Q2 2025 Affirm Holdings Inc Earnings Call

Good afternoon, welcome to a firm Holdings, Inc. Second quarter fiscal 2025 earnings call. Following the speaker's remarks, we will open up the lines for your questions.

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 would now like to turn the call over to Zane Keller director of Investor Relations. Thank you you may begin.

Zane Keller: Thank you operator.

Speaker Change: Before we begin I would like to remind everyone listening that todays call may contain forward looking statements.

Speaker Change: 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.

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

Speaker Change: 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, todays call may include non-GAAP financial measures.

Speaker Change: These measures should be considered as a supplement to and not a substitute for GAAP financial measures.

Speaker Change: 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: Hosting todays call with me are Max Levchin firm's founder and Chief Executive Officer, Michael Wilford firm's Chief Financial Officer, Chief Operating Officer.

Rob O'Hare: And Rob O'hare affirms Chief Financial Officer.

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

Rob O'Hare: On that note I will turn the call over to Max to begin.

Max Levchin: Thanks Zane.

Max Levchin: Another great quarter, So I do not feel a strong need to expand any links on the numbers they speak for themselves.

Rob O'Hare: I do want to take a moment to thank my frequent partner in crime and our President LIBOR, whose name is not in fact pronounced LIBOR, so that would make for an epic joke.

Rob O'Hare: He's been here at the firm for 10 years.

Rob O'Hare: And he and I met over 30 years ago, but we're studying computer science at the University of Illinois, Urbana Champaign, and affirm isn't even our first rodeo together, but I'd be remiss in not taking a moment to thank him for not only putting up with me for 10 years.

Rob O'Hare: But more importantly, keeping our engineering product operations and perhaps most importantly credit efforts humming along with his typical eastern European Grumpy call.

Rob O'Hare: Thank you lieber here's to many more years together back to you, saying.

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

Rob O'Hare: Operator, please open the line for our first question. Thanks.

Speaker Change: Thank you he would like to ask a question. Please press star one on your telephone keypad.

Speaker Change: We like to remove your question from the queue. You May press star two and for participants using speaker equipment may be necessary to pick up your handset before pressing the star keys.

Speaker Change: Our first question is from Ramsey El <unk> with Barclays. Please proceed.

Ramsey El: Hi, Thanks for taking my question this evening terrific results.

Ramsey El: I wanted to ask about the noticeable increase in zero percent loans and just ask you about how you're deploying those are you opening new merchant doors with them are there particular verticals you're targeting is it for existing partners like is there a sort of a strategy behind it or is it just more broad base.

Ramsey El:

Ramsey El: Yes.

Speaker Change: The very short answer is all of the above but it's a great question.

Ramsey El: Thank you for asking it.

Speaker Change: First of all these are programs, where merchants and sometimes manufacturers.

Speaker Change: Donate if you will parts of their margin to our borrowers too.

Speaker Change: To give them essentially interest free or sometimes.

Speaker Change: Reduced interest loans.

Speaker Change: And it's very powerful.

Speaker Change: Sure.

Speaker Change: Good reason.

Speaker Change: Not paying interest at all obviously is a compelling reason for someone to pull the trigger on buying.

Speaker Change: Our merchants turn towards growth.

Speaker Change: They frequently do in calendar fourth quarter, they look for ways to do promotions.

Speaker Change: There are a handful of well understood ways of doing it one such way is discounts.

Speaker Change: Okay, 20% off which compromise us.

Speaker Change: Pricing integrity and teachers consumers to wait for the next 10% sale.

Speaker Change: Channeling the same promotional dollars into reduced apr's or theory. If you are a very powerful because on one hand allows them to say hey.

Speaker Change: Here's a reason to buy on Nuomi at the same while at the same time, saying the prices the price, we're not discounting and so on.

Speaker Change: Our longtime merchants notice really well some of the earliest purchase really pioneered this practice we've since really.

Speaker Change: Industrial is this by creating tools, where they can do this essentially with very little work on our part and so thats whats undisclosed and we'd said I think in our last quarterly call that that's a thing we're going to lean into and we've delivered on that very strongly the thing that's really worth highlighting here.

Speaker Change: That's <unk>.

Speaker Change: So it doesn't meet the eye immediately.

Speaker Change: We now have a very sizable audience that is fuel direct to consumer in our app and with our card.

Speaker Change: And.

Speaker Change: For a long time these promotions were largely available on.

Speaker Change: Our merchants point of sale online.

Speaker Change: We have now offer them an opportunity to bring these promotions, especially syndicate them across the entire T. Other firms surfaces, which is to say they are available in our app.

Speaker Change: On our card and across many of the wallets, where we're integrated so you can see at the beginning of the affirm network syndication strategy really play out where the offers that we negotiated with merchants on our consumers' behalf are available across all the programs and then Youll see this narrative repeat it in things like Universal financing programs that I'm sure we'll talk about it in the second but.

It's really really important to us the network is valuable because it is aware of the skus or wherever the transactions.

Speaker Change: And delivers great unique reasons for people to buy for consumers to buy on every surface, where we play. So we will see more of this you'll see things that are not immediately visible to the naked eye as we lead into the strategy.

Thank you. Thank you for that one follow up for me.

Speaker Change: You came in above your 3% to 4% of our LTC guide this quarter and I think you've indicated in the past you'd move to reinvest that excess our LTC rather than just letting it flow through to profit what is that look like right. Now does that mean opening up the credit box a bit more maybe subsidizing some of these zero percent loans.

Speaker Change: Does that then flow through to higher volumes like what should we be looking out for in terms of the P&L impact of that reinvestment of the excess or LTC.

Speaker Change: Yeah.

Speaker Change: Yeah, I think certainly leaning into zero percent and in some cases.

Speaker Change: Subsidizing zero percent, so even the zero percent product is slightly.

Speaker Change: Lower margin for us that are interest bearing products. So taking a program that historically has been interest bearing and introducing some zero percent into that program would be slightly margin dilutive, but we think a great thing for our network in terms of what it does.

Speaker Change: For for reaching a broader cross section of consumers. So yeah, I think that the growth in zero percent in a quarter, where we had really really strong our LTC margins I mean, that's not a coincidence that that's something that we're actively trying to do more of.

Speaker Change: Got it thanks, so much.

Speaker Change: Our next question is from will Nance with Goldman Sachs. Please proceed.

Will Nance: I appreciate you taking the question I wanted to kind of follow up sort of in the last two questions combined I know youre talking about leaning into zero percent loans. I was wondering if you could talk a little bit about just the RPC margin profile of some of that incremental growth and I know that's a lever that you guys have to manage the margin.

Speaker Change: I guess where are you in that strategy.

Speaker Change: Obviously, there was some kind of I think you called out a couple of benefits to the margin from some of the loan sales this quarter.

Speaker Change: But just kind of where do you kind of see a tipping point from a margin perspective, where you start to lean in a lot harder and are you doing that or was the ramp in zero percent more a function of some of these kind of merchant driven promotions this quarter.

Speaker Change: Yeah I'll start.

Rob O'Hare: And then Rob can pile on.

Speaker Change: I think.

Speaker Change: We definitely think long term, we want to be in between three and 4% that doesn't mean that.

Speaker Change: We would do things that we don't think are good for their business and so we think about investing dollars are trying to drive incremental growth.

Speaker Change: We don't want to do it in a way that makes good financial sense. So when we think about the credit question that was asked earlier, it's important to us that we don't dilute our performance on credit overall.

Speaker Change: The thing that's allowed us to execute so well in the capital markets and.

Speaker Change: We've learned.

Speaker Change: How important that is over the past several years and really have come to value the capital market's appreciation for our execution there.

Speaker Change: And so we're really thoughtful about things that we do want to do.

Speaker Change: The framework of 3% to 4% remains the long term it doesn't mean that quarter might be above and the bar for investment inside of a quarter is still really high we think it's really important that we're putting dollars to work in ways that makes sense.

Speaker Change: The reason we like for example, investing in expanding really compelling APR offers like see a percent in fixed APR offers is because of the positive selection that we do get from credit. So as Rob mentioned those are actually a lower site lower profile overall, but with also a lower credit profile look at loss profile, which is obviously a track.

Speaker Change: But to the overall portfolio and also I think we're still fine grained in terms of where we can set cut offs for zero percent that we don't need to make a huge or long term debt. We can iterate on setting the right approval thresholds to make sure that we're attracting the sorts of consumers that we want to attract and that where we're <unk>.

Speaker Change: <unk> these programs at the margin profile, we want to run out.

Speaker Change: Got it I appreciate you taking the question guys.

Our next question is from Matt O'neill with Ft Partners. Please proceed.

Matt O'Neill: Thanks, So much for the question I was just curious entering the quarter I believe you were pointing to a three 8% of our LTC margin.

Speaker Change: And this quarter benefited from $60 million collectively.

Speaker Change: Between the securitization and loan sales did that did those two amounts kind of come in and contribute together as expected or was that a bigger than expected benefit I'm just I'm, just trying to sort of parse the.

Speaker Change: You expected versus realized impact to the margin in the quarter.

Speaker Change: Yeah. Thanks for that question I think it's really important to be really clear on this.

Speaker Change: When we gave the guidance.

Speaker Change: When we talked in November we talked about the capital markets pipeline as being a key part of our confidence in that guide if you recall.

Speaker Change: And that was in reference to the deals that we were working on that.

Speaker Change: And had confidence we would execute so not all of those deals were incremental to our outlook. It is the case that the pricing we were able to execute that was better than than we thought but not all of the benefit that we had associated with those deals.

Speaker Change: Was unexpected we planned on doing those transactions and we had a certain.

Speaker Change: Meaningful portion of that already in the number but it helps explain why we were we were ahead of our goals, which were already set we think on the high end of the range.

Speaker Change: Thanks, so much and as a follow up I know, it's a it's always a delicate subject on wallet partners, but it was mentioned in the release I figured I would ask is there anything there that came in better than expectation or plan or any sort of revised outlook as we turn into calendar 'twenty five here with respect to wallet partners. Thank you and appreciate them.

Speaker Change: The quotes.

Yeah, Hi.

Speaker Change: He's someone who cares.

Speaker Change: So.

Speaker Change: Generally speaking very pleased with the wallet integrations.

Speaker Change: They're shaping up to be.

Speaker Change: A really meaningful part of the business.

Speaker Change: Across the board the metrics on these integrated wallets are really strong, but we see good repeats.

Speaker Change: Add to the.

Speaker Change: Transaction per user averages the ads to conversion metrics that we track internally they are accretive on the.

Speaker Change: Credit quality side of the equation. So all in all quite happy with what's happening there a really important piece of our work sort of echoing a little bit to the answer to Brandon's question, we've been quietly busy making sure that our.

Speaker Change: Consumer offers our harmonized across wallets and not wallet integrations and Thats really been driving quite a lot of nice engagement.

Speaker Change: The purpose of that of course is to make sure that consumers understand that whatever door. They choose if theres a firm logo on their door theyre going to get the same quality of service the same.

Speaker Change: Offers same rates etcetera, and so that's been a really important although kind of somewhat behind the scenes effort that also contributed to the.

The waterfront I don't think we are at Liberty to offer any updates too.

Speaker Change: The forecasts are models related to this thing, but we are certainly.

Speaker Change: We're pleased with what's happening so far.

Speaker Change: Thank you.

Speaker Change: Our next question is from Dan do live with Mizuho. Please proceed.

Dan: Hey, guys.

Speaker Change: Amazing quarter.

Dan: As always.

Speaker Change: Can you maybe Max and team can you give us an update on the U K launch specifically youre moving into a territory, where you can cut your incumbent is a market leader so given that your product is much more.

Speaker Change: Diverse than just paying for them how.

Speaker Change: How do you think the share market share evolution can go there over time and how much share can you take from incumbent overtime in Europe. Thank you.

Speaker Change: I think it's a little early to prognosticate share taking I will note that by all public sources, we took share in the U S from our various competitors here quite nicely so at.

Speaker Change: At least past experience bodes well.

Speaker Change: You're totally right, we do have a diverse array of term offerings and the ability to deliver.

Speaker Change: He's really sophisticated subsidized apr's either for longer terms.

Speaker Change: There is definitely very real market, Paul one of my meetings today. It was actually with a prospective merchant that's quite a meaningful player in the U K and it's very clear that the market is hungry for things like 24 month loans and 36 month loans, because the incumbent banks, who provide that sort of product or just not really willing to approve.

Speaker Change: <unk>.

Speaker Change: What I can tell at all but I'm sure some people get alone, but most don't.

Speaker Change: Our pure play competitors are just not in that space in any kind of meaningful way and where we're coming in loaded for that.

Speaker Change: And excited to deliver our value and it seems like the merchants are.

Speaker Change: Impatiently asking us.

Speaker Change: Not with you, but how quickly and how much can we work together so very excited by the opportunity.

Speaker Change: I think last we talked I joked that we have dozens and dozens of transactions at this point, it's still dozens of dozens, but many so that's better and.

