Affirm Holdings, Inc. (NASDAQ:AFRM) Special Call (Affirm Shareholder Fireside Chat) December 6, 2022 11:00 AM ET
Company Participants
Michael Linford – Chief Financial Officer
Conference Call Participants
Dan Dolev – Mizuho Bank
Michael Linford
Good morning, everyone, and thanks for dialing into our quarterly conversation here. And I want to thank Dan for being our host today. I’ll start off with a brief summary of where we’re at, and then I’ll hand it off to Dan to curate some questions from you.
For those of you who haven’t used the platform, feel free to submit questions ahead of the call, and we will be sure to grab them. So we appreciate the participation and engagement from all of our investors, especially people who submitted the questions via SA [ph] technology.
We ended the calendar year — or we’re closing in on the end of the calendar year 2022. And I couldn’t help but think that Affirm, where we were just two years ago. When we completed our IPO in January of 2021, we had a small fraction of the scale that we have today. We have more than tripled our active consumers to $14.7 million, with roughly 50% growth in frequency and nearly tripled our trailing 12-month GMV, growing it by 187%.
Not only have we scaled our platform, but we’ve more than doubled our revenue and nearly tripled our revenue less transaction costs, growing it by 195% to $732 million. Affirm is continuing to take share, and we are well positioned for the future as a category leader in honest finance.
For consumers, we responsibly increase their purchasing power and enable them to purchase the things they want and need, without late fees or hidden charges or deceptive financial products. For merchants, we enable them to convert their sales that otherwise would not happen.
And amidst an increasingly volatile macroeconomic backdrop, our mission has never been more important, as we help consumers and merchants navigate inflation and the macroeconomic backdrop.
Credit card debt recently increased to pre-pandemic levels and the majority of our outstanding credit card debt comes from revolvers that don’t pay off their balances in full each month. With Affirm, you can’t revolve and you never owe a penny more than you agree to upfront.
So with that, I’ll hand it over to Dan. We’ll begin the Q&A session.
Question-and-Answer Session
Q – Dan Dolev
Thanks, Michael. So with that, we’ll now begin the Q&A session. Our first question is, Michael, what do you say differentiates Affirm versus other buy-now-pay-later peers?
Michael Linford
Yes. It’s a — to the question that we get a lot, I think, the first and most important thing is that we’re a real technology company. And because of that technology power that we have, we’re able to build a broad set of products that can address every transaction type, whether that’s online or offline, whether that’s low AOV, average order value, or high average order value, 0% in interest bearing. And we can do that without charging any late fees, because we have really strong underwriting capabilities. This is differentiated from both the traditional financial institutions and the BNPL companies.
Dan Dolev
Thank you. That’s very helpful, Michael. And now there’s a question from a retail investor, via Sky Technologies [ph]. So, Corbit K [ph] asks, what are the current short-term and long-term goals for Affirm?
Michael Linford
So our long-term goals remain the same. The vision at Affirm, our mission is to build on those financial products that improve lives. And I always talk about how broad that scope is. Our vision here is to keep working on any and all financial products that are honest and straightforward for consumers, transparent and that ultimately improve lives.
And that’s not just good for the world, it’s good for business, too. We’ve demonstrated that when you engage consumers with honest financial products that increases their frequency of the product and allows you to earn very healthy margins.
In the near term, our goal is to achieve adjusted operating income profitability. We’ve talked to the market about doing that by July of 2023. And to do that, we got to scale up the existing relationships that we have and continue to add new ones.
And then if you think about the financial goals longer term, we believe that the category should have very strong penetration across all of e-com and offline purchases. And so we need to continue to scale into that category that we think will be very big, and we need to deliver the unit economics that we’ve signed up for. And we talk about our unit economics. We talk about 3% to 4% ramping less transaction costs as a percentage of GMV.
And lastly, we need to show operating leverage. That is, we need to be able to control our fixed cost investments slower than the growth in revenue.
