Affirm Aktie

All right. We're going to kick this off. We are very excited here to have Max Levchin yet again from Affirm. Max, thanks for joining us. Really looking forward to the conversation again.

Thank you for having me.

All right. So at the Investor Forum in May, you framed the business around $100 billion in annual GMV. You laid out a 25% growth algorithm with 10 points each coming from your point-of-sale product, your direct-to-consumer franchise as well as 1 to 5 points from some of the more fledgling products, international expansion, the bank distribution. When you look across those buckets, where do you see the biggest go get? And what do you think needs to happen to get there?

It's actually kind of designed to be not dependent on any one thing. So we certainly have lots of room to go in the U.S. alone. In the last shareholder letter, we pointed out that we're still fairly thin in terms of penetration into top 500 e-commerce retailers. Off-line is still very nascent. So just growth of that type alone could take us to our goals, but we're certainly plenty ambitious. So none of these, at least the ones you quoted, feel to me like, "Oh man, I better put the E team on that." We don't have a B team fortunately. We're a well-run machine, so B team don't survive. But some of the more interesting stuff that is in the other product bucket is what I consider to be the go against because there are exciting opportunities to expand the product offerings and just to widen the network.

Yes. Makes sense. All right. So you don't have a B team. I would argue you kind of have an A team. You've been talking more recently about your own personal SWAT team and some of the exciting things you're getting to do with it. You made some leadership changes more recently that I think the goal was to kind of give you more bandwidth to focus on this kind of 0 to 1 project initiative that you have. So can you talk a little bit about what has enabled that and how your day-to-day role in the organization could change?

Sure. Those who are -- if all of you are paying attention to the coming and going of my executive team, I apologize. But just on the odd chance, not everybody is parsing through my team announcements. There's been no team changes. There's only been responsibility changes. So I'm fortunate in a sense that the totality of my direct and their direct with very few exceptions have been at Affirm for 5-plus years. My direct reports, I think, average last I looked were something like 7 or 8 years. So I've had a very successful partnership with a handful of people I consider my betters in certainly the ability to execute and many other things.

And the 2 players that have -- 2 executives that have been kind of my strongest supporters and folks I lean on to for everything, both sort of the emergencies and the long terms are Michael, our now President and just recently, Chief Operating Officer and Libor, who has almost the co-founder has been at Affirm almost as long as I have, who started as our CTO and is also a President of ours. And so very recently, I basically realized that the company is already effectively managed by these 2 guys and consolidated all responsibilities under the 2 of them, primarily from the recognition that they are, in fact, better operators than I could ever hope to be.

We're also not trying to improve as an operator. What I am trying to do is figure out how to grow Affirm not just to $100 billion of GMV, but to $200 trillion, whatever -- wherever the opportunities take us. And so this consolidation of reporting and 0 people were asked to leave Affirm, and I'm very pleased to hear that even as I sort of moved the deck chairs a little bit, no one felt slided and decided to leave the company. So the executive team is exactly as it was at the beginning of this change.

But what I've done is I've freed up a significant amount of my own time to work with the team we know internally as DT1, 0 to 1. And that team reports directly to me it's a handful of engineers, a handful of product managers, an analyst and sort of full-time operator. And so it functions essentially as a lab, sort of a startup within a startup, if you will, where we work entirely on what we call the next set of S curves. So the card, now a large, maybe the most interesting thing we've come up with in the last few years, came out of DT1. The next set of to the moon and beyond or infinity and beyond curves that we hope to launch will come out of this team.

My involvement -- just to give you a tangible sense for what that looks like, my involvement with DT1 until these org changes was on the order of 45 to 60 minutes per week, which was kind of the breadth of fresh air that I wanted and was looking forward to every week because that was the moment where I get inert out and maybe even write some code sometimes or certainly read and write some specs, which has now flipped into multiple times a week for a handful of hours. Tomorrow, as it happens, is my DT1 in person, which will start as early as I get off the bike and will end with probably very late at night. So I'll spend the entire day working with a handful of people just discussing, prototyping, looking at data very deeply, et cetera.

And so if it sounds like I'm excited about it, I really am because I think that's the best insurance policy I can take out on making sure the card is not the last 100% year-over-year compounding project we have. I hope to launch. The goal is to launch one of those every year. That's not the hard goal, but that's the -- that's what we will ensure we get to the $1 trillion of GMV, hopefully, a handful of years from now.

So I guess with the amount of extra time you're spending now with that team, is that once a year time frame significantly faster than what you've been able to do historically? Like other than the card, are there other examples of things that have seen the light of day out of that project?

Yes. There are. I will avoid calling them out simply because I don't want to set the expectations that each one is going to be as successful as the card. But I was bragging to someone else. I'll give you a nonanswer answer, but I'm excited about this one today. So this is what you guys.

So in the last letter, I pointed out that the rough spend -- total spend of a consumer that has the Affirm Card in their wallet is about twice the spend of an average Affirm consumer. So it's roughly goes from $2,000 to $4,000, a few dollars difference. Within DT1, we have built a product, and this product has been around for a little while. So this is something you can actually kind of piece together by just looking at the various things we've released. Within that product, the consumer spend is now $8,000, which is slightly north of the target we set for the cardholder at peak.

So this is -- this particular statistics print or dashboard glance as recently as the last 48 hours or so I am obsessing over exactly what else can I know about this consumer. So who are these people? What have we done that they are so committed to Affirm that they're basically spending on the order of 80% of their disposable income using our instrument. It's not a huge group just yet, but I'm going to spend a lot of time tomorrow figuring out how to make it as big as possible.

That's great. One of the things it sounds like that has enabled you to spend so much more time with this group has been the ability to get so much more work done using AI tools, the ability for you to start writing more code on the main products than you have maybe in the past decade. You talked a lot about the benefits of the organization in the shareholder letter last couple of quarters and talking about the accelerated code pushes, just more development in general being done by AI. I know the business runs pretty lean already. But when you think about changes to the organization directly as a function of some of these AI tooling, like what are the most important callouts?

Our philosophy has not changed. So we're still very focused on do more with the same number of people versus any sort of a where can we cut fast or reduce headcount. That's not why we got into the AI game and that's not where we're headed. It's exciting to watch -- we almost -- Zane did not get his way. He's here somewhere. I promise you I will eventually print the curve that he wanted to show, which shows a very steady reduction in cost per feature shipped.

I say have a year worth of data, maybe we'll show, but it's sort of -- it's an unbelievable chart to show like here's how many dollars we spend making a feature of Affirm Card or Affirm anything, and it just marches down and down and down. In the world where you can continue lowering the cost and increase speed, you don't want to reduce the number of people who can drive this kind of value. And so we don't expect to need or want to change the contour of the team, but we're able to drive productivity effectively at the same headcount, which is kind of amazing.

Stick with the theme of AI for another one. You've announced a number of integrations and partnerships around Agentic commerce, and there have been a lot of ebbs and flows around the intensity of focus around Agentic over the last year, initially pushing really hard and then some of the Frontier labs maybe reprioritizing earlier this year. There's a range of viewpoints from large merchants about how all this is going to work, who's going to own the customer relationship, who's going to be evaluating identity and consumer intent and Agentic transactions. What do you hear from your partners on Agentic? And then how do you think Affirm is positioned in some of the different versions of reality that could take place?

I think I'm on the record including this conference that commerce is not a monolithic thing. There are definitely things that fit very well into agents do this for me, don't come back until you're done, all the way to complex and almost like a mating dance between me and the next bike I'm going to buy. Like I know which one I want, but it's really expensive and it's going to take a little while before I convince myself that that's what I need to spend a lot of money on.

And shopping is a form of entertainment. It's a form of learning. There's a lot of components to it, and that will not change in a way that excludes the human. We derive a lot of pleasure from finding the things that we ultimately decide we have to own. A lot of these [ utilitarian ] stuff is already happening, and it will happen even more. Robot, find me more milk is a thing that I can't outsource too soon. Robot, buy me the best bike of 2026. Not at all. I'm going to read every list, and I'm going to get as much as I possibly can out of that.

And so I think that has always been my assumption. I think for a little while, we lived in this strange world where some people decided to convince themselves that everyone else was wrong. And in fact, there's no value in shopping. There's only value in buying or using and it just isn't true. Like any student of basic psychology will readily tell you like that's not how the world works. The reason advertising is important is because it gives you inspiration. It's not there to hammer you over the head with like you must buy this thing. It's there to make you feel or to tell you what it will feel like to own the thing that is in front of you. And different products are advertised differently. Toilet paper is not advertised the same way fancy bikes are advertised, but that's sort of nature of the.

And advertising is the cornerstone of shopping and commerce, including Agentic. And you can readily see that the industry is pivoting towards that quickly. The headlines have recently changed from OpenAI engineers will write the robots that will buy whatever it is you want to OpenAI's advertising business is skyrocketing. And it is, in fact, because they realize that the other or one of the other viable alternatives in the world of LLM frontier development is none other than Google. And by the way, it's the advertising business that pays for the GP user in their case, TPUs and so on.

So I think generally speaking, we're headed in the direction that not to take my horn too much, but we've been predicting for quite some time at Affirm will get there. I think advertising is going to be very important. There's a bunch of really good work on standards that are being done to make sure that different LLMs, different chatbots come to kind of the same approach, the same approach to just information exchange, authentication, anti-fraud discovery. And so all of that is heading in the right direction. But I guess it will take a while. And there's nothing wrong with that. I think we're -- I'm generally very optimistic about Agentic shopping, but I do think it's going to be a journey versus an overnight switch.

Makes sense. All right. Pivoting to the card. Card has continued to compound, growing over 100%. It's moved from single digits to almost 20% of GMV. You've also been clear that I don't think you've ever really marketed it outside of the existing base. And with the loyalty program on the way, an app redesign rolling out, could we see more forceful marketing of the card in the road map? And maybe if not, what are the constraints that have kept you from leaning in harder to date on more targeted advertising drive?

Never say never, but we're pretty far from saturation of the card within our existing base. And so it's very hard to justify a spend of any size other than -- so we constantly test market. Every time I say we never market anything in spirit is 100% true. Dollars and cents, it's like 99.5% true. We run -- we're not so proud of -- we know our way in no other way is interesting. We constantly test and try to find out the answer to the question, all right. So if we wanted to go market a thing, what would be the cost of acquisition.

We are extremely fortunate to be promoted by our merchant partners at their point of sale, effectively resulting in something that resembles zero CAC. That's a great business if you can have it, but it doesn't obviously need to know what that CAC would be if you chose to advertise. And so we know what those numbers are. They're not nearly compelling enough for us to go spend any meaningful money. We'll continue testing. And at the point where these things become -- these things being a possible CAC becomes somewhat interesting, we'll do more testing. But for now, we've underwritten 70-plus million Americans. We've transacted with 50 million-ish, the active numbers last trailing 12 were 26 million, 27 million, if I remember correctly. So that's a lot of consumers to give a card to that have a very real relationship with.

By the way, when we count actives, unlike some of our esteemed competition, we're only counting people who have initiated a transaction in that period versus have been coming to our app to pay us back. So the actual addressable base at any given point is very, very large. And the active card base as big as it is, it's not even 10 million. Like it's a long way before we start saying, "Oh my God, where will the next card consumer come from?"

So never say never. I think the more aggressive posture in marketing the card will look like us saying, hey, you've transacted with us once before. You really ought to learn about the card more than the current, which is very polite sort of like we know you're busy, your time is valuable, you're paying your bill. If you would like, there's a door, you can check it out, the card is behind that door. Like we can obviously be a lot more in your face and aggressive. And we tend to be very careful. I was complaining to our team yesterday about not getting enough e-mails from Affirm on Labor Day. And they said, like remember, we practically reach, reach, not frequency. So we're not trying to saturate the airwaves with must get a card. But long before we start trying to talk about the card outside of the Affirm walls, we need to saturate the walls that we have. And that's a very, very large base.

One of the best areas of investment in the card and in customer acquisition is just the surface areas that your products sit on, the way that customers come in the front door and the point-of-sale side of the business.

I wanted to maybe talk specifically about the 0% strategy. It's been a lot of focus over the last 2 years. And I want to maybe take a step back because we often get asked about the mechanics for how you scale this product efficiently over the network without going to each individual merchant and negotiating custom MDRs and things of that nature. So can you talk about just the channels that help you scale 0% distribution and make it easier for merchants of all sizes to participate in, whether it's the wallet partnerships, PSP partnerships and so on. And I think it also might be helpful to talk about how 0% offers work on the card when people use the Affirm Card.

There's a lot of there. That's probably several layers in one question. I'll try to hit them all, but if I skip something, feel free to point that out.

There's a bunch of different things that have to come together for 0% programs to work across Affirm. So kind of in no particular order, but there's 5, as I'm counting in my head, different technologies that we have to build. So one of the things that Libor likes to say, we embrace channel conflict. So as an active participant in digital wallets and our own card, which we love for people to use and direct integration with hundreds of thousands of merchants and integrations with ISVs and platforms, inevitably, these days, you go to a merchant and there's 3 different ways or 5 different ways to pay with Affirm by going through different doors.

it's very important for us that no door is better or worse than any other one. Otherwise, we are actively discouraging a partner from supporting us or promoting us. And so we have an entire initiative called UFP Universal Financing Programs, where, generally speaking, with very few exceptions, if you are at a merchant X and you're trying to pay with Affirm, you are going to encounter basically the same deal. There's some exceptions, sometimes some promotion doesn't get updated in time, et cetera, but that's very much an exception, not the rule. The rule is if you decided to pull out your favorite digital wallet and then put it back in and pull out your card, if there's 0 available, you're going to find it in both places. And if you're going directly, you're going to find it.

So that infrastructure has existed for a few years. We built it primarily as we scaled with digital wallet and ISVs and that was quite an undertaking. It's more than just a technology. Obviously, technologically, there's some complexity around how do you settle, things like settlement time, time value of money comes into play, et cetera. The more important piece is the ability to change terms as the terms come up in one source, they need to be reflected in all the other channels. So there's also a legal component where the contracts with merchants, the things that they sign allows us to change these pricing, et cetera, within the confines that they can configure out, et cetera. So UFP is kind of one piece of it.

The other piece of offering these zeros is the ability to offer them not as a blanket product. So it's very easy to say, hey, let's just give everyone no interest at all. It will be great. You can imagine that is a very, very expensive fare, especially if we're talking about longer term. So our calling card from the very beginning has always been these long-term loans, where you're not just getting a 0% loan for 6 weeks or 3 months, we will go as far as 4 years sometimes where consumer really pays no interest. And if it is your first time, I range against the idea of deferred interest because I hate the notion of we promise you a 0%, but don't read define print because it might flip and become retroactively compounding some horrible sounding number.

And so any time Affirm promises you a 0% loan, it is, in fact, a real 0% loan. You can be delinquent. You can take a break. I hope you don't. But if you take a break from paying us for a year, you'll still eventually pay 0% of interest because that's the promise we make. That's the brand we've built. We are the transparency first lender, et cetera.

And so to make sure it is not prohibitively expensive for the merchant who's paying for the zeros, we built what initially was known as Adaptive Checkout, eventually became Adapt AI and then culminated in this thing called Boost AI, which all the acronyms or all the fancy terms boil down to one very specific thing. Any time through any of these doors where Affirm is offered, as consumer goes through based on the best possible highest converting probability anyway, lowest cost to the merchant, that is the offer that the consumer will see. It also has to be synchronized with the advertising the merchant can do, both technically and legally. There's many restrictions around Reg Z has a bunch of things to say about truth in advertising as it pertains to loans being offered.

So you can imagine there's a very complex piece of infrastructure that figures out something like if you're going to merchant X and you're looking at a price and it says as low as 0% that typically means that we've already been able to underwrite you and decide that you're almost certainly going to qualify for a true 0%. And that's what you'll see as you check out. So that's Adapt AI and Boost AI together.

Finally, not every merchant actually has the margin to subsidize zeros as much as they love them. By the way, 0% loans are fantastically conversion inducing. So a typical impact for a merchant, if they offer 0% for these longer-term higher ticket items, something like an 80% increase in basket size and on the order of 25% increase in conversion. So these are outlier best marketing tool you can possibly imagine.

These are also slightly less profitable for Affirm or any lender trying to do this because there's no consumer interest at all. And so underwriting that goes into this has almost no room for error. If you scrub underwriting and you make too many 0% loans or too many low interest loans, you're going to end up with a book that's upside down. And so underwriting is a key underpinning, which is why all these AI pieces have to come in to make sure that we don't offer offers we cannot support.

To make sure we have enough margin to actually subsidize enough loans to make this as compelling as I just quoted for these merchants, we ask -- first, we talk to every vertically integrated merchant and say, look, you're probably sitting on a 40%, 50%, 60% gross margin. You would be foolish not to give us 7%, 8%, 9% of it so that we can turn this into a bonanza 0% deals. Some merchants do this all the time, all day long because they love it. If you look no further than some of the famous sports brands or sports equipment brands of yesteryear, they typically run 0% programs the entire year. They don't wait for Christmas sales. Some of the brands that we work with decide that they only want to do this during sales, retail calendar, et cetera.

Another way of funding these is what we call BSP, Brand-sponsored promotions. This works really well for general merchandisers that have many, many brands on their shelves, virtual or otherwise, where it's the brand that's actually paying for the sponsorship. So this is now a 3-way transaction. Affirm is underwriting, promoting, pricing, presenting the deal. The retailer ships, fulfills, et cetera, but it's the brand that's kicking in their margin to subsidize the 0% deal.

In a normal time or a normal world, this is a 3-way deal that has to be signed every time. Like this does not scale. And we didn't invent this idea. This has existed in banking and cards world for quite some time. But it's typically limited to like a few of these out time because there's such a pain to actually make sure there's a meeting of the mind, so schedule dependent, budget dependent. It also revealed information about who has what margin to offer, which is never a good idea, retailers and brands notoriously hide margin from each other. So we built a platform that allows us to facilitate these deals without revealing too much information while offering all the participants still a lot of transparency into what's happening.

If I confuse the hell lot of you with all of this, don't worry too much about it. It works beautifully. I almost quoted the percentage of the BSP 0 volume in our last letter, but decided to hold back, but it's a good number, and it's growing really well. But I'll have one last PS on this one.

So everything I just rattled off, if it makes sense, cool. I'm glad you're following it. But it doesn't make sense. Don't worry about it, just yet, BSP is the largest project DT1 is working on. So this is the next big thing that came out of DT1. It's now live enough where it's running hundreds of millions of dollars of volume. So it's far from experimental. I have a lot of confidence that it will scale into a very, very large product for us, and it came out entirely of DT1. So by the time it is at the $1 billion scale, I'll also figure out a way to market it, both to investors and to analysts. The good news is that it markets itself really well to merchants and brands and consumers only need to understand that when they come into Affirm, they see a 0% deal, there's no asterisk. They're not going to get screwed. It's a true 0% deal. And so it's one of the finer examples where the product is easy to explain. The underpinnings are actually very, very complex.

There was a lot there, but I think a lot of it centered on just the creative ways that you guys think about distribution. Maybe pivoting to some of the other distribution channels you have. I think the wallet partnerships have been a consistent call out in the letter, both as a driver of GMV growth as well as a big contributor to active merchant count and particularly nonintegrated merchants and merchants that you don't work with on a direct basis.

How do you see wallets contributing going forward? And then how do you think about it both from a volume generator, but also from a customer acquisition channel as well?

I think we've been very fortunate to be partnered with some of the best digital wallets. And the initial expectation for us was certainly it's another door. If people can't go through it and find Affirm where they expect it, that's a problem. We have to address it. And so we mostly came at it through with a point of view of we just have to make sure Affirm is supported inside like fill in your favorite digital wallet.

The good and sort of maybe slightly unexpected news is that it has turned out to be something of a growth channel, customer acquisition channel for us, which we've been very happy to lean into and are continuing to do so. If you expand your definition or expand your mind slightly when you think of digital wallets to include some of the more agentic first sort of chatbot interactions, even things that have happened inside some of the browsers most recently, you can pretty quickly see how this could be a huge source of new consumers. There's amazing features inside Chrome and really all the browsers that have come out recently as every one of these companies have prepared for kind of what shopping looks like in a world of AI.

We integrate with, I think, all of those at this point, and it's been a great source of both transactions and recently user acquisition. So it's -- I think it's the sort of thing that probably speaks for itself. We can actually test it out and just see how well it works. And I know some of our people, some of Affirmers believe that the best way to use Affirm is actually through one or some of the digital wallet. So it's definitely very much a first class as far as integrations go.

That's great. Another distribution channel that's been a pretty big theme this year has been around ISVs. I think Intuit and QuickBooks in particular, as well as Service Titan. What have you learned from the early innings with these big platform relationships? And I guess, a, how does the product need flex for services versus the traditional retail channels you operate in? And then how do you think about other verticals that are potentially good fits for ISV distribution?

It turned out to be kind of a pretty amazing thing. I mean we obviously knew when we were signing up for trying to partner with folks at Intuit and Service Titan, et cetera. So like we always understood there was a ton of opportunity and came to that with great gust and ideas.

The thing that we were kind of blown away by is the richness of use cases. And it's always very easy to say, cool but not today when you speak to, I don't know, cosmetic surgery clinic, someone who runs one of these places will tell you, "Oh my God, half of my volume is financed, and I hate my provider, they're complicated, they overcharge. I don't have any transparency. Consumers don't like them. Would you guys please build something?" It's like, sure, but we have no idea how big it is.

Partnering with ISVs gives you this instant sort of very compelling picture like that's a [indiscernible] $100 billion industry. You figure out 1% of that that's a lot. That actually still adds up to the targets of today. And so I see are as much about just gaining volume, partnering with good people, but it's also about learning that things that appear niche as you talk to merchants, and I spend a lot of time talking to merchants and certainly our revenue team does, sometimes would benefit greatly by just zooming out and saying, wait a second, like what is that inside some giant ISV report that we get like, wow, like that's a much bigger than I expected. And so that gives us inspiration to customize the product because we understand just how big the opportunity is.

So it did not enter my mind that elective medical was going to be an enormous opportunity for us until we saw just how big of an inside a couple of ISVs actually that serve that industry. And intuitively like, well, it's big, but like how big could it really be? I mean like, actually, it's enormous, and we should be so lucky to go and build the right products for it. And so it's a source of engineering and product innovation for us. We're very committed to partnering more. Now that we've done a bunch of these deals, we actually understand what success looks like. We know where we can go fast, where we have to go step by step. We -- maybe one last thought on that one. I said it before, maybe even from this stage, there's as big an opportunity in what we do in small business as it is in consumer. One of the things that ISVs teach you very quickly is that it really is that big. So there's plenty of B2B products that this genre of borrowing needs, and we'll certainly have something to say about that at some point. Another good detail on project maybe.

Okay. One -- I think our last question probably, but you mentioned before we got on stage, you were fresh off the [ taste ] from London, I believe, 24 hours ago. International expansion has been a big topic, part of the growth algorithm that you've articulated over the next couple of years. You've launched in several different markets, but I think the U.K. is probably farthest along. So maybe talk a little bit about early learnings so far, the market receptivity and just how quickly that playbook can be compressed and replicated in newer markets?

So far, so good. I was just in the U.K. last few days and met with a handful of merchants, some of the larger ones that we have either won, haven't launched or are trying to win. The good news is that we were right when we said that the market wants our brand of products. Obviously, U.K., they well address buy now, pay later market. Australia, where we just launched Shopify is extremely well addressed. That's one of the original players comes from Australia. And so the risk is always maybe they have it all figured out. We don't add a lot of value. That is not the case. In the U.K., the conversation is focused entirely around how longer terms really matter, how they love the transparency, how they love the no late fee posture. They love the clarity we bring to the idea of we will not market brand A to brand B customers just because both are paying us. Plenty of merchants are concerned with leakage of data, the way we sort of built our company, I think, provides a lot of assurance that we will not quietly monetize our own customers against each other.

And so I think that's been very successful so far. Obviously, U.S. is still growing so quickly. It will be a little while before international volume starts becoming a big noticeable part of the overall, but it's going really well. We have a handful of brands we're excited to hopefully bring over the line in a minute now. And we're definitely fully committed to it. One of the major things that we did organizationally, we have now created a role of an SVP whose sole job is driving international strategy across the globe from the top, which -- it's not like we didn't know what we were doing. It's as though we didn't have a strategy, but now having someone who has who wields significant amount of power influence happens to be someone who's been at Affirm also for a dozen years. So having someone who's very senior, this one Pat is going to do great for the team's confidence in our conviction, but also just access to top-level resources.

So very excited about that. I'll be back in Europe in less than 2 weeks. So I'm personally involved in a lot of the international work, too.

Hopefully, back in a year and more to say.

Yes, I should hope so.

All right. Well, that does take us time, Max. There's always a lot to cover, but really appreciate the time and all the thoughts on the business, and thanks for being with us today.

Thank you.

Good afternoon. Welcome to the Affirm Holdings Fourth Quarter Fiscal 2026 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded, and a replay of the call will be available on our Investor Relations website for a reasonable period of time after the call. I'd now like to turn the call over to Zane Keller, Head of Investor Relations. Thank you. You may begin.

Thank you, operator. Before we begin, I would like to remind everyone listening that today's call may contain forward-looking statements. These forward-looking statements are subject to numerous risks and uncertainties, including those set forth in our filings with the SEC, which are available on our Investor Relations website. Our actual results may differ materially from any forward-looking statements that we make today. These forward-looking statements speak only as of today, and the company does not assume any obligation or intent to update them, except as required by law.

In addition, today's call may include non-GAAP financial measures. These measures should be considered as a supplement to and not a substitute for GAAP financial measures. For historical non-GAAP financial measures, reconciliations to the most directly comparable GAAP measures can be found in our earnings supplement slide deck, which is available on our IR website. Hosting today's call with me are Max Levchin, firm's Founder and Chief Executive Officer; Michael Linford, a firm's President; and Rob O'Hare, Affirm's Chief Financial Officer. In line with our practice in prior quarters, we will begin with very brief opening remarks from Max before proceeding immediately into your questions. With that, I will turn it over to Max to get started.

Thank you again. As always, the performance as good as it is. I'll keep the prompt remarks brief. As you may have noticed, fiscal fourth quarter was our most profitable quarter ever, even without the tax allowance release. Companies thriving in the core business is firing on all business. I'm excited to announce that our veteran execs, Pat and Michael Enfora promoted to SVP GM of Global Markets and President, respectively, setting us up for an even tighter execution and allowing me to get even deeper into developing our next generation of products and services. WIth that, happy to address your questions. Back to you, Zane. .

Okay. Thank you, Max. Now let's get to your questions. Operator, please begin the Q&A session.

[Operator Instructions] Our first question comes from the line of Adam Frisch with Evercore ISI. .

Congrats to you, Mike, on a well-deserved promotion. Max, at the Analyst Day, you said you're most excited about things you can't really talk about yet. If precedent holds on the initial guidance and how you ultimately will end the year, growth in fiscal '27 should again be terrific, but with investors focused on the sustainability of high growth rates, when should we expect to see some of these initiatives start to show up in future years? And do you believe that over the long term, a firm needs to or should offer consumers multiple financial products and services in addition to what you do today?

Thank you. It's a compound question. I'll go backwards. We already offer multiple products to consumers today. So the answer to, should we do that, we think is yes, otherwise we wouldn't have built all these other things. For the moment, majority of our products are various expressions of offering credit but not necessarily at the point of sale. It also comes obviously in a form a card. We have an account. We have a version of our product that works for business purchases. So we've already spread into several other subcategories, including verticals that we addressed. Actually, there's a bunch of that in my note as well. .

So we absolutely expect to continue expanding. In terms of when these things will show up, I think this is probably a question for our CFO and Michael in sort of how we set guidance. But the -- a big part of the expectations from this promotion that Michael got and my own focus is I plan to spend a lot more time working on things that will only show up in fiscal '28, '29 and so on. And so the numbers we're putting to the market today reflect our products that are working and growing and printing profits. Some of the crazier ideas from the future are in the future, and we try very hard not to overpromise and under deliver.

Okay. I think growth is in good hands with you taking that.

Our next question comes from the line of Harry Bartlett with Rothchild.

I just or to touch on something you mentioned in your shelter, clearly is doing very well, but you said that you're really available 80 the top 250 canaries and 10% of e-commerce merchants. You're very well integrated with a lot of the major PSPs now and clearly very well known as a brand. So I guess the question is, what's the impediment for getting these remaining merchants to sign up? And how do you kind of bridge that gap to get there.

We don't think of it as an impediment. I think we have an exceptionally strong revenue team and Wayne who runs it is an exceptional executive and deserves every accolades and so I expect his team to continue executing and signing each 1 of these merchants one by one, sometimes in bulk, but mostly one by one. I think the Majority of the time for large merchants, these are long sales cycles that take a lot less convincing than ever before. People understand the value that we provide, and they are excited to see it added to their checkout. But many large enterprises that sell things online have complex and frequently outdated systems, a lot of times adding a new major point-of-sale system requires them to do some major modifications. Sometimes it pushes them to do whatever work that they were postponing because they weren't planning on adding another one.

So these are not things that flip in 1 quarter. But the reason I mentioned the numbers you quoted is because there's just an enormous amount of greenfield. We think our if anything, this is a sort of a notion of -- our sales team has a lot of work to do for probably quite a number of quarters, but no 1 should be taking a break or should you be thinking we're running out of the Internet or anything.

Our next question comes from the line of Harshita Rawat with Bernstein.

I want to ask about in-store as a form card continues to scale and now you have the wallet partnerships, how can you scale in-store usage of a form where the opportunity is positively much bigger as you also alluded I know there are unique friction points in terms of getting approvals, but happens when you do not get denied physically kind of in-store. I know 30% of your firm card transactions are offline, but it's still very small as a percentage of your overall GMV. So we'd love to hear your thoughts on the product planning.

Couldn't agree more. I 100% agree One of the things that the innovation team that I have now more time to run is working on is improving the in-store process. And most things payments in general are very rarely about uncovering some low-hanging fruit that was just already in the ground, you need to pick it up. It's primarily about polishing off on Happy Path core connectivity? How do you make sure your product works in a large store that's essentially a Faraday cage you can't get connected to the Internet, how do you integrate with point-of-sale systems that don't know how to read QR code mean hydrate barcodes. It's kind of an endless long tail or not endless there's a meaningful long tail of conditions that make approval or tender delivery or even handling things like card size adjustments in store just that much harder than online.

Online, you hit back on your browser and you correct whatever it is needed, you correct. In store, you have to go back to the back of the queue to the cash register, which is annoying and people would rather not do that. So the bar for error is much lower? Like you have to create a much better consumer experience. So we're excited to work on that. By no means that should imply that we are unexcited about e-commerce. We actually have a lot to do. Obviously, there's still 80% more e-commerce to go, but offline is a giant portion of the market and continues to be. And we have some real interesting ideas on how to make the experience not just uniquely better but also uniquely affirmed. So maybe the best answer to your question is not quite going to preannounce anything here yet, but we expect to launch a few ideas that are uniquely Affirm specific, which through the lens of so product development, you can ask people to do more work to use your product if you're delivering disproportionate value.

You can consider sort of a firm online relative to credit cards. Credit cards are really easy. Just type in a number are you tap it off-line and off you go. A firm asked you did a little bit more work, so you got approval to understand why you might get declined, but the value is there. You get to amazing 0% deal, you get no fees, you get no deferral. And so the work is a little bit more, but the value is tremendous. And so we're going to bring that same ecos, maybe the work is a little bit more, but the value is so much better than what you do with your traditional payment instrument offline. And we'll throw something off in the coming quarters.

Our next question comes from the line of Rob Wildhack with Autonomous Research.

I wanted to ask you about the U.K. It sounds like you're pleased with the progress to date. But could you just tell us more about the early receptivity from consumers and from merchants -- and then I'm also curious if there's been any competitive response or changes from the incumbents there that you've seen. Any details there would be great. And congrats to Michael and to Pat on the new roles.

Pretty excited about the United Kingdom, seeing solid results. We just held our first executive dinner there a couple of nights ago where we met with some of the larger existing merchants there and got their first round of formal feedback in Latin all accounts, it was a loss. So I think we're doing well in terms of creating new friends and early fans. The consumer uptake, but I think we said it before and it turned out to be true. There's a lot of love to be had when you don't try to make money by sneaking your business model into the fine print and hiding things with fees and such, and we don't do any of those things and sure enough consumers love it, but retailers actually have a fresh appreciation for that because to date, there hasn't been a player in the market that would build the products the way we do. On the competitive response, and I don't want to be too loud here because I might wake someone up, but we're not seeing much to report on the matter to be honest. I think for now, at least, we're doing great in terms of feeling like our product is a unique play in the market. .

Our next question comes from the line of Will Nance with Goldman Sachs.

I wanted to ask just on the growth in interest-bearing this quarter. obviously very strong. I know you're calling out the 41% growth in Pay and X, but it's also great to see kind of the largest product almost keeping pace with that product. So just curious how you're thinking about overall product mix and then just more of a nuance there. Just wondering if like the shift to the promotional event if that created any like mix dynamics that we should consider from the fourth to the first quarter?

Yes. Great question. I think it really comes down to mix within sort of the 2 largest centers of gravity within the product portfolio. So on the 1 hand, we have point of sale. We did actually see sort of an acceleration in 0% share within point-of-sale integration, and I think some of that is due to the big nutting event. But just -- it's also been a push of ours in terms of what we're selling into merchants. And then really on the direct-to-consumer side, we actually see a much higher proportion of interest-bearing loans within that product set. So we're running sort of north of 80% interest bearing on our direct-to-consumer products. And I think just with the continued growth and scaling of things like a firm card, it's really that that's driving the sort of mix shift back towards interest-bearing a little bit.

Our next question comes from the line of Dan Dolev with Mizuho Securities.

Exceptionally, as you said, Max, ludicrous quarter, I like that one. I had a question about some -- I have a question about something you said at the Analyst Day. You said it gets easier to grow as you gain scale, but some of your competitors are not seeing that. So what are you doing right or maybe what are they doing wrong that makes you benefit from that virtue? And congrats again.

Thank you I can only speak, I guess, to what we're doing right. I think we know exactly who we are. Like we have a very, very specific set of views on why we do what we do, why we prioritize certain things, why we won't do other things and not just what kind of products or what sort of structures we're willing to put in front of our customers and what we're not. But we are a network. Every decision we make at the product level, at the sales level, at the capital markets level, we ask ourselves, does this benefit every part of our network? Does this grow the consumer base? Does it give them a reason to spend more with us does it give them a reason to spend more with our customers, the merchants. By adding a merchant, are we exposing our consumers to the merchants, we want them exposed to and so on.

And so we are constantly asking ourselves how can we create a virtuous cycle? How can we eat the virtuous cycle that we've created. Do you have a network eventually, you start seeing network effects. And network effects are very simply, it is expensive to leave because you're going to miss out on a large and growing body and it's dumb not to join because you are missing out on a large and growing body of business. So the larger we get, the more valuable than ever it becomes, the more activity there happens on the edges of the graph we're building and the more people, the more merchants want to join the graph. I think for most payment systems, if you sort of cast dry across the last 50 years of -- I've been building payment systems for almost that long, Sadly, the ones that survive and thrive are the ones that are extremely focused on building a network almost to the expense of anything else.

And by the way, if you are willing to stay focused and go along, you are rewarded with profitability, with pricing power, with sustainability of the business, sustainable growth. All of that comes in time if you're focused on building a network. And we have been from the very beginning, if you look through my letters, you'll find the word network, probably the most commonly repeated noun. And that's sort of the secret to success so far, and we have no intention of changing that I think a lot of the players in the space decide that the next shiny object is the thing that will create short-term value and whatever happens in the next happens next. We try to measure things not in quarters, but in years and hopefully, decades. So the strategy has worked for us so far. We'll continue doing after that.

Our next question comes from the line of Jason Kupferberg with Wells Fargo. .

So everyone's been asking you guys for a while, are there any signs of consumer stress in the business? Any concerning signals in your data, delinquencies? We see another strong quarter here. The consumer is really resilient. Is there a case to be made that you guys could actually loosen the credit box a little bit? Or does that feel too risky in light of some of the macro uncertainty out there and then just a quick one for Rob. Any way you want us to think about modeling GAAP EPS for fiscal '27.

How about you answer, and I'll think of something clever?

Sure. I mean I think we've given you a lot of building blocks of GAAP EPS. Jason, we've given you GAAP operating income, and we've also given you estimate for share count. I think the 1 piece you're missing is the tax rate, and I'll probably go back to some of the guidance that we gave at the Investor Forum in May. We think on sort of a run rate basis, the GAAP tax rate lands in sort of the mid- to high 20% range. I would just caution though that there can be some volatility in the effective tax rate just based on some of the gap versus tax differences and how things like stock-based compensation and some other forms of share remuneration treated. So there's likely to be a bit of volatility, especially as we're continuing to scale profitability. So that's one of the reasons we stopped short of giving an exact guide for EPS. It's just the volatility that we think may play out in the tax rate. .

Yes. And on the credit side, sort of a couple of thoughts that are sort of disconnected or not so big that you can look at a firm and read the tea leaves of the overall macroeconomic state of the United States. Our consumer is doing fine. You can see that in the numbers. And we are benefiting tremendously from the ability to say yes and no to every transaction. So we are literally choosing the loans we want to make in real time in very small increments. -- roughly 100 million times a quarter. So it's a highly differentiable curve. And we decided the shape and the area under. So in the sense of control of our credit outcomes, I said it before, I'll say it again, 1,000 times, we are in control of the credit reality.

You would see us slow down growth before you would see us have a real credit disturbance. And obviously, these are imprecise science. So there are always ups and downs in the DQs. But generally speaking, we manage to a number in the sense that credit target is the input, not the output of the business. The output is the approval rate something, but -- and so with that, we definitely have conversations around what the overall policy stands. Are we feeling good about the future? Are we feeling less good about the future? Should we tighten, should we loosen? But it's never expressed in terms of some giant lever somewhere that Robin again grabs on to the both hands and opens up the floodgates of money or closes down the work like that at all.

There's a constant conversation happening in the credit team asking themselves, are there opportunities for strategically more permissive stands at a class of transactions for a class of consumers at a class of merchants. And those conditions happen all the time on a weekly basis, just like the credit team reports back to the management team on a weekly basis of exactly what the landscape looks like. At any given moment, you could hear them say, you know what, here's what's going on an interesting standout is this, and this could be anything like we're seeing an early signal in DQ 0 or DQ 1. So day after the payments are due 2 days after the payments or do we're wondering what that is we're going to monitor it for the next 6 weeks and make a decision. And so we told flavor is to give you a sense, we just really do not think about credit at this binary switch that gets flipped on or off.

We never scramble to or away from it. in part because we have so much control in part because we have an extremely serious point of view on what these numbers have to be for us to be a responsible and reliable counterparty to our capital markets partners. And so that is the most important relationship in the business on the supply side, and we have to maintain it. And so I am sure somewhere right now, I hope they're not listening to me rant, but instead of doing their job in credit, but someone in the credit analytics team is putting together scenario analysis showing how a merchant is getting slightly higher approval than what that does for our GMV and an alternative analysis showing how the merchant is getting a slightly lower approval than what that does for our and consumer satisfaction and so yes, the works done constantly by the end of this call, a decision to loosen and a decision to tighten will be made, and it will be executed in denotionby the end of the.

Our next question comes from the line of James Faucette with Morgan Stanley.

I want to touch on the increase in Pay in X and kind of the comments that were made in the letter -- shareholder letter about getting some increased participation from merchants there. Just wondering like how you think about being able to expand that program? And then at least more interestingly, perhaps to me is, is that a gateway to improving or expanding up into 0% promotions, et cetera, for those kind of merchants? Is it basically a test/proof point for them?

That's a great question. I'll start this time and Rob can speak to the exact Pay in X growth, which was pretty good this quarter. So kind of the most important thing to understand is free use of money is valuable to all consumers. So you can sort of ask like what is a firm 4? And 1 version of the answer is it's for people trying to figure out how to fit a considered purchase, something that actually registers on their personal financial radar into their monthly outflows. So it's affordability, it's access to capital when they need it or access to credit when they need it. That's kind of baseline answer. A more sophisticated answer is there's always alternatives in that space. And so the question then becomes what's the cost of money? What's the cost of obviously, the cost is interest we charge and the best possible deal is, well, what if there was no interest to what have someone else paid your interest. .

And that is a really, really important function in part because that makes the product appealing across all credit spectrum. So you could argue that there's a natural point where you say, well, you know what, I have excess of cash. I just don't care. And if you're going to charge me interest, I'm going to pay cash to move on or I'm going to pay it my credit card and paid off before the end of the month, so there's no interest at all. The second you enter a space of very low interest demonstrably lower than your credit card APR or 0, which is for everyone's favorite price, you end up in a place where even a super-prime borrower would benefit from pre use of money. And the longer term is the loan, the more obvious the benefit. So every one of these Pay in X type products is a version of access to money at no cost to the consumer. We're always looking for ways of funding those transactions by the hands of our partners because they are the primary beneficiaries of these transactions.

So it extends from merchants to manufacturers, 2 brands, sometimes to marketing partners, to platform partners. There's plenty of people who are involved in a transaction that have a degree of margin and have a different level of excitement to see that transaction go through. The most exciting ones are of course, merchants because they're dealing with things like inventory management, they have discounts they'd rather not make, but they do want to see inventory move. But there's also people in manufacturing and original equipment in factors, in particular, that have a predictable upgrade cycle that they're trying to stick to, and they will be very excited a year from launch to push their last year's innovation so that the new ones can go forward. And so all of that adds up to ample opportunity to create more of these Pay in X and pay over time transactions and I particularly like the longer-term ones because that's where underwriting at 0% consumer interest is a really, really hard science, like this is the kind of thing where if you screwed up a little bit, you'll make a lot of unprofitable transactions. Part of our longevity in the space and our competitive strength has been our ability to precisely price these things, both on the credit side and the profitability side, the capital markets lens. -- it's very, very hard to do right, unless you're very good and very confident in both your underwriting and your control of your underwriting.

So that's kind of why these transactions keep showing up. That's why we do things like the big nothing. That's why we do a lot of these promotions in various forms of Pay in X. That's why you see growth of various paying extractions. And should we expect to continue to see more of these. They're all building a giant book of this is proof that you, your favorite, you the manufacturer, the retailer, all the participants should participate in these because even though they tap into your margin a little bit, they drive the kind of buyer that has a lot of choices and this is their favorite choice.

Yes. And the only thing I would add to that, James, is just I think we really pride ourselves on the breadth of product offerings we can bring to a merchant that can be tailored to the basket of goods that they're selling. And in most cases, the products that we're offering to that merchant's consumers will be dynamic as you go up the basket size spectrum. And so I think what you saw play out this quarter was we had a large merchant that has a relatively low average order value compared to the rest of our network, and they decided to make paying for an evergreen part their financing program, and that showed up in a bit of an acceleration in growth for Pay-in-4, -- but we're pretty agnostic ourselves around whether it's a Pay in 4 offering or a 3-month 0% offering. We really want to make sure we put the right offer in front of the consumer that's going to do the right amount of cash flow smoothing for that consumer. And so it really is going to be merchant dependent. And I think our ability to customize those financing programs specific to the merchant is a real differentiator for us in the market.

Our next question comes from the line of Connor Allen with JPMorgan.

