Good afternoon. Welcome to the Affirm Holdings third quarter 2023 earnings conference call. Following the speaker's remarks, we will open the lines for your questions. As a reminder, this conference call is being recorded, and a replay of the call will be available on our investor relations website for a reasonable period of time after the call. I'd now like to turn the call over to Zane Keller, Director of Investor Relations. Thank you. You may begin.
Thank you, operator. Before we begin, I would like to remind everyone listening that today's call may contain forward-looking statements. These forward-looking statements are subject to numerous risks and uncertainties, including those set forth in our filings with the SEC, which are available on our investor relations website. Actual results may differ materially from any forward-looking statements that we make today. These forward-looking statements speak only as of today, the company does not assume any obligation or intent to update them except as required by law. In addition, today's call may include non-GAAP financial measures. These measures should be considered as a supplement to, and not a substitute for, GAAP financial measures. For historical non-GAAP financial measures, reconciliations to the most directly comparable GAAP measures can be found in our earnings supplement slide deck, which is available on our investor relations website.
Hosting today's call with me are Max Levchin, Affirm's Founder and Chief Executive Officer, and Michael Linford, Affirm's Chief Financial Officer. In line with our practice in prior quarters, we will begin with brief opening remarks from Max before proceeding immediately into questions- and- answers. On that note, I will turn the call over to Max to begin.
Thank you, Zane. Thanks everyone for joining. I hope you had a chance to read our quarterly letter as it packs lots of great information. I will offer a very quick summary for you. We had an excellent quarter, beat across all of the important metrics we track while continuing to maintain excellent credit results. On the execution side of things, I'm really proud of how the team performed this quarter. We shipped well over 100 projects from pricing to new credit model to dozens of user interface improvements. In isolation, each of these wins is probably relatively small, they compounded to huge gains. One major project this quarter was our continued effort in rolling out Debit+ We delivered Debit+ into the main Affirm app, while it's still quite early, we continue seeing strong signals of consumer demand.
Debit+ user transaction frequency after 90 days from activation is about 7x that of a regular Affirm user. I'm truly excited about this product and what the team has planned for it. We intend to give you a significantly more fulsome update on Debit+ in the quarters to come. It seems that there's a once in a century event that happens every week lately, rattling capital markets. We continue to deliver great returns for our capital market partners, and it was rewarded by an incremental addition to our funding capacity in the quarter as well as in April after we closed. In short, we had a great quarter. We compounded many small wins into big gains. We're very excited about Debit+ and the overall outlook for Affirm as a company. Back to you, Zane.
Great. Thank you, Max. With that, we will now begin our question- and- answer session. Operator, please open the line for our first question.
Thank you. Ladies and gentlemen, if you would like to ask a question, please press Star one on your telephone keypad, and a confirmation tone will indicate your line is in the question queue. You may press Star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your headset before pressing the star keys. One moment please while we call for questions. Our first question comes from the line of Moshe Orenbuch with Credit Suisse. Please proceed.
Great, thanks. Congratulations. I, you know, I saw in your letter, Michael, that, you had a 110 basis point increase, in the interest-bearing GMV in the quarter and, you know, more than that if you went back six months. Could you talk a little bit about, you know, how much that will have risen by the time, you know, this is fully phased in? Also, just strategically, you know, how does that impact your, you know, both your willingness to serve certain types of merchants and, you know, your credit decisioning and what impact that could have on GMV?
Thanks. Yeah. We are proud of the progress that we made in our pricing initiatives. Just to recap on how this works, the first step for us is getting any caps in the way, you know, getting the caps out of the way, allowing us to price where we think we need to price always underneath 36. We were subject to a number of 30% APR caps, and so one potential way to read that is there's 6 points. However, we don't intend to price every loan up that amount, and so there is a reasonable limit to expect. You know, that being said, we're about halfway rolled out, and we've got about a point. I think a fair rule of thumb would be to double our progress to date, and that's a good ending spot.
