2023-03-15 17:10:22 ET
Affirm Holdings, Inc. (AFRM)
Wolfe FinTech Forum Conference
March 15, 2023 01:50 PM ET
Company Participants
Michael Linford - CFO
Brooke Major-Reid - Chief Capital Officer
Conference Call Participants
Scott Wurtzel - Wolfe Research
Presentation
Scott Wurtzel
Good afternoon, everyone. My name is Scott Wurtzel, and I work on Darrin Peller’s Payments, Processors, and IT Services team here at Wolfe Research. Happy to be joined by Affirm here, Michael Linford, CFO; and Brooke Major-Reid, the Chief Capital Officer. So maybe to start off, Michael, could you maybe share with the audience where you and the rest of the executive team at Affirm are spending also in your time these days and how you're prioritizing opportunities for the company?
Michael Linford
Yes. I think if you'd asked me this question last week, you get a different answer than what you get today, because I do think the world has changed quite a bit in the past seven days. And as a result, there's a lot of focus right now on not so much Affirm, but the stakeholders we have and making sure that we're attending to them. So that's our vendors, our merchant partners or even our team. This weekend, for example, we spent most of our time making sure that payroll wasn't going to go to Silicon Valley Bank and that when we were paying our vendors that they were going to be able to receive the payments and that was the focus this weekend. And I would say that the events of the past 24 hours continued to add some of that extra volatility into the mix and so we're doing a lot of that. But stepping back from that and thinking a little bit longer term, we're focused on ensuring that we deliver excellent credit results so that our capital partners and the market understand that when we say we have the ability to control credit outcomes, that we mean it. You saw that in pretty explicit fashion in our Q2 results.
You’ve seen where the credit card companies, delinquencies and charge-offs are trending to and you see where and how Affirm is managing its credit outcomes. And I think there’s a really important thing that we need to get the market very comfortable with and bought into and underwritten to around the structural advantage that we have given the short duration of our asset and the ability to have transaction level approvals. It’s funny. It’s really interesting. I think if you -- we used to use the word until very recently, and talk about risky assets, and that was code for credit risk. And I think this past week has been a lesson and risk is a lot more than just credit risk. Duration risk is a real thing. And I think the position of our asset, the short duration asset puts us in a really good spot to navigate kind of the macroeconomic uncertainty that we're in. So we're spending a lot of time on that. We're spending a lot of time on Debit+ to make sure that we continue to scale up the new opportunities that unlocks a huge opportunity for us offline and a whole new payment modality that we haven't been able to address, and spending a lot of time with the team, keeping them motivated and aligned to the mission to make sure we improve lives with on the financial products.
Question-and-Answer Session
Q - Scott Wurtzel
Got it. It’s very helpful. And you mentioned structural advantages in there, and I think that’s probably a good place to start before we get into questions on strategy and outlook. So when you think about your business, can you talk about what you believe to be some of the key differentiators of Affirm maybe relative to some of the other BNPL players in the space?
Michael Linford
I think the most important differentiator for Affirm versus people who only do BNPL and in particular only do it in the -- for product is the product breadth. We have a mixture of interest bearing and 0% loans. We have a mixture of short duration today as short as six week and longer duration loans. And we have a mixture of different AOVs that we can serve. We can serve transactions at very different sizes. Now we’re not where we want to be, frankly. I think our goal is to be able to have a product to serve all transaction types, and so that for us right now is part of the reason Debit+ is and focus is that really does unlock a significant number of transactions that are today too small to think about as a Buy Now Pay Later transaction. You think about a lot of our competitors, they really only have one thing. And that's a bit limiting in environments like this, it’s a bit limiting in terms of new merchants and it’s a bit limiting in terms of how you manage risk and so deliver strong unit economics in periods of pretty unprecedented economic volatility.
Scott Wurtzel
Makes sense. And when we sort of look back at the last calendar year, it was a bit of a renormalization year for the entire BNPL space, given tough compares and a little bit more normalization towards in-store shopping. So can you just remind us of some of the trends you saw during the quarter and how that informed your revised outlook for the rest of the fiscal year?