Speaker Change: And more than a handful of merchants now so we're still in the testing phase we're seeing all the metrics that we need to track to feel comfortable confident rolling it out widely.

Speaker Change: No letter you'll note that I mentioned that Shopify is our first major.

Speaker Change:

Speaker Change: Enterprise scale integration, that's going to be live in the U K relatively soon and so we're definitely the right time to check in on uptake with a wide group of merchants as soon as that goes.

Pre announce amazing.

Speaker Change: I can speak too freely now.

Speaker Change: Sorry.

Speaker Change: Thank you Max Amazing results again I appreciate it thanks.

Speaker Change: Our next question is from Kyle Peterson with Needham <unk> Company. Please proceed.

Speaker Change: Okay.

Speaker Change: Great.

Speaker Change: Thanks for taking the question and nice results here.

Speaker Change: Wanted to ask on the funding mix moving forward.

Speaker Change: Are you guys looking to expand and add more of these deals kind of like the sixth Street partnership seems like a really good win.

Speaker Change: Are you guys looking at more deals kind of similar to this or how should we think about the mix of funding moving forward between warehouse ABS and <unk>.

Speaker Change: Some of these forward flow agreements.

Speaker Change: Yeah, we are really proud of the progress that we've made in capital markets. This quarter. Our team has really executed very well out there.

Speaker Change: The partnership with <unk> is really an incredible leap forward for our program.

Speaker Change: It's a big it's a big program those I wouldn't expect us to do and the Super near term a bunch more like that in that size and scale, it's a pretty big partnership and we spent a lot of time thinking about who and how we were going to kind of partner. There now that being said I think it is reflective of a very constructive market that.

Speaker Change: Really does value the asset that we create.

Speaker Change: And so we're going to continue to take advantage of that.

Speaker Change: <unk>.

Speaker Change: Our very thoughtful around scaling our capital program we.

Speaker Change: We think about where we'll be in three and five and maybe even 10 years.

Speaker Change: And make decisions that are constructive towards enabling the kind of scale that we're building two so at the Investor Forum last November a year and a half ago, we talked about getting to $50 billion in <unk> and so the team is hard at work and enabling that the capital program scale to allow us to deliver against that goal.

Speaker Change: Here before we know it and when it is we'll take that an eye towards the next milestone and continue to scale, our capital program and to to get to those kind of scale points.

Speaker Change: <unk> that we are.

Speaker Change: Thoughtful that we are leaning towards the flavor of the year with respect to the capital markets and are are designing a program that is durable and can survive multiple economic scenarios and conditions.

Speaker Change: What it means is yes, the forward flow Marquette in particular partnerships with private credit and insurance companies are really attractive right now and we're going continue to take advantage of those.

Speaker Change: As much as we can but we're we're also thoughtful around making sure that we have a good reputation and good execution in the ABS markets consistently in.

Speaker Change: The two really do work with one another about the only program for us that is less.

Speaker Change: A piece of real scale enablement is our warehouse business and that's mostly because of the attractive.

Financing that we get in the ABS market combined with the obviously the good.

Speaker Change: So we have in the Port Florida.

Speaker Change: Great. Thank you and then I guess, just a quick follow up on <unk> Street in particular.

Speaker Change: Shareholder letter you guys mentioned that is expected to start ramping up in second half of 'twenty five.

Speaker Change: Is that like a phased launch the start smaller and the volumes will ramp or is one thing.

Speaker Change: The volumes start it should be is that a fairly steady run rate or how should we think about.

Speaker Change: And the contribution and the ramp time with fixed rate.

Speaker Change: Yeah, It should ramp over the course of the next year. So we're not planning on turning it up.

Speaker Change: All the way to its maximum levels overnight, we'll be very very thoughtful about scaling it carefully over.

Speaker Change: Over the course of the next year.

Speaker Change: Alright, Thank you very much for the color.

Speaker Change: Our next question is from Rob Lab pack with Autonomous research. Please proceed.

Speaker Change: Hey, guys.

Speaker Change: Active customers were up 23% year over year I think you noted in the letter that's four quarters of accelerating growth.

Speaker Change: To ask a where that is coming from b, how much it benefits from things like the zero percent APR growth and then <unk> I guess, how sustainable do you think that is in the 20% plus range.

Speaker Change: I think the root causes of these accelerations are.

Speaker Change: Multiple quarters, maybe even multiple years in the making.

Speaker Change: Yeah.

Speaker Change: We were actually quite focused on.

Speaker Change: Increasing our.

Speaker Change: Active consumers and it's gratifying to see the results compound.

Robley.

Speaker Change: Most impactful project.

Speaker Change: In that effort, where our focus on direct to consumer. So the card obviously is a great product to increase engagement.

Speaker Change: Reawaken, if you will dorman consumers that have transacted with us sometime in the past, but haven't use us in a while so bringing them back as a really important effort.

Speaker Change: It also does not hurt to continue expanding e-commerce coverage the more counters, if you will to more checkouts we're on.

Speaker Change: The better the probability that someone who would use affirmed before will say, hey, I remember that product that was great better than my credit card and I should use them again, so all those things add up to a little bit more conversion, just a little bit better.

Speaker Change:

Speaker Change: Re engagement.

Speaker Change: For the <unk> a doubt it is not a.

Speaker Change: Some sort of a dramatic credit machinations behind the scenes, which people we suspect wait a second you just opened up the box should be apparent in the credit results, but for the avoidance of doubt we have been very steady hand it on.

Speaker Change: On credit.

Speaker Change: Okay.

Speaker Change: The best I can offer is it was a very deliberate prioritization on our part about a year ago to focus on active consumers and like everything else. We do here when we focus on something it typically takes a little while but the results come out.

Speaker Change: Okay. Thanks, and then on the non-GAAP operating expenses sales and marketing in particular, it looks like that was up quite a bit sequentially. You have typically not done a lot of direct sales and marketing. So just wondering what the driver was there and if you expect non-GAAP.

Speaker Change: Sales and marketing to stay at that like $30 million level going forward. Thanks.

Speaker Change: Yeah, We did Rob we did make some investments in the quarter to support some new programs.

Speaker Change: Graham launches, but the marketing spend that we had to <unk> earlier point. It really wasn't focused on direct user acquisition. We continue to see most of these are acquisition coming from point of sale as Max alluded to so really not a change in strategy.

Speaker Change: In terms of the go forward spend we haven't broken out the opex into the various cost centers.

Speaker Change: You can see from the guide we do expect Opex to be roughly in line with Q2 in both Q3 and Q4 so.

Speaker Change: It's going to be a pretty similar opex envelope as we look ahead to the next two quarters.

Okay. Thank you.

Speaker Change: No.

Speaker Change: Okay.

Speaker Change: Next question is from Reggie Smith with Jpmorgan. Please proceed.

Reggie Smith: Hey, guys congrats on the quarter.

Speaker Change: Was hoping to dig in a little bit on AI.

Mentioned, I guess, the chatbot and be in the shareholder letter I was curious how you guys are thinking about AI and whether it can be used for more commercial purposes, I don't know products that face off against consumers and then the second piece of that question is how AI is changed.

Speaker Change: Youre thinking on head count and what you can get done with your current.

Speaker Change: Size of your staff and if that's changed over the last 12 months. Thank you.

Speaker Change: Okay.

Speaker Change: Thank you Richie good questions both.

Speaker Change: So we.

Speaker Change: We try to.

Speaker Change: Contrarians here so.

Speaker Change: The industry Zags with Agri, we don't talk that much about AI, but.

Speaker Change: We've been using machine learning and artificial intelligence since inception, all of our underwriting and fraud fighting all built on what is now called AI.

Speaker Change: We have a lot of really cool stuff that doesn't meet the <unk> that we just don't.

Speaker Change: [noise] about too much but for what it's worth.

Speaker Change: A lot of the most modern transformer architecture approaches to model building is something we're actively investing in internally for all the thing. It's all the same things we accomplished with more traditional machine learning and even some sort of really innovative stuff in.

Speaker Change: Is it kind of thing where I'd love to dig into it and probably have the call would get very bored.

Speaker Change: My rants, but.

Speaker Change: Literally.

Speaker Change: Out of my morning, looking at a completely novel transport architecture.

Speaker Change: Design that we think we're going to pick up some really interesting results from in fighting fraud.

So that's entirely in terms of actually the underwriting.

Speaker Change: Antifraud type stuff.

Speaker Change: We are engaged in deploying AI tools for productivity purposes, which.

Speaker Change: It is absolutely a.

Speaker Change: Productivity or operating leverage in the cancer across the team, thereby giving us choices in hiring and allowing us to focus on hiring specialists.

Speaker Change: Higher caliber versus more entry level jobs, not just in customer service, but in things like engineering, etcetera, etcetera, and so pretty excited about that.

Speaker Change: We are.

Speaker Change: Fine example, I think I may have given before but one of my favorite ones. We have 300 and something thousand active merchants. The total number of merchant contracts. We have signed is in hundreds of thousands anytime we're asking ourselves can we launch this new product do our merchant contract allow us to do that so.

Speaker Change: Some human somewhere is going to open up the 300000 documents and thats not going to be easy if you ask an equivalent of a.

Well trained.

Speaker Change: You can answer that question in seconds and so that's a fine example of where our legal team benefits from.

Speaker Change: Generative AI without the need to expand the head count So we're doing that and legal we're doing that in compliance we're doing it in an accounting marketing et cetera. So all of that is exciting and happening.

Speaker Change: And then on the consumer side.

Speaker Change: Got to bite my tongue and not to pre announce anything but obviously.

Speaker Change: The tools that the opportunities that come out of <unk> are pretty awesome, and we'll have RSA.

Speaker Change: Products to show for it when we're ready.

Speaker Change: Got it and then I guess if I can.

Speaker Change: I'm just kind of follow up you get a finer point on it you guys gave us the operating leverage targets this year.

Speaker Change: I guess.

Speaker Change: How much and even at your analyst day like how much AI is kind of baked into that leverage is still.

Speaker Change: Did you contemplate that slowly or how should we think about that you follow my question.

Speaker Change: I think so Rob you want to opine.

Speaker Change: Yeah, again I think.

Speaker Change: What we're doing with AI has sort of been an inherent part of how we've operated the business and as Mac said since inception and so.

Speaker Change: We really did.

Speaker Change: Take a hard look at driving efficiency in the business that was over two years ago now and we've we've asked the demanded for operating leverage in every operating plan that we built and so I think finding ways to do more with less as just part of how we've been operating so it's hard to really quantify rajiv but.

Speaker Change: We're always looking to be as efficient as we can and to scale the business without.

Speaker Change: Adding tons are in place.

Speaker Change: Perfect that sounds great great quarter.

Speaker Change: Appreciate you taking the questions.

Speaker Change: Okay.

Speaker Change: Our next question is from Andrew <unk> with Wells Fargo. Please proceed.

Andrew: Hey, Thanks for taking my question and nice set of results here.

Andrew: In the shareholder letter you talk about the redesign of the firm apt and focusing on the utility.

Speaker Change: If you can just give us a little bit more color on what you've learned about the redesign how affirm is becoming more of a marketplace and what kind of about other opportunities that that's kind of leading to.

Speaker Change: When we think about the affirm card longer term getting to that level of free to use and scale that you've talked about in the past.

Speaker Change: Sure.

Speaker Change: And it got edited a little bit in the final hours of the letter writing but.

Speaker Change: Many of the changes we built last quarter, which is what the letters referring to have only rolled out now for this one.

Speaker Change: Still rolling out like we don't change UX.

Speaker Change: Willy Nilly and so youll see a few more but we will look different for example, still looks almost the same today, but.

Speaker Change: Some bits or different more all.

Speaker Change: Obvious changes will happen on the UX front, if you sort of follow the app carefully you'll see that we're leaning in more and more into this notion that the affirmed network is this really rich collection of merchants that.

Speaker Change: At any given time, our offering be staggering zero percent deals either funded by the retailer or the manufacturer or both.

Speaker Change: And our consumers have come to expect that the affirm app is a place where they can find these deals.

Speaker Change: And for a while it was kind of an organic thing that we put together because people asked I used to go underwrite it and read people asking the question, Hey, where can I find it affirms zero percent deal at some point you gave me the idea where really you should be able to find the firm's eruption deals maybe in the affirm app that'd be a good place. So we started there was a catalog and our deal SAP in the App.

Speaker Change: Is a little bit of that and we're now fielding close to.

Speaker Change: Hundreds of thousands of searches per week.

Speaker Change: And rising rapidly.

Speaker Change: In the App looking for these European deals.

Speaker Change: Obviously naturally leads to an opportunity to say hey.

Speaker Change: Someone will want to be featured there and we're very careful not to.

Speaker Change: God forbid pit our merchants against each other it's not a comparison shopping engine or anything like that it's really a place to showcase.

Speaker Change: The exciting offers that our retailers are bringing out to affirm shoppers and so.

Speaker Change: Keep leading to that we keep on seeing better conversion.

Speaker Change: A quarter or two ago I rattled off the search to transaction initiation rate is like 25% last I looked at is clipped 30. So people are using this really effectively to find reasons to say, yes to buying and so we'll keep doing that.