In terms of the impact that those pricing initiatives have on approvals, it's absolutely the case that we get to approve more consumers, drive better conversion for our merchant partners, and grow our business faster by being able to price loans in that zone. That is our intent. Our intent would be to leverage that, to protect asset yields for our investors and still approve more volume. Part of the reason why we've seen the acceleration in our direct-to-consumer business is because it's how we've been operating it, frankly, since we've been able to get that moved first ahead of any sort of merchant interaction.
Thank you.
Our next question-
Operator, can we take our next question?
Our next question comes from the line of Bryan Keane with Deutsche Bank. Please proceed.
Hi, guys. Mike, maybe you could just give us your thoughts on the guidance, in particular revenue less transaction margin. Just looking at that. The net take rate. I know there's always some puts and takes there when I look sequentially. Well, actually just gross take rate and then net take rate. Maybe you can just help us walk us through between 3Q- 4Q.
Yeah, thanks. We had obviously a really strong quarter on revenue less transaction costs in Q3, driven in large part by our outperformance in credit. That resulted in a pretty large beat ahead of our expectations in the provision for losses, and that was despite operating in a very volatile capital markets. We assume that Q4 will remain volatile. That's not to say that it isn't a spot where we can add capacity. We do intend to add capacity like we do almost every quarter. It does mean that we're being very thoughtful around what we assume as we prepare our forecasts and the guidance, that we aren't overly reliant on things getting better in the debt capital markets for us.
What that means for us is a little bit more of a, of a reliance or usage of our warehouse funding mechanisms into our fourth quarter. As you see in the GMV guidance, we're showing pretty strong sequential GMV growth from Q3- Q4. In fact, from a seasonality perspective, I think even faster than what we saw last year. As we saw during our second quarter, when you have that kind of sequential growth in GMV or that acceleration quarter to quarter, it can sometimes push some of the economics for loans originated in that quarter into subsequent quarters. The reason why Q3's outperformance was so strong was in part because of the both the volume and balance sheet strategies we had used in Q2.
Volatile markets that we think we're going to be able to continue to navigate to fund and scale the business, but it will change the shape of the earning a little bit. What we saw in Q3 versus Q2, we kind of expect to see in Q1 of next year against Q4 this year.
Got it. No, that's really helpful. Just as a quick follow-up. The initial rollout of Debit+, how do we think about the modeling for that and the impact? Probably obviously not much in 4Q, when should we start to see an impact and how do we think about the modeling?
Yeah. We haven't broken anything out 'cause it's not big yet. We do intend to give you know, better tools to model it when we have it becoming a more material part of our business. Because we're not providing any guidance in 2024, we're not doing that today. As we talked about before, there's really two different pieces to that product. One is will look more like our direct-to-consumer product that we have today. Just looks like an installment loan, whether that's a Pay in four or a monthly installment loan. The other would be a little pay now volume, which of course will have a very different margin structure.
Later this calendar year, we plan on walking everyone through how to think about modeling it and the impact it has on the P&L.
Okay, great. Thanks for taking the questions.
Our next question comes from the line of Ramsey El-Assal with Barclays. Please proceed.
Yes. Thanks so much for taking my question. I was wondering if you could update us on credit reporting and buy now, pay later seems to be an area of growing interest. Just wondering if you could share your latest thoughts on that topic.
Sure. First of all, I encourage everybody to look at the report Consumer Financial Protection Bureau published just about a year ago, just under a year ago, where they highlighted what they like and dislike or have concerns rather about in buy now, pay later. The headline was really, Hey, this is a really good product, better than credit cards. That said, there are concerns specifically around stacking and furnishing, which is a fancy term for reporting credit performance back to the credit reporting agencies. CFPB expressed strong desire to see the industry figure out a way to help folks build a credit and also have accurate reporting of performance of these loans.
Actually quite proud to share that we at Affirm are partnering with FICO, which is the maker of preeminent scores out there, to build a first of its kind credit scoring model that would enable buy now, pay later loans to be consistently, transparently factored into credit and lending decisions and to be reported to the credit reporting agencies. I'm a big fan of Will Lansing, who runs FICO, and I really appreciate his partnership on this, and so we're quite excited to talk more about it when we're ready. We intend to step into the leadership role and help the industry report buy now, pay later loans and make sense of them in the broader context of borrowing.
