AFRM - Earnings call transcript Q3 2021

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Operator

Good afternoon, ladies and gentlemen. Thank you for standing by. Welcome to Affirm Holdings Fiscal Third Quarter 2021 Earnings Conference Call. At this time, lines have been placed on mute to prevent any background noise. After the speakers’ remarks, we’ll open the lines for your questions.

conference being this reminder, a call recorded. is As the to Mr. now like over turn to I’d call Ron of Clark, Head Investor Relations. Thank you.

You may begin.

Ron Clark

Thanks, operator.

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

on measures. a for most website. Officer. call considered And earnings should Executive In Max addition, I’d be These to release, Linford, to Financial Officer; Chief measures. measures today’s our Chief measures can supplement begin. a in which substitute and found to turn Affirm’s like call Investor as not GAAP as financial and and to comparable GAAP call is the Reconciliations today’s financial be directly may Hosting are to with Levchin, Founder non-GAAP press Relations over available Michael Affirm’s Max the today’s that, include

Max Levchin

everyone, thanks us for on joining today’s Welcome, and call.

I help through Affirm. numbers, achieved past quarter progress We’re the call excited the power to a demonstrate update like in we you few the of of by our since sharing our we go from But on and the to the to business stories performance February. start before would

tailored fiscal the and end quarter. and XXX%, that Affirm also to expect heart doubled we value technology. that customers. Gen To the why February. which expand a financial delivered April That say impact that confidence started them new with I Priceline payments for new year-over-year take come unrivaled two of the that It’s consumers never of lives, we’re charge us instantly or accelerated to payment seconds. solutions. put us which We fees. also one We as XX% we on people things Z payment elevate of will merchants scalability the was share have our strive significantly of In active in favorite choose their second move One greater platforms many Shop from accuracy growth why thanked interest importance own. technology them we at Affirm’s late of And reach consumers Affirm constantly As flexible of by to personal helping XX,XXX. more for come many in XX,XXX quarter. what you know, provided consumers with about our we quality in early us That’s nearly back our we’re our of to celebrated birthday how to count our millennial were core they we to I get before ninth of excluding experience Shopify using we’re March, Instagram. we grew looking how speed values their Thanks their posted. and pains need. results thanked up help with that that to we booking partnering to during that availability want and outlook we Affirm’s another massager, merchant GMV our stories consumers. number achieve nurse of with than The I the their mother than them World her needs without always Priceline, out our merchants. the strong we reach Affirm. goals and inspired us also participate, the of merchants, let baby partnerships. They hidden quarter of to have overview shared an people’s on Today, at added asked we shared and XX% merchants Pay consider general gone her our her than have for helped that with appreciated just large-scale of with GMV companies to installments has establishing their A to previous me special with us third to been bank. and consumers’ live Theragun the share options pandemic. that critical consumers like monthly among deliver the travel Understanding book And affordable expect helping with and She she between year-over-year May, particular we we us the her XX-hour but which technology requests of to arrived. XX% to to in frequently breaking their within demand moment, coming buy them in a existing family led provide Peloton, meeting helps they and and gaucher-free after XXXX, a pent-up focus grow partner. long-term her lot time this allows and and when now as excited to Affirm, XX,XXX consumers’ allowed and more and on the merchants aches exceeded announce a I’ve Prime the is technology could is Affirm’s just for vacation in purchase shift because giveaway in our soothe a the or and is quarter. means are pandemic. like Recently, first. the speak Affirm, At new the more before their a from Disney to June. spending

mark Nearing the quarter, pressured sharp to perform. also to Travel categories particularly category was been the XXXX second a Pass, was homewares quarter continued driven with which active last Affirm’s for tripled Vrbo, was in primarily Ikon pre-COVID others. as relationships pandemic. sporting This throughout consumers by more quarter. also end strong that by we and that last for among the the as XX and and see furniture across have in of by the as GMV merchants consumer the nearly in uptick quarterly Neiman began grew travel. and the of We over in for of fared demand such than months. such categories the versus XX% GMV year, new third have and pandemic goods, grew all spending Categories ticketing by strong. QX offerings Marcus well as well XX% expanded was growth our high fiscal

out the We are momentum record another pandemic a Affirm. the that paying down provide encouraged spending and after of tailwind by for significant this believe will strengthening have power coming Americans growing $XX shoppers billion also online, debt to has buy pandemic markets $XXX trained amassing U.S. card to in $X.X credit in and more billion. nearly The e-commerce XXXX. trillion in the economy savings

see We off dress with coupled loved they before among ongoing for growth. missed expect the and our they the ones. this positive and put a or health, suit returning wedding reopening, use to as to for continued buy support to rising financial their improved work, the We to consumers being airline forward consumers ticket sentiment an reception there look

months. also last made our progress strategic Our team objectives on excellent over few the

with into categories higher-frequency we expand our a by mentioned partnership ago, presence continuing moment to are Shopify. our I activating As

a We to weeks, February. last merchant you more that we up with and their the Installments Pay than XXX our and Over both believe shared XX% buy growth onboarding, scaling Affirm checkout partnership will by Shopify’s accelerated Shopify scale by XX,XXX as offer installments with for team grow with position rapid much of we merchants, and Shop several has that us in reduced solution merchants diverse by back them pay as Affirm us our Shop users. enabled large have a to with merchants. business that returning in now, enabling will shop new for set later told from our pilot that times Pay

