Affirm Holdings, Inc. · NASDAQ:AFRM
Affirm — Investor Day (June 2023)
35 slides from Affirm's investor day presentation, June 2023
Slide 1: Affirm Financial Model Information Session
Affirm Financial Model Information Session June 2023 AFFIRM | 2023
Slide 2: Agenda
Agenda RLTC walkthrough 01 02 Operating expense walkthrough We will hold Q&A breaks after the RLTC section and conclusion 03 Conclusion AFFIRM | 2023 2
Slide 3: Cautionary note about forward-looking statements
Cautionary note about forward-looking statements This document contains forward-looking statements within the meaning of maintain, renew or replace its existing funding arrangements and build and grow new Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and funding relat
Slide 4: Use of Non-GAAP Financial Measures
Use of Non-GAAP Financial Measures To supplement our condensed consolidated financial statements, which are prepared and presented in accordance with generally accepted accounting principles in the United States ("GAAP"), we present the following non-GAAP financial measures, including revenue less tra
Slide 5: Revenue less transaction costs (RLTC) walkthrough
01 Revenue less transaction costs (RLTC) walkthrough AFFIRM | 2023 5
Slide 6: Suggested approaches to model RLTC
Suggested approaches to model RLTC Forecast revenue Bottom up Forecast GMV by Estimate on vs. off and transaction approach product balance sheet GMV cost line items RLTC forecast Top down Forecast total GMV Forecast RLTC as a % of GMV approach AFFIRM | 2023 6
Slide 7: Gross merchandise volume
Gross merchandise volume Product mix drivers in $ million by product type ● Changes in merchant mix ● Ability to add new products at 18% 24% Ex-Peloton existing merchants Growth Growth ● Increasing adoption of Adaptive Checkout vs. Pay in 4 only Structural GMV drivers ● U.S. e-commerce spend ● Incre
Slide 8: On vs. off-balance sheet GMV
On vs. off-balance sheet GMV in $ million loans sold and GMV less loans sold Drivers ● Funding market conditions ● GMV growth relative to funding capacity additions Note: GMV reflects gross merchandise volume net of refunds and includes volume from Pay Now or down payments on loans; loans are net of
Slide 9: Revenue
Revenue AFFIRM | 2023 affirm
Slide 10: How we monetize GMV
How we monetize GMV Revenue sources in $ million and total revenue as a % of GMV 7% Growth AFFIRM | 2023 Metrics are unaudited. 10
Slide 11: Network revenue
Network revenue in $ millions and as a % of GMV Drivers ● Total GMV ● GMV mix between Pay in 4, 0% APR, interest-bearing product, and Pay Now AFFIRM | 2023 Metrics are unaudited. 11
Slide 12: Illustrative merchant fee rates
Illustrative merchant fee rates MDR has been stable on a like-for-like product basis Drivers ● Product mix - the most important driver of overall MDR ● Loan duration within 0% APR ● Merchant mix Core 0% Long includes loans with term lengths greater than 12 months and 0% APR; Core 0% Short includes l
Slide 13: Interest income
Interest income in $ million and as a % of average loans held for investment Drivers ● Average balance of loans held for investment (LHFI) ● LHFI mix between interest-bearing and 0% APR, including Pay in 4 ● Pricing initiatives AFFIRM | 2023 Metrics are unaudited. 13
Slide 14: Gain on sales of loans
Gain on sales of loans in $ millions and as a % of loans sold Drivers ● Loans sold during quarter ● Funding market conditions ● Benchmark interest rates and credit spreads ● Average APR on loans sold ● Credit quality of loans sold AFFIRM | 2023 Metrics are unaudited. 14
Slide 15: Servicing income
Servicing income in $ million and as a % of average off balance sheet platform portfolio Drivers ● Average balance of platform portfolio held off balance sheet AFFIRM | 2023 Metrics are unaudited. 15
Slide 16: Transaction Costs
Transaction Costs AFFIRM | 2023 16
Slide 17: Transaction cost overview
Transaction cost overview in $ million and total transaction costs as a % of GMV AFFIRM | 2023 Metrics are unaudited. 17
Slide 18: Loan Loss Allowance Waterfall
Loan Loss Allowance Waterfall QUARTERLY CHANGE IN ALLOWANCE LAST 12 MONTHS CHANGE IN ALLOWANCE $182 $61 $(67) $176 $159 $294 $(278) $176 Allowance Provision Charge-offs, Allowance Allowance Provision Charge-offs, Allowance December 2022 for Losses Net March 2023 March 2022 for Losses Net March 2023
