Affirm Holdings, Inc. — Call Transcript 2026

All right. Just remember, there are millions of people on the camera. That's right. 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, 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. Let's start off, beyond buy now, pay later. I asked a question at the investor forum. Max really laid into it. We're not just buy now. "Oh, okay, Max. Okay, all good." With the launch of Affirm Bank, it's clear that you have bigger ambitions out there. 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 head as you diversify away from. Sure Consumer transactions. Sure. 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? Yep. 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. Yes. In the short run here, assuming that 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. Really, in this 1st 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 as well. What kind of products would those be? Well, just, you think about even just the basic buy now, pay later loans that we originate today. Yeah. We utilize a bank partner to originate those loans, over time, we would expect the originations to come more from the Affirm Bank versus our partner banks. Okay. 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. I think over time, we're looking to bring those in-house. 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 consumer's financial life. This bank charter is, I think, a good 1st step, but it's not the end-all be-all in the next couple of years. Is the right way to frame it, I ask the question, if 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, three- to five-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. Right. It's not 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. Yeah. 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. 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. Right now, I think 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 same suite of financing products at merchants that accept Visa, right? Almost anywhere. In-store, e-commerce. I think right now we're seeing just the strength of the product offering we have is really resonating with consumers, and we're continuing to deepen the relationship with our existing base through products like Affirm Card. Yeah. 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, this year will be somewhere around 40%. Next year it'll be 35%, and then 30%, and then 25%, and that's it, where I look at three secular tailwinds, it's geography, it's vertical, and it's more users. Sure. Could this be a much more multi-year kind of growth cycle that you don't expect to see deceleration? We think the opportunity here is immense. 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? 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. 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. 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 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- Sure of a recession anyway. Let's talk about how the current backdrop influences your decisioning and your growth and all that, and which indicators are you watching most closely? Yeah. I think the most important thing for us at 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'll incur for a cohort of new loans is in line with our expectations. That's true in a good market. I know you want to talk a bit about sort of some downside scenarios. Yeah Some hypotheticals there. 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 zero losses for a cohort. We do take risk in our business. That we're able to size that risk in advance, and we're able to drive predictable outcomes against those expectations. Yeah. Total sense. Anything change materially on the consumer health front in the last hour? Yeah. Nothing today. Nothing today. Again, I think it all comes down to us, like you mentioned it, one of the metrics that we track very closely is something called 1st payment delinquency. Yeah. Again, for a new origination cohort, when they get to that 1st repayment event, which typically is about 30 days in to 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? 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. Yeah as we'd like. Yeah. 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. The macro side, you're watching unemployment and wage growth. On your business, you're watching 1st repayment. Yeah. I think we're obviously aware of the macroeconomic environment that we're in. Because the loans that we're originating are so short-dated, the average term length is roughly one year. The weighted average life is even shorter. It's closer to five months. 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 $250 increments. 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. We can sort of course correct and change our aperture really in a matter of days. You talked about your average duration is about five months. That's obviously because the interest bearing and zero percenter is making up 85-ish%. Yeah of the book, right? For pay in X, it would be shorter. Be shorter, yeah. than that. It's a six-week loan. Yeah. Probably closer to three weeks. Yep. Your average size is, was it $250? Is that- $250, $275. Yeah. Somewhere in that range. Okay. Let's talk about 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. I think that's largely true if you're talking about traditional open to buy credit products. What I'm talking to more and more investors about, and because I've done this before in the company that I ran. We're micro duration. We have a matter of, like, 18 hours 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. Yeah. 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. That doesn't make them bad credit risk. It makes them bad credit risk if they have the bad product. If they have the right product, this demographic, it's fine. Right. It's a good fit, and I think that's what you guys found. Yeah. It's a good fit. 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. Yeah. We look a lot like a cross-section of the U.S. Yeah. Yeah. I think there's a lot of value in being current with the consumer, and we underwrite every loan every single time. More than 95% of our transactions in a given quarter are coming from repeat borrowers. Yeah. 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. Yeah. Of course, if we're in a stressed environment, that could change, and we can see good payers go to bad payers. 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. Yeah. Average income, have you disclosed average income? Yeah Average FICO scores? It's in roughly the $75,000 a year range. Yeah. Average FICO can fluctuate a little bit, but it's in sort of the $650, $660 range. Okay, cool. it's sort of a prime to near-prime borrower if you sort of put brackets around. Yeah the medians. Yeah. Yeah. Okay, cool. Let's talk about downside scenario. Everything is going really well now, fairly steady. It kind of feels like we should say we should be speaking more negatively, just given the macro, but the data's not showing it. Yeah. You're not seeing it, Chime's not seeing it, Cash App's not seeing it. All the peers are saying, "We're not seeing it. Right. Let's just say, tomorrow morning, someone walks into your office and says, "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. Yeah Of we are about to enter a consumer-led recession, or the consumer's 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. Yeah. How do you manage that downside scenario? Right. What do you see first which says, "Hey, we need a meeting on this"? Right. How does that progress through the system? Yeah. The analogy that we've used historically is that we always have our hands on the steering wheel. Yeah. Even in benign times, which I would classify today, frankly pretty benign consumer and credit environment. Even in benign times, the entire executive team is looking at the weekly credit report. Yeah Risk team is pulling together. As I mentioned, first payment delinquencies at both the four-day mark and the 30-day mark, those are really, really important and primary internal KPI that we manage the business to. 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? Yeah. 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. Honestly, in terms of actioning a company-wide change in our underwriting posture, we would really have to see it show up in the 1st payment delinquency data. I mean. Putting aside something like maybe COVID. Right It just was sort of this black swan event. Yep Honestly, the company actioned very quickly there. If it's sort of a typical, the stress is starting to creep into the consumers' financial lives, then it'll show up in our data, because again, I think we originate enough loans that it's. Going to show up there. We'll start to work on getting the models to sort of fit where the consumer is. 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. Yeah The IR team does a bit of a disservice to the incredible risk team that we have internally. Yeah. 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, and we can go to 92.7 or 92.75. Yeah. 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 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 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. Yeah Well-defined playbook for how to roll this out across the merchant base. The change is going to be gradual, right? It's not like Wednesday afternoon, everything's fine, and then Thursday morning, everything explodes, right? Yeah. This is going to happen really gradually. This is the other thing we should talk about. Everyone says, "Well, Affirm really hasn't seen a down cycle yet. Yeah. You could say, well, late 2022, early 2023 was kind of, sort of, it was short-lived. How long would it take for you to start saying, "Okay, our rates are starting to look like they're forming a trend"? Yeah. Is it a week or a month or? I would say typically if the new cohort of 1st payment delinquencies comes in and there's an elevation in terms of delinquencies versus expectation, that's all it takes to prompt an investigation. 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 a merchant's configuration. 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? The answer to that question will sort of inform how we triage the remedy. 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. Yeah. In the company that I ran, that's how we ran risk as well, right? There was one merchant where a few locations were driving our loss rates through the roof, so we just turned off those locations. Yeah. Everything was fine. Yeah. Right. Okay, you look at all that data. This happens gradually over a few weeks/months, depending on what you're seeing in the data. Yeah, but again, it's like, really that 1st payment delinquency tells us a lot about- That's the key. Is the underwriting right? Is the model set up properly to predictably drive credit outcomes? If we see drift, we take that really seriously. Yeah. Is it a foregone conclusion that in a macro slowdown, you guys automatically have lower growth? Is it definitely a foregone conclusion? You could just say, "Hey, if the traditional lenders pull back, more people are going to want to go to buy now, pay later. Sure. We could actually see steady growth in a downturn even though we're scaling back on our risk. Yeah. Is it possible? I think it's definitely possible. Maybe not likely. Both Affirm and buy now, pay later broadly are continuing to take meaningful share within U.S. consumer wallets. It's not out of the question that we could continue to grow through a downturn. Again, I think the most important thing is that we're driving predictable credit outcomes. That's important to Affirm. Yeah It's also really important to our funding partners. Yeah. 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. Yeah 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. Really, again, we want to get it right, and I think we have every incentive to get the underwriting right. Let's continue on this track of the down cycle, whenever it'll happen. You guys perform well. I'm assuming margin stays relatively flat, right? You manage to the margin. Yep. Maybe growth fluctuates, maybe it's down, maybe it's steady, maybe it's up a little bit, depending on how the market's changing. On the other side of this, if we look forward, people are going to say, "You guys managed through the cycle pretty well." You are underwriting a specific transaction at a specific point in time. Right. Your algorithms are terrific on the risk side. The margin stayed flat. You didn't have any major losses or provisions or anything like that. Right the traditional creditors will have. Yeah, maybe growth fluctuates. It's down a little, it's up a little, whatever. You guys sell through, and now we're back to business. I think that's right. Every recession is different, of course. Yeah. It's hard to be precise in this hypothetical. I think what's important to remember is that we set up our financing programs, and the other important thing is every merchant is different. Yeah. Every merchant has a different cutoff because there's just different product mix, there's different economics in each of our merchant relationships. 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 break even or better. 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 break even loans out of the system. It should not be a significant drag from a profitability perspective. Yeah. We are giving up growth, of course. Yeah. That's the KPI that we're going to see potentially soften. 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. Yeah. 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. Let's talk about happy stuff. Did I kill that enough? 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 till 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. Yeah 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. Talk to me about cash flow underwriting and how much better you think this could make your system. Could you actually see, are people underestimating the impact it could have to volume growth just because you're going to have much better data? Yeah In addition to the algorithms that are already top of class? Yeah, look, there's a whole team at Affirm focused on developing and then testing and ultimately graduating the next underwriting model. Yeah. 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. The company's been around for about 15 years. 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. There's a whole bunch of criteria that are often diametrically opposed here to make sure that. Yeah the model is truly better for everybody involved. It's a really high bar. Again, cash flow underwriting is part of that. We ultimately want to find a way to get to a yes with the consumer if we can, right? 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. Yeah. Yeah. I think 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? Oh. I think the other thing to keep in mind is just most of our consumer transactions today are what we call repeat borrowers, right? Right. Meaning it's not their first Affirm loan. Yeah. Over a consumer's life cycle, we tend to rely more and more on the consumer's repayment history with us. Like their Affirm file starts to matter a lot. Some more than others because no, yeah. I think where it helps us is just in some of the growth areas around acquiring new users. Yeah New merchant maybe. Yeah. It can be really compelling there, because sort of the early days of a merchant program are really critical to get on that- Yeah steep trajectory of growth. Yeah. Yeah. I know that firsthand. Yeah. Cash flow won't necessarily be applied to everybody, but in certain use cases. Yeah it's going to really drive difference. Again, I think for certain populations. That makes total sense. Yeah. It can be really compelling. Yeah. Yeah. Totally. Love that. Let's talk about credit. We've done a lot of work post the controversial, not controversial. I forgot the name. Ridge. One of your people in the credit facility. Oh, Stone Ridge. Stone Ridge. Thank you. That was a middle-aged moment. Rob, thanks for bailing me out. 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, "Look, we will forego growth to make sure that our creditors are happy because that's our lifeline for the next- Yep As far as the eye can see in terms of growth." We don't really see a problem there. 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. Yeah. 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. Yeah. Okay. Just want to understand all the mechanics and sort of the broader funding ecosystem. Yeah, if you asked 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. Yeah Of just the health of that environment and that market and right now, honestly, we're seeing spreads at all-time lows on a like-from-like basis across recent deals, and so it feels like the market's really healthy today. Yeah. They like quality. They do, yeah. If things go south, 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. Sure. From the investor forum, you've 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 ain't as easy as you guys make it look. If the 25% medium-term GMV growth target proves to be conservative over time. At least. You forgot two words there. At least 25. At the least. Yeah. I have the greater than sign in my question here. Yeah, it's important. Sorry. It does a lot. Yeah. I need my glasses to get that one. If the at least 25% growth, people are going to love that 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. If you look at sort of the drivers of our growth today, right? Yeah. Both point of sale and the direct-to-consumer businesses are both growing far in excess of at least 10% we called out. Love it. For both of those programs. Again, if we outperform that, it's because we're sort of maintaining what we're doing today, right. 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. Look, I think we've got two 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. 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. I don't think we're 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. Yeah. They're not in your, That's all. I think that's appropriate, right? Yeah. 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's- It doesn't mean we're not excited about them, but just in terms of how we guide. Yeah. I think that's the right way to do it. No sense setting up for failure and false expectations, right? It's everything you're seeing today, plus a couple of other things that could be more meaningful. Yeah Et cetera. Okay, cool. You did say at least 25. At least 25. That could be the title of the note right here. Maybe we'll do that. Okay, let's switch to RLTC guidance. I thought you'd go to three and a half to four and kind of But 375-4, that's a tight range. Yeah For RLTC. You and I have had this conversation. Yeah offline. I think RLTC was viewed as kind of like a all-in measure about consumer health, there are so many factors in there like gain on sale and all. Yeah. There's so many factors in RLTC. It's not really a pure proxy for consumer health. Right. The 375-4, 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. Yeah. 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. 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. Yeah. Just the sort of layers that we've been able to put into the funding base, we've done three-year ABS deals that are at fixed costs of borrowing. It does insulate us against a movement upwards in an 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 two 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. That gives us confidence that some of the error bars, the error bar being a point wide, that felt like more room than we needed for these next several years of operating. Okay. It's a tight range, which I think is good because it almost removes that from the equation kind of thing. Yeah. Right? Even though people will probably still have a stroke if they see a three handle, somewhere around four I think is great. I remember the comment we made at a group lunch. I said, "Rob, if you do 3.9%, you suck. If you do four, you're good. If you do 4.1%, you walk on water." You looked at me like, "Seriously? Again, it's just coming in, 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, it just feels like the error bars we have on those. Yeah Just a lot smaller than maybe they were five years ago. Yeah When we established the 3%-4% range. Yeah. I think it's good for the narrative, too, because it pushes everything to GMV growth and margins. That's really what you should, at this stage of your development. Yeah That's really what the story is about. How fast are you growing, and are you increasing your profitability? Yeah. 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? Over the next couple of years. You seem focused, obviously, very heavily on organic growth, as you should. GMV is accelerating year-over-year at ex Walmart. How do you think about M&A? How do you think about buybacks? Yeah. How do you think about dividends, maybe? Yeah. Talk about how you rank all these. 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. Yeah. That 1st convertible bond that we did is going to mature in Q4 of 2026. We've been chipping away at that, especially there was a period in time where those bonds were trading at a pretty meaningful discount and we felt like that was kind of a no-brainer move in terms of capital allocation, was sort of buying those back, buying back that future liability at a pretty meaningful discount. I think that's served us well. 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've generated in the last year, but it's still early days there. 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. Yeah In any environment and through the cycle. Cash is an important part of how we think about stress testing and scenario planning for a downside scenario. 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. Yeah. I would say 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. It wouldn't surprise me if in the next five years we did something on the M&A front, but there's a really high bar for those opportunities given our own internal development chops. It's going to have to be the right opportunity, and it's really hard to predict the timing of that. Yeah. It's going to be idiosyncratic, I think. Look, I think over time, buybacks are probably potentially a way that we could return capital to shareholders, but I think it's early enough for us today that we haven't. Yeah Made a commitment there. Personally, I'd rather see M&A because it'll 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, but the stock is so volatile. It was 83, then 43, and now it's back up. It's like, you're not a hedge fund. Let's talk about M&A. Bring us into the exec committee meeting when M&A is being discussed, and 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." Is it that? Yeah. Is it something tangential? Take us into that conversation about. Yeah 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. Arguably the best M&A deal that we've done to date, it was probably the acquisition of PayBright in Canada. Yep Where we had an opportunity to acquire and merge with, frankly, the market leader for buy now, pay later in Canada. 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. Yeah Merchants. They had just won Apple's first-party hardware business in Canada, right? 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. Yeah, 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? Yeah. They should be able to- Yeah to get to the two or three things that are maybe below the line for internal development, but still long-term valuable to the overall strategy. Yeah 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? Yeah which is table stakes at this point. Sure. How you see it driving growth as well. Yeah. We're still at a point in our development where the only shortage is capacity to get these ideas built, right? There's no shortage of ideas. We've really pushed the product and engineering teams to utilize AI more in their development cycles. We actually did an AI tooling week in late January where we shut down development at the company for a week to let some of the early leaders in terms of utilizing AI at Affirm work with the rest of the engineering team to show and share wins. 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 more than 60% of a week's pull requests coming from AI-aided development. 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. Then if you double-click and go a level deeper, for me as 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. Yeah A feature or a piece of software. 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. 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 right-sized for the job, right? Right. We don't need the cutting-edge Claude token to check the weather, right? Yeah. Making sure that we're using the right model for the right job. That'll be another layer of optimization that we'll do, but yeah, it's been really awesome to see the acceleration in development internally. Are you monitoring the cost of tokens? Of course. I mean, yeah. The answer is yeah. Yeah. Is it a growing piece of the P&L where you're like, "Hmm, that's getting to be a much bigger number," and that's good because we're offsetting? Yeah That cost with not hiring as much in certain areas and things like that. The efficiency of a token versus a human is obvious, right? Yeah. Again, I think we've got a really robust roadmap internally. Yeah. We are continuing to add to the team. We're doing it, I think, in a pretty measured way. Yeah Of headcount growth. Yeah. 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. Yeah. Yeah, we need to build financial plans that are aware of all these things, and I think we've done a good job of that. 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." You run really efficiently. It's obviously a really incredible management team. 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. Growth. Like I said, yeah. Yeah. Good. 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. We haven't done AI-driven layoffs. Okay. All right. I have a bunch more questions, but we're out of time. All right. Thanks, Adam. Great. Thanks, Rob. Yep. Appreciate it. Thanks, everybody.