I wanted to ask about the services vertical. It looks like volume in that category accelerated quite a bit. almost doubled year-over-year. So can you talk maybe just a little bit about services, what drove that acceleration? And then maybe how sustainable the premium growth is within that category.

Part of it is we signed this really large services platform or 2 and feel like I give an exceedingly long answer last time, so I promise I'll do a shorter one now. So we signed a couple of very large services platforms they're doing well and growing. And yet, this will inevitably come up at some point in this conversation. We're still very, very early in all of those platforms. The product needs to be adapted to the specific motions of those products or services. And we're pretty excited to our best integrations are always the ones where we get to co-build with the people we are integrating, and we're knee deep in building a bunch of really cool new stuff specifically for the services platform. So no promise is how long the 2x the speed is going to keep going, but I don't think we're even out of the first inning of that particular game.

Our next question comes from the line of Bryan Keane with Citi.

Congrats on the promotions, of course. I wanted to ask on Affirm EDGE, Max, I think you said that could be a source of upside in the future. Any traction to highlight during the quarter? It looks like we have a couple of pilots now going to happen in the second half of the year? Maybe just how is that product resonating and the potential for it to be a needle mover in fiscal year '28? And then secondly, just, Rob, on revenue less transaction costs, I know it always gets a lot of attention. We were talking, I think, 3.5% to 4%. And the guidance obviously for fiscal year '27 a little bit above that at 4.16%. Can you just talk about mix and maybe the drivers to be above the midterm guide there?

Sure. I'll take the second one first. Just in terms of the revenue less transaction cost. Outlook. I mean, really just with the execution that we've seen within the debt capital markets, we just -- we brought on a capital base that gives us a profile and a funding cost that we think should carry on through fiscal '27. And the other big assumptions are things like the mix of how we fund the business and we expect the mix to stay pretty consistent with what we saw in fiscal '26. Loan product is the other sort of mix component that can drive revenue less transaction costs, take rates. We may start to skew slightly higher to interest-bearing, but it would be a very slight mix shift there. So just given the setup that we have, the other piece, of course, would be consumer credit, and we're not seeing anything in the business today that gives us pause or worry. So I think with sort of those building blocks coming into the year, that's what informed the outlook that we gave, which really is consistent take rates with what we experienced in fiscal '26.

Edge, banks move slowly. That's maybe not a very nice thing to say about our prospective partners. But they're deliberate. They have regulators. They need to make sure that what they launch is not just looks good and looks good to them. And we total has to look good to federal deposit insurance perforation and sometimes Office of currency controller and so on. So there's a fair number of people that have to okay and bless structures. That said, pretty excited. We're still building out parts of it. So a little bit of it is just like we have to build the rest of the technology. You're building a thing that you're hosting locally for a bank to log in and like fine-tune their financing programs. It's a thing we didn't do before now. We have to. So there's some work to be done in terms of technical part of it, but majority of the stuff is built. We're very excited about the reception we're getting. .

I continue saying this sort of in various quarters. I think the second you see one, you should expect to see more like a bunch. But the first one is always going to feel like whether something goes wrong, how do I handle that? And we're very sensitive to that. And we know how to launch credit product, but it's not the same thing as launching it for others. So we will frankly take as long as it takes for us as long as we need to bring to handhold these first launches to market to be able to report excellent results and hopefully get everybody else excited too.

Our next question comes from the line of Matt O'Neill with Bank of America.

Yes. Appreciate it. Max, I was curious, you laid out a pretty complete map of growth factors this quarter. I didn't notice leasing or device upgrades on the list. You presumably looked at it given how much your volume is how take electronics, you push hard into 0% APR, I was hoping maybe you could just walk us through how you think about the economics of the lease versus an installment loan for the same purchase what an originator might gain from that? And why you conclude it's not a strategy for a firm either now or ever.

Host a breakout seminar on 45 minutes on deep dives in the economics and complexity of leasing. There's a couple of different things going on in that domain. So the notion of kind of a subscription to your device, and the automatic upgrade to the latest and greatest unpredictable cadence. It's actually a really good idea. It's been around for a little while. It certainly pops up in conversations and sort of attempted launches here and there over the last decade. So I don't think -- there's nothing too equival with on that front. On the other side of the equation, you ask your favorite financial services financial institutions analysts how they feel about lease-to-own and rental on companies. And if it's a unedited context, you might hear some expletives. And so between those 2, there's a lot of complexity in leasing it doesn't usually happen on day 1. It happens on day 365 or whatever it is 720 something when find out that the thing you've been doing for the last couple of years, you don't actually own any of it. .

And we definitely care very much about the high-end device sales and scheduled upgrades and creating structures that help our retail partners, our manufacturing partners push their merchandise that way. So I think that's a very, very important task and we're certainly quite motivated to participate in that segment. We think there are better ways. We think we can offer something to the market that is little bit less prone to the -- what the bleep happened here that happens a couple of years from launch of such things? And we'll have more to say on the matter in some reasonably predictable future.

For now, I think we're all going to learn with some of the ones that have launched recently and certainly information to be had, but we tend to try to build things from first principles, and that's what we're going to try to do here, too.

Our next question comes from the line of Andrew Bauch with BMO Capital Markets.

I want to ask about Affirm money accounts. I feel like it hasn't been discussed in some time. So could you please provide an update there? And then as we think about your list of priorities, -- are there any interplays to consider with Affirm card as it pertains to Affirm money accounts? Meaning does Affirm card serve as an on-ramp to Affirm money accounts similarly to overall active accounts served as an on-ramp to Affirm card? And what does that -- what could that ultimately look like?

That's a great question. For one, it's really important for us to have a first-party product that is the most beautiful version possible of a first-party debit card that speaks to a tightly integrated checking/savings account that works really well with the Affirm card structure because that's literally what edge gets. So anytime we go telebank, it's going to be amazing to look at the stats we better have something that's real. So it happens that we have 1 of our own don't talk too much about it, but I think great product. I happen to think it's the best way to use Affirm card reveal too many reveals here, but it's something that my year-one team has full ownership of, and we're working quite hard on making it an exceptional product. It's already a great product. If you haven't connected your Affirm card to your common account, you should definitely try that, but it has been iterated on and is looking better than ever. And it is the experience that firm edge will offer to our bank partners on the issuing side, but there's even more to come. I'll like my talk on that one, but ask me again in a quarter. .

Our next question comes from Moshe Orenbuch with TD Cowen.

I wanted to follow up on an earlier question on the firm card. Given that you get much higher spending, I think you mentioned twice as much on the card versus a typical customer. But at the same time, in-store commerce is 3 or 4x and the card is still growing at a rapid pace. Could you talk a little bit about how you think -- or what the drivers are for its contribution to GMV? Like is it going to be more about the attach rate? Is it going to be more about the spending per card -- and anything that you would share with us about things you're doing to kind of enhance both of those metrics?

Good question. I think the honest answer is both. And we are -- we care a lot about attach rates. I think we try not to be overly aggressive in pushing it because it is kind of the more sophisticated that you have to work your way to understanding why you want 1 of these products. So it's not another thing we hammer with. -- then again, we do see 2x the use. So we should obviously be hammering it perhaps harder. And so anyway, attach rate is important. We're at 19% right now relative to actives, will I think, see it increase, that's a reasonably good guess. On the flip side, we love the idea of higher usage per consumer too, and we're working on that.

To accomplish that, I think a key goal in managing a successful credit business you have to remember that your job is to help someone spend money responsibly. Like it's not very difficult to convince someone to borrow money, especially if you're not particularly concerned with how they'll pay you back. it's a much tougher job to convince them that -- to spend money with you is a better idea than through another product.

So there's some degree of transparent that we need to engineer, we're pretty successful at it, obviously, given the 2x number. And we're finding more ways to do so. One we're thinking about it, or at least the way I speak to the team about it is we need to make sure that the Affirm card isn't just the best card in the world, it's also the best way to use Affirm -- so as you sort of cast your mind across various firm offerings, you should always come back to -- if I use the card, I will get even better bank. So you should expect us to launch features and products that are card-specific that make it more compelling which in turn will help attach rates because obviously not going to be a secret to telling people, if you use the card, you'll get X and Y and Z, you use just a firm maybe slightly less Amazing. And definitely not going to nerve the firm at the point-of-sale experience, but we'll keep on finding interesting and exciting ways to reward cards.

And then -- there was another leg to this question. I talked for too long, I forgot. I think that's probably -- those are definitely the important 2 dimensions to be in without the card is still a very profitable product for us. It's not a trade down in terms of profitability. We're not going to make it different in terms of financing programs. You'll still get all financing programs to get at the point of sale. We never want to be less for our merchant partners, but there are ways of making the car even more compelling, and we'll work on that. .

Our next question comes from the line of Darrin Peller with Wolfe Research.

Can you just give us a quick update? I mean, obviously, you're outperforming the majority of players in the market, in fact, I think pretty much all of them. But when you think about the competitive landscape -- how do you -- I mean, we've seen obviously a number of your peers doubling down on BNPL and some rolling out debit Flex cards. So your debit Flex card, is there a differentiation you see there? And just more broadly, -- anything in the market in general, you're seeing changing as these competitors start to roll out more and more products also?

I can't say we spend a ton of time obsessing over our competitors. I think we are fairly fixated on our selfish as that sounds great for us. I think the product that we have is really compelling. It is different. I still am not aware of any product out there that offer exactly what we do. I think the beta flexible credential that we put together with them is a unique construct and has now been adopted by a couple of players, which is great, but I'm excited to see more innovation come through the networks. And that's always a good thing. But the way we built our BFC Card is quite unique. It connects to our accounts in a very specific way. And we're again, I'm not aware of anyone else who's quite replicated. -- perfectly. The other thing, like Rob mentioned it and I'll repeat it, 1 of the unique strengths of ours is we have a large collection of financing programs that we bring to bear for our merchants but also for our consumers as they decide what fits their bill, their monthly exposure. .

And I think our card is still highly unique in just how wide that collection of offerings is and every quarter has more and more of these truly unique 0% programs added to it. Like the rewards in the Affirm card, people often ask us, where is the rewards program? Why is there not a 1% cash back or 2% cash back and the honest answer is you're getting an extraordinarily more value in every transaction where the merchant is funding your zeros. That's effectively in 8%, 9%, 10%, 15% cash back. And so we wouldn't ever express it that way because that's not how it's understood, but it is the same pace except you're paying no interest on it at all for some time up to 3 years. And that is definitely not -- has not been replicated by anyone and I don't expect it to be easily replicable by anyone at all.

Our next question comes from the line of Dan Perlin with RBC Capital Markets.

And congratulations on the quarter and obviously promotions. I wanted to just touch on quickly the gain on sale revenues, which once again was really the strongest line item for growth. I know you have a pretty balanced growth, but this one continues to stand out, but it also looks like it might be normalizing a bit. And so I'm just trying to think about the revenue mix expected around our '27 guide. And -- and that's really just predicated off your road map, the product road map and maybe some international expansion, which it sounds like isn't going to be overly meaningful yet. But any kind of, I guess, mix shifts that we need to be mindful of would be helpful. .

I think the 1 thing that I would call out, and this has been true for several years, but it should play out similarly in fiscal '27 as well is just that we will have quarters where -- and Q4 is an example of this. We'll have quarters where when we do a nonconsolidated ABS we executed in the fourth quarter, still see or gain on sale revenue in those quarters around. So we stopped sort of sharing an exact schedule of nonconsolidated ABS deals for fiscal '27. But I think we did 2 in fiscal '26 and we would expect to have a pretty similar funding plan from that perspective going into fiscal '27.

Our next question comes from the line of John Hecht with Jefferies.

Congrats on the promotions and Max and looking forward to the 2029 product launch. The question I have is...

Are you mocking effect that it gives me 3 years to do anything good.

Which is okay I think, Max, you implied that you you're now focused on the way out in the future opportunities.

Putting into your spreadsheet. .

Sorry, I don't anyway. The question I have is just sort of the maturation or seasoning of both your customers and your merchants -- at the customer level, are you seeing things like a more rapid path to repeat usage are at the merchant level? Or are you seeing more rapid pace to a certain level of penetration? Or are there tools that you guys can use to get there?

We're actually seeing really good results on both. And so a lot of it, it's sort of embarrassing. I'd love to take this great credit for like we discovered electricity, and everything is faster now. Like we launched Crate&Barrel a few days ago and that I saw an e-mail in my inbox telling me, "Hey, Herrera Barrel customer because good news is you're in a firm customer and a firm that works with great like I think in the past, like 5 years ago, I'm not sure I would have gotten an e-mail 2 years ago, about many mall a month after the launch. And a year ago, I would have maybe gotten in the same week. And now just like all those things are much tighter coordinated, there are machines, not people who are responsible for running through a checklist that had happened. So the time from launch to meaningful impact to the first report to the merchant saying, Here, we're doing this for you, let's get excited. Let's do more together. It just is a lot tighter. And so we're doing all those things, we're doing even better. .

So on the merchant side, we're just constantly improving the post-sales support, if you will. And on the consumer side, the best number I can point you to is transactions per user per year just steadily rises. And we -- if anything, I rated our product team for not sending me off e-mail or enough notifications or any form of telling me, did you know that you haven't used Affirm in the last couple of weeks is I would welcome it. I'm not sure everybody else would, but we don't really do a whole lot of, hey, please come back. the sheer number of more surfaces where our logo is visible as a great reminder for consumers to say, "Oh, that was a great experience good again." And cards obviously help et cetera. But all in the growth of transactions per user is actually a fairly natural phenomenon. And so we continue to just make sure that merchants sign a lot of merchants. We bring them live. We help them promote us. We co-market things together.

We now have a very large user base that we can tell excitedly about brands that we love that we are excited to come into the fold, and that has a predictable effect where people say, "Oh, yes, I'd love to ease a firm great and barrel. So I think both of those things are happening fairly organically and I'm sure we can do more, by the way. So I suspect we'll only sorry.

Our next question comes from the line of Jim Timothy Chiodo with UBS.

I want to talk a little bit about approval rates. I know earlier on the call, we were talking about how for credit loss it's kind of a given number that you set, you can dial it up. You can dial it down. It's in your control. And the approval rate is sort of related to that at a given level of revenue or unit economics for that loan on the top line? The question that we get often from investors is around your approval rates relative to the other BNPL offerings that are out there. Clearly, they must be much stronger. But when the enterprise sales team goes into with a new prospective merchant, -- what are they pitching in terms of how much better those approval rates are and how much more GMV they could deliver to that merchant.

I'm allowed to spread a slide amount of fund. I will do so. we definitely all compared on approval rates, and merchants love to ask for guaranteed approval rates. And as a rule, we try very hard not to even talk about those things because that's always a counterweight to our ability to modify our credit policy on the fly as we must. The typical competitive bake-off often enough includes us launching a checkout experience as we would anywhere else, and our esteemed competitors launching 1 where they remove underwriting and fraud prevention and demonstrating extraordinary approval rates only to then have to pull back very hard because you can only make so many bad loads for a while. And we tend to be very focused on our numbers and our losses.

And again, I said a million times, so I'm not going to dwell too much on it, but it's not enough to have great unit economics. We can obviously approve much deeper and just charge more interest and the profitability would be more or less the same, but anyone who's observing our credit results independent of the profitability we say, wait a second, like these guys are now going much deeper, maybe this isn't going to be as durable in a macroeconomic change out. And so we tend to be very, very careful about not just the net result but also the gross losses of the loan content itself. And so we pretty rarely ask ourselves how can we compete with approval rates. We -- all the time, like literally every single quarter ask ourselves how can we refine our models which if you want to imagine a credit model, it's a sorting function.

It's a very, very sophisticated sorting function, but it looks at a large number of applicants on any given unit time and sort them into lease risky to most risky. And the job of a crater policy is to say after this level of most risky, I don't want to approve any more because that's the old risk I'm going to be able to somato. And so long as our sorting is as precise as the future reality as close to future reality as we can possibly get it. That's what we must do. There's not really a shortcut where we'd say, what if we just approved deeper because the competitors might do so. If anything, we kind of want them to approve deeper than us because they are not as good as we are at sorting risk, full stop. And so long as we are giving enough time to compare and contrast, very quickly, you start realizing that what looks like a great approval rate on day 1 looks like rig has been pulled and the approval rates are down and the losses are of course, accumulated from the prior time periods. -- is putting his head down because he's heard off of this. I'll stop there.

That concludes today's question-and-answer session. I'd like to pass it back over to management for closing remarks.

Great questions. Thank you all for joining the call today. I think we will be seeing many of you on the conference circuit soon. So see you there. Have a good day. Thanks again.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

Good morning, everybody. Thank you for joining us for the third day of the William Blair Growth Stock Conference. My name is Andrew Jeffrey. I cover fintech at William Blair. It's a pleasure to have Michael Linford, the COO of Affirm with us. Just as far as the obligatory disclosures, you can find any potential conflicts and full disclosures on the williamblair.com website.

With that, let me introduce Michael.

Thank you, Andrew. And thanks for spending half an hour with me. I will do my best to entertain you, maybe teach you a thing or 2, but would encourage everybody to also come to our breakout afterwards if you've got questions and like to ask us anything additionally.

So what I hope to do in the next 30 minutes is describe a little bit of the Affirm 101. For those of you who were here last year or who are familiar with our name, this might be a little repetitive, but I still hope you might pick up a thing or 2. We'll talk a little bit about how we started, what we've built, why we think we have some real structural advantages in the market we play in. Talk about the results that we've been delivering and where we go from here.

So let's start with our mission. Everything at Affirm starts with our mission. Our mission is to deliver honest financial products that improve lives. That mission is unchanged from the day the company was founded. And it's not just words. It really does guide everything that we do. A big part of the reason why our growth has been so strong, why our consumer love has been so high is because we get ourselves on the side of the consumer. The company was founded very much with an understanding that so many people in the financial services industry get themselves on the other side of the consumer. They profit when the consumer loses. And we think that is not just bad morally, but we think it's bad business. The right business model, get yourself aligned with your stakeholders, create situations where you win when they win. And when you do that, you force yourself to become really good underwriters, you force yourself to be really disciplined about how you build your business and you skip all the shortcuts.

We really believe we are the first financial services company with a moral backbone, and we do. We debate the morality of decisions in our business every day. I think it's really important that investors understand that because that means that the thing that we're building is very different than what you might see somewhere else. We'll get to the product descriptions in a second, but we don't charge late fees. We don't charge additional interest. There's no deferred interest in our product. Interest is capped and fixed. And these features are sometimes really difficult for financial services investors to get their arms wrapped around them. And you might think those are detriments to the business, but they're actually features. They allow us to do things that other people can't.

And that shows up with real customer love. We see this a lot, and I know other people talk about these things quite a bit, but I really can't stress enough the degree to which our consumers love what we do. Open offer to anybody willing to sport Affirm swag, I'll get you some wear it around the world. You'll be shocked at how many people will stop you down and talk to you about how the Affirm product has impacted their lives.

The [indiscernible] happened to be recently, which were just phenomenal, I was taking my family to Europe for spring break and on the way back, the flight attendant stops me as I'm boarding the plane and she gives me her whole life story. She tells me way too much information about her life and how Affirm has enabled her to do things. She then was so tickled that there was an employee of Affirm on the plane that she called her friend back in the States and relayed to me that her friend told me, you need to tell him how great his company is. How great this product is, not how great the loans that she took out are, but how much she loved the company.

I changed airports in Detroit and then headed home to Austin. And in the Austin flight, a different flight attendant stops me as onboarding, and it was like déjà vu, exact same situation and this flight attendant told me her whole life story, again with too much information. And the reason why consumers feel this desire to talk to us about it is because what we do for them matters. Affirm helps them do things that matter for them and that they understand very, very basically why we're on their side given how the product works.

So our business model is built around aligning our interest with consumers and creating win-wins everywhere that we work. We believe that to do that, you've got to be simple, direct, transparent and honest with your consumers. So we don't have compounding interest. We don't have hidden fees. There's no gotchas. There's no -- all those additional things. Consumers check out and they take that immutable certainty of what's going to cost them to purchase that item, and they really value that simplicity and transparency.

So unlike our credit cards, if you think about contrasting the 2, our product is more aligned to them. So we don't have open lines of credit. Everything is transaction level, and close ended, which means every time a consumer would like to make a purchase, we underwrite that transaction. We don't allow consumers to accrue additional interest. So when they check out, we calculate the interest on the full term of the loan. If they're late, we text them. If they're on time, they pay the amount as agreed. If they pay early, they get a reduction because they would have avoided interest that would have otherwise accrued on top of the principal schedule.

We offer 0% loans that are real, no deferred interest products with no late fees, of course. And about 1/3 of our GMV is -- in Q3 was a 0% APR offer that allows consumers to have a -- we call it a true 0. I'm sure all of you have seen promotional financing offers before in your life. And then you spend a little bit of time in squint and you realize that the 0% is 0 only if, and there's a lot of conditions that happen from there. And ours is an unconditional 0. The consumer can never pay us more than the purchase amount on a 0% loan.

And the main incentive here for credit card companies is to begin revolving and maintain their revolving balance. They would like those balances to stay high. They talk a lot, credit card CFOs and CEOs talk a lot about maintaining and what's the average balance and how do we grow average balances. At Affirm, every loan is amortizing very quickly. The successful path for Affirm is that the obligation, the asset goes away. Something like 45% of originations that we do every quarter are fully paid back by the time we report earnings. And that is a feature of our business that stands out very differently. We like the velocity of our asset. We like the fact that consumers end up with less debt even if they still make good use of credit.

Okay. Let's talk about what we've built so far. I am really proud of -- okay. Brief discussion on the product mix. This is a bit of an oversimplification because the way the products are actually offered at Affirm almost always has a lot of offers that are co-mixed and commingled. But if you need to draw a distinction between 3, we talk about interest-bearing 0% APR monthly loans, and we call it Pay in X, includes pay in 4 weeks or paying for payments. The MDRs range wildly, as you can see. The interest-bearing products have MDRs that look like consumer credit card MDRs to the merchant. Obviously, when you go to 0% monthly loans, the MDRs go up and the Pay in X is mid- to high single digits of MDRs. [indiscernible] for consumers can range from 0% to 36% on interest-bearing and monthly zeros and of course, it's always 0 on Pay in X. And the term lengths can range from 3 to 60 months on our monthly loans and 30 days to 8 weeks on our Pay in X products.

Usually, we do biweekly payments for the repayment and the average order values, as you can see, are a lot higher on our monthly 0% loans, average mid- to low single-digit hundreds of millions -- hundreds of dollars, excuse me, in the Pay in X and interest-bearing loans.

So how do the monthly installment products work? It's pretty simple. You check out at the point of sale. You see an equal monthly payments between 3 and 6 months. We go up to $35,000, although our average again, is in the low hundreds of dollars, and the APRs are 0% to 36%. On the right-hand side here, you can see what a consumer would see. So you can see monthly installments is the second and third option, but they'll still see a biweekly payment option with no interest as they're checking out. And they can make a choice. Do I want to pay $120 every 2 weeks or $83 every month or $45 every month.

Obviously, the longer in duration you get, the cost of financing does go up, but a consumer sees very transparently, in order for me to extend this purchase out over 12 months and make my payment less than $50 a month, I will pay $54 in interest for that right. And the consumers have a really good sense of the certainty that gives them. I'm going to be able to spread this out over months, but I'll take the $50 payment as a result. Pay in X works a little bit differently. It's the same idea of the certainty when you check out, but it's a lot quicker. So it's typically for lower average order value transactions and you make a payment every 2 weeks. This is the product that I think most people think about as what buy now, pay later is, at least in the Western world. And there, there's no interest due. You typically will make a payment at checkout and then another payment every 2 weeks to finish the purchase. And the unique thing about our product is there's never any late or hidden fees, no repayment fees, no long list of fees that amount to 100% APRs.

And let's talk a little about another product of ours we're really proud of the Affirm Card. The Affirm card takes all of the features of those Affirm loans and delivers them on a physical piece of plastic or a fixed card number if you use it online. The key thing here to remember, we got this question at the Investor Forum. I think the question was worded what do you do with those revolving balances? We don't have any revolving balances on the card. It is a card that still creates installment loans. These are still closed-end installment loans with all the same features that I was just ranting about on the card that allow you to check out in the store or online with a fixed card account.

And the thing about the card is it's just been this incredible source of growth and profitability for Affirm. We've got over 4 million active cardholders growing at a very fast clip and the spend per user is about 3x the average spend in the rest of Affirm. And the reason for that is because we removed so much friction involved in using Affirm in more places when you have a card. You have it in your wallet, you have it in your tap to pay wherever you are.

So what does that give us? We have a marketplace that the card grew out of that continues to be really important for how we engage our consumers. We have 15 million visitors to our app every month. We have 1 million new visitors incrementally every month -- sorry, yes, monthly new visitors, 10,000 merchants are advertising on our app in some way. And there's over 4 million checkouts that are happening inside of our app surface today. If you think about our direct-to-consumer offerings, we've got an app with big distribution. The consumers have a reason to come to our app. That's usually to make repayments and service their loans. But they also have an opportunity to reengage there, understand their purchasing power, see the merchant network breadth and buy the things they want and need.

And okay, so we're also super proud of our merchant distribution here. So I would put our merchant network up against pretty much anybody's -- for a lot of reasons, we can't include the names of all of our merchant partners. But you can see here a pretty robust list of merchants who we're really proud to partner with and many more who I'm sure you're aware that we do business with. That distribution is an incredible advantage for us. Affirm's business model is one where we do not pay to acquire users. We go get merchants to allow us to be offered at the point of sale. That's where we meet our consumers for the first time. That's where we reengage our consumers on profitable repeat transactions, and we get to partner with the world's best. And the world's best pick us because they know that we're going to treat their consumers the way they would want them to be treated.

And what's another thing about our merchant network is that it's not just these big logos that you saw on the prior page. You can be one of the smallest merchants in the world and still use Affirm, either through platforms like Shopify or through platforms like Intuit, QuickBooks. Our ability to reach the largest and the smallest merchants to reach across all verticals, whether you're travel, lifestyle, fashion, beauty or even med spas, we can serve you. And that has seen a real acceleration in merchant count over the past several quarters as our strategy of working through software vendors that do invoicing for these smaller merchants has allowed us to extend our reach in a more ubiquitous way. There's over -- we've added 157,000 merchants just in the last 12 months, and it looks like it's accelerating.

Okay. So that's kind of what we've built. It's a quick overview. Now let's talk a little bit about how we think about our structural advantages. We spent a lot of time on this at our Investor Forum. So hopefully, this is not too repetitive, but it's really important, we think, to understand why we think what we've built has a pretty big moat. So let's talk about flywheels. We love that metaphor a lot here at Affirm. Flywheels are big and massive. And once they get moving, they tend to have the ability to maintain a lot of energy in them. We talk a lot about our merchant and consumer network flywheel. That is to say, as our network grows, more merchants means we can give consumers more value because they have more places to use us. And as our consumer network grows, we're more valuable to the merchants. And the 2 really do reinforce one another. We spend less time talking about how our approach to risk management. Also creates effects that reinforce the network.

As we meet more consumers, we build more robust models with more data that allow us to underwrite and price credit risk better, which in turn allows us to price offers to consumers and merchants in a better way, which allows more transactions to come into the system. The more transactions we get in the system is more opportunities to learn and therefore, deliver the kind of targeted returns that our capital markets partners would require, allowing us to engineer the credit outcomes that reinforce both the merchant and consumer side of the network as well as all of our partners, whether that's funding the business in the capital markets or our bank partners who help us originate loans.

So those are the 2 flywheels. That's the output of the advantages, and I'll walk through each of these very quickly. We have real network effects in our business. I kind of alluded to that a second ago. Our approach to transaction level underwriting is very unique. Our ability to say yes and no to a consumer every time they like credit allows us to deliver the kind of credit results that reinforce those 2 flywheels quite a bit. We have a data asset that's unmatched in the world of advanced models, modeling is great. Data is the fuel that those engines need. We don't just build models. We build and operate and deploy models on a routine basis. And lastly, we have the infrastructure and scale that allows us to serve the world's largest players at the highest peak times.

So let's talk about transaction level underwriting for a second. The Affirm's advantages can't be overstated when it comes to a short duration asset that's approved every time a consumer would like to take out credit. That advantage is interesting, and it's more interesting when you also apply really world-class models. So on the chart here, you see Affirm's advantage against FICO. You can see Affirm's line and FICO's line around pick your delinquency rate and then pick your approval rate. So obviously, as you have more delinquency in the system, you can have less approvals and vice versa. Affirm's -- the gap between what Affirm is able to do and what a FICO-based underwriting approach is interesting.

But then when you apply that advantage, we're smarter about who and how we approve and then we do it every time. A credit card may make that decision once every 18 months for a consumer or maybe they revisit the line annually. Affirm is making that decision 5, 6 times a year every time a consumer tries to check out. That means we're taking a real-time view into the consumer's ability to repay for every transaction, yielding substantially different credit outcomes.

And those credit outcomes aren't just borne out in our unit economics. They're also seen in how we can go execute in the capital markets. These charts here summarize our static ABS deals. The top line is how we price the loss in these deals. And the bottom line is either the realized loss or a projection from that based upon life to date in the static securitizations. And the X-axis is in months and it goes out 3 years, 36 months. We price the deal upfront. We estimate the losses that the loans will have over the next 36 months, and we are consistently able to deliver just underneath the pricing assumptions. That is a really important thing.

Affirm's ability to price the credit risk and model out the actual losses allows us to go to the capital markets with a lot of confidence and have the capital markets value our ability to deliver dialed-in losses even though it's 3 years out. Those advantages show up in ability to get access to credit. They also show up in the ability to get lower spreads. And both of those 2 things are benefiting the business quite a bit right now and a key part of the reason why we're delivering really good financial results.

So how do we make money? Let's look at our revenue over the past several years. Last 12 months, around $4 billion in revenue. Since 2021, that's been compounding at 38%. We make a little bit of money servicing loans on behalf of third parties. We sell loans. What's important is that the sale of loans for us is not episodic. It's a flow program. It's a key part of the structural monthly and quarterly allocations of loans in our portfolio. We earn interest from consumers, and we earn revenue from merchants as well. All of those pieces of our business are growing in line with the total growth in GMV in the business, again, with a 38% compounded growth rate.

Let's talk about how we fund the business. I mentioned before that we benefit from that ability to dial in credit losses, and we're seeing the benefit show up in spreads as well as access to funding. Our business is funded about 45% forward flow, about 1/4 in ABS and about 1/3 in warehouse funding when you think about it from a capacity standpoint. Now we tend to utilize all of our forward flow and ABS funding channels, just given the nature of those relationships. So most of our unused capacity sits in warehouse -- so the business is actually using 30% into the warehouse lines. Warehouse funding is, as you'd expect, it's done at large banks. These are funding facilities that tend to have floating costs and are in the mid-80s advance rates. Forward flow, we sell whole loans. We sell whole loans with no recourse back to Affirm, and we sell whole loans to really world-class investors.

This morning, in fact, we're really proud to announce the extension of our relationship with CPPIB. And I'm so proud to have them as partners. They are -- been with us since 2019. And we do when we think about our capital program as we seek out counterparties who we think can scale with us into the $1 billion-plus context. And that's really the level we need to be at now. And we find partners who we know are going to be in the game completely regardless of the cycle, who are going to be through-the-cycle investors in the credit asset because we believe that our credit asset is better and that the best investors want to buy it. And that's why we get to partner with people like CPPIB and Sixth Street Partners, long-term blue-chip credit investors.

That approach to funding and that revenue mix has yielded some pretty good results. The little under $4 billion in trailing 12-month revenue, you can see the quarterly breakdown there, nice, steady and continuous rise. I like to joke around that if you look at the volatility of the stock price against the consistency of execution, you might be a little confused. The company is executing, I think, exceptionally well over the past 4 years. And our unit economics have remained really robust. If you look on the right-hand side, this is both the revenue less transaction cost dollars, which is a lot of words to say what is the economics we make on the loans that we originate on a variable basis. And what is that as a percentage of GMV. And you see there over the past 8 or so quarters, we've been hanging out in the 4% range. And we updated our medium-term framework at the Investor Forum to dial in this number between 3.75% and 4% for the next several years as we continue to scale the business to the $100 billion context.

This is industry-leading, of course. Our unit economics stand out. And again, as a reflection, I think, of some of the best execution in fintech broadly. And it's not just those variable margins that those are great, but we've been able to turn those variable margins into really strong growth in the bottom line, both on a GAAP operating income basis and, of course, on an adjusted operating income basis. In fiscal '23, we were just approaching breakeven on an adjusted basis. In '24, '25 and so far in '26, we've delivered a tremendous amount of leverage in the adjusted operating income line in the P&L. And of course, we turned GAAP profitable on a quarterly basis coming into this fiscal year and have delivered really steady growth in that GAAP profitability.

If you look at the operating margins on the right-hand side, -- over the last 12 months, the operating margins are now at 8 points. If you think about where that was just 2 years ago at negative 76%, it's a pretty massive step-up in GAAP operating margins. Most of that was actually driven by the improvement in the adjusted margins, but also the rolling off of some of those warrant relationships that we had with some large partners. The net result, though, is a really attractive earnings profile in the business. We're now generating close to 30% adjusted margins. We're generating that with continued line of sight to more operating leverage in the business. and a lot of growth still in the top line. It's a false trade-off to think about growth or profitability. Affirm is really doing both right now.

And we think the primary reason for that is because we have a really scalable approach to what we do. We write software at the end of the day. Software is monetized through a complicated set of merchant relationships and consumer relationships to go create these financial assets. At the end of the day, our ability to scale what we've done is really robust given the fact that it is at the end of the day, technology.

So we put this framework out there a few weeks ago for how we expect growth between here and $100 billion. We'll be rounding the corner on $50 billion at some point in time soon. And so we thought about how do we double the business from here. And the growth rate is going to come from more than 10 points of growth on the merchant point of sale, more than 10 points in our direct-to-consumer, a few points from international, and that should give us north of 25% compounded growth from here to $100 billion, i.e., the next doubling.

And importantly, we took some really cool and exciting things that are still on the edge out of that model, including Affirm Edge and Agentic commerce. There are really exciting opportunities for us, but they're so early. We didn't want to include them in what we thought it was a more clear line of sight growth rate to doubling the business. Edge, for those who don't know real quick, is our ability to take the Affirm Pay overtime features and extend them to any bank's debit card, are partnering with technology platforms and going direct to banks to give banks the ability to add the Affirm features. At our Investor Forum, we had a bank partner there who I thought summarized the thesis in the best way possible. And I promise you, we didn't encourage him to say anything. He volunteered.

And that was these banks see their users using the product. They see it in their accounts. They see the Affirm user showing up at their bank, and that's happening whether they like it or not. And they can choose to either participate in that or they can let it happen to them. And then separately, they recognize they're never going to build this on their own. And so if you accept that you have to make a hard decision of whether or not you want to play in the game and you're not going to build it, you better find a partner. And Affirm is ready, willing and able to partner with all of them.

And of course, Agentic commerce, everyone is really excited about it. A lot of protocols, a lot of people talking about where the future might go. We certainly agree that it's a really exciting thing and demoed a few ideas that we have for it at our Investor Forum, but it's awfully early. So I think it's still a little bit premature to begin baking into your models.

All right. I'm talking really fast here. I'm trying to get through everything, doing my best. I'm going to talk about the path to ubiquity here for a few minutes. So we talked about the merchant partnerships, and I'm really proud of those. But we also partner with the world's largest wallets. In 2024, we partnered with Google Pay in later '24, we partnered with Apple Pay. We added Chrome Autofill in 2025. If you've not used that product, it's actually one of my favorite. We've basically removed the need to integrate with any merchant so long as you have Chrome Autofill as a payment method that you use. Next time you're in Chrome, just click on the pay later icon and you can use Affirm pretty much anywhere. And then we, of course, added Apple Pay in-store in September of last year.

All of these wallets give us a chance to reach more touch points to give the consumers more chances to use our product, whether they have the Affirm card or not. Massive growth for us, massive chance to reengage the consumers that we already have and acquire new ones. And of course, I mentioned Agentic. It's definitely transforming -- going to transform how we shop. You're going to have a fundamentally different approach to discovery, search, affordability and you're going to have the world's smartest financial adviser in your pocket. And that's great for us. Consumers who want to make a smart financial decision are going to choose to pay over time with Affirm and put that revolving credit product aside.

And we think a lot about that as we call the affordability layer. A problem that we solve for consumers is how they can afford the thing that they want and need that matters to them. So how do you afford the thing that you want, you can break it up into payments. One way to do that today is to use a revolving credit product. We think agents are going to be pretty good at telling consumers that those aren't the right products for them. And we think that the ability to extend that same pay overtime features without any of the things that are trapped and bad are going to give us real advantages when we have a more agentic world. And obviously, the fact that we are partnered with the likes of Google and Stripe and Shopify put us in a very strong position to take advantage of these pretty big macro trends, not to mention our incredible network of merchants who are also on the leading edge of what's going to happen in agentic development generally.

All right. Lastly, I just want to -- a second on international here. International is a giant opportunity. Now obviously, the U.S. is our core market. It's very growthful. It's very big, and it's going to continue to be the majority of our business for the foreseeable future. But we have basically no presence out of North America today. We recently launched in the U.K., which we think is an exciting opportunity. And the rest of Europe and Australia add another $1.7 trillion to the addressable market.

Now obviously, a smaller opportunity that we have in the U.S., and we think we're still early in the U.S., but nonetheless, a really big opportunity when you look at it in aggregate. We turned the corner in getting live in the U.K. and excited to get into Australia and Western Europe soon. And I mentioned Affirm Edge briefly, but the bottom line is we want to add the features of Affirm to every debit card in America.

All right. So where to from here? So Max loves this chart, I do too. If you look at that Affirm logo there at the bottom of that slide, it doesn't look like our current logo. It's because it's not. This was an actual slide from a fundraising deck that Max had back when the company was just getting started. And his original vision was that Affirm should be available everywhere, and it should be seen as alongside as all the other payment networks that exist. we always harken back to this because we are truly trying to meet the consumer wherever they are. And we think about our ultimate vision here is our product being available to consumers no matter where they shop or what they're buying, we believe that we can improve the quality of their experience and deliver a better financial product than they could get otherwise.

And thank you all for listening.

Okay. Thanks. We're going to get started here with Affirm, Rob O'Hare, CFO; Adam Frisch from Evercore ISI doing this as well. Thank you very much for being here.

Thanks for having me.

This is being broadcast. So everybody out there, I hope you enjoy and can hear everything well. We're going to cover a bunch of stuff today with Rob. Obviously, growth, downside scenario, credit facility, all the stuff you would expect us to ask about with a few others as well.

So let's start off beyond buy now, pay later. I asked a question at the investor forum. really into it. We're not just buy now, pay later. Okay, Matt. Okay. Okay. Okay good. But with the launch of Affirm Bank, it's clear that you have bigger ambitions out there.

So let's talk a little bit about how you think the long-term vision is going to shape out a little bit and where you think all this is going to as you diversify away from just consumer transactions.

Sure. And maybe I'll just use the opportunity to clarify a little bit on the bank charter that we're pursuing. I think it's really important to remember that we're creating a subsidiary bank that's going to be a part of Affirm. Affirm itself is not becoming a bank, right? And just in terms of our ability to continue to innovate and to continue to grow at rapid rates, we think that's a really important distinction. And so in the short run here, assuming the bank charter is approved, we would be collecting deposits as a way to diversify our funding base and potentially lower the cost of our funding base as well.

The charter that we're pursuing is an industrial loan company. And so there are going to be some limitations around how closely we can engage with the consumer and the sorts of consumer products that we can put in the hands of that consumer base. So really, in this first number of years, the bank is really going to do more, I think, on the funding side than it's going to do in terms of deepening the relationship with the consumer. That said, there are several products today where we utilize a partner bank to offer those products to consumers. And I think having the charter will allow us to sort of vertically integrate a bit more and to bring some of those workflows in-house and rely less on some of our bank partners, not necessarily turn them off, but potentially bring some of those flows in-house as a way to diversify.

What kind of products would those be?

Well, just -- I mean, you think about like even just the basic buy now, pay later loans that we originate today, we utilize a partner, a bank partner to originate those loans. And over time, we would expect the originations to come more from the Affirm bank versus our partner bank. So I think pretty much everything we do, there's probably a bank partner somewhere in the product, even virtual cards and some of the issuances that we do there, we rely on a third-party bank partner. So I think over time, we're looking to bring those in-house. But it's more of an infrastructure and a diversification play than it is becoming a financial super app or something like that.

I think over time, we definitely have big ambitions to touch more of the consumers' financial life. And this bank charter is, I think, a good first step, but it's not the end all be all in the next couple of years.

So is the right way to frame it, I asked the question, other competitors out there are trying to do lots of things, whether it be the core account and then add EWA and add buy now, pay later eventually. Is that something that is more of a -- I don't know, I'll put a number on it, 3- to 5-year kind of endeavor as opposed to right now, you still got to launch outside the U.S. You're still chasing lots of verticals. You're still growing user base. You're still growing -- accelerating GMV. So it sounds like you're in a jam on growth. Is it more like, hey, we got a lot to execute on what we're doing today and then we can diversify over time? Is that the mindset?

I think we have a right to win more of the consumer's wallet. I think the consumers that we work with, which are 27 million predominantly Americans today in the last year, they come to us for fair and honest financial products. And I think it's on us to make sure that we continue to widen the aperture and do as much with the consumer as possible. But right now, the killer app within Affirm is fair and honest financing.

And that's why consumers are coming to us. That's why they're opting into Affirm card to be able to get that that same suite of financing products at merchants that accept Visa, right, almost anywhere, in-store e-commerce. So I think right now, we're seeing just the strength of the product offering we have is really, really resonating with consumers. And it's continuing -- we're continuing to deepen the relationship with our existing base through products like Affirm Card.

Yes. Do you feel like some people -- going off script a little bit here, but do you feel like some people miss or underestimate the growth potential for what you're doing today? It's like, okay, well, last year was -- this year will be somewhere around 40%. Next year, it will be 35% and then 30% and then 25%, and that's it. Where I look at 3 secular tailwinds, it's geography, it's vertical and it's more users. Could this be a much more multiyear kind of growth cycle that you don't expect to see deceleration?

We think the opportunity here is immense. I mean I think the addressable market that we're attacking first and foremost, is the $1.3 trillion of revolving credit card balances just in the U.S. alone, right?

So yes, geographic expansion should be an accelerant to our current growth and a new growth vector for us in the medium to long term here. But even just the U.S. opportunity alone, it still feels like we're incredibly early in that opportunity.

I would agree with that. I think people underestimate that a little bit, to be honest with you. Okay. So let's switch gears a little bit, talking about the operating environment. Inflation is kind of heating up a little bit. We're seeing mixed reviews, economy is strong, lower end struggling a little bit more, and that's kind of the definition of the lower end. I think they're always on the verge of a recession anyway.

So let's talk about how the current backdrop influences your decision and your decisioning and your growth and all that? And which indicators are you watching most closely?

Yes. I mean I think the most important thing for us at like a super high level is that our underwriting models are able to rank order risk. And by being able to rank order risk, we should be able to predict repayment rates, right?

