AFRM - Earnings call 2 2021 | Affirm Holdings, Inc.

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Operator

Good afternoon, ladies and gentlemen. Thank you for standing by. Welcome to the Affirm Holdings Fiscal Second Quarter 2021 Earnings Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded. I'd now like to turn the call over to Rob O'Hare, Senior Vice President of Finance, to begin.

Robert O'Hare

Thanks, operator.

would forward-looking remind statements. I call that begin, contain may we like everyone to today's Before filings which These risks Relations XX, those our XXXX. and statements website, uncertainties, the forward-looking are filed including set subject including our forth on our available on are to prospectus numerous with Investor SEC, January in Actual today. differ from forward-looking any materially may results statements make we required assume update as statements today, and as not speak them, does to intent only of law. any forward-looking or These company obligation by except the

In to which addition, can on our include measures website. most may is available financial non-GAAP financial be considered the measures. should release, GAAP today's call a be GAAP These found as and for to Relations comparable measures a Investor substitute in Reconciliation supplement today's measures. directly press not earnings

Founder are today's and Linford, Affirm's call Hosting Financial Levchin, Michael Max Chief Officer; Officer. Chief Executive and Affirm's

to With call the that, begin. over to like to I'd Max turn

Max Levchin

first for Thanks, as all Rob. company. Thank a you for joining earnings public call our us

We in to revenue increase merchants growth product billion continue are year-over-year our quarter, consumers which with volume year-over-year XX% XX% results included the as and a alike. gross a pleased record of merchandise offerings to $X.X the and resonate quarterly for with

I'd our In quarter by from earnings merchant strategic overview minutes, on our driving to base few growth provide of performance grew the will the by in tailwinds is prior active quarter, second industry also XX% call, some like the second details more XX% we a consumers and our our time year. Michael initiatives. this first our a Affirm, but spend providing brief since and

from tired to bottom consumers ago financial decade a lives. that the late deferred penalties honest almost knew build their and promotional lines. them merchants their like were constant avoiding We needed can brands interest credit and products gimmicks, which dilute knew fees founded could customers with we the cards. improve retain was mission payment that and of Affirm solutions attract that and And new while that help discounts

kind first own and and to conversion. building consumers want sales need on anywhere in finances, last months, success transactions consumers million consumers new charged past Since We've their in the wins X.X the deferred of new over we've we partners align In adding and also billion focused fee years, the almost its accelerating a the merger Affirm merchants merchants. the our win. pay payment take our $X.XX U.S. of in XX network, when for and things late to drive beginning, and increasing control success growth interest. enabled enabling empowered $XX.X with the time, we've helped both them We've of never by they X.X customers, over or the to of a

the led relationships has approach Our of sides on ecosystem. to both commerce trusted

Our enhance role has play advance of us we merchants. payment consumers both platform enabled at the to our and commerce mission center and for the

feel and about I their into go words. we're give you consumers sense for wanted so we I a to what Affirm where far built the Before of headed, how have details in own

not to it mom, tickets "To us, able to their For graduations, would kids, was her who get military the so to example, have use." through reasonable be of told to a able graduation able Affirm and such the make get. and otherwise not I attend I to make are tickets app normally nice. payments Payments easy would is expensive been plane on that It's been

that empower a for have single our these fees about and honest company." mission I company validate no satisfied with consumer, couldn't great day. on of Another completely to testimonials to many enough being which founding as thank such on be deliver late timing working you more godsend. We a payments is mission every and received "For such a Affirm us

of commerce merchant Affirm solutions: technology platform solution and Our payment consists our a app. a point-of-sale consumers, for core solution X

control merchant choose pay. to they solution selecting from terms biweekly weeks information at payment as pieces a Payment as point-of-sale months. and consumers Our checkout. monthly and X and to gives how as payment flexibility of schedules wish little range as consumers option, then After options Affirm to include and enter XX up as X long

and merchants the from small affordability provide increase customers' also consumers and marketing data, sales. solutions efficiently with only spend. used technology drive merchant valuable, target greater data. we data incremental to These consumer on and tailor a efficiently high-quality Our retailers, and largest prepayment help return insights data that power, they behavior reach their elsewhere. can do promotions purchasing world's item-level customers, This merchants businesses we purchase them data, new to includes enable be Not more repeat more cannot get achieve address to

our And third, and shopping merchants their also relevant offers discover get to the consumers Affirm can is spending and app knows marketplace where tailored habits. exclusive

love customer Affirm open as that from great they a valued Merchants highly a many account. the million can twice app same savings transaction also app, their X.X a be in used Affirm great virtual the period being saw volume. approximately overall last our The for manage merchants. through acquisition. of our and anywhere consumers December we it's originated on also Properties, place consumers, transactions as for In be U.S., can the in tool interface offers it almost their a by simple vehicle approximately that payments X/X placement outreach targeted addition card making to high-yield and quarter, year where can a In to an

financial powering create these several prefer massive institutions more Affirm. than Consumers, to opportunity durable Z, XXX credit million trillion power. for generations lieu $X.X consumers spending current in in and represented payment solutions with payment increasingly our innovative younger combining and U.S. flexible in XXXX, and look a traditional digital options. Gen particularly In network, millennials estimated of and have over lost our trust we are As to tailwinds there strong and business expand more

commerce of element every online. Additionally, is moving

by customer and retail significant convert X% Even biggest The boomed, cost increasing with fueling as are facing total retail a acquire the e-commerce the XX.X%. the by Affirm. that in merchants, XXXX, to declined in challenges sale fact to X for change of demand are coupled behavior, consumer worldwide sales

