Q3 2026 Affirm Holdings Inc Earnings Call

May 7, 2026

Speaker #1: Will open the lines for your questions. As a reminder, this conference call is being recorded, and a replay of the call will be available on our investor relations website.

Operator: We will open the lines for your questions. As a reminder, this conference call is being recorded, and a replay of the call will be available on our investor relations website for a reasonable period of time after the call. I'd now like to turn the call over to Zane Keller, Head of Investor Relations. Thank you. You may begin.

Speaker #1: For a reasonable period of time after the call. I'd now like to turn the call over to Zane Keller, Head of Investor Relations, thank you, you may begin.

Speaker #2: Thank you, operator. Before we begin, I would like to remind everyone listening that today's call may contain forward-looking statements. These forward-looking statements are subject to numerous risks and uncertainties, including those set forth in our filings with the SEC, which are available on our investor relations website.

Zane Keller: Thank you, operator. Before we begin, I would like to remind everyone listening that today's call may contain forward-looking statements. These forward-looking statements are subject to numerous risks and uncertainties, including those set forth in our filings with the SEC, which are available on our investor relations website. The actual results may differ materially from any forward-looking statements that we make today. These forward-looking statements speak only as of today, and the company does not assume any obligation or intent to update them except as required by law. In addition, today's call may include non-GAAP financial measures. These measures should be considered as a supplement to, and not a substitute for, GAAP financial measures. For historical non-GAAP financial measures, reconciliations to the most directly comparable GAAP measures can be found in our earnings supplement slide deck, which is available on our investor relations website.

Speaker #2: The actual results may differ materially from any forward-looking statements that we make today. These forward-looking statements speak only as of today, and the company does not assume any obligation or intent to update them except as required by law.

Speaker #2: In addition, today's call may include non-gap financial measures. These measures should be considered as a supplement to and not a substitute for gap financial measures.

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

Speaker #2: For historical non-gap financial measures, reconciliations to the most directly comparable gap measures can be found on our in our earnings supplement slide deck, which is available on our investor relations website.

Speaker #2: Hosting today's call with me are Max Levchin, firm's founder and chief executive officer; Michael Linford, a firm's chief operating officer; and Rob O'Hare, a firm's chief financial officer.

Zane Keller: Hosting today's call with me are Max Levchin, the firm's founder and Chief Executive Officer, Michael Linford, Affirm's Chief Operating Officer, and Rob O'Hare, Affirm's Chief Financial Officer. In line with our practice in prior quarters, we will begin with brief opening remarks from Max before proceeding immediately into questions and answers. Before we begin the call, as a reminder, we will be hosting our 2026 Affirm Investor Forum next week on Tuesday, 12 May from 2:00 PM until approximately 5:00 PM Eastern Time. The event will be available to the public via live cast on our investor relations website. We will also publish a replay on our website after the event ends. With that, I'll turn the call over to Max to begin.

Zane Keller: Hosting today's call with me are Max Levchin, the firm's founder and chief executive officer; Michael Linford, Affirm's chief operating officer; and Rob O'Hare, Affirm's chief financial officer. In line with our practice in prior quarters, we will begin with brief opening remarks from Max before proceeding immediately into questions and answers. Before we begin the call, as a reminder, we will be hosting our 2026 Affirm Investor Forum next week on Tuesday, 12 May, from approximately 2:00 PM until 5:00 PM Eastern Time.

Speaker #2: In line with our practice and prior quarters, we will begin with brief opening remarks from Max, before proceeding immediately into questions and answers. Before we begin the call, as a reminder, we will be hosting our 2026 Affirm Investor Forum next week on Tuesday, May 12th, from 2:00 until approximately 5:00 PM Eastern Time.

Speaker #2: The event will be available to the public via live casts on our investor relations website. We will also publish a replay on our website after the event ends.

Zane Keller: The event will be available to the public via live cast on our investor relations website. We will also publish a replay on our website after the event ends. With that, I'll turn the call over to Max to begin.

Speaker #2: With that, I'll turn the call over to Max to begin.

Speaker #3: Thank you, Zane. Fiscal Q3 was another one for the record books. Given this streak, one could be forgiven if one thought this actually pretty easy.

Max Levchin: Thank you, Zane. Fiscal Q3 was another one for the record books. Given this streak, one could be forgiven if one thought this is actually pretty easy. That's all because the fantastic Affirm team is starting to make it look that way. It is not, in fact, easy, and we're very proud of this particular quarter. As Zane said, I look forward to seeing many of you in person at the Investor Forum next week. On that note, back to you, Zane.

Max Levchin: Thank you, Zane. Fiscal Q3 was another one for the record books. Given this streak, one could be forgiven if one thought this was actually pretty easy. That's all because the fantastic Affirm team is starting to make it look that way. It is not, in fact, easy, and we're very proud of this particular quarter. As Zane said, I look forward to seeing many of you in person at the Investor Forum next week. On that note, back to you, Zane.

Speaker #3: That's all because the fantastic Affirm team is starting to make it look that way. It is not, in fact. Easy. And we're very proud of this particular quarter.

Speaker #3: Zane said, "I look forward to seeing many of you in person at the investor forum next week." On that note, back to you, Zane.

Speaker #2: Thanks, Max. Okay, let's get to your questions, operator. Please begin the Q&A session.

Zane Keller: Thanks, Max. Okay, let's get to your questions. Operator, please begin the Q&A session.

Speaker #1: Thank you. We will now be conducting a question and answer session. If you'd like to ask a telephone keypad. A confirmation tone will indicate your line is in the question queue.

Operator: Thank you. We will now be conducting a question and answer session. If you'd like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please while we poll for questions. Our first question comes from Jason Kupferberg with Bank of America. Please proceed with your question.

Operator: Thank you. We will now be conducting a question-and-answer session. If you'd like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. Our first question comes from Jason Kupferberg with Bank of America. Please proceed with your question.

Speaker #1: You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your hands up before pressing the star keys.

Speaker #1: One moment, please, while we pull for questions. Our first question comes from Jason Kupferberg with Bank of America. Please proceed with your question.

Speaker #4: Hey, guys. This is Cassie Chan on for Jason. you know, great quarter. I just wanted to ask, I guess, you know, first on the private credit side and in general on credit, you know, it seems like the delinquencies that were were pretty stable this quarter.

Cassie Chan: Hey, guys. This is Cassie Chan on for Jason. You know, great quarter. I just wanted to ask, I guess, you know, first on the private credit side and in general on credit. You know, it seems like the delinquencies were pretty stable this quarter. I guess, is there anything that you're seeing in terms of changes or slowdowns in credit? You know, obviously, unease in private credit seems to be a theme, but are you guys seeing any issues or changes on the funding side of the business? Thank you.

Cassie Chan: Hey, guys. This is Cassie Chan on for Jason. You know, great quarter. I just wanted to ask, I guess, you know, first on the private credit side and in general about credit. You know, it seems like the delinquencies were pretty stable this quarter. I guess. Is there anything that you're seeing in terms of changes or slowdowns in credit? You know, obviously, unease in private credit seems to be a theme, but are you guys seeing any issues or changes on the funding side of the business? Thank you.

Speaker #4: I guess, is there anything that you're seeing in s in terms of changes or slowdowns in credit? And, you know, obviously, unease in private credit seems to be a theme, but are you guys seeing any issues or changes on the the funding side of the business?

Speaker #4: Thank you.

Speaker #3: I'll start with the, credit side, Michael. We'll pick up the funding side. no. We are not. at this point, I think we've earned the right to say the Affirm consumer, and so these are not comments on the universe or even North America or United States consumer, but people that we choose to underwrite and lend to, we are not seeing deterioration.

Max Levchin: I'll start with the credit side. Michael will pick up the funding side. No, we are not. At this point, I think we've earned the right to say the Affirm consumer, and so these are not comments on the universe or even North America or United States consumer, but people that we choose to underwrite and lend to, we are not seeing deterioration. We're not seeing any disturbances in the force, which naturally translated to a very stable and pleasant funding environment for us. Michael, can you tell me more?

Max Levchin: I'll start with the credit side. Michael will pick up the funding side. No, we are not. At this point, I think we've earned the right to say the Affirm consumer, and so these are not comments on the universe or even North American or United States consumers, but people that we choose to underwrite and lend to; we are not seeing deterioration. We're not seeing any disturbances in the force, which naturally translated to a very stable and pleasant funding environment for us. Michael, can you tell me more?

Speaker #3: We're not seeing any disturbances in the force. which naturally translated to a very stable and pleasant funding environment for us, Michael. Can you tell any more?

Speaker #2: Yeah, I the the the funding market, broadly, remains exceptionally constructive for us. We're we're kind of at a adjective to describe just how great the execution has been.

Michael Linford: Yeah. The funding market broadly remains exceptionally constructive for us. We're kinda outta adjectives to describe just how great the execution has been. I know a lot of ink is being spilled elsewhere about what's going on in the capital markets. From our perspective, we see a market that's very deep. We see sustained and reducing spreads, and we see deals with significant oversubscription along with forward flow partners who are, you know, if anything, still clamoring for a bigger allocation of our portfolio. We see the market as being very constructive to us, and it's a key part of the reason why we feel there's so much tailwind in the business.

Michael Linford: Yeah. The funding market broadly remains exceptionally constructive for us. We're kind of out of adjectives to describe just how great the execution has been. I know a lot of ink is being spilled elsewhere about what's going on in the capital markets. From our perspective, we see a market that's very deep. We see sustained and reducing spreads, and we see deals with significant oversubscription along with forward flow partners who are, you know, if anything, still clamoring for a bigger allocation of our portfolio. We see the market as being very constructive to us, and it's a key part of the reason why we feel there's so much tailwind in the business.

Speaker #2: I know a lot of the ink is being spilled elsewhere about what's going on in the capital markets, but, from our perspective, we see a market that's very deep.

Speaker #2: We see sustained and and reducing spreads. And we see deals with significant oversubscription, along with forward-flow partners who are you know, if anything, still, clamoring for a bigger allocation of our portfolio.

Speaker #2: So we see the market as being very constructive to us in a in a key part of the reason why our we feel there's so much, tailwind in the business.

Speaker #4: Thank you.

Cassie Chan: Thank you.

Speaker #1: Our next question comes from Nate Svensson with Deutsche Bank. Please proceed with your question.

Operator: Our next question comes from Nate Svensson with Deutsche Bank. Please proceed with your question.

Speaker #5: Hey, guys. Thanks for the question and congrats on the record number of Lebowski references in the letter. I did want to ask. About upcoming bi yeah, yeah, yeah.

Nate Svensson: Hey, guys. Thanks for the question, and congrats on the record number of Lebowski references in the letter. I did wanna ask.

Max Levchin: Thank you. Thank you.

Nate Svensson: Anyway, sorry, I wanted to ask on the upcoming Big Nothing. Going through the transcript last quarter, Max, you were obviously pretty effusive about all the first order and derivative benefits from that event, things like cardholder sign-ups. I assume directionally you're expecting a lot of the same things. On the call last quarter, you also talked about getting better and smarter as you do more of these. I guess the question is around what ways you think you got better and smarter, and maybe what are some of the incremental changes or initiatives we should be on the lookout for for the event next week?

Speaker #5: anyway, sorry, I wanted to ask on the upcoming Big Nothing. Was going through the transcript last quarter, Max, you were obviously pretty effusive about all the first order and and derivative benefits from that event, things like cardholder sign-ups.

Nate Svensson: Anyway, sorry, I wanted to ask about the upcoming Big Nothing. Going through the transcript last quarter, Max, you were obviously pretty effusive about all the first-order and derivative benefits from that event, things like cardholder sign-ups. I assume directionally you're expecting a lot of the same things. On the call last quarter, you also talked about getting better and smarter as you do more of these. I guess the question is around what ways you think you got better and smarter, and maybe what are some of the incremental changes or initiatives we should be on the lookout for for the event next week?

Speaker #5: I assume directionally you're expecting a lot of the same things, but on the call last quarter, you also talked about getting better and smarter as you do more of these.

Speaker #5: So I guess the question is around what ways you think you got better and smarter, and maybe what are some of the incremental changes or initiatives we should, be on the lookout for for the event next week?

Speaker #3: I don't really want to reveal all the surprises to the completely honest, but I appreciate the the kind words and and, we did get smarter.

Max Levchin: I don't really wanna reveal all the surprises, to be completely honest, but I appreciate the kind words and we did get smarter. I think probably if you wanna sort of look for breadcrumbs, we got smarter about targeting. That's certainly. It's less about sort of sitting down in a lab somewhere and trying to come up with ideas, much more about looking at the data we gathered in the last Big Nothing and just using all the same ML/AI techniques we have here to ask the question, what's the

Max Levchin: I don't really want to reveal all the surprises, to be completely honest, but I appreciate the kind words, and we did get smarter. I think probably if you want to sort of look for breadcrumbs, we got smarter about targeting. That's certain. It's less about sort of sitting down in a lab somewhere and trying to come up with ideas, much more about looking at the data we gathered in the last Big Nothing and just using all the same ML/AI techniques we have here to ask the question, what's the

Speaker #3: I think probably if if you want to sort of look for breadcrumbs, we got smarter about targeting. That that's certainly and it's less about sort of sitting down in a lab somewhere and trying to come up with ideas much more about looking at the data we gathered and the last Big Nothing.

Speaker #3: And just using all the same ML AI techniques we have here to ask the question, what's the least costly highest probability of conversion for any one SKU, any one consumer, any one merchant, etc.?

Max Levchin: Least costly, highest probability of conversion for any one SKU, any one consumer, any one merchant, et cetera. It'll get more efficient. That's certainly the case. We got smarter kind of qualitatively. I think we really underplayed the event itself in the early hours and kind of had to play a little bit of a catch-up on the marketing side of things. This won't happen this time. We'll hit the ground running with just promoting it correctly to all the right people. Again, maximizing the effective per dollar yield for our merchant partners. We expect to be even more satisfying to those who are paying for these deals.

Max Levchin: Least costly, highest probability of conversion for any one SKU, any one consumer, any one merchant, et cetera. It'll get more efficient. That's certainly the case. We got smarter, kind of qualitatively. I think we really underplayed the event itself in the early hours and kind of had to play a little bit of a catch-up on the marketing side of things. This won't happen this time. We'll hit the ground running with just promoting it correctly to all the right people. Again, maximizing the effective per-dollar yield for our merchant partners. We expect to be even more satisfying to those who are paying for these deals.

Speaker #1: The market is being very constructive to us, and it's a key part of the reason why our deals are so much tailwind the business.

Speaker #3: So it'll it'll get more efficient. that's certainly the case. We got smarter kind of qualitatively I think we really underplayed the event itself in the early hours and kind of had to play a little bit of a catch-up on a marketing side of things.

Speaker #2: Thank you.

Speaker #3: Our next question comes from Nate Svensson with Deutsche Bank. Please proceed with your question.

Speaker #4: Hey guys, thanks for the question and congrats on the record number. I'll ask you references in the letter. I did want to ask you all.

Speaker #3: And this one happened this time, so we we'll we will hit the, the ground running with just promoting it correctly to all the right people.

Speaker #4: Yeah, yeah, yeah. anyway, so I wanted to ask about the upcoming big up and was going through the transcript last quarter, Max, you were obviously pretty appreciative about all the first quarter and, and derivative benefits that have been things like hardware signups.

Speaker #3: Again, maximizing the effective per dollar yield for our merchant partners. So we we expect to be even more satisfying to those who are paying for these deals.

Speaker #4: I assume directionally you're expecting a lot of the same things on the call last quarter. You all had talked about getting better and smarter as you do more of these.

Speaker #5: Thanks. Excited to look out for it.

Nate Svensson: Thanks. Excited to look out for it.

Speaker #4: So I guess the question is around what way do you think you got better and smarter, and maybe what are some of the incremental changes or initiatives we should, be on the lookout for for the event next week?

Speaker #1: Our next question comes from Brian Keane with Citi. Please proceed with your question.

Operator: Our next question comes from Bryan Keane with Citi. Please proceed with your question.

Speaker #1: I don't really want to reveal all the surprises to you completely honest, but I appreciate the, the kind words and, and, we did get smarter.

Speaker #2: Yeah, guys, can you give us, some insights on the ABS market, the deal in March, and then, the recent deal? What's going on with spreads and demand side and demand for you guys?

Bryan Keane: Yeah, guys, can you give us some insights on the ABS market, the deal in March, the recent deal, what's going on with spreads and demand for you guys?

Bryan Keane: Yeah, guys, can you give us some insights on the ABS market, the deal in March, the recent deal, and what's going on with spreads and demand for you guys?

Speaker #1: I think probably if, if you were sort of looking for breadcrumbs, got smarter about marketing, but that's certainly, it's less about sort of sitting down in a lab somewhere and trying to come up with ideas much more about looking at the data we gather.

Speaker #5: Yeah, thanks for the question. you know, I think we've we've executed three deals so far this year, two revolving deals in the quarter, and then we we just priced, a static deal, and we haven't yet closed on.

Michael Linford: Yeah, thanks for the question. You know, I think we've executed 3 deals so far this year. 2 revolving deals in the quarter, then we just priced a static deal we haven't yet closed on. The trend really across all 3 is incredible depth, you know, lots of oversubscription these deals and continued and sustained tightening of spreads. It's a, you know, a key part of the reason why you see funding costs down on the order of 125 basis points year-on-year. Obviously, benchmark rates are down as part of that, you're also seeing spreads coming in at the same time. It's just really a reflection of the capital markets demand for our asset and our team's ability to execute despite quite a bit of economic volatility and headlines out there.

Michael Linford: Yeah, thanks for the question. You know, I think we've executed 3 deals so far this year. 2 revolving deals in the quarter, then we just priced a static deal we haven't yet closed on. The trend really across all 3 is incredible depth, you know, lots of oversubscription on these deals and continued and sustained tightening of spreads. It's a, you know, key part of the reason why you see funding costs down on the order of 125 basis points year-on-year. Obviously, benchmark rates are down as part of that; you're also seeing spreads coming in at the same time. It's just really a reflection of the capital markets' demand for our asset and our team's ability to execute despite quite a bit of economic volatility and headlines out there.

Speaker #5: And the the trend really across all three is, incredible depth, you know, lots of oversubscription in these deals, and continued and sustained tightening, spreads.

Speaker #1: And the last big nothing, and just using all the same MLA techniques we have here to ask the question, what's the least costly, highest probability of conversion for anyone for you, anyone consumer, anyone merchant, etc.?

Speaker #5: And it's a you know, a key part of the reason why you see funding costs down on the order of $125 basis points year on year.

Speaker #1: So the it'll, it'll get more efficient. that's within the case. We got smarter qualitatively I think we really underplayed the event itself in the early hours, and kind of had to play a little bit of catch up on a marketing side of things.

Speaker #5: Obviously, benchmark rates are down. As part of that, but you're also seeing spreads coming in at the same time. It's it's just really a a reflection of the capital market's demand for our asset and our team's ability to execute despite quite a bit of economic volatility and headlines out there.

Speaker #1: And this one happened this time, so we, we, we will hit the, the ground running with just promoting it correctly to other people. again, maximizing the effective per dollar yield for our merchant partners.

Speaker #5: We we feel like the market is just extremely constructive for our name.

Michael Linford: We feel like the market is just extremely constructive for our name.

Speaker #6: Yeah, and it just feels like they're starting to recognize maybe the the differences between what you guys your your credit versus others in the short duration, and obviously, the quick turn.

Bryan Keane: Yeah, it just feels like they're starting to recognize maybe the differences between what your credit versus others and the short duration and obviously the quick turn. It looks like the market's starting to recognize that, so it's good to see.

Bryan Keane: Yeah, it just feels like they're starting to recognize maybe the differences between your credit versus others and the short duration and obviously the quick turn. It looks like the market's starting to recognize that, so it's good to see.

Speaker #1: So we expect to be even more satisfying to those who are paying for the deals.

Speaker #4: Thanks. Excited to look out for it.

Speaker #6: But it looks like the market's starting to recognize that, so it's good to see.

Speaker #3: And our next question comes from Brian Keane with Citi. Please proceed with your question.

