Affirm Earnings Put Consumer Credit, Private Credit in Focus

Affirm’s latest quarter earnings call landed at a revealing moment for consumer finance. The company plays at the intersection of two of the most important and most uncertain areas of the economy: consumer credit and private credit. Its buy now, pay later (BNPL) model depends on consumers continuing to spend and repay. Its growth depends on the investors and funding partners willing to buy or finance those loans. That made Affirm’s earnings call less about the headline numbers and more about whether stress is showing up on either side.

The first analyst question went directly to both concerns. Asked whether delinquency trends or private credit unease were creating issues, CEO Max Levchin separated Affirm’s borrowers from the broader consumer market.

“No, we are not,” Levchin said. “At this point, I think we’ve earned the right to say the Affirm consumer — and so these are not comments on the universe or even North America or United States consumer, but people that we choose to underwrite and lend to — we are not seeing deterioration. We’re not seeing any disturbances in the force,” he added, saying that had “naturally translated to a very stable and pleasant funding environment.”

On the consumer side, the quarter suggested continuing demand rather than a pullback. Affirm’s gross merchandise volume rose 35% year over year to $11.6 billion. Transactions rose 45%, and 96% of transactions came from repeat customers. Delinquencies also stayed contained: U.S. monthly installment loans, excluding Pay in X, had a 30-plus-day delinquency rate of 2.8% at March 31, compared with 2.7% at Dec. 31; the 60-plus-day rate held at 1.6%, and the 90-plus-day rate improved to 0.7% from 0.8%.

Asked later about the strength of GMV, Levchin pushed back on the idea that the quarter had been helped by something unusual or unsustainable.

“No, there’s nothing unnatural about this one,” he said. “We move up and down with the economy. We’ve hit product-market fit quite some time ago. We’re still tiny relative to the massive payment volume in the U.S. alone, on eCommerce alone. We’re really, really small. Taking share, it’s not that hard yet.”

For investors trying to read the consumer, that was the core message: Affirm says its customers are still borrowing, buying and repaying.

The private credit question is different, but just as important. In simple terms, Affirm needs funding because every loan approved at checkout has to be paid for before the consumer pays it back. Affirm can hold loans itself, finance them through warehouse lines, package them into securitizations, or sell loans through forward-flow agreements to large investors. If investors pull back, growth can become more expensive. If demand is strong, Affirm can grow with less of its own capital tied up in loans.

Levchin framed the funding side as an advantage.

“Capital markets are now very familiar with our product,” he said. “They understand exactly what we manufacture. They understand that we are entirely non-compromising in our view of what is and isn’t fit to sell into forward flow or securitizations. We have a lot of trust with our counterparties, and we tend to take that very seriously.”

Affirm executives also tried to answer concerns about weak spots in private credit. COO Michael Linford said the funding market was “exceptionally constructive,” with “sustained and reducing spreads” and forward-flow partners “still clamoring for a bigger allocation” of Affirm’s portfolio.

He also said Affirm’s forward-flow buyers are “heavily, heavily weighted away” from liquid vehicles subject to volatility, and include a joint venture with Sixth Street, pension funds and large insurance complexes.

The financials backed up that point. Affirm reported $28.2 billion of funding capacity at quarter end, while its total platform portfolio stood at $18.4 billion, equal to 65% of that capacity.

The top-line numbers were strong. Revenue rose 33% year over year to $1.04 billion. Revenue less transaction costs rose 41% to $498 million. Affirm posted GAAP operating income of $88 million, compared with an $8 million operating loss a year earlier, and adjusted operating income of $281 million. Active consumers rose 22% to 26.8 million, while transactions per active consumer increased 20% to 6.7. Affirm Card remained a standout, with $2.13 billion in GMV and 4.4 million active consumers.