leverage and the can portion core competitive we we've an set By out ecosystem we even strengths to larger reinvent. continuing our capture advantages, of believe to

of innovate Our personalize the consumer proprietary managing experiences, purchase And risk. to data technology in ground have while maximized so we and transactions new is don't consumers scale data our of data, This up the systems. to quickly efficiently custom-built merchants, item-level finely to respond we priced all from products. legacy data and the can and changes the we've behavior constraints and on world, data, repeat value benefit repayment our leveraging more means

to set high online Further, all and our flexible partner us and the from low transactions to and payment our ability and depth breadth apart. merchant AOV, terms network AOV off-line, of service our

calendar financial proud tech Promoter we scores satisfaction. consumer XXXX, institutions. to of that with In and brands a were a see the have of than significantly result, most earned XX% some a strong purchases Score par is repeat of the As traditional XX, admired higher Net And by score of year made approximately users. we're Affirm on

industry of We merchants accommodate regardless customer can partner AOV profile. size, with and or

new over our base During merchant significant merchants, with traction affiliate the merchants. to paying quarter, we XXX growing generated

recently marquee Ford to Airlines largest We the Williams-Sonoma, an to Our International, some brands Neiman Marcus merchant of and wins agreement Olivia, to expect range the and Tom with from and world. signed in Alice range American be Most in of we that in January. the soon. broad new appeal. aa.com wide signed the American available app agreement This on our merchant X-year brands Airlines about excited with Walmart demonstrates

in the partnerships and to that added millions We thousands quarter our access merchants. strategic also hundreds more of new consumers increase of

the businesses as many well leader ticketing Inntopia, as recently For platform with leading positioning a we omnichannel launched payment the world's a in example, space. resort global Affirm Adyen, ski as and for of

Shopify, our first to Additionally, last make announced on we progress summer. continue with partnership

beta are merchants and have XXX our results with currently been in pleased with so very We far. nearly

allows buy-now-pay-later platform. to integration user The commerce platforms to consumers Our service partnership us API a enables to a external is deeper as and that which enabled any are for point-of-sale offer with through with partner Shopify Affirm deliver their customized on to products, merchants the experience partner. platforms our

shopping a shopping Affirm merchant our financing platforms augment marketplace cash-back large, our Shopify, via consumer which in networks customers their excited others. platform, like carts. partners and virtual strong launch offer and December, these allows as to partner through Rakuten us API, with for Rakuten, the to many debuted Similarly, consumer leading We're high-growth

Canada's ago, our a strategic leading buy-now-pay-later we PayBright, Just few of one providers. weeks acquisition, purchasing first made

our merchant so merchants our and scale We across enable Key and well pleased far growth Bay, department to driving exceeding relationships pay-monthly growth North We're Canada's Canada very the in Samsung, with in first-mover and Hudson's our GMV and expand both results performance in-store, split-pay offerings. us both to Canada complementary retailer. on expect in America. quarter-to-date store advantage reach acquisition with with PayBright's include expectations as as largest online this

we new, portion trillion billion United the estimated believe Furthermore, can we $X.X bring merchants ahead, trillion of card but States. and of to in believe in and by not merchants e-commerce address the a off-line continuing at only high-quality they address processed look acquisition. $XXX the on spent, $X the customer large spend can of we As loyal customers, we we the U.S., spent online

is commerce making ramping for principle purchases. solutions next of and product, split-pay considered We Shopify how of up with accelerate growth partnership higher our marketing. demonstrated our key in by purchases to our strategic expand investments frequency into investing have our phase successfully can enable larger, A more in and

holiday The other featured campaign Affirm personalities. with Keke credit brand Whitney made Ashley cards. Live, a Park Cummings, focused our traditional foray amplified Late Jimmy marketing by was benefits quarter second also into the that first The Palmer campaign Show over Corden, Kimmel Minhaj, James in We and with and the prominent Hasan of on

XX-point position XXX volume increase actions During positive, was these transaction efforts merchants, advertising. these response we have a quarter-over-quarter. than and holiday us has to and on awareness very to brand increased merchants' well been to in with our engagement more marketing platform. We the marketing prominently leading increase Affirm and in combined both believe seen season, The featured consumers

from of significant product. business to see while our that for are to accounts see see product, to drive benefited and permanent our example. to right new isn't also growth new is Take how consumers engagement focused large savings the products future savings consumers savings use We to it customer with existing and We've savings product define continue commerce an great of develop can halo a opportunity growth. marketing non-lending base And account our interesting to our communications relationship with now, seen products. a their their other and investments has our start where making that on effect to plan Affirm part our deepen

point of in period. than our suited merchant which our to across our In transaction AOV, high ample there's is holiday while And XX% use we area, opportunity approximately installment pay purchase eventually, we've sale, platforms start frequency, have the all: of further addition, our split-pay loan AOV product, showed core segment introduced lower addressing expanded split higher higher believe the app. and rate daily November-December product The the more over and purchases, even AOV into our category to expand spend. frequent the cases, we lower got largest in repeat

on all ubiquity and of establish and further their innovative network our expect expand to new the develop platform. help revenue to grow breadth platform of our of and this base, our merchants our our We merchant ability more and solutions to consumer our

merchants. of commerce. all grateful thank a be to consumers we're for day, to over for X mission put incredible finances, proud our so years. aimed want Each back of to strive I last Affirm-ers I'm control revenue their to of powerful you dedication our the their for so transforming Finally, and you accelerator in how

With the to to quarter that, over our I'd to results. call discuss financial second now like turn Michael