Dan Dolev
Okay. Helpful. Thank you. And we have another question that has come from Ethan H [ph] who asks, what Affirm’s plans for profitability moving forward?
Michael Linford
Yes. So as I discussed, I think, the most important thing is to get there by next year and we talked about achieving that on a sustainable basis. We’ve achieved profitability sporadically, meaning there’s been a few quarters of profitability over the past several years. And we really hope to do that on a sustainable basis, meaning on an ongoing basis by the end of this fiscal year end. And to do that, that means the unit economics in the business, our revenue less transaction costs needs to be bigger than the rest of our operating costs.
Last quarter, we had about $182 million in revenue less transaction costs to purchase about $200 million in the other adjusted costs. So you see there, there’s about an $18 million gap. You know our job at Affirm is to continue to scale the units and how much margin needs those units has and have that scale faster than the operating expense investments that we make.
And we make those operating expense investments in order to scale the enterprise, right? So a lot of what we spend money on is the human capital to build these honest financial products, to address the merchant and consumer needs. And that capital that we put to work in building great technology products is what enables our scale in the long run. So if we think about it, we’re going to moderate in pace our investments in the scaling investments consistent with the economic output of the business our revenue less transaction costs. So the TLDR [ph] there is just grow faster than we’re investing.
Dan Dolev
Got it. Thank you. Very helpful. And can you maybe discuss how you manage your delinquencies and funding costs as rates continue to rise?
Michael Linford
Yes. The most important thing for investors is that our level of delinquencies and the level of credit loss in the business is a choice point. And we’ve been saying that for a long time now, and I think some folks have a hard time really getting their hedge on it. Let me spend a few minutes on what that means. When we think about our business model, it’s very unlike traditional financial institutions.
A traditional financial institution might think about extending credit for five or maybe even 30 years. The firm is extending credit for what amounts to about five months of weighted average life. So we make very short-term duration loans in the scheme of the financial services industry. And we do so with lots and lots of frequency. So we look at tens of millions of transactions every month and every quarter. Excuse me — feedback area.
We look at tens of millions of transactions. And what that allows us to do is sort the risk. We talk about our credit underwriting. What it really means is that we’re sorting these transactions by their risk score. And the better we can sort that risk, the better off we are. And if we were approving only a handful of transactions with very long duration is very hard to do this. But because we’re approving or underwriting millions of transactions and we do so with very short duration, it means that we can be very reactive. I talked about it as being proactive and reactive. So we can proactively predict the level of loss in the group of transactions.
But just as strong as that is because of the duration and structural advantage we have, we can be very reactive. And so as the economy ebbs and flows, as unemployment ticks up or inflationary pressures, the pressures on household cash flow, we’re able to change the underwriting cost of the business very, very quickly.
And that stands apart from really any traditional financial institution who’s sitting back and using legacy scoring systems like FICO that don’t move anywhere near as quickly or adapt to the environment as our internal scoring does. And do so with multiple years’ worth of weighted average life, meaning that they are taking on a lot more risk on any given credit approval decision than we are. The position, we have at the point of sale allows us to approve and deny every transaction, that’s very different than any other lender out there.
Dan Dolev
Got it. That makes a lot of sense. And another question from investor Matthew asks, what is the way Affirm makes money when you don’t charge interest on payments?
Michael Linford
Thank you, Matthew, for the question. We have two groups of products at Affirm. We have our 0% APR products, which I think you’re asking about, which do not charge interest. When we say we didn’t charge interest, really, we don’t charge the consumer anything. There’s no interest. There’s no late fees. There’s no account activation fees. There’s no fees of any kind for the consumer on our 0% loans. That includes both our Pay in 4 products and our longer-duration 0% loans like you might find, for example, at some of our largest merchant partners.
For the 0% APR loans, we earn a merchant fee. And so the merchant pays us a fee. We call that the merchant discount rate in exchange for facilitating the transaction with the bank. For – that’s roughly – that’s a big part of our business, and it’s been historically a big part of our business. It’s not the exclusive part of our business, but we also have interest-bearing loans and interest-bearing loans are similarly no late fees and no deferred interest, but do charge the consumer, example, interest capped interest amount at the beginning of a transaction. And for those products, we earn interest income similar to the revenue models that you might see for traditional financial institution.