Speaker #5: Yeah, the the the short duration of our asset is is a huge advantage, and and it's taken us a a long time to to earn that.

Michael Linford: Yeah. The short duration of our asset is a huge advantage, and it's taken us a long time to earn that. We've also done a really good job, I think, in engaging the investor base and bringing on board over the years, a wider set of investors. That's really important for the depth of the market we play in. It's a key channel for our long-term growth. Also the more broad of the investor base you bring on, the better you could get on pricing.

Speaker #5: We've also done a really good job, I think, in engaging the investor base and bringing on board over the years, a wider set of investors.

Speaker #5: Yeah, guys, can you give us, some insights on the ABS market, the deal in March, and then, the recent deal, what's going on with spreads and demand side and demand for you guys?

Speaker #5: That's really important for the depth of the market that we play in, to to key channel for our long-term growth. But also, the more the more broad of the investor base you bring on, the the better you could get on pricing.

Speaker #4: Yeah, thanks for the question. you know, I think we've, we've executed three deals so far this year, two revolving deals in the quarter, and then we, we just priced, a static deal we haven't yet closed on.

Speaker #6: Yeah. Okay, great. Congrats on the results.

Bryan Keane: Yeah. Okay, great. Congrats on the results.

Speaker #4: And the, the trend really across all three is, incredible depth, you know, lots of oversubscription in these deals, and continued and sustained tightening, spreads into you know, a key part of the reason why you see funding costs down on the order of $125 basis points year on year.

Speaker #3: Thank you.

Michael Linford: Thank you.

Speaker #1: Our next question comes from Rob Wildhack with Autonomous Research. Please proceed with your question. Looks like we don't have him. let's go to the next question.

Operator: Our next question comes from Robert Wildhack with Autonomous Research. Please proceed with your question. Looks like we don't have him. Let's go to the next question. Our next question comes from Moshe Orenbuch with TD Cowen. Please proceed with your question.

Speaker #4: Obviously, benchmark rates are down as part of that, but you're also seeing spreads coming in at the same time. It's, it's really a reflection of the capital markets demand for asset and our team to execute despite quite a bit of economic volatility and headlines out there.

Speaker #1: Our next question comes from Moesha Orenbuch with TD Cohen. Please proceed with your question.

Moshe Orenbuch: Great, thanks. I noticed that growth in the Pay in X has, you know, is your fastest-growing segment now. Are there different either programs or, you know, kind of merchant partnerships or anything that, you know, is kind of driving that? Do we think that's going to continue into, you know, fiscal Q4?

Speaker #6: Great. Thanks. I I noticed that, growth in the pay and X has, you know, is your fastest growing segment now. Is there are there different either programs or, you know, kind of merchant partnerships or anything that, you know, is kind of driving that?

Speaker #4: We, we feel like the market is just extremely conductive for earnings.

Speaker #5: Yeah, and it just feels like there's certain recognize maybe the, the differences between what you guys your, your credit versus others in the short duration, and obviously the quick turn.

Speaker #6: And, you know, do we think that's going to continue into you know, if this will Q4?

Speaker #5: but it looks like the market's starting to recognize that, so it's good to see.

Speaker #5: Yep. Hi, Mosha. This is Rob. we do expect that trend to continue into fiscal Q4. and I think the answer was largely in your question.

Rob O'Hare: Yep. Hi, Moshe, this is Rob. We do expect that trend to continue into fiscal Q4. I think the answer was largely in your question. We did have one very large program move to having an evergreen 0% and be a Pay in 4 offer. That definitely drove a bit of the uptick. We also continue to see most of our Pay in 4, Pay in X volume coming from the Shopify program, which continues to grow nicely. A bit of sort of business as usual there. We did have one large program make a change to their financing program, which we think is a real positive.

Speaker #4: Yeah, the, the short duration of our asset is, is a huge advantage in that taking a long time to, to earn that. We've also done a really good job, I think, in, in gauging the investor base and bringing on board over the years, a wider set of investors.

Speaker #5: We did have one large one very large program, moved to having an evergreen, 0% and be a pay and for offer. So that that definitely drove a bit of the uptick, and then we also continue to see, most of our pay and for, pay and X volume coming from the Shopify program, which continues to grow nicely.

Speaker #4: It's important for the depth of the market to play in, to, to key channel for our long-term growth. But also, the more the more broad of the investor base you bring on, the, the better you get on pricing.

Speaker #5: Yeah. Okay, great. Congrats on the results.

Speaker #4: Thank you.

Speaker #5: So a bit of sort of business as usual there, and then we did have one large program, make a change to their financing program, which we think is real positive.

Speaker #3: And our next question comes from Rob Wildpack with Autonomous Research. Please proceed with your question. Looks like we don't have it. let's go to the next question.

Moshe Orenbuch: Yeah. Thanks, Rob.

Speaker #3: Thanks, Rob.

Speaker #1: And our next question comes from Ramsey Ellisall with Kander Fitzgerald. Please proceed with your question.

Operator: Our next question comes from Ramsey El-Assal with Cantor Fitzgerald. Please proceed with your question.

Speaker #3: Our next question comes from Moisha Orenbach with TD Collins. Please proceed with your question.

Speaker #7: Hi, this is Ryan on for Ramsey. Thanks for taking our question today. I wanted to ask about the active merchant count, which went up by 44%, accelerating beyond a strong Q2.

[Analyst] (Cantor Fitzgerald): Hi, this is Ryan on for Ramsey. Thanks for taking our question today. I wanted to ask about the active merchant count, which went up by 44%, accelerating beyond a strong Q2. Where or what is the largest opportunity to add more merchants? How penetrated is the market, not in terms of consumer usage, but in terms of merchant presentment for BNPL? Thank you.

Ryan Campbell: Hi, this is Ryan on for Ramsey. Thanks for taking our question today. I wanted to ask about the active merchant count, which went up by 44%, accelerating beyond a strong Q2. Where or what is the largest opportunity to add more merchants? How penetrated is the market, not in terms of consumer usage, but in terms of merchant presentment for BNPL? Thank you.

Speaker #6: great. Thanks. I, I noticed that, growth in the 10x has, noticed your fastest growing segment now. Is there, are there different either programs or, you know, kind of merchant partnerships or anything that, you know, is kind of driving that?

Speaker #7: Where or what is the largest opportunity for to add more merchants? And how penetrated is the market, not in terms of consumer usage, but in terms of merchant presentment for BNPL?

Speaker #6: And, you know, do we think that's going to continue into, you know, fiscal Q4?

Speaker #7: Thank you.

Speaker #3: I I mean, I think in terms of merchant count, we're still looking at some of our largest platform partners as the biggest accelerant to growing our current merchant base.

Rob O'Hare: I mean, I think in terms of merchant count, we're still looking at some of our largest platform partners as the biggest accelerant to growing our current merchant base. Some of the big PSPs where we have relationships as well as large merchant platforms like Shopify, those have been really additive to our merchant base overall. I think in terms of presentment, you know, we still feel like it's really early innings in terms of presentment. Obviously, we have a brand-new program with Intuit, and there's lots of optimizations to do within that merchant base. That's an enormous universe of merchants that we're just scratching the surface on, and it's very early days in that program. There's countless other examples across our portfolio.

Speaker #4: Yep. I imagine this is Rob. we do expect that trend to continue into fiscal Q4. and the answer was largely in your question. We did have one large one very large program, moved to having an evergreen, 0% in BFA and 4 offer.

Speaker #3: So some of the big PSPs where we have relationships as well as large merchant platforms like Shopify, tho those have been really additive to our merchant base overall.

Speaker #4: So that, that definitely drove a bit of the uptick, and then we also continue to see, most of our pay and 4 pay X volume coming from Shopify program, which continues to grow nicely.

Speaker #3: I think in terms of presentment, you know, we still feel like it's really, really early innings in terms of presentment. Obviously, we have a brand new program with Intuit, and there's lots of optimizations to do, within that merchant base.

Speaker #4: So, a bit of sort of business as usual there, and we did have one large program, make a change to their financing program, which we think is real positive.

Speaker #3: That's an enormous universe of merchants that we're just scratching the surface on, and it's very early days, and that program. So there's countless other examples across our portfolio, but I I think in terms of the partnerships that drive some of these big merchant counts, I think we're still we still have plenty of room to optimize, how we show up on the the end merchant site.

Speaker #4: Thanks, Rob.

Speaker #3: And our next question comes from Randy Ellisall with Android Gerald. Please proceed with your question.

Rob O'Hare: I think in terms of the partnerships that drive some of these big merchant counts, I think we still have plenty of room to optimize how we show up on the end merchant site.

Speaker #7: Hi, this is Ryan. I'm from Randy. Thanks for taking our question today. I wanted to ask about the active merchant count. Like, when a 44% accelerating beyond a strong Q2, where or what is the largest opportunity for add merchants?

Speaker #7: Great. Thank you. I'm looking forward to hearing more at the, investor forum.

[Analyst] (Cantor Fitzgerald): Great. Thank you. Looking forward to hearing more at the Investor Forum.

Ryan Campbell: Great. Thank you. Looking forward to hearing more at the Investor Forum.

Speaker #7: And how penetrated is the market in terms of consumer usage, but in terms of merchant presentment for BNPL? Thank you.

Speaker #1: And our next question comes from Harry Bartlett with Rothschild & Co. Redburn. Please proceed with your question.

Operator: Our next question comes from Harry Bartlett with Rothschild & Co Redburn. Please proceed with your question.

Speaker #1: I, I mean, I think in terms of merchant count, we're still looking at some of our largest platform partners as the biggest accelerant to growing our current merchant base.

Speaker #8: Hey, guys. Thanks for the question. I just wanted to touch on the the kind of, agentic codes development point in the shareholder letter. you know, you cited the the kind of noticeable ramp in agentically written code.

Harry Bartlett: Hey, guys. Thanks for the question. I just wanted to touch on the kind of agentic codes development point in the shareholder letter. You know, you cited the kind of noticeable ramp in agentically written code. It looks like you're kind of doing double the amount of requests that you were doing previously. I guess could you try to talk about this broadly in terms of, you know, how you're thinking maybe costs will develop versus how they developed historically, or whether you kind of see this more as a vehicle for more rapid product development, I guess. Thank you.

Speaker #1: So, some of the big PSPs where we have relationships as well as large merchant platforms like Shopify, those have been, really additive to our merchant base overall.

Speaker #8: and it looks like you're kind of doing double the amount of requests that you were doing previously. So I guess, could you try to talk about this broadly in terms of, you know, how you're thinking maybe cost will develop versus how they developed historically?

Speaker #1: I think in terms of presentment, we still feel like it's really, really early innings in terms of presentment. Obviously, we have a brand new program with Intuit and there's lots of optimizations to do, within that merchant base.

Speaker #8: or whether you kind of see this more as a vehicle for more rapid product development, I guess? Thank you.

Speaker #1: That's an enormous universe of merchants that we're just scratching the surface on, and it's very early days in that program. So, there's countless other examples across our portfolio, but I think in terms of partnerships that drive some of these big merchant counts, I think we're still we still have plenty of room to optimize, how we show up on the, the head merchant site.

Max Levchin: This is very tempting to turn this into a 15-minute answer in the finer points of software development, which I am personally invested and involved in. The shorthand, first of all, and I will rely on Rob in a second to maybe try to even quantify it, but it's unequivocally accretive to the bottom line to use AI the way we are. This is a net strongly positive. The fact that we are increasing our development velocity is just incredibly strong for our bottom line and then some. The actual mechanics of development using agentic, the processes and et cetera, we're pretty unique, and we feel pretty great about where we are and where we're headed.

Speaker #3: so I there's a very tempting to turn us into a 15-minute answer in the finer points. So structure development, which I am personally invested and involved in.

Speaker #3: so the shorthand first of all, and I I will rely on Rob in a second to maybe try to even quantify it, but it's unequivocally a creative to the bottom line to use AI the way we are.

Speaker #4: Great. Thank you. Looking forward to hearing more of the, answer form.

Speaker #3: And our next question comes from Harry Bartlett with Rothschild and Co Redburn. Please proceed with your question.

Speaker #3: And so this is a a net strongly positive, the fact that we are increasing our development velocity is just incredibly strong for our bottom line.

Speaker #8: Hey, guys. Thanks for the question. I just wanted to touch on the, the kind of, agentic codes development point, Michelle, that, you know, you cited the, the kind of noticeable ramp in agentic written codes.

Speaker #3: And then some. The actual mechanics of development using agentic the processes and and etc., we're pretty unique, and we we feel pretty great about where we are and where we're headed.

Speaker #8: and it looks like we're kind of doing double the amount of requests that you did previously. But I guess, could you try to talk about this broadly in terms of, you know, how we're thinking maybe possible development versus how they developed historically, or whether you kind of see this more as a vehicle for more rapid product development, I guess?

Max Levchin: If you ever read the fine print of, you know, the likes of ChatGPT or Gemini, there's a little thing at the bottom that says, "AI makes mistakes." Basically, you're on your own. We don't really have the luxury of putting that in our code. If we make an underwriting mistake, if our engine somehow treats some consumer unfairly, or if we're off by a penny here and there, like, none of that is okay. As much as we can and do use these tools, there are still many unique to Affirm checks and balances and processes that ensure that what we ship is of the same or higher quality than what we did before these tools came around. We spent quite a lot of time getting there, gaining the confidence, testing it.

Speaker #3: you know, if you ever, read read the fine print of, you know, the likes of ChatGPT or Gemini, there's a little thing at the bottom that says, "AI makes mistakes." Basically, you're on your own.

Speaker #8: Thank you.

Speaker #3: We don't really have the luxury of putting that in our code. If we make an underwriting mistake, if our engine somehow treats some consumer unfairly, or if we're off by a penny here and there, like none of that is okay.

Speaker #4: So there's a tempting person to a 15-minute answer in the finer points. So software development, which I am personally invested and involved in, so the shorthand, first of all, and I, I will rely on Rob a second to be trying to quantify it, but it's unequivocally a creative to the bottom line to use AI in the way we are.

Speaker #3: And so as much as we can and do use these tools, there are still many unique to a firm checks and balances and processes that ensure that what we ship is of the same or higher quality than what we did before these tools came around.

Speaker #4: So this is a net strongly positive, the fact that we are increasing our development velocity is just incredibly strong for our bottom line. And then, the actual mechanics of development using agentic dev processes and, and etc., pretty unique.

Speaker #3: And we we spent quite a lot of time getting there, gaining the confidence, testing it. And so the the reason we have this sort of a uncorket moment early in the year is because we we felt that we were ready to mass deploy it internally, and have so far been very pleased with what what's transpired.

Max Levchin: The reason we had this sort of a uncork it moment early in the year is because we felt that we were ready to mass deploy it internally and have so far been very pleased with what's transpired. We'll definitely do more. I'm sure our engineering leadership is listening slash reading these letters. I don't think anybody is begrudging me the right to say, we think we can connect this productivity further. You know, it's very early days. We're very excited about it. We have no shortage of things we wanna build. Therefore, humans that are both the creators of ideas, the arbiters of good taste, and the ultimate responsibility carriers for this no errors, no fine print, no bugs, are still very necessary.

Speaker #4: We, we feel pretty great about where we are and where we're headed. you know, if you ever, read the fine print of, you know, the, like, ChatGPT Gemini, there's a little thing about it that says, "AI makes mistakes." Basically, you're on your own.

Speaker #3: And we'll we'll definitely do more. I think and I'm I'm sure our engineering leadership is is listening/reading these letters, and I don't think anybody is begrudging me the right to say we think we can 10x this productivity further.

Speaker #4: We don't really have the luxury of putting that in our code. If we make an underwriting mistake, if our engine somehow treats some consumer unfairly, or if we're off by a penny here and there, none of that is okay.

Speaker #3: So you know, it it's very early days. We're very excited about it. we have no shortage of things we want to build, and therefore humans that are both the creators of ideas, the arbiters of good taste, and the ultimate responsibility carriers for this no errors, no no fine print, no bugs are are still very necessary.

Speaker #4: And so as much as we can and do use these tools, there are still many unique to our firm checks and balances and processes that ensure that what we ship is of the same or higher quality that what we did before these tools came around.

Speaker #4: And we've spent quite a lot of time getting there, getting the confidence, testing it, and so the reason we have this sort of a uncorket moment early in the year is because we felt that we were ready to mass deploy it internally and have software been very pleased with what, what transpired.

Speaker #3: So we don't anticipate any sort of a decimation of the engineering team, but we are certainly very excited to give each one of our engineers basically superpowers and you know, Rob has any additional cost points to make?

Max Levchin: We don't anticipate any sort of a decimation of the engineering team. We are certainly very excited to give each one of our engineers basically superpowers. I know Rob has any additional cost points to make.

Speaker #9: Yeah. In in terms of the cost, I mean, they they did obviously show up in the P&L this quarter. They'll continue into Q4 as well.

Rob O'Hare: Yeah. In terms of the cost, I mean, they did obviously show up in the P&L this quarter. They'll continue into Q4 as well. Wouldn't say it's a material impact to the P&L overall. It's sort of very low single-digit millions per quarter in terms of spend. To Max's point, I mean, we're seeing a lot of efficiency. Spending money on developer tools is something we've always done. We're just thinking about ways to make sure that on a holistic basis, that all-in budget makes sense for us and that we're seeing efficiency and lift from the entire portfolio of tools that we're employing.

Speaker #4: And we'll definitely do more I think, you know, I'm sure our engineering leadership is, is listening/reading these letters and I don't think anybody is grudging me the right to say we think we can next this productivity further.

Speaker #9: wouldn't wouldn't say it's a material impact to the P&L overall. It's sort of very low single-digit millions per quarter in terms of spend. So to Max's point, I mean, we're seeing a lot of efficiency spending money on developer tools is something we've always done.

Speaker #4: So, you know, it, it very early days, we're very excited about it. we have no shortage of things we want to build, and therefore, humans that are both the creators of ideas, the arbiters of taste, and the ultimate responsibility carriers for this no errors or no fine print, no bugs are still very necessary.

Speaker #9: So we're just thinking about ways to make sure that on a holistic basis, that that all-in budget makes sense for us, and that we're seeing efficiency and lift from the entire portfolio of tools that we're employing.

Speaker #8: Super helpful. Thank you.

Harry Bartlett: Super helpful. Thank you.

Speaker #4: We don't anticipate any sort of a decimation of the engineering team, but we are certainly very excited to give each one of our engineers basically superpowers and Rob has any additional cost points to make.

Speaker #1: And our next question comes from Rob Wildhack with Autonomous Research. Please proceed with your question.

Operator: Our next question comes from Robert Wildhack with Autonomous Research. Please proceed with your question.

Speaker #1: in, in terms of the cost, I mean, they did obviously show up in the P&L this quarter. They'll continue into Q4 as well. I would say it's material impact to the P&L overall.

Speaker #10: Hey, can you guys hear me this time?

Rob Wildhack: Hey, can you guys hear me this time?

Speaker #7: Yeah.

Max Levchin: Yeah.

Speaker #8: Great. cool. I wanted to ask about the different affirm surfaces, namely the app. You know, you've highlighted in the past the the GMV lift there.

Rob Wildhack: Great. Cool. I wanted to ask about the different Affirm surfaces, namely the Affirm app. You know, you've highlighted in the past the GMV lift there. That's intuitive. I'm curious, though, where consumer awareness is on that. Like, are consumers still opening up their Affirm app to make a payment then going, Oh, lucky me, here's this great offer? Or have they become more attuned to the fact that this is a place where they can start looking for products and shopping via the Affirm app first?

Speaker #1: It's sort of very low single-digit millions per quarter in terms of spend. So to Max's point, we're seeing a lot of efficiency spending on development tools is something we've always done.

Speaker #8: That's intuitive. I'm curious though where consumer awareness is on that. Like, are consumers still opening up their format to make a payment, then going, "Oh, fucking me.

Speaker #1: So we're just thinking about ways to make sure that on a holistic basis, that, that all in budget makes sense for us and that we're seeing efficiency and lift from the entire portfolio of tools that we're employing.