Returnly expanded merchants to merchants acquiring our more satisfaction. helps Affirm. X than a look both revenue delivering also Returnly, that return and consumers and returns to returns X,XXX their from Today, than elevate more with forward exchanges to introducing by rates, million seamless increase drive repurchase and consumer more technology platform and users for returns offerings company to We merchants. We makes

outcomes. offers my manage Before the for competitive ways others turn that I point serves on proprietary an as a to our merchants me won’t. to machine technology technology our briefly consumers both in earlier over able we’re efficiently important proven complex our technology advantage. problems advantage. for Leveraging call Affirm better is technical back price is among come expertise on can’t that achieve consumers, competitors. to credit we more risk solving and Michael, and resulting learning, let believe We The our personalize credit or thrive unparalleled and company,

for Affirm us more buy them that us in allowing other categories As a advantages duration pay critical values. consumers a offer result, much to loan later which of than providers now, and travel range solution, by we’re differentiate networks is as short allowing transaction able [ph] to to more flexibility consumers, across have These pay use points from durations. price and a offer such high

values for for Our the in drive and conversion rates, enables them, They of generate technology also consumers. our purchases increased measurable merchants. order growth we average us to this volume see incremental higher

and site. approximately one-third driven were of In app fact, in quarter, the Affirm’s transactions from third

to with choose ability why partner results so Walmart strong large to many Priceline, consistently is for Affirm. deliver including merchants Our our and enterprises,

technology, great it the is sustain behind and in advantage technologists. the technology we’re Of elevating extend its to order our investing in leadership great course, within people In Company. and ultimately about

to bring President our platform a a Directors. most today critical is industry is significant learning for Affirm’s Libor as part of that better merchants the one fintech been his solutions deliver technology to advantages announced and our critical leveraging that we’re reflects scale. Libor’s appointment in Libor competitive systems, minds a technology that, our world-class boardroom. role the dedication exceptional us key Building allow has to machine experience is strategy, pleased security, has of advantage technology of to Michalek, software, that appointed Technology, Board As have at consumers in engineering a and for technology proprietary our and highly-regarded played developing and to to Libor we competitive innovation our and business. of

term, be needs while on deputies, our ubiquity the role have play announced and time we Chief to briefly had Sharda we step to Katherine assuming Sharda we leadership of conducted our platform, we Company and for down Today, continue a leadership. been a and Officer. of role Caro Adkins me of for increased I our one strengthening, market we has the strong senior growth. supporting and of want a our as our team, IPO, Katherine and navigated excellent counselor her part critical thank made important legal wish In responsibility valued of her been period will her an achieved a team. best. dedication leadership growing all Affirm legal and progress whole critical Legal of goals. her the we to to that integral strategic me team to and taken scaling trusted Sharda’s Del She’s part unprecedented and additional expand has at on our as tremendous Company. quarter a led summary, as let during the our conclude, grateful the She I updates. her decided will we’re role our Castillo, an Officer, the to Before team long leadership our from legal for Legal Chief and some third Affirm. turn

opportunity we and We’re to our of positioned uniquely adoption front us. merchant fourth have and through of and will us in service but be turn of Michael on for focus and to success take the over as appreciative shareholders. None the in Affirmers. exceptional capture this we the behalf third grow, our hard the our we’re be dedication to and Affirm that, continues quarter accomplished And seeing consumers through and you merchants delivered proud quarter. Affirm really consumers, work believe a results just our strengthening of large as I provided getting and more Returnly our for it and excellent consumers of growing will welcomed prepared the lot, merchants, business share PayBright I started. and Affirmers’ to and Together, with is a momentum our the couldn’t the public of family without to to Company. details outlook pandemic, possible teams have They

Michael Linford

Thanks, everyone. Max, and good afternoon,

quarter on prior delivered the rates noted, we we from compared than XXX%. respectively, period, We in had this second achieved financial exceeded despite As growth efficiency, GMV outlook, more XXXX. third equity balance sheet a the and reducing strong required Max XX% growing and capital our quarter. growth year-over-year year with the of XX% and the by revenue growing significantly accelerating capital greater to by XX%,

all financial compared allowance and stronger quarter fiscal share you financial and of color to We for are building we business. record to of highlights credit percentage through then are encouraging, to the on of delivered low data also investment some performance declining comparative fiscal our which our reflect of period-to-period third refers held momentum Unless on the today of I’ll loans to we performance for as raising some remain XXXX move key otherwise this trends stated, strong outlook, XXXX. with our quarter the quarter third walk X.X%. as on we the focused now our a of a forward. These

$X.X outlook merchant by adoption GMV and $X.X billion grew $X.XX billion. to categories. increase our for exceeding strong across to consumer quarter was The XX% driven Third all billion,

quarter, to X.X also rose than the end from over active to prior merchants X.X. of of As XX-month increased XX,XXX to consumer the active XX% which nearly X.X million. active we the per while Transactions consumers, third period, more doubled measure

the exceeded GMV even growth headline the the than stronger While outlook, was XX% momentum of business indicates. our

and served compared quarter XX% third fulfillment expectations, broad-based GMV Peloton, quarter serves to outpacing GMV as of both well Excluding as third Peloton, concentration ago. XX% from times across the categories existing diversify all Affirm category growth our where new lead driven year doubled, to a also as represented growth The relationships. improved, merchant merchant by that

the its even to has travel to to GMV quarter. X% indicated, Max but in ending April, travel among its the the of continued the takeoff just though quarter. began steadily growth was for in real taking verticals, As total. X% of XX% our Company-wide accounted late In quarter highlight March accelerate, Travel of grown GMV proportion September

quarter partnerships meaningfully contribute in the we’ve the Given category, and we the investments in in fourth made to travel expect beyond.

