Affirm(AFRM) - 2026 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported a strong quarter with significant growth, maintaining a revenue-less transaction cost (RLTC) of 4.2% [22][105] - The updated fiscal year 2026 outlook indicates an increase in operating margins to more than 7.5%, up from the previous guidance of over 6% [73][74] Business Line Data and Key Metrics Changes - The company highlighted that approximately half of the GMV growth came from direct point-of-sale merchant integrations, while one-third came from direct-to-consumer channels [52] - The 0% APR loans are identified as the fastest-growing loan product, with expectations for continued growth in this area [78] Market Data and Key Metrics Changes - The company noted a healthy spending environment for consumers, particularly in sectors like sporting goods and outdoor products [27] - Delinquency trends remain low, indicating strong consumer repayment behavior [29] Company Strategy and Development Direction - The company extended its agreement with Amazon for an additional five years, indicating a commitment to long-term partnerships [4][47] - The strategy includes expanding relationships with payment service providers (PSPs) to enhance integration speed and market reach [15][34] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the ability to execute in the ABS market despite broader market challenges, attributing success to strong asset performance and investor relationships [10][112] - The company is focused on maintaining a long-term perspective, with a target RLTC range of 3% to 4% for sustainable growth [23][107] Other Important Information - The company is actively exploring new verticals, including services and automotive repair, with a robust process for adapting underwriting models [96][97] - The recent promotional event, referred to as "Zero Days," was successful in driving consumer engagement and merchant awareness [61][104] Q&A Session Summary Question: Thoughts on funding market execution amidst challenges - Management highlighted their strong execution in the ABS market and the unique value of their products, which are well-received by investors [10] Question: Insights on PSP relationships and strategy - Management emphasized the importance of PSPs for integration speed and expanding market access, noting ongoing efforts to enhance these relationships [15][34] Question: Trends in consumer spending and delinquency rates - Management confirmed that consumer spending remains healthy, with low delinquency rates indicating effective underwriting practices [27][29] Question: Update on operating margins and expense expectations - Management attributed the increase in operating margins to growth rather than cost-cutting, with a focus on revenue growth driving operating leverage [74] Question: Competitive environment and capital market conditions - Management noted a constructive capital market environment for their assets, with a focus on maintaining strong relationships with investors [112]