Ultimately, that's our job is to predict repayment rates and make sure that we set the aperture or the approval rate in such a way that we're going to drive predictable outcomes and that the losses that we will incur for a cohort of new loans is in line with our expectations. And so -- that's true in a good market. I know you want to talk a bit about sort of some downside scenarios, some hypotheticals there. But honestly, it's kind of the same calculus in a stressed environment. We want to make sure that our models are current on where the consumer is and that when we originate a new loan cohort, which for us is about $100 million a day, that the repayment rates we're going to see against that $100 million of issuance is in line with expectations.

Again, the expectation is never that there's 0 losses for a cohort. We can take risk in our business, but that we're able to size that risk in advance and we're able to drive predictable outcomes against those expectations.

Yes. Total sense. Anything changed materially on the consumer health front in the last hour?

That's a new day. That's a new day. No. I mean, again, I think it all comes down to us, like you mentioned it, there's a one of the metrics that we track very closely is something called first payment delinquency. So again, for a new origination cohort, when they get to that first repayment event, which typically is about 30 days into the life of the loan cohort, what are the repayment rates and in turn, what are the delinquency rates and are those in line with expectations?

And if we see, frankly, deviation in either direction, if losses are -- or delinquencies rather are too high or too low, that would cause us to do an investigation and make sure that the model is sort of fitting to where the consumer is today, and we can make adjustments to the underwriting posture if we feel like the model for whatever reason isn't tracking as closely as we'd like.

So yes, the short answer, though, is we still see a really healthy consumer, and we haven't seen any sort of turn for the negative in the last weeks.

So on the macro side, you're watching unemployment and wage growth on your particular on your business, you're watching first repayment?

Yes. I mean I think we're obviously aware of the macroeconomic environment that we're in. But because the loans that we're originating are so short dated, I mean, the average term length is roughly a year. The weighted average life is even shorter. It's closer to 5 months. And so that fact alone allows us to be really nimble. It's also important to remember, we're not giving consumers an open to buy or a line of credit. We're sort of extending credit in like $250 increments. And so if there is a change for the worse or the better, frankly, in the macroeconomic environment, and we start to see stress on the consumer side, we can be really nimble, and we can sort of course correct and change our aperture really in a matter of days.

You talked about your average duration is about 5 months. That's obviously because the interest-bearing and 0% is making up 85-ish percent of the book, right? For Pay in X, it would be shorter than 6-month loan...

Probably closer to 3 weeks.

Yes. And your average loan -- your average size is was it [ $250 ].

[ 250, 275 ]

Yes, somewhere in that range. Okay. So let's talk about -- I think before I go into a downside scenario, I think investors take your customer base and say, people making less than $75,000, terrible cohort if you're about to enter a down cycle. And I think that's largely true if you're talking about traditional open-to-buy credit products. And what I'm talking to more and more investors about and because I've done this before in the company that I ran, we were micro duration. We had a matter of like 18 hours for -- until we could pull the funds out of the consumer's account. But it's a specific transaction at a specific moment in time for a specific consumer, and that's a completely different model than an open to buy. And so do you find this tug-of-war of trying to educate investors about why this is different?

Yes, it's the same cohort of or demographic of less than $75,000. It doesn't make them bad credit risk. It makes them bad credit risk if they have the bad product. But if they have the right product, this demographic, it's fine. It's a good fit. And I think that's what you guys found.

Yes. And again, I wouldn't say that we skew high income or low income. I think we skew sort of median income. And really, our consumer base that we have today is a function of honestly, the merchant relationships that we've built over the last several years, and we're kind of everywhere that Americans shop. And so we look a lot like a cross-section of the U.S.

So yes, I mean, again, I think there's a lot of value in being current with the consumer, and we underwrite every loan every single time. And more than 95% of our transactions in a given quarter are coming from repeat borrowers. And if you look at the empirical data, the amount of risk loss that is in a loan does step down with each subsequent transaction that a consumer takes out with us, right? We are building a relationship here. Now of course, if we're in a stressed environment, that could change, and we can see good payers go to bad payers. And again, I think that's where it's important that we have a really short-dated book. We're giving loans out in very small increments, and we can course correct really, really quickly if we need to.

Average income is -- have you disclosed average income or FICO scores?

It's in roughly the $75,000 a year range. Average FICO can fluctuate a little bit, but it's in sort of the 650, 660 range.

Okay. Cool.

So it's sort of a prime to near prime borrower if you sort of put brackets around the median.

Yes. Okay. Cool. Let's talk about downside scenario. So everything is going really well now, fairly steady. kind of feels like we should say we should be speaking more negatively just given the macro, but like the data is not showing it. It's not -- you're not seeing it. [ Chime ] is not seeing it. Cash App is not seeing. All the peers are saying, we're not seeing it. So -- but let's just say, tomorrow morning, someone walks into your office and say, "Hey, Rob, we're seeing some data here that we need to talk about. We don't know what it is."

Let's just go through a scenario of we are about to enter a consumer-led recession or the consumer is about to take a major downtick, whether it's oil prices or some other thing that we don't know about yet. Let's go through that. How do you manage that downside scenario? What do you see first, which says, hey, we need a meeting on this? And then how does that progress through the system?

Yes. The analogy that we've used historically is that we always have our hands on the steering wheel. So even in benign times, which I would classify today, frankly, as a pretty benign consumer and credit environment, even in benign times, -- the entire executive team is looking at the weekly credit report that the risk team is pulling together.

As I mentioned, first payment delinquencies at both the 4-day mark and the 30-day mark. Those are really, really important and primary internal KPI that we manage the business to. And that, as I mentioned, that really is that sort of check on for the most recent cohorts, when they get to that first repayment event, did we get the underwriting right for where the consumer is today in terms of being stressed or not stressed. And so as much as the macro is, of course, important to our business, headlines about the cost of oil or rising unemployment rates. If it's not showing up in the delinquency rates internally, we're probably not actioning change proactively, to be honest.

We can do some things on the margin to shorten durations a bit more or potentially increase the level of down payments that we're asking a consumer, both of those take risk out of the system, and we can do that in a really lightweight or small way if we want to. But honestly, like in terms of actioning a company-wide change in our underwriting posture, we would really have to see it show up in the first payment delinquency data, putting aside something like maybe COVID, where it just was sort of this black swan event that the company action very quickly there. But if it's sort of a typical the stress is starting to creep into the consumers' financial lives, then it will show up in our data because, again, I think we originate enough loans that it's going to show up there, and we'll start to work on getting the models to sort of fit where the consumer is. And it may mean that we take some risk out of the system. We can do that in several different ways.

We talk a lot about loosening or tightening. It's so much more nuanced than that. I think the IR team does a bit of a disservice to the incredible risk team that we have internally. But yes, we can we can raise the minimum credit score for a given merchant. That's typically the bar that the transaction has to clear to be approved. We can be incredibly fine-grained. Some of our programs run at 92.6 is the score that you need to clear, we can go to 92.7% or 97.75. So we can be incredibly fine-grained there if we need to take risk out of the system. I already mentioned increasing the down payments for sort of the marginal borrower -- historically, if the consumer has some skin in the game with the transaction via down payment, we tend to see better credit outcomes there, better repayments.

We can shorten the length of the loans that takes risk out of the system for us, too. We can increase the APRs if we wanted to or needed to. There's just -- there are several things that we can do to take risk out of the system. And the good news is we can action them all really quickly. I think we've got a really well-defined playbook for how to roll this out across the merchant base.

And the change is going to be gradual, right? It's not like Wednesday afternoon, everything is fine and then Thursday morning, like everything is closed, right? This is going to happen really gradually. So where would you see -- if you were to -- this is the other thing we should talk about, everyone says, well, Affirm really hasn't seen a down cycle yet. And you could say, well, late '22, early '23 was kind of sort of it was short-lived. But when would you -- how long would it take for you to start saying, okay, our rates are starting to look like they're forming a trend. Is it a week or a month or...

I would think typically if the new cohort of first payment delinquencies comes in and there's an elevation in terms of delinquencies versus expectation, that's all it takes to prompt an investigation. And when we do the investigation internally, we want to make sure that we really understand what's driving the deviation, right? Sometimes there can be a messaging bug or sometimes something could have changed with the merchant's configuration.

And so we're typically looking to understand is the stress that we're seeing in the data, is it limited to one merchant? Is it geographic? Or is it broad-based? And so the answer to that question will sort of inform how we triage the remedy. And again, we can be really quick in terms of raising the underwriting approval thresholds and about other sort of levers we have to take risk out of the system.

That's how we -- in the company that I ran, that's how we ran risk as well, right? Like there was one merchant where a few locations were driving our loss rates through the roof, so we just turned off those locations. everything was fine.

Okay. So you look at all that data, and this happens gradually over a few weeks/months depending on what you're seeing in the data.

Yes. But again, it's like really that first payment delinquency tells us a lot about...

That's the case...

Is the underwriting right? Like is the model set up properly to predictably drive credit outcomes? And if we see drift, we take that really seriously.

Yes. Is it a foregone conclusion that in a macro slowdown, you guys automatically have lower growth? -- is it definitely a foregone conclusion? Or could you say, hey, if the traditional lenders pull back more people are going to want to go to buy now, pay later, we could actually see steady growth in a downturn even though we're scaling back on our risk.

I think it's definitely possible. I mean, I do think Affirm and buy now, pay later broadly are taking -- continuing to take meaningful share within U.S. consumer wallets. So it's not out of the question that we could continue to grow through a downturn. But again, I think the most important thing is that we're driving predictable credit outcomes. That's important to Affirm, but it's also really important to our funding partners. And frankly, we're so aligned with the consumer. We think it's good for the consumer, too. We don't want to put loans in the hands of consumers that can't afford them and won't be able to pay them back. we don't profit from that. It's not good for the consumer. It's not good for their financial lives. It erodes trust, right, between the consumer and Affirm. So really, again, we want to get it right, and I think we have every incentive to get the underwriting right.

Let's go through the -- let's continue on the track of the down cycle whenever it will happen. You guys perform well. I'm assuming margin stays relatively flat, right? You manage to the margin. Maybe growth fluctuates, maybe it's down, maybe it's steady, maybe it's up a little bit depending on how the market is changing. But on the other side of this, if we kind of look forward, people are going to say, you guys manage through the cycle pretty well because of the -- you are underwriting a specific transaction at a specific point in time.

Your algorithms are terrific on the risk side. And so the margins stayed flat. You didn't have any major losses or provisions or anything like that like the traditional creditors will have. And yes, maybe growth fluctuates it's down a little, up a little bit, whatever, but you guys sell through and now we're back to business.

I think that's right. Every recession is different, of course. So it's hard to be precise in this hypothetical. But I think what's important to remember is that we set up our financing programs and the other important thing is like every merchant is different. Every merchant has a different cutoff because there's just different product mix, there's different economics in each of our merchant relationships.

But in theory, we're setting every merchant relationship up and every financing program with a merchant such that the last loan that we approve is breakeven or better. And so if you do introduce stress into the system, what are we doing? We're raising the threshold for approval, and we're taking sort of marginally profitable or probably breakeven loans out of the system. And so it should not be a significant drag from a profitability perspective. We are giving up growth, of course. That's the KPI that we're going to see potentially soften. But again, we think that's important. We think that's important for the brand promise that we have to consumers. We think it's really important to the funding ecosystem that we've built as well that like if there is stress, we're going to course correct and we're going to manage through whatever credit environment we're in.

Okay. All right. I'm done with the downside.

Then talk about happy stuff.

Did I kill that? Did I beat that one good enough?

Let's talk about underwriting. I was fascinated that you guys aren't really leveraging cash flow underwriting at all up until now, which is for those of you who aren't familiar with cash flow underwriting, it's getting 90-day transaction data from a third-party data aggregator where you can see inflows and outflows in the underlying account. The fact that you guys were able to do what you do without seeing that data is fascinating to me.

In my business, we wanted that data and we couldn't get it because we didn't qualify in the transaction type. But talk to me about cash flow underwriting and how much better you think this could make your system. Could you actually see -- could it -- are people underestimating the impact it could have to volume growth just because you're going to have much better data in addition to the algorithms that are already top of class.

Yes. Look, I mean, there's a whole team at Affirm focused on developing and then testing and ultimately graduating the next underwriting model. And things like cash flow underwriting are just one ingredient that go into sort of the incremental gains that we see every time a model rolls out. I think we're on -- we call it POS point-of-sale model. I think we're on 13 now. It's been around for about 15 years.

So it's a huge effort. It takes about a year for us to develop these models, sufficiently test these models and prove to ourselves that the models are going to do better in terms of conversion rate for the merchant, credit outcomes for us, approval rates, like there's a whole bunch of criteria that are often diametrically opposed here to make sure that the model is truly better for everybody involved. So it's a really high bar. Again, cash flow underwriting is part of that. We ultimately -- we want to find a way to get to a yes with the consumer if we can, right? And so down payments are a part of that. Internally, we call them step-ups, asking for more information, that's where cash flow underwriting would come in. We really want to make sure that we have the fullest possible picture of the consumer's financial health before we get to that ultimate decision. So yes, I mean, I think it's really -- the early results are promising, and it's a really interesting way to sort of step up and try to get to that marginal approval where we can.

In your mind, what's the optimal percentage of transactions that would go through cash flow underwriting?

I think the other thing to keep in mind is just most of our consumer transactions today are what we call repeat borrowers, right, meaning Affirm loan. So we tend to -- over a consumer's life cycle, we tend to rely more and more on the consumers' repayment history with us, like where Affirm file starts -- so I think where it helps us is just in some of the growth areas around acquiring new users at a new merchant maybe. So it can be really compelling there because sort of the early days of our merchant program are really critical to get on that steep trajectory of growth.

Yes. I know that firsthand. Yes. So cash flow won't necessarily be applied to everybody, but in certain use cases.

Yes again, I think for a certain population can be really compelling.

Yes, totally. I love that. Let's talk about credit. We've done a lot of work -- Post the contra -- not, I forgot the name, Ridge. One of your credit -- people in credit.

Stone Ridge...

Stone Ridge. thank you. It was a middle age moment. Rob, thanks for bailing me out. So when Stone Ridge came out, we really delved into it and your creditors love you. They love the paper, and you take the same risk that they're taking. And I think one of the things that stood out to me early on was you guys said, like, look, we will forego growth to make sure that our creditors are happy because that's our lifeline for the next as far as the eye can see in terms of growth. So we don't really see a problem now. The ABS deal you just did was really great. The agreements you have with all your people in the credit facility are terrific. It's kind of like that concern has kind of come and gone. Do you still get a lot on that? Or is it...

I think we still get questions there, especially for investors that are maybe new to the story. I just want to understand all the mechanics and sort of the broader funding ecosystem. But yes, if you ask me for one KPI on the health of our funding ecosystem, I would say the terms that we get in the most recent or the next ABS deal is probably the best leading indicator of just the health of that environment in that market. And right now, I mean, honestly, we're seeing spreads at all-time lows on a like-for-like basis across recent deals. And so it feels like the market is really healthy.

And they like quality. And if things go out, they're going to flock more to quality. And if you guys are viewed as that quality paper, then...

I think that's okay. I think that's a good outlook for you. Let's talk about guidance a little bit, switching gears -- from the investor forum, you built a great reputation for kind of beating and raising guiding conservatively, you make it look easier than it is. I know you guys -- it at as easy as you guys make it look. But if the 25% medium-term GMV growth target proves to be conservative over time?

At least. You forgot 2 words there. At least -- at least.

I have a greater than [indiscernible] question.

Yes, it's important. Sorry. It says a lot.

My glasses to get that one. So the at least 25% growth, people are going to love the correction. By the way, I'm just thinking about all the investors on the call here, they're going to love that correction. Where did the upside comes from?

Gosh. I mean if you look at sort of the drivers of our growth today, right, both point-of-sale and the direct-to-consumer businesses are both growing far in excess of the at least 10% we called out for both of those programs. So again, like if we outperform that, it's because we're sort of maintaining what we're doing today, right?

And then we've got sweeteners on top that we called out with international becoming a bigger part of the story over the next several years. And then we've also got, I think, really good irons in the fire around both Affirm Edge and Agentic, too. So look, I think we've got programs and projects that could be meaningful in the medium term that we're not ascribing any sort of growth to in that at least 25% target in Agentic and Affirm Edge. So I think those could be contributors to outperformance. And again, just the base business today, both sides, POS and D2C are both growing significantly more than 10% today. So I don't think we're not -- we're not like envisioning a world that doesn't already exist. I think it's just about continuing to execute and continuing to sort of grow with the primary drivers that have fueled us to date.

It's worth reiterating that the Agentic and Edge aren't really in the numbers yet.

Yes.

They're not in your -- that's all.

And I think that's appropriate, right? Hopefully, you've seen from us over the years that we tend to be pretty measured about signing up for big numbers for new programs. We have a lot of confidence that we've got the right playbooks and tools to make these programs large where we can, but we do take a pretty balanced view and a pretty conservative view on new things generally. So it doesn't mean we're not excited about them, but just in terms of how we guide.

Yes, that's the right way to do it. No sense setting up for failure and false expectations, right? Okay. So it's everything you're seeing today plus a couple of other things that could be more meaningful, et cetera.

Yes

Okay. Cool. And you did say at least 25.

At least.

That could be the title right here. Maybe we'll do that.

Okay. Let's switch to RLTC guidance. I thought you'd go to like 3.5% to 4% and kind of like 3.75% to 4%. That's a tight range for RLTC. You and I have had this conversation offline. I think RLTC was viewed as kind of like a all-in measure about consumer health, but there are so many factors in there, like gain on sale and there are so many factors in RLTC. It's not really a proxy -- a pure proxy for consumer health.

So the 3.75% to 4%, like is there a message that you're trying to send folks with that narrow range?

I think that maybe the broadest message would just be that we feel like we have good visibility into the business. And I think that's rooted in the fact that we've been really active on the ABS side from a funding perspective, same on the forward flow side as well. And so we have a pretty good sense for where the funding is going to come from.

Of course, we're going to grow and we're going to need more funding along the way. But just the sort of layers that we've been able to put into the funding base, we've done 3-year ABS deals that are at fixed cost of borrowing. So it does insulate us against a movement upwards in upwards rate environment. Similarly, with the trajectory that we're on with Affirm Card and also just where we are with both Shopify and Amazon, our 2 largest merchant programs, we just feel like we've got really good line of sight into how those programs should perform over the next several years, certainly from a profitability perspective. And that gives us confidence that some of the error bars, the error bar being a point wide, just that felt like more room than we needed for these next several years of operating.

Okay. So it's a tight range, which I think is good because it almost like removes that from the equation kind of thing, right? So even though people probably still have a stroke if they see a 3 handle, somewhere around 4%, I think, is great.

I remember the comment we made at a group lunch. I said, Rob, if you do 3.9 you 4 if you do 4.1, you like walk on water. And you looked at me like...

And again, it's just -- again, like coming in, I mean, we're at the tail end of our budgeting cycle for next year. And just as we think about all the levers, as we think about all the building blocks for growth and profitability in a given year, again, we just -- it just feels like the error bars we have on those are a lot smaller than maybe they were 5 years ago when we established that 3% to 4% range.

And I think it's good for the narrative, too, because it pushes everything to GMV growth and margins.

And that's really what you -- at this stage of your development, that's really what the story is about. How fast are you growing and are you increasing your profitability?

Yes.

It doesn't need to be more complicated than that. Okay. Let's switch gears again. We got a little under 10 minutes left. As CFO, how do you think about capital allocation? We need to -- over the next couple of years. You seem focused obviously very heavily on organic growth as you should. GMV is accelerating year-over-year ex Walmart. How do you think about M&A? How do you think about buybacks? How do you think about dividends? Talk about how you rank all these.

Yes. I mean I think just maybe pointing to some of the things that we've done historically, we've been pretty active around buying back the convertible issuance that we did in 2021. That first convertible bond that we did is going to mature in Q4 of 2026. So we've been chipping away at that, especially there was a period of time where those bonds are trading at a pretty meaningful discount. And we felt like that was kind of a no-brainer move in terms of capital allocation with sort of buying those back -- buying back that future liability at a pretty meaningful discount.

And so I think that served us well. And so when there's been opportunities to allocate capital to something that we think has a really, really high return, we've done it. I think we're still very early, though, in generating cash. I'm really proud of the cash that we generated in the last year, but it's still early days there. And we spent a lot of time today just right here talking about recession planning and recession scenarios, and we do stress testing ourselves within the capital team and the treasury team to make sure that if that rainy day comes that we feel good about the balance sheet that we've built and our ability to fund the business in any environment and through the cycle. So it's -- cash is an important part of how we think about stress testing and scenario planning for a downside scenario.

So it's a high bar for us to sort of distribute cash externally. That's true with M&A. It's true with buybacks. It's true with dividends. I would say we are -- we do have a team that fields both inbound calls on the M&A side as a potential acquirer, and we also are out trying to meet people in our industry and in adjacent industries. So it wouldn't surprise me if in the next 5 years, we did something on the M&A front, but there's a really high bar for those opportunities given our own internal development shops. And it's going to have to be the right opportunity, and it's really hard to predict the timing of that. It's going to be idiosyncratic, I think. So look, I think over time, buybacks are probably potentially a way that we could return capital to shareholders. But I think it's just -- it's early enough for us today that we haven't made a commitment there.

I mean personally, I'd rather see M&A because it will drive the growth story. I think buybacks and dividends. I think dividends at your stage are not really appropriate. Buybacks, you could argue when the stock is down, the stock is so volatile, like it was 83 and 43 and now it's back up. like you're not a hedge fund. But let's talk about M&A. Bring us into the exec committee meeting when M&A is being discussed. And is there -- what would make sense for you guys to do? Would it be, hey, this company has a product that we think would go really well and a bunch of users and active members that we think we -- is it that? Is it something tangential? Is it -- take us like into that conversation about what you -- just generically.

Sure. I think it's more likely to be something tangential. And I think tangential for us can either mean tangential in terms of a product category or tangential in terms of a geographic market. Like if you look at arguably the best M&A deal that we've done to date, it was probably the acquisition of PayBright in Canada, where we had an opportunity to acquire and merge with, frankly, the market leader for buy now, pay later in Canada. And it was a business that looked a lot like Affirm. They thought really deeply around how they treated the consumer. They were winning an incredible roster of merchants they had just won Apple's first-party hardware business in Canada, right?

So I think it's something like that where we look at the business, and we feel good about how they've treated the consumer. We're not looking for revenue models that are overly dependent on fees, right? That's a huge part of our promise to the consumer. So yes, I think it's a really high bar, but I think ultimately, the corporate development team, they should be expanding our product development efforts, right? They should be able to sort of get to the 2 or 3 things that are maybe below the line for internal development, but still long-term valuable to the overall strategy to the business.

Okay. That's great color. Let's focus the last couple of minutes we have on AI. You guys touched on the shareholder letter, how it's driving productivity. Remind us how it's doing that from the cost side, I guess, is the kind of table stakes at this point, but how it's -- how you see it kind of driving growth as well?

Yes. I mean we're still at a point in our development where we just -- the only shortage is capacity to get these ideas built, right? I mean there's no shortage of ideas. And so we've really pushed the product and engineering teams to utilize AI more in their development cycles. And we actually did an AI tooling week in late January, where we sort of shut down development at the company for a week to let some of the early sort of leaders in terms of utilizing AI at Affirm work with the rest of the engineering team to sort of show and share wins. And it's actually been incredible.

The uptake of AI usage, we shared in the letter a table that showed the percentage of our pull requests, so sort of the software features that are being shipped and integrated into the code base. I think we're now up to like more than 60% of a week's pull requests coming from AI-aided development. So the team has really embraced these tools, and it's a meaningful step function change in terms of the throughput of development that we've seen. And then if you double-click and go a level deeper for me as a CFO, we're also seeing really nice efficiency, like our cost per pull request is actually going down, even though we have brought on some new vendors and there's some new cost in terms of tokens, the rate at which we're using these tokens to ship software means that we're still more efficient in terms of the cost to develop a feature or a piece of software.

So I think that's really important. I think that all said, we've done a pretty good job of getting our arms around the spend early, and I think we have the right tracking in place. And so there is, of course, still work to be done around optimizing. I think one of the things we're starting to do a bit more around is just making sure that the model or the token type that we're using is rightsized for the job, right? We want -- we don't need the cutting-edge cloud token to sort of check the weather, right? So like making sure that we're using the right model for the right job. That will be another layer of optimization that we'll do. But yes, it's been really awesome to see the acceleration in development internally

Are you monitoring the cost of tokens?

Of course. I mean, the answer is yes.

But like is it a big piece of the growing piece of the P&L, you're like that's a big -- that's getting to be a much bigger number, and that's good because we're offsetting that cost with not hiring as much in certain areas and things like that. So the efficiency of a token versus a human is obvious, right?

Yes. And again, I think we've got a really robust road map internally. And so we are continuing to add to the team. We're doing it, I think, in a pretty measured way in terms of headcount growth. But right now, we're adding the token costs and we're growing the size of the team as well, and that's working for us. I think we're really happy with the throughput we're seeing. But yes, we need to build financial plans that are aware of all these things. I think we've done a good job of that and all of the token costs are factored into our near-term guide and our medium-term guide as well.

We could end it on this one. I think at the last lunch we held, it was right around the time one of your kind of sort of not competitors made a major headcount reduction and you said, hey, if you look at your gross profit per employee, it would be what they would be post RIF. So you run really efficiently. It's obviously a really incredible management team. So do you see AI more as a continuous growth driver as opposed to a cost reduction? Or is it a combination of both?

We do. I think right now, it's very much more the former. Like I said, yes, we are still continuing to add human beings to help develop more software, and they're using AI tools to get there faster and more efficiently. But we haven't done sort of AI-driven layoffs.

Okay. All right. I have a bunch more questions, but we're out of time.

All right.

Thanks. Thanks, Rob. Yes, appreciate it. Thanks, everybody.

Welcome to the 2026 Affirm Investor Forum for the -- we are live here at NASDAQ in New York. We appreciate those of you that are joining us here in person, but as well as those of you that are joining us virtually. This is the third iteration of our investor forum, and we certainly hope it's our best one yet.

As many of you know, I'm Zane Keller, I'm the Head of Investor Relations here at Affirm. Before we begin, we do have to go through a few legal disclosures. Today's presentation may contain forward-looking statements, including projections, estimates, targets and illustrations as well as statements regarding the company's strategy, future operations and partnerships.

These forward-looking statements are subject to numerous risks and uncertainties, including those set forth in our filings with the SEC, which are available on our Investor Relations website.

Actual results may differ materially from any of the forward-looking statements that we make today. These forward-looking statements speak only as of today, and the company does not assume any obligation or intent to update them, except as required by law.

We will have several guest speakers today, as you might imagine. The statements and opinions expressed by these panels are solely their own and they do not necessarily reflect the views of Affirm. You should not treat any of their statements as a recommendation to make a particular investment or follow a particular investment strategy.

Finally, today's presentation will contain non-GAAP financial measures. These measures should be considered a supplement to and not a substitute for GAAP financial measures. For historical non-GAAP financial measures, reconciliations to the most directly comparable GAAP measures can be found on our Investor Relations website.

With that, I'd like to introduce the agenda for today. We will begin, of course, with Max, who will provide an update to the vision for the company as we continue to build the Affirm network.

Afterwards, you will hear from Libor and Michael, who will speak to our structural advantages and why we believe these give us an enduring competitive advantage. We will then discuss our 5 medium-term growth drivers. You will notice 5 instead of 3 last time.

You'll hear from Wayne, Vishal and Pat, who will delve into each of these 5 drivers from both a commercial and product perspective.

Finally, John and -- Rob and John Marion will close this out with an update on our funding outlook as well as the all-important update to the medium-term financial framework. With that, let's get started.

Thank you for showing up. Definitely I was not looking for a applause, but thank you. We have a lot to go through, so I'll try to get through my part quickly.

In the next 10 minutes, I will tell you absolutely nothing that will help you with your spreadsheet. So this is the time to dream with me a little bit versus dig deep into the models that are important, I recognize, but that is to come.

All right. I'll tell you about what we've been up to and where we're headed. So there's one thing you want to -- you should -- in my hope, my opinion, you should take away from my talk track is we've built a network. And it's not just a network and the sort of thrown around all the time, payments accepting term of art.

It is a network that is real in a sense that it is fully closed loop. We are both the issuer of credit, the transmitter of the credit information, the acquirer and the risk manager. We're also unique in the sense that we are fully information preserving. That is to say merchants and consumers give us a lot more than any other payment network has to benefit from.

Most importantly, and this really is kind of the whole point of what I'm here to tell you and what my colleagues will do to have so much more to say about is we are exhibiting very real network effects. And the business should be, in my opinion, of course, judged through that lens from this moment until the rest of this presentation and from now on.

Let's start at the beginning. So we started Affirm with a mission. The mission is honest financial products that improve lives. I wish I thought about clever way of saying this when I wrote it down, but the whole point of having mission and core values is to put them down once and keep them in stone. And that is ours. We mean it. We really mean it.

And I mean it so much that even for a formal event like this one where Zane explicitly told me do not wear jeans or T-shirts. I dress up exactly as I do every day, wearing my Affirm logo in multiple parts on my person.

I want to show you the other ones, but -- kidding. But I got to keep the room awake. The reason for this is actually quite selfish. I love the dopamine hit of getting out there and being stopped on the street.

Somebody asked me this morning in the gym, whether I was the Max Levchin, which was like, I don't know what's it about to happen? I said, love what you've built, love the product. It's just so cool how you guys are building this company.

And that happens a lot, a lot, a lot these days. Like I don't think a day has gone by over the last 6 or 12 months where either I didn't have the experience personally or one of my executive team wouldn't come in and say, Oh my God, I had just the coolest thing. Michael, I'm going to steal a story because I don't think he's going to share it.

When he was traveling to some place most recently where we met up, he said he had 2, oh my God, I love Affirm moments from 2 flight attendants on 2 different flight legs, which is like that's a new high. It is a great high.

I encourage you to sort of step back and ask yourself, what other lending brand you know that engenders love among its customers. I'll wait, but I think I'll be waiting a long time. I don't think this is a common reaction. I think our customers love it, love us for real.

That intensity, the approach we take to our products, to the way we treat our consumers, the way we treat our merchants, our capital partners, our investors, that integrity that sort of is the building block is really important to us. It's entirely real. We don't just bring it out sometimes.

It is a daily occurrence here. That is where the brand comes from. We spend basically rounds down to $0.00 on brand advertising and yet we have such a strong consumer preference that comes out of these conversations.

The fundamental insight that we had 15 years ago, which is sort of terrifying to say I was in my 30s, which is not the case anymore. The world was ready for a better approach to credit.

We didn't want to build a product that was just like anyone else, we thought we would have a chance of persuading people to give another way of paying a try by simply telling the truth, giving them a sense of control, transferring the transparency directly into their hands and doing it right where they're shopping at the point of sale.

Fast forward to today, we are in more than 0.5 million checkouts online alone, obviously, offline, Affirm Card works everywhere. We're starting to break out into a thing that everyone has seen heard of and for our consumers, I think they love.

So 14 years ago, going back to the beginning, I won't trouble you with the names of the merchants because some of them are no longer with us and others are not -- no longer nearly as enormous as some of the ones that we are proud to call customers.

We were given a chance by -- literally these friends of mine. I would call them like, hey, I got this payments company like, no, not the first one. This is the new one, different really. And I got a payments idea. Can you put a button on your check? I'm like, oh my God, another button, like no, I really think it will help. Like what do you think will happen?

What happened is what's now known as the Affirm effect. It's a 30% on average pop in your online conversion. And this has been true since the very beginning and varies a little bit. We have different share of card, different impacts on different kinds, but this is not an outlier.

A 30% increase in checkout conversion is a very, very normal thing for a fully integrated Affirm, or if you're selling many SKUs, the conversion might not go quite as much, but you would see a doubling of your AOV.

Somebody would come in to buy a pair of shoes and would walk out virtually or otherwise with a dress and a pair of shoes in a bag. And that has propelled us to incredible growth from the very first point.

Like we literally went from does anybody care to, I think we have a product market fit. I'd love to point out to our team and anyone who cares. We have never had to pivot. Like every company, and this is my #9, I think, I've ever been involved with. We pivoted and pivoted until we found that elusive product market fit.

Affirm took about a year wondering through the desert of prototyping and trying to figure out how this thing will work. But once it clicked, it's clicked. We never had to change who we are or how we do business, which is blessing for an entrepreneur.

That doesn't mean we didn't evolve. We worked very, very hard on every little bit of that Affirm effect. Affirm effect is the checkout experience, the conversion, that is what we are in the business of selling.

That means the user interface have to become sharper and sharper, like I try to remind our designers and our product managers that we literally bring a chisel to the pixels that we have on checkout and take out any pixel that we don't think has to be there because that's between us and that sale.

The other thing is underwriting. Like it's fun -- all fun in games if you're a closed-loop network, but if you're the one managing the risk, which is what happens, even if we sold the risk in the capital markets, we are still on the hook.

Because the next sale of the next loan depends on how well we did in the previous one, which means every single transaction has to be underwritten in real time with the tight requirement of the user interface without too many step-up questions or identity confirmation screens.

And then that loan has to get approved or decline in real time very quickly. And we have to pretty soon then figure out what of the many capital markets channels is going to go to.

We've have to go from, hey, we think we can gather these things up in a spreadsheet and then figure out how we might finance it later to a giant machine that issues securitizations every month and many, many other channels, and we'll talk about our [indiscernible] program in a little while.

All of this is only possible if you have data as a first-class citizen. We have built our entire company around managing data, aggregating data, mining data, modeling data, modeling outcomes. The thing that I sometimes like to say is that the product is the rocket ship. We didn't have to pivot the product worked. It is the rocket ship, but the data is rocket fuel. Like that is what takes us forward.

The fancy graphic, those of you who recognize is, of course, a neural network. That is what powers the checkout that we have. So Affirm checkout is the product, that is the conversion that we sell so well.

The optimization function that takes place every time, even before you click on anything, even before you choose to go to Affirm, the list of choices we show you in that moment is powered by a model that was deliberately designed to maximize your interest as a shopper to minimize the cost that the retailer incurs to maximize your interest, to produce the best possible financial outcome for you, the consumer, because if you're not going to pay us on time, we will lose money because there are no late fees.

We've never charged a penny and never will, to make sure that we have the yield for the capital markets expectations that we have probably negotiated months in advance with a rate that has since been modified by the Fed funds rate. That all of this happens before we know who you are, if you're not logged in. And if you are, we have some incremental data. So the amount of AI for lack of a better term, that takes place in this checkout is astounding.

The thing that I will tell you because Libor, who will come right after me is too modest to brag. We've been building these models for 15 years from the very beginning. The company was founded by a bunch of computer scientists who basically thought that we could do better than FICO because more data, better techniques.

The last 1.5 years or so, we've been working on a completely different class of models inspired by what you encounter when you talk to ChatGPT or Gemini. So it's a transformer-first model with an attention mechanism that drives everything from selection of terms to underwriting.

You will see the results, which are quite phenomenal. But that should give you a flavor for just how much time and effort we put and how seriously we take the idea that this business only makes sense with the level of machine learning and AI that we have in our DNA.

And the reason it is more important to us from the consumer's perspective, obviously, it makes sense. We want people to feel great. We want them to have the sense of control. We want them to get the best deal possible. The wrinkle that I sort of referred to on the merchant side is actually worth pausing for a second.

When you see a 0% deal, when you see an APR that compares very favorably to your credit card APR, someone is paying for a time value of money, and it's not us. It is typically coming out of the marketing budget of the merchant.

And we are the steward of that capital, which means that for every penny they're putting into our model, we have to show them, and we have to feel great about the fact that we're maximizing their yield on marketing investment. That is a fairly profound responsibility to take on in addition to all the other responsibilities that we take.

On the flip side, though, we've gotten very, very good at this and the giant stack of custom pricing contracts that give us the right to tap into these marketing budgets in real time. is the moat that Affirm has created just on that side of the business.

Trying to replicate has been very challenging for our competitors, as you may have noticed. In part, that's because we've built these trusted relationships with consumers. We built a great brand. We do have brand preference at this point, but we also have a deep sense of trust and care with the merchants that we have these custom pricing.

And we've been leaning into 0% financing, as you have seen, obviously, over the last couple of quarters, all of that comes from the contracts and it's a profound differentiation that we have across the whole industry.

I love this animation, admiring it for a second. All this was created with AI way too quickly, but frees up our designers to actually build products that require human involvement. As we increase our transaction count, transaction per active user per unit time, has a really nice consequential effect on the data aggregation side, which translates to visibility.

We understand the consumer that much more. We have less period of waiting between loans, more time or more data to understand who that person is, better understanding for exactly what drives them when shown 3 different financing programs, are they going to accept the first, the second or the third?

We have a model that reorders which ones you'll see first. We know where your eye will trend. We know what you will click on based on previous transactions. The more transactions we have, the faster the flywheel of the Affirm network growth spins.

Higher frequency, of course, gives us better share of wallet of that consumer, makes us more relevant to the merchant. The goal of Affirm has always been to become as important to merchants as Visa, Mastercard, American Express, the great American Payment Networks.

We're getting there by building out this network, by experiencing these network effects. The more we have of everything in the network, the easier perhaps conversely, it is for us to grow because we become that much more relevant to merchants.

More and more people stopping me on the street saying, Hey, I love Affirm. That means they're telling their merchants either directly or indirectly, you should accept Affirm if you aren't yet, which is, fortunately for all of us, a diminishing number of people who have not yet integrated. We've underwritten 70 million Americans. We've transacted with more than half of them. If you've seen our latest quarterly numbers, you can see that, that number is -- the second number is a little bit more than the ones that transacted in the last 12 months.

The opportunity to decrease the gaps between transactions to increase the frequency is still very, very substantial. the Affirm consumer is real. She does, in fact, exist. She has her preferences. A very large retailer decided to remove Affirm from an integrated checkout a little while ago. And the expectation, certainly according to our stock price movement was that we'll just lose the volume, and that's going to be that.

That is not what, in fact, happened. A large percentage, a large majority, in fact, of the shoppers from said retailer simply went out and got themselves Affirm Cards and continue to today to access Affirm at the point of sale online and offline using Affirm Cards, fully benefiting from all the Affirm Card functionality.

The volume at that retailer continues to grow for us, which not what was -- I think many people thought was in the cards. We have 27 million active consumers in the last 12-month period. 15 million of those are in our app every single month.

That has now become a big enough surface where marketers, not just those who are paying for these 0% deals or discounted APR deals, any marketer within any retailer can come to us and say, Hey, I would love to tell our story. I would love to launch a product.

I would love to do something with you guys. The audience is so big, and we know we are seeing them on every channel, integrated through digital wallets, through the Affirm Card. Obviously, that wasn't sitting idle as an idea for too long.

We decided know what, we're going to have our own shopping event. People don't come to us to pick the thing they're going to buy. They definitely come to us with a view, I'm going to buy a thing.

I'd like to know which retailer will offer me 0% financing, which is why we invented this thing called Big Nothing Days, which -- and if you know the Affirm team, you know we love our silly puns and take ourselves extremely unseriously.

And so the big nothing. The latest one we'll launch tonight. This was sort of a coincidence. I'm not sure we meant for it to be at this event, but I'm here to tell you, if you're in a market for just about anything, there are thousands, maybe tens of thousands now of retailers that are going to gladly pay your interest for you, and you can find it all in the Affirm app starting midnight tonight and will go for 3 days.

Last time we did this, which was October, we moved the needle for participating merchants north of 30% and it had no pull-forward effect, which is what retailers hate because if they promote something today and the transaction goes away tomorrow, they don't exactly love it.

We waited this long to do another one because we wanted to make sure it's very clear that there's no pull forward. These transactions were an expression of preference as opposed to just switch. So more big nothing is coming up. My reaction to the big nothing numbers was, well, why don't we do this every week? I've been overruled.

But we're definitely going to do more of these. So I promise I'll get off the stage in a second, but I have to mark the shorts a little bit. So the best bear case for Affirm has been it's all the credit risk and no consumer preference.

Hopefully, I've beaten the consumer preference horse to death right in front of you here. Like we really do have consumer preference. People will actively switch to our card only to counterweight the fact that a merchant decides to no longer support Affirm.

Our merchant churn is, rounds down to effectively 0 because most merchants are very clear that they have to support Affirm. Our logo is important to them. That said, the one thing that I will not try to dispute or combat here, the credit risk is real.

Like Michael wanted to write our S-1 starting with a sense, we take risk, which I thought was amazing. And of course, the legal team had its way with it. But I love our legal team. And I mean that.

I nerd out with them as much as I nerd out with the engineers. But the credit risk is a thing that we take on proudly. You've seen the results. You can see it every month in all of our securities. So we've done a pretty amazing job.

Credit is job #0 at Affirm as an engineer, I count from 0. It will always be there. The thing about the scale of the network is 3, 4 years ago, when we had just gone public, I entertained a bunch of investors and one of them said, Oh, guys, it $100 billion? Is that like a thing? Is that going to happen? So we're dangerously close to $50 billion in trailing 12 months.

So at this point, the debate has shifted, when do you get to $100 billion, not if you get to $100 billion, which I'm pleased to welcome everyone to that way of thinking. That said, if it takes us a little bit longer to get to the milestone, which I think is entirely unavoidable in a good way, we will take as long as we must.

We will not compromise the credit quality, the trust we've built with capital markets just to achieve some kind of a gaudy GMV number. And so that was important to say. That said, I said, but I'll say it again, the other takeaway is it is easier to grow now that we're larger, which I think for most businesses, it's actually the other way around, not for businesses that exhibit true network effects.

Merchants now reach out to us saying things like a few years ago, we told you guys BNPL was not a thing. It is a thing, and we want it, where do we sign up?

Even weird version of this is they say, Hey, we definitely want to sign up, but could you integrate us into your app before we go live because we want to tap into your audience because we want to start using you as a marketing channel, which is great because it's a new revenue stream for us.

Just a couple more sort of nuggets to it. The last 12 months -- trailing 12 months looking back, 5 cohorts, that's as far as I looked. Every one of those, the transactions per user grew faster than the one before. So the flywheel is just spinning faster on its own.

The most we're doing to increase transactions in the network is just signing up more retailers. If you look at card cohorts, every new cohort is starting a little bit higher than the last. It's spending a little bit more.

Again, we're not telling them, please spend more. We need to show good numbers. It is happening on its own. It took us about a year -- actually now, it took us more than 2 years to get from 2 transactions per user to 3 transactions per user.

We've just gotten from 6 to 7 in less than a year. Again, another sign that the network is just spinning. We're gaining share of mind, but we're also gaining share of wallet. The audience is now big enough where we're fielding millions of searches in our app alone for brands that support Affirm. That is a great sales tool.

I frequently go to a merchant that hasn't yet seen the light and say, you may not care about us, but our users do care about you. Here's $100 million of GMV that we fielded from our app. People search for you specifically in the context of we should do something.

I can drop a bunch of brands that have literally seen the light with that sales talk track. Anyway, I'll stop beating the network effect a real horse in front of you here, but that is the only thing that I'm here to tell you.

As is my last slide in front of you, the one on your left is a throwback. This is from our very first fundraising deck. That's why the Affirm logo is outdated. But from the very beginning, the vision that -- no, we had said we want to be on every door.

We want to be a must-accept payment mark as important to retailers as Visa and Mastercard. And I wouldn't quite go as far as to declare victory right now, but we are really well on our way and all signs point to the fact that this is happening. Consumers love us.

