AFRM - Earnings call transcript Q2 2022

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Operator

Good afternoon, ladies and gentlemen. Thank you for standing by. Welcome to the Affirm Holdings Fiscal Year 2022 Second Quarter Earnings Conference Call. At this time, all lines have been placed on mute to prevent any background noise.

Following the speakers’ remarks, we will open the line for your questions.

period conference call being your will website a this replay and Investor reminder, the for the after of be reasonable a call recorded is a Relations call. As time of available on I'd Ron Vice now President to Clark, Relations. like the Investor over turn to call of you. Thank

You may begin.

Ron Clark

operator. Thanks,

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

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

Max Levchin

first from our just earnings tenth debut. you this anniversary handful thank anniversary us Hello, and the away also public Affirm this for joining its of marks report a call. on of days earnings is and

We employees so our we've our focused a does reflection warrant the and and all We moment the the months. significantly While to feel of longer the is occasion great of consumers, about road compounding progress. than stakeholders, value far, unpivoted remain during our XX delivering merchants, execution quite the on on last of long-term one strategy ahead shareholders. traveled us

As talked to a public ago key the ourselves introduced markets year we we themes. about several

we accelerated the too, ago last a more is active we've XX% and is consumer the honest of mission to expanded from measure increase for There just do day. XX-month and year, consumer our so reach. merchants our our important another and consumers. over year increase number of a with with a days never for The which without on to marketing is lives the every tool merchant. XX mission, north much drive partners to option growing opportunity a Affirm. I’ve buyer, who sales help our Indeed growth It's is is talked our financial the Growth so embedded well. to foremost way pay. can to needing as the our serve constituent, the well gimmicks active products we next and other as pay-over-time to to vast for Affirm improve seller. still the is rolling Because We've we key XXx of significantly platform from just to growth in provide to meaningful open getting financial we it and million deliver on the our the Affirm well-being transparent Affirm. the the get important done while is people also than million all on impact XXX% incremental about delighting resort people also or have accelerated very us First smarter safe and XX folks for discounting. by is about the ago. ultimate about tally very rely We a reported

of largest to technology, results. working businesses all world's development strategy to this retailers. of early investing support in up delivering The the heavily focused competitive of superiority. smallest policy is founded company enough scalable technological by way in a pursuit and economically As on and investment We've the we continued the engineers,

us innovation Black tech is with and executed the report to exhilarating a IPO. shopping pleased consumer-friendly Black in public. out engineering brings Friday, extension holiday participating intense to companies Friday our product savings. of launched slows market. we the our record-breaking and this has lent of outline the grateful for flawlessly far X.X% an that Target. exercise the is weekend, super of introduced prepped since greatest volume by In just the Each are the for I'm that technology to to last teams of merchants, in Monday year, version number had what Even in our and product delivering off-treated proud increase days an I'm concurrent in It Cyber go also enabled estimate number I'm checkout, a savvy Affirm to to rolled all adaptive transactions of their Affirm a as signifier engineering, the and another Chrome scalability friends who crypto how for is Walmart, momentous Affirm the very giants, ever fact, of expertise Friday able rewards us yet we outage processed beta down, the unique delivered at We another this US some Shopify we that early rush work as triple-digit preparedness. before. technical from decade and Shopify, the were year. delivery simple transaction our Simultaneously, such We've back cash ramp-up accelerate year's Amazon we've experienced. Black weekend period, SuperApp as

consumer, scale, our I magnitude is of greater that Affirm our average, above an regular of On on which launch waitlist P&L own Though caution to share. you order weekly Visa continue initial at fun excluding crazy have to will partner than of do impact I announcement rollout. to give the the yet not Debit+ this forecasting the product's noted number have Debit+ for in may insight transactions by user. a is the now You employees being of

a expect and about excited first course, the early see but Of a it's we and fully to daily future look is expect phenomenon borders. like. of normalize, fees, Affirm's We We number international BNPL to might we late Affirm grudges, an last regress exciting lot to approach to said of product, what this unique instrument had these and no very year. no about are remain more beyond home no bring this as it enthusiastic glimpses intend the adopters year talk our well that

PayBright on active platform of last the American the XX XXXX, more had by to market, business industry solidified our leadership launched Over accelerate. in calendar growth first the of the Affirm Australia Affirm continues end non-North we've our of as with in and Canada months, our merchants largely than than XX,XXX our half growth partnerships to and In now all thanks sites XXX% present to year-over-year for continues the is second platforms. from aggregate, fiscal with number that quarter, first online quarter. to account e-commerce our higher GMV US XX% that of in march every accelerated Affirm In commerce on day. more and

of Amazon beyond our significant collaboration a growth. with Moving was the driver this phase holidays the of before testing

exclude GMV However, you if Amazon, year-over-year. our still doubled

cognizant highly XX% the are offline. commerce still is conducted of We over that of fact

to our numerous expanding to just Verifone use and bring partnerships like Debit+. financial also investments We're Affirm consumers ability in-store announced products at to making of the our two partners physical are the own with the recently with we're with honest point-of-sale. Adient products Our

we been partnerships deliver from winning a to shows stopped improve efficiency to to using strategy long-standing on a in new and finding technology has growth optimize our value. number more relationships. up exceptional and drive never of Affirm, This focus in even for Our ways and results ways

products. three last our the of years, our has over iterating prove example, we For with relationship grown, as the value Walmart

great other We expect things major partnerships similarly time. with from our

and grew and consumer As and they by added are coverage to network small. of learn year-over-year transactions rising from new learnings transactions The is we tremendous We merchants develop big in XX% customer, we rapidly. and by to we of these are strength per even of both with bring the and user measured consumers. all merchant as which repeat each products total number engender a active XXX% excited our engagement

momentum Our is strengthening.

three that mission; double continue down be merchants intelligent things here: reliability; growth care got on fully choice about and are three unique scalability the financial our We is the strategy align extending lead. our Two for working and One, and that to intend that delightful Our of we key deepen underwriting partner products and with to advantage. deliver us our

