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Affirm Holdings - $AFRM - Earnings Analysis: Significant increase in total revenue and user base.

By sagebytes —

Business Model

Affirm generates revenue through merchant network fees, interest income on loans held for investment, gain on sales of loans, servicing income, and card network revenue.

Revenue Sources

  • Merchant network revenue: Fees received from merchants when consumers use Affirm to finance purchases.
  • Interest income: Interest accrued on loans held for investment.
  • Gain on sales of loans: Gains from selling consumer loans to third parties.
  • Servicing income: Fees earned from servicing loans sold to third parties.
  • Card network revenue: Revenue from the Affirm Card product.

Revenue Distribution by Channel

  • Affirm Direct-to-Consumer GMV was $2.8 billion, including Affirm Card GMV of $845 million.

Income Statement Analysis

  • Total revenue increased by 47% year over year.
  • Operating loss significantly decreased from $(172.2) million to $(4.3) million.
  • Net income turned positive from a loss of $(166.9) million to a profit of $80.4 million.

Balance Sheet Analysis

  • Total assets increased by approximately 10.1% from June 30, 2024 to December 31, 2024.
  • Total stockholders’ equity increased slightly by 2%.
  • Total liabilities increased by approximately 13.4%.

Cash Flow Analysis

  • Net cash provided by operating activities increased significantly by 320%.
  • Net cash used in investing activities decreased by 85.8%.
  • Net cash provided by financing activities decreased by 71.6%.
  • Cash and cash equivalents at end of period increased by 20%.

Capital Allocation

Affirm continues to invest in product and technology innovation, balance sheet optimization, dilution management, and flexibility for opportunistic and disciplined M&A. In the quarter, Affirm allocated $100 million towards share repurchases, bringing full year 2024 share repurchases to $600 million.

Management Commentary

We reached record high global users, surpassing 550 million MAUs globally.

We achieved our first $1 billion revenue quarter as we grew revenue 18%.

We have made significant progress against our strategic priorities.

Challenges still remain within the food and beverage category.

It's too early to say the headwind is fully behind us.

Overall Sentiment: Positive, with management highlighting significant growth and progress, while acknowledging certain ongoing challenges.

Recommendation

Rating: Buy

Reason for Rating: Affirm has demonstrated strong revenue growth, improving profitability, and operational efficiency, indicating a positive outlook.

Disclaimer: This report is for informational purposes only and not investment advice. The analysis is based on limited information and subject to change. Investing in securities involves risks, including potential loss of principal. Past performance doesn't guarantee future results. Always conduct your own research, understand the risks, and consult a financial professional before making investment decisions.

Generated on: 2/7/2025, 2:22:20 AM