Margin Outlook
Q: What's the outlook for operating income margins and future expectations?
A: Michael Linford stated that Affirm is not updating its long-term outlook but acknowledges they are running above their previous 3% to 4% RLTC margin framework. This is due to exceeding their own expectations in driving operating leverage. They aim to achieve profitability down the P&L and expect to continue growing margins from here.

Funding Costs and Capital Markets
Q: How are interest rate movements impacting funding costs and balance sheet management?
A: Michael Linford explained that the strong market for forward flow whole loan purchasers benefits Affirm due to their solid credit performance over the past 1.5 years. For every 100 basis points of rate movement, there's about 40 basis points impact on the P&L, which takes about a year to 1.5 years to flow through. Lower rates will be a marginal tailwind, but they plan to reinvest benefits into consumer and merchant offers.

Consumer Growth Acceleration
Q: What factors are driving the acceleration in active consumer growth?
A: Max Levchin attributed the growth to reinvesting strong margins into deeper approvals and compelling new consumer deals. Affirm is improving re-engagement strategies to increase transaction frequency, achieving five transactions per user, a new high. They focused deliberately on active users and plan to continue these efforts.

U.K. Market Entry
Q: What are your early thoughts on the U.K. launch and competitive positioning?
A: Max Levchin reported strong initial reception from merchants in the U.K., who are excited about Affirm's longer-term monthly payment products of 3, 6, and 12 months. This need is not well served in the U.K., and merchants appreciate Affirm's clear business model without hidden fees. Their first partner, Alternative Airlines, is seeing positive results.

Underwriting Posture and RLTC Margins
Q: Can you provide more color on underwriting posture and RLTC margin trends?
A: Max Levchin stated that their underwriting posture is largely unchanged, with no significant movements in approval rates. The guidance implies a 3.8% RLTC margin for Q2, and they feel good about margins going forward, aiming for the higher end of the 3% to 4% range for the full year.

0% Promotions for Holidays
Q: What's the outlook for 0% promotions during the holiday season?
A: Max Levchin expressed strong excitement from merchants for leveraging 0% promotions to attract new consumers. Affirm plans to use these promotions to drive volume, benefiting from their strong unit economics to be aggressive in the market while remaining mindful of the economics of these promotions.

Impact of Regulatory Scrutiny
Q: Will increased scrutiny on sponsor banks impact the growth of the Affirm card?
A: Max Levchin assured that it will not impact the growth of the Affirm card. Affirm is familiar with regulators and has invested appropriately in compliance. They are not dependent on any one provider and are prepared to handle regulatory changes without being affected.

Reinvesting Excess RLTC
Q: Are you planning to reinvest excess RLTC back into growth?
A: Michael Linford confirmed they plan to reinvest healthy margins into growth, utilizing foregone revenue through 0% or APR incentive offers and making operating expense investments. There's still a healthy amount of benefits flowing through to support these initiatives.

Competitive Landscape
Q: How do you view the competitive landscape with new entrants in longer-duration products?
A: Max Levchin believes Affirm's advantage lies in offering longer-term loans without late fees and possessing robust underwriting capabilities. Their commitment to doing the hard work without compromise has helped them succeed in the U.S., and they're confident as they expand into the U.K.

Underwriting in the U.K.
Q: How are you approaching underwriting in the U.K. market?
A: Max Levchin noted that while the U.K. market is slightly different, Affirm is well-prepared with infrastructure and experience from a decade of building underwriting engines. They consult with local credit agencies and will scale their loan book carefully, monitoring and refining their models.

Future Funding Costs
Q: Can you discuss the path of funding costs given the current interest rate outlook?
A: Michael Linford reiterated that rate impacts take time to flow through the P&L. While declining rates will be a tailwind, the benefit is marginal and will take about 1 to 1.5 years to realize. The rule of thumb is 40 basis points of benefit for every 100 basis points of rate movement. They plan to reinvest any cost benefits into consumer and merchant offers.