Speaker #8: Here's this great offer," or have they become more attuned to the fact that this is a place where they can start looking for products and shopping via the app first?

Speaker #7: All right. You're front-running like half of my speech next week, so I'm not gonna answer not gonna not gonna gratify this one with a no, I'm kidding.

Speaker #8: Super helpful. Thank you.

Max Levchin: All right. You're front running like half of my speech next week. I'm not gonna gratify this one with No, I'm kidding. The short answer is, it is trending in the very direction you described. Affirm app was deliberately designed to make sure that there is more value to be had there than just sort of a in passing setting up or checking up on your auto-pay. All the different components in the first three and the fifth tabs of the app are all designed to create engagement, to expose consumers to various merchant promotions. It is not an accident that the Big Nothing Days are basically organized around the app. We're trying to teach consumers that this is where you go. There's always 0% offers in the app.

Speaker #3: And our next question comes from Rob Wildpack with Autonomous Research. Please proceed with your question.

Speaker #7: the short answer is it is trending in the very direction you described. So affirm app was deliberately designed to make sure that there is more value to be had there than just sort of a in-passing setting up or checking up on your autopay.

Speaker #9: Hey, can you guys hear me?

Speaker #4: Yeah.

Speaker #9: Great. cool. I wanted to ask about the different, firm services, namely the app. You know, you highlighted in the past the, the GMV lift there.

Speaker #9: That's intuitive. I'm curious to where, consumer awareness is on that. Like, are consumers still opening up their Macs to make a payment, then going, "Oh, welcome me.

Speaker #7: So all the different components in the first three and the fifth tabs of the app are all designed to create engagement, to expose consumers, to various merchant promotions.

Speaker #9: Here's this great offer," or have they become more attuned to the fact that this is a place where they can start looking for products and shopping via the app first?

Speaker #7: it is not an accident that the Big Nothing days are basically organized around the app. We're we're trying to teach consumers that this is where you go.

Speaker #4: All right. You're front running like half of my speech next week, so I'm not going to answer not going to not going to gratify this one with a kidding.

Speaker #7: There's always 0% offers in the app. The B&D is just a nexus of many of them concurrently, but at any given time, there's a lot to begin with.

Speaker #4: the short answer is it is trending in the very direction you described. So a firm app was deliberately designed to make sure that there is more value to be had there than just sort of in passing setting up or checking up on your autopay.

Max Levchin: The BND is just a nexus of many of them concurrently, but at any given time, there's a lot to begin with. We have a really nice number. I won't spoil the eventual report on that one. Number of searches that consumers run in our app, we're watching that grow. It's all in the service of teaching consumers that the best experience of Affirm is the app plus the card. I'm deliberately obscuring some of the maybe more interesting portions, but you'll have to wait 6 more days before we start really doing some fun reveals. Directionally, you're exactly right. Like, we are motivated to make the app experience excellent, both as a product and as a financial service to our consumers.

Speaker #7: we have a really nice number. I I won't spoil the the the the eventual report on that one. Number of searches that consumers run in our app.

Speaker #7: we we're watching that grow. And it it's all in the service of teaching consumers that the best experience of affirm is the app plus the card.

Speaker #4: So all the different components in the first three and the fifth tabs of the app are all designed to create engagement, to expose consumers, to various merchant promotions.

Speaker #7: And so I'm I'm deliberately obscuring some of the maybe the more interesting por portions that you'll have to wait six more days before we start really doing some fun reveals.

Speaker #4: it is not an accident that the, big nothing days are basically organized around the app. We're, we're trying to teach consumers that this is where you go.

Speaker #4: There's always 80% offers in the app. The B&D is just a nexus of many of them concurrently, but at any given time, there's a lot to begin with.

Speaker #7: But directionally, you're exactly right. Like, we we are motivated to make the app experience excellent both as a product and as a financial service to our consumers, and there's a bunch of things to show.

Speaker #4: we have a really nice number. I won't spoil the, the, the, the eventual report on that one. Number of searches that consumers run in our app.

Max Levchin: There's a bunch of things to show and many more that we're probably not gonna show off necessarily next week. You know, it shapes the roadmap for years in our minds.

Speaker #7: And many more that we're probably not gonna show up necessarily next week, but you know, it it shapes the roadmap for years. In in our minds.

Speaker #4: we're watching that grow. And, it's all in a service teaching consumers that the best experience of a firm is the app plus the card.

Speaker #8: Got it. And then quick one for Rob, if I may. Max was up quarter over quarter. Could you just call out the drivers there?

Rob Wildhack: Got it. A quick one for Rob, if I may. Was up quarter-over-quarter. Could you just call out the drivers there?

Speaker #4: And so I'm, I'm deliberately obscuring some of the, maybe the more interesting portions that you'll have to wait six more days before we start really, doing some fun reveals.

Speaker #7: I'm sorry. Could you repeat the question?

Rob O'Hare: Sorry, could you repeat the question?

Speaker #8: The allowance was up quarter over quarter. Just wondering the drivers there.

Rob Wildhack: The allowance was up quarter-over-quarter. Just wondering the drivers there?

Speaker #4: But correction, you're exactly right. We, we are motivated to make the app experience excellent in both as a product and as a financial service to our consumers.

Rob O'Hare: Yeah, I mean, it's of course, partly a function of just seasonality. The allowance rate typically is elevated in Q3, just given we have the sequential downtick from holiday volumes in Q2 down to a lower base in fiscal Q3. That's part of it. Another driver, which I think Max called out in his portion of the letter, which is that we did see elevated prepayments on the platform. It's a little bit of a counterintuitive point, but that's a really positive credit signal, and it has the effect of reducing, the overall loan balance, which, you know, obviously the good loans are being paid off early, and so you're left with more delinquencies off of a lower base.

Speaker #7: yeah. I mean, it's it's of course partly a function of just seasonality. the allowance rate typically is elevated in Q3 just given we have the sequential downtick from holiday volumes in Q2 down to a lower base in in fiscal Q3.

Speaker #4: And there's a bunch of things to show. And many more that we're probably not going to show up necessarily next week, but, you know, it, it shapes the roadmap for years.

Speaker #4: In, in our months.

Speaker #9: Got it. And then, quick one for Rob if I may. was that quarter over quarter? Did you just call out the driver today?

Speaker #7: That's part of it. another driver, which I think Max called out in his portion of the letter, was just that we did see elevated prepayments on the platform.

Speaker #4: I'm sorry. Can you repeat the question?

Speaker #9: The allowance, was that quarter over quarter? Just wondering the drivers there.

Speaker #7: It's a little bit of a counterintuitive point, but that's a really positive credit signal. And it has the effect of reducing the overall loan balance, which you know, obviously the good loans are being paid off early, and so you're left with more delinquencies off of a lower base.

Speaker #4: yeah. I mean, it's, it's of course partly a function of just seasonality. the allowance rate typically is elevated in Q3 just given we have the sequential downtick from holiday volumes in Q2 down to a lower base in, in fiscal Q3.

Speaker #7: so that was that that contributed to a higher allowance rate all-in, but we think it's a really positive credit signal across our users at large.

Rob O'Hare: That contributed to a higher allowance rate all in, but we think it's a really positive credit signal across our users at large. Those were sort of the two biggest drivers, seasonality and then a bit of favorable prepayments from tax season.

Speaker #4: That's part of it. another driver, which I think Max called out in his portion of the letter, is just that we did see elevated prepayments on the platform.

Speaker #7: So those were sort of the two biggest drivers: seasonality and then a a bit a bit of favorable prepayments from tax season. This particular tax season was under understandably refund maxed.

Speaker #4: It's a little bit of a counterintuitive point. That's a really positive credit signal. And it has the effect of reducing the overall loan balance, which, you know, obviously, the good loans are being paid off early.

Max Levchin: This particular tax season was.

Rob Wildhack: Thanks.

Max Levchin: understandably refund maxed. Is that what the kids say?

Speaker #7: Is that what the kids say?

Speaker #4: And so you're left with more delinquency off of a lower base. so that was that, that contributed to a higher allowance rate all in.

Speaker #4: We think it's a really positive credit signal. across our users at large. So those were sort of two biggest drivers: seasonality and then a bit, a bit of, favorable prepayments for next season.

Speaker #1: Okay. And our next question comes from Dan Domet with Nzihu. Please proceed with your question.

Operator: Okay. Our next question comes from Dan Dolev with Mizuho. Please proceed with your question.

Operator: Next question comes from the line. Timothy Chiodo, UBS.

Speaker #4: The fiscal tax season was, understandably refund maxed. Is that what you're saying?

Speaker #11: Hey, guys. as always, very impressive results. just wanted to ask you Max, can you hear me well?

[Analyst]: Hey, guys. As always, very impressive results. Just wanted to ask you, Max, can you hear me well?

Timothy Chiodo: Hey, guys. As always, very impressive results. Just wanted to ask you, Max, can you hear me well?

Speaker #12: Yeah.

Max Levchin: Yeah, yeah. Sorry.

Speaker #7: Yeah, yeah. Sorry. We're just we're. We're silent waiting.

Max Levchin: Yeah, yeah. Sorry.

[Analyst]: Okay.

Timothy Chiodo: Okay.

Max Levchin: We're silent waiting.

Speaker #3: Okay. And our next question comes from Dan Gomez with Mizzou. Please proceed with your question.

Speaker #11: Thanks.

[Analyst]: Okay.

Timothy Chiodo: Okay.

Max Levchin: Thank you.

Speaker #7: Sorry. I just wanted to ask really quickly some of your competitors have done some significant layoffs because of AI. I just wanted to know what you know, the official affirm stance is on this topic.

[Analyst]: Sorry. I just wanted to ask really quickly, some of your competitors have done some significant layoffs because of AI. I just wanted to know what, you know, the official firm stance is on this topic. Thank you so much.

Timothy Chiodo: Sorry. I just wanted to ask really quickly, some of your competitors have done some significant layoffs because of AI. I just wanted to know what, you know, the official firm stance is on this topic. Thank you so much.

Speaker #10: It comes from the line of Tim Chito.

Speaker #11: Hey, guys. I was very impressed with the results. just wanted to ask you, Max, I don't know what, sorry, we're just we're celebrating. Sorry.

Speaker #7: Thank you so much. we are not planning AI-related layoffs full stop. I I I don't mean to belittle anyone out there making the right or what they believe to be the right decisions for their company.

Max Levchin: We are not planning AI-related layoffs, full stop. I don't mean to belittle anyone out there making the right or what they believe to be the right decisions for their company. Strictly Affirm-centric view of the world from us. If you look at our revenue per employee, it is already hanging out in, like, NVIDIA territory. I don't remember the last time I looked at it, but it's very high number of dollars per employee. We today operate as a very lean machine. If you look at our overall headcount, it hasn't grown very much. If you look at the revenue per employee, you'll see that we're just highly efficient. If you look at overall operating leverage, it's done really well. We, long before AI tools came along, we had tooled ourselves up to be very efficient.

Speaker #11: I just wanted to ask really quickly, some of your competitors have done some significant layoffs because of AI. I just wanted to know what, you know, the official firm stance is on this, topic.

Speaker #11: Thanks so much.

Speaker #7: so strictly affirm-centric view of the world from us. If you look at our revenue per employee, it is already hanging out in like Nvidia territory.

Speaker #4: we are not planning AI-related layoffs. Full stop. I, I don't mean to belittle anyone. They're making right or what they believe to be the right decisions for their company.

Speaker #7: I I don't remember the last time I looked at it, but it's very high number of dollars per employee. So we today operate as a very lean machine.

Speaker #4: so strictly a firm-centric view of the world from us. If you look at our revenue per employee, it is already hanging out in like NVIDIA territory.

Speaker #7: If you look at our overall headcount, it hasn't grown very much. If you look at the revenue per employee, you'll see that we're just highly efficient.

Speaker #7: If you look at overall operating leverage, it's done really well. So we long before AI tools came along, we had tooled ourselves up to be very efficient.

Speaker #4: I remember a lot of time I looked at it, but it's very high number of dollars per employee. So we today operate as a very lean machine.

Speaker #4: If you look at our overall headcount, haven't grown very much. If you look at our new employees, you'll see that we're just highly efficient.

Speaker #7: These tools are giving us rocket boosters, wings, you know, whatever whatever metaphor you want. And we're very happy for it, but at least for now and as far as the eye can see, as far as I can see anyway, it is just a thing we're gonna keep using to ship more the list of things we want to ship is very long and until very recently, a lot of our conversations were, "Well, we don't know when we're gonna prioritize this thing that you want, Max, because we have so much more to build." And blissfully, these conversations are now like, "Well, we can just have a hackathon on 48 hours later.

Max Levchin: These tools are giving us rocket boosters, wings, you know, whatever metaphor you want, and we're very happy for it. At least for now, and as far as the eye can see, as far as I can see anyway, it is just a thing we're going to keep using to ship more. The list of things we want to ship is very long. Until very recently, a lot of our conversations were, Well, we don't know when we're going to prioritize this thing that you want back because we have so much more to build. Blissfully, these conversations are now like, Well, we can just have a hackathon and 48 hours later we'll have a working prototype. We just wrapped up one here where our product team literally delivered dozens of shippable features, which is just impossible to imagine 12 months ago.

Speaker #4: If you look at overall operating leverage, it's done really well. So we long for AI tools coming along. We had tools ourselves up to be very efficient.

Speaker #4: These tools are giving us rocket boosters, wings, you know, whatever, whatever metaphor you want. And we're very happy for it, but at least we're now and as far as the eye can see, as far as I can see anyway, it is just nothing we're going to keep using to ship more.

Speaker #4: The list of things we want to ship is very long. And very recently, a lot of our conversations were, "Well, we don't know when we're going to prioritize this thing that you want, Max, because we have so much more to build." Mostly, these kind of things have been out like, "Well, we can just have a hackathon at 40 hours later.

Speaker #7: We'll have a working prototype." We just wrapped up one here where our product team literally delivered dozens of shippable features, which is just impossible to imagine 12 months ago.

Speaker #7: And so we we we we need all the people we got. We we think we have fantastic people, and we we like them all.

Max Levchin: We need all the people we got. We think we have fantastic people, and we like them all.

Speaker #4: We'll have a working prototype. We just wrap up on here where our product team literally delivered dozens of shippable features, which is just impossible to imagine 12 months ago." And so we, we, we know all the people we got to touch that we think we have fantastic people and we like them all.

Max Levchin: We need all the people we got. We think we have fantastic people, and we like them all.

Speaker #1: And our next question comes from Dan Perlin with RBC Capital Markets. Please proceed with your question.

Operator: Our next question comes from Daniel Perlin with RBC Capital Markets. Please proceed with your question.

Speaker #7: Thanks. Good evening. I'm wondering, can you just speak I think maybe holistically to your expansion plans, you know, outside of North America? I know you you talk about it a little bit embedded in the guidance here for the product and go-to-market initiatives and and not being material in '26.

Daniel Perlin: Thanks. Good evening. I'm wondering, can you just speak, I think maybe holistically to your expansion plans, you know, outside of North America? I know you talked about it a little bit embedded in the guidance here for the product and go-to-market initiatives and not being material in 2026. I'm just trying to think, contemplating in terms of investments as we, as we start to think about next year. Also, I guess in the context, although it's a little bit of a different driver, the RLTC margins continue to run, you know, above long-term targets. I'm just wondering as you go into the international markets, how that might impact it. Thank you.

Speaker #3: Our next question comes from Dan Berlin with RBC Capital Markets. Please proceed with your question.

Speaker #12: Thanks. Good evening. I'm wondering, can you just speak, I think maybe holistically to your expansion plans outside of North America? I know you, you talked about it a little bit embedded in the guidance here for the product and good market initiatives and not being material in '26.

Speaker #7: But I'm just trying to think contemplating in terms of investments as we as we start to think about next year. and also, I guess in the context, although it's a little bit of a a different driver, but the L you know, the RLTC margins continue to run, you know, above long-term targets.

Speaker #12: But I'm just trying to think, companies in terms of investments as we, as we start to think about next year. and also, I guess in the context, although it's a little bit of a, a different.

Speaker #7: I'm just wondering, as you go into the international markets, how that might impact it. Thank you. sure. I'll I'll take them in order. you know, I think we're gonna spend a bit of time talking about our expansion plans with a bit more specificity in terms of markets.

Speaker #12: You know, RFC margins came from, you know, above long-term targets. I'm just wondering if you go in the international markets, how that might impact.

Rob O'Hare: Sure. I'll take them in order. You know, I think we're going to spend a bit of time talking about our expansion plans with a bit more specificity in terms of markets. I'll leave the deep dive on the international markets for next week's Affirm Investor Forum, if that's okay. You know, in terms of the investment portfolio for those launches, some of that work is already underway today. That's definitely been an area that we've been investing in ahead of those markets coming live. As you've seen from the results, we've been able to drive really nice operating leverage despite that investment. I think we would expect to do more of the same in fiscal 2027, but I'll stop short of-

Speaker #4: sure. I'll, I'll take my order. you know, I think we're going to spend a bit of time talking about our expansion plans with a bit more specificity in terms of markets.

Speaker #7: So I'll I'll leave the deep dive on the international markets for next week's investor forum if if that's okay. you know, in terms of the investment portfolio for those launches, some of that work is already underway today.

Speaker #4: So I'll, I'll leave the deep dive on the international markets for next week's investor forum if that's okay. you know, in terms of the investment portfolio for those lunches, some of that work is already underway today.

Speaker #7: So that's definitely been an area that we've been investing in ahead of those markets coming live. and and as you've seen from the results we've been able to drive, really nice operating leverage despite that investment.

Speaker #4: So it's definitely been an area that we've been investing in ahead of those gets coming live. and as you've seen from the results, we've been able to drive really nice operating leverage despite that investment.

Speaker #4: So I think we would expect to do more of the same. In fiscal '27, but I'll, I'll stop short of, giving a sort of outlook or guidance for '27 today.

Speaker #7: So I I think we would expect to do more of the same. In fiscal '27, but I'll I'll stop short of giving any sort of outlook or guidance for '27 today.

Rob O'Hare: Giving any sort of outlook or guidance for 2027 today. In terms of unit level economics, I mean, I think as we ramp in new countries, we would expect potentially that there is a bit of a investing period where we're meeting new consumers and coming down the curve in terms of underwriting prowess. There could be a small drag on revenue less transaction costs as we enter these new markets. Given the size of the US and Canadian businesses today, we think any headwinds there would be pretty minimal.

Speaker #4: in terms of unit-level economics, I mean, I think as we ramp in new countries, we would expect potentially that there is a bit of a investment period where we're meeting consumers and, and coming down the curve in terms of underwriting prowess.

Speaker #7: in terms of unit-level economics, I mean, I think as we ramp in new countries, we would expect potentially that there is a bit of a investment period where we're meeting new consumers and and coming down the curve in terms of underwriting prowess.

Speaker #4: So, there could be a small drag on revenue-less transaction costs as we enter these new markets. But given the size of the, the US and Canadians as it is today, we think any headwinds there would be, pretty minimal.

Speaker #7: So there could be a small drag on revenue-less transaction costs as we enter these new markets. But given the size of the the US and Canadian businesses today, we think any headwinds there would be pretty minimal.

Speaker #12: That's great. Thank you so much.

Speaker #3: Our next question comes from Andrew Bosch with CMO Capital Markets. Please proceed with your question.

Speaker #7: That's great. Thank you so much.

Daniel Perlin: That's great. Thank you so much.

Speaker #13: Hey, thanks for taking the question. wanted to talk about FirmGuard. The level of ads you can see to stack up here. you know, the $700,000 users is pretty impressive, especially coming off of the, the $900,000 last quarter.

Speaker #1: And our next question comes from Andrew Bosch with BMO Capital Markets. Please proceed with your question.

Operator: Our next question comes from Andrew Bauch with BMO Capital Markets. Please proceed with your question.

Speaker #13: Hey. Thanks for taking the question. wanted to talk about affirm card and the level of ads you continue to stack up here. you know, the $700,000 users is pretty impressive, especially coming off of the the $900,000 last quarter.