Again, I love Affirm is something that I love hearing, but I hear more and more often and just fills my heart with joy. I won't steal Vishal's thunder, so I'm not going to rattle off all the things we're going to build, but kind of the themes to focus on growth.

It is easier to grow when you're getting bigger. We are still very focused on growing. Modular credit, modular, keeping extremely close eye on everything from capital markets downstream concerns there, all the way to making sure that we never overstep our credit requirements, but growth is still very, very top of mind.

That means more channel partnerships, more ISVs. We'll talk a little bit about Affirm Edge, the official renaming of Affirm AC/DC. We did not want to get sued by the band. If you don't know what that means, don't worry about it, you'll see what that is in a second.

And then Agentic, it's everyone's topic. [indiscernible] our morning's release, we are getting fully integrated into Gemini. That's not the only one, but this morning, that's the one we're talking about. We're very focused on direct-to-consumer.

The card is now a big enough part of our business that we're recognizing that we are not actually serving every economic strata the way they want to be served with our card that just creates more opportunity for us to go build some more software, which is exciting.

Our card is a dumb piece of plastic with an extremely sophisticated set of features in the app, and that's exactly what we're digging deeper and deeper into.

And finally, again, a little trite. I refer you to my shareholder letter if you really want to see what that means, but AI is a superpower. This is a moment where the world is divided into companies run by engineers and companies that are trying to figure out how are the companies run by engineers leapfrogging them.

We are very fortunately in the former, the founding team of all engineers. Pretty much every executive team member writes code either for their job or to make sure their job is a little bit more fun.

And so we are firmly in the engineering mindset, and we're loving every moment. Don't take no AI layoffs as what they're being portrayed to be. Those of us who know how to build software love having people who can direct AI.

I'll leave it there. Anyway, Affirm logo on every card. We're not there yet, but we're getting closer and closer. It's very exciting. With this, I will leave you in the capable hands of Michael and Libor, my 2 co-conspirators on just about everything we do. Please welcome them to the stage. They're good men and thorough.

We will do our best to get back on time here. He is not into brevity. Thank you all so very much for being here today. I really appreciate you making the trip and listening to us a little bit about what's going on at Affirm.

I'm up here on stage with my friend and colleague and fellow Pirate, Libor. And we're going to walk through how we see our structural advantages and why we think they point to long-term durable growth with really compelling unit economics.

Before I dive into the structural advantages of the business, we thought we'd take a second and put a framework out there for you to think about the way those advantages show up in the form of 2 reinforcing flywheels.

The left-hand side, we talk about a lot. That is our merchant and consumer network, where as we get more consumers and delight them with transactions, they get more value out of the network.

Merchants want to be able to participate in that network, allows us to attract more merchants who in turn give more value to the consumers and the 2 reinforce each other. We spend a little bit less time in these forums talking about the right-hand side, but it's very important, and we're going to talk quite a bit about it today.

And that is our approach to risk management and how we vertically integrate it across credit, capital and everything that we need to do in order to scale the business. The key thing here is as we get more transactions on the network, we get smarter.

Our capital partners can have more confidence in the level of credit losses that we underwrite, thereby generating more returns, which in turn help us deliver better offers to our merchant and consumer partners. And these 2 flywheels really do work together, and you don't have the business without both. So thinking about our advantages, [indiscernible] will walk through today. I'll walk through them all in the following slides, but I'll quickly introduce them.

I'll hit the first one and let Libor take the rest, and then we'll come back and talk about the way they show up. The first is network effects. Max talked a lot about that. We talk a lot about that in our business.

But as our business scales, it gets more valuable for all participants in the network, making our job to grow the business and network easier as we get bigger.

The second, again, we talk about a lot, which is that we have transaction level underwriting. I cannot repeat enough how important transaction level underwriting applied to short duration loans fundamentally changes the outcomes on credit.

The third is our data asset. Our data asset is unmatched in the industry. We've been at it for quite some time. Models are all the rage. They need data. Otherwise, they can't function, and we have a data asset that cannot be matched.

The models themselves are not as interesting as the way you operate them. We can update the models and again, make decisions throughout the course of a particular period to make sure that we're engineering the right outcomes for our capital partners, our merchant partners and our consumers.

And then lastly, our infrastructure scale. We have built a robust and reliable platform that allows us to serve the most demanding and largest e-commerce players in the world that is a real strategic asset for us. So let's think about the network effects.

Here, we got some data, 71 million underwritten consumers all time, a little over 0.5 million merchants. That's the merchant and consumer side of the network generating a tremendous amount of transactions.

Again as more merchants on the platform, consumers can get more value as more consumers are on the platform, merchant gets better sales. They can get value out of Affirm both in terms of higher conversion, larger average order values and then obviously delighted customers.

We make their customers happy for what we're able to do for them. But we don't spend as much time talking about the network effects that we see across the broader ecosystem. Our capital partners who benefit from the scale that we create return that with better cost of funds that we can then build really compelling products for the consumers and the merchants making our growth easier.

Scale begets scale and scale begets economics in our business. The result of these complicated and finally tuned systems of interactions is a very, very complicated yet very powerful machine. When tuned correctly, Affirm can generate really large scale, lots of growth and a lot of delighted and happy customers throughout the process. I'm going to -- I will handover to Libor to talk about underwriting and infrastructure.

Thank you, Michael. Really appreciate it. So transactional level underwriting, by engaging consumers to evaluate their repayment options and pricing as a part of their purchase, we create the opportunity to individually underwrite every single transaction, which enables more accurate risk evaluation and real-time pricing, greater clarity and of course, improved conversion, AOV and repayment on the consumer part.

As a result of underwriting each individual transaction compared to a model that is product-agnostic, all or nothing approvals, Affirm is able to deliver significantly better approvals for the same delinquency rate or much better delinquencies for the same approvals.

For example, this graph compares using Affirm to FICO across a large set of our transactions based on a specific delinquency target where we pick it, we are able to deliver significantly greater approvals at target economics, process more transactions, collect even more performance data and satisfy more merchants and consumers in the process.

Through a vertically integrated product and transactional underwriting together, we are able to collect more data to train our models. We develop a clear picture of each user's behaviors, finances, choices at the time of the transaction.

We are able to acquire and originate across the full journey of the purchase, everything from offers they saw, the merchants that they considered, the terms that we offered them, what they chose and then how they repaid those installments.

This includes category, merchant, item-specific data. For example, in travel, the time from when the customer made the purchase to when the trip actually happens as it relates to the length of the loan is a huge signal on repayment and ultimately approvals as well.

Vertical integration drives visibility into user choice and outcomes. And over the last 14 years, we've seen $150 billion in volume, $2.3 billion repayments, continually increasing the scale of data on which we train our models.

As we've grown our consumer and merchant network, we've steadily grown the number of loans and the number of repayment installments we use to train each successive generation of model.

Additionally, through research and experimentation and development, we've steadily also increased the number of features describing those purchases and those repayments, resulting in an acceleration of the combined number of loans, installments, features, the full data set that we use to train each individual model has continued to increase.

And as we've increased the scale of our model training data, as the product evolves, the models learn new behaviors and interactions, differentiating how people respond to distinct offers and how that impacts their repayment to consistently deliver better performance.

Now normally on these graphs, people like to show like area under the curve, and it's really hard to kind of normalize that. So we decided to look at like delinquencies as it relates to approvals, right?

And so we see the same effect across 2 distinct classes of models here, our repeat model and our new user model. Each successive generation is delivering better approvals at the same delinquency level or better approvals -- better delinquencies at the same approval.

And that differentiation across generations on the right side of each graph gets better and better in the most pronounced in discovering the strongest consumer segments where we get the best repayment. We're also very excited and super excited with our latest AI model form using a transformer-based architecture.

It is delivering more -- it is basically discovering more pockets of opportunity more deeply in our data, especially in making dimension a first-class feature. So we're able to actually -- in using our existing data, finding new information within it using transformer-based architecture.

It's actually shown here the -- even though the model, it's on the top, the green line was released shortly before our mainline model as an experiment, it's already significantly outperforming the model that actually went out a month later, which is the red line.

So it's the form that we're going to be transitioning all of our models to, and this creates a new baseline for us to continue delivering improved performance with each new model generation and, of course, with even more data.

This flywheel of data acquisition is steadily converted into better models, which drive improved customer and merchant outcomes, which in turn drives more data, research and model gains.

Being able to underwrite every transaction and price every offer creates better outcomes for consumers and merchants. And being able to do it quickly and reliably is an obligation we take seriously. We're not just matching a transaction to a credit line. The full underwriting ensemble of models, policies, pricing, all of it has to work quickly and correctly every single time. We spend a lot of time analyzing, obviously, performance of underwriting.

We obsess just as much about delivering that capability consistently and reliably every single time. For example, during this past Black Friday, Cyber Monday, we managed peaks of 4,000 checkouts and 14,000 app opens every single minute. all with a consistently high reliability and our merchants and customers rely on us, and we take that trust seriously. And speaking of merchants, Michael?

We want to walk through a few proof points of these advantages that we discussed. The first is the size and scale of our merchant network. Obviously, we're really proud of the distribution that we already have, and we think it's a market-leading position.

We work across nearly all verticals, all merchant sizes and merchant types from the world's largest e-com players to the small shops on Shopify. Our platform can integrate -- be integrated with directly with merchants, and we can deliver great economics when we do that or we can use partners to integrate any way the merchant sees fit.

We want to help meet the merchant wherever they are and find the consumers wherever they are. The list here is obviously just a narrow slice, and we're adding more merchants every day, but we're really proud of the scale of those -- the merchants in our platform that benefit our consumers.

Again, the merchants will get bigger baskets, better conversion. We're a payment method to them. We're a marketing method for them, and it's all wrapped up in a lot of customer love.

Merchant network is great. We also have some receipts, so to speak, on how we think about the outcomes on credit and capital markets. And we decided to try to visualize for the investor base here our static ABS deals over the past several years since 2023.

And 2 big insights here. The first is, if you look at the top line, that's where we price the deal. When we begin a deal, we tell the market that we expect this level of losses and the curves should look like the top line. the line below is a mixture of the realized losses and then a projection where we don't have the realized losses fully in yet. And it's incredible our ability to dial in the losses consistent with the pricing assumptions 3 years out.

Affirm's ability to price credit correctly creates a real differentiation that allows our capital partners to trust that the way in which we approach losses will be consistent and just under the assumption that we put out there.

And that trust shows up as real economic advantage for Affirm. On the left-hand side, you see the credit spreads for the past several years of our ABS deals. We were running in the 300 basis point context back in 2023, and we're running in the 100 basis point context today.

I don't think I have to tell this group what 200 basis points of funding cost does to our business is pretty powerful in terms of the tailwind and what we can do.

When you also combine that with our other advantages, the transaction level underwriting, models that can price risk correctly, having that extra capacity to invest in the merchants and the consumers allows us to be very growthful and again, makes our job a lot easier.

But it's not just the ABS markets. On the right-hand side, you see the forward flow markets. The ability for Affirm to attract capital from some of the world's best investors from pension plans to insurance funds to yes, asset managers is remarkable.

And we've been able to do it while building real scale in the platform because of the durable advantages that we talked about. Put simply, our investors trust us, and it shows up with the results. And speaking of trust...

This trust and confidence is also seen in consumer engagement. While we've scaled to 27 million annual active users, we have seen a steady increase in user engagement, capturing a greater share of their considered purchases.

Since the last investor forum, we've increased the number of transactions per customer per year by 50% and now sitting at 6.7 transactions per active customer.

These improvements are being driven through the expansion of our merchant network, improvements to risk management, consumer retention and significant continued growth in card users.

Of course, the increase in active consumers and number of transactions per user also reinforces our positive impact on merchants, the underwriting and repayment data we collect and the trust we build with consumers. And AI is only accelerating these flywheels.

Most exciting parts of the business are what AI is starting to do for us. For underwriting, as I already talked about, AI drives improvements that increase the salience of our data, transformer-based models being better incorporating the time, thereby significantly increasing the complexity of the feature set from our existing data.

AI improves the operational cadence of everything from model building, servicing, pricing, offer creation to collections and capital allocation and, of course, engineering productivity.

Similarly, consumer and merchant personalization also becomes richer. For consumers, we are providing a more tailored experience in everything from search all the way through to the customer support experience. And for merchants, we are providing optimizations customized to their business and to their customer base to deliver even better results for the same budget and to make even more efficient use of their incremental promotional budget.

We're only at the beginning and could not be more excited about what AI is going to do for the business. And with that, I will hand it back to Zane to tell us about our next speaker.

Okay. So we've heard from Max about the update to our vision and also most recently, our structural advantages. Now we'd like to go into the 5 different growth drivers that we have. And to kick us off, we're going to begin with Wayne Pommen, who's our Chief Revenue Officer. Please give him a round of applause.

All right. Thank you, Zane. So Affirm's first-ever transaction was at a merchant point of sale. There was an online order from a flower delivery merchant.

And 14 years after our founding and hundreds of millions of transactions later, merchant point-of-sale remains our foundation. So our direct-to-consumer business is growing very quickly, which you're going to hear more about later.

But in the last quarter, point-of-sale still represented 76% of our transactions. Every year, we welcome thousands of new merchants onto the platform. We grow our volumes with partners that we already have.

And as we do that, we meet millions of consumers at the point of sale and welcome them into our network. And so ultimately, this core of our business is a very strong growth engine. Over the past 3 years, it's grown at 32% annually. And as I'm going to try to lay out in the next few minutes, in some ways, we think we're still just getting started.

So you heard a moment ago from Michael and Libor about the structural advantages that we have in our business. Those are also the underpinning of the value that we deliver to merchants and distribution partners. That includes our ever-growing consumer network and the propensity of those consumers to transact with us.

You heard about our credit decisioning, our transaction level decisioning, which drives superior conversion and AOV results for retailers. Our data asset supports delivering the right offer to the customer at the right time to drive traffic and again, conversion.

Our ever-evolving models, the power of our models drives ongoing increases in performance, but also importantly, sustainability of results for retailers. And you also heard about our enterprise infrastructure, which delivers the scale that our largest retailers require, especially in their big moments each year, and it also supports the depth and the velocity of our product.

And as these structural advantages compound, so too does the value that we can deliver to the merchant network. So as a reminder, we think about our merchant point-of-sale strategy in 3 broad pillars: signing up new merchants and entering new verticals.

Then once the merchants are on our platform, growing our share; and then thirdly, working with distribution partners to accelerate distribution, especially in the long tail. And I'll go through each of these in turn.

So first, new merchants and verticals. In the past year, we have accelerated our merchant acquisition significantly. We added 157,000 new merchants to the platform in the past 12 months, and we've more than doubled our active merchant count since 2023.

And that, again, is driven especially by expanded distribution into the SMB segment through wallets, payment service providers and ISVs, which I'll speak more about in a few moments.

I want to zoom in for a moment on the U.S. enterprise segment, which drives the majority of our point-of-sale GMV. We carefully track the top 250 e-commerce and travel merchants in the United States, e-commerce and travel being the original core markets that Affirm was focused on.

So in the past 3 years, we integrated an additional 32 of these merchants, including many household names that we're very proud to be partnered with across multiple categories of retail, reaching a total of 75.

But of course, when we look at this chart, we see more opportunity than accomplishment. There's 175 merchants in this sample we have not yet integrated with, and that's something that my team is focused on every day.

Also important to remember, though, that we don't need an integration with a merchant for our customers to transact with us there because of our direct-to-consumer channels.

If you look at that 175 merchants that we are not integrated with, we drove $3.3 billion of GMV in the last 12 months with those merchants through our direct-to-consumer channels, and that nearly doubled over the last year.

So if we then look at our market penetration in GMV terms, the scale of how much opportunity we still have really comes into focus.

So again, looking at these original core markets of e-commerce and travel in the United States, those end markets are growing between 2020 and 2025. They grew 1.7x to reach $1.6 trillion.

In the same time period, Affirm grew over sevenfold. So we gained share rapidly. But yet, we're not even at a 3% penetration of these core markets, and we think we're far from any sort of ceiling even in these core markets that we've been in for over a decade now.

So what if we look beyond those original markets? The U.S. consumer spends trillions of dollars more in other areas of the economy where our product is also valuable to them.

We see this every day with the Affirm Card when somebody uses it to make a healthcare purchase or to pay for a professional service or to make a charitable donation. And we are also now integrating with these types of merchants as well.

We have a team that focuses exclusively on entering new verticals and laying out the go-to-market strategy. And as a result, we're growing in these adjacent verticals very quickly, approaching $2 billion a year. And we think the opportunity ahead is enormous.

So now I'll come on to the second pillar, growing share of card. We always say that when we sign up and onboard a merchant, that's just the beginning of our opportunity to work with that merchant and to drive more impact for them and for their customers.

Share of card is something we track very closely by comparing our GMV to the total sales of our integrated merchant partners. These figures you see here are, again, from the U.S. enterprise segment, where we've steadily increased our share over time.

And in the last quarter, we processed 2.9% of those partners' total sales. This is a very powerful lever. When we look across our total merchant portfolio, every 1 basis point increase in penetration is worth over $120 million of annual GMV.

And to accomplish this, we have a well-established playbook of initiatives and enhancements that we work with merchants to deploy throughout the customer journey to drive awareness, engagement and ultimately, conversion.

And more broadly, we continue to invest in our checkout product with the goal of having the best and highest-performing checkout experience available.

Last quarter, we announced BoostAI. BoostAI allows merchants to take even more advantage of Affirm's machine learning capabilities. With BoostAI, merchants can work with us to determine the optimal set of program parameters to drive conversion and return on their spend with Affirm.

BoostAI has now been adopted by 67% of our merchant partners -- enterprise partners, sorry, and rolled out to tens of thousands of SMBs. We're also rolling out an offering we call connected accounts, and that's where we work with merchants to recognize returning users when they first arrive on a merchant site.

We can then make them aware of their purchasing power, affordability, any personalized offers. And because we already know who they are, they can skip steps in checkout for a faster, smoother, higher converting experience.

And this is now live with some of our largest merchant partners. And in the same vein, we're rolling out embedded checkout. The idea here is we no longer want consumers to have to complete the checkout process in a separate window.

We want to keep them natively in line on the merchant site, again, for the most seamless, fastest, highest converting experience we can produce. So this is a sample of some very recent developments, but by no means are we stopping there with our checkout product.

So when we put all of this together, when we add our share of cart playbook with our track record of merchant retention, we end up with a consistently strong net expansion rate. And over the past 15 quarters, it's averaged 116%.

And when we look back at the different vintages of merchants that have come on to our platform, we see solid annual growth in each of them over time.

So the third pillar, accelerating distribution through partnerships. As a reminder, our partnerships take several forms. There are e-commerce platforms where we have integrations with 55 different platforms, large and small.

Payment service providers, PSPs where we have partnerships with 18 different ones and also wallets and browsers bring us to the checkout as well. I want to go deeper on PSPs for a moment as these have become a much more important distribution partner for us in the past few years.

We're now working with the leading PSPs to bring Affirm to their merchants. And it's about -- it's more than about just having Affirm technically available at checkout. It's increasingly about working with these platforms on a joint product to maximize our performance on those platforms and increasingly about doing joint go-to-market to maximize our reach on those platforms.

So for example, co-selling together to large merchants or having default-on motions for the long tail. And we're seeing the results. Our GMV originated through PSP partnerships is growing much faster than our business as a whole.

Now PSPs are also help bringing us access to ISVs, aka vertical SaaS. SMBs in many verticals now rely on ISVs for a range of software-based services, including payments. And so often through one integration with a PSP like Stripe or Adyen, we can partner with ISVs and serve large numbers of underlying merchants efficiently.

And we now have over 50,000 ISV merchants live and active on our platform. And because most ISVs operate outside e-commerce and travel, ISVs have become a critical part of our strategy to enter those adjacent verticals that I spoke about a moment ago.

We're now partnered with leading ISVs in each of the categories you see here, and that includes Intuit, which we were very excited to launch just a few weeks ago. I want to close on the PSP topic by highlighting our partnership with Stripe.

We started that partnership in fiscal 2022, and we've driven enormous growth together since then. And we've done that very intentionally, deepening that partnership as we've gone along.

For example, we've expanded into Canada. We launched support for ISVs a couple of years ago. We became a preferred partner of Stripe, which unlocked much closer go-to-market cooperation.

We launched in -- as part of Stripe's in-store terminal product. And then more recently, we've been working very closely with Stripe on Agentic capabilities such as their shared payments tokens program.

So we're very excited about all of this progress with Stripe. We think it's still very early days given the scale of their platform, and we see much more opportunity ahead. And so for our next segment, we're going to go a little bit deeper on our Stripe partnership. Max spoke with Will Gaybrick, Stripe's President, for a prerecorded fireside chat.

So let's talk about Affirm and Stripe. How do you distinguish yourself from others? What is it that makes Stripe unique and special and perhaps relevant to us? How do you choose your partners? How does your unique approach to payment shape who you partner with and how?

Well, thanks for having me. Very excited to be here and our partnership. I'd say one of the things that's very foundational to our partnership is that focus on growth, credit being the fuel for the global economy and now Stripe and Affirm coming together to offer super seamless, both for the developers integrating them and of course, for consumers adopting them, credit offers writ in checkout.

And so it's been probably 4 years that we've been partnering. But over the past year, we've seen really, really nice looking curve, and I think it's just the beginning.

We are measuring our scale of the partnership, the GMV of the partnership in billions of dollars. From your side of the fence, what have you seen? How have we worked together? What's been the unlock? And you're right, we were both looking at this graph and boy, it looks good. It looks really good.

Yes. Probably 2 primary dimensions. So one is making Affirm ship natively with Stripe. I think it's probably the best way to describe it, which is you integrate Stripe and you just get Affirm. Of course, you can turn it off. But...

Users don't do that.

It drives a ton of growth, a ton of conversion. And the other side of that for consumers, just the front-end experience of using Affirm on Stripe is hyper optimized. So it's just a couple of clicks, you get your offer right in situ and you're off to the races.

What are you seeing? So you are a platform, you're a platform of platforms. How does demand for Affirm's product appear? What's the shape of that on the Stripe side?

So Stripe is just relentlessly focused on increasing conversion rates for our customers. And so the calculus for Affirm is just very simple. You turn on Affirm and conversion rates go up. Offering consumers just great credit products right there at checkout just works.

So we see across major global e-commerce users, marketplaces like Turo, SeatGeek. it's all the same value prop, just higher conversion, more revenue, merchants are happy.

We've done a really strong push into vertical SaaS/ISV world, which is a place of strength, obviously, for Stripe and has been from inception. Curious how that has done for you guys in -- as it relates to us, but also just generally?

SaaS platforms really thrive. As you mentioned, serving software platforms, vertical SaaS for a particular part of the economy or horizontal SaaS for e-commerce platforms like Shopify or Squarespace.

That's been something that we've really focused on for the past decade. We have 16,000 platforms on Stripe. And one thing we've seen is that Affirm is a really big driver for growth for these platforms in 2 ways. So one is it drives conversion. So you just have more success at checkout.

So you're an e-commerce platform, you have an SMB selling goods to consumers and just those purchases are succeeding more often because Affirm is integrated. And then because Affirm is driving the uptick in conversion, the platform itself is actually making more margin.

And so the platform monetizes better. So it's really a win-win-win. Consumers are happy, the SMBs are more happy and the platform is thrilled to be monetizing better.

Let us talk a little bit about Agentic. It is the talk of the town, so we will be remiss if we don't address it. And you guys are extremely active in the space, have partnerships with just about everyone. What are you seeing? What's real? What's not? What's coming tomorrow? What's coming, who knows when?

I think it's hard to overestimate the impact of agents being responsible for the majority of transactions on the Internet.

And I really think they will be. I just think that the experiences of delegating, slogging through websites and forms and so on is coming, whether it's browser automation or new protocols, the big insight is just that rather than our fingers and eyes navigating the Internet, agents are going to do it for us.

For us, in our partnership, it's really just how should we think about credit and conversion on new surfaces. And these new surfaces aren't necessarily the same shape as we've seen in the past.

One of the things that I'm excited about in the partnership is to work with a highly technical company like Affirm to figure out how should payment methods be exposed to agents, how should we think about how they're integrated into hybrid experiences humans are in the loop, but agents are maybe initiating transactions.

What's next for you guys? Where are you headed?

One of our major priorities is always to accelerate the rate of sort of global expansion for businesses. And so one thing that's excited that we're doing together is we're going to the U.K. together, which is great. So Affirm in the U.K. on Stripe is going to be exciting.

Part of our merchant point-of-sale business, which is, as Wayne mentioned, our core business today and still by far the most amount of GMV that we're generating.

We're now going to shift gears a little bit and move on to some of the product initiatives that we believe will be our growth drivers for the future. So I'm going to invite on stage our Chief Product Officer, Head of Product, Vishal Kapoor. He's going to talk to you about the combination of the Affirm consumer ecosystem, the cornerstone of which is Affirm Card.

He's also going to talk to you about our more nascent efforts, I'd say, within both Agentic commerce as well as some of the other initiatives we have. So with that, we'll play a short introduction video, and then he will take the there.

[Presentation]

My team would like to remind you that no music artists were harmed in the production of that video. That was all generated by me over the weekend. So if you like this, you can give me credit, if not, then we can move on.

All right. Wayne just described the first chapter of Affirm. That was how we built a PowerCore business for our merchant partners. The next chapter for us is putting Affirm in every hand, in every wallet, in every shopping conversation and every banking app.

I'm Vishal. I lead the product and design teams here at Affirm, and I'm excited to tell you 4 bets that are going to take us there. First, with Affirm Card, how we are reimagining a card, credit cards wish they could build.

The second is we take that same card and we put in every single digital wallet out there. Third, how we are not just situated to play in agent commerce, but how we are situated to actually win it outright. And the last, how we will integrate our Affirm structural advantages into a place where millions of Americans already bank, which is with their trusted banking partners.

These are 4 structural bets. It leads to one outcome, which is how Affirm is going to be the consumer payments network of the next decade and plus some. Let's start with card.

You've heard a bunch about how Affirm started as an online checkout button. It was a beautiful button. A lot of customers used it across a host of different merchant partners, but they came back to us with one singular question that defines this next chapter for us.

And that question was, where else can I use Affirm? So we listened. We did a bunch of user labs and then we built this beautiful thing that you see here. This is the new version of Affirm.

This is an Affirm that you can take everywhere you go at the terminal, in your wallet, and you can use it online or in store, and customers have been loving it. Don't just take my word for it.

Look at the ways that we have actually taken the structural advantages and combine them into a thing that no one else can replicate. The first is the purchasing power. This is not a static limit. You don't have to call in for an increase. It actually works for you because it's powered by real-time underwriting that happens on every single swipe.

Second is we give you total flexibility. You can either pay now, you can pay later, you can pay now and decide later. For every single swipe, the choice is the consumers, not the issuers.

And last, because of our vast merchant network that we have heard a bunch about, we can actually personalize offers, deliver them to your inbox without any caveats, without any fine print, real value delivered.

These are the 3 structural advantages in motion and it comes alive through the way of the card. No other card in the market does it today, and we feel we have a very good position in terms of how customers are loving it.

Let's look at some numbers. We are seeing the 4.4 million active cardholders are spending $2,400 annually on the card, and that's growing about 130% year-on-year. That's a really tremendous trajectory for where the product is right now. But that's not all.

When these cardholders take on the card, we see them spend 3x more across the Affirm than non-cardholders. That translates into $3,900 of total cardholder spend across the network. And 16% of these customers are Gen Z. So that means that a sizable amount of our population is choosing an

Affirm Card over traditional payment methods right from the get-go. This is our highest growing product and it's our most profitable product, and we are just getting started. So if you look at -- this is one of the most important charts that we obsess about at Affirm.

This is a cohort spend on the card. What you notice is that every single line is stacking on top of each other, which means that we are not just adding more cardholders every quarter, every year. These cardholders found more value in Affirm.

So they're using it more because we are giving them more access to merchants. We are giving them a better product. We're giving them more purchasing power. All of that stacks up in more cardholder spend in the network.

This is really important because in any product market fit question, you actually look at, is the customer happy? Are they coming back? Are they using it more? Are they spending more? The answer is unanimously yes.

All right. So what is our big opportunity ahead of us? Well, we think it's actually very massive. We have a clear path of going from 4.4 million actives into 20 million actives. And that is not by paid acquisition. That is not by paid marketing.

We are going to serve the customers that are already in our file. You heard Michael and Libor talk about 71 million underwritten, half of them have transacted. Those customers are our future cardholders.

Second, we see their spend annually going from $2,400 more than triple to 7,500 in the longer term because we're going to give them more features, more value, more products. That 2 stats leads us to believe that we have a clear path to getting to $150 billion annually in terms of total cardholder spend.

Let that sink in for a second because that is a gigantic number, but we have a clear path to getting there. Let me show you 3 specific ways that are going to happen soon that get us there. First is that our app and web properties are already shopping destinations.

Our app in the U.S. is one of the top shopping apps, and we see that customers come to the app to manage their payments, but they stay to finance their next purchase because they're looking for a better way to pay. They're looking for an offer.

What that translates into, Max alluded to it a little bit as well. We have 15 million actives onto our direct-to-consumer properties. Our apps, our web. They see 15 million actives every month, 1 million of which are completely new.

So these folks are hearing about us from word of mouth, from their friends organically, maybe searching for us. And that leads into 4 million checkouts every single month originated from these surfaces.

We also have 10,000 merchants offering specific deals, and that number is growing every day. But what that means is that our app is already a destination. Our web is already a destination and that destination is a chance to distribute more cards and give more value to customers.

And when we turn that destination into a moment, amazing things happen. So last fall, we tested and experimented our very first 0% days to see whether we can turn actual demand into something that can scale. And it did. It was very popular, and we saw some amazing numbers.

We saw 60% more 0% take-up in offers. We saw 30% incremental GMV without pull forward, what Max was alluding to as well. And one of the most interesting stats we saw was that 25% more prime and super prime card acquisitions happened during that time period, those days that we ran those offers.

All of that was the network working in concert with each other. Merchant-funded offers, deep customer engagement, take-up, all going round around in the flywheel, leading up to these amazing numbers.

And because the price for good work is more good work is what we say at Affirm, we are going to do it again. We're going to do it in a way that leads up to more offers. So we have 70% more offers in the ecosystem. We have 60% more card exclusive offers.

So that means that if you're a card member, you get access to these things that you wouldn't otherwise. And we are seeing the e-mails as well as the communication we are sending to customers already being very sticky and very engaged.

We couldn't be more excited, ride for yourself tonight. It starts tonight and it runs for 3 days, buy something that you're on the market for. It's 0% APR. It's a very good deal.

All right. Now for an interlude. Does this scene look familiar? This might actually have been the scene some of you had to bear through while coming to this event.

This is the late fees credit card industrial complex doing its job. They lead you to believe that the annual fees that people pay for their credit cards is worth it.

They lead you to believe that credit cards are beloved forms of payments. They lead you to believe that rewards and points is the religion that everyone should find. The reality is actually much starker.

This scene is being played out in many, many, many airports, in many lounges, which means that you're paying thousands of dollars sometimes to avail of no rewards, you get spreadsheets to model out how much you should be spending on which category to get the right amount of points.

Then you have to do more math to see where you can use those points. Those points have breakage, they have fine print. It is a wild, wild west out there in terms of the credit card industry is trying to figure out what a loyalty program should work for the credit card industry, not for the consumer.

So we, at Affirm, we want to take a sldegehammer to that. I wanted to say, what if we reimagine this from the ground up. So first, I'm very proud to announce that in the coming months, we're going to launch a loyalty program for our cardholders to give them 2 value props that is very much one of our popular hits on the program.

One is exclusive offers. We just talked about this. But instead of doing this once a year or twice a year, we're going to have daily offers available to cardholders that is powered by our merchants. This is something that only Affirm can do.

So when they go into the app, they will see either a 0% or a longer term or something that is customized and personalized to them. The second is they will get more purchasing power. That's another thing that we hear a lot of time from our customers.

So as you get the card, you use it, you pay it, you link a bank account, so we can underwrite you with cash flow, you get more purchasing power, something that works for you.

Both these features are going to come to all cardholders for Affirm for a grand price of $0. And we believe with this engagement that we drive and the value that we provide, we're going to see a lot more cardholders being happy and rewards working for them.

All right. The last thing, as a product person, one of the key things that gives me satisfaction is building amazing experiences, not just for the sake of it, but because better experiences lead to better engagement, lead to happy customers.

So I'm very proud to say that in the coming weeks, we're going to redesign the app from the ground up to give better access to our customers in terms of sign in and sign up.

We're going to revamp the home tab so they can easily navigate the app from the information architecture perspective. And most importantly, we're going to have a new deal tap where customers can come and find personalized offers just like 0% days and figure out where they can spend their well-earned dollars.

And that's not all. We're also going to take the card and we're going to redesign it. You might find a momento in your line here today. That is the design that we're going to ship to all new cardholders because we believe that better design leads to better customer engagement that leads to better outcomes and the flywheel goals.

So what I just showed you are 3 important things: more cardholders, spending more, happier customers that lead us to feel how this card opportunity can be super big for us.

All right. Now that we've talked about card, let's talk about wallets. Wallets are eating commerce right now. This is the biggest shift in payments that we're seeing in 20 years, and our customers are asking us the same question they usually ask, which is where else can I use Affirm, can I use it within a wallet?

So we see these secular trends take shape, both for e-com and also in-store and customers are looking for us to provide this value to them instantly where they're shopping.

So we listened to them and we got to work. We partnered with the largest wallet providers in the world. First, we partnered with Google in Jan 2024 and integrated with Google Pay. Second, we partnered with Apple with their iOS release and integrated into their Apple e-com.

Third, we went back to Google again based on popularity and demand and built this amazing Google Auto Fill feature for Chrome, which is one of the best hidden best features that we have.

And then last but not least, for the last iOS, we introduced the power of Affirm right in the hat of in-store. These are 4 cornerstone launches that we have done and the customers have been loving it. Let me show you how.

First, we are seeing some tremendous volume in the trailing 12 months, $1.7 billion in GMV used by 2.3 million customers, and we're seeing 155% year-on-year growth. But that's not all.

The biggest thing here is that product market fit wise, once these customers use it, 70% more TPUs arise. That means that they're coming back over and over again because wallets are sticky, Affirm is stickier and the combination of them is explosive.

One stat I want you to leave on this slide. 80% of the volume that I just described is coming from unintegrated merchants. What does that mean? That means that these merchants were previously inaccessible to Affirm.

And now through these wallet partners, we are able to actually serve our customers wherever they're shopping, and we're generating incremental volume for Affirm while serving these customers.

Okay. No story about wallets would be complete without in-store, which is the final frontier, we believe, for a company that was born digital-native. We are seeing with our wallet partnerships, a 165% year-on-year growth.

But more importantly, we are seeing a 4x growth in categories like restaurants and dining and 3x increase in gas and services because customers are choosing us to transact in offline environments in categories of everyday spend.

This is a leading indicator for why we believe that with Affirm in these wallets, we are uniquely positioned to win with our structural advantages because we are building and providing better value to these customers.

All right. Agentic. A lot of ink has been spilled as we say, about the future of Agentic commerce and how it's going to take shape and how customers and merchants are going to engage with it.

We at Affirm, instead of taking shape the prediction game, we are trying to actually listen to our customers and anticipate what is going to be because we believe that Agentic commerce is already upon us. Let me show you a little bit why.

Agents are going to take away the drudgery out of shopping. So right now, if you're on a shopping website, you have to go and search for the item. You have to look at the different prices if you choose to, you have to look at reviews and then you have to pull up a credit card maybe and then you have to complete the whole process and then you buy the item.

There's a lot of mechanical things that happen today in terms of shopping. The thing that happens when you remove the drudgery, if you believe that, is that 2 things get elevated, their affordability as well as access to credit and trust. These 2 things cannot be disintermediated by an agent. This is a truly human thing that will continue having its place in any shopping environment, we truly believe.

And if you believe that, Affirm is uniquely situated to win this entire category because over the last 15 years, we've been building underwriting that is real time in nature, and we're building affordability components that are easily read and understood by agents.

Agents will reward products for their humans, which are transparent, which are easy to understand, which are honest. They will punish things that -- they cannot understand like compounding fees or late fees or interest.

Those are things that the agents are not going to be looking for when they're recommending options for their customers. So the up-funnel messaging that we have built is one of the most popular products because it makes -- help customers make informed choices.

And then purchasing power, which we have talked about, it helps you assess, determine in real time whether this thing is right for you. So what we're doing is operationalizing these structural advantages in 3 different ways.

First, we are shaping the standard. We just announced our partnership with Google in the morning. We have signed with Stripe, and we are working with Shopify, 3 important key players in this Agentic commerce history.

Second, we're taking what we just described on ALA components and purchasing power and custom making it for the Agentic protocols because unlike the credit card rail that we have to retrofit our first version of Affirm, in this version, when we shape the standard, we can build a native for the Agentic journeys.

And then once we have the first and the second, we're going to make it ubiquitous. So across the biggest LLMs like Gemini and our marquee partners like Priceline, Nectar and Newegg and many, many more, we're going to be everywhere where commerce is happening, everywhere where shopping is happening.

Let's take a specific example to walk through how this would look like. So take a journey with me, meet Melissa. She's a mom, she's a world traveler, she's looking for her next vacation.

She's looking for a vacation to a theme park in the summer, like many of us, but affordability is also very much top of mind for her. She's looking to have this dream vacation, but make sure it fits her budget.

So she goes to Priceline. She starts her purchasing journey there. She talks to Penny, which is Priceline's agent and ask where can I find some hotel rooms for my particular budget within walking distance.

Penny goes hard to work, find some options. Those options are great, but they're a little bit over budget. So Penny at Melissa, she's open on the dates. And Melissa wants the same dates because that's what works for her family.

Then Penny goes hard to work again and suggest Affirm as an option because we are a proud partner of Priceline, and that shows up in a way that is very clear and understandable to Melissa to purchase these hotel options.

These hotel options would probably would not have been consummated if Affirm was not an option here. But what you saw is that discovery as well as financing happened in the same surface and Melissa was able to buy the particular hotels at her price point in a confident way. That's what Affirm does. We turn hesitation into confidence.

Second, now Melissa goes to Gemini to find some headphones for her son, because she's looking for an easy way to purchase this and Google Search is powering the search results here.

At the same time, Affirm is going to be front and center while Melissa tries to purchase these headphones. And because Melissa knows Affirm is the honest way to pay, she prefers that, breaks the payments, tries to smoothen the payments to match our cash flow, and we are also going to enable Gemini to serve these options in a very easy and transparent way.

So now that the trip is booked, headphones are bought, a few weeks have passed, Melissa has been paying off her loans. She goes to the Affirm app to make sure that everything is good, everything is paid off.

It is -- the purchasing power goes up because she's paying her loans back. And she's on the lookout for some point and shoot cameras, but she's not sure. She doesn't know if it fits their budget.

So she goes to the Affirm search, starts the journey on, I'm looking for point and shoot cameras. Are there any deals going on. And this is something very, very specific about Affirm.

Because we integrate with a lot of merchants, those merchants can surface deals and offers in a very customized way. In this case, Newegg is running a particular promotion, they can actually target folks like Melissa and saying 0% only for you as a welcome offer, let's say, or a promotional offer and Melissa can use that to just buy the camera right from the Affirm app.

So what did we see? We saw 3 surfaces, same Melissa, trip booked, headphones bought, cameras bought, all through easy discovery, through easy purchases and honest financing. That is how Affirm is going to not just play in this space, but go and outright win it.

Okay. We're not done yet with Agentic. We're working with the major players, and there's more to come. This is just a sneak peek. All the things we just showed you are going to be in production soon in the coming weeks and months, and we couldn't be more excited about it.

All right. So now we have looked at card, wallets, and Agentic, 3 surfaces, through line that Affirm is going to become the preferred way for customers to pay. But there's one last surface that we haven't discussed, which is the banking apps.

There are 130 million Americans who use their trusted banking app to conduct their business. These same customers also tell us their financial life is complicated and honestly fragmented. They don't want one more app.

So we listened to them and we thought of ourselves, what if you could bring the best of Affirm right where the banking is happening. So we did something about it.

I'm proud to introduce Affirm Edge in which now in the known and trusted banking apps, -- the same Affirm, people trust and love, can conveniently be hooked in.

You can see your purchasing power. You can access all the offers that we were talking about in terms of specific needs that you might have, and it all comes in a way that is very easy for customers to understand and very easier for issuers to integrate with.

With that, I'm going to hand it back to Wayne to talk about how this will look on the issuer side. Thank you.

Okay. We are very excited about Affirm Edge and the opportunity to enable banks and credit unions to deliver BNPL to their customers within their products on their surfaces.

And we often get the question, how big is the potential opportunity here? We think it's pretty big. There's different ways to estimate it.

But when we look at the consumers in the United States who are debit first, who prefer to use their debit card, and we also look at the percentage of users who prefer to lead with their mobile banking, that's how they prefer to interact with their bank, and we assume about a $2,000 a year annual incremental spend, we come up with $140 billion annual addressable volume opportunity.

And through our initial partnerships with Fiserv and FIS, we're able to serve a significant portion of the issuers in the market and the cardholders as well. So with Affirm Edge, we've been hard at work developing a super strong value proposition for the issuers who partner with us.

We've had the opportunity to engage with banks and credit unions of all different shapes and sizes, and these are some of the value drivers that have been resonating. First, it's very attractive for issuers to be able to keep BNPL transactions within their ecosystem to engage their own customers that they've had these long-standing trusted relationships with.

Issuers can also earn additional revenue, not only through incremental transactions that they capture, but also through flexible credentials that are available from the leading networks.

Third, issuers get to take advantage of Affirm's leading BNPL offering, which you've heard a lot about today. And a key part of that is our merchant network and the offers such as 0% APR that they fund, and those will be available through Affirm Edge as well.

And then finally, but by no means least, we're working very hard to make this offering as easy as possible for issuers to integrate and operationalize. We're doing the work so that they don't have to.

But you don't need to hear it just from me. For our next segment, we're excited -- very excited to have the opportunity to hear directly from some of our partners about Affirm Edge. Please welcome Arika Selleck from Fiserv and Phil Lehner from Old National Bank.

Okay. Well, Phil, Arika, thank you so much for joining us. It's really awesome to have you here to talk more about this. Maybe if you could both just briefly introduce yourselves, your role just to give the audience a sense of your perspective on this.

Sure. Phil Lehner, I am President of Consumer Lending at Old National Bank.

Hi, Arika Selleck, the Senior Vice President of Card Strategy at Fiserv.

Great. So maybe, Arika, we can start with you. So we obviously announced our partnership on this earlier this year. We were very excited to join forces with you. And can you say a few words about why Fiserv pursued this partnership and kind of why you think now is the right time for this type of offering?

Yes. For us, it was really about how do we meet consumers where they are today. We know Buy Now, Pay Later is now making up something like 6% of U.S. e-com transactions. We want to be able to bring that flexibility into the existing debit card.

So we want it to be on their current payment instrument as opposed to having to have a new one. We see an opportunity for debit to not just be sort of a utility as it is today where you pay for everyday payments.

We want it to be something a bit more strategic. And the Affirm team really has proven that you can do that with the debit card. So that was sort of the reason why we were interested in this now.

