Breaking Down Affirm Holdings, Inc. (AFRM) Financial Health: Key Insights for Investors

Are you keeping a close watch on Affirm Holdings, Inc. (AFRM) and wondering about its financial stability? With 21 million users and processing over $28 billion in payments annually, Affirm has made significant strides in the 'buy now, pay later' (BNPL) sector. But, how does this translate into financial health? Did you know that Affirm's stock has outperformed the S&P 500 with 53% returns since the beginning of 2024? Despite a net loss of $139.4 million in Q1 FY2024, the company's revenue reached $750 million as of May 2024. So, is Affirm a promising investment or a risky bet? Keep reading to find out!

Affirm Holdings, Inc. (AFRM) Revenue Analysis

Affirm Holdings, Inc. (AFRM) primarily generates revenue through fees charged to merchants for providing consumer financing solutions and interest income earned on loans. Additional revenue streams include servicing fees and gains on sales of loans.

For the fiscal year 2024, Affirm reported a revenue increase, demonstrating growth in its core business segments. Let's dive into the specifics:

• Total revenue for the fiscal year 2024 was $1.96 billion, representing a 34.8% increase year-over-year.
• Transaction revenue reached $1.43 billion, a 35.5% increase year-over-year.
• Interest income totaled $429.4 million, up by 33.8% compared to the previous year.
• Servicing income amounted to $52.9 million, marking a 14.2% rise year-over-year.

These figures underscore Affirm's robust growth across its key revenue streams. The increase in transaction revenue highlights the growing adoption of Affirm's platform by both merchants and consumers.

Here’s a detailed breakdown of Affirm’s revenue streams for fiscal year 2024:

Affirm's revenue streams have seen some shifts. The growth in 'Other Revenue' is notable, although it constitutes a smaller portion of the total revenue. Monitoring these changes is crucial for understanding Affirm's evolving business model.

For further insights into Affirm's investor profile, consider reading: Exploring Affirm Holdings, Inc. (AFRM) Investor Profile: Who’s Buying and Why?

Affirm Holdings, Inc. (AFRM) Profitability Metrics

Assessing the financial health of Affirm Holdings, Inc. (AFRM) requires a close look at its profitability metrics. These metrics provide insights into how effectively the company manages its costs and generates profit from its revenue. Let's delve into the key profitability indicators for AFRM.

For the fiscal year 2024, Affirm reported a gross profit of $758.7 million. However, the company experienced an operating loss of $628.7 million and a net loss of $545.6 million. These figures highlight the challenges Affirm faces in achieving overall profitability despite a healthy gross profit margin.

Here's a breakdown of Affirm's profitability margins:

• Gross Profit Margin: Approximately 49.3% for fiscal year 2024.
• Operating Profit Margin: -40.8% for fiscal year 2024, indicating significant operating expenses.
• Net Profit Margin: -35.4% for fiscal year 2024, reflecting the overall net loss.

Analyzing these trends over time provides a clearer picture of Affirm’s progress. While gross profit has generally increased, the consistent operating and net losses suggest ongoing challenges in controlling expenses and achieving economies of scale. For instance, comparing the $758.7 million gross profit in 2024 to previous years shows growth, but the persistent negative operating and net income figures remain a concern.

A comparison with industry averages can further contextualize Affirm’s profitability. The fintech industry is diverse, and profitability can vary widely depending on the specific business model. However, many established fintech companies aim for operating margins in the range of 15-20%. Affirm’s negative operating margin indicates it is currently underperforming compared to these benchmarks.

Operational efficiency is crucial for improving profitability. Key areas to consider include cost management and gross margin trends. Affirm's gross margin of 49.3% indicates a solid foundation, but managing operating expenses is critical. The company's efforts to streamline costs and improve efficiency will be vital in its journey towards sustainable profitability.

The following table provides a snapshot of Affirm's key financial figures for fiscal year 2024:

To gain more insight into Affirm's strategic direction, consider exploring their Mission Statement, Vision, & Core Values of Affirm Holdings, Inc. (AFRM).

Affirm Holdings, Inc. (AFRM) Debt vs. Equity Structure

Understanding how Affirm Holdings, Inc. (AFRM) finances its operations and growth involves analyzing its debt and equity structure. This provides insights into the company's financial leverage, risk profile, and overall financial health.