Speaker 1: All right. Just remember, there are millions of people on the camera. All right. all right Just remember, there are millions of people on the camera. just remember there are millions of people on the camera

Speaker 2: That's right. That's right. that's right

Speaker 1: 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. Okay, thanks. okay thanks We're going to get started here with Affirm, Rob O'Hare, CFO. we're going to get started here with affirm rob o'hare cfo Adam Frisch from Evercore ISI doing this as well. adam frisch from evercore isi doing this as well Thank you very much for being here. thank you very much for being here

Speaker 2: Thanks for having me. Thanks for having me. thanks for having me

Speaker 1: This is being broadcast, so everybody out there, 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. Let's start off, beyond buy now, pay later. I asked a question at the investor forum. Max really laid into it. We're not just buy now. "Oh, okay, Max. Okay, all good." With the launch of Affirm Bank, it's clear that you have bigger ambitions out there. 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 head as you diversify away from. This is being broadcast, so everybody out there, hope you enjoy and can hear everything well. this is being broadcast so everybody out there hope you enjoy and can hear everything well We're going to cover a bunch of stuff today with Rob. 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. obviously growth downside scenario credit facility all the stuff you would expect us to ask about with a few others as well Let's start off, beyond buy now, pay later. let's start off beyond buy now pay later I asked a question at the investor forum. i asked a question at the investor forum Max really laid into it. max really laid into it We're not just buy now. "Oh, okay, Max. we're not just buy now "oh okay max Okay, all good." With the launch of Affirm Bank, it's clear that you have bigger ambitions out there. okay all good." with the launch of affirm bank it's clear that you have bigger ambitions out there 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 head as you diversify away from. 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 head as you diversify away from

Speaker 2: Sure Sure sure

Speaker 1: Consumer transactions. Consumer transactions. consumer transactions

Speaker 2: Sure. 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? Sure. sure Maybe I'll just use the opportunity to clarify a little bit on the bank charter that we're pursuing. 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. 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? affirm itself is not becoming a bank right

Speaker 1: Yep. Yep. yep

Speaker 2: 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. 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. 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

Speaker 1: Yes. Yes. yes

Speaker 2: In the short run here, assuming that 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. Really, in this 1st 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. In the short run here, assuming that 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. in the short run here assuming that 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. 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 Really, in this 1st 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. really in this 1st 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 as well. 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. 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 as well. in-house as a way to diversify as well

Speaker 1: What kind of products would those be? What kind of products would those be? what kind of products would those be

Speaker 2: Well, just, you think about even just the basic buy now, pay later loans that we originate today. Well, just, you think about even just the basic buy now, pay later loans that we originate today. well just you think about even just the basic buy now pay later loans that we originate today

Speaker 1: Yeah. Yeah. yeah

Speaker 2: We utilize a bank partner to originate those loans, over time, we would expect the originations to come more from the Affirm Bank versus our partner banks. We utilize a bank partner to originate those loans, over time, we would expect the originations to come more from the Affirm Bank versus our partner banks. we utilize a bank partner to originate those loans over time we would expect the originations to come more from the affirm bank versus our partner banks

Speaker 1: Okay. Okay. okay

Speaker 2: 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. I think over time, we're looking to bring those in-house. 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 consumer's financial life. This bank charter is, I think, a good 1st step, but it's not the end-all be-all in the next couple of years. I think pretty much everything we do, there's probably a bank partner somewhere in the product. 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. even virtual cards and some of the issuances that we do there we rely on a third-party bank partner I think over time, we're looking to bring those in-house. i think over time we're looking to bring those in-house It's more of an infrastructure and a diversification play than it is becoming a financial super app or something like that. 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 consumer's financial life. i think over time we definitely have big ambitions to touch more of the consumer's financial life This bank charter is, I think, a good 1st step, but it's not the end-all be-all in the next couple of years. this bank charter is i think a good 1st step but it's not the end-all be-all in the next couple of years