Thank you. That's super helpful. A quick follow-up from me. There's been some media chatter about some potential consolidation in the sort of broader buy now, pay later space.
What is your sort of house view on exploring, you know, strategic alternatives for the business? Is it something that you'd be open to at this point or, maybe not at this juncture in the cycle?
You know, I'm very focused on things that I love doing versus, speculating on such complicated things as strategic, matters. We're very much heads down on just building out the product, in particular, Debit+, which is, as everybody knows, is my baby. I think that's where my mind is at.
Fantastic. Thank you so much.
Our next question comes from the line of Jason Kupferberg with Bank of America. Please proceed.
Thanks.
We lost Jason. Operator, I think we need another-.
Jason, you're back in.
Okay, good.
Can you hear me?
No, we lost you. Please repeat.
Yeah, we're good now.
I think we can hear you now. Try asking again.
Can you guys hear me?
Yes.
Oh, sorry about that. I wanted to ask about the reserve ratio. It's declined for, I think, six straight quarters. Can you talk about some of the drivers of that trend? Could it move lower from here? Then maybe just remind us what drives the seasonally higher delinquencies in Q4 that you touched on in the shareholder letter. Thanks.
Yeah. We're really proud of the credit results in the business, and given the very short duration of our asset, the real-time performance of the portfolio derives the allowance calculation for Affirm. What we're not doing is making estimates of where the economy will be in a year and building balances for that because by the time we get there, of course, our asset turns over too fast. There'll be very little of any principal left on the balance sheet or outstanding with even four flow partners by the time you get there. We don't think about credit as a long-term estimate. Instead, we think about it as a more near-term reflection of the actual performance of the credit that we have out.
Given our really strong delinquency performance, measured however you'd like, the allowance rate has continued to come down, and we would expect that to be in line with historical patterns from here. The seasonal factors that come into play are a little bit... It's a little bit inverted. The biggest seasonal factor is the depressed delinquency numbers you see in and around tax return season. As you get past that, you start to normalize up a little bit. We would expect to follow the seasonal trends pretty much directly on our regular credit monitoring shows being right on top of the historical patterns here and feel very confident about, you know, staying within those bands.
That's helpful. I'm curious if you can share with us, GMV growth if we exclude not only Peloton but Amazon. I mean, if not a specific number, just, directionally, what it looked like perhaps, versus last quarter.
We're not gonna provide any numbers broken out, but what I can say is that we had exceptionally strong growth in a couple of pockets. Our largest partners grew really quickly, including our partnerships with platforms like Shopify, where we actually saw an acceleration in the business. We also had a real acceleration in our direct-to-consumer business, which is obviously away from merchants like Amazon. Yet we showed really strong growth with Amazon as well.
Okay. Thanks for the color, Michael.
Our next question comes from the line of Andrew Jeffrey with Truist Securities. Please proceed.
I appreciate taking the question. Looks like some good momentum in Debit+, Max, which is encouraging. I think you called out in the letter 5% card present spend today. Where do you think that number can go? Is grocery still the primary category? Because it seems to me if you have a lot of success in card present, the whole nature of the business model changes. I know you're not talking about the economics of card-present transactions yet, but how should we think about... Is this gonna be a steep ramp, you know, a longer-term trend change? How are you thinking about that?
Just to quibble a little bit maybe with the grocery point, I never said grocery is the primary use case. It just happens to be the thing that most of us buy a lot. I think that's necessarily a common purchase if it's a top of wallet cart. The goal for Debit+ is to become the top of wallet. If you ask any Affirmer what is the most common word out of my mouth in the last 3 months, everyone will probably tell you frequency. Like, what we want is consumer frequency. 88% of our transactions are coming from repeat consumers. That's not an accident. We will continue putting lots and lots of wood behind that particular area. The ramp of Debit+, you know, I think it's something that's probably premature to talk about too much right now.