Andrew Bauch: Hey, thanks for taking the question. Wanted to talk about Affirm Card and the level of adds you continue to stack up here. You know, the 700,000 users is pretty impressive, especially coming off of the 900,000 last quarter. Is there anything that's working differently or stronger than it has been in the past as far as card customer acquisition goes? My follow-up would be, you know, now that we're doubled the base and at 4.4, you know, are you starting to see more and more benefits of scale coming through the pike?

Speaker #13: So is there anything that, that's working differently or stronger than it has been in the past as far as our customer acquisition goes? And then my follow-up would be, you know, now that we're doubled the base and at 4.4, you know, are you starting to see more benefits of scale coming to the pike?

Speaker #13: So is there anything that that's working differently or stronger than it has been in the past as far as card customer acquisition goes? And then my follow-up would be, you know, now that we're doubled the base and at 4.4, you know, are you starting to see more and more benefits of scale coming through the pike?

Speaker #4: I think the two, the first part, the long list of things we have done and continue to do to just increase adoption we said it before and remain true that cards are by far the fastest growing and also our most profitable product.

Max Levchin: I think to the first part, there's a long list of things we have done and continue to do to just increase adoption. We've said it before, and remains true, that card are by far fastest-growing and also our most profitable product, so there's absolutely no reason not to try to grow it. That said, we have not been in any way fuel juicing the growth. You know, it's natural. There's not a secret game somewhere being played or anything like that. It, it's growing about as fast as we can make it grow without tilting anything in a weird direction. Still primarily remains a repeat product. We've never tried to advertise it or promote it outside of existing Affirm user base. It's still roughly in the 20% of the active, ±.

Speaker #7: I think the two the first part, I mean, there's a long list of things we have done and continue to do to just increase adoption.

Speaker #4: So there's absolutely no reason not to try to grow it. That said, we have not been in any way fueled to see the growth.

Speaker #7: We've said it before and remains true that card are by far fastest growing and also are most profitable products. So there's absolutely no reason not to try to grow it.

Speaker #4: And, you know, it's natural. There's not a secret game somewhere. We're being played or anything like that. So it's, it's growing as fast as we can make it grow without doing anything in the other direction.

Speaker #7: That said, we have not been in any way fueled chasing the growth. And you know, it it's natural. There's not a secret game somewhere being played or anything like that.

Speaker #4: Still primarily remain a repeat product. We've never tried to advertise or promote it outside of existing customer user base. It's still roughly in the 20% of the active customer market.

Speaker #7: So it it it's growing about as fast as we can make it grow without tilting anything in a weird direction. Still primarily remains a repeat product.

Speaker #4: So it's, you know, we have a lot of road to cover before we start asking where, where can we get more cardholders. The RFC users in the sense that they transact most frequently.

Speaker #7: We've never tried to advertise it or promote it outside of existing affirm user base. It's still roughly in the 20% of the active plus or minus.

Speaker #4: They tend to be least lossy just because we have to know them a lot quicker, a lot more frequently. And so it, it, it's all goodness.

Speaker #4: Nothing's sort of n-nothing hidden or, or regrettable there. let's see. And, and in terms of scale, I think, I'm completely upset. I haven't thought through very carefully or finding benefits of scale.

Speaker #7: So it's you know, we have we have a lot of road to cover before we start asking where can we get more cardholders. The R, our favorite users in a sense that they transact most frequently.

Max Levchin: you know, we have a lot of road to cover before we start asking where can we get more cardholders. They are our favorite users in the sense that they transact most frequently. They tend to be least lossy just because we get to know them a lot quicker, a lot more frequently. it's all goodness. Nothing hidden or regrettable there. Let's see. the economy of scale, you know, I haven't thought it through very carefully if we're finding benefits of scale that are sort of truly unique. The one thing that is true in a software development context, which is a little sort of maybe a glimpse into the resource allocation, your fastest-growing product is typically your smallest product.

Speaker #7: They tend to be least lossy just because we get to know them a lot quicker. A lot more frequently. And so so it it there's it's all goodness, nothing sort of not nothing hidden or or regrettable there.

Speaker #4: There's a truly unique the one thing that is true in a software development context which is a little certainly be a glimpse of the resource allocation your fastest growing product is typically a smallest product.

Speaker #4: And so no matter how much you love your youngest child, you can't really allocate the greatest number of resources towards it because it's just too small.

Speaker #7: let's see. And and the economy to scale you know, I think to be completely honest, I don't I haven't thought it through very carefully if we're finding benefits of scale that are sort of truly unique.

Speaker #4: The card is now in the billions of dollars of volume. It is no longer a small product, which means that it deserves and gets the software engineering attention and the risk attention.

Speaker #7: The one thing that is true in a software development context which is a little sort of maybe a glimpse into the resource allocation you're fastest growing product is typically your smallest product.

Speaker #4: And so all the various pieces that we would perhaps wonder if they're worth allocating to other parts. And so you can expect it to get more features sooner, more, you know, maybe even more growth sooner, although that is not a, not, not a forecast or forward statement.

Speaker #7: And so no matter how much you love your youngest child, you can't really allocate the greatest number of resources towards it because it's just too small.

Max Levchin: No matter how much you love your youngest child, you can't really allocate the greatest number of resources towards it because it's just too small. The Card is now in the $ billions of volume. It is no longer a small product, which means that it deserves and gets the software engineering attention and the risk attention and so all the various pieces that we would perhaps wonder if they're worth allocating from other parts. You can expect it to get more features sooner, more, maybe even more growth sooner, although that is not a forecast or forward-looking statement. Is just sort of hitting its stride in every dimension, including internal resource allocation.

Speaker #4: it is just sort of hitting its stride in randomity, including internal resource allocation.

Speaker #7: The card is now in the billions of dollars of volume. It is no longer a small product which means that it deserves and gets the software engineering attention and the risk attention and so all the various pieces.

Speaker #12: Got it. Thank you.

Speaker #3: Our next question comes from Matt O'Neill with Bank of America. Please proceed with your question.

Speaker #14: Yeah. Hi. thanks for the question. being cognizant of the upcoming forum, I'll try not to get too, too long-term focused. but, maybe we could talk a little bit about the, the card and what that sort of pertains to the longer-term, you know, banking, idea.

Speaker #7: That we would perhaps wonder if they're worth allocating from other parts. And so you can expect it to get more features sooner, more you know, maybe even more growth sooner, although that is not a not not a forecast or for we're looking at statements.

Speaker #14: So there's allocation put in this past quarter. you know, reflecting that, I expect a lot more of this next week. are there any sort of, point you can kind of hint at, as far as the focus around things like, you know, sort of pay now, you know, direct deposit, the dynamic to contemplate, as, as you guys proceed on the path?

Speaker #7: is is just sort of hitting its stride in every dimension including internal resource allocation. Got it. Thank you.

Andrew Bauch: Got it. Thank you.

Operator: Our next question comes from Matthew O'Neill with Bank of America. Please proceed with your question.

Speaker #1: Matt O'Neill with Bank of America. Please proceed with your question.

Speaker #14: Yeah. Hi. thanks for the question. being cognizant of the upcoming forum, I'll try not to get too too long-term focused. but maybe we can talk a little bit about the the card and what that sort of portends to the longer-term you know, banking idea.

Matthew O'Neill: Yeah, hi. Thanks for the question. Being cognizant of the upcoming Affirm Investor Forum, I'll try not to get too long-term focused. Maybe we could talk a little bit about the Affirm Card and what that sort of portends to the longer term, you know, banking idea. Obviously, there's application put in this past quarter. You know, respecting that I expect a lot more of this next week, are there any sort of points you can kind of hint at as far as the focus around things like, you know, sort of pay now, you know, direct deposit, the dynamics to contemplate as you guys proceed down that path?

Speaker #4: it's definitely worth separating the bank application in the product roadmap. The move in blue for time horizon. We are excited to continue the conversation with our regulatory friends and it may take a little time, it may take a long time.

Speaker #4: We, we don't know, and that's part of the process. and I really have nothing to, to share on that front at the moment. On the feature set, of, where the product roadmap's headed, we'll cover some of that next week.

Speaker #14: Obviously, there's application put in this past quarter. you know, w-respecting that, I expect a lot more of this next week. are there any sort of points you can kind of hint at as far as the focus around things like you know, sort of pay now, you know, direct deposit, the the dynamics to contemplate as as you guys proceed down that path?

Speaker #4: So I definitely want to take what y'all's talking points away from him. but we definitely have aspirations in a variety of consumer financial services.

Speaker #4: I mean, for the longest time, we said we see ourselves our mission is pretty clear. We're kind of the honest financial products and improve lives.

Max Levchin: It's definitely worth separating the bank application and the product roadmap. Like, they move on completely different time horizons. We are excited to continue the conversation with our regulatory friends, and it may take a little time, it may take a long time. We don't know, and that's part of the process. We certainly have nothing to share on that front at the moment. On the feature set of where the product roadmap is headed, we'll cover some of that next week, so I definitely don't wanna take Vishal's talking points away from him. We definitely have aspirations in a variety of consumer financial services. For the longest time, we said we see ourselves. Our mission states it pretty clearly. We're trying to build honest financial products to improve lives.

Speaker #4: We're not, you know, trying to build short-term 100-point sales to improve lives. And so there's plenty of opportunity, we think, to right the wrongs of some of the poorly product in the industry and also just in our own and, and, and do interesting things there.

Speaker #7: it's definitely worth separating the bank application and the product roadmap. Like, they move in completely different time horizons. We we are excited to continue the conversation with our regulatory friends and it may take a little time.

Speaker #4: So I'm getting a little bit of a retaliator here, but with aspirations in just about everything that you can possibly imagine in consumer financial services, more to come.

Speaker #7: It may take a long time. We we don't know. And that's part of the process. and and certainly have nothing to to share on that front at the moment.

Speaker #4: I'm also cognizant that sometimes we announce things and take three years to get them to the point where, they're good enough to launch. And so, I'm, I'm, I'm extra cautious not to say, "Okay.

Speaker #7: On the feature sets of where the product roadmap is headed, we'll cover some of that next week. So I I definitely don't want to take the shell's talking points away from him.

Speaker #4: Here's something we're going to do." And we'll definitely do it, but it may take a year or two.

Speaker #14: Thanks. I appreciate that. And the delineation between the regulatory process and the and the business build-out out will affect it.

Speaker #7: but we definitely have aspirations in a variety of consumer financial services. I mean, for the longest time, we said w-we see ourselves our our mission states it pretty clearly.

Speaker #3: Our next question comes from Darren Peller with Wolf Research. Please proceed with your question.

Speaker #7: We're trying to build honest financial products to improve lives. We're not you know, trying to build short-term loans at the point of sale to improve lives.

Max Levchin: We're not, you know, trying to build short-term loans at the point of sale to improve lives. There, there's plenty of opportunity, we think, to right the wrongs of some of the poorly made products in this industry and also just invent our own and do interesting things there. I'm giving a little bit of a word salad here. We have aspirations in just about everything that you can possibly imagine in consumer financial services. More to come. I'm also cognizant that sometimes we announce things and take 3 years to get them to the point where they're good enough to launch. I'm extra cautious not to say, Oh, yeah, here's something we're gonna do, and we'll definitely do it, but it may take us 1 year or 2.

Speaker #15: Hey, guys. Thanks. Can we just touch base again on the strategy and the side from what in the sustainability? Number one, just making sure there was nothing unusual or unsustainable about quarter.

Speaker #7: And so there there's plenty of opportunity we think to right the wrongs of some of the poorly made products in this industry and also just invent our owns a-and and and do interesting things there.

Speaker #15: But and which I'm sure you'll say probably not. I, I, I I guess I'm trying to figure out what's to stop this to this, this type of growth rate from being sustainable.

Speaker #7: So I'm giving you a little bit of a word salad here. But we have aspirations in just about everything that you can possibly imagine in consumer financial services.

Speaker #15: from your perspective, and then more importantly, I mean, and on that note, we've heard a lot from competitors about trying to do more in this space, but it seems a very little impact on your growth cycle.

Speaker #7: more to come I'm also cognizant that sometimes we announce things and take three years to get them to the point where they're good enough to launch.

Speaker #15: So I mean, anything you're seeing from competitors that's changed worth sharing over the past, you know, quarter or two would be great. Thanks, guys.

Speaker #7: And so I'm I'm I'm extra cautious not to say, "Oh yeah, here's something we're going to do." And we'll definitely do it. But it may take us a year or two.

Speaker #15: Nice job.

Speaker #16: Thank you. I'll start, I suspect, Michael, who's doing us a victory dance right next to me. I will have something to add. but you're totally right.

Speaker #14: Thanks. I appreciate that. And the delineation between the regulatory process and the and the business build-out. I'll I'll hop back in.

Matthew O'Neill: Thanks. I appreciate that and the delineation between the regulatory process and the business build-out. I'll hop back in.

Speaker #16: We don't see a reason and again, I don't have to front-run our promises and, and, and start telling next week. But no, there's nothing unnatural about this one.

Speaker #7: Okay.

Speaker #1: And our next question comes from Darren Peller with Wolf Research. Please proceed with your question.

Operator: Our next question comes from Darrin Peller with Wolfe Research. Please proceed with your question.

Speaker #16: we move up and down with the economy. But we are you know, we've, we've hit a product market fit quite some time ago. But, we're still tiny, relative to the, the massive payment volume in the US alone.

Speaker #15: Hey guys. Thanks. Can we just touch base again on the strength of the GMV side for a moment and the sustainability? Number one, is just making sure there was nothing unusual or unsustainable about the quarter.

Darrin Peller: Hey, guys. Thanks. Could we just touch base again on the strength of the GMV side for a moment and the sustainability? Number 1 is just making sure there was nothing unusual or unsustainable about the quarter. Which I'm sure you'll say probably not. I guess I'm trying to figure out what's to stop this type of growth rate from being sustainable from your perspective. More importantly, I mean, on that note, we've heard a lot from competitors about trying to do more in this space, but it seems to have very little impact on your growth potential. I mean, anything you're seeing from the competitive landscape that's changed worth sharing over the past, you know, quarter or 2 would be great. Thanks, guys. Nice job.

Speaker #16: E-commerce, we're really, really small. So taking share, it's not that hard yet. in terms of competitive and I really will let my colleagues speak.

Speaker #15: But and which I'm sure you're you'll say probably not. I just I I guess I'm trying to figure out what's to stop this t this is this type of growth rate from being sustainable from your perspective.

Speaker #15: and then more importantly, I mean, and on that note, we ha we've heard a lot from competitors about trying to do more in this space.

Speaker #16: it's hard to double one of our long-tenured executives here has this line: they're never retrieving, retreating. They're just reloading. So I, you know, it's, it's, it's a fantastic space in PL overall.

Speaker #15: But it seems to have very little impact on your growth potential. So I mean, anything you're seeing from a competitive landscape that's changed worth sharing over the past you know, quarter or two would be great.

Speaker #16: It's just a very compelling product. We don't have a monopoly in the idea. And so it's always going to be a competitive space. There are no monopolies in payments, to begin with.

Speaker #15: Thanks, guys. Nice job.

Speaker #7: Thank you. I'll start, I suspect, Michael who is doing a small victory dance right next to me. I will have something to add. but you're you're totally right.

Max Levchin: Thank you. I'll start. I suspect Michael, who is doing a small victory dance right next to me, will have something to add. You're totally right. We don't see a reason, and again, I don't wanna front run our promises and storytelling next week. No, there's nothing unnatural about this one. We move up and down with the economy, we are, you know, we've hit a product market fit quite some time ago. We're still tiny relative to the massive payment volume in the US alone. On e-commerce alone, we're really small. Taking share, it's not that hard yet. In terms of competitive, and I really will let my colleagues speak, it's hard to tell.

Speaker #16: So it's just not a thing we can expect to eventually own entirely to ourselves. We do, in our, our mind, a very biased view of the world.

Speaker #7: W-we don't see a reason and again, I don't want to front-run our promises and and and storytelling next week. But no, there's nothing unnatural about this one.

Speaker #16: Are the best at it. We do have some really great economies of scale. Account markets are now very familiar with our product. They understand exactly what we manufacture.

Speaker #16: They understand we are entirely non-compromising in our view of what is, is fit to sell into forward flow or, or securitizations. And so we have a lot of trust with our counterparties.

Speaker #7: we move up and down with the economy. But we are you know, we've we've we've hit a product market fit quite some time ago.

Speaker #7: But there we're still tiny relative to the the massive payment volume in the US alone on e-commerce alone. We're we're really really small. So taking share it's not that hard yet.

Speaker #16: And we, we tend to, take that very seriously. on the consumer side, you know, we've, we're not really heavy advertisers, certainly not heavy brand advertisers.

Speaker #16: And yet we do have a brand just ran a bunch of studies that show that we're really well recognized. People trust us. They understand after 15 years that when we say no late fee, we mean it.

Speaker #7: in terms of competitive and I really will let my my colleagues speak. it's hard to tell. I one of our long-tenured executives here has this line, "They're never retrieving retreating.

Speaker #16: Never dependent. Don't have a plan to ever charge a penny late fee. So that's been slowly but surely building up in favor. and then just in the pure competitive front, I think the, you know, speaking of maybe most important and, least understood advantage that we have, we have been at it for a very long time.

Max Levchin: One of our long-tenured executives here has this line: "They're never retreating, they're just reloading." You know, it's a fantastic space. The BNPL overall is just a very compelling product. We don't have a monopoly on the idea, it's always gonna be a competitive space. There are really no monopolies in payments to begin with, it's just not a thing we can expect to eventually own entirely to ourselves. We do, in our, or my anyway, very biased view of the world, are the best at it. We do have some really great economies of scale. Capital markets are now very familiar with our product. They understand exactly what we manufacture. They understand that we are entirely non-compromising in our view of what is and isn't fit to sell into forward flow or securitizations.

Speaker #7: They're just reloading." So I c you know, it it's it's a fantastic space, the NPL overall. It's just a very compelling product. We don't have a monopoly on the idea.

Speaker #16: We have built some very, very sophisticated underwriting capabilities. We'll definitely talk a lot about that next week. So I'm, I'm going to bite my tongue right there.

Speaker #7: And so it's always going to be a competitive space. There are really no monopolies in payments to begin with. So it's just not not a thing we can expect to eventually own entirely to ourselves.

Speaker #16: But we have some very, very cool stuff that we've done. Just not just recently, but over the years in underwriting. And a great advantage maybe the totality of our competitors that have raised their hand and said, "Sure, underwriting's that hard.

Speaker #7: We do in our our my anyway, very biased view of the world are the best at it. We do have some really great economies of scale.

Speaker #16: We can do it." One by one found out that it is. It is actually very, very difficult. And by showing our results, we may have fooled the world by, you know, printing the result quarter after quarter after quarter, and we get a yield that, you know, gosh, why don't you guys already admit that, it's always going to be a 4%?

Speaker #7: Capital markets are now very familiar with our product. They understand exactly what we manufacture. They understand that we are entirely non-compromising in our view of what is and isn't fit to sell into forward flow or or securitizations.

Speaker #16: It is a difficult balance to strike to print these unit economics day in and day out. And all of that, a lot of that comes from our AI team and the research that they do.

Speaker #7: And so we have a lot of trust with our counterparties. And we we tend to take that very seriously. on the consumer side, you know, we've we're not really heavy advertisers.

Max Levchin: We have a lot of trust with our counterparties, and we tend to take that very seriously. On a consumer side, you know, we're not really heavy advertisers, certainly not heavy brand advertisers, and yet we do have a brand. We just ran a bunch of studies that show that we're really well-recognized. People trust us. They understand after 15 years that when we say no late fees, we mean it. Never charged us a penny. Don't have a plan to ever charge a penny of late fees. That's been slowly but surely building up in our favor. Just in a pure sort of competitive front, I think the, you know, speaking of maybe the most important and least understood advantage that we have, we have been at it for a very long time.

Speaker #16: And it's hard work. And so I think we make it very easy to believe that just isn't that hard. And it really is. And the longer this show goes, the more it becomes obvious that we are pretty good at math and are very serious about it.

Speaker #7: Certainly not heavy brand advertisers. And yet we do have a brand. We just ran a bunch of studies that show that we're really well recognized.

