Reginald Smith

Reginald Smith asked if Affirm's expansion into new categories like home improvement, medical, and auto repair signals anything about its core retail BNPL business, how new verticals are chosen, and if there's any link between these moves and obtaining a bank charter.

Answer

Max Levchin, Founder and CEO of Affirm Holdings, stated that new categories are chosen based on consumer pull, often identified through Affirm Card usage. He explained that the goal is to be a universal acceptance mark, expanding to all online and offline doors, not signaling issues with the core business. He clarified that the bank charter is a long-term regulatory stability investment and not related to funding new categories in the short term.

Reginald Smith asked if Affirm's expansion into new categories like home improvement, medical, and auto repair signals anything about its core retail BNPL business, how these categories are chosen, and any link to the bank charter.

Answer

Max Levchin, Founder and CEO, clarified there's no link to the bank charter for these categories. He explained new categories are chosen based on 'consumer pull' identified through Affirm Card usage data, as Affirm aims to be a universal acceptance mark across all retail sectors.

Reginald Smith from JPMorgan Chase & Co. asked for details on the 0% coupon loans that Affirm "self-funds," inquiring about their typical duration and deployment strategy.

Answer

CFO Robert O'Hare clarified that only about 10% of 0% volume comes from Affirm's own surfaces like the Affirm Card. COO Michael Linford and CEO Max Levchin stressed that "self-funding" means accepting a slightly lower margin by using existing revenue (like interchange) to offer a better rate, not offering financing with no revenue. The recent 0% loans clustered around a 12-month term.

Reginald Smith inquired about Affirm's use of AI for commercial purposes, its impact on headcount philosophy, and how much AI-driven efficiency is already baked into the company's operating leverage targets.

Answer

CEO Max Levchin explained that Affirm has used AI (machine learning) in underwriting and fraud since inception and is now deploying modern AI tools for productivity across legal, compliance, and engineering, which enhances operating leverage. CFO Robert O'Hare added that driving efficiency has been an inherent part of operations for over two years, so it's hard to quantify the specific AI impact, but it's integral to their plan to scale the business without adding significant headcount.

Reginald Smith asked if increased regulatory scrutiny on sponsor banks would affect the Affirm Card's growth and inquired about any underwriting nuances for consumers in the U.K. versus the U.S.

Answer

CEO Max Levchin stated that regulatory scrutiny will not impact the card's rollout, citing Affirm's strong compliance investments and diversified partner relationships. Regarding U.K. underwriting, he expressed confidence in their existing technology and team, explaining they will use their proven U.S. approach of scaling and fine-tuning the model with proprietary data.

Reginald Smith inquired about how Affirm's business model might perform in a falling interest rate environment, focusing on potential impacts to consumer spending and pricing advantages over traditional credit cards.

Answer

CEO Max Levchin stated that a falling rate environment is a significant benefit, as it would allow for higher approval rates, leading to more new and repeat users. He emphasized Affirm's advantage of not being tied to a single floating rate. CFO Michael Linford added that the pace of rate changes is critical and that their current assumptions are for a change in direction rather than a rapid, large-scale drop.

Reginald Smith requested more details on the 0% coupon loans that Affirm appears to self-fund, asking about their typical duration and how they are deployed to consumers.

Answer

CFO Robert O'Hare clarified that only about 10% of 0% volume occurs on Affirm's own surfaces, like the Affirm Card, and is typically offered to high-quality, existing customers. COO Michael Linford added that 'self-funding' is not a binary concept; the company always considers the revenue mix (e.g., interchange) and may accept a slightly lower margin to drive volume, but does not offer unprofitable loans to acquire users.

Reginald Lawrence Smith followed up on marketing, asking about the marginal cost to acquire a new loan and how it compares to the origination/marketplace ratio, suggesting potential for further efficiency. He also inquired about the BlackRock program and the insurance sales channel, specifically regarding liquidity for consumers and the potential for committed numbers from the insurance channel. Additionally, he asked about the feasibility and regulatory hurdles of a direct-to-consumer retail channel for loans.

