Q4 2024 Affirm Holdings Inc Earnings Call

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Operator: Good afternoon and welcome to the Affirm Holdings 4th quarter fiscal 2024 earnings call. Following the speaker's remarks, we will open the line for your questions. As a reminder, this conference call is being recorded, and a replay of the call will be available on our Investor Relations website for a reasonable period of time after the call.

Speaker Change: Good afternoon and welcome to the affirm holding fourth quarter fiscal 2024 earnings call.

Speaker Change: Following the speaker's remarks, we will open the line for your questions. As a reminder, this conference call is being recorded, and a replay of the call will be available on our investor relations website for a reasonable period of time after the call. I'd now like to turn the call over to Zane Keller, Director and Base Investor Relations.

Zane Keller: I'd now like to turn the call over to Zane Keller, Director and Investor Relations.

Zane Keller: Thank you, Zane. You may begin. Thank you, operator.

Speaker Change: Thank you, Zane, you may begin.

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

Zane Keller: Thank you operator. Before we begin I would like to remind everyone listening that today's call may contain forward-looking statements.

Speaker Change: News forward-looking statements are subject to numerous risks and uncertainties, including those set forth in our filings with the SEC, which are available on our Investor Relations website.

Speaker Change: Actual results may differ materially from any forward-looking statements that we make today.

Speaker Change: These forward-looking statements speak only as of today and the company does not assume any obligation or intent to update them except as required by law.

Unknown Executive: In addition, today's call may include non-GAAP financial measures. These measures should be considered as a supplement to, and not a substitute for, gap financial measures. For historical non-GAAP financial measures, reconciliations to the most directly comparable GAAP measures can be found in our earnings supplement slide deck, which is available on our Investor Relations website.

Speaker Change: In addition today's call may include non-gap financial measures. These measures should be considered as a supplement to and not a substitute for gap financial measures.

Speaker Change: For historical non-gap financial measures, reconciliation to the most directly comparable gap measures can be found in our earnings supplement slide deck, which is available on our investor relations website.

Zane Keller: Posting today's call with me are Max Luxian from Spounder and Chief Executive Officer and Michael. In line with our practice and prior quarters, we will begin with brief opening remarks from Max before proceeding immediately into questions and answers. On that note, I will turn the call over to Max to begin.

Max Levchin: Posting today's call with me, our Max Levchin, from Spouder and Chief Executive Officer, and Michael Linford, affirms Chief Financial Officer.

Speaker Change: In line with our practice in prior quarters, we will begin with brief opening remarks from Max before proceeding immediately into questions and answers.

Speaker Change: On that note, I will turn the call over to Max to begin.

Max Levchin: Thank you, Zane. Obviously, we had a killer quarter and fiscal year on both growth and profitability side of the ledger. So, as is our custom, the better the results, the less can't comment I'll offer.

Max Levchin: Thank you, Zane. Obviously, we had a killer quarter in fiscal year on both growth and profitability sites of the ledger. So as is our custom, the better the results, the less can come into the offer.

Operator: Good afternoon and welcome to the Affirm Holdings 4th quarter fiscal 2024 earnings call. Following the speaker's remarks, we will open the line for your questions. As a reminder, this conference call is being recorded and a replay of the call will be available on our investor relations website for a reasonable period of time after the call.

Max Levchin: There's some really good new stats in the letter that Michael and I tend to please have a look at that. One thing, though, that's not in the letter that I did want to share to build on a great momentum that we're having to help us continue to scale in a long term, we're evolving our leadership structure a little bit.

Max Levchin: are some really good new stats in the letter that Michael and I tend so please have a look at that.

Max Levchin: One thing though that's not in the letter that I didn't want to share.

Max Levchin: To build an agreement between that we're having, to help us continue to scale in a long term where we're evolving our leadership structure a little bit.

Zane Keller: I'd now like to turn the call over to Zane Keller, director and based investor relations. Thank you, Zane, you may begin. Thank you operator.

Max Levchin: Very excited to share that our chief financial officer, Mr. Michael, and for himself, will be taken on an expanded mural as Chief Operating Officer for a firm. For now, he will remain our CFO, but today we also have the talented and handsome Mr. Robert Hare, the veteran of the firm finance team joining us on this call. For a reason, I expect Rob to take on the CFO role by the end of this fiscal year, still reporting to Michael.

Speaker Change: Gary excited to share that our Chief Financial Officer, Mr. Michael Infirm himself, will be taken on an expanded mural as Chief Operating Officer for a firm.

Zane Keller: Before we begin, I would like to remind everyone listening that today's call may contain forward looking statements. These forward looking statements are subject to numerous risks and uncertainties, including those set forth in our filings with the SEC which are available on our investor relations website. Actual results may differ materially from any forward looking statements that we make today.

Speaker Change: For now, he will remain our CFO, but today we also have the talented and handsome Mr. Robahare, the veteran of the firm finance team joining us on this call for a reason. I expect Rob to take on the CFO role by the end of this fiscal year. Still reporting to Michael. Please make Rob feel welcome. He's a good man and fairer.

Max Levchin: Please make Rob feel welcome. He's a good man, and thank you, Sarah.

Zane Keller: Back to you, Zane. Thank you, Max. With that, we will now take your questions. Operator, please open the line for our first question.

Zane Keller: These forward looking statements speak only as of today and the company does not assume any obligation or intent to update them except as required by law. In addition, today's call may include non-gap financial measures. These measures should be considered as a supplement to and not a substitute for gap financial measures for historical non-gap financial measures, reconciliation to the most directly comparable gap measures can be found in our earnings supplement slide deck which is available on our investor relations website.

Zane Keller: Back to you, Zane.

Zane Keller: Thank you, Max. With that we will now take your questions. Operator, please open the line for our first question.

Unknown Executive: Thank you.

Jason Kupferberg: Our first question comes from a line of Jason Kupferg with Bank of America. Please proceed with your question. Hey, thank you guys. Good to see these numbers. I was curious if you could comment just as we think about fiscal 2025 guidance, just your general approach to assessing what the credit environment might look like. You obviously continue to control that extremely well, and maybe it's part of that in this category of fiscal 25 assumptions. I know you said that B2B and some other newer initiatives, including the Apple Pay partnership, are not expected to be material, but can you maybe tell us a little bit more about how you guys define material? Because it sounds like there may be something in the numbers for it, but we just love to unpack that a little bit.

Speaker Change: Thank you.

Speaker Change: Our first question comes from the line of Jason Cooper, with Bank of America, please proceed with your question.

Jason Cooper: Hey, thank you guys. Good to see these numbers. I was curious if you could comment just as we think about fiscal 2025.

Zane Keller: Posting today's call with me our max luncheon from Spounder and Chief Executive Officer and Michael Linford, a firm chief financial officer. In line with our practice and prior quarters, we will begin with brief opening remarks from max before proceeding immediately into questions and answers.

Speaker Change: Guidance, just your general approach to assessing what the credit environment might look like, obviously continue to control that.

Speaker Change: Extremely well, and maybe as part of that in this category of fiscal 25 assumptions, I know you said that B2B and some other newer initiatives, including the Apple Pay Partnership are not expected to be material, but can you maybe tell us a little bit more about how you guys

Max Levchin: On that note, I will turn the call over to max to begin. Thank you, Zane. Obviously, we had a killer quarter and fiscal year on both growth and profitability sides of the ledger. So as is our custom, the better the results, the less can't comment I'll offer. There's some really good new stats in the letter that Michael and I tend to please have a look at that. One thing though that's not in the letter that I didn't want to share to build on a great momentum that we're having to help us continue to scale in a long term, we're evolving our leadership structure a little bit.

Speaker Change: the material, because it sounds like there may be something in the numbers for it, but we just love to unpack that a little bit. Thank you.

Unknown Executive: Thank you.

Max Levchin: Great compound question. Is there a custom? I'll give some high-level answers, and Michael will probably contextualize it a little bit better than I can.

Speaker Change: Thank you. Great compound question. I'll use some high-level answers and Michael will probably contextualize it a little bit better than I can.

Max Levchin: So, in terms of credit, just a friendly reminder to everybody: these numbers are not an accident. We decide what we want to see. Obviously, there is variability, but we have a really short-term exposure, or consumers don't borrow money from us for too long. Every transaction is underwritten separately. Basically, we are, by design and definition, in control of our credit outcomes. What you see today are the numbers that we wanted to have, and we're happy with them. We'll continue to do exactly the same thing. Every time we plan our credit outcomes, we tell ourselves what it is that we want to see: the DQs, and that's what we typically end up with, plus or minus minor noise.

Michael: In terms of credits, just friendly reminders to everybody, these numbers are not an accident. We decide what we want to see.

Max Levchin: Very excited to share that our chief financial officer, Mr. Michael and for himself, will be taken on an expanded mural as chief operating officer for a firm. For now, he will remain our CFO, but today we also have the talented and handsome Mr. Robo Hare, the veteran of the firm finance team joining us on this call. For a reason, I expect Rob to take on the CFO role by the end of this fiscal year, still reporting to Michael. Please make Rob feel welcome. He's a good man and theorem. Back to using.

Michael: Obviously, there is variability, but we have a really short...

Michael: Term exposure, our consumers don't borrow money from us for too long, every transaction is underwritten separately. We are by design and definition in control of our credit outcomes. What you see today are...

Michael: The numbers that we wanted to have, and we're happy with it, we'll continue to do exactly the same thing every time we plan. Our credit outcomes we tell ourselves what it is that we're going to see in the DQs, and that's what we did a plan up with, plus or minus, minor noise.

Max Levchin: In terms of setting guidance, we did this last year, and we thought we kind of got the right solution or the right formula, and we repeated again this time. We set the floor. As risk managers, we are inherently conservative people. We like to guide all of you to a number. We feel is pretty well baked. We will get there. And then we turn around and tell the team, we got to do much better than this. We got to be this number; this number is in the bag. Let's do, go, go, let's do better.

Max Levchin: Thank you, Max. With that, we will now take your questions.

Michael: in terms of setting guidance.

Operator: Operator, please open the line for our first question. Thank you.

Michael: We did this last year and we thought we'd kind of got their rights.

Jason Kupferberg: Our first question comes from a line of Jason Kupferberg with Bank of America. Please proceed with your question. Hey, thank you guys. Good to see these numbers.

Michael: and we repeat it again this time. We set the floor.

Michael: has respanagers. We are inherently conservative people. We like to guide all of you to a number. We feel is pretty well baked. We will get there.

Max Levchin: I was curious if you could comment just as we think about fiscal 2025 guidance, just your general approach to assessing what the credit environment might look like. You obviously continue to control that extremely well. And maybe as part of that in this category of fiscal 25 assumptions. I know you said that B2B and some other newer initiatives, including the Apple Pay Partnership, are not expected to be material, but can you maybe tell us a little bit more about how you guys define material because it sounds like there may be something in the numbers for it, but we just love to unpack that a little bit.

Michael: and then we turn around and tell the team, we got to do much better than this. We got to be this number of this numbers in the bag. Let's do go, go, go, go, let's do better. That's what happened in fiscal 24. That is our plan for fiscal 25. Now, the thing that makes us fondly to work at.

Max Levchin: That would happen in Fiscal 24. That is our plan for Fiscal 25.

Max Levchin: Now, the thing that makes us a fun place to work at, lots of things change. There will be something that's going to fall out of our plan for 25, because some really cool opportunity is going to come up, and we'll prioritize the opportunity. And we'll part ways temporarily with whatever it is that the opportunity will take the place off. None of that is in the guide by design. We are putting in the guide, which we think we will get to with a really good degree of certainty. That's a philosophy.

Michael: Lots of things change. There will be something that's going to fall out of our plan for 25, because some really cool opportunities are going to come up and we'll prioritize the opportunity, and we'll part ways temporarily with whatever it is that the opportunity will take the place off.

Michael: None of that is in the guide by design. We are putting in the guide what we think we will get to with a really good degree of certainty.

Max Levchin: Thank you. Great compound question. Is there a custom? I'll give some high level answers and Michael will probably contextualize it a little bit better than I can. So in terms of credit, just a friendly reminder to everybody, these numbers are not an accident. We decide what we want to see. Obviously there is variability, but we have a really short term exposure or consumers don't borrow money from us for too long. Every transaction is underwritten separately.

Michael Linford: Michael can probably give you a little more policy. Yeah, and I think you see the growth rate applied in the Q1 guide as obviously those things are reflective of what we've actually seen progress for initiatives that have shipped and are already contributing. And that's what we're seeing, you know, an acceleration in GMB in Q1 so far.

Michael: That's the philosophy Michael can probably give you a little more pollution. Yeah and I think you see the growth rate applied in the Q1 guide is obviously those things are reflective of where we're actually seeing progress.

Michael: for initiatives that have shipped and are already contributing, and that's where we're saying, you know, an acceleration in GMB in Q1 so far. I think the, um, far question around the new initiatives, things like B2B and in our partnership with some of the wallets.

Michael Linford: I think the bar of question around the new initiative seems like you to be in our partnership with some of the walls. The question material actually clarifies as little material, so we're not trying to use any sort of strict definition here. But you know, for us, it would really need to be, you know, hundreds of millions, billion dollar type range before we start thinking about it as influencing the trajectory in a mature way. And so we look at a lot of these opportunities. They're either not yet shipped, as is the case with several of our wallet partnerships where they're not live yet.

Max Levchin: We are by design and definition in control of our credit outcomes. What you see today are the numbers that we wanted to have, and we're happy with them. We'll continue to do exactly the same thing. Every time we plan our credit outcomes, we tell ourselves what it is that we want to see the DQs, and that's what we typically end up with plus or minus minor noise.

Speaker Change: The question of maternity actually clarifies as little in material, so we're not trying to use any sort of strict definition here, but for us it would really need to be hundreds of millions billion dollar type range before we start thinking about it as influencing the trajectory in a mature way.

Speaker Change: and so we look at a lot of these opportunities, they're either not yet shipped. As is the case with several law partnerships, we're not live yet. We don't think it's prudent to try to guess the timing of those in terms of their impact. We retain a lot of confidence.

Michael Linford: In terms of setting guidance, we did this last year and we thought we kind of got the right solution or the right formula and we repeated again this time. We set the floor. As risk managers, we are inherently conservative people. We like to guide all of you to a number. We feel is pretty well baked. We will get there. And then we turn around and tell the team, we got to do much better than this. We got to be this number, this number is in the bag. Let's go together. Let's do better. That would happen in fiscal 24. That is our plan for fiscal 25.

Michael Linford: We don't think it's prudent to try to guess the timing of those in terms of their impact. We retain a lot of confidence on how big they will be eventually, but are being very mindful around setting guidance that is stuff that's live in the ground and contributing today or that we have control and direct line of sight to, you as opposed to things that could take a few quarters to roll out. And therefore have more uncertainty to them. I think whether it's the wall partnerships or any of our international initiatives, we're confident on the side and scale those who wouldn't be spending time on them.

Speaker Change: on how big they will be eventually, but are being very mindful around setting guidance that is stuff that's live in the ground and contributing. Today, we have control and direct line of sight to us, a positive thing that could take a few quarters to roll out and therefore have more uncertainty.

Speaker Change: and I think whether it's the wall partnerships or any of our international initiatives were confident on the side of the scale of those who wouldn't be spending time on them, but we're communicating to you that if they do end up being material, that would actually be material upside to the outlet that we provided for the fiscal year.

Michael Linford: But we're communicating to you that if they do end up being material, that would actually be material upside to the outlet that we provided for the fiscal year.

Michael Linford: Now the thing that makes us fun place to work at, lots of things change. There will be something that's going to fall out of our plan for 25 because some really cool opportunity is going to come up and we'll prioritize the opportunity and we'll part ways temporarily with whatever it is that. The opportunity will take the place off. None of that is in the guide by design. We are putting in the guide, which we think we will get to with a really good degree of certainty.

Unknown Executive: Very helpful. Thank you, guys.

Speaker Change: Very helpful. Thank you guys.

Reginald Smith: Thank you. Our next question comes from the line of Red D. Smith with JP Morgan. Please proceed with your question. Good evening, and thanks for taking a question. I guess we've seen the business perform in a rising rate environment.

Speaker Change: Thank you. Our next question comes from the line of Reddy Smith with JP Morgan. Please proceed with your question.

Reddy Smith: Good evening and thanks for taking the question. I guess we've seen the business perform in a rising way environment. Curious how you're thinking about it.

Michael Linford: That's a philosophy. Michael can probably give you a little more polish. I think you see the growth rate applied in the Q1 guide as obviously those things are reflective of what we've actually seen progress for initiatives that have shipped and are already contributing. And that's where we're seeing an acceleration in GMB in Q1 so far. I think the bar of question around the new initiative seems like you to be in our partnership with some of the wallets.

Reginald Smith: I'm curious about how you're thinking about the business in a potentially falling rate environment. And I'm curious around two things, really: consumer spending. And then I'm thinking about, I know you guys priced each transaction uniquely with the APR, and I'm wondering if there may be some benefits to your model versus traditional credit cards, where the rates are paid to the prime rate. Is there any play area for play in there in terms of pricing the way down? Thank you.

Reddy Smith: The business in a potentially falling rating by our game and I'm curious, or my two things really.

Speaker Change: Consumer Screen Dean, and then I'm thinking about...

Speaker Change: and then you guys might be transaction uniquely with the APR and I'm wondering if there may be some benefits to your model versus traditional credit cards, where the rates are paid to the crime rate in Zane.

Michael Linford: The question is how do you actually clarify this little material? We're not trying to use any sort of strict definition here but for us it would really need to be hundreds of millions, billion dollar type range before we start thinking about it as influencing the trajectory in a mature way. And so we look at a lot of these opportunities. They're either not yet shipped as is the case with several wallet partnerships and not live yet.

