What happened

Shares of the buy-now, pay-later (BNPL) company Affirm (AFRM -9.51%) fell nearly 13% in August, according to data provided by S&P Global Market Intelligence.

The reason for the decline largely had to do with the company's earnings report during the month but also as market sentiment turned bearish.

So what

Affirm reported a net loss of $0.65 per diluted share on total revenue of $364.1 million for 2022's fourth fiscal quarter, ending June 30. Earnings missed analyst estimates for the quarter, while revenue beat.

In the quarter, Affirm delivered gross merchandise volume (GMV) of $4.4 billion on its platform, up from $2.5 billion for the same time period in the fiscal year 2021. Total GMV for the fiscal year 2022 came in at $15.5 billion, up from $8.3 billion in the fiscal year 2021.

In an earnings statement, Affirm's CEO Max Levchin said:

Affirm delivered strong performance in the fourth quarter ... We grew GMV by 77% and set a new record for consumer reengagement with 85% of transactions coming from repeat users, all while prudently managing risk. We remain focused on scaling our network, maintaining attractive unit economics, capturing greater share, and helping our partners grow.

Affirm, did, however, see credit quality start to deteriorate. Delinquencies have continued to rise in recent months and charge-offs, which are debts unlikely to be collected and a good indicator of actual losses, also rose roughly 38% from the prior quarter.

Affirm is guiding for GMV in the current quarter to come in between $4.2 billion and $4.4 billion, revenue between $345 million and $365 million, and an adjusted operating margin of -12% and -10%. Affirm is also guiding for GMV to come in between $20.5 billion and $22 billion for the fiscal year 2023. Revenue is expected to come in between $1.625 billion and $1.725 billion, and the adjusted operating margin is projected to be between -6.5% and -4.5%.

Now what

While the quarter wasn't necessarily bad, I think investors were concerned about the fintech company's guidance.

Affirm's current-quarter guidance suggests less GMV and less revenue than the company just reported in 2022's Q4. The fiscal year 2023 guidance suggests slower year-over-year GMV growth than Affirm generated in the fiscal year 2022.

The economic outlook is also quite uncertain, so if the U.S. economy enters some kind of more severe recession, then loan losses could increase and consumer spending could plunge, both factors that would hurt the company. I'm staying away from the stock right now.