Answer

CEO Scott Sanborn explained that LendingClub underwrites to a marginal cost of acquisition that reflects the customer's lifetime value, focusing on profitable, sustainable growth by improving targeting, creative, and conversion rates. He noted that repeat customers are lower cost, lower credit risk, and have higher lifetime value. CFO Drew LaBenne clarified that the BlackRock program is not direct-to-consumer, and the insurance pool is deep, offering a low cost of capital with potential for channel growth and improved average sales prices. Scott Sanborn added that while individual capital comes through managed funds, a direct-to-consumer retail model (like their original model) involves significant overhead and disclosure, making it less desirable.

Reginald Smith asked about the shift in marketing channels away from direct mail, the potential to monetize rejected applicants, and the mechanics of the new rated structured securities program.

Answer

CEO Scott Sanborn confirmed the company retrenched to its most efficient channels (like aggregators and its own app) when margins tightened but will now re-engage dormant channels like direct mail without changing its credit box. He also affirmed that as top-of-funnel volume grows, the opportunity to monetize declined applicants improves. CFO Andrew LaBenne clarified that getting the senior tranche of the structured certificate rated will open it to new buyers like insurance companies at a tighter, more economically attractive spread.

Reginald Smith requested more details on the $1.3 billion portfolio purchase, historical context for the 98% loan sale pricing target, and the primary drivers for renewed interest from bank partners.

Answer

CFO Drew LaBenne explained the portfolio purchase was a competitive bid and that the company has sufficient excess capital for it without impacting origination plans. CEO Scott Sanborn clarified that a historical steady-state price is around 99% to 101%, so 98% is still lean but sufficient to reactivate marketing channels. CFO LaBenne added that banks are attracted to the high-yield, short-duration nature of LendingClub's assets, which helps them manage duration risk and diversify away from areas like commercial real estate.

Reginald Smith asked about the proportion of fraud from large, coordinated attacks and whether Agentic Commerce threats stem more from LLMs or purpose-built AI. He followed up on the exclusivity of the Human Security partnership and efforts to partner directly with LLMs.

Answer

CEO Idogal confirmed an increase in professional, coordinated fraud attacks, often involving device takeovers or large data breaches. He specified that with Agentic Commerce, the primary threat is stolen cards being loaded into AI shopping agents. He described the Human Security partnership as creating a unique offering by combining their bot identification with Riskified's risk intelligence. He also noted that direct LLM partnerships would involve providing a risk-querying service for dedicated AI shoppers.

Reginald Smith asked about recent macroeconomic trends, the potential impact of tariffs, how fraud occurs with biometric-enabled payments like Apple Pay, and the company's perspective on market consolidation.

Answer

CFO Aglika Dotcheva noted strong recent performance in tickets, payments, and food, with some stabilization in fashion. CEO Eido Gal explained that APM fraud can occur via account takeovers or by loading stolen cards into digital wallets. He also stated that Riskified sees itself as a market leader with opportunities to consolidate smaller competitors and acquire technologies to expand its platform.

Reginald Smith asked for details on the recent client loss, including whether it was a mid-contract cancellation and why the migration was so fast. He also explored the potential for Riskified's AI/ML capabilities to be monetized in new applications beyond fraud and policy, such as demand generation.

Answer

CEO Eido Gal confirmed the client loss occurred at the end of a contract, not mid-term, and the rapid transition was possible because the merchant had previously integrated multiple vendors. Regarding future applications, Gal explained that Riskified's core capability is its "machine learning factory," which can be applied to various e-commerce challenges. While not providing a specific roadmap for competitive reasons, he acknowledged the potential to create a suite of AI-enabled services for enterprise clients, including using predictive capabilities for smarter business outcomes.

Reginald Smith from J.P. Morgan asked if the timeline for securing a deal is influenced by Riot's focus on a 'build-to-suit' model versus simply selling power, which might have more immediate takers. He also questioned the importance of the sites' proximity to major hubs like Dallas and Austin.