Michael Linford
Yes. I mean, I think there’s two themes that are really important to understand about how we’re seeing our business unfold. One is around the consumer and discretionary purchases, which really have seen a market slowdown estimates vary out there quite a bit, trying to sum it up across merchants outside of Affirm. But numbers like 30% declines have been thrown around and I think those are like probably in the ZIP code for what the kind of headwind that subcategory has. And that is, we think, driven in part due to the comparable. Last year, it was a year where a lot of folks were able to spend more on discretionary stuff but also the impact of inflation on most households’ ability to spend and desire to spend. And put very simply, you're spending more on apples and eggs and less on computers and mattresses. And that’s -- that impacts us in that the very top of the funnel, the beginning of the consideration journey to purchase is definitely in a period that we think of some headwind. And then on top of that is our need to be managing credit outcomes like we have. And I think both of those two things really inform how we think about the balance of our fiscal year and how we want to operate the business.
Scott Wurtzel
Got it. And then we sort of drilled out into some of the key strategic priorities that you outlined in your fiscal 2Q share letter. One of them was driving greater frequency and repeat usage. And it’s something that we hear about with other BNPL players and digital wallets and neobanks is this concept of driving incremental engagement on the platform. So can you just talk about some of the initiatives that Affirm is undertaking to sort of increase engagement with its customers?
Michael Linford
Yes. So I mean one of the things that’s really important as we think about managing credit standards and managing credit performance is to make sure you think about making sure that repeat users on the platform continue to enjoy access to approval, right? So it’s really important that we can invest in creating a good experience for our best users. And so a lot of work going into our direct-to-consumer products, the marketplace, everything in our app to ensure that the consumers have a good shopping experience and can continue to have access to the credit that they need but then also is the truly net new products. And I think I can't think of a better engagement product than Debit+ when we get it to scale. In the meantime, we're going to be bringing a lot of features of the direct-to-consumer product to the app that we think can really help users increase usage quite a bit.
Scott Wurtzel
Got it. And maybe moving to Debit+ and pivoting there. Can you give an overview of the product to the audience in case some of them may not be as familiar?
Michael Linford
Yes. Sometimes at Affirm, we can be guilty of making the very complicated, more and more complicated in how we talk about it. So let me try this version of it. Debit+ is just Affirm on a physical card. It’s everything that we do for the consumer delivered in a form factor that they’re used to. And what does that mean? That means you can use it for everyday purchases and be taken out of your checking account a couple of days later. It also means that you can plan your larger purchases and get an installment loan all with the same card. And the innovation there is in that idea that the card can be one card and it can do all of the things. And there's a number of ways this gets really exciting for us, but the simplest is the more we can get users to think about that card as a top of wallet card, as the only card they need to use, we can drive lots of engagement and everyday spend, we can drive lots of engagement even in taking out longer installment loans.
Scott Wurtzel
Got it. And is that sort of your roadmap to potentially increase penetration in offline usage of BNPL, because it’s one of the areas where it’s, I guess, still a little bit underpenetrated relative to online retail?
Michael Linford
Yes. I would say it’s not underpenetrated. I think the penetration is negligible. I think it really hasn't started yet. I believe that none of the players have really figured this out. And I think it comes down to how you think about the checkout experience for most retail. For some retail, it’s a high touch sales environment and you can actually do anything, right? And if you're in a high touch sales environment, you can pull out your app and pay that way, it’s not a problem. In most retail context, it needs to be fast, efficient and reliable. You can’t wait for a screen to load. You can’t have spotty cell reception. You can’t, all of the things. And the good news is like we have that -- the infrastructure and the card is a physical card, you can chip in, tap it, swipe it. And the infrastructure for that is pretty foolproof, right? Very rarely are you at a retailer and you’re checking out and they can’t take cards that wouldn’t work. But quite often, the Wi-Fi isn’t working or the cell signal is weak in the store or whatever the reasons that may pop up. And so you’ve got a design experience, which is bulletproof if you wanted to work kind of at real retail scale.
Scott Wurtzel
Got it. That makes sense. And sort of switching gears a little bit on sort of the adoption side. I mean consumer adoption of the BNPL has grown pretty rapidly over the last couple of years. But despite that, Affirm has still been able to post pretty meaningful active customer growth over the last couple of quarters. So just wondering, have you seen any changes at all in the cost to acquire customers recently in competition in that space?
Michael Linford
Quick clarification. We don’t have costs to acquire users. We get paid to acquire users. So if you think about our economics, we’re not out buying ads like say, a credit card company is in order to get people to download our app or fill out a credit application. Affirm is positioned at the point of sale and we are able to provide credit offers to consumers as they’re checking out or as they’re shopping on the product display stages. And when we are able to underwrite a transaction and get to the approval that user then becomes an Affirm user, and we get to reengage them throughout their life cycle. And that first transaction, it’s really important for us that, that first transaction is profitable. And the reason why that's important to us is because of the very complicated way in which we go about funding and operating the business and the risk management mentality that we have drilled into our core. It is not okay for us, in our view, to have a [lossy] set of transactions early in a consumer’s life cycle to make it up later. That, we think, is a pretty difficult way to have conversations with capital partners as at the end of the day, those specific assets need to deliver the returns to the partners. And I don't know, Brooke, if you want to add anything on that.