accounted exceeded and APR of length XXXX, consistent term reflecting XX% expanded higher the in Loans business X also a revenue and greater XX our quarter Our total lower $XXX translated strong $XXX the in average we growth that from $XXX order slightly AOV value than for merchant you categories. GMV, down XX% our in expectations to The to growth the third Accordingly, velocity in shared XXXX. momentum into the quarter declined GMV of million $XXX. quarter base of third third also accounted million. XX%, for with with months from of with February

by million rather than grew volumes discounts sale quarter consumer by as net increased the revenue loan and sheet from and a driven year-to-year. from on quarter more revenue, which $XXX pricing $XX for up grew to million. of consumer to network Third result of of income held interest increased $XX loans the The in million the portion was of interest XX% XX% on the one-third interest $XX of terms to income which Roughly more balance XX% XX%, slowly, income favorable driven grew $XXX investment payments. of million total Revenue loans interest more sold. gain related on sale interest from million payments amortization year-ago

revenue, results of call income servicing our include impact QX loans increased $X unpaid financial third prior in to year million in out of $X to total I’d million $X.X year-over-year. the million which grew as principal The split by recorded based the to This from in in like Peloton parties $X.X balance that return recent relation the reduction owned Finally, by average for estimated Peloton’s a most and million Tread+ estimate June interest to XX, million income. rates on network recall merchant in ending products. we quarter projected their was of its $X.X XXXX, Affirm filing. announced provided Tread the reduction quarterly is voluntary between of and revenue

losses provision economics a unit our revenue provision credit QX, including grew transaction improve quarter, excluding costs, XX%. to for XX% continued costs, million, the the XX% of decrease. Transaction credit We third were in year-over-year for $XX growing the losses, in all

a $XX provision Third quarter than losses, XXXX. credit million $XX $XX $XX excluding versus XX% decrease third XXXX, from for the for revenue the a $XX been volume incremental record has reduction allowance million, Transaction $XX of by the the were the of of million losses quarter released estimates mentioned we the to to $XX provision the reflecting for X.X% to the credit million in growth. losses costs, results Loss have significantly an took compared X% in portfolio. over Provisions on prior on gain reduced reflects loan history experiencing an materially of slower of low million we purchase was expense loans million Last driven in which The anticipation APR been loans. in allowance was performance. I increased time losses included commitment million in credit or for consistent of credit loan prior up year, our future $X compared million in with held and unemployment, an that investment. provision record year, strong stronger-than-expected repayment year, as is better

reflects third held the of slower the average but due emerging increased million debt adopted as well provision impact the as for also CECL to which period. lower material investment. $X credit XXXX accounting standard fixed we a grew from Additionally, Funding losses than rates. costs July to $XX rate of at of our X, increased a for quarter not funding bear interest issuance trusts, average which retroactive by in did growth this loss in The status, million on loans offset have securitization company to the increase XXXX, interest

better-than-expected total million million. $XXX than combination we scale servicing reduced transaction outlook Finally, in $XX The portfolio performance platform in efficiencies. to quarter million, costs realized of processing line of cost less our transaction million third quarter slower compared and strong $XX up grew to top but from were year-ago revenue for $XX $XX resulted and the as million

and drive reflecting $XX advantage beyond previously. quarter technology analytics meaningful noted XX% XX% Max or there to grew impact the competitive from costs net primarily from as worked this to transaction expense SBC higher long-term a stock-based to to was and we revenue, investments that January Looking million our to extend growth, XXX% primarily headcount of to engineering IPO. Technology related data and our compensation

$XX from XX% a expense vesting Shopify as primarily of Excluding to data analytics expense awards Sales grew and partnership. SBC revenue, million of $X of to result long-term $XX technology XX% the increased exclusive and to year-ago our or to million, net quarter. SBC from and compared marketing granted X% of million associated with the

SBC headcount revenue, grew in real of included remote light from also G&A legal, expense growth or Company’s Excluding operations. of net increased the due footprint year-ago support of to company $XX in quarter. sublet to policy. sales to year last and to million, impact XX% $XX million by of compared administrative million $XXX to $XX XX% first from $XX operations and in the warrants part an the $XX administrative million million increase marketing and estate expense Shopify an and impairment the General long-term our and our changing to relating finance, public of million

in ‘XX our and the which items of with period. expenses $X of excludes $XX of year-ago income, these compared from SBC $XXX Shopify to in $XX million operating million, Including nonrecurring Officer, warrants which the G&A was the improvement and quarter GAAP of $XXX multiyear $XX million, loss compensation million, expenses, options of operating amortization the an stock other to compared the grant million the of associated million, XXXX. of $XX million, XXX% includes $XX third stock-based a Chief quarter million was to grew $XX year-ago in loss third adjusted million of operating $X depreciation million performance-based quarter. Adjusted Excluding million Executive the of $XX

margin a XX of percentage points quarter third and As X%. increased revenue, was of the from adjusted operating XXXX

to our grow business being equity with capital. continue We our very strategy to deliver while our on efficient

of our billion total the the $X.X the includes XX, March third parties, by which billion portfolio, funded with platform held growth growth while flow from the facilitated at platform, in growth. side, all $X.X to through XXXX, end of of third of volume we quarter $X.X $X.X billion in having. relatively billion were as those we’re billion year-to-year unpaid On balance flat loans grew including million $XXX loans or the in year-on-year This by forward on-balance $X.X and securitization sheet was volume

our allowed quarter, On the billion, million side, to us third addition loans by in balance executed able scale the efficiently required securitization by XXXX-A capital Despite to new reduce from our XX% program. a the sale funding year-ago facility $XXX $X.X to a quarter the loan equity deals and revolving in program. new we our we growing warehouse in from sheet $XXX million. to These were

As XX% fell platform the required in a equity ago quarter. percentage of approximately year X% portfolio, total capital to from

are our a Looking encouraged overall fourth the in the believe economy the of we ahead, in strengthening tailwind the as momentum and by will business, we serve quarter.