Slide 19: Provision for credit losses
Provision for credit losses in $ million and as a % of GMV less loans sold during the quarter Drivers ● Allowance for loans held at end of period ● Product and merchant mix ● Credit posture, reflected in ITACS mix ● Actual credit outcomes AFFIRM | 2023 Metrics are unaudited. 19
Slide 20: Processing and servicing expense
Processing and servicing expense in $ million and as a % of GMV Drivers ● Total GMV and platform portfolio size ● Mix of GMV originated at a large enterprise partner with a revenue-share agreement ● Repayment mix and servicing optimizations AFFIRM | 2023 Metrics are unaudited. 20
Slide 21: Funding costs
Funding costs in $ million and as a % of funding debt & securitization notes Drivers ● Average balance of funding debt plus securitization notes ● Average funding cost (benchmark rate + credit spreads) ● Loans held for investment AFFIRM | 2023 Metrics are unaudited. 21
Slide 22: Loss on loan purchase commitment
Loss on loan purchase commitment in $ millions and as a % of GMV from 0% APR products excluding Pay in 4 Drivers ● 0% and Low APR loans held on balance sheet originated by partner banks ● Duration of 0% APR loans originated by partner banks AFFIRM | 2023 Metrics are unaudited. 22
Slide 23: Top Down Approach RLTC as a % of GMV
Top Down Approach RLTC as a % of GMV AFFIRM | 2023 23
Slide 24: Recent drivers of RLTC as a % of GMV
Recent drivers of RLTC as a % of GMV Driver Business Impact FY’23 RLTC impact Affirm / BNPL Industry Specific Dynamics Pricing initiatives ● Higher APRs increase consumer interest and gain on sale Tailwind ● Higher merchant fees increase network revenue Product mix ● Our loan products have differing p
Slide 25: RLTC summary
RLTC summary in $ million and as a % of GMV Final RLTC considerations ● Macroeconomic factors have been a significant headwind to RLTC as a % of GMV in FY’23 ● Affirm-specific factors have had a neutral impact to RLTC as a % of GMV in FY’23 ● Pricing initiatives will take several quarters to achieve ma
Slide 26: RLTC Q&A
AFFIRM | 2023 RLTC Q&A affirm) 26
Slide 27: Operating expense walkthrough
02 Operating expense walkthrough AFFIRM | 2023 27
Slide 28: Non-GAAP operating expenses
Non-GAAP operating expenses $ million Non-GAAP operating expenses exclude (a) depreciation and amortization; (b) stock-based compensation included in GAAP operating loss; (c) AFFIRM | 2023 expenses related to warrants and share-based payments granted to enterprise partners; and (d) certain other cos
Slide 29: Share-based payment expense
Share-based payment expense $ million AFFIRM | 2023 Metrics are unaudited. Amounts above are included in Operating Expenses. 29
Slide 30: Share-based payment accounting
Share-based payment accounting $ 000 unless otherwise indicated Considerations ● GAAP share-based expenses are added back to stockholders’ equity at the end of each fiscal period ● The main impact of share-based expenses is dilution ● Since 3FQ’21, our shareholder equity has been stable at ~$2.5 bill
Slide 31: Enterprise warrant and commercial agreement expenses
Enterprise warrant and commercial agreement expenses $ million unless otherwise indicated Item 3FQ’23 expense Driver Commercial agreement $19 million Fixed expense Enterprise warrants $94 million Performance based We expect total enterprise warrant and commercial agreement expense to decline substan
Slide 32: Employee stock-based compensation
Employee stock-based compensation $ million unless otherwise indicated Considerations ● We establish SBC based upon an annual dilution target, not GAAP expense ● Additional CEO Value Creation Award stock options will be earned only if the 90 trading day VWAP of Affirm Class A shares exceeds $132 AFFI
Slide 33: Conclusion
03 Conclusion AFFIRM | 2023 33
Slide 34: Final considerations when modeling our business
Final considerations when Modeling our business Focus on forecasting RLTC Non-GAAP operating expenses Share-based payments ● Consider using both bottom up ● We have demonstrated good ● We target a certain amount of and top down approaches non-GAAP sales and marketing annual share-based dilution and
Slide 35: Thank you and Q&A
Thank you and Q&A Questions? ir@affirm.com AFFIRM | 2023 35