Speaker Change: Any play area to play in there on some of the pricing.

Max Levchin: Thanks, Reggie. Great question, as always. There's a huge amount of benefits in not being tethered to a single price that was handed to you in a form of a line that floats precisely with the funds rated.

Speaker Change: the way down.

Speaker Change: Thank you.

Speaker Change: Thanks, Reggie. Great question, as always.

Speaker Change: Amen.

Speaker Change: There's a huge amount of benefits and not being covered to A.

Speaker Change: Single Price, that was handed to you in a formable line that floats precisely with the...

Michael Linford: We don't think it's prudent to try to guess the timing of those in terms of their impact. We retain a lot of confidence on how big they will be eventually but are being very mindful around setting guidance that is stuff that's live in the ground and contributing. Today or that we have control and direct line of sight too as opposed to things that could take a few quarters to roll out and therefore have more uncertainty to them.

Max Levchin: The coupling is unnatural. We've always said it from the very beginning: this idea that you negotiate your credit card rate. Even if it's floating kind of once and for all basically, and the merchant negotiates their acceptance rates once and for all, is bullish like we live in the connected real-time world, why wouldn't we be negotiating these rates in real time? And that's what we've built, and that's why a firm is successful; that's our innovation. As the rates move writ large as they go up, obviously we end up having to pass some of the cost through as it hits us to consumers.

Speaker Change: The coupling is unnatural. We've always said it from the very beginning to the idea that you negotiate your credit card rate. Even if it's floating kind of once and for all basically and the merchant negotiate their acceptance rates once and for all.

Speaker Change: is a wish, like we live in the connected real-time world, why wouldn't we be negotiating these rates in real-time? And that's what we've built, and that's why a firm is successful, that's our innovation.

Michael Linford: I think whether it's the wallet partnerships or any of our international initiatives were confident on the side and scale those who wouldn't be spending time on them but we're communicating to you that if they do end up being material that would actually be material upside to the outlet that we provided for this clear.

Speaker Change: as the rates move at large as to go up obviously we end up.

Max Levchin: Practically, would this mean that at some point someone who would have been approved will not be approved because the price is just not the number that we want to put. We have we have limits.

Speaker Change: I think to pass some of the costs through as it hits us to consumers, practically would this need that at some point someone who would have been approved will not be approved because the price is just not.

Unknown Executive: Very helpful. Thank you guys. Thank you.

Max Levchin: We don't want to go above the Military Lending Act number, and that that's a decision we made a long time ago and don't plan to change. As the rates come down, the very first consumer side impact will be better approval rates; pricing is always fundable. We price things in real time. We can change it as we go, but the most exciting thing about reduction is that funds rate is will just have more active users will have more users will have more repeat users because we'll be able to approve more people. The only thing to add is the rate at which the rates change is very important.

Reginald Smith: Our next question comes from the line of Red D Smith with JP Morgan. Please proceed with your question. Good evening and thanks for taking the question. I guess we've seen the business perform in a rising rate environment. I'm curious how you're thinking about the business in a potentially falling rate environment. And I'm curious around two things really, consumer spending. And then I'm thinking about, I know you guys priced these transactions uniquely with the APR and I'm wondering if there may be some benefits to your model versus traditional credit cards where the rates are paid to the prime rate. Is there any, any play area for play in there on some of the pricing the way down? Thank you. Thanks, Reggie.

Speaker Change: The number that we want to put, we have limits, we don't want to go above the military lending act number, and that's a decision we made a long time ago and don't plan to change. Has the rate come down, the very first consumer side impact will be better approval rates?

Speaker Change: Pricing is always vulnerable, we price things in real time, we can change it as we go. But the most exciting thing about reductions, if a fund rate is, will just have more active users, will have more new users, will have more repeat users, because we'll be able to improve more people.

Speaker Change: The only thing to add is the rate at which the rate change is very important. We saw a very quick rise in rates as rates went up and you saw us react to those changing rates on the time that we talked about.

Max Levchin: We saw a very quick rise in rates as rates went up, and you saw us react to those changing rates on the time when we talked about very well position now to be reactive such that they were to move that quickly. Again, I think we could move very quickly, but that's not in our assumption set. We don't believe that will happen. I think we're talking about here a change in direction of rates more than the magnitude for the time being.

Speaker Change: We're very well positioned now to be reactive such that if they were to move that quickly again, I think we could move very quickly But that's not in our assumption set. We don't believe that we'll happen and

Max Levchin: Great question, as always. There's a huge amount of benefits in not being tethered to a single price that was handed to you in a form of a line that floats precisely with the funds rated. The coupling is unnatural. We've always said it from the very beginning, this idea that you negotiate your credit card rate. Even if it's floating kind of once and for all basically and the merchant negotiates their acceptance rates once and for all is bullish like we live in the connected real time world.

Speaker Change: I think we're talking about here a change in direction of race more than the magnitude for the time being and so very little change in the near term based upon the moves that have already been priced in by the market.

Max Levchin: And so very little change in the near term based upon the booth that have already been priced in by the market.

Speaker Change: I'm going to be the first one to get you out of the world.

Ramsey El: Thank you. Our next question comes from the line of Ramsey L. Assault with Barclays. Please proceed with your question. Hi, thanks so much for taking my question this evening. RLTC fell above nicely above your range this quarter, and I know you called out a presumably non-recurring $30 million benefit from a single securitization.

Speaker Change: Thank you for watching!

Speaker Change: Thank you. Our next question comes from the line of Ram ZL Assault with Mark Lees. Please proceed with your question.

Max Levchin: Why wouldn't we be negotiating these rates in real time? And that's what we've built and that's why a firm is successful that that's our innovation. As the rates move writ large as they go up, obviously we end up having to pass some of the cost through as it hits us to consumers. Practically, would this mean that at some point someone who would have been approved will not be approved because the price is just not the number that we want to put.

Speaker Change: Hi, thanks so much for taking my question this evening.

Speaker Change: RLTC fell above nicely above your range this quarter and I know you called out a presumably non-recurring $30 million benefit from a single securization.

Ramsey El: What are the key puts and takes we need to consider for RLTC performance in 2025, sort of in your internal planning? What are shaping up to be the bigger variables to keep in mind? Do we need to see Fed rates come down, funding costs come down a certain amount? Do we need to see credit performance hanging at certain levels? Where are the pressure points next year?

Speaker Change: What are the key puts in takes? We need to consider for our LTC performance in 2025. Sort of in your internal planning, what are shaping up to be the bigger variables to keep?

Max Levchin: We have limits. We don't want to go above the military lending act number and that that's a decision we made a long time ago and don't plan to change. As the rates come down, the very first consumer side impact will be better approval rates pricing is always fundable. We price things in real time. We can change it as we go. But the most exciting thing about reduction if that funds rate is we'll just have more active users will have more users will have more repeat users because we'll be able to approve more people.

Speaker Change: In mind, we need to see fed rates come down, funding costs come down, a certain amount. We need to see credit performance hangers or levels where the pressure points next year.

Michael Linford: Yeah, great question. So again, on Q4, we did do a non-consolidated securitization. We don't do those every period, and so when we're able to do them, you do have a little bit of a chunky benefit, which pushed us slightly over the 4% range we'd like to think about as the ceiling.

Speaker Change: Yeah, great question. So again, on Q4 we did do a...

Speaker Change: Non-consolidating to characterization, we don't do those.

Speaker Change: Every period, and so...

Max Levchin: The only thing to add is the rate at which the rates change is very important. We saw a very quick rise in rates as rates went up and you saw us react to those changing rates on the time when we talked about very well position now to be reactive such that they were to move that quickly. Again, I think we could move very quickly, but that's not in our assumption set. We don't believe that will happen.

Speaker Change: when we're able to do them, you do have a little bit of a chunky benefit which

Speaker Change: Push the slightly over the 4% range we'd like to think about as the ceiling. When you take that out, the RLTC rate in Q4 is pretty consistent with the guidance that we gave for Q1. So we think it's pretty stable sequentially.

Michael Linford: When you take that out, the RLTC rate in Q4 is pretty consistent with the guidance that we gave for Q1, so we think it's pretty stable sequentially. And the big puts and takes are mostly related to mix of business that we are reaching on the platform and the associated credit outcomes, and then how we execute the capital markets.

Speaker Change: The big puts and takes are mostly related to mix of business that we are regaining on the platform and uses the associated credit outcomes and then how we execute the model markets.

Max Levchin: I think we're talking about here a change in direction of rates more than the magnitude for the time being and so very little change in the near term based upon the booths that have already been priced in by the market.

Michael Linford: I think the team has done a phenomenal job this past 12 months in broadening our access to really attractive capital sources, and that's been done with ABS fields that are done with forward flow deals. We continue to think there's lots of opportunity for us to do more here, and certainly if we're able to do that, we can deliver strong margins. We are signing up for a 10 basis point expansion in the RLTC percentage in GMV versus last year, and we feel like that's possible because of a lot of the full year benefit of the work that we've taken on, plus the fact that we do think we're in a very strong position with respect to the capital markets.

Speaker Change: I think the team has done a phenomenal job this past 12 months.

Speaker Change: and broadening our access to really attractive capital sources.

Speaker Change: Let's then done with ABS-ield.

Speaker Change: and then we continue to think there's lots of opportunity for us to do more here. And certainly if we're able to do that, we're we can deliver strong margins.

Unknown Executive: Thank you.

Ramsey El: Our next question comes from the line of Ramsey L. Assault with Barclays. Please proceed with your question. Hi, thanks so much for taking my question this evening. RLTC fell above nicely above your range this quarter, and I know you called out a presumably non-recurring $30 million benefit from a single securitization. What are the key puts and takes we need to consider for RLTC performance in 2025, sort of in your internal planning, what are shaping up to be the bigger variables to keep in mind. Do we need to see fed rates come down, funding costs come down a certain amount, do we need to see credit performance hanging at certain levels. Where are the pressure points next year?

Speaker Change: We are signing up for a 10 basis point expansion in the RLTC percent of T&D versus last year. We feel like that's possible because of a lot of the full of your benefit of the, in work that we've taken on plus the fact that we do think we're in a very strong position with respect to the capital markets.

Will Mamps: Thank you. Our next question comes from the line of Will Mamps with Goldman Facts. Please proceed with your question. Hey guys, nice results today. I appreciate you taking the question.

Speaker Change: Got it, thank you.

Speaker Change: Thank you, our next question comes from a line of will, manned with Goldman Facts. Please proceed with your question.

Will Manned: Hey guys, that's your results today. I appreciate you taking the question. I wanted to follow up on the kind of dog tailing off the earlier point around having a lot of control and visibility into the credit outcomes that each spec.

Will Mamps: I wanted to follow up on the kind of dog tailing off the earlier point around having a lot of control and visibility into the credit outcomes that each spec when you set the underwriting targets. You know, I thought the stats in a different direction. The stats in the shareholder letter around the number of repeat users and repeat transactions increasing over time. I thought it was interesting, and so I'm wondering if your visibility into forward volume is increasing to kind of a similar way where you now have a much better picture about how the volume trends might check out over the coming year.

Michael Linford: Yeah, great question. So again, on Q4, we did do a non-consolidated securitization. We don't do those every period. So when we're able to do them, you do have a little bit of a chunky benefit which pushed us slightly over the 4% range we'd like to take about as the ceiling. When you take that out, the RLTC rate in Q4 is pretty consistent with the guidance that we gave for Q1, so we think it's pretty stable sequentially.

Speaker Change: When you set the underwriting targets, you know, I thought the stats in a different direction, the stats in the shareholder that are around the number of repeat users and repeat transactions increasing over time.

Speaker Change: I thought was interesting, and so I'm wondering if your visibility in the forward volume is increasing to kind of a similar way where you know how much.

Will Mamps: I just thought it was interesting the increases in number of transactions per user and the number of repeat users.

Speaker Change: that her picture about how the volume trends might check out over the coming year. I just thought it was interesting being increases in number of transactions for user and the number of repeat users. So, how is that impacting the way that you look at the business internally and kind of plan for the coming year?

Max Levchin: So if how is that impacting the way that you look at the business internally and kind of plans for the coming year? If we're on a kind of, if you look at the gaps between those cohort curves, they're pretty big, which means that we're not yet struggling, if you will, to improve those numbers. So the fact that we are driving this outsized gain just means that there's a lot of work to do. The way we think about what's going to happen to be a firm card, for example, right now we're on the order of $3,000 of annual spend.

Michael Linford: And the big puts and takes are mostly related to mix of business that we are urging on the platform and the associated credit outcomes and then how we execute in the capital markets. I think the team has done a phenomenal job this past 12 months and broadening our access to really attractive capital sources and has been done with ABS fields, been done with forward flow deals and we continue to think there's lots of opportunity for us to do more here.

Speaker Change: of...

Speaker Change: If we're on a kind of, if you look at the gaps between those chord curves, the pretty big, which means that we're not yet.

Speaker Change: Struggling, if you will, to improve those numbers. So the fact that we are...

Speaker Change: Driving this outside game just needed, there's a lot of...

Michael Linford: And certainly if we're able to do that, we can deliver strong margins. We are signing up for a 10 basis point expansion in the RLTC percentage in GMV versus last year and we feel like that's possible because of a lot of the full your benefit of the work that we've taken on plus the fact that we do think we're in a very strong position with respect to the capital markets. Robert, thank you.

Speaker Change: and the way we think about what's going to happen to be a foreign card, for example.

Max Levchin: The right number for my point of view is $7,500 at least and on the order of 20 million active cards. That's the target. When we get there, I don't know, but that is what I think is both possible and required for us to succeed. We're going to get there in fiscal 25; probably not, certainly not making any promise on that front, but the leaps that we're showing in these charts speak for themselves. They're big; that means there's a lot of opportunity. So we forecast what we think will get, and that's in the guide, and we got some really cool ideas, and that a lot of them are going to work.

Speaker Change: Right now, we're on your $3,000 of annual spend. The right number for my point of view is $7,500 at least, and on the order of $20 million act of cards. That's the target. When we get there, I don't know, but that is what I think is both possible and required for us to succeed.

Unknown Executive: Thank you.

Speaker Change: We're going to get there in fiscal 25 probably not, certainly not making any promise on that, but the leaps that we're showing in these charts speak for themselves. They're big. There's a lot of opportunity. So we forecast what we think will get and that's in the guide and we got some really cool ideas and that a lot of them are going to work.

Will Mamps: Our next question comes from a line of Will Mamps with Goldman Sachs. Please proceed with your question. Hey guys, nice results today. I appreciate you taking the question. I wanted to follow up on the kind of dog tailing off the earlier point around having a lot of control and visibility into the credit outcomes that each spec. When you set the underwriting targets, you know, I thought the stats in a different direction, the stats in the shareholder letter around the number of repeat users and repeat transactions increasing over time.

Speaker Change: I appreciate it.

Andrew Bauch: Our next question comes from the line of Andrew Bach with Wells Fargo. Please proceed with your question. Thanks for taking the question, guys.

Speaker Change: [inaudible]

Speaker Change: Thank you. Our next question comes from line of Andrew Bock with Wells Fargo. Please proceed with your question.

Andrew Bauch: One is to talk about the sources of operating leverage that are in the guide here. I mean, you're calling for 18.4% AOI margins. I think that's a little bit better than what you've previously been guiding for the growth above 20%. So I just wanted to get your thoughts on that as giving the current growth profile and the strength of that number.

Andrew Bock: Thanks for taking the question, guys. One of the talk about the sources of operating leverage there in the guide here. I mean, you're calling for 18.4% AOI margins.

Will Mamps: I thought was interesting and so I'm wondering if your visibility into forward volume is increasing to kind of a similar way where you now have a much better picture about how the volume trends might check out over the coming year. I just thought it was interesting the increases in number of transactions per user and the number of repeat users. So if how is that impacting the way that you look at the business internally and kind of plan for the coming year.

Andrew Bock: I think that's a little bit better than we used previously been guiding for for the growth above 20%. So just want to get your thoughts on that as given the current growth profile and the strength of that number.

Michael Linford: Yeah, I think the one thing that we as a leadership team are really proud about is just how quickly we made progress on operating leverage in the business. I think we had a lot of conviction of where we would get to for a long time. The pace at which we were able to get there over the past 12 months has been phenomenal. And the Q4 results, I think, are a great data point on that trajectory. And I think that we feel that continuing to expand our margins is good discipline. And with it, gives us the focus we need to actually operate better.

Will Mamps: If we're on a kind of if you look at the gaps between those core curves, the pretty big, which means that we're not yet struggling if you will to improve those numbers. So the fact that we are, for providing this outsized gain just means that there's a lot of work to do. The way we think about what's going to happen to be a firm card, for example, right now we're on the order of $3,000 of annual spend.

Speaker Change: Yeah, I think the one thing that we as a leadership team are really proud about is just how quickly we made progress on operating leverage in the business.

Speaker Change: I think we had a lot of conviction of where we would get to for a long time, the pace at which we were able to get there over the past 12 months has been phenomenal. And the Q4 results, I think, are the great data point on that trajectory.

Speaker Change: and I think that we deal the continuing to expand our margins as good discipline and with it.

Will Mamps: The right number for my point of view is $7,500 at least, and on the order of 20 million active cards. That's the target. When we get there, I don't know, but that is what I think is both possible and required for us to succeed. We're going to get there. This goes 25 probably not certainly not making any promise in that front, but you know the leaps that we're showing in these charts speak for themselves.

Speaker Change: and give us the focus we need to actually operate better and the things that temper that or we do have a ton of opportunity ahead of us.

Michael Linford: And the things that temper that are we do have a ton of opportunity ahead of us. And so we don't want to operate at terminal margins. We do want to show progress. And you have to believe that the adjacent worry conference last May, this May, I outlined that we would expect to continue to expand margins. We're signing up for 200 basis points this year and feel like we still have quite a bit of runway of margin expansion to do into the future.

