Jason Kupferberg: Thank you guys. I just wanted to start on GMV. I’m just looking at the new outlook there. You talked in the shareholder letter about some slowdown in discretionary consumer spending, but just wanted to take your temperature on how much of the lower outlook on the volume is that versus other factors, whether it be competition or just some tightening of the credit box. And then if you can just talk about what you see ultimately reaccelerating the GMV growth, because I think, the mass suggests you’ll be down around 13% or 14% in the next couple of quarters. Thank you.
Max Levchin: That’s a great question. So, the discretionary spend is down. We get a pretty good preview of what that looks like, especially around Christmas shopping and Black Friday from our seats, electronics were down about 11%, homewares and supports equipment in particular, were hovering in the negative high 30s. So there’s quite a lot of €“ I’m not sure of the right word to use, but folks are digesting the purchases they made during the pandemic. And I think those are not transactions that will disappear forever, but I think they are probably going to remain muted for, we expect at least a few quarters of that. On the flip side, credit is always an input. We set the loss rate that we’re willing to live with and our capital partners are willing to live with, and then we manage everything towards that that’s why the delinquencies are as good as they look.
We have total control and we are willing to compromise GMV, although don’t have to compromise too much of it to maintain industry winning loss rates. And so I’m not sure I’m prepared to give you a breakdown, but those are the two fundamental reasons consumers are pulling back their spend. Every time I talk to my friends CEOs of broadline retailers, they tell me that discretionary spend is down. There is quite a lot of movement into things like consumables and obviously food prices being higher does not help either. To the re-acceleration point, obviously we’ve talked for a long time about Debit + I’m sure somebody will ask me and I’ll give you a full update on what’s going on there, but I remain very, very bullish on that. We’ve worked really hard over the last six months.
It’s hard to overstate just how much work went into the product just over the last couple of quarters. We feel very good about its state of readiness and we’ll start fighting out just how much of that food and consumable spend we’re going to be able to shift to Affirm. Our consumers still love us, they still come back to us. You can see that the frequency per user is rising. The network activity is extremely healthy. I think probably the set of metrics that I would direct all of you to look at if you wanted €“ how does a firm win story spelled out very clearly. There’s almost a 40% growth in active consumers year-over-year, almost 40% growth in transactions, 3.5 transactions per year per active user, 51% growth in transactions themselves and 86% up slightly from last one is the repeat transactions.
And so, the network itself is increasing density, and that is fundamentally the long term play. Like if we are able to pick up more and more of your transactions, we will ultimately have a really good shot at also helping you buy groceries. And that is transactions that do not, generally speaking, diminish much in the positive and negative economic environment. So that is where the real reacceleration will come from. We’re also selling to more merchants and launching new projects and new products with them. So that, too, will bear fruit. But in terms of new categories, off-line and lower AV transactions off-line in particular, is where I’m most excited about.
Jason Kupferberg: And then just quickly on Amazon, I think the exclusivity provision of the contract expired January 31. Just any updates there? Thanks again.
Max Levchin: I think the world where you can lock up your partners with a 10-year contract and not do much after that is €“ that’s left to card issuing banks. We’re not one of those. The way we maintain our partnerships and hopefully, have a rate to continue showing up is by showing up and delivering real value every day. I think we feel very good about all of our enterprise partnerships.
Michael Linford: Yes. Just real quick. In our Q, you’ll see we are breaking down the concentration that you see for Amazon. And I think we are €“ we have a meaningful exposure there. We are a little over 20% of our GMV. That is still underpenetrated versus Amazon’s share of e-commerce. So, we still feel like we have a lot of room to grow there. And nothing happened to our business on to Max’s earlier point, on the day the contract terms turned over.
Operator: Our next question is from Rayna Kumar with UBS. Please proceed.
Rayna Kumar: Hi, thanks for taking my question. Just looking at your FY 2023 guidance, you’re calling for cut at the midpoint on revenue of 8% and transaction costs to be cut by 2% at the midpoint. Just wondering what that €“ why there’s that big differential. Any call-outs there?
Michael Linford: Sorry. Is your question why are we able to…
Rayna Kumar: Why are you cutting revenue more than the transaction costs?
Michael Linford: Okay. Yes. I think we €“ the guidance for the back half of the year, transaction cost does reflect continued some volatile macroeconomic conditions, including and especially the capital markets where we would continue to expect there to be a lot of pressure on the yields that we need to generate for our capital partners. I think that’s reflected in the guide. That’s the thing that’s happening to us. The thing that we’re doing about it is the pricing initiatives that Max alluded to. I think we’d feel better about the world, have that already been in the ground and reflected in the mix of GMV that we’re originating. And so we do expect that continue to be a source of pressure on us in the near-term.