Dan Dolev
Got it. Makes sense. And how do you think about maintaining and further penetrating your enterprise merchant volumes?
Michael Linford
So we’re very proud that we have over 60% of US e-commerce covered with some relationship with the Affirm that’s anchored with some of the largest merchants in the world like Amazon and Walmart, but also merchants like Target and of course, our partnerships with platforms like Shopify and BigCommerce give us access to wide sets of small merchants as well. And because of that strong penetration across all of e-commerce, our focus is as much on growing share with those existing partners.
And one of the questions that we get a lot is just what is the maturity or what inning are we in with these partners? And I always talked about it is we’re in the very early innings. A year ago, I told folks that we were still in the national anthem – and I think we’re past the national anthem, but we’re still in the very early innings. Because the – as you could see with the level of integration we have with some of our partners, it just takes a lot of time. These are not the kind of relationships where you flip a switch and get to full penetration overnight. These things take time to build into scale. And so we think we have a lot of runway left to continue to scale these partnerships, and help the industry achieve its penetration that we think it should have as a percentage of US e-commerce.
We’ve talked about that being in the 10% to 20% range is very widely across the industry, but we know we have a long way to go from here to there. And given our strong relationships we have with these enterprise partners, we think that’s a reasonable level for the industry to get to overall.
Dan Dolev
And speaking of large merchants, Adam Cue [ph] asks, will you expand your Amazon partnership globally?
Michael Linford
Thanks for the question, Adam. I am personally very pleased with the level of engagement and the progress that we’ve made in the Amazon integration. And as I said just now, I think we have a lot of work left to do just in the US. However, we recently expanded our partnership into Canada and excited to support that business and their consumers all the way up into Canada. And we would consider any additional geographies as a great way to expand the partnership, although no specific plans to talk about.
Dan Dolev
Got it. And what about some of the other — can we touch a little bit on the other larger partnerships like Shopify. Could you discuss the relationship with Shopify? How it’s ramping? And what is the future of this relationship?
Michael Linford
I’m very — I continue to be really impressed with the depth of technical integration that we have with the Shopify team. We have an aligned set of interest in expanding Shop Pay Installments on the Shopify platform and have a really deep technical integration with the team. We added in May, a product that we call Adaptive Checkout, which brings the right kind of financial products to really any transaction type. So, you can bring the interest-bearing or paying for transactions to the merchant with really no lift on the merchant side.
And so, it’s a small example of the continued work that we have in front of us. This — I think that relationship is slightly more mature, just because we’ve had a little bit more time at it. But again, it’s still — we still have a lot of runway left to further optimize the relationship. And when I say that, I don’t mean the relationship, I should say the integration, the way in which our product shows up for merchants and the features that we’re able to deliver.
Dan Dolev
And lastly on that topic, like on the big partnerships, like how’s the partnership with Amazon going right now? What is most exciting for you about it?
Michael Linford
I think the most exciting is just the sheer scale of working with somebody like Amazon. They have such incredible scale behind them. And so when they point at any problem and put any effort behind it, it really is needle moving. And it’s fun to work at that kind of scale with the same speed and pace that you have at smaller enterprises.
And so, that makes it very fun. That means we can touch a lot of consumers’ lives. We can really engage in a lot more transaction volume than we could have really otherwise before. When you’re someone who’s as big as I think roughly a third of US e-commerce, obviously, touching that is pretty massive in everything that we do.
And maybe just qualitatively, I think the most exciting thing is just how aligned the two companies appear to be. When I talk to my counterparts over there, we have the shared vision for what we’re trying to do. And it starts with the consumer, and consumer orientation is pretty rare in financial services.
There’s a reason why we think we’re quite differentiated on things like our Net Promoter Score. And these are things that Amazon has cared a lot about. And that kind of shared in aligned vision for what we want to build is pretty rare and it’s fun to build something at scale with real technologists who have that aligned consumer orientation.
