Affirm(AFRM) - 2026 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported excellent results for Q2 of fiscal 2026, with significant growth in key metrics [4][10] - The RLTC take rates are expected to remain slightly above 4% for Q3 and Q4, with transaction costs benefiting from lower funding costs [21][22] Business Line Data and Key Metrics Changes - The Affirm Card saw GMV growth of just under 160% year-over-year, with active cardholders increasing by 121% and 0% deals on the card rising by 190% [60] - The "other" category, which includes various small merchants, has grown to 15% of total GMV and is experiencing triple-digit growth [29][32] Market Data and Key Metrics Changes - The company is seeing healthy consumer trends, with consumers willing and able to repay loans, indicating a stable economic environment [15] - The ABS market remains constructive, with recent deals priced with spreads under 100 basis points, reflecting strong market confidence [48] Company Strategy and Development Direction - The company is focused on expanding its network and aims to be universally accepted across various retail sectors, similar to major credit card brands [109] - The decision to explore new verticals such as home improvement and medical is driven by consumer demand and the goal of building a comprehensive service network [108] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the current consumer health and the ability to manage credit effectively, with no significant disturbances noted in the market [94] - The company is tracking regulatory developments closely but has not identified any immediate concerns regarding potential caps on BNPL rates [70][71] Other Important Information - The company has applied for a bank charter to enhance regulatory certainty and potentially unlock new products and services in the future [38][39] - The Boost AI product is still in early stages, but it is expected to enhance merchant engagement through automated A/B testing [46] Q&A Session Summary Question: Can you discuss the dynamics of growth with the top five merchants? - Management noted that the top five merchants for Q2 of FY 2026 are different from the previous year, and the business is diversifying well despite some concentration [11] Question: What are the current consumer and credit trends? - Management indicated that consumers are healthy and willing to repay loans, with no significant deviations from previous quarters [15] Question: Can you elaborate on the RLTC margin trajectory? - Management expects RLTC take rates to hover around 4% for the remainder of the year, with transaction costs benefiting from favorable funding conditions [21][22] Question: How is competition affecting merchant pricing? - Management stated that aggressive promotional strategies from competitors have not impacted Affirm's pricing or market position [26][28] Question: What is the growth outlook for the Affirm Card and international expansion? - The Affirm Card is a significant growth driver, with plans for further expansion in the UK and other international markets [61][62] Question: What is the current state of the ABS market? - Management reported strong execution in the ABS market, with favorable pricing conditions and high confidence from investors [48] Question: How is the regulatory environment evolving? - Management is actively monitoring regulatory discussions but has not seen immediate threats to their business model [70][71] Question: What are the implications of entering new verticals? - Management clarified that new verticals are based on consumer demand and are part of a strategy to build a comprehensive service network [108]