Summary of Affirm Fireside Chat - September 23, 2025 Company Overview - **Company**: Affirm (NasdaqGS:AFRM) - **Industry**: Specialty finance and fintech, specifically focusing on Buy Now, Pay Later (BNPL) services Key Points and Arguments Financial Guidance and Growth Outlook - **Q1 Guidance**: Affirm expects a high end GMV growth of 37% and a transaction profit growth of 43% for Q1 [4][5] - **Full Year Guidance**: Affirm sets a floor for GMV at $46 billion, implying a year-on-year growth of approximately 25.5% [5] - **Margins**: Adjusted operating income margins are projected at 23-25%, with GAAP operating income margins expected to be between 1-3% for Q1 [5][6] Direct-to-Consumer (DTC) Growth - **DTC Performance**: The Affirm card, a key DTC product, saw GMV growth exceeding 130% in Q4 [8] - **Integration with POS**: Strong growth is also observed in point-of-sale transactions, indicating a synergistic relationship between DTC and traditional POS channels [9] Product Mix and Loan Types - **Loan Products**: Monthly 0% loans are expected to continue being the fastest-growing product line, with growth over 90% in Q4 [11][12] - **Consumer Appeal**: 0% loans resonate well with higher-end credit consumers, complementing interest-bearing loans [12] Competitive Landscape - **BNPL Market Growth**: The BNPL category is growing at approximately 25% annually in the U.S., with Affirm leading this growth [15][16] - **Market Penetration**: Affirm has over 8% penetration in U.S. e-commerce, with potential for further growth compared to international markets where penetration can reach 15-20% [16] Economic Resilience and Underwriting - **Transaction-Level Underwriting**: Affirm underwrites every transaction, allowing for agile credit decisioning, which is seen as a competitive advantage [21][29] - **Short Loan Terms**: The average loan term is about 12 months, with a weighted average life closer to 5 months, enabling quick adjustments to economic conditions [22] International Expansion - **UK Market Entry**: Affirm launched in the UK, where the e-commerce market is about one-third the size of the U.S. market, with similar BNPL penetration rates [34][35] - **Partnership with Shopify**: Affirm is in beta with Shopify in the UK, which is expected to drive success in the new market [37][39] Consumer Health and Delinquency Rates - **Delinquency Management**: Affirm reports low delinquency rates compared to traditional credit products, attributed to transaction-level underwriting and a focus on repeat borrowers [31][84] - **Consumer Repayment Rates**: Current repayment rates align with predictions, indicating a stable consumer base [83][84] Funding and Interest Rate Impact - **Interest Rate Sensitivity**: A 100 basis point change in rates is expected to result in a 40 basis point change in revenue less transaction costs [58] - **Funding Structure**: Only 15% of Affirm's funding is floating rate, meaning changes in rates will have a delayed effect on fixed-rate funding [59] Marketing and Customer Acquisition - **Customer Acquisition Costs**: Affirm's customer acquisition costs are effectively negative, primarily driven by merchant partnerships rather than large advertising budgets [75] - **Loyalty Programs**: Affirm is exploring ways to enhance customer loyalty through interest rate adjustments rather than traditional points or rewards systems [80][81] Future Considerations - **Bank Charter Consideration**: Affirm may consider a bank charter in the future for diversification, but it is not currently necessary due to strong capital programs [67] - **Balancing Growth and Profitability**: Affirm aims for operating leverage and margin expansion while pursuing growth opportunities [69][70] Additional Important Insights - **AI Utilization**: Affirm does not use AI for underwriting but employs machine learning for real-time decision-making and operational efficiency [52][56] - **Market Trends**: The company is aware of macroeconomic signals and adjusts its underwriting posture accordingly to maintain stability [84]