Dan Dolev
And if you kind of reflect back over the last few years, like what have you learned about converting consumers on checkout from what happened in the last few years. And what are the most important things that you think are needed to get conversion and how do you win versus some of the competitors out there?
Michael Linford
I’m smiling quite a bit because I feel like that’s one of the true secret sauces at a firm is how you – how you actually drive the right level of positive credit selection, finding the right risk and still driving high levels of conversion. And if it were really simple and straightforward and easy, a lot of people would be able to do it.
I really think that our product is differentiated because we can do that, and it’s a really, really difficult problem to solve. And it’s enabled by super deep integrations with the merchants, where we can see SKUs, and we can even sometimes see the channel that people come in on, and we have merchant-specific models that help us think about risk and conversion at that merchant site, enabled by some of the world’s best technology.
And then you bring to it a broad set of products that are built to handle multiple transaction types and you find ways to say yes to the consumer, even in these difficult macroeconomic times, you find a way to get to that approval. And when you put all that together, you just really stand out and apart from pretty much anybody else trying to do this in the space.
Dan Dolev
That’s very helpful. And actually, one buy now pay later operator told me that if used by buy now pay later is a countercyclical tool, i.e., that the merchants might be willing to pay higher rates to make conversions in rough times, have you seen any signs of this phenomenon at all?
Michael Linford
Yes. So I think we have a real live example of it back during COVID. And I’m going to wind the clock back because I think the history is — it’s actually kind of interesting how different it played out than we thought it was going to. But if you go back to March of 2020, when the shelter in place orders first went down, the US economy was staring down a massive surge in employment that was going to happen overnight.
And of course, because we take risk management very seriously, the first thing we did was did what we needed to do with respect to credit, that’s tightening approvals, making sure that we have our credit models up to date and the like. And I went to our merchant partners. And they were facing a similar set of shocks to their business models, where if you were an omni-channel merchant, you had online and offline business, your offline channel, your brick-and-mortar channel was facing a shutdown.
And your whole orientation flipped on you very, very quickly. And the conversations that we had with merchants back then, which I admit weren’t easy, because everybody was quite stressed about where the macroeconomic environment was going. But the conversations in those moments of stress, really, they were distilling because there logic came to play out, which is emerging partners I talked to said, I need to run my business for cash.
So anything that drives incremental sales for me, that is still cash flow positive, I need to do. And what that allowed us to do is to continue to build up additional merchant fees in order to keep approvals as high as possible during this time. And you saw that actually in our data. If you look at our earnings supplement, you see the merchant fees going back to the period right after COVID took a big step up. Now we normalize that very quickly because the way a firm operates, we did that for a few months and we quickly realized that the macroeconomic environment wasn’t going to be as bad as we thought, and we weren’t going to take advantage of that.
And I think we’re in a similar position today. So while we do have, we believe pricing power with merchants, we don’t intend to use it all the time. And pricing power here just means we have the ability to negotiate higher prices with merchants. And we have that ability to do so. It doesn’t mean we’re going to, in all cases, and it doesn’t mean we need to do it yet. We’ve talked a lot about our long-term economic model in getting 3% to 4% revenue less transaction cost.
And the question we get a lot is like, you’ve been above 3% to 4%. Does that mean you’re going to be above always and I’m always add in that, that now 3% to 4% is the right range for this business. And if we felt like the macroeconomic conditions required higher merchant pricing to achieve that, we’ll pull the lever. And if we don’t, then we won’t.
The other thing about the countercyclicality of the business is really important from our perspective, is consumers need this product more now, and they will need it more during a recession. And yet the ability to differentiate risk, it’s harder in that time. And so think about it as the product is more valuable and the challenge for us is also more difficult. And so we believe what that means is that there’s an even bigger prize to be won for those who can successfully navigate the macroeconomic conditions ahead of us.
