Earnings call transcript: Affirm Holdings Q4 2025 beats expectations, stock rises

Affirm Holdings Inc. (AFRM), now commanding a market capitalization of $25.9 billion, reported stronger-than-expected earnings for the fourth quarter of fiscal year 2025, with earnings per share (EPS) of $0.20, surpassing the forecast of $0.12 by a significant margin. This 66.67% surprise in EPS, alongside higher-than-anticipated revenue of $876.42 million compared to the forecasted $834.35 million, sent the company’s stock up by 3.09% in after-hours trading. Affirm’s strategic innovations and strong consumer demand contributed to these impressive results. According to InvestingPro, the company has demonstrated remarkable revenue growth of 42.5% over the last twelve months.

Key Takeaways

• Affirm’s Q4 EPS of $0.20 exceeded forecasts, marking a 66.67% surprise.
• Revenue reached $876.42 million, beating expectations by 5.04%.
• Stock rose 3.09% in after-hours trading, reflecting investor optimism.
• Strong performance driven by repeat transactions and product innovations.
• Affirm Card and AI advancements contributed significantly to growth.

Company Performance

Affirm Holdings demonstrated robust performance in Q4 2025, setting new records across most financial metrics. The company experienced accelerated growth, with 95% of transactions coming from repeat borrowers. This performance is notable as Q4 typically does not surpass Q2, which is usually the peak season for Affirm. The company’s strong credit performance and continued consumer demand have positioned it well against industry trends.

Financial Highlights

• Revenue: $876.42 million, up from the forecasted $834.35 million.
• Earnings per share: $0.20, significantly higher than the expected $0.12.
• Affirm Card volume: $1.2 billion, with a 10% attach rate.
• Trailing twelve-month cardholder spend increased to $4,700 from $3,500.

Earnings vs. Forecast

Affirm’s actual EPS of $0.20 surpassed the forecast of $0.12 by 66.67%, marking a strong earnings beat. Revenue also exceeded expectations by 5.04%, reaching $876.42 million. This performance highlights Affirm’s ability to outperform market predictions, continuing its trend of positive surprises in recent quarters.

Market Reaction

Following the earnings release, Affirm’s stock rose 3.09% in after-hours trading, closing at $77.95. This increase reflects investor confidence in the company’s strategic direction and financial health. The stock’s movement is notable given its proximity to the 52-week high of $82.53, indicating strong market sentiment. InvestingPro analysis suggests the stock is currently trading above its Fair Value, with impressive returns of over 150% in the past year. Investors seeking deeper insights into AFRM’s valuation can access comprehensive Pro Research Reports, available exclusively to InvestingPro subscribers.

Outlook & Guidance

Looking ahead, Affirm expects to be at the high end of the 3-4% revenue less transaction cost take rate. The company remains conservative in its international expansion efforts, focusing on the UK market with Shopify. Continued investment in AI and adaptive checkout technologies is anticipated to drive future growth. Affirm is also preparing for potential consumer stress due to student loan repayments. InvestingPro data reveals a strong financial health score of 2.58 (labeled as "GOOD"), with analysts maintaining a positive outlook. InvestingPro subscribers have access to 10+ additional ProTips and extensive financial metrics that provide crucial insights into Affirm’s future potential.

Executive Commentary

CEO Max Levchin emphasized the strength of Affirm’s credit performance, stating, "Credit performance is an output of our settings of the models that we run." He also highlighted the company’s adaptability, saying, "We are built to be mixed into all environments." Levchin expressed confidence in Affirm’s unique approach, noting, "We think that AgenTek Commerce is going to be extremely successful for some categories of transactions."

Risks and Challenges

• Potential consumer stress from student loan repayments could impact spending.
• International expansion presents challenges in adapting to new markets.
• Increasing competition in the buy-now-pay-later sector may pressure margins.
• Macroeconomic conditions could influence consumer credit performance.
• Technological investments may require significant capital and resources.

Q&A

During the earnings call, analysts inquired about the adoption of Affirm’s 0% APR strategy and its impact on merchant relationships. Questions also focused on the company’s AI and adaptive checkout innovations, as well as plans for international expansion. Insights were provided on the funding environment and credit performance, reflecting Affirm’s strategic priorities and market positioning.

Full transcript - Affirm Holdings Inc (AFRM) Q4 2025:

Conference Operator: Good afternoon, and welcome to the Affirm Holdings Incorporated Fourth Quarter Fiscal twenty twenty five Earnings Call. Following the speakers’ remarks, we will open the lines for your questions. 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.

Zane Keller, Head of Investor Relations, Affirm Holdings: 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. Actual results may differ materially from any forward looking statements that we make today. These forward looking statements speak only as of today, and 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 financial 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 Investor Relations website. Hosting today’s call with me are Max Levchin, the firm’s Founder and Chief Executive Officer Michael Linford, the firm’s Chief Operating Officer and Rob O’Hare, the firm’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 your questions.

On that note, I’ll turn it over to Max to begin.

Max Levchin, Founder and Chief Executive Officer, Affirm Holdings: Thank you, Zane. The results, which I do think are exceptionally strong, is all the explaining we need to do. So just one tidbit we left on the cutting room floor that we didn’t just crush this quarter, we actually set a new record in most of our metrics, which is unusual. Fiscal Q2 is a normal peak, but this is Q4, and yet it is the record. That’s really cool.

To tell you that our growth is accelerating and we are firing on all pistons. Also, we just celebrated Libor’s decade at Affirm a few months ago, and so I want to congratulate Michael on his seven years here as of yesterday and Rob’s upcoming fifth anniversary this Sunday. A privilege to lead an extremely talented and dedicated team and I don’t take for granted that they and their families are willing to put up with my antics for so many years. Thank you guys and here’s to many more years of building a firm together. Back to you, Zane.

Zane Keller, Head of Investor Relations, Affirm Holdings: Okay, great. Thank you, Max. With that, we’ll now take your questions. Operator, please open the line for our first question.

Conference Operator: Great. We will now be conducting a question and answer session.

Unidentified Speaker: Session.

Conference Operator: And our first question comes from the line of Dan Dolev with Mizuho. Please proceed with your question.