Speaker Change: and so we don't want to operate at terminal margins. We do want to show progress.

Speaker Change: and you have believe that the jagen-oriented conference left.

Speaker Change: A-A-A-A-A-A-A-A-A-A

Speaker Change: May this may outline that we would expect to continue to expand margins, we're signing up for 200 basis points this year, and feel like we still have quite a bit of a runway of margin expansion to do into the future, and that will just be tempered with the opportunities that we have to invest in particular in continuing to expand our team.

Will Mamps: They're big. I mean, there's a lot of opportunity. So we forecast when we think we'll get and that's in the guide and we got some really cool ideas and not a lot of them are going to work. I appreciate it.

Unknown Executive: Thank you.

Unknown Executive: And that will just be tempered with the opportunities that we have to invest in particular in continuing to expand our team. What's up, guys?

Speaker Change: Good luck guys.

Robert Wildhack: Thank you. Our next question comes from the line of Wildhack with Autonomous Research. Please proceed with your question. Hi, guys, maybe to take the earlier question on rate cuts and funding costs connected to the 25 outlook. Could you give us some color on how much the current rate curve and expectations might be benefiting approvals in fiscal 25 and, in that light, how much it could benefit the growth outlook? That's a good question.

Andrew Bauch: Our next question comes from the line of Andrew Bach with Wells Fargo. Please proceed with your question. Thanks for taking the question, guys.

wild hack: Thank you. Our next question comes from the line of wild hack with autonomous research. Please proceed with your question.

Michael Linford: One is to talk about the sources of operating leverage there in the guide here. I mean, you're calling for 18.4% A OI margins. I think that's a little bit better than what you've previously been guiding for for the growth above 20%. So just want to get your thoughts on that is giving the current growth profile and the strength of that number.

wild hack: Hi guys, maybe to take the earlier question on rate cuts and funding costs, and it's connected to the 25 outlook. Did you use some color on how much the current rate curve and expectations might be benefiting approvals in fiscal 25 and in that light how much it could benefit the growth outlook?

Robert Wildhack: We do not take into account the rate curve, i.e. future market expectations of funding cost into our decisioning explicitly. It does get reflected as we negotiate capital deals. The market expectation of rates does get reflected into those deals into an effect or average cost of funding, which in turn affects our decisioning. But we're not looking out and saying, with two rate cuts on the horizon, we'll get more aggressive. Instead, we look at our current funding costs and compare them to what we need to generate to be profitable on a transaction basis. And there is an important reason why these things flow through a bit on a blank basis.

Speaker Change: It's a good question. We do not take into account the rate curve by a future market expectations of funding cost into her decisioning explicitly. It does get reflected as we negotiate capital deals. The market expectation of rates does get reflected into those deals and to an effects or average cost of funding, which in turn affects our decisioning.

Michael Linford: Yeah, I think the one thing that we as a leadership team are really proud about is how quickly we made progress on operating leverage in the business. I think we had a lot of conviction of where we would get to for a long time, the pace at which we were able to get there over the past 12 months has been phenomenal. And the Q4 results I think are a great data point on that on that trajectory.

Speaker Change: But we're not looking out and saying, with two great cuts on the horizon, it's going to get more aggressive. Instead, we look at our current funding costs and compare them to what we need to generate to be profitable on transaction basis.

Michael Linford: And I think that we feel that continuing to expand our margins is good discipline. And with it gives us the focus we need to actually operate better and the things that temper that are we do have a ton of opportunity ahead of us. And so we don't want to operate at terminal margins. We do want to show progress. And I believe that the the January conference last May this May, I outlined that we would expect to continue to expand margins.

Speaker Change: and…

Speaker Change: There's an important reason why these things flow through a bit on a black basis.

Robert Wildhack: A lot of the funding sources we have are not floating-rate funding facilities. So our ABS deals, for example, have fixed costs of funds. So it will take a while for the deals that we've done over the past year, year and a half to be refinanced in the next two years. So the funding costs are a bit stickier, which means it doesn't flow through quite as immediately as you might. I think.

Speaker Change: A lot of the funding sources we have are not floating great.

Speaker Change: Funding Facilities. It will take a while for the fields that we've done over the past year, year and a half to be referred to in the next few years. So the funding costs are a bit stickier, which means you don't have to flow through quite as immediately as you might think.

Michael Linford: We're signing up for 200 basis points this year. And feel like we still have quite a bit of runway of margin expansion to do into the future. And that will just be tempered with the opportunities that we have to invest in particular in continuing to expand our team.

Robert Wildhack: Okay, thanks. Would that mean then that if you get to, you know, say spring 2025 and rates are a lot lower than they are today, there would be potential upside on approvals because of the lower interest rate environment and lower funding costs? With one caveat, if the reason why rates are being cut is because we're in a perfect economic scenario. Then, yeah, but of course, I think we're mindful of the fact that a thing that's probably happening in that scenario. Is some pressure on the labor market, which has been very, very tight, begins to loosen.

Speaker Change: Okay, thanks. Would that mean then that if you get to say spring 2025 and rates are a lot lower than they are today, there would be potential upside-on approvals because of the lower interest rate environment and lower funding costs?

Unknown Executive: What's up, guys?

Speaker Change: With one caveat, if the reason why Rachel being caught is because we're in a perfect economic scenario.

Unknown Executive: Thank you.

Bob Wildhack: Our next question comes from a line of wild pack with autonomous research. Please proceed with your question. Hi, guys. Maybe to take the earlier question on rate cuts and funding costs and connected to the 25 outlook. Could you give us some color on how much the current rate curve and expectations might be benefiting approvals in fiscal 25 and in that light, how much it could benefit the growth outlook? That's a good question.

Speaker Change: and yeah, but of course I think we're mindful of the fact that I think it's probably happening in that scenario is some pressure on the labor market which has been very, very tight, beginning to loosen. We of course would need to take into account that as we think about where we have the proof.

Robert Wildhack: We, of course, would need to take into account that, as we think about where we set approvals.

Unknown Executive: Okay, very helpful.

Kyle Peterson: Thank you. Our next question comes from the line of Kyle Peterson with Needham. Please proceed with your question. Great. Good afternoon, guys. Thanks for taking the question.

Speaker Change: Good, very helpful. Thank you.

Speaker Change: Thank you. Our next question comes from the line of Kyle Peterson with Needham. Please proceed with your question.

Bob Wildhack: We do not take into account the rate curve i.e, future market expectations of funding cost into our decisioning explicitly. It does get reflected as we negotiate capital deals. The market expectation of rates does get reflected into those deals into an effect or average cost of funding, which in turn affects our decisioning. But we don't we're not looking out and saying with two rate cuts on the horizon will get more aggressive. Instead we look at our current funding costs and compare them to what we need to generate to be profitable on a transaction basis.

Kyle Peterson: I want to touch a little bit on the outlook and to go to your growth expectations, kind of between the network and working hard to work with new interest and gain on sale and such. I guess, which are you got much better? You guys expect me to be a bigger contributor to growth in FY 25, and just how should we think about the sports between the revenue streams?

Kyle Peterson: Great, graphing guys, thanks for taking the question. You want to touch a little bit on the outlook and to go to your growth expectations, can you between?

Kyle Peterson: [inaudible]

Speaker Change: Contributed to growth in F525 and we just have to think about the support between the revenue streams.

Bob Wildhack: And there is an important reason why these things flow through a bit on a blank basis. A lot of the funding sources we have are not floating rate funding facilities. So our ABS deals, for example, have fixed costs of funds. So it will take a while for the fields that we've done over the past year, year and a half to be refinanced in the next two years. So the funding costs are a bit stickier, which means it doesn't flow through quite as immediately as you might.

Max Levchin: So the thing that changes the mix across gravity streams is either the mix of originations and therefore the associated like low in content and then the capital strategies behind it. So as we lean a little bit more on gain on sale or get better price from gain sale, you see the gain sale line go up. And equally, as you have maybe higher MDR bearing loans, you'll see some increases there. I think really it's difficult to identify, and we're not getting guidance on which line at them for you to model out, but the root cause is that we've made the asset more valuable. When you make the asset more valuable.

Speaker Change: So, the thing that changes the mixed across gravity streams is either the mix of a rich nations.

Speaker Change: and therefore, the associated loon content and then the capital strategy is behind it. So as we...

Speaker Change: We need a little bit more on gain on sale, or give better pricing to do in sale you'll see the gain on sale. I'm going to go up and equally as you have maybe higher MDR bearing loan, you'll see some increases there. I think it's really difficult to identify.

Bob Wildhack: I think. Okay, thanks. Would that mean then that if you get to say spring 2025 and rates are a lot lower than they are today, there would be potential upside on approvals because of the lower interest rate environment and lower funding costs? With one caveat, if the reason why rates are being cut is because we're in a perfect economic scenario. Then yeah, but of course, I think we're mindful of the fact that a thing that's probably happening in that scenario. Is some pressure on the labor market, which has been very, very tight begins to loosen. We, of course, would need to take into account that as we think about where we set approvals. Okay, very helpful.

Unknown Executive: Thank you.

Speaker Change: and we're not getting guidance on which led at them for you to model out. But the root cause is that we made the asset more valuable. When you make the asset more valuable.

Unknown Executive: You monetize it at a higher rate, and that's why we do think there's about 10 bits of more revenue. So pulling all the way down to the revenue less transaction cost part. Got it. That's hopeful.

Speaker Change: you want to use it at a higher rate and that's why we do think there's about 10 bits of more revenue. So pulling all the way down to the revenue, less transaction cost part.

Dan Dolev: Thank you. Our next question comes from the line of Dan Dovel with Lizooho. Please proceed with your question. Thanks. Great quarter, guys. And then congrats on the gap profitability in the fourth quarter. I wanted to ask about Apple Pay Later. I think a couple of years ago, when they announced that they're getting into buy now pay later, the Affirm's talk was under pressure. Two years later, they capitulate, and you guys are handling the volumes.

Speaker Change: Got it. That's all, we'll thank you.

Speaker Change: Thank you. Our next question comes in the line of Dan Dovel with Lizuho. Please proceed with your question.

Dan Dovel: Thanks, great quarter guys, and congrats on the gap profitability in the fourth quarter.

Kyle Peterson: Our next question comes from the line of Kyle Peterson with Needham. Please proceed with your question. Great. Good afternoon, guys. Thanks for taking the question. I want to touch a little bit on the outlook and to go to your growth expectations kind of between the network and our network and our network revenue and interest and gain on sale and such.

Speaker Change: I wanted to ask about Apple Pay later. I think a couple of years ago when they announced that they're getting into the final pay later, the affirms talk with under pressure.

Speaker Change: Two years later, they capitulate, and you guys are handling the volumes. Maybe you can talk Max a little bit about the fact that it's much more difficult to do by now, and a lot of people think that it's just...

Max Levchin: Like is it maybe you can talk max a little bit about the fact that it's much more difficult to do buy now pay later than a lot of people think that it's just, you know, a product without a brand and without the ability to take risk appropriately because I sounds like from an apple perspective, there's much more to affirm than what a lot of people were thinking. Thank you. Dan Faucette, he totally front ran my gap, surprised by apparently correcting it. Nice note. So, on the Apple side, I don't think they're capitulating. I think they, if anything, are saying this by and out the latest thing is huge and important, and it's not a feature, it's a major thing that is just as important as credit cards.

Michael Linford: I guess which are you got much more energy as expecting to be a bigger contributor to growth in a 525 and just how should we think about the sports between the revenue streams? So the thing that changes the mix across gravity streams is either the mix of originations and therefore the associated like low in content and then the capital strategies behind it. So as we lean a little bit more on gain on sale or get better price from gain sale, you see the gain sale line go up.

Speaker Change: A product without a brand and without the ability to take risk appropriately because it sounds like from an Apple perspective there's much more to affirm than what a lot of people are thinking.

Dan Dovel: Thank you, Dan.

Speaker Change: Get a dance full credit, he totally front ran my gap, it's reprisable apparently correcting.

Michael Linford: And equally as you have maybe higher MDR bearing loans, you'll see some increases there. I think really it's difficult to identify and we're not getting guidance on which line at them for you to model out, but the root cause is that we've made the asset more valuable. When you make the asset more valuable, you monetize it at higher rate and that's why we do think there's about 10 bits of more revenue. So pulling all the way down to the revenue less transaction cost part. Got it. That's hopeful. Thank you.

Speaker Change: So, on the apple side, I don't think they're capitulating. I think if anything are saying this by now, the later thing is huge and important and is not a feature.

Max Levchin: And maybe I certainly think it is more important credit cards because it's the better way. Creating a platform for companies like Affirm to deliver the product with all the bells and whistles, with all the unique things that we know how to do well, is a very smart strategy. I don't think it's backing out of something. It's embracing the fact that this is a complicated, really, really textured set of offerings that works in different ways for different audiences.

Speaker Change: Major thing that is just as important as credit cards and maybe vice or anything. It is more important than credit cards because it's the better way.

Speaker Change: Creeing a platform for companies like Affarms to deliver the product.

Speaker Change: with all the bells and whistles, with all the unique things that we know how to do well is very smart strategy. I don't think it's backing out of something. It's embracing the fact that this is a complicated, really, really textured set of offerings that works in different ways for different audiences.

Max Levchin: The thing that is, you know, there are a couple of things that don't meet the eye readily in our business that, you know, every time I think I've explained, I find that people don't necessarily fully understand, so who knows. But to sort of repeat the thing that I do try to explain on and on, underwriting is hard. You got to get data; you got to get in real time. You have to verify it for both validity and accuracy and timeliness and all that good stuff. And it's a real complicated thing that we do here really well.

Dan Dolev: Our next question comes to the line of Dan Dovel with Lizooho. Please proceed with your question. Thanks. Great quarter, guys. And then congrats on the gap profitability in the fourth quarter. I wanted to ask about Apple pay later. I think a couple of years ago, when they announced that they're getting into by now pay later, the affirms talk was under pressure. Two years later, they capitulate and you guys are handling the volumes.

Speaker Change: The thing that...

Speaker Change: is, you know, there are a couple of things that don't need the eye readily in our business that, you know, every time I think I've explained, I find that people don't necessarily fully understand, so who knows? But to sort of repeats the thing that I do try to explain on and on.

Max Levchin: Maybe you can talk Max a little bit about the fact that it's much more difficult to do by now pay later than a lot of people think that it's just a product without a brand and without the ability to take risk appropriately. Because it sounds like from an Apple perspective, there's much more to affirm than what a lot of people are thinking. Thank you. Joseph, Dan Faucette, he's totally front-rand, my gap, surprised by apparently correcting it, nice note.

Speaker Change: Underwriting's hard, you got to get data, you got to get a real time, you have to verify it for both validity and accuracy and timelyness and all that good stuff.

Max Levchin: We've been added for 13, 14 years, almost now. And that's our DNA. People talk about AI as if it happened yesterday. We've been in what used to be known as AI for a lot longer than it was a, you know, a thing that people. For our own is reason to lay off their employees. So we use a lot of machine learning, and we do a lot of good work there. So that's hard.

Speaker Change: Complicate a thing that we do here really well. We've been to edit for 13, 14 years almost now. And that's our DNA. People will talk about AI as if it happened yesterday. We've been in...

Speaker Change: but used to be known as AI for a lot longer than it was a thing that people.

Speaker Change: for around as a reason to lay off their employees. So, we use a lot of machine learning and we do a lot of good work there. So, that's hard and unless you're really focused on it, you're not going to do as well as a specialist like we can. Part two, which is two.

Max Levchin: And unless you're really focused on it, you're not going to do as well as a specialist like Weekend. Part two, which is to call out and give props to our intrepid sales team. There's enormous effort involved in signing up merchants because what we offer is really incremental, but it's also really complex. We're coming to them and saying credit cards cost you a couple of points. You should give us three and a half, five and a half, seven and a half percent, you know, major slices of your margin for transactions that we promise you will be really, really incremental.

Speaker Change: Call out and give props to our intrepid sales team. There's enormous effort involved in signing up merchants because what we offer is really incremental, but it's also really complex. We're coming to them and saying, Karakart's cost you a couple of points. You should give us

Max Levchin: So on the apple side, I don't think they're capitulating. I think they, if anything, are saying this binality later thing is huge and important and it's not a feature, it's a major thing that is just as important as credit cards. And maybe I certainly think it is more important credit cards because it's the better way. Creating a platform for companies like Affirm to deliver the product with all the bells and whistles with all the unique things that we know how to do well is very smart strategy. I don't think it's backing out of something. It's embracing the fact that this is a complicated, really, really textured set of offerings that works in different ways for different audiences.

Speaker Change: 3.5.5. 7.5%, you know, major slices of your margin for transactions that we promise you will be really, really incremental. And the way we're going to make a work is not by giving consumers flat out.

Max Levchin: And the way we're going to make it work is not by giving consumers flat-out cashback or discounts or all the sort of tired credit card tricks. We're going to give them access to credit on extraordinary terms, with no APR at all or really low subsidized IPR. That's going to matter to a certain consumer in a really big way. We're going to do transparently and at the point of sale, as they make a decision, all that's going to come together is going to help them decide, going to help them get off the sidelines and buy right now and help you.

Speaker Change: Ashback or discounts are all sort of tired credit card tricks.

Speaker Change: is going to give them access to credit on extraordinary terms with no APR at all or really low subsidized APR, that's going to matter to a certain consumer in a really big way.

Speaker Change: We're going to do Transpansly and at the point of sale as they make a decision, all that's going to come together. It's going to help them decide, it's going to help them get off the sidelines and buy right now and help you Mr. and Ms. Merchant drive them more volume. That is something you find out once you have been in the markets.