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modeling schedules operate powerful both predictable as to an level. our of of pay a us a so. managing This well consumers back, installment advantage because consequence a deliver we lines do cash Unlike and underwrite of fundamental to models risk. picture for has, also consumer's own of repayment separability transactions are Another forward-looking as This flow. propensity recursive as at product separability notion reliable its transactions. Affirm well credit, modeling individual ability total is of our We're is is of able separability highly individually structural their to our as tool providers a

with model disparate our and any our focused new for significant specific incorporate select models potential other integrated time, data large curve we into into the raw we directly ones, can a underwriting variable looking merchants decisioning from change. models existing weight Even sources the we technique incremental every a us as new with using of as loose impact too. our us a products as equally of Underwriting continuously results. very well and update we Moreover, invented ended who while network best merchants features XXX significant data offers use acquire over conditions over models and library new few as macroeconomic we data launch help consumer area create proprietary products engineering. of we on and and We both train academically Our decay to very modifications in we've of we types as non-traditional merchant improve individual are of eliminating for models few them. of and up a information, that give at and with models levels. that existing the partners, percentage that maintain new We well-understood that Because time the points feature or from ones proprietary boosting performing under beginning, advantage behaviors consumer months. their over number and

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models us Our in look of retest a processes this, would proprietary like allow versus while credit rapidly traditional longest-serving performance a system illustrate models and system our delinquencies has and by a a using days. deteriorated of scoring reduce matter one one-third FICO. only let's in redeploy side-by-side by Using XX% eliminate proprietary would mere reducing XX%. the at retrain, the ITACS, to software originations of take To traditional dollars, delinquencies all ITACS where credit scoring

we a while only Let's XX% ITACS, further. step would traditional were If XX%. XX% the score of all reduce originations it catch by we take remove would to using delinquencies,

our lot quite this just isolation advantages pandemic at exceptional but design These industry more impact and Affirm technology models see at and great the their well continue Any family young loan college they give both because capabilities. And better with perform X.X picking our a So credit short, future. precision model abstract, is associated traditional both first by standard. have months, retained sound and confidence needless of advanced tickets average that sold to can and of it. the may the in origination will risks real very of a achievements underwriting superior Affirm's buying portfolio parents stroller. very approve say, slopes up with many use us duration recall to has than after to our months students

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join talents more this I bring makes e-commerce be, am so a my to genuinely of possible. who Affirm. been some all is it about folks also extraordinary it. bear. more company heavily excited explainability None embarrassment of around model decisions our quite might the Affirm me easily. that this among of to so We from teammates as course our this Affirm. and their for and outcomes, of X% would of brilliant next value without merchants these and both numbers and mission both with It group decade to team of that consumers truly that excited mathematical to people of understand and to are accounts deliver start riches still can turn exist of optimistic the Large fortunate of minds, get other And consumers we to are invest in US attracted make in have more able regulators talented and

all staying stakeholders on even all value their my thank want I truly work. pretty our for on the to moments price And long-term our during focused our mission. creation and some team for amazing volatile usual for As stock for

Michael the to numbers. on for Now

Michael Linford

and Thanks, Max afternoon, good everyone.

explosive States. Frequency round. by by completed the the advantage. outlook of contribution GMV demonstrated and Series while grew Amazon's less massive D Amazon excluding initial private user even offering rate We results largest XXX% alongside with United capital we faster prior economics Unit our strong. active for and than than quarter increased both at XX costs increased times. And versus our revenue consumers we Revenue step loans both at network In we since second rollout partnership than our Growth our significantly revenue driven transaction fund that we Our change XX% in a our the from were Total as transactions technology exceeded November, our even accelerated the accelerated revenue. grew operate GMV we of year. the enterprises more grew growth. sides in reducing scale also XX%. year. fastest as to network network in more on merchants funding equity XXX%, the our active growth, doubled, And by to efficiency last our with XX% continue used

our XXXX, With for the partners, and more our raising outlook growth we which our moment. business about are share traction with accelerating the early of year a in enterprise fiscal I'll

active Shopify. grew trailing which the over of frame the September from to On basis ending scaling from with we part calculate quarter. and a their let's that increased We quarter our XXXX fiscal do refer businesses. platforms year-to-year leveraging increased pace to sequentially XX.X the adding merchants, growth. just consumer more In X.X million XXXX. by more walk aggressive last brands of otherwise versus fiscal thanks X,XXX power of million to Affirm QX. More we Unless our transactions grew merchants to XXX,XXX stated consumer results. transactions. had Active second to and second of users than I active of the for number active and year the are quarter XXX% XX% comparisons QX Before at time all the quarter second this partnership large per great tripled XX-month quarter grow through than in consumers another fiscal grew XX% a merchants from sequential Despite

grew in our to look infancy $X.X in billion work $X.X completed road on November is its launch XXX% a GMV. from ahead Black the long we've the growth rapid The while of GMV with of from last partnership Friday. our Amazon. to collaboration. a with this increase increase of consumer We still at in Turning optimizations the program forward program Amazon billion years to second We map to includes year. of We interest-bearing seen And in adoption. quarter volume our

across We our momentum strong have business.

with in note also year of I against Excluding slate and Amazon growth merchant across following strong up by partner was quarter product the verticals. COVA with GMV largest GMV an business unusually products launch and by all doubled our would our that second We the tailwinds. comp Peloton boosted a prior new

team As a would testament diversify the more proud One later we for on accounted year QX frequency higher merchant purchase network and shareholders. A expand our really single our for objectives than of industry and merchant partnerships. how our areas breadth we vertical. our to of discussed XX% the these has into increasing depth how delivered no of GMV. I'm ago year

more Monday, took phenomenal BNPL we volume share have doubled pure both and Friday than We we holiday from and significant incumbents believe plays. Cyber season. We our traditional from market Black

estimate strength our ticketing by in strong we year, the was Amazon key the Monday which leading merchandise and holiday Affirm US, by that with General partnership Black last X.X% despite US. in high in shared, story year-to-year launch from the TVs, gaming our great the categories variant. electronics, QX. facilitated laptops in last offering Travel XXX% driven Omicron particular XXX% XXX% Max up As emergence for quarter's and the driven another industry's grew and consoles. volume year, at online demand period of of saw topping the the above Consumer of grew even last deepening Cyber we retailers total increased, mark Friday, and for transaction

our season to holiday importantly, Our from and we're Outside in any this And why we environment. grow another share highered take outstanding so had US, the quarter. composition. different results ability the

there. existing brisk the Australian with Our quarter, including Canadian to launched growing with consumer fall business look them more In entered and we and the market also than forward Apple in second thanks partnerships, to demand. our business tripled in to size, which Peloton, the new

significantly our program includes up billion. quarter, interest-bearing year-on-year Amazon initial which offering our grew XXX% $X.X to This at