We the are seeing pandemic across hit particularly all recovers. GMV demand as those categories, hardest by growth

We Reflecting are for third balance also encouraged adoption in outlook we strong quarter. and the are raising year. the we of fiscal our the by dynamics, the saw these merchant consumer

XXXX, million; $X.XX For quarter million; of of and million to million. revenue less to operating to to loss $XXX June of ending and million cost share weighted count billion million $XXX $XX $XXX cost of revenue $XX a GMV transaction billion; XXX average $XX to our we to million; of $X.X transaction $XX expect fourth XX, million million; $XXX adjusted

in QX, As represents the which I $X.X noted reduction a moment a revenue recall. million impact estimated from Tread+ Tread to we and recorded revenue Peloton’s direct ago,

operating metrics any do While will the fees additional term, an we expect in expect we increase impact like key revenue refunded QX, in negatively starting returns GMV. which from the impact do in near merchant not

estimated future Tread+ Tread the lower takes this impact associated as impact outlook refunds account GMV. well with as estimated into and an financial GMV Our on

in Xst Returnly, our from closed on the Additionally, QX. to includes not do impact be of material May we the acquisition outlook which but expect

had loss to of billion, $XXX transaction count adoption GMV million a cost $XXX retroactive million This reduction XX, million credit $XX the of we to million. and year XXXX. strong fiscal the provision believe to third $XX product transaction in in less million; to growth previously to seeing closing, first July of numbers to a to financials In million; quarter. reported our $X.XX fiscal of in of as $XXX XXXX offering, the to full Consumers For yet adoption fiscal expect and billion $XXX revenue weighted real million; are downward we and resulted adopting partners a by XXX cost greater and year CECL The is ‘XX X, year-to-date of the the allowance. adjusted revenue impact product operating the XXXX, approximately million; million merchant revision $XX of of a now $X.XX include enabled losses share guidance are for for our June result of million come. $XXX average our we $XXX our of ending half best the

happy answer honest results while delivering shareholders. our improve questions. on to our also to products financial are with lives that, delivering for your we’re mission With We

Operator

[Operator Instructions] Our Dan first Markets. RBC question Capital comes from line with of Perlin the

Dan Perlin

you maybe very could dynamic assuming I’m in understand Peloton that and Thanks, to with in bringing sure quarter that merchant do help to it’s with be But of the it of just guys. play good stay if some helpful. these dynamics on maybe to has particular, at also that quarter. at wanted would the Shop the like looks Pay take of make and evening. here. are And June kind I dropped In levels first, I that all kind Installments. implied these rate

Michael Linford

Yes.

network looking key way particular, revenue travel a at virtual really sum card fee the from collect we thing both to important card first lines. and is the the our network when So, merchant revenue up merchant is network In fees revenue, virtual revenue merchant the merchants.

longer-term take So, And important Peloton, in total it’s biggest continues which at as to from with notably around look an declined in yes, combination. then, line loans, in which mix away rate, in impact’s is line actually to just expectations, the the gain our was travel concentration. X% importance, the

Dan Perlin

Okay.

were at to to basis you that I you closer this go XXXX that are I period, don’t the the XXXX be it is be XXX-plus kind want suggesting that of implying this So, but models the out downtrend -- here. guidance may -- like to previously to would point, and feel in accelerating points on know set

So the to kind that is going ultimately run we thinking next the GMV I’m that all and card we rate network you. is, help to your should combine to about Shopify get or I increase be merchant when about year? think of the to offset this on the that, guess, is virtual trying we meaningfully is Thank even to, expectation as jumping both

Michael Linford

Yes.

here. $X.X fee wouldn’t We’re to total thing -- merchant But, merchant -- not which other to change Shopify. from a the number from, going I’d you into the expect impact only at be merchant of definitely on side in dynamic, million But there’s interest also this now. small give a play recognition the there any impact we then obviously, the is right ‘XX the income is, guidance from revenue material affects see add a Peloton quarter and

Operator

with the Barclays. Our of El-Assal Ramsey next line question comes from

Ramsey El-Assal

ask I April. than the really rapid about state would about to see pretty a expected, plenty X% seems vertical travel more It’s up of in travel to the have vertical. larger rapid ticketing enjoying It be candidly quarter your kind presuming to wanted this and world given at XX% there’s I still Do the I total percentage in GMV business, think for of recovery a become runway that out? the we of think that said of of can right the now. will recovery, play you Where you go? and

Max Levchin

Yes.

only So, resurgence. totally be what seeing could all, as is first and ticketing of you’re a Traveling right. described

comparing So, are collapsed high last to QX, coming fiscal COVID we’re from a year, pre-COVID was this because that XX% even you to number we pre-COVID essentially note in base. it’s kind of look was everything. that comparison general, quarterly a if obviously market, in at to really important growth Affirm quarter which the off a that versus the changed But

and look in at what’s Now, is the right growth nearly sort month-to-month of now, zoom if you tripled. happening

space. very, very And just is. we’re so, an that very unbelievable about resurgence, excited quickly in it it’s And

very We’re well-positioned.

We like these have then, Ikon Expedia, as in well. Vacations, like other have partner Delta Airlines, of like American long all some folks kinds the of exciting new of been Priceline, Pass, partners time, Vrbo, us places enormous and for course, partner accounts our a very with

It so, for in multi-hundred that among somewhere of very we’re getting we’re pent-up well provide tickets play our positioned fact BNPL to brethren of bit both to nice there. a and multi-thousand sense the space. higher quite dollar the And and and that our for ticket and low a little town services implies in demand out speaks values we dollar in have high-ticket just unique and both sort items, obviously we actually going

do of we those. well with So, very all

So, super Michael huge the is on exactly think, opine I’ll travel positioned ticketing I economic we But, to. in well just want might the to what guide we let benefit. are overall space, and recovery to

off. setting this to year investments pay recovery for starting We’re made see over all really the last just that we the up

Ramsey El-Assal

into your can sort and if an how we next annualized That’s us year. terrific. just revenue a ask fits of to wonder P&L Returnly could I color to figure bit strategy, give on the And more broad how it out so little model contribution a of I also to it maybe acquisition, the you on kind synergies

