Citing economic turbulencebuy now, pay later giant Affirm announced today that it is cutting its workforce by 19%, or about 500 employees, and closing its crypto unit.
That leaves the company with about 2,000 employees.
In a written statement, founder and CEO Max Levchin said he “takes full responsibility for this decision and for those leading up to it.” The company has not specified which departments will be affected by the move.
Going forward, Levchin said, the company will “refocus” on its core business and accelerate headcount growth “behind that of revenue.”
He added: “Our goals remain very ambitious: to firmly control risk, grow both volume and revenue, and drive our consumers to continue to increase repeat use, both online and offline. In the future, we will launch new initiatives with more discipline, greenlighting only long-term bets with high conviction.”
Regarding its crypto offering, Levchin subscribed a letter to shareholders that Affirm would “postpone” the unit, as the company also postponed projects with “less certain revenue timelines” as it worked to “align operating costs with revenue.”
Affirm also today released its second quarter results for fiscal year 2023. GMV (gross trading volume) of $5.7 billion set a new all-time high, but still fell short of the outlook Affirm itself provided in November.
Both sales and earnings fell short of analyst estimates. While revenue rose 11% year-over-year to $400 million, that was lower than the $415 million analysts expected. Meanwhile, a loss per share of $1.10 exceeded analyst expectations of a loss of 98 cents per share.
Affirm’s stock was sharp down today on all news – closing nearly 7% at $16.02, then falling another 17.1% after close to $13.28.
As the economy boomed, the “buy now, pay later” space boomed. But as inflation and interest rates have risen, so have the players in the space struggled with more defaults and less discretionary spending.
Like New York Times author James Ledbetter recently wrote: “The industry now faces an existential crisis as earnings remain elusive, valuations plummet, competition intensifies and regulators ask tough questions about the lending practices behind BNPL”
Indeed, last September, the US Consumer Financial Protection Bureau (CFPB) released a report today suggesting that companies like Klarna, Affirm and Afterpay, which allow customers to pay for products and services in installments, should be subject to stricter supervision.
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