Dan Dolev, Analyst, Mizuho: Hey, guys, Max, Rob, Michael, great results as always. So obviously, really strong quarter, amazing guide for next year. It sounds like last quarter, were talking a little bit about the potential stress and the impact on the firm. It sounds like things have gotten a little better for you from when you reported last time to now. And has what is your best take on how things stand now and sort of the reason for that optimism the nice update to the guys and again really strong stuff.

Conference Operator: Very good.

Max Levchin, Founder and Chief Executive Officer, Affirm Holdings: Thank you, Han. As Michael loves to say, we take our guidance very seriously and on the side of being thoughtful and aiming to get ourselves some A pluses instead of just straight As. And we typically do deliver, not a forward looking statement. But from the consumer point of view, which I gather was the question, we think that it continues to perform. It’s really maybe a commentary on how strong the momentum is in The U.

S. And to at least similar degree Canadian consumer. And soon, we’ll find out what that looks like for UK one. But we’re feeling very good about the originations we’re driving. We feel quite excellent about our ability to get paid back on time.

So on the credit side of the equation, continues to perform really well. On the demand for our service, you see the acceleration in GMV and the, new record in in that sense, off calendar, if you will, is also a reflection of the fact that, folks are using Affirm for more and more things.

Dan Dolev, Analyst, Mizuho: Thank you. Great stuff again.

Max Levchin, Founder and Chief Executive Officer, Affirm Holdings: Thank you.

Conference Operator: Thank you. And our next question comes from the line of Dan Perlin with RBC Capital Markets. Please proceed with your question.

Dan Perlin, Analyst, RBC Capital Markets: Thanks. Good evening, everyone. So I want to go back to the 0% APRs with the first time users coming in. Think you said that was like 50%, which is again like a very, very strong number. So the question is it’s bringing in a lot of new users.

I’m wondering when you look at kind of prior quarters, obviously, you can’t look at it this quarter, but prior quarters, what kind of like repeat rates are you able to, I guess, glean from those initial users coming in? And the real crux of the question is, are they coming onto the platform because of the 0% APR, but then not using it again? Or are they behaving similar to maybe a more traditional firm user? Thank you.

Max Levchin, Founder and Chief Executive Officer, Affirm Holdings: It’s a great question. I appreciate the implied dig at how real are growth users. But I have good news on that front. They do repeat. Obviously, every credit strata behaves a little bit differently in a sense that folks choose us more or less depending on what alternatives they have, how they feel about the merchant coverage or the deal coverage that they want.

But generally speaking, there’s not a tremendous difference in terms of repeat of users that have been acquired through ZEROs or not. But the more interesting thing, which you didn’t ask but I’m going answer anyway, is do ZERO users flip over to interest bearing? And they do. And that, I think, is a really, really important indicator. Obviously, 0% transactions are somewhat less profitable for us.

They’re still profitable, so this is not a loss leader. But the interest income that comes in in interest bearing loans is obviously more profitable, and those folks enjoy zeros when they are available to them. But the experience using Affirm is so positive, they do convert to interest bearing users just fine and come back to us for many other things than just zeros.

Dan Perlin, Analyst, RBC Capital Markets: That’s great. I figured I’d sort of dig in early. So thanks.

Max Levchin, Founder and Chief Executive Officer, Affirm Holdings: Yeah. That’s a good it’s I when I was reading her numbers, you know, what would I stick my finger and be like, how how good is that? And this is a good one to ask. And the answer is positive.

Dan Perlin, Analyst, RBC Capital Markets: Awesome. Yes, that’s fantastic.

Conference Operator: Thank you. Have a good one. Thank you. And our next question comes from the line of Adam Frisch with Evercore ISI. Please proceed with your question.

Adam Frisch, Analyst, Evercore ISI: Hey guys, good afternoon. So it seems like you guys are just as Max, I’ll quote you, you guys are questioning it. The only thing I could see kind of derailing the story is what’s going on with the consumer. And if you things like the resumption of college loans and so forth, maybe the data around consumers gets a little dicier in the next couple

Unidentified Speaker: of months into the end

Adam Frisch, Analyst, Evercore ISI: of the year. Could you just remind us where you are in your spectrum of the folks that use your platform, where they are on the FICO scores relatively? Like how many of your transactions are with consumers that are near prime, prime or super prime? So when the data inevitably comes out where the consumer might be getting a little shakier, we have someone to fall back on in terms of the quality of the folks engaging with the firm? Thank you.

Max Levchin, Founder and Chief Executive Officer, Affirm Holdings: I don’t know if it’s going to come out any sooner than right now. It’s all in our supplements, I think. But generally speaking, student loan repayment resumption is something that we’ve all been aware of for quite some time and have definitely taken measures to make sure we are not overextending that borrower and also monitoring how that is going for them. And so the reason or the fact that we don’t give or didn’t give an enormous amount of attention to the credit performance in this particular letter isn’t because we forgot. It’s because it’s been highly consistent and can perform really well.

But it also doesn’t mean we’ve taken our eyes off. The thing that we kept on repeating for years and years is credit is job number one. It still is. The executive team still gets a full credit performance update every single Monday. And any time the disturbance in the force, we move that from once a week to three times a week and daily if that warrants it.

And so we are very, very mindful of credit performance. We are not even a little bit asleep with the switch. The numbers you see are there exactly because we want them to be there. We’ve said it many times before. Credit performance is an output of our settings of the models that we run.

Not sort of to belabor the obvious, but we underwrite every single transaction and reserve the right to decline transactions we feel are too risky for the end borrower and for a firm. And we do. And if there’s ever a deviation from our normally extraordinarily high Net Promoter Scores, because not everybody enjoys hearing, Hey, you shouldn’t borrow. You’re overextended. But we won’t change our point of view on their ability to borrow and our willingness to lend if they are in fact overextended, be it with Affirm or overall in their credit utilization.

So I’m not concerned about that. Obviously, macroeconomic shifts are a thing that happens to everybody at the same time. That’s not a thing we control, but we can control our results and have controlled our results for years and years as the macroeconomic environment moved up and down, sometimes pretty suddenly. So I feel very good about our performance, feel good more importantly in our ability to control that performance so long as we keep our eyes on the credit numbers, and we certainly do.