And then, of course, with Affirm, number one, I just generally love the team. I think you guys have all seen them today, a great team to work with. They also have proven their product works at scale. So that was something we were interested in.

And then lastly, it was really all about this responsible credit offering. So a lot of our banks and credit unions, we have over 3,000 of them that process on our platform. They don't like the idea of bringing buy now, pay later and saying we're going to charge you all these fees, right? We want it to be accessible in a responsible way.

Phil, maybe turning to you. So you've obviously been in the banking sector for many years. You've seen the development of this whole BNPL thing. I'd be interested in your perspective on how have you seen the growth of that product and kind of what kind of adoption you've seen in your customer base?

Yes. Our customers are using it, plain and simple. Last year, we did over $60 million in transactions through buy now, pay later. Currently, today, we have 40,000 customers that have an active pay plan with Buy Now, Pay Later.

So our customers are already using it. So for us, it's how do we get into that transaction that customers are thinking they're doing that transaction with us at Old National Bank and thinking about us first.

That makes sense. And so obviously, we and Fiserv came to you with this idea. Is there something about this offering that's attracted you?

Yes. It's simple, I think. We've talked about this for a while now at Old National. Like is this something we can do on our own and build on our own. That would be quite a lift to be able to do on our own.

So partnering with somebody like Affirm who's been in the space a long time. You had mentioned in your introduction about the merchant network that you have. That's not something we'd be able to replicate in any time, if ever.

So it makes perfect sense to partner with the firm. And then with Fiserv, we've been working together for a very long time, partners, not a customer vendor type relationship. We really think about each other as partners. So when they came to us with this offering, it's a no-brainer. It makes perfect sense for us.

And how about you, Arika, you've obviously talked to a number of issuer partners in addition to ONB, like what kind of feedback have you received about this idea?

Yes. I would say it's pretty consistent to what Phil just said. They have seen -- we looked at our overall transaction base. So we process 25 billion transactions a year on this debit processing platform that we're talking about here.

Buy now, pay later transactions make up about 1%, and that's card-present, card-not-present. So it's something that we're seeing wide-scale adoption and the banks and credit unions want to participate. But of course, they want to have it in their own ecosystem.

So for them, this is a no-brainer solution, particularly on debit. You see a lot of this on credit, but less so on the debit side. So lots of demand. I think folks really like that we are doing the heavy lifting.

So as Fiserv, we have not only the integrations with Affirm and we call it the upstream, we have work with Visa and Mastercard. We also have the mobile front end with all the digital providers, so we can bring to life the solution that you guys saw in the video pretty rapidly. They don't have to do much as well as the credit underwriting and servicing will be done by Affirm.

And Arik, I think you've been pretty enthusiastic that once we're out of the gate, we can have pretty widespread and potentially rapid issuer adoption. Like what do you see as kind of underpinning that potential?

Yes. I think a couple of things for us. The first is just -- I mentioned the scale, right? So we have no shortage of issuers, over 3,000 that process directly on us.

Many of those use our mobile front end, $25 billion transactions a year. So the scale is there. The Affirm Card has also shown us one of the biggest things that we wanted to do this year and a lot of what you'll see coming from my table is how do we make debit more of an engagement tool versus just utility.

So you guys really proved part of the business case we had to work on together was how do you make a debit card? How do we drive higher transactions? How do we drive more spend and usage and deepen that engagement. And that was really the core of why we think this is going to be successful.

And Phil, do you have a view on if you add this to your portfolio and you have BNPL and debit, how it might change the role of debit kind of in your product lineup?

Yes. I think it moves from just transactional to strategic. Customers are not only going to use debit card for those short everyday basic purchases, but think about the longer-term purchases or the more strategic preplanned purchases.

We are firm believers that we're going to get many more swipes with our debit card and it gives us the flexibility to truly be top of wallet. You don't have to wonder if you need to pull out a credit card or a debit card, this one card can do it all.

And if you think about it alongside your credit card offering, do you worry at all about cannibalization? Like how do you see those 2 products?

Not at all. As President of Consumer Lending, I get asked that question a lot internally at the bank, like are you worried about that? But no, we want our customers to transact with Old National Bank. That's debit card, credit card, traditional lending products, it doesn't really matter. This really just gives our customers more options.

Younger demographics as well, like seem to be debit card first users compared to previous generations that use credit cards more often. So this is just a perfect option for us to put into our offerings.

So maybe final question for each of you. If you look ahead a couple of years, what does success look like here for this product, this offering, if you think about for your own businesses and then for the consumer ultimately?

Sure. Again, top of wallet. So our debit card is top of wallet. Customers could use our cards for everyday transactions and those preplanned transactions. Everything is integrated into our mobile app into our ecosystem.

So customers don't need to worry about going to a third party or a different app to do their transactions or which card they're going to pull out. So for us, success in a couple of years is the customers thanking Old National Bank for all of their transactions with the one debit card.

For us, it would be obviously wide-scale adoption. So we'd love for Phil and all of our issuers to participate. We've got over 200 million cardholders in the U.S. that work off of or have cards on Fiserv process platform. So that would be a huge win.

Debit on BNPL, just generally as a standard payment form would be amazing here. And then really thinking about debit as a more strategic instrument rather than just the utility, which I described.

So I think all of those would be -- and then, of course, responsible lending. I think that's one of the nice things. We see this really as a cash flow management tool rather than another form of credit. So that's something we think is really valuable for our issuers.

Okay. We'll leave it there. Thank you so much for coming to mic.

Appreciate it.

Thanks for having us.

Slight change of stage here. I'd like to say thank you again to Jim and Arika for participating in our fireside chat. We really appreciate their time. Okay. For the next section, we're going to give an update on our international expansion initiatives. And to do that, I would like to introduce on the stage, Pat Suh, who's our Senior Vice President of Revenue. Pat?

Thank you, Zane. Always glad to be the final act before the main event. But in any case, my name is Pat Suh. I'm the Senior Vice President of Revenue at Affirm. And I'm so excited to speak to you today about our international expansion, our progress and the opportunities that lie ahead. So you just heard from Wayne and Vishal, and they talked about the opportunities we have to land and to deepen and expand within North America. And beyond that, there's still a significant amount of opportunity. In fact, more than $5 trillion of e-commerce and travel spend occurs outside of North America. And shortly after our last investor forum, Shopify came to us and said, we have a problem. International is our largest growth vector, but the markets are very fragmented.

In every country, there are multiple local providers, disjointed customer experiences and subpar underwriting and technology. They wanted a single trusted partner that could simplify the complexity and deliver a better experience globally. And that conversation was not unique to Shopify. In fact, we heard the same thing from many of our largest partners and merchants. 72% of our top merchants actually operate globally. And so you see we have the opportunity, we have the demand. And in February 2025, we announced our exclusive partnership with Shopify to launch in Australia, Germany, France and the Netherlands. And that, along with the EU, opens up over $1.7 trillion of addressable TAM.

So why are we well positioned to expand internationally? Well, first, we have the technology. We have the best underwriting in the industry. We have a proprietary risk infrastructure. You heard about the 14 years of investment in our risk models as well as the transaction data. So this gives us a significant head start into any market that we enter. We're able to localize our proven infrastructure and adapt quickly with the local signals that we have. Next, we have just the global scale. There is no provider that provides such global scale and consistency the way we have. No one else works with the largest retailer -- e-commerce retailer in the world. And over the last decade, we've built systems that are designed for that reliability, consistency and the operational rigor necessary to operate on international scale.

But most importantly, I want to talk about the customer value proposition. Of course, transparent financing with no hidden fees really resonates across markets. I think that's sort of a universal. But in many international markets, there's not a lot of flexibility or a lot of financing options, to be honest. You see, especially in the U.K. and Australia, Pay in 3, Pay in 4 dominates. What we've done is we've actually made all the necessary investments technologically. We got the regulatory relationships in order to be able to offer longer-term options to be able to offer monthly payments and really be able to offer a full suite of financing offerings for our merchants across the board.

And so when you see that, all of this helps drive higher conversion, larger basket sizes and better merchant outcomes. So how have we proven all this? Well, we started in Canada, and I want to talk about our progress in Canada. We've been in market for several years. And you can see we've launched and signed a number of merchants, both in the U.S. and expanded as well as local partners there.

Now I want to draw your attention to the slide on the left. You can see that in April 2025, we launched with Shopify. And you can see the pace really accelerated. In fact, we saw a 7x growth of our merchant count to 26,000 merchants in 12 months. So very exciting growth. And what we learned was that launching with a distribution partner can really accelerate that growth and derisk your entry into certain markets. And so as you can see, with this rapid scaling, we've also signed on a set of additional distribution partners to continue to grow within Canada. So we took those learnings and we took it to the U.K.

And in September of 2025, we actually launched much earlier with Shopify. And again, you see the rapid growth, 10,000 active merchants, 260,000 users in only a couple of quarters. So again, distribution and scale, and this gives us a tremendous amount of local momentum to address the $230 billion of TAM in the U.K. And so we've already signed a number of select U.K. commitments and many more to come that we'll be announcing over the next several months.

And so we have a consistent, repeatable playbook. We land, Scalefast with existing partners. We also expand growing merchant adoption both locally and with the merchants that we have in place. But I'm especially excited about this idea of deepening. So all the products that you saw between the card and the marketplace as we continue to grow our consumer network and continue to grow our merchant network, those 2 flywheels also help in enabling that growth. So we can introduce these products in market in the same way we have in the U.S., deepening and strengthening our penetration within these countries. And so tying everything together, we have 3 major work streams. One is obviously launching with Shopify in Australia, Netherlands, Germany, France.

We continue to expand our global partnerships as well as signing new merchant partnerships within the regions. And then we continue to make investments on that structurally advantaged platform, the platform from a technology perspective, our regulatory relationships in order to be able to be compliant in market and then obviously, our consumer benefits and our consumer products that we can introduce over time. And so all this just builds on the flywheel and the structural advantages that we've talked about all day today.

Now to close, I wanted to just talk a little bit more about the Shopify and Affirm partnership. And I know we've talked about it at a good length here. But I think it's really important to underscore how much this partnership really drives growth for both parties. I mean is a true competitive advantage in terms of distribution when we launch in any market. It derisks us as we enter those markets. It also derisks the partner as well that they can go with a proven partner like us. And so to date, we've done over $20 billion in overall GMV, and there's still much more opportunity to come. And so to close, I wanted to leave you with the perspective from Shopify with Harley Finkelstein, Shopify's President.

Hello, everyone. My name is Harley Finkelstein. I'm the President of Shopify. And I know, of course, today is Affirm's investor forum. So I thought I'd jump on here and share some of my thoughts on what's been an incredible partnership between Shopify and Affirm and also to tell you how much opportunity we see ahead. To say the thing, Affirm supports us with one of our most important products and one of the most important parts of Shopify, which is called Shop Pay. Shop Pay has now been used by over 200 million consumers all over the world. And unofficially, I think it is the world's favorite checkout.

I'm really proud of that, and it is critical for me that it stays that way. And that is why I think Affirm is such an important partner to us here at Shopify and to me personally. Through this partnership, the world's favorite checkout now offers the world's best buy now, pay later product with Shop Pay Installments, which is, of course, powered by Affirm. We launched this partnership together in 2021. And to date, we've facilitated over $20 billion in purchases together.

So it's been a huge success, especially in the U.S., and now we are rolling this out to more places globally, which is really exciting. We've already expanded to Canada and the U.K., and now we're rolling out to new markets like Australia, Germany, France and the Netherlands. So we think the opportunity for us to keep working together just keeps growing. Now around half of Shopify's merchants are based outside the U.S. So this partnership to expand has so much potential to merchants all over the world and offering them fair and very transparent credit and also helping our merchants grow their business, which is the business that we are in at Shopify.

So I just want to say thank you to Max and the entire team at Affirm. It's been an incredible partnership, often technology. You don't see a lot of companies that work together that are so aligned from an ambition perspective, from a mission perspective, but also from a technical chops perspective. And we are wonderful partners, and we think the world of the folks over at Affirm. So excited for what we're building ahead. Enjoy the rest of your day. And to Max and the Affirm team, congrats, and let's keep going.

Okay. We appreciate the kind words from Harley. We're now going to begin our first question-and-answer session. So I'm going to invite back up on stage several of our Affirm speakers that have spoken already. We ask that you not ask any financial questions yet because we haven't given the financial update yet. I know it's hard to resist, but you'll just have to wait until the final Q&A session. So we're going to bring the chairs up here. You'll have 6 of our management team members and I'll moderate. In terms of the rules of the road -- sorry, don't want that part. Rules of the road. So for those of you in person, we are going to walk around 2 microphones. Maggie, if you don't mind getting one, I think [indiscernible].

So we have 2 microphones if you want to ask an in-person question. If you're watching this virtually, we ask that you e-mail us at [email protected]. We'll try to mix in questions from both here in the audience as well as online. Again, just to reiterate, please do not ask financial questions.

We're not going to be able to answer them yet because we haven't given an update to the medium-term framework. We also ask when you ask a question, please indicate your name as well as the company that you represent. That's important for our transcript purposes. Okay. I think we're ready for our management team members. Okay. Does anyone on the brave person that goes first. James Faucette.

James Faucette, Morgan Stanley. I appreciate all the details today. One thing that I've kind of always left -- has always left me scratching my head a little bit, and you mentioned a couple of different points. And this is this idea, particularly as you've tied it to the card, the purchasing power concept. I'm just wondering if you can talk through a little bit how the purchasing power has arrived at, particularly as you're trying to do transaction-based underwriting. And then would love to hear as people become aware of their purchasing power, especially with the card, how that changes behavior.

Well, I mean, I think the -- a lot of -- obviously, people have a tendency to compare it to limits, right, to card limits. One of the things that we want to be able to communicate to consumers and be able to do it clearly and consistently is in the moment, how much purchasing power do you have left? That can change based on, obviously, what kind of purchases you've made in the past. And not only are we actually now underwriting at every transaction as a part of the transaction, we're actually doing the same as soon as the transaction is completed to understand what the individual's purchasing power is going forward.

We -- it changes based on things like duration, right, shorter loans, larger monthly payments have an impact on purchasing power. Obviously, things like repayment or lack thereof have an impact on purchasing power. So it is a mechanism for us to be able to communicate with the consumer about in the moment, what is their purchasing power based on the facts at a given time.

Ramsey El-Assal from Cantor. I had a question about underwriting in an agentic commerce context. It seems like agentic credit, including buy now, pay later, is a little bit of a different paradigm where the bot in some circumstances might make the purchase decision, but then the owner of the bot is stuck with the payback sort of obligation. Hopefully, those 2 things are in sync.

But I guess my question is, in terms of underwriting there, do you see a different -- is your historical data and your models, how do you prepare to underwrite that? Can you leverage the data that you have now? Or is there going to be sort of an air pocket for the industry where you're trying to season models with new classes of data basically?

Well, I mean, it doesn't exist, so we don't have data on it. But I mean, we do think that it will actually result in more data, richer data. The initial work we're doing with Stripe, with Shopify, with Google and including our own first-party CLI for agents to use and interact with us. We are specing out and creating a richer set of data that the agent is bringing with it in order to interact with Affirm as a part of the underwriting process as well as the post-purchase process, right? So like as you see these purchases showing up, they are going to be distinct from obviously, purchases that you are making without the help of an agent. We want people to understand, hey, this is happening on your behalf. Hey, did you know about this when they go to repay. This is a repayment for a purchase that your agent made.

So a lot of the information that we're going to be using in our underwriting of agent transactions is also they're doing double duty to help the customer understand what is going on in the moment as well as after the purchase has been made so that there's no confusion, there's no issues. And so that the customer support process becomes richer that then all of it as that happens today, all of that information gets folded back into underwriting.

So we're pretty excited about it. Anything where we've looked at where we're getting more data through a channel, when a merchant integrates and starts providing us more data, that leads to better outcomes, better decisioning. And so anything that can provide us more data is for us is great. And we already think of the product the flow, this idea of every transaction is an engagement. That product flow is a data magnet and then agentic is only going to accelerate that. So we expect significantly better underwriting as a result.

I get a little geographic diversity in here. Jason, do you want to...

Jason Kupferberg from Wells Fargo. My question is for Max. Max, of everything you've shared so far today, what are you most excited about over the next decade? My guess would be at the last Investor Day, it would have been card. It was very nascent at the time. Where do you stand today?

Michael likes to claim that I'm from the future. I don't want to hold my feet to the fire on this one too soon. But the honest answer is the stuff that I'm most excited about, I can't share yet. I know Michael is about to hit me somehow from remote. But part of the awesomeness of having an executive team like this, which I hope all of you got a good sense for who they are and how good they are, is I actually get to go off into a cave and build stuff that will be the next card or the next something that I'll be excited to announce sometime from now and 3 years from that point, we'll be gushing how great a product it is. And for every one of those things, this team die in the shop room floor because they're not good enough. But that is the nonanswer of the things that we covered today.

And I think we're dangerously close to making edge a reality, which I think is just a force multiplier to this whole idea of who we are and how we do business and what we deliver to our consumers. So it's very hard not to be super excited about it. I'm generally very excited about AI. So anything touching AI with AI in it baked in AI with AI as a side dish is great. These guys know that one too well. Those are probably the 2 sort of like front and center. But my personal excitement about being at Affirm, leading Affirm has monotonically improved over the last 15 years, for sure, it's sampled quarterly, but the function has a distinctively exponential bent to it over the last, call it, 3 or 4 quarters. And so there's just a lot of really cool stuff happening. And because of agentic, in particular coding tools, it's a lot easier to find out if some of these ideas are good about. And so it's almost -- that was a silly question. We'll find out if all the things that I'm excited about are -- which ones are going to work.

We actually did receive a question online that I thought was pretty interesting. So James Sterling from [indiscernible] Capital asks, can you expand on Affirm's potential or future appetite to participate in merchant partner marketing automation, whether that be off the Affirm app, in the Affirm app, somehow leveraging the data assets that Affirm has on consumers. And he also asked somewhat related question, do you think that might bring us into competition with our own merchants?

I think the -- I'll start, and this is definitely Vishal, Libor, Wayne, Pat, it touches a lot of -- just as you sort of analyze -- so there are 2 questions in that question. Question number 1 is, do we have a product to sell or a value to offer to merchants beyond payment acceptance. And the answer is obviously, yes. We are a marketing surface, as you saw in our app. We are a co-marketer with them on their own surfaces.

So there's many things we do with merchants today that precedes the actual sale to help them get the qualified buyer in the door. The -- not to sort of unveil too much on the future -- future road map, but we do have a bunch of things in mind of how might we help them do a better job marketing to their consumers, to there would be consumers on our own services or elsewhere just because we understand the buyer so much better. Like if you -- one of the things that I used to drop, I think I may have actually said this, I don't know if I said in the last one of these events, but I've said it before, so it's not a big secret, but the conversion end-to-end from a search in the Affirm app to the actual purchase hangs out in the 25%, which is like the first time you see like, oh my gosh, like so Google is like 0.025 and you guys are a couple of orders of magnitude better, that's insane. People come to our app because they know what they want to buy. We're there to provide credit.

But it's still kind of on the face of it is a great number. And so bringing some of that goodness, which is obviously top machine learning to our partners in other endeavors of areas in marketing, it's a great idea. We're working on things like that and more to come. On the other side of the question is the -- so isn't that naturally going to lead you down the route of, okay, so you have 5 merchants selling jeans, you should pit them against each other and somebody is searching for, I don't know, AG brand, maybe we should be selling them Levi's instead. The short answer is that's not the business we're in. And part of why we can serve competing merchants, like very competitive merchants, in fact, in the same app with the same product is because we're very good at not pitting our merchants against each other.

The business we're in is providing honest financial products. That's what the people who come to our app are there to do. There's not a world in which we say, cool merchant A, we want to power your sales, but merchant B is paying us too much money to help you. So we're going to take some of your marketing dollars and route it to the other guys. Like it just wouldn't work in our app, wouldn't work in other surfaces. So that's not the plan. And I think we've been consistent with that message and consistent with that reality enough where merchants trust us and we wouldn't want to do anything to break that trust.

So there's not a competition with our merchants. There's definitely competition among our merchants, and we're there to make sure everyone does their very best for our shared consumers.

Andrew Bauch from BMO Capital Markets. There was one slide you had where you kind of outlined the top 250 enterprise partners that you're not working with today on an integrated basis and then the volume that's coming from D2C quite outpacing the rest of the growth in the business. So maybe you could walk us through a little bit further how you kind of see the penetration within that base get unlocked from using the card on a regular basis when they're not integrated and how that kind of evolves from a penetration perspective.

Sure. I mean, look, the beauty of building these products in this industry is that the customers love the product so much. There's an emotional factor in it. They come and tell us all the things they want. Like there's not a mystery. When we talk to them, they're telling us how much they love it. The same love takes us down that route of Affirm is not integrated on that particular merchant, how else can I use the Affirm. So that's where the card comes into play. But one even above that, there is this fact that we are able to provide them better purchasing power and offers that they wouldn't get on any other way that they're paying for it. That's why the love exists because we can give them a product that doesn't exist in the market so far.

So that is what we are seeing both from wallets that I showed in the slides as well as well as in the card. And 80% of the wallet volume is coming from unintegrated merchants for that particular reason. And we see that penetration just going higher because as people are using those products in those services, they're actually coming back on a higher repeat usage, which I also showed. So we see that there's a clear path. You find a way to use Affirm at those merchants, you use it and you use it more and the flywheel goes round and around because we can better underwrite you, et cetera. So we see a clear path of getting that.

And I'll just tack on. So we're obviously delighted to be able to serve the consumers on those unintegrated merchants. But make no mistake, we would love to have the merchant integrations as well. And the D2C volume that we do is an exceptional proof point when we're speaking to those merchants and say, did you know in the past year, this many customers transacted, this many were repeats, this was the volume. This was the average order value. Here's what we think we could do based on all our prior experience if we were to integrate with you. And so it's often a great lead move to have that D2C volume when we think about the integration path.

I was just going to say that even though that D2C volume is quite substantial, when we're integrated, it's a multiple of that. If you think about the kind of friction even going through an app, someone gets there, has to put that card information into the site. So just imagine the multiplicative effect of having -- being on site.

Yes. And that we've found is usually [indiscernible] due to different consumer populations. Different people think about how they're going to pay for something at different points in the journey. So obviously, card users have the card. That's how they're thinking about making that payment. Other consumers think about it when they're at the bottom of checkout and selecting a payment method. And so what we see is when we do the direct integration, as Pat said, it's multiplicative, and we have enough of those proof points now to be able to show people the math and talk to merchants about it and stand behind that when they do. Dan, I see you way in the corner of the room because your [indiscernible] there.

Max, a question for you. You mentioned in the beginning, a specific merchant that caused a lot of issues. You want me to ask the other question. Now what would be -- what would you say, what would be the tangible benefits if that -- for that merchant specifically or any merchant, if they actually come back to Affirm, I think it's very relevant given your underwriting. It's Dan Dolev from Mizuho, by the way.

We're hypothesizing. I think from the volume perspective, brings right back to the previous question, the previous answer. It is a multiplicative effect. We would absolutely see more volume that merchant would absolutely see more volume full stop. The slightly deeper answer. Part of the value we bring to the consumer is affordability and incremental access to credit that is safe. Our structure as a lender, no late fees, no compounding, no deferred. All of that isn't just like a great thing for the consumer. It's also a truth teller for us as an underwriter. We screw up, we lose money. We don't get to say like, well, you're late, we'll make some money on your late fees. I'm just like, oh, we made a mistake, we're not going to make money on this loan at all or might take too long. And so the fact that we keep ourselves honest structurally and always have is a proof point or it's a vector that we are constantly being propelled forward with by asking, hey, we need more data. We need some way of underwriting these people because they're coming to us for affordability.

So any time we're integrated, it just naturally feeds the model that allows us to say yes more often, also with deals that are actually specific not just to the consumer, but to the merchant and the merchandise. A loss of a merchant, which doesn't happen to us very frequently at all, I'm happy to say, means that we get less SKU level data. And we get it in some ways that are more than compensate for the credit losses, but the incremental approvals would immediately go up. You would see better sign-up rates because people would find out that we exist in the moment of saying, I'm not sure I want to put this on my debit card and here's Affirm, I've heard of it. So the answer I'm trying to drive to, which may or may not be useful to your question, is actually something that Wayne just said. So we love the idea that card reaches everywhere. We love the idea that we get to ride the long tail of merchants, we will never get to some remote village in Thailand and hang the Affirm logo. Maybe we will one day. I don't want to short the option.

But it will take a while before we get to really remote locations and hang our logo on a door, but we don't have to. The card will work there. I use the card internationally all the time. It's quite amazing. But every time we add another merchant, we are pushing the flywheel forward. And so we will never get out of the business of showing up to merchants and saying, "Hey, so about that integration, either former or never, we do want our logo here. We want the good housekeeping stamp of approval. Affirm works here and works here well. And this is a path for you to offer your own 0% data. Any day of the week you like, you want to do a sale, great. flip a switch, it will shop at your checkout, completely on beholden to anybody else's calendar. So there's a lot of benefits to being integrated, and we are constantly telling merchants, we think you're missing out. There's hundreds of millions of dollars of volume, billions of dollars of volume perhaps sometimes in some merchants that should already be integrated.

And by the way, the data quality of that channel does a lot, not just for us, but also for the merchant, they get to see every quarter, a very deep cut into what's happening with these consumers. What are they buying? What are they paying back? What else might they be buying, et cetera. So it's definitely -- it's a thing we want. This is -- I was bragging about the consumer side of the retention, not even a little bit suggesting that we don't care so much anymore. We care very much.

Adam Frisch from Evercore. Max, a question for you on strategy. You guys laid out a really good supporting case for why you're growing in all the different levers within buy now, pay later, no doubt. But my question is going forward, do you see yourself several years from now still being single thread buy now, pay later? Or do you envision Affirm becoming a more diversified flywheel? Chime and Cash App, for example, are showing some really good adoption for different products. Not to say one is right or wrong, but do you see yourself going that way at some point in the future where you're more than just buy now, pay later?

I love the question. So buy now, pay later is not a product. This is something that I would love for the world to fully grasp. It is an observation or a strategic shift in the way people consume financial products. It has a weird name, and I don't like the acronym, and I've tried many times to convince people, don't call us that. But we can call it something. People seem to call it buy now, pay later. But what it means to us is financial products and specifically a way to consume financial products, no fine print, no gushes, no gimmick a way to differentiate from prior players. And so in that sense, we're going to continue down the road that we have chosen for ourselves, building honest financial products. Even if you focus on the P, that is to say, pay part of buy now, pay later, there's still a lot more road to travel there than just the one thing that we're famous for.

So absolutely, we'll build lots of financial products. And they will all be in this vein of buy now, pay later insofar as the strategic shift of consumption is concerned. The specifics of the products are not for me to announce right now. But no, we're not going to be a single pay in 6, 12 and 18. But when we launched, we were pay in 30 days, and that was the only product we had. We've since expanded into, I don't know, 40 different financing programs that we offer at the point of sale, and we have a bunch of other stuff, and we have Edge and we have agentic, which has some wrinkles to it. So -- and yet, it's all kind of -- we think of it as the way to do financial services for consumers. And by the way, we're also more than doubling in financial services for businesses now, too. So the part with intuit is a good exhibit A and then that story. So hopefully, I can impose the buy now, pay later is not just one product. It's a collection of product.

This is Nate Svensson from Deutsche Bank. I wanted to ask about some of the initiatives to drive share of card. I think you had the stat on every basis point $120 billion of GMV. Wondering specifically, I think that was focused on enterprise. I'm wondering about the long tail of merchants, some of those qualitative initiatives you talked about, Boost AI, embedded checkout, connected accounts. Wondering if the same initiatives are going to apply to the long-tail merchant. And then you also showed the penetration in terms of share of cart getting up to 2.7% of the share of card. Is that kind of like the right run rate to think about going forward? Or do you think these initiatives can kind of change the direction of that curve and inflect positively going forward?

So I'll start by clarifying. The $120 million figure is on the total merchant portfolio. So the one chart I showed that went up to 2.9% was U.S. enterprise, but the $120 million figure was a total portfolio. So there's a whole toolkit of things that I didn't bother going over in great detail, but there's like a dozen or more levers that when we launch with the merchant, we're rolling out up funnel messaging to make sure that, that's really clear. So the customer knows about their purchasing power. We're talking to the merchants about initiatives like 0% APR and then on to the things that I described like Boost AI, connected accounts, embedded checkout. I think as a broad statement, wherever we can, we take the things that are working and roll them out as far as we can through the merchant base.

It's very common for us to innovate with a big partner, discover something that works and then say, "Hey, this -- we know the results now, this makes sense, let's roll it out as widely as we can. There are certain things where it really only makes sense for an enterprise partner to do because of the ins and outs of it, shall we say. But where we can, we roll it out as widely as possible. And so as we develop these initiatives, we spread them out.

I mean just a little bit more color, like Boost AI and Adapt AI, both of those came out of work we were doing manually with the very largest enterprises of tuning those programs for them. And AI made it possible for us to -- with relatively straightforward ability to take all those optimizations that took a ton of analysts to do for the largest merchants and say like, okay, now do it for any merchant of any size. So yes, we expect those kinds of -- those specific products as well as products like that to have outsized impact on outside of enterprise relative to enterprise.

To answer the point about the long tail, we do offer different pricing programs that have different levels of conversion. So for our specific long-tail merchants, we have 3 programs just to simplify it, a base program and then increasingly more premium products that introduce more 0% and increase conversion. So the merchant is paying a little bit more for better conversion ultimately, which is a combination of all of the tools we have. Shopify, in fact, has 2 programs. They simplify it even more. One just introduces a lot more 0% longer-term, 0% up to 12 months. And so from a long-tail scale perspective, just offering a simplified set of programs really allows merchants to choose and opt into more aggressive programs.

Darrin, do you want to go next?

It's Darrin Peller from Wolfe. Can you just touch on the steps you think you need to take and perhaps the timing expected to improve the levels of engagement you talked about on the card? I think you quoted the 2,500 or 2,400 going to over 7,000. And you talked about the loyalty program on card expanded offers. Is that merchant funded? And then I actually just had one quick one on the international side. When you talked about all the growth you saw in the different markets, is the consumer profile similar enough in some ways, do you expect a similar trajectory in each of these markets given that credit and adoption of credit in those markets have often different?

With the card -- so the trend line that we are seeing, and this is over a longer-term period is that you saw the cohort spend, it stacks on top of each other. And that stacking is happening organically in many ways. We haven't actually gone and done a lot of product features that specifically increase the spending that is happening with those cardholders. What we are seeing though is that once they start using it, their engagement to the app increases and all the things that we've been discussing on how that engagement leads to better conversion and better outcomes, that is rising to the up and right. So to answer your question, the loyalty program that we are devising is actually coming from both the consumer side, but also on the merchant side because it's a top destination for merchants to actually go and show this value prop right in front of a captive audience and have them use the offer, just like you saw the agentic context as well. If there's a special SKU that is being subsidized by a particular merchant, that can drive conversion while maintaining price integrity.

So it's a huge conversion lever. It is like a marketing effort in many ways, and they are using those dollars to actually fund these offers. And then what we want to do is to offer this to the entirety of the cardholder population and show them this is a specific exclusive thing that you could only get with Affirm because that's something that is like very near and near to us. Our merchant network, our real-time underwriting and then being able to match those consumers to those merchants, all of those are possible now because we have this highly engaged surface, both on the app and the web. So that is how we see more users coming in. So the visitors are going up into the right. They're taking on more cards. They're using the card more. And once we start building features, including the redesign I showed you, -- we just see a step function change in many of those behaviors, and we make it easier for customers to discover and then use the card in all of these different places. So yes, that's the path that we see to more than triple the current spend on the card.

To answer the international piece, we do see a lot of demand, as I mentioned a bit about longer-term products. So in many markets, it's only Pay in 3, Pay in 4. What we find is that people haven't put in the level of effort that is needed to meet some of the regulatory requirements in some of those regions. And so we are making that investment, and we've made those investments for a long time. We are really, Max joked about legal teams and how we get dives deep, but that's because we are very conscious of all the regulations and work very closely with regulatory bodies in every region. So definitely see demand in countries that Pay in 3, Pay in 4 dominate. As we think about places like Germany that have different sort of set of financial products, we certainly will test in market. We will work with partners that have been in market to make sure we have the right financial products and offerings. But the fact that we can offer a breadth of different financing options really opens up the opportunity for us.

We'll take one last question, and then we'll...

There'll be one more Q&A. Don't worry.

There will be a final Q&A session, so please keep your...

Rayna Kumar from Oppenheimer. You make a very strong case for agentic commerce. Do you think there will be a stronger economics for you in an agentic commerce transaction versus a normal e-commerce transaction over time? And then separately, to move forward in agentic commerce, do you think you need a stablecoin strategy?

Michael likes to warn people not to ask me the meaning of life question as the last question and in an investor meeting. This is dangerously close to it. The short answer on the latter half, I don't think so. We will have things to say about stablecoins. But as a bunch of technologists and honestly, nerds, we love new toys, especially if they're shinning and stablecoins are sure very shiny right now. But we try very hard to put them through the ringer of do we need this? Do we have value to offer to the ecosystem just because this tool is available, we shouldn't play with it. We shouldn't launch things to launch things. So we'll have something to say on the stablecoin front. But no, I don't think agentic commerce specifically is a make or break with stablecoins -- in part, I think the proof point there is very simple. We are directly integrated with 0.5 million points of sale. We're rapidly increasing that. That's another form of presentment and settlement.

Stablecoin is a really clever way of settling very cheaply. We have a proprietary rail on which we settle just fine. That's a long conversation. We'll perhaps get to it maybe before the next one of these events happens. On the margin side of agentic, I'm sort of a perma optimist. And so I think we'll make more money in that world, in part because I think discovery will become a much more human affair while the mechanics of checkout will become much more automated. I think the reality of agentic shopping isn't going to be as simple as buy me a pair of pants and they just show up. I think it's going to be much more, well, I want the green kind with stripes. Now go find me the ones that fit and make sure they ship -- all the downstream execution will be handled by AI. The taste-dependent part will probably remain human for a very long time. Even after AI really knows what kind of green pants I like, I'm still going to want to verify that it keeps to my current set of taste.

And so deciding on a financial product, the mechanics of how to settle is going to be automated. The part where you decide, I love the fact that I'm paying no interest on this thing at all, will still be a taste moment. And until -- now you could still be fooled by the fact that a 0% with an asterisk from one of our competitors versus our 0%, which has no asterisk and never have, never will. If you're in a hurry, the 2 compare similarly, actually, I'll take the first one I saw. Agentic will not allow you to make a mistake, wait a second, like that 0, that's not a real 0. Like that's literally designed to make it not be 0. And so with a natural shift of preference with AI driving it, we'll just have more leverage in the ecosystem, we will help you convert people that are conscious of the true cost of credit. And that will go from finances like us to everyone because AI is there to monitor.

So I feel like that particular wind is very strongly into our back. That said, there's not a whole lot of agentic transactions happening right now. So what do we really know? The signs are pointing in this direction just from the sheer enthusiasm of the partners we work with.

Yes. Maybe another way to sort of say the same thing is that in an agentic world, which is rational, more of the promotional budgets will gravitate towards rational decision-making, rational incentives like credit, like terms, like offers. And we believe that, that will accrete to us in an agentic world. So we're pretty excited.

Okay. Great. Thank you. We'll see you all in about 15 minutes. [indiscernible] This is actually not a break. So next, we'd like to talk about our funding and financial outlook. I know this is what has brought many of you here today to get the updated medium-term financial framework. So for that, I'd like to introduce Robert O'Hare.

[Presentation]

All right. I know I'm keeping everyone from snacks, and it's been a long day. So hi, everyone. Good afternoon. I'm Robert O'Hare, Affirm's CFO. We've covered a lot of content today across Affirm's entire business. And in this last section and with my time with you, we're going to cover 3 more areas. So I'll start with a focus on the current state of our funding program. My colleague, John Marion, is going to give an overview of the Affirm Bank initiative. And then I'll close with perspectives on our framework for future growth and profitability. So with that, let's talk about how we fund the business.

Affirm has achieved significant growth over the last several years. And as our business has scaled, we've continued to build and diversify our funding channels and relationships. The goal of our funding strategy is to ensure that funding is never a limiter to our growth. And historically, we've built our funding program across 3 primary channels; warehouse, ABS and forward flow. We'll review each channel shortly, but we hope the key takeaways are that we're highly diversified across approximately 200 unique funding partners that we've built our program around multiyear committed funding relationships, and we're not overly reliant on any single partner or channel.

So let's take a look at warehouse funding. We have roughly 15 warehouse partners, primarily large and multinational banks. Our warehouse facilities are typically used to fund loans on our balance sheet in advance of ABS issuances and also in advance of allocations to forward flow buyers. We tend to keep warehouse utilization rates low, so this channel plays an important role ensuring we always have excess capacity during peak seasonal periods and also across market cycles.

Moving to our ABS program. We utilize 2 types of ABS issuances with the majority of our ABS funding coming in the form of revolving on-balance sheet vehicles and a lesser amount via off-balance sheet static issuances. Program-wide, we've reached roughly 150 unique investors, and we raised over $7 billion in notes over the last 2 years. Since 2022, we've seen a 3.4x oversubscription rate for our offerings, and this strong demand has allowed us to build deep relationships with a blue-chip institutional investor base. Lastly, our forward flow program is our most capital-efficient funding channel and also our largest at roughly $13 billion in capacity. This capacity is spread across a diverse group of 20 institutional investors, including insurance carriers, pension funds, asset managers and investment banks. Our typical forward flow relationship involves a 2-year commitment from the loan buyer, and we have a strong track record of renewing and upsizing commitments with most partners. When a firm sells a loan to a forward flow investor, we earn gain on sale revenue and that loan moves off of our balance sheet.

I'll close the funding section with a quick perspective on the trends in our funding mix. As you can see, we've historically been almost evenly split between on-balance sheet and off-balance sheet funding with warehouse and revolving ABS comprising the on-balance sheet funding and forward flow and static ABS comprising the off-balance sheet funding. As we look ahead to the future, we see an exciting opportunity to add deposit funding to the mix through the Affirm Bank while also continuing to grow our existing funding relationships and channels.

And so with that, I'll turn it over to John Marion to share a bit about the Affirm Bank.

Hi, everyone. I'm John Marion, and I'll be President of Affirm Bank once it's approved. After spending 25 years in financial services, companies like JPMorgan and a few fintech sponsor banks, I joined the firm in September to help the bank -- help the firm with the bank charter application process and to build the bank. Our bank will be designed specifically to support Affirm's ecosystem and make Affirm's platform more resilient and more self-reliant over time. We will do that in 2 key ways. First, funding. As Rob mentioned, the bank will add a stable direct-to-consumer savings deposit product. And secondly, for the bank diversification, creating Affirm Bank that will operate alongside our existing bank partners today.

The bank's products are going to be very focused on the deposit side, high-yield savings accounts that will be the primary balance sheet source of funding for the bank. And on the lending side, originating the same buy now, pay later loans from Affirm that you all know. To do this right, execution matters a lot, and we've built a team that's done this before with deep bank operating experience alongside of Affirmers with experience operating effectively within the company. Let me pause for a minute and talk a little bit about what is an industrial bank and why did we choose the industrial bank charter for Affirm. So Industrial Bank is a state-chartered bank. For us, we're seeking a Nevada charter, and that bank is FDIC insured. Industrial banks do not require that the parent company, affirm become a bank holding company. And that distinction is critical. It allows the firm to access the benefits of being a bank, including FDIC insurance, bank partner resiliency.

And in practice, it means the firm can continue to innovate, pursue new products, expand into new adjacent businesses without the kind of holding company restrictions that apply to OCC or any other federally chartered bank. We think about building the bank in 3 phases. First, regulatory approval. We submitted an application in January, and we have been engaged with the FDIC as well as the State of Nevada. Second, to build the bank, including the people, the systems and the processes that we need; and third, to launch and operate the bank with controlled growth throughout the de novo period. By the end of the de novo period, we expect that Affirm Bank will originate roughly 40% to 50% of Affirm's loan volume, and the bank will hold to maturity approximately 10% of those loans that originates. So say, just less -- slightly less than 5% of all Affirm loans at the end of the de novo period will be funded with Affirm Bank savings deposits.

And over time, as the bank scales, it will likely become an increasingly meaningful part of Affirm's funding mix and bank partner strategy. From a financial perspective, Affirm will make roughly $20 million investment in fiscal year 2027 to build the bank. And that's primarily related to onboarding employees and implementing the technology prior to the bank's opening. Over time, Affirm Bank will earn -- our Affirm will earn a small net benefit from lower funding costs and retaining the economics that we currently share with our bank partners, including interest on held-for-sale loans, loan origination fees and virtual card issuance fees. Those benefits will be partially offset by the cost to operate the bank, primarily people, technology, deposits marketing and loans and deposit servicing. But I want to emphasize the primary value of Affirm Bank is improved resiliency that's going to help support Affirm's long-term growth.

And finally, Affirm will make an initial contribution -- initial capital contribution of approximately $350 million to start the bank. And at the end of the de novo period, we're targeting roughly 20% return on equity. So we expect earnings to be sufficient to sustain the bank with profitability coming in year 2. And therefore, we don't anticipate needing additional capital contributions from Affirm once the bank is operating.

With that, I'll turn it back to Rob.

All right. Last section. So I'm excited to be here and to be in a position to increase our framework for future profitability and to share the drivers that give us confidence in this new profitability targets. But before we get there, I think it's important to share some context around the current state of Affirm and what we're building towards. You've heard from my colleagues this afternoon about the capabilities we've built across credit, product and engineering and how these capabilities are resonating with merchants and consumers in a growing number of geographies. Today, the network that we've built consists of over 0.5 million integrated merchant relationships and 27 million active consumers with 4.4 million of those consumers also active on Affirm Card. Those merchants and consumers drove over $46 billion of GMV in the last 12 months. While our network is large in scale, it is also growing rapidly and driving significant profitability.

In the last 3 years, we've compounded revenue at 40% per year, and our adjusted operating margin has scaled to 28% in the last 12 months, which is up 29 points in the last 3 years. As we look ahead, we're focused on executing against multiple secular growth drivers and expect to see continued growth across our merchant point-of-sale and PSP relationships, our direct-to-consumer offerings like Affirm Card and wallet partnerships via international expansion and also through Affirm Edge and agentic commerce. But to put our current scale into perspective, compared to our last investor forum, we are over 2x larger in GMV and cardholders are more than an order of magnitude bigger. At the 2023 Investor Forum just 2.5 years ago, we spoke about the path to $50 billion in annual GMV, a milestone that is now clearly in sight. Internally, we're now focused on achieving $100 billion in annual GMV as the next important scale point and the new increased financial framework we're sharing today is meant to provide our shareholders with an understanding of how we expect to operate on the path to $100 billion.

