Citing economic turbulence, buy now, pay later giant Affirm announced today that it is reducing its staff by 19%, or about 500 employees, and shutting down its crypto unit.
That leaves the company with about 2,000 employees.
In a written statement, founder and CEO Max Levchin said that he takes “full responsibility for this decision and for those leading up to it.” The company did not specify which departments would be affected by the move.
Moving forward, Levchin said, the company will “refocus” on its core businesses and pace its headcount growth “behind that of revenue.”
He added: “Our goals remain very ambitious: Remain firmly in control of risk, grow both volume and revenue, and engage our consumers to continue increasing repeat usage, both online and offline. Moving forward, we will launch new initiatives with more discipline, greenlighting only high-conviction, long-term bets.”
With regard to its crypto offering, Levchin wrote in a letter to shareholders that Affirm would “sunset” the unit as the company also delayed projects with “less certain revenue timelines” as it worked to “align operating expenses with revenue.”
Affirm today also posted its second quarter results for the 2023 fiscal year. GMV (gross merchandise volume) of $5.7 billion set a new record but still fell short of an outlook that Affirm itself had provided in November.
Both revenue and earnings fell below analysts’ estimates. While revenue was up 11% year over year to $400 million, that was lower than the $415 million anticipated by analysts. Meanwhile, a loss per share of $1.10 was greater than analysts’ expectations of a loss of 98 cents per share.
Affirm’s stock was down sharply today on all the news — closing down nearly 7% at $16.02, and then sliding by another 17.1% to $13.28 after hours.
When the economy was booming, the buy now, pay later space was thriving. But as inflation and interest rates have climbed, players in the space have struggled with increased defaults and less discretionary spending.
As New York Times author James Ledbetter recently wrote: “The industry is now facing an existential crisis, as profits remain elusive, valuations plummet, competition increases and regulators ask tough questions about the lending practices behind B.N.P.L.”
Indeed, last September, the U.S. Consumer Financial Protection Bureau (CFPB) issued a report suggesting that companies like Klarna, Affirm and Afterpay, which allow customers to pay for products and services in installments, must be subjected to stricter oversight.
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