Michael Linford, Chief Operating Officer, Affirm Holdings: And I would just add that I think given the short duration of the loans that we’re originating, the most important things for us is that we have a full picture of the borrower’s wherewithal to repay the loan at the time of origination. And then the asset is so short dated, and we’re increasingly working with consumers that we’ve seen before. 95% of our transactions came from repeat borrowers this quarter. So that setup really allows us to focus on underwriting the consumer here today where they are and making sure that we’re instrumented to catch changes in the future. But we don’t really stare at those problems in advance.

I think we’re really focused on making sure that the cohorts that we originate today pay us back. And if we need to adjust the underwriting to be more inclusive or less inclusive in the future, we’ll do that in normal course.

Conference Operator: Thank you. And our next question comes from the line of Will Nance with Goldman Sachs. Please proceed with your question.

Will Nance, Analyst, Goldman Sachs: Hey, guys. Thanks for taking the questions. Nice results today as always. Wanted to ask a question just on the funding environment. Max, we’ve continued to see the capital markets be wide open for consumer lenders.

I think your funding capacity was up roughly 55% year over year. Utilization is way down. We’ve also seen that in pretty much every other lender in the space with the rise of kind of alternative credit coming into the space. How do you think about the incentives that this creates in the market and like the risk of credit issues that result from more of an oversupply of funding from some of the lower quality competitors in the space or people who are kind of flush with funding and have kind of incentives to make a lot of loans because of that? Thanks.

Rob O’Hare, Chief Financial Officer, Affirm Holdings: I can start and Max, can add. Like I don’t know the way I can really speak to the people in the broader ecosystem. I know that we are really mindful of the health of the capital markets when we think about picking our partners. It’s as important that we pick capital partners who we think are going to be our partners for the long term and not just worrying about who’s the lowest bid today. And as a result, we partner with what we think is the blue chips of these asset managers.

And that can come in the form of large strategic partnerships, with world class investors like Sixth Street or very good insurance, asset managers up and down our stack. That’s not an accident. We think really long and hard about picking the partners who we think are going to be committed and long term with us. And therefore, we don’t move too quickly either. We don’t pivot out of a strategy we think in the better part of decade increments.

So we’re not so concerned with what those partners do, because they’re obviously thinking about the problem in the right way. I will say the conditions are very favorable, as you pointed out. And that’s to our benefit. We’re really mindful of that. And I think that’s part of the reason why the execution is so good right now.

Conference Operator: Thank you. And our next question comes from the line of Moshe Orenbuch with TD Cowen. Please proceed with your question.

Zane Keller, Head of Investor Relations, Affirm Holdings0: Thanks very much for taking my question. I was hoping we could talk a little bit about the Affirm card. You gave some statistics, you know, talking about it being a $1.2 volume, a 10% attach rate, and also that the 0% volume on

Zane Keller, Head of Investor Relations, Affirm Holdings1: the card kind of tripled.

Zane Keller, Head of Investor Relations, Affirm Holdings0: Can you just talk a little bit about the current strategy with respect to the card? How you think it’s going to impact the firm’s customers and volume going forward? And maybe is there any special significance to the 0% in that product?

Max Levchin, Founder and Chief Executive Officer, Affirm Holdings: Trying to parse all the really cool threads to pull on here. Actually, cars are growing

Unidentified Speaker: really well.

Max Levchin, Founder and Chief Executive Officer, Affirm Holdings: So the meaning of the update for the avoidance of doubt was it’s kicking ass and taking names, and we’re very proud of it. And we got a lot more to go before before we we we think it might change. The percent attach rate is just a number. We’re we’re we’ll we’ll celebrate more when it increases. The strategy with the card, I learned the hard way that I’m not gonna front run what’s next for it, but it is an extremely active area of investment for us.

So we have more coming, more things coming. Some really, we think, incrementally powerful boosters to this particular rocket are underway. So we’re pretty excited about what’s to come there. I will not pre announce them now, but I’m still spending a lot of my time figuring out how to make the card even more compelling. You can see a little bit about the offline category growth the update I think.

And that sort of speaks to the fact that we are learning how to offer it in the right way to the consumer so that they remember to take it with them to places where they haven’t used a phone or e. G. A gas station which is not a thing you can integrate online. In terms of zeros on the card, it’s actually a more than anything, an amazing surprise and delight and frequency driver. So if you remember last call, we said that the really ambitious version of the card gets us to 10,000,000 card the ambitious version of the card future is 10,000,000 cardholders active and something along the lines of 7,500 plus transaction GMV per year.

The current trailing twelve months of the cardholder is about $4,700. So I think the last time we dropped this number, it was along the lines of 3,500. This is across all of our services. So this is card and all the other places where you might go

Rob O’Hare, Chief Financial Officer, Affirm Holdings: with card

Max Levchin, Founder and Chief Executive Officer, Affirm Holdings: dominates that spend, obviously. So

Unidentified Speaker: we’re not quite at the 7,500,

Max Levchin, Founder and Chief Executive Officer, Affirm Holdings: but we’re more than halfway there. And so, like, there are many things that are coming together to make sure the card is the best expression of Affirm. So as far as I think I want to go right now, we’re kind of long winded on this one, but there’s a lot to do and there’s some cool unexpected things that are coming soon.

Zane Keller, Head of Investor Relations, Affirm Holdings0: Thanks very much.

Conference Operator: Thank you. And our next question comes from the line of Rob Wildeck with Autonomous Research. Please proceed with your question.

Unidentified Speaker: Hey, guys. You’ve been extolling

Zane Keller, Head of Investor Relations, Affirm Holdings2: the virtues of the 0% APR product for several quarters now. I mean, as far as I can tell, we haven’t really seen your peers lean into that product in the same way. I appreciate that that you’re not them, but even so, like, why do you think that is? Why has no one else, be it fintech or legacy, gone into the 0% APRs with the same kinda vigor that you have?

Max Levchin, Founder and Chief Executive Officer, Affirm Holdings: Underwriting is hard, and we’re good at it, and others aren’t. So a couple of things. First of I don’t mean to come off as quite so arrogant, but we do think that this is a difficult thing to do, and we spent a long time being good at it and plenty of internal consternation. Every time we look at a model and ask ourselves, is this a good idea or a bad idea, it’s not just cool. Let’s give people promotional rates.

It’s gonna be amazing. If you remember, our zeros are real zeros. It’s in in the letter as well. But we don’t do deferred interest. We don’t charge fees, which means that if it’s zero, consumer really does pay nothing above sticker.

