Affirm Holdings Inc. announced plans to cut 19% of its staff Wednesday following an earnings report in which the buy-now-pay-later company came up shy with both its results and outlook.
“The root cause of where we are today is that I acted too slowly as these macroeconomic changes unfolded,” Chief Executive Max Levchin told employees in a note about the layoffs that was also shared to Affirm’s
AFRM,
-6.91%
corporate site.
“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,” Levchin said, but rising rates have dampened consumer spending levels and upped Affirm’s cost of borrowing.
Affirm had 2,552 employees as of June 30, 2022, according to its latest 10-K filing.
“It is an economic reality that we have to live within our means and match growth of headcount with growth in revenue, but just for the…
2023-02-08 20:33:00 Affirm stock tanks after earnings whiff, as company plans to lay off 19% of staff
Source from www.marketwatch.com
Shares of fintech startup Affirm tanked nearly 20% per share on Wednesday after the company provided an underwhelming earnings report for the fourth quarter. Affirm had projected that it would post a loss of between 15 cents and 14 cents per share, and on Tuesday the company announced it had lost 16 cents per share in the quarter.
The company also indicated it would lay off 19 per cent of its staff, or about 300 employees, as part of a larger restructuring effort. Affirm co-founder and CEO Max Levchin said in a statement that the company had taken steps to reduce costs, cutting back on general and administrative expenses, marketing and sales.
“Though these decisions were painful, they were essential to the long-term success of an Affirm run by Affirmans (our endearment for our Affirm employees),” Levchin said.
Analysts had mixed reactions to the news. Some found solace in the fact that the company had managed to stay afloat despite drastic market changes throughout the year. Others remained cautious of the company’s future.
Deutsche Bank analyst Rayna Kumar cautioned investors to remain on the sidelines due to the staff reductions and lack of growth. She warned that Affirm may struggle to attract new customers, which could further affect its profitability.
“Given the expected staff reductions, Affirm will be in a race to attract new customers, and it is unclear whether the company can maintain its current subscriber base in light of the current operating environment,” Kumar said.
With the restructuring, Affirm has signaled that it is ready to move forward as it continues to weather the pandemic storm. Investors, however, may want to watch the company closely for signs of stabilization before placing their bets.