I'm incredibly happy where the product is, which was not the case six or nine months ago. I'm really glad we took the time to build it the right way. We need to do it right to roll it out correctly, make sure that we continue delivering on the overall company goals while ramping up Debit+. I think it's probably a little too early to declare the shape of the curve of Debit+ adoption. That said, I am finally now putting it in front of every one of our users that qualify for it and quite excited about that.
Okay. Helpful. Michael, you know, we're watching equity capital required as a percent of the platform funding sort of creep up here. Can you comment on that? I assume we're not going back to 10%. Maybe clarify that and also just discuss sort of how you think about life of loan profitability given some of the shifts in funding.
With respect to equity capital, it is creeping up and above our long-term goal of 5% and nowhere near 10%. We don't intend to run the business anywhere near that number. I think we said that last quarter. I'll just keep repeating it, and thank you for the question, because it's... I know it's on people's minds. We don't wanna run a business with that much equity capital. Today, we have a pretty low leverage, let's say a low advance rate funding strategy with our warehouse lines, for example. That's a lever that we could pull in the future if we continue to feel like we're operating in this environment and need to use balance sheet.
Today, it hasn't been a priority for us because firstly, we have adequate liquidity with over $2 billion of cash and securities available for sale. Obviously our economics on loans that we put on the balance sheet actually do return higher to us overall. With those two factors, we're not really too worked up around it today, something that the team will get work on in the future if the current market continues to operate like this. In terms of the total loan economics in this funding environment, we feel really good about it. You saw this quarter's Revenue less transaction cost being, you know, a little over the midpoint of the 3%- 4% range that we've talked about.
We're gonna oscillate, quarter- to- quarter with an admittedly high degree of volatility, but none of that takes away from our confidence in that 3%-4% range. You know, if you think about the question that was asked at the very top of the call, our ability to get those pricing initiatives over the line and realized, will offset a healthy amount of the headwind that we're experiencing in the capital markets broadly.
All right. Thank you.
Our next question comes from the line of Eugene Simuni with MoffettNathanson. Please proceed.
Hi, guys. Thank you. Thank you for the question. I wanted to ask a relatively high-level question. Great to see strong credit performance over the last couple of quarters. I think it kind of gives the evidence to what you guys been always saying, your ability to really control credit outcomes. That's great to see. If that's the sort of where did you pull, I think the natural question becomes, is there an opportunity to, you know, tune the wheel to, you know, make the credit performance a little bit worse, but volume growth, which perhaps is something that would be desirable? Would love if you can give us your latest kind of philosophy on that.
What opportunity do you see there, especially as we exit, you know, the volatile times, hopefully that we're in today, and maybe it gives you a little bit more opportunity to turn that dial. Would love to hear your thoughts on that.
Great question. First of all, I hope the world is listening because they're saying the same thing for a very long time and printing quarter after quarter of good credit returns. At some point, I think people will believe us. Until they do and well after it, credit is always job number one, probably through number five. I think as a non-depository lender, it is our responsibility to deliver good returns to our capital partners to make sure that they never have a second thought about partnering with us. That's philosophically at the very, very top of what matters to us. We have a mission.
That mission has everything to do with delivering honest financial products to improve people's lives. The only way we can achieve that mission is by having strong capital market partnerships. The way we get that is through having consistent and really strong credit performance. That's ultra-important. No compromise there. The question around, is there pockets of growth, if I can put words in your mouth, with credit as a sort of chip to cash in? The short answer is, I think we'll know a lot more in the coming few quarters. On the positive side of things, the economy is basically fully employed.
Inflation, knock on wood, tomorrow's news or whatever the next CPI print is not negative, it does feel like the Fed is actually succeeding, if maybe not as quick as they would like, in doing their job in tamping inflation down. Meanwhile, the labor market held up. If that continues, you know, that maybe does look like soft landing, and that would be quite excellent for all involved. There are lots of things that could go wrong. For example, the student loan repayment that's gonna hit us sometime July, August timeframe impact a lot of consumers, we want to make sure that we are prepared for either side of that equation. The good news is that the reason we have such control over our credit outcomes is because we are structurally just really short duration.