Dan Dolev
Good, thoughtful answer. Thank you. And can we maybe touch on pricing, Michael? So interest-bearing loans, can you please explain how they work and how much leverage you have to potentially raise pricing?
Michael Linford
Yes. So let me first talk a little bit about how our interest-bearing loans work. So as I talked about their — the business model is similar to what you might see, but the way we deliver it is very differentiated. So we charge consumers a simple interest that is capped. So what that means is when you check out, you’re seeing the total amount of potential interest charge that you could have.
And if you prepay a loan, you pay nothing or you pay only the portion which you borrowed for. And if you’re late or you miss a payment, there’s no additional interest too. And so because of that, these are not revolving interest loans and consumers think less of the APR and more of the dollars that we’re charging. And that’s a huge differentiated component of these installment — closed-end installment loans. It’s very unlike how people think about, say, a mortgage rate or even the APR on a credit card.
And as a result, what we’re really doing is trying to hit a monthly payment amount and then a monthly interest charge or a total interest charge. That’s the number the consumer is a lot more sensitive to. And if you think about the kind of transaction sizes that we work with, whether that’s a $300 transaction for six months — and you think about what a few points of APR embedded into a multi-payment amount shakes out for that consumer. It ends up being pretty low. And as a result, we know that the consumer doesn’t have a great deal of sensitivity to that.
And that’s really because the APR or the interest rate isn’t really the cost that most consumers see whenever they think about using a firm in comparison to credit cards. They think about the actual dollar amount because we’re delivering that promise to that. That’s the most you can ever eventually pay.
And so today, we have the ability to go up to 36% APRs, and I think our average in the portfolio is in the high 20s. And so we have a lot of room to go for a pricing mechanism that there’s not a lot of elasticity to. And so while we’re going to be thoughtful about how we do it and make sure we protect the consumer, we do feel like given the rise in credit card APR, there’s room to move on rates, and that should accrete to us as a result.
Dan Dolev
That’s actually a really interesting analysis. Can you discuss the various sources of funding on your platform? And what is their state right now? Are they trending?
Michael Linford
Yes. The word of the day is volatility for those investors on the line, I’m sure you feel that way in the equity markets, they’re also volatile in the debt markets. And I think that’s just the nature of the broad macroeconomic uncertainty that exists.
If you look at the way the equity and debt markets react to really any macroeconomic news, it’s quite remarkable. You have a — you have a jobs report come out, which is, in a normal times, really good news that we have good, strong job growth and great employment. And its really bad news for the macroeconomist because we’re worried about the impact it might have on inflation.
And as you — I talked about it as being a really tightly wound spring where really any piece of news can send it off in any one direction. And it will just swing back and forth very, very quickly.
I believe the forward curve for interest rates, which just measures the future cost — the market expectation and future cost of money moved something like 20 or 30 basis points, like two days after our earnings call in November. And that’s like an incredible shift to happen over a month, let alone to happen over days. And that is the environment that we’re in. It’s just very, very volatile.
And it impacts the three funding channels we have differently. So, we have our forward flow program in which we sell whole loans to counterparties. They take on all the risk; we service the loans. It’s very balance sheet efficient because we don’t have any capital out. And yet we do have to deliver a return to the partner. And so our return is lower on a percentage of GMV basis.
We then have our asset-backed security channel, our ABS channel, where we create securities for investors that really structure a low-risk return profile that allows us to deliver a pool loans into a funding mechanism of really low cost.
And then we have our warehouse lines. These are on-balance sheet funding channels that are bank lines of credit. And these are the least equity efficient and the most floating rate. So, they tend to have the most exposure to the volatility in the rate environment, but it’s also the most in our control.
And so what’s happened over the past three to four months is we’ve reduced the expectation implied in our guidance for forward flow and ABS deals and increased the amount of warehouse capacity that we think we’re going to use.
And the great news is that our capital team has done a great job in funding the business. We feel very confident in our ability to continue to fund the business despite all of this volatility because we have the warehouse capacity. And yet the warehouse capacity is being used because the other channels are quite dislocated.