Answer

CEO Jason Les responded that while selling raw power is an option, the 'build-to-suit' model is pursued because it maximizes the value of Riot's assets, a strategy supported by their strong balance sheet and team. He confirmed that location is very important, with Corsicana's proximity to the Tier 1 Dallas market and Rockdale's proximity to the emerging Austin market allowing them to command better economics.

Reginald Smith of JPMorgan Chase & Co. inquired about potential tariff exposure for power infrastructure components, not just ASICs. He also asked about the expected client-facing milestones for the HPC business, such as LOIs or tenant agreements, over the next year.

Answer

CEO Jason Les acknowledged that tariffs could impact the cost of imported components like high-voltage transformers, but noted Riot's engineering division produces switchgear domestically, mitigating some risk. For HPC milestones, he suggested an LOI would likely precede a final lease agreement. He outlined that key steps include building the internal team and completing a basis of design to facilitate more concrete discussions with potential tenants.

Reginald Smith inquired about the drivers behind rising SG&A expenses, asking for a normalized run rate and the company's current employee count. He also asked for any guidance on the potential timeline for finalizing an HPC deal.

Answer

CEO Jason Les attributed the elevated G&A to approximately $22 million in one-time M&A and litigation expenses in Q4. He stated the employee count is 783 and projected a quarterly cash SG&A run rate of $30-$33 million going forward. Regarding a deal timeline, he noted it is unpredictable but that Riot is aggressively pursuing the opportunity without a fixed deadline.

Reginald Smith asked how Riot weighs building mining sites versus buying Bitcoin directly, how the time differential between mining and buying factors into its calculus, and whether the proximity of its sites to major Texas cities is a key advantage in HPC discussions.

Answer

CEO Jason Les explained that Riot's strategy is to leverage its low cost of power to acquire Bitcoin at a discount to the market price, viewing mining as a dollar-cost averaging mechanism that is less risky than a spot purchase. He confirmed that proximity to cities like Dallas and Austin is a significant advantage for HPC, as it provides access to a larger talent pool and multiple fiber network options, which is attractive to potential partners.

Reginald Smith from JPMorgan Chase & Co. asked for performance metrics like uptime for the AI Cloud business and sought insight into the progress of customer negotiations for the Horizon 1 data center, including how a site transformation would impact current operations.

Answer

Kent Draper, Chief Commercial Officer, confirmed that IREN tracks a full range of operational metrics and receives highly favorable customer feedback, validated by white-labeling contracts with other cloud providers. Daniel Roberts, Co-Founder and Co-CEO, added that negotiations for Horizon 1 are in advanced stages with multiple parties, focusing on scalability beyond the initial 50 MW. Draper also clarified that a site transformation could occur in phases, minimizing disruption to existing Bitcoin mining operations.

Reginald Smith asked how management appraises the 'strategic value' of its assets when considering deals and inquired about the level of urgency being sensed from potential AI partners for near-term capacity.

Answer

Co-CEO Daniel Roberts described the valuation process as both 'art and science,' combining NPV modeling with market intelligence. He emphasized the market is increasingly recognizing the value of secured interconnection agreements. He confirmed a growing sense of urgency from potential partners, citing a recent inquiry from a hyperscaler, but stressed that the company remains focused on signed deals rather than speculation.

Reginald Smith of JPMorgan Chase & Co. asked for more detail on the early manufacturing improvements driven by the CompoSecure Operating System (COS). He also asked Executive Chairman Dave Cote how he evaluates progress for the Resolute Holdings M&A team.

Answer

CEO Jon Wilk explained that COS implementation has started in production and manufacturing, leading to improvements in output and yield that are expected to have a positive net impact on 2025 results. Executive Chairman Dave Cote added that for Resolute, he measures progress by the quality and quantity of the M&A pipeline, emphasizing the need for a large pool of opportunities to find the few that will make a difference, rather than focusing on the number of deals done.