Speaker #7: People trust us. They understand after 15 years that when we say no late fees, we mean it. Never charge the penny. Don't have a plan to ever charge a penny of late fees.

Speaker #16: And the rest of the competitors are not.

Speaker #14: And, and then, Darren, just to your question on the growth rate, obviously, we're really happy with the growth rate that we posted in Q3.

Speaker #7: So that's been slowly but surely building up in our favor. and then just in a pure sort of competitive front, I think the you know, spe-speaking of maybe the most important and least understood advantage that we have, we have been at it for a very long time.

Speaker #14: And we were incrementally more positive on the Q4 growth rate in the updated guide. I will just remind everyone that we did sunset a top three merchant in Q1 of this year.

Speaker #14: So we are comping against, you know, there is a difficult comp, in the prior year period. And that comp did step up a little bit from Q3 to Q4.

Speaker #7: We have built some very very sophisticated underwriting capabilities. We'll definitely talk a lot about that next week. So I'm I'm going to bite my tongue right there.

Max Levchin: We have built some very, very sophisticated underwriting capabilities. We'll definitely talk a lot about that next week, so I'm gonna bite my tongue right there. We have some very, very cool stuff that we've done, not just recently, but over the years in underwriting. A great percentage, maybe the totality of our competitors that have raised their hand and said, Sure, underwriting is not that hard, we can do it, one by one found out that it is. It is actually very, very difficult.

Speaker #7: But we have some very very cool stuff that we've done. Oh, just not just recently but over the years in underwriting. percentage maybe the totality of our competitors that have raised their hand and said, "Sure.

Speaker #14: So it's a little bit more of a headwind to growth. we're getting sort of a few points of growth in terms of headwind. And, and as we get into fiscal 27, you know, the comp's getting a lot easier for us.

Speaker #7: Underwriting's not that hard. We can do it." One by one found out that it is. It is actually very very difficult. And by showing our results, we may have fooled the world by you know, just print a good result quarter after quarter after quarter.

Speaker #14: It's more of a same, same-store comp for us. So we do we don't think that the Q4 growth rate will necessarily be a ceiling, as we look ahead into fiscal 27.

Max Levchin: By showing our results, we may have fooled the world by, you know, just print a good result quarter after quarter after quarter, and we get yelled at, you know, Gosh, why don't you guys already admit that, it's always gonna be over 4%? It is a difficult balance to strike to print these unit economics day in and day out. All of that or a lot of that comes from our AI team and the research that they do, and it's hard work. I think we make it very easy to believe that just isn't that hard, and it really is. The longer the show goes, the more it becomes obvious that we are pretty good at math and are very serious about it, and the rest of the competitors are not.

Speaker #14: Okay. Very helpful, guys. Thank you.

Speaker #7: And we get yelled at, you know, "Gosh. Why don't you guys already admit that it's always going to be over 4%?" It is a difficult balance to strike to print these unit economics day in and day out.

Speaker #3: Our next question comes from Connor Allen with JPMorgan. Please proceed with your question.

Speaker #17: Hi. Thanks for taking my question. I wanted to ask about transactions per active that's been growing above 20% for quite a while. And I was curious, maybe this quarter or somewhat recently, you could just kind of decompose that a little bit for us.

Speaker #7: And all of that or a lot of that comes from our AI team and the research that they do. And it's hard work. And so I think we make it very easy to believe that just isn't that hard.

Speaker #17: Maybe it's a bit duplicative of some of the other comments about just broader engagement. But I, I don't know. Anything you could share around cohorts and their behaviors around this engagement or how broad versus targeted the improving engagement is, maybe just to double-click, deeper dive on the engagement side.

Speaker #7: And it really is. And the longer this show goes, the more it becomes obvious that we are pretty good at math and are very serious about it.

Speaker #7: And the rest of the competitors are not. And and then Darren, just to your question on the growth rate, obviously we're really happy with the growth rate that we posted in Q3.

Rob O'Hare: Darrin, just to your question on the growth rate, obviously, we're really happy with the growth rate that we posted in Q3, and we're incrementally more positive on the Q4 growth rate in the updated guide. I will just remind everyone that we did sunset a top 3 merchant in Q1 of this year, so we are comping against, you know, there is a difficult comp in the prior year period, and that comp did step up a little bit from Q3 to Q4. It's a little bit more of a headwind to growth. We're talking sort of a few points of growth in terms of headwind. As we get into fiscal 2027, you know, the comps get a lot easier for us. It's more of a same store comp for us.

Speaker #17: Next.

Speaker #18: all of the above. It's, it's really good. there's definitely a few good lines on that one next week. So I, I want to steal that thunder.

Speaker #7: And we're incrementally more positive on the Q4 growth rate in the updated guide. I will just remind everyone that we did sunset a top three merchant in Q1 of this year.

Speaker #18: But, this is actually a really, really good example of network effect. So I will I'll give you like a super brief preview. So even if we did absolutely nothing to improve product usability, and just converted more and more consumers to cardholders, you would see an increase of transactions per user with absolutely no effort on our part beyond that.

Speaker #7: So we are comping against you know, there is a difficult comp in the prior year period. And that comp did step up a little bit from Q3 to Q4.

Speaker #7: So it's a little bit more of a headwind to growth. we're talking sort of a few points of growth in terms of headwind. And and as we get into fiscal 27, you know, the comps get a lot easier for us.

Speaker #18: But we don't just do that. We also sign new merchants, which means that we are visible with our logo at the very least at checkout, but also in other forms of merchant communications, including but not limited to their own advertising.

Speaker #7: It's more of a same same store comp for us. So we do we don't think that the Q4 growth rate will necessarily be a ceiling as we look ahead into fiscal 27.

Rob O'Hare: We don't think that the Q4 growth rate will necessarily be a ceiling, as we look ahead into fiscal 2027.

Speaker #18: So that creates an, you know, another push towards the flywheel where more consumers are aware of us, more consumers know that we are, in fact, real, that our promise of no late fees is true.

Speaker #7: Okay. Very helpful, guys. Thank you.

Darrin Peller: Okay. Very helpful, guys. Thank you.

Speaker #18: Our showing up in more and more places, that, that pushes consumer flywheel along, more consumers sign more, more consumer trust is available. Consumers get to their second or third loan quicker just because of more checkout counters available, which makes them eligible for the card, which we, of course, let them know as soon as they qualify, which drives the flywheel of cards.

Speaker #1: Our next question comes from Connor Allen with JP Morgan. Please proceed with your question.

Operator: Our next question comes from Connor Allen with JPMorgan. Please proceed with your question.

Speaker #6: Hi. Thanks for taking my question. I wanted to ask about transactions per active. It's been growing above 20% for quite a while. And I was curious maybe this quarter or somewhat recently you could just kind of decompose that a little bit for us.

Connor Allen: Hi. Thanks for taking my question. I wanted to ask about transactions per active. It's been growing above 20% for quite a while. I was curious, maybe this quarter or somewhat recently, you could just kind of decompose that a little bit for us. Maybe it's a bit duplicative of some of your other comments about just broader engagement, but I don't know, anything you could share around cohorts and their behaviors around this engagement or how broad versus targeted the improving engagement is. Maybe just a double-click, deeper dive on the engagement side. Thanks.

Speaker #6: And maybe it's a bit duplicative of some of your other comments about just broader engagement. But I I don't know. Anything you could share around cohorts and their behaviors around this engagement or how engagement is?

Speaker #18: And so the acceleration across the usage AKA transactions per user in the business is a function of both the merchant side of the network increasing through sales and the consumer side of the network increasing through sign-ups because of the increased merchant reach, but also sign-ups from occasional use to the card, which is much more frequent use.

Speaker #6: I don't know. Maybe just the double clip deeper dive on the engagement side. Thanks.

Max Levchin: All of the above. It's really good. There's definitely a few good lines on that one next week, so I won't steal that thunder. This is actually a really, really good example of network effects. I'll give you, like, a super brief preview. Even if we did absolutely nothing to improve product usability and just converted more and more consumers to cardholders, you would see increase of transactions per user with absolutely no effort on our part beyond that. We don't just do that. We also sign new merchants, which means that we are visible with our logo, at the very least at checkout, but also in other forms of merchant communications, including but not limited to their own advertising.

Speaker #18: So those are just the two vectors. Add investor forum will, will really break it down into all the various drivers.

Speaker #7: all of the above. It's it's really good. there's definitely a few good lines on that one next week. So I I won't steal that thunder.

Speaker #14: Thanks.

Speaker #7: But this is actually a really really good example of network effect. So I will I'll give you like a super brief preview. So even if we did absolutely nothing to improve product usability, and just converted more and more consumers to cardholders, you would see increase of transactions per user with absolutely no effort on our part beyond that.

Speaker #3: Our next question comes from James Bossette with Morgan Stanley. Please proceed with your question.

Speaker #19: Hey, good afternoon, everybody. just wanted to ask on this goes back a little bit to our LTC and Max. I appreciate it. It's hard to it may seem easy to stay above where your targets are, but, it's really hard.

Speaker #19: But along those lines, just trying to think about how the 0% APR mixed ceiling can affect that and just how you're thinking about how high that can go.

Speaker #7: But we don't just do that. We also sign new merchants which means that we are visible with our logo at the very least at checkout but also in other forms of merchant communications.

Speaker #19: You, you call out that that typically has lower RLTC margin. And along those lines, I guess I wonder if, as merchants become more informed and, and see the benefits of, of working with the firm for 0%, if you can actually close that 0%, RLTC margin gap with the rest of the business.

Speaker #7: Including but not limited to their own advertising. So that creates an you know, another push towards the flywheel where more consumers are aware of us.

Max Levchin: That creates an, you know, another push towards the flywheel, where more consumers are aware of us, more consumers know that we are in fact real, that our promises of no late fees, et cetera, are shown up in more and more places. That pushes consumer flywheel along. More consumers sign up, more consumer trust is available. Consumers get to their second or third loan quicker just because of more checkout counters available, which makes them eligible for the card, which we of course, let them know as soon as they qualify, which drives the flywheel of cards.

Speaker #7: More consumers know that we are in fact real. That our promises of no late fees, etc., are shown up in in more and more places.

Speaker #19: Thanks.

Speaker #14: It's a great question, actually. in reverse order, it's I think it's another example of the network effects, playing out. So to answer directly, I think yes.

Speaker #7: That that pushes consumer flywheel along. More consumers sign up. More more consumer trust is available. Consumers get to their second or third loan quicker.

Speaker #7: Just because of more checkout counters available. Which makes them eligible for the card which we of course let them know as soon as they qualify.

Speaker #14: I think over time, more and more merchants and part of why we stage these big nothing events and we'll, we'll do more is because they act as teaching aids, if you will, sort of the, the white paper right themselves.

Speaker #7: Which drives the flywheel of cards. And so the acceleration across the usage aka transactions per user in the business is a function of both the merchant side of the network increasing through sales and the consumer side of the network increasing through sign-ups because of the increased merchant reach.

Max Levchin: The acceleration across the usage, AKA transactions per user in the business, is a function of both the merchant side of the network increasing through sales and the consumer side of the network increasing through signups because of the increased merchant reach, but also signups from the occasional use to the card, which is much more frequent use. Those are just the two vectors. At Investor Forum, we'll really break it down into all the various drivers.

Speaker #14: If you fund these 0% deals, you will sell more, and you'll sell more predictably, and there will not be a pull forward. These are actual sales events that work.

Speaker #14: And so all of that adds up to a product that we think is increasing in value in part because the size of our consumer audience is increasing as well, and we're able to sort of shine a concentrated spotlight on a merchant that wants to fund these deals, etc.

Speaker #7: But also sign-ups from the occasional use to the card which is much more frequent use. So those are just the two vectors. Add investor forum will will really break it down into all the various drivers.

Speaker #7: Thanks, Matt.

Connor Allen: Thanks, Max.

Speaker #14: And we have a lot of really interesting stuff in works for that. I've been monopolizing the airwaves, so let Rob or Michael answer the, the dynamic breakdown.

Speaker #1: Our next question comes from James Faucette with Morgan Stanley. Please proceed with your question.

Operator: Your next question comes from James Faucette with Morgan Stanley. Please proceed with your question.

Speaker #14: But, you know, it, it does remain true that 0%s are slightly lighter on the RLTC basis. We are not fussed by that.

Speaker #8: Hey. Good afternoon, everybody. just wanted to ask on this goes back a little bit to RLTC and Max. I appreciate it. It's hard to it may seem easy to stay above where your targets are.

James Faucette: Hey, good afternoon, everybody. Just wanted to ask, this goes back a little bit to RLTC, and Max, I appreciate it. It may seem easy to stay above where your targets are, but it's really hard. Along those lines, just trying to think about how the 0% APR mix ceiling can affect that and just how you're thinking about how high that can go. You call out that typically has lower RLTC margin. Along those lines, I guess I wonder if, as merchants become more informed and see the benefits of working with Affirm for 0%, if you can actually close that 0% RLTC margin gap with the rest of the business. Thanks.

Speaker #20: Yeah. No, I, I think we, we love all our loan products equally. there's a lot to like about our interest-bearing loans, but to your point, James, I mean, there are there is slightly less revenue content today.

Speaker #8: But it's really hard. But along those lines just trying to think about how the 0% APR mixed ceiling can affect that. And just how you're thinking about how high that can go.

Speaker #20: And I think as we look ahead as well within 0% program, but the good news is there's, there's less in terms of credit costs typically as well.

Speaker #8: I you you call out that that typically has lower RLTC margin. And along those lines I guess I wonder if as merchants become more informed and and see the benefits of of working with the firm for 0%.

Speaker #20: So we really like that trade, and we think it's a really good complement to the strong and, and profitable high-growth interest-bearing book that we have as well.

Speaker #20: And so yeah, I mean, again, we're, we're really here to drive conversion for merchants. And we think 0% should be an ingredient in every merchant financing program.

Speaker #8: If you can actually close that 0% RLTC margin gap with the rest of the business. Thanks.

Speaker #20: And, and as we look at portfolio today, our largest programs are all utilizing 0%, which we think is a really good sign. we're definitely leaning into it within the firm card as well on our own services.

Max Levchin: It's a great question, actually. In reverse order, I think it's another example of the network effects playing out. To answer it directly, I think yes. I think over time, more merchants, and part of why we stage these Big Nothing events, and we'll do more, is because they act as teaching aids, if you will. Sort of the white papers write themselves. If you fund these 0% deals, you will sell more, and you'll sell more predictably, and there will not be a pull forward. These are actual sales events that work. All of that adds up to a product that we think is increasing in value, in part because the size of our consumer audience is increasing as well, and we're able to sort of shine a concentrated spotlight onto a merchant that wants to fund these deals, etc.

Speaker #7: That's a great question actually. in reverse order it's I think it's another example of the network effects. Playing out. So to answer directly I think yes.

Speaker #20: So we're doing everything we can to get as much out there and to continue to, to push that product.

Speaker #3: Our next question comes from Dave Sharp with Citizens Capital Markets. Please keep with your question.

Speaker #7: I think over time more mer merchants and part of why we stage these big nothing events and we'll we'll do more is because they act as teaching aids if you will.

Speaker #21: Hey, good afternoon. This is Adam for David. I think congratulations on another great quarter. I wanted to dig in a little bit on the card side of stuff.

Speaker #7: Sort of the the the white papers write themselves. If you fund these 0% deals you will sell more and you'll sell more predictably. And there will not be a pull forward.

Speaker #21: sorry, I know you guys can hear me a little bit of an echo. but yeah, I wanted to kind of see what the profile of the average card user is, obviously, you know, I think there was a kind of a medium-term target of $10 billion of GMV and about 7.5 million active card users.

Speaker #7: Th+these are actual sales events that work. And so all of that adds up to a product that we think is increasing in value. In part because the size of our consumer audience is increasing as well.

Speaker #21: And, you know, for kind of approaching that level, at about 60% of the card user level. So yeah, kind of wondering if we can get an update on kind of what the profile is and kind of what the use cases are for those card customers.

Speaker #7: And we're able to sort of shine a concentrated spotlight onto a merchant that wants to fund these deals, etc. And we have a lot of really interesting stuff in works for that.

Max Levchin: We have a lot of really interesting stuff in the works for that. I've been monopolizing the airwaves, so I'll let Rob or Michael answer the economic breakdown. You know, it does remain true that 0%s are slightly lighter on the RLTC basis. We are not fussed by that.

Speaker #20: for general terms, it skews a little bit higher credit quality than the average affirmed consumer. By no other for no other reason than we make it that way.

Speaker #7: I've been monopolizing the airwaves. So I'll let Rob or Michael answer the the the economic breakdown. But you know, it it does remain true that 0%s are slightly lighter on the RLTC basis.

Speaker #20: We're still at the limit slightly more conservative as to who gets the card offers and, and approvals. it's really converging towards this just the average affirmed consumer.

Speaker #7: We are not fussed by that. Yeah. No. I I mean I think we we love all our loan products equally. there's a lot to like about our interest-bearing loans.

Rob O'Hare: Yeah, no, I mean, I think we love all our loan products equally. There's a lot to like about our interest-bearing loans. To your point, James, I mean, there is slightly less revenue content today, and I think as we look ahead as well within the 0% program. The good news is there's less in terms of credit costs typically as well. We really like that trade, and we think it's a really good complement to strong and profitable and high-growth interest-bearing book that we have as well. Yeah, I mean, again, we're really here to drive conversion for merchants, and we think 0% should be an ingredient in every merchant financing program.

Speaker #20: But right now, I think the, the credit quality is slightly better on the card or somewhat better on the card. the usage patterns are broader, more frequent.

Speaker #7: But to your point, James, I mean there there is slightly less revenue content today. And I think as we look ahead as well within the 0% program.

Speaker #20: Obviously, than sort of the more casual affirmed consumer that uses us four or five times a year, six times a year now. card customers start out, I think it's like a 40% higher and goes up from there.

Speaker #7: But the good news is there's there's less in terms of credit costs typically as well. So we really like that trade. And we think it's a really good complement to the strong and and profitable and high-growth interest-bearing book that we have as well.

Speaker #20: the maybe most useful thing is the, the category usage is more even. Like typically, it takes a little while for an affirmed consumer to realize that if they found us or got exposed to us and category X, it takes them some number of months to discover us rediscover us again at another retailer and say, "Oh, wait a second.

Speaker #7: And so yeah. I mean again w+we're we're really here to drive conversion for merchants. And we think 0% should be an ingredient in every merchant's financing program.

Speaker #7: And and as we look at the portfolio today our largest programs are all utilizing 0% which we think is a really good sign. we're definitely leaning into it within the a firm card as well on our own surfaces.

Rob O'Hare: As we look at the portfolio today, our largest programs are all utilizing 0%, which we think is a really good sign. We're definitely leaning into it within the Affirm Card as well on our own surfaces. We're doing everything we can to get as much out there and to continue to push that product.

Speaker #20: It also works in fashion, not just travel." When you get the card, you have muscle memory for this is a general-purpose tool. It works everywhere.

Speaker #7: So we're doing everything we can to get as much out there and to continue to to push that product.

Speaker #20: And so the, the category dispersion begins a little bit sooner, and, just stays fairly wide. It's a little skews more considered purchases than kind of your typical low AOV spend.

Speaker #1: Our next question comes from David Sharf with Citizens Capital Market. Please proceed with your question.

Operator: Our next question comes from David Scharf with Citizens Capital Markets. Please proceed with your question.

Speaker #9: Hey. Good afternoon. This is Zach. I'm for David. I think congratulations on another qu great quarter. I wanted to dig in a little bit on the card side of stuff.

David Scharf: Hey, good afternoon. This is Zach on for David. Congratulations on another great quarter. I wanted to dig in a little bit on the card side of stuff. Sorry, I don't know if you guys can hear me. There's a little bit of an echo.

Zach Oster: Hey, good afternoon. This is Zach on for David. Congratulations on another great quarter. I wanted to dig in a little bit on the card side of stuff. Sorry, I don't know if you guys can hear me. There's a little bit of an echo.

