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,
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“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 record, what we’ve done is we’ve rolled back six months of engineering hiring,” Levchin said on Affirm’s earnings call, according to a transcript provided by AlphaSense/Sentieo.
Shares were off 19% in extended trading Wednesday.
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The company generated a fiscal second-quarter net loss of $315 million, or $1.10 cents a share, compared with $158 million, or 57 cents a share, in the year-prior quarter. Analysts tracked by FactSet were expecting a 95-cent loss per share on a GAAP basis.
Affirm’s revenue rose to $400 million from $361 million a year ago, while analysts were modeling $416 million.
“A key operational misstep contributing to these results is that we began increasing prices for our merchants and consumers later in the year than we should have, and this process has taken us longer than we anticipated,” Levchin said in the shareholder letter. “This had a negative impact on both our ability to approve more consumers and improve our margin.”
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