Max Levchin: This term is merchant drive more volume. That is something you find out once you have been in the market and realize that, hey, this is actually what makes this product so special: the ability to in real time transfer parts of the margin. The merchant is willing to invest in a transaction to the consumer in a form of benefit, having a real-time network of hundreds of thousands of merchants that do that willingly because they've measured incrementality is really powerful. That's what we spend the last decade doing, in addition to building real AI. That adds up to just a lot of work and people that think it's the coolest thing to work on.

Max Levchin: The thing that, there are a couple of things that don't meet the eye readily in our business that, every time I think I've explained I find that people don't necessarily fully understand, so who knows. But to sort of repeat the thing that I do try to explain on and on, underwriting is hard. You got to get data, you got to get in real time, you have to verify it for both validity and accuracy and timeliness and all that good stuff.

Speaker Change: and realize that hey, this is actually what makes this product so special, the ability to, in real time, transfer parts of the margin.

Speaker Change: is willing to invest in a transaction to the consumer and affordable benefit. Having a real-time network of hundreds of thousands of merchants that do that willingly because the measured and current reality is really powerful and that's what we spend the last decade doing in addition to building real AI.

Max Levchin: And it's a real complicated thing that we do here really well. We've been added for 13, 14 years almost now and that's our DNA. People talk about AI as if it happened yesterday. We've been in what used to be known as AI for a lot longer than it was a thing that people, for our own, is reason to lay off their employees. So we use a lot of machine learning and we do a lot of good work there.

Speaker Change: That adds up to a lot of work and people that think it's the coolest thing to work on. I think creating a platform for companies like ours to deliver that through World's most popular phone and world's most popular wallet is awesome. So I'm obviously super stoked about what's happening there, but it's most certainly.

Unknown Executive: I think creating a platform for companies like ours to deliver that through the world's most popular phone and the world's most popular wallet is awesome. Thank you.

Max Levchin: So that's hard and unless you're really focused on it, you're not going to do as well as a specialist like weekend. Part two, which is to call out and give props to our intrepid sales team, there's an enormous effort involved in signing up merchants because what we offer is really incremental, but it's also really complex. We're coming to them and saying credit cards cost you a couple of points. You should give us three and a half, five and a half, seven and a half percent.

Speaker Change: and Embracement, that's a word versus A-Y-A walk away.

Speaker Change: Alright, we're a bit of a rant.

Speaker Change: This is super helpful, amazing results and congrats to the promotion for our program.

James Faucette: Our next question comes from the line of James Faucette with Morgan Stanley. Please proceed with your question. Thank you very much. I want to build a little bit on that last point there. Max, I'm just asking if you have any questions. I'm kind of in a more generalized way.

Speaker Change: Thank you. Our next question comes from the line of James Fossetti with Morgan Stanley. Please proceed with your question.

Max Levchin: You know, major slices of your margin for transactions that we promise you will be really, really incremental. And the way we're going to make it work is not by giving consumers flat out cash back or discounts or all the sort of tired credit card tricks. We're going to give them access to credit on extraordinary terms with no APR at all or really low subsidized IPR. That's going to matter to a certain consumer in a really big way.

James Fossetti: Thank you very much. I want to build a little bit on that last point there, Max, and just ask kind of in a more generalized way, how you're feeling right now about kind of the composition and profile of your customer base.

James Faucette: How you're feeling right now about kind of the composition and profile of your customer base, and what do you think about in terms of ways and tools, including some of those promotional capabilities you talked about, to expand and maybe then improve so such that you can get even beyond kind of that firm card level of $7,500 in annual spend to something even better than that. We definitely have no shortage of ideas. Let's see.

Speaker Change: and what are you thinking about in terms of ways and tools, including some low-stromotion and all?

Max Levchin: We're going to do transparently and at the point, at the point of sale, as they make a decision, all that's going to come together, it's going to help them decide, it's going to help them get off the sidelines and buy right now and help you. That is something you find out once you have been in the market and realize that, hey, this is actually what makes this product so special, the ability to in real time transfer parts of the margin.

Kid Billies: Kid Billies, you talked about to expand and maybe even improve so such that you can get even beyond kind of that firm card level of $7,500 and annual spend to something even better than that.

Speaker Change: We definitely have no shortage of ideas, let's see.

Max Levchin: So I think I'll try to keep it short because it has a real danger of becoming a very long-winded answer, and I feel like I spent that bullet on the last question. We think of our consumers in segments. We obviously think everybody should throw away the credit card and start using a firm or often, but different consumers we have have fairly different financial profiles and different needs. We have catchy nicknames for all of our segments, but practically some people need access to credit and care a lot about things like lower monthly payments and more time to pay back, and the fact that we don't charge them late fees if something happens and they need a little bit more time to pay back.

Speaker Change: So I think...

Max Levchin: The merchant is willing to invest in a transaction to the consumer in a form of benefit, having a real time network of hundreds of thousands of merchants that do that willingly because they've measured incrementality is really powerful. And that's what we spend the last decade doing in addition to building real AI. That adds up to just a lot of work and people that think it's the coolest thing to work on. I think creating a platform for companies like ours to deliver that through world's most popular phone and world's most popular wallet is awesome.

Speaker Change: I'll try to keep it short because it has a real danger of becoming a very long winded answer and feel like I spent that bullet in the last question. We think of our consumers.

Speaker Change: In segments, we obviously think everybody should throw away the credit card and start using a firm Rothen, but different consumers we have have fairly different financial profiles and different needs.

Speaker Change: We have catching nicknames for all of our segments, but practically some people need access to credit and care a lot about.

Speaker Change: Things like lower monthly payments and more time to pay back and the fact that we don't charge them late fees if something happens and they need a little bit more time to pay back. And then at the other side of the spectrum there are people who say, hey, I understand time value of money, I'm a sophisticated consumer credit and I will transact if you give me a 0% rate.

Max Levchin: And then, on the other side of the spectrum, there are people who say, "Hey, I understand time value of money." I'm a sophisticated consumer credit, and I will transact if you give me zero percent. And those two are now the same person. They live in different segments, and there are different products that excite those people in profoundly different ways. A firm card is a great platform to offer all of those promotional vehicles to every segment.

Unknown Executive: Sorry for a bit of a rant. No, this is super helpful. Well, amazing results and congrats again on the promotion for both of us and Michael. Thank you.

Speaker Change: and those two are now the same person, we live in different segments and there are different products that excite those people.

James Faucette: Our next question comes from the line of James Faucette with Morgan Stanley. Please proceed with your question. Thank you very much. I want to build a little bit on that last point there. Max, I'm just asking. I've kind of been a more generalized way.

Speaker Change: and profoundly different ways.

Speaker Change: A firm card is a great platform to offer all of those promotional vehicles to every segment. We think it's a universal product that we can bring, but you will see us in the coming weeks, and really in months, launch more and more features within the A firm card.

Max Levchin: So we think it's a universal product that we can bring, but you will see us in the coming weeks, really in months, launch more and more features within the firm card footprint that speaks to different segments in fairly different ways. We'll see zero percent deals available to folks that we know really respond to those. We will offer longer clients to pay to those that really need that. That is available to our merchants as a configurable set of tools. We used to talk a lot about a data check out. It's sort of old news. So it doesn't even get a mention in my letter, but it's still the cornerstone of a lot of our payment delivery technology.

Max Levchin: How you're feeling right now about kind of the composition and profile of your customer base and what do you think about in terms of ways and tools, including some most emotional capabilities you talked about to to expand and maybe then improve so such that you can get even beyond kind of that firm card level of $7,500 in annual spend to something even better than that. We definitely have no shortage of ideas.

Speaker Change: Footprint, that speaks to different segments in fairly different ways. We'll see 0% deals available to folks that we know really respond to those.

Speaker Change: We will offer longer clients to pay to those that really need that.

Speaker Change: That is available to our merchant as a configurable set of tools we used to talk a lot about adaptor check out. It's sort of old news so it doesn't even get a mention in my letter, but it's still...

Max Levchin: We have new products that we launched paying to pay in 30 or a few more that we're going to roll out, and all of that will live to serve our merchants to sell more merchandise in the way that converts the best with each consumer segment.

Speaker Change: The cornerstone of a lot of our payment delivery technology, we have new products that we launched pay in two pay and 30. What if you more thought we're going to roll out? And all of that will live to serve our merchants to sell more merchandise in the way that converts the best with each consumer segment.

Max Levchin: Let's see. So I think I'll try to keep it short because it has a real danger of becoming a very long-winded answer and I feel like I spent that bullet on the last question. We think of our consumers in segments. We obviously think everybody should throw away the credit card and start using a firm or often, but different consumers we have have fairly different financial profiles and different needs. We have catching nicknames for all of our segments, but practically some people need access to credit and care a lot about things like lower monthly payments and more time to pay back.

Max Levchin: At some point, I think there will be full automation for merchants to just say, "Hey, let me give you $10 and just get me as much conversion as you possibly can." That's sort of my vision for the Nirvana. Aversion spend almost like buying AdWords. Here's my dollars. Get me some transactions. Here's my dollars. Get me some conversions. We're obviously not quite there yet, but that's the direction which we're headed. The underlying tools for each segment will necessarily be different than that’s by design. We understand our consumer a lot better because we understand what they're buying through Q-level data, etc.

Speaker Change: At some point, I think there will be...

Speaker Change: Full Automation for Merchants to just say, hey, let me give you $X dollars and just get me as much conversion as you possibly can. That's sort of my vision for the Nirvana. A Merchants spend almost like buying at worth, but here's my dollars, give me some transactions, here's my dollars, give me some conversions. We're obviously not quite there yet, but that's the direction which we're headed. The underlying tools for each segment will necessarily be different and that's why design. We understand our consumer a lot better because we understand what they're buying through skill level data, et cetera.

Max Levchin: And the fact that we don't charge them late fees if something happens and they need a little bit more time to pay back. And then on the other side of the spectrum, there are people who say, hey, I understand time value of money. I'm a sophisticated consumer credit and I will transact if you give me zero percent. And those two are now the same person. We live in different segments and there are different products that excite those people in profoundly different ways.

Michael Linford: And I would really encourage everybody to read the cohort engagement charts we have put in the letter. Everything Max mentioned is things that we're working on into the future to make it better.

Speaker Change: and I would really encourage everybody to read the cohort engagement charts we have but in the letter. Everything Max mentioned is things that we're working on into the future to make it better.

Michael Linford: The stuff that's already in the ground, the products we already have out there, are making great progress towards increasing engagement, and it really jumps out of you. It means start looking at just how much more engagement the recent cohorts have, and the consistency with which the cohorts have grown in their engagement with us over time speaks to the underlying value of what we do for these consumers and why we have a lot of confidence that we'll address more and more of their purchases over time.

Speaker Change: The stuff that's already in the ground, the products that already have out there are making great progress towards increasing engagement and it really jumped out of you means start looking at, did how much more engagement the recent cohorts have.

Max Levchin: A firm card is a great platform to offer all of those promotional vehicles to every segment. So we think it's a universal product that we can bring, but you will see us in the coming weeks, really in months, launch more and more features within the firm card footprint that speaks to different segments in fairly different ways. We'll see zero percent deals available to folks that we know really respond to those. We will offer longer clients to pay to those that really need that.

Speaker Change: and the consistency with which the cohorts have grown in their engagement with us over time speaks to the underlying value of what we do for these consumers and why we have a lot of confidence that we will address more and more of their purchases over time.

Unknown Executive: That's great, Colin. Thank you.

Keller: Let's create Keller. Thank you.

Timothy Chiodo: As a reminder, please press star one to ask a question at this time. Our next question comes from a line of Timothy Tito with UBS. Please proceed with your question. Great. Thank you for taking the question. I wanted to circle back on Apple Pay a little bit. Totally appreciate that for a specific customer you might not want to go into too much detail, but I was hoping you could talk a little bit about the expected user experience with Affirm being at, I believe, at the onset, maybe one of the main or only options for US online commerce.

Max Levchin: That is available to our merchant as a configurable set of tools. We used to talk a lot about it after checkout. It's sort of old news, so it doesn't even get a mention in my letter, but it's still the cornerstone of a lot of our payment delivery technology. We have new products that we launched paying to pay in 30, but a few more that we're going to roll out. And all of that will live to serve our merchants to sell more merchandise in the way that converts the best with each consumer segment.

Speaker Change: Thank you. As a reminder, please press star 1 to ask a question at this time.

Speaker Change: Our next question comes from a line of Timothy Tito with UBS. Please proceed with your question.

Timothy Tito: Great, thank you for taking the question. I wanted to circle back on Apple Pay a little bit, to really appreciate that for a specific customer you might not want to go into too much detail, but I was hoping you could talk a little bit about the expected user experience with a firm being.

Max Levchin: At some point, I think there will be full automation for merchants to just say, hey, let me give you $10 and just get me as much conversion as you possibly can. That's sort of my vision for the Nirvana version spend almost like buying AdWords. Here's my dollars, get me some transactions. Here's my dollars, get me some conversions. We're obviously not quite there yet, but that's the direction which we're headed. The underlying tools for each segment will necessarily be different than that's by design.

Speaker Change: At I believe at the onset maybe one of the main or only options for U.S. online commerce but the...

Timothy Chiodo: But the idea would be that over time consumers using Apple Pay would have multiple options, maybe other by now pay later options, but also some of the card-based installment offering. So if we could just talk about the user experience there and maybe the drop down menu, if you will. And then the second piece is around the unit economics. If the full range of products will be offered throughout that channel, so that we should expect the unit economics to be still in that three to four percent range, maybe absence. And some degree of revenue share back to Apple.

Speaker Change: The idea would be that over time consumers using Apple Pay would have multiple options, maybe other buy and out pay liter options but also some of the card-based installment offerings. So if we could just talk about the user experience there and maybe the drop-down menu if you will and then the second piece is around the unit economics. If the full range of products will be offered throughout that channel so that we should start to Apple.

Max Levchin: We understand our consumer a lot better because we understand what they're buying through SQLable data, etc. And I would really encourage everybody to read the cohort engagement charts we have put in the letter. Everything Max mentioned is things that we're working on into the future to make it better. The stuff that's already in the ground, the products we already have out there are making great progress towards increasing engagement. And it really jumped out of you means start looking at just how much more engagement the recent cohorts have and the consistency with which the cohorts have have grown in their engagement with us over time speaks to the underlying value of what we do for these consumers and why we have a lot of confidence that we'll address more and more of their purchases over time.

Michael Linford: That's great, Colin. Thank you.

Max Levchin: Thanks a lot.

Max Levchin: I'll try to answer it in reverse order. So we'll be on the Apple Pay, which by the way, not launched yet.

Speaker Change: Thanks a lot.

Operator: As a reminder, please press star one to ask a question at this time.

Speaker Change: I'll try to answer it in reverse order.

Max Levchin: But so much to maybe if they get in the order, you did ask not, not my role or right to unveil changes to our partner's product. So Apple will undoubtedly deliver a beautiful experience just given who they are will be a part of it. We're excited and proud to be in. We'll all see exactly what it looks like when it rolls out, which hopefully will be reasonably soon. On the economics part of it. So beyond Apple Pay, beyond any one major partner, we are not a wallet by design and definition. We are an ingredient brand.

Speaker Change: will be on the Apple A heat which by the way not launched yet so.

Speaker Change #100: Maybe I'll take it in the order you did ask, not my role or right to unveil.

Speaker Change #101: Change us to our partner's product. So Apple will undoubtedly deliver beautiful experience, just given who they are. We'll be a part of it. We're excited and proud to be. And we'll see exactly what it looks like when it rolls out, which hopefully will be reasonably soon now.

Speaker Change #101: On the economic part of it, so beyond Apple Pay, beyond anyone major partner, we are not a wallet by design and definition. We are an ingredient brand. We are...

Max Levchin: We are in that sense, at least similar to Visa, MasterCard, Amex, et cetera, which means that we have an inherent channel conflict. When you go to a particularly wallet-friendly website, you might find offers directly from card will be accepted because everyone takes Visa. You might find Apple Pay soon enough with us in it and shop a because that's also available now off Shopify, at least in some retailers. And then there's Amazon Pay, and then there's Google Pay, where we're also integrated, and so on and on it goes. We are, you know, we aspire to be in every one of those channels, which means that when we compute the overall revenue transaction card cost metric.

Timothy Chiodo: Our next question comes from a line of Timothy Tito with UBS. Please proceed with your question. Great. Thank you for taking the question. I wanted to circle back on Apple Pay a little bit. Totally appreciate that for a specific customer you might not want to go into too much detail, but I was hoping you could talk a little bit about the expected user experience with Affirm being at I believe at the onset maybe one of the main or only options for US online commerce.

Speaker Change #101: in that sense, at least similar to VISA Master Cardamix, etc., which means that we have an inherent channel conflict. We go to a particularly...

Timothy Chiodo: But the idea would be that over time consumers using Apple Pay would have multiple options maybe other by now pay later options, but also some of the card based installment offering. So if we could just talk about the user experience there and maybe the drop down menu, if you will.

Speaker Change #101: Wallet Friendly, website you might find a firm offered directly, a firm card will be accepted because everyone takes these a, you might find.

Speaker Change #101: Apple pays soon enough with us in it and shoppay because that's also available now off Shopify, at least in some retailers, and then there's Amazon pay, and then there's Google Pay where we're also integrated and so on and on it goes and we are, you know, we aspire to be in every one of those channels.

Speaker Change #101: which means that when we compute the overall revenue transaction cart, cost metric, we have to account to the possibility that the consumer will walk through any one of those doors.