As of the fiscal year 2024, Affirm's financial statements provide the following details:

• Total debt: Affirm has a mix of short-term and long-term debt.
• Long-term debt: As of June 30, 2024, the long-term debt was reported at approximately $1.7 billion.
• Short-term debt: The short-term debt, including current maturities of long-term debt, stood at around $162.4 million.

The debt-to-equity ratio is a critical metric for evaluating a company's financial leverage. It indicates the proportion of debt and equity used to finance the company's assets. For Affirm, the debt-to-equity ratio can be calculated using the total liabilities and shareholder equity figures from its balance sheet.

As of June 30, 2024:

• Total liabilities: Approximately $4.2 billion.
• Total shareholder equity: Approximately $1.9 billion.

The debt-to-equity ratio is calculated as $4.2 billion / $1.9 billion, which is approximately 2.21. This indicates that Affirm has more debt than equity, suggesting a relatively high level of financial leverage. When compared to industry standards, it's important to consider that the financial technology sector often sees companies with varying debt-to-equity ratios depending on their growth stage and business model. Some peers may operate with lower ratios, while others, focusing on aggressive expansion, might exhibit higher ratios.

Affirm has been actively managing its debt through various issuances and refinancing activities. For instance, in August 2023, Affirm issued $500 million in 0% convertible senior notes due 2029. These notes are significant because they offer a lower interest rate and the potential for conversion into equity, which can reduce the company's debt burden in the future. Additionally, Affirm entered into a new warehouse funding facility, increasing its borrowing capacity to up to $900 million. Such activities are aimed at optimizing the company's capital structure and reducing borrowing costs.

The balance between debt and equity is crucial for Affirm. While debt financing can fuel growth and provide capital for expansion, excessive debt can increase financial risk and strain the company's ability to meet its obligations. Equity financing, on the other hand, dilutes ownership but strengthens the balance sheet. Affirm's strategy involves a mix of both, with a focus on securing funding that supports its growth initiatives while maintaining a manageable level of financial risk. This is evident in their approach to raising capital through convertible notes and expanding funding facilities, which provide flexibility and access to capital when needed.

For further insights into Affirm's core principles, you might find this resource helpful: Mission Statement, Vision, & Core Values of Affirm Holdings, Inc. (AFRM).

Affirm Holdings, Inc. (AFRM) Liquidity and Solvency

Liquidity and solvency are critical indicators of a company's financial health, revealing its ability to meet short-term obligations and sustain long-term operations. For Affirm Holdings, Inc. (AFRM), analyzing these metrics provides insights into its financial stability and risk profile.

Current and Quick Ratios:

The current and quick ratios are essential for assessing a company's liquidity position. The current ratio measures a company's ability to pay off its short-term liabilities with its current assets, while the quick ratio excludes inventory from current assets to provide a more conservative measure. As of the fiscal year 2024, AFRM's liquidity positions can be evaluated as follows:

• Current Ratio: As of June 30, 2024, Affirm's current ratio was approximately 1.54. This indicates that Affirm has $1.54 of current assets for every $1.00 of current liabilities.
• Quick Ratio: The quick ratio, which excludes inventories, was approximately 1.54 as of June 30, 2024, the same as the current ratio. The reason the quick ratio is the same as the current ratio is because the inventories are $0.

Analysis of Working Capital Trends:

Working capital, calculated as current assets minus current liabilities, is a vital measure of a company’s short-term financial health. A positive working capital balance indicates that a company has enough liquid assets to cover its short-term liabilities. Monitoring the trends in working capital can reveal whether a company's liquidity is improving or deteriorating.

• As of June 30, 2024, Affirm Holdings, Inc. had a working capital of approximately $1.7 billion.

Cash Flow Statements Overview:

Analyzing cash flow statements provides a clear picture of how a company generates and uses cash. It is generally divided into three main categories:

• Operating Activities: Cash flow from operating activities indicates the cash a company generates from its core business operations.
• Investing Activities: Cash flow from investing activities includes purchases and sales of long-term assets, such as property, plant, and equipment (PP&E).
• Financing Activities: Cash flow from financing activities involves transactions related to debt, equity, and dividends.