Speaker 1: Is the right way to frame it, I ask the question, if 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, three- to five-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. Is the right way to frame it, I ask the question, if 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 the right way to frame it i ask the question if 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, three- to five-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? is that something that is more of a i don't know i'll put a number on it three- to five-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. you're still growing accelerating gmv

Speaker 2: Right. Right. right

Speaker 1: It's not 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? It's not like you're in a jam on growth. it's not 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? 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

Speaker 2: I think we have a right to win more of the consumer's wallet. I think we have a right to win more of the consumer's wallet. i think we have a right to win more of the consumer's wallet

Speaker 1: Yeah. Yeah. yeah

Speaker 2: 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. 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. Right now, I think 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 same suite of financing products at merchants that accept Visa, right? Almost anywhere. In-store, e-commerce. I think right now we're seeing just the strength of the product offering we have is really resonating with consumers, and we're continuing to deepen the relationship with our existing base through products like Affirm Card. 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. 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 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. 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 Right now, I think the killer app within Affirm is fair and honest financing, and that's why consumers are coming to us. right now i think 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 same suite of financing products at merchants that accept Visa, right? that's why they're opting into affirm card to be able to get that same suite of financing products at merchants that accept visa right Almost anywhere. almost anywhere In-store, e-commerce. in-store e-commerce I think right now we're seeing just the strength of the product offering we have is really resonating with consumers, and we're continuing to deepen the relationship with our existing base through products like Affirm Card. i think right now we're seeing just the strength of the product offering we have is really resonating with consumers and we're continuing to deepen the relationship with our existing base through products like affirm card

Speaker 1: Yeah. 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, this year will be somewhere around 40%. Next year it'll be 35%, and then 30%, and then 25%, and that's it, where I look at three secular tailwinds, it's geography, it's vertical, and it's more users. Yeah. yeah 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? 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, this year will be somewhere around 40%. it's like okay well this year will be somewhere around 40% Next year it'll be 35%, and then 30%, and then 25%, and that's it, where I look at three secular tailwinds, it's geography, it's vertical, and it's more users. next year it'll be 35% and then 30% and then 25% and that's it where i look at three secular tailwinds it's geography it's vertical and it's more users

Speaker 2: Sure. Sure. sure

Speaker 1: Could this be a much more multi-year kind of growth cycle that you don't expect to see deceleration? Could this be a much more multi-year kind of growth cycle that you don't expect to see deceleration? could this be a much more multi-year kind of growth cycle that you don't expect to see deceleration

Speaker 2: We think the opportunity here is immense. 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? 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. Even just the U.S. opportunity alone, it still feels like we're incredibly early in that opportunity. We think the opportunity here is immense. we think the opportunity here is immense 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? 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 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. 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 Even just the U.S. opportunity alone, it still feels like we're incredibly early in that opportunity. even just the u.s opportunity alone it still feels like we're incredibly early in that opportunity

Speaker 1: I would agree with that. I think people underestimate that a little bit, to be honest with you. 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 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- I would agree with that. i would agree with that I think people underestimate that a little bit, to be honest with you. i think people underestimate that a little bit to be honest with you Let's switch gears a little bit. let's switch gears a little bit Talking about the operating environment, inflation is kind of heating up a little bit. talking about the operating environment inflation is kind of heating up a little bit We're seeing mixed reviews, economy strong, lower end struggling a little bit more, and that's kind of the definition of the lower end. we're seeing mixed reviews economy 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- i think they're always on the verge-

Speaker 2: Sure Sure sure

Speaker 1: of a recession anyway. Let's talk about how the current backdrop influences your decisioning and your growth and all that, and which indicators are you watching most closely? of a recession anyway. of a recession anyway Let's talk about how the current backdrop influences your decisioning and your growth and all that, and which indicators are you watching most closely? let's talk about how the current backdrop influences your decisioning and your growth and all that and which indicators are you watching most closely

Speaker 2: Yeah. I think the most important thing for us at 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'll incur for a cohort of new loans is in line with our expectations. That's true in a good market. I know you want to talk a bit about sort of some downside scenarios. Yeah. yeah I think the most important thing for us at 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. i think the most important thing for us at 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? 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'll incur for a cohort of new loans is in line with our expectations. 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'll incur for a cohort of new loans is in line with our expectations That's true in a good market. that's true in a good market I know you want to talk a bit about sort of some downside scenarios. i know you want to talk a bit about sort of some downside scenarios

Speaker 1: Yeah Yeah yeah

Speaker 2: Some hypotheticals there. 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 zero losses for a cohort. We do take risk in our business. That we're able to size that risk in advance, and we're able to drive predictable outcomes against those expectations. Some hypotheticals there. some hypotheticals there Honestly, it's kind of the same calculus in a stressed environment. 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. 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 zero losses for a cohort. again the expectation is never that there's zero losses for a cohort We do take risk in our business. we do take risk in our business That we're able to size that risk in advance, and we're able to drive predictable outcomes against those expectations. that we're able to size that risk in advance and we're able to drive predictable outcomes against those expectations

Speaker 1: Yeah. Total sense. Anything change materially on the consumer health front in the last hour? Yeah. yeah Total sense. total sense Anything change materially on the consumer health front in the last hour? anything change materially on the consumer health front in the last hour

Speaker 2: Yeah. Nothing today. Nothing today. Again, I think it all comes down to us, like you mentioned it, one of the metrics that we track very closely is something called 1st payment delinquency. Yeah. yeah Nothing today. nothing today Nothing today. nothing today Again, I think it all comes down to us, like you mentioned it, one of the metrics that we track very closely is something called 1st payment delinquency. again i think it all comes down to us like you mentioned it one of the metrics that we track very closely is something called 1st payment delinquency

Speaker 1: Yeah. Yeah. yeah

Speaker 2: Again, for a new origination cohort, when they get to that 1st repayment event, which typically is about 30 days in to 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? 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. Again, for a new origination cohort, when they get to that 1st repayment event, which typically is about 30 days in to 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? again for a new origination cohort when they get to that 1st repayment event which typically is about 30 days in to 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 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. 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

Speaker 1: Yeah Yeah yeah

Speaker 2: as we'd like. Yeah. 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. as we'd like. as we'd like Yeah. yeah 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. 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

Speaker 1: The macro side, you're watching unemployment and wage growth. On your business, you're watching 1st repayment. The macro side, you're watching unemployment and wage growth. the macro side you're watching unemployment and wage growth On your business, you're watching 1st repayment. on your business you're watching 1st repayment

Speaker 2: Yeah. I think we're obviously aware of the macroeconomic environment that we're in. Because the loans that we're originating are so short-dated, the average term length is roughly one year. The weighted average life is even shorter. It's closer to five months. 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 $250 increments. 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. We can sort of course correct and change our aperture really in a matter of days. Yeah. yeah I think we're obviously aware of the macroeconomic environment that we're in. i think we're obviously aware of the macroeconomic environment that we're in Because the loans that we're originating are so short-dated, the average term length is roughly one year. because the loans that we're originating are so short-dated the average term length is roughly one year The weighted average life is even shorter. the weighted average life is even shorter It's closer to five months. it's closer to five months That fact alone allows us to be really nimble. 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. 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 $250 increments. we're sort of extending credit in $250 increments 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. 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 We can sort of course correct and change our aperture really in a matter of days. we can sort of course correct and change our aperture really in a matter of days

Speaker 1: You talked about your average duration is about five months. That's obviously because the interest bearing and zero percenter is making up 85-ish%. You talked about your average duration is about five months. you talked about your average duration is about five months That's obviously because the interest bearing and zero percenter is making up 85-ish%. that's obviously because the interest bearing and zero percenter is making up 85-ish%

Speaker 2: Yeah Yeah yeah

Speaker 1: of the book, right? For pay in X, it would be shorter. of the book, right? of the book right For pay in X, it would be shorter. for pay in x it would be shorter

Speaker 2: Be shorter, yeah. Be shorter, yeah. be shorter yeah

Speaker 1: than that. than that. than that

Speaker 2: It's a six-week loan. It's a six-week loan. it's a six-week loan

Speaker 1: Yeah. Yeah. yeah

Speaker 2: Probably closer to three weeks. Probably closer to three weeks. probably closer to three weeks

Speaker 1: Yep. Your average size is, was it $250? Is that- Yep. yep Your average size is, was it $250? your average size is was it $250 Is that- is that-

Speaker 2: $250, $275. Yeah. $250, $275. $250 $275 Yeah. yeah

Speaker 1: Somewhere in that range. Okay. Let's talk about 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. I think that's largely true if you're talking about traditional open to buy credit products. What I'm talking to more and more investors about, and because I've done this before in the company that I ran. We're micro duration. We have a matter of, like, 18 hours 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. Somewhere in that range. somewhere in that range Okay. okay Let's talk about 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. let's talk about 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 I think that's largely true if you're talking about traditional open to buy credit products. i think that's largely true if you're talking about traditional open to buy credit products What I'm talking to more and more investors about, and because I've done this before in the company that I ran. what i'm talking to more and more investors about and because i've done this before in the company that i ran We're micro duration. we're micro duration We have a matter of, like, 18 hours 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. we have a matter of like 18 hours 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

Speaker 2: Yeah. Yeah. yeah

Speaker 1: 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. That doesn't make them bad credit risk. Do you find this tug of war of trying to educate investors about why this is different? 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. yes it's the same cohort of or demographic of less than $75,000 That doesn't make them bad credit risk. that doesn't make them bad credit risk It makes them bad credit risk if they have the bad product. If they have the right product, this demographic, it's fine. It makes them bad credit risk if they have the bad product. it makes them bad credit risk if they have the bad product If they have the right product, this demographic, it's fine. if they have the right product this demographic it's fine

Speaker 2: Right. Right. right

Speaker 1: It's a good fit, and I think that's what you guys found. It's a good fit, and I think that's what you guys found. it's a good fit and i think that's what you guys found

Speaker 2: Yeah. Yeah. yeah

Speaker 1: It's a good fit. It's a good fit. it's a good fit

Speaker 2: 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. Again, I wouldn't say that we skew high income or low income. 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. 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

Speaker 1: Yeah. Yeah. yeah

Speaker 2: We look a lot like a cross-section of the U.S. We look a lot like a cross-section of the U.S. we look a lot like a cross-section of the u.s