Speaker #20: which is fine with us. We, you know, we're that, that is a much easier value point to drive to merchants. They understand that they would have sold a $700 thing or a $500 thing unless a firm was involved for the typical consumer given their preferences and the card highlights that, that much better.

Speaker #9: sorry. I don't know if you guys can hear me. It's a little bit of an echo. but yeah. I wanted to kind of see what the profile of the average card user is?

[Analyst] (Citizens JMP Securities): Yeah, wanted to kind of see what the profile of the average Card user is. Obviously, you know, I think there was a kind of a medium-term target of $10 billion of GMV and about 7.5 million active Card users. You know, we're kind of approaching that level at about 60% of the Card user level. Yeah, kind of wondering if we can get an update on kind of what the profile is and kind of what the use cases are for those Card customers.

Zach Oster: Yeah, wanted to kind of see what the profile of the average Card user is. Obviously, you know, I think there was a kind of a medium-term target of $10 billion of GMV and about 7.5 million active Card users. You know, we're kind of approaching that level at about 60% of the Card user level. Yeah, kind of wondering if we can get an update on kind of what the profile is and kind of what the use cases are for those Card customers.

Speaker #9: obviously, you know, I think there was a kind of a medium-term target of $10 billion of GMD and about 7.5 million active card users.

Speaker #20: And so sort of a quick at, at the investor forum, we'll, we'll say a lot about the card as well. We have some nice, nice little surprises there.

Speaker #9: And, you know, we're kind of approaching that level. At about 60% of the card user level. So yeah. Kind of wondering if we can get an update on kind of what the profile is and kind of what customers.

Speaker #21: Got it. Thank you very much.

Max Levchin: Super general terms, it skews a little bit higher credit quality than the average Affirm consumer for no other reason than we make it that way. We're still, at the limit, slightly more conservative as to who gets the card offers and approvals. It's really converging towards this is just the average Affirm consumer. Right now, I think the credit quality is slightly better on the card or somewhat better on the card. The usage patterns are broader, more frequent, obviously, than sort of the more casual Affirm consumer that uses us four or five times a year, six times a year now. Card customers start out, I think it's like a 40% higher and goes up from there. The maybe most useful thing is the category usage is more even.

Speaker #7: super general terms. It skews a little bit higher credit quality than the average affirmed consumer. By no other for no other reason than we make it that way.

Speaker #3: Our next question comes from Jacob Haggerty with Baird. Please proceed with your question.

Speaker #22: Hey, guys. Thanks. So I was just looking at the, loan loss on purchase commitment. And it looks like that came down as a percentage of like lower than it's been in the last, few quarters.

Speaker #7: We're still at the limit slightly more conservative as to who gets the card offers and and approvals. it's really converging towards this is just the average affirmed consumer.

Speaker #22: Is there anything to that why you're getting maybe better economics from your purchasing partners or something along those lines?

Speaker #7: But slightly better on the card or somewhat better on the card. the usage patterns are broader more frequent obviously than sort of the more casual affirmed consumer that uses us four or five times a year six times a year now.

Speaker #20: Yeah. That, that's really driven by the 0% volume in the business. It's, it's not necessarily due to the economics with a single vendor or, originating bank or anything in that ecosystem.

Speaker #20: it's just a function of the, the sort of discount rate that we apply to 0% loans. so yeah, no, no, no economic changes there.

Speaker #7: card customers start out I think it's like a 40% higher and goes up from there. the maybe most useful thing is the the category usage is more even.

Speaker #20: It's really a, a function of mix in term length.

Speaker #21: Gotcha. Thank you.

Speaker #3: Our next question comes from Kyle Peterson with Needham & Company. Please proceed with your question.

Speaker #7: Like typically it takes a little while for an affirmed consumer to realize that if they found us or got exposed to us and category X it takes them some number of months to discover us rediscover us again at another retailer and say, "Oh.

Max Levchin: Like, typically it takes a little while for an Affirm consumer to realize that if they found us or got exposed to us in category X, it takes them some number of months to rediscover us again at another retailer and say, Oh, wait a second, it also works for fashion, not just travel. When you get the Affirm Card, you have a muscle memory for this is a general-purpose tool, it works everywhere. So the category dispersion begins a little bit sooner and just stays fairly wide. It still skews more considered purchases than kind of your typical low AOV spend, which is fine with us. We're, you know, that is a much easier value point to drive to merchants.

Speaker #23: great. Good afternoon and, and thank you for taking, my question. I wanted to go back on funding. specifically on forward flow side, see if you guys could give us, you know, whether it's a, a rank order kind of relative sizing, of some of these, forward flow buyers kind of as to what they look like under the hood.

Speaker #7: Wait a second. It also works for fashion not just travel." When you get the card you have a muscle memory for this is a general-purpose tool.

Speaker #7: It works everywhere. And so the the category dispersion begins a little bit sooner. And just stays fairly wide. It still skews more considered purchases than kind of your typical low AOV spend.

Speaker #23: you know, understand everyone can be a lot different here, but I think some of the stress seems to be worse than some of these kind of semi-liquid retail vehicles versus, you know, kind of larger, more permanent firms forms of capital.

Speaker #23: So I guess, like, if you could just give us any relative sizing or, or color on what the forward flow channel looks like, that would be extremely helpful.

Speaker #7: which is fine with us. We, you know, we're that that is a much easier value point to drive to merchants. They understand that. They wouldn't have sold a $700 thing or a $500 thing unless a firm was involved for this particular consumer given their preferences and the card highlights that that much better.

Max Levchin: They understand that they wouldn't have sold a $700 thing or a $500 thing unless Affirm was involved for this particular consumer, given their preferences, and the card highlights that much better. Sort of a quick sketch. I think at the investor forum, we'll say a lot about the card as well. We have some nice little surprises there.

Speaker #20: Yeah. Without, without getting too specific, we're, we're heavily, heavily, heavily weighted away from things that are, very liquid and, and subject to those kind of, that volatility that you're referring to.

Speaker #7: And so sort of a quick sketch. I think I think at at the investor forum we'll we'll say a lot about the card as well.

Speaker #20: You know, our largest, forward flow counterparties are Joint Venture with Xtree, we have large pension funds and large, insurance complexes. We obviously don't fit that description.

Speaker #7: We have some nice nice little surprises there.

Speaker #20: And, and even, among the funds who do participate in our program, they are, they, they tend to be again, overwhelmingly not of the, the kind that, I think people are talking about.

Speaker #9: Got it. Thank you very much.

[Analyst] (Citizens JMP Securities): Got it. Thank you very much.

Zach Oster: Got it. Thank you very much.

Speaker #1: Our next question comes from Jacob Haggerty with Baird. Please proceed with your question.

Operator: Our next question comes from Jacob Haggerty with Baird. Please proceed with your question.

Speaker #10: Hey guys. Thanks. So I was just looking at the loan loss on purchase commitment. And it looks like that came down as a percentage of like lower than it's been in the last few quarters.

Jacob Haggerty: Hey, guys. Thanks. I was just looking at the loan loss on purchase commitment, and it looks like that came down as a percentage of Like, lower than it's been in the last few quarters. Is there anything to that, why you're getting maybe better economics from your purchasing partners or something along those lines?

Speaker #20: And, and that's why we, we see such a strong, renewal and repeat rate while demand continues to be very high for the asset amongst whole loan buyers.

Speaker #20: you know, they, they really do like the ability for firms to generate consistent credit, outcomes that they can underwrite to and generate returns for their for their funds.

Speaker #10: Is there anything to that why you're getting maybe better economics from your purchasing partners or something along those lines?

Speaker #20: And, and, we, we like the capital efficiency of those partnerships. And so we, we grow together and have done a really good job of that over the past three years.

Speaker #7: Yeah. That that's really driven by the 0% volume in the business. It it's not necessarily due to the economics with a single vendor or originating bank or anything in that ecosystem.

Max Levchin: Yeah, that's really driven by the 0% volume in the business. It's not necessarily due to the economics with a single vendor or originating bank or anything in that ecosystem. It's just a function of the sort of discount rate that we apply to 0% loans. Yeah, no economic changes there. It's really a function of mix and term length.

Speaker #23: Great. Thank you very much.

Speaker #3: Our next question comes from Jamie Friedman with Susquehanna. Please proceed with your question.

Speaker #7: it's just a function of the the sort of discount rate that we apply to 0% loans. so yeah. No no no economic changes there.

Speaker #24: Hi. thanks for taking my question. I wanted to ask, about adaptive checkout. I don't mean to front-run the conversation next week, but if you might have any perspective on how that's evolving.

Speaker #7: It's really a a function of mix in term length.

Speaker #9: Gotcha. Thank you.

Jacob Haggerty: Gotcha. Thank you.

Speaker #24: It seems, you know, like a, a real opportunity to serve merchants and consumers alike. so any perspective on adaptive checkout, would be helpful. Thank you.

Speaker #1: Our next question comes from Kyle Peterson with Needham & Company. Please proceed with your question.

Operator: Our next question comes from Kyle Peterson with Needham & Company. Please proceed with your question.

Kyle Peterson: Great. Good afternoon, and thank you for taking my question. Wanted to go back on funding, specifically on the forward flow side, see if you guys could give us, you know, whether it's a rank order kind of relative sizing of some of these forward flow buyers, kind of as to what they look like under the hood. You know, I understand everyone could be a lot different here, but I think some of the stress seems to be worse in some of these kind of semi-liquid retail vehicles versus, you know, kind of larger, more permanent forms of capital. I guess, like, if you could just give us any relative sizing or color on what the forward flow channel looks like, that would be extremely helpful.

Speaker #11: great. Good afternoon and and thank you for taking my question. I wanted to go back on funding. specifically on the forward flow side. See if you guys could give us, you know, whether it's a a rank order kind of relative sizing.

Speaker #25: I see you really well. definitely don't mistake my lack of name checking it in this particular letter for any, any sort of backing away from the strategy.

Speaker #25: Quite the opposite. We are at this point, we're basically selling adapt and boost together as a single thing, one of the we have a tendency to, be overly literate literal, literal.

Speaker #11: Of some of these forward flow buyers kind of as to what they look like under the hood. you know, understand everyone could be a lot different here.

Speaker #11: But I think some of the stress seems to be worse in some of these kind of semi-re liquid retail vehicles verse, you know, kind of larger more permanent firms that ca forms of capital.

Speaker #11: So I guess like if you could just give us any relative sizing or or color on what the forward flow channel looks like that would be extremely helpful.

Speaker #25: which could be overly literal in our description of our products. And so we're, we're trying to learn how to, package and market better. And so very soon, you'll, you'll just hear strictly about a firm checkout, something like that.

Speaker #7: Yeah. Without without getting too specific we're we're heavily heavily heavily weighted away from things that are very liquid and and subject to those kind of the that volatility that you're referring to.

Max Levchin: Without getting too specific, we're heavily weighted away from things that are very liquid and subject to those kind of volatility that you're referring to. You know, our largest forward flow counterparties are joint venture with Sixth Street. We have large pension funds and large insurance complexes, which obviously don't fit that description. Even among the funds who do participate in our program, they tended to be, again, overwhelmingly not of the kind that I think people are talking about. That's why we see such a strong renewal and repeat rate while demand continues to be very high for the asset amongst whole loan buyers.

Speaker #25: but it's, it's doing really well. It's, becoming more and more understood by our merchant base. And that is what you want. I, I think hopefully very soon it'll just be the thing you turn on and, you know, you don't try to play with it of yourself.

Speaker #7: You know, our largest forward flow counterparties are Joint Venture with SixTree. We have large pension funds and large insurance complexes which obviously don't fit that description.

Speaker #25: Our AI will, will find the optimal setting in real time for every new internal consumer. So seeing well, I think we do have a bunch of content on it at the investor forum.

Speaker #7: And and even among the funds who do participate in our program they are they they tend to to be again overwhelmingly not of the the kind that I think people are talking about.

Speaker #25: So I'd rather not drop any stats on that here.

Speaker #24: Understood. Thanks, man.

Speaker #3: Our next question comes from John Hutch with Jefferies. Please proceed with your question.

Speaker #7: And and that's why we we see such a strong renewal and repeat rate while demand continues to be very high for the asset amongst whole loan buyers.

Speaker #26: Good afternoon and thanks for taking the question. a lot of questions have been asked and answered. But, you know, I'm wondering Max, like, what do you, you, you know, this is obviously competitive industry, not only with other buy now, pay later companies, but the general consumer credit spectrum.

Max Levchin: You know, they really do like the ability for Affirm to generate consistent credit outcomes that they can underwrite to and generate returns for their, for their funds. We, we like the capital efficiency of those partnerships, we grow together and have done a really good job of that over the past three years.

Speaker #7: you know, the they really do like the ability for firms to generate consistent credit outcomes that they can underwrite to and generate returns for their for their funds.

Speaker #7: And and we we like the capital efficiency of those partnerships. And so we we grow together and have done a really good job of that over the past three years.

Speaker #26: And clearly, you guys are taking share in a competitive maybe even increasingly competitive industry. And I'm wondering, you know, obviously size, scale, brand, all that stuff matters.

Speaker #11: Great. Thank you very much.

Kyle Peterson: Great. Thank you very much.

Speaker #26: That's stuff that's been around for a while for you guys. What do you think is is there anything new or what do you think is changing in terms of competitive positioning, you know, as the industry, even though it's not mature, but as it generally matures?

Speaker #1: Our next question comes from Jamie Friedman with Susquehanna. Please proceed with your question.

Operator: Our next question comes from James Friedman with Susquehanna. Please proceed with your question.

Speaker #12: Hi. thanks for taking my question. I wanted to ask about adaptive checkout. I don't mean to front run the conversation next week. But if you might have any perspective on how that's evolving.

James Friedman: Hi. Thanks for taking my question. I wanted to ask about Adaptive Checkout. I don't mean to front run the conversation next week, but if you might have any perspective on how that's evolving. You know, like a real opportunity to serve merchants and consumers alike. Any perspective on Adaptive Checkout would be helpful. Thank you.

Speaker #27: I'll, I will invite Michael and Rob to comment in a second because I'm going to scrape the bottom of my brain for, for some incrementally new.

Speaker #12: It seems you know, like a a real opportunity to serve merchants and consumers alike. so any perspective on adaptive checkout would be helpful. Thank you.

James Friedman: You know, like a real opportunity to serve merchants and consumers alike. Any perspective on Adaptive Checkout would be helpful. Thank you.

Speaker #27: But we're very focused internally, I guess. The, the reason I'm struggling to come up with something particularly clever is I can tell you a lot about what's changing here.

Speaker #27: It's really hard to see what the outside world is doing when you're that focused on internal effort. It's a little bit easier to do what we do, to be completely transparent.

Speaker #13: I do really well. definitely don't mistake my lack of name checking it in this particular letter for any any sort of backing away from the strategy.

Max Levchin: It's doing really well. Definitely don't mistake my lack of name-checking it in this particular letter for any sort of backing away from the strategy. Quite the opposite. At this point, we're basically selling Adapt and Boost together as a single thing. We have a tendency to be overly literal in our description of our products, and so we're trying to learn how to package and market better. Very soon, you'll just hear strictly about Affirm Checkout, something like that. It's doing really well. It's becoming more and more understood by our merchant base, and that is what you want.

Speaker #27: The consumer knows who we are. The one thing that is true, and we can see this when we do just consumer surveys as well as sort of more mechanical understanding of consumer preferences, there are people that have decided a firm is their jam and that's what they're going to use.

Speaker #13: Quite the opposite. We are at this point we're basically selling adapt and boost together as a single thing. O+one of the we have a tendency to be overly liter literate literal?

Speaker #27: And it's really compelling. We can tell consumers, "Hey, you should go and get yourself a firm card because brand X is not yet integrated with a firm directly, but it's okay.

Speaker #13: Literal. It's been a long time. which tends to be overly literal in our description of our products. And so we're we're we're trying to learn how to package and market better.

Speaker #13: And so very soon you'll you'll just hear strictly about a firm checkout. Something like that. but it's it's doing really well. It's becoming more and more understood by our merchant base.

Speaker #27: It's accessible." And at some point in the past, that felt like, you know, maybe it will, maybe they won't. We now have data that shows that they will.

Speaker #27: Consumers believe some percentage of our consumers believe that a firm is a general-purpose tool. It works anywhere. You just have to have a firm card or the firm virtual card on your app screen.

Speaker #13: And that is what you want. I I think hopefully very soon it'll just be the thing you turn on and you know, you don't try to play with an object yourself.

Max Levchin: I think hopefully very soon it'll just be the thing you turn on and, you know, you don't try to play with the knob yourself. Our AI will find the optimal setting in real time for every new incremental consumer. It's doing well. I think we do have a bunch of content on it at the Affirm Investor Forum, so I'd rather not drop any stats on that here.

Speaker #27: And more and more of them understand how it's done. So long as we treat them right and we handle our post-transactional relationship as well as we do in the transaction, they come back.

Speaker #13: Our AI will will find the optimal setting in real time for every new incremental consumer. So doing well. I think we do have a bunch of content on it at the investor forum.

Speaker #27: And that just makes repeats a little bit easier. You know, we continue to maintain 90-plus percent of our transactions come from returning users to a firm, which is great.

Speaker #13: So I'd rather not drop any stats on that here.

Speaker #27: It's a lot easier to get the second and third transaction than the first. So all of that, it's, it's a little bit easier to grow today than it was six months ago and 12 months ago and every passing quarter or year makes our growth actually feel a little bit easier.

Speaker #12: Understood. Thanks, man.

James Friedman: Understood. Thanks, Max.

Speaker #1: Our next question comes from John Hutch with Jefferies. Please proceed with your question.

Operator: Our next question comes from John Hecht with Jefferies. Please proceed with your question.

Speaker #14: Good afternoon and thanks for taking the question. a lot of questions have been asked and answered. But you know, I'm wondering Max like, what do you y+you know, this is obviously competitive industry.

John Hecht: Afternoon, thanks for taking the question. A lot of questions have been asked and answered, you know, I'm wondering, Max, like, you know, this is obviously a competitive industry, not only with other buy now, pay later companies, but the general consumer credit spectrum. Clearly, you guys are taking share in a competitive, maybe even increasingly competitive industry. I'm wondering, you know, obviously size, scale, brand, all that stuff matters. That's stuff that's been around for a while for you guys. What do you think is there anything new, or what do you think is changing in terms of competitive positioning, you know, as the industry, even though it's not mature, but as it generally matures?

Speaker #27: There's a great cycling expression. It doesn't get any easier. You just go faster. And we still are just as hard as we've ever done.

Speaker #14: not only with other buy now pay later companies but the general consumer credit spectrum. And clearly you guys are taking share in a competitive and maybe even increasingly competitive industry.

Speaker #27: But the results are escalating, if you will.

Speaker #26: I, I, this is Michael. I, I think for, for complicated business with a lot of moving parts, I, I think, I think about our, our position in the market a little it's actually quite simple.

Speaker #14: o+obviously size, scale, brand, all that stuff matters. that's stuff that's been around for a while for you guys. What do you think is is there anything new?

Speaker #26: This is what you get when you compound results like this. Over the course of many years without pivots, without changing your identity as to who you are, we show up to the capital market the same way we did when we first showed up.

Speaker #14: Or what do you think has changing in terms of competitive positioning you know, as the industry even though it's not mature but as it generally matures?

Speaker #26: We showed up to merchants the same way. Offering to drive better conversion, better outcomes. The promises we make to consumers, we kept over the years.

Max Levchin: I will invite Michael and Rob to comment in a second because I'm going to scrape the bottom of my brain for something incrementally new. We're very focused internally. I guess the reason I'm struggling to come up with something particularly clever is I can tell you a lot about what's changing here. It's really hard to see what the outside world is doing when you're that focused on internal efforts. It's a little bit easier to do what we do, to be completely transparent. The consumer knows who we are. The one thing that is true, and we can see this when we do just consumer surveys as well as sort of more mechanical understanding of consumer preferences, there are people that have decided Affirm is their jam, and that's what they're going to use. It's really compelling.