Reginald Smith from JPMorgan Chase & Co. asked about the scope of Resolute Holdings, the nature of the CompoSecure Operating System (COS), the potential impact of tariffs, and the possible scale of future M&A deals. Specifically, he questioned if Resolute would manage other companies, what cost areas the COS targets, and if there was an upper limit on deal size.

Answer

CEO Jonathan Wilk and Executive Chairman Dave Cote clarified that Resolute's primary focus is to increase the value of CompoSecure stock, where its team holds significant equity. Cote described the COS as a process and culture-driven system, not a capital-intensive one, focused on improving yields and efficiency. Wilk acknowledged tariffs are a watch item but stated the company is less exposed than typical industrial firms. Regarding M&A, they will consider deals of all sizes—small, medium, and large—where they can add value and deliver exceptional investor returns.

Reginald Smith of JPMorgan Chase & Co. asked for a definition of the 'culture of excellence' mentioned by management and the roadmap for achieving it. He also inquired about the key challenges cited, such as competition and digital wallets, and whether these issues are interconnected.

Answer

CEO Jon Wilk, referencing comments from Executive Chairman David Cote, explained that the 'culture of excellence' will be driven by the 'CompoSecure Operating System,' a systematic framework for improving process efficiency and effectiveness. Wilk added that the company is actively monitoring competition, as it has for years, and while digital wallets are a key watch item, he believes physical cards will remain relevant for a long time, partly due to the convenience of tap-to-pay.

Reginald Smith sought to confirm if the smartphone issue was a crackdown on counterfeit phones leading to a supply disruption, and asked how this would resolve in the second half. He also inquired about any other potential regulatory risks in Kazakhstan.

Answer

Executive David Ferguson clarified the issue is not about supply but about price increases due to the proper enforcement of import duties on all smartphones, a long-term positive for the formal economy. CEO Mikheil Lomtadze identified two other potential regulatory changes: a new 10% tax on revenue from government securities and a previously discussed potential increase in the bank income tax rate from 20% to 25%.

Reginald Smith sought to clarify the nature of Kaspi's influence over Hepsiburada, asking if it would be exercised strictly through formal board meetings or a more hands-on approach, and inquired about the planned frequency of board meetings.

Answer

CEO Mikheil Lomtadze explained that while influence will be channeled through proper board governance suitable for a NASDAQ-listed company, Kaspi is a strategic investor, not a passive one. He emphasized that Kaspi will actively add value where possible, believing in the high potential of e-commerce. He noted that board meetings will occur as needed to address important matters rather than on a fixed schedule.

Reginald Smith of JPMorgan Chase & Co. asked for more detail on the integration approach for the Hepsiburada acquisition, specific product opportunities in Turkey, the planned frequency of 'Juma' promotional events in 2025, and the growth rate of that initiative.

Answer

CEO Mikheil Lomtadze responded that the 2025 promotional campaign schedule will be similar to 2024's, with roughly quarterly events making seasonality more predictable. On integration, he emphasized the cultural similarities and Hepsiburada's existing strengths, stating Kaspi will share its broader technology and experience while also learning from Hepsiburada's deep e-commerce focus. The goal is a collaborative sharing of knowledge between the two teams post-closing.

Reginald Smith asked how Upstart is driving its increasing mix of super-prime borrowers and how its institutional investors view the target return spread over the 2-year Treasury yield.

Answer

CEO David Girouard explained the super-prime strategy began with creating a competitive product and is now shifting to marketing and messaging. CFO Sanjay Datta stated that the return spread over treasuries reflects the current risk environment and that conversations with investors ultimately center on achieving a target ROE, of which the spread is one component.

Reginald Smith of JPMorgan Chase & Co. inquired about the transaction volume contribution from small-dollar loans and the primary drivers of the overall improvement in conversion rates. He also asked how loan buyers gain confidence in new, improved models.

Answer

Executive David Girouard stated small-dollar loans are over 15% of loan count but only ~3% of dollar volume. He attributed conversion gains to two core dynamics: more accurate models and increased automation reducing friction. CFO Sanjay Datta added that loan buyers understand the model evolves and that model improvements benefit borrowers through lower APRs, while investors receive their required, calibrated return.