Speaker Change: There's a couple more things company coming into the App.

Speaker Change: Better experienced the described by MISO.

Speaker Change: Stop myself from.

Speaker Change: Revealing too much but it's entirely about just making the card.

Speaker Change: A more convenient thing okay.

Speaker Change: I've talked about in the past that as much as I Love My favorite child. The card there's still so much to do in terms of.

Speaker Change: User interface improvements, we just updated a little bit of the transaction planning flow. So you can really quickly figure out what youre purchasing power is and what will happen. If you swipe the card without asking for a loan upfront et cetera. So all of that is a long list of features that we're building but.

Speaker Change: All of it is all about just finding 123 more points of growth for the garden has already obviously growing really well, but we're not going to be I wont be happy.

Speaker Change: If it slows down and so we just have to keep working on it.

Speaker Change: So really exciting stuff and congrats on the GAAP EPS.

Thank you.

Speaker Change: Our next question is from Jason.

Speaker Change: <unk> with Bank of America. Please proceed.

Speaker Change: Well, thank you guys.

Speaker Change: I know, Matt you said at the outset.

Speaker Change: And I'm, just kind of speak for themselves, which they do so I'm curious like with things.

Speaker Change: Going well on credit and funding and volume growth in profitability really what are the one or two things.

Speaker Change: Just items that you are spending the bulk of your time focusing on driving improvement in.

Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: The list is long.

You can give me more than one or two then.

Speaker Change: Okay.

Speaker Change: Trying to prioritize.

Speaker Change: Okay.

Speaker Change: Let's see.

Speaker Change: Yeah.

Speaker Change: Okay.

Speaker Change: Ultimately live and die by conversion and uptake.

Speaker Change: And.

Speaker Change: Up to a point you can do this by having blanket.

Speaker Change: Great terms and more zero percent et cetera.

Speaker Change: Some point you have to personalize ware.

Speaker Change: It's not enough to say to someone.

Speaker Change: Your purchasing power increased you have to speak to your purchasing power at a particular merchant is waiting for you et cetera, and so there's always opportunity to find that efficient frontier up offerings, so when access to credit without over extending them.

Speaker Change: One thing that again I'm sure Im repeating myself at this point, but we're not in the business of making consumers spend more money.

Speaker Change: In fact, we're in a business of hopefully helping consumers pay less for access to credit.

Speaker Change: But we're more than excited to take over.

Speaker Change: More of our consumer spend in the last letter I think I said that we want to get the card to 20 million cardholders.

Speaker Change: <unk> $7500 per year of spend.

Speaker Change: Somewhat arbitrary numbers theyre, just they multiply out to a big number and we're hoping to get bigger and bigger so anything we can do to personalize the experience to give people a chance to feel like this is the best alternative they have to their debit or credit card is we're busy with.

Speaker Change: That's in the U S internationally, obviously, there's more than a little to do in the U K we are doing.

Speaker Change: Doing well there.

Speaker Change: Lots to do but the initial results are.

Speaker Change: Really.

Speaker Change: Pleased but not satisfied I think it's the the internal terminology I used.

Speaker Change: Yeah.

Speaker Change: <unk>.

Speaker Change: Etcetera, So I think that those are kind of the.

Speaker Change: Maybe things that are top of mind at any given time, there is always something exciting going on here.

Speaker Change: Definitely some pretty fascinating things happening.

Jenni: It's a great question was jenni I that I spent a little bit of my time on.

Again, not in the service of anything but.

Jenni: We have set out to do in your build build good financial product. So there's just a lot to build new product categories.

Speaker Change: Right and maybe just a follow up on card I mean, now it's up to 8% or just over 8% of total GMB I'm wondering if you've seen any change in consumer behavior with the product in terms of paint Alberta pay later or any newer merchant categories that youre seeing increased traction in terms of usage of the card.

Jenni:

Jenni: No we have not but we're very actively working on expanding it. So the card is really great for some of the transactions that covers today and it's not optimal at all or not as good as it should be anyway for other kinds and so I spent a meaningful amount of my time trying to answer the question of how do we.

Jenni: We get to that $7500 per user.

Jenni: And obviously, there's only so many couches and.

Jenni: Bicycles youre going to buy per year. There is a lot of other kinds of transactions and so everything we do here is in the service for the card in particular.

Jenni: Answering the question how else can we be useful to you where else can we have an honest financial product that doesn't charge late fees doesn't compound all the good things, we do with it doesn't charge of any interest at all with the merchants interested in getting you to say, yes. So that's a.

Jenni: One way to answer. This question is how can we be useful to you in groceries, how can we be useful to you. When you are buying medicine and that we just launched was good Rx and it's.

Jenni: In the letter I think.

Jenni: That's a category that we really think is very important helping people buy what is a progressively more expensive part of their life dedication is something that we're quite proud about and excited to do more and so.

Jenni: Each one of these categories is something that you have to think through and the modalities of purchase can be different.

Jenni: Easily what it looks like to use it from card.

Jenni: At a.

Jenni: Our restaurant versus a general merchandise store versus a specialty electronics store.

Jenni: Those are the areas of possible impact and we.

Jenni: We are seeing at this point the card is big enough, where we can observe usage.

Jenni: Behind areas, where conversion is not as high as it is in other and ask ourselves what can we do to improve the experience and that's actually probably one of the areas that I'm. Most excited about and spending a lot of my time on trying to anticipate how can we improve conversion improved uptake in places where it's not as high as it can be.

Max Levchin: Okay. Thanks Max.

Speaker Change: Our next question is from Vincent.

Max Levchin: With <unk>. Please proceed.

Speaker Change: Hey, good afternoon, thanks for taking my questions.

Speaker Change: And I actually spoke earlier about taking share in the U S. This quarter.

Speaker Change: I think it's interesting when I contrast for strong growth in your LTC margin versus some of the credit cards for instance that I cover.

Speaker Change: Providing maybe weak weaker in 2025 guidance on GMB and calling for tighter credit underwriting.

Speaker Change: I'm wondering.

Speaker Change: What you're seeing in terms of being able to capture maybe even more share through the course of 2025.

Speaker Change: Are you seeing opportunities with merchant so maybe different behaviors from customers is that other lenders have pulled back.

Speaker Change: And what are you expecting how will this play out over the course of calendar 2025.

Speaker Change: Definitely not.

Just thinking about to predict right because these things are a little bit.

Speaker Change: They are both slow moving and quite dynamic, especially as seen through the lens of things like credit reporting obviously any time lenders pulled back.

Credit card space.

Speaker Change: Yes.

Speaker Change: At least as often related to their forward looking view as it is about them dealing with mistakes of their path.

Speaker Change: So anytime somebody offers you a conservative guidance on credit issuance.

Speaker Change: Maybe speaking about their overall view of the consumer thinking that people are going to spend less money or there may be over extended.

Speaker Change: But as often as not Theyre also speaking to the fact that they overextended that consumer in their portfolio and are now dealing with having to average into reasonable yield loss rate.

Speaker Change: Because of how our product works.

Speaker Change: Have much less of a concern and that damaged we underwrite every transaction.

Speaker Change: Typical term is much shorter.

Speaker Change: We get to assess the consumers financial health in the moment and.

Speaker Change: Our best to help them, but if we think that they were sending themselves the answer can be.

Speaker Change: Sure just put it all into the big bucket into revolve away. So because we have the discipline and we try to extend it to our borrower.

Speaker Change: A lot easier for us to feel good about the state of the consumer given our numbers.

Speaker Change: We're not apologizing for the mistakes of the past because.

Okay.

Speaker Change: So I do think that as if the reports in the forecast it to be believed.

Speaker Change: These lenders will pull back and we'll be there to help these customers.

Speaker Change: Cause we should it's our job.

Speaker Change: Hey, guys.

Speaker Change: It sounds like I'm hesitating, it's not that I don't have the confidence in our ability. She is always very difficult to figure out what's going to happen next in this.

Speaker Change: This business and the structure of our product specifically, so that we can react very quickly to whatever macroeconomic wins might bring.

Speaker Change: Right now U S consumers.

Speaker Change: Healthy shopping.

Speaker Change: Our paying their loans back the economy basically fully employed which is really solid we're not afraid of higher for longer because we've been able to operate at these rates quite successfully so.

Speaker Change: Everything looks good we'll continue lending because it seems.

Speaker Change: It seems like a really good business decision for us should things change we will be there to go back smartly, we don't grow based on credit we issue credit based on our.

Speaker Change: Two.

Speaker Change: Healthy credit results for our capital partners.

Speaker Change: Okay, Great. That's very helpful. Thank you and actually a follow up on that you said.

Speaker Change: For instance, we're not afraid of higher for longer.

Speaker Change: It seems like every day, we get some new macro or political used to think about.

Speaker Change: Whether it's CFPB director departure, or tariffs or where interest rates are higher for longer.

Speaker Change: Wanted to get your thoughts on maybe what's important and impactful to affirm from what's coming out of Washington.

Speaker Change: I think.

Speaker Change: We are sufficiently self aware.

Speaker Change: To know that we are on the receiving end of what's coming out of Washington, and so our job is to help consumers buy and merchant sell and we're pretty good at that job.

Speaker Change: The rates.

Speaker Change: Bill in phases.

Speaker Change: Again, I think we've shown that we will thrive.

Speaker Change: So at any rate environment, we've seen so far.

Speaker Change:

Speaker Change: Regulatory.

Speaker Change: We have not.

Speaker Change: Held back nor do we expect to do something new and a natural based on the administration because we are guided by our mission and a sense of right and wrong Thats internal but who we are versus whats on the latest headlines and we will continue lending will continue not charging late season, not compounding interest in.

Speaker Change: The raging against deferred interest and things like that and so none of that is going to change.

Speaker Change: So we don't need to for us to reexamine any of our core values.

Speaker Change: Things like tariffs are super hard to predict but they.

Speaker Change: Tend to have inflationary impact on the economy and when the inflation was raging we were there to help our customers afford things that they needed to buy and we will continue to be there for them.

Speaker Change: Yeah.

Speaker Change: Et cetera, So I think.

Speaker Change: If I don't mean to sound overly sanguine because every day is a new day and we keep our eyes and.

Speaker Change: On the on.

Speaker Change: The dial to enhance firmly on a steering wheel, but.

Speaker Change: We learned in Democratic and Republican administrations in Red and Blue States, all the time and certainly have no.

No plans to change any of that.

Speaker Change: Okay very helpful. Thanks, so much.

Speaker Change: Our next question is from John Hecht with Jefferies. Please proceed.

John Hecht: Afternoon, guys, congratulations and thanks for taking my questions.

You did talk about.

John Hecht: Some of the goals within the card segment.

John Hecht: But I guess, what I'm wondering is what have you learned so far when it comes to customer interaction.

John Hecht: And kind of overall revpar per customer when it comes to that product layered upon.

John Hecht: The buy now pay later products that might have brought him into the into the network.

John Hecht: So I think I said it before.

John Hecht: Bears repeating.

John Hecht: Card is not in and of itself.

John Hecht: Sure.

John Hecht: <unk> two our usage.

John Hecht: <unk> a filter in a sense that people that will eventually become our best consumers people that really buy into the value proposition of a firm zero percent.

John Hecht: The deals the discounted apr's no fees like everything we stand for.

John Hecht: <unk> opt into the card.

John Hecht: You're leaning into affirm and choosing to become essentially what do we think is going to be a lifetime relationship and so the card is this do you want to embrace a firm fully here.

John Hecht: <unk>. Please please go for it and so I don't think its for everyone, but it is our best customers choosing to do more with us and the good news is that we have.

John Hecht: Shortage of those and maybe eventually it'll be just all of our customers but consumers.

John Hecht: But that's an important thing so as we look at the card stats there all staggeringly strong it's our best economics, it's our best.

John Hecht: Margin, it's our best engagement, that's our best transactions per year. So all of that is really strong.

John Hecht: But it's also not a surprise, it's not like Oh, we discovered that these people are amazing.

John Hecht: We're already on track to be our best customers now they are just becoming our best customers that much faster. So I think that's a it's an important background to understand about that consumer.

John Hecht: We are leaning very heavily into making sure that they never regret their choices, so there'll be more and more things to like about the card program. We have other variants of the products that are available in our card in mind, we think we have.

John Hecht: Another type of program to offer types of program to offer to folks that are slightly different than today's consumer that picks up the card. So the journey is just beginning but there's many more things to build.

John Hecht: But generally speaking these are the best consumers, we didn't necessarily know we have and as soon as they take up the card we know they're here for a long time and we're excited to serve them.

Okay. That's very good context and helpful. Second question is related to expense them.

Speaker Change: You scaled a ton on expenses in the past year, especially the tech side and the G&A side.

Speaker Change: And now margins are better than I think anybody would have expected how do we think about that trajectory of scaling in the next few quarters given.

Speaker Change: The fact that margins are better so you have an opportunity to reinvest maybe in some longer term growth initiatives.

Speaker Change: I guess just the question is how do we think about the trajectory of that scale.

