Welcome, everyone. I'm Rayna Kumar, and I lead U.S. Payment Processors and IT Services Equity Research at UBS. Today it is my pleasure to welcome Rob O'Hare, Senior VP of Finance at Affirm, and Pat Suh, Senior VP of Revenue at Affirm. Thank you both for joining me today. Thank you so much for having us. Thank you. So Rob, if we could start with you. For audience members who are unfamiliar with you, can you please introduce yourself and tell us a little bit about your role? Sure. I've been with Affirm for about three years now, and I sit on our executive team internally and then work across five sub-functions within finance. So I cover strategic finance, which does all of our financial forecasting and planning. I lead corporate development, which does all of our M&A work. I lead merchant pricing, which sets our go-to-market rate cards with merchant partners. I lead investor relations, and then also work across procurement. And before Affirm, I was CFO of a couple smaller companies, one of which, Spark Networks, is a publicly traded company. And then started my career earlier in financial planning and investor relations at Pandora and Square. Great. Okay. So starting at a high level, we're now nine months into the calendar year. Macro has remained fairly resilient, but there are some signs of consumer stress. Would love to just hear how you're thinking—the items. Yeah. Obviously, we keep an eye on the macro. We're always looking at the forward rate curve and always looking at unemployment figures as well. I think one of the nice things about our model and it from an underwriting perspective is that we're able to re-underwrite the consumer every time they get back. So while the macro is of course important to us, really, we're actually driving the business based on the repayment data that we see. So we don't need to prognosticate too much out on the macro because we create a really valuable and really short-term asset, and we're able to course correct pretty quickly if we start to see signs of stress from the consumer. And so what we've seen so far is that while there's been inflationary pressures on the consumer, and that has created some stress on repayments, employment is still incredibly strong and the repayment data on our side has been really resilient. You have five core product offerings, long, short, interest-bearing, and 0% APR, Pay in 4 and Affirm Card. Interest-bearing products now represent about 70% of your GMV mix. Can you talk about the trends in your product mix and corresponding merchant fee rates over the past year? Yeah. One of the nice things about Affirm is that we're, we're pretty indifferent in terms of the sorts of loan products that we offer at a merchant's point of view. We can be really flexible. We have the ability to... So growth that we've seen in terms of the mix moving into interest-bearing has really been driven by some of our larger partners. We also added interest-bearing loans to the Shopify program about 15 months ago now, and so that has helped drive up on the interest rates as well. You're currently in the process of implementing a higher 36% APR cap across your merchant base. As of July, approximately 70% of interest-bearing GMV is offered at the 36% rate. Can you quantify the economic lift potential from this pricing action? Yeah, I think it's important to remember that, as we've raised the APR cap, we're going to start to see new originations, benefit from that higher cap, but it'll take a couple of quarters for the entire book... to predate the cap at some of these, larger merchants at some of these programs. So, I think the rough math is that, you know, as we move from a 30% cap to the new higher 36% APR, we will-- you'll have to apply for the weighted average life of our loans, which is about half a year. So it won't be a full 6 points if you denominate it on a GMV basis, it'll be about half of that. And then ultimately, we haven't guided to a terminal rate for how much of the portfolio will move to the cap, but we think we have a lot of headroom still from the 70% that we were at, at Q3. Got it. That's very helpful. Pat, let's go over to you. Maybe, just like Rob, if you can just introduce yourself, give us a brief background and, tell us a little bit about your role. Sure. So my name is Pat Suh, and I am the SVP of Revenue at Affirm. I've been at Affirm about eight years, which in dog years is, quite a long time. But I manage the client-facing teams, the sales, client success, and marketing team. So, our field teams that meet with our merchant partners today. Previously to Affirm, I was working, in SaaS security and SaaS IP, was at Microsoft for quite a long time, actually in New York, so covered a lot of the banks here as well. So it's a good merger of financial services, payments, and, technology. Really happy to be at-- been at Affirm for a while. Wonderful. So Pat, maybe just talk about some of the major initiatives that you're focused on in the near term. So as Rob kind of talked about some of the products, we're very excited about the low AOV space. So, you know, our bread and butter has been highly considered purchases, higher average order values, but we've been moving over the last few years into the low AOV space. These are lower price points. A couple weeks, it was like the top downloaded apps. So very excited about really expanding into