Michael Linford

and Max, Thanks, everyone. good afternoon,

into get second first about capital fiscal I funding our and XXXX model models. quarter want our results, to we Before talk business

has on who least consumer, the refund; our in conducted across active We of platform months. or the period, previous on all platform a the in a on KPIs, average the X the the amount months; engages of GMV; transaction of our merchant transactions merchandise XX consumer per gross consumers, measure transactions net defined transactions in our number number consumer dollar as XX including and active platform in value, total success that of at and active consumer previous an

We've As proven model is ways. interest both our incentives Max can outcomes with generate for Affirm. merchants. consumers several the aligned business merchants our has aligning our consumers, and in great revenue and mentioned, of in that We different result

refer each Affirm this discount on to platform. processed charged rate, fee transaction We MDR. First, a merchant through partners or the as are the merchant

we purchased earned We loans on also our generate revenue balance bank through our partners. consumer originating from sheet hold interest on

portion our loans revenue use roughly recent on our by quarters, virtual consumer. GMV, borne purchases comes the interchange rate XX% carried when an In consumers fees of card by for smaller earned of or our A interest offline. from

X% While virtual use U.S. our it periods, represents product allows roughly card. contributed consumers credit of that has at revenue capability a accepts total any card in products Affirm's an revenue to that important recent merchant

sell of of Additionally, in we the on third-party our a investors these a originating and loans gain portion loss loans. platform recognize the to sale or

fee loan have third-party of behalf providing purchased for on Lastly, from we us. investors services earn loans that a consumer

costs X% support that a loss-on-loan expected of in allocated we for our funding made purchase a securitization; loans, up which of from above personnel-related originating which the partner team expense, the and of are price loan's our fees, rates); overhead. borrowings future losses; and and income at costs and of incur a other with subset processing connection losses, fees amounts incurred processing and primarily care transaction amortization of: purchased customer consists consists funding charged all to our we payment customer salaries our costs, with period interest Our on credit of servicing commitment; and on and credit expense facilities the during collection which incurred consolidated loans the is loss bank and occurs for costs which mainly expenses, third-party allowance APR lastly, below-market and (this consists value provision with market maintain an against interest loans of fair

to warehouse fund channels: our in facilities investors; and securitization retained where into loans credit We offerings. third-party forward against loans balance sheet; where through X we relationships flow primary business we structured bundled debt borrow vehicles, consumer our where we loans sell

we remains commercial undrawn credit agreement XXXX, further first revolving to entered for the an date. our facility currently We facility our though syndicated banks January debt no credit to sheet. corporate liquidity, balance revolving enhance our other corporate drawn In into have unsecured with the on

resilient, the we Our securitization funding income. We we $X additional predictable X large into as demonstrated and billion pandemic. model and the in programs XXXX. retain this ecosystem assets to is built existing funding, committed durable to our able which generate introduced servicing able our in and produce, but year were were added because part of capital do of interest to high-quality be Not over only calendar during we

hold cycles. our not in to in sheet balance short the we and duration Additionally, assets are thus need do withstand credit multiple

the Our highlighted the risk our assets proprietary capabilities our management COVID-XX approach. performance and underwriting of during and quality of

were As of XX% to compared our portfolio and our December percentage rates, deferral excluding and program, XX% as December XX, a lower XX, impact XXXX. loan XXXX, to of XX, of our as approximately as June payment the compared XXXX, lower delinquency

as approximately December In XX, portfolio to X-month program, of XXXX, as XX, addition, payment XX% and XX% as as XXXX, our of the impact lower of trailing lower deferral XXXX. loan December were compared a to compared percentage our and XX, gross charge-off, June excluding

of scale, our have to performance our loan been strong result a requirement for platform decreasing capital the expand able assets, and while consistent business. our equity loan of we demand at As investor our

as While of we the equity our XXXX. platform XXXX, December XX% the December from required XX, to portfolio as year to added billion loan in decreased $X.X to portfolio total X% capital of XXXX, service calendar XX, relative

the of the XXXX. to XX% X-month XX% GMV period Turning the was quarter to $X.X consumers ending billion. primarily quarter fiscal now grew merchants which to approximately growth X,XXX by increase the to the approximately year-on-year in year-on-year results increased driven and approximately from last GMV million. $X.X our in active organic XX, our end time same second The active for at in expansion XX% year, active December X,XXX merchant base of

typically a composition assess mix color on we different GMV the across more dimensions. Providing a little of few our GMV,

GMV. First, interest-bearing X% versus

XX% GMV for For the ended loans APR compared XXXX. quarter months accounted XX, XX, to ended our December total of XX% XXXX, for the December X X%

transactions. portion our assess non-Affirm-initiated the network. of Affirm's our track consumer of the originated We versus owned properties transactions strength Affirm to on

XXXX, of transactions on quarter December ended For XX, XX% same our the property fiscal in last occurred to the Affirm's X year. the XX% compared months

believe with We any are business of provides tied partners the our sector not offering diversification. a Industry the merchant as unique our we to diversity one competitive of economy.

ended months no XX, of X accounted one XXXX, the December more segment During XX% than volume. for our

home Over of the Mirror West lifestyle, Peloton, Purple, the largest Wayfair pandemic Rad and were and XX merchants and such includes Power outdoors, tailwinds. Both months, includes and Bikes; segments which Elm. these such merchants as last fastest-growing sporting which segments goods and had and as

XX which such to last Priceline fell include volume XX% ticketing, Conversely, only Delta from calendar our of year-on-year as Notable in year XX% segment brands in over merchants space the marquee year Expedia, this and was Vacations. and calendar in X% months small XXXX. travel declined our XXXX and

