Dan Dolev: Hey, guys. Great results. Congrats, Max and Mike and the team. Quick question — I have two questions. The first one is on the guide. Obviously, the knee-jerk reaction, which we disagree with was that the GMV guide is conservative. You beat by $700 million. You’re increasing the guide by $1 billion — and for GMV, like you sound very upbeat about the macro. Is it just conservatism?
Michael Linford: Yeah. I mean, just like we have all year long for the full year, we’re only providing a floor or our full year guide. And so we did take our floor up by $1 billion, which we think is a pretty big step up in what we would expect for the year. We remain very upbeat and excited about the opportunity. .
Dan Dolev: Got it. Yeah. No, that’s what it seems like. And then maybe one other question on kind of the direct deposit opportunity. You’ve had tremendous success with the card. Can you maybe talk a little bit about what you’re seeing in terms of the usage and frequency for the people that are doing the direct deposit into the card or into the Affirm app?
Max Levchin: A little early. We gave the future name about 60-something days ago. So it’s a little early to brag about the results. But we feel very good about it. It’s done in the early versions that it is about as well as we could hope for. We have a lot more things coming for that product, working on a couple of very specific things that are just required before you can really call yourself an account. But feel great. It’s definitely – and I think I mentioned this before, but there’s kind of three stages of Affirm usage. If you are a not cardholder, non-account holder, regular user, frequencies 4.5 transactions a year and grew again 20% plus year-on-year. But if you have a card that goes up quite a lot, is about 4x, and then it grows again, fairly significantly if you are an account holder. So very excited to give more accounts to people because that’s ultimately a frequency driver for us as well.
Dan Dolev: Got it. Well, it sounds like a huge opportunity. Congrats again.
Max Levchin: Thank you.
Operator: Our next question comes from the line of Rob Wildhack with Autonomous Research. Please proceed with your question.
Robert Wildhack: Hey, guys. May I ask a question on volume in a different way. I think the shareholder letter called out three quarters of accelerating volume growth and then within the December quarter each month, accelerated to the updated outlook for the rest of the year seems to point to a pretty healthy slowdown in the second half, half over half. So I wanted to get your thoughts on what might be driving that slowdown if there’s anything specific that you’re seeing?
Michael Linford: So again, I think the full year outlook for us is just a floor. And so we’ve not given even a range or a ceiling to where we’d expect any calculation being done on Q4 is probably not getting to a midpoint. And any math you’re doing on that number inclusive of our Q3 range is taking — is probably squeezing that number quite a bit. Separate from that, we had a really good Q2, right? And so the really strong second quarter isn’t something that we would ever take and say that’s a fundamental change of business. That’s something we would take credit for, be very happy with, but we’d be pretty cautious about how we would build up the outlook for the balance of the year and want to be mindful of all of the factors that can go into that. But there’s nothing in our business that would suggest that we’re slowing down right now.
Robert Wildhack: Okay. Thanks. And then your picture, and I appreciate this may not be in play for this fiscal year, but how would you expect potential interest rate cuts to flow through to funding costs? And then strategically, would you want to drop those savings to the bottom line via higher RLTC margin or do something different?
Michael Linford: That’s a great question. So whenever we think about a change in rates, we need to understand why the rates are moving. Certainly, if the rates are moving in response to other stress in the economy, specifically employment, then it’s not a one-for-one benefit. But if you hold all other factors constant, then a decline in rates would help us the RLTC line. We would seek to continue to run the business in the 3% to 4% range that we’ve talked about really since we’ve gone public. And if we were able to be earning at the high end or above that, we would seek to reinvest that in products to engage and reengage — acquire new users and reengage them.
Robert Wildhack: Okay. Thanks, guys.
Operator: Thank you. Our next question comes from the line of Jason Kupferberg with Bank of America. Please proceed with your question.
Jason Kupferberg: Thank you. So you highlighted in the shareholder letter, I think that 2/3 of the revenue growth in the quarter was from interest income. Is it fair to say that’s also the revenue line item that surprised you most to the upside relative to your guidance? And just curious how much of the revenue guidance range for the fiscal year is coming from the interest income line, you guys have obviously been doing a really good job on that side of the equation.
Michael Linford: No. Certainly, we’re happy to have the unit economics we do have, but I think we’re probably more surprised with the healthy merchant fee growth. Whenever merchant fees outpaced GMV growth, it creates pretty good flow through to the full P&L in a way that’s outsized. I think some of the strong performance we had above our expectations around RLTC and the flow-through for the full P&L was actually driven by the really healthy merchant line. Yes, the total aggregate revenue growth wasn’t there. But remember, against that, interest income growth is a pretty steep rise in funding costs, and that’s driven by both the balance sheet growth as well as the higher benchmark rates that we’re in this year. And in fact, interest funding costs grew faster than interest income.