Max Levchin

terms to synergy. us, part of that’s let this, it’s speak an the Michael since But, value headache. to his certainly I’ll of the modeling in amazing

of picks If point of product the you Returnly where sort up view, Affirm leaves from think literally off. of it

their they shoe the until in step for enough to a if be just opportunity don’t what if to even at said, fit transparency bring and pricing, customer And then unwanted look you And so, -- a always up inventory to that consumer to refund item quite shop in for or a a clean the merchants and move that allow in the before total quicker? enough color, the they and happy There’ll Affirm accelerate we once Returnly. you. fees. So, counter often if go be it actually can if as if happen know they certainty this come well, just be with confidence really them back we doesn’t what to put say, what exchanged. to invested need they’re that we that able get the satisfaction and great, afford shop. and well the nice process commerce that saw saw will long restocks we can much But refunds, there’ll we’ll Returnly huge merchant them they much will like box and checkout we they ago And for faster acquisition, And the as well, help the to the be in so no this, buy. you us

time. not So, and this track friend. would is for old see it long a very an progress We

and something synergies. too be synergies us you just from to We’re the them realize see the will away that far amount proud too and of completed let investors were an to great And incredible acquisition.

do you the charge to standard First from of fees. handling the our question, love view don’t hidden what us. well, do we’ve we We been, markets, be speak and of we’ll gadget. consumers because point has to partner no best Often There’ll foremost, return heard always of about be answer your returns? merchants, going when

of can help they more. sell away have even Now, course, even before will in can you and shopping unwanted saying, better, box, by "actually, item it make a be we there, to we’ll start we the put augment right they

to we’re why a that’s excited it’s this and about so have close so together. we just market ton to so And bring

successfully, users. for account have to that’s opportunities. if I to work comment and million for the side, and do want revenue to our Michael, network more much shift products Returnly We know, on you together. how another massive the used of don’t X have Affirm on a people there’s

Michael Linford

Yes.

profitability disclosed or any revenue for Returnly. We haven’t

a product a base. update component, though you underwriting that which September. think the stickiness space. the both as low merchant can value you for bringing in if about now would in as what outlined. well just the And they as to component, What guys merchants on They a to charge think that, adds most do have cost model we use existing of two that We Max think the AOV lot our process the risk-taking also an we add side of they We the revenue I will adds is who note SaaS do streams. and in into fight product, different

Ramsey El-Assal

it. Got

great you like Sounds my a taking fit. appreciate I questions.

Operator

Sachs. Our Matt next with from O’Neill line of question Goldman the comes

Matt O’Neill

if time you I rollouts. better curious sort a just articulate a of of help could for bit little was couple lines

But broader the again, of will that up then, at later or found or exciting kind that as get XX,XXX a your side similarly, that much understand I announcement, card a curious, the just now to that couple curious both? distribution? the on what XXX milestones was merchants as Thanks. side in broader to launch. year on I launch. to next Is of getting Shopify’s in just So, of are allow the months, kind and what’s very going And Shopify merchants the is far on closer be that

Max Levchin

great update Yes. question. for the And That’s you. I a I’m Shopify have number to afraid

press the last number went since the release, Just XX,XXX. to up we added the

forward-looking know grow, got we how pretty don’t quickly. statement. obviously, So, this -- it’s a is but will not I quickly growing it

a what’s at quick just you give breakdown So to of happening Shopify.

first excited super Installments coming we’re the Shopify will GA will product have Shop all, new for that every in available obviously means we’re Affirm merchant June. be sometime So, that enabled here. Pay to on this platform powered that finally by automatically. And of

think, so, tremendous amount the on side. And merchant see, we we’ll uptake just a of

the and or onto Affirm’s hundreds small thousands Now, where been we numbers are coming products and because that exactly sort existing for network, product are that’s together, of Shopify not merchants from. is have fact, scaling platform, eligible hundreds there pre-approving and of a inviting in of are collaborative merchants these

there. done from far We’re

I more there’s very continue not how as go, but And to expect this we lot linearly. will this to fast a little number to so, add to XX,XXX. have growing it And prediction

offer Shopify about as so, fact, One so sure where by well, when to just And of worked being, way to of the make excited merchants I cool on and hard. side stat exclusive in what’s together Very just we happening an product honest this long about things. more Lots very wanted Shopify, we that’s the that lots to and headed. partner. do we’re better as that’s to opposed

Pay at And versus both products Installments Shop least Affirm may you in in to powered that a the timed we complete converting. encountered and all using by had time a XX% new transaction competing while. so, In existing we’re other customers, faster the

product, the we product So, have placement not are, this do prime also we only in the very market. a of in best fact, offering

think going before some during do we your testing what fairly announcement. to very I And It’s to offering. excited wanted actually consumers. what’s the went without roughly head very confirmation have endorsement And public waters from so, card easy powerful own us I initial on do a that’s I platform. different. Card, the exciting, of get with met getting you about it’s the process out on in It’s our that’s a but agree so, to

this of world in we’re to our that’s ourselves from fintech. vantage So, length see happen actually my is we product good people to market. exciting we would the yawns the very excellent saying, happy to wow, announced in it’s to report the to product cycle and thing time. what pretty list wait the list? primarily hit find surrounded wait most by Would or that’s news exciting that all point, Very already that the But, excited bring

We’re going this let year. to out

Matt O’Neill

one that’s quick line provision two jump just think it. us help been to as quarter’s quarters specifically willing back public all got of guys. because in. the follow-up. at real Thanks, I’ll Would just the a of guidance, a And Okay, next to composition in respect company? the maybe outperformance Thanks. through you be with

Michael Linford

last pretty releases. two We seen that’s quarters do behind have think large us The Yes. now.

a investment we at decline think something look in from safe the you code not percentage but would held materially a that’s the for here. allowance Zip of X.X%, as of at pretty number If loans see