Speaker 1: Yeah. Yeah. yeah

Speaker 2: Yeah. I think there's a lot of value in being current with the consumer, and we underwrite every loan every single time. More than 95% of our transactions in a given quarter are coming from repeat borrowers. Yeah. yeah I think there's a lot of value in being current with the consumer, and we underwrite every loan every single time. i think there's a lot of value in being current with the consumer and we underwrite every loan every single time More than 95% of our transactions in a given quarter are coming from repeat borrowers. more than 95% of our transactions in a given quarter are coming from repeat borrowers

Speaker 1: Yeah. Yeah. yeah

Speaker 2: 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. 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? 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. we are building a relationship here

Speaker 1: Yeah. Yeah. yeah

Speaker 2: Of course, if we're in a stressed environment, that could change, and we can see good payers go to bad payers. 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. Of course, if we're in a stressed environment, that could change, and we can see good payers go to bad payers. of course if we're in a stressed environment that could change and we can see good payers go to bad payers 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. 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

Speaker 1: Yeah. Average income, have you disclosed average income? Yeah. yeah Average income, have you disclosed average income? average income have you disclosed average income

Speaker 2: Yeah Yeah yeah

Speaker 1: Average FICO scores? Average FICO scores? average fico scores

Speaker 2: It's in roughly the $75,000 a year range. It's in roughly the $75,000 a year range. it's in roughly the $75,000 a year range

Speaker 1: Yeah. Yeah. yeah

Speaker 2: Average FICO can fluctuate a little bit, but it's in sort of the $650, $660 range. Average FICO can fluctuate a little bit, but it's in sort of the $650, $660 range. average fico can fluctuate a little bit but it's in sort of the $650 $660 range

Speaker 1: Okay, cool. Okay, cool. okay cool

Speaker 2: it's sort of a prime to near-prime borrower if you sort of put brackets around. it's sort of a prime to near-prime borrower if you sort of put brackets around. it's sort of a prime to near-prime borrower if you sort of put brackets around

Speaker 1: Yeah Yeah yeah

Speaker 2: the medians. the medians. the medians

Speaker 1: Yeah. Yeah. yeah

Speaker 2: Yeah. Yeah. yeah

Speaker 1: Okay, cool. Let's talk about downside scenario. Everything is going really well now, fairly steady. It kind of feels like we should say we should be speaking more negatively, just given the macro, but the data's not showing it. Okay, cool. okay cool Let's talk about downside scenario. let's talk about downside scenario Everything is going really well now, fairly steady. everything is going really well now fairly steady It kind of feels like we should say we should be speaking more negatively, just given the macro, but the data's not showing it. it kind of feels like we should say we should be speaking more negatively just given the macro but the data's not showing it

Speaker 2: Yeah. Yeah. yeah

Speaker 1: You're not seeing it, Chime's not seeing it, Cash App's not seeing it. All the peers are saying, "We're not seeing it. You're not seeing it, Chime's not seeing it, Cash App's not seeing it. you're not seeing it chime's not seeing it cash app's not seeing it All the peers are saying, "We're not seeing it. all the peers are saying "we're not seeing it

Speaker 2: Right. Right. right

Speaker 1: Let's just say, tomorrow morning, someone walks into your office and says, "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. Let's just say, tomorrow morning, someone walks into your office and says, "Hey, Rob, we're seeing some data here that we need to talk about. let's just say tomorrow morning someone walks into your office and says "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. we don't know what it is." let's just go through a scenario

Speaker 2: Yeah Yeah yeah

Speaker 1: Of we are about to enter a consumer-led recession, or the consumer's 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. Of we are about to enter a consumer-led recession, or the consumer's about to take a major downtick, whether it's oil prices or some other thing that we don't know about yet. of we are about to enter a consumer-led recession or the consumer's 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. let's go through that

Speaker 2: Yeah. Yeah. yeah

Speaker 1: How do you manage that downside scenario? How do you manage that downside scenario? how do you manage that downside scenario

Speaker 2: Right. Right. right

Speaker 1: What do you see first which says, "Hey, we need a meeting on this"? What do you see first which says, "Hey, we need a meeting on this"? what do you see first which says "hey we need a meeting on this"

Speaker 2: Right. Right. right

Speaker 1: How does that progress through the system? How does that progress through the system? how does that progress through the system

Speaker 2: Yeah. The analogy that we've used historically is that we always have our hands on the steering wheel. Yeah. yeah The analogy that we've used historically is that we always have our hands on the steering wheel. the analogy that we've used historically is that we always have our hands on the steering wheel

Speaker 1: Yeah. Yeah. yeah

Speaker 2: Even in benign times, which I would classify today, frankly pretty benign consumer and credit environment. Even in benign times, the entire executive team is looking at the weekly credit report. Even in benign times, which I would classify today, frankly p retty benign consumer and credit environment. even in benign times which i would classify today frankly p retty benign consumer and credit environment Even in benign times, the entire executive team is looking at the weekly credit report. even in benign times the entire executive team is looking at the weekly credit report

Speaker 1: Yeah Yeah yeah

Speaker 2: Risk team is pulling together. As I mentioned, first payment delinquencies at both the four-day mark and the 30-day mark, those are really, really important and primary internal KPI that we manage the business to. 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? Risk team is pulling together. risk team is pulling together As I mentioned, first payment delinquencies at both the four-day mark and the 30-day mark, those are really, really important and primary internal KPI that we manage the business to. as i mentioned first payment delinquencies at both the four-day mark and the 30-day mark those are really really important and primary internal kpi that we manage the business to 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? 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

Speaker 1: Yeah. Yeah. yeah

Speaker 2: 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. Honestly, in terms of actioning a company-wide change in our underwriting posture, we would really have to see it show up in the 1st payment delinquency data. I mean. Putting aside something like maybe COVID. 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. 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. 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. 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 Honestly, in terms of actioning a company-wide change in our underwriting posture, we would really have to see it show up in the 1st payment delinquency data. honestly in terms of actioning a company-wide change in our underwriting posture we would really have to see it show up in the 1st payment delinquency data I mean. i mean Putting aside something like maybe COVID. putting aside something like maybe covid

Speaker 1: Right Right right

Speaker 2: It just was sort of this black swan event. It just was sort of this black swan event. it just was sort of this black swan event

Speaker 1: Yep Yep yep

Speaker 2: Honestly, the company actioned very quickly there. If it's sort of a typical, the stress is starting to creep into the consumers' financial lives, then it'll show up in our data, because again, I think we originate enough loans that it's. Going to show up there. We'll start to work on getting the models to sort of fit where the consumer is. 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. Honestly, the company actioned very quickly there. honestly the company actioned very quickly there If it's sort of a typical, the stress is starting to creep into the consumers' financial lives, then it'll show up in our data, because again, I think we originate enough loans that it's. if it's sort of a typical the stress is starting to creep into the consumers' financial lives then it'll show up in our data because again i think we originate enough loans that it's Going to show up there. going to show up there We'll start to work on getting the models to sort of fit where the consumer is. we'll start to work on getting the models to sort of fit where the consumer is It may mean that we take some risk out of the system. it may mean that we take some risk out of the system We can do that in several different ways. we can do that in several different ways We talk a lot about loosening or tightening. we talk a lot about loosening or tightening It's so much more nuanced than that. it's so much more nuanced than that

Speaker 1: Yeah Yeah yeah

Speaker 2: The IR team does a bit of a disservice to the incredible risk team that we have internally. The IR team does a bit of a disservice to the incredible risk team that we have internally. the ir team does a bit of a disservice to the incredible risk team that we have internally

Speaker 1: Yeah. Yeah. yeah

Speaker 2: 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, and we can go to 92.7 or 92.75. We can raise the minimum credit score for a given merchant. 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. that's typically the bar that the transaction has to clear to be approved We can be incredibly fine-grained. we can be incredibly fine-grained Some of our programs run at 92.6, is the score that you need to clear, and we can go to 92.7 or 92.75. some of our programs run at 92.6 is the score that you need to clear and we can go to 92.7 or 92.75

Speaker 1: Yeah. Yeah. yeah

Speaker 2: 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 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 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. We can be incredibly fine-grained there if we need to take risk out of the system. 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 the marginal borrower. i already mentioned increasing the down payments for 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. 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. we can shorten the length of the loans That takes risk out of the- system for us, too. that takes risk out of the- system for us too We can increase the APRs if we wanted to or needed to. we can increase the aprs if we wanted to or needed to There's 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. there's 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

Speaker 1: Yeah Yeah yeah

Speaker 2: Well-defined playbook for how to roll this out across the merchant base. Well-defined playbook for how to roll this out across the merchant base. well-defined playbook for how to roll this out across the merchant base

Speaker 1: The change is going to be gradual, right? It's not like Wednesday afternoon, everything's fine, and then Thursday morning, everything explodes, right? The change is going to be gradual, right? the change is going to be gradual right It's not like Wednesday afternoon, everything's fine, and then Thursday morning, everything explodes, right? it's not like wednesday afternoon everything's fine and then thursday morning everything explodes right

Speaker 2: Yeah. Yeah. yeah

Speaker 1: This is going to happen really gradually. This is the other thing we should talk about. Everyone says, "Well, Affirm really hasn't seen a down cycle yet. This is going to happen really gradually. this is going to happen really gradually This is the other thing we should talk about. this is the other thing we should talk about Everyone says, "Well, Affirm really hasn't seen a down cycle yet. everyone says "well affirm really hasn't seen a down cycle yet

Speaker 2: Yeah. Yeah. yeah

Speaker 1: You could say, well, late 2022, early 2023 was kind of, sort of, it was short-lived. How long would it take for you to start saying, "Okay, our rates are starting to look like they're forming a trend"? You could say, well, late 2022, early 2023 was kind of, sort of, it was short-lived. you could say well late 2022 early 2023 was kind of sort of it was short-lived How long would it take for you to start saying, "Okay, our rates are starting to look like they're forming a trend"? how long would it take for you to start saying "okay our rates are starting to look like they're forming a trend"

Speaker 2: Yeah. Yeah. yeah

Speaker 1: Is it a week or a month or? Is it a week or a month or? is it a week or a month or