As we see the next change in the weather vane, we know how to tune credit approvals to make sure that we stay within the bands that we must stay. The slightly unrelated but or related but slightly different answer to your question, though, I said it last quarter a little bit, and I sort of tried to highlight it in the letter this time around. We have an enormous amount of opportunity in growth that has nothing to do with credit. A lot of the acceleration you see in consumer, some of the really successful performance we've seen with our partners. Michael mentioned that our business with Shopify accelerated this quarter. A lot of that has nothing to do with credit. In fact, it has everything to do with optimizing every little bit we can.
Like you would be either bored to tears or excited by the pipeline of projects that we've put forth on just every possible metric of the business that has nothing to do with credit performance. I promise I'll keep this short as I can, but just a very, very quick walkthrough of what it means to actually apply and get approved for a loan with Affirm. You find us typically up funnel. There's a thing we call as low as, which is basically a opportunity to pre-qualify. That's about three screens. You get to checkout, that's a apply for a loan. You get your selection of terms, you select one, then you go to, if it's a new sign-up, identity verification. If not, a behind-the-scenes identity verification. You see a Truth in Lending disclosure, then you have to agree.
You sign up for auto pay or type in your credit payment credentials. Every one of them. It's a huge amount of steps. It's actually a product that needs to be simplified more, and we're working tirelessly on it. That's also why I'm so excited about this card, because a lot of these steps are completely disappeared with the card product. Online, each one of these steps has a conversion rate, and I am not kidding when I can tell you I can rattle off every one of these steps conversion rate, what it was and what it will be when we're done with the work. It's something that keeps me excited and up at night because there's so much opportunity to just get more people through the funnel. We'll continue investing in that relentlessly. Credit is not for playing games with.
Got it. Got it. Very helpful. Then for a quick follow-up, very interesting to see direct to consumer highlighted kind of at the top of the letter this time. Sounds like great progress on Debit+. Can you talk a little bit about direct to consumer sort of strategically and the way you laid it out in the shareholder letter, it sounded to me like, you know, the sequence of consumer engagement is still going to be through merchant first and sort of direct to consumer then second. Am I interpreting that correctly, or are you also going to be focusing on finding merchants, you know, and who we just engage directly through direct to consumer?
You're 100% right. It is exactly. What I attempted to do in the shareholder letter is to lay out the flywheel. One of the greatest things about Affirm since the very beginning of time is we have no cost of user acquisition. Merchants promote our product to their shoppers that they hope to turn into buyers because we're able to approve the right number of shoppers and help them buy. As these consumers come back to us, we have a chance to introduce them to new products. Card is the single most important one. That is the thing that we've been working so hard on, and we're now seeing real fruit of our labor.
With an Affirm card, Debit+ in their physical wallet, in their electronic wallet, in their browser autofill, everywhere we can possibly put it, these consumers come back to other merchants, whether they are integrated or not. One of the really, really important things that I think I ultimately edited out because the letter was getting longer than I wanted it to, but it's really worth highlighting. The card will work. All the Affirm functionality will work at any merchant, even if it has absolutely nothing to do with Affirm integration. Pick a favorite brand where Affirm is not yet offered. All you need to do is sign up for the card, which is now basically available to anyone. Bring your card to that site or to that store, and you suddenly have both pay now and buy now, pay later functionality on a single payment device.
The flywheel is merchant integration, consumer transactions. Consumer repayment gives us a chance to market Debit+ to these consumers. Debit+ becomes the universal access to Affirm at any point of sale.
Got it. Very clear.
Thank you.
Our next question comes from the line of Rayna Kumar with UBS. Please proceed.
Hi, this is Karandeep Singh dialing in for Rayna. Thanks for taking my question. Can you just tell us a little bit about what's going on with the capital markets? Any updates there and any change in investor demand for securitized consumer credit assets?