Brooke Major-Reid
No, I think that’s exactly right. And if you think about how we are designing and have designed the model, it’s really to create that power of executing and creating good units, good unit economics that flow through to good loans that we can actually scale the business sustainably.
Michael Linford
And I think what’s really interesting to me is today, we acquire users at the same spot that we’ve monetized them, right? Like we’re acquiring user at the point of sale, it’s also where we reengage them, both at merchant sites but also in our app in our marketplace. Not to keep coming back to it, but as we continue to grow Debit+ in products like it where we give consumers a way to use Affirm in different form factors, there is an additional monetization of that, as I think about it, additional way that we can generate value for the network without involving checkouts at the point of sale of merchants. And that’s extra goodness but it all starts with still acquiring users in a way that actually creates margin for us, not the other way around.
Brooke Major-Reid
Exactly.
Scott Wurtzel
Makes sense. Maybe if we switch gears here, I mean, in a lot of our conversations with investors about the BNPL space, one of the main topics that comes up and especially recently is how the loans and not just specific to Affirm but the whole space would perform in a potential consumer credit downturn. And you had mentioned at the beginning that delinquencies have been holding up well so far, even looking relative to pre-pandemic levels. So maybe from a high level, can you talk about Affirm’s underwriting decisioning and how you can flex the model if you were to see headwinds in broader consumer credit?
Michael Linford
Yes. And I can tell you how we intend to manage through the cycle and I can tell you how we have managed already. Consumers have seen stress. And that stress, we think, is mostly driven by inflation, but that’s a real phenomenon. And there is a reason why most of the card issuing banks have shown kind of steady growth in delinquencies and charge offs, and it is not just normalization. I think folks have pointed to that as a reason to explain what has happened and that is part of it. We are normalizing. There is also stress on the consumer and that is the thing that we saw early in our fiscal year and reacted accordingly. And when we see that stress for us, again, because we do think that the transactions need to be profitable and we do need to protect the units. Remember, Affirm doesn’t charge late fees. Affirm doesn’t have deferred interest products. We have no toxic stuff in what we do. We have to manage credit or we cannot generate units. You’ll never hear me say delinquencies are up and, therefore, the revolving balances are great, and I can generate more income. And that is the thing that you hear out there in banks. That doesn’t work, our business model doesn’t work that way. We have to manage credit outcomes or we don’t get the units we want. And so when we see stress, we manage it.
How do we manage it? Well, one, I mean we’re really good at underwriting, meaning our models are really good. A lot of people have good models. We think our models are the best but also we recognize that that’s not an advantage that allows you to just ignore risk. Then it’s how you operate the business. And so when you see stress and how you choose to take risk on and off the table is where the real outcomes come in. And I like to talk about it as even if Affirm didn’t have an underwriting advantage, and we really do, our ITAC score can beat FICO by 30% for the same levels of credit approvals. And we're very confident in that and we do that, we’re very happy about that. But even if we didn’t have that, we have a structural advantage. We say yes and no to every transaction. And so we don’t have consumers who have open lines, open when there was a benign environment, now dealing a more stressed environment. We can make the decision that’s appropriate at that point in time, and that’s a structural advantage that really the traditional credit providers don’t have. And then because we started with the longer terms and the more diverse product sets, it’s our capabilities that we don’t think any of our BNPL competitors really have.
Scott Wurtzel
Got it. It's very helpful. And maybe staying on a similar topic and Brooke, if you want to chime in on this one. When we think about funding of the loans, can you talk about Affirm’s approach to funding the loans and maybe how it’s changed a little bit over the last year given the rising rate environment and how you see that mix kind of shaking out near to medium term?