Speaker 2: I would say typically if the new cohort of 1st payment delinquencies comes in and there's an elevation in terms of delinquencies versus expectation, that's all it takes to prompt an investigation. 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 a merchant's configuration. 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? The answer to that question will sort of inform how we triage the remedy. 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. I would say typically if the new cohort of 1st payment delinquencies comes in and there's an elevation in terms of delinquencies versus expectation, that's all it takes to prompt an investigation. i would say typically if the new cohort of 1st payment delinquencies comes in and there's an elevation in terms of delinquencies versus expectation that's all it takes to prompt an investigation When we do the investigation internally, we want to make sure that we really understand what's driving the deviation, right? 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 a merchant's configuration. sometimes there can be a messaging bug or sometimes something could have changed with a merchant's configuration So we're typically looking to understand is the stress that we're seeing in the data, is it limited to one merchant? 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? is it geographic or is it broad-based The answer to that question will sort of inform how we triage the remedy. the answer to that question will sort of inform how we triage the remedy 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. 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

Speaker 1: Yeah. In the company that I ran, that's how we ran risk as well, right? There was one merchant where a few locations were driving our loss rates through the roof, so we just turned off those locations. Yeah. yeah In the company that I ran, that's how we ran risk as well, right? in the company that i ran that's how we ran risk as well right There was one merchant where a few locations were driving our loss rates through the roof, so we just turned off those locations. there was one merchant where a few locations were driving our loss rates through the roof so we just turned off those locations

Speaker 2: Yeah. Yeah. yeah

Speaker 1: Everything was fine. Everything was fine. everything was fine

Speaker 2: Yeah. Yeah. yeah

Speaker 1: Right. Okay, you look at all that data. This happens gradually over a few weeks/months, depending on what you're seeing in the data. Right. right Okay, you look at all that data. okay you look at all that data This happens gradually over a few weeks/months, depending on what you're seeing in the data. this happens gradually over a few weeks/months depending on what you're seeing in the data

Speaker 2: Yeah, but again, it's like, really that 1st payment delinquency tells us a lot about- Yeah, but again, it's like, really that 1st payment delinquency tells us a lot about- yeah but again it's like really that 1st payment delinquency tells us a lot about-

Speaker 1: That's the key. That's the key. that's the key

Speaker 2: Is the underwriting right? Is the model set up properly to predictably drive credit outcomes? If we see drift, we take that really seriously. Is the underwriting right? is the underwriting right Is the model set up properly to predictably drive credit outcomes? is the model set up properly to predictably drive credit outcomes If we see drift, we take that really seriously. if we see drift we take that really seriously

Speaker 1: Yeah. Is it a foregone conclusion that in a macro slowdown, you guys automatically have lower growth? Is it definitely a foregone conclusion? You could just say, "Hey, if the traditional lenders pull back, more people are going to want to go to buy now, pay later. Yeah. yeah Is it a foregone conclusion that in a macro slowdown, you guys automatically have lower growth? is it a foregone conclusion that in a macro slowdown you guys automatically have lower growth Is it definitely a foregone conclusion? is it definitely a foregone conclusion You could just say, "Hey, if the traditional lenders pull back, more people are going to want to go to buy now, pay later. you could just say "hey if the traditional lenders pull back more people are going to want to go to buy now pay later

Speaker 2: Sure. Sure. sure

Speaker 1: We could actually see steady growth in a downturn even though we're scaling back on our risk. We could actually see steady growth in a downturn even though we're scaling back on our risk. we could actually see steady growth in a downturn even though we're scaling back on our risk

Speaker 2: Yeah. Yeah. yeah

Speaker 1: Is it possible? Is it possible? is it possible

Speaker 2: I think it's definitely possible. I think it's definitely possible. i think it's definitely possible

Speaker 1: Maybe not likely. Maybe not likely. maybe not likely

Speaker 2: Both Affirm and buy now, pay later broadly are continuing to take meaningful share within U.S. consumer wallets. It's not out of the question that we could continue to grow through a downturn. Again, I think the most important thing is that we're driving predictable credit outcomes. That's important to Affirm. Both Affirm and buy now, pay later broadly are continuing to take meaningful share within U.S. consumer wallets. both affirm and buy now pay later broadly are continuing to take meaningful share within u.s consumer wallets It's not out of the question that we could continue to grow through a downturn. it's not out of the question that we could continue to grow through a downturn Again, I think the most important thing is that we're driving predictable credit outcomes. again i think the most important thing is that we're driving predictable credit outcomes That's important to Affirm. that's important to affirm

Speaker 1: Yeah Yeah yeah

Speaker 2: It's also really important to our funding partners. It's also really important to our funding partners. it's also really important to our funding partners

Speaker 1: Yeah. Yeah. yeah

Speaker 2: 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. Frankly, we're so aligned with the consumer. frankly we're so aligned with the consumer We think it's good for the consumer, too. 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. we don't want to put loans in the hands of consumers that can't afford them

Speaker 1: Yeah Yeah yeah

Speaker 2: 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. Really, again, we want to get it right, and I think we have every incentive to get the underwriting right. Be able to pay them back. be able to pay them back We don't profit from that. we don't profit from that It's not good for the consumer. it's not good for the consumer It's not good for their financial lives. it's not good for their financial lives It erodes trust, right, between the consumer and Affirm. it erodes trust right between the consumer and affirm Really, again, we want to get it right, and I think we have every incentive to get the underwriting right. really again we want to get it right and i think we have every incentive to get the underwriting right

Speaker 1: Let's continue on this track of the down cycle, whenever it'll happen. You guys perform well. I'm assuming margin stays relatively flat, right? You manage to the margin. Let's continue on this track of the down cycle, whenever it'll happen. let's continue on this track of the down cycle whenever it'll happen You guys perform well. you guys perform well I'm assuming margin stays relatively flat, right? i'm assuming margin stays relatively flat right You manage to the margin. you manage to the margin

Speaker 2: Yep. Yep. yep

Speaker 1: Maybe growth fluctuates, maybe it's down, maybe it's steady, maybe it's up a little bit, depending on how the market's changing. On the other side of this, if we look forward, people are going to say, "You guys managed through the cycle pretty well." You are underwriting a specific transaction at a specific point in time. Maybe growth fluctuates, maybe it's down, maybe it's steady, maybe it's up a little bit, depending on how the market's changing. maybe growth fluctuates maybe it's down maybe it's steady maybe it's up a little bit depending on how the market's changing On the other side of this, if we look forward, people are going to say, "You guys managed through the cycle pretty well." You are underwriting a specific transaction at a specific point in time. on the other side of this if we look forward people are going to say "you guys managed through the cycle pretty well." you are underwriting a specific transaction at a specific point in time

Speaker 2: Right. Right. right

Speaker 1: Your algorithms are terrific on the risk side. The margin stayed flat. You didn't have any major losses or provisions or anything like that. Your algorithms are terrific on the risk side. your algorithms are terrific on the risk side The margin stayed flat. the margin stayed flat You didn't have any major losses or provisions or anything like that. you didn't have any major losses or provisions or anything like that

Speaker 2: Right Right right

Speaker 1: the traditional creditors will have. Yeah, maybe growth fluctuates. It's down a little, it's up a little, whatever. You guys sell through, and now we're back to business. the traditional creditors will have. the traditional creditors will have Yeah, maybe growth fluctuates. yeah maybe growth fluctuates It's down a little, it's up a little, whatever. it's down a little it's up a little whatever You guys sell through, and now we're back to business. you guys sell through and now we're back to business

Speaker 2: I think that's right. Every recession is different, of course. I think that's right. i think that's right Every recession is different, of course. every recession is different of course

Speaker 1: Yeah. Yeah. yeah

Speaker 2: It's hard to be precise in this hypothetical. I think what's important to remember is that we set up our financing programs, and the other important thing is every merchant is different. It's hard to be precise in this hypothetical. it's hard to be precise in this hypothetical I think what's important to remember is that we set up our financing programs, and the other important thing is every merchant is different. i think what's important to remember is that we set up our financing programs and the other important thing is every merchant is different

Speaker 1: Yeah. Yeah. yeah

Speaker 2: Every merchant has a different cutoff because there's just different product mix, there's different economics in each of our merchant relationships. 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 break even or better. 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 break even loans out of the system. It should not be a significant drag from a profitability perspective. Every merchant has a different cutoff because there's just different product mix, there's different economics in each of our merchant relationships. every merchant has a different cutoff because there's just different product mix there's different economics in each of our merchant relationships 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 break even or better. 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 break even or better If you do introduce stress into the system, what are we doing? 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 break even loans out of the system. we're raising the threshold for approval and we're taking sort of marginally profitable or probably break even loans out of the system It should not be a significant drag from a profitability perspective. it should not be a significant drag from a profitability perspective

Speaker 1: Yeah. Yeah. yeah

Speaker 2: We are giving up growth, of course. We are giving up growth, of course. we are giving up growth of course

Speaker 1: Yeah. Yeah. yeah

Speaker 2: That's the KPI that we're going to see potentially soften. 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's the KPI that we're going to see potentially soften. that's the kpi that we're going to see potentially soften Again, we think that's important. again we think that's important We think that's important for the brand promise that we have to consumers. 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. we think it's really important to the funding ecosystem that we've built as well

Speaker 1: Yeah. Yeah. yeah

Speaker 2: If there is stress, we're going to course correct, and we're going to manage through whatever credit environment we're in. If there is stress, we're going to course correct, and we're going to manage through whatever credit environment we're in. if there is stress we're going to course correct and we're going to manage through whatever credit environment we're in

Speaker 1: Okay. All right. I'm done with the downside. Okay. okay All right. all right I'm done with the downside. i'm done with the downside

Speaker 2: Let's talk about happy stuff. Let's talk about happy stuff. let's talk about happy stuff

Speaker 1: Did I kill that enough? 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 till 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. Did I kill that enough? did i kill that enough Did I beat that one good enough? did i beat that one good enough Let's talk about underwriting. let's talk about underwriting I was fascinated that you guys aren't really leveraging cash flow underwriting at all up till now. i was fascinated that you guys aren't really leveraging cash flow underwriting at all up till 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. 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. the fact that you guys were able to do what you do without seeing that data

Speaker 2: Yeah Yeah yeah

Speaker 1: 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. Talk to me about cash flow underwriting and how much better you think this could make your system. Could you actually see, are people underestimating the impact it could have to volume growth just because you're going to have much better data? Is fascinating to me. 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. in my business we wanted that data and we couldn't get it because we didn't qualify in the transaction type Talk to me about cash flow underwriting and how much better you think this could make your system. talk to me about cash flow underwriting and how much better you think this could make your system Could you actually see, are people underestimating the impact it could have to volume growth just because you're going to have much better data? could you actually see are people underestimating the impact it could have to volume growth just because you're going to have much better data

Speaker 2: Yeah Yeah yeah

Speaker 1: In addition to the algorithms that are already top of class? In addition to the algorithms that are already top of class? in addition to the algorithms that are already top of class