Looking at our historical GMV growth, as I mentioned, we've achieved $46 billion in GMV over the last 12 months. This represents a 36% compound annual growth rate since our last investor forum. Our growth in the last 12 months was nearly 40%, and we grew 35% in our most recent quarter. As we look ahead to $100 billion in annual GMV, we expect the business to grow at a 25% rate or better. As we've shared, we have multiple growth vectors, and we've tried to size their respective contributions here. First, our merchant point-of-sale program is expected to contribute over 10 points of total growth. Next, our direct-to-consumer offerings, namely Affirm Card and digital wallets are also expected to contribute over 10 percentage points of total growth. And lastly, our expansion into new international markets is expected to contribute 1 to 5 percentage points of total growth. We view our Affirm Edge and agentic commerce efforts to be outside of this 25% growth target, but we also expect them to be additive to our total growth.

While we're proud of the growth that we've achieved, we're also proud of the profitable product set that has driven this growth. Our product set has consistently delivered industry-leading revenue and revenue less transaction cost or RLTC take rates. RLTC has seen a 49% compound annual growth rate since the last investor forum, and our RLTC take rate has exceeded 4.1% over the last 12 months, outperforming our long-range target of 3% to 4%. Given the strength we've seen in RLTC take rates and our current expectations for future product mix, we expect to operate in a higher and more narrow RLTC take rate range as we progress towards $100 billion in annual GMV. We now expect to operate between 3.75% and 4% RLTC take rates. We have increased confidence in this critical measure of profitability due to the improvements we've made in our funding costs and the expectations we have for loan product mix over the next few years.

Consistent GMV growth and strong unit economics have resulted in significant operating leverage. Our adjusted operating income has eclipsed $1 billion in the last 12 months, and our AOI margins have increased to 28%. As we look ahead, we expect continued margin expansion. To achieve this, we're targeting at least 70% flow-through of growth in RLTC dollars to growth in adjusted operating income dollars. We're confident that this framework will allow us to both make the necessary OpEx investments to fund our ambitious growth plans while also allowing us to continue to scale our adjusted operating margins. All of this leads to our new medium-term framework, which again is indexed off $100 billion in annual GMV.

At that scale point, we're targeting the following; revenue as a percentage of GMV in the 7.5% to 8.5% range, RLTC as a percent of GMV in the 3.75% to 4% range; GAAP operating margins of 20% to 25%, adjusted operating margins of 30% to 35%. There's also a few key assumptions that are informing our framework. In the coming quarters and years, we expect our GAAP effective tax rate to normalize in the mid- to high 20% range.

And lastly, we're targeting annual dilution of no more than 3%. With the assumptions above, this framework should culminate in GAAP earnings per share of $3 to $4. That's the end of our prepared remarks today, and we're now going to move to our last Q&A session.

Okay. Thank you, Rob. We're going to invite all of our Affirm speakers back on stage now. So you've got 8 of us on stage, I'll be slightly off stage moderating the Q&A. [indiscernible] Okay. So as a reminder, for those of you attending in person, we're going to have 2 people walking around with microphones. Please raise your hand. We'll do our best to get to you. If you're watching us virtually, please e-mail us at Affirm [email protected]. Before our Q&A, I do have a few thank yous to give while we set up here. So first, thank you to our partner speakers that participated in the event. That was Will from Strike, Erica from Fiserv, Phil from Old National and Harley, of course, from Shopify. I'd also like to thank those of you that took the time to come attend today. We've got almost 200 people in this room, which is really incredible. It's more than twice what we had the last time we held this event.

And I'm sure there's many more watching virtually as well. So thank you for tuning in. I'd also finally like to thank many of Affirmers that participated in making this presentation possible. I think last count, there was well over 100 people at Affirm that participated in this, helped create it. And I know we also have several Board members in attendance as well. So we thank them for their time. Our executive team to come and take a seat, please. Okay. With those ground rules read, just one final reminder. When you ask a question, please say your name and the company you represent in that way we can get you on the transcript...

All right. Here we go. It's Bryan Keane at Citi. One of the themes today is as you guys get bigger, it gets easier. So we see the metrics. As you get to $100 billion, do you get towards the higher end of some of those targets that you laid out? And how does you guys have been running a little bit north of 4% in RLTC. How does as you get bigger and move into international in the card and the different metrics, how does that change the RLTC metric as we go forward to hit the $100 billion?

I can start. obviously, we've looked at our plans for growth and what we would expect the product mix, but also the geographic mix to be around the time that we land at $100 billion in annual GMV. And so those are all factored into the framework. I think some of the things that we're doing on the product side are landing at -- and we showed this in the deck, but they're landing at unit economics that are slightly below today's overall average. And of course, we have parts of the business that are operating at higher ranges as well. So that mix of products really is one of the biggest assumptions that goes into the framework that we provided. And that's one of the reasons why while we have operated above 4%, we do want to leave ourselves space to go execute on all of these really exciting growth initiatives. And we think if we're able to stay in the ranges that we provided today, the business will be really, really healthy and drive the profitability and in turn, the cash flow generation that everyone wants to see.

Don, I'm looking straight at you, so let's go to you next, raise your hand. We got to get you on the webcast actually.

John Hecht with Jefferies. Just going to the bank, I know you said you're going to convert, I think it was like 5% of the loans within the bank. What about revolving lines of credit tied to the credit card? Are those going to be in the bank?

We do not have revolving lines of credit.

As you grow out the credit card product, will not have revolving lines of credit? And then one question I have about the credit -- the card product, excuse me, is you're giving your customers a lot more democracy of how they use their own credit. When you're -- as you're seeing them use those options, are they -- what are they doing? Are they pushing out duration or term? Are they borrowing and then as soon as they get like a bonus payment and paying it off. I mean what are you seeing in terms of the behavior during that journey?

Oh gosh. I mean, I think we see all of it. It -- I mean, obviously, it depends heavily on consumers. Probably the most salient observation maybe worth sharing is that really what matters to a person in terms of how they're thinking about accessing credit and which of our sub products they're using, term lengths, all of that is -- it's very purchase size dependent relative of the purchase size to their cash flow, their income. And so where something like is a 0% important or are longer terms important is very specific to the person and to the purchase size. And so we see a variety of behaviors, but we see patterns within that, and it helps us think about tuning promotional offers and what Vishal spoke to in terms of loyalty and those aspects of what is actually salient to this person for this specific purchase and targeting that so that -- to maximize conversion of that purchase for that merchant. And that's how we think about it.

I can add one other thing. When they're using the revolving credit cards less, that money goes back into their pocket and they use it on Affirm and there's a positive flywheel that we see because they're not paying late fees when they're behind, they're not paying revolving fees and all of that money that they save goes back into the bucket and their purchasing power goes up. So we see positive behavior from our best customers.

Okay. Why don't you take a question from the Internet here. So the -- it's from Ross Holl & Company. They asked, I think this is probably best for Wayne. Could you please expand upon some of the most exciting opportunities within new verticals such as QuickBooks? And anything you can share in terms of use cases we're seeing there initially, specifically they [indiscernible] handyman or something like that.

Sure. I'm actually going to hand this over to Pat, who's been very close to our Intuit account.

Really excited about how we're launching with them. We're actually enabled on, I think, as of this week, close to 1 million of their SMB merchants that are on the QuickBooks platform. So we are in an exclusive deal over the next several years to work with them and tailor programs specifically for those SMB merchants. What's interesting about Intuit, which is actually part of the reason they chose us is that they -- not only do they offer B2B, they offer do B2C, and then there's also B2B2C. So it kind of gets very interesting in terms of the flow of funds and our presence there. So we're very excited about the partnership because, again, in the same fashion as we are expanding with our partners, we have these design partnerships that really allow us to enter into these markets in both a safe way, it derisks us entering it. And we work with providers and partners that really are experts in that field and help guide us as we go along. So it's just the beginning with Intuit, and you're going to see more of that to come.

Tim Chiodo with UBS. So that 3.75% to 4% that is tight. And we know it's kind of wanted to go higher, it wants to go higher, and you guys have a very nice way of reinvesting that back in price across products to drive more RLTC dollars. I was hoping you could expand upon how you plan to reinvest any of that upside into exactly that.

Sure. Yes. I mean I think we spoke to it a bit today already. Obviously, we're launching several new markets, right? It will take time for those markets to scale and for us to make those markets as big and successful as they can be. That's one clear investment area. We've obviously been leaning into 0% offerings over the last several quarters now, and we expect to continue to use that as a way to both add new users to the Affirm network, but also to incentivize the existing users as well. We've got the big nothing event happening tonight and midnight set your calendars. So yes, I think those are 2 like very clear and obvious ways that we would invest some of the margin dollars. But I'm sure there will be others as we run the business for the next couple of years. I don't know if others would add.

I don't want to get too deep into the complicated matters of mathematics with dollars. But one of the nice is of just getting bigger as the absolute dollar size, the -- whatever that incremental thing that the 3.75% to 4% really wants to be, just multiply that by GMV, that's a lot more absolute dollars, which we can spend in more than just the actual running of the business, but developing of new things. So I, for one, I'm looking forward to having more tokens. We're actually -- that's a joke. But we do have quite a lot of new stuff to build. And I think that the growth opportunities are so significant sort of the joke is still on what will we build next or first versus when we start harvesting this cash flow.

Connor Allen at JPMorgan. So the 25% volume growth, up from the 20% before and the components have shifted a little bit. It seems like the merchant side, a little slower, DTC a little faster and then you have kind of international that seems better than before. Could you just talk through maybe your confidence across those, how you kind of came to those conclusions? And then on top of that, what would you need to see for Affirm Edge to then be kind of part of your algorithm as you're thinking about it?

So for the first 2 components of the growth algorithm, point-of-sale and direct-to-consumer, I do just want to make sure everyone heard me. Those are minimums, right? This is a 10% minimum in terms of growth contribution. So we're not putting a ceiling on what the growth of either of those businesses could be. And I think as we look ahead to the very, very near-term future, we would expect point-of-sale to be well above 10% in terms of total contribution to growth. So that's one. On the Affirm Edge point, I mean, I think as you heard today, we're out talking to banks. We're out working with our platform partners to have as many of those conversations as possible. And I think we will get to a point where we have signed engagements with these banks. And I think that will make the program that much more real for us. And I think that's when we would start to think about how big can this be and how it layers into the rest of the growth drivers that we've spoken to.

I try to wait until the last because I think you've given some shiny numbers, everyone wants to focus on that, but thank you. The question is a little bit more -- and Adam kind of asked half of my question, like are you solving the biggest problem that you want to solve, but more from an expansion lens as well, right? Some of your peers, your rivals, they're like talking about global at get-go, the pace of expansion overseas. It's not like you're constrained on growth, right? Like you can grow. What is the thought process around how you're planning that expansion? Like what are your constraints? What is your consideration around that?

I'll start a little bit, but Pat, I'm sure, has a much stronger point of view. We are not constrained by many things, but we are very mindful of the fact that we're entering jurisdictions where we're not necessarily the first, which means that we have to be the best at something at the get-go. So showing up to the U.K. and saying, we too do Pay in 3 and Pay in 4 because it's the easiest thing regulatorily, capital, underwriting would have been undifferentiated. So we took the road less traveled and said we're going to figure out how to do this in the longer term, talking to merchants, hearing over and over again, demand is for longer-term loans. That's what you guys should do. That required a fairly complex set of conversations with everyone from capital partners to his managers' treasury and so on and so forth.

And we feel great about where we are now, but it took the right amount of time. Some markets are would say carbon copy, but they are connected to each other well enough and especially in European economies, where you can say one begets the other because some of the licensing regimes are exportable, et cetera, and others are not. And the risk, if you will, is definitely not in the -- will we have enough merchants to go live with. We have a fair number of batteries included given our global partnerships. Will we have the products? We think we do, but we hear it from the local merchants. But regulatory regime and deep understanding of the local consumer Marais, everything from how repayment happens, what's the least frictionful mode, what are the downstream consequences of reporting to the local equivalent of credit agencies are very important.

And so we can definitely do more than one market at a time, and we absolutely expect to do so. I think there are many companies whose chart bodies or at least parts of their chart bodies are littering the roads to global expansion. We said we're going to lend money to everyone in every market. Like it turned out to be a thing that takes 3 to 12 months to find out if you're any good at it. And we're quite happy with the way things have evolved in the U.K. but we didn't enter it with a guarantee of victory. So we have the right amount of trepidation. We will bring that trepidation to all the other markets. That said, every time we see success in markets 1 and 2, the next set of expansions, we think will do 3, 4 and 5 and 6 and perhaps we'll expand the funnel.

That said, just the other side of the argument, the reason we have taken our time to get to international, the vast majority of commerce is local. And there was a very, very long time before Visa owned Visa International because there's just not that much I'm just going to up and go from the U.S. to the U.K. and shop as if I exist in both places. These are fairly locally and primarily driven, of course, by speed of shipping, et cetera. And so we will experience network effects. I'm quite confident of that in every market we enter. The cross-border commerce is a big deal, especially with some of our partners for sure, but it's not enough to create a truly sticky network effect in and of itself. And so it is still a 1 plus, 1 plus, 1 plus 1. The synergies happen on some level, but I wouldn't sort of expect it to just be all at once after a certain point.

Yes. There's actually one thing that's worth double-clicking on that Max said because it is something that's common across our broader strategic initiative investment framework and how we think about all of them, not just international. There is a natural cadence to the rate at which we can grow products, new products that is set by the fact that the product ultimately depends on monthly repayment, right, over some period of time. That sets a clock on really how you learn about consumer behavior whether it's in a new market or even in the U.S., where it's a new product, you really have to understand how does the customer ultimately interact with it? What does it mean for the bottom line in terms of repayment.

And so as a result of it, when we think about strategic investment and what Rob showed of where we're putting money, we are always looking at and investing in multiple growth vectors that are largely orthogonal from each other in terms of the learnings and the feedback loops that we're generating, and we pursue them in parallel and allocate internal resources to match that framework. And so international and multiple markets is one of those investments. Obviously, we've heard about things like Edge, card, agentic and others.

Rob Wildhack with Autonomous. A question on the updated RLTC range and given how narrow it is. Is that strategically like a flag in the ground that these are the products we're going to do. This is the mix. This is where the next $50 billion is going to come from? Or if there was this great opportunity, say, in pay in for something that's lower margin, would you pursue that? Or would you say we're sticking with what we laid out, and that's why the range is both higher and narrower?

Again, I'll start. I think it's really just more simply a function of some of the very large products and programs that we have today and also just frankly, the really high growth rates we see in those products and programs today as well. And so just given the economic content that we're generating from the known programs and products, we just don't see a scenario where we deviate outside of that range, certainly not meaningfully below that 3.75%. So I think it's really just acknowledging that our biggest and in terms of card, our fastest-growing programs are also our most profitable. And so that gives us a lot of confidence in that narrower range.

Well, I mean, I would just add to that I think as there's new opportunities, right, and we're going to go pursue them, like the stuff that Max is working on in his lab. I mean, we think, obviously, those have potential for different profiles, but they're on a different -- again, on a different time line, and we expect a lot of opportunities. We don't plan on stop growing at $100 billion. And a lot of those things that are going to take us past $100 billion are in the works. They're just, to Rob's point, at a different scale point relative to what the model says.

Dave Koning at Baird. And I guess my question is on data. You talked a lot about using data, increasingly making better credit decisions, offers, et cetera. We hear a lot about with AI, the endless amounts of data companies using more and more and it's costing more. How are you kind of balancing that spend, that cost with the production and then just data security on top?

I mean we're ultimately looking at it through the lens of productivity -- of employee productivity. And so when we think about how much are we spending on AI, how much are we spending on productivity -- AI for productivity or for modeling or for improvements, I mean, we're looking at it through the lens of ROI, right? Like are we actually getting something out of this? Is it producing more than what we're putting in. And so far, what we are seeing and what we're sticking to is that we are increasing the output of the employee base relative to what we're putting in on a dollar basis.

I mean I think 70% incremental margins would put that in context, I think if we're flowing down a substantial portion of our incremental RLTC growth. It says a lot about the operating efficiency of what we're doing. And if anything, I think those are tailwinds for the business in terms of the productivity benefit way exceeding the cost. And then in terms of data security, I think suffice it to say, we take it really, really seriously, I think your line from the infrastructure slide was really important, which is we don't take what we do very lightly. We joke a lot, plenty of Lebowski references in every letter, but we take our day jobs pretty seriously and data security is at the top of that list.

Moshe Orenbuch at TD Cowen. You mentioned 10 points of growth coming from the wallets, direct-to-consumer. Could you talk a little bit about how much of that is coming from in-store commerce? And given how large in-store commerce is relative to e-commerce, could there be a time when that 10 is higher or whatever that contribution is actually higher than the traditional point of sale?

I'll start with in-store is a very tiny but high growth part of the entire spectrum of where we are seeing the marginal incremental growth coming from. But it's very exciting because, again, one of the key leading indicators that the product team looks at is product market fit and specifically the transaction per user. And what we're seeing is that when customers are going in-store and finding that transaction through the card or the wallet, they're actually coming back much faster for the next subsequent purchases. So the TPU stat that Max had in the initial prologue was about how fast the frequency of the network is growing.

If I take a slice and just add it to our direct-to-consumer channel, that frequency is much higher and in-store as a proportion is also higher. So it's tiny. It's going to grow fast, and we see no upper bound on it because, as we said, 85% of commerce is still in store. And now with cards and wallets, we have access to that commerce. And also as we improve the product because we fine-tune every single step in the process, there's a ways to go to how do we make this even simpler for the customer. So the road is pretty long and meaningful ahead of us.

We've got 2 from the online channel that I think are pretty short or easy to answer. We'll start the first one, I think, for Wayne. And the question that the investor had, who takes the credit risk with Affirm Edge? Is it us that takes it? Or is it the issuer?

It is us.

Okay. Second question. This question comes from Daniel Perlin at RBC. He asked that -- I think we'll probably disagree quickly with the first part of this question, but he say, well, in the early days of achieving your $50 billion GMV target, it was clear that lower income consumers were an appropriate target market. But as you are scaling reenvisioning reward constructs, do you believe the aperture will open up to the more affluent?

Our cardholders are actually -- I mean, we talked about the super prime -- prime for 0% days. I mean the stats speak for themselves. We cater to all of the FICO bands equally and we love them all equally. And they are using the products, both on the merchant checkout and direct-to-consumer in ways that we feel that the value accretes to every single bank because it's a better product. And so I don't think that either the first $50 billion was for lower income. We actually see higher income, higher FICO customers use it and like it more. We also see it in the prime -- near prime as well. And the reason is if you're revolving, you're paying that incremental dollar to the banks and the late fees, and that doesn't work no matter how much your income or your FICO is. So that is the short answer. And then the rewards, the 0%, the longer term, everyone loves them. There is no FICO specific lens to that particular part?

Well, we have a very short memory. I mean we grew with Peloton. 95% of the online retail market were all service programs originally targeting the high-end consumer and the super prime users, and then we just extended those. So I think even at our IPO, that was one of the concerns, and we've been able to...

One of the token I was really going to go there, like I remember being asked over and over again, like when everybody buys themselves of Peloton and those people never default, are you guys done? So we still enough ink on this one, but we worked for everyone, different credit quality consumers derive different kinds of value from Affirm. That's a very fair observation. And we never get to the -- we know we're going to lose a lot of money, but it's okay, we're overcharging someone else for it. That's the thing that we don't do. Everyone else is welcome to use the product, and we love them all. But for different credit quality, the answer could be longer term and the credit rate is not that big of a deal for someone who is need in choices and credits, they're very much on the hunt for the best possible APR and the number they prefer, of course, is 0.

Yes. I mean just one more drop of income because I think we're all pretty excited and passionate about it. I mean we have 27 million active users and our median income is $75,000 a year. I mean -- so we have a broad range of consumers, and we serve all of them, I think, quite well.

Okay. We'll probably do another 5 minutes or so of questions.

It is Julian Bollinger from Compass Point. I realize that when you obviously put out very helpful numbers when it comes to financial guidance, one of the categories that seems to be kind of outside of that or excluded in some ways is Agentic or AI and LLM type partnerships. They obviously -- a lot of those platforms have tens of millions, if not hundreds of millions of weekly active users, and that's an enormous market that fits right into your product market fit in terms of online purchasing and online spend. When you think about the different growth drivers, does that have the potential to become kind of a fourth leg to the stool when you think about the different drivers of merchant point of sale from Card and International, does that have the potential to be material enough to really create its own fourth vertical when it comes to growth drivers going forward?

I don't see a reason why not. I mean the thing is that it's early. And I think a lot of the things that we are saying here is that we have different products in different stages of the maturity life cycle. This one is early because we are just starting to shape the protocols. We just announced with Google in the morning. And so as this takes shape, to your point, the white space in front of us is immense. As agents take the treasury and the mechanical work and start to do the things that humans actually want, Affirm's value prop just shines through and through affordability, ALA messaging, purchasing power.

And we feel that the way that this will actually shape a lot of things will change in front of us in ways that we haven't seen because you can have fully delegated, fully human in the loop, somewhere in the middle. But in all of those cases, Affirm has a very specific role to play in our opinion. So short answer is we don't see a reason why it can't be the next big growth lever. That's why we presented as such. But we're not baking any specific things because the volume there is negligible right now across the industry, including Affirm. But as these things take shape, we'll obviously have more to share.

We're already thinking ahead the Investor Forum in 2030, and we like it. [indiscernible]

Will Nance from Goldman. One question I wanted to ask around the long-term thought process, long-term targets was around capital allocation. You announced one specific allocation of capital to the bank, which makes sense, and it sounds like that will be self-funding from there. But obviously, with GAAP profitability, there's a lot of organic capital generation. So how are you thinking about organic needs to fund the growth in the balance sheet versus potentially evaluating capital return down the line?

Look, I don't think we're going to say a lot more than what we said on the bank and that we like the way we fund the business today. If you think about the mix of on and off, you think about the mix of forward flow, on and off securitizations and of course, our warehouse business, think that mix is a good mix, not being precise there, but the overall direction of travel is where we want to be here. And so that means that the capital needs of the business are really consistent with what we've experienced over the -- over our recent history. Obviously, there's a really zesty funding market out there. It's really good for us. But we don't plan on taking that to fundamentally change.

So even when you model that forward and think about a kind of consistent approach to fund the business, you still are going to generate a pretty healthy amount of cash. And we don't really want to be too specific as to what we want to do with that. We've announced, obviously, that we have the plan to retire the first convertible notes, and we would continue -- we have that coming up due in November. Those are pretty small in the scheme of the next 3 years. And beyond that, we really haven't communicated and aren't going to share anything else today. Unless you want to, Rob?

I think you covered it well. I mean I think we're really excited about the cash that we're generating today. We generated about $350 million of cash in the last 12 months. But that's probably the first period where we generated that much cash. So I think we're working through the retirement of the debt and the funding needs of the business will be sort of the first outflow of cash for us. And from there, I think we'll sort of reevaluate as we continue to scale cash flow.

I think we'll take one more after this and...

Kyle Joseph with Stephens. Just a very quick one. When should we expect slides? Just I was typing pretty fast, but not that fast.

Yes, they actually should be posted -- I'm looking at Maggie over here. I think we're posting them right now a couple of minutes.

And then a follow-up. Just I think in 2023, you kind of got the question about the competitive environment. I think you covered it. Basically, it's broad because of the amount of products you have, but just kind of a quick update there and how you see that evolving with the bank as little as you're going to talk about the bank.

The bank is actually sort of orthogonal to the competitive situation. I think it helps us regulatorily. It sets us up for some future efficiencies, but it's not a thing that we see as an inherent competitive advantage. If anything, we are trying to make ourselves as accessible and friendly to our would-be partner banks, and you've heard from some of our partners on stage today. So I think that part of the business is highly synergistic. That said, in payments and in consumer finance in general, it's coopetition all the time, all the way. There's never been a monopoly in payments full stop because it's such an enormous market. Everybody specializes, everybody partners with someone else for the things that are not specialist in and everybody overlaps and competes with those same partners just because it's a complex market, which is why we will like it so much.

And so this space is really attractive. If you look at these margins, even the numbers we just upgraded for you, it would be foolish to believe that no one else will come. In fact, everyone has come. We think that our advantages are durable. We think that we have gotten better at the things that we consider to be the moats and the advantages. The catalog of custom merchant contract has, I don't know, almost 10x since the IPO, if I'm doing my math correctly. So that's a fairly impressive digging of that moat. Our models are now being built on also 2 orders of magnitude more data. That's actually a correct statement. And so on. So everything we do that we think we are uniquely great at that separates us from the pack, we've gotten much better. And no accident. We've invested in all those things.

So it's a little bit easier to compete, I think, in the areas where we are selling the thing that we have put the original flag in the ground for. Every time we go to expand, be it new geographies, new products, it is never empty. There's always someone there who is saying, well, that's my turf, what are you doing here? And our answer has to be we're here to provide a new and different kind of value. We're just here to make it cheaper or we're here to undermine your business. It's kind of a -- it's a stupid excursion. We shouldn't be a part of it. What we are very good at is saying, wait a second, this need the spotlight. Consumers here are overpaying and they don't understand that they are. That's a great opportunity for us. Like we're very good at saying, actually, let's flush out all the gunk. This is a bad product. We can do a better job.

And so we love innovating in product. We love innovating in risk where consumers are not giving access to credit or giving access to financial products because the incumbents think the risk is too much. And we think through better use of math, we can actually underwrite it and price it correctly and not rely on slot like late fees, et cetera. So those are the areas where we've been investing. It's become easier to compete. I think I'll actually let Pat and Wayne touch on sort of what it's like out there fighting with our esteemed competitors, but it's never going to be noncompetitive. This business is no danger of being a monopoly, but the fact is we are upping our margin rate should give you a pretty good sense for where we think we're headed in terms of our ability to defend our market. You guys want to add on the revenue side?

Honestly, I don't have a sort of snappy answer for you. I've been in this space for 10 years selling BNPL and the environment is always changing, different competitors are doing different things. And I think what has worked for us is just focusing on our own capabilities and extending our lead and maybe part of it is getting older and wiser, you can't change what competitors are doing. So focus on yourself, and I think that's been paying off well for us.

Great. On that note, we are at the end of today's event. So for those of you attending in person, if you turn to your right, you'll see the gates have opened to the bar. If you go beyond that, we actually have product demos off the left that you'll probably want to take a look at. And if you go even further to that, beyond that, there's a terrace that looks out over Times Square. So we encourage you to enjoy the view of the beautiful weather today. Thank you again for joining.

Good afternoon. Welcome to the Affirm Holdings, Inc. Third Quarter Fiscal 2026 Earnings Call. [Operator Instructions] As a reminder, this conference call is being recorded, and a replay of the call will be available on our Investor Relations website for a reasonable period of time after the call.

I'd now like to turn the call over to Zane Keller, Head of Investor Relations. Thank you. You may begin.

Thank you, operator. Before we begin, I would like to remind everyone listening that today's call may contain forward-looking statements. These forward-looking statements are subject to numerous risks and uncertainties, including those set forth in our filings with the SEC, which are available on our Investor Relations website.

The actual results may differ materially from any forward-looking statements that we make today. These forward-looking statements speak only as of today, and the company does not assume any obligation or intent to update them, except as required by law.

In addition, today's call may include non-GAAP financial measures. These measures should be considered as a supplement to and not a substitute for GAAP financial measures. For historical non-GAAP financial measures, reconciliations to the most directly comparable GAAP measures can be found on our -- in our earnings supplement slide deck, which is available on our Investor Relations website.

Hosting today's call with me are Max Levchin, Affirm's Founder and Chief Executive Officer; Michael Linford, Affirm's Chief Operating Officer; and Rob O'Hare, Affirm's Chief Financial Officer. In line with our practice in prior quarters, we will begin with brief opening remarks from Max before proceeding immediately into questions and answers.

Before we begin the call, as a reminder, we will be hosting our 2026 Affirm Investor Forum next week on Tuesday, May 12, from 2 until approximately 5:00 p.m. Eastern Time. The event will be available to the public via live cast on our Investor Relations website. We will also publish a replay on our website after the event ends.

With that, I'll turn the call over to Max to begin.

Thank you, Zane. Fiscal Q3 was another one for the record books. Given this streak, one could be forgiven if one thought it is actually pretty easy. That's all because the fantastic Affirm team is starting to make it look that way. It is not, in fact, easy, and

we're very proud of this particular quarter.

As Zane said, I look forward to seeing many of you in person at the industry forum next week. On that note, back to you, Zane.

Thanks, Max. Okay. Let's get to your questions. Operator, please begin the Q&A session.

[Operator Instructions] Our first question comes from Jason Kupferberg with Bank of America.

This is Cassie Chan on for Jason. Great quarter. I just wanted to ask, I guess, first on the private credit side and in general on credit. It seems like the delinquencies were pretty stable this quarter. I guess, is there anything that you're seeing in terms of changes or slowdowns in credit? And obviously, unease in private credit seems to be a theme, but are you guys seeing any issues or changes on the funding side of the business?

I'll start with the credit side, Michael will pick up the funding side. No, we are not. At this point, I think we earned the right to say the Affirm consumer. And so these are not comments on the universe or even North America or United States consumer, but people that we choose to underwrite and lend to, we are not seeing deterioration. We're not seeing any disturbances in the course, which naturally translated to a very stable and pleasant funding environment for us. Michael, can you tell any more?

Yes. The funding market broadly remains exceptionally constructive for us. We're kind of out of adjectives to describe just how great the execution has been. I know a lot of ink is being spilled elsewhere about what's going on in the capital markets. But from our perspective, we see a market that's very deep. We see it sustained and reducing spreads, and we see deals with significant oversubscription along with forward flow partners who are, if anything, still clamoring for a bigger allocation of our portfolio. So we see the market as being very constructive to us and a key part of the reason why our -- we feel there's so much tailwind in the business.

Our next question comes from Nate Svensson with Deutsche Bank.

Congrats on the record number of Lebowski references in the letter. I just want to ask -- Sorry, I wanted to ask on the upcoming Big Nothing. But going through the transcript last quarter, Max, you were obviously pretty effusive about all the first order and derivative benefits from that event, things like cardholder sign-ups. I assume directionally, you're expecting a lot of the same things. But on the call last quarter, you also talked about getting better and smarter as you do more of these. So I guess the question is around what ways you think you got better and smarter and maybe what are some of the incremental changes or initiatives we should be on the lookout for, for the event next week?

I don't really want to reveal all the surprises to be completely honest, but I appreciate the kind words, and we did get smarter. I think probably if you want to sort of look for bread crumbs, we got smarter about targeting, that's certainly -- and it's less about sort of sitting down in the lab somewhere and trying to come up with ideas, much more about looking at the data we gathered and the last Big Nothing and just using all the same ML AI techniques we have here to ask the question, what's the least costly highest probability of conversion for any one SKU, any one consumer, any one merchant, et cetera. So it will get more efficient. That's certainly the case.

We got smarter, kind of, qualitatively. I think we really underplayed the event itself in the early hours and kind of had to play a little bit of a catch-up on the marketing side of things. And this won't happen this time. So we will hit the ground running with just promoting it correctly to all the right people, again, maximizing the effective per dollar yield for our merchant partners. So we expect to be even more satisfying to those who are paying for these deals.

Our next question comes from Bryan Keane with Citi.

Can you give us some insights on the ABS market, the deal in March, and then the recent deal, what's going on with spreads and demand for you guys?

Yes. Thanks for the question. I think we've executed 3 deals so far this year, 2 revolving deals in the quarter, and then we just priced a static deal we haven't yet closed on. And the trend really across all 3 is incredible depth, lots of oversubscription in these deals and continued and sustained tightening of spreads and a key part of the reason why you see funding costs down on the order of 125 basis points year-on-year.

Obviously, benchmark rates are down as part of that, but you're also seeing spreads coming in at the same time. It's just really a reflection of the capital markets demand for our asset and our team's ability to execute. Despite quite a bit of economic volatility and headlines out there, we feel like the market is just extremely constructive for earning.

Yes. And it just feels like they're starting to recognize maybe the differences between what you guys -- your credit versus others and the short duration and obviously, the quick turn. But it looks like the market is starting to recognize that. So it's good to see.

The short duration of our asset is a huge advantage, and it's taken us a long time to earn that. We've also done a really good job, I think, in engaging the investor base and bringing on board, over the years, a wider set of investors. That's really important for the depth of the market we play in. It's a key channel for our long-term growth. But also the more broad of the investor base you bring on, the better you could get on pricing.

Our next question comes from Rob Wildhack with Autonomous Research. Our next question comes from Moshe Orenbuch with TD Cowen.

I noticed that growth in the Pay in X has -- is your fastest-growing segment now. Is there -- are there different either programs or kind of merchant partnerships or anything that is kind of driving that? And do we think that's going to continue into fiscal Q4?

Moshe, this is Rob. We do expect that trend to continue into fiscal Q4. And I think the answer was largely in your question. We did have one large -- one very large program move to having an evergreen 0% via Pay in 4 offer. So that definitely drove a bit of the uptick. And then we also continue to see most of our Pay in 4, Pay in X volume coming from the Shopify program, which continues to grow nicely. So a bit of sort of business as usual there, and then we did have one large program make a change to their financing program, which we think is real positive.

And our next question comes from Ramsey El-Assal with Cantor Fitzgerald.

This is Ryan on for Ramsey. I wanted to ask about the active merchant count, which went up by 44%, accelerating beyond a strong Q2. Where or what is the largest opportunity for -- to add more merchants? And how penetrated is the market, not in terms of consumer usage, but in terms of merchant presentment for BNPL?

I mean, I think in terms of merchant count, we're still looking at some of our largest platform partners as the biggest accelerant to growing our current merchant base. So some of the big PSPs where we have relationships as well as large merchant platforms, like Shopify, those have been really additive to our merchant base overall.

I think in terms of presentment, we still feel like it's really, really early innings in terms of presentment. Obviously, we have a brand-new program with Intuit, and there's lots of optimizations to do within that merchant base.

That's an enormous universe of merchants that we're just scratching the surface on, and it's very early days in that program. So there's countless other examples across our portfolio. But I think in terms of the partnerships that drive some of these big merchant counts, I think we're still -- we still have plenty of room to optimize how we show up on the end merchant site.

Our next question comes from Harry Bartlett with Rothschild & Co Redburn.

I just wanted to touch on the kind of agentic code development point in the shareholder letter. You cited the kind of notable ramp in agentic written code, and it looks like you're kind of doing double the amount of requests that you were doing previously. So I guess, could you kind of talk about this broadly in terms of how you're thinking maybe costs will develop versus how they developed historically or whether you kind of see this more as a vehicle for more rapid product development, I guess?

So this is very tempting to turn this into a 15-minute answer in the finer point of software development, which I am personally invested and involved in. So the shorthand, first of all, and I will rely on Rob in a second to maybe try to even quantify it, but it's unequivocally accretive to the bottom line to use AI the way we are. So this is a net strongly positive, the fact that we are increasing our development velocity is just incredibly strong for our bottom line and then some.

The actual mechanics of development using agentic processes and et cetera, pretty unique, and we feel pretty great about where we are and where we're headed. If you ever read the fine print of the likes of ChatGPT, Gemini, there's a little thing in the bottom that says AI makes mistakes. Basically, you're on your own. We don't really have the luxury of putting that in our code. If we make an underwriting mistake, if our engine somehow treats some consumer unfairly or if we're off by a penny here and there, like none of that is okay. And so as much as we can and do use these tools, there are still many unique-to-Affirm checks and balances and processes that ensure that what we ship is of the same or higher quality than what we did before these tools came around.

And we spent quite a lot of time getting there, getting the confidence, testing it. And so the reason we have this sort of uncork it moment early in the year is because we felt that we were ready to mass deploy it internally and have, so far, been very pleased with what's transpired. And we'll definitely do more. I think, I'm sure our engineering leadership is listening/reading these letters, and I don't think anybody is begrudging me the right to say we think we can 10x this productivity further.

So it's very early days. We're very excited about it. We have no shortage of things we want to build and therefore, humans that are both the creators of ideas, the arbiters of good taste and the ultimate responsibility carriers for this no errors, no fineprint, no bugs are still very necessary. So we don't anticipate any sort of a decimation of the engineering team, but we are certainly very excited to give each one of our engineers basically superpowers. And Rob has any additional cost points to make?

In terms of the costs, I mean, they did obviously show up in the P&L this quarter. They'll continue into Q4 as well. I wouldn't say it's a material impact to the P&L overall, it sort of very low single-digit millions per quarter in terms of spend. So to Max's point, I mean, we're seeing a lot of efficiency spending money on developer tools is something we've always done. So we're just thinking about ways to make sure that on a holistic basis, that all-in budget makes sense for us and that we're seeing efficiency and lift from the entire portfolio of tools that we're employing.

Our next question comes from Rob Wildhack with Autonomous Research.

Can you guys hear me?

Yes.

I wanted to ask about the different Affirm services, namely the app. You've highlighted in the past the GMV lift there, that's intuitive. I'm curious where consumer awareness is on that. Like are consumers still opening up their home app to make a payment and going, oh, can we hear this great offer? Or have they become more attuned to the fact that this is a place where they can start looking for products and shopping via the app first?

You're front running like half of my speech next week. So I'm not going to answer -- I'm not going to gratify this one [indiscernible]. The short answer is it is trending in the very direction you described. So Affirm app was deliberately designed to make sure that there is more value to be had there than just sort of in passing, setting up or checking up on your AutoPay. So all the different components in the first 3 and the fifth tabs of the app are all designed to create engagement to expose consumers to various merchant promotions.

It is not an accident that The Big Nothing days are basically organized around the app. We're trying to teach consumers that this is where you go. There's always 0% offers in the app. The B&D is just a nexus of many of them concurrently, but at any given time, there's a lot to begin with. We have a really nice number. I won't spoil the eventual report on that one, number of searches that consumers run in our app. We're watching that grow. And it's all in the service of teaching consumers that the best experience of Affirm is the app plus the card.

And so I'm deliberately obscuring some of the maybe more interesting portions, but you'll have to wait 6 more days before we start really doing some fun reveal. But directionally, you're exactly right. Like we are motivated to make the app experience excellent, both as a product and as a financial service to our consumers, and there's a bunch of things to show and many more that we're probably not going to show up necessarily next week, but it shapes the road map for years in our minds.

Got it. And then a quick one for Rob, if I may. This was up quarter-over-quarter. Can you just call out the drivers there?

I'm sorry, could you repeat the question?

The allowance was up quarter-over-quarter. Just wondering the drivers there.

Yes. I mean it's, of course, partly a function of just seasonality. The allowance rate typically is elevated in Q3, just given we have the sequential downtick from holiday volumes in Q2 down to a lower base in fiscal Q3. So that's part of it.

Another driver, which I think Max called out in his portion of the letter was just that we did see elevated prepayments on the platform. It's a little bit of a counterintuitive point, but that's a really positive credit signal, and it has the effect of reducing the overall loan balance, which obviously, the good loans are being paid off early.

And so you're left with more delinquencies off of a lower base. So that was -- that contributed to a higher allowance rate all in, but we think it's a really positive credit signal across our users at large. So those are sort of the 2 biggest drivers, seasonality and then a bit of favorable prepayments from tax season.

This tax season was understandably refund maxed. Is that what...

And our next question comes from Dan Dolev with Mizuho.

As always, very impressive results. Just wanted to ask you, Max -- can you hear me well?

We're just -- we're silent waiting.

I just wanted to ask really quickly, some of your competitors have done some significant layoffs because of AI. I just wanted to know what the official Affirm stance is on this topic.

We are not planning AI-related layoffs, full stop. I don't mean to belittle anyone out there making the right or what they believe to be the right decisions for their company. So strictly Affirm-centric view of the world from us. If you look at our revenue per employee, it is already hanging out in like NVIDIA territory. I don't remember the last time I looked at it, but it's a very high number of dollars per employee.

So we, today, operate as a very lean machine. If you look at our overall headcount, it hasn't grown very much. If you look at the revenue per employee, you'll see that we're just highly efficient, if you look at overall operating leverage, it's done really well.

So we -- long before AI tools came along, we had tooled ourselves up to be very efficient. These tools are giving us rocket boosters, wings, whatever metaphor you want, and we're very happy for it. But at least for now and as far as the -- as far as eye can see anyway, it is just a thing we're going to keep using to ship more.

The list of things we want to ship is very long. And until very recently, a lot of our conversations were, well, we don't know when we're going to prioritize this thing that you went back because we have so much more to build. Blissfully, these conversations are now like, wow, we can just have a hackathon and 48 hours later, we'll have a working prototype. We just wrapped up one here where our product team literally delivered dozens of shippable features, which is just impossible to imagine 12 months ago. So we know all the people we got. We think we have fantastic people, and we like them all.

Our next question comes from Dan Perlin with RBC Capital Markets.

I'm wondering, can you just speak, I think, maybe holistically to your expansion plans outside of North America? I know you talked about it a little bit embedded in the guidance here for the product and go-to-market initiatives and not being material in '26. But I'm just trying to think contemplating in terms of investments as we start to think about next year, and also, I guess, in the context, although it's a little bit of a different driver, but the RLTC margins continue to run above long-term targets. I'm just wondering as you go into the international markets, how that might impact it.

Sure. I'll take them in order. I think we're going to spend a bit of time talking about our expansion plans with a bit more specificity in terms of markets. So I'll leave the deep dive on the international markets for next week's investor forum, if that's okay.

In terms of the investment portfolio for those launches, some of that work is already underway today. So it's definitely been an area that we've been investing in ahead of those markets coming live. And as you've seen from the results, we've been able to drive, really nice operating leverage despite that investment. So I think we would expect to do more of the same in fiscal '27, but I'll stop short of giving any sort of outlook or guidance for '27 today.

In terms of unit-level economics, I mean, I think as we ramp in new countries, we would expect potentially that there is a bit of an investment period where we're meeting new consumers and coming down the curve in terms of underwriting prowess. So there could be a small drag on revenue less transaction costs as we enter these new markets. But given the size of the U.S. and Canadian businesses today, we think any headwinds there would be pretty minimal.

Our next question comes from Andrew Bauch with BMO Capital Markets.

I wanted to talk about Affirm Card and the level of ads you continue to stack up here. The 700,000 users is pretty impressive, especially coming off of the 900,000 last quarter. So is there anything that's working differently or stronger than it has been in the past as far as Card customer acquisition goes? And then my follow-up would be, now that we've doubled the base at [ 4.4 ], are you starting to see more and more benefits of scale coming through the pike?

I think the first part -- there's a long list of things we have done and continue to do to just increase adoption. We've said it before and remains true that Card are, by far, fastest growing and also our most profitable product. So there's absolutely no reason not to try to grow it. That said, we have not been, in any way, fuel -- choosing the growth. It's natural. There's not a secret game somewhere being played or anything like that. So it's growing about as fast as we can make it grow without tilting anything in a weird direction.

Still primarily remains a repeat product. We've never tried to advertise or promote it outside of existing Affirm user base. It's still roughly in the 20% of the actives, plus or minus. So it's -- we have a lot of road to cover before we start asking where can we get more cardholders.

They are our favorite users in a sense that they transact most frequently. They tend to be least lossy just because we get to know them a lot quicker, a lot more frequently. And so there's -- it's all goodness, nothing sort of -- nothing hidden or regrettable there.

And the economies of scale, I think -- to be completely honest, I haven't thought it through very carefully if we're finding benefits of scale that are sort of truly unique. The one thing that is true in a software development context, which is a little maybe a glimpse into the resource allocation, your fastest-growing product is typically your smallest product. So no matter how much you love your youngest child, you can't really allocate the greatest number of resources towards it because it's just too small.