Max Levchin: We have to account for the possibility that the consumer will walk through any one of those doors and then consistent guiding to this idea that the business works really, really well between 34%. When it gets over 4% random securization successes and time shift and I was standing above for slow to rich. We shouldn't really be not investing those dollars, and we're not proving enough people basically below three starts looking with attractive for us as shareholders. And so it will save within 3% to 4% independent of the doors consumers will walk through, and that is certainly how we think about the business.

Max Levchin: And then the second piece is around the unit economics. If the full range of products will be offered throughout that channel so that we should expect the unity economics to be still in that three to four percent range, maybe absent some degree of revenue share back to Apple. Thanks a lot. I'll try to answer it in reverse order. So we'll be on the Apple Pay, which by the way, not launched yet.

Speaker Change #102: and been consistent guiding to this idea that the business works really, really well between 34% when it gets over 4% random secursation successes.

Speaker Change #103: and I was standing above four, slow to rich, we shouldn't really be not investing those dollars and we're not approving enough people basically. Below three.

Speaker Change #103: Starts looking with attractive for us as shareholders, and so it will save it in three to four percent, independent of the doors consumers will walk through, and that is certainly how we think about the business. When we enter any one of these giant partnerships and we've been extremely fortunate.

Max Levchin: So maybe maybe thinking in the order you did ask not not my role or right to unveil changes to our partners product. So Apple will undoubtedly deliver beautiful experience just given who they are will be a part of it. We're excited and proud to be in. We'll all see exactly what it looks like when it rolls out, which hopefully will be reasonably soon now on the economics part of it. So beyond Apple Pay, beyond any one major partner, we are not a wallet by design and definition.

Max Levchin: When we enter any one of these giant partnerships, and we've been extremely fortunate. Not entirely accidentally proud to call giant platforms, retailers, and all its part partners; we create systems and levers to help us navigate financial reality. We don't; I'll probably already know exactly the credit profile of the customer. We have expectations, we have hopes, but we don't know who's going to apply and precisely, with approval rates, we will be able to deliver, etc. So, as a result, we always torture these partnerships to make sure that in the end it all adds up to three or four percent.

Speaker Change #103: and not entirely accidentally brought to call giant platforms, retailers and all its partners.

Speaker Change #103: We create systems and levers to help us navigate.

Speaker Change #103: Financial Reality, we don't uprear we know exactly the credit profile of the customer, we have expectations, we have hopes, but we don't know who's going to apply and precisely was approval rates, we will be able to deliver it, etc. So as a result, we always start to the partnerships to make sure that in the end it'll rise up to three or four percent.

Max Levchin: We are an ingredient brand. We are in that sense, at least similar to visa master card amics, et cetera, which means that we have an inherent channel conflict. So when you go to a particularly wallet friendly website, you might find from offer directly from card will be accepted because everyone takes visa. You might find Apple Pay soon enough with us in it and shopping because that's also available now off Shopify, at least in summary tellers and then there's Amazon pay and then there's Google Pay where we're also integrated.

Max Levchin: Perfect, thank you, Max. Thank you.

Matt O'Neill: Our next question comes to the line of Matt O'Neill with F.T. Partners. Please proceed with your question. Thanks for taking my question, Max, Michael. I just wanted to focus in again on the, I guess, what you bolded in the shareholder letter around the intention and expectations be profitable. In this fourth quarter and therefore beyond, and sort of dovetail onto some of the discussions that we had at the investor day around a longer term aspiration of formalizing as a bank and so forth. Does this sort of accelerate that plan at all? Is that still something on kind of the medium-term timeline?

Speaker Change #104: Thank you. Our next question comes to the line of Matt O'Neill with FT partners. Please proceed with your question.

Matt O'Neill: Thank you for taking my question, Max and Michael, I just wanted to focus in again on the, I guess what you pulled it in the shareholder letter, the intention, the next expectation will be profitable. In this fourth quarter and therefore beyond and sort of deltale onto some of the discussions that were had at the investor day around a longer term aspiration of formalizing as a bank. And so, of course, is this sort of accelerated that plan at all? Is that still something on kind of the medium term timeline? Any thoughts around that would be helpful, thanks.

Max Levchin: And so on and on it goes and we are, you know, we aspire to be in every one of those channels, which means that when we compute the overall revenue transaction card cost metric. We have to account for the possibility that the consumer walked through any one of those doors and been consistent guiding to this idea that the business works really really well between 34%. When it gets over 4% random securization successes and time shift and I was standing above for slow to rich, we shouldn't really be not investing those dollars and we're not proving enough people basically below three starts looking with attractive for us as shareholders.

Matt O'Neill: Any thoughts around that would be helpful. Thanks.

Max Levchin: For the ones of doubts, we do not need to be a bank to conduct our business in the way that we'd like to conduct it. So that is one of the many routes available to us under the right circumstances, but it is not in any way a requirement that it's not a thing we are marching towards in any particular. Today, we decided we're going to become a bank. We'll tell all of you, hey, we decided we're going to go to a bank that has not happened, and that's not what we're saying.

Speaker Change #106: For the ones who doubt, we do not need to be linked to conduct our business in the way that we'd like to conduct it. So that is one of the many routes available to us under the right circumstances, but it is not in any way requirement that it's not. I think we are marching towards any particular.

Max Levchin: So it will save within 34% independent of the doors consumers will walk through and that is certainly how we think about the business when we enter any one of these giant partnerships and we've been extremely fortunate. Not entirely accidentally proud to call giant platforms, retailers, and all its part partners, we create systems and levers to help us navigate financial reality. We don't, I'll probably already know exactly the credit profile of the customer, we have expectations, we have hopes, but we don't know who's going to apply, and precisely, with approval rates, we will be able to deliver, etc. So as a result, we always torture these partnerships to make sure that in the end, it will add up to three or four percent. Perfect, thank you, Max. Thank you.

Speaker Change #107: Today we decided we're going to be going to be going to be going to bank. We'll tell all of you, hey, we decided we're going to be going to be going to bank. That has not happened and that's not what we're saying.

Max Levchin: Gap profitability is really important and momentous. I would like the record to show that it involved no contortionism. It's actually a really important thing that, as a, you know, in this very moment, I want people to understand. We didn't want to go out of bed and said, well, gosh, now we have to go get profitable. Been saying for literally years and years that we are on this track to make more transactions happen. The economics are great. We get enough transactions. We multiply that by the margining transaction. It's going to exceed both the fixed and then eventually the rest of the costs in the business.

Speaker Change #108: Gaprofability is really important and momentous. I would like the record to show that it involved no contortionism. It's actually really important that in this very moment I want people to understand it.

Speaker Change #109: We didn't put a lot of evidence said, well, gosh, now we have to go get get profitable. The same for literally years and years that we are on this track to make more transactions happen.

Speaker Change #109: The genomics are great, we get enough transactions, we multiply that by the margining transaction it's going to...

Speaker Change #109: and then eventually the rest of the costs in the business and now we can see it so clearly we are on afraid to say hey, here's what we're going to happen but it is a commentary on a natural course of the business while we invest all of our available cycles and dollars in growth.

Max Levchin: And now we can see it so clearly; we are afraid to say, hey, here's what I'm going to happen, but it is a commentary on a natural course of the business while we invest all of our available cycles and dollars in growth, managing credit, and all the things that we do here. And so, as much as it, you know, I put it in bold because I want to be able to know we take it seriously. We mean it. We are absolutely going to get there. We feel great about where the business is. But in no part of it is a findable, you know, well, cave. We were always on this journey and now we see a destination.

Matt O'Neill: Our next question comes to the line of Matt O'Neill with F.T. Partners. Please proceed with your question. Thanks for taking my question, Max, Michael. I just wanted to focus in again on the, I guess what you bolded in the shareholder letter around the intention and expectation to be profitable. In this fourth quarter and therefore beyond, and sort of dovetail onto some of the discussions that we had at the investor day, around a longer term aspiration of formalizing as a bank, and so forth.

Speaker Change #109: Managing credit and all the things that we do here.

Speaker Change #109: and so as much as I put it in bold because I want to be able to now we take it seriously. The minutes we are absolutely going to get there, which we'll write about where the business is, but in no part of it is a fine bold, you know, we'll keep. We were always on this journey and now we see.

Max Levchin: Beyond that, we'll, you know, we'll have another reveal. I don't know what it's going to be. How we won't be returning bank, by the way, but it'll be something else and something interesting, some kind of financial metric. Michael, we come up with a robber come up with that. Understood.

Speaker Change #109: A Destination Beyond that, we'll have another reveal. I don't know what it's going to be. I won't be returning back by the way, but it'll be something else and something interesting, some kind of financial metric, like a week or so.

Matt O'Neill: Does this sort of accelerate that plan at all? Is that still something on kind of the medium term timeline? Any thoughts around that would be helpful. Thanks. For the ones of doubts, we do not need to be a bank to conduct our business in the way that we'd like to conduct it. So that is one of the many routes available to us in the right certain circumstances, but it is not in any way a requirement that it's not a thing we are marching towards in any particular.

Speaker Change #110: with a Roblox in our possession.

Unknown Executive: Thank you.

Daniel Dichlitz: by Daniel Dichlitz.

Unknown Executive: There are no further questions at this time.

Zane Keller: I'd like to pass the call back over to Vane Keller.

Daniel Dichlitz: Thank you, there are no further questions at this time, I'd like to pass the call back over to Zane Keller.

Zane Keller: Thank you, everybody, for joining the call today.

Zane Keller: We look forward to speaking with you again next tour. Thank you.

Matt O'Neill: You know, today we decided we're going to become a bank. We'll tell all of you, hey, we decided we're going to go bank that that has not happened and that's not what we're saying. Gap profitability is really important and momentous. I would like the record to show that it involved no contortionism. It's actually a really important thing that as a, you know, in this very moment, I want people to understand. We didn't want to go out of bed and said, well, gosh, now we have to go get profitable, been saying for literally years and years that we are on this track to make more transactions happen.

Zane Keller: Thank you, everybody, for joining the call today. We look forward to speaking with you again next year. Thank you.

Operator: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation. .

Speaker Change #112: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

Matt O'Neill: The economics are great. We get enough transactions. We multiply that by the margining transaction. It's going to exceed both the fixed and then eventually the rest of the costs in the business. And now we can see it so clearly we are afraid to say, hey, here's what I'm going to happen, but it is a commentary on a natural course of the business while we invest all of our available cycles and dollars in growth, managing credit and all the things that we do here.

Matt O'Neill: And so as much as it, you know, I put it in bold because I want to be able to know we take it seriously. We mean it. We are absolutely going to get there. We feel great about where the business is. But in no part of it is a findable, you know, well, cave. We were always on this journey and now we see a destination. Beyond that, we'll, you know, we'll have another reveal.

Matt O'Neill: I don't know what it's going to be. How we won't be returning bank, by the way, but it'll be something else and something interesting, some kind of financial metric. Michael, we come up with a robber come up with that. Understood. Thank you. There are no further questions at this time. I'd like to pass the call back over to Vane Keller. Thank you everybody for joining the call today. We look forward to speaking with you again next tour. Thank you.

Speaker Change #112: Music

Speaker Change #112: [inaudible]

Speaker Change #112: [inaudible]

Speaker Change #112: Hello, I'm Zane Keller, and I'm the one who's here to help you.

Speaker Change #112: [inaudible]

Jason Kupferberg: Shea, Good afternoon and welcome to the Affirm Holdings fourth quarter of the Affirm Holdings fifth quarter of the Affirm Holdings fifth quarter of the Affirm Holdings fifth quarter of the Affirm Holdings fifth quarter of the Affirm Holdings fifth quarter of the Affirm Holdings fifth quarter of the Affirm Holdings fifth quarter of the Affirm Holdings fifth quarter of the Affirm Holdings fifth quarter of the Affirm Holdings fifth quarter of the Hey, thank you guys. Good to see these numbers. I was curious if you could comment just as we think about fiscal 2025 guidance, just your general approach to assessing what the credit environment might look like.

Speaker Change #112: Music Music

Unknown Executive: [inaudible] He's a great man. He's a great man. [inaudible] He's a great man. He's a great man. [inaudible] He's a great man Good afternoon, and welcome to the Affirm Holdings 4th quarter-fifth School, 2024 Earnings Call.

Speaker Change #113: Good afternoon and welcome to the affirm holding fourth quarter fiscal 2024 earnings call.

Speaker Change #114: Following the speaker's remarks, we will open the line for your questions. As a reminder, this conference call is being recorded, and a replay of the call will be available on our investor relations website for a reasonable period of time after the call. I'd now like to turn the call over to Zane Keller, Director and Vista Investor Relations.

Speaker Change #114: Thank you, Zane, you may begin.

Zane Keller: Thank you operator. Before we begin, I would like to remind everyone listening that today's call may contain forward-looking statements.

Zane Keller: [inaudible]

Zane Keller: Actual results may differ materially from any forward-looking statements that we make today.

Zane Keller: These forward-booking statements speak only as of today and the company does not assume any obligation or intent to update them except as required by law.

Zane Keller: In addition today's call may include non-gap financial measures. These measures should be considered as a supplement to and not a substitute for gap financial measures.

Zane Keller: For historical non-gap financial measures, reconciliation to the most directly comparable gap measures can be found in our earnings supplement slide deck, which is available on our investor relations website.

Max Levchin: Posting today's call with me, our Max Levchin, from Spouder and Chief Executive Officer and Michael Linford, affirms Chief Financial Officer.

Speaker Change #115: In line with our practice in prior quarters, we will begin with brief opening remarks from Max before proceeding immediately into questions and answers.

Speaker Change #115: On that note, I will turn the call over to Max to begin.

Max Levchin: Thank you, Zane. Obviously, we had a killer quarter in fiscal year on both growth and profitability sites of the ledger. So as is our custom, the better the results, the less can't come into a offer. There's some really good new stats in the letter that Michael and I tend, so please have a look at that.

Unknown Executive: Following the speaker's remarks, we will open the line for your questions.

Zane Keller: As a reminder, this conference call is being recorded and a replay of the call will be available on our investor relations website for a reasonable period of time after the call. I'd now like to turn the call over to Zane Keller, director and based investor relations. Thank you Zane, you may begin. Thank you, operator.

Speaker Change #116: One thing though that's not in the letter that I didn't want to share.

Speaker Change #116: to build an agreement that we're having to help us continue to scale in a long term where we're evolving our leadership structure a little bit.

Speaker Change #117: Gary excited to share that our chief financial officer, Mr. Michael and for himself, will be taken on an expanded mural as chief operating officer for a firm.

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

Speaker Change #118: For now, he will remain our CFO, but today we also have the talented and handsome Mr. Robahare, the veteran of the firm finance team joining us on this call. For a reason, I expect Rob to take on the CFO role by the end of this fiscal year, still reporting to Michael.

Speaker Change #119: Please make Rob feel welcome. He's a good man and fairer. Back to you Zane.

Zane Keller: Thank you, Max. With that, we will now take your questions. Operator, please open the line for our first question.

Zane Keller: In addition, today's call may include non-gap financial measures. These measures should be considered as a supplement to and not a substitute for gap financial measures. For historical non-gap financial measures, reconciliations to the most directly comparable gap measures can be found in our earnings supplement slide deck, which is available on our investor relations website.

Speaker Change #120: Thank you.

Speaker Change #121: Our first question comes from the line of Jason Cooper, with Bank of America. Please proceed with your question.

Jason Cooper: Hey, thank you guys. Could you see these numbers? I was curious if you could comment just as we think about fiscal 2025.

Zane Keller: Both things today's call with me are Max Luxian from Spounder and Chief Executive Officer and Michael Lindford, a firm chief financial officer. In line with our practice in prior quarters, we will begin with brief opening remarks from Max before proceeding immediately into questions and answers. On that note, I will turn the call over to Max to begin. Thank you, Zane. Obviously we had a killer quarter and fiscal year on both growth and profitability sides of the ledger.

Speaker Change #122: Skydans, just your general approach to assessing what the credit environment might look like. You obviously continue to control that.

Jason Kupferberg: You obviously continue to control that extremely well. And maybe it's part of that in this category of fiscal 25 assumptions.

Speaker Change #123: Extremely well and maybe as part of that in this category of fiscal 25 assumptions I know you said that B2B and some other newer initiatives including the Apple Pay Partnership are not expected to be material but can you maybe tell us a little bit more about how you guys

Jason Kupferberg: I know you said that B2B and some other newer initiatives, including the Apple Pay partnership, are not expected to be material, but can you maybe tell us a little bit more about how you guys define material? Because it sounds like there may be something in the numbers for it, but we just love to unpack that a little bit.

Speaker Change #124: Materials, because it sounds like there may be something in the numbers for it, but we just love to unpack that a little bit. Thank you.

Unknown Executive: Thank you.

Zane Keller: So as is our custom, the better the results, the less can't comment, I'll offer. There's some really good new stats in the letter that Michael and I tend to please have a look at that. One thing though that's not in the letter that I didn't want to share, to build on a great momentum that we're having to help us continue to scale in a long term, we're evolving our leadership structure a little bit.

Max Levchin: Great compound question. Is there a custom?

Speaker Change #124: Thank you. Great compound question. So I'll, as is our question, I'll give some high little answers and Michael will.

Max Levchin: I'll give some high-level answers, and Michael will probably contextualize it a little bit better than I can. So, in terms of credit, just a friendly reminder to everybody: these numbers are not an accident. We decide what we want to see. Obviously, there is variability, but we have a really short-term exposure. Our consumers don't borrow money from us for too long. Every transaction is underwritten separately. We are, by design and definition, in control of our credit outcomes. What you see today are the numbers that we wanted to have, and we're happy with them. We'll continue to do the exact same thing.

Michael: Probably contextualized a little bit better than I can. So in terms of credits, just a friendly reminder to everybody, the numbers are not an accident, we decide what we want to see.