Before, of the me to statement. the illustrate income the jump into offering I through walk financials, impact let mechanics this the on

the over monetize portion this to QX. ultimately duration reflects interest we selling either the which income, loans, generated loans the maturity just GMV, yield of When we revenue the to in by hold them Hence, we On the revenue them parties. loan. earn holding will we side, third of a the primarily we from quarter's we total these or recognize see

the recognize over subsequent will quarters. We the balance

the As and retained point, an the loans in quarter, data of this we the generated XX% illustrative interest-bearing US remainder. sold

for On the provision that hold the expense back-end margin means side, is credit losses we we weighted. for upfront loans profile this

more Our to and full key we realize are merchants enterprise every the investing our partnerships unlocking with opportunities today business long-term for are day potential.

in scaling to just are network scale. economics unit in already are expansion beginning them we we strong seeing deliver drive expect stages partnerships, the and reach these While we they when

Total of our growth. turning Now our just and constant $XXX X% gain revenue XXX XX%, to the to offerings. income for our revenue mix. XX% interest also rose strong for more driven website percentage Investor basis sale and merchant GMV than points four Revenue in see Split GMV as revenue while the to supplement rates of each take you relatively four-fold. have growth that drove strong product quarter outlook. of grew accounted grew million, grew Relations to revenue above earnings well from XX% GMV loan a contracted XX% second on times financials, over will Net increased by our year. In the network Pay year-on-year, remained posted last XX%

XX% of grew to to a as provision the excluding growth we compared GMV side, transaction transaction basis And transaction continue expense of declined percentage of Total leverage. revenue real XX%. XXX points $XXX credit for grow costs revenue faster X.X%. year-over-year losses, to costs On than million delivering cost

to while X% XX%. million grew credit $XX $XX improvements included losses intentional growth ago cost the mix APR the duration million while the in figure Provision year excess commitments of helped loss the for of longer declined million $XX to year's several as the discussed reflects year credit our a this release programs shift we've for over a on quarters. COVID-related from Given funding loans, X%, loan that past ago limit allowance, figure loan capital when normalization of purchase

delinquencies the XX remain more have Over and the the managed fiscal fiscal or to more of of have credit pandemic. days half to below periods the XXXX, of first to the level box early we same year, expanded as we of a days XXXX normalized compared even

line and in Our GMV. leverage drove a million, to strong increase top growth we or achieved X.X% $XXX on transaction transaction our XX% range less above costs outlook costs of revenue

beyond Looking at OpEx transaction costs.

increased We around team more continue invest headcount in than brand. to building doubled our elevating We XXXX holidays. our and to the Affirmers and marketing

teams delivered of have a new exciting Our offerings. torrent

foreign While and our all aided awareness among XX%. reach and grew million of costs $XXX to related of helped across cohorts at IPO stock-based expenses total in exclusive greater the operating age Growing which expense and BNPL personnel million, $XXX In brand our awareness drove campaign costs, transaction us providers stock-based QX, resulted acquisitions. highest and our team was one-time higher compensation, expenses, D&A, compensation. to related

operating non-transactional a the quarter in $XXX grew basis, million, year. last million a operating a $XX items, of the was loss compares to of to compared loss loss GAAP which prior million XXX%. $X in Adjusted was $X income year. million these Excluding expenses operating On

extremely significantly billion growth senior invest zero $X.X accelerating notes have November, with five-year issued which convertible costs, long-term GMV manage efficiency. we with while an In our coupon to the and capital a increased attractive we delivered Now at has in dilution. growth, minimizing fortified turning maturity, in cash borrowing sheet. and continuing to to while our discipline position balance capital We our

approach capital than helped million. $XXX equity fund by to business Our as effective million balance the grew from and used reduce on to $XXX year even sheet last capital $XXX our more markets disciplined program to million loans

of billion. from increased As capital XX% portfolio to last and in our X.X% the percentage equity overall year. we from $X.X billion billion portfolio, to end billion from at $X.X to required last capacity year total a grew X.X% line platform $X.X Total $X.X funding platform declined

on Over the both new past $X.X brought year, and in partners. buyer capital from existing new we commitments loan billion

flow our balance XXX% our while billion Our buyers grew third-party program from loan is grew securitization program XX%. forward held to by $X.X

efficient continue Our declined to XX% we on health balances vehicles. funding as more focus

Before to I top touch rates. investors' an been important on move to our outlook, mind topic I want of has for interest that

dominated headlines, continue have strong we economics ability hikes rise. rate interest in remain our grow as confident to while to rapidly potential While delivering rates

financial rate Our point X% a revenue also in LIBOR three-month reflects outlook and to already cost increase a model basis curve roughly forward less long-term X% of caused XXX current transaction the our normalization. which embedded assumes

economics XX sophisticated portfolio assets and significant us impact allows diverse our have and counterparties, shift inherently our We nimble that less advantages manage turnover to with help cost and underwriting to partnerships, environment allow and to to rates, including funding short-term risk mitigate high unit management cost broad changes increase quickly the make result that of would a point rate-sensitive to to funding rising us of to infrastructure that that impact for XX changing us product to able a basis basis the a increase and remainder of fiscal XXX year react At estimate to curve as XXXX. the transaction revenue-less a current point in constant implied market the funding yield mix, only GMV by we conditions. percentage beyond

we funding optimizations. offsets merchant including of any consumer is our increase, beyond would And revenue to in transaction before mix. numerous again XXX pricing, that and based the cost fiscal of percentage and that and believe current upon a less out GMV only rate have impact to XX basis basis we we credit current approximately Looking apply point expectations as point a XXXX, result GMV funding strategies further

our we forward current of revenue points less percentage revenue curve. current at the XXX points transaction that’s fiscal before to as approximately And beyond of XXXX movement every rate year for beyond cost, optimization. estimate basis Looking and applying to and the mix, basis be impact again costs funding XX any a product credit