Speaker 2: Yeah, look, there's a whole team at Affirm focused on developing and then testing and ultimately graduating the next underwriting model. Yeah, look, there's a whole team at Affirm focused on developing and then testing and ultimately graduating the next underwriting model. yeah look there's a whole team at affirm focused on developing and then testing and ultimately graduating the next underwriting model

Speaker 1: Yeah. Yeah. yeah

Speaker 2: 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. The company's been around for about 15 years. 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. There's a whole bunch of criteria that are often diametrically opposed here to make sure that. Things like cash flow underwriting are just one ingredient that go into sort of the incremental gains that we see. 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. 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. i think we're on we call it pos point of sale model i think we're on 13 now The company's been around for about 15 years. the company's been around for about 15 years It's a huge effort. 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. 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 There's a whole bunch of criteria that are often diametrically opposed here to make sure that. there's a whole bunch of criteria that are often diametrically opposed here to make sure that

Speaker 1: Yeah Yeah yeah

Speaker 2: the model is truly better for everybody involved. It's a really high bar. Again, cash flow underwriting is part of that. We ultimately want to find a way to get to a yes with the consumer if we can, right? 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. the model is truly better for everybody involved. the model is truly better for everybody involved It's a really high bar. it's a really high bar Again, cash flow underwriting is part of that. again cash flow underwriting is part of that We ultimately want to find a way to get to a yes with the consumer if we can, right? we ultimately want to find a way to get to a yes with the consumer if we can right Down payments are a part of that. down payments are a part of that Internally, we call them step-ups. internally we call them step-ups Asking for more information. asking for more information That's where cash flow underwriting would come in. 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. 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

Speaker 1: Yeah. Yeah. yeah

Speaker 2: Yeah. I think 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. Yeah. yeah I think 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. i think 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

Speaker 1: In your mind, what's the optimal percentage of transactions that would go through cash flow underwriting? In your mind, what's the optimal percentage of transactions that would go through cash flow underwriting? in your mind what's the optimal percentage of transactions that would go through cash flow underwriting

Speaker 2: Oh. I think the other thing to keep in mind is just most of our consumer transactions today are what we call repeat borrowers, right? Oh. oh I think the other thing to keep in mind is just most of our consumer transactions today are what we call repeat borrowers, right? i think the other thing to keep in mind is just most of our consumer transactions today are what we call repeat borrowers right

Speaker 1: Right. Right. right

Speaker 2: Meaning it's not their first Affirm loan. Meaning it's not their first Affirm loan. meaning it's not their first affirm loan

Speaker 1: Yeah. Yeah. yeah

Speaker 2: Over a consumer's life cycle, we tend to rely more and more on the consumer's repayment history with us. Like their Affirm file starts to matter a lot. Over a consumer's life cycle, we tend to rely more and more on the consumer's repayment history with us. over a consumer's life cycle we tend to rely more and more on the consumer's repayment history with us Like their Affirm file starts to matter a lot. like their affirm file starts to matter a lot

Speaker 1: Some more than others because no, yeah. Some more than others because no, yeah. some more than others because no yeah

Speaker 2: I think where it helps us is just in some of the growth areas around acquiring new users. I think where it helps us is just in some of the growth areas around acquiring new users. i think where it helps us is just in some of the growth areas around acquiring new users

Speaker 1: Yeah Yeah yeah

Speaker 2: New merchant maybe. New merchant maybe. new merchant maybe

Speaker 1: Yeah. Yeah. yeah

Speaker 2: It can be really compelling there, because sort of the early days of a merchant program are really critical to get on that- It can be really compelling there, because sort of the early days of a merchant program are really critical to get on that- it can be really compelling there because sort of the early days of a merchant program are really critical to get on that-

Speaker 1: Yeah Yeah yeah

Speaker 2: steep trajectory of growth. Yeah. steep trajectory of growth. steep trajectory of growth Yeah. yeah

Speaker 1: Yeah. I know that firsthand. Yeah. yeah I know that firsthand. i know that firsthand

Speaker 2: Yeah. Yeah. yeah

Speaker 1: Cash flow won't necessarily be applied to everybody, but in certain use cases. Cash flow won't necessarily be applied to everybody, but in certain use cases. cash flow won't necessarily be applied to everybody but in certain use cases

Speaker 2: Yeah Yeah yeah

Speaker 1: it's going to really drive difference. it's going to really drive difference. it's going to really drive difference

Speaker 2: Again, I think for certain populations. Again, I think for certain populations. again i think for certain populations

Speaker 1: That makes total sense. Yeah. That makes total sense. that makes total sense Yeah. yeah

Speaker 2: It can be really compelling. Yeah. It can be really compelling. it can be really compelling Yeah. yeah

Speaker 1: Yeah. Totally. Love that. Let's talk about credit. We've done a lot of work post the controversial, not controversial. I forgot the name. Ridge. One of your people in the credit facility. Yeah. yeah Totally. totally Love that. love that Let's talk about credit. let's talk about credit We've done a lot of work post the controversial, not controversial. we've done a lot of work post the controversial not controversial I forgot the name. i forgot the name Ridge. ridge One of your people in the credit facility. one of your people in the credit facility

Speaker 2: Oh, Stone Ridge. Oh, Stone Ridge. oh stone ridge

Speaker 1: Stone Ridge. Thank you. That was a middle-aged moment. Rob, thanks for bailing me out. 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, "Look, we will forego growth to make sure that our creditors are happy because that's our lifeline for the next- Stone Ridge. stone ridge Thank you. thank you That was a middle-aged moment. that was a middle-aged moment Rob, thanks for bailing me out. rob thanks for bailing me out When Stone Ridge came out, we really delved into it, and your creditors love you. 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, "Look, we will forego growth to make sure that our creditors are happy because that's our lifeline for the next- 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 "look we will forego growth to make sure that our creditors are happy because that's our lifeline for the next-

Speaker 2: Yep Yep yep

Speaker 1: As far as the eye can see in terms of growth." We don't really see a problem there. 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. As far as the eye can see in terms of growth." We don't really see a problem there. as far as the eye can see in terms of growth." we don't really see a problem there The ABS deal you just did was really great. the abs deal you just did was really great The agreements you have with all your people in the credit facility are terrific. 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. it's kind of like that concern has kind of come and gone

Speaker 2: Yeah. Yeah. yeah

Speaker 1: Do you still get a lot on that or is it? Do you still get a lot on that or is it? do you still get a lot on that or is it

Speaker 2: I think we still get questions there, especially for investors that are maybe new to the story. I think we still get questions there, especially for investors that are maybe new to the story. i think we still get questions there especially for investors that are maybe new to the story

Speaker 1: Yeah. Okay. Yeah. yeah okay Okay. okay

Speaker 2: Just want to understand all the mechanics and sort of the broader funding ecosystem. Yeah, if you asked 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. Just want to understand all the mechanics and sort of the broader funding ecosystem. just want to understand all the mechanics and sort of the broader funding ecosystem Yeah, if you asked 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. yeah if you asked 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

Speaker 1: Yeah Yeah yeah

Speaker 2: Of just the health of that environment and that market and right now, honestly, we're seeing spreads at all-time lows on a like-from-like basis across recent deals, and so it feels like the market's really healthy today. Of just the health of that environment and that market and right now, honestly, we're seeing spreads at all-time lows on a like-from-like basis across recent deals, and so it feels like the market's really healthy today. of just the health of that environment and that market and right now honestly we're seeing spreads at all-time lows on a like-from-like basis across recent deals and so it feels like the market's really healthy today

Speaker 1: Yeah. They like quality. Yeah. yeah They like quality. they like quality

Speaker 2: They do, yeah. They do, yeah. they do yeah

Speaker 1: If things go south, 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. If things go south, they're going to flock more to quality, and if you guys are viewed as that quality paper, then I think that's okay. if things go south 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. i think that's a good outlook for you Let's talk about guidance a little bit, switching gears. let's talk about guidance a little bit switching gears

Speaker 2: Sure. Sure. sure

Speaker 1: From the investor forum, you've 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 ain't as easy as you guys make it look. If the 25% medium-term GMV growth target proves to be conservative over time. From the investor forum, you've built a great reputation for kind of beating and raising, guiding conservatively. from the investor forum you've built a great reputation for kind of beating and raising guiding conservatively You make it look easier than it is. you make it look easier than it is I know you guys. i know you guys It ain't as easy as you guys make it look. it ain't as easy as you guys make it look If the 25% medium-term GMV growth target proves to be conservative over time. if the 25% medium-term gmv growth target proves to be conservative over time

Speaker 2: At least. You forgot two words there. At least. at least You forgot two words there. you forgot two words there

Speaker 1: At least 25. At least 25. at least 25

Speaker 2: At the least. At the least. at the least

Speaker 1: Yeah. I have the greater than sign in my question here. Yeah. yeah I have the greater than sign in my question here. i have the greater than sign in my question here

Speaker 2: Yeah, it's important. Sorry. It does a lot. Yeah. Yeah, it's important. yeah it's important Sorry. sorry It does a lot. it does a lot Yeah. yeah

Speaker 1: I need my glasses to get that one. I need my glasses to get that one. i need my glasses to get that one If the at least 25% growth, people are going to love that 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. If you look at sort of the drivers of our growth today, right? If the at least 25% growth, people are going to love that correction, by the way. if the at least 25% growth people are going to love that correction by the way I'm just thinking about all the investors on the call here. i'm just thinking about all the investors on the call here They're going to love that correction. they're going to love that correction Where did the upside comes from? where did the upside comes from Gosh. gosh If you look at sort of the drivers of our growth today, right? if you look at sort of the drivers of our growth today right

Speaker 2: Yeah. Yeah. yeah Both point of sale and the direct-to-consumer businesses are both growing far in excess of at least 10% we called out. Both point of sale and the direct-to-consumer businesses are both growing far in excess of at least 10% we called out. both point of sale and the direct-to-consumer businesses are both growing far in excess of at least 10% we called out

Speaker 1: Love it. Love it. love it

Speaker 2: For both of those programs. Again, if we outperform that, it's because we're sort of maintaining what we're doing today, right. 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. Look, I think we've got two 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. For both of those programs. for both of those programs Again, if we outperform that, it's because we're sort of maintaining what we're doing today, right. again if we outperform that it's because we're sort of maintaining what we're doing today right 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. 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 Look, I think we've got two 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. look i think we've got two 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 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. I don't think we're 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. 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. 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 I don't think we're envisioning a world that doesn't already exist. i don't think we're 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. 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

Speaker 1: It's worth reiterating that the Agentic and Edge aren't really in the numbers yet. It's worth reiterating that the Agentic and Edge aren't really in the numbers yet. it's worth reiterating that the agentic and edge aren't really in the numbers yet