Brooke Major-Reid
Yes. So that’s a great question, given the volatility we’ve seen kind of stepping into actually late ‘21, heading into ‘22. So for the benefit of the audience, we fund across three major channels, main channels. We execute in the ABS market, both term deals and revolving deals. We do warehouse lines or funds via warehouses, as well as selling loans, which are forward flow agreements. And we really think of that as a complement in terms of what we have in our ecosystem. It’s diversified, not just in terms of the channels themselves but also the partners. So we have a range of partners from kind of highly well capitalized diversified financials, we have some funds, we have some pension funds, we have insurance companies. So that mix really does create optionality for us. So when you think about how we’ve kind of shifted in terms of what the funding mix looks like now versus what it did a year plus ago is that we -- you’ve probably seen that we have increased our equity and loans over the last couple of quarters. And that’s really because the volatility in the market has created some challenges and headwinds such that we have had to really look at all the channels, look at it from an economic perspective, be disciplined about how we approach the ABS market. We’re not reliant on the ABS market. We love the efficiency and the fact that we get really good investors. We’re building a bench. We’re building a program. That said, we’re not reliant upon it. So we have these warehouse lines that have been typically on the lower side of the utilization spectrum. And you lean into that a little bit more. And those spreads have held in, in terms of just credit -- the credit spread piece, there’s a floating benchmark, plus the spread those spreads have held in. We’ve continued to add new capacity.
So as we think about the volatility and the headwinds in the market, we want to also remain very disciplined about how we access each channel. Job one through five for me is funding the business. Michael will tell the company that, the Board that’s -- we need to fund the business and there will never be a time in which I will have to say to the company, I cannot -- we have to slow growth or we can’t fund the loans that we are producing or generating. So I think one of the challenges that you have when you have such a model is really optimizing and making sure that the cost of funds and how it flows through in terms of the units on our P&L that you’re really looking at that in terms of making those decisions but also realizing that the priority is funding the growth we have ahead of us. And we have never been able to -- we’ve never said we’ve been unable to fund the business. We ended utilization last quarter at about 74%, so we have 25 to 30 points of capacity growth to fund our growth. So that’s something we’re really quite proud of.
Michael Linford
And I can’t tell you how proud I am of our capital team’s execution this year. As I said, I used the precedented word unprecedented word, like we’re in an environment that is just -- it’s volatile, it’s hard to see through look round corners. The future has got so much uncertainty in it. I’d like to wind the clock back to about this time last year when the Fed started moving on rates. If you go look at the forward curve when the Fed first started moving to where it was in the summer, to where it was in the early fall, to where it was by the time you got to November, and it wasn’t a little bit of change. It was truly unprecedented at the rate at which the expectations of rates moved. And to be able to not have capital be a constraint on your business with respect to access to the dollars you need to enable growth is something that I think our team stands out for. And that’s because if you think about the way we run things, we make sure that we do job one through five, as Brooke said, to fund the business first.
And so when we went out and added warehouse capacity going into the fiscal year and knowing that things could get volatile with no understanding of how volatile they would truly be but with an understanding that they might get more volatile. So we wanted to make sure we had capacity, and that’s the posture of the business. We’re always trying to lean in and get ahead of things as they’re coming, and we’re not perfect, I think no one is. But I’m really proud of the execution of the team has gotten to, and I’m proud of our ability to continue to grow all the channels of our partnerships. And I think that the focus on credit that we have is in part there to ensure that that continues to be the case. If we protect the unit economics, it could protect our units and the credit performance and our capital partners are going to be rewarded for it. And I think they’re going to be focused on buying assets that have short duration, limited exposure to things that are right now creating quite a bit of talk in the market like commercial and that have a real demonstration of control of credit outcomes. And I think that’s the playbook and that’s what we’ve been running, and I’m really proud of the results we’ve seen so far.
Scott Wurtzel
It’s great to hear. Kind of maybe moving to a different topic. You’ve talked recently about rolling out new pricing to merchants. Can you give an overview of these pricing initiatives and even talk about what you’re seeing in the competitive environment regarding pricing as well?
Michael Linford
Yes. So we talked about pricing in two ways. We have consumer pricing and we have merchant pricing, and consumer pricing is the APRs that we charge. We express those APRs in both a total dollar amount as well as a monthly amount to the consumer. As we don’t revolve the APR is a bit of a weird number for us in that it’s not as comparable in terms of your total cash cost to finance as you are with other credit products. And nonetheless, we of course, communicate that because these are loans and that’s what you should -- and we will do. The -- we know there’s a lot of room to move on consumer pricing there and that has a lot to do with the idea that the fixed dollar amount that the consumer has -- and again just to recap, really important. Affirm loans don't revolve, they’re close end, they’re capped. So if a consumer -- I have this conversation quite a bit. If the consumer is laid on in Affirm loan, there’s no late fee, there’s no additional interest, there’s no other revenue, none. The consumers’ total exposure is the number that they see when they check out. And that’s -- I have to repeat that many times to folks in financials context, because they really just don't believe that that’s what happens. And so -- but consumers get it. And they use the word, they feed back to us the word control quite a bit. We give them control. And what they mean is not like choice and optionality, they mean control in the sense of it’s not reckless, it’s not risky, it can’t hurt me. And that’s what they mean.