Now outlook. the turning to

reflect been outlook. our raising remainder accelerating robust the outlook the we business are year, has including contribution results, the are Amazon's look to expected fiscal through stronger. to And our we the and business now as Our in of momentum quarter we never second financial

For fiscal be $XX.XX fiscal year representing XXXX, billion to and we XX% now XX% from to a increase $XX.XX billion, GMV between expect XXXX. year

Given to the comprise for fiscal year. Split now we're to with the total Pay of strong traction GMV our XX% we expect offering XX% Shopify, seeing

We $X.XX representing billion $X.XX XX% XX%. revenue of year-over-year to growth expect of billion to

$XXX seeing mix continued cost This of to costs are the of $XXX transaction shift in $XXX transaction expect We to $XXX million, in the we million. revenue resulting million million less business. reflects

revenue as XX% to of from a with a rollout weighted Affirm We we business continue the of of remarks, operating XX% percentage shares not expect long-term invest the an to Consistent Debit+. impact of does $XXX approximately assume as of and our Max's material loss million. adjusted average growth in

We I'd this to now In average shares add for team great and of my our XX% this line thanks of also GMV will the revenue posted transaction loss third and work we $XXX billion, costs seizing like of momentum $X.XX weighted percentage on very XX% million million. to total of costs with $XXX as revenue Affirmer’s of to closing, quarter revenue operating an just $XXX a less strong million; deliver questions. Max to $X.XX and $XXX to of million to the to outstanding of our continue and mission. all billion transaction a $XXX Adjusted of million. incredible $XXX great fiscal expect million million $XXX to is I open of to quarter. quarter

Operator

gentlemen, a you. will we [Operator Instructions] Ladies at be session. question-and-answer this time conducting and Thank

Ron Clark

inadvertently from human release release Q&A, I of promptly as results waiting to Affirm's because we issuance results was QX to Q&A a of Before full that, we than the today. to portion possible earlier Doug And it address error, open rather until financial I'll our today. that to to than were appropriate for the the our want earlier customary earnings account small felt of official begin session. over after as closed. it Twitter tweeted it thereafter our press briefly up Due market turn With

Operator

you. Thank

comes your Our with proceed of James with Morgan Please first line question Stanley. question. from Faucette the

James Faucette

mean, the But for if more quarter December massive as especially outlook and my you, I question et Shopify from dynamic, guys. sequential kind expected split seasonality impact on this of quarter now on Thank Amazon Great. timing comparatively March more especially of from cetera. Peloton through revenue very seem incorporating much. pay Can we're and walk doesn't others. strong, you drag the I obviously, us guess particularly, Amazon a is and first basis? was is than the you that

kind of business? the help the evolution us Just of sequential understand

Michael Linford

QX grab that said pretty as to scaling with network. happy the spectacular it I'll very sorry special calendar results a of in were results, spectacular were Yes. we're pretty off, the indeed The pace you I And quarter. was and start QX one. -- think

our reiterating guidance are taking and We it up.

excess continues So, fiscal stock. the phase. in our phase of for balance growth outlook we're improve year. high the hyper growth in still of the for well to And the the We're

we to the so doing. holiday really scaling And QX with tends heavier impacts about feel good are that Calendar Yes, of be there we're seasonality. shopping.

a I shared we remarks, holiday As season. in my strong really had

we're the will yes, pace create sequential this some of think next really which over impact the to to and bit be the in back-endedness scaling But I profile those of next decade. both will growth originations. concerned about on focused and little tend We're And with happy revenue with a interest-bearing there. of margin again, we're not looking certainly the the where there's network or very we're quarter. So

James Faucette

cetera. delinquencies do with most to have close supplemental the noticed you the of for this lot XX-day update But that a likes of said, kind there's the of you -- but and consumer incremental of better credit expect from you're or I And -- think, and target. nature delinquency we you started percentage Michael, to repayments, mix tightening rates. both coming from -- of down the probably we also as in because standards? the and to But is around of away should your then kind you, of evolve your the recent quarters? of questions are the that turn that in weeks. other been And indicated a Amazon in is purely to Is how highlighted Max at questions the interest or that target of that And lot least X% recent et

Michael Linford

question. good Very

really only tied with the you about portfolio and happy here to looking we're the manage mean is reiterate total have XXXX there have I'd numbers, And a both losing or the still with right particular intentional the supplement, number there's our add XXXX more been seasonality of to in that normalized delinquencies, we're but back the the curve We're below can the intentionally seasons And to credit to past XXXX what we bit I XXXX fiscal now. we're very repayment out and There's a chart to of driving see And respect total seasonality folks If the very we a you a delinquency delinquencies. light at point, unit we credit at securitization happened. outcomes of thing other and you we approach and And a have of think feel a here. of delinquencies misunderstanding slice the seasonality and the in business. we're look bit looking over schedules level vehicle good quite portfolio see do of curve at actually one one really that, with the box shopping we that the the year. in economics driving. not and take

thoughtful very portfolio has funding a that based into And one needs. goes market profile our vehicles. are construction one unique upon any our and We of each demand about

delinquency, made have et sensor split For example, may cetera. content We pay loans that change. pledge the

our so really And at securitization, supplement the set everybody portfolio-wide can to data DQs. view would no portfolio investor of to encourage a represent see look and really real one

James Faucette

Thank very Michael. That's much. you great,

Operator

Please with from Chiodo line comes Credit the Timothy with Suisse. your of Our proceed next question question.