Speaker Change: Yeah. Thanks for the question John.

Speaker Change: We have made investments of course to support launches like the UK for example, and so typically what you'll find with a firm is that the work that goes into getting a product or a program life happens several quarters before that product reaches public availability. So that was definitely the case.

Speaker Change: The U K I feel like we've done a really good job of investing ahead of these programs to make sure that we maintain.

Speaker Change: Really healthy growth rates in the in the medium and long term.

Speaker Change: I would also just say I mean, it puts you to a couple of things I mean, the guide that we gave both for Q3 in Q4, you can see the implied.

Speaker Change: non-GAAP operating expenses, they are pretty consistent with the level of spend that we had in the second quarter. So in terms of the trajectory going forward, we do expect it to.

Speaker Change: To be relatively flat from the Q2 levels there.

Speaker Change: There is a portion of our fixed operating expenses that is variable with transactions <unk>, just sort of general activity in the business. So.

Speaker Change: I think it does makes sense that some of the operating expenses will will scale a bit with GMB growth. So those are good spend we're happy to spend a bit more as the business grows to support customers and to make sure all of our infrastructure for the sites and for our merchants is up and running.

Speaker Change: So that's how we're thinking about it.

Speaker Change: Okay. Thanks very much.

Speaker Change: Yeah.

Speaker Change: Our next question is from Andrew Jeffrey with William Blair. Please proceed.

Andrew Jeffrey: Good afternoon I appreciate you taking all the good questions.

Speaker Change:

Speaker Change: I wanted to ask a little bit about durability of the funding cost improvements youre seeing obviously, it's a good environment and you've made comments and demonstrated a firm's ability to improve loan sale execution and overall funding cost how much do you think what we're seeing today is structural.

Speaker Change: The words, what would carry through through the next consumer recession or economic recession recession, how much is sort of.

Speaker Change: <unk> sort of a sign of where we are.

Speaker Change: Currently in the economy.

Speaker Change: Yes.

Speaker Change: Humbly, we are definitely the beneficiaries of the market conditions and so.

Speaker Change: Definitely can.

Speaker Change: We can't ignore that the environment is very favorable for what we do.

Speaker Change: But we do think we're differentiated we think that the performance that we've been able to demonstrate on credit.

Speaker Change: Is it really changed that both the tone and depth of conversations with all stripes of capital partners and we think that's very durable.

Speaker Change: Commitment, we've made to our investors both debt and equity around our focused execution on credit and our commitment to deliver against those commitments.

Speaker Change: And job number one is Mexico he says.

Speaker Change: That commitment and the results that it generates.

Speaker Change: We are it's how we're going to operate through any cycle in any any macro volatility.

Speaker Change: And what Youre seeing right now is is that kind of credit for the results that we're delivering combined with the favorable market conditions, resulting in just really excellent conditions for us it's execution license. So.

It is the case that we're beneficiaries, but I don't want to be dismissive of the advantages that we get because of the good work and we think that's pretty durable.

Speaker Change: I will note specifically in our fiscal Q2, we do benefit a little bit in terms of the average funding cost numbers that we show in our.

Speaker Change: Our materials just from the timing of some originations and so I don't I don't.

Speaker Change: I wouldn't expect the.

Speaker Change: Calculation as we do it there to be the same.

Speaker Change: Future quarters, but really the fundamental trends ignoring just kind of the math in the quarter. The fundamental trends are very real and we think we can continue to sustain those we get a question a lot about how much is actually just truly rate driven and I think we're not seeing any of the impact of rates right now in the business.

Speaker Change: So I think it's much more about spreads and credit execution and the overall favorability of the asset.

Speaker Change: Alright, that's super helpful and then Max if I could ask.

Speaker Change: One on your your baby on the firm card, which is performing very well I appreciate it.

Speaker Change: The the.

Speaker Change: The comments on efforts to expand use cases can you talk about sort of as a percentage I know, it's still early but as a percentage of that is $1 7 million cardholders are so how many of those are sort of primary banking relationships for firm I guess as measured by direct deposit and I'm trying to get a sense of.

Speaker Change: What the lift is potentially there too.

Speaker Change: Not many right now.

Speaker Change: It's a.

Speaker Change: I guess, the good news bad news I'm, not sure, which one you're looking for but there's plenty of room to.

Speaker Change: To add to the services, we offer to the consumer because majority of them do not really have a.

Speaker Change: Depository relationship with US we're not a bank, we're not particularly busy or engaged in gathering deposits from the consumers.

Speaker Change: That said the ones that are willing to trust us with some of their money.

Speaker Change: Especially in a form of direct deposit benefit from us understanding their total financial state that much better and their ability to borrow goes up so it's a natural.

Speaker Change: Saying, we do where we.

Speaker Change: We will take your money, if you'd like to deposited with us and.

Speaker Change: We'll understand that much better and we will be able to expand your access to credit would that understanding. So there is definitely more to do there and where.

Speaker Change: A little bit remiss and updating the street on the progress we are doing there but.

Speaker Change: That's going to change in the next few quarters.

Speaker Change: Okay. Appreciate it thank you.

Speaker Change: Our next question is from Timothy Chiodo with UBS. Please proceed.

Speaker Change: Great. Thank you for taking the question often investors look at the list of really really strong partners that you have obviously, Apple Amazon Shopify, Walmart Expedia, it really doesn't get much better than that and there is this question of who could be next and oftentimes. The answer is it's more of the international opportunity with many of those large enterprise partners and customers.

Speaker Change: And I realized you are likely not able to discuss your constructive discussions that you might be having with some of them, but if you could maybe just put some context around that opportunity in terms of if there are any limiting factors if theres any maybe exclusive agreements or anything else that would preclude you from longer term being able to.

Speaker Change: Go outside the U S with many of those in addition to the start you already have with Shopify.

Speaker Change: I am sure I cannot speak to exact.

Speaker Change: Contracts.

Speaker Change: Such.

Speaker Change: Just because these things are understandably frequently confidential.

Speaker Change:

Speaker Change: The short answer is I don't think.

Speaker Change: This is <unk>.

Speaker Change: If you flip it around it is currently a target rich environment to use a military term I think we have lots of opportunity.

Speaker Change: Internationally, but also domestically.

Speaker Change: We're still not at 100% of E Commerce, and we aspire to get to dangerously close to that number and we are on precious few offline checkouts and we certainly aspire to be a meaningful player in both.

Speaker Change: Obviously, the card consumers benefit from a firm online and offline because the card works just about anywhere visa is accepted.

Speaker Change: But there's more we can do there and we will but internationally.

The pipelines of our sales team are are currently quite well filled and we feel very good about the lot of the conversations we have.

Speaker Change: Maybe I'd add a small thing I don't think we think there is anything that limits our ability to go get those relationships et cetera, we.

Speaker Change: We have to go get them.

And as much as we have really good relationships and do something really unique for those.

Speaker Change: Partners.

Speaker Change: The reality is we're today really only live in just fairly so in the U K and there's lots of other geographies that they are partners are talking to us about going into <unk>.

Speaker Change: Do we have to get there with a go live we have to prove that we can deliver the same experience. We do in the U S. But I would I would answer your question directly there is no limiting factor in our ability to scale with that with those kind of partners everywhere.

Speaker Change: Perfect. Thank you for both of those I appreciate it.

Speaker Change: Our next question is from Jamie Friedman with Susquehanna. Please proceed.

Speaker Change: Hi.

Could you share what percentage of the GMB is now made up of.

Speaker Change: Offline like face to face.

Speaker Change: I don't think we break that out.

Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: So maybe we can wait for that crew future time I wanted to ask about market share. So periodically, though you do Max share your own observations about market share I think he has shared one.

Speaker Change: Almost six months ago.

Speaker Change: Do you have that.

Speaker Change: That number now and if not maybe qualitatively if you could talk to how you saw a market share shift in the quarter.

Speaker Change: Yes, why don't I grab that one.

Speaker Change: So we don't we did not break out quantitatively, we do share our estimates from time to time as you probably know it's a bit of a difficult number to pin down.

Speaker Change: That being said, we do believe we're taking share in this market. We think we were the fastest growing of all of our large competitors. We think that we had real traction versus versus the competitors, who break down break out there their north American businesses, where we were able to grow much more quickly with them.

Speaker Change: It's a function of a number of factors, but not least of which is something I think Tim alluded to which is when you partner with the best who have.

Speaker Change: Holiday periods.

Speaker Change: You are the beneficiary of that in terms of market share and our distribution really did help us quite a bit last quarter and I think stand out.

Speaker Change: Versus our competition in North America.

James Faucette: Our next question is from James Faucette with Morgan Stanley. Please proceed.

James Faucette: Yes.

James Faucette: Great. Thank you so much I wanted to ask quickly and I. Appreciate you guys have answered a lot already.

James Faucette: Approach to these calls so I appreciate that.

James Faucette: Looking at the delinquency improvement in December that that seems to be seasonal.

James Faucette: Do you expect to get some continued benefit through the tax return season or at least that would also be typical.

James Faucette: You've also been clear that you intend to increase risk exposure at least some but how should we be thinking about your target high watermark or like a kpis like delinquency rate and how much incremental GMB.

James Faucette: You can unlock along the way to whatever that target is.

James Faucette: So probably bears to start by saying.

James Faucette: The targets, we will look at internally for delinquencies et cetera.

James Faucette: Our more than anything about our capital relationships like we understand what our partners require of us to feel good there are always two numbers right, there's yield either for us or for them doesn't matter and then theres delinquencies and defaults that.

James Faucette: Kind of as a signal of safety uncertainty in both of those numbers are fundamentally determined by us and our partners in concert and in constant currency.

James Faucette: And so we don't really think.

James Faucette: Ever in terms of hey, let's take a little bit more risk and grow a bit more the risk. We take is determined by those conversations the settings are very clear the conversations are entirely in the context of credit frankly, because our capital partners just don't care, how fast we grow they are here for the yield and for the safety of our returns.

James Faucette: The stability of the numbers for something they don't care, if we grew at 35% or 25%. So long as they are able to deploy capital successfully they feel great about our stewardship up their money and so that's that entirely independently of our growth.

It is exactly how it should be I think many of company got in trouble in the past by saying Oh, we need to do to grow is just be a little bit looser credit standards. That's the first step down into the proverbial Hell.

James Faucette: Bad credit management, and we won't let that happen here. So are you.

James Faucette: You are totally right that there is a seasonality to credit improvements in.

You can see it in the typical supplement chart that we show as sort of a <unk> fluctuate up and down as the year goes.

James Faucette: We keep our hands on the wheel and we move that number up and down.

James Faucette: Approvals up and down based on what we're seeing in the numbers, how we feel the seasonality is going sometimes seasonality can be delayed which is sort of this last year was a little bit weird.

James Faucette: In that sense, but again like the two are separate conversations our growth internally.

James Faucette: Is a major topic and it's entirely in the context of.

James Faucette: What merchants can we do a great zero percent program with where can we get into checkout, where we arent who can launch sooner who wants to run a program in our App, who wants to extend easier percent deal. They ran through the holidays. All the way through January those are growth initiatives that we really love and enjoy.

Doing in pushing and selling and all of that it has never ever in our conversation that oh by the way Shouldnt, we get a little bit looser was credit because that will help our growth like the data. It happens I am feeling at my job Libre scaling it is.

James Faucette: Just doesn't does not happen so I strongly encourage everyone.

<unk> not.

James Faucette: Contemplate the two in concert just because it creates a false.

James Faucette: Correlation where there isn't one.

Zane Keller: We have reached the end of our question and answer session I would like to turn the conference back over to Zane for closing remarks.

Zane Keller: Well. Thank you all for joining the call today, we look forward to speaking with you all again next quarter.

Zane Keller: Thank you. This will conclude today's conference you may disconnect. Your lines at this time and thank you for your participation.

Zane Keller: Okay.

Zane Keller: [music].

Zane Keller: Yeah.

Zane Keller: Yeah.

Zane Keller: [music].

Zane Keller: Okay.

Zane Keller: Okay.

Zane Keller: Uh huh.

Zane Keller: [music].

Zane Keller: Yeah.

Zane Keller: Yeah.

Zane Keller: Okay.

Zane Keller: Uh huh.

Okay.

Zane Keller: Yeah.

Zane Keller: Yes.

Zane Keller: [music].

Zane Keller: Yeah.

Zane Keller: Yeah.

Zane Keller: [music].

Speaker Change: Good afternoon, welcome to affirm Holdings, Inc. Second quarter fiscal 2025 earnings call. Following the speaker's remarks, we will open up the lines for your questions.

Speaker Change: As a reminder, this conference call is being recorded and a replay of the call will be available on our Investor Relations website.

Speaker Change: For a reasonable period of time after the call I would now like to turn the call over to Zane Keller director of Investor Relations. Thank you you may begin.

Speaker Change: Thank you operator before we begin I would like to remind everyone listening that todays call may contain forward looking statements.

Speaker Change: 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.

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

Speaker Change: 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: In addition, todays call may include non-GAAP financial measures.

Speaker Change: These measures should be considered as a supplement to and not a substitute for GAAP financial measures.