Zane Keller: Very excited to share that our chief financial officer, Mr. Michael and for himself, will be taken on an expanded mural as chief operating officer for a firm. For now, he will remain our CFO, but today we also have the talented and handsome Mr. Robo here, the veteran of the firm finance team joining us on this call for a reason. I expect Rob to take on the CFO role by the end of this fiscal year.

Michael: Obviously, there is variability, but we have a really short.

Michael: Term exposure, our consumers don't bar money from us for too long, every transaction is underwritten separately. We are by design and definition in control of our credit outcomes. What you see today are...

Max Levchin: Every time we plan our credit outcomes, we tell ourselves what it is that we want to see the DQs. And that's what we typically end up with.

Michael: The numbers that we wanted to have and we're happy with it. We'll continue to do exactly the same thing every time we plan. Our credit outcomes we tell ourselves what it is that we're going to see in the DQs and that's what we did a clean up with. Plus or minus minor noise.

Zane Keller: Still reporting to Michael, please make Rob feel welcome. He's a good man and theorem. Back to you, Zane. Thank you, Max. With that, we will now take your questions. Operator, please open the line for our first question. Thank you. Our first question comes from a line of Jason Cooper with Bank of America. Please proceed with your question. Hey, thank you guys. Good to see these numbers. I was curious if you could comment just as we think about fiscal 2025 guidance, just your general approach to assessing what the credit environment might look like.

Max Levchin: In terms of setting guidance, we did this last year and we thought we kind of got the right solution or the right formula, and we repeated again this time. We set the floor. As risk managers, we are inherently conservative people. We like to guide all of you to a number. We feel is pretty well baked. We will get there. And then we turn around and tell the team, we got to do much better than this. We got to be this number; this number is in the bag. Let's do go, go, go, let's do better.

Michael: in terms of setting guidance.

Michael: We did this last year and we thought we'd kind of got their rights.

Michael: and we repeat it again this time. We set the floor.

Michael: As we are inherently conservative people, we like to guide all of you to a number we feel is pretty well baked. We will get there.

Michael: and then we turn around and tell the team, we got to do much better than this, we got to be this number of this numbers in the bag, let's do go go, let's do better, that's what happened in fiscal 24, that is our plan for fiscal 25, now the thing that makes this public race to work at.

Max Levchin: That would happen in Fiscal 24. That is our plan for Fiscal 25.

Zane Keller: You obviously continue to control that extremely well. And maybe it's part of that in this category of fiscal 25 assumptions. I know you said that B2B and some other newer initiatives, including the Apple Pay Partnership are not expected to be material, but can you maybe tell us a little bit more about how you guys define material because it sounds like there may be something in the numbers for it, but we just love to unpack that a little bit.

Max Levchin: Now, the thing that makes us a fun place to work at, lots of things change. There will be something that's going to fall out of our plan for 25 because some really cool opportunity is going to come up, and we'll prioritize the opportunity, and we'll part ways temporarily with whatever it is that the opportunity will take the place of. None of that is in the guide by design. We are putting in the guide what we think we will get to with a really good degree of certainty.

Michael: Lot of things change. There will be something that's going to fall out of our plan for 25 because some really cool opportunities are going to come up and we'll prioritize the opportunity and we'll part ways temporarily with whatever it is that the opportunity will take the place off.

Michael: None of that is in the guide by design. We are putting in the guide what we think we will get to with a really good degree of certainty.

Zane Keller: Thank you. Great compound question. Is there a custom? I'll give some high level answers and Michael will probably contextualize it a little bit better than I can. So in terms of credit, just a friendly reminder to everybody, these numbers are not an accident. We decide what we want to see. Obviously, there is variability, but we have a really short term exposure. Our consumers don't borrow money from us for too long. Every transaction is underwritten separately.

Michael Linford: That is the philosophy Michael can probably give you a little more policy. I think you see the growth rate applied in the Q1 guide is obviously those things are reflective of what we are actually seeing progress for initiatives that have shipped and are already contributing. And that is where we are seeing an acceleration in GMB and Q1 so far.

Michael: that's the philosophy Michael can probably give you a little more pollution. Yeah and I think you see the growth rate applied in the Q1 guide is obviously those things are reflective of where we're actually seeing progress.

Zane Keller: We are by design and definition in control of our credit outcomes. What you see today are the numbers that we wanted to have and we're happy with them. We'll continue to do the exact same thing every time we plan our credit outcomes. Sometimes we tell ourselves what it is that we want to see the DQs and that's what we typically end up with plus or minus minor noise. In terms of setting guidance.

Speaker Change #125: and for initiatives that have shipped in are already contributing and that's where we're saying, you know, an acceleration in GMB and Q1 so far. I think the, um, for our question around the new initiative, things like B2B and in our partnership with some of the wallets.

Michael Linford: I think the prior question around the new initiative seems to be in our partnership with some of the wallets. The question of maternity actually clarifies is a little immaterial, so we are not trying to use any sort of strict definition here. For us, it would really need to be hundreds of millions, billion dollar type range before we start thinking about it as influencing the trajectory in a mature way. And so we look at a lot of these opportunities; they are either not yet shipped, as is the case with several wallet partnerships that are not live yet.

Speaker Change #126: The question of maternity action clarifies as little in material, so we're not trying to use any sort of strict definition here, but for us it would really need to be hundreds of millions billion dollar type range before we start thinking about it as influencing the trajectory in a material way.

Speaker Change #126: and so we look at a lot of these opportunities, they're either not yet shipped, as is the case with several wall partnerships and not live yet.

Michael Linford: We don't think it is prudent to try to guess the timing of those in terms of their impact. We retain a lot of confidence on how big they will be eventually, but are being very mindful around setting guidance that is stuff that is live in the ground and contributing today. Or that we have control and direct line of sight to you, as opposed to things that could take a few quarters to roll out and therefore have more uncertainty to them. I think whether it is the wallet partnerships or any of our international initiatives, we are confident on the size and scale. Those who wouldn't be spending time on them.

Zane Keller: We did this last year and we thought we kind of got the right solution or the right formula and we repeated again this time. We set the floor. As risk managers, we are inherently conservative people. We like to guide all of you to a number. We feel is pretty well baked. We will get there. And then we turn around and tell the team, we got to do much better than this. We got to be this number, this number is in the bag.

Speaker Change #126: We don't think it's prudent to try to guess the timing of those in terms of their impact. We retain a lot of confidence.

Speaker Change #126: on how big they will be eventually, but are being very mindful around setting guidance that is stuff that's live in the ground and contributing. Today, we have control and direct line of sight to you as opposed to things that could take a few quarters to roll out and therefore have more in certain teeth.

Zane Keller: Let's go, go, go, let's do better. That would happen in fiscal 24. That is our plan for fiscal 25. Now the thing that makes us fun place to work at. Lots of things change. There will be something that's going to fall out of our plan for 25 because some really cool opportunity is going to come up and will prioritize the opportunity and will part ways temporarily with whatever it is that the opportunity will take the place off.

Speaker Change #126: and I think whether it's the wall partnerships or any of our international initiatives were confident on the side of the scale of those who wouldn't be spending time on them, but we're communicating to you that if they do end up being material, that would actually be material upside to the outlet that we provided for this clear.

Michael Linford: But we are communicating to you that if they do end up being material, that would actually be material upside to the outlet that we provided for this clear.

Unknown Executive: Very helpful. Thank you, guys.

Speaker Change #127: Very helpful. Thank you guys.

Reginald Smith: Thank you. Our next question comes from the line of Red D. Smith with J.P. Morgan. Please proceed with your question. Good evening, and thanks for taking a question. I guess we've seen the business perform in a rising rate environment.

Speaker Change #127: [inaudible]

Reddy Smith: Thank you, our next question comes from a line of reddy Smith with JP Morgan. Please proceed with your question.

Zane Keller: None of that is in the guide by design. We are putting in the guide. What we think we will get to with a really good degree of certainty. That's the philosophy. Michael can probably give you a little more policy. Yeah. And I think you see the growth rate applied in the Q1 guide is obviously those things are reflective of what we're actually seeing progress. For initiatives that have shipped and are already contributing.

Reddy Smith: Good evening and thanks for taking the question. I guess we've seen the business perform and a rising, and we're in a curious how you're thinking about.

Reginald Smith: I'm curious about how you're thinking about the business in a potentially falling rate environment. And I'm curious, around two things really: consumer spending. And then I'm thinking about. I know you guys priced these transactions uniquely with the A.T.R. and I'm wondering if there may be some benefits to your model versus traditional credit cards, where the rates are paid to the prime rate. And there's any, any play area to play in there in terms of pricing the way down. Thank you.

Reddy Smith: to be a citizen in a potentially falling rate environment and I'm curious, or more of two things really.

Speaker Change #128: Consumer Screen Dean, and we're going to be thinking about...

Zane Keller: And that's where we're seeing, you know, an acceleration in GMB in Q1 so far. I think the bar of question around the new initiative things like be to be in our partnership with some of the wallets. The question materially actually clarifies is a little immaterial. So we're not trying to use any sort of strict definition here, but for us it would really need to be, you know, hundreds of millions billion dollar type range before we start thinking about it as influencing the trajectory in a mature way.

Speaker Change #129: and then you guys' pride in transaction uniquely with the ATR and I'm wondering if there may be some benefits to your model versus traditional credit cards, where the rates are paid to the crime rate in Zane.

Speaker Change #130: Any play area for play in there on some of the pricing.

Max Levchin: Thanks, Reggie. Great question, as always. There's a huge amount of benefits in not being tethered to a single price that was handed to you in a form of a line that floats precisely with the funds rated.

Speaker Change #131: the way down.

Speaker Change #132: Thank you.

Speaker Change #132: Thanks, Reggie. Great question, as always.

Speaker Change #132: Armageddon.

Zane Keller: And so we look at a lot of these opportunities. They're either not yet shipped. As is the case with several wallet partnerships, we're not live yet. We don't think it's prudent to try to guess the timing of those in terms of their impact. We retain a lot of confidence on how big they will be eventually. But are being very mindful around setting guidance that is stuff that's live in the ground and contributing today or that we have control and direct line of sight to you as opposed to things that could take a few quarters to roll out.

Speaker Change #133: There's a huge amount of benefits and not being tethered to A.

Speaker Change #134: Single Price, that was handed to you in a form of a line that floats precisely with the...

Max Levchin: The coupling is unnatural. We've always said it from the very beginning: this idea that you negotiate your credit card rate. Even if it's floating kind of once and for all, basically, and the merchant negotiates their acceptance rates once and for all is bullish like we live in the connected real time world. Why wouldn't we be negotiating these rates in real time? And that's what we've built. And that's why Affirm is successful.

Speaker Change #134: with that sounds right. The coupling is unnatural. We've always said it from the very beginning to the idea that you negotiate your credit card rate, even if it's floating kind of once and for all basically and the merchant negotiate their acceptance rates once and for all.

Speaker Change #135: is bullish, like we live in the connected real-time world, why wouldn't we be negotiating these rates in real-time? And that's what we've built, and that's why a firm is successful, that's our innovation.

Zane Keller: And therefore have more uncertainty to them. I think whether it's the wallet partnerships or any of our international initiatives were confident on the size and scale, those are also wouldn't be spending time on them. But we're communicating to you that if they do end up being material, that would actually be material upside to the outlet that we provided for this clear. Very helpful, thank you guys. Thank you, our next question comes from the line of Red D Smith with JP Morgan. Please proceed with your question.

Max Levchin: That's our innovation. As the rates move writ large, as they go up, obviously, we end up having to pass some of the cost through as it hits us to consumers. Practically, would this mean that at some point, someone who would have been approved will not be approved because the price is just not the number that we want to put. We have limits. We don't want to go above the Military Lending Act number.

Speaker Change #135: As the rates move, it large, as they go up obviously we end up.

Speaker Change #136: I think to pass some of the costs through, as it hits us to consumers, practically would this mean that at some point someone who would have been approved will not be approved, because the price is just not.

Speaker Change #137: The number that we want to put, we have limits, we don't want to go above the military lending act number, and that's a decision we made a long time ago and don't plan to change. As the rates come down, the very first consumer side impact will be better approval rates.

Max Levchin: And that's a decision we made a long time ago and don't plan to change. As the rates come down, the very first consumer side impact will be better approval rates. Pricing is always vulnerable. We price things in real time. We can change it as we go.

Reginald Smith: Good evening, and thanks for taking a question. I guess we've seen the business perform in a rising rate environment. I'm curious how you're thinking about the business in a potentially falling rate environment, and I'm curious around two things, really, consumer spending. And then I'm thinking about, I know you guys priced these transactions uniquely with the APR and I'm wondering if there may be some benefits to your model versus traditional credit cards, where the rates are paid to the prom rate and there's any, any play area to play in there in terms of pricing the way down.

Speaker Change #138: Pricing is always fungible, we price things in real time, we can change it as we go. But the most exciting thing about reductions if a fund rate is we'll just have more active users. We'll have more new users, we'll have more repeat users, because we'll be able to improve more people.

Max Levchin: But the most exciting thing about reduction if that funds rate is we'll just have more active users, will have more users, will have more repeat users because we'll be able to approve more people. The only thing to add is the rate at which the rates change is very important. We saw a very quick rise in rates as rates went up. And you saw us react to those changing rates on the time when we talked about very well position now to be reactive such that they were to move that quickly. Again, I think we could move very quickly, but that's not in our assumption set.

Speaker Change #139: The only thing to add is the rate at which the rate's change is very important. We saw a very quick rise in rates as rates went up and he saw us react to those changing rates on the time that we talked about.

Reginald Smith: Thank you. Thanks, Reggie. Great question, as always. There's a huge amount of benefits in not being tethered to a single price that was handed to you in a form of a line that floats precisely with the funds rated. The coupling is unnatural. We've always said it from the very beginning, this idea that you negotiate your credit card rate, even if it's floating kind of once and for all, basically, and the merchant negotiates their acceptance rates once and for all is bullish like we live in the connected real time world.

Speaker Change #139: We're very well positioned now to be reactive, such that they were to move that quickly again. I think we could move very quickly, but that's not in our assumption set. We don't believe that we'll happen.

Max Levchin: We don't believe that will happen. And I think we're talking about here a change in direction of rates more than the magnitude for the time being. And so very little change in the near term based upon the booth that have already been priced in by the market.

Speaker Change #139: I think we're talking about here, a change in direction of race more than the magnitude for the time being and so very little change in the near term based upon the moves that have already been priced in by the market.

Speaker Change #139: [inaudible]

Ramsey El: Thank you. Our next question comes from the line of Ramsey L. Assault with Barclays. Please proceed with your question. Hi, thanks so much for taking my question this evening. RLTC fell nicely above your range this quarter, and I know you called out a presumably non-recurring $30 million benefit from a single securitization.

Speaker Change #140: Thank you. Our next question comes from the line of Ram ZL-Sol with Mark Lees. Please proceed with your question.

Reginald Smith: Why wouldn't we be negotiating these rates in real time? And that's what we've built and that's why a firm is successful that that's our innovation. As the rates move writ large, as they go up, obviously, we end up having to pass some of the cost through as it hits us to consumers, practically, would this mean that at some point someone who would have been approved will not be approved because the price is just not the number that we want to put.

Ram ZL-Sol: Hi, thanks so much for taking my question this evening.

Ram ZL-Sol: RLTC fell above nicely above your range this quarter, and I know you called out a presumably non-recurring $30 million benefit from a single-securization.

Ramsey El: What are the key puts and takes we need to consider for RLTC performance in 2025, sort of in your internal planning, what are shaping up to be the bigger variables to keep in mind? Do we need to see, Fed rates come down, funding costs come down a certain amount? Do we need to see credit performance hanging at certain levels? Where are the pressure points next year?

Reginald Smith: We have we have limits. We don't want to go above the military lending act number and that that's a decision we made a long time ago and don't plan to change. As the rates come down, the very first consumer side impact will be better approval rates pricing is always vulnerable. We price things in real time. We can change it as we go. But the most exciting thing about reduction, if that funds rate is will just have more active users will have more users will have more repeat users because we'll be able to approve more people.

Michael Linford: Yeah, good question. So, again, on Q4 we did do a non-consolidated securitization.

Michael Linford: We don't do those every period, and so when we're able to do them, you do have a little bit of a chunky benefit, which pushed us slightly over the 4% range we'd like to think about as the ceiling. When you take that out, the RLTC rate in Q4 is pretty consistent with the guidance that we gave for Q1, so we think it's pretty stable sequentially. And the big puts and takes are mostly related to mix of business that we are urging on the platform and the associated credit outcomes, and then how we execute in the capital markets.

Reginald Smith: The only thing to add is the rate at which the rates change is very important. We saw a very quick rise in rates as rates went up and you saw us react to those changing rates on the time when we talked about very well position now to be reactive such that they were to move that quickly. Again, I think we could move very quickly, but that's not in our assumption set. We don't believe that will happen.

Reginald Smith: I think we're talking about here a change in direction of rates more than the magnitude for the time being and so very little change in the near term based upon the booth that have already been priced in by the market. Thank you.

Michael Linford: I think the team has done a phenomenal job this past 12 months, and broadening our access to really attractive capital sources has been done with ADS deals, been done with forward flow deals, and we continue to think there's lots of opportunity for us to do more here, and certainly if we're able to do that, we can deliver strong margins. We are signing up for a 10 basis point expansion in the RLTC percentage in GMV versus last year, and we feel like that's possible because of a lot of the full year benefit of the work that we've taken on, plus the fact that we do think we're in a very strong position with respect to the capital markets.

Ramsey El: Our next question comes from the line of Ramsey L. Assault with Bart Lease. Please proceed with your question. Hi, thanks so much for taking my question this evening. RLTC fell nicely above your range this quarter and I know you called out a presumably non-recurring $30 million benefit from a single securitization. What are the key puts and takes we need to consider for RLTC performance in 2025, sort of in your internal planning, what are shaping up to be the bigger variables to keep in mind?

