Q:What are Affirm's thoughts on the funding market and their ability to execute well despite challenges?
A:Affirm is proud of their ability to execute in the ABS market and capital markets broadly. They attribute their success to expanding relationships with blue-chip forward flow buyers, scaling their ABS program, and the performance of their assets. They also credit their team for effectively communicating the value of their products to investors.
Q:Can you elaborate on Affirm's PSP strategy and its importance?
A:PSP (Payment Service Provider) relationships are crucial for Affirm as they provide multiple entry points for merchants and consumers. These relationships help with faster integrations and allow Affirm to scale more efficiently. While PSPs are important for integration, Affirm remains highly involved in sales and configuration to ensure product performance.
Q:Why is Affirm's full-year '26 guide for RLTC unchanged despite a strong quarter?
A:Affirm focuses on maintaining 4% as an upper bound for revenue less transaction cost take rates. While they have been running slightly above 4%, their long-term target remains 3% to 4%. They aim to balance growth and profitability, and quarterly fluctuations are influenced by capital markets transactions and other factors.
Q:What is Affirm's perspective on the consumer spending environment and delinquency trends?
A:Affirm observes that their consumers are borrowing, repaying, and shopping healthily. They attribute this to their robust underwriting practices. They also noted that even during events like government shutdowns, delinquencies among affected groups remained stable, indicating overall consumer health.
Q:What are the economics of PSPs compared to direct merchant integrations, and how do PSPs fit into international expansion?
A:PSP agreements are typically bespoke and vary significantly. PSPs help Affirm access smaller merchants efficiently, which is key for international expansion. Shopify, for example, acts as a significant distribution partner, providing benefits similar to PSPs.
Q:What drives the growth of Affirm card members, and how does cash flow underwriting impact approvals?
A:The growth of Affirm card members is driven by internal marketing and deliberate expansion into various user segments. Cash flow underwriting helps younger consumers and those with limited credit profiles, enabling Affirm to approve more transactions and grow volume per card.
Q:Can you provide details on the Amazon agreement extension?
A:The Amazon agreement has been extended for five years, reflecting a long-term commitment from both companies. Affirm is focused on continuing to serve Amazon consumers effectively.
Q:Why is the core 0% longer-term merchant fee rate trending lower?
A:The decline is due to an adjustment in a single merchant program with a high proportion of 0% long-dated loans. This adjustment was specific to a significant merchant.
Q:How does Affirm view the mix of GMV growth from direct point-of-sale integrations and direct-to-consumer channels?
A:Affirm values all channels equally and aims to be available everywhere. They are investing in direct-to-consumer products like the Affirm card and promotional services to engage consumers directly and drive growth.
Q:What are Affirm's plans for 0% APR promotions, and what were the learnings from the recent 0% Days event?
A:Affirm plans to continue leaning heavily into 0% APR promotions, which attract higher credit quality consumers. The recent 0% Days event demonstrated Affirm's ability to drive targeted promotions for merchants and engage consumers effectively. They plan to repeat such events in the future.
Q:What is the trend in Affirm's average order value (AOV), and what does it indicate about consumer spending?
A:Affirm's AOV has slightly decreased over the last few years, reflecting growth in lower AOV categories like apparel and beauty. However, the increase in transaction frequency indicates that Affirm is capturing a larger share of consumer spending.
Q:What is driving Affirm's improved operating margins, and what are the expectations for expenses?
A:Improved operating margins are driven by growth in revenue less transaction cost dollars, with incremental dollars flowing to operating income. Affirm does not provide specific guidance on individual expense lines but focuses on overall margin targets.
Q:What is the breakdown of GMV growth by product type, and where is growth strongest?
A:Affirm's fastest-growing loan product is 0% monthly installment loans, driven by promotional efforts and consumer demand.
Q:Is Affirm considering entering the earned wage access (EWA) market?
A:While Affirm has not announced plans to enter the EWA market, they remain open to building new financial products that align with their mission of improving lives through honest financial products.
Q:What trends are observed in Affirm card usage, and how does it compare to traditional bank cards?
A:Affirm is capturing a growing share of discretionary spending through its card, with higher starting points for new cohorts. They aim to make the card the preferred way for consumers to interact with Affirm's products.
Q:What is the potential for growth in partnerships with Amazon and Shopify?
A:Affirm sees significant growth potential in both partnerships. These relationships require ongoing optimization and investment to maximize their impact.
Q:How does Affirm adapt its underwriting for new verticals like services?
A:Affirm has a robust process for building and modifying underwriting models to incorporate new data and adapt to different verticals. This capability allows them to enter new markets confidently.
Q:What is the profile of consumers using 0% APR products, and what are the goals for these promotions?
A:Consumers using 0% APR products tend to have higher credit quality. Affirm aims to use these promotions to drive targeted merchant sales and engage consumers effectively.
Q:When does Affirm expect to return to its targeted RLTC range of 3% to 4%?
A:Affirm maintains its 4% target for fiscal '26 and focuses on long-term trends rather than quarterly fluctuations. Changes in funding mix and other factors can impact RLTC in the short term.
Q:What is the competitive environment for Affirm, and how are they positioned in the capital markets?
A:Affirm focuses on its own execution and product development. They have seen strong engagement in the ABS market, benefiting from a flight to quality among investors.
Q:Review of Unclear Management Responses
A:Management avoided providing specific details on the economics of PSP agreements, the breakdown of GMV growth by product type, and the exact share of cart for partnerships with Amazon and Shopify. They also did not disclose specific expense expectations for G&A, sales and marketing, and other categories.