Reginald Smith of JPMorgan Chase & Co. asked how SoFi approaches underwriting for its Personal Loan business in an environment with a 'signaled potential shock,' and whether any underwriting changes have been made.

Answer

CEO Anthony Noto explained that SoFi uses an early warning dashboard to guide credit policy. If negative indicators arise, they tighten the credit box by cutting higher-risk tiers to maintain their 8% life-of-loan loss target. He stated that while current indicators are volatile, they do not yet warrant a change in underwriting standards, as credit performance remains strong. However, he affirmed they are prepared to 'change on a dime' if necessary.

Reginald Smith of JPMorgan Chase & Co. sought clarification on the loan platform business, asking if it sells only non-SoFi standard loans, if it could sell higher-quality loans, and about the fee structure.

Answer

CEO Anthony Noto clarified that the LPB sells high-quality loans both within and outside of SoFi's typical credit box to meet specific buyer demand. CFO Chris Lapointe explained the structure includes an upfront flat fee per loan, a capitalized servicing fee, and origination fees charged on a portion of the loans.

Asked about contribution profit per loan, consumer reception of the AI assistant (including demographics and opt-out rates), and the speed from loan approval to funding.

Answer

The company manages the business based on contribution margin per loan, which is improving, and they will consider disclosing it in the future. The AI assistant "Betsy" has a high adoption rate, with only 18% of users opting out for a human, and is most popular with the 20-35 and 55+ demographics. They can close loans significantly faster than the industry average (e.g., 32 days vs. 46 in New York).

Reginald Smith of JPMorgan Chase & Co. asked about contribution profit per loan, consumer adoption of the AI agent "Betsy" across different age demographics, and the company's average time to fund a loan.

Answer

CFO Kevin Ryan acknowledged the focus on contribution margin and committed to providing a clearer breakout in future reports. CEO Vishal Garg addressed AI adoption, stating that about 18% of users opt to speak to a human, with the highest uptake among the 20-35 and 55+ age groups. He also noted that Better's average closing time in New York is 32 days, faster than the 46-day industry average.

Reginald Smith asked about the company's Fed rate assumptions, the proportion of the book repriced for potential late fees, and the mechanics of these APR increases. He also requested the latest thinking on the Bread BNPL product and how its white-label offering is resonating with merchants.

Answer

EVP & CFO Perry Beberman disclosed an assumption of two Fed cuts for the year and explained that APR increases are partner-dependent, with 95% having a contractual understanding of the plan. He confirmed that changes are already being phased in and vary by customer cohort. President & CEO Ralph Andretta stated that the BNPL business continues to grow, is regulatory compliant, and is a key part of the product suite offered to partners as pricing in the space has rationalized.

Reginald Smith asked for the rationale behind repurchasing low-coupon convertible notes versus other capital actions. He also asked for mechanical details on how APR increases affect balances and whether the Q4 mitigation benefit comes mostly from statement fees.

Answer

EVP and CFO Perry Beberman explained the repurchase was part of a broader strategy to delever the parent company, strengthen the balance sheet, and de-risk future shareholder dilution. He confirmed that CARD Act payment allocation rules mean APR benefits build slowly. He clarified that the Q4 NIM benefit comes from the building effect of APR increases, as statement fees are recorded in noninterest income, not NIM.

Reginald Smith of JPMorgan Chase & Co. asked why, despite the apparent urgency, HPC deals haven't been signed yet, questioning if pricing or other factors are causing hesitation.

Answer

CEO Tyler Page attributed the pace to several factors: the need for extensive diligence by large, bureaucratic organizations, the complexity of the long-term leases, and a "dating process" for tenants to get comfortable with Cipher's capabilities. He emphasized that Cipher's team, with experience from Google and Meta, shows well in diligence, contrasting with the "built on the cheap" approach common in the Bitcoin mining industry. He expressed high confidence that deals will be finalized.