these smaller item purchases. We're also looking at expanding the categories, other categories such as healthcare, groceries. So we're already looking at expansions there and extending our reach into those broader categories. We're also looking at in-store, so our strategy with the card and expanding into its properties. I mean, 85% of sales is taking place in store, so we unlock that through products in the card. So we're excited about those expansions. And then finally, our distribution partnerships. So we continue to work with, like, the Amazon Pay, Worldpay, where integrations become very easy. These are platform plays where someone can enable our, so those are all our main initiatives for the next years. Understood. Can you talk a little bit about how you right now? Yeah, I think, you know, as we look at BNPL, there's probably a couple ways to segment it, but like, Pay in 4, that's probably where it's hyper-competitive, and where you're probably seeing most of the press. That's where most of our competitors are. So that continues to be competitive, mainly because there's less barrier to entry. It's less underwriting, to be honest. So we're seeing a lot of competition there that are able to enter the market. Where we've been, you know, sort of having our competitive advantage in our traditional higher average order value space. Because of our underwriting, because of our decade of experience in this, and like Rob was mentioning, the payment data, et cetera, we're able to underwrite better than anyone else. So competitively, we're the leader in anything that's of a higher average order value and considered purchase. So competitively, we don't see much competition there. And I think lastly, like with the card, I think we're being quite innovative. So competitively, you know, we're really pushing the envelope in what we're doing. Who do you see as your competitors? I think there's actually a gap we fill between, say, private label credit cards, credit cards, and debit cards. We're a unique offering that allows a debit card user to have the ability to manage their cash flow, that ability to take that on, to manage that cash flow. And then you have the physical card that you can use. So, really, we don't see many competitors at all. Okay. Tell me a little bit about your international expansion opportunity and how do international markets that you're looking at compare to that? Yeah. We're still, yeah, we're continuing to look to expand. I think the U.K. will be first on our radar, as the next area that we've announced we're expanding into. And we're always looking for new, new regions that can expand our reach. As we look at, you know, the differences, I mean, obviously, the U.S. is the biggest market for BNPL. So we've certainly started here, so we're concentrating on expanding our footprint here. Elsewhere, it looks like much more Pay in 4 from the BNPL players, less longer-term installments that we do. So I think, you know, as we expand into those markets, we'll have the same advantages we have as in the U.S. internationally. Understood. Okay. So, Affirm recently announced partnerships with Worldpay and Amazon Pay. How does Affirm think about distribution partnerships long term? Very big part of our strategy, because if you look at the integration piece, it's minimal. You can activate just by integrating with these partners. Our integrations with these partners within their portals, be able to flip a switch to turn them on and activate the Affirm technology. So these platform plays, like you mentioned, Worldpay, Amazon Pay, Shopify, they're all native integrations that allow a merchant to just flip it on. So, when we think about the long tail, very easy to activate, no integration on their part, lessens our time to market with those partnerships. Understood. Tell us why you are spending for Affirm, and how does Affirm plan to win? I think, in-store is definitely a big part of our expansion. Like I mentioned, 85% of transactions are made in store, so, we are continuing to invest there. I think the two main strategies are taking BNPL, putting that in a physical factor they take in store is just really powerful. Very limited touch option, it's a familiar form factor, and from a merchant perspective, there's no training involved really in having to accept the card. And then, native point-of-sale integrations, like a Shopify in store, allows us to expand very quickly to any point of sale systems that people provide in store. So those are the two pieces of our- Got it. Rob, I want to move over to you, and this is also about the Affirm Card. Represents a meaningful opportunity for you as, as you know, Pat mentioned as well. You, you've had an increase in our users. Why have you started users? It really is a decision on our side. We've got, we're fortunate to have a base of active consumers of about 16 million. Affirm is very much a product. We're driving that product into the base of consumers that already know it as Affirm, and so it's been up to us to sort of roll that out, and we've done a lot of work behind the scenes to make sure that we get the product economics right, that we get the conversion funnel right when we mail out a card to a user. And so as we see... So we started to put on the- ... card users. Got it. Do you think this growth is sustainable going forward, that we saw in the previous