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Affirm CFO Michael Linford joins Yahoo Finance Live to discuss the buy now, pay later company's outlook amid stock volatility.
JARED BLIKRE: Welcome back. Volatile market conditions are rocking the derivatives world. Buy now, pay later lender Affirm delayed an asset-backed security deal that would have offloaded some of its consumer loans. That's after a major investor reportedly pulled out of the deal due to market volatility on Friday. The stock has been under pressure recently, down 82% from its November peak. But only this morning, the company raised its full-year and third-quarter financial outlook.
And joining us now is Affirm CFO Michael Linford. So, Michael, thank you for joining us here today. I know that you believe there might have been some confusion by market participants reacting to this news on Friday and today. Just break it down for us. What's going on?
MICHAEL LINFORD: Yeah, thanks for having me. Look, we're seeing very strong momentum in our business. And we raised our outlook this morning to reflect that progress that we're delivering for shareholders. We believe that our stock price does not reflect the company's performance, which remains strong by virtually every measure.
You're seeing us really step up the rate at which we're scaling the network for users, which grew 150% last quarter, and we believe will continue to grow strong this quarter. You're seeing GMV growth and revenue growth. And that's actually why we've been maintaining very strong unit economics. And one of the things we wanted to communicate to the shareholders today is that despite the volatility in the market, our outlook for our unit economics remains very robust.
BRIAN SOZZI: Michael, we've been talking to Affirm a good bit of late. Now, the stock was at $101 in November of last year. It's now at $30. When you talk to shareholders, what are some of the biggest concerns?
MICHAEL LINFORD: When we talk to shareholders, we like to remind them that the thesis for Affirm, the reason that investors have and will continue to invest in us has remained intact. And today the management team has more conviction than even we did a month ago, especially a year ago, as our business has scaled, we think, quite well. We're committed to executing on our strategy and we're delivering great progress there. We continue to believe that we can generate massive scale, deliver leading unit economics, and in the long run generate really strong cash flow, with adjusted operating margins in the 20% or 30% range at scale.
In the short term, we're going to keep investing, and in doing so responsibly and with discipline, as we retain conviction. And the thing that generates the largest shareholder return in the long run is building a massive network. And I think the thing to know is that Affirm is built for times like this.
Our solutions mean more to consumers and merchants in times like this. And our approach to capital, credit, and risk management has been thought through from day one. Our short-term asset and strong underwriting and deep merchant relationships give us the tools to navigate these turbulent markets.
BRIAN SOZZI: But just, Michael, when the stock loses that much value-- and we have to stay on this, because it's one of the most active stocks on the Yahoo Finance platform-- clearly the market is concerned that something fundamentally has changed. Do you think the market is concerned about, as you've opened up a wider credit net to get more customers, that delinquencies might continue to rise?
MICHAEL LINFORD: Well, I think that we don't measure ourselves against the stock price. That doesn't mean we don't care, because we do. But it does mean that we're trying to focus on the things that we can control, which is scaling our business.
That being said, specifically with respect to the trends you're seeing in credit, the most important thing for folks to know is that we're in control. Max and I talk a lot about how we make lots of little decisions. Affirm's underwriting model is tuned to specific transactions. We can approve any one transaction or decline the next. And that gives us the incredible control to pick the level of loss that we have in the business.
The right way to look at whether or not the credit box loosening or tightening is working is in our unit economics. We talk about that as our revenue less transaction costs. When you see strong unit economics, that means that the decisions that we're making are delivering good results for the shareholders.
JARED BLIKRE: And we have a Federal Reserve meeting and big decision coming up in two days. I'm just wondering in general how your business seems-- believes it will navigate a higher interest rate environment. I know you're a relatively new company, but a number of your peers have been in the space for years. I'm just wondering, how does buy now, pay later skill with increased borrowing costs?
MICHAEL LINFORD: Yeah, firstly, our product means more to our consumers and merchants in the higher rate environment. If you think about our product mix, whether that's our interest-bearing product, where consumers might compare it to their alternatives, or a 0% product, both of those products have a better value to the consumer in a higher-rate environment.
And secondly, I think it's important to put the rate movements in context. We think about rates as normalizing as opposed to returning to a higher rate environment. Our business was great pre-COVID, where rates were closer to 2%. And we're happy to go back to those rates.
And we sized up for investors how we think about the potential exposure at the outer limit and feel like it's range bound and pretty small. We have plenty of leverage to mitigate it. And to be really candid with you, it's not something that we'd spent a lot of time worrying about, given the fact that we know our product is so much more valuable in a higher-rate environment.
BRIAN SOZZI: Michael, there's a lot coming at US consumers here-- inflation, the Russian-Ukraine war. How confident are you that they continue to spend at the same rate using Affirm this year as they did last year?
MICHAEL LINFORD: There is a lot going on with the consumer. And there's a lot going on in the market more broadly. That state of unease is certainly felt in the equity capital markets and the debt capital markets.
But you're not seeing it in the consumer right now. And so when we look at the key indicators of performance, including the labor market, or looking at the actual credit performance inside of Affirm, we see expectations largely or performance largely in line with expectations. And that gives us the confidence to keep investing there the way that we are.
With respect to consumer demand, some of our competitors talk about the changing macro environment affecting whether or not consumers will continue to demand goods and services. I think that is missing the point about what our product does. Our product enables consumers to get the things they want and need in the best way possible. And again, in a higher rate environment, funding opportunities like Affirm, financing opportunities like Affirm are the best way for consumers to buy things.
JARED BLIKRE: All right, we've got to leave it there, but appreciate you stopping by to share all that with us. Michael Linford, Affirm CEO-- CFO, excuse me.