That being said, it changes a lot. And I think if you test me in a week or two, you’re going to get a different answer. So, in earlier this fiscal year, we opened up and upsized one of our earlier — this calendar year ABS sales or 2022 deal. And that deal was really well received by the market and there’s a lot of engagement, and we executed really well.
It was a few short months later when the market was a lot less constructive with us. And nothing changed in a firm between those two data points, but the macroeconomic environment did shift. And so I think it’s going to keep shifting. And our job is just to navigate around all of that kind of uncertain and unpredictable macroeconomic environment.
Dan Dolev
Makes sense. And if you fast-forward two to three years and you think about a firm, what do you think — what type of loan products do you think will be the most popular? And why?
Michael Linford
We love all of our children. There’s not a favorite for us. And this is a really, I think, important concept that affirm. The pieces all work together in a way that’s really important. We get better economics out of our interest-bearing loans and the merchants don’t have to sign up for big merchant discount rates. And so as a result, the largest enterprises want to adopt those products. That gives us a great way to engage consumers and on its financial product.
But short-term loans like our paid-for offerings, they allow us to drive a lot more engagement with users and keep them active on our platform in a way that’s safe and good for the consumer and us. And our longer-term zero loans are the best marketing tool that a merchant can have. The dollar — for the buck in a long-term 0% loan for higher AOE purchases just can’t be matched. And these three pieces all work together. And so the popularity of them is to make sure of the merchanting question and the situation that the consumer might find themselves in, but all three are really important.
Now that being said, we are right now seeing a higher mix of our interest-bearing loans as we continue to scale our largest enterprise partners who, as I said, do benefit from the economic arrangement that we have with the consumer. And that will continue to grow in the P&L. But we really believe that all three products are an incredibly important part of the total picture. And it’s really difficult to pick them apart. They really work together as a complete set.
And that is one of the things that’s separate between us and a lot of the other buy now pay later companies. Many of them have the pay and for model. They don’t have the other products. And we believe that you’ve got to put them all together to serve all transaction types to touch all consumers and all merchants.
Dan Dolev
Got it. And if you kind of reflect back on the last 12 months, maybe a little longer, what do you think you didn’t think about, say, pre-COVID about the business or even during COVID, like how is it prior — are you surprised by the impact of the higher rates on the business? Is this something you kind of anticipated — like this is an unprecedented time, I guess, between COVID and now, and I just want to hear when you go back home, how do you think about this every day?
Michael Linford
We do a little bit of backward looking. But one of the things that Max likes to say is we’re from the future. And so we definitely spend more time thinking about the future. But that being said, things that I’m really impressed with is just how quickly we’ve grown our user and engagement on the platform. We talk a lot about internally, we talk about the network needs reach and frequency. And if you think about the business, we operate a network business and networks need lots of touch points and they need lots of engagement for each touch point. And I could not be more proud of the way in which we’ve scaled active users to a little under $15 million on the platform and frequency up to now 3.3 transactions per active user.
And that 3.3 it’s a bit concealing in the sense that the most recent users haven’t had a chance to repeat yet. And so we expect that to continue to grow. And that is — those two stacks, $3.3 million and $15 million are substantially higher than what we were just a year ago or two years ago. And that’s a reflection of our strategy really working and working with the largest enterprises and the largest platforms to deliver a wide set of products. And I think that just can’t be overstated. When we were going public, some folks gave us a lot pushback around the concentration risk we had with who has been our largest partner and that was Peloton and the pushback was around that concentration risk. And that went from being a substantial portion of our business, and really, as they went to we — to now it’s low single digits in terms of the total portion of our business. And that’s because we’ve grown away from them and grown the platform kind of comprehensively. And that is a pretty remarkable thing to have achieved.
I think that specifically with respect to rates, I feel really, really good about, how well we’ve predicted what the rates will do to our business. Back in February, which is way before the rate curve started moving as much as it did, we gave the market a framework for how to think about the impact of rates on our business in our February earnings call. And we’ve come in a little bit better than the framework we’ve given folks, but it’s been a really good way to think about it.