The revenue strong to basis GMV compared an in year. revenue period same XX revenue same XX%, last a costs to or total increase last than Total of in Total points transaction the increased increase was of as XX% the GMV $XXX.X growth drove percentage million of year-on-year, annual XX% the to XX% year. an $XX.X million. growth period less significantly compared approximately

offset from a by in our a loans a rate. as purchase interest last costs, in a lower a to by balances, bank a debt XX% commitment loans XX% to X% period compared a our increase to increase approximately average the basis partners proportion in increase same partially primarily for our of due corresponding increase average average and in investment, XX% the increase originating the were XX% funding market purchased of during and XXX held in increase significantly due year. costs and period percentage was points X.X%, decrease The significant to loss GMV primarily Transaction loan driven of

and fiscal in a to only payment and activity in servicing an debts year balances XXXX, primarily and now in XX% increase credit losses securitization QX to processing credit by a decrease losses by credit during fiscal issued increases increase due will due for processing in debt and due provision funding offset loan partially also quality. collection and increase in XX% notes include in our third-party and an improved current increase trust fixed costs rate included volume. fees and Our an to servicing the These payments lower held expenses, servicing year; were

we loans required retain For credit in which for provision is for the we that all the our allowance change losses. determined estimates The for credit losses hold net are an occur sheet, to on and balance future generally period. charge-offs in the losses by

balances retained XXXX. continued of during During ended December improved as outlook decrease higher the held of credit credit offset on to a recorded by million was allowances the performance allowance period the X ended that XX, months and in loans improved existing stronger-than-expected similarly the in X XXXX, credit increase, outlook an quality provision expense of This for portfolio the a losses. and the resulting credit XX, in with loans credit decrease $XX.X months December a resulted investment for for

XX, decrease of to investment. of loans to the relative allowance the overall balance XX% for led in the $XX.X losses the improvement December million and decrease months provision credit or X the X The XXXX, held XX, December for months compared combination growth ended XXXX, in months to ending in the December despite X credit by XXXX, for XX, the credit ended losses the quality

was million less in quarter, second $XX.X transaction Total up XXX% cost year-on-year. the revenue

driven Total increase less year percentage was less As costs in revenue an approximately to our period was of a of to expense. compared total compared transaction of last allowance XXX release This credit as as percentage of cost revenues, year. due revenue XX% resulted portfolio, in same XX% performance points increase which a was period. strong the loan lower a basis losses X%, in prior credit GMV total to by for provision transaction the

offset and XX% increased underwriting personnel costs in increase an hosting costs. data year-on-year. due by analytics science as This infrastructure to was increase were partially data and primarily by data the to a an increases decrease These million as data in $XX and or in Technology costs. product engineering, well provider expense increase

expense with with marketing increased amortization $XX This expense year-on-year. million of associated and agreement executed with million $XX.X Sales noncash or in by Shopify, which XXX% the our of commercial due associated July was to was an increase asset XXXX. primarily

increase million public merchants' initial shopping brand holiday the in marketing and marketing, campaign, we there Furthermore, in activation offering. from over marketing by our Additionally, over consumer a professional resulted in was fees resulting meaningful XXX a of brand $X.X $XX.X and onetime which inclusion incurred and costs advertising holidays. our million driven marketing

grew organizations. $XX.X and increase General an expenses XX% operations, year-on-year. in as we of our increase finance, to million or legal, million primarily administrative costs personnel increased was and by This $X.X in due administrative headcount

increased to fees $X of professional $X.X our million Additionally, initial and the regulatory acquisition public of the our G&A PayBright. initial million acquisition, compliance during offering and included programs. PayBright support onetime offering by with period and the public associated expenses costs

prior Operating $XX.X in year loss as the in compared million was million the period. second $XX.X quarter to

loss our million and period. compared amortization, Excluding with costs net million compensation from last quarter, increased offering the PayBright, loss the period expenses, to public in depreciation $X.X Shopify the year. our year was and same In in the expenses stock-based $XX.X of to $XX.X operating associated second as acquisition $XX noncash adjusted million ago initial onetime and million

on common price of us on XX.X XXXX, end offering $X.X of IPO January XX, Class proceeds initial to an of share. before Subsequent offering $XX of expenses approximately we stock million closed were the to at the shares billion. public A The per our quarter, the a

this the not our current into revenue approximately fiscal from quarter This second GMV, in resulted period, date, which when significant captured third effects the change approach A funds reflected a couple capturing our based amount at check-out. of the shifting are The thinking on below. from fiscal a in $XX.X mind keep of is change quarter. of of about of our began fiscal Peloton things In guidance future of previous million in December, in quarters. transactions capture shipment delaying to

PayBright will the the be our impact include the quarter first financial results of to Additionally, acquisition. third

providing based are upon current following We and guidance year third fiscal our for our 'XX the fiscal quarter assumptions.

we third $XX March $XXX of million For expect to less to our of million, count adjusted million, of million transaction $XXX of $XXX revenue a million million, million XXXX, billion, costs GMV to operating quarter to $XX.X and XX, XXX million. revenue $XXX share billion $XX $X.X of to loss of fiscal transaction $XX.X $X.XX costs ending million

June XXX For a to of to $XXX our of revenue million we fiscal count billion, and XXXX, costs $X.XX of of to year of million, million $XXX $X.XX million XXXX, ending adjusted million to less to revenue XX, GMV billion expect transaction operating costs $XXX of $XXX million, $XXX $XXX share million. transaction $XXX million, $XXX million loss

Thank you call the again today. for joining

are open for please questions questions. happy line We may Operator, the any to you answer have. now

Operator

[Operator from Instructions] Stanley. comes Our Faucette Morgan question first with James