The good news about the capital markets is that we demonstrated in our 2023-A deal and the recent reopening that when structured correctly and timed correctly, we're able to access the ABS markets, I think, really constructively. Qualitatively, the investor sentiment was exceptionally positive in our 2023-A reopening. Our team did a really good job in working with investors and executing in that market. Quantitatively, that particular transaction was 3x oversubscribed, and those are all really positive signals. It's important to put that transaction in context of the broader capital markets and macroeconomic conditions. We did that transaction in between the failure of Silicon Valley Bank and the sale of First Republic.
I think that it is the case that these things do not impact us directly on a first order basis. Credit spreads for all asset classes, including ours, are going to widen in times of these moments of pretty peak economic dislocation. It is just a unfortunate reality of the world right now that things are extremely volatile. That being said, we did execute those two transactions I mentioned in between these pretty severe economic events, and we are confident that we can continue to do so. Nonetheless, it will remain volatile. We're also adding net new partners in our funding ecosystem, adding warehouse funding capacity from net new institutions and expanding existing relationships with our existing funding partners.
I would just leave you with the idea that it's volatile and obviously spreads are widening, and that will offset some of what we expect to be a declining rate environment going forward. Nonetheless, still able to fund the business, which is always job one for our capital team, and we've done that excellently.
I understand. Maybe just as a follow-up, can you comment on what's driving the uplift in the Debit+ usage? Is it just something consumers are resonating with the product's value proposition, or is there something else?
We've built a really great product that we've put in front of, at this point, lots of consumers who many of whom have told us over and over again that they would love to use Affirm at their favorite grocery, at their favorite offline store, at a website where a competitor might be integrated, but they prefer Affirm. Debit Plus is the unlock to use Affirm anywhere you like, online and offline. It's gaining popularity, and we're very excited. By the way, just to be very clear, this is very much V1. The roadmap for Debit Plus spans years. We have a lot to build, so this is not even remotely the final movement of that particular thing.
Our next question comes from the line of Dan Dolev with Mizuho. Please proceed.
Hey, guys. Excellent quarter. I love the acceleration in revenue less transaction costs. A great job there. Quick question, guys and Max, like, you know, you're I think you're guiding to a slightly lower revenue less transaction cost in the fourth quarter. Long-term, you're still saying 3%-4%. Can you maybe bridge us kind of the how to get to that long-term? What do you envision to get to that sustained long-term? Thank you.
Yeah. We still feel very confident about 3%-4%. In the long run, this quarter was again the higher end of that range and also ahead of our expectations that we had provided guidance for in February. Yet we do forecast a sequential reduction in that as a percentage of GMV into next quarter. Again, I think the two factors to think about are when we have a sequential growth in GMV and we use our warehouse funding, that means that we provide the provision for the loans that originated upfront, and we are a little bit back end in how those earn. That is very similar to what you saw in Q3.
We were benefiting in Q3 from the origination and balancing strategy in Q2, and we'd anticipate a similar trend to play out for Q4 versus Q3. Separately, it is just the case that we have a very volatile capital market. Our guidance is always going to try to assume what we think we have high degree of confidence in. We have a lot of sensitivity to our ability to execute there. When we think about building guidance in our forecast, we're pretty careful about making sure we have in the model the deals that we expect to be able to complete in the quarter.
Got it. Thank you. Great results. Appreciate it.
Our next question comes from the line of James Faucette with Morgan Stanley. Please proceed.
Hey, everybody. Thanks a lot for all the color and questions today. you know, given your APR cap increases, you know, that I think you said across half of roughly your merchants. Two things associate with that. When do you expect that to be complete? How much incremental application demand is that allowing you to convert? you know, any metrics you can share there.
Yeah. On the first, I don't think that we're ever gonna get to 100%. So complete is probably, like, never. I mean, we're gonna keep moving forward and try to continue to expand it, but we don't expect to ever be at 100% of our merchants for a variety of reasons we can go into. We do anticipate continuing to make progress with respect to merchant amendments to allow us to go up to 36%. We have a lot of wood left to chop, and we're gonna keep working on that between now and the rest of this calendar year. When you think about what that does for approvals, it's a pretty simple answer with really complicated math.