Speaker Change: 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: Hosting todays call with me are Max Levchin firm's founder and Chief Executive Officer, Michael Winford, firm's Chief Financial Officer, Chief Operating Officer and.

Speaker Change: Rob Ohare 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 in the questions and answers.

Max Levchin: On that note I will turn the call over to Max to begin.

Max Levchin: Thanks Zane.

Max Levchin: Another great quarter, So I do not feel a strong need to expand at any length on the numbers they speak for themselves.

Speaker Change: I do want to take a moment to thank my frequent partner in crime and our President LIBOR, whose name is not in fact pronounced library, so that would make for an epic joke.

Speaker Change: He's been here at the firm for 10 years.

Speaker Change: And he and I met over 30 years ago and both of them are studying computer science at University of Illinois, Urbana Champaign, and affirm isn't even our first rodeo together, but I'd be remiss in not taking a moment to thank him for not only putting up with me for 10 years.

Speaker Change: But more importantly, keeping our engineering product operations and perhaps most importantly credit efforts humming along with his typical eastern European Grumpy call.

Speaker Change: Thank you Labour here's to many more years together back to you, saying.

Speaker Change: Thank you Max with that we will now take your questions.

Speaker Change: Operator, please open the line for our first question.

He would like to ask a question. Please press star one on your telephone keypad as it relates to remove your question from the queue. You May press star two and for participants using speaker equipment.

Speaker Change: Sorry to pick up your handset before pressing the psyche is.

Ramsey El: Our first question is from Ramsey El <unk> with Barclays. Please proceed.

Ramsey El: Hi, Thanks for taking my question this evening terrific results.

Speaker Change: I wanted to ask about the noticeable increase in zero percent loans and just ask you about how you're deploying those are you opening new merchant doors with them are there particular verticals you're targeting is it for existing partners like is there a sort of a strategy behind it or is it just more more broad base.

Ramsey El: Okay.

Ramsey El: The very short answer is all of the above but it's a great question.

Ramsey El: Thank you for asking it.

Ramsey El: First of all these are programs, where merchants and sometimes manufacturers.

Ramsey El: Donate if you will parts of their margin to our borrowers.

Ramsey El: To give them essentially interest free or sometimes.

Ramsey El: Reduced interest loans.

Ramsey El: And it's very powerful for a good reason.

Ramsey El: Not paying interest at all obviously is a compelling reason for someone to pull the trigger on buying.

Ramsey El: Our merchants turn towards growth.

Ramsey El: They frequently do in calendar fourth quarter, they look for ways to do promotions.

Ramsey El: There are a handful of well understood ways of doing it one such way is discounts.

Ramsey El: 10, 20% off which compromise us.

Ramsey El: Pricing integrity and teachers consumers to wait for the next 10% sale.

Ramsey El: Channeling the same promotional dollars into reduced apr's or theory, PR is very powerful because on one hand allows them to say hey.

Ramsey El: Here's a reason to buy at the same while at the same time, saying the prices the price, we're not discounting and so on.

Ramsey El: Our longtime merchants notice really well some of the earliest merchants really pioneered this practice.

Ramsey El: Really industrialized this by creating tools, where they can do this essentially with very little work on our part and so thats, what the undisclosed and we'd said I think in our last quarterly call that that's a thing we're going to lean into and we've delivered on that very strongly the thing that's really worth highlighting here that's.

Ramsey El: Maybe so it doesn't meet the eye immediately.

Ramsey El: We now have a very sizable audience that is fuel direct to consumer in our app and with our card.

<unk>.

Ramsey El: For a long time these promotions were largely available on.

Our merchants point of sale online.

Ramsey El: We have now offer them an opportunity to bring these promotions, especially syndicate them across the entire <unk>.

Ramsey El: Firms surfaces, which is to say they are available in our app.

Ramsey El: On our card and across many of the wallets, where we're integrated so you can see at the beginning of the affirm network syndication strategy really play out where the offers that we negotiated with merchants on our consumers' behalf are available across all the programs and then Youll see this narrative repeat it in things like Universal financing programs that I'm sure we'll talk about it in the second but it is.

Ramsey El: Really really important to us the network is valuable because it is aware of the skus are aware of the transactions and delivers.

Ramsey El: <unk> unique.

Ramsey El: For people to buy for consumers to buy on every surface, where we play. So we will see more of this you'll see things that are not immediately visible to the naked eye as we lead into the strategy.

Speaker Change: Thank you. Thank you for that one follow up for me.

Speaker Change: You came in above your 3% to 4% of our LTC guide this quarter and I think you've indicated in the past you'd move to reinvest that excess on our LTC rather than just letting it flow through to profit.

Speaker Change: What is that look like right now does that mean opening up the credit box a bit more maybe subsidizing. Some of these zero percent loans does that then flow through to higher volumes like what should we be looking out for in terms of the P&L impact of that reinvestment.

Speaker Change: The excess or LTC.

Speaker Change: Yeah.

Speaker Change: Yes, I think certainly leaning into zero percent and in some cases subsidizing zero percent, even zero percent product is slightly.

Speaker Change: Margin for us that are interest bearing products. So taking a program that historically has been interest bearing and introducing some zero percent into that program would be slightly margin dilutive, but we take a great thing for our network in terms of what it does.

For for reaching a broader cross section of consumers. So, yes, I think that the growth in zero percent in a quarter, where we had really really strong our LTC margins I mean, that's not a coincidence that that's something that we're actively trying to do more of.

Speaker Change: Got it thanks, so much.

Speaker Change: Our next question is from will Nance with Goldman Sachs. Please proceed.

Will Nance: I appreciate you taking the question I wanted to kind of follow up sort of in the last two questions combined I know youre talking about leaning into zero percent loans. I was wondering if you could talk a little bit about just the RPC margin profile of some of that incremental growth I know that's a lever that you guys have to manage the margin.

Speaker Change: I guess where are you in that strategy.

Speaker Change: Yes.

Speaker Change: Obviously, there was some kind of I think you called out a couple of benefits to the margin from some of the loan sales this quarter.

Speaker Change: But just kind of where do you kind of see a tipping point from a margin perspective, where you start to lean in a lot harder and are you doing that or was the ramp in zero percent more a function of some of these kind of merchant driven promotions this quarter.

Speaker Change: Yeah I'll start.

Rob: And then Rob can pile on.

Speaker Change: I think.

Speaker Change: We definitely think long term, we want to be in between three and 4% that doesn't mean that.

We would do things that we don't think are good for their business and so we think about investing dollars.

Speaker Change: Trying to drive incremental growth.

Speaker Change: We don't want to do it in a way that makes good financial sense. So when we think about the credit question that was asked earlier, it's important to us that we don't dilute our performance on credit overall.

Speaker Change: The thing that's allowed us to execute so well in the capital markets and.

Speaker Change: We've learned.

Speaker Change: How important that is over the past several years and really have come to value the capital market depreciation for our execution there.

Speaker Change: And so we're really thoughtful about things that we do want to do.

Speaker Change: The framework of 3% to 4% remains the long term it doesn't mean the quarter might be above and the bar for investments inside of a quarter is still really high we think it's really important that we're putting dollars to work in ways that makes sense. The reason we like for example, investing in <unk>.

Speaker Change: Expanding really compelling APR offers like see a percent in fixed APR offers is because of the positive selection that we do get from credits as Rob mentioned those are actually a lower slightly lower profile overall, but with also a lower credit profile lower credit loss profile, which is obviously attractive to the overall portfolio and also I think we're still fine.

Speaker Change: And in terms of where we can set cut offs for zero percent that we don't need to make.

Speaker Change: Huge or long term debt, we can iterate on setting the rate approval thresholds to make sure that we're attracting the sorts of consumers that we want to attract and that where we're running these programs at the margin profile, we want to run out.

Speaker Change: Got it I appreciate you taking the question guys.

Matt O'Neill: Our next question is from Matt O'neill with Ft Partners. Please proceed.

Matt O'Neill: Thanks, So much for the question I was just curious entering the quarter I believe you were pointing to a three 8% of our LTC margin.

Speaker Change: And this quarter benefited from $60 million collectively.

Speaker Change: The securitization and loan sales did that did those two amounts kind of come and contribute together as expected or was that a bigger than expected benefit I'm just I'm just trying to parse.

Speaker Change: Do you expected versus realized impact to the margin in the quarter.

Speaker Change: Yes. Thanks for that question I think it's really important to be really clear on this when we gave the guidance.

Speaker Change: When we talked in November we talked about the capital markets pipeline as being a key part of our confidence in that guide if you recall.

Speaker Change: And that was in reference to the deals that we were working on that.

Speaker Change: And had confidence we would execute so not all of those deals were incremental to our outlook. It is the case that the.

Speaker Change: The pricing we were able to execute act was better than we thought but not all of the benefit that we had associated with those deals.

It was unexpected we planned on doing those transactions and we had a certain meaningful portion of that already in the number but it helps explain why we were we were ahead of our goals, which were already set we think on the high end of the range.

Speaker Change: Thanks, so much and as a follow up I know it's.

Speaker Change: Delegates subject on wallet partners, but it was mentioned in the release I figured I would ask is there anything there that came in better than expectation or plan or any sort of revised outlook as we turn into calendar 'twenty five here with respect to wallet partners. Thank you and appreciate the movie quotes.

Speaker Change: Finally, someone who cares.

Speaker Change: So.

Speaker Change: Generally speaking very pleased with the wallet integrations there.

Speaker Change: They're shaping up to be.

Speaker Change: A really meaningful part of the business.

Speaker Change: Across the board the metrics on these integrated wallets are.

Speaker Change: Really strong, but we see good repeats.

Speaker Change: Add to the.

Speaker Change: Transaction per user averages the AD to conversion metrics that we track internally they are accretive on the.

Speaker Change: Credit quality side of the equation. So all in all quite happy with what's happening there a really important piece of our work sort of echoing a little bit to the answer to Randy's question, we've been quietly busy making sure that our.

Speaker Change: Consumer offers our harmonized across wallets and not wallet integrations and Thats really been driving quite a lot of nice engagement.

Speaker Change: The purpose of that of course is to make sure that consumers understand that whatever door. They choose if theres a firm logo on their door theyre going to get the same quality of service the same.

Speaker Change: Offers same rates etcetera, and so thats been a really important although kind of somewhat behind the scenes effort that also contributed to the.

Speaker Change: The board efforts I don't think we are at Liberty to offer any updates too.

Speaker Change: The forecasts are models related to this thing, but we are certainly.

Speaker Change: We're pleased with what's happening so far.

Speaker Change: Thank you.

Speaker Change: Our next question is from Dan do live with Mizuho. Please proceed.

Dan: Hey, guys.

Speaker Change: Amazing quarter.

Dan: As always.

Speaker Change: Can you maybe Max and team can you give us an update on the UK launch specifically you are moving into a territory, where youre incumbent as a market leader so given that your product is much more.

Dan: Diverse than just paying for.

Dan: How do you think the share market share evolution and go there over time and how much share can you take from the incumbent overtime in Europe. Thank you.

Dan: I think it's a little early to prognosticate share taking I will note that by all public sources, we took share in the U S from our various competitors here quite nicely so at least past experience bodes well.

Dan: You're totally right, we do have a diverse array of term offerings and the ability to deliver.

Dan: He is really sophisticated subsidized apr's even for longer terms.

Dan: There is definitely very real market poll, one of my meetings today, it was actually with a prospective merchant.

Dan: Right.

Dan: Single player in the U K and it's very clear that the market is hungry for things like 24 month loans and 36 month loans, because the incumbent banks, who provide that sort of product or just not really willing to approve.

Dan: What I can tell at all but I'm sure some people get alone, but most don't.

Dan: And our pure play competitors are just not in that space any kind of a meaningful way and where we're coming in loaded for that.

Dan: And excited to deliver our value and it seems like the merchants are.

Dan: Impatiently asking us.

Dan: Not with you, but how quickly and how much can we together so very excited by the opportunity.

Dan: I think last we talked I joked that we have dozens and dozens of transactions at this point, it's still dozens and dozens, but many so that's better and more than a handful of merchants now. So we're still in the testing phase we're seeing all the metrics that we need to track to feel comfortable confident rolling it out widely.

Dan: Later Youll note that I mentioned that Shopify is our first major.

Dan:

Dan: Enterprise scale integration, that's going to be live in the UK relatively soon so were definitely the right time to check in on uptake with a wide group of merchants as soon as that goes.

Dan: I don't pre announce amazing.

Dan: I can speak too freely now.

Speaker Change: Sorry, Thank you Max Amazing results again I appreciate it thank you.

Our next question is from Kyle Peterson with Needham <unk> Company. Please proceed.

Speaker Change: Okay.

Speaker Change: Great.

Speaker Change: Thanks for taking my question and nice results here.

Speaker Change: I wanted to ask on the funding mix moving forward.

Speaker Change: Are you guys looking to expand and add more of these deals kind of like the sixth Street partnership seems like a really good win.