Speaker #26: And when you compound all that and stay really focused on doing the thing that matters, you end up building a pretty big lead, I think, in some of our some of the other players in the space have, have changed who they are, want to try to enter new spaces and become something that they're not.

Speaker #13: I'll I will invite Michael and Rob to comment in a second 'cause I'm gonna scrape the bottom of my brain for for for something incrementally new.

Speaker #13: But we're very focused internally I guess. The the reason I'm struggling to come up with something particularly clever is I can tell you a lot about what's changing here.

Speaker #26: And it shows with, with their footballs and, and doubling on results and ours is just the, the benefit of compounding the same awesome thing over and over and over again.

Speaker #13: It's really hard to see what the outside world is doing when you're that focused on internal effort. It's a little bit easier to do what we do to be completely transparent.

Speaker #27: That is very well said.

Speaker #28: All right, guys. Thank you for the perspective.

Speaker #13: The consumer knows who we are. The one thing that is true and we can see this when we do just consumer surveys as well as sort of more mechanical understanding of consumer preferences there are people that have decided a firm is their jam and that's what they're going to use.

Speaker #27: Thank you.

Speaker #3: Our next question comes from Jeff Cantwell with Seaport Research. Please proceed with your question.

Speaker #29: Okay. Thanks, guys. I wanted just to follow up on that earlier question. On the affirm card, you said it's a long list of things you've done.

Speaker #13: And it's really compelling. We can tell consumers, "Hey, you should go and get yourself an affirmed card because brand X is not yet integrated with the firm directly but it's okay.

Max Levchin: We can tell consumers, Hey, you should go and get yourself an Affirm Card because brand X is not yet integrated with Affirm directly, but it's okay. It's accessible. At some point in the past, that felt like, you know, maybe they will, maybe they won't. We now have data that shows that they will. Consumers believe, some percentage of our consumers believe that Affirm is a general purpose tool that works anywhere. You just have to have the Affirm Card or the Affirm virtual card on your Affirm app screen. More and more of them understand how it's done. Long as we treat them right and we handle our post-transactional relationship as well as we do in the transaction, they come back. That just makes repeats a little bit easier.

Speaker #29: And continue to, to increase adoption. I was just hoping to better understand what exactly is on that list of things you're doing. It's probably not increasing cardholders to 4.4 million.

Speaker #29: Can you maybe help us understand the work you're putting in to increase, the number of cards in your customers' hands? And then as you look ahead, what are going to be some of the biggest drivers to increase that number by even more?

Speaker #13: It's accessible." And at some point in the past that's felt like you know, maybe they will maybe they won't. We now have data that shows that they will.

Speaker #29: I would imagine you would expect to see that 17% of cash rate increase further over time. But what would you say are going to be the biggest drivers to increase the number of firm cardholders?

Speaker #13: Consumers believe some percentage of our consumers believe that a firm is a general-purpose tool. It works anywhere. You just have to have the affirmed card or the affirmed virtual card on your app screen.

Speaker #29: Is it, you know, marketing of the product or opening new geographies or other new channel opportunities? Just kind of to help us understand the outlook for the affirm card there.

Speaker #13: And more and more of them understand how it's done. So long as we treat them right and we handle our post-transactional relationship as well as we do in the transaction they come back.

Speaker #29: Thanks.

Speaker #28: Yeah. you know, we don't do performance marketing at firm. We don't have a business model to pay to acquire users. and I think maybe that's a, a bit of a, a misconception that some people who are less excited about the card than we are have about it.

Speaker #13: And that just makes repeats a little bit easier. You know, we we continue to maintain ninety-plus percent of our transactions come from returning users to a firm which is great.

Max Levchin: You know, we continue to maintain 90% plus of our transactions come from returning users to Affirm, which is great. It's a lot easier to get the second and third transaction than the first. All of that, it's a little bit easier to grow today than it was 6 months ago and 12 months ago. Every passing quarter or year makes our growth actually feel a little bit easier. There's a great cycling expression, It doesn't get any easier. You just go faster. We still work just as hard as we've ever done, but the results are escalating, if you will.

Speaker #28: we're not out buying ads, not mailing cards to, to, to mailing advertisements to people in the mail. I just don't know how this works.

Speaker #13: It's a lot easier to get the second and third transaction than the first. So all of that i+it's a little bit easier to grow today than it was six months ago and twelve months ago and e+every passing quarter or year makes our growth actually feel a little bit easier.

Speaker #28: The reason why the card is such a compelling business for us is it's the best way to re-engage consumers who we already know and have had successful transactions with.

Speaker #28: and that's really the strategy. The strategy is to continue to scale the network and ensure that the consumers who know some of us best get access to the card.

Speaker #28: And that we build a card that they can understand and they can use in a, in as many transactions, as possible to continue to, to take a, a big share of their spend from other payment devices.

Speaker #13: There's a great cycling expression. Doesn't get any easier. You just go faster. And we still work just as hard as we've ever done. But the results are escalating if you will.

Speaker #28: and that's the focus. And it's really that simple.

Speaker #27: Yeah. And just to give you some flavor of the things we do internally, some of these will sound very unglamorous, but given our scale and our attention to numerical detail, I assure you these are very meaningful.

Speaker #14: I I this is Michael. I I think for for complicated business with a lot of moving parts I I think I think about our our position in the market a little it's actually quite simple.

Michael Linford: This is Michael. I think for a complicated business with a lot of moving parts, I think about our position in the market. It's actually quite simple. This is what you get when you compound results like this over the course of many years without skipping, without changing your identity. It's who you are. We show up to the capital market the same way we did when we first showed up. We show up to merchants the same way, offering to drive better conversion, better outcomes. The promises we make to consumers, we've kept over the years. When you compound all that and stay really focused on doing the thing that matters, you end up building a pretty big lead.

Speaker #14: This is what you get when you compound results like this. Over the course of many years without pivots without changing your identity as to who you are we show up to the capital markets the same way we did when we first showed up.

Speaker #27: So every pixel in the app is, at any given time, being A/B tested by which I mean A, B, C, D, E, F, like multi-legged extremely high-density multivariate testing.

Speaker #14: We showed up to merchants the same way. Offering to drive better conversion better outcomes. The promises we make to consumers we kept over the years.

Speaker #27: And, the outcome of that is just shave down the friction. So if you I mean, it, it, it, it's it's not super easy to replicate because we're, we're fairly good at keeping our covert separate.

Speaker #14: And when you compound all of that and stay really focused on doing the thing that matters you end up building a a pretty big lead.

Speaker #14: I think some of our some of the other players in the space have have changed who they are and wanna try to enter new spaces and become something that they're not.

Michael Linford: I think some of the other players in the space have changed who they are, want to try to enter new spaces and become something that they're not, and it shows with their footfalls and stumbling on results. Ours is just the benefit of compounding the same awesome thing over and over and over again.

Speaker #27: But if you've got enough people together and they all open their app and none of them had the card, they would see a slightly different experience, a very subtle ways.

Speaker #14: And it shows with with their footballs and and doubling on results. And ours is just the the benefit of compounding the same awesome thing over and over and over again.

Speaker #27: And in some number of weeks or days, we will know which one of them is most compelling when someone signs up for the card.

Speaker #27: But not just signs up for the card, actually uses the card and sticks to it and becomes a no more compelling or no less compelling credit risk.

Speaker #12: That is very well said.

Max Levchin: That is very well said.

Speaker #14: All right guys. Thank you for the perspective.

John Hecht: All right, guys. Thank you for the perspective.

Speaker #12: Thank you.

Max Levchin: Thank you.

Speaker #27: And so there's a lot of downstream effects of any form of internal product change that we have to contend with. Like, we can't just say, "Oh, go do this." You know, it, it's not like you get a loan and everybody gets a loan.

Speaker #1: Our next question comes from Jeff Cantwell with Seaport Research. Please proceed with your question.

Operator: Our next question comes from Jeff Cantwell with Seaport Research. Please proceed with your question.

Speaker #15: Hey. Thanks guys. I wanted just to follow up on that earlier question. On the affirmed card You said there's a long list of things you've done.

Jeff Cantwell: Hey, thanks guys. I wanted just to follow up on that earlier question on the Affirm Card. You said there's a long list of things you've done and continue to do to increase adoption. I was just hoping to better understand what exactly is on that list of things you're doing, just driving on increasing Cardholders to 4.4 million. Can you maybe help us understand the work you're putting in to increase the number of cards in your customers' hands? As you look ahead, what are gonna be some of the biggest drivers to increase that number by even more? I would imagine you would expect to see that 17% attach rate increase further over time. What would you say are gonna be the biggest drivers to increase the number of Affirm Cardholders?

Speaker #27: Like, you get a loan and then we have to make sure that the loan you got actually got paid off. And it was a good idea to give you the card based on whatever you in this thought experiment is.

Speaker #27: And so there's an incredible number of just optimization that happens on our own surfaces. And every time we think we've hit plateau, we find that there's another singular double-digit percentage gain to be had.

Speaker #15: And continue to do to increase adoption. I was just hoping to better understand what exactly is on that list of things you're doing. Just driving that increase in cardholders to four point four million.

Speaker #15: Can you maybe help us understand the work you're putting in to increase the number of cards in your customers' hands? And then as you look ahead what are gonna be some of the biggest drivers to increase that number by even more?

Speaker #27: And we're, we're very far from running out of ideas. to give you a totally different flavor of what we might do at some point, there's painful little going on in store for any of the BNPL players.

Speaker #15: I'd imagine you would expect to see that seventeen percent of cash rate increase further over time. But what would you say are gonna be the biggest drivers to increase the number of affirmed cardholders?

Speaker #27: And we think we're the best. We think we're, we're the farthest ahead in terms of how to use our product inside of a physical retail but boy we have some really interesting ideas.

Speaker #15: Is it you know marketing of the product or opening new geographies or other new TAM opportunities? Just curious if you could help us understand the outlook for the affirmed card better.

Jeff Cantwell: Is it, you know, marketing of the product, or opening new geographies, or other new TAM opportunities? Just case we can help understand the outlook for the Affirm Card better. Thanks.

Speaker #27: And we're, we're, we're getting on the most quickly as we can. And so that's another reason to use our card as much as we love our online e-commerce domination.

Speaker #15: Thanks.

Speaker #14: Yeah. you know, we don't do performance marketing at affirmed. We don't have a business model to pay to acquire a users. and I think maybe that's a a bit of a a misconception that some people who are less excited about the card than we are have about it.

Michael Linford: You know, we don't do performance marketing at Affirm. We don't have a business model to pay to acquire users. I think maybe that's a bit of a misconception that some people who are less excited about the card than we are have about it. We're not out buying ads. We're not mailing cards, mailing advertisements to people in the mail. That's not how the business works. The reason why the card is such a compelling business for us is it's the best way to reengage consumers who we already know and have had successful transactions with. That's really the strategy.

Speaker #27: We definitely want the remaining 80% of commerce or 75% of commerce, whatever it is. And so there's just a lot to do with the product.

Speaker #27: I-I'll end where Mark where where Michael started. It is not a matter of external marketing. It's a matter of just making sure the product is as accessible as easy to understand.

Speaker #14: we're not out buying ads. We're not mailing cards to to to mailing advertisements to people in the mail. I just don't have the business works.

Speaker #27: We have a running tally of every possible declination when the card does, does not approve a transaction. And every day, there's, you know, someone's job is to ask the question, "Does this decline intelligent as in this was a bad credit decision?" Consumer should not have been approved.

Speaker #14: The reason why the card is such a compelling business for us is it's the best way to re-engage consumers who we already know and have had successful transactions with.

Speaker #14: and that's really the strategy. The strategy is to continue to scale the network and ensure that the consumers who know us and know us best get access to the card.

Michael Linford: The strategy is to continue to scale the network and ensure that the consumers who know us and love us best get access to the Card, and that we build a Card that they can understand and they can use in as many transactions as possible to continue to take a big share of their spend from other payment devices. That's the focus, and it's really that simple.

Speaker #27: Or is it a mistake of the user, a mistake of a firm, a mistake of our underwriting engine, etc., etc.? And so all of that is an enormous volume of work.

Speaker #14: And that we build a card that they can understand and they can use in a in this many transactions as possible to continue to to take a a big share of their spend from other payment devices.

Speaker #27: It can move as quickly as my agents can code it, but it still has to be tested in the real world and, and validated and made significant.

Speaker #14: and that's the focus and it's really that simple.

Speaker #27: And it is very little doubt in my mind that we will not run out of things to do there for years.

Speaker #12: Yeah. And just to give you some flavor of the things we do internally some of these will sound very unglamorous but given our scale and our attention to numerical detail I assure you these are very meaningful.

Max Levchin: Yeah. Just to give you some flavor of the things we do internally. Some of these will sound very unglamorous, but given our scale and our attention to numerical detail, I assure you these are very meaningful. Every pixel in the app is, at any given time, being A/B tested, by which I mean A, B, C, D, E, F, like multi-legged, extremely high density multivariate testing. The outcome of that is we just shave down the friction. It's not super easy to replicate because we're fairly good at keeping our cohort separate. If you got enough people together and they all open their app and none of them had the card, they would see a slightly different experience in very subtle ways.

Speaker #29: Great. Thanks very much.

Speaker #3: There are no further questions at this time. So I'd like to turn the call back over to Zane Keller for closing comments.

Speaker #12: So every pixel in the app is at any given time being A/B tested by which I mean A, B, C, D, E, F like multi-legged extremely high-density multivariate testing.

Speaker #28: Okay. Thank you for joining the call this afternoon. We appreciate your time. Looking forward to seeing many of you at the Investor Forum next week.

Speaker #28: Bye.

Speaker #12: And the outcome of that is we just shave down the friction. So if you I mean i+it it it's it's not super easy to replicate because we're we're fairly good at keeping our cohorts separate.

Speaker #12: But if you've got enough people together and they o+open their app and none of them had the card they would see a slightly different experience and very subtle ways.

Speaker #12: And in some number of weeks or days we will know which one of them is most compelling when someone signs up for the card.

Max Levchin: In some number of weeks or days, we will know which one of them is most compelling when someone signs up for the card. Not just signs up for the card, actually uses the card and sticks to it and becomes a no more compelling or no less compelling credit risk. There's a lot of downstream effects of any form of internal product change that we have to contend with. Like, we can't just say, "Oh, go do this." You know, it's not like you get a loan, everybody gets a loan. Like, you get a loan, and then we have to make sure that the loan you got actually got paid off and it was a good idea to give you the card based on whatever you in this thought experiment is.

Speaker #12: But not just signs up for the card but actually uses the card and sticks to it and becomes a no more compelling or no less compelling credit risk.

Speaker #12: And so th+there's a lot of downstream effects of any form of internal product change that we have to contend with. Like we can't just say oh go do that you know it it's not like you get a loan and everybody gets a loan.

Speaker #12: Like you get a loan and then we have to make sure that the loan you got actually got paid off. And it was a good idea to give you the card based on whatever you in this thought experiment is.

Speaker #12: And so there's an incredible number of just optimization that happens on our own surfaces. And every time we think we've hit a plateau we find that there's another singular double digit percentage gain to be had.

Max Levchin: There's an incredible number of just optimization that happens on our own surfaces, and every time we think we've hit plateau, we find that there's another single or double-digit % gain to be had. We're very far from running out of ideas. To give you a totally different flavor of what we might do at some point, there's painful little going on in store for any of the BNPL players, and we think we're the best. We think we're the farthest ahead in terms of how to use our product inside of a physical retail. Boy, we have some really interesting ideas, and we're getting on them as quickly as we can. That's another reason to use our Card.

Speaker #12: And we're we're very far from running out of ideas. to give you a totally different flavor of what we might do at some point there's painful little going on in store for any of the BNPL players.

Speaker #12: And we think we're the best. We think we're we're the farthest ahead in terms of how to use our product inside of a physical retail but boy we have some really interesting ideas and we're we're we're getting on the most quickly as we reason to use our card as much as we love our online e-commerce domination.

Max Levchin: As much as we love our online e-commerce domination, we definitely want the remaining 80% of commerce or 75% of commerce, whatever it is. There's just a lot to do with the product. You know, I'll end where Michael started. It is not a matter of external marketing. It's a matter of just making sure the product is as accessible, as easy to understand. We have a running tally of every possible declination when the card does not approve a transaction. Every day there's, you know, someone's job is to ask the question, was this decline intelligent? As in this was a bad credit decision, the consumer should not have been approved. Is it a mistake of the user, a mistake of Affirm, mistake of our underwriting engine, et cetera, et cetera?

Speaker #12: We definitely want the remaining eighty percent of commerce or seventy-five percent of commerce whatever it is. And so there's just a lot to do with the product you know.

Speaker #12: I I'll end where Mark where where Michael started. It is not a matter of external marketing. It's a matter of just making sure the product is as accessible as easy to understand.

Speaker #12: We have a running tally of every possible declination when the card does does not approve a transaction. And every day there's you know someone's job is to ask the question was this decline intelligent as in this was a bad credit decision the consumer should not have been approved?

Speaker #12: Or is it a mistake of the user? A mistake of a firm? A mistake of our underwriting engine? Et cetera et cetera. And so all of that is an enormous volume of work.

Max Levchin: All of that is an enormous volume of work. It can move as quickly as my agents can code it, but it still has to be tested in the real world and validated and made statistically significant. There's very little doubt in my mind that we will not run out of things to do there for years.

Speaker #12: It can move as quickly as my agents can code it. But then it still has to be tested in the real world and and validated and made statistically significant.

Speaker #12: And it is very little doubt in my mind that we will not run out of things to do there for years.

Speaker #16: Great. Thanks very much.

Jeff Cantwell: Great. Thanks very much.

Operator: There are no further questions at this time, so I'd like to turn the call back over to Zane Keller for closing comments.

Speaker #3: There are no further questions at this time. So I would like to turn the call back over to Zane Keller for closing comments.

Speaker #14: Okay. Thank you for joining the call this afternoon. We appreciate your time. We look forward to seeing many of you at the Investor Forum next week.

Zane Keller: Okay. Thank you for joining the call this afternoon. We appreciate your time. We look forward to seeing many of you at the Investor Forum next week. See you there.

Speaker #1: Good afternoon. Welcome to the Affirm Holdings, Inc., third-quarter fiscal 2026 earnings call. Following the speaker's remarks, we will open the lines for your questions.

Speaker #1: As a reminder, this conference call is being recorded and a replay of the call will be available on our investor relations website. For a reasonable period of time after the call.

Speaker #1: I'd now like to turn the call over to Zane Keller, head of investor relations, thank you. You may begin.

Speaker #2: In addition, today's call may include non-GAAP financial measures. These measures should be considered as a supplement to and not a substitute for GAAP financial measures.

Speaker #2: For historical non-GAAP financial measures, reconciliations to the most directly comparable GAAP measures can be found on our in our earnings supplement slide deck, which is available on our investor relations website.

Speaker #2: Hosting today's call with me are Max Levchin, Affirm's Affirm's founder and chief executive officer; Michael Linford, Affirm's chief operating officer; and Rob O'Hare, Affirm's chief financial officer.

Speaker #2: In line with our practice and prior quarters, we will begin with brief opening remarks from Max before proceeding immediately into questions and answers. Before we begin the call, as a reminder, we will be hosting our 2026 Affirm investor forum next week on Tuesday, May 12th, from 2:00 until approximately 5:00 PM Eastern Time.

Speaker #2: The event will be available to the public via live cast on our investor relations website. We will also publish a replay on our website after the event ends.

Speaker #2: With that, I turn the call over to Max to begin.

Speaker #3: Thank you, Zane. Fiscal Q3 was another one for the record books. Given this, streak, one would be forgiven if one thought this actually pretty easy.

Speaker #3: That's all because the fantastic Affirm team is starting to make it look that way. It is not, in fact. And we're very proud of this particular quarter.

Speaker #3: Zane said, "I look forward to seeing many of you in person at the investor forum next week on that note." Back to you, Zane.

Speaker #2: Thanks, Max. Okay, let's get to your questions, operator. Please begin the Q&A session.

Speaker #4: Thank you. We will now be conducting a question-and-answer session. If you'd like to ask a question, please press star one on your telephone keypad.

