted operating margin was 19%, exceeding management’s estimated 14-16% range. The metric was 12% in the year-ago quarter. Net loss of $100.2 million was narrower than the prior-year quarter’s loss of $171.8 million.

Financial Position of Affirm Holdings (as of Sept. 30, 2024)

Affirm Holdings exited the fiscal first quarter with cash and cash equivalents of $1 billion, which increased 3.3% from the fiscal 2023-end figure. Total assets of $10.1 billion rose 6.5% from the fiscal 2023-end.

Funding debt amounted to $1.74 billion, which rose 5.1% from the figure as of Sept. 30, 2023. Total stockholders’ equity of $2.8 billion grew 3.8% from the fiscal 2023-end figure.

AFRM generated $196.9 million of net cash from operations during the September quarter compared with $98.9 million in the prior-year quarter.

2Q25 Guidance

Affirm Holdings forecasts second-quarter fiscal 2025 GMV to be in the range of $9.35-$9.75 billion. Revenues are anticipated to be within the range of $770-$810 million. Transaction costs are estimated to be between $420 million and $440 million. The weighted average shares outstanding are expected to be 322 million. It projects the adjusted operating margin to be within 21-23%.

Fiscal 2025 View

Management anticipates a GMV of more than $34 billion in fiscal 2025. Revenues, as a percentage of GMV, is now projected to expand at least 20 basis points from the fiscal 2024 figure. Adjusted operating margin is now estimated to be at least 20%. Weighted average shares outstanding were estimated at 322 million.

Affirm Holdings Zacks Rank

Affirm Holdings currently carries a Zacks Rank #2 (Buy).  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 September-quarter results so far, the bottom-line results of The Western Union Company WU, Equifax Inc. EFX and Robert Half Inc. RHI beat the respective Zacks Consensus Estimate.

Western Union reported third-quarter adjusted EPS of 46 cents, which surpassed the Zacks Consensus Estimate by 4.6%. The bottom line advanced 7% year over year. However, total revenues declined 6% on a reported basis to $1.04 billion. Additionally, the top line beat the consensus estimate by 0.4%. Adjusted operating margin was 19.1%, which deteriorated 50 bps year over year.  Operating income fell 22% year over year to $164.9 million. 

The Consumer Money Transfer, or CMT, segment recorded revenues of $932.2 million, which tumbled 9% on a reported basis and 8% on an adjusted basis. Transactions within the CMT segment grew 3% year over year, attributable to 15% transaction growth in the Branded Digital business. Branded Digital revenues, which accounted for 25% of CMT’s third-quarter revenues, advanced 8% on a reported basis and 9% on an adjusted basis. The CS segment’s revenues climbed 32% on a reported basis and 15% on an adjusted basis to $103.8 million. 

Equifax’s third-quarter 2024 adjusted earnings (excluding 72 cents from non-recurring items) were $1.8 per share, which outpaced the Zacks Consensus Estimate by a slight margin and increased 5.1% from the year-ago quarter’s actual. Total revenues of $1.4 billion missed the consensus estimate by a slight margin but grew 9.3% on a year-over-year basis. Revenues in the Workforce Solutions segment totaled $620 million, up 7% from the year-ago quarter. Within the segment, Verification Services’ revenues of $524.9 million were up 14% from the year-ago quarter’s actual. Employer Services’ revenues of $95.1 million were down 19% on a year-over-year basis.

USIS segment’s revenues were $476.9 million, which grew 12% from the year-ago quarter and outpaced our expectation of $459.4 million. Within the segment, Online Information Solutions’ revenues of $381.1 million grew 9% year over year. Mortgage Solutions’ revenues of $38 million increased 39% from the year-ago quarter. Financial Marketing Services’ revenues were $57.8 million, which gained 14% on a year-over-year basis. Adjusted EBITDA amounted to $471.9 million, up 8% on a year-over-year basis. 

Robert Half reported third-quarter earnings of 64 cents per share, which beat the consensus mark by 1.6% but declined 28.9% year over year. Revenues of $1.47 billion beat the consensus mark by 1.7% but decreased 6.3% year over year. Talent Solutions’ revenues of $954 million decreased 13% year over year on an as-adjusted basis. U.S. Talent Solutions’ revenues of $725 million were down 13% year over year. Non-U.S. Talent Solutions revenues also decreased 13% year over year on an adjusted basis to $229 million.

Protiviti revenues were $511 million, which were up 5% year over year on an as-adjusted basis and surpassed our expectation of $490.2 million. The U.S. Protiviti revenues of $411 million increased 8% year over year on an adjusted basis. Non-U.S. Protiviti revenues of $90 million declined 8% year over year on an as-adjusted basis. Adjusted gross profit was $577.8 million, down 9.5% year over year. The adjusted gross profit margin of 39.4% declined 140 basis points year over year.

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