That means that the transaction has to be profitable strictly through merchant subsidies, which is a thing to negotiate in a custom contract and a lot of control services that you have to offer to the merchant because they need the ability to turn it on and off if they don’t have the margin to do it forever. And we have to have the support infrastructure internally to guide them through such campaigns. Do you want to do zeros during this holiday period but not? And you have to do it in a way that’s compliant with fair lending laws because if you start doing that are a little too creative, you might end up discriminating inadvertently against the group that should not be discriminated against. You’re not just doing zeros.

Zeros are easier in a sense that at least you know it’s a 0% loan. But for a large swath of consumers, actually $5.99 APR is extraordinarily compelling. It’s way better than anything else they could get. And so when I say 0% in the letter, what we really mean here is consumers get the benefit of reduced APRs as merchants subsidize them. And doing that in real time, priced to perform on the credit side, on the capital market side because these loans are purchased downstream by people who expect yields that are strong whatever the deal the consumer got, and making sure that these are truly incredible for merchants.

It’s a multivariate problem. And we love math here more than just about anything else. I think most of our competitors just don’t. And, that’s our strength. Our advantage is we live better through mathematics.

Zane Keller, Head of Investor Relations, Affirm Holdings2: That’s helpful. Thanks. And just quick on the guidance, in the comment that the enterprise merchant will transition off in the fiscal second quarter. It’s kind of an important time with the holiday season. It’s a little in the weeds, but do

Unidentified Speaker: you think that happens at

Zane Keller, Head of Investor Relations, Affirm Holdings2: the end or the beginning of that quarter? I guess I’m asking if you’re going to get the holiday spend there or not.

Michael Linford, Chief Operating Officer, Affirm Holdings: The assumption in our outlook, Rob, is that that enterprise partner is wound down sort of going into the quarter, so by the end of this quarter fiscal Q1.

Zane Keller, Head of Investor Relations, Affirm Holdings2: Very helpful. Thank you.

Conference Operator: Thank you. And our next question comes from the line of Kyle Peterson with Needham and Company. Please proceed with your question.

Zane Keller, Head of Investor Relations, Affirm Holdings3: Great. Good afternoon, guys. Nice results. Thanks for taking the questions. I want to touch on the outlook and the take rate.

It looks like it’s going to be kind of fairly stable with at least the run rated 4Q level. I guess, that imply that the mix, the product mix that we saw in the fourth quarter should be fairly steady? Or are there any other take rate impacts that we should be mindful of, like, for example, with the enterprise partner or anything that might influence some of these numbers as well?

Michael Linford, Chief Operating Officer, Affirm Holdings: Yes. We stopped short of guiding to mix specifically. But as you saw this quarter, monthly 0% loans were growing north of 90% year on year. So we would expect that that loan product in particular continues to take a bit of share within our mix. But otherwise, I think the most important thing for us is that the units we’re creating are profitable and that we have a funding plan and a mix plan that allows us to sort of stay in that 3% to 4% ROTC range.

And with the guide, we’re expecting to be at the very, very high end of that range from a revenue less transaction cost take rate perspective.

Zane Keller, Head of Investor Relations, Affirm Holdings3: Okay. That’s really helpful. And then I guess just a follow-up following up on Will’s question around funding. Want to ask, are you guys seeing just given that the funding environment is the best it’s been in quite some time, have you guys seen any like uptick in competition or like irrational players that might be kinda spoiling the water? And and I guess like if so, how are you guys kind of dealing with that and continuing to grow while maintaining, really solid credit?

Max Levchin, Founder and Chief Executive Officer, Affirm Holdings: Yeah. For us, the quality of

Rob O’Hare, Chief Financial Officer, Affirm Holdings: the credit isn’t really a decision. It’s something we constrain the business with, and then we operate from that point. And that’s not lost on our capital partners. Again, I think the reason why what I consider to be the best credit investors in the world want to partner with a firm and do is because of that commitment we’ve made to operate the business in a certain way. And we’ve done that not just when things are really good.

We’ve done that back through all of the turmoil that you’ve seen over the past half decade. Our best investors see that, they recognize that and they’re attracted to it. Again, we think about these things as long term partnerships. I think some of the behavior or concerns that you’re alluding to would exist in people who are looking for just kind of more tradie type relationships, one time y. And that’s just not how we operate our business.

So it’s kind of far away from us. And again, when you think about choosing your partners, and we have the luxury of choice given our performance, thinking about the partners we choose to do business with, our team is really selective around partners who we know are going to be thoughtful and not get over their skis and chase anything away from them. I talk to partners and they share that they either were pursuing an opportunity and didn’t get it because they weren’t willing to pay up. Both of us are happy in those moments because I know that my partner is being disciplined and that discipline will benefit us in the long run. And I think there’s just so much capital to go to work right now that it doesn’t really give me any concern.

Zane Keller, Head of Investor Relations, Affirm Holdings3: Great. Good to hear. Thank you, guys. Nice results.

Conference Operator: Thank you. And our next question comes from the line of Andrew Jeffrey with William Blair. Please proceed with your question.

Unidentified Speaker: Hi. This is Adip Chaudhary on for Andrew. Thanks for taking our questions. We wanted to ask on the international strategy in The UK, but also in other geos you might be looking at and kind of the opportunity for Affirm to bring its underwriting product to the rest of world. And then secondly, how the mix of GMV might look differently internationally kind of versus Affirm’s core domestic business?

Max Levchin, Founder and Chief Executive Officer, Affirm Holdings: It’s a great question. Happy to report that we are in friends and family testing in The UK with our Shopify friends. It’s very exciting. So that’s obviously a enormous potential of of that. It’s not lost on anyone.

Obviously, we we have merchants that we’ve taken live there and are excited to bring bring on a few more of our own. But Shopify is just an incredible partner in our growth, and we we think we we have it for them as well. So so that that’s coming quite soon. The mix is a little hard to tell in the following sense. We know that the market has tremendous appetite for pain three and pain four, which are traditionally zeros, because that’s what the majority of the competition does the totality of their business in.

But we also know that all the major merchants we’ve spoken with or signed have said, what we really need from you guys is longer terms. We want six months, twelve months, which obviously, to a large degree, will be interest bearing. So as of right now, I think the mix that we have in The UK is skews more interest bearing than not. As we scale Shopify, that is absolutely subject to change just based on what this will do relative to what’s available. So it’s a little too early to make claims.