Speaker 2: Yeah. Yeah. yeah

Speaker 1: They're not in your, That's all. They're not in your, That's all. they're not in your that's all

Speaker 2: I think that's appropriate, right? I think that's appropriate, right? i think that's appropriate right

Speaker 1: Yeah. Yeah. yeah

Speaker 2: 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. 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. 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. 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

Speaker 1: So it's- So it's- so it's-

Speaker 2: It doesn't mean we're not excited about them, but just in terms of how we guide. Yeah. It doesn't mean we're not excited about them, but just in terms of how we guide. it doesn't mean we're not excited about them but just in terms of how we guide Yeah. yeah

Speaker 1: I think that's the right way to do it. No sense setting up for failure and false expectations, right? It's everything you're seeing today, plus a couple of other things that could be more meaningful. I think that's the right way to do it. i think that's the right way to do it No sense setting up for failure and false expectations, right? no sense setting up for failure and false expectations right It's everything you're seeing today, plus a couple of other things that could be more meaningful. it's everything you're seeing today plus a couple of other things that could be more meaningful

Speaker 2: Yeah Yeah yeah

Speaker 1: Et cetera. Okay, cool. You did say at least 25. Et cetera. et cetera Okay, cool. okay cool You did say at least 25. you did say at least 25

Speaker 2: At least 25. At least 25. at least 25

Speaker 1: That could be the title of the note right here. Maybe we'll do that. Okay, let's switch to RLTC guidance. I thought you'd go to three and a half to four and kind of But 375-4, that's a tight range. That could be the title of the note right here. that could be the title of the note right here Maybe we'll do that. maybe we'll do that Okay, let's switch to RLTC guidance. okay let's switch to rltc guidance I thought you'd go to three and a half to four and kind of But 375-4, that's a tight range. i thought you'd go to three and a half to four and kind of but 375-4 that's a tight range

Speaker 2: Yeah Yeah yeah

Speaker 1: For RLTC. You and I have had this conversation. For RLTC. for rltc You and I have had this conversation. you and i have had this conversation

Speaker 2: Yeah Yeah yeah

Speaker 1: offline. I think RLTC was viewed as kind of like a all-in measure about consumer health, there are so many factors in there like gain on sale and all. offline. offline I think RLTC was viewed as kind of like a all-in measure about consumer health, there are so many factors in there like gain on sale and all. i think rltc was viewed as kind of like a all-in measure about consumer health there are so many factors in there like gain on sale and all

Speaker 2: Yeah. Yeah. yeah

Speaker 1: There's so many factors in RLTC. It's not really a pure proxy for consumer health. There's so many factors in RLTC. there's so many factors in rltc It's not really a pure proxy for consumer health. it's not really a pure proxy for consumer health

Speaker 2: Right. Right. right

Speaker 1: The 375-4, is there a message that you're trying to send folks with that narrow range? The 375-4, is there a message that you're trying to send folks with that narrow range? the 375-4 is there a message that you're trying to send folks with that narrow range

Speaker 2: I think that maybe the broadest message would just be that we feel like we have good visibility into the business. I think that maybe the broadest message would just be that we feel like we have good visibility into the business. i think that maybe the broadest message would just be that we feel like we have good visibility into the business

Speaker 1: Yeah. Yeah. yeah

Speaker 2: 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. 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. I think that's rooted in the fact that we've been really active on the ABS side from a funding perspective. 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. same on the forward flow side as well We have a pretty good sense for where the funding is going to come from. 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. of course we're going to grow and we're going to need more funding along the way

Speaker 1: Yeah. Yeah. yeah

Speaker 2: Just the sort of layers that we've been able to put into the funding base, we've done three-year ABS deals that are at fixed costs of borrowing. It does insulate us against a movement upwards in an 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 two 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. That gives us confidence that some of the error bars, the error bar being a point wide, that felt like more room than we needed for these next several years of operating. Just the sort of layers that we've been able to put into the funding base, we've done three-year ABS deals that are at fixed costs of borrowing. just the sort of layers that we've been able to put into the funding base we've done three-year abs deals that are at fixed costs of borrowing It does insulate us against a movement upwards i n an upwards rate environment. it does insulate us against a movement upwards i n an 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 two 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. similarly with the trajectory that we're on with affirm card and also just where we are with both shopify and amazon our two 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 That gives us confidence that some of the error bars, the error bar being a point wide, that felt like more room than we needed f or these next several years of operating. that gives us confidence that some of the error bars the error bar being a point wide that felt like more room than we needed f or these next several years of operating

Speaker 1: Okay. It's a tight range, which I think is good because it almost removes that from the equation kind of thing. Okay. okay It's a tight range, which I think is good because it almost removes that from the equation kind of thing. it's a tight range which i think is good because it almost removes that from the equation kind of thing

Speaker 2: Yeah. Yeah. yeah

Speaker 1: Right? Even though people will probably still have a stroke if they see a three handle, somewhere around four I think is great. I remember the comment we made at a group lunch. I said, "Rob, if you do 3.9%, you suck. If you do four, you're good. If you do 4.1%, you walk on water." You looked at me like, "Seriously? Right? right Even though people will probably still have a stroke if they see a three handle, somewhere around four I think is great. even though people will probably still have a stroke if they see a three handle somewhere around four i think is great I remember the comment we made at a group lunch. i remember the comment we made at a group lunch I said, "Rob, if you do 3.9%, you suck. i said "rob if you do 3.9% you suck If you do four, you're good. if you do four you're good If you do 4.1%, you walk on water." You looked at me like, "Seriously? if you do 4.1% you walk on water." you looked at me like "seriously

Speaker 2: Again, it's just coming in, 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, it just feels like the error bars we have on those. Again, it's just coming in, 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, it just feels like the error bars we have on those. again it's just coming in 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 it just feels like the error bars we have on those

Speaker 1: Yeah Yeah yeah

Speaker 2: Just a lot smaller than maybe they were five years ago. Just a lot smaller than maybe they were five years ago. just a lot smaller than maybe they were five years ago

Speaker 1: Yeah Yeah yeah

Speaker 2: When we established the 3%-4% range. When we established the 3%-4% range. when we established the 3%-4% range

Speaker 1: Yeah. I think it's good for the narrative, too, because it pushes everything to GMV growth and margins. That's really what you should, at this stage of your development. Yeah. yeah I think it's good for the narrative, too, because it pushes everything to GMV growth and margins. i think it's good for the narrative too because it pushes everything to gmv growth and margins That's really what you should, at this stage of your development. that's really what you should at this stage of your development

Speaker 2: Yeah Yeah yeah

Speaker 1: That's really what the story is about. How fast are you growing, and are you increasing your profitability? That's really what the story is about. that's really what the story is about How fast are you growing, and are you increasing your profitability? how fast are you growing and are you increasing your profitability

Speaker 2: Yeah. Yeah. yeah

Speaker 1: 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? Over the next couple of years. You seem focused, obviously, very heavily on organic growth, as you should. GMV is accelerating year-over-year at ex Walmart. How do you think about M&A? How do you think about buybacks? It doesn't need to be more complicated than that. it doesn't need to be more complicated than that Okay, let's switch gears again. okay let's switch gears again We got a little under 10- minutes left. we got a little under 10- minutes left As CFO, how do you think about capital allocation? as cfo how do you think about capital allocation Over the next couple of years. over the next couple of years You seem focused, obviously, very heavily on organic growth, as you should. you seem focused obviously very heavily on organic growth as you should GMV is accelerating year-over-year at ex Walmart. gmv is accelerating year-over-year at ex walmart How do you think about M&A? how do you think about m&a How do you think about buybacks? how do you think about buybacks

Speaker 2: Yeah. Yeah. yeah

Speaker 1: How do you think about dividends, maybe? How do you think about dividends, maybe? how do you think about dividends maybe

Speaker 2: Yeah. Yeah. yeah

Speaker 1: Talk about how you rank all these. Talk about how you rank all these. talk about how you rank all these

Speaker 2: 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. I think just maybe pointing to some of the things that we've done historically. 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. we've been pretty active around buying back the convertible issuance that we did in 2021

Speaker 1: Yeah. Yeah. yeah

Speaker 2: That 1st convertible bond that we did is going to mature in Q4 of 2026. We've been chipping away at that, especially there was a period in time where those bonds were trading at a pretty meaningful discount and we felt like that was kind of a no-brainer move in terms of capital allocation, was sort of buying those back, buying back that future liability at a pretty meaningful discount. I think that's served us well. When there's been opportunities to allocate capital to something that we think has a really, really high return, we've done it. That 1st convertible bond that we did is going to mature in Q4 of 2026. that 1st convertible bond that we did is going to mature in q4 of 2026 We've been chipping away at that, especially there was a period in time where those bonds were trading at a pretty meaningful discount and we felt like that was kind of a no-brainer move in terms of capital allocation, was sort of buying those back, buying back that future liability at a pretty meaningful discount. we've been chipping away at that especially there was a period in time where those bonds were trading at a pretty meaningful discount and we felt like that was kind of a no-brainer move in terms of capital allocation was sort of buying those back buying back that future liability at a pretty meaningful discount I think that's served us well. i think that's served us well When there's been opportunities to allocate capital to something that we think has a really, really high return, we've done it. 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've generated in the last year, but it's still early days there. 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. I think we're still very early, though, in generating cash. i think we're still very early though in generating cash I'm really proud of the cash that we've generated in the last year, but it's still early days there. i'm really proud of the cash that we've generated in the last year but it's still early days there 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. 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

Speaker 1: Yeah Yeah yeah

Speaker 2: In any environment and through the cycle. Cash is an important part of how we think about stress testing and scenario planning for a downside scenario. 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. In any environment and through the cycle. in any environment and through the cycle Cash is an important part of how we think about stress testing and scenario planning for a downside scenario. cash is an important part of how we think about stress testing and scenario planning for a downside scenario It's a high bar for us to sort of distribute cash externally. 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. that's true with m&a it's true with buybacks it's true with dividends

Speaker 1: Yeah. Yeah. yeah

Speaker 2: I would say 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. It wouldn't surprise me if in the next five years we did something on the M&A front, but there's a really high bar for those opportunities given our own internal development chops. It's going to have to be the right opportunity, and it's really hard to predict the timing of that. I would say 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. i would say 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 It wouldn't surprise me if in the next five years we did something on the M&A front, but there's a really high bar for those opportunities given our own internal development chops. it wouldn't surprise me if in the next five years we did something on the m&a front but there's a really high bar for those opportunities given our own internal development chops 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 have to be the right opportunity and it's really hard to predict the timing of that