The Card is now in the billions of dollars of volume. It's no longer a small product, which means that it deserves and gets the software engineering attention and the risk attention is all the various pieces that we would perhaps wonder if they're worth allocating from other parts. And so you can expect it to get more features sooner, more -- maybe even more growth sooner, although that is not a forecast or forward-looking statement, is just sort of hitting its stride in every dimension, including internal resource allocation.

Our next question comes from Matt O'Neill with Bank of America.

Being cognizant of the upcoming forum, I'll try not to get too long-term focused. But maybe we can talk a little bit about the Card and what that sort of portends to the longer-term banking idea. Obviously, there's application put in this past quarter. Respecting that I expect a lot more of this next week, are there any sort of points you can kind of hint at as far as the focus around things like sort of pay now, direct deposit, the dynamics to contemplate as you guys proceed down that path?

It's definitely worth separating the bank application and the product road map. Like they move in complete different time horizons. We are excited to continue the conversation with our regulatory friends and it may take a little time, it may take a long time. We don't know, and that's part of the process. And certainly have nothing to share on that front at the moment.

On the feature set of where the product road map is headed, we'll cover some of that next week. So I definitely don't want to take Vishal's talking points away from him. But we definitely have aspirations in a variety of consumer financial services. For the longest time, we said we see ourselves -- our mission states it pretty clearly, we're trying to build honest financial products to improve lives. We're not trying to build short-term loans at the point of sale to improve lives. And so there's plenty of opportunity, we think, to write the wrongs of some of the poorly made products in the industry and also just invent our owns and do interesting things there.

So I'm getting a little bit of a word salad here, but we have aspirations in just about everything that you can possibly imagine in consumer financial services. More to come. I'm also cognizant that sometimes we announce things and take 3 years to get them to the point where they're good enough to launch. And so I'm extra cautious not to say, oh, here's something we're going to do, and we'll definitely do it, but it may take us a year or 2.

I appreciate that and the delineation between the regulatory process and the business build-out.

Our next question comes from Darrin Peller with Wolfe Research.

Can we just touch base again on the strength of the GMV side for a moment and the sustainability? Number one is just making sure there was nothing unusual or unsustainable about the quarter, but -- which I'm sure you'll say probably not. I just -- I guess I'm trying to figure out what's to stop this type of growth rate from being sustainable from your perspective.

And then more importantly, I mean -- and on that note, we've heard a lot from competitors about trying to do more in the space, but it seems to have very little impact on your growth potential. So I mean, anything you're seeing from the competitive landscape that's changed worth sharing over the past quarter or 2 would be great.

Thank you. I'll start. I suspect Michael, who is doing a small victory dance right next to me, will have something to add. But you're totally right. We don't see a reason. And again, I don't want to front-run our promises and storytelling next week. But no, there's nothing unnatural about this one. We move up and down with the economy, but we are -- we believe we've hit a product market fit quite some time ago. But we're still tiny relative to the massive payment volume in the U.S. alone. On e-commerce alone, we're really, really small. So taking share. It's not that hard yet.

In terms of competitive, and I really will let my colleagues speak, it's hard to tell. One of our long-tenured executives here has this line. They're never retreating. They're just reloading, so it's a fantastic space. The NPL overall is just a very compelling product. We don't have a monopoly in the idea. And so it's always going to be a competitive space. There are really no monopolies in payments to begin with.

So it's just not a thing we can expect to eventually own entirely to ourselves. We do -- or anyway, very biased view of the world are the best at it. We do have some really great economies of scale. Capital markets, are now very familiar with our product. They understand exactly what we manufacture.

They understand that we are entirely noncompromising in our view of what is and isn't fit to sell into forward flow or securitizations. And so we have a lot of trust with our counterparties, and we tend to take them very seriously.

On the consumer side, we're not really heavy advertisers, certainly not heavy brand advertisers, and yet we do have a brand. We just ran a bunch of studies that show that we're really well recognized. People trust us. They understand after 15 years that when we say no late fees, we meet it, never charges a penny, don't have a plan to ever charge a penny of late fees. So that's been slowly but surely building up in our favor.

And then just on a pure sort of competitive front, I think speaking of maybe the most important and least understood advantage that we have, we have been at it for a very long time. We have built some very, very sophisticated underwriting capabilities. We'll definitely talk a lot about that next week. So I'm going to bite my tongue right there, but we have some very, very cool stuff that we've done, not just recently, but over the years in underwriting.

And a great percentage maybe the totality of our competitors that have raised their hand and said, sure, underwriting is not that hard, we can do it. One by one found out that it is. It is actually very, very difficult. And by showing our results, we may have fooled the world by just print a good result quarter after quarter after quarter, and we get a yield that, gosh, why don't you guys already admit that it's always going to be over 4%. It is a difficult balance to strike to print these unit economics day in and day out. And all of that -- or a lot of that comes from our AI team and the research that they do, and it's hard work.

And so I think we make it very easy to believe that just isn't that hard, and it really is. And the longer this show goes, the more it becomes obvious that we are pretty good at math and are very serious about it, and the rest of the competitors are not.

{And then, Darrin, just to your question on the growth rate, obviously, we're really happy with the growth rate that we posted in Q3, and we are incrementally more positive on the Q4 growth rate in the updated guide.

I will just remind everyone that we did sunset a top 3 merchant in Q1 of this year. So we are comping against -- there is a difficult comp in the prior year period, and that comp did step up a little bit from Q3 to Q4. So it's a little bit more of a headwind to growth. We're talking sort of a few points of growth in terms of headwind. And as we get into fiscal '27, the comps get a lot easier for us. It's more of a same-store comp for us. So we do -- we don't think that the Q4 growth rate will necessarily be a ceiling as we look ahead into fiscal '27.

Our next question comes from Connor Allen with JPMorgan.

I wanted to ask about transactions per active. It's been growing above 20% for quite a while. And I was curious, maybe this quarter or somewhat recently, you could just kind of decompose that a little bit for us. And maybe it's a bit duplicative with some of your other comments about just broader engagement. But I don't know anything you could share around cohorts and their behaviors around this engagement or how broad versus targeted the improving engagement is? Maybe just a double-click deeper dive on the engagement side.

All of the above. It's really good. There's definitely a few good lines on that one next week, so I won't feel that [indiscernible]. But there's actually a really, really good example of network effect. So I will -- I'll give you like a super brief preview.

So even if we did absolutely nothing to improve product usability and just converted more and more consumers to cardholders, you would see increase of transactions per user with absolutely no effort on our part beyond that. But we don't just do that, we also signed new merchants, which means that we are visible with our logo, at the very least at checkouts, but also in other forms of merchant communications, including, but not limited to, their own advertising.

So that creates another push towards the flywheel where more consumers are aware of us, more consumers know that we are, in fact, real that our promises of no late fees, et cetera, are showing up in more and more places.

That pushes consumer flywheel along, more consumers sign up, more consumer trust is available. Consumers get to their second or third loan quicker just because of more checkout counters available, which makes them eligible for the Card, which we, of course, let them know as soon as they qualify, which drives the flywheel of cards.

And so the acceleration across the usage, a.k.a. transactions per user in the business is a function of both the merchant side of the network increasing through sales and the consumer side of the network increasing through sign-ups because of the increased merchant reach, but also sign-ups from the occasional use of the Card, which is much more frequently used. So those are just the 2 vectors. At investor forum, we'll really break it down into all the various drivers.

Our next question comes from James Faucette with Morgan Stanley.

Just wanted to ask on -- this goes back a little bit to RLTC, and Max, I appreciate it's hard to -- it may seem easy to stay above where your targets are, but it's really hard. But along those lines, just trying to think about how the 0% APR mix ceiling can affect that and just how you're thinking about how high that can go? You call out that typically has lower RLTC margin.

And along those lines, I guess I wonder if as merchants become more informed and see the benefits of working with the firm for 0%, if you can actually close that 0% RLTC margin gap with the rest of the business.

It's a great question, actually. In reverse order, I think it's another example of the network effects playing out. So to answer it directly, I think, yes, I think over time, more and more merchants -- and part of why we stage these Big Nothing events and we'll do more is because they act as teaching aids, if you will, sort of the white papers write themselves. If you fund these [indiscernible] deals, you will sell more and you'll sell more predictably and there will not be a pull forward because these are actual sales events that work.

And so all of that adds up to a product that we think is increasing the value, in part, because the size of our consumer audience is increasing as well, and we're able to serve -- shine a concentrated spotlight onto a merchant that wants to fund these deals, et cetera. And we have a lot of really interesting stuff in works for that.

I've been monopolizing the airwaves, so I'll let Rob or Michael answer the economic breakdown. But it does remain true that 0% are slightly lighter on an RLTC basis. We are not fussed by that.

Yes. No, I mean I think we love all our loan products equally. There's a lot to like about our interest-bearing loans. But to your point, James, I mean, there is slightly less revenue content today. And I think as we look ahead as well within the 0% program. But the good news is there's less in terms of credit costs typically as well. So we really like that trade, and we think it's a really good complement to the strong and profitable and high-growth interest-bearing book that we have as well.

And so yes, I mean, again, we're really here to drive conversion for merchants, and we think 0% should be an ingredient in every merchant's financing program. And as we look at the portfolio today, our largest programs are all utilizing 0%, which we think is a really good sign. We're definitely leaning into it within the Affirm Card as well on our own surfaces. So we're doing everything we can to get as much out there and to continue to push that product.

Our next question comes from David Scharf with Citizens Capital Markets.

This is Zach on for David. Congratulations on another great quarter. I wanted to dig in a little bit on the Card side of that. Sorry, I don't know if you guys can hear me, there's little bit of echo. But yes, I want to see what the profile of the average Card user is. Obviously, I think there was kind of a medium-term target of $10 billion of GMV and about 7.5 million active Card users, and we're kind of approaching that level at about 60% of the Card user level. So kind of wondering if we can get an update on kind of what the profile is and kind of what the use cases are for those Card customers.

Super general terms. It skews a little bit higher credit quality than the average Affirm consumer by no other -- for no other reason than we make it that way. We're still at the limit, slightly more conservative as to who gets the Card offers and approvals. It's really converging towards this is just the average Affirm consumer. But right now, I think the credit quality is slightly better on the Card or somewhat better on the Card. The usage patterns are broader, more frequent, obviously, than sort of the more casual Affirm consumer that uses us 4 or 5 times a year or 6 times a year now. Card customers start out, I think it's like a 40% higher and goes up from there.

The maybe most useful thing is the category usage is more even. But typically, it takes a little while for an Affirm consumer to realize that if they found us or got exposed to us in category X, it takes them some number of months to discover us -- rediscover us again at another retailer and say, "oh wait a second, it also works for fashion, not just travel." When you get the Card, you have a muscle memory for, this is a general purpose tool that works everywhere. And so the category dispersion begins a little bit sooner and just stays fairly wide.

It still skews more considered purchases than kind of your typical low AOV spend, which is fine with us. That is a much easier value point to drive to merchants. They understand that they wouldn't have sold a $700 thing or a $500 thing unless Affirm was involved for this particular consumer given their preferences and the Card highlights that much better. And so sort of a quick sketch. I think at the investor forum, we'll say a lot about the Card as well. We have some nice little surprises there.

Our next question comes from Jacob Haggarty with Baird.

So I was just looking at the loan loss on purchase commitment, and it looks like that came down as a percentage of -- like lower than it's been in the last few quarters. Is there anything to that why you're getting maybe better economics from your purchasing partners or something along those lines?

Yes. That's really driven by the 0% volume in the business. It's not necessarily due to the economics with a single vendor or originating bank or anything in that ecosystem. It's just a function of the sort of discount rate that we apply to 0% loans. So yes, no economic changes there. It's really a function of mix and term length.

Our next question comes from Kyle Peterson with Needham & Company.

I want to go back on funding, specifically on the forward flow side, see if you guys could give us whether it's a rank order kind of relative sizing of some of these forward flow buyers kind of as to what they look like under the hood. I understand everyone could be a lot different here, but I think some of the stress seems to be worse than some of these kind of semi liquid retail vehicles versus kind of larger, more permanent forms of capital. So I guess like if you could just give us any relative sizing or color on what the forward flow channel looks like, that would be extremely helpful.

Without getting too specific, we're heavily, heavily, heavily weighted away from things that are very liquid and subject to those kind of volatility that you're referring to. Our largest forward flow counterparties is our joint venture with Sixth Street. We have large pension funds and large insurance complexes, which obviously don't fit that description. And even among the funds who do participate in our program, they are -- they tend to be, again, overwhelmingly not of the kind that, I think, people are talking about.

And that's why we see such a strong renewal and repeat rate. While demand continues to be very high for the asset amongst whole loan buyers, they really do like the ability for a firm to generate consistent credit outcomes that they can underwrite to and generate returns for their funds. And we like the capital efficiency of those partnerships, and so we grow together and have done a really good job of that over the past 3 years.

Our next question comes from Jamie Friedman with Susquehanna.

I wanted to ask about Adaptive Checkout. I don't mean to front run the conversation next week, but if you might have any perspective on how that's evolving. It seems like a real opportunity to serve merchants and consumers alike. So any perspective on Adaptive Checkout would be helpful.

[indiscernible] well. Definitely don't mistake my lack of name checking it in this particular letter for any sort of backing away from the strategy, quite the opposite. We are -- at this point, we're basically selling Adapt and Boost together as a single thing. One of the -- we have a tendency to be overly literal -- we tend to be overly literal in our description of our products, and so we're trying to learn how to package and market better. And so very soon, you'll just hear strictly about Affirm Checkout, something like that.

But it's doing really well. It's becoming more and more understood by our merchant base, and that is what you want. I think, hopefully, very soon, it will just be the thing you turn on and you don't try to play with the knobs yourself, our AI will find the optimal setting in real time for every new incremental consumer. So, well, I think we do have a bunch of content on it at the investor forum, so I'd rather not drop any stats on that here.

Our next question comes from John Hecht with Jefferies.

A lot of questions have been asked and answered, but I'm wondering, Max, what do you -- this is obviously a competitive industry, not only with other buy now, pay later companies, but the general consumer credit spectrum. And clearly, you guys are taking share in a competitive and maybe even increasingly competitive industry. And I'm wondering, obviously, size, scale, brand, all that stuff matters. That's stuff that's been around for a while for you guys. What do you think is -- is there anything new, or what do you think is changing in terms of competitive positioning as the industry, even though it's not mature, but as it generally matures?

I will invite Michael and Rob to comment in a second because I'm going to scrape the bottom of my brain for something incrementally new. But we're very focused internally. I guess, the reason I'm struggling to come up with something particularly clever is I can tell you a lot about what's changing here. It's really hard to see what the outside world is doing when you're that focused on internal efforts.

It's a little bit easier to do what we do, to be completely transparent. The consumer knows who we are. The one thing that is true, and we can see this when we do just consumer surveys as well as sort of more mechanical understanding of consumer preferences, there are people that have decided Affirm is their jam, and that's what they're going to use. And it's really compelling.

We can tell consumers, hey, you should go and get yourself an Affirm Card because brand X is not yet integrated with Affirm directly, but it's okay. It's accessible. And at some point in the past that felt like maybe they will, maybe they won't. We now have data that shows that they will. Consumers believe -- some percentage of our consumers believe that Affirm is a general purpose tool that works anywhere. You just have to have the Affirm Card or the Affirm virtual Card on your app screen.

And more and more of them understand how it's done, so long as we treat them right and we handle our post-transactional relationship as well as we do in the transaction, they come back. And that just makes repeats a little bit easier.

We continue to maintain 90-plus percent of our transactions come from returning users to Affirm, which is great. It's a lot easier to get the second and third transaction than the first. So all of that, it's a little bit easier to grow today than it was 6 months ago and 12 months ago, and every passing quarter or year makes our growth actually feel a little bit easier. There's a great cycling expression. It doesn't get any easier, you just go faster. And we still work just as hard as we've ever done, but the results are escalating, if you will.

This is Michael. I think for a complicated business with a lot of moving parts, I think about our position in the market a little -- it's actually quite simple. This is what you get when you compound results like this over the course of many years without pivots, without changing your identity to who you are. We show up to the capital market the same way we did when [indiscernible] merchants the same way, offering to drive better conversion, better outcomes.

The promises we make to consumers, we kept over the years. And when you compound all that and stay really focused on doing the thing that matters, you end up building a pretty big lead. I think some of our -- other players in the space have changed who they are, want to try to enter new spaces and become something that they're not, and it shows with their footfalls and doubling on results. And ours is just the benefit of compounding the same awesome thing over and over and over again.

That is very well said.

Our next question comes from Jeff Cantwell with Seaport Research.

I wanted just to follow up on that earlier question on the Affirm Card. You said there's a long list of things you've done and continue to do to increase adoption. I was just hoping to better understand what exactly is on that list of things you're doing, is driving another increase in Card holders to 4.4 million. Can you maybe help us understand the work you're putting in to increase the number of cards in your customers' hands?

And then as you look ahead, what are going to be some of the biggest drivers to increase that number by even more? I imagine you would expect to see that 17% attach rate increase further over time, but what would you say are going to be the biggest drivers to increase the number of Affirm cardholders? Is it marketing of the product or opening new geographies or other new TAM opportunities? Just curious if you can help us understand the outlook for the Affirm Card better.

Yes. We don't do performance marketing at Affirm. We don't have a business model to pay to acquire users. I think maybe that's a bit of a misconception that some people who are less excited about the Card than we are have about it. We're not out buying ads, not mailing cards to mailing advertisers to people in the mail. That's how the business works. The reason why the Card is such a compelling business for us is it's the best way to reengage consumers who we already know and have had successful transactions with.

And that's really the strategy. The strategy is to continue to scale the network and ensure that the consumers who know us know us best, get access to the Card and that we build the Card that they can understand and they can use as many transactions as possible to continue to take a big share of their spend from other payment devices. And that's the focus, and it's really that simple.

Yes. And just to give you some flavor of the things we do internally, some of these will sound very unglamorous, but given our scale and our attention to numerical detail, I assure you these are very meaningful. So every pixel in the app is, at any given time, being A/B tested by which I mean A, B, C, D, E, F, like multi-legged, extremely high-density multi-variant testing.

And the outcome of that is, we just shave down the friction. So if you -- it's not super easy to replicate because we're fairly good at keeping our cohort separate. But if you got enough people together and they open their app and none of them had the Card, they would see a slightly different experience in very several ways. And in some number of weeks or days, we will know which one of them is most compelling when someone signs up for the Card. But not just signs up for the Card, actually uses the Card and sticks to it and becomes a no more compelling or no less compelling credit risk.

And so there's a lot of downstream effects of any form of internal product change that we have to contend with, like we can't just say, oh, go do that. It's not like you got a loan, everybody gets loan. Like you got a loan and then we have to make sure that the loan you got actually got paid off. And it was a good idea to give you the Card based on whatever you in this thought experiment is. And so there's an incredible number of just optimization that happens on our own surfaces. And every time we think we've hit plateau, we find that there's another single or double-digit percentage gain to be had, and we're very far from running out of ideas.

To give you a totally different flavor of what we might do at some point, there's painful little going on in store for any of the BNPL players, and we think we're the best. We think we're the farthest ahead in terms of how to use our product inside of a physical retail, but boy, we have some really interesting ideas, and we're getting them as quickly as we can. And so that's another reason to use our Card.

As much as we love our online e-commerce domination, we definitely want the remaining 80% of commerce or 75% of commerce, whatever it is. And so there's just a lot to do with the product. I'll end where Michael started, it is not a matter of external marketing, it's a matter of just making sure the product is as accessible as easy to understand. We have a running tally of every possible declination when the Card does not approve a transaction. And every day, someone's job is to ask the question, was this decline intelligent as and this was a bad credit decision, the consumer should not have been approved? Or is it a mistake of the user, a mistake of a firm, mistake of our underwriting engine, et cetera, et cetera. And so all of that is an enormous volume of work. It can move as quickly as my agents can code it, but it still has to be tested in the real world and validated and made significance. And there's very little doubt in my mind that we will not run out of things to do there for years.

There are no further questions at this time, so I'd like to turn the call back over to Zane Keller for closing comments.

Okay. Thank you for joining the call this afternoon. We appreciate your time. We look forward to seeing many of you at the Investor Forum next week. See you there.

Bye.

I'm going to give a few seconds for people to join. But in the meantime, welcome to Affirm's fireside chat. They do these on a quarterly basis. My name is Harry Bartlett. I'm a fintech analyst here at Rothschild & Co Redburn. I'm very happy to be joined by Rob O'Hare, who's the CFO of Affirm. Rob, thanks for being with us today.

Yes. Great to see you. Thanks for hosting us.

Pleasure. Now look, in terms of the format of the call, so Affirm give the opportunity to retail investors to also put their questions to Rob. So the questions today are going to be a mix of my own and also some retail questions. So Rob, if you're happy, we'll crack on.

Yes, sounds great.

Great. So look, it's kind of hard to avoid the current environment at the moment. So maybe I'll start there looking at the consumer. So I guess given we're seeing kind of increasing geopolitical risk and I guess, depending on how long this lasts and we could see some spillover effects. I mean, I guess in terms of what you're seeing from the consumer in terms of demand in the credit side, maybe you can talk us through there. And I guess we've seen [indiscernible] has asked, how do you anticipate inflation and unemployment affecting your business?

Sure. Maybe taking the questions in order. I mean, in terms of the elevated oil prices, it's really too early for us to see any sort of discernible trend coming out of this heightened environment that we're in. Demand continues to sort of pace along with sort of steady growth rates consistent. It's been pretty consistent throughout the quarter. So really nothing that we can point to that would say the current elevated fuel prices are causing stress with the consumer, although in the long run, we would expect that this could have an impact if the current prices stay elevated. I think that's the question mark that we have on our side. It's just we don't know the severity or the extent or how long sort of this heightened environment will persist.

So in terms of how we operate our business, I mean, we underwrite every single transaction with every consumer every time. And so that allows us to stay current with our consumers, and we think that allows us to be really nimble if we do find ourselves in an environment where the consumer is seeing stress. Again, that's not what we're seeing today, but we're confident that we'll be able to operate in that environment if that's what happens next. So that gives us a lot of confidence that we don't necessarily need to predict what the impact of rising oil prices will be in 6 months. We can continue to be iterative and course correct and make sure that we set the right underwriting posture as we go.

And we're large enough now that we originate on average like $150 million of loans a day. And so really looking at the early repayment signals that we see when the consumer gets to their first repayment event, which for us is typically 30 days after origination. So that's the best leading indicator that we have and looking at sort of that first payment event and the level of delinquencies that we see, that tells us if we have the right underwriting posture or not.

Sure. Yes. I mean, I guess you've kind of touched on it there, but maybe you could talk about I guess if we're thinking about going into maybe a slightly more contractionary period, some of the tools -- other tools you might have in that scenario. And I know you've very helpfully disclosed in the past that you would expect kind of a 50% increase in credit stress leading to about a 10 percentage point reduction in GMV growth. So maybe for some of the investors, you could help to kind of contextualize that in terms of how you're thinking about the assumptions there and how that scenario might manifest.

Sure. I mean maybe to level set, we run most of our merchant -- large merchant programs in a way where the sort of last loan that we would approve from a credit spectrum perspective is going to be breakeven or better. And so when we're thinking about a situation where we feel like we need to tighten our underwriting posture. The loans that we're taking out of the system are not huge contributors to our profitability, right? We're sort of starting with breakeven loans at the low end of the spectrum. And we're going to find a new equilibrium point where with the added theoretical stress in the system, we'll set a new breakeven point and we'll underwrite and run the business to those levels.

So what that means is that we would expect to see some sort of slowdown in GMV. But in terms of the profitability headwinds, those should be pretty minimal because, again, most of our profitability is coming from sort of the middle to the upper part of our credit spectrum. And so taking sort of loans that were previously breakeven out of the system and finding a new breakeven point that, again, there's not going to be as much impact to the business at large.

But in terms of how we would implement those tightenings, there's a lot of levers that we have at our disposal. We can do things like asking the consumer to make a down payment upfront as part of the transaction. That helps us take risk out of the system if the consumer has some skin in the game, so to speak, and is paying down a portion of the loan on day 1. We can play with term lengths, shortening term lengths is another way to take risk out of the system for us.

And again, we can ask the consumer to give us more information as well. That's something increasingly that we're doing, especially for consumers that are sort of at that marginal point in our underwriting. If we can get some more information about the consumer's financial health, that can allow us to get to a yes or present a terms -- a set of terms that would be sort of putting our best foot forward and making sure that we maximize conversion for the merchant partner there. So -- and then again, after all of those, we can also just adjust the minimum credit score that we would say yes to within a given merchant program.

Sure. No, that's very helpful context. I guess one of the other areas of focus we're seeing in the market at the moment is this private credit narrative. You talked a lot about your kind of consistency of underwriting performance and the benefits that's given you from a funding perspective, not just in terms of demand, but also pricing. But we have seen obviously some concerns there. So I guess, given that, what would you say around the kind of interest of buyers in the market for Affirm loans? And is there kind of a plan B if that interest dwindles. So maybe you could just talk about how Affirm is positioned from a funding perspective and across the various channels.

Well, I think I'd be remiss if I didn't call out our 2026-2 securitization, which literally just closed yesterday. Really a fantastic outcome in terms of what we saw and heard from the market. We launched with a $500 million deal. We -- there was enough demand in the book for us to upsize that to a $750 million deal. We were still something like 2.5x oversubscribed against that bigger quantum. We only did 3 days of marketing versus what typically we would do a 5-day marketing period. And so with all that, we were able to price at an all-in spread of 116 basis points for what is a 3-year offering. If you compare that to our last 3-year offering, we actually brought spreads in by 8 basis points versus the deal we did in late 2025.

So like-for-like, I would say the demand for our ABS issuances is as strong as it's been, we were really, really happy with that outcome. And we, of course, acknowledge all of the volatility and turbulence out there from a macro perspective. But in terms of the deal we were just able to price, we came away really, really happy. And I think it's a testament to how we've been able to build our program on the capital side. We look for partners that are going to be here throughout the cycle and can work with us in size. And typically, ABS can be a way to start the relationship with a funding partner, and we look to deepen those relationships into forward flow and other formats as well.

So we feel really, really good about the health of the ABS market despite the headlines. And again, I think we've got a very, very recent data point here that supports that confidence. If we were to see some sort of dislocation in the ABS market, we've been really thoughtful about how we've crafted our capital program. ABS is just one channel that we utilize to fund the business. We also have committed forward flow loan buying relationships with several counterparties. We typically ask for at least a 2-year commitment from those counterparties. So we know that there's capacity there when we need it.

And then lastly, we utilize warehouse loans from several large bank counterparties and warehouses to get to your -- the second part of your question, warehouses is where we tend to keep most of our unused capacity. So if you look at the disclosures we have in our 12/31 filing, I think we had something like $4 billion of untapped warehouse capacity. So if we were to see a dislocation in ABS, that's likely the channel that we would utilize a bit more to absorb the dislocation that we're seeing in ABS.

But it's important to remember, our ABS facilities typically have a 2- or 3-year revolving period. And so we're going to be able to utilize the funding vehicle that we just closed. We're going to be able to utilize that capacity for the next 3 years before the facility starts to amortize. So we feel really, really good about our funding capacity. And again, I think we've built the program in a way where we can utilize -- we can sort of move in and out of various channels if for whatever reason the market does experience a dislocation.

Sure. And maybe just as an extension to that, I mean, I guess, how are you thinking about kind of the on- versus off-balance sheet strategy? I know you've kind of moved a bit more towards off-balance sheet given the funding conditions and how favorable they've been. But how are you kind of thinking about that over the next 12 months or so?

Yes. We really haven't given any sort of forward guidance around on versus off. I think if you look at our business historically, we've been roughly 50-50 between on and off. The ABS deal that I just spoke to, that's an on-balance sheet funding vehicle. The advance rates, though, are really, really healthy. I mean we're approaching, I think, 96.5% advance rate. So it's a really capital-efficient way for us to fund the business, and we retain a bit more of the loan economics than we would if we were to move a loan off balance sheet through a loan sale.

So I think there's always pluses and minuses. But I think what's important to us is that we're able to fund the business through sort of any kind of economic cycle. And I think as we sit here today, we feel really good about the capacity we have and just the low overall levels of utilization that we have against that total capacity.

Sure. Great. Let's move on to the card. So we saw yet another strong quarter. It's up to kind of 16% of the GMV now, growing at 150% year-on-year. Can you talk about some of the factors that have caused GMV growth from the card to kind of accelerate over the last few quarters?

Yes. I mean I think we're continuing to really tap into the core of our user base. And I think the functionality that we bring with Affirm Card of making it very seamless and easy to transact anywhere that accepts Visa. I think that's sort of the killer feature of the card. We did make a small change on the product side starting October 1, where cards that are -- transactions that are facilitated through a permanent pan or permanent card on one wallet partner in particular, those are now being counted as card transactions and as card volume because we moved that program from being onetime card-driven to being a permanent pan. And so in order to be consistent with what we've called card historically, the transactions from that program are now being counted.

So that did help drive a bit of a bend upward in the curve in terms of growth in users and in GMV. But yes, I mean, we've been really, really happy with the traction that we've seen with card. I think card is a great unlock for offline spend. Historically, both Affirm, but even BNPL at large has been very heavily concentrated within e-commerce. And what we're seeing with the card usage is that we see more than an order of magnitude, more mix from in-store purchases. And so we feel like we found a product that resonates with our base, and we're really excited to see it continue to scale.

And I guess you talked about maybe the uptake of the card has exceeded some of your earlier expectations. So I mean how do you see penetration evolving over the medium term? Is it a situation where long term, Affirm Card is the primary distribution channel?

I think we're still a ways from it ever being the primary distribution channel. I still think our model of continuing to win as much coverage of checkout as we can, we work with some of the largest and most sophisticated players in commerce generally. And that approach has served us really, really well. We're able to build profitable financing programs at our merchants, and that served as an on-ramp from a consumer perspective into our network. And right now, card continues to almost exclusively be sort of a second use product within our user base. So I think that model is serving us well.

When you look at the growth rates of card that we posted in the December quarter and have posted pretty consistently here for the last several quarters, I don't get the sense that we're at any sort of saturation point, far from it. And so I don't want to hazard a guess in terms of what ultimate penetration of our user base can be. But I think the good news is we continue to grow the overall user base at really, really healthy levels, and we're continuing to see more and more penetration of that user base and more and more of those individuals taking card out and using card pretty frequently as well. So again, I think that tells us that we're on the right path. And in the long run, again, I don't know what the ultimate ceiling is here. But again, it feels like we have a lot of headroom just given the growth we're seeing today.

Yes. I mean you touched on the, I guess, the penetration of the user base, but I think one that you talked about in the past is the kind of trying to reach that $7,500 spend per user. So maybe you can just talk a bit about how you bridge to that point. I mean, how do you go from, I guess, a product that's used maybe once or twice a month to kind of a regular top of wallet product and the sorts of product innovations you might see there?

Yes. I mean, really, the target that we have of $7,500 per cardholder of Affirm spend, that really is rooted in some industry data and some survey data that we've done within -- around sort of what we believe our core user is. And that's the rough discretionary spend that we would expect in a given year from a user with sort of the profile that we see in our business. So I think that's a target that just is focused on capturing as much of the discretionary spend that we can within our users.

And I think the way that we do that is just continuing to put the right offers in front of our users. Increasingly, that's a mix of 0% loans and interest-bearing loans. And I think our ability to go from 30 days out to 36 or in some cases, 48 months and then also on the other axis to do anything from a 0% APR up to a 36% APR, that allows us to be incredibly flexible in terms of the offers that we put in front of consumers.

And thus far, that served us really, really well to make sure that whatever the consumer rather is solving for, whether it's a low APR or longer terms that may help smooth out their monthly cash flow and help them manage their personal budgets. We can sort of be there with the right offers. And increasingly, we're using the data sets that we've been able to compile over almost 15 years to make sure that we're optimized as much as we can be in terms of that offer set that we're presenting to the consumer.

So I think we're still very early both in terms of overall card users, but even in terms of annual spend. And that's how we arrived at that target is really just looking at getting to a much higher percentage of share of wallet with our consumer.

Sure. Very clear. We move on now to talk about the 0% APR. Again, another very strong driver of growth, strongest growth in terms of the products -- across your kind of 3 main products. In terms of penetration, where are you in terms of the number of merchants or I guess, volume of merchants in terms of those offering 0% APRs?

Again, I think that we're never done there. As we -- as much as we've made a push to drive more 0% volume within our network, we still have several large merchants that are utilizing 0%. And so that tells me that there's definitely more room to go. And I think it's important to remember that we really believe that 0% are a great complement to the very profitable and the very nice and high-growth interest-bearing program that we have as well.

So I heard a little bit in your question. I don't think we're pivoting away from interest-bearing. We're looking to add more zeros as a complement to interest-bearing. And what we see in the consumer uptake is that even if a consumer starts with a 0% loan, there is still a high propensity for them to utilize an interest-bearing loan in their life cycle. So again, I think it's about finding the right mix of offers for consumers and understanding what works for a consumer for a specific transaction.

Again, for smaller dollar transactions, Pay in 4 may be the best offering for them. It's 0 interest when we do it. There's no late fees. But it is a very short-dated loan. And so for larger ticket items and more considered purchases, our consumers tell us that they really value the term length that we can go out to just because that allows them to get that monthly payment down to an affordable level. So again, it's -- there's definitely not a one size fits all. And I think given where Affirm is in its life cycle, we really want to make sure that we have a full set of offerings that can resonate with any consumer.

Yes. I mean maybe just kind of touching on that. I mean, I guess, as a product, do you think that arguably 0% kind of open you up to a wider customer base and thinking maybe the higher income user who may not typically use interest-bearing or maybe if we think about international markets where maybe there's less kind of propensity to use credit products, do you think that has a wider product market fit?

Yes. Again, I think it's a really important ingredient. And again, I think given where we were coming from in terms of our interest-bearing mix in the program where when we started to lean a bit more into 0%, I think it felt like adding more 0% made sense for the network overall. But it's really hard for us to pick one single loan product and say that's the best one for any given market just because we really do aim to support such a wide breadth of transactions and average order values.

And so -- and again, I think in the context of the merchants that we work with today and the merchants we hope to work with in the future, really having that flexibility around being able to support transactions across the spectrum and also flexibility around, frankly, how we construct the financing programs at a given merchant. Some of our largest merchants are very, very cost of acceptance focused and driving an interest-bearing program allows us to monetize the consumer side of the equation and craft a program that allows us to get that prominence at the point of sale with a large merchant and make it cost effective and help them reach both their cost and their conversion targets in their business.

So again, we really -- again, we try to craft programs that work for our consumers and work for our merchants, and it's really not -- we're not ever focused on one single product as the end all be all. Again, I think it's always sort of a multivariate calculus here to make sure we have the right program that works across a wide range of transactions.

Sure. Maybe let's move on to kind of margins. I think one of the areas that people have been talking about quite a lot is the kind of mix shift to 0% and the kind of potentially dilutive effect that has on net take rates. And obviously, there's a lot of offsets in there. But I guess if you're thinking about the business and the mix going forward, how do you balance some of those lower net take rate products versus growth?

Well, again, I think we've got a long-term range that we've established of wanting to be in the 3% to 4% revenue less transaction cost as a percentage of GMV, that's about full. And for the last several quarters, we've been operating sort of at or above the high end of that range, pretty close to 4% for most of the recent quarters. And so 0% to your framing, right, 0% can be a way to forgo some income. We're not getting interest income in those transactions from the consumer. And so it's a way for us to mix into a slightly dilutive loan product, but we do think it's an important part of having a full product offering to a range of consumers.

So as I said previously, we think it's a really important ingredient to the overall business. And when I look at the business from a financial perspective, again, we're printing unit economics that are at or above the high end of our long-term range of 4%. And then as you go down the P&L as well, we've driven really, really nice operating leverage in the business over the last several years as well.

So I think the business the business is performing very well from a financial perspective. And for us, it's really making sure that we drive strong units and drive operating leverage, of course, but also that we maximize the opportunity that we think we have as a market leader in the U.S. and making sure that we continue to reach as many merchants and as many consumers as possible, just given everything that we're able to bring to bear in various financing offers.

Sure. One of the things you talked about previously within the card is the very strong weighting of card towards interest-bearing products, which helps to kind of, I guess, offset some of the lower MDRs. So I guess we've looked to the latest quarter, the card seems to becoming a really strong vehicle for distributing 0%. So maybe you could just give us some color there and how this kind of plays into your thinking and I guess, the overall economics.

Yes. Card is obviously one of the fastest, if not the fastest-growing part of our business. And to your point, the mix of interest-bearing loans within card has historically always been above our overall company mix of interest-bearing. So really, product mix is probably the single biggest driver of product economics or product profitability and card benefits from a very high interest-bearing mix, and that was still true in the December quarter as well. So as much as we are leaning a bit more into 0%, I think we also have card with really, really strong growth rates, sort of bringing that interest-bearing mix back a bit, too. And the interchange that we collect on card transactions is very, very healthy.

And so on an all-in basis, I mean, card is arguably our most profitable product, depending on how you define products at Affirm. But that collection, those loans -- and the other thing that's important to remember, because it is almost exclusively a repeat use product, getting through that first transaction, the first transaction with a new consumer tends to be the riskiest from an empirical basis. And so because we're benefiting from positively selected and repeat borrowers that we've already underwritten once, that does help take some of the credit losses out of the product as well. So that combination of really high interest-bearing mix and then a pretty favorable credit setup, those 2 things contribute to a really, really nice profitability in the card.

Sure. Yes. So just on the subject of pricing. We've got a question here from Amanda and she says, what's Affirm's long-term strategy to maintain competitive advantage and continue growing market share?

I think for us, I think that one of the things that is unique about Affirm, particularly in the U.S. is the breadth of loan products that we offer. Most of our competitors are very highly concentrated within Pay in 4 transactions. And there's a lot to like about Pay in 4 transactions. But if you just look at how the product works, you really are dependent on a relatively high merchant discount rate. The merchant is driving the lion's share of the revenue in those transactions. And so I think it can be difficult to penetrate some of the more cost of acceptance focused large retailers in the U.S. if Pay in 4 is your only product offering.

And so I think what's been really advantageous to Affirm is our ability to craft financing programs that meet the merchant's cost of acceptance needs, but are also nicely profitable for us and also convert well and put offers in front of consumers that resonate with those consumers as well. So I think that sort of that triangle of conversion, cost of acceptance for the merchant and profitability for us, I think we've been able to win across all 3 of those considerations. And we do it by crafting a program that has maybe some 0% volume to drive conversion for the merchant, but also we can build an all interest-bearing program if we need to, that will still convert plenty well for the merchant and help them lower their cost of acceptance.

So again, we -- similar to the 0% question, we can sort of build a program that optimizes for the merchants' needs, and we have a lot of confidence that we'll figure out ways to make that program drive growth for the merchant and can drive increased levels of conversion over time too through optimization.

That's great. I mean I guess just on the subject of kind of competition and some of the areas where you have innovated, I guess, on products. I interested to talk about AdaptAI and BoostAI, sort of uptake you're seeing from merchants. And I guess, how important those tools have been in terms of when you're having conversations with new merchants?

Yes. AdaptAI is sort of on our direct-to-consumer side of the house, and those optimizations are live and running, and we control those surfaces and AdaptAI really helps us optimize the set of offers that we present to a consumer for any given transaction and making sure that we're driving as much conversion and as much take-up is the term we use, take-up by the consumer. So those are live today and helpful.

On the BoostAI side, I think we're still relatively early in that market opportunity. And really what Boost is doing is it's taking a pretty static financing program that was hard coded into our historical merchant agreements and we're partnering with merchants to find ways to dynamically optimize the offer set. So maybe moving away from a static 3-, 6- and 12-month set of offers that the merchant might be presenting on their sites to finding the right set of offers across a range of AOVs. It's sort of a dynamic calculus to make sure that we drive as much conversion for the merchant, as much GMV as possible and also making sure that we drive strong unit economics throughout those optimizations on the Affirm side, too.

So it does take a lot of trust with the merchant and just -- it does require repapering our contracts. And so we're in the early innings of getting that rolled out. But it's something that's really exciting because what we've seen in the early data is it's GMV lift for the merchants. It's higher take-up for our consumers, which means we're putting a better offer in front of them. And it's -- we're benefiting from the increased GMV, but it's also better unit economics for us as well. So it really is a win-win-win across merchants, consumers and Affirm. And so we're confident that we're on the right track. It's just -- there is a lot of blocking and tackling with merchants to just get through some of these amendments that we need to get this fully rolled out.

Sure. Let's move on to talk about some of the longer-term trends. Agentic commerce, I know it's received a lot of attention. I know we're still kind of in the foothills of that. But quite recently, we heard that OpenAI was kind of retreating from its instant checkout within ChatGPT after only 5 months. So it seems like we're kind of shifting back to a world where transactions may be completed in websites or in apps rather than this kind of new model that people were expecting. I guess, did that new surprise you? And how does that change how you're thinking about the agentic commerce opportunity?

I don't think it changes anything on our side. We fully expect to have a seat at the table if consumer demand moves to agentic to facilitate transactions. I think looking at the size of our consumer base in the U.S., right, Affirm is clearly a financing option that consumers want and that consumers need. And so we would expect to be a player in any sort of updated protocol that does roll out or there may be multiple protocols for a while here as well.

So I think if you look at what we've been able to do in terms of e-commerce, we use the term internally. We embrace channel conflict. We've been able to partner directly with merchants. We also have large partnerships like Shopify, where we're able to leverage existing platforms, merchant base and distribution to accelerate our growth. And so we fully expect to be -- we've done similar things with Apple Wallet and Apple Pay Later program as well.

So we would expect to be anywhere that consumers are shopping. And if that moves into an agentic world, then we would fully expect to be a part of those transactions as well. And again, I think that's something that our merchants are going to want, and I think it's also something that consumers will want.

Sure. Well, nice Shopify reference service segue on to my next question. So we think about international, you launched in the U.K. in 2024. You started ramping throughout last year. I mean, where are you with your ramp with Shop Pay Installments in the U.K.? And I guess, what needs to be done in terms of going to that automatically switched on for new merchants?

Yes. I think we're working towards that end goal of being auto on for merchants within the Shopify platform in the U.K. And I think we're at a pretty similar point in the program life cycle. We went through the same phase that we're in now in the U.S. before we had the bigger launch. And right now, it's just about making sure we understand how conversion works within the program and making sure that the program is as optimized as it can be before we get ready for this sort of step function change in scale that would come with a broad auto-on release within Shopify.

So I think we're right on schedule in terms of that progress. And having gone through the U.S. rollout, I think this is a really important stage to make sure that we're ready for the volume that can come through a platform like Shopify.

Sure. And I guess maybe we think about your next leg of growth beyond the U.K. I mean, I guess, to what extent can you more rapidly roll out Shop Pay across your merchants in Continental Europe? I know you talked about Australia and I guess some of the steps that need to go in place there?

Yes. I mean, obviously, outside of our existing markets, which today are the U.S., Canada and the U.K., I mean, we will need new and different licenses to operate outside of our existing 3 geos. So that's something that we'll need to prioritize and bring in-house before we're ready to launch a new program. And yes, we fully -- we don't think that we're done expanding with Shopify after the U.K. So we're excited to get the U.K. right, to your point earlier, there's still some work to be done to get that fully launched. And then we'll start to talk about new markets when they're a little bit closer to being live.

