Affirm Logs Big Gains From Its Shopify And Amazon Deals While Addressing a CFPB Probe

When it comes to fast growth, it doesn’t hurt to have huge merchant platforms like Amazon.com Inc. and Shopify Inc. in your corner, a proposition Affirm Inc. underscored late Thursday as it reported huge increases in merchandise volume, active users, and other indicators. “We feel great about our progress,” said Affirm chief executive Max Levchin told equity analysts, referring to the buy now, pay later company’s expansion just since its move to go public a year ago.

San Francisco-based Affirm’s inclusion in Shopify’s Shop Pay app last year, combined with a fledgling program for use on Amazon’s site, drove big results in the quarter ended in December, Affirm’s second fiscal quarter.

Holiday shopping helped out as well, the company said, as gross merchandise volume hit $4.46 billion, up 115% year-over-year and a 65% increase just from the September quarter. The active-user count reached 11.2 million, up 150% from December 2020 and a 29% rise from the prior quarter. And, as might be expected, the active merchant count exploded, rising from 7,900 a year ago to 168,000 in the latest quarter. “We just posted an incredible quarter for growth,” said chief financial officer Michael Linford during the earnings call.

And Amazon hasn’t fully kicked in yet, Levchin said, as Affirm is “moving beyond the testing phase” with the e-commerce behemoth. Excluding Amazon altogether, he said, Affirm’s volume still doubled from the year-earlier quarter.

If there’s a shadow cast over Affirm these days, it’s an inquiry initiated by the Consumer Financial Protection Bureau into the BNPL business. In December, the agency issued a demand letter to Affirm and five other BNPL providers—Afterpay Ltd., Klarna AB, PayPal Holdings Inc., and Zip Co.—seeking information about the potential for overspending by consumers, among other concerns.

Levchin told analysts on Thursday’s call that “it’s not for us to comment on [the CFPB’s] work,” but added, “we have a very high moral ground in our approach to this business.” The letter, he added, was a “detailed request for information,” which he said Affirm will provide by the agency’s March 1 deadline. But one part of the letter, he said, was easy to address. “There was quite a lot of requests for fees charged,” he said. “We filled that out with zeroes—we don’t charge [consumer fees].” For now, he added, “it’s too early to tell what the future looks like [with the CFPB probe]. We’re happy to engage.”

Still, Affirm pays close attention to user growth, Levchin pointed out, because “the pricing power of a network is directly proportional to the number of users. That’s the reason we are so consumer-focused.” That focus, he said, allows Affirm to deliver business to merchants, which are expected “to pay for that [network] appropriately.”

Despite the upbeat news regarding user growth, Wall Street punished the company late Thursday for missing expectations for loss per share and for a lower-than-expected projection for third-quarter revenue. Affirm’s stock plunged 21% for the day to close at $58.68. For the quarter, Affirm recorded revenue of $361 million, up 77% year-over-year and a 34% leap from the September quarter–and also above analysts’ consensus estimate of $332.5 million. But its third-quarter projection of $325 million to $335 million fell short of the consensus projection of $334.8 million.