Speaker Change: Are you guys looking at more deals kind of similar to this or how should we think about the mix if funding moving forward between warehouse ABS.

Speaker Change: Some of these forward flow agreements.

Speaker Change: Yes.

Speaker Change: We're really proud of the progress that we've made in capital markets. This quarter. Our team has really executed very well out there.

The partnership with <unk> is really an incredible leap forward for our program.

Speaker Change: It's a big it's a big program those I wouldn't expect us to do and the Super near term a bunch more like that in that size and scale, it's a pretty big partnership and we spent a lot of time thinking about who and how we were going to kind of partner. There now that being said I think it is reflective of a very constructive market that.

Speaker Change: Really does value of the asset that we create.

Speaker Change: And so we're going to continue to take advantage of that.

Speaker Change: We are.

Speaker Change: Our very thoughtful around scaling our capital program.

Speaker Change: We think about where we'll be in three and five and maybe even 10 years and make decisions that are constructive towards enabling the kind of scale that we're building two so at the Investor Forum last November a year and a half ago, we talked about getting to $50 billion in <unk> and so the team is hard at work and enabling that the capital program <unk>.

Speaker Change: Bill to allow us to deliver against that goal and that will be here before we know it and when it is we'll take that an eye towards the next milestone and continue to scale the capital program and to get to those kind of scale points. It is important that we are.

Full that we arent leaning towards the flavor of the year with respect to the capital markets and are are.

Speaker Change: Our designing a program that is durable and can survive multiple economic scenarios and conditions.

Speaker Change: It means is yes, the forward flow Marquette in particular partnerships with private credit and insurance companies are really attractive right now and we're going continue to take advantage of those.

Speaker Change: As much as we can but we're we're also thoughtful around making sure that we have a good reputation and good execution in the ABS markets consistently.

Speaker Change: And the two really do work with one another about the only program for us that is less.

Speaker Change: A piece of real scale enablement is our warehouse business and that's mostly because of the attractive.

Speaker Change: Financing that we get in the ABS market combined with <unk>.

Speaker Change: The good economics, we have and the Port Florida.

Speaker Change: Great. Thank you and then I guess, just a quick follow up on fixed rate in particular.

Speaker Change: Shareholder letter you guys mentioned that is expected to start ramping up in the second half of 'twenty five.

Speaker Change: Is that like a phased launch to start smaller and the volumes will ramp or is one sei.

Speaker Change: The volume start should we is that a fairly steady run rate or how should we think about.

Speaker Change: And the contribution and the ramp time with fixed rate.

Speaker Change: Yes, it should ramp over the course of the next year. So we're not planning on turning it up.

Speaker Change: All the way to its maximum levels overnight, we will be very very thoughtful about scaling it carefully over.

Speaker Change: Over the course of the next year.

Speaker Change: Alright, Thank you very much for the color.

Rob Liptak: Our next question is from Rob Liptak with Autonomous Research. Please proceed.

Speaker Change: Hey, guys.

Speaker Change: Active customers were up 23% year over year I think you noted in the letter that's four quarters of accelerating growth.

Speaker Change: To ask a where that is coming from b, how much it benefits from things like the zero percent APR growth and then <unk> I guess, how sustainable do you think that is in the 20% plus range.

Speaker Change: I think the root causes of these accelerations are.

Speaker Change: Multiple quarters, maybe even multiple years in the making.

Speaker Change: Okay.

Speaker Change: We were actually quite focused on.

Speaker Change: Increasing our.

Speaker Change: Active consumers.

Speaker Change: Gratifying to see the results compound.

Speaker Change: Robley.

Speaker Change: Most impactful project.

Speaker Change: In that effort.

Our focus on direct to consumer so the card obviously is a great product to increase engagement.

Speaker Change: Reawaken, if he will dorman consumers that have transacted with us sometime in the past, but haven't use us in a while so bringing them back is a really important effort.

Speaker Change: Okay.

Speaker Change: It also does not hurt to continue expanding e-commerce coverage the more counters, if you will to more checkouts where on the.

Speaker Change: The better the probability that someone who would use affirmed before will say, hey, I remember that product that was great better than my credit card I should use them again.

Speaker Change: All of those things add up to a little bit more conversion, just a little bit better.

Speaker Change: Okay.

Speaker Change: Re engagement.

Speaker Change: For the <unk> of doubt it is not a.

Speaker Change: Some sort of a dramatic credit machinations behind the scenes, which people we suspect wait a second you just opened up the box should be apparent in our credit results, but for the avoidance of doubt we have been very steady hindered.

Speaker Change: On credit.

Speaker Change: Okay.

Speaker Change: The best I can offer is it was a very deliberate prioritization on our part about a year ago to focus on active consumers and like everything else. We do here when we focus on something it typically takes a little while but the results compound.

Speaker Change: Okay. Thanks, and then on the non-GAAP operating expenses sales and marketing in particular, it looks like that was up quite a bit sequentially. You have typically not done a lot of direct sales and marketing. So just wondering what the driver was there and if you expect non-GAAP.

Speaker Change: Sales and marketing to stay at that $30 million level going forward. Thanks.

Speaker Change: We did Rob we did make some investments in the quarter to support.

Some new program launches, but the marketing spend that we had to <unk> earlier point. It really wasn't focused on direct user acquisition. We continue to see most of these are acquisition coming from point of sale as Max alluded to so really not a change in strategy.

Speaker Change: In terms of the go forward spend we haven't broken out the opex into the various cost centers.

Speaker Change: We can see from the guide we do expect Opex to be roughly in line with Q2 in both Q3 and Q4 so.

Speaker Change: It's going to be a pretty similar opex envelope as we look ahead to the next two quarters.

Speaker Change: Okay. Thank you.

Speaker Change: Yes.

Speaker Change: Our next question is from Reggie Smith with Jpmorgan. Please proceed.

Reggie Smith: Hey, guys congrats on the quarter.

Reggie Smith: Hoping to dig in a little bit on AI, you mentioned, I guess, the chatbot and the and the <unk>.

Speaker Change: Shareholder letter I was curious how you guys are thinking about AI and whether it can be used for more commercial purposes, I don't know products that face off against consumers and then the second piece of that question is how AI has changed your thinking on head count and what you can get done.

Reggie Smith: <unk>.

Reggie Smith: <unk> will be a staff and if that's changed over the last 12 months. Thank you.

Reggie Smith: Okay.

Speaker Change: Thank you Rajeev good questions both.

Reggie Smith: Yes.

Reggie Smith: So we try to.

Reggie Smith: We're all contrarians here so.

Reggie Smith: The industry Zags with Agri, we don't talk that much about AI, but.

Reggie Smith: We've been using machine learning and artificial intelligence.

Reggie Smith: Allergan since inception, all of our underwriting and fraud fighting all built on what is now called AI.

Reggie Smith: Yes.

Reggie Smith: We have a lot of really cool stuff that doesn't meet the eye that we just don't brag about too much but for what it's worth a lot of the most modern transformer architecture approaches to model building is something we are actively investing in internally for all the things all the same things we accomplished with more.

Reggie Smith: Traditional machine learning and even some really innovative stuff.

Speaker Change: Is it kind of thing where I'd love to dig into it and probably have the call would get very bored.

Reggie Smith: My rants, but.

Reggie Smith: Literally spent part of my morning, looking at a completely novel transform architecture.

Reggie Smith: Design that we think we're going to pick up some really interesting results from in fighting fraud.

Reggie Smith: So that's entirely in terms of actually the the underwriting.

Reggie Smith: Antifraud type stuff.

Reggie Smith: We are engaged in deploying AI tools for productivity purposes, which.

Reggie Smith: It is absolutely a.

Reggie Smith: Productivity or operating leverage enhancer across the team, thereby giving us choices in hiring and allowing us to focus on hiring specialists.

Reggie Smith: Higher caliber versus more entry level jobs, not just in customer service, but in things like engineering, etcetera, etcetera, and so pretty excited about that.

Reggie Smith: We are.

Reggie Smith: Fine example, I think I may have given before but one of my favorite ones. We have 300 and something thousand active merchants. The total number of merchant contracts. We have signed is in hundreds of thousands anytime we're asking ourselves can we launch this new product do our merchant contract allow us to do that so.

Reggie Smith: Some human somewhere is going to open up the 300000 documents.

Speaker Change: Not going to be easy if you ask an equivalent of a.

Reggie Smith: Well trained.

Reggie Smith: You can answer that question in seconds and so that's a fine example of where our legal team benefits from.

Reggie Smith: Generative AI without the need to expand the head count So we're doing that and legal we're doing that in compliance we're doing it in an accounting marketing et cetera. So all of that is exciting and happening.

Reggie Smith: And then on the consumer side.

Reggie Smith: We've got a bite my tongue and not to pre announce anything but obviously.

Reggie Smith: The tools that the opportunity to come out of journey II our pre.

Reggie Smith: Awesome.

Reggie Smith: Have RSA.

Reggie Smith: Products to show for it when we're ready.

Reggie Smith: Got it and then I guess.

Reggie Smith: Im just kind of follow up you get a finer point on it.

Gay Mitchell: Gay Mitchell.

Gay Mitchell: Operating leverage targets this year.

Gay Mitchell: I guess.

Gay Mitchell: How much and even at your analyst day like how much AI is kind of baked into that leverage is still there.

Gay Mitchell: Did you contemplate that slowly or how should we think about that you follow my question.

I think so Rob you want to opine.

Rob: Yeah again, I think what we're doing with AI has sort of been an inherent part of how we've operated the business isn't as Mac said since inception and so.

Gay Mitchell: We really did.

Gay Mitchell: Take a hard look at driving efficiency in the business that was over two years ago now and we've we've asked the demanded for operating leverage in every operating plan that we built and so I think finding ways to do more with less as just part of how we've been operating so it's hard to really quantify rajiv but.

We're always looking to be as efficient as we can and to scale the business.

Gay Mitchell: Business without.

Adding tons are in place.

Gay Mitchell: Perfect that sounds great great quarter.

Speaker Change: I appreciate you taking the questions.

Gay Mitchell: Okay.

Speaker Change: Our next question is from Andrew <unk> with Wells Fargo. Please proceed.

Andrew Jeffrey: Hey, Thanks for taking my question and nice set of results here.

In the shareholder letter you talk about the redesign of the firm apt and focusing on the utility maybe if you can just give us a little bit more color on what you've learned about the redesign how affirm is becoming more of a marketplace and what kind of about other opportunities that that's kind of leading to.

Andrew Jeffrey: When we think about the affirm card longer term getting to that level of free to use and scale that you've talked about in the past.

Andrew Jeffrey: Sure.

Andrew Jeffrey: And it got edited a little bit in the final hours of the letter writing but.

Andrew Jeffrey: Many of the changes we built last quarter, which is what the letters referring to have only rolled out now for this one.

Andrew Jeffrey: Still rolling out, but we don't change UX.

Andrew Jeffrey: Willy Nilly and so youll see a few more but behalf will look different for example, still looks almost the same today, but.

Andrew Jeffrey: Some bits or different more all.

Andrew Jeffrey: Obvious changes will happen on the UX front, if you sort of follow the app carefully you'll see that we're leaning in more and more into this notion that the affirm network is this really rich collection of merchants that.

Andrew Jeffrey: At any given time are offering these staggering zero percent deals either funded by the retailer or the manufacturer or both.

Andrew Jeffrey: And our consumers have come to expect that the affirm app is a place where they can find these deals.

Andrew Jeffrey: And for a while it was kind of an organic thing that we put together because people asked I used to go underwrite it and read people asking the question, Hey, where can I find and affirms zero percent deal at some point you gave me the idea where really you should be able to find the firm's ireson deals maybe in the affirm app that'd be a good place. So we started there was a catalog and our deals tab in the App.

Andrew Jeffrey: It's a little bit of that and we're now fielding close to.

Andrew Jeffrey: Hundreds of thousands of searches per week.

Andrew Jeffrey: And rising rapidly.

Andrew Jeffrey: In the App looking for these European deals.

Andrew Jeffrey: Obviously naturally leads to an opportunity to say hey.

Andrew Jeffrey: Someone would want to be featured there and we're very careful not to.

Andrew Jeffrey: God forbid pit our merchants against each other it's not a comparison shopping engine or anything like that it's really a place to showcase.

Andrew Jeffrey: The exciting offers that our retailers are bringing out to affirm shoppers and so.

Andrew Jeffrey: Keep leading to that we keep on seeing better conversion.

Andrew Jeffrey: A quarter or two ago I rattled off the search to transaction initiation rate is like 25% last I looked at is clipped 30. So people are using this really effectively to find reasons to say, yes to buying and so we'll keep doing that.

Andrew Jeffrey: There's a couple more things company coming into the App.

Andrew Jeffrey: Better experienced the described by MISO.

Stop myself from.

Andrew Jeffrey: <unk> too much but it's entirely about just making the card.

Andrew Jeffrey: A more convenient thing okay.

Andrew Jeffrey: I've talked about in the past that as much as I Love My favorite child. The card there is still so much to do in terms of.