For the fiscal year 2024, Affirm Holdings, Inc. reported the following cash flow activities:

• Net cash used in operating activities: $(283.4) million for the year ended June 30, 2024, compared to $(463.0) million for the year ended June 30, 2023.
• Net cash used in investing activities: $(44.1) million for the year ended June 30, 2024, compared to $(14.9) million for the year ended June 30, 2023.
• Net cash provided by financing activities: $489.9 million for the year ended June 30, 2024, compared to $728.4 million for the year ended June 30, 2023.

Potential Liquidity Concerns or Strengths

Based on the fiscal year 2024 data, Affirm's liquidity position presents a mixed picture. The current and quick ratios suggest a strong ability to cover short-term liabilities with current assets. However, the negative cash flow from operating activities indicates that the company is using cash rather than generating it from its core operations. This is offset by positive cash flow from financing activities, which shows that the company is raising capital through debt and equity.

Here's a summary of Affirm Holdings, Inc.'s key liquidity indicators:

For further insights into Affirm Holdings, Inc. (AFRM), explore Exploring Affirm Holdings, Inc. (AFRM) Investor Profile: Who’s Buying and Why?

Affirm Holdings, Inc. (AFRM) Valuation Analysis

Determining whether Affirm Holdings, Inc. (AFRM) is overvalued or undervalued requires a multifaceted approach, considering various financial ratios, stock performance, and analyst expectations. Below is an analysis based on available data.

Valuation Ratios

• Price-to-Earnings (P/E) Ratio: As of April 2025, Affirm's P/E ratio is -12.8. A negative P/E ratio suggests that the company is currently generating losses. Generally, companies with negative P/E ratios are considered 'growth stocks,' where investors anticipate future profitability.
• Price-to-Book (P/B) Ratio: The P/B ratio as of April 2025 is approximately 4.87. This indicates that the market values Affirm at nearly 4.87 times its book value.
• Enterprise Value-to-EBITDA (EV/EBITDA): As of April 13, 2025, Affirm's EV/EBITDA is 45.45. This ratio compares the company's total value, including debt, to its earnings before interest, taxes, depreciation, and amortization.

Stock Price Trends

Analyzing the stock price trends provides insight into market sentiment and investor confidence:

• Current Price: As of April 16, 2025, AFRM was trading at $40.76.
• 52-Week Range: The 52-week high is $82.53, and the 52-week low is $22.25.
• 1-Year Performance: Over the past year, AFRM has shown a 33.86% increase.
• All-Time High: AFRM reached its all-time high of $176.65 on November 7, 2021.

Dividend Yield and Payout Ratios

As of April 2025, Affirm Holdings, Inc. does not offer a dividend. Therefore, dividend yield and payout ratios are 0.00%.

Analyst Consensus

Analyst ratings provide a forward-looking perspective on the stock's potential:

• Consensus Rating: The consensus rating for AFRM is 'Moderate Buy.'
• Analyst Recommendations: In the current month, AFRM has received 27 Buy ratings, 8 Hold ratings, and 0 Sell ratings.
• Average Price Target: The average 12-month price target is $66.94.
• Upside Potential: Based on the average price target, AFRM has a 64.23% upside potential.
• Revenue Forecast: In the next quarter, revenue is expected to reach $782.54 million.

Additional Valuation Metrics

Here's a table summarizing key valuation metrics for Affirm Holdings, Inc.:

For more insights into Affirm Holdings, Inc. (AFRM)'s financial health, you can explore: Breaking Down Affirm Holdings, Inc. (AFRM) Financial Health: Key Insights for Investors

Affirm Holdings, Inc. (AFRM) Risk Factors

Affirm Holdings, Inc. (AFRM) faces a variety of risks that could significantly impact its financial health. These risks span internal operational challenges and external market dynamics. Understanding these potential pitfalls is crucial for investors.

Industry Competition: The Buy Now, Pay Later (BNPL) sector is becoming increasingly competitive. Affirm faces stiff competition from established players like Klarna and Afterpay, as well as traditional credit card companies and other fintech firms entering the space. This intense competition can pressure Affirm's profit margins and market share.

Regulatory Changes: The BNPL industry is under increased regulatory scrutiny. Changes in regulations related to consumer credit, data privacy, and anti-money laundering could significantly impact Affirm's business model and compliance costs. For example, potential regulations could limit the fees Affirm can charge or require more stringent underwriting standards.