And so while that was important for us to be able to get the business where it is, it’s also the case that — we don’t see that as the real tailwind here. We’re still managing through a rate environment that’s substantially lower last year than this year. And as those things abate, then we will begin to see the benefit end of the future.
Jason Kupferberg: Okay. No, that makes sense. And then just like a two-part question on GMV. What’s your latest expectation for Affirm card GMV this fiscal year? And then any comments you might have around January GMV trends. I’m kind of curious because we heard from others that card-present volumes suffered because of the severe weather. So just wondering if your business benefited at all from that? Thank you.
Michael Linford: So we’ve not given any outlook for the card, and I won’t now. What I would say in the letter, we talked briefly about the seasonality of the card, and I think this is a really important thing for everybody to pay attention to, which is the card had really strong growth from Q1 to Q2. We would estimate that about half of that growth in card volume was actually underlying seasonality and the other half was growth in the card which just means as you think through where the volume should be for the card in the balance of the year. Just keep in mind the Q2 starting point is benefited by a pretty big step up from Q1 to Q2 from seasonality as consumers do spend more in the holiday season. And we’re still early enough with the card. Fortunately, we’re not seeing things like weather impact our card performance.
Operator: Thank you. Our next question comes from the line of Jill Shea with UBS. Please proceed with your question.
Jill Shea: Good evening. Thanks for taking the question. I was wondering if you could provide us an update on the Shopify partnership and any stats that you could share with us, that would be great. Thanks.
Max Levchin: Hi. It’s one of the highlights of this last quarter is going unbelievably strong. It accelerated for the fourth consecutive quarter. The program is over three years old and the fact that it’s still picking up steam is just great, and they’ve been extraordinary partners to us and nothing but wonderful things to say about Tobi and CAS in Arlington team there, and there’s just been nothing but excellent in both our execution and the partnership that we had. I think already drop that stat. But the program at Shopify grew twice the speed of the overall Affirm growth on the GMV side of things. They have aspirations off-line that they’re going after quite strongly and there’s still a lot of synergies and what we’re doing now there. We have a whole host of programs we’re contemplating going forward. So lots of with the job feeling very good. The fact that it’s accelerating suggests that there’s just more growth to be had for both of us.
Jill Shea: Very helpful. Thank you.
Operator: Thank you. Our next question comes from the line of James Faucette with Morgan Stanley. Please proceed with your question.
James Faucette: Great. Thank you very much this afternoon, guys, for all the time. I wanted to ask on 0% promotions. It seemed like, at least anecdotally, those increase some, particularly towards the end of the December quarter. And I think in your supplement, you showed that 0% long duration merchant rates had picked up. Can you talk a little bit about like what’s driving that merchant rate tick up? Is it just longer duration generally within that long group? And how should we think about that both in terms of impact on RLTC margin, but also in terms of the type of customer and that you’re bringing in with those promotions? Just wondering if that’s enough to move the needle on some of these other metrics.
Michael Linford: Yeah. It’s a good question. The — as rates have gone up, any of our longer-term 0% programs have needed higher merchant fees and I really think there’s really not much more to it than that. So it’s the mix and tied to benchmark rates. In terms of the customers that we bring in, it does skew a little bit higher on the credit spectrum when you do those kind of products. But given the high levels of repeat, it’s not really going to change the average as much at Affirm. We, of course, have been, we were very active. We’re meeting our merchant partners where we could in providing anything promotionally in the second quarter, and we continue to do that. But it’s it didn’t change an awful lot from the prior quarter in terms of the total mix. So I wouldn’t — I don’t really think there’s a fundamental trend there.
James Faucette: Got it. And then I wanted to ask, maybe it’s a little bit convoluted question, but you’re obviously growing the Affirm card really nicely kind of that run rate that you talked about seems to be around 100,000 cards a quarter or I’m sorry, a month. How should we think about is, a, I’m wondering how we should think about the availability or the credit pool available and how that’s growing by comparison, right? Because as you send out cards, people will use it, you said most of it of that is interest bearing. So some of that available credit gets absorbed, but then there’s new credit growth in that pool as you add more cards. So just how should we think about that potential to buy pool growing vis-a-vis the growth in cards. Hopefully, that question makes sense.