quarter? Yeah, yeah, we've been pretty steady. It was pretty steady over our fiscal fourth quarter, which ended in June, and we're really excited about the uptake that we've seen and just the usage that we've seen with the product. Understood. As of the fourth quarter, 80% of Affirm Card GMV and 50% of transactions were in the form of interest-bearing loans. How do you expect the pay now versus pay later mix to evolve over time, and how should this impact your RLTC margins? Sure, and maybe just to give a quick primer on the card. So the Affirm Card sits on top of a consumer's existing bank account, and then from there, there's effectively three different ways that a consumer can use the Affirm Card. So the first is a use case that we call pay now. So these are a debit swipes. The economic model for Affirm there is that we collect non-regulated interchange, so a much lower take rate than we see in the rest of our business, but that's very much a new surface area and a really large opportunity for Affirm. So we found a way to make sure that those transactions are still accretive to Affirm overall, and we'll still make a small margin there. It just won't be at quite the same profile, but we think that adds a lot of frequency. If we're successful with that part of the card, we expect to have the card be top of wallet and drive a lot of engagement with our base. And then, for the... what we would call pay later transactions, it's really a mix of two product types. It'll be some Pay in 4 transactions, and then as we posted in Q4, the majority of interest-bearing loans. So, you know, how we divert the financing side across Pay in 4 and interest-bearing, I think we've got a really good model to optimize those transactions, to make sure that economically we, you know, we stay in line with the rest of the portfolio. And so, if we are fortunate to see more pay now volume, I think that'll drive really nice frequency, within that consumer base, and we think that's a real positive, but it, it could result in, slightly lower economics overall for the card. But I don't think it'd be a meaningful drag on the portfolio at all. Got it. Okay. With the exception of Affirm Card, Affirm has primarily focused on consumer lending products. For some of your competitors, like PayPal and Block, the buy now, pay later product offerings are just one part of a broader financial services ecosystem. Have you contemplated making a big push into more traditional financial services and payment solutions there? Certainly. I mean, I think we're still really early in the journey on the Affirm side. We haven't shared too much beyond card. So I think card is really the next product initiative that we want to drive in fiscal 2024. And I think card shows that we want to mean something to all our consumers' transactions, whether it's a finance transaction or everyday spend. And so, I think we've still got an incredible opportunity to optimize that product next, and we've got some interesting things going on the international side down the road. And so, yeah, that's what we're focused on right now. Understood. The direct-to-consumer business represented about 25% of your GMV in FY 2023. Can you talk about the importance of your direct-to-consumer business and spend some time discussing the economics for this business? Sure. Yeah, I mean, I think the great thing about the consumer business is that it shows where Affirm sits in the shopping journey for our consumer base. Like, the majority of the transactions on the direct-to-consumer side are really starting on an Affirm surface, and I think that's really compelling when we're out talking to merchants and talking about the mentality that we can bring to merchants large and small. You know, the nice thing about direct-to-consumer also is that a second-use product. Most, most consumers don't start their journey with Affirm on our direct-to-consumer services. It's something that they find after they've discovered Affirm at a point of sale with an integrated merchant. And so because we're working with a base of consumers that have proven themselves to be good borrowers and, and to have paid us back, there's inherently less risk in direct-to-consumer transactions. We've, we've sort of taken out some of the risk that comes with the first transaction with a consumer. So that, that really helps a lot on the economics of the direct-to-consumer side. That's been true with our Affirm Anywhere product, which runs on a virtual card, and that'll be true again with Affirm Card as well. So we really like that cohort of users. It's a way to drive a lot of engagement with a base of users that, that really trust Affirm and, and love the, the ease of use that Affirm brings. Understood. Enterprise partnerships are obviously a key component of Affirm's growth strategy. Looking specifically at Amazon and Shopify, you've now been with these platforms for a few years. Can you talk about how these relationships are progressing, and what is the remaining opportunity with both Amazon and Shopify? Yes, thanks. I think there's still tremendous potential on both platforms. You look at BNPL in the U.S. at large, I think it's roughly a 60% penetration of e-commerce, and we're nowhere near that penetration rate yet at either of those platforms. So we think that there's an opportunity just to sort of catch up with the rest of