Operator

question comes with Suisse. Credit Moshe of line the Our from Orenbuch next

Moshe Orenbuch

on be that Shopify. you just able with of of the Affirm with Congratulations you help will wondering to And continue the those ecosystem. customers part forward be them? of account, kind your to or progress of be just they all kind kind get marketing to will the Affirm an Shopify Affirm customers -- just talked venture they how you us that and will going will they understand if about relate to Great. could of Are

Max Levchin

it the an So, I you -- app. able its that extremely black Installments easiest white either Shop your for loan be guess, thing idea to service or the Shop and Pay is to app to serve make will inside

have to of So, a that I lot answer. quite should of interface be that lot think There’s read. of give user you the sort a details

the it’s recognize Shopify the broader a is environment. very at if within within which to together this of the big we customer Shop And so, again ecosystem, Shopify course, easy see Pay point, them with quite

a ecosystem, don’t If outside we placement before. this find experience hey, sure prime possible. have customer want Shopify and we’ve We be saying, by we the there freak of to that of you will met when and say, we them sort smoothest a out make

So, use extremely and able to you how able our kind do identity, that become well -- will reaffirm of you go, their you’re they’ll be merchant. smooth But could services be to will, be any if experience signed and up. other as on

this things we they’re most in to understanding is is, have that the all do with to we simple. the someone difference make the happens really underwriting be to worth those willing risk thing that customer data customer a between extremely slight all important to are The So, in but associated that paths, provisions, take with there’s designed the that’s all transaction. sure the that fact, first cost,

of there’s well enormous an as bring so, customers we user from just financially board. And point synergies view interface these as on as

Moshe Orenbuch

at you point able to Is to And even then, invite of maybe, clearly, to, that of them? some and something form, be -- able kind possible? I would ask, guess be then be out in or that them kind that’s reach you’d to able

Max Levchin

think Shopify I spamming doubt, if answer have you we the think, if that’s on little customers, yes, than bit of a but happening. not the the there’s depending That’s underlying intention no nuance probably I circumstances, more have question. to

Operator

line from Truist. Andrew question the with comes next Jeffrey Our of

Andrew Jeffrey

the that there pent-up see where temper and other to kind category of any in reopening? see strong in encouraging with just a that In recovery consumers in juxtapose Can behavior seems very recovery any travel behavior of you other you ticketing. changes shift Certainly e-comm demand? to central in that words, from in be lot card-present is might there a consumer in otherwise

Max Levchin

I going a strands different on. of So, think lot there’s

a we things of connected tailwind to bunch huge economic a that different general, us, there’s recovery and in So, see as the are for it.

that and some And is up in large up are to travel but just may of able sort category, There’s people loved rapidly is which to ticketing spitting quite it also of are immediately naturally not their go are they see as of now ones. all and coiled subcategories to and kinds travel finally happening.

For X% canceled. of got old example, only that XX% weddings of postponed and got

other So, expensive people these buy relatively positions us as well sorts there’s as some again, items high-ticket of to and also lot everyday playing low-ticket in as items dresses really the And well bridal things. need expenses. affordable a that for of luxuries as well

All fashion we see of strong just seeing in so, will. all these traditionally different break a and categories that Affirm kind in in demand home, very reduction very, categories we strong. continuing a during fact fitness, not you XXXX, in And That outdoor. are demand took of lot if has are where in been a said, the

have grew quarter which this we XXX%, ex-Peloton, we pretty from prior. massive acceleration at the the quarter, again, If pre-pandemic sort in the look of a you is actually, comparison

still is of from what’s to effectively, we less began, quite, a And doubled second the trade-off the sort of derivative the from is So, growth but recovery already category. for category small this almost growth. driving but our not It’s product here. demand the base, that as

believe So, all to. these we’re things will and places spins the be I very excited demand in have there up. about all of it as obviously those

Andrew Jeffrey

is as what be can to like? and And Okay. regard us to important about That’s the and the you card-present on your growth generally, going in look category, you card-present how update with to might think card helpful. that trajectory thoughts

Max Levchin

what -- by actually to was out you trying I meant I was figure card-present.

So now, I it. get

provide the for especially solutions omnichannel it known slight sometimes step So, important us what to as largest but partners. back, for our be could

interacting have new We modalities store, up in very partnership for customers now in store. A buy completely online, been setting with buy with large Walmart their a very larger enterprise of that’s successful. consumers, return online, long-term are return our of lot

In and is to that itself, best we of we chance it to have is you we’ll go. for are score a modes our have new you different able important part, offer is net reengagement techniques these consumers one we much really our think transacting all strategy be where that in a meet a to the the So, kind thing, something our love consumer. pretty actual we are your that are. of use if card screen speaks you wallet, of and you in on to or remind wallet, everywhere promoter If Affirm we your physical can Affirm it’s

of and able that meet making of card making overall And the we’re where continuous demands. of a our store consumer is as sort sure, end of being strategy strategy so, sure think we landscape out their and omnichannel just and in to in case, customer is store this the

Operator

the from comes Morgan Faucette question of James next Stanley. Our with line

James Faucette

about part compression take their mix. see came you and I You rate other pulling the of own Did the impacting changes, that any wondering, some X%, may more merchants cetera? And X% acquisition, think have that a from, mix back from to as that all? impacted from guess, of as interest-bearing, your its promotions down coming also should mentioned Peloton how we that et little bit customer I’m maybe at

Michael Linford

Peloton, come which see mean, terms year-on-year in the for that business We X% Yes. the with period. of I in otherwise, down But long-term not I the X%. did I was think big actually flat a think did same change X% driver total. is program biggest clearly

impact So, was specifically. see Peloton from generally, biggest programs the and I pullback didn’t we think a X% on

Max Levchin

outside Peloton accelerated. In fact, of X%

James Faucette

beyond And of captured to calendar do captured it. of in fully that the second June half the first spill that you got what think the of it, or to be called or or products. the be associated -- year? expected with then program is impact will separately, you going you That’s the will into returns the your expect half be Tread from Do out or fiscal think quarter like fully quarter, Got that to year kind highlighted you the June helpful. revenue