Andrew Jeffrey: User interface improvements, we just updated a little bit of the transaction planning flow. So you can really quickly figure out what youre purchasing power is and what will happen. If you swipe the card without asking for a loan upfront et cetera. So all of that is a long list of features that we're building but.

Andrew Jeffrey: All of it is all about just finding one two or three more points of growth for the garden has already obviously growing really well, but we're not going to be I wont be happy.

Andrew Jeffrey: If it slows down so we just have to keep working on it.

Andrew Jeffrey: Really exciting stuff and congrats on the GAAP EPS.

Andrew Jeffrey: Thank you.

Speaker Change #100: Our next question is from Jason.

Andrew Jeffrey: <unk> with Bank of America. Please proceed.

Speaker Change #101: Well, thank you guys.

Andrew Jeffrey: I know Max you said at the outset.

Andrew Jeffrey: And I'm, just kind of speak for themselves, which they do so im curious like with things.

Andrew Jeffrey: Going well on credit and funding and volume growth in profitability really what are the one or two big.

Andrew Jeffrey: Or just items that you are spending the bulk of your time focusing on driving improvement.

Okay.

Andrew Jeffrey: Okay.

Andrew Jeffrey: The list is long.

Andrew Jeffrey: Yes.

Andrew Jeffrey: You can give me more than one or two then.

Okay.

Andrew Jeffrey: Trying to prioritize.

Andrew Jeffrey: Okay.

Andrew Jeffrey: Let's see.

Andrew Jeffrey: Yes.

Andrew Jeffrey: Okay.

Andrew Jeffrey: Ultimately live and die by conversion and uptake.

Andrew Jeffrey: And.

Andrew Jeffrey: Up to a point you can do this by having blanket.

Andrew Jeffrey: Great terms and more zero percent et cetera.

Andrew Jeffrey: Some point you have to Personalise, where it's.

Andrew Jeffrey: It's not enough to say to someone.

Andrew Jeffrey: Fixing power increased you have to speak to your purchasing power at a particular merchant is waiting for you et cetera, and so there's always opportunity to find that efficient frontier up offerings somewhat access to credit without over extending them.

Andrew Jeffrey: One thing that again I'm.

Andrew Jeffrey: Im sure Im repeating myself at this point, but we're not in the business of making consumers spend more money.

Andrew Jeffrey: In fact, we're in a business of hopefully helping consumers pay less for access to credit, but we're more than excited to take over.

Andrew Jeffrey: More of our consumer spend in the last letter I think I said that we want to get the card to <unk>.

Andrew Jeffrey: <unk> million cardholders.

Andrew Jeffrey: Averaging $7500 per year of spend those are somewhat arbitrary numbers theyre just they multiply out to a big number and we're hoping to get bigger and bigger so anything we can do to personalize the experience to give people a chance to feel like this is the best alternative they have to their debit or credit card is we're busy with.

Andrew Jeffrey: That's in the U S internationally, obviously, there's more than a little to do in the U K we are doing.

Andrew Jeffrey: Doing well there.

Andrew Jeffrey: There's lots to do but the initial results are.

Andrew Jeffrey: Really.

Andrew Jeffrey: Pleased but not satisfied I think it's the internal terminology I used.

Andrew Jeffrey: And.

Andrew Jeffrey: Etcetera, So I think that those are kind of the.

Andrew Jeffrey: Maybe things that are top of mind at any given time, there is always something exciting going on here.

Andrew Jeffrey: Definitely some pretty vast anything is happening.

Andrew Jeffrey: Our greatest question was Gen AI that I spent a little bit of my time on.

Andrew Jeffrey: Again, not in the service of anything but.

Andrew Jeffrey: We have set out to do build build good financial product. So there's just a lot to build new product categories.

Andrew Jeffrey: Right.

Speaker Change #102: Maybe just a follow up on card I mean, now it's up to 8% or just over 8% of total GMB I'm wondering if you've seen any change in consumer behavior with the product in terms of paint Alberta pay later or any newer merchant categories that you are seeing increased traction in terms of usage of the card.

Speaker Change #102: No we have not but we're very actively working on expanding it. So the card is really great.

Speaker Change #102: Some of the transactions that the coverage today and it's not optimal at all or not as good as it should be anyway for other guidance and so I spent a meaningful amount of my time trying to answer the question of how do we get to that $7500 per user.

Speaker Change #102: And obviously, there's only so many couches and.

Speaker Change #102: Bicycles youre going to buy per year. There is a lot of other kinds of transactions and so everything we do here is in the service put a card in particular.

Speaker Change #102: Answering the question how else can we be useful to you where else can we have an honest financial product that doesn't charge late fees doesn't compound all the good things, we do doesn't charge of any interest at all with the merchants interested in getting you to say, yes. So that's a.

Speaker Change #102: One way to answer. This question is how can we be useful to you in groceries, how can we be useful to you. When you are buying medicine and that we just launched was good Rx.

Speaker Change #102: In the letter I think.

That's a category that we really think is very important helping people buy what is a progressively more expensive part of their life dedication is something that we're quite proud about and excited to more so.

Speaker Change #102: Each one of these categories is something that you have to think through and the modalities of purchase can be different.

Speaker Change #102: <unk> easily what it looks like to use it from card.

Speaker Change #102: At a.

Speaker Change #102: Our restaurant versus a general merchandise store versus a specialty electronics store. So those are the areas of possible impact and we.

Speaker Change #102: We are seeing at this point the card is big enough, where we can observe usage.

Speaker Change #102: Behind areas, where conversion is not as high as it is in other and ask ourselves what can we do to improve the experience that's actually probably one of the areas that I'm. Most excited about and spending a lot of my time on trying to.

Speaker Change #102: We anticipate how can we improve conversion improved uptake in places, where it's not as high as it can be.

Speaker Change #102: Yes.

Speaker Change #102: Okay.

Speaker Change #102: Thanks, Matt.

Speaker Change #103: Our next question is from Vincent <unk> with <unk>. Please proceed.

Speaker Change #103: Hey, good afternoon, thanks for taking my questions.

Speaker Change #103: I actually spoke earlier about taking share in the U S. This quarter.

Speaker Change #103: It's interesting when I contrast affirmed strong growth in your LTC margin versus some of the credit cards for instance that I cover.

Speaker Change #103: <unk>, maybe weak weaker in 2025 guidance on GMB and calling for tighter credit underwriting I'm.

Speaker Change #103: Im wondering.

Speaker Change #103: What you're seeing in terms of being able to capture maybe even more share through the course of 2025.

Speaker Change #103: Are you seeing opportunities with merchants, so maybe different behaviors from customers as other lenders pullback.

Speaker Change #103: And what are you expecting how.

Speaker Change #103: How will this play out over the course of calendar 2025.

Speaker Change #103: Definitely not just thinking about to predict these things are a little bit.

Speaker Change #103: They are both slow moving and quite dynamic, especially as seen through the lens of things like credit reporting.

Speaker Change #103: Obviously any time lenders pulled back.

Speaker Change #103: Credit card space.

Speaker Change #103: At least as often related to their forward looking view as it is about them dealing with mistakes of the past.

So anytime somebody offers you a conservative guidance on credit issuance.

Speaker Change #103: Maybe speaking about their overall view of the consumer thinking that people are going to spend less money or there may be over extended.

Speaker Change #103: It is often does not theyre also speaking to the fact that they overextended that consumer in their portfolio and are now dealing with having to average into reasonable yield loss rate.

Speaker Change #103: Because of how our product works.

Speaker Change #103: Have much less of a concern and that damaged we underwrite every transaction.

Speaker Change #103: Typical <unk>.

Speaker Change #103: <unk> is much shorter.

Speaker Change #103: To assess the consumers financial health in the moment in Europe.

Speaker Change #103: Do our best to help them, but if we think that they were setting themselves. The answer can't be sure just put it onto the big bucket and revolve away. So because we have the discipline and we try to extend it to our borrower.

Speaker Change #103: It easier for us to feel good about the state of the consumer given our numbers were.

Speaker Change #103: Not apologize for mistakes in the past because.

Speaker Change #103: Okay.

Speaker Change #103: So I do think that.

Speaker Change #103: If the reports in the forecast is to be believed.

Speaker Change #103: Some of these lenders will call back and we'll be there to help these customers.

Speaker Change #103: We should be it is our job.

Speaker Change #103: Again.

Speaker Change #103: Like I'm hesitating, it's not that I don't have the confidence in our ability to it's always very difficult to figure out what's going to happen next in this business.

Speaker Change #103: The structure of our product specifically, so that we can react very quickly to whatever macroeconomic wins might bring.

Speaker Change #103: Right now you as consumers really healthy shopping they are paying their loans back the economy basically fully employed which is really solid we're not afraid of higher for longer because we've been able to operate at these rates quite successfully so everything looks good we will continue lending because.

Speaker Change #103: It seems like a really good business decision for us should things change, we will be there to pullback smartly, we don't grow based on credit we issue credit based on our needs too.

Speaker Change #103: Print healthy credit results for our capital partners.

Speaker Change #103: Okay, Great. That's very helpful. Thank you and actually a follow up on that you said for.

Speaker Change #103: For instance, we're not afraid of higher for longer.

Speaker Change #103: It seems like every day, we get some new macro or political and used to think about.

Speaker Change #103: Whether it's the CFPB director departure, or tariffs or where interest rates are higher for longer.

Speaker Change #103: Wanted to get your thoughts on maybe what's important and impactful to affirm from what's coming out of Washington.

Speaker Change #103: I think.

Speaker Change #103: We are sufficiently self aware.

Speaker Change #103: To know that we are on the receiving end of what's coming out of Washington, and so our job is to help consumers buy and merchants sell and we're pretty good at the job.

Speaker Change #103: The rates.

Speaker Change #103: Bill in phases, and again I think we've shown that we will thrive.

Speaker Change #103: So at any rate environment, we've seen so far.

Speaker Change #103: Regulatory early.

Speaker Change #103: We have not.

Speaker Change #103: Held back nor do we expect to do something new and a natural.

Speaker Change #103: Just on the administration, because we are guided by a mission and a sense of right and wrong Thats internal who we are versus to whats on the latest headlines and we'll continue lending will continue not charging late season, not compounding interest in.

Speaker Change #103: The raging against deferred interest and things like that and so none of that is going to change.

Speaker Change #103: So we don't need to for us to reexamine any of our core values.

Speaker Change #103: Things like tariffs are super hard to predict but okay.

Speaker Change #103: They tend to have inflationary impact on the economy and when inflation was raging we were there to help our customers afford things that they needed to buy and we will continue to be there for them.

Speaker Change #103: Et cetera, So I think.

Speaker Change #103: I don't mean to sound overly sanguine because every day is a new day and we keep our eyes.

Speaker Change #103: On the.

Speaker Change #103: The dial to enhance firmly on the steering wheel, but.

Speaker Change #103: We learned in Democratic and Republican administrations in Red and Blue States, all the time and certainly have no.

Speaker Change #103: No plans to change any of that.

Speaker Change #103: Okay very helpful. Thanks very much.

Speaker Change #105: Our next question is from John Hecht with Jefferies. Please proceed.

John Hecht: Afternoon, guys, congratulations and thanks for taking my questions.

Speaker Change #105: You did talk about.

John Hecht: Some of the goals within the card.

John Hecht: And.

John Hecht: But I guess, what I'm wondering is what have you learned so far when it comes to customer interaction.

John Hecht: And kind of overall revpar per customer when it comes to that product layered upon.

John Hecht: The buy now pay later products that might have brought him into the into the network.

John Hecht: So I think I said, it before and it bears repeating.

John Hecht: Card is not in and of itself.

John Hecht: Sure.

John Hecht: <unk> two our usage.

John Hecht: <unk> a filter in a sense that people that will eventually become our best consumers people that are really buy into the value proposition of a firm zero percent.

John Hecht: The deals we did this discounted apr's no fees like everything we stand for.

John Hecht: You opt into the card.

John Hecht: You're leaning into affirm and choosing to become essentially what do we think is going to be a lifetime relationship and so the card is this do you want to embrace a firm fully <unk>. Please. Please go for it and so I don't think its for everyone, but it is our best customers choosing to do more with us and the good news is that we see no shortage of those and maybe eventually.

John Hecht: It'll be just all of our customers, but consumers.

John Hecht: But that's an important thing so as we look at the card stats there all staggeringly strong it's our best economics, it's our best.

John Hecht: Margin, it's our best engagement, that's our best transactions per year. So all of that is really strong.

John Hecht: But it's also not a surprise, it's not like Oh, we discover that these card people are amazing.

John Hecht: We're already on track to be our best customers now they are just becoming our best customers that much faster. So I think thats, an important background to understand about that consumer.

John Hecht: We are leaning in very heavily into making sure that they never regret their choices, so there'll be more and more things to like about the card program. We have other variance of the products that are available on our card in mind, we think we have.

John Hecht: Another type of program to offer types of program to offer to folks that are slightly different than today's consumer that picks up the card. So the journey is just beginning but there's many more things to build.

John Hecht: But generally speaking these are the best consumers, we didn't necessarily know we have and as soon as they take up the card. We know they are here for a long time and we're excited to serve them.

