Affirm Holdings (AFRM) shares soared after the buy now, pay later (BNPL) fintech company reported better-than-expected fiscal fourth-quarter results and issued strong guidance after the bell on Wednesday. The company posted a 48% year-over-year revenue increase, reaching $659 million for the quarter. Additionally, Affirm significantly reduced its net loss to $45 million, or 14 cents per share, compared to $206 million, or 69 cents per share, in the same period last year. Both revenue and earnings figures exceeded analyst expectations, according to Visible Alpha. The company’s Gross Merchandise Volume (GMV), representing the total value of transactions on the Affirm platform, also rose 32% to $7.2 billion.
Following the positive earnings report, Affirm's stock skyrocketed nearly 30% on Thursday. Bank of America analysts expressed optimism, raising their price target for the stock from $36 to $42.
Looking ahead, Affirm has guided for revenue between $640 million and $670 million for the current quarter, with even the low end of the range surpassing analysts’ expectations.
Affirm CEO Max Levchin expressed confidence in the company’s trajectory, stating that Affirm expects to achieve profitability on a GAAP basis by the fiscal fourth quarter of 2025.
"The path to reaching any profitability goal is simply more transactions," Levchin said. "Fortunately, we see no shortage of demand for the honest financial products Affirm builds and the transactions these products enable."
BNPL financing companies like Affirm allow consumers to make purchases and pay for them over time, a particularly attractive option in a consumer spending environment affected by high inflation.
Earlier this week Australia’s But now pay later stalwart Zip (ASX:ZIP) reported an impressive performance for the fiscal year 2024, achieving a substantial 243% increase in earnings before interest, tax, depreciation, and amortization (EBITDA). This robust financial outcome, largely driven by significant growth in the U.S. market, contrasts sharply with a 7% decline in the company's share price following the earnings announcement.
For FY24, Zip Co Ltd posted a group cash EBITDA of AUD 69.0 million, reflecting a 243.2% increase from the previous year. Revenue also saw a strong uptick, rising by 28.2% to AUD 868.0 million. The U.S. market was a standout, with Zip Americas reporting record earnings of AUD 77.2 million, a staggering 420% increase compared to FY23. U.S. revenue also surged by 45.6%, reaching a record AUD 450.6 million.
The remarkable growth in the U.S. has been attributed to sustained support from existing customers in higher-margin channels, as well as effective product and underwriting optimization. The launch of new products, such as Zip Plus in Australia and the ‘Pay-in-8’ offering in the U.S., further underscores Zip’s innovative approach and commitment to enhancing both customer and merchant experiences.
Cynthia Scott, Group CEO and Managing Director, highlighted the strong financial year, emphasizing that the company successfully delivered four consecutive quarters of profitability. “We saw significant improvements this year, with Cash EBITDA reaching AUD 69.0 million, up AUD 117.0 million from FY23. The U.S. market was crucial to this success, achieving record figures in cash EBITDA, total transaction volume (TTV), and revenue,” Scott noted.
Scott also discussed strategic initiatives undertaken during the year, including simplifying the balance sheet, eliminating note liabilities, repaying corporate debt through an institutional equity placement in July, and refinancing AUD 2.4 billion in funding.
Bottom Line Zip has demonstrated significant financial progress in FY24, particularly in the U.S. market, with substantial growth in both earnings and revenue. The company’s strategic innovations and financial maneuvers have strengthened its position, though the mixed market reaction suggests investors may have lingering concerns.