Michael Linford

Yes.

and we’re that. we that’s that number to a -- million in $X.X in we QX. And the Peloton’s volume, guidance percentage of got how their fiscal was million return Q used actually around estimated $XX the we So, certain our

So, anticipate thought also impact refunds. a dollars to quarter. don’t do any I fiscal of associated any we number. returns in important return in with context would couple QX further put million be Peloton there We’ll to be in it that given in hundred

X the outside. us, impact So, than a smaller from might is for this much think

James Faucette

it. got it, Got

from that like some just small so, to if be that, be for estimate, then? vary account Michael their adjustments future on however, to -- And could clear there returns

Michael Linford

we the the was of exactly. I be when in that anticipate Yes, again to mean, number, we is even QX. don’t recorded material. But, bulk $X.X that take million which

in be So, an impact QX. this should not

Operator

Our next question Jason Kupferberg comes of America. from of with the line Bank

Jason Kupferberg

start far consumer seen I’m to how with QX Affirm/Shop Shopify, GMV follow-up among gone there. and just wanted question wondering that guide just on I and/or uptake the the revenue on have guys. that much a within of And color just merchants live. Thanks, any Pay Installment you’ve so

Max Levchin

to sure this happened Michael all I to I’ll I But, numbers, bit in -- speak perjuring fact giving XX,XXX think -- of it. make literally, quoted, just XX less but number we let don’t that there. the the XX,XXX speak early myself we’re guidance given think the a I’m number just to that last little not deck the the to it’s days,

able competitive We’ll than positioned and clearly itself to a what and better to in -- them. have very, we of a so, in more faster we testing much merchant that be product, very better spent much speak there competition, year a very volume numbers we it’s speak it’s high actually making as terms And terms But hopes but of consumer we’ll generation, of competition. and -- to bit what we’ll adoption. in terms actually real of for base. in volume sure the -- as rapidly increasing this means nearly Obviously, little have the means converting than is

Jason Kupferberg

Yes.

Okay…

Michael Linford

getting focus to so the material to would QX, expect be fiscal the GA in is for specifically Very we more ‘XX. that impact

Jason Kupferberg

Okay.

what your we’ll think quarter, maybe you get for from next a on expectations ‘XX Shopify? are So, sense

Michael Linford

Yes.

Jason Kupferberg

follow-up X guys for more you in and merchants be consolidation. and trends are I’m adopting what industry might both implications a question. just consumers than Okay. then, time terms seeing of BNPL what wondering just think you provider And the over

Max Levchin

best. has to speak the integrated, to we industry I to for ultimately obviously, AOV while since us. But low the a everybody last bias said capacity include trends quarter, said, I to of hard that their think providers have consolidation expect probably doesn’t own. something on Definitely lines multiple higher one AOV we’re offer That to think We provider.

has at I that’s I AOV has quick than think as still stronger retain been multiple ability true. merchants the I even that as say to I’d while ability not an momentum AOV high to low serve would anticipated, a merchant the towards single been quite providers thought.

at that’s for complexity we higher to both competitors I credibly of technical to speak things, That’s core AOV on management hard all. and very the risk very what our in that area vantage. the sort and consider think be our real it’s

pent-up the there’s hard that are at Shopify. again, There’s I demand think every lower early. -- the amount the brands -- It’s growth ultimately, I AUV, it’s on in much things, two, pretty or three little quoted maybe hard of side a that much And numbers AOV low on so low goods. this will demand goods, some merchant looking beauty, the fashion, moment, bit side. the believe of providers. so In available there’s I that low-cost fundamentally of just at It’s clear one On sub-segment. have an enormous just

major on quarter. in overlap so, not a And the topic the minds. moment, But, back our at is competitive a yet we’ll report

Operator

line Our with next the of Seaport from comes Global. question Chris Brendler

Chris Brendler

insight it of to are there’s travel seems Affirm a their are think checkout adoption where we at of us the got don’t that ask give lot later that or just pay about yet. currently pay to website. I you you adoption now, And all gain look can and terms some don’t on now, with merchant It in the have but numbers traction, that consumer especially there later. quarter, sites like your wanted a app travel of great the like this in buy screens merchant I merchants it travel in buy you have starting little in adoption, space? feels on

So, maybe there. give Thanks. thoughts your

Max Levchin

work. are That their have is we hard very They team. a agree. I why problem. sales at It’s

So I’ll answer. a you give serious more

we there’s our merchants. -- -- multiple in with collaborate and ways app, So, it actually even

XX, buy for merchant’s of price them, obviously, later suite at -- and we checkout day the sense the this point. sort of pay the pay sale, X point that classic is now, makes or One of offer at embedded that whatever in particular

at fair consumers the offers, pay Affirm then, starting our the and or and that, not. cetera, consumer I and point larger the help those a our the interchangeably of it a say incremental when in merchants sites Beyond a use app, perhaps journey And have for the within merchant. for situations, more to products, valuable they at both bringing referral those our bounty be -- But we very, screen that competition way partners by sites. for very of powerful, get shopping our impact their merchant to whether new The prefer advertising I for potentially than lot opportunities transactions, our format. us use a those can the amount bonus with just cases, app our point consumers In we integrated their from app are et are are quite merchants going to ecosystem. or bring to way, the driving this of actually them. customers our because there’s itself, by essentially frequently sale way, we in sale. you quite app, these their close These a listed approximately, which you’re new them, will are in A

in all there the so, is And financial those relationship a with merchant. situations,

point yet. of be sale Part we have teams on ability we technical quickly. ourselves integrated this waiting become live what agreement, is already the They very pride to merchant doesn’t here the the to for available. of have Sometimes, Affirm and may at are signing