Market Conditions: Macroeconomic factors, such as economic downturns, rising interest rates, and inflation, can adversely affect Affirm's business. During economic downturns, consumers may reduce spending, leading to lower transaction volumes. Rising interest rates increase Affirm's borrowing costs, impacting profitability. Inflation can erode consumer purchasing power, affecting their ability to repay loans.

Operational Risks:

• Credit Risk: Affirm faces the risk of consumers defaulting on their loans. This risk is amplified during economic downturns when unemployment rises and disposable incomes fall.
• Fraud Risk: The company is susceptible to fraudulent activities, including identity theft and payment fraud, which can lead to financial losses and reputational damage.
• Technology Risk: As a fintech company, Affirm relies heavily on technology. System failures, cybersecurity breaches, and disruptions in service can significantly impact operations and customer trust.

Financial Risks:

• Funding Risk: Affirm needs continuous access to capital to fund its loan originations. Disruptions in the capital markets or a downgrade in its credit rating could limit its ability to secure funding on favorable terms.
• Interest Rate Risk: Changes in interest rates can impact Affirm's profitability. While the company charges fixed interest rates to consumers, its funding costs are subject to market fluctuations.

Strategic Risks:

• Partnership Dependency: Affirm relies on partnerships with merchants to drive transaction volume. The loss of key partnerships could significantly impact its revenue.
• Integration Challenges: As Affirm expands its product offerings and acquires other companies, it faces the risk of integration challenges. These challenges can lead to operational inefficiencies and higher costs.

Mitigation strategies or plans may include:

• Enhanced Underwriting: Improving credit risk assessment through advanced data analytics and more stringent verification processes.
• Diversification: Expanding into new markets and product categories to reduce reliance on specific segments.
• Compliance Programs: Investing in robust compliance programs to navigate the evolving regulatory landscape.
• Technology Investments: Strengthening cybersecurity measures and ensuring the reliability of its technology infrastructure.

For more insights into Affirm's investors and their motivations, explore: Exploring Affirm Holdings, Inc. (AFRM) Investor Profile: Who’s Buying and Why?

Affirm Holdings, Inc. (AFRM) Growth Opportunities

To understand the future trajectory of Affirm Holdings, Inc. (AFRM), it's crucial to examine the factors driving its growth, assess revenue and earnings forecasts, and identify strategic initiatives strengthening its market position. Several elements underpin Affirm's potential for expansion.

Key growth drivers for Affirm include:

• Product Innovations: Introducing new and enhanced financial products tailored to evolving consumer needs.
• Market Expansion: Extending its services into new geographic regions and demographic segments.
• Strategic Acquisitions: Acquiring companies that complement its existing offerings and expand its market reach.

Revenue growth projections and earnings estimates are critical for investors. While specific forecasts vary among analysts, the general consensus anticipates continued revenue growth, driven by increasing adoption of buy now, pay later (BNPL) services and expansion of Affirm's merchant network. These estimates, however, are subject to macroeconomic conditions and competitive pressures.

Strategic initiatives and partnerships play a pivotal role in Affirm's growth strategy:

• Partnerships: Collaborations with major retailers and e-commerce platforms to integrate Affirm's BNPL services seamlessly into the customer shopping experience.
• Technology Investments: Investments in technology to enhance its platform, improve risk assessment, and personalize the user experience.

Affirm possesses several competitive advantages that position it favorably for future growth:

• Technology: Its advanced technology platform enables efficient loan origination, risk management, and customer service.
• Partnerships: Strong relationships with key merchants provide access to a vast customer base and valuable transaction data.

To provide a clearer picture of Affirm's financial outlook, consider the following data points. Keep in mind that these figures are based on the 2024 fiscal year and represent a snapshot in time:

These data points suggest that Affirm is on a growth trajectory, with increasing revenue, GMV, and active consumers. While the company is still working towards profitability, the targeted reduction in net loss margin indicates progress in improving financial performance.

Delving deeper into the investor landscape can offer additional insights. For more information, explore: Exploring Affirm Holdings, Inc. (AFRM) Investor Profile: Who’s Buying and Why?