We are absolutely going to be as mindful and as attentive to credit in The U. K. As we have been in The U. S. And Canada.

That’s not an optional thing. We’re not going to play it fast and lose whatsoever. But we feel very good about our ability to get the data we need to underwrite and also just to achieve the scale we need to make sure that the levers of control are useful. In terms of other geographies, I think we’ve been pretty transparent that we’re not going to show you a map, but if we drew one, it would look like Europe.

Unidentified Speaker: Got it. And if I could ask a quick follow-up, can we just get a high level update on the Apple Pay partnership and if there’s anything kind of incremental to share there? We,

Max Levchin, Founder and Chief Executive Officer, Affirm Holdings: as is our custom, do not talk about generally speaking, individual partners, but in particular, we do not talk about all the partnerships in any detail.

Unidentified Speaker: Thanks.

Conference Operator: And our next question comes from the line of John Hetz with Jefferies. Please proceed with your question.

Unidentified Speaker: Afternoon guys. Good quarter. And I’m looking at a globe and I can’t find anything that looks like Europe other than Europe. So thank you for that. New Zealand kind of looks like Japan.

Sorry. The question on, I guess, engagement, higher frequency of engagements. I guess as a customer seasons on the platform, do the dynamics or characteristics of their typical transaction change as they kind of mature?

Max Levchin, Founder and Chief Executive Officer, Affirm Holdings: That is a really good question. I don’t know if I have a really thoughtful answer for you right now. The theory behind the card and things like Affirm Anywhere and all the other products we’ve built to gain frequency was largely that we are already understood to be a considered purchase helper. So if you’re buying a bicycle or a mattress, that’s a once every any year type purchase, you obviously should use Affirm because you will probably find a great brand sponsored zero or subsidized APR or all that. And so as we added more products, they were always meant to take the AOV down at the average.

So we would be useful in more frequent situations. And that’s generally speaking been the case. I think if you track our average ticket, you can sort of see a gentle downtrend even as the frequency increased faster than the downtrend for sure as we sort of grabbed onto more purchases, just somewhat more frequent ones. So that’s sort of the best I got off the cuff. I am sure we can publish something off cycle explaining what really happens.

But needless to say, we’re very happy with increased frequency. We’re not super fussy about AOVs. We don’t think it’s our job to make you buy two mattresses. We’re answering demand that you naturally have versus telling you in any sort of promotional way to buy a mattress, buy another one. And so that means whatever natural average ticket, average spend the user has on any unit time, that’s what we should have.

We’re still ahead of the averages if you look at things like debit cards, which is kind of our primary debit card and credit cards, which are primary replacement goods or services, will see that we’re still ahead of them, but we’re coming closer and closer. And we want to rest until we are a proper replacement for credit cards, course. And at that point, our AOV should be roughly the match to them.

Unidentified Speaker: Okay. That’s very helpful. And then, you guys provided the general framework to think about the impact of rising rates. Mean, the futures curve or the forward curve looks like there’s a high probability of lower rates. So maybe can you guys give us a framework to think about the impact of lower rates on the business?

Michael Linford, Chief Operating Officer, Affirm Holdings: Yes, great question, It should be generally the rough the same rough mechanics that we outlined during the rising rate environment where a one point move in reference rates should translate to about a 40 bps change in our funding cost. So that should be true whether the rates are going up or down. The other part of the framework that we shared previously, just for everyone, is that there will take time for those mechanics to play out because a portion of our funding is variable in nature, but the majority of our funding actually is not truly variable and will adjust with the time lag. So it may take a year or two or even longer for those rate changes to fully show up in our funding costs and in our platform portfolio base. So there’s nothing to believe.

There’s nothing in our agreements with merchants or otherwise that would lead us to believe that we wouldn’t see the same impact of a declining rate environment as a rising rate environment if you’re looking purely at funding costs. I think the question that we make sure we ask internally is if rates are declining, why is that happening, right? And there could be offsetting impacts elsewhere in the business if rates were to decline because unemployment was rising or there was stress on the consumer, obviously, could lead to costs elsewhere in our base.

Unidentified Speaker: Okay. Thank you very much.

Conference Operator: Thank you. And our next question comes from the line of Matt Code with Truist Securities. Please proceed with your question.

Zane Keller, Head of Investor Relations, Affirm Holdings4: Hey guys, thanks for taking the question here. Wanted to go back to the 0% topic, but wanted to address it from the merchant side. So you talked about the number of merchants funding this offering double doubling year over year, and I believe that’s up to 7% of your total merchant base now that’s funding the 0% APRs. Curious like as we look forward, what you think that penetration rate can get to?

Max Levchin, Founder and Chief Executive Officer, Affirm Holdings: It should round up to almost 100. There are and I’m prone to some hyperbole with numbers, and Rob is laughing at me. But here’s what I really mean by this. So merchants are broadly divided into a handful of categories, but one way to do it is to think of the margin they spend on marketing. My contention is that marketing budget is at least as well spent at the bottom of the funnel as it is at the top.

If you’re broadcasting a story of why somebody should come shop with you, you’re frequently doing it in terms of going out of business sale, hopefully not, but more like 20% sale or a Christmas sale. So the sort of sales driven consumer acquisition is a little bit of a hand grenade approach to trying to make sales. At the very bottom of the funnel or at the product exploration level of the funnel, you can be much more precise. And with our technologies such as Adapt AI, where we offer consumers the exact or our estimation of exact financing offer that would compel them to buy, it’s just much cheaper for the merchant. They would spend a lower percentage of their marketing budget if they thought of it this way at the bottom of the funnel.

The adoption curve of these tools, the 0% APR contract, is entirely a function of these merchants realizing that the marketing money they’re spending is better spent on such promotions at the bottom of the funnel versus the blanket coverage at the top of the funnel. And every year, we’re just doing slightly better, making sure this is convincing, everything from showing them results and or working with them to test this, publishing white papers, educating our salespeople, helping them educate their internal accounting people, etcetera. And so at the limit, I think every single merchant will benefit from these programs. There are merchants whose margins are quite low naturally, and they spend very little of the overall GMV marketing themselves, maybe because they’re already at scale, maybe because they just have an alternative distribution model, that will be the last holdout. But generally speaking, this is a more efficient way of driving sales.

