Release Date: November 07, 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 unit economics, with increased revenue from interest income and merchant fees.
- The company is experiencing healthy consumer growth, attributed to capital availability for incremental approvals.
- Affirm Holdings Inc (AFRM) is benefiting from a strong forward flow market and consistent ABS execution, enhancing its funding stability.
- The company is well-positioned for the holiday season with aggressive 0% promotions, supported by strong unit economics.
- Affirm Holdings Inc (AFRM) has successfully accelerated active consumer growth, focusing on increasing user engagement and transaction frequency.
Negative Points
- The company faces a competitive landscape, particularly in the UK market, which is already well-served by existing players.
- Affirm Holdings Inc (AFRM) must navigate regulatory scrutiny, especially concerning sponsored banks, which could impact product rollouts.
- The impact of declining benchmark rates on funding costs will take time to materialize, affecting immediate financial benefits.
- The company is cautious about maintaining a stable funding base across channels, despite favorable market conditions.
- Affirm Holdings Inc (AFRM) is not updating its long-term margin outlook, indicating potential uncertainty in sustaining current performance levels.
Q & A Highlights
Q: Could you unpack the uplift to revenue as a percentage of GMV for the full year and the drivers of RLTC coming up from 10 to 20 basis points?
A: Michael Linford, CFO: The business continues to have strong unit economics, earning more through interest income and price initiatives. We benefit from capital markets, impacting gain on sale, and have further upside with merchant fees through flexible credentials, all contributing to margin improvements.
Q: Can you provide more color on your current underwriting posture and where you expect RLTC margins to trend?
A: Max Levchin, CEO: Our underwriting posture is largely unchanged, with no major movements in approval rates. We enjoyed healthy consumer growth in Q1 and will continue tuning as needed. We expect strong performance in the back half of the year, with margins in the higher end of the 3 to 4% range.
Q: How does the pickup in secondary market activity impact your balance sheet management and retention versus sale strategy?
A: Michael Linford, CFO: The market for forward flow whole loan purchasers is strong, benefiting from our credit performance and the value of short-duration assets. We maintain a stable funding base across all channels, with consistent ABS execution supporting forward flow execution.
Q: What is the outlook for 0% promotions during the holiday season, and how does it tie to RLTC commentary?
A: Max Levchin, CEO: We see great excitement from merchants for 0% promotions, which help attract new consumers. We expect to leverage these promotions effectively, benefiting from merchant advertising campaigns. Our strong unit economics allow us to be aggressive in meeting merchant needs.
Q: Can you discuss the factors behind the acceleration in active consumer growth?
A: Max Levchin, CEO: The margin improvements allow us to reinvest in deeper approvals and compelling new consumer deals. We focus on reengaging consumers and increasing transaction frequency, achieving higher active user numbers and transaction rates.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
