Referring to the economic turbulence, the giant Affirm announced that it will reduce its staff by 19%, or around 500 employees, and will close 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 those who led it." The company did not specify which departments would be affected by the measure.
Going forward, Levchin said, the company will "refocus" on its core businesses and pace its workforce growth "behind that of revenue."
He added: “Our goals remain very ambitious: maintain firm control of risk, grow both volume and revenue, and engage our consumers to continue increasing use repeated, both online and offline. Going forward, we will launch new initiatives with more discipline, greenlighting only long-term, high-conviction bets.”
Regarding his cryptocurrency offering, Levchin wrote in a letter to shareholders that Affirm would "terminate" the unit as the company also delayed projects with "less certain revenue timelines" while working to "align operating expenses with revenue."
Affirm also published today its second quarter results for fiscal year 2023. The GMV (gross merchandise volume) of $5.7 billion set a new record, but still fell short of the outlook that Affirm itself had provided in November.
Both revenue and profit fell below analyst estimates. While revenue was up 11% year-over-year, to $400 million, that was less than the $415 million anticipated by analysts. Meanwhile, a loss per share of $1,10 beat analysts' expectations for a loss of 98 cents per share.
Affirm's actions were down sharply All over the news today: Closed down nearly 7% at $16.02 and then fell 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 risen, players in the space have fought with higher defaults and fewer discretionary spending.
As New York Times author James Ledbetter recently said wrote: “The industry now faces an existential crisis, as earnings remain elusive, valuations plummet, competition increases and regulators ask tough questions about the lending practices behind BNPL”
In fact, last September, the US 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 at deadlines, should be subject to stricter supervision.