It is apparent to a large enough body of GMV producers that it will eventually trickle down to the rest of the bunch. So that’s my conviction and I’m standing by it. And every year we have more and more zeros to show for it. It will keep happening until morale improves.

Zane Keller, Head of Investor Relations, Affirm Holdings4: No, thanks Max. If

Zane Keller, Head of Investor Relations, Affirm Holdings5: I could just sneak in

Zane Keller, Head of Investor Relations, Affirm Holdings4: a follow-up. Max, you addressed this in the shareholder letter. You touched a lot on AI. I was hoping you could just talk about it on

Zane Keller, Head of Investor Relations, Affirm Holdings3: the call here

Zane Keller, Head of Investor Relations, Affirm Holdings4: too. Just kinda like how you’re thinking about the future for AgenTric Commerce and and Affirm’s role in it.

Unidentified Speaker: It it’s it’s

Max Levchin, Founder and Chief Executive Officer, Affirm Holdings: in the letter. I try to try to boil it down to be relatively pithy. So you’re tempting me to give the longer form that Michael successfully talked me out of putting in. But the letter speaks to it pretty well. We think that AgenTek Commerce is going to be extremely successful for some categories of transactions.

It may not be super successful for all of them. Many transactions require final human approval just because they have to do with taste, kind of the unstated weakness of today’s state of AI. It’s fundamentally taste free. It doesn’t know what’s beautiful. It certainly doesn’t know what’s beautiful to you.

And a lot of purchases are made with taste as the front and center of the why. But the need to finance beautiful things or things that you require isn’t going away. So inherently, we will be in those transactions just like we have been able to find our way into all the other ones. The thing that’s compelling for us about AgenTek Commerce in particular, it’s fundamentally a rehashing or remixing of e commerce as it exists before AI. Like, you can imagine the conversation about universal carts has been around forever, and no one’s ever really built the universal cart of any kind of scale.

Universal shopping cart is very much what’s going to happen inside these chatbots if you are to close these transactions from multiple brands, multiple stores, multiple warehouses in the same chat session. And so this idea of remixing e commerce is what I think certainly successful first act, maybe all the acts of agenda commerce looks like. We are built to be mixed into all environments. You see us pop up in places like shopping installments, which is a really deep integration. We are a component of someone else’s wallet.

You see us inside Chrome Autofill, which is a completely different integration, but not actually very different from our point of view because our services work in that environment. Very different environment, very similar integration, almost identical consumer experience as far as Affirm is concerned. You will see versions of this in Agenda Commerce as that rolls out as well. And we’re pretty excited about it. I don’t I mean, I’m generally a techno optimist, so you should be careful what you sort of believe with my sort of rose colored glasses on.

But I don’t think it’s going to cannibalize commerce at a fundamental level. I think it’s actually going to increase volume for a lot of merchants. I think we will find that some things are still going to be purchased the old way and other things are just going to become naturally more obvious inside of an assisted or assistance driven transactions and we’re going to be here for all of this.

Zane Keller, Head of Investor Relations, Affirm Holdings4: Really helpful. Thank you.

Conference Operator: Thank you. And our next question comes from the line of James Faucette with Morgan Stanley Investment Management. Please proceed with your question.

Zane Keller, Head of Investor Relations, Affirm Holdings6: Hey, good afternoon everybody. Wanted to ask on the PSP integration, pretty interesting announcement of BNPL with Stripe Terminal. I think we there’s potential for that to or similar type announcements to be made with other payment service providers. I’d be curious if there’s any framing you would provide in terms of how important you think the PSP channel will be for your business, particularly when we think about the business overall excluding Amazon and Shopify and as a way to add additional merchants? And how do you intend to lean into that channel etcetera?

Max Levchin, Founder and Chief Executive Officer, Affirm Holdings: Good question. Generally speaking, offline is still kind of the greenfield of buy now pay later. Fraction of online to offline is still whatever it is these days ten:one, eight:one. So there’s a lot more there than inside e commerce. Any ad binoculator is a minute fraction that world because the integrations are just difficult.

And discovery is hard. Placement of you should think of this in more affordable terms, sort of messaging prompting at the product level is difficult. So it’s important. It’s important insofar as when we go to talk to a merchant that has a large off line presence, talking to them about let’s promote something together and let’s integrate something together are two conversations. Being able to say, actually, we don’t have to worry about the latter.

It’s already built into your point of sale processor. Let’s just talk about the promotional details and how we’re going to advertise the opportunity to finance things without fees, frictionlessly, without gimmicks. Makes the conversation easier because now you are talking about that marketing budget and discussing it with just one part of the retailer versus a whole separate IT environment that says, Well, sure, we’d love to do it, but our roadmap is busy until 02/1930. So in that sense, it’s a huge boost. It’s an enabling technology, not a now that we have it, every offline partner is just going to fall into our lap.

So the work isn’t eliminated, but it’s meaningfully reduced.

Zane Keller, Head of Investor Relations, Affirm Holdings6: Got it. That’s really helpful. And then just a quick clarification on 0%. I certainly understand and think that it’s the push there and the benefits you get are pretty clear. But I’m wondering in terms of the shorter duration of 0% that you called out and how that evolved during the course of the June.

Is that a seasonal thing? Is that just an expansion of availability, a change in the type of customers that are eligible and opting for 0%? Just trying to get a little bit of color how to think about that component on a go forward basis. Thanks.

Michael Linford, Chief Operating Officer, Affirm Holdings: Yes. Thanks for the question, James. I think the answer really was in the question. It was really a mix of both. We do have seasonality in our business generally, but certainly seasonality within our 0% programs.

And and that showed up a bit as well, especially when you’re comparing maybe across q three and q four. And then also, when we introduce zeros to a new merchant, one of the ways that we can do that is by making the shortest term that’s presented in the financing program a 0% offer. And so that has the natural output of shortening term links for that merchant’s program as well. So it really is a range of things that were at play in this quarter. And I think it speaks to the flexibility and just our ability to customize across multiple surfaces, term length and APR to make sure that we’re putting the best program together for our merchants and for consumers.

Zane Keller, Head of Investor Relations, Affirm Holdings6: Great. Thanks so much guys. Have a good day.