e-commerce as we continue to optimize and scale those programs. In particular, we extended that relationship early last summer, and with that extension, we also expanded into interest-bearing loans. And so I think that's a really good model for how we think about the opportunity with all of our large partners. If you remember, Shopify started as a Pay in 4 only offering, and then we added interest-bearing to complement Pay in 4 about a year into the relationship. And so we would love to bring that model to all of our large partners, where oftentimes a large partner is starting with a single loan product, and then we can expand into Pay in 4 or, you know, add interest-bearing into the Pay in 4 only product. So that's really the plan to run and to make sure that bring the entire product to merchants and able to optimize it to, to fit within the context of their business. Are there other large, partnerships that we can expect to hear about in the near future, that replicate, some of the work you've done with Amazon and Shopify? I mean, I don't think there's anything quite at Amazon's scale or even Shopify's. But we always have—Pat's always out talking to merchants, and we always have a pipeline that we're really excited about there, but nothing to announce today. Understood. Sticking with enterprise, can you talk about how the economics and product offering differs with these large e-commerce platforms, compared to some of the smaller individual merchants? Yeah, I think, you know, because we have such a wide breadth of product offerings, we can really meet the merchant where they are, right? Some merchants are very cost sensitive, in which case they want a lower cost. For us, it probably an interest-bearing offering, interest-bearing merchant discount rates. Other merchants are more focused on driving incrementality, or they may be selling a higher ticket item or a higher margin item, and they're more open to partnering on things like 0% APR, which, in that transaction, we're only monetizing the merchant side of things, so the merchant will pay us higher MDRs in that situation. So, yeah, I think, you know, we've, like I said, sort of expand the offering with Shopify. We've done that, in a profitable way. And then similarly with Amazon, Amazon historically has been an interest-bearing only product, but we don't think that that's an end state for the relationship. Okay. We can now open the floor for questions from the audience. We have a mic going around, so if anyone has any questions, just raise your hand, and we'll bring over the mic. Okay, and if you don't, I have plenty of more questions, so that's, that's fine. That's fine as well. More time. Rob, your 2024 GMV guide implies a deceleration in growth. Sustained low approval rates are likely a factor. Are there any macro indicators that would potentially make you more constructive on your approval rates? For example, the Fed pivoting its interest rate policy. We think investors are looking for catalysts that would drive GMV acceleration here. Yeah, as I mentioned, I think while we're obviously tracking all of the macro indicators, we really start our underwriting decisions with the repayment performance. And that for us is oftentimes the best signal of stress or strength in the consumer base. But that's going to dictate how tight or that we set the credit boxes and how we underwrite program. Really, the data, I think, is going to dictate. I know you have an upcoming Investor Day. Can you talk a little bit about what we should expect to hear? I'm going to be a little coy there. I mean, I think we're really excited to obviously share a bit more about Card, which has been very top of mind for investors since we've announced earnings. In the last Investor Day, we did give an update on some of the economics in the business and how we expect to operate from a growth and profitability perspective. So I would expect that those are some technical for the event, but don't want to front run the event too much. Okay. And both of you have spoken about some of the things that are important at Affirm. Do both of you maybe answer on how this M&A potentially plays to some of your strategies? Sure. I'll start there, and Pat can fill in. You know, I think if you look at the M&A that we've done at Affirm, and we've been relatively acquisitive over the last two years. I think the most successful deal that we've done was really PayBright, which was a market-leading BNPL provider in Canada, and, you know, Affirm is playing in such a large space, being a U.S. market leader, that, oftentimes it can be hard to prioritize the work needed to launch a new country. And with PayBright, we were able to, you know, buy entry into what is a really important market in Canada. And I think if we were to do future M&A, we would certainly consider, you know, a buy versus build approach in some of the international markets that we think are interesting. So I think that's maybe the easiest one to point to. Within corporate development, we also view our role as being an extension of the product roadmap. And so, so many things here, and so we're always... You know, what are some of the interesting areas that are maybe below the line for that team and out talking to potential targets as a way to augment the in-house product resources. Okay, fair, fair enough. I want to go back to the competitive