Affirm Holdings, Inc. Q3 FY2025 earnings call

• The quarter's results show improvement in outlook for current quarter and fiscal year, with leaning into growth opportunities, excellent credit quality, and LTV characteristics while hitting targets.
• Zero APR products have excellent traction, driving brand halo, conversion, and GMV growth, with good credit externalities and being on-brand. Work on reporting back to credit bureaus is important for consumers' credit building.
• Efforts to drive top wallet share, with work on app functionality and addressing user experience holes. Partnerships like Costco and Shopify are in progress, with focus on fine-tuning for profitability.
• International expansion efforts in UK and Canada, with sales doubling down and work on beta periods for Shopify integration.
• Use of AI and machine learning in operations, with GenAI for user interface and machine learning for precise processes like credit underwriting.

No specific segment performance data on absolute terms and revenue contribution % provided in the transcript.

• Improved outlook for current quarter and fiscal year.
• Calls for 34% year-on-year GMV growth, expecting growth to moderate from recent levels.
• Mention of off-balance sheet funding due to a recent non-consolidated ABS deal.

• Potential economic downturns affecting credit performance and repayment rates.
• Regulatory concerns around credit reporting and loan stacking.
• Competition impacting merchant fee rates and profitability.

Q: Andrew Jeffrey asks about balancing economics of zero APR products vs interest-bearing loans and merchant contribution to zero APR product.

A: Max Levchin says zero APR is reactive to merchant requests, drives brand halo and conversion, has better credit quality, and card user acquisition benefits.

Q: Dan Dolev asks about pockets of strength in GMV and Apple Pay.

A: Rob O'Hare says GMV growth was broad-based, with direct-to-consumer services growing faster, and March was the strongest month for GMV growth.

Q: Moshe Orenbuch asks about 0% products as acquisition channel for Affirm card.

A: Max Levchin says zeros are profitable, drive GMV growth, and result in higher percentage of qualified card users; Rob O'Hare adds it depends on portfolio profitability and surplus for investment.

Q: Rob Wildhack asks about assumptions in recession scenario analysis and credit bureau reporting.

A: Max Levchin says it's based on past experience, and credit bureau reporting is important for consumers' credit building, though technically challenging. Rob O'Hare mentions focus on early signs of stress in loan book.

Q: Adam Frisch asks about initiatives for Affirm Card use like debit card and future financial services.

A: Max Levchin says building top wallet is a major effort, with gradual improvements in app functionality and focus on fixing user experience holes.

Q: Ramsey El-Assal asks about Costco partnership and Shopify renewal P&L impact.

A: Max Levchin says Costco partnership is in progress with no immediate impact modeling, and Shopify renewal has no economic concessions but longer amortization period for warrants.

Q: James Faucette asks about app's role in repayment and promotional offers.

A: Max Levchin says repayment is a key guardrail, app is a catalog of merchant offers including 0% offers, and will send more reasons for consumers to check app for offers.

Q: Matthew O’Neil asks about international expansion in UK and AI impact.

A: Max Levchin says Adyen partnership speeds up integration, UK sales are doubling down with education of market, and AI used in dispute resolution and code writing.

Q: Kyle Peterson asks about credit allowance creeping up.

A: Rob O'Hare says healthy repayment rates, slight uptick in prepayments, and allowance rate still healthy despite slight increase.

Q: Vincent Caintic asks about competition and bank charter thoughts.

A: Max Levchin says bank charter not a funding solution, and Michael Linford says competition is intense but pricing is consistent and based on value, not price.

Q: David Scharf asks about 0% loan focus and merchant motivation.

A: Michael Linford says merchants wanting 0% are growth-oriented, and Rob O'Hare says it's accretive to merchant gross margins on direct sales.

Q: Reggie Smith asks about zero coupon offers.

A: Rob O'Hare says ~10% of 0% volume on Affirm Card and wallet partnerships, and Michael Linford clarifies it's about revenue mix and intentional offer directing rather than self-funding in a binary sense.

Q: Unidentified Analyst asks about sales and marketing line.

A: Max Levchin says step down was due to end of warrant amortization expense from a large partner, with similar run rate expected in future quarters.