By Liz Moyer
Investing.com -- Affirm Holdings Inc (NASDAQ:AFRM) is cutting 19% of its workers after a hiring binge before economic conditions worsened.
Shares of the Buy-Now-Pay-Later fintech fell 17% in after-hours trading. Affirm also reported quarterly results that fell short of expectations and provided a gloomier than expected outlook.
Max Levchin, founder and CEO, said in a letter on the company's website: "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. This was a deliberate decision: the product opportunities in front of Affirm were too compelling to ignore, and the revenue growth we posted gave us confidence in this strategy."
But that all changed in mid-2022, Levchin said, as the Federal Reserve's interest rate increases piled up. "This has already dampened consumer spending and increased Affirm’s cost of borrowing dramatically. The root cause of where we are today is that I acted too slowly as these macroeconomic changes unfolded."
Levchin said Affirm had built a larger team "than we can reasonably expect to support."
The cuts bring Affirm back to the size of the company it was six to 12 months ago, he said.
The second fiscal quarter loss per share of $1.10 was bigger than the loss of 95 cents a share expected by analysts. Revenue of $400 million fell short of the $416M expected. Gross merchandise value of $5.658 billion was also below expectations.
Affirm's guidance was also below expectations. For the third quarter, revenue is projected to be $360M to $380M, while analysts expected $418M. Gross merchandise value is projected to be $4.4B to $4.5B versus expectations of $5.275B.
For the full year 2023, the company is forecasting revenue of $1.475B to $1.550B, below expectations for $1.639B. Gross merchandise value was projected to be $19B to $20B versus expectations for $21.2B.
Affirm shares are up 67% so far this year.