James Faucette

through between Wanted to you originating of finding Affirm and to of just what perspective are or moving can where consumer how your platform cross where ask merchants kind you benefits things already and there Max, versus have kind there's track? see Just some of on people engagement from trying behavior, in you're there what through the seeing terms on acceptance?

what color Michael, loan in performance, you improvements of those key some highlighted on And various the maybe think drivers Can metrics. bit you made -- some cetera, of a the as are? to of give then little improvements quickly, you et you

Max Levchin

sure could to dry. paint I'm one So use it we remarks, prepared watch I think the said which in

originated and of And On are Affirm users as that the majority Affirm of using our vast point journey. transactions are now properties. order their on starting a coming in shopping X/X back of existing

a sometimes pay, case, and interest to share things just value hey, be find to counter, we a And sort so also true think merchants X that better, checkout lower-priced the transparent, itself. have are even more discover to but of end as transactions in for I just, way great us the isn't X also to speaks that interesting of very the you proposition perhaps our way and customers. and interest with our it'd customer offer Part

very Affirm you're our Michael. I the nicely add? in marketplace form you still of muted, so is platform that to in the are heavily. And growing the think want and app, area Michael, investing we very

Michael Linford

So, James, in response yes. --

second key to fast, The are portion question, the of period. originations last So turns that meaningful around was DQs quantifiables credit the Sorry. have are are James. tighter from to where this The And drivers the In took portfolio the materially of response a obviously we we are to still even both though down which summer, the posture gross were than over -- prior and right? your of period that QX. our year. a we charge-offs function through we book posture credit the in

course, We wouldn't performance. you're also, of these at improvements is levels. and there good just so what continue model, to continue expect seeing to make to underwriting our really us I

for the in summer. think that's the I drive -- But results loose think we're the of period. this certainly having taken more a biggest credit posture out coming I

James Faucette

sorry, -- ahead. I Go interrupted quick And Max. you,

Max Levchin

I give to to I -- numbers. answers just love about want always

the about XXX%. year-on-year so can growth platform, the there on And you of one I our the tell that transactions thing north originated was

right are So they not only is growth the triple-digit a are matter growing, now. Affirm-originated transactions

James Faucette

it. Got it. Got

When credit to remain we meant level? remain wouldn't performance you Michael. expect we clarify back in reference you delinquency? -- to be by trying at this those at and we to expect or Were And box Just this kind the -- to meaning what this wouldn't -- to you sorry, them at or said, of level. the your shouldn't

Michael Linford

Yes.

we Our to run delinquencies rates lows. business. how historic intend the at are not really charge-off that's And and

Operator

El-Assal Investment Barclays Ramsey from comes question Bank. next with Our

Ramsey El-Assal

if would P&L impact? terms other of Or pace rollout, your some eventual you of was give I additional us helpful? any the the the be on expectations magnitude wondering color agreement of in could for Shopify the commentary the there

Max Levchin

doing we? Michael keep Sorry aren't going different mute They're -- this, keep yes. buttons. and We're that. X I about Both to

this is, fact, -- one on rodeo sorry, entirely mute my this one. but my Sorry, buttons, I'm Normally No. confident with and me in It's first this isn't it.

if back was exclusive So I necessary. do we and platform. we the are we care were and and it the team engineering as myself, we is, it's short things -- picked an enormous long reason partner because The of an Shopify. build so well have their And take say take time exceptional to we and

we We program, we're we rates. on care how getting happy the X/X the So in road our continue doing -- saw other think testing the I tightness, way improved another going. are with up we'll quite just pleased all and show, that added very to XXX these We're uptime our conversion well. metrics integration, the systems. are tests the we to about merchants the since each with all almost the beta We're

That to underdeliver. overpromise said, I think it's and foolish

when when expect an It for turn to accomplish ready such takes we enormous massive. the scalability to like we So is it will it of only fully, amount including volume. on time, we feel turn on definitely prime that be it

not overnight, expect as as take I So well conservative and what expect to time, our we to we but have forecast this will we tried absolutely something to tell be about publicly in internal when would our happen.

Ramsey El-Assal

merchant was Okay. I'm there if curious wanted about any came The performance in I what the the model. the below call-outs? yields a but And in primarily revenue I'm are? GMV bit amazing. drivers thinking yields then there on our to just quarter, curious network -- I the the were also other mix, was little just ask

Max Levchin

Michael. probably button. mute right Press It's the

Michael Linford

X In values and tends average period. have about lower think, There's seasonality. question. QX, little our I think for holiday It's up, the good a calendar basis the year-on-year XX bit One a revenue it's fiscal to lower to shopping order same yields. points about. season Yes, things of actually the QX, is our

There's see around to think the I the material to or It's is report So transactions really shift to which respect that is around the the seasonality mix pricing you more year. of merchants sort just biggest end this season. during with any where merchant mix driver, the nothing be time of the there. probably tend

Operator

Our next question O'Neill comes from Goldman with Sachs. Matt

Matthew O'Neill

guess, Max, of strategic. sort long-term I touch wanted on I to the

AOV. So AOV, low starting sort path then into is understanding business moving glide and a where clear of the higher the the today

and the of app You've of started and out build to customer vis-à-vis properties your through sort purchasing channel the own website. sort acquisition

built account. also You a savings

consumer we what Any I'll now. or what about comprehensive come So the hints follow-up And be sort a just kind on suite what can more thinking of of of map? just my may curious, is to ask next services? else then for guidepost road

outperformance from James' as getting of more For to the of hopeful And as the more Michael, here? maybe question we'll kind what out the pandemic got add as affluent, higher the more Peloton, we've of it mix and that's part FICO? partners of the of onset on a credit. working like which conservatism back back recovery the maybe Is now provision Or just some skew clarity here, back? growth byproduct the far was around that going around at