Core Insights - Affirm is positioned for profitability after years of investments impacting its bottom line, with gross merchandise volume (GMV) increasing by 43% year-over-year to $10.4 billion and revenue rising by 33% to $876 million, marking the company's first operating profits [1] Financial Performance - The Affirm card contributed significantly to growth, with GMV increasing by 132% to $1.2 billion and active cardholders rising by 97% to 2.3 million [2] - For the upcoming fiscal year, Affirm anticipates approximately 25% growth in GMV [2] Strategic Expansion - The company plans to expand internationally following successful launches in the UK and Canada, with a focus on enhancing the Affirm card's use cases [3] - New features and experiences for the Affirm card are in development to ensure its usability in various markets, as demonstrated by recent successful transactions in Norway [3] Market Sentiment - Affirm's stock has increased by 44% year-to-date, with a majority of sell-side analysts (36 out of 44) rating the stock as a Strong Buy or Buy [4] - Analysts express confidence in Affirm's growth trajectory, citing core growth, new channels gaining scale, and accelerating profitability, while acknowledging potential volatility due to consumer spending trends [5]

Affirm (AFRM) Conference Call Summary Company Overview - Affirm is a point of sale finance company specializing in buy now, pay later (BNPL) transactions and transaction processing, primarily in the U.S. market [4][5] - Key partners include Amazon and Shopify, with recent expansion into the U.K. market [5] - The company has demonstrated strong growth, with top-line growth in the mid-twenty percent range and customer growth exceeding 20% [5][6] Financial Performance - Affirm reported a strong third fiscal quarter, with active consumer base growth exceeding 20% and active merchants also growing by more than 20% [9][10] - Gross Merchandise Volume (GMV) grew by 36%, surpassing the previous year's performance [11] - Revenue growth aligned with GMV, with transaction profit growing over 50% and adjusted operating income margin at approximately 22%, reflecting a nine-point year-over-year margin expansion [12][13] - Affirm card, a direct-to-consumer offering, reached 1.9 million active cardholders, contributing to 9% of GMV with over 100% growth in the quarter [14][15] Market Dynamics - The BNPL category is growing at approximately 25%, with Affirm outpacing this growth [12] - Strong growth was observed across various categories, particularly in general merchandise and consumer electronics [16] - Monthly 0% installment loans saw a 44% growth, distinguishing Affirm's product offering from competitors [18][19] Customer Acquisition and Engagement - Most customer acquisition is driven by merchant partnerships, with a focus on e-commerce visibility [24] - New customer cohorts are transacting more frequently, with an average of over 5.5 transactions per user per year [26] - Affirm is gaining market share from credit cards, with a significant addressable market of $1.2 trillion in revolving credit card debt in the U.S. [29][30] Competitive Landscape - The market remains competitive, particularly in the pay-in-four product segment, where competitors dominate [33] - Affirm's adaptive checkout product allows for a mix of loan options tailored to merchant needs, enhancing competitiveness [34][35] - Klarna is noted as a key competitor, with Affirm actively engaging in the market despite their presence [36][37] Consumer Trends - Consumer spending has shown resilience, with GMV growth reaching 40% in March, attributed to effective product offerings [39][40] - Delinquencies remain in line with historical expectations, indicating strong credit performance despite increased demand [41][42] - Growth has been broad-based across categories, with the exception of sporting goods [43] Funding and Regulatory Environment - Affirm's average loan term is about 12 months, with a weighted average life of 5 months, making it less sensitive to interest rate changes [44][46] - The company has a robust funding capacity of $23 billion, with only 59% utilized, indicating strong growth potential [48][49] - Regulatory changes under the new U.S. administration are monitored, but Affirm's business model remains aligned with consumer-friendly practices [52][53] Future Growth Opportunities - Affirm is exploring in-store commerce opportunities through wallet partnerships and the Affirm card [66] - Expansion plans include entering the U.K. and other European markets, as well as Australia [68] Conclusion - Affirm continues to demonstrate strong growth and market leadership in the BNPL space, with a focus on consumer-friendly products and strategic partnerships. The company is well-positioned for future expansion and profitability.