Sure. Let's go to another deal that you've announced recently is QuickBooks. So I mean it looks like a very interesting partnership, $175 billion online payment volumes. Maybe you could just talk a bit about this opportunity and your expectations, I guess, in terms of adoption.

Yes. I mean it's a really exciting partnership. We're -- the first phase of the program will be bringing Affirm financing programs to business-to-consumer invoices through the QuickBooks platform. So we want to make it as frictionless as possible for consumers to pay those invoices with our set of financing offers. And we're -- I think when we look at some of the KPIs within the program that's existed historically, it's a large enough average order value that I think a lot of the strengths that Affirm has around underwriting every transaction and also being able to go longer on terms to smooth the consumers' cash flow. I think it's a really nice setup for us in terms of the sweet spot of the invoicing program that exists and what we're able to do on the Affirm side.

So it's really, really early. We are live with an increasing number of merchants today, and we're hoping to continue to scale that over the course of this month. So lots to like so far, but it's so, so early that with our existing base of business, it won't be material this year, but it's a program that we're really excited about. And I think more than anything, it's a great expansion into the services vertical, which is, I think, historically an area where BNPL has been underpenetrated. I think Affirm has been underpenetrated as well. So we have a lot of confidence that what Affirm does should work really, really well in that end market. And we're excited to partner with a market leader like Intuit to broaden our reach.

Very clear. So maybe we talk about the bank license next. So obviously, there's a funding benefit here, but maybe you could just talk about some of the other benefits you expect to see from a kind of cost and a product velocity perspective.

Yes. Yes. I think one of the things that we're the most excited about is just being able to have Affirm participate in more of the value chain within our product offerings. And so if you envision a world where -- we do have a banking subsidiary. That subsidiary could be an originator of loans, which just allows us to be that much closer to the consumer and a bigger portion of the product flow generally. So there's enough growth in our business. And I think the true sort of ramp of the bank and the scaling of the bank will play out over a handful of years, assuming we are granted the license.

And so we're really not thinking about turning off any of our existing banking partners, and we would expect that with all the growth and scale that's on the come at Affirm that the bank subsidiary would just be a part of that growth and a participant in that growth alongside our existing partners. So originating loans is one area, issuing cards can be another area where we utilize bank partners. And I think over time, we may be able to bring more of that flow in-house or at least have some redundancy through the Affirm Bank for those workflows. So those are some of the early things, but we are several years out from, again, having a bank that's scaled. And we also want to leave a little bit of surface area to cover at our investor forum in May for the bank topic.

Sure. Maybe we ask one question, but feel free to defer. I mean, I guess we talked about kind of costs and the benefits there. But -- where do you see opportunities from a revenue standpoint? I guess longer term, is the vision to position Affirm as a kind of provider of installment credit in any situation where customers underserved or penalized by large banks beyond BNPL? And I guess along those lines, we've got a question from Karan who's asked, will we ever see Affirm finance vehicles or homes?

I mean, right now, there's a pretty bright line around secured lending. So we don't want to repossess goods from our consumers. So I think autos and homes is a no today forever is a long time. So that may change. But today, I think that's a pretty clear no for us. And I think the other piece of the question, I'm going to defer to May.

Okay. Fine. Great. Well, let's move on to talk about the FIS and the Fiserv deals. It seems like the opportunity here in terms of the overall TAM could be huge. So I guess the question really is how well you can penetrate that TAM. So maybe you can give some insight into how you go about distribution? And I guess, any early feedback you've had from the conversations with banks and perhaps the differences in how we should think about FIS and Fiserv.

Well, I mean, I think generally, we're utilizing the same approach and would have the same vision across both platforms. There can be some differences just in terms of the average size of bank that the various platforms work with. But really, like in a nutshell, the idea and the pitch to banks is there are several small- to medium-sized banks that have meaningful debit programs and large customer bases. And we can see in our data and the bank can probably see in theirs that they're going elsewhere for financing, right?

They're utilizing credit cards, whether it's Capital One or Citi or whomever to consummate their considered purchases. And with the Affirm Card functionality, we can bring that to the bank's existing debit programs and allow them to participate in those swipes a lot more than they are today and also, again, to sort of maintain or probably grow their share of wallet with their existing consumers.

So I think right now, we're in the very, very early stages of having conversations with banks. I think the conversations are resonating with banks, but it's a lot of work for us to do to build this functionality into the various banking cores. And we're excited to continue to have the conversations on the sales side to hopefully land some early pilot bank partners here.

Great. And then I think we've had a question here from [ Ajmal ] on kind of capital, I guess, maybe slightly longer term. But I guess, how do you think about implementing share repurchase programs or dividends? And then I guess, from a distribution perspective, once you reach that point?

Yes. I mean I think today, we do have an existing buyback program for our convertible bonds. And so that's been the place historically where we've returned capital to shareholders, but just by delevering and being opportunistic about how and when we buy back our convert. So I think with that program and the relatively near-term maturity for our 2026 convertible bonds, I think that's where you're going to see us continue to lean in, in terms of capital allocation.

And then in the longer run, again, I think we're still relatively early in being a profitable company. We're really proud of the cash flow generation that we're seeing in the business today. But I think over time, we'll start to give more time and thought to capital allocation just as we see the business continue to mature. And yes, again, right now, I think the convert is what's sort of front and center for us.

Sure. And then I guess kind of on the same topic, I mean, how do you think about new acquisitions? I guess, Felix asked here, do you think is it a way to accelerate your expansion?

I think so. I mean I think we have a corporate development team that is very active in terms of working through inbound opportunities that we receive, but also prospecting within various sort of product expansion areas, new markets. So I think it's a really nice complement. I think M&A can be a really nice complement to our existing product and engineering capabilities. And again, there's always a sort of -- could we go faster if we bought something? I think that's often a question we ask internally, and I think that will be our program going forward as well.

Sure. Well, Rob, that's been great. I think we've just about run out of time, but thanks very much for your time today. And yes, look, if anyone has any questions, please follow up with Zane or Maggie from the Affirm's IR team.

Awesome. Thanks, Harry. Really appreciate all the questions.

Thanks.

All right, guys. Why don't we get the ball rolling just to keep things on time. Really happy to have Affirm here with us. Affirm is a name that we've been covering now for really just a couple of quarters, a few quarters, but we're really enjoying it as a company that clearly stands above others, not only around buy now, pay later and financing, but really just broad e-comm and addressable to the consumer, really offering a great service to both merchants and consumers. Rob, we've had you here before. I really appreciate you coming back. Rob is the CFO of the company. Maybe just start off with -- before we get into the details, high level, what you're seeing as the company's main accomplishments over the last year or so. It's really changing so fast and growing so quickly. I'd love to start there.

Yes. Yes. Thanks for having me. Look, I think the business has performed incredibly well over the last 12 months. We grew GMV about 39% over the last 12 months, and we've scaled -- in our most recent quarter, we posted a 30% adjusted operating income. So I think really having success across both growth and profitability is really critical to us. It's a core part of how we operate. And I think we've done it in a really compelling way as well through deepening our relationships with some of our direct-to-consumer offerings. So Affirm Card is probably the most noteworthy product within that set.

That business -- that part of the business continues to perform incredibly well. We did about 16% of our GMV on Affirm Card in our last quarter and about 14% of our users were also utilizing Affirm Card. So we've seen really nice traction in terms of take-up of that product. And then outside of card, we've continued to land some really exciting merchant partnerships, both new and existing. We signed a renewal in November with Amazon, which is our largest merchant partner and also announced recently a renewal with Expedia and then have brought on some new players like Intuit and Lowe's as well and also ServiceTitan. So I think just across the board, I've been really happy with the way the business has performed.

Just before we get into the weeds, I want to revisit this, and this wasn't even an order of the questions, but I want to just remind people what the differentiation is. Why are these merchants signing on with you? What's really the value prop that you're providing that's resonating so well?

Well, I think increasingly, the size of our consumer network is a real huge part of the value proposition that we bring to merchants. We have now quite 26 million active consumers on our services in the last year. I think when a merchant is looking to bring on a new payment type, the size of the consumer base that you're bringing, right? These are engaged and these consumers are showing up with financing almost already in hand. So I think that's a really important part. I also think the breadth of products that we offer from a loan perspective is pretty unique in the market. We do about 2/3 of our volume in monthly interest-bearing loans. And having that interest-bearing component allows us to be really flexible around how we monetize the loan, and it can allow us to create a financing program for the merchant that meets all of their objectives, including cost of acceptance and then also the conversion rates they want to drive.

I was going to say you're also showing cart size improvements, right? It's really everything above not just conversion rates, but...

Typically, the average order values that we see on our programs with the merchant, sometimes they're multiples of what the merchant is seeing outside of the Affirm program.

Right. So again, this goes back to questions we got. I mean, is there a disruption from AI or at the end of the day, you're offering real financing to these consumers. You're getting an engaged consumer for the merchants. It seems hard in our view to disrupt that. All right. Let's go back. I mean you had a strong fiscal second quarter in February that came out, 36% GMV growth, 23% active consumer growth, 29% RLTC growth. And so -- and then GAAP operating margins expanding to almost 11% -- just touch on the key highlights of the quarter in your view and where you're seeing the most momentum underlying that in the business.

Yes. I mean I think it was a great quarter financially. I mean you touched on some of the highlights. We're really proud of the growth and really proud of the profitability. I spoke to it at the open, but we also signed a renewal with Amazon for 5 years in that quarter. So we're really proud of that and excited to continue to partner with them. And then I'd have to call out the growth in card was just really incredible. I mean we continue to see more than a doubling of users on a year-over-year basis opting into card and more of a doubling of GMV as a result as well. So I think continuing to build those direct-to-consumer products, that's been a big part of our success, and we expect that to continue.

What is it about -- like why are consumers taking on the card so much? I mean is it just they're utilizing the wallet more and more. And so it's a nice add-on? Or is there some feature around it that's helpful?

Well, as much as we're really proud of the merchant distribution that we have through our point-of-sale integrations, there are still merchants that haven't integrated with Affirm yet. And card really fills the gap that's created there. So a user can use Affirm card anywhere that accepts Visa. And we also think it's a smoother and more elegant way to transact offline. So in-store usage is about an order of magnitude higher on card than it is in the rest of the business. So we think that we found a way to take some friction out of buy now, pay later transactions for in-store situation.

You're at, I think, 14% or so, right, of your total users that actually have a card now. Has that still even -- intra-quarter, are you still seeing the trends go in the right direction there? And where do you see that going at 14%?

Gosh, I would hesitate to put a cap on it. I mean I think right now, growth inflected positively from a user perspective in the December quarter. So we would continue to expect that it becomes an increasingly meaningful part of the business. And I think the great thing about card is that the unit level economics are really, really strong. So that allows us to really lean in pretty hard to continue to find ways to bring new users to the product.

Okay. Let's talk about guidance for a minute. Again, you had a very strong quarter. Your fiscal year guidance has 32.5% GMV growth and RLTC as a percentage of GMV just over 4%, which has really been your target for some time, right? GAAP operating margin is just over 8% at the midpoint. Just any embedded assumptions in your guidance that you can share? And related to macro funding conditions, progressive -- progress on key initiatives or any conservatism in there? Just help us understand your thought process on that.

Yes. I mean we revisit the guidance quarterly, and we try to reflect current conditions, both in the funding markets, but also in terms of what we're seeing in repayment data with our consumers. And so that's all reflected in the guide. We utilize the forward rate curve at the time that we set the guidance. But the trends have actually been pretty stable on the credit side for us. And that shows up both in terms of the credit cost in the business, but also demand in the various industries that we map to from a GMV perspective. So really nothing noteworthy to call out in terms of underlying assumptions.

Okay. All right. Back to the RLTC for a minute. Again, you've historically described 3% to 4% as a long-term range for the business. But you've landed above 4% now for fiscal '25. You're guiding to just over 4% again right now. So just as we look over time, I mean, if you could just share your latest thoughts on this target range, how you've been balancing profitability and growth a little bit more?

Sure. Maybe I'll just go back for a second. I mean that 3% to 4% range really was established as part of the IPO process on our side. And at that time, we were very, very heavy into monthly installment loans, particularly 0% monthly installment loans. Actually, Peloton was our largest merchant at the time. And so we had some new partnerships coming online, namely Amazon and Shopify, and we wanted to leave space for those programs to scale.

And really, the 3% to 4% range was to allow for a different mix of loan products, particularly Pay in 4 becoming a bigger part of the business. If you look at our last quarter, Pay in 4 was about 1/6 of our overall volume. And I think we've sort of found a little bit more of a range for what we think the ultimate mix of the various loan products can be. And it probably means that in May at the Investor Forum, we'll revisit that 3% to 4% range. But where we sit today, it's hard for me to imagine a situation where we go all the way to 3% in the short run here. So again, I think the range was purposely very broad, and we're proud of the fact that we've been able to operate sort of towards the high end.

Okay. Look, I mean, your business from an idiosyncratic standpoint is obviously trending really well. Let's talk macro for a quick moment, given you should have a pretty good vision on some of the different consumer profiles. What are you seeing out there? Obviously, K-shaped economy is a discussion quite often. And so just help us understand some of the credit metrics you're seeing and how you feel about it.

I think one structural advantage that we have today at our scale is that 96% of our transactions come from repeat borrowers in a given quarter. That trend has been true for the last several quarters. So increasingly, we're extending loans, albeit small loans to consumers that we know and consumers that have a history of paying us back and paying us back on time. So I think we're well served with that setup. Otherwise, I mean, we really tend to manage the business to what we call first payment delinquencies. So when a borrower gets to that first payment event, which in our business typically happens about 30 days after origination, what's the delinquency rate for that first payment?

That's typically the best leading indicator of the credit health of that cohort of loans. And at our scale point, that's a real deep data set to evaluate. We're originating on average about $150 million of GMV a day. So we think we get a really good signal from the first payment event. And right now, we're seeing repayment events that are absolutely in line with our expectations. There is risk in our business. Not everyone is going to pay back on time, but what's important to us is that we're able to rank order risk and that the repayment outcomes are in line with our expectation, and that's 100% what we're seeing right now.

Are they in line with recent trends also? Have they changed at all? Or are they still in line with the -- are they consistent?

No, they're very consistent. Yes, we really haven't had a meaningful change in our credit posture. We're always making optimizations across various merchant programs, but our credit posture has been pretty static.

Okay. So credit sounds stable. How about spending volume levels?

Yes. I mean we grew GMV 36% in the December quarter. That's actually up on a year-over-year basis in terms of growth rate versus where we were in the December quarter a year ago. So we're not seeing any sort of pullback in terms of demand. And actually, we've hit a bit of an asymptote with our average order values. And so the spending patterns have been pretty consistent.

Talking about profitability, I know you mentioned a moment ago with RLTC that we'll probably get some updated thoughts at Investor Day in May. But just on margins, again, we might get more than there as well. What are your -- what is the real investment required for this business to keep growing at this rate? I mean, how do you think about that as a trade-off versus profitability going forward?

Yes. I mean we really don't view it as a trade-off. We view it as an and. I think both are...

Doable.

Definitely doable and very important to how we think about building business plans internally. I think we're fortunate in that the loans that we create are very profitable. That's true across the spectrum of product offerings that we have. And one of the fastest-growing parts of the business, Affirm Card is one of the most profitable as well. So I think it's a great setup for us to have. We just signed a 5-year renewal with our largest merchant partner. And so we have really good line of sight into how that program should evolve over the next 5 years, which gives us a lot of confidence in the business as well. So for us, I think we've demonstrated really nice operating leverage over the last several years. We've done it while continuing to grow the business. And if you look at the last 12 months, we've grown the business at accelerating rates as well. So I think you should expect more of the same maybe not...

Continued margin expansion.

Yes. I mean I think continued margin expansion is the way that I would say it. We are looking at expanding our use of AI tools. I think for us, that's going to be a mechanism to drive more efficiency. I don't think for us, it means that we would look to reduce headcount per se, but I think it's going to be an enabler to do probably more with more. So I think we would continue to expect some modest and continued growth in headcount given all the things that are on our plate that we think are really compelling opportunities. We've got international expansion. We've got the bank application out there, and we've got a really exciting partnership with both Fiserv and FIS that I'm sure we'll talk about here. So I think we've just got a really long list of really compelling opportunities, and we're trying to make sure that we get as much new product development through our teams as possible, and AI has been a way that we expect to continue.

Right. So AI will help with product velocity internally, but it doesn't sound like you have any intention to reduce headcount. Could we moderate headcount growth because of it?

Yes. I think we've been pretty measured about headcount growth. I think we've grown headcount about 10% on a year-over-year basis as of today, looking back 12 months. So I think that level of growth is pretty appropriate. But we're right in the throes of our planning for fiscal '27. And again, we'll speak to some of this in the investor forum. But it's about making sure that we maximize the opportunity set that's in front of us, but also continue to show continued operating.

Right. There's a strong mix shift happening in the business, which should lend to better margins anyway. How about from a competitive standpoint? I mean, I'm curious, we had a panel yesterday with a number of other smaller companies that provide financing for consumers, whether it's Pay in 4 installments or others. So just talk a little bit about what you're seeing out there. We've also had PayPal talking about being more aggressive and trying to effectively buy positioning with merchants. I mean you probably haven't seen it yet, but I'm curious what you're seeing out there.

Yes. There's really nothing I could point to that says there's been a marked change in competitive intensity, I would say, in either direction. Most of our growth in any given year on the merchant side comes from our existing merchants. So we're really focused on optimizing the opportunity that we have with the merchants we already know. I think we're going to continue to win our fair share of new merchants as well. And we're really excited about some of the newer logos we've brought in. I mean, logos like Costco, Lowe's and then the Intuit program that is just now getting live. So again, it feels like win rates are at a really healthy place from a merchant perspective, and we're continuing to see really nice growth with existing.

So you're not seeing any change competitively impacting your ability to win business or even from a consumer standpoint.

No.

Okay. That's good. We talked about AI internally, but from an agentic commerce comes up and it's perceived as by some as it could be a risk, mainly because folks think maybe you're going to -- folks will use -- ask ChatGPT to just buy on whatever best tool possible out there, any credit, any credit card or -- how do you respond to that?

I mean I think our thesis is rooted in the belief that we're unique in our ability to solve a real need for our consumers. And the need for financing doesn't necessarily change and certainly doesn't go away if you're utilizing an agentic tool to facilitate a transaction. So I think ultimately, we provide affordability for consumers, and that's something that's going to exist no matter how the consumer is enacting the transaction. So it's really our hope that with the way that we've built our products through the fact that we don't utilize late fees or any sort of gimmicks or fine print in our transactions that an agent is going to be able to understand that what you see is what you get with Affirm and the all-in cost of an Affirm loan hopefully will show up as being really favorable to some of the other options that are going to be out there.

Okay. Let's touch on 0% APR for a minute because it's -- I mean, it grew 65% year-over-year last quarter versus overall GMV up 36%. So clearly, it's resonating with folks. I think you even -- in your promotional event in October, it accounted for over 15% of total GMV during the month. What do you see about it that's working so well and really resonating?

I think it's really compelling on both the merchant and the consumer side of the equation. And that creates a nice flywheel, to be honest. I mean it...

And by the way, merchants are funding this, right?

Merchants are funding the economics, yes. Yes, I think this has gotten sort of misconstrued somehow. Our 0% programs are profitable. They attract a higher credit borrower to our ecosystem, which we think is a really nice complement to the 2/3 of our volume that runs through interest-bearing. And so 0% loans are, I think, an important part of the story. But between monthly 0% and our Pay in 4 product, which is also 0%, that's about 1/3 of our business. So the lion's share is still happening with interest-bearing loans. But 0% have been great. They drive really nice uptake with consumers.

The consumer is more likely to say yes. if they have a set of 0% offers presented to them versus interest-bearing. So there's a nice uptick there. That accretes to both Affirm in terms of more GMV, but also to our merchants. And so I think we've been able to demonstrate with our merchants that allocating a bit more in terms of dollars to MDR, to merchant discount rate to pay more for a 0% loan, that's a worthwhile investment for them, and it's able to help them accelerate growth in their business and drive higher conversion.

Right. Okay. How about international expansion, another area that I know you've talked about for a little while now, but it's grown in terms of presence and opportunity for the company. And so just you continue to make progress. I know Shop Pay Installments now launched in the U.K. as an example, announcements of key merchant partners. Just what does the opportunity look like for you?

Yes, it still feels like we're very, very early innings in the U.K. We're continuing to do the optimization work that we need to do with Shopify before making that widely available and making that a default part of Shop Pay. This is a very similar approach that we took in the U.S. and that launch has proven to be incredibly successful. So we have a lot of confidence that we're on the right path with Shopify. We're also scaling Canada with them as well. So a lot going on with Shop. And then I think outside of Shopify in the U.K., we're continuing to post some really nice merchant wins as well. We just announced VMO2, which is the Virgin Mobile telco. They're a very large retailer of handsets. So financing is an important part of that ecosystem. We're excited to partner with them. We've announced Wayfair as well. So we're starting to land some large merchants in country, and it's a nice mix of brand-new merchants and also some U.S. merchants that we're expanding geographically with.

Okay. So before we go into the bank application or some other areas like vertical differentiation or focus and diversification, it sounds like the key drivers are all trending as well as you would have hoped. I mean your -- when you thought about setting your guide, these are all trending in line or maybe even better in many cases versus your assumptions even now. Is that fair?

I think that's right. I mean we've now guided to full year FY '26, I guess, 3 times, and we've taken our estimates up twice, right? So we continue to be incrementally more positive on the full year. And the business, I think, has performed really well.

It's great to hear. Just one more on the business itself, vertical diversification. Again, over the years, you guys have diversified verticals that you operate in. I think we've seen you announce existing -- exciting partnerships like the one with ServiceTitan. Just touch on key areas you see more opportunity for that.

Yes. I mean I think services is definitely an easy one to point to. We're really, really excited about ServiceTitan and Intuit. I think Intuit has the potential to really accelerate us in the services vertical. We are going to be part of the invoicing that happens within QuickBooks, right, which I think has a lot of the tenets of transactions that are very squarely in our wheelhouse. These are -- tend to be larger dollar, sometimes nondiscretionary, right? If you have a hole in your roof, right, you need that roof patched. So we think it has a really great setup in terms of transactions that lend themselves to the sort of financing that we provide. And we're excited to partner with Intuit to make the integration as smooth as possible, both for the underlying merchants, but also for consumers as well.

That's really neat. All right. I want to ask you about the bank application. You submitted -- or you announced in January, at least that you submitted for a bank subsidiary. So what does that mean for the business, both from a go-to-market and strategy standpoint, but also just economically, -- what does that mean in terms of profitability or other funding?

Yes. I think in the long run, it will be a mild positive for us. That said, we're still very early in the application process. We did just submit it in January. So...

How long is it -- do you expect it to take?

I mean we would expect maybe a year, I think, is a good estimate. We don't have ultimate line of sight on when -- if or when the approval decision would be made. But I think internally, we're thinking about it in terms of hopefully getting to a decision within a year. So it's going to be a while. And then once we're live, assuming we do go live with a bank, we will be in a period of ramping the bank subsidiary in a pretty measured way. So really for us, it's about bringing diversification to how loans are originated. The Affirm Bank would be another bank that's originating loans for us and then also maybe some diversification around how we issue virtual cards and a couple of other places where we touch a partner bank. So we think there's enough scale in the business and frankly, enough growth in the business that we don't expect to really alter any of our relationships with existing bank partners, but we expect the bank to be there to absorb some of the growth that we expect in those channels.

Okay. All right. I'm going to ask one more and then, guys, anyone in the audience, you're welcome to ask a question or 2 as well. Also in January, you announced Fiserv as a new partner, similar to what I think you had with FIS already. This actually came up in our chat with Stephanie, the CEO of FIS yesterday. And so they're excited about it. I mean curious how you see that going and the opportunity really to provide for cards, debit cards at banks. And just talk about the go-to-market there and how that should trend.

Yes. And maybe just to zoom out for a second, I mean, the partnerships that have been announced there, really, we're partnering with both Fiserv and FIS to bring the Affirm Card functionality to debit cards at banks, right? So we're hoping to utilize the network of banks that Fiserv and FIS have amassed to expand the distribution of Affirm card. And so we think it's hopefully pretty compelling for banks themselves where they may have a scaled debit program, but they may see their consumers utilizing other credit card providers outside of the bank for the consumers' financing needs. And with Affirm Card, we can keep those financed purchases in the bank's ecosystem and partner with the bank to bring a pretty seamless user experience to the bank's customers.

Okay. A lot going on. It seems like it's going well, obviously, and we're happy to hear that. Just to wrap up, anything you want to share that in terms of your own investments you want to make that you need to do for the company to succeed from here, M&A, anything else that's worth calling out?

I don't think so. I mean I think we've got a pretty solid operating plan through the remainder of this fiscal year. We've got good line of sight into FY '27 at this point. So I think we're really pretty heads down on executing. And yes, there's a lot of momentum in the business, both in terms of growth and profitability.

Great. All right. Well, we have a few minutes, guys. So I'm happy to take a couple of questions if anyone has. Yes, it's one in the back.

I understand very early days, but if a bank subsidiary is established, how would you view a steady-state funding mix looking understanding very long term, but just between ABS, forward flow, deposits would be in there, warehouse. What would a good balance look like for you?

Yes. I mean so just maybe for everyone, the deposits would be the net new funding channel. Today, we utilize warehouse, ABS and forward flow. We would want to be thoughtful and measured about how we scale deposit funding. But I would expect that over the course of sort of the 3-year period post the launch of the bank that we're probably scaling to roughly maybe 10% of our funding coming from deposits towards the tail end of that period. But that's sort of an early estimate that we would refine if and when we start to be closer to going live with the bank.

Any other questions? There's one right in the back.

Quick question. As the firm expands globally, have you guys considered branching off into stablecoins for like cross-border benefits?

Yes. Today, the large, large majority of our volume is still happening in the U.S. And even as we have expanded into new markets for us like Canada and now the U.K. as well, all of the volume happening in those markets is actually sort of happening in that single country. So we haven't really seen much in terms of cross-border volume happening on our platform yet. I think if that were to change, we may revisit our thinking there. But right now, it's -- we haven't prioritized stablecoins just given the setup that we have.

Okay. And let's -- I see there's one more here or 2 more looks like.

Is there anything new on the regulatory landscape around BNPL or anything that we need to worry about or focused on rates?

I don't think so. New York did come out with a proposed new legislation around BNPL. Our read of what's been proposed we don't see it as any sort of headwind for our business. I think they're very focused on making sure they manage the fee load that can happen with BNPL transactions. And in our model, just fees are not part of the equation between us and the consumer. So we came away from our first reading of that pretty positively, and I think it allows us to continue to do what we've been doing.

I think we have time for one last one.

Yes.

Rob, so Affirm is kind of more focused on higher upscale products for buy now, pay later. And you guys recently announced that you're going to go into buy now, pay later through rent and kind of rent expenses. So I'm kind of curious, can you kind of explain how that's going to work as well as if you're looking to go more -- even more upscale beyond rent?

Yes. We've actually seen average order values in our ecosystem come down. We're right around $275 today. So that's sort of the sweet spot where we're operating. And that's a function of the various programs that we support. Programs like Shopify and Amazon have a lower average order value than that overall average. In terms of the rent pilot that we have with Isuzu, that's something that we're testing into. It's really important to us that we have the right financing program for something like rent. And so in our case, we want to make sure that the terms of the loan are less than 30 days. We don't want to create these stacked loans of monthly rent obligations. But we do think that there's an ability to smooth cash flows for consumers. But in the case of rent, we want to make sure that we do it in a very short-dated way.

All right. Guys, I think we're going to wrap it up there. Rob, thank you very much for that great discussion. For everyone here, we have a 20-minute break. And then at 12:20, if you want to be back for our macro and policy update with our economics team and our U.S. policy team. Thanks again, everybody.

Thanks.

All right. We'll go ahead and get started here. Thank you all for joining us at the Morgan Stanley TMT Conference 2026. Definitely excited to have Affirm and its President Libor here. Thank you very much for joining us today.

I have 2 things to say, a, this is probably the presentation that I'm most excited about this week, at least in my coverage group. So I hope I don't mess it up. And secondly, you're the only company for whom I have 3 pages of questions. We're going to hit on...

No pressure, all right.

So before I get started though, please see Morgan Stanley's research disclosure website at the morganstanley.com research disclosures. And if you have any questions, please reach out to your Morgan Stanley sales rep.

All right. So, Libor, great to have you here again with us at the 2026 TMT Conference. I guess maybe before hitting on the consumer and the secular tailwinds to BNPL, I want to start with the market's reaction to earnings, which seem to be largely predicated on 2 key areas. First, let's talk about you kind of -- or the way that the outlook was or communicated, it contemplated some deceleration in GMV growth in the second half of the year.

Like how should we think about that? Why would that be the case? Why would that not be the case? What's potential variance there?

Probably the biggest reason or probably the biggest driver for that was the previous year's year-over-year growth. In the previous year, was on the order of 40%, 45% year-over-year growth in that quarter. So I think when we look at it over time over multiple years, it's more of a normalization to what we think of as growth within the year that quarter, Q4, specifically of last year was also pretty quite a bit of Walmart volume, which obviously rolled off into our consumer business coming after that. So we're now lapping the parting of ways. And so that should also cause a reverting to the mean. But if you look at last quarter, Q2, we saw even without that partner, we saw an acceleration in year-over-year growth. So we're pretty...

Yes. So it sounds like, look, there's a reason you had great second half of your fiscal year, first half of last calendar year. Walmart, you had volumes through June. So you're taking that into account. But there are some other things, the consumer is good. You had your 0% promotion at the beginning of October that was helpful.

Yes, yes. Well, I mean consumer both on the demand side as well as on the repayment credit side, all of that looks quite healthy, and we're really excited about that. But yes, then last quarter, all of what we call 0% days, the big nothing, a lot of demand there, which was really exciting to see, especially testing those waters. We didn't see pull forward. We saw just an aggregate increase in volume across the quarter. So that was also nice to see.

Got it. So let's talk about, I think one of the hardest things that people have had have to deal with when modeling Affirm's business over the years has been the ebbs and flows of 0% promotions, right? I mean this is merchant funded, particularly when that happens. I mean trying to anticipate well what the impact on RLTC margins might be. No. there's clearly some level of RLTC margin dilution drag when you're running merchant fund at 0% versus interest-bearing.

But on the other hand, I don't think you would be doing this if it wasn't meaningfully dollar accretive. So maybe you can expand on that point and help us understand what you think investors might be missing on the trade-offs?

Well, I mean I think it is -- I shouldn't say I think of it, it is ultimately dollar-accretive. It also drives engagement, both on the consumer side as well as the merchant side. One of the -- obviously, consumers like it, they get the incremental benefit we see increase in user retention, increase in user subsequent transactions, which obviously are accretive. As importantly, on the merchant side, it is an important lever for how the merchants manage their own businesses. How they think about driving conversion, how they think about promotional offers sometimes the merchant just needs to clear out some inventory to make room for the next year's models. It's a really effective way for them to do that.

And so we make that available. We think it's a really cost-effective way for them to deliver value to consumers to be able to ensure their conversion, their growth. And so ultimately, dollar accretive, and we remain pretty committed.

So how much benefit do you get from a customer profile perspective was 0% promotion, even when it's merchant funded? I mean, I guess, I've always felt like on top of the things that you described, you also will tend to be able to attract a consumer that maybe is either higher FICO and/or has more purchasing power. And then to the degree that, as you say, as you get better retention, et cetera, just kind of continues to improve the quality of the base. But is that fair? Does that happen? What are the caveats that you put on that?

It does happen. I mean that is the primary reason to do it. We see a great user retention, right? When we think about a longer time horizon, we talk a lot about our annual actives, 25 million users using the product every year. But when we zoom out and we look at something like a 4-year time horizon, it is -- it's a large number, it's like 40 million users.

And their probability of using the product, again approaches 80%. So that kind of retention, that kind of usage is, a, really encouraging on the product side, but we do want to foster that through things like 0% where it specifically target targeted at the users where it actually has the most impact where it is unit economic positive. It's a transaction that might be coming in at a lower margin. But that transaction wouldn't have happened without it. And it is still dollar positive. So...

Right. It's not like you're sacrificing...

It's not like we're giving away money to something, right, to that is negative.

So let's talk about -- you kind of mentioned it in your preamble comments, but let's delve in a little bit into consumer health and credit. Certainly, last -- the second half of last calendar year, there was some wobbles in other parts of the credit market that made people a little bit skittish around maybe what was happening with the consumer. What are you seeing with respect to consumer spending, repayment data, et cetera, anything that you would call out incrementally in terms of quarter-to-date trends?

Unfortunately, no, it's actually surprisingly and positively boring. We see healthy consumer demand across a large range of merchants and services. We continue to see repayment in line with the expectations and the numbers we're managing to. So there's nothing that is jumping out as particularly concerning or noteworthy. Obviously, we manage it very, very actively. We're looking at this every day, every week. And the short weighted average life of our product lets us react and lets us pivot if we need to, but we're not changing right now anything in terms of what we're originating or what the credit box looks like.

Got it. So let's talk about the -- so those were kind of some of the near-term questions that we've got. And certainly, recur almost all the time. I'm sure you hear them as well. But let's talk about the secular BNPL tailwinds in TAM generally. You can just see it in the statistics, BNPL keeps gaining share, especially within e-commerce, but also within consumer credit more broadly. What do you view as kind of the main structural drivers of that shift? And do you believe that share games can persist rather than plateau over the next few years? What needs to happen for that to continue?

That's a great question. I think that it will persist over the coming years. I think that there's a number of things that we look at, that's -- whether do we look at other markets -- smaller markets, but other markets in the world, where BNPL has been around for longer, certainly much greater penetration in those markets suggest that as a share of e-commerce currently on the order of 8% to 9% for BNPL large in the U.S., other markets are north of 20%. And so that's positive.

On the addressable market side, at the end of the day, it is a -- we're delivering consumer credit. It is a better form of consumer credit than revolving credit cards. It is a knowable upfront exactly what a consumer is getting into. They know how much it's going to cost, no late fees, no revolving, no deferred interest, just to explain what you see is what you get.

So, I ultimately think that on the longer term, it is a natural replacement for revolving credit. And that's the TAM, $1.1 billion, $1.2 trillion of revolving debt shouldn't be revolving. It should be on very unclosed ended fixed purchase financing.

Got it. So let's talk about TAM expansion. Maybe understandably, BNPL was at least historically framed around retail goods. But we see the Affirm button popping up into other categories, including high ticket prices, services-oriented, we were talking about beforehand, how much the team, particularly MAX loves the affirmed logo and being in as many places as we can. So I'm sure he's happy to see that.

But at the same time, we tend to get a lot of questions about, does this change, maybe the economics but also the risk associated with it with your consumers, especially when people think about people using BNPL, if you will, to buy things like fast food, et cetera. And what has changed that's made those categories that are now open to you?

That's a great question. I mean it's an ongoing question at both ends of the spectrum, dollar spectrum. Obviously, smaller dollar amounts, convenience is a really important element high dollar amounts, obviously, is more natural kind of expansion for us as well as we continue to grow in both directions.

The -- it ultimately comes down to consumer convenience. We really think about not just modeling the individual transactions, right? We always talk about underwriting each transaction individually. But that transaction is underwritten in the context of that consumer's overall debt load, right? We spend a lot of time looking at what is their monthly outlay in terms of paying us back in terms of all of their debt obligations and making sure that we're managing that along with that individual transaction, how that fits into their debt load.

The important thing when we think about services, when we think about consumers buying something that is recurring with Affirm is, is that an unsustainable path in terms of increased debt load over time that is a ticking time bomb or is this more of a time shift. For example, HOA payments, annual thing. It's a service. It's something that comes up regularly. It totally makes sense to break it up into a monthly payment on a 12-month term.

Breaking it up into a monthly payment on a 36-year -- a 36-month term, if it's going to happen every year, that's just a path right to nowhere. So we really think about making sure that the product actually matches the use case and matches how our underwriting expects to manage users monthly payments as a part of what are we going to roll out with a specific partner.

No, that makes sense. So let's talk about other catalysts for BNPL share gains when you are doing your planning and you're thinking about where you can take Affirm, what are the key catalysts that you think about that could accelerate BNPL penetration from here? Does that distribution, whether that be via other wallets or payment service providers, is it product evolution like the card, better underwriting or merchant funding. What do you think matters most among all the things that you're looking at to help drive growth?

I'll say all of the above. I mean -- that's the easy answer. And the reason -- I mean, the reason it is the answer -- I'll go into more detail. But the reason it is the answer is because all these things act as a flywheel with each other. So when we think about improving our distribution across the merchant network, we think about increasing the surface area across which we're available, giving consumers more opportunities to use the product to gain benefits expanding that way.

So from an expansion perspective, we definitely -- I'll leave the international out of it. I mean, it's an important investment area for us, expanding -- continuing to go other countries beyond the U.K. and Canada. The other opportunities are, a, the card. We continue to invest heavily there, especially as we think of making a product that speaks to specific segments of the consumer base.

Today, product is available to millions of users use it, but it is effectively the same product across the entire user base. So we are looking at what that product looks like for different specific credit segments of consumers at different income levels. As well as we think about distribution through into services. I think this week, as of today, we're rolling out with Intuit. We signed service tighten things like Lowe's -- so we continue to expand there.

And then the partnership we've announced with FIS and Fiserv to be able to bring Affirm to debit issuers, products. And so that they can then offer that product to their customers directly through the debit card they already have versus anything to go to some rights.

So we may be able to circle back on some of the distribution. But I think look, if I look at and talk to investors generally, I think people kind of appreciate the way we started the conversation like, okay, maybe what's different a little bit in the way that you're starting this calendar year, the comparables some familiarity with how you tend to formulate outlook, you're saying that the environment is boringly stable for consumers, which is really good to hear.

But there are definitely more difficult to quantify concerns that are floating around in the market right now. And one of them may be agentic commerce. And Talk about where BNPL fits. Like this morning, you had a very interesting announcement in conjunction with Stripe. But I think the general question that we get a lot is as shopping becomes more agentic and that you think about assistance, AI assistance comparing options, optimizing checkout, even steering payment choice. Where do you see BNPL fitting and does it become a default financing layer or merchant funding conversion level? Just help us think through like how that's -- how you think that sort...

Yes. I mean I'll specifically through the firm lines, I don't know about what everybody else is thinking or doing. The kind of goes back to what is the TAM for this product. I mean, it ultimately is a better way for consumers to access credit. They want to pay for something over time. It is the best way to do it. People will always want to be able to pay for something over time because there is greater value to having that couch today than a year from now.

And so 1 of the things we've always done is right, no late fees, no revolving, no deferred. It is a, what you see is what you get pricing upfront as a part of the purchase of the item. That's something that resonates with consumers, but at times can also be difficult to communicate to consumers. Not every customer gets it. in agentic world, it's much easier to explain this to an agent, right? This is actually the best way to fit this purchase into this customers into their budget.

And so we think of it as naturally accretive over time because it is a selection bias for the best form of payment, if you need to pay for something over time on credit. And I think that persists because when you think about a genetic shopping, I mean, yes, an agent is doing the purchasing, but they are still acting on consumer well. Like the consumer has directed the agent one way or another to get it to the best deal to get it to ferrous financing to get it the most optimal solution to the problem of having this item tomorrow and a firm is the optimal way to do that.

So I think similarly on the merchant side, as long as merchants are going to be -- are going to want to incentivize specific agents that are looking for something to come to them -- the best way to do that is through promotional offers through 0% through longer-term length through enhanced exposure limits, all of that.

Yes. No, it's an interesting point because like one of the things that even I grapple with in my own personal pratices is that you see a lot of inertia in the behavior of consumers in terms of how they pay for things, right? Like just generally. And that's true in the U.S. or any other market around the world. But if agentic has a potential to change that and to push people towards the best solution at any given point. I mean it means that Affirm's in an interesting position with a lot of opportunity. If it's the best credit opportunity or -- and/or it's the best operator merchant can make to a consumer.

Yes, yes. I mean, I definitely see it as potentially a consumer adoption accelerate for sure.

Right, for sure. I want to take a breath. If there are any questions in the audience. If you do, just raise your hand, we'll get you a microphone.

So one here in the front.

I'll just take a step back through the last few years of the firm presenting here. You really seem to have separated yourselves from what was a lot of competition. If you were to just pinpoint 1 or 2 things for the nonexperts. What do you think it is that's really, really resonated to get you to this position now?

I think at the end of the day, it is delivering value to customers, the consumers, to merchants and focusing on their problems. I mean, yes, we are ultimately a provider of credit to them to enable them to purchase the things that they want for merchants to be able to sell optimally and to improve conversion within their funnels. And so focusing on the customer and making sure we're delivering as much value as possible. In credit and financing.

What that means for many, many, many consumers is not just a very tightly bounded and time offer of credit, but it is actually managing their repayment over months or even years to achieve those goals. And the longer the term length lengthens and the more of their financing that you're managing, the more complicated that problem gets through an underwriting, pricing, optimization problem and being able to manage that through to your capital partners through servicing and through your merchant partners.

And so that investment in underwriting and credit and pricing and dynamic optimization and doing the hard things and chipping away at them over the years and making sure that, that translates the value to the customer whether they be a consumer or a merchant, I think is ultimately what it's been.

So can I push on that a little bit, if you will, Libor. So one of the things that we see is like you and the rest of the team always focus a lot on underwriting. And one of the differences that we see in your underwriting is the ability, and you talked about like solutions, et cetera. But when I break it down, I see it very concretely that you can deliver longer duration, longer duration, bigger ticket size underwriting than a lot of the competitors in the space.

Like, is that a fair assessment of the way. What you're going after? And maybe the next question then is, how do you sustain that? Or is that sustainable?

Well, I think to sustain it, part of the part of the thesis of the business from the get-go was that vertical integration matters, right, that you are in control and have visibility to everything from the beginning of the shopping journey, promotions, placements on the merchant side through the checkout funnel into the purchase into terms through the servicing, even things like capital, collector in all of your visibility into that full funnel allows you a lot of data that you can then use to underwrite especially on repeat users and as that improves.

Now the sustainability is that these products, both in terms of where they're distributed, and how consumers understand them and how consumers use them is an ever-changing problem. It is always evolving, always changing. And so your underwriting and your modeling has to keep pace with those changes. -- it is a constant reinvestment to be able to deliver on that performance, continue to optimize as the surface area of where you're available, the heterogeneity of it and the heterogeneity of your consumer base is ever evolving, your underwriting has to continue to evolve with it. And so it's not a point-in-time technology. It is not a point-in-time view of what the product is. It is that process of constant evolution in order to be able to continue to deliver those same results.

Got it. The I want to go to another question, and I think this may actually be a bigger question mark among investors right now. And that is the funding market and your balance sheet strategy. I think you guys have been very focused on delivering consistent performance in your underwriting and in the credit book that you're delivering to investors, et cetera, and you have a variety of channels that you can use to fund. But maintaining that consistency has been a priority so that you maintain access to efficient funding sources.

Recently, there's been a lot of chatter on that, the health of the private credit space generally, Wall Street Journal from a article yesterday talking about some of that -- those question marks. That being said, your recent vintages returns have looked really attractive versus benchmarks. But have you seen any change in the spread or return characteristics that your partners are demanding?