Max Levchin

questions. Great

are dual statements, So General Officer disclose directly if you're the also Legal mute I a forward-looking any is because in get thing to wondering call I'm and trouble. Counsel Zoom staring and going my face. why happening if is we're on And in my

I anything So a you say really things to any can't few our breaking without try tell about rules. I'll --

unaddressed favorite or opportunity think cash-denominated just BNPL one low something my that's understand, growing -- what's is So consumer the idea an to easy excited very then well. obviously, of where very, of and but high purpose strong, understand really world very and payments enormous we're on ubiquitous. And transparent, of it which a very where in we're is that's the now we're transactions, things going has AOV, about, nomenclature, is not I that the in which enumerated AOV

being There's think over the it. bring overdraw into part spent. category us, right well now, an instruments enormous someone, some of insufficient using as funds their And thrown that all people well. will light financial are as it and other be still that's I their tunnel with might piece tired, and And old

domain. So our of seeing that you're markedly. services what our products a improve in -- today will lot in have The and ideas interesting we really

the of a of the that really maybe products that's is is very think One things combined the but of important sort BNPL understand to X.X, maybe world much there's of X.X, version, there. sort lot improvement as sees today we what

very very, should iterate us products the existing actively. you expect So to on

overlook, in to major the is we have sort things actively for service. want a rebuilt things we of lot sort one we the take which to parts I of do read is of Shopify the pride basically of that to we before, One in Affirm content of that that of don't

and It's have an market of to way kind just is also our ways. different And which that bring switch growing big of so their of as this we like quite substantive before a excited the very different something offering give. product going organic partner to single doing work of and are probably existing we're in that and partner really on we're with something we've I'll business participants answers so on way benefit. there's has idea this and but in intend cryptocurrencies about something new is really, platform transactions we We more flip forth. to technologists all built as in it can where one support I Rakuten, with. to already. a also that launched Shopify, which a way. to a service by platforms into a start of very And that speculating So plugs Michael finance-related and these the offer stop that

Michael Linford

Yes.

our that and that credit need merchants. has and clear. things what And credit side, this is summer. posture loans do so effect kind -- markets while still same and try consumers we'll do a that be is the we outstanding a business really you that to less the we just see than towards run Peloton to held posture we'll clearly, our environment do of safely Just thing we'll the you credit the servicing to do trends, loans Peloton, can we capital take do I not that macro the look on always mean, in best mix Peloton improvement. the an and the took of But do to that credit at the for ensures see as

like cautious, this also going so consistent charge-offs of the I reflects point And by here that participation see active we the being and towards on kind quite that now. is the us the have quarter, careful markets being out summer reality very right And portfolio borne this you provision healthy. the fact that's and that looked trend that DQs release the this on in capital the think

Operator

comes Dan next with question Perlin Our RBC. from

Daniel Perlin

stuff. a second. first wanted know Installments I the I exciting on for the quarter Shop back just of jump you're in on Pay Congratulations in to box, beta. out

can said I'm you the that early types thinking today. about some wondering, are attributes Here, repeat XXX stage of -- acceleration, of metrics. you talk you're merchants kind think that's I of about seeing this to just channel usage, we're AOV influence maybe how lower what those going merchants? from those

the I would in there stages helpful? guess, early Just be anything,

Max Levchin

lot for early and here. simple take be experience product why as don't interim We Installments too the little next to so What by to make instead enough too will conversion. not Shop we will consumer they my it to this be, have time say customers, want ideally, time. I sure I else there. that much. in that with want but card of want the using concerned more smooth I Rob, when guess comes this out very smoothest a a to a we am was Pay CEO a probably Pay I'll most is don't metric because thought as an "Hmm, them than be." focused promise also would And we're it work debit is or Shop powered think, or experience do experience makes wasn't that the transaction of highest pull it up Affirm, for Installments, as I simple anything is a very, have to converting, over maybe

but conversion I good numbers to not those make are say sure I'm very, looking chat box about good. loud, into not That disclosing very to feeling metrics. my allowed out end-to-end anything that very am we're looking said, I'm

as are And really rate a but driving and transactions for cover we we a percentage consumer share acceptance metric share as them. end-to-end of there, other The that influences is matters cards. time, one, obviously, Ultimately, conversion that it's is valuable over repeat cards. merchants to

in I now. actually Shopify's XXX, qualitative with will we Hopefully, next back case, is so give of the in quarter, which a will can that And handful grounded some is, numbers merchants. numbers really than be for come more

declare that. So it's early too a little to

Daniel Perlin

growth speak the though. funding question Understand. Michael, guys GMV And lot. are can a you to helpful, kind of maybe capacity That's you available seem to expecting? that that relative get just to We the

Just you're in the making significant sure to growth the these balance velocity of sheet in everyone and fund able understands levels? how GMV the

Max Levchin

unmute. Michael,

Michael Linford

did at this enhanced and $XXX you securization efficiencies securitization attractive who in amount significantly That's tracking healthy price really question. -- for quarter recent a good of million week funding actually for another saw most that this really volume. is And And And we just deal capacity. during a pretty doing capital we're are those pretty a costs. earlier at it,

see have. in remain strong to while and coverage advantage capital We're position markets and funding now we the partners, we're feel us like on take really doing new ones. wide open the existing any of We they So real really constraints in expanding confident we do adding We to a intend kind both the remain feel there. of that right and open. don't securitizations

Operator

Chiodo with Crédit Timothy question comes next from Our Suisse.

