Release Date: August 28, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Affirm Holdings Inc (AFRM, Financial) reported strong growth and profitability for the fourth quarter of fiscal 2024.
- The company is evolving its leadership structure, with CFO Michael Linford taking on an expanded role as COO.
- Affirm Holdings Inc (AFRM) has successfully managed credit outcomes, maintaining control over credit exposure.
- The company has broadened its access to attractive capital sources, enhancing its financial stability.
- Affirm Holdings Inc (AFRM) is confident in the size and scale of new initiatives, including partnerships with major wallets like Apple Pay.
Negative Points
- The company acknowledged that some new initiatives, such as B2B and Apple Pay partnerships, are not expected to be material in the near term.
- Affirm Holdings Inc (AFRM) faces challenges in a potentially falling rate environment, which could impact consumer spending and pricing strategies.
- The company’s RLTC performance benefited from a nonrecurring $30 million securitization, which may not be replicable in future quarters.
- Affirm Holdings Inc (AFRM) must navigate the complexities of integrating with multiple wallet platforms, which could impact unit economics.
- The company’s growth and profitability are contingent on maintaining favorable credit performance and managing funding costs effectively.
Q & A Highlights
Highlights from Affirm Holdings Inc (AFRM) Q4 2024 Earnings Call
Q: Can you comment on your approach to assessing the credit environment for fiscal 2025 and the impact of newer initiatives like the Apple Pay partnership?
A: Max Levchin (CEO): We control our credit outcomes by underwriting each transaction separately. Our guidance is conservative, and we aim to exceed it. Michael Linford (CFO) added that new initiatives like B2B and wallet partnerships need to be substantial to impact our trajectory significantly. If they become material, it would be upside to our outlook.
Q: How are you thinking about the business in a potentially falling rate environment, especially regarding consumer spending and pricing?
A: Max Levchin (CEO): Lower rates would improve approval rates and increase user activity. Michael Linford (CFO) noted that the rate of change in rates is crucial, and we are well-positioned to react quickly if needed.
Q: What are the key factors affecting RLTC performance in 2025?
A: Michael Linford (CFO): The main factors are the mix of business and credit outcomes, along with our execution in capital markets. We expect a 10 basis points expansion in RLTC percent of GMV due to our strong position in capital markets.
Q: How is the increasing number of repeat users and transactions impacting your business planning?
A: Max Levchin (CEO): The increasing engagement shows significant opportunity. We forecast based on current trends and have many ideas to further improve user engagement and transaction volume.
Q: Can you discuss the sources of operating leverage in your guidance for fiscal 2025?
A: Michael Linford (CFO): We have made significant progress on operating leverage, and we plan to continue expanding margins while investing in growth opportunities.
Q: How might the current rate curve and expectations benefit approvals and growth outlook for fiscal 2025?
A: Michael Linford (CFO): We do not explicitly factor future rate expectations into our decisioning. However, lower funding costs over time could improve approval rates and growth.
Q: How do you view the impact of Apple Pay Later on Affirm's business?
A: Max Levchin (CEO): Apple Pay Later validates the importance of Buy Now Pay Later. Affirm's expertise in underwriting and merchant partnerships makes us a strong partner for Apple. This partnership is an embracement of the complexity and value of our offerings.
Q: What are your thoughts on the composition and profile of your customer base and ways to expand it?
A: Max Levchin (CEO): We segment our customers and tailor products to their needs. The Affirm Card is a universal product that can offer various promotional deals to different segments. We aim to increase engagement and transaction volume through targeted features.
Q: How does the expectation of GAAP profitability impact your long-term plans, including the possibility of becoming a bank?
A: Max Levchin (CEO): GAAP profitability is a natural progression of our business. Becoming a bank is not a requirement for our operations, and we are focused on achieving profitability through organic growth and efficient operations.
Q: Can you provide more details on the user experience and unit economics of the Apple Pay partnership?
A: Max Levchin (CEO): The user experience will be seamless, and we aim to maintain our revenue less transaction cost metric within the 3% to 4% range, ensuring profitability across all channels.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