Timothy Chiodo

the the in stable. little touch them which question. few for bit, lines moving little right, I on that if in a is Thanks fee wanted could the has we pay a are you're the touched rates. slide this bit you Great. terms a your the on of XX, remarks of And prepared taking merchant which Michael, most overall, are blue, dark just pretty specifically of up split around see bit just rate. line elaborate And appreciate thinking ticking us of to maybe down IB, non-integrated could those maybe little seems if a the to is the related that that context? be be I hair the of card on really a purple green Shopify, in either Core then and the was also which terms to also take ticking help related could you would the Amazon? virtual to maybe

Michael Linford

is we The amount you Yes. we really line have earn. the nailed least the of And that over network it. think The control interchange that of a we function rates split I Shopify in really back QX last year-on-year particular up you in fiscal QX, but fee with pay see promotional the were XXXX. that on versus merchant even up QX, in to

line scale that drive our pay set. So, lot our fees really the with the IB respect we got we is of user we reason most of about in resiliency good the split that strong volume offering as how we in well really part in two and lot space, high growth that feel along as enterprises, product tremendous of those of with is the that you've with a function you everywhere things so think growth these have a in is growing point processing a we out than split mix largest would to And will our favor, economics. combined else. there really which enterprise offerings merchant The competitive where have you run pay long would comes in we're with the less that the earn growth confident we're

really we about have out the investors So, when the income of when the you want that understand major portfolio, sort in you in shifts statement. differently really -- the average in to shake the feel mix mix will it good

Timothy Chiodo

mix it. is Point on you. follow-up Quick on there well appreciate Thank taken the I various dynamics. processing costs.

in on expense item, will little be line could line, share revenue with that mix of Shopify bank repayment? Is a the a bit cause that within upward pressure potential which increase work to appreciate offset a specific that their account any hit could or mix of but for fully potential a Plaid loan card the reduced help there you repayment. Finicity like someone direct to So

Max Levchin

we amazing. created cost -- at that you XX a devices The rest are something exactly on repayment the this completely the The there's you're We're now, is And kind really Michael touched like the -- have flash you screams it. to repayment of right. the for really it's if the After sorry I is -- the is the way back the There many questions, or the kind just side mess we're credit wide and because of number be the is And the basis transactional vehicles lifetime ROA of managing cetera. created and charge-offs of you But -- all think course are doing obviously, points dimensions right that you we you longer opportunity. -- manage and Michael that's was of costs which is some on your There's other kind is hesitant a not one you're consumer sort our asking asleep, interesting that way starting because it really answering guys and potential. you basis, script, and experience to incur look what great job to want credit that one with points sort going servicing The is fall webservices really, happening have away. where over of, economics ruthless years currently much, really us. beyond you well per at in ACH time I cheapest Yes. product, it's whole per to we at popular and totally look equal. that goes to a perfect decide valuable a a he's lots of number. we'll excellent look consumer too one. et and to done it. eight even is we optimize be innovation lots lot to but basically of basis just most to of high-touch always my that merchant, of to it We once drive it

network still is a lot the space. white now. so there. are we're forward of The in will we of right what we important enormous do grading things of and is whole growth quarter And this of ourselves absolutely going on we're this It story amounts taking more reporting

a We guessed we reduction are and be we'll real pretty cost well opportunities these paying are. of costs And attention involved. at to where scale dollars in invest

Timothy Chiodo

and Michael you, Thank Excellent. Max.

Operator

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

Ramsey El-Assal

Hi, over helpful. in next they could you few guys. very evening. out of less spread Where think wanted volumes ask kind of of and What about on to be and trend my the terms kind out? Thank where would sort about question you do so year? that much them I we next just that yields between comment shake of, expectations about costs the quarters? for the those should taking should modeling your this transaction If revenue get and exit year

Michael Linford

for Yes. We're give ready guidance XXXX. not to

well. the talk avoid I'll that of So lot between one. the back X% that on half quarter transaction just And somewhere and and we're the a revenue-less we But on that the of cost long-term I being year last guide business a and basis. of for posted results think see about guidance as the economics we X% you higher the end inside the the

think respect economics. there -- level to the quite changing product with I quickly it While is

not with X.X% fees points four you're to of X% margin. to If making be merchant a going Split on taking you're product Pay

true transaction so timing you're revenue percentage opposite on business. is continue little a to but where of able total I scale compression we're think costs GMV those the And some as a to interest-bearing on Split we bit to business do our partnerships some of again of you basis And the on over going expect higher of even things. see enterprise time. the earn And Pay our yet to back-endedness

guidance at competition. we long-term when not later better reflects which this than we that is And the to months. our still our update staying in with X% believe materially with talk concerned X% guidance next year, our six but So all range, everybody the we're back the over of we XXXX we'll expect mix

Ramsey El-Assal

of broadly the, pace change your the solve guess ramp-down any on I ramping term? than the these partners larger of profitability ability view of, there maybe up profitability, of the path more world on over significantly the profitability kind larger updated for can the you any expected And Has like your been to view of us of faster multiyear to Okay. Amazons longer to Peloton. as or sort approach kind at -- give same or longer-term

Michael Linford

to macro No. hasn't reiterate strategy talked like model setup in no what in about financial that conditions I I'd is our changed. framework mean matter and which the today Max's changing. line and September the We true, the remains

is our While with business the a it economics, to the capital. well growth to we we're Human And network. at we're foot path what's profile going and scaling opportunity. the opportunity into grow same is take off we human have are we investing not where the this an to results towards profitability, unit up pace capital function industry-leading what of and of incredible scale think than remains the greater going and prepared we all achieving think these to the we're fantastic us still the think keep what keep adding financial gas is driving of we're long-term

Ramsey El-Assal

Appreciate. so much. Thanks Great.

Max Levchin

command to function it. to I directly that buy Just Like is you to to want I I using is would thinking way that about how product, like one to it out, my delivering pricing it, have proportionate check number has. product to a of that like utilize. to price when a a And and and active back prefer call able many whatever of way payments the we of experience use just would going of product odd tender, are to people of power one is inevitably more come guess that market ago, my fundamentally years it the users network from say ultimately, more you

we reason obsessed sort for to the are And market come some ultimately largest are intend so so and to number we we a the isn't growth but coverage vanity of fact network. say, that consumer and the

for pay appropriately. most We are active the would like to We network. you that

this so profitability. the direct to to path tie is growth a And

Ramsey El-Assal

I see. Great.

for evolve. your I has much Thanks view other changed your too answers. prior not businesses it. So appreciate despite since

Operator

your line with Markets. with comes Our Perlin proceed of Capital Dan Please question RBC next from the question.

