Affirm Holdings Inc Q4 2024 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Jason Kupferberg - BofA Securities - Analyst : Hey, thank you, guys. Good to see these numbers. I was curious if you could comment just as we think about fiscal 2025, guidance, just your general approach to assessing what the credit environment might look like. You obviously continue to control that extremely well. And maybe as part of that in this category of fiscal '25 assumptions, I know you said that B2B and some other newer initiatives, including the Apple Pay partnership are not expected to be material. But can you maybe tell us a little bit more about how you guys define material? Because it sounds like there may be something in the numbers for it, but would just love to unpack that a little bit. Thank you.

Question: Jason Kupferberg - BofA Securities - Analyst : Very helpful. Thank you, guys.

Question: Reginald Smith - JPMorgan Chase & Co. - Analyst : Hey, good evening, and thanks for taking the question. I guess we've seen the business perform in a rising rate environment. I'm curious how you're thinking about the business in a potentially falling rate environment. And I'm curious around two things really, consumer spending, and then thinking about, I know you guys price each transaction uniquely with the APR. And I'm wondering if there may be some benefits to your model versus traditional credit cards, where the rates are pegged to the prime rate. And is there any play area for play in there in terms of pricing on the way down? Thank you.

Question: Ramsey El-Assal - Barclays Bank PLC - Analyst : Thanks so much for taking my question this evening. RLTC fell above nicely above your range this quarter and I know you called out a presumably nonrecurring $30 million benefit from a single securitization. What are the key puts and takes we need to consider for our RLTC performance in 2025? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 28, 2024 / 9:00PM, AFRM.OQ - Q4 2024 Affirm Holdings Inc Earnings Call Sort of in your internal planning, what are shaping up to be the bigger variables to keep in mind? Do we need to see Fed rates come down, funding costs come down a certain amount. Do we need to see credit performance hang in at certain levels? Where are the pressure points next year?

Question: Ramsey El-Assal - Barclays Bank PLC - Analyst : Got it. Thank you.

Question: Will Nance - Goldman Sachs Group, Inc. - Analyst : Hey, guys. Nice results today. I appreciate you taking the question. I wanted to follow-up on the kind of dovetailing off the earlier point around having a lot of control and visibility into the credit outcomes that you expect when you set the underwriting targets. I thought the stats in a different direction, the stats in the shareholder letter around the number of repeat users and repeat transactions increasing over time. I thought was interesting. And so I'm wondering if your visibility into forward volume is increasing to kind of a similar way where you now have a much better picture about how the volume trends might shake out over the coming year? I just thought it was interesting the increases in number of transactions per user and the number of repeat users. So how is that impacting the way that you look at the business internally and kind of plan for the coming year?

Question: Will Nance - Goldman Sachs Group, Inc. - Analyst : Appreciate it.

Question: Andrew Bauch - Wells Fargo Securities, LLC - Analyst : Thanks for taking the question, guys. I wanted to talk about the sources of operating leverage there in the guide here. I mean you're calling for 18.4% AOI margins. I think that's a little bit better than what you had previously been guiding for, for the growth above 20%. So just wanted to get your thoughts on that as given the current growth profile and the strength of that number?

Question: Robert Wildhack - Autonomous Research US LP - Analyst : Hi, guys. Maybe to take the earlier question on rate cuts and funding costs connected to the '25, outlook. Could you give some color on how much the current rate curve and expectations might be benefiting approvals in fiscal '25? And in that light, how much it could benefit the growth outlook? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 28, 2024 / 9:00PM, AFRM.OQ - Q4 2024 Affirm Holdings Inc Earnings Call

Question: Robert Wildhack - Autonomous Research US LP - Analyst : Okay. Thanks. Would that mean then that if you get to say spring 2025, and rates are a lot lower than they are today, there would be potential upside on approvals? Because of the lower interest rate environment and lower funding costs?

Question: Robert Wildhack - Autonomous Research US LP - Analyst : Okay. Very helpful. Thank you.

Question: Kyle Peterson - Needham & Company LLC - Analyst : Great. Good afternoon, guys. Thanks for taking the question. I wanted to touch a little bit on the outlook and particularly your growth expectations kind of between in the merchant network and card network revenue and interest in gain on sale and such. I guess which bucket are you guys expecting to be bigger contributor to growth in FY'25? And just how should we think about the split between the revenue streams? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 28, 2024 / 9:00PM, AFRM.OQ - Q4 2024 Affirm Holdings Inc Earnings Call

Question: Kyle Peterson - Needham & Company LLC - Analyst : Got it. That's helpful. Thank you.

Question: Dan Dolev - Mizuho Financial Group Inc - Analyst : Thanks. Great quarter, guys. And then congrats on the GAAP profitability in the fourth quarter. I wanted to ask about Apple Pay later. I think a couple of years ago when they announced that they're getting into by Buy Now Pay Later, the Affirm's talk was under pressure. Two years later, they capitulate, and you guys are handling the volumes. Like is there, maybe you can talk, Max, a little bit about like the fact that it's much more difficult to do Buy Now Pay Later than a lot of people think that it's just a product without a brand and without the ability to take risk appropriately because sounds like from an Apple perspective, there's much more to Affirm than what a lot of people were thinking?

Question: Dan Dolev - Mizuho Financial Group Inc - Analyst : No. This is super helpful. Well amazing results and congrats again on the promotion for both Rob and Michael.

Question: James Faucette - Morgan Stanley - Analyst : Thanks very much. I want to build a little bit on that last point there, Max. And just ask kind of in a more generalized way. How you're feeling right now about kind of the composition and profile of your customer base? And what are you thinking about in terms of ways and tools including some of those promotional capabilities you talked about to expand and maybe even improve such that you can get even beyond kind of that Affirm Card level of $7,500 in annual spend to something even better than that?

Question: James Faucette - Morgan Stanley - Analyst : That's great color. Thank you.

Question: Timothy Chiodo - UBS - Analyst : Great. Thank you for taking the question. I wanted to circle back on Apple Pay a little bit. Totally appreciate that for a specific customer, you might not want to go into too much detail, but I was hoping you could talk a little bit about the expected user experience with Affirm being at, I believe, at the onset maybe one of the main or only options for US online commerce, but the idea would be that over time, consumers using Apple Pay would have multiple options maybe other Buy Now Pay Later options. But also some of the card-based installment offerings. So if we could just talk about the user experience there and maybe the drop-down menu if you will. And then the second piece is around the unit economics, if the full range of products will be offered throughout that channel so that we should expect the unit economics to be still in that 3% to 4% range, maybe absent some degree of revenue share back to Apple? Thanks a lot.

Question: Timothy Chiodo - UBS - Analyst : Perfect. Thank you, Max.

Question: Matthew O'Neill - Financial Technology Partners - Analyst : Thanks for taking my question, Max and Michael. Just wanted to focus in again on the I guess what you bolded in the shareholder letter around the intention and expectation to be profitable in this fourth quarter and therefore beyond and sort of dovetail onto some of the discussions that we had at the Investor Day around a longer-term aspiration of formalizing as a bank and so forth. Does this sort of accelerate that plan at all? Is that still something on kind of the medium-term time line? Any thoughts around that would be helpful. Thanks.

Question: Matthew O'Neill - Financial Technology Partners - Analyst : Understood. Thank you.