In light of the economic downturn Buy now and Pay later company Affirm announced that it would be reducing its workforce by 19% or around 500 employees. It is also closing its crypto division.
This Leaves The Company with Around 2500 Employees.
In a statement in writing the CEO and founder Max Levchin said that he is taking “full accountability in this decision and the events that led to the decision.” It did not elaborate on which departments are affected by the decision.
Going forward, Levchin said, the company will “refocus” on its core activities and speed up the growth of its headcount “behind the rate in terms of revenues.”
He continued: “Our goals remain very ambitious: Maintain a firm control of risk, increase both revenue and volume, and work with our customers to increase repeat use offline and online. In the future, we’ll start new initiatives with more discipline, and only approve those with a high level of conviction, and long-term investments.”
In relation to its cryptocurrency offering, Levchin wrote in a letter to shareholders that Affirm will “sunset” the unit since the company put off projects with “less certain revenue timeframes” in order to “align the operating costs with revenue.”
Affirm has also announced its results for the second quarter of the fiscal year 2023. GMV (gross merchandise volume) of $5.7 billion was an all-time record but did not meet the expectations that Affirm had announced in November.
Both earnings and revenue fell below analyst estimates. Although revenue grew by 11% over the past year up to $450 million this was less than the $415 million forecast by analysts. In addition, the profit per share of $1.10 was more than the analysts’ estimates of losing one cent per share.
The Affirm stock fell dramatically today due to all the news, closing around 7% lower at $16.02 after which it fell to another 17.1 percent up to $13.28 in the hours following.
When the economy was growing and the buy now, pay later space was in a blaze. As inflation and rates of interest have increased, those in the market have had to deal with a rise in defaults and less discretionary spending.
According to New York Times, author James Ledbetter recently wrote recently “The sector is now in an existential crisis since profits aren’t forthcoming and valuations fall while competition rises and regulators pose tough questions about the lending practices that underlie B.N.P.L.”
In September of last year in September, in September, the U.S. Consumer Financial Protection Bureau (CFPB) released an advisory note that suggested that businesses such as Klarna, Affirm, and Afterpay which let customers purchase products or services through installments, should be subject to more rigorous supervision.