Dan Perlin

the first-time users. Thanks of question around ask and customers good repeat frequency the evening, versus guys. I a wanted of to kind

is how be You a influencing between we and next And model bit. have acquisition your should really into a interplay the and that even of second thinking maybe little about question cost the slide on half year there the year? the into that customer

Michael Linford

actually the on. a then and slide that surface, much increasing in mean have can when step of included think actually what's where user frequency really we're that we Max you repeat we're business. – with there growth. going start and is the underneath I'll – to have And rate at we XXX% and in growth you and really change growth I the number add is I of the is users proud supplement because on feels really user on the at There which challenging. user chart unit just net the total growth from a look It look the if users growth alongside really a some transactions impact spot of good respect the new economics. a like new

tends profitable lifetime First than of to the time less the use be consumer. slightly value

to have you mentioned user of Max more But do as growth. so And associated with important us. little bit costs that before, a much that's start-up long-term,

in it gives network platform. run to the the That's ultimately that in So business. And at talked around the of that. the long-term all And much alongside growth in on part be. confidence We're we means. we're us world economics in adding effects so stay long repeat in reason aggressive focused the will going usage economics the is going confidence clip. keep we the right where very on that's about what a have And users happening the tremendous to

Dan Perlin

growing of that so pretty quickly as have to quickly. that set the Yes. I impressive was network frequency that you thought numbers a of think about level

that the other the trends around have share there the know of I health you could have with maybe income like. into might that particular portfolio. kind some what be you some players insight of dynamic lower cohorts around have around out So is in that some – the of January us any coming do concerns looking question I

could So those share that you. be you Thank would if any of great.

Michael Linford

Yeah.

taken overall should delinquency is about think function to-date credit our effects what I you are -- similar to saw seasonal fine for And tooth that us performance. again approval about taking is rates. And give not guide quarter. credit to require decisions others confidence this obviously where outcomes in which disclosure do of the that's to broader in of I we've the feel think, have any But the still you that a it our think that really the around good weakness seeing with what we we're at. seen the respect There's gives trend co-mover. a have number the

Dan Perlin

you. Thank Great.

Operator

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

Jason Kupferberg

guys. Thanks Hey.

is to back the interest-bearing adding come of not we're transaction full to GMV kind I wanted just loans this off due and to throwing general how guide, changing kind of is year dynamic there. lag you're a dynamic is much And to bit? the kind know billion I revenue we're talking Amazon? I revenue-less that I long dynamics how I typically? this $X.X topic mean this think of but the recognition of mean, of that's expense. basically of of So sort people a about

Michael Linford

Yeah.

is it. growth Amazon the -- part great of well So the But is Amazon in while addition Amazon of us. for the rate

GMV excluding we Amazon. still we doubled As communicated,

portfolio. a whole lot happening And so, across -- the we growth of know there's

portfolio So that is the have it's that tend that you to talked not just to limited quickly. Amazon. quite about. does But interest-bearing growing effect And

revenue-less of we again, we're And and that of economics in at confidence the space unit shake our the on that take respect feel up to we're with which transaction folks costs. at us to repeated X% The a of and run GMV is, revenue in a our X% it's we've rates would is again, thing given as mix towards, theme as the really other in ourselves I with mix lower. think only anybody repeat revenue out here. delivering Split with cost but Pay, against respect both the a with Again, range respect range again transaction put impact again, less does the does to it product other the percentage rates to obvious the And have to the higher like end operating here. lot long-term

Jason Kupferberg

guess I all about some of be excluding GMV then, we the they're And just at expectation challenges the half should Okay. Like, back for has on having? year, thinking how year the telecom Peloton? of changed growth full your that given just

Michael Linford

Yeah.

And And they're where current a us. incredible Our our they're frankly thinking our feel We internal like still for QX of on guidance had good current quarter we reflects above all amount of in expectations. with we're admire at. volume an brand. them delivering And have with grow We their that amongst keep them Australia we going past business. them. And keep consumers. their admire loyalty in we'll helping launched their to they And partnering quarter. this the

Jason Kupferberg

Okay. Thank you.

Operator

Our next question comes Securities. Please Jeffrey from Truist of with with Andrew line question. proceed your the

Andrew Jeffrey

Hi. relates the Maybe little Yes. sort question. of it too. taking to question trying Shopify, bit I to appreciate you I'm a James' reconcile as still

would might It's totally XX% although, of a be XX% where not first ramp, we will XX% would which you XX% GMV Can business out I go? be can thought. question a it guess, the our of year. little bit think line the to XX% quick lower be of on you will with then, think to this your those that do I be, follow-up Pay it kind implies points? said, the be, growing rest Split expectations. is pretty address about you volume-wise, two the guidance that have just than And about of based might

Max Levchin

Michael let I'll and finish. start I'll

exactly And excellent. Split very has we'll merchant Shopify obviously out think don't is. yet, percentage adoption performance demand. break I there's The of been of growing shortage so, well. -- no And Pay But what it's

out wrong up I'm me we're can there's in of correct it amount confident I'm And or don't an if enormous think more. that I But breaking our there. guidance can here. growth go Michael so

But been if should that service idea not alone, support has the loans look scratched Shop headline, as Just you a even a at pretty installments you Pay, interest-bearing quick shopping with today. lot a that take more. a doesn't give good

Michael Linford

Yes.

XX% good to how It XX% could be is big be? big. very so, And it number, a could

we Shopify. have of like interest-bearing Just on a launch

enterprise merchants. two launched with Split either of our haven't We Pay largest

So of I lot can continue go a to have confidence out. that number that

on across whole of number. We're a not is rest the drag continue zero up up with how thinking balance portfolio, the that with of effects we're network then only QX to some in just, the of show portfolio. it, we something trying about the finance would elevated against target growth to call think this other are I be again how usage repeat our, but growth a we to network long-term expect a scales that levels the business. continued point the respect those to and And portfolio

Andrew Jeffrey

right. All appreciate I Okay. it. Well, you. Thank

Operator

Nikko Our of SMBC next question comes your from the proceed with Andrew with Bauch America. Please Securities line question.