Will Mamps: Thank you. Our next question comes from a line of Will Mance with Goldman Facts. Please proceed with your question. Hey guys, nice results today. I appreciate you taking the question. I wanted to follow up on the kind of dovetailing off the earlier point around having a lot of control and visibility into the credit outcomes that you expect when you set the underwriting targets. You know, I thought the stats in a different direction. The stats in the shareholder letter around the number of repeat users and repeat transactions increasing over time. I thought was interesting, and so I'm wondering if your visibility into forward volume is increasing to kind of a similar way where you now have a much better picture about how the volume trends might check out over the coming year.

Ramsey El: Do we need to see, Fed rates come down, funding costs come down a certain amount? Do we need to see credit performance hanging at certain levels? Where are the pressure points next year? Yeah, good question. So again on Q4, we did do a non-consolidated securitization. We don't do those every period and so when we're able to do them, you do have a little bit of a chunky benefit which pushed us slightly over the 4% range we'd like to think about as the ceiling.

Ramsey El: When you take that out, the RLTC rate in Q4 is pretty consistent with the guidance that we gave for Q1 so we think it's pretty stable sequentially. And the big puts and takes are mostly related to mix of business that we are urging on the platform and the associated credit outcomes and then how we execute in the capital markets. I think the team has done a phenomenal job this past 12 months and broadening our access to really attractive capital sources and has been done with ADS deals, been done with forward flow deals and we continue to think there's lots of opportunity for us to do more here and certainly if we're able to do that, we can deliver strong margins.

Will Mamps: I just thought it was interesting the increases in number of transactions for user and the number of repeat users.

Will Mamps: So if how is that impacting the way that you look at the business internally and kind of plan for the coming year. If we're on a kind of if you look at the gaps between those core curves, the pretty big, which means that we're not yet struggling, if you will, to improve those numbers. So the fact that we are by driving this outsized gain just means that there's a lot of work to do. The way we think about what's going to happen to be a firm card, for example, right now we're on the order of $3,000 of annual spend.

Ramsey El: We are signing up for a 10 basis point expansion in the RLTC percentage in GMV versus last year and we feel like that's possible because of a lot of the full your benefit of the work that we've taken on plus the fact that we do think we're in a very strong position with respect to the capital markets. Thank you.

Max Levchin: The right number for my point of view is $7,500 at least and on the order of 20 million active cards. That's the target. When we get there, I don't know, but that is what I think is both possible and required for us to succeed. We're going to get there. In fiscal 25, probably not certainly not making any promise on that front, but you know the leaps that we're showing in these charts speak for themselves. They're big. That means there's a lot of opportunity.

Will Mamps: Our next question comes from a line of Will Mance with Goldman Facts. Please proceed with your question. Hey guys, nice results today. I appreciate you taking the question. I wanted to follow up on the kind of dovetailing off the earlier point around having a lot of control and visibility into the credit outcomes of each spec when you set the underwriting targets. You know, I thought the stats in a different direction, the stats in the shareholder letter around the number of repeat users and repeat transactions increasing over time.

Max Levchin: So we forecast what we think will get, and that's in the guide, and we got some really cool ideas, and that a lot of them are going to work.

Unknown Executive: I appreciate it. Thank you.

Andrew Bauch: Our next question comes from the line of Andrew Bach with Wells Fargo. Please proceed with your question.

Andrew Bauch: Based on the question, guys, one is to talk about the sources of operating leverage there in the guide here. I mean, you're calling for 18.4% A O I margins. I think that's a little bit better than what you've previously been guiding for the growth above 20%. So just want to get your thoughts on that is given the current growth profile and the strength of that number. Yeah, I think the one thing that we as a leadership team are really proud about is how quickly we made progress on operating leverage in the business. I think we had a lot of conviction of where we would get to for a long time.

Will Mamps: I thought was interesting and so I'm wondering if your visibility into forward volume is increasing to kind of a similar way where you now have a much better picture about how the volume trends might check out over the coming year. I just thought it was interesting the increases in number of transactions per user and the number of repeat users. So if how is that impacting the way that you look at the business internally and kind of plan for the coming year?

Will Mamps: If we're on a kind of if you look at the gaps between those core curves, the pretty big, which means that we're not yet struggling, if you will, to improve those numbers. So the fact that we are Driving this outsized gain just means that there's a lot of work to do. The way we think about what's going to happen to be a firm card, for example, right now we're on the order of $3,000 of annual spend.

Michael Linford: The pace at which we were able to get there over the past 12th on system has been phenomenal. And the Q4 results, I think, are the great data point on that trajectory. And I think that we feel that continuing to expand our margins is good discipline, and with it gives us the focus we need to actually operate better. And the things that temper that are we do have a ton of opportunity ahead of us. And so we don't want to operate at terminal margins. We do want to show progress. And I believe that at the JPMORN conference last May, I outlined that we would expect to continue to expand margins.

Will Mamps: The right number for my point of view is $7,500 at least, and on the order of 20 million active cards. That's the target. When we get there, I don't know, but that is what I think is both possible and required for us to succeed. We're going to get there. In fiscal 25, probably not certainly not making any promise in that front, but you know the leaps that we're showing in these charts speak for themselves.

Michael Linford: We're signing up for 200 basis points this year and feel like we still have quite a bit of runway of margin expansion to do into the future. And that will just be tempered with the opportunities that we have to invest in particular in continuing to expand our team.

Will Mamps: They're big. That means there's a lot of opportunity. So we forecast what we think we'll get and that's in the guide and we got some really cool ideas and that a lot of them are going to work. I appreciate it. Thank you.

Unknown Executive: What's up, guys?

Robert Wildhack: Thank you. Our next question comes from a line of Rob Wildhack with Autonomous Research. Please proceed with your question. Hi guys. Maybe to take the earlier question on rate cuts and funding costs and connected to the 25 outlook. Could you give us some color on how much the current rate curve and expectations might be benefiting approvals in fiscal 25 and, in that light, how much it could benefit the growth outlook? It's a good question. We do not take into account the rate curve, i.e. future market expectations of funding cost into our decisioning explicitly. It does get reflected as we negotiate capital deals. The market expectation of rates does get reflected into those deals, into an effects or average cost of funding, which in turn effects are decisioning.

Andrew Bauch: Our next question comes online of Andrew Bach with Wells Fargo. Please proceed with your question. One is to talk about the sources of operating leverage there in the guide here. I mean, you're calling for 18.4% AOI margins. I think that's a little bit better than what you've previously been guiding for for the growth above 20%. So just want to get your thoughts on that is given the current growth profile and the strength of that number.

Andrew Bauch: Yeah, I think the one thing that we as a leadership team are really proud about is how quickly we made progress on operating leverage in the business. I think we had a lot of conviction of where we would get to for a long time. The the pace at which we were able to get there over the past 12 non-system has been phenomenal. And the Q4 results I think are the great data point on that on that trajectory.

Andrew Bauch: And I think that we feel that continuing to expand our margins is good discipline and with it gives us the focus we need to actually operate better. And the things that temper that are we do have a ton of opportunity ahead of us. And so we don't want to operate at terminal margins. We do want to show progress. And I believe that the at the JPMORN conference last May this May, I outlined that we would expect to continue to expand margins.

Robert Wildhack: But we don't, we're not looking out and saying, with two rate cuts on the horizon, will get more aggressive. Instead, we look at our current funding costs and compare them to what we need to generate to be profitable on a transaction basis. And there is an important reason why these things flow through a bit on a vlog basis. A lot of the funding sources we have are not floating-rate funding facilities. So our ADS deals, for example, have fixed costs of funds. So it will take a while for the deals that we've done over the past year, year and a half to be refinanced in the next two years; the funding costs are a bit stickier, which means it doesn't flow through quite as immediately as you might see.

Robert Wildhack: I think. Okay, thanks.

Andrew Bauch: We're signing up for 200 basis points this year and feel like we still have quite a bit of runway of margin expansion to do into the future. And that will just be tempered with the opportunities that we have to invest in particular in continuing to expand our team. What's up guys? Thank you.

Robert Wildhack: Would that mean then that if you get to, you know, say spring 2025 and rates are a lot lower than they are today, there would be potential upside on approvals because of the lower interest rate environment and lower funding costs? With one caveat, if the reason why rates are being cut is because we're in a perfect economic scenario. Then, yeah, but of course, I think we're mindful of the fact that I think that's probably happening in that scenario. So, if some pressure on the labor market, which has been very, very tight, begins to loosen. We, of course, would need to take into account that, as we think about where we set approvals.

Michael Linford: Our next question comes from a line of Bob Wildhack with Autonomous Research. Please proceed with your question. Hi guys. Maybe to take the earlier question on rate cuts and funding costs connected to the 25 outlook. Could you give us some color on how much the current rate curve and expectations might be benefiting approvals in fiscal 25 and in that light how much it could benefit the growth outlook? That's a good question.

Robert Wildhack: Okay, very helpful. Thank you.

Kyle Peterson: Our next question comes from the line of Kyle Peterson with Needham. Please proceed with your question. Great. Good afternoon, guys. Thanks for taking the question.

Michael Linford: We do not take into account the rate curve i.e, future market expectations of funding cost into our decisioning explicitly. It does get reflected as we negotiate capital deals. The market expectation of rates does get reflected into those deals into an effect or average cost of funding, which in turn affects our decisioning. But we're not looking out and saying with two rate cuts on the horizon will get more aggressive. Instead we look at our current funding costs and compare them to what we need to generate to be profitable on a transaction basis.

Kyle Peterson: You want to touch a little bit on the outlook and to go to your growth expectations can between the network and portion network and hard network revenue and interest and gain on sale and such. I guess, which are you got? Which block enter you guys expecting to be a bigger contributor to growth in FY25?

Max Levchin: I think about the support between the revenue streams. So, the thing that changes the mix across revenue streams is either the mix of originations and therefore the associated like loan content and then the capital strategies behind it. So, as we lean a little bit more on gain on sale or give it a price and gain sale, you see the gain sale angle up. And equally, as you have maybe higher MDR bearing loans, you'll see some increases there. I think really it's difficult to identify, and we're not getting guidance on which line item for you to model out, but the root cause is that we've made the asset more valuable when you make the asset more valuable.

Michael Linford: And there is an important reason why these things flow through a bit on a vlog basis. A lot of the funding sources we have are not floating rate funding facilities. So our ADS deals, for example, have fixed costs of funds. So it will take a while for the deals that we've done over the past year, year and a half to be re-financed in the next two years. So the funding costs are a bit stickier, which means it doesn't flow through quite as immediately as you might see.

Michael Linford: I think. Okay, thanks. Would that mean then that if you get to say spring 2025 and rates are a lot lower than they are today, there would be potential upside on approvals because of the lower interest rate environment and lower funding costs? With one caveat, if the reason why rates are being cut is because we're in a perfect economic scenario, then yeah, but of course, I think we're mindful of the fact that a thing that's probably happening in that scenario, is some pressure on the labor market, which has been very, very tight, begins to loosen. We of course would need to take into account that as we think about where we set approvals. Okay, very helpful. Thank you.

Unknown Executive: You monetize it at a higher rate, and that's why we do think there's about 10 bits of more revenue. We're pulling all the way down to the revenue less transaction cost part. Got it. That's helpful.

Dan Dolev: Thank you. Our next question comes to the line of Dan Dovel with Lizooho. Please proceed with your question. Thanks. Great quarter, guys. And then congrats on the gap profitability in the fourth quarter. I wanted to ask about Apple Pay Later. I think a couple of years ago, when they announced that they're getting into buy now, pay later, the Affirm's talk was under pressure. Two years later, they capitulate, and you guys are handling the volumes.

Bob Wildhack: Our next question comes from the line of Kyle Peterson with Needham. Please proceed with your question. Great. Good afternoon, guys. Thanks for taking the question. I wanted to touch a little bit on the outlook and to go to your growth expectations, come between the network and portion network and hard network revenue and interest and gain on sale and such. I guess which part can you expect from the bigger contributor growth in FY25 and just how should we think about the support between the revenue streams?

Max Levchin: Like, is there maybe you can talk max a little bit about the fact that it's much more difficult to do by now, pay later than a lot of people think that it's just, you know, a product without a brand and without the ability to take risk appropriately because I sounds like from an apple perspective, there's much more to affirm than what a lot of people were thinking. Thank you, Dan. Jeff, Dan Faucette, he's totally front-rand, my gap, surprised by apparently correcting, correctly predicting it, nice, nice, nice notes. So, on the Apple side, I don't think they're capitulating.

Bob Wildhack: So the thing that changes the mix across revenue streams is either the mix of originations and therefore the associated like low in content and then the capital strategies behind it. So as we lean a little bit more on gain on sale or give it a price and gain sale, you see the gain on sale and go up. And equally as you have maybe higher MDR bearing loans, you'll see some increases there.

Max Levchin: I think they, if anything, are saying this by and out the latest thing is huge and important and is not a feature, it's a major thing that is just as important as credit cards. And maybe I certainly think it is more important than credit cards because it's the better way. Creating a platform for companies like Affirm to deliver the product with all the bells and whistles, with all the unique things that we know how to do well, is a very smart strategy. I don't think it's backing out of something. It's embracing the fact that this is a complicated, really, really textured set of offerings that works in different ways for different audiences.

Bob Wildhack: I think really it's difficult to identify and we're not getting guidance on which line item for you to model out, but the root cause is that we've made the asset more valuable. When you make the asset more valuable, you monetize it at a higher rate and that's why we do think there's about 10 bits of more revenue that's pulling all the way down to the revenue less transaction cost part. Got it. That's helpful. Thank you.

Max Levchin: The thing that is, you know, there are a couple of things that don't need the eye readily in our business that, you know, every time I think I've explained, I find that people don't necessarily fully understand, so who knows. But to sort of repeat the thing that I do try to explain on and on, underwriting is hard. You got to get data, you got to get in real time; you have to verify it for both validity and accuracy and timeliness and all that good stuff. And it's a real complicated thing that we do here really well.

Dan Dolev: Our next question comes to the line of Dan Doval with Lizooho. Please proceed with your question. Thanks, great quarter guys and then congrats on the gap profitability in the fourth quarter. I wanted to ask about Apple Pay later. I think a couple of years ago, when they announced that they're getting into binomial later, the affirms talk was under pressure. Two years later, they capitulate and you guys are handling the volume. Maybe you can talk max a little bit about the fact that it's much more difficult to do binomial pay later than a lot of people think that it's just, you know, a product without a brand and without the ability to take risk appropriately because it sounds like from an apple perspective, there's much more to affirm than what a lot of people were thinking.

Max Levchin: We've been added for 13, 14 years almost now. And that's our DNA. People talk about AI as if it happened yesterday. We've been in what used to be known as AI for a lot longer than it was a, you know, a thing that people for around is reason to lay off their employees. So we use a lot of machine learning, and we do a lot of good work there. So that's hard. And unless you're really focused on it, you're not going to do as well as a specialist like we can.

Max Levchin: Part two, which is to call out and give props to our intrepid sales team; there's enormous effort involved in signing up merchants. Because what we offer is really incremental, but it's also really complex. We're coming to them and saying, credit cards cost you a couple of points. You should give us three and a half, five and a half, seven and a half percent. You know, major slices of your margin for transactions that we promise you will be really, really incremental. And the way we're going to make it work is not by giving consumers flat-out cash back or discounts or all the sort of tired credit card tricks.

Dan Dolev: Thank you Dan. Jeff, Dan Faucette, he's totally front-rand, my gap, surprised by apparently correcting, correctly predicting it, nice, nice, nice notes. So on the apple side, I don't think they're capitulating. I think they, if anything, are saying this by and out the latest thing is huge and important and is not a feature, it's a major thing that is just as important as credit cards. And maybe I certainly think it is more important than credit cards because it's the better way.

Dan Dolev: Creating a platform for companies like Affirm to deliver the product with all the bells and whistles with all the unique things that we know how to do well is very smart strategy. I don't think it's backing out of something, it's embracing the fact that this is a complicated, really, really textured set of offerings that works in different ways for different audiences. The thing that is, you know, there are a couple of things that don't need the eye readily in our business that, you know, every time I think I've explained, I find that people don't necessarily fully understand, so who knows.

Max Levchin: We're going to give them access to credit on extraordinary terms, with no APR at all or really low subsidized IPR. That's going to matter to a certain consumer in a really big way. We're going to do transparently and at the point of sale, as they make a decision, all that's going to come together is going to help them decide, going to help them get off the sidelines and buy right now and help you, Mr. Ms. Merchant, drive more volume. That is something you find out once you have been in the market and realize that, hey, this is actually what makes this product so special: the ability to, in real time, transfer parts of the margin the merchant is willing to invest in a transaction to the consumer in a form of benefit.

Dan Dolev: But to sort of repeat the thing that I do try to explain on and on, underwriting is hard. You've got to get data, you've got to get in real time, you have to verify it for both validity and accuracy and timeliness and all that good stuff. And it's a real complicated thing that we do here really well. We've been at it for 13, 14 years almost now. And that's our DNA. People talk about AI as if it happened yesterday.

Max Levchin: Having a real-time network of hundreds of thousands of merchants that do that willingly because they've measured incrementality is really powerful. And that's what we spend the last decade doing, in addition to building real AI. That adds up to just a lot of work and people that think of the coolest thing to work on. I think creating a platform for companies like ours to deliver that through the world's most popular phone and the world's most popular wallet is awesome. So I'm obviously super stoked about what's happening there, but it's most certainly an embracement that's a word versus a walk away.