And when they use that word and say that, they value that a lot. And so changing your paying them out by $0.25 a month isn’t going to change the value they put on the structure of the borrowing. It’s a different kind of credit, it has a different structure and they really value that. And we’ve done a bunch of studying on both the impact that, that would have on both the credit outcomes and the consumer takeup and we feel really good about our ability to take a little bit of price with respect to consumer APR pricing. On the merchant side, on the merchant discount rate side, it is something that we’ve been more cautious about and are going to be cautious. I think merchants are in dealing with their own instead of headwinds. Our costs are up given the funding environment that we’ve been dealing with. Their costs are up given inflation and everything that they do, their labor costs are up, their cost of goods have gone up as well. And we think it’s really important to be good partners to merchants and to find a way to sustainably build the business. But one of the ways you can have a pricing conversation with the merchant isn’t through the MDR they charge but instead, it’s about the program that you build.
If you bear with me for a second. We have a merchant partner who was using 0% longer term loans as the primary program that they had. Those are really, really expensive in their eyes. And while it generates a lot of incremental gross margin dollars, most merchant CFOs are focused on finding ways to reduce costs. And so they came to us with an ask to help reduce the cost of the program. And if we were a simple monoline company, we had only one product, our only choice would be tell the merchant, okay, we’re going to charge you less if you want your costs to go down. And so we’d have that unfortunate decision. But with us, we have a lot more levers at our disposal. So for example, we can introduce a small fixed APR and we’ve done that. We charge a 5% APR instead of 0%. And I think our ability to do that is differentiated and really, really valued by merchants, as their costs can come down, we can still deliver the same program. So it’s pricing through different lenses, i.e., finding ways to create margin for us, reduce the cost of the program even if it doesn’t actually mean more MDR is being paid.
Scott Wurtzel
That’s very helpful. Maybe moving back to sort of high-level strategy. There’s been a big talk in sort of the fintech space, probably even more broadly about balancing growth and profitability. And you laid out a framework in your last letter where talking about being profitable on an adjusted operating income basis while still being in a position to grow revenue in sort of the 20% to 30% range. So wondering if you can sort of share with us some puts and takes of that and also talk about some of the actions that Affirm has taken to sort of rightsize its cost base recently.
Michael Linford
Yes, I think the -- again, we can have a complicated business. So I think trying to really focus it in on what I think investors should pay attention to, we need scale, we need profitable unit economics and we need to show operating leverage. And those are three distinct things. And I think on the scale side, it’s so important to us to continue to address the remaining portion of US e-commerce we don’t address. We talk a lot about how Affirm is distributed at around 60% of US e-commerce, that’s great. 60 is a great number, but it still leaves 40 on the table, and there’s a lot of opportunity for us to go address with the remaining portion of US e-commerce. I think on the unit economics, those pricing initiatives we talked about are really important to us. We did have a tremendous growth in the cost of funds. The cost of capital has gone up a lot. Now I should know that as we’re talking, things are changing, so like talk to me next week. But for the past year, you’ve seen a dramatic rise in rates and that rise in rates has definitely increased our cost.
And so we have to do what we need to do to mitigate those cost increases with other cost takeouts, things like credit management, but also to find new revenue sources to get to that level of unit economics that we know we can earn over time and feel good about our long term range of 3% to 4% as a really good revenue less transaction costs as a percentage of GMV. So a lot of opportunity to continue to get scale. And on scale point, sorry, I forgot to mention. Of course, getting offline is also huge, right? It’s -- one way to think about it is expanding your TAM by 4 times as the offline commerce world remains very, very large and important. Unit economics is really about us having digested the cost increases from the Fed and finding ways to offset them with new revenue or through other cost offsets that the team is working on.