Timothy Chiodo

Shopify On as well.

Third or with maybe higher talk heart bit one a to onboard other of mechanics, you potential I And markets expand opportunity, could on Shopify around on, if the in, go that existing everyone, how you for AOV new different more longer-term Shopify? concepts addressable? the about investors merchants, could on tactically, this, the perhaps that then could recap ultimately are for so the the sorry get whether out? merchants, just opt regions to think much little to there. question opt trying But to is And of the volume to it's become default the or really

Max Levchin

great a question. It's

focused -- U.S. other cannot speculate one on now. definitely and that's think about That we're aspect geographies I But both includes not, markets something Canada. our I of very because that just should home is it. it So

a intent someone's number for be powered say, to In a other Affirm. up. it a incredibly essentially it's on the merchant irresponsible and Ottawa make how But partnership shopping I to is. of at "Oh, it this our terms testing yes, of an spontaneous In exactly sign merchant The by easy possible to is that smooth words, what experience to part of in big for partners is probably again, a think Shop. -- with overall exactly what speculate will reach we're

Of course, to I this." want do

includes the And -- high AOV overall to everybody get low of Shopify of not as volume items, also AOV intent course so as as the possible. that That, is sells well. on items, much

we're that that's -- merchant both need sign-up make and ultimately of. proud merchant's sure to experience, headed. are So share thing But is moment, all for we acceptance sort the the end-to-end conversion that underwriting that where cards we're of live the -- the go

Operator

question next Deutsche comes Our Keane with Bank. from Bryan

Bryan Keane

wanted came company. ask off public Congrats on to I as a area. quarter significantly. first The the travel obviously about volumes that

I start a is do by -- you or said does year When modeled also you back a of that kind of there? fiscal ramping That'll do American to think help, QX more any -- it was even Airlines 'XX that spring And XXXX. you only when have you guys in phenomenon? into in I'm sure. think X% up or going when be

Max Levchin

start Michael unmuting to and yourself let qualitatively of parts Michael now. answer answer it. modeling I'll the

American, So very obviously, deal. a it's recent

been and going we except some going our to year took The us and industry travel with set quite hit very been partnership time, partnership disparage XXXX with XXXX. actually and for for it be happy our them. for And it extremely Affirm, very about us; valuable travel invested We not or was building excited quite heavily super travel. feature incredibly up existing Delta, which of to with for entire fact, the set we're XXXX in in we've year so awesome be travel diminish the a of was in in our it's And any to way, to think has in in everyone. both not

back bounds like things increase are we vaccine really first I'm are about not other that intent. to it I'm probably say said, not I'm airline think a our recovery. the great to expect, sure American our if industry point, the going In travel that to for I get quite when tailwind or wanted this what it seeing -- quantitative sense we not be. rollouts is all I starting world in when it's bit to terms going to so it say, think will places, how Obviously, the That right Michael person the attention seeing and am speculate we a prepared a what of normal I and of But back answer deal in and that words, nice up speaks And getting I I our we to go to within in and of the and to at means. probably is some be a to idea wake about plane signs the to forecast. to tell and on we're little thinking think us. will planning the some you volume. here's

Michael Linford

Yes.

terms fiscal more to don't in of outlook, on. a talked of Just we turn about have for it We've year pretty it here. this in 'XX fiscal being We're particular cautious moment a thing. year

starts pretty So now, change take we'll here. for up-to-date being we're starts if off. volume that and after you fall. But right summer to into cautious keep the the Obviously, the to

Bryan Keane

that Got and penetration it. of a And get the maybe more MDR lower industry kind MDRs, PayPal obviously, increases. about the as lot talking space. there's concern as go BNPL And the have just BNPL they some to pushing thinking will theirselves into in a about as is follow-up,

is, MDRs, see on, these we'll Will it a overall or question levels Max, will rates a bit? drop the guess be more sustainable is I phenomenon? So maybe on at as comes volume it -- natural little

Max Levchin

even -- in what can't provide ability others of service the we BNPL. relatively like the expect portion don't very that prognosticate that's is A competitive it's ourselves special think obviously, unique, to we difficult industry, entirety and do a to think what our address or in we of the highly I values. we about future very like a transaction huge the from

complicated, little the space, more competitive. time-centric less a it's therefore, more a so a AOV more and And versus there a of management is components low be successful to AVPs. little a bit of bit high more risk and marketing-centric in easier It's

there. we're I and proven those well all years so that the segments, over of very think done we've at we've good And

"we'll really love have transaction." and company, technology merchants a services. that we to on have provide do goes price. value-added Affirm-as-a-service bringing you help value on of lot So Ultimately, we the beyond sort love well data this market. data-centric of we We As competing collection competing a we're close now the we don't things to We others of rich can on that offerings and cannot. that

the about but others we'll where things So can I that inventing prices I tell have. continue can't don't you, go, prognosticate

Operator

Our next Securities. question comes from Andrew Jeffrey Truist with

Andrew Jeffrey

And a wins? you maybe market. Can And perspective. from players There Affirm peers? little Pay of you really I are X competitive off in particularly, not Max, Bryan's number I'll elaborate question a mean, doing on competitive to why if just big platforms the se much you more bit And with Shopify, a Affirm differentiates have think you Affirm why in take per build advantage? you're what like from exclusivity think the I about a positioned little could It's today. wonder a notwithstanding? model. speak for you complex share is uniquely a why maybe bit