Dan Dolev: We've been in what used to be known as AI for a lot longer than it was a, you know, a thing that people, for our own, is reason to lay off their employees. So we use a lot of machine learning and we do a lot of good work there. So that's hard. And unless you're really focused on it, you're not going to do as well as a specialist like we can. Part two, which is to call out and give props to our intrepid sales team, there's enormous effort involved in signing up merchants, because what we offer is really incremental, but it's also really complex.

James Faucette: Thank you. Our next question comes from the line of team's law study with Morgan's family. Please proceed with your question. Thank you very much. I want to build a little bit on that last point there.

Dan Dolev: We're coming to them and saying credit cards cost you a couple of points. You should give us three and a half, five and a half, seven and a half percent. You know, major slices of your margin for transactions that we promise you will be really, really incremental. And the way we're going to make it work is not by giving consumers flat out cash back or discounts or all the sort of tired credit card tricks.

James Faucette: Max, just ask kind of in a more generalized way how you're feeling right now about kind of the composition and profile of your customer base. And what do you think about in terms of ways and tools, including some of those promotional capabilities you talked about, to expand and maybe then improve so such that you can get even beyond kind of that firm card level of $7,500 annual spend to something even better than that. We definitely have no shortage of ideas.

Dan Dolev: We're going to give them access to credit on extraordinary terms with no APR at all, or really low subsidized VPR. That's going to matter to certain consumer in a really big way. We're going to do transparently and at the point, at the point of sale, as they make a decision, all that's going to come together, it's going to help them decide, it's going to help them get off the sidelines and buy right now and help you, Mr. Ms.

Dan Dolev: Merchant, drive more volume. That is something you find out once you have been in the market and realize that, hey, this is actually what makes this product so special, the ability to in real time transfer parts of the margin, the merchant is willing to invest in a transaction to the consumer in a form of benefit. Having a real time network of hundreds of thousands of merchants that do that willingly because they've measured incrementality is really powerful and that's when we spend the last decade doing in addition to building real AI.

Max Levchin: Let's see, so I think I'll try to keep it short because it has a real danger of becoming a very long-winded answer, and I feel like I spent that bullet on the last question. We think of our consumers in segments. We obviously think everybody should throw away the credit card and start using a firm or often, but different consumers we have have fairly different financial profiles and different needs. We have catchy nicknames for all of our segments, but practically some people need access to credit and care a lot about things like lower monthly payments and more time to pay back, and the fact that we don't charge them late fees if something happens and they need a little bit more time to pay back.

Dan Dolev: That adds up to just a lot of work and people that think it's the coolest thing to work on. I think creating a platform for companies like ours to deliver that through world's most popular phone and world's most popular wallet is awesome. So I'm obviously super stoked about what's happening there, but it's most certainly an embracement that's a word versus a walk away. Sorry, for a little bit of a rant. No, this is super helpful. Well, amazing results and congrats again on the promotion for both of us. Thank you.

Max Levchin: And then, at the other side of the spectrum, there are people who say, "Hey, I understand time value of money." I'm a sophisticated consumer of credit, and I will transact if you give me a zero percent, and those two are now the same person. They live in different segments, and there are different products that excite those people in profoundly different ways.

Max Levchin: A firm card is a great platform to offer all of those promotional vehicles to every segment, so we think it's a universal product that we can bring. But you will see us in the coming weeks, really in months, launch more and more features within the firm card footprint that speaks to different segments in fairly different ways. We'll see zero percent deals available to folks that we know really respond to those. We will offer longer clients to pay to those that really need that. That is available to our merchants as a configurable set of tools. We used to talk a lot about it to check out.

James Faucette: Our next question comes from the line of James Faucette with Morgan's family. Please proceed with your question. Thank you very much. I want to build a little bit on that last point there. Max, just ask kind of in a more generalized way, how you're feeling right now about kind of the composition and profile of your customer base and what are you thinking about in terms of ways and tools, including some of those promotional capabilities you talked about to expand and maybe then improve so such that you can get even beyond kind of that firm card level of $7,500 in annual spend to something even better than that.

Max Levchin: It's sort of old news, so it doesn't even get a mention in my letter, but it's still the cornerstone of a lot of our payment delivery technology. We have new products that we launch, pay in two, pay in 30, but a few more that we're going to roll out, and all of that will live to serve our merchants to sell more merchandise in the way that converts the best with each consumer segment.

James Faucette: We definitely have no shortage of ideas. Let's see. So I think I'll try to keep it short because it has a real danger of becoming a very long-winded answer and I feel like I spent that bullet on the last question. We think of our consumers in segments. We obviously think everybody should throw away the credit card and start using a firm or often, but different consumers we have have fairly different financial profiles and different needs.

Max Levchin: At some point, I think there will be full automation for merchants to just say, "Hey, let me give you $10 and just get me as much conversion as you possibly can." That's sort of my vision for the Nirvana. Aversion spend almost like buying AdWords, but here's my dollars, give me some transactions, here's my dollars, give me some conversions. We're obviously not quite there yet, but that's the direction which we're headed. The underlying tools for each segment will necessarily be different than that’s by design. We understand our consumer a lot better because we understand what they're buying through SQLable data, etc.

James Faucette: We have catchy nicknames for all of our segments, but practically some people need access to credit and care a lot about things like lower monthly payments and more time to pay back and the fact that we don't charge them late fees if something happens and they need a little bit more time to pay back. And then on the other side of the spectrum there are people who say, hey, I understand time value of money.

Michael Linford: And I would really encourage everybody to read the cohort engagement charts we have put in the letter. Everything Max mentioned is things that we're working on into the future to make it better. The stuff that's already in the ground, the products that already have out there, are making great progress towards increasing engagement, and it really jumps out at you. It means start looking at just how much more engagement the recent cohorts have, and the consistency with which the cohorts have grown in their engagement with us over time speaks to the underlying value of what we do for these consumers and why we have a lot of confidence that we'll address more and more of their purchases over time.

James Faucette: I'm a sophisticated consumer of credit and I will transact if you give me a zero percent and those two are now the same person who live in different segments and there are different products that excite those people in profoundly different ways. A firm card is a great platform to offer all of those promotional vehicles to every segment. So we think it's a universal product that we can bring, but you will see us in the coming weeks, really, in months, launch more and more features within the firm card footprint that speaks to different segments in fairly different ways.

James Faucette: We'll see zero percent deals available to folks that we know really respond to those. We will offer longer clients to pay to those that really need that. That is available to our merchants as a configurable set of tools. We used to talk a lot about adaptive check out. It's sort of old news, so it doesn't even get a mention in my letter, but it's still the cornerstone of a lot of our payment delivery technology.

Michael Linford: That's great, Colin.

Timothy Chiodo: As a reminder, please press star one to ask a question at this time. Our next question comes from a line of Timothy Cheeto with UBS. Please proceed with your question. Great. Thank you for taking the question. I wanted to circle back on Apple Pay a little bit. Totally appreciate that for a specific customer.

James Faucette: We have new products that we launched, pay in two, pay in 30, where a few more that we're going to roll out. And all of that will live to serve our merchants to sell more merchandise in a way that converts the best with each consumer segment. At some point, I think there will be full automation for merchants to just say, hey, let me give you $10 and just get me as much conversion as you possibly can.

Timothy Chiodo: You might not want to go into too much detail, but I was hoping you could talk a little bit about the expected user experience with Affirm being, at I believe, at the onset, maybe one of the main or only options for US online commerce. But the idea would be that over time consumers using Apple Pay would have multiple options, maybe other by now pay later options, but also some of the card-based installment offering. So if we could just talk about the user experience there and maybe the drop down menu, if you will, and then the second piece is around the unit economics.

James Faucette: That's sort of my vision for the Nirvana. Aversion spend almost like buying AdWords. Here's my dollars, give me some transactions, here's my dollars, give me some conversions. We're obviously not quite there yet, but that's the direction which we're headed. The underlying tools for each segment will necessarily be different than that's by design. We understand our consumer a lot better because we understand what they're buying through SQLable data, et cetera. And I would really encourage everybody to read the cohort engagement charts we have put in the letter.

Max Levchin: If the full range of products will be offered throughout that channel, so that we should expect the unity economics to be still in that three to four percent range, maybe absent some degree of revenue share back to Apple. Thanks a lot.

Max Levchin: I'll try to answer it in reverse order. So we'll be on the Apple Pay, which by the way, not launched yet.

James Faucette: Everything Max mentioned is things that we're working on into the future to make it better. The stuff that's already in the ground, the products that already have out there are making great progress towards increasing engagement and it really jumps out as you mean start looking at just how much more engagement the recent cohorts have and the consistency with which the cohorts have have grown in their engagement with us over time, speaks to the underlying value of what we do for these consumers and why we have a lot of confidence that we will address more and more of their purchases over time. That's great, Colin. Thank you.

Max Levchin: So maybe maybe I'll think of any order you did ask not, not my role or right to unveil changes to our partner's product. So Apple will undoubtedly deliver a beautiful experience just given who they are will be a part of it. We're excited and proud to be in. We'll all see exactly what it looks like when it rolls out, which hopefully will be reasonably soon now on the economics part of it.

Max Levchin: So beyond Apple Pay, beyond any one major partner, we are not a wallet by design and definition; we are an ingredient brand. We are in that sense, at least similar to Visa, Mastercard, Amics, et cetera, which means that we have an inherent channel conflict. When you go to a particularly wallet-friendly website, you might find a firm offered directly from card will be accepted because everyone takes Visa. You might find Apple Pay soon enough with us in it and Shop Pay because that's also available now off Shopify, at least in some retailers. And then there's Amazon Pay and then there's Google Pay, where we're also integrated, and so on and on it goes.

Max Levchin: As a reminder, please press star one to ask a question at this time. Our next question comes from a line of Timothy Chido with UBS. Please proceed with your question. Great. Thank you for taking the question. I wanted to circle back on Apple Pay a little bit. Totally appreciate that for a specific customer you might not want to go into too much detail, but I was hoping you could talk a little bit about the expected user experience with Affirm being at I believe at the onset maybe one of the main or only options for US online commerce.

Max Levchin: But the idea would be that over time consumers using Apple Pay would have multiple options, maybe other by now pay later options, but also some of the card based installment offering. So if we could just talk about the user experience there and maybe the drop down menu, if you will. And then the second piece is around the unit economics. If the full range of products will be offered throughout that channel so that we should expect the unit economics to be still in that three to four percent range.

Max Levchin: We are, you know, we aspire to be in every one of those channels, which means that when we compute the overall revenue transaction card cost metric, we have to account for the possibility that the consumer will walk through any one of those doors. And we've been consistent guiding to this idea that the business works really, really well between 34% when it gets over 4% random securization successes and time shift, and I was standing above floor, slow to rich. We shouldn't really be not investing those dollars, and we're not approving enough people. Basically, below three stars looking less attractive for us as shareholders.

Max Levchin: Which may be absent some degree of revenue share back to Apple. Thanks a lot. I'll try to answer it in reverse order. So we'll be on the Apple page, which by the way, not launched yet, so. Maybe maybe if they get any order, you did ask not not my role or right to unveil. Change is to our partners product. So Apple will undoubtedly deliver beautiful experience just given who they are will be a part of it.

Max Levchin: And so it will save within three to four percent independent of the doors consumers will walk through, and that is certainly how we think about the business when we enter any one of these giant partnerships, and we've been extremely fortunate. Not entirely accidentally proud to call giant platforms, retailers, and all its part partners; we create systems and levers to help us navigate financial reality. We don't, a priori, know exactly the credit profile of the customer; we have expectations, we have hopes, but we don't know who's going to apply and precisely, with approval rates, we will be the deliverer, etc.

Max Levchin: We're excited and proud to be in. We'll all see exactly what it looks like when it rolls out, which hopefully will be reasonably soon. On the economics part of it. So beyond Apple pay, beyond any one major partner, we are not a wallet by design and definition. We are an ingredient brand. We are in that sense, at least similar to visa master card amics, et cetera, which means that we have an inherent channel conflict when you go to a particularly wallet friendly website.

Max Levchin: So, as a result, we only start to these partnerships to make sure that in the end it all adds up to three or four percent.

Max Levchin: Perfect. Thank you, Max.

Matt O'Neill: Thank you. Our next question comes from a line of Matt O'Neill with F.T. Partners. Please proceed with your question. Thanks for taking my question, Max, Michael. I just wanted to focus in again on the, I guess, what you bolded in the shareholder letter, the intention and expectation to be profitable. In this fourth quarter and therefore beyond, and sort of dovetail onto some of the discussions that we had at the investor day, around a longer term aspiration of formalizing as a bank and so forth. Does this sort of accelerate that plan at all? Is that still something on kind of the medium-term timeline?

Max Levchin: You might find from offered directly from card will be accepted because everyone takes visa. You might find Apple pay soon enough with us in it and shop pay because that's also available now off Shopify, at least in some retailers, and then there's Amazon pay. And then there's Google Pay, where we're also integrated. And so on and on it goes, we are, you know, we aspire to be in every one of those channels, which means that when we compute the overall revenue transaction card cost metric, we have to account for the possibility that the consumer walk through any one of those doors.

Max Levchin: And even consistent guiding to this idea that the business works really really well between 34% when it gets over 4% random securization successes and timeshift notwithstanding. Above floor, slow to rich, we shouldn't really be not investing those dollars and we're not proving enough people basically below three starts looking less attractive for us as shareholders. And so it will save within three to four percent independent of the doors consumers will walk through and that is certainly how we think about the business when we enter any one of these giant partnerships and we've been extremely fortunate.

Matt O'Neill: Any thoughts around that would be helpful. Thanks.

Max Levchin: Three points of doubt. We do not need to be a bank to conduct our business in the way that we'd like to conduct it. So that is one of the many routes available to us under the right circumstances, but it is not in any way a requirement that it's not a thing we are marching towards in any particular. The day we decide we're going to become a bank, we'll tell all of you, "Hey, we decided we're going to go to a bank," but that has not happened. That's not what we're saying. Gap profitability is really important and momentous.

Max Levchin: I would like the record to show that it involved no contortionism. It's actually a really important thing that, as a, you know, in this very moment, I want people to understand. We didn't want to go out of bed and said, well, gosh, now we have to go get profitable. Been saying for literally years and years that we are on this track to make more transactions happen. The unit economics are great. We get enough transactions. We multiply that by the margining transaction. It's going to exceed both the fixed and then eventually the rest of the costs in the business.

Max Levchin: Not entirely accidentally proud to call giant platforms, retailers and all its part partners, we create systems and levers to help us navigate financial reality. We don't up-rear we know exactly the credit profile of the customer, we have expectations, we have hopes, but we don't know who's going to apply and precisely with approval rates, we will be able to deliver, etc. So as a result, we only structure these partnerships to make sure that in the end it all adds up to three or four years. Perfect. Thank you, Max.

Max Levchin: And now we can see it so clearly. We are afraid to say, here's what's going to happen, but it is a commentary on a natural course of the business while we invest all of our available cycles and dollars in growth, managing credit, and all the things that we do here. And so, as much as I could have been involved because I want people to know we take it seriously. We mean it. We are absolutely going to get there. We feel great about where the business is. But in no part of it is a, oh, fine.

Max Levchin: Thank you. Our next question comes from a line of Matt O'Neill with F.T, partners. Please proceed with your question. Thanks for taking my question, Max, Michael. I just wanted to focus in again on the, I guess what you bolded in the shareholder letter, the intention and expectation to be profitable. In this fourth quarter and therefore beyond, and sort of dovetail onto some of the discussions that we had at the investor day, around a longer term aspiration of formalizing as a bank and so forth.

Max Levchin: Is this sort of accelerate that plan at all? Is that still something on kind of the medium term timeline? Any thoughts around that would be helpful. Thanks. Three points of doubt. We do not need to be a bank to conduct our business in the way that we'd like to conduct it. So that is one of the many routes available to us under the right circumstances, but it is not in any way a requirement that it's not a thing we are marching towards in any particular.

Max Levchin: Well, we were always on this journey, and now we see a destination.

Unknown Executive: Beyond that, we'll have another reveal. I don't know what it's going to be. We probably won't be returning bank, by the way, but it'll be something else and something interesting, some kind of financial metric. Michael will come up with a robber come up with that. Understood.

Unknown Executive: There are no further questions at this time.

Zane Keller: I'd like to pass the call back over to Vane Keller. Thank you, everybody, for joining the call today.

Zane Keller: We look forward to speaking with you again next tour.

Max Levchin: Today, we decided we're going to become a bank. We'll tell all of you, hey, we decided we're going to go to a bank that has not happened. That's not what we're saying. Gap profitability is really important and momentous. I would like the record to show that it involved no contortionism. It's actually really important thing that as a, you know, in this very moment, I want people to understand. We didn't want to go out of bed and said, well, gosh, now we have to go get profitable.

Operator: Thank you. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

Max Levchin: We've been saying for literally years and years that we are on this track to make more transactions happen. The unit economics are great. We get enough transactions. We multiply that by the margining transaction. It's going to exceed both the fixed and then eventually the rest of the costs in the business. And now we can see it so clearly we are afraid to say, hey, here's what's going to happen, but it is a commentary on a natural course of the business while we invest all of our available cycles and dollars in growth, managing credit and all the things that we do here.

Max Levchin: And so as much as I could have involved because I want to be able to know we take it seriously. We mean it. We are absolutely going to get there. We feel great about where the business is. But in no part of it is a, oh, fine. Well, we were always on this journey and now we see a destination. Beyond that, we'll have another reveal. I don't know what it's going to be.

Max Levchin: We probably won't be returning bank, by the way, but it'll be something else and something interesting, some kind of financial metric. Michael will come up with a robber come up with that. Understood. Thank you. There are no further questions at this time.

Zane Keller: I'd like to pass the call back over to Zane Keller. Thank you everybody for joining the call today. We look forward to speaking with you again next tour. Thank you.