lens.... and you both explained really well just the advantages that our firm has in the market. Can you talk a little bit about who you actually view as your main competitors here in the different segments of your market, and how often do you run into Block's Afterpay? So, I mean, I can start there. Well, I think, you know, what we submitted earlier, I think for Pay in 4, it's the traditional folks that you've seen, Pay in 4, like you mentioned. Yeah, those are, from our perspective, we, you know, we differentiate in a way where we offer the Pay in 4 offering, but we also offer installments. And so it's almost like we work with these added extension and features. So what Rob kind of mentioned with Shopify, how we launched with Pay in 4 initially, but then expanded into interest-bearing installment loans and longer-term loans, that's where we're very differentiated. So when we look at competitors, no one has that offering. So we might compete on the Pay in 4 space initially, but then we always look to kind of expand and broaden our offering. That really resonates with a lot of merchants where we want to have the broader spectrum of offerings. Even when you look at a Temu that we launched recently, their average order values are probably less than $50 today. We're seeing pretty, pretty healthy margins where, I mean, where people are bundling these lower price tags. So, for us, we feel like Pay in 4 is just one piece of BNPL. We're able to offer a broader, broader offering to our merchants. So that's been helpful. Yeah, and I would just add, I mean, think about the breadth of our product offering. That's interesting in and of itself, but it also means that we can profit by monetizing consumer interest on the one hand, and we're not dependent on purely monetizing the merchant side of the equation, like a Pay in 4 model would be. And so I think that's really interesting. That allows us to be really flexible in some of the enterprise discussions that we're part of. It also means that we have, I think, a pretty differentiated consumer base when you compare us to an Afterpay or a Klarna, because they're playing predominantly in Pay in 4, we bring a base that may have a different consumer type. And so that gives us the ability to be incremental to either of those platforms. And some of the opportunities that we see in the market today, there is a side-by-side approach where the merchant may be looking to bring on an incremental, you know, a second or third provider, and I think our network of consumers is really unique. Rob, you alluded to this before. As we both mentioned, some of your competitors are offering consumer-facing financial products, and you said in FY 2024, that was a key initiative. Should we expect announcements of newer consumer products throughout the coming months? I think we're really heads down on card and making sure that we maximize the card opportunity and then get it right with our consumers, and then continue to invite new consumers to enter into that product set. So I think you should expect to see continued progress on the card front. That's what I expect to share in the coming quarters. Okay, fair. All right. I know we only have a few minutes left, so I just want to ask both of you a final question. This is, and actually, maybe it's two questions. What are you both most excited about coming on to the phone? Oh, let's see. Well, I, not to beat a dead horse, I mean, I'm very excited about the card. I think, as I mentioned, it just unlocks just a wealth of different, you know, channels for us. It's something that's very exciting, and merchants are really, really asking about how they can leverage the power of the card within, within their stores and within their, their, their marketing. So, you know, for me, being at Affirm, it's exciting, which is innovative product. And so that keeps me going, you know, especially after eight years, just being excited about the offerings and what's coming, and I really do think we're changing the way people are shopping, you know, with, with, buy now, pay later and with, with our products. So, that's what keeps me going. You know, I'm certainly worried about the macro pieces. I mean, less worried in sort of the sense that Rob's talking about for our business, but, you know, the consumer is pressured today, merchants are pressured, there's a lot of these external forces. So, you know, how that affects, you know, trying to understand how that affects our merchants and being able to tailor our solutions for that. We've seen, you know, we've been able to navigate that, but, yeah, it is always an overarching concern. On my side, I would echo Pat's excitement about card and then would also point to the fact that we delivered adjusted operating profitability in Q4 and then gave guidance for fiscal 2024 that we'll do the same on a full year basis. So I'm really excited to execute against that plan and to deliver results in the coming quarters. Yeah, and I think in terms of worries, I mean, really, it's such a tremendous opportunity, right? Like making sure that we prioritize the right things at the right time to make sure that we maximize the BNPL opportunity here in the U.S. and then also in new markets. I think that's probably what keeps me going. Great. Well, it's wonderful having both of you. Very insightful. Thank you. Thank you. Thank you.