Speaker #4: A confirmation tone will indicate your line's in the question queue. You may press star two if you would like to remove your question from the queue.

Speaker #4: For participants using speaker equipment, it may be necessary to pick up your hands up before pressing the star keys. One moment, please. I'll wait for questions.

Speaker #4: Our first question comes from Jason Kupferberg with Bank of America. Please proceed with your question.

Speaker #5: Hey, guys. This is Cassie Chan on for Jason. you know, great quarter. I just wanted to ask, I guess, you know, first on the private credit side and in general on credit, you know, it seems like the delinquencies that were, were pretty stable this quarter.

Speaker #5: I guess, is there anything that you're seeing in the in terms of changes or slowdowns in credit? And, you know, obviously, unease in private credit seems to be a theme, but are you guys seeing any issues or changes on the, the funding side of the business?

Speaker #5: Thank you.

Speaker #3: I'll start with the, credit side. Michael will pick up the funding side. no. We are not. at this point, I think we've earned the right to say the Affirm consumer, and so these are not comments on the universe or even North America or United States consumer, but the people that we choose to underwrite and lend to, we are not seeing deterioration.

Speaker #3: We're not seeing any disturbances in the course. which naturally translates to a very stable and pleasant funding environment for us. Mike can tell you more.

Speaker #6: Yeah. The, the funding market broadly remains exceptionally constructive for us. We're, we're kind of out of adjectives to describe just how great the execution has been.

Speaker #6: I know a lot of it is being spilled elsewhere about what's going on in the capital markets, but, from our perspective, we see a market that's very deep.

Speaker #6: We see sustained and, and reducing spreads. And we see, deals with significant over-scription along with forward-flow partners who are you know, if anything, still, clamoring for a bigger allocation to our portfolio.

Speaker #6: So we see the market being very constructive to us and a and a key part of the reason why our we feel there's so much, tailwind in the business.

Speaker #5: Thank you.

Speaker #4: Our next question comes from Nate Svensson with Deutsche Bank. Please proceed with your question.

Speaker #7: Hey, guys. Thanks for the question and congrats on the record number of Lebowski references in the letter. I did want to ask you about upcoming yeah, yeah.

Speaker #7: anyway, sorry. I wanted to ask on the upcoming big nothings. Going through the transcript last quarter, Max, you were obviously pretty effusive about all the first order and, and derivative benefits and then things like cardholder signups.

Speaker #7: I assume directionally you're expecting a lot of the same things, but on the call last quarter, you also talked about getting better and smarter as you do more of these.

Speaker #7: So I get the question is around what ways do you think you've got better and smarter, and maybe what are some of the incremental changes or initiatives we should, be on the lookout for for the event next week?

Speaker #3: I don't really want to reveal all the surprises to you, to be honest, but I appreciate the, the kind words and, and, way to get smarter.

Speaker #3: I think probably if you want to sort of look for breadcrumbs, we got smarter about targeting certainly, and it's less about sort of sitting down and lab somewhere and trying to come up with ideas much more about looking at the data we gathered and the last big nothing.

Speaker #3: And just using all the same ML/AI techniques we have here to ask the question, what's the least costly, highest probability of conversion for any one SKU, any one consumer, any one merchant, etc.?

Speaker #3: So the it'll, it'll get more efficient. that's certainly the case. We got smarter kind of qualitatively I think we really underplayed the event itself any early hours and kind of had to play a little bit of a catch-up on the marketing side of things.

Speaker #3: And this won't happen this time, so we'll we will hit the, ground running with just promoting it correctly to all the right people at, again, maximizing the effective per-dollar yield for our merchant partners.

Speaker #3: So we, we expect to be even more satisfying to those who are paying for these deals.

Speaker #7: Thanks. Excited to look out for it.

Speaker #4: Our next question comes from Brian Keane with Citi. Please proceed with your question.

Speaker #2: Yeah, guys. Can you give us, some insights on the ABS market, the deal in March, and then, the recent deal? What's going on with spreads and demand side and demand for you guys?

Speaker #6: Yeah. Thanks for the question. you know, I think we've, we've executed three deals so far this year, two revolving deals in the quarter, and then we we just priced, a static deal.

Speaker #6: We haven't, you know, closed on. And the, the trend really across all three is, incredible depth, you know, lots of oversubscription in these deals, and continued and sustained tightening, spreads.

Speaker #6: And, you know, a key part of the reason why you see funding costs down on the order of $125 basis points year on year, obviously, benchmark rates are down.

Speaker #6: As part of that, but you're also seeing spreads coming in at the same time. It's, it's just really a, a reflection of the capital market's demand for our asset and our team's ability to execute despite quite a bit of economic volatility and headlines out there.

Speaker #6: We, we feel like the market is just extremely constructive for our name.

Speaker #2: Yeah. And it just feels like they're starting to recognize maybe the, the differences between what you guys your, your credit versus others in the short duration and obviously the quick turn.

Speaker #2: but it looks like the market's starting to recognize that. So it's good to see.

Speaker #6: Yeah. The, the short duration of our asset is, is a huge advantage, and, and I've taken a, a long time to, to earn that.

Speaker #6: We've also done a really good job, I think, in engaging the investor base and bringing on board over the years, a wider set of investors.

Speaker #6: That's really important for the depth of the market that we play in to, to keep channel for our long-term growth. But also, the more the more broad the investor base you bring on, the, the better you can get on pricing.

Speaker #2: Yeah. Okay. Great. Congrats on the results.

Speaker #3: Thank you.

Speaker #4: Our next question comes from Rob Wildhack with Autonomous Research. Please proceed with your question. Looks like we don't have him. let's go to the next question.

Speaker #4: Our next question comes from Moesha Warrenbuck with TD Cohen. Please proceed with your question.

Speaker #2: Great. Thanks. I noticed that, growth in the Paynex has, you know, is your fastest growing segment now. Is there are there different either programs or, you know, kind of merchant partnerships or anything that, you know, is kind of driving that and, you know, do we think that's going to continue into, you know, Q4?

Speaker #7: Yep. Hi, Mike. This is Rob. we do expect that trend to continue into fiscal Q4. and I think the answer was largely in your question.

Speaker #7: We did have one large one very large program, moved to having an evergreen, 0% and be paying for offer. So that, that definitely drove a bit of the uptick.

Speaker #7: and we also continue to see most of our paying for Paynex volume coming from the Shopify program, which continues to grow nicely. So, a bit of sort of business as usual there, and then we have one large program, make a change to their financing program, which we think is real positive.

Speaker #3: Thanks, Rob.

Speaker #4: And our next question comes from Ramsey Ellisall with Kander Fitzgerald. Please proceed with your question.

Speaker #8: Hi. This is Ronan for Ramsey. Thanks for taking our question today. I wanted to ask about the active merchant count, which went up by 44%, accelerating beyond a strong Q2.

Speaker #8: Where or what is the largest opportunity for to add more merchants? And how penetrated is the market in terms of consumer usage, but in terms of merchant presentment for BNPL?

Speaker #8: Thank you.

Speaker #3: I, I mean, I think in terms of merchant count, we're still looking at some of our largest platform partners as the biggest accelerant to growing our current merchant base.

Speaker #3: So some of the big PSPs where we have relationships as well as large merchant platforms like Shopify, those, those have been, really additive to our merchant base overall.

Speaker #3: That's an enormous universe of merchants that we're just scratching the surface on, and it's very early days in that program. So, there's countless other examples across our portfolio, but I, I think in terms of the partnerships that drive some of these big merchant counts, I think we're still we still have plenty of room, to optimize, how we show up on the, the merchant site.

Speaker #8: Great. Thank you. And look forward to hearing more at the, investor forum.

Speaker #4: And our next question comes from Harry Bartlett with Rothschild & Co. Woodburn. Please proceed with your question.

Speaker #9: Hey, guys. Thanks for the question. I just wanted to touch on the, the kind of, agentic codes development point in the shelter letter. you know, you cited the, the kind of noticeable ramp in agentically written codes.

Speaker #9: and it looks like you're kind of doing double the amount of requests that you were doing previously. So, I guess, could you kind of talk about this broadly in terms of, you know, how you're thinking maybe cost will develop versus how they developed historically or whether you kind of see this more as a vehicle for more rapid product development, I guess?

Speaker #9: Thank you.

Speaker #3: So there's a tempting to turn us into a 15-minute answer in the final discussion development, which I am personally invested and involved in. so the shorthand first of all, and I, I will rely on Rob in a second to maybe try to even quantify it, but it's unequivocally a creative to the bottom line to use AI the way we are.

Speaker #3: So this is a net strongly positive, the fact that we are increasing our development velocity is just incredibly strong for our bottom line. And then some.

Speaker #3: The actual mechanics of development using agentic the processes and, and etc., we're pretty unique, and we, we feel pretty great about where we are and where we're headed.

Speaker #3: you know, if you've ever, read the fine print of, you know, the likes of ChatGPT or Gemini, there's a little thing at the bottom that says, "AI makes mistakes." Basically, you're on your own.

Speaker #3: And so as much as we can do use these tools, there are still many unique to a firm checks and balances and processes that ensure that what we ship is all the same or higher quality than what we did before these tools came around.

Speaker #3: And we, we spent quite a lot of time getting there, gaining the confidence, testing it. And so the, the reason we have this, uncorket moment early in the year is because we, we felt that we were ready to mass deploy it internally and have so far been very pleased with what, what's transpired.

Speaker #3: And we'll definitely do more. I think, you know, I'm sure our engineering leadership is, is listening/reading these letters and I don't think anybody is begrudgingly the right to say, "We think we can 10x this productivity further." So, you know, it's very early days, very excited about it.

Speaker #3: we have no shortage of things we want to build, and therefore, humans that are both the creative ideas, the arbiters, good taste, and the ultimate responsibility carriers for this no errors, no fine print, no bugs are, are still very necessary.

Speaker #3: in, in terms of the cost, I mean, they did obviously show up in the C&L this quarter, they'll continue into Q4 as well. wouldn't, wouldn't fit the material, impact to the P&L overall.

Speaker #3: It's sort of very low single-digit millions per quarter in terms of spend. So to Max's point, we're seeing a lot of efficiency spend money on development tools is something we've always done.

Speaker #3: So we're just thinking about ways to make sure that on a holistic basis, that, that all-in budget makes sense for us and that we're seeing efficiency and lift from the entire portfolio of tools that we're employing.

Speaker #9: Super helpful. Thank you.

Speaker #4: And our next question comes from Rob Wildhack with Autonomous Research. Please proceed with your question.

Speaker #10: Hey, can you guys hear me this time?

Speaker #8: Yeah.

Speaker #9: Great.

Speaker #10: cool. I wanted to ask about the different, firm services, namely the app. You know, you've highlighted in the past the, the DMV list there, that's intuitive.

Speaker #10: I'm curious though where, consumer awareness is on that. Like, are consumers still opening up their app to make a payment, then going, "Oh, fucking me?

Speaker #10: Here's this great offer," or have they become more attuned to the fact that this is a place where they can start looking for products and shopping via the app first?

Speaker #3: Your front-running like half of my speech next week, so, I'm not going to answer it. Not going to gratify this one. I'm kidding. the short answer is it is trending in the right direction you described.

Speaker #3: So firm app was deliberately designed to make sure that there is more value to be had there than just sort of in passing setting up or checking up on your autopay.

Speaker #3: So all the different components in the first three and the fifth tabs of the app are all designed to create engagement, to expose consumers, to various merchant promotions.

Speaker #3: it is not an accident that the, Big Nothing days are basically organized around the app. We're trying to teach consumers that this is where you go.

Speaker #3: There's always 0% offers in the app. The B&D is just a nexus of many of them concurrently, but at any given time, there's a lot to begin with.

Speaker #3: we have a really nice number. I, I won't spoil the, the, the eventual report on that one. Number of searches that consumers run in our app.

Speaker #3: we, we're watching that grow. And, it's all in the service of keeping consumers that the best experience of a firm is the app plus the card.

Speaker #3: And so I'm, I'm deliberately obscuring some of the, the more interesting por-portions that you'll have to wait six more days before we start really, doing some fun reviews.

Speaker #3: But directionally, you're exactly right. Like, we are motivated to make the app experience excellent both as a product and as a financial service to our consumers, and there's a bunch of things to show.

Speaker #3: And many more that we're probably not going to show up necessarily next week, but, you know, it shapes the roadmap for years. In, in our minds.

Speaker #9: Got it. And then, quick one for Rob if I may. was that quarter over quarter? Could you just call out the drivers there?

Speaker #3: I'm sorry. Could you repeat the question?

Speaker #10: The allowance was that quarter over quarter? Just wondering the drivers there.

Speaker #3: yeah. I mean, it's, it's of course partly a function of just seasonality. the allowance rate typically is elevated in Q3 just given we have the sequential downtick from holiday volumes in Q2 down to a lower base in, in fiscal Q3.

Speaker #3: That's part of it. another driver, which I think Max called out in his portion of the letter, was just that we did see elevated prepayments on the platform.

Speaker #3: It's a little bit of a counterintuitive point, but that's a really positive credit signal. And it has the effect of reducing the overall loan balance, which, you know, obviously the good loans are being paid off early, and so you're left with more delinquency off of a lower base.

Speaker #3: so that was that, that contributed to a higher allowance rate all in, but we think it's a really positive credit signal, across our users at large.

Speaker #3: So those were sort of the two biggest drivers: seasonality and then a bit, a bit of, favorable prepayments from next season.

Speaker #10: This is, understandably refund maxed for the kits that.

Speaker #4: Okay. And our next question comes from Dan Domez with Nzihu. Please proceed with your question.

Speaker #11: Question comes from the line.

Speaker #12: Hey, guys. there's always very impressive results. just wanted to ask you, Max, can you hear me well?

Speaker #8: Yeah.

Speaker #3: Yeah, yeah. Sorry. We're just, we're. We're silent waiting.

Speaker #8: Thanks.

Speaker #3: Sorry. I just wanted to ask really quickly, some of your competitors have done some significant layoffs because of AI. I just wanted to know what, you know, the official firm stance is on this, topic.

Speaker #3: Thank you so much.

Speaker #8: we are not planning AI-related layoffs. Full stop. I, I, I don't mean to belittle anyone out there making the right or what they believe to be the right decisions for their company.

Speaker #8: so strictly a firm-centric view of the world from us. If you look at our revenue per employee, it is already hanging out in like NVIDIA territory.

Speaker #8: I, there are a lot of them out there, but it's very high number of dollars per employee. So today operate at a very lean machine.

Speaker #8: If you look at our overall headcount, it hasn't grown very much. If you look at the revenue per employee, you'll see that we're highly efficient.

Speaker #8: If you look at overall operating leverage, it's done really well. So we long before AI tools came along, we had tooled ourselves up to be very efficient.

Speaker #8: These tools are giving us rocket boosters, wings, you know, whatever, whatever metaphor you want. And we're very happy for it, but at least for now and as far as the eye can see, as far as I can see anyway, it is just a thing we're going to keep using to ship more the list of things we want to ship is very long and until very recently, a lot of conversations were, "Well, we don't know when we're going to prioritize this thing that you want back because we have so much more to build." And blissfully, these conversations are now like, "Well, we can just have fun on 48 hours later.

Speaker #8: We'll have a working prototype." We just wrapped up one here where our product team literally delivered dozens of shippable features, which is just impossible to imagine 12 months ago.

Speaker #8: And so we, we, we, we need all the people we got. We, we think we have fantastic people, and we, we like them all.

Speaker #4: And our next question comes from Dan Perlin with RBC Capital Markets. Please proceed with your question.

Speaker #13: Thanks. Good evening. I'm wondering, can you just speak, I think maybe holistically to your expansion plans outside of North America? I know you, you talked about it a little bit embedded in the guidance here for the product and go-to-market initiatives and not being mature in '26.

Speaker #13: But I'm just trying to think contemplating in terms of investments as we, as we start to think about next year. and also, I guess in context, although it's a little bit of a, a different driver, but the L, you know, the RLTC margins continue to run, you know, above long-term targets.

Speaker #13: I'm just wondering as you go in the international markets how that might impact it. Thank you.

Speaker #3: sure. I'll, I'll take an order. I think we're going to spend a bit of time talking about our expansion plans with a bit more specificity in terms of markets.

Speaker #3: So I'll, I'll leave, deep dive on the international markets for next week's investor forum if, if that's okay. you know, in terms of the investment portfolio for those launches, some of that work is already underway today.

Speaker #3: So that's definitely been an area that we've been investing in ahead of those markets coming live. and, and as you've seen from the results, we've been able to drive really nice operating leverage despite that investment.

Speaker #3: So I, I think we would expect to do more of the same. In fiscal '27, but I'll, I'll stop short of, giving any sort of outlook or guidance for '27 today.

Speaker #3: in terms of unit-level economics, I mean, I think as we ramp in new countries, we would expect, potentially that there is a bit of an investment period where we're meeting new consumers and, and coming down the curve in terms of underwriting prowess.

Speaker #3: So, there could be a small drag on revenue-level transaction costs as we enter these new markets. But given the size of the, the US and Canadian businesses today, we think any headwinds there would be, pretty minimal.

Speaker #13: That's great. Thank you so much.

Speaker #4: And our next question comes from Andrew Bosch with Samo Capital Markets. Please proceed to your question.

Speaker #10: Hey, thanks for taking the question. wanted to talk about a firm card and the level of ads you need to stack up here. you know, the $700,000 users, it's pretty impressive, especially coming off of the, the $900,000 last quarter.

Speaker #10: So is there anything that, that's working differently or stronger than it has been in the past as far as card customer acquisition goes? And then my follow-up would be, you know, now that we're doubled base and at 4.4, you know, are you starting to see more and more benefits of scale coming to the pike?

Speaker #3: I think the two, the first part, I mean, there's a long list of things we have done and continue to do to just increase options.

Speaker #3: We've said it before and remain true that cards are by far the fastest growing and also our most profitable product. So there's absolutely no reason not to try to grow it.

Speaker #3: That said, we have not been in any way, if you will, juicing the growth. You know, it's natural. They're not a secret game somewhere being inflated or anything like that.

Speaker #3: So it's, it's growing about as fast as we can make it grow without tilting anything in a weird direction. Still primarily remains a repeat product.

Speaker #3: We've never tried to advertise it or promote it outside of existing firm user base. It's still roughly in the 20% of the active plus or minus.

Speaker #3: So it's, you know, we have a lot of road to cover before we start asking, "Where can we get more cardholders?" The R, our favorite users in the sense that they transact most frequently.

Speaker #3: They tend to be least lossy just because we get to know them a lot quicker, a lot more frequently. And so, so it, it there's, it's all goodness, nothing sort of not, nothing hidden or, or incredible there.

Speaker #3: let's see. and the economies of scale I think, to be completely honest, I, I haven't thought it through very carefully. If we're finding benefits of scale that are so truly unique, the one thing that is true in a software development context which is a little sort of maybe a glimpse into the you're fastest growing product is typically your smallest product.

Speaker #3: And so no matter how much you love your youngest child, you can't really allocate the great number of resources towards it because it's just too small.

Speaker #3: The card is now in the billions of dollars of volume. It is no longer a small product, which means that it deserves and gets the software engineering attention and the risk attention.

Speaker #3: And so all the various pieces that we would perhaps wonder if they're worth allocating from other parts. And so you can expect it to get more features sooner, more you know, maybe even more growth sooner, although that's not a, not, not a forecast or forward-looking statement.

Speaker #3: is, is just sort of hitting stride in a dimension, including internal resource allocation.

Speaker #10: Got it. Thank you.

Speaker #4: And our next question comes from Matt O'Neill with Bank of America. Please proceed with your question.

Speaker #11: Yeah. Hi. thanks for the question. being cognizant of the upcoming forum, try not to get too, too long-term focused. but, maybe we can talk a little bit about the, the card and what that sort of portends to the longer-term, you know, banking, idea.

Speaker #11: Obviously, there's application put in this past quarter. you know, w-w-respecting that, I expect a lot more of this next week. are there any sort of, points you can kind of hint at, as far as the focus around things like, you know, sort of pay now, you know, direct deposit, the, the dynamic?