Speaker Change #106: Okay. That's very good context and helpful. Second question is related to expense them.

Speaker Change #107: You scaled a ton on expenses in the past year, especially the tech side and the G&A side.

Speaker Change #107: And now margins are better than I think anybody would have expected how do we think about that trajectory of scaling in the next few quarters given.

Speaker Change #107: The fact that margins are better so you have an opportunity to reinvest maybe in some longer term growth initiatives.

I guess just the question is how do we think about the trajectory that scale.

Yeah. Thanks for the question John.

Speaker Change #107: We have made investments of course to support launches like the UK for example, and so typically what you'll find with a firm is that the work that goes into getting a product or a program life happens several quarters before that product reaches public availability. So that was definitely the case.

Speaker Change #107: The U K I feel like we've done a really good job of investing ahead of these programs to make sure that we maintain.

Speaker Change #107: Really healthy growth rates in the medium and long term.

Speaker Change #107: I would also just say puts you to a couple of things I mean, the guide that we gave both for Q3 in Q4, you can see the implied.

Speaker Change #107: non-GAAP operating expenses, they are pretty consistent with the level of spend that we had in the second quarter. So in terms of the trajectory going forward, we do expect it to.

Speaker Change #107: To be relatively flat from the Q2 levels there.

Speaker Change #107: There is a portion of our fixed operating expenses that is variable with transactions <unk>, just sort of general activity in the business. So.

I think it does makes sense that some of the operating expenses will will scale a bit with GMB growth. So those are good spend we're happy to spend a bit more as the business grows to support customers and to make sure all of our infrastructure for the sites and for our merchants is up and running.

Speaker Change #107: So that's.

Speaker Change #107: That's how we're thinking about it.

Speaker Change #107: Okay. Thanks very much.

Speaker Change #107: Yeah.

Speaker Change #107: Our next question is from Andrew Jeffrey with William Blair. Please proceed.

Andrew Jeffrey: Good afternoon I appreciate you taking all the good questions.

Andrew Jeffrey: I wanted to ask a little bit about durability of the funding cost improvements youre seeing obviously, it's a good environment and you've made comments and demonstrated a firm's ability to improve loan sale execution and overall funding cost how much do you think what we're seeing today is structural.

Andrew Jeffrey: In other words, what would carry through through the next consumer recession or economic recession recession, how much is sort of cyclical sort of a sign of where we are.

Andrew Jeffrey: Currently in the economy.

Andrew Jeffrey: Yes.

Andrew Jeffrey: Humbly, we are definitely the beneficiaries of the market conditions and so.

Andrew Jeffrey: Definitely can.

Andrew Jeffrey: We can't ignore that the environment is very favorable for what we do.

Andrew Jeffrey: But we do think were differentiated we think that the performance that we've been able to demonstrate on credit.

Andrew Jeffrey: Is it really changed that both the tone and depth of conversations with all stripes of capital partners and we think that's very durable.

Andrew Jeffrey: Commitment, we've made to our investors both debt and equity around our focused execution on credit and our commitment to deliver against those commitments.

Speaker Change #108: And job number one is Mexico he says.

Andrew Jeffrey: That commitment and the results that it generates.

Andrew Jeffrey: That's who we are it's how we're going to operate through any cycle in any any macro volatility.

Andrew Jeffrey: And what Youre seeing right now is is that kind of credit for the results that we're delivering combined with the favorable market conditions, resulting in just really excellent conditions for us it's execution license. So.

Andrew Jeffrey: It is the case that we're beneficiaries, but I don't want to be dismissive of the advantages that we get because of the good work and we think thats pretty durable.

Andrew Jeffrey: I will note specifically in our fiscal Q2, we do benefit a little bit in terms of the average funding cost numbers that we show in our.

Andrew Jeffrey: Our materials just from the timing of some originations inside.

Andrew Jeffrey: I wouldn't expect the.

Andrew Jeffrey: Calculation as we do it there to be the same in the future quarters, but really the fundamental trends ignoring just kind of the math in the quarter. The fundamental trends are very real and we think we can continue to sustain those we get a question a lot about how much is actually just truly rate driven and I think.

Andrew Jeffrey: We're not seeing any of the impact of rates right now in the business I think it's much more about spreads and credit execution and the overall favorability of the asset.

Andrew Jeffrey: Alright.

Max Levchin: Helpful and then Max if I could ask.

Max Levchin: One on your your baby on the firm card, which is performing very well I appreciate that.

Max Levchin: The comments on efforts to expand use cases.

Max Levchin: Can you talk about sort of as a percentage I know, it's still early but as a percentage of that is $1 7 million cardholders are so how many of those are sort of primary banking relationships for firm I guess as measured by direct deposit and I'm trying to get a sense of kind of what the lift is potentially there too.

Max Levchin: Not many right now.

Max Levchin: It's a.

Max Levchin: I guess, the good news bad news I am not sure, which one you're looking for but there's plenty of room to.

Max Levchin: To add to the services, we offer to the consumer because majority of them do not really have a.

Max Levchin: Depository relationship with US we're not a bank, we're not particularly busy or engaged in gathering deposits from the consumers.

Max Levchin: That said the ones that are willing to trust us with some of their money.

Max Levchin: Especially in a form of direct deposit benefit from us understanding their total financial state that much better and their ability to borrow goes up so it's a natural.

Max Levchin: Thing, we do where we.

Max Levchin: We will take your money, if you'd like to deposited with us and.

Max Levchin: We will understand that much better and we will be able to expand your access to credit with that understanding. So there is definitely more to do there.

Max Levchin: <unk>.

Max Levchin: A little bit remiss and updating the street on the progress we are doing there but.

Max Levchin: It's going to change over the next few quarters.

Speaker Change #109: Okay. Appreciate it thank you.

Speaker Change #110: Our next question is from Timothy Chiodo with UBS. Please proceed.

Speaker Change #111: Great. Thank you for taking the question often investors look at the list of really really strong partners that you have obviously, Apple Amazon Shopify, Walmart Expedia, it really doesn't get much better than that and there is this question of who could be next and often the answer is it's more of the international opportunity with many of those large enterprise partners.

Speaker Change #112: Customers and realized you likely not able to discuss your constructive discussions that you might be having with some of them, but if you could maybe just put some context around that opportunity in terms of if there are any limiting factors if theres any maybe exclusive agreements or anything else that would preclude you from longer term being able to.

Speaker Change #112: To go outside the U S with many of those in addition to the start you already have with Shopify.

Speaker Change #112: I am sure I cannot speak to exact.

Speaker Change #112: Contracts and such.

Speaker Change #113: Such Jessica.

Speaker Change #113: Just because these things are understandably frequently confidential.

Speaker Change #113: The short answer is I don't think.

Speaker Change #113: This is <unk>.

Speaker Change #113: If you flip it around it is currently a target rich environment to use a military term I think we have lots of opportunity.

Speaker Change #113: Internationally, but also domestically.

Speaker Change #113: We're still not at 100% of E Commerce, and we aspire to get dangerously close to that number and we are on precious few offline checkouts and we certainly aspire to be a meaningful player in both obviously the card consumers benefit from a firm online and offline because the card works just about anywhere.

Speaker Change #113: Accepted.

Speaker Change #113: But there's more we can do there and we will but internationally.

Speaker Change #113: The pipelines of our sales team are are currently quite well filled and we feel very good about the lot of the conversations we have.

Speaker Change #113: Maybe I'd add a small thing I don't think we think there is anything that limits our ability to go get those relationships et cetera.

Speaker Change #113: Can we get them.

Speaker Change #113: And as much as we have really good relationships and do something really unique for those.

Speaker Change #113: Partners.

Speaker Change #113: The reality is we're today really only live and just fairly so in the U K and there's lots of other geographies that they are partners are talking to us about going into <unk>.

Speaker Change #113: Do we have to get there we have to get a lag we have to prove that we can deliver the same experience. We do in the U S. But I would I would answer your question directly there is no limiting factor in our ability to scale with that with those kind of partners everywhere.

Speaker Change #114: Perfect. Thank you for both of those I appreciate it.

Jamie Friedman: Our next question is from Jamie Friedman with Susquehanna. Please proceed.

Speaker Change #114: Hi.

Speaker Change #114: Could you share what percentage of the GMB is now made up of.

Speaker Change #114: Offline like face to face.

Speaker Change #114: I don't think we break that out.

Speaker Change #114: Okay.

Speaker Change #114: Okay.

Speaker Change #114: So maybe we'll wait for that crew future time I wanted to ask about market share. So periodically, though you do Max share your own observations about market share I think is shared one.

Speaker Change #114: Six months ago.

Speaker Change #114: Do you have that number now and if not maybe qualitatively if you could talk to how you saw a market share shift in the quarter.

Yes, why don't I grab that one.

Speaker Change #116: So we don't we did not break out quantitatively, we do share our estimates from time to time as you probably know.

Speaker Change #116: A bit of a difficult number to pin down.

Speaker Change #116: That being said, we do believe we're taking share in this market. We think we were the fastest growing of all of our large competitors.

Speaker Change #116: That we had real traction versus versus the competitors, who break down break out there their north American businesses, where we were able to grow much more quickly with them I think it's a function of a number of factors, but not least of which is something I think Tim alluded to which is when you partner with the best who have all.

Speaker Change #116: Today periods.

Speaker Change #116: You you are the beneficiary of that in terms of market share and our distribution really did help us quite a bit last quarter and I think stand out.

Speaker Change #116: As our competition in North America.

Speaker Change #116: Our next question is from James Faucette with Morgan Stanley. Please proceed.

Speaker Change #116: Yes.

Speaker Change #117: Great. Thank you so much I wanted to ask quickly and I. Appreciate you guys have answered a lot already.

Speaker Change #117: Your approach to these calls so I appreciate that.

Speaker Change #117: Looking at the delinquency improvement in December that seems to be seasonal and you.

Speaker Change #117: Do you expect to get some continued benefit through the tax return season or at least that would also be typical.

Speaker Change #117: <unk> also been clear that you intend to increase risk exposure at least some but how should we be thinking about your target high watermark for like API like delinquency rate and how much incremental GMB.

Speaker Change #117: You can unlock along the way to whatever that target is.

Speaker Change #117: So probably bears to start by saying.

Speaker Change #117: The targets, we look at internally for delinquencies et cetera.

Speaker Change #117: Our more than anything about our capital relationships like we understand what our partners require of us to feel good there are always two numbers right, there's yield either for us or for them doesn't matter and then theres delinquencies and defaults that.

Speaker Change #117: Kind of as a signal of safety and uncertainty in both of those numbers are fundamentally determined by us and our partners in concert and in constant currency.

Speaker Change #117: And so we don't really think.

Speaker Change #117: Ever in terms of hey, let's take a little bit more risk and grow a bit more the risk. We take is determined by those conversations the settings are very clear the conversations are entirely in the context of credit frankly, because our capital partners just don't care, how fast we grow they are here for the yield and for the safety of our returns.

Speaker Change #117: The stability of the numbers for something they don't care, if we grew at 35% or 25%. So long as they are able to deploy capital successfully they feel great about our stewardship of their money and so that's that entirely independently of our growth.

Speaker Change #117: It is exactly how it should be I think many of company got in trouble in the past by saying Oh, we need to do to grow is just be a little bit looser credit standards. That's the first step down into the proverbial Hell.

Speaker Change #117: <unk> current management and we won't let that happen here. So are you.

Speaker Change #119: You are totally right that there's a seasonality to credit improvements in.

Speaker Change #117: You can see it in the typical supplement chart that we show as sort of a <unk>.

Speaker Change #119: Hughes fluctuate up and down as the year goes.

Speaker Change #119: We keep our hands on the wheel and we move that number up and down.

Speaker Change #119: Approvals up and down based on what we're seeing in the numbers, how we feel the seasonality is going sometimes seasonality can be delayed which is sort of this last year was a little bit weird.

Speaker Change #119: In that sense, but again like the two are separate conversations our growth internally.

Speaker Change #119: Is a major topic and it is entirely in the context of what.

Merchants can we do a great zero percent program with where can we get into checkout, where we arent who can launch sooner who wants to run a program in our App, who wants to extend easier percent deal. They ran through the holidays. All the way through January those are growth initiatives that we really love and enjoy.

Speaker Change #119: Doing in pushing and selling and all of that it has never ever in our conversation that oh by the way Shouldnt, we get a little bit looser was credit because that will help our growth like the data. It happens I am feeling at my job Libre scaling it is.

Speaker Change #119: Just doesn't does not happen so I strongly encourage everyone to not count.

Speaker Change #119: Contemplate the two in concert just because it creates a false.

Speaker Change #119: Relation where there isn't one.

Zane Keller: We have reached the end of our question and answer session I would like to turn the conference back over to Zane for closing remarks.

Well. Thank you all for joining the call today, we look forward to speaking with you all again next quarter.

Zane Keller: Then.

Zane Keller: Thank you. This will conclude today's conference you may disconnect. Your lines at this time and thank you for your participation.