Andrew Bauch

wanted going share, of kind you've buy-now-pay-later. to CFPB And give a sense how forward? they're guys. a Hey, ask look discussions about from question garnered anything is us whatever looking of there the initial at the from can I offering those you that at

Max Levchin

Sure.

conduct the very ground XX approach moral of is we it's all, et a obviously disputes, true years cetera. that's the comment deal last to way us their way to we et treat the that entire ourselves, we not First we there. cetera consumers, way business, very, this work for with to been over thing have on The high for us the to

equal. And We've the around the should the suggesting so, just a been rules the look a and of regulators that they at have the contact of openings a forefront of industry set good kept and guidance clear all to players.

a space we in for charge there pointed fees the to we that out information record a that both the thing. to compel a reply things public asking be information the detailed little of serious glib, with and late all out around zeros more with don't is of charged amount or lot And we a bit regulatory There's interest interacting in to other was fill consumers we to request will time, over -- that things I this pride small will was fees rules will fairly for regulatory any news. That's to a to of I'm our great. is Obviously, regulatory took relationship the think information. all a there quite But important in those deferred attention when we sort We're a a very it's attention demand, them. said, sense, of with right. well a so do approach comply And space positive that. very dedicated to of things. or the consumers because our treating and stuck confident that we'll stuck mission, That and there. necessary I

So too like. future very early certainly, we're engage. to happy fit but to to tell looks It's what the determine

Andrew Bauch

model, the a assumption in you're helpful. kind be? of the unemployment, just there but appreciate you're macro be kind That’s give you're to rate that that the would a follow-up any outlook guidepost the baseline for embedding is to you. of I perspective And what moves your what embedding of in thinking My impact inflation Thank color us rates. and interest about from on would going number the

Max Levchin

Yes.

product people about So, products and get I I'm Sorry, that macro think have was one we'll and as the when finance thing the go high last the to misunderstand useful. yours. go really interest really up is perhaps, prices just prices so up just of I'll But now when popular more sure I views more our is -- it -- maybe go outside rates But our because well.

ends for trying and you couch is rates card the you're confusing and a clarity, and make just went your plus Affirm And credit you and and time gives for there fees. a and in minus the sponsor and try or pay a you're half If you pay to to to schedule up meet will any things late seller way are no done pain then the interest. clear new

Affirm are X% Just experiments. like homeware seller it's compelling. paid that example powered rate shop rate you how the about for card offering gone you If you more a a at basic feel that X% the do is the up X%

product significantly the actually happens, better provide inflation we consumer and demand as it. of more that bearing useful is so of And powerful more sort side

that rates but flipside get can Michael, it a the generally things you government raises we've a et On what and tell I'll equal at not course, about this done cetera. line of what inflation addresses tailwind the stop is headwind. now top

Andrew Bauch

guys. it. Appreciate it, Got

Max Levchin

Michael?

Michael Linford

Yes.

of of forward outlook curve. avoidance total the our the doubt, Just reflects all

of give our roughly when rate into that movement. And we the increases. guidance. models points of all market take rate with It's of consistent so XXX We expectation there's basis

And so all. the problem we not talk rising That's a us about reflected for That's guidance. at already rates. in

Andrew Bauch

color. the Appreciate

Operator

with Our Deutsche next question your proceed comes Keane Bryan of from with Bank. question. the line Please

Bryan Keane

guys. Thanks taking the for Hi, questions.

I the few almost times. take you clarifications, a QX implied X%. it's guess, rate was about for But two gave because guidance Just cost when revenue just up transaction come

surprises in so came of that at I was And think, one the X.X%.

talked about mix. and -- So you

pay So much it. on much was was to factor that and it just a shop that you that grow realize of that had that the didn't business going

the make sure the Just to guidance versus trying actual.

Michael Linford

we which business we right. mix excess on percentage fact the little bit to a beat costs a obviously be the weighted. transaction of go was despite had given those of a well the impact that caused either take that lower to The the the mix that in more guidance tend revenue Yes, total or of And percent tended in towards the both the two that's did guidance effects the course growth quarter saw of rates as we basis. to back-end down, dollar

Bryan Keane

do And we profitability are obviously Because in -- the it. merchants merchants contracts larger Amazon or terms How question Pay. often follow-up hardest. pricing some we the typically the larger those Shop in think like those Got with then merchant acquiring push the on those larger get that? about is

And is so SMB. on really pricing all made

that to trying think just much. So so about Thanks relationship?

Michael Linford

Yes.

a take for at breaking with the work merchant not I able Split we fact we you rate us key fact to the to economic the If model to respect merchant merchant a out the look good to think not rates We're fees. do you'll continue delivering the strong of we're partner. the largest clearing unit ability experiences that get in that allow our again merchants were enterprises to in really exceptional reason part the economics. quite well fees. largest enterprise we're to by does that fee profitability slide supplement, have But is on that earn still the deliver see business these consumer Pay interest doing to reliant just on while The

Bryan Keane

Got it. clarification. Thanks for the

Operator

with the proceed question next Please Dan line your from Our with question. Dolev Mizuho. comes of

Dan Dolev

basis lower that investors is a conservatism and hopefully GMV. we're lot something of I taking is beat a kind a make you quarter. question are have just GMV guiding sign of got I terms still you in the maybe getting kind you to Hey, this in And then so for the question in there's my that I'm the that massive seem get guidance? of around a in to and to thank where of this evening, from just question. of what's be the weaker. regarding sequential implied that terms trying want much my head else there's sure

and want just the to that strong given reassure results? investors we is being ourselves So conservative this simply

Max Levchin

all, of already of business. significant think seasonality is this the I Michael First a mentioned this component

asking an of about, of piece point that's not that I'm of so have exactly you're the may what puzzle. And gotten important in not something view. our terms sure from weaker

we and opposed to and what that weakness. try sure promise we done philosophical there. not as I out see make But we've we think a fine and and that to older That's approach guys promise to probably anticipating deliver happens.

Dan Dolev

Yes. it. Got

a like question the doesn't I at Sorry at trends I look sort QX like If mean it. sort on harp basis kind pre-COVID weaker. on QX, least I GMV That's of of it asked look why of to didn't but...

Max Levchin

absolutely all just exited monster. Again, an in of honesty quarter kind the we just

of of going we me, And I'm so, metric tripled I count. for series to you or that year-on-year may no Black our so well one transaction look correct remember tripled will of That Michael, matter But company. Friday wrong any but it I next not transaction should what haven't here, be we've think CCC say volume. Monday like here. class what the Cyber -- happened sort

a the growth quite GMV transactions and more. so and some digest We'll lot. accelerated grow And of

Dan Dolev

Appreciate. Thank you much so guys. it. Appreciate

Operator

with comes question the Please your from question. Vincent with next Our of Caintic Stephens. proceed line

Vincent Caintic

if and the credit thanks guess the this there. up question. that. all the for follow trends, Thanks I it business, on to all. details at my on how about concern credit normalization slides Hey. taking for And I just all impacts the wanted there's

so at well. the looking slides, the the but below net as charge-off XXXX, delinquencies And still getting there

earlier you you the that optimization, the the Just merchant describe if you're on is Thank business? And like how be normalizing, that helpful. if pricing of would so as impact that thinking, mentioned wondering some credit does can and offsets the you.