We modalities. have a variety integration of

[ph] minutes many which Affirm integration. merchants literally we’ve this of thing called, to a within that been have signing contract. leading there’s We live into, allows of really Lite, But modalities different go

those that’s what us it’s our merchant merchant just integration. partners. point high, all day when of a ways That’s every yet doesn’t sometimes Sometimes, we merchant of all value sale things app do and in promoting have to delivering you’ll our of the a day. are find yet But, going

Chris Brendler

to I bear the or on other away merchant is That’s pricing Great. get the pushback seems it question, case partners. your I great merchant value like and color. and delivering of free" And to have I "for bit could have potentially entrance different, loan do product pay given little now, that is mix products. that card model actually to who give used. credit start-ups pioneers potential of pricing related of rates the interchange a biggest lot providers guess, is a buy story this It and or the that your a are later or, Affirm speaking going impression your My undermine PayPal ability

levels, merchants. and into similar at Thanks. pricing the that merchant ability on value to contract comment given renewals your just have pricing relatively drive maybe So,

Max Levchin

I’ll although short, a into there. a well keep [indiscernible]. try it to turn There’s in lot may this

perception of So, payment just relationship Affirm, one provider. merchant’s a are merchant’s way maybe thinking with about not or we

marketing for merchants. We are a fundamentally device

And why really -- the talk know so, compression, It common of about are you you price when interchange industry? typically outside to you as doesn’t us. boxes a payment apply

for of something not do budget. or your else? both, do budget offense. X% maintain do payments I When to discount. the powerful something to up our figure rate I or offer at they the integrity. can transaction trying merchants almost but transactions really competing for do our are The says, of want without consumers and are stands out Instead, on We do says, discount don’t do price Peloton. transact importantly converters merchant want more That volume. are transact what Affirm the X% marketing right and They’re but that to That’s we half they whether help, what at we that’s now. is

marketing with more where So, a app the from, payments that you really it marketing it’s that budget, it for and really, accelerator. came the a important. a think really just doesn’t There’s second channel lot what compete so a And becomes payments if as against doesn’t much does. fundamentally, go about or

they out convert, merchants tell servicing this they on. about it So, is find another while it are a what consumers become that’s as doesn’t brought helping But, ecosystem. the help consumers opportunity excited this maintain is out to even loan, we price they’re checking Maybe spending that, all our promotion, hey, product can their about it new them integrity. idea, our new helps maybe time interesting merchant in

them. space I’ll of with… I there. in actually so, details. as pause -- you And think those points not comparing into to I’ve really fundamentally like I we’re our Michael, feel or highlight that honest kind credit the card we’re not players meandered keep pricing same

Chris Brendler

fair awesome. detail not to term? want is that’s don’t call. just one of Maybe concerns Maybe on -- say pricing get near merchant this I that your Max to biggest into

Max Levchin

It’s it’s probably where in most not, is and apparent the items. high-ticket

It’s Peloton, more that’s And from me -- also your exciting you I and the a with opportunities the are with relationship and risk really think the if with that interaction technical managing overall becomes managing or tell you your creates very buying Affirm powerful. navigating different you provider. PayPal, see just consumer that a space. the XX card about can think, frankly, about about lot integration -- to that’s credit the for really, things all really happening in cool that

Operator

with comes line Keane question Deutsche from the of Bryan next our And Bank.

Bryan Keane

of I going does renewals, also lot, to a seeing, just AOV and solid was Hi, perspective a what Michael, know same-store up guys. maybe ask quarter. that. come big low I a that sales high you’re kind take about there difference Maybe because between AOV? and merchant on your Really is rate on

Michael Linford

of terms in trend There’s renewals. around a not the difference

out start of in contract things the the frankly, that. on think, on innings probably still early years And will over next like we’re meaningful pressure I itself to that couple bear before see you renewals.

in What the I it’s that very point we a data unquestionably not competitive -- So, really though, is AOV out would there space. say there. low

it’s offer services you’re value wider increasingly average hence of increase and offer the for, now, we to solutions pay so that And acquisition If we think important that’s the range is order just and beyond payment buy only becoming merchant for offering commoditized. Returnly. a it later, why

Bryan Keane

how base, And the those to up more on XX,XXX Thanks. How quicker? now? push it. solution guys also will there of the the a up a doing just -- you’re Is checkout? existing ramped to Do you get deal. you to to then, you’re Got at merchant is something And converting Shopify way solution? follow-up there push the push more them get end do more the you Affirm get guys

Max Levchin

lot answer I expect a think we is, to get more. the short

we’re comes to this sure only pervasive, that it think, a primarily last ready went than solution And merchants. Shopify XX,XXX make so. the that both the companies guess, for, GA now for makes I motivated across word I live I is merchants or the I’m is really a deal sense a this if that to finally think a lot days in XX,XXX are very rollout ecosystem. XX more just looking

multiple concert we education with good with a Shopify. is opportunities in of test that like. The this -- so, looks And what demand have

larger we to market go For players, together.

A We big have a is Shopify what figure us making that working they solutions not them. exactly for we enterprises, pony. we our sure we’re customize part sales chose out educate one-trick sure making teams that why of side-by-side,

and very our We’re you very, systems very partners else what Priceline We’ve not to complex, for do built just need. from Walmart. paying for interesting

communicating very hundreds pretty are are there. requirements for tail, And the larger this at be that players to to And have in some of some thousands of to of the solution. strict merchants. fairly excited really are we opportunity with the go eligible the plenty long the that story Shopify tell is shops exceptional Shopify there’s on and finally ready of to And

Operator

as concludes gentlemen, session, question-and-answer our this that, ladies with and today’s conference call. And well as

We You this participation. thank may day. wonderful have now your disconnect And you a for your time. lines at

Affirm (AFRM) 11 May 212021 Q3 Earnings call transcript