And then the question is, can we show operating leverage in the business? And I think we’ve historically been growing at such a clip that, that has been a pretty far off priority for us, where we were willing to invest into capacity to deliver 12, 24 or even 36 months out levels of results and sometimes the time lines are really that long. I mean, we signed our deal, for example -- we signed the deal with Shopify, I think, in the summer of 2020, and it took us about a year to get that live and then another year to ramp it. And so a lot of the engineering work was happening before we even signed the deal. And then when you think about the time line, it’s one or two years of work to get that return on your investment. And so we’ve been historically at a posture, we want to really build and hire ahead and build the team to build the thing that’s going to deliver 24 months from now. And I think that works when you have these kind of pockets of explosive and nonlinear growth. I think when we get to settling into a more normal and steady growth, addressing the remaining 40% of e-comm, getting offline and beginning to serve those transactions, there, you can begin to pace your operating expense investments a little bit closer to the growth that you’re seeing and that’s what we're both committed to doing and are doing right now.
Scott Wurtzel
Maybe one last one here before we take some questions from the audience. But obviously, there’s a lot going on in environment that could impact the business. But as we sort of move through the calendar year, like what are you most excited about in regards to Affirm, and also what do you think maybe is something that investors are underappreciating about the story?
Michael Linford
I am very excited for continuing the dialog with investors about how we manage credit risk through the cycle. What we saw over the past week was, I think, us -- we had to revisit a lot of assumptions. I mean we being the US, us, the world, we had to revisit a lot of assumptions about what risk is, how institutions are managed, what risk management means. I think we saw this just incredible, and I think, hopefully, well, not to be repeated, events unfold. And I think it’s an opportunity to have a new dialog around what world class risk management looks like. And I don’t think it looks like what I think a lot of folks just assume, because I know that institution had been through a cycle. And they had been through the cycle and yet they hadn’t managed something that I think was as basic as asset liability management. And I think there’s a real conversation we should be having, and I’m excited to have it and to see how this plays out around what world class risk management looks like. And I’m really hoping that we can talk about all of Affirm’s approaches here, because I think they are very good. And I think it’s also going to be exciting to be able to put to bed the question of how we perform through the cycle as evidenced by our results. So I want to earn the badge of work but I also -- I want to have a dialog about what that looks like, because I do think what we do is maybe underappreciated with a lot of folks in the market and it is differentiated to the good. And then I’m really, really excited about how we get everything going with respect to our direct-to-consumer engagement devices, everything happening in our app right now, everything happening with our Debit+ product. There’s a lot going on that I think is just really cool and fun alongside scaling up these -- the largest partnerships.
Scott Wurtzel
Got it. All right, time for some Q&A from the audience. Anyone? Going once.
Unidentified Analyst
Thanks. So kind of going back to the question on profitability and whatnot. One of the factors that we’ve kind of seen investors focus more on more recently is, one, is idea of profitability, but two, this idea of cleaner profitability. And kind of with that being said, I wanted to get your takes on how you guys are kind of thinking about dynamics like stock based compensation? Just any color on that would be great.
Michael Linford
It’s a good question. I know it’s very topical. The most important thing about how we think about stock based compensation is we want to manage the business to a dilution number. We’re less concerned with the GAAP stock based compensation number. And the reason for that is a little bit of the mechanics and the actionability. So mechanics. Stock based compensation and warrant compensation is established at the time those warrants or stock based awards are granted. Given the volatility in the market that means that you have a pretty big disconnect between the value and the perceived value vis-a-vis dilution, which makes it very difficult to take our stock based compensation number and then figure out how you’re actually going to be diluted from the GAAP stock based compensation number. And then what’s important is to know -- again, we have warrant arrangements with two of our merchant partners. And in both those cases, they’re not really actionable in a way that’s good for the shareholder. It’s same thing, for example, for our CEO’s Value Creation Award.
I don’t think the shareholder has benefited if we terminate those relationships. I think those are good things. I think we want to continue to grow those, which means you’re going to continue to have that flow through the P&L quite mechanically. And I think that isn’t a bad thing if we’re managing total dilution, and that’s the focus of the team is to make sure that our -- on a fully diluted basis, the shareholders still owns as much as the company as is possible and is reasonable, all while still attracting world class engineering teams, which we still need to do. And while the market for engineering talent is different today than it was a year ago, for sure, we still attract and retain the world’s best engineers. And to do that, you definitely need to have stock based compensation, it will continue to be part of our model going forward. And we want folks at the company who are invested in the company’s financial success as it relates to the stock price.
Unidentified Analyst
Very helpful.
Scott Wurtzel
I think that’s all the time we have. Michael, Brooke, thank you for joining us today.
Brooke Major-Reid
Thank you. Thanks so much.
Michael Linford
Thank you.
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Affirm Holdings, Inc. (AFRM) Presents at Wolfe FinTech Forum Conference (Transcript)