Affirm Holdings, Inc.

Good afternoon, ladies and gentlemen. Thank you for standing by. Welcome to the Affirm Holdings Fiscal Year 2022 Fourth Quarter Earnings Conference Call. At this time, all lines have been placed on mute to prevent any background noise. Following the speaker's remarks, we will open the lines for questions. As a reminder, this conference call is being recorded and a replay of the call will be available on our investor relations website for a reasonable period of time after the call. I'd now like to turn the call over to Rob O'Hare, Senior Vice President of Finance, to begin. Please go ahead, sir.

Thanks, Operator. Before we begin, I would like to remind everyone listening that today's call may contain forward-looking statements. These forward-looking statements are subject to numerous risks and uncertainties, including those set forth in our filings with the SEC, which are available on our Investor Relations website. Actual results may differ materially from any forward-looking statements we make today. These forward-looking statements speak only as of today, and the company does not assume any obligation or intend to update them except as required by law. In addition, today's call may include non-GAAP financial measures. These measures should be considered as a supplement to, and not a substitute for, GAAP financial measures. For historical non-GAAP financial measures, reconciliation to the most directly comparable GAAP measures can be found in today's earnings press release. which is available on our investor relations website. Hosting today's call are Max Levchin, a firm's founder and chief executive officer, and Michael Linford, a firm's chief financial officer. With that, I'd like to turn the call over to Max to begin.