In the super near term, there’s less impact, because we have less exposure to floating rate debt. But in the longer term, we have some gross exposure that it’s our job to mitigate. And I feel really proud about our ability to manage and navigate through that. And yet the challenges are by no means behind us. We still have a lot of work to do to continue to navigate what are, like you say, unprecedented economic times.
Dan Dolev
Thank you. That’s good reflection. And let’s end with a few final questions from Say Technology. So Nicholas P asks, as a firm considered a stock buyback is Max, buying the stock and stock trading under $13 is about 70% below IPO price by the shares here in resale when the firm is over $50 per share.
Michael Linford
Yes. So let me start with making sure every investor, especially those who are here on the Say Technology platforms, understand that we care an awful lot about the shareholder. We are all very aligned in trying to deliver total shareholder return. That’s really important to all of us. It’s important to all of us because that’s how we’re wired. But it’s also important to us, because that’s where we have a significant portion of our personal accounts. I think Max has about a 10% economic stake in a firm. So there’s very few people who are less exposed than he is. In fact, I’m positive that he’s the most exposed person to the share price. And so, he has a lot of reasons to care, and that’s true for our whole management team, where we care about the delivering shareholder return.
That being said, we are very long term in how we think about it. We are building an enterprise here that we believe has substantial value. And what we don’t want to do is, do anything short term that jeopardize that. So, when we think about commitments like we have to get into profitability, those have to be viewed to the context of what’s healthy for building a large valuable enterprise, not trying to achieve some short-term trading value. And I know that can be disappointing to folks, but what that means is that, we’re trying to build something that should be very rewarding to shareholders over the long term.
And we’ve said that for a very long time. That’s not a recent statement from us. That’s the statement we’ve made all throughout the time when we were private and even early in our public time periods. And so, as we think about things like, stock buybacks and other uses of capital, we have to evaluate that use of capital against the use of capital and scaling our enterprise. And we ultimately conclude we can create more shareholder value by continuing to scale the enterprise than we can in the short-term action of just buying back stock. And that’s where we’re going to remain focused.
All that said, of course, we look at it, we evaluate that all the time. We’re looking at where the stock is at. And we’re looking at how much capital we have. And we think our uses of capital are going forward.
Dan Dolev
Understood. And maybe potentially the last question here. Nicolas P [ph] again, asks other buy-now-pay-later peers inquired on buying Affirm, combining with or partnering with Affirm because the stock seems way undervalued.
Michael Linford
Just for investors, these are good questions. I think the shortest answer is it’s a very competitive space that has seen a re-rating across the board. The entire growth sector has obviously had a substantial reduction in value.
And so as much as we feel like, we are undervalued in this market. I think a lot of folks feel the same way. So I don’t know that the price movement is as instigating as folks might think in stimulating M&A activity.
I also think the opposite is true, where in the — for private companies who are potential targets of companies like Affirm, I don’t know that they’ve really come to terms yet with the kind of change in regime and change in prices and valuation multiples to expect.
And both those two things point to, I think this — I think time needs to play out a little bit before there’s any meaningful pickup in M&A activity. That being said, we really like our hand. And we’re focused on delivering the most value we can, and winning the way we have.
And we really feel like we have a market leadership position in everything that we do, and feel like that will continue to play out on the organic path even if we’re unable to be acquisitive here.
Dan Dolev
Okay, very helpful. Thank you for that. Are there any other questions? I think there were maybe one or two questions on your e-mail, but not necessarily if not, we can wrap it up here.
Michael Linford
I think that may be all we have time for.
Dan Dolev
Okay. Perfect. Well, thank you so much, Michael. Thank you for the team. Always a pleasure to speak with you and I definitely learned a lot today. So thank you for that.
Michael Linford
Thanks, Dan. Thanks for hosting us. And thanks, everybody.
Dan Dolev
Thank you. Thanks team. Thanks.
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