The simple answer is we try to maintain the same level of unit profitability, the extra revenue allows us to approve proportionately more, and offsetting the associated credit losses you'd expect in those marginal populations. We do think about it on a portfolio basis, it is obviously something that allows us to create a lot more economic yield across the portfolio and approve more consumers as a result. It is also the case that we need some of that to offset the rising cost of funding and maintain the unit economics that we need. Not all of it will go to expanded approvals. Certainly there are a set of approvals that we simply can't and don't want to approve, right? A consumer defaulting on a loan is a bad outcome that we seek to avoid.
We're never gonna recklessly approve a consumer who we think will. That being said, it is the current posture of the business, given the credit tightenings that we've done, do allow us to be expansionary with any 36% cap.
Got it. Got it. appreciate that. Just quickly on trends. I know that you kinda mentioned, that you'd seen, strong services in travel, although a little bit of weaker performance in discretionary. Has that changed at all or worsened maybe for discretionary through April and the first few days of May?
I think the short answer is no, we're not seeing particularly significant movement in either direction. Travel remains very strong.
Yeah. Other color on the quarter, we mentioned our strength in direct-to-consumer. Our guidance definitely points to that trend continuing where we also have strength in some of our largest partnerships that are, you know, either accelerating or still growing at very, very fast clips. Travel and ticketing remains a real bright spot. We continue to see weakness in sporting goods overall. Although, as we get through the next quarter, we do have what used to be our largest partner will now be less than 1% of our GMV going forward and becomes very trivial. Some of the sporting goods headwind will become a lot less of an impact in the GMV growth rate of the business.
Obviously categories like home and lifestyle and electronics continue to be in a pretty suppressed levels when thinking about their comparisons. We do think that as you get to Q3 of next fiscal year, when we get to about nine months from now, you will begin to lap a lot easier comps. We're optimistic that by the time we get there, some of those businesses will return to some solid growth. For now, the headwinds there continue.
That's great. Thanks for that.
Ladies and gentlemen, as a reminder, if you'd like to ask a question, please press star one on your telephone keypad. Our next question comes from the line of Rob Wildhack with Autonomous Research. Please proceed.
Hey, guys. with Debit+ out in the wild now, can you give us some additional color on the unit economics there and how they fit into the 3%-4% RLTC as a percentage of GMV that you have in the core business?
We do plan on giving a very detailed breakdown for investors later this year, not today. Again, think about the products GMV. The stuff that looks like installment loans will fit within our frameworks today because they are very similar loans, and they should have similar economics, similar funding requirements, similar, you know, it's more of what we do every day. The volume that we call pay now that comes out of the consumer's accounts a few days after they swipe the card, those will have different economics. Today, that's not the majority of the volume running on the card, but we'll watch that closely and give investors a way to think about modeling that as it becomes material.
Okay. Noticed that you reaffirmed the commitment to positive adjusted operating income exiting this year. As you think about or look to that over the medium- term, what's the current line of thinking on the level of reinvestment you need to continue to scale versus your ability to generate real operating leverage and start to drop some of that more and more to earnings?
It's a good question. As you saw in this quarter and our guidance kind of implies, we expect to continue to drive real leverage in G&A. Sales and marketing, on a non-GAAP adjusted basis will continue to be slightly volatile in that some of our co-marketing commitments are a little bit more episodic. You'll see that number kind of bounce around a little bit, but over time, still showing real leverage. The area of the business that we do intend to continue to invest in is tech data and analytics. That enables growth in the business, both in the near- term, enabling us to add infrastructure and acquire more data, but also, hire engineers and product managers to build product to change the world.
We are going to keep doing that, and we intend to keep our foot on the gas with the technology side of the business and showing leverage in the other parts. We've not given a framework for what that means in terms of bottom line profitability growth or the trend of adjusted operating income, but we do intend to update investors on that later this year.
Okay. Thank you.
Thank you. Ladies and gentlemen, this concludes our question and answer session. I'd like to turn the call back to Zane Keller.
Thank you, everybody, for joining the call today, and we look forward to speaking with you again next quarter.
This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.