Financial Data and Key Metrics Changes - The company is pleased to improve its outlook for the current quarter and the fiscal year, indicating a positive trend in financial performance [6][7] - The quarter showed strong growth in GMV (Gross Merchandise Volume), with March being the strongest month at 40% year-on-year growth [20] Business Line Data and Key Metrics Changes - Strong growth was observed across various business lines, particularly in direct-to-consumer services, which outpaced the overall business growth [19] - The zero APR product is gaining traction, although it has a lower revenue and return on loan compared to interest-bearing loans [10][12] Market Data and Key Metrics Changes - The company noted broad-based strength in GMV across its merchant base, with only one category experiencing a decline [19] - The company is actively engaging with merchants to promote zero APR offers, which are seen as beneficial for both parties [11][28] Company Strategy and Development Direction - The company aims to balance growth and profitability while continuing to take market share [7] - There is a focus on enhancing the Affirm app to improve user engagement and repayment rates, with ongoing updates and features being rolled out [61][63] Management's Comments on Operating Environment and Future Outlook - Management is mindful of potential economic challenges, including the impact of student loan enforcement and broader economic conditions [59] - The company is prepared for recession scenarios and has a proactive approach to adjusting credit quality and underwriting standards as needed [34][112] Other Important Information - The partnership with Costco is highlighted as a significant development, although specific timelines and metrics are not disclosed [70][71] - The company is committed to reporting loan data to credit bureaus, which is seen as beneficial for consumers and the company's brand [40][42] Q&A Session Summary Question: Can you discuss the balance of economics between zero APR and interest-bearing loans? - Management indicated that while zero APR loans generate less revenue, they enhance brand loyalty and customer acquisition, leading to better credit quality in the long term [10][12] Question: What are the pockets of strength in GMV? - The company reported strong growth across most categories, with direct-to-consumer services leading the charge [19][20] Question: How does the company view the impact of student loan enforcement? - Management is monitoring the situation closely and has already factored student loan delinquencies into their underwriting processes [59] Question: Can you elaborate on the competition and funding structure? - The competitive landscape remains intense, but the company focuses on conversion and impact rather than pricing to maintain its market position [122][123] - A bank charter is not seen as a solution for the current funding strategy, but the company remains open to pursuing one if necessary for product development [116][120]

Financial Data and Key Metrics Changes - The company is pleased to improve its outlook for the current quarter and the fiscal year, indicating a positive trend in financial performance [6] - The company is on a journey towards becoming GAAP profitable, balancing growth and profitability [6] Business Line Data and Key Metrics Changes - The strength in GMV (Gross Merchandise Volume) was broad-based, with strong growth across various categories, particularly in direct-to-consumer services, which grew faster than the overall business [18][19] - March was highlighted as the strongest month of growth, achieving a 40% year-on-year GMV growth [19] Market Data and Key Metrics Changes - The company noted that the 0% APR product is gaining excellent traction, with a focus on maintaining high credit quality [10][12] - The company is actively responding to merchant requests for promotional financing, which is seen as a growth opportunity [10][12] Company Strategy and Development Direction - The company aims to balance growth opportunities with excellent credit quality while being judicious in spending [6] - The management emphasized the importance of the 0% APR product as a tool for market share growth and customer acquisition, viewing it as a long-term value booster [12][28] Management Comments on Operating Environment and Future Outlook - Management is mindful of the potential implications of student loan enforcement and has factored this into their underwriting processes [59] - The company is continuously monitoring credit trends and is prepared to adjust its strategies based on market conditions [110][115] Other Important Information - The company is focused on enhancing its app to improve user engagement and repayment rates, with ongoing updates and improvements [61][64] - The partnership with Costco is seen as a significant opportunity, although specific timelines for impact were not disclosed [70][71] Q&A Session Summary Question: Can you discuss the balance between zero APR loans and interest-bearing loans? - Management indicated that while zero APR loans generate slightly lower revenue, they significantly improve credit quality and customer acquisition, leading to long-term benefits [10][12] Question: What are the pockets of strength in GMV? - The company reported strong growth across various categories, with direct-to-consumer services leading the charge [18][19] Question: How does the company view the competitive landscape? - Management acknowledged the competitive environment but emphasized their focus on conversion and impact rather than pricing [126][129] Question: What are the implications of student loan enforcement? - The company is monitoring the situation closely and has already incorporated student loan data into their underwriting processes [59] Question: Can you provide an update on international expansion? - The partnership with Adyen is expected to speed up integration in the UK, with ongoing efforts to educate the market about the company's offerings [91][92] Question: How is AI being utilized within the company? - The company is leveraging machine learning for credit scoring and operational efficiency, while also exploring generative AI for customer interactions [96][100]