Max Levchin

in chime as let and Michael well. start I'll

delinquency unexpected post tired So I'll compensating or it, choose a module but we number we repeating the never completely of events.

loosened quite we we've or we'll that like a were retrospectively a job/goal/approach And drive the better And number. managing already number for like that range lack -- or here. have else term. deliberately. probably to feel we that as gotten we to to also now Our you the of actually And we've noted, noticed unnecessarily roughly so, and we we careful is then someone continue that necessarily tight

ability to at time of which in consumer behavior, at terms allows stimulus derivatives impacting ups of the not to number credit also transaction. events a so are it at as a of we any and means specific and a have type a it's to product derivatives, differential control but in of the sense, other being given point both us level differentiate But of number differentiate, of and high purchase point And number we as have and in level all line every an the transactions there basically -- of a curve versions that's sort up of of consumer business. inevitably that winding infinite downs microconomic think the enormous

a I'll with to sort And we are that or from -- the the numbers, late to is for willingness fees consumer borrow willing There's a -- for essence, we us hard are margin of loss less product driving read outcomes bad and in certainly bet that is continue to it's just in given our cases we'll what into so our me system. a more allow to macroeconomic guardrails realities we we because our it's it's macroeconomic choice something is gray things related what borrow wider for need And to into approving to more many the no particular react want cetera. idea of than lot our the the become as always demand numbers. doing. the trend for are the macroconomic our And we'll consumer sheets But zone. et

right we'll the So in outstrips significantly that sense of managing sort there. continue the our take and risk willingness product demand product to the for

Vincent Caintic

situation, credit input -- Okay. that so guess decision on I Great. a I mean issue, of -- up have mean the kind inputs if credit about like doesn't it's you pricing sound it's I if and as your guess, Thank you of more going that there an -- is product in know to variables same stay should the that merchant making. following the credit don't impact becomes valuable talk I or macro you. there? or that because your maybe is really volumes your outputs like I could

Max Levchin

In days get our lot So, I'll early are of generating before We we color there's of worsen tell they to anecdotes. a said know the going a the uncertainty. you of macroeconomic believe went little pandemic to don't really we conditions the merchants bit better. a actually and look

product, topline people depends the resell embedded and the And For it to and not down some bottom-line, who in points here on in where a significantly adjust command manufacture say repay focused they generally -- margin allow that right? during on increases ability able products merchant's content go going are Again usable us so means We're merchant in sort ability gray of on be others for to and XXX%. approval a resell buy the up the bit. those is zone of But you but focused on they is speaking something we're that their down. increase the our have will those And we is to to the dealing uncertainty this the powerful. or it. days the early are price is base because margin margin little which the consumer the provide very at all to approvals credits we the own the that significant pandemic of moments to so just we of -- the the model

as and move happy pay off sense complete control generally all I And our helps many ebbs because consumers described the consumers yes, many, very -- that issues there's shelves. so And things. of to flows certainty provide credit macroeconomic economy we But that there. access merchandise to lots if the of more is of add of kinds many, need partners them more speaking, the be are can transactions and mean to as to what for

little buy government uncertainty of so driver swimming glib, just business is If in a maybe for essence, a was everybody money ours. like macroeconomic just it's stimulus everything but cash. actually And in

a for and net for side various demand so discontinuation on is And to the pay the stimuli of willingness merchants' the services. both business on positive driver our consumer the

Vincent Caintic

very Thank you. Okay, helpful perfect. commentary. That’s

Operator

proceed question next of the Davidson. Please line from Our with question. Brendler your Chris comes with D.A.

Chris Brendler

thinking side. taking sales these all technology start Hi should we thanks. as know there I little Good boring more in growth about expense well. the related out non-GAAP guidance a of Thanks on afternoon. as about some you would expense for will slow for just -- and questions. to get a some increases ramp-up of or is And growth the near-term, think expenses to wanted run in I great rate? sequential of my big bit that I give Pretty characteristic expense be partnerships, the a the marketing. but some the growth operating sense the just a Thanks. maybe and have obviously, of income expense

Michael Linford

the is Characteristic marketing on with capital investments mostly side. Yes. human combined non-GAAP

with side, D&A, stock-based non-cash there's and GAAP other compensation, the also the the associated items. On impact

guidance long-term of the our by September that the gave stand rate. will we function think a the business growth I profitability being we in around of

that starts begin and to slow growing expenses we investing consumers. great income. ever grow build see delight human to capital products operating growth deliver and keep we're this, when you'll to positive rate much us if to adjusted And that going slower So, while like down, are in and

think will is intend think income that's for change. have we really we the I manage adjusted this become of out the as or It's up to the number we you down hit. to, operating that what number profitability period rates bottom-line that and growth measures and for guidance where scaling the we

Chris Brendler

boring markets and on in some you. the Okay. came off you know to bit balance loans the securitization question of debt a actually more like our And Thank guess whole another Balance sold little continue estimates. looks the growth both below this quarter. you is It health I just Michael sheet. sheet I use

as is has given was Just given increasing your the healthy investors, conditions? fixed it traction pullback income of or it as been there still bit among a macro

Michael Linford

I in we continue forward No, very market to deals still think have both well-received our single and counterparty deals relationships. the flow

of us assets. And the lot has a very, As markets continue successful. again by we we mentioned those also been be business you're adding and active I great And for deliver continue see very our going in of deal upsizing new our efficiency. had partners to And very to the grow to still securitization of a to both in demand think receive we and levers activity there two script, and existing ones. excellent to capacity capital continue

Chris Brendler

the so well. you Congrats as results Thank on Great. much.

Operator

question-and-answer This your participation. this call. gentlemen concludes our concludes for our you also and session. Thank Ladies

have at a lines disconnect day. and may your this wonderful You time

Affirm (AFRM) 11 Feb 222022 Q2 Earnings call transcript