Thank you for joining us on this call. The fourth quarter capped off an exceptionally strong fiscal 22 for our firm. We have once again posted a very healthy set of numbers, beating our own financial targets. We executed well throughout the quarter, meeting US consumer spend where it was. With COVID restrictions nearly gone, getting out of the house and out of town became a huge draw. While homewares and fashion experienced something of a retreat to more normal levels of growth, we were able to help our longtime partners and online travel agencies have a banner quarter, posting triple-digit year-on-year growth in some cases. We had anticipated this shift a little while ago and recently announced some timely new partnerships in the space, like Agoda and SeatGeek. despite what you may have heard elsewhere people are still buying things online a lot of them Last month featured our very first Prime Day, which was as much a test of our product as it was of our systems and scalability, and we were quite pleased with the results. Running up to, and during the event, we introduced zero APR programs on numerous SKUs. We also expanded our partnership with WooCommerce, which includes extending our reach to support their merchants in Canada. More recently, Affirm became BigCommerce's preferred pay-over-time partner, replacing a provider that specialized in the six-week loan variety. underscoring merchant demand for complete solutions. And we significantly broadened our relationship with Stripe, unlocking streamlined distribution to more merchants and more consumers. We often talk about a firm as a two-sided network of consumers and merchants. The less obvious but all-important third side is our capital partners. Maintaining a diverse set of funding sources is critical in this economic environment, and from our earliest days, we knew there was no winging it with capital markets. Today, we are proud to call some of the most sophisticated investors in the world our long-term partners. Thanks to our excellent capital team, we added just over $1.6 billion of net new committed capital. Approximately 70% of this capacity came from existing and newer house and forward flow agreements, including a new half a billion dollar multi-year forward flow commitment. In addition, our capital team executed two new asset-backed securitizations during this quarter. As proud as we are of our results this year and quarter, we know that many people are thinking about how the economic picture may unfold, and so are we. The economy is more than likely in the beginning stages of a downturn. It's too early to tell how deep it will be and how long it will last. So how do we continue building the strongest firm amidst uncertainty? In a sentence, we are going to be cautious in our management of risk while investing aggressively in the expansion of our total addressable market. The former means our credit posture will remain conservative until we have a clearer view of the real economy. The latter is that we expect significant growth from new partnerships, new products, and new geographies. In the language of the 1990s internet, we're widening the top of our funnel while keeping a watchful eye on its bottom. Let me spend some time on both of these topics. As we have said numerous times in the past, credit performance is a non-negotiable guardrail for our firm. This is true because we see guarding our consumers' financial health as a part of our mission and because we remain obsessively focused on delivering exceptional results to our capital partners. We have both the underwriting technology and the control systems to deliver on this goal. We covered this in our May earnings call, but for a quick refresher, relatively short terms and individual loan approvals give us enormous flexibility when it comes to managing our back and front books, respectively. Being able to request a transaction-specific down payment or additional income information and offer risk-appropriate term selection are just some of the powerful tools we have built over the years. This part probably does not need to be said, but just because there still seems to be some confusion, unlike the folks in the marketplace lending businesses, we are not dealing with the decaying performance of loans made years ago in pursuit of growth at all costs. Roughly half of our outstanding loan book is expected to pay down within four months or so, and about 80% within eight months. Our mission and our business model compel us to keep our consumers' long-term financial interest in mind alongside our partners and our own. But while we expect to have a conservative mindset with respect to credit during this period, we intend to use our advantaged position to grow and to continue taking market share by expanding our total addressable market aggressively. Here are just some of the growth initiatives I'm excited about. Inclusive credit. We have worked relentlessly over the last several years to evolve our approach to identifying and underwriting credit-worthy applicants left outside the traditional credit reporting infrastructure. By some estimates, this is almost 45 million Americans. And we are excited to begin deploying some of these features in time for the upcoming holiday season. scaling brand-sponsored promotions. We continue to leverage unique features of the Affirm Network, most importantly, SKU awareness. Through our brand-sponsored promotions product, manufacturers have the ability to sponsor low and zero APR deals at specific retailers on an item-by-item basis. Taking this concept a step further, we are delivering a full self-service console to participating brands and manufacturers to enable them to deploy promotions on the Affirm network seamlessly. International expansion. Paybrite, now known as Affirm Canada, continues to deliver very good results. and I am pleased to announce that this past quarter I asked Wayne Palman, formerly the CEO of Paybrite, to step up to lead all of our international efforts. Under his leadership, we are investing in the United Kingdom market this fiscal year and plan to continue from there. Debit Plus. We have spent significant time fine-tuning Debit Plus this quarter, focusing on the usability and profitability of the card. Transactions per active consumer are at a healthy 2.7 times per week, and the online-offline usage breakdown is split nearly evenly. It is still quite early, so as usual, a warning about reading too deeply into the fine-grained metrics. That said, GMV per active DebitPlus consumer is over 40% higher than a non-DebitPlus one, and after the first two weeks from consumer onboarding, we see near-perfect cohort retention. As you will hear in a second, we're still adding significant features to DebitPlus, and its at-scale contribution to our top and bottom lines is difficult to forecast. As a result, we have excluded all DebitPlus-related metrics from our forecast today. We are excited by what we see in the usage so far and are committed to making DebitPlus a massive long-term success, expanding our reach, frequency, and profitability. Rewards. One of the key preference-driving features of modern consumer payments is rewards. It is the most common theoretical objection to BNPL versus credit cards. We can stop the debate. Our plan is to launch Affirm Rewards in beta this September with a number of participating retailers. As we roll the program out, Affirm consumers will begin to earn points on eligible point-of-sale, Affirm Anywhere, and DebitPlus transactions, with redemptions in the Affirm app. We're very excited about the possibilities here and expect to scale the program in time for the holidays. I'll stop here, but there are numerous other initiatives we're plowing away on while keeping credit performers top of mind. Last year, we hosted an event where we discussed our product roadmap in detail and plan to do one again late this year. We'll give you a much more detailed overview of what's getting built then. Before I hand it off to Michael, one more comment on growth. For quite some time, we've expected consolidation to begin in this space. Our exciting mission, market leadership, and a strong cash position make Affirm an exit of choice for teams with great talent, now that the prices in the parlance of our times have corrected a bit. We have no specific M&A targets to report today, but are keeping a very keen eye on the markets. We continue to see strong demand for the simple idea of paying over time, and in particular for our take on it, supporting many transaction types and sizes and keeping away from gimmicks and hidden fees. Our strategy remains exactly the same as before, to continue building our network. More partners, more active consumers, and more transaction volume. As always, I want to thank the ever-growing worldwide band of farmers united by our shared sense of mission and to send a special shout out to the veterans still going strong through the shared ups and downs of our first decade together. It's amazing to contemplate that just a few years ago, we imagined that supporting $50 million of transactional volume would be quite the achievement, even as we now plan our march to $50 billion of GMV just a few years from now. And now, on to Michael for the numbers.