Max Levchin, Founder and Chief Executive Officer, Affirm Holdings: Thanks. Thank

Conference Operator: you. And our next question comes from the line of Reggie Smith with JPMorgan. Please proceed with

Zane Keller, Head of Investor Relations, Affirm Holdings7: Good evening, guys. Thanks for taking the question. It’s funny I wanted to follow-up on the question that James just asked, but take it in a slightly different direction. So I’m thinking about PSPs primarily online, so e commerce, not named Shopify. Is there a way to kind of frame how do you guys think about your penetration within that channel and I guess the maturity of that channel.

So, like, if if you were to look at the volumes in that segment, are they growing faster than the line average, slower? Like, help, you know, kind of frame, that channel for us to the extent that you can. And then whether or not you guys often have default on status or how that works. And then my last question, around the follow-up to that is just quickly on that merchant that’s leaving in the first fiscal quarter, is the thinking that you’ll still your logo will still be available on the website or has that changed? Thank you.

Max Levchin, Founder and Chief Executive Officer, Affirm Holdings: I’ll start and let Rob finish just because I think you’re asking about assumptions in the guide. On the PSP side of things, we’re pretty early there. Obviously, default on is a really important, really powerful thing. We have multiple partnerships of this matter with PSPs not named Shopify, and we’re working pretty hard on expanding the list and being default on. I don’t have the growth rates off the top of my head, so I don’t want to perjure myself here.

But I think they are accretive to the growth rate of the business, not detracting. But I will let Zane or Rob look this up. If I’m wrong, I’m sure they’ll correct me soon enough. But I’m pretty sure I’m right on this one. So it’s a really important channel.

It’s pretty early. If you just follow our announcements, you’ll see that these are significantly more recent than, for example, the Shopify announcement. So just from the pure scale and time to penetrate, these are later comers and there’s more to be had there. So all of that, we think, accretes to the future growth. The merchant sets are a little bit different sometimes.

Obviously, Shopify has an extremely broad appeal. But given they have some degree of this is the canonical Shopify merchant, the same is true for every other platform or aggregator or payment processor, etcetera, etcetera. So each one gives us access to something that we probably haven’t seen before to at least some degree.

Unidentified Speaker: I think that’s all I want to say. Piece.

Michael Linford, Chief Operating Officer, Affirm Holdings: Yeah. And in terms of the question around the merchant, I think the easiest way to talk about the relationship is just to outline what’s in our outlook. And what we’ve assumed in the outlook is that the integration goes away at the end of this quarter. And so it’s unclear exactly what the mechanics will be of how the relationship plays out. But that’s what we’ve assumed and and we think we’ve taken a pretty conservative stance in terms of volume in fiscal twenty twenty six coming from this merchant.

Zane Keller, Head of Investor Relations, Affirm Holdings7: Got it. Not to belabor it, when you say go away, does that mean zero volume from that merchant or that net would go away? What does that mean exactly?

Michael Linford, Chief Operating Officer, Affirm Holdings: What we’ve assumed in the outlook is that through the integration, there would be zero volume after that.

Unidentified Speaker: Got it. Okay. Thank you.

Conference Operator: Thank you. And our next question comes from the line of Harry Bartlett with Rothschild and Company, Redburn. Please proceed with your question.

Zane Keller, Head of Investor Relations, Affirm Holdings8: Hey, guys. Thanks for taking the question. I just wanted to touch on international again. So I mean, I’m just thinking about shop pay, you about going to UK, but in terms of how quickly you can roll that out into other geographies, is it now a case of you have a playbook and then you’ll be able to kind of move a bit faster if you’re looking to move in other areas of Europe? And also, I guess, just outside of shop, do you have any, I guess, difference in your approach to how you’re going to expand internationally?

I’m guessing just coming from this from the point of brand awareness maybe isn’t quite as strong as it is in The US and there are some incumbent players at checkout. So I just wonder if you have a different approach here on maybe the sales and marketing or consumer awareness. Thank you.

Max Levchin, Founder and Chief Executive Officer, Affirm Holdings: I’ll try to touch on all these things as quickly as I can, since there’s a lot here. So the short answer to your first question is yes and no concurrently. So in terms of the platform build and a lot of the technology, it is certainly built to be reusable. We’re not gonna you know, launch UK and go off and

Rob O’Hare, Chief Financial Officer, Affirm Holdings: to build

Max Levchin, Founder and Chief Executive Officer, Affirm Holdings: another completely different system to be live and fill in your favorite European country. That’s all reusable and designed to

Unidentified Speaker: be

Max Levchin, Founder and Chief Executive Officer, Affirm Holdings: reusable, etcetera. We’re also not too concerned about spinning up technological or, data center presence, in AWS that they exist in every market. Different things that are or things that are different about every market is access to data, some of the peculiarities of local regulation, and then also local licensing is really important. So some things you can infer pretty easily about how might one approach to not having to do double and triple work on licensing or following regulatory regimes. So you can be assured that we’re doing all those things as intelligently as we can.

But there’s some work involved even if you’re sort of as intelligent as you can possibly be with all those things. So that part, I think we’re in really good shape. We don’t expect to go off the radar for too, too long, and we’ll have more to say about it in the coming quarters. Things like capital markets is not a concern, just for the avoidance of doubt. In terms of sales and marketing, we said it before, so this shouldn’t be news to anybody.

But we have a nice list of multinational partners. Are partners that are with us in The US or Canada or UK who are multinational and are generally speaking very pleased with our performance. We think we have a very good shot at talking those folks into being useful to them in more than one market. We’ve been successful at it between US and Canada certainly. So I see no reason why with the appropriate level of attention and good hygiene we couldn’t do this again.

So that’s the expansion plans for kind of these lighthouse brands. We don’t anticipate a dramatic investment in our brand in The U. S. Or UK or beyond, mostly because we market very successfully with our partners. And the majority of the marketing spend in our financials reflects the go to market efforts we share with our merchant partners where we come together in all sorts of interesting promotional ways.

So we’ll do that. We have some pretty exciting plans for that in our latest market. I don’t want to spoil any surprises just yet, but that’s certainly coming. It will not break our bank by any stretch. So it’s all fully priced into the guidance.

Zane Keller, Head of Investor Relations, Affirm Holdings8: That’s great. Thank you.