Max Levchin

be what "not point. you I'm this in sure meant I So XXX% at PayPal's doing we're not a by, Pay Pay in trademark X." think of X

way So that someone we're of have pay, that trademark, product using very competes market the we much in not which we happen else's by very to but rate under a name split space. interest not -- of not installments for

we an are of $XX quite splitting it that fees, more and Ours X that charge into much simpler. we But and transparent of is item payments nicely. sort late something performing we the because easy taking and is do, idea it's said, better and don't $XX of

is take particular in bit of X a And that's end to, get is months, I saying, air when becomes happens plenty products et cetera. probably put -- having The a also XX that we weeks X a of that much agree little well, up do space do this from all let's $XXX to you product you $XXX there XX things a span just to rarer product. it X weeks what from that where say, months. if the bit months, that start are little you players cash and that transaction, have every flow $XXX. do too perspective single And uncomfortable to in

opportunity choice items X that to long offer offer as is a potentially and merchants higher that a AOV payment plan quite in an AOV. for years we as short for sense, So low and consumers

with which in technology, That's has the spades sort platforms, a tends provider enterprise of one partner to to that of and fact, aggregators, merchant in advantages, are, merchants where especially -- key or enterprise merchants excellence which certainly do matters. and we we want And someone bring in we of of good able and who the totality are service their totality products. can scalable that, of their quite the in and such are all to and customers

And have consistently X why in so those why chosen why of are the space the been other by we've endpoints selected partners Rakuten, us. Shopify,

other interest. never on don't keep so don't end The actually We're in I airplay, just consumer gets repeating late the which fees. it. that We to important it's the only to merchants, speaks space deferred fundamentally and I'll charge enough the any feel one, We things ones do eyes do is their and that drives We very don't of at very about. to us, angry very, your love spurs Consumer brand what between just and transaction. somewhere rolling the ultimately and get important truthfully.

about, and brand That's that something line the and winning lead. we we in great change take to strongly we very are keen would love in because that moment, partner own brands because our embarrass merchant with we well sense, them. wish view. a continue follow deals we as that of pride their ultimately, platforms of But to down that point on the and that and potentially to continuing are feel So industry as continue to unique to merchants very for add that opposed want

Andrew Jeffrey

of Is point me. GMV there And little XQ distinction guidance, was that? then, could That's to slow appear I in Michael, reaccelerate? that something would It particular if helpful and Okay. bit behind on wondering the it's for a offer color. projected you just

Michael Linford

Yes.

ex-Peloton think capture QX. QX, a remarks, acceleration about prepared that we're I acceleration. even biggest thing the saw root. to and that more talked material we're the where think the Peloton seeing projecting material are issue in acceleration seeing take is in we QX we about Ex-Peloton, in We

the very extremely of the with orders GMV overall, demand ship. to going function timing be Peloton, strong, a of is of good recognition consumer those when that but So

Operator

Seaport Our last from Brendler Chris with Global. question comes

Christopher Brendler

of around talk U.S. to I'd regulatory now like there's sorry, taking from little It environment and land little grab -- with perspective. different the world. the a about a the buy-now-pay-later off here competitive seems the like really a right in

how see there sort along than questions front where of the impact and share point-of-sale provider that when X is X provider? or do more Affirm's instances are: X any hold you you any up there's my see at So do market does than more

of Or marketplace in large you Like it but second is of And potentially about deals to a is potential. more and equity of question kind you're cost incentive? of lot these a near mega sort you're Do of term? little deal, is seems there's do strategic going a thinking exciting well? then lot transactions are my bit the claim stake a one as you in this where some equity Shopify these super of a has volume, to where question, this more expect providing of how

Max Levchin

questions. Great

universally brands if predictor the, creation I not, of point. X of Discover ultimately are but the recognized past. certainly on Amex history's depending or include checkout with whether Mastercard, that network think this Visa, first are on you a always on every former, round So at settled more And you good the or payment less will, X or

in we're an favor. a and there's things players BNPL sound -- Obviously, do checkouts. positive, than lot volume, believe And is think I credit we're win. but growth the is of part that'll volume, we're I at have being and over equal, brand to of that be biased at, least like X quite there of enormous multiple the all so But does expectation more everyone. all to I'd our some transaction land chunk all expect of yes the card especially And that will the not reality should taking be grab for

of the sign are that deals we some And exclusive.

some of by are existing we worth we to the cases, have then are than. added doing work that to deals our an In better to provider Some not. demonstrate

how with we is overall, are think developing. I So happy that The question...

Christopher Brendler

Another Shopify?

Max Levchin

going I'm of one. busy Sort through the I was first sorry, I notes. my -- was with

So is in very two-part to The the would deals. form love mega short good we Shopify more one. question answer is do a

the special. those think are, structure and I definition, deals unique by of

-- exactly probably any proven, scope and in and and But do say scalable are what so again, we enormous if said, speculation technology -- have because I what And so conversation. take another sign to we platforms, of would are beyond form of Shopify advantage the these provider this myself, very of is the it large specifically perfect data for robust. this very, that

I partner anything. able be fundamentally, think mega someone offering to volume so to their And chunk company mega your believe the you'll doesn't don't is a if going do of withstand

selects actually and on So piece equity and not the because is and ball. good we're can billions dodge somebody billions take the It's the do, at we Affirm. we what reason

Operator

would There Linford like to over are the no for further questions I floor comments. turn to any at this time. back closing Michael

Michael Linford

you next on Thanks, quarter. guys seeing everybody, for you. joining our call, look and Thank we'll to forward

Operator

call. tonight's concludes This

you participation. this Have your You a may wonderful evening. time. lines for Thank at your disconnect

Affirm (AFRM) 11 Feb 212021 Q2 Earnings call transcript