BNPL Company Affirm Looks for Acquisition Targets to Pursue Growth

Buy now-pay later company Affirm is on the lookout for acquisitions now that prices for targets have declined amid market turmoil.

Affirm CEO Max Levchin told analysts on a call to discuss the company's fiscal fourth-quarter results last Thursday that the big BNPL player is pursuing growth that could include buying up other players struggling in the current economic environment. One U.S. rival, Sezzle, recently dropped a plan to be acquired by the Australian BNPL company Zip.

"If we can find something in the space, or near the space, that is better off owned by us and operated by us, I think we will take it very seriously now that the prices have normalized and we do have a clear road to profitability and have quite a significant cash position," Levchin said during the call.

While he noted that no purchase is imminent, he explained that other competitors in the space may not be as adept as Affirm at the credit underwriting aspect of the business and may benefit from his company's expertise in that area and from its scale.

"We're looking for businesses that have amazing entrepreneurs, amazing ideas, amazing first signs of traction, that would really benefit from being put on a platform that has exceptional underwriting, exceptional capital markets reach, (and) at this point, a very, very large user base, very large merchant base," Levchin said. "So there's, we think, lots of opportunity. We’ll be very judicious."

The company's fiscal fourth-quarter, ending June 30, and full-year results underscored its growth, with revenue jumping 39% to $364 million and 55% to $1.35 billion, respectively, according to its earnings press release issued last Thursday. Nonetheless, like so many BNPL providers, Affirm's losses continue to widen, with the company posting a $186.4 million loss for the fourth quarter, compared to $123.4 million for the year-ago period, and a $707.4 million loss for the year, compared to $441 million for the prior year.

The company had $1.26 billion in cash, and cash equivalents, as of the end of the quarter, down from $1.47 billion as of the end of the period last year, according to the release.