Speaker 1: Yeah. Yeah. yeah

Speaker 2: It's going to be idiosyncratic, I think. Look, I think over time, buybacks are probably potentially a way that we could return capital to shareholders, but I think it's early enough for us today that we haven't. It's going to be idiosyncratic, I think. it's going to be idiosyncratic i think Look, I think over time, buybacks are probably potentially a way that we could return capital to shareholders, but I think it's early enough for us today that we haven't. look i think over time buybacks are probably potentially a way that we could return capital to shareholders but i think it's early enough for us today that we haven't

Speaker 1: Yeah Yeah yeah

Speaker 2: Made a commitment there. Made a commitment there. made a commitment there

Speaker 1: Personally, I'd rather see M&A because it'll 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, but the stock is so volatile. It was 83, then 43, and now it's back up. It's like, you're not a hedge fund. Let's talk about M&A. Bring us into the exec committee meeting when M&A is being discussed, and 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." Is it that? Personally, I'd rather see M&A because it'll drive the growth story. personally i'd rather see m&a because it'll drive the growth story I think buybacks and dividends, I think dividends at your stage are not really appropriate. i think buybacks and dividends i think dividends at your stage are not really appropriate Buybacks, you could argue when the stock is down, but the stock is so volatile. buybacks you could argue when the stock is down but the stock is so volatile It was 83, then 43, and now it's back up. it was 83 then 43 and now it's back up It's like, you're not a hedge fund. it's like you're not a hedge fund Let's talk about M&A. let's talk about m&a Bring us into the exec committee meeting when M&A is being discussed, and what would make sense for you guys to do? bring us into the exec committee meeting when m&a is being discussed and 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." Is it that? would it be "hey this company has a product that we think would go really well and a bunch of users and active members." is it that

Speaker 2: Yeah. Yeah. yeah

Speaker 1: Is it something tangential? Take us into that conversation about. Is it something tangential? is it something tangential Take us into that conversation about. take us into that conversation about

Speaker 2: Yeah Yeah yeah

Speaker 1: Just generically. Just generically. just generically

Speaker 2: 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. Arguably the best M&A deal that we've done to date, it was probably the acquisition of PayBright in Canada. Sure. 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. 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 Arguably the best M&A deal that we've done to date, it was probably the acquisition of PayBright in Canada. arguably the best m&a deal that we've done to date it was probably the acquisition of paybright in canada

Speaker 1: Yep Yep yep

Speaker 2: Where we had an opportunity to acquire and merge with, frankly, the market leader for buy now, pay later in Canada. 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. Where we had an opportunity to acquire and merge with, frankly, the market leader for buy now, pay later in Canada. where we had an opportunity to acquire and merge with frankly the market leader for buy now pay later in canada It was a business that looked a lot like Affirm. it was a business that looked a lot like affirm They thought really deeply around how they treated the consumer. they thought really deeply around how they treated the consumer They were winning an incredible roster of. they were winning an incredible roster of

Speaker 1: Yeah Yeah yeah

Speaker 2: Merchants. They had just won Apple's first-party hardware business in Canada, right? 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. Yeah, 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? Merchants. merchants They had just won Apple's first-party hardware business in Canada, right? they had just won apple's first-party hardware business in canada right I think it's something like that, where we look at the business and we feel good about how they've treated the consumer. 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? 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. that's a huge part of our promise to the consumer Yeah, 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? yeah 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

Speaker 1: Yeah. Yeah. yeah

Speaker 2: They should be able to- They should be able to- they should be able to-

Speaker 1: Yeah Yeah yeah

Speaker 2: to get to the two or three things that are maybe below the line for internal development, but still long-term valuable to the overall strategy. to get to the two or three things that are maybe below the line for internal development, but still long-term valuable to the overall strategy. to get to the two or three things that are maybe below the line for internal development but still long-term valuable to the overall strategy

Speaker 1: Yeah Yeah yeah

Speaker 2: to the business. to the business. to the business

Speaker 1: 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? Okay. okay That's great color. that's great color Let's focus the last couple of minutes we have on AI. let's focus the last couple of minutes we have on ai You guys touched on the shareholder letter, how it's driving productivity. 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? remind us how it's doing that from the cost side i guess

Speaker 2: Yeah Yeah yeah

Speaker 1: which is table stakes at this point. which is table stakes at this point. which is table stakes at this point

Speaker 2: Sure. Sure. sure

Speaker 1: How you see it driving growth as well. How you see it driving growth as well. how you see it driving growth as well

Speaker 2: Yeah. We're still at a point in our development where the only shortage is capacity to get these ideas built, right? There's no shortage of ideas. We've really pushed the product and engineering teams to utilize AI more in their development cycles. We actually did an AI tooling week in late January where we shut down development at the company for a week to let some of the early leaders in terms of utilizing AI at Affirm work with the rest of the engineering team to show and share wins. It's actually been incredible, the uptake of AI usage. Yeah. yeah We're still at a point in our development where the only shortage is capacity to get these ideas built, right? we're still at a point in our development where the only shortage is capacity to get these ideas built right There's no shortage of ideas. there's no shortage of ideas We've really pushed the product and engineering teams to utilize AI more in their development cycles. we've really pushed the product and engineering teams to utilize ai more in their development cycles We actually did an AI tooling week in late January where we shut down development at the company for a week to let some of the early leaders in terms of utilizing AI at Affirm work with the rest of the engineering team to show and share wins. we actually did an ai tooling week in late january where we shut down development at the company for a week to let some of the early leaders in terms of utilizing ai at affirm work with the rest of the engineering team to show and share wins It's actually been incredible, the uptake of AI usage. 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 more than 60% of a week's pull requests coming from AI-aided development. 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. Then if you double-click and go a level deeper, for me as 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. 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. 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 more than 60% of a week's pull requests coming from AI-aided development. i think we're now up to more than 60% of a week's pull requests coming from ai-aided development 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. 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 Then if you double-click and go a level deeper, for me as CFO, we're also seeing really nice efficiency. then if you double-click and go a level deeper for me as 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. 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. 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

Speaker 1: Yeah Yeah yeah

Speaker 2: A feature or a piece of software. 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. 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 right-sized for the job, right? A feature or a piece of software. a feature or a piece of software I think that's really important. 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. 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 There is, of course, still work to be done around optimizing. 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 right-sized for the job, right? 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 right-sized for the job right

Speaker 1: Right. Right. right

Speaker 2: We don't need the cutting-edge Claude token to check the weather, right? We don't need the cutting-edge Claude token to check the weather, right? we don't need the cutting-edge claude token to check the weather right

Speaker 1: Yeah. Yeah. yeah

Speaker 2: Making sure that we're using the right model for the right job. That'll be another layer of optimization that we'll do, but yeah, it's been really awesome to see the acceleration in development internally. Making sure that we're using the right model for the right job. making sure that we're using the right model for the right job That'll be another layer of optimization that we'll do, but yeah, it's been really awesome to see the acceleration in development internally. that'll be another layer of optimization that we'll do but yeah it's been really awesome to see the acceleration in development internally

Speaker 1: Are you monitoring the cost of tokens? Are you monitoring the cost of tokens? are you monitoring the cost of tokens

Speaker 2: Of course. I mean, yeah. Of course. of course I mean, yeah. i mean yeah

Speaker 1: The answer is yeah. The answer is yeah. the answer is yeah

Speaker 2: Yeah. Yeah. yeah

Speaker 1: Is it a growing piece of the P&L where you're like, "Hmm, that's getting to be a much bigger number," and that's good because we're offsetting? Is it a growing piece of the P&L where you're like, "Hmm, that's getting to be a much bigger number," and that's good because we're offsetting? is it a growing piece of the p&l where you're like "hmm that's getting to be a much bigger number," and that's good because we're offsetting

Speaker 2: Yeah Yeah yeah

Speaker 1: That cost with not hiring as much in certain areas and things like that. The efficiency of a token versus a human is obvious, right? That cost with not hiring as much in certain areas and things like that. that cost with not hiring as much in certain areas and things like that The efficiency of a token versus a human is obvious, right? the efficiency of a token versus a human is obvious right

Speaker 2: Yeah. Again, I think we've got a really robust roadmap internally. Yeah. yeah Again, I think we've got a really robust roadmap internally. again i think we've got a really robust roadmap internally

Speaker 1: Yeah. Yeah. yeah

Speaker 2: We are continuing to add to the team. We're doing it, I think, in a pretty measured way. We are continuing to add to the team. we are continuing to add to the team We're doing it, I think, in a pretty measured way. we're doing it i think in a pretty measured way

Speaker 1: Yeah Yeah yeah

Speaker 2: Of headcount growth. Of headcount growth. of headcount growth

Speaker 1: Yeah. Yeah. yeah

Speaker 2: 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. 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. 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. i think we're really happy with the throughput we're seeing

Speaker 1: Yeah. Yeah. yeah

Speaker 2: Yeah, we need to build financial plans that are aware of all these things, and I think we've done a good job of that. All of the token costs are factored into our near-term guide and our medium-term guide as well. Yeah, we need to build financial plans that are aware of all these things, and I think we've done a good job of that. yeah we need to build financial plans that are aware of all these things and i think we've done a good job of that All of the token costs are factored into our near-term guide and our medium-term guide as well. all of the token costs are factored into our near-term guide and our medium-term guide as well

Speaker 1: 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." You run really efficiently. It's obviously a really incredible management team. Do you see AI more as a continuous growth driver as opposed to a cost reduction, or is it a combination of both? We could end it on this one. 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." You run really efficiently. 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." you run really efficiently It's obviously a really incredible management team. it's obviously a really incredible management team Do you see AI more as a continuous growth driver as opposed to a cost reduction, or is it a combination of both? do you see ai more as a continuous growth driver as opposed to a cost reduction or is it a combination of both

Speaker 2: We do. I think right now it's very much more the former. We do. we do I think right now it's very much more the former. i think right now it's very much more the former

Speaker 1: Growth. Growth. growth

Speaker 2: Like I said, yeah. Like I said, yeah. like i said yeah

Speaker 1: Yeah. Good. Yeah. yeah good Good. yeah good

Speaker 2: 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. We haven't done AI-driven layoffs. 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. 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 We haven't done AI-driven layoffs. we haven't done ai-driven layoffs

Speaker 1: Okay. All right. I have a bunch more questions, but we're out of time. Okay. okay All right. all right I have a bunch more questions, but we're out of time. i have a bunch more questions but we're out of time

Speaker 2: All right. Thanks, Adam. All right. all right Thanks, Adam. thanks adam

Speaker 1: Great. Thanks, Rob. Great. great Thanks, Rob. thanks rob

Speaker 2: Yep. Yep. yep

Speaker 1: Appreciate it. Thanks, everybody. Appreciate it. appreciate it Thanks, everybody. thanks everybody