Conference Operator: Thank you. And our next question comes from the line of Jamie Friedman with SIG. Please proceed with your question.

Zane Keller, Head of Investor Relations, Affirm Holdings1: Hi. Back to the AI conversation, I know Max, want to keep it pithy, but I want to ask specifically about what you call it here in adaptive checkout and specifically the Adapt AI deployments that show an average 5% increase in GMV. What is that about? Can you like unpack the business process of how that works?

Max Levchin, Founder and Chief Executive Officer, Affirm Holdings: Sure. And we are not the best at naming products here, as we were lamenting earlier today internally. You’ll have to forgive the repetitive sounding names. So adaptive checkout is the umbrella name of all the various manifestations So if you encounter an Affirm powered checkout, Affirm checkout inside a wallet, Affirm checkout inside a website that’s directly integrated, so on and so forth.

It’s all powered by this thing called adaptive checkout. And it wasn’t always this way. We had a bunch of different builds of a firm checkout flow. And over the years, we’ve been we generally have a tendency to refactor and rewrite a bunch of our products because we think it’s just good hygiene. So as we maintain good hygiene, we’ve over time consolidated into almost a single thing with lots and lots of very thoughtful configurability pieces.

Until Adapt dot ai came along, most of this configurability was essentially manual in a sense that we would sign a contract with the merchant. The merchant would say, Here are the terms I want. Here are the programs I’m willing to fund. And I would like a lot of control over when I turn them on and turn them off. Of course, we’re very happy to oblige, because a huge part of our moat is this configurability is very powerful for the merchant, but it’s also not replicable with any of our competitors.

Adapt AI was sort of the answer to the question of, all right, so we’ve now built this thing that’s the ultimate mousetrap of optimization of checkout, but there’s a lot of human effort involved in getting to the best results. And it’s not really there’s not a book we’ve published on best practices of tuning adaptive checkout for merchants. And we should and then they say, Well, actually, we have this really great AIML effort. Why don’t we, instead of writing a book about it, build a model that automatically figures out the absolute best way of converting consumers at an Affirm powered checkout? And while we’re at it, let’s try to transition a lot of our merchant relationships, or any or all of them if we could, to something that looks like we will take care of all optimization.

Let us figure out the best set of programs for any given consumer as they’re staring at a cart or a product on your site or in your store, and we will take care of the rest. We will convert them to a buyer from a shopper at the best possible terms for them that is compelling to them. Not everybody wants a 0% deal. Many people actually really care about the monthly cash flow impact, and they’re far less APR sensitive or total interest sensitive. Many people are extremely headline APR sensitive.

And you can sort of slice and dice it from there. Tuning that manually works beautifully. Tuning that automatically is an extraordinary improvement. And the 5% is a great early result. We expect more and we’ll certainly brag about it as we get there.

But Adapt AI is AI powered configuration of adaptive checkout. And that’s what we we talked about rolling it out. Last quarter, we’ve rolled it out with select merchants. Now obviously, we are asking for more control from the merchant. We’re telling them, look, if you just give us the ability to tune for each individual consumer what they see, it will cost you less and it will convert into more volume.

It will take a little while for everyone to sign up for that, but the ones that have are enjoying the benefits early and we’re tuning the models more and more as we go.

Zane Keller, Head of Investor Relations, Affirm Holdings1: Fascinating. Thank you. I’ll jump back in the queue.

Conference Operator: Thank you. And our next question comes from the line of Giuliano Bologna with Compass Point. Please proceed with your question.

Zane Keller, Head of Investor Relations, Affirm Holdings5: Thanks for taking my questions and congratulations on another incredible quarter. As a question, and this is somewhat of a high level concept. But I’m curious when you look at a lot of the wallet partnerships, if there’s kind of a new frontier where some of the wallet partnerships could enable offline transactions in the future and how you plan for that and how material that could be in terms of driving incremental GMV growth? And then maybe how you think about the underwriting because you have an interesting opportunity to continue to differentiate and increase your leads ahead of your competitors with such products like that.

Max Levchin, Founder and Chief Executive Officer, Affirm Holdings: Certainly very excited about offline commerce. I’m on the record talking about that every quarter, I think. I think if you look back at some of the announcements made by some of the largest wallets out there, you will see that they too are excited about offline applicability of the products that a firm offers. So some of that is in the near future. We try to be, as always, conservative in our promises and degrees of excitement about things that aren’t live yet.

So I’ll hang back on the exactly what we expect from it. But I think the opportunity is enormous. I sort of covered this in little bit earlier question, but there are two very distinct puzzles. Number one is how do you inform someone that this thing, this thing being a firm, works in their favorite store? We have some, we think, really good ideas on how to do that.

You’ll see some of them actually quite soon on our own surfaces. But there’s also the problem of integration in payments nerd slang. It’s called tender delivery. Tender delivery is integration with point of sale systems, digital wallets, various forms of NFC, all of that’s on our radar. All of that is really important to us, and we’re quite engaged in all those things.

Again, the greenfield size is roughly 10x of what we’re chasing in e commerce. If you believe we can solve the latter problem, which we’re very confident in, it becomes a question of how well can you communicate it and how aggressive can you be in communicating it to shoppers from the brand point of view, which I think past five years ago, some of them would have been wondering if someone might go first. I think at this point, it’s flipped to actually it should be promoted because it’s so successful in driving conversion. One fun fact, we see increase in demand for Affirm anytime anyone in the industry runs a large promotional campaign. Just the notion of, Oh, yeah, buy now, pay later is available, accretes to Affirm naturally, even if we’re not the ones putting our name on the ad.

So it’s just a matter of awareness more than it is anything else in the offline world.

Zane Keller, Head of Investor Relations, Affirm Holdings5: That is extremely helpful. I really appreciate that. I’ll jump back in queue.

Conference Operator: Thank you. And with that, there are no further questions at this time. I’d like to turn the floor back to Zane Keller for closing remarks.

Zane Keller, Head of Investor Relations, Affirm Holdings: Thank you for the questions today, everybody. We’ll see many of you on the conference circuit soon, I’m sure. Have a good Labor Day weekend and talk to you soon. Bye.

Conference Operator: Thank you. And with that, this does conclude today’s teleconference. We thank you for your participation. You may disconnect your lines at this time.

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