Affirm Set to Unveil Q4 Earnings: Anticipated Outlook 

Affirm Stock

Affirm Holdings, Inc. (NASDAQ:AFRM) is poised to disclose its financial results for the fourth quarter of fiscal 2023 on August 24, following the conclusion of trading hours.

Insights from Estimates 

The consensus estimate for the fourth quarter of fiscal 2023 indicates an expected loss per share of 86 cents, reflecting a 32.3% decline compared to the loss of 65 cents in the previous year. This projection has remained steady over the past week. Forecasts for fourth-quarter fiscal 2023 revenues stand at $404.2 million, indicating an 11% growth compared to the figures reported in the same period last year. 

Affirm’s performance in terms of earnings has shown a mixed trend, surpassing expectations in one out of the last four quarters while falling short thrice. On average, the negative surprise has been around 8.5%, as demonstrated in the chart below. Before delving into the detailed expectations for the upcoming quarter, let’s review Affirm’s performance in the preceding quarter. 

Retrospective on Q3 Earnings 

In the most recent quarter, this prominent payment network recorded an adjusted loss per share of 69 cents. This figure was 24.2% narrower than the consensus estimate provided by Zacks, attributable to enhanced virtual card network revenues and interest income. However, this positive outcome was mitigated by lower servicing and merchant network revenues, alongside rising operating expenses. Now, let’s explore the developments leading up to the earnings announcement for the fourth quarter of fiscal 2023. 

Key Aspects for Q4 

For the quarter under review, the company anticipates a weighted average of 300 million outstanding shares. Spending related to travel and entertainment is expected to remain resilient, thereby potentially bolstering the presence of active merchants and consumers. The estimated merchant network revenues are pegged at $130.1 million, reflecting a 10.1% rise from the previous year. 

Additionally, the consensus projection for servicing income stands at $22.5 million, indicating a year-over-year increase of 4.4%. It is anticipated that revenues from virtual card networks will demonstrate growth. The consensus estimate for virtual card network revenues is $32.6 million, signaling a 3.3% increase compared to the previous year. 

Affirm’s projections for fourth-quarter fiscal 2023 Gross Merchandise Volume (GMV) range between $5.20 billion and $5.35 billion, showcasing an upswing from the $4.4 billion reported a year ago. The consensus estimate for interest income in the fiscal fourth quarter is $186.6 million, reflecting a substantial 35.6% surge from the same period in the previous year, primarily due to the prevailing high-interest rate environment. These factors are likely to pave the way for year-over-year revenue growth in the fiscal fourth quarter. However, these positives may be counterbalanced by diminished gains from the sale of loans and escalated operating expenses. 

The consensus estimate for gains from loan sales indicates a 41.5% decline year-over-year, amounting to $32.4 million. The company expects transaction costs to range between $245 million and $255 million, which is notably higher than the $179.8 million reported in the previous year. Moreover, the quarter’s operating costs are expected to rise due to increased technology and data analytics expenses, as well as funding costs. Elevated processing and servicing expenses, driven by growing volumes, are likely to contribute to higher operating costs, potentially impacting profits and casting uncertainty on the likelihood of an earnings beat. 

Earnings Projections and Earnings ESP

Our reliable model does not definitively predict an earnings beat for Affirm this time around. 

The current Earnings ESP for the company stands at -18.15%. This is due to the Most Accurate Estimate, which is currently projected at a loss of $1.02 per share, wider than the Zacks Consensus Estimate of a loss of 86 cents. 

Featured Image: Megapixl © Timonschneider

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