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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2021

OR

 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from  __________ to __________

Commission file number 001-39888

Affirm Holdings, Inc.
(Exact name of registrant as specified in its charter)
Delaware
84-2224323
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
650 California Street
San Francisco, California
94108
(Address of Principal Executive Offices)
(Zip Code)
(415) 984-0490
Registrant's telephone number, including area code


Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Class A common stock, par value $0.00001 per shareAFRMThe Nasdaq Global Select Market

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days.    Yes     No  

Indicate by check mark whether the registrant has submitted electronically and every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding
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12 months (or for such shorter period that the registrant was required to submit and post such files).     Yes     No   

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer
Accelerated filer
  
Non-accelerated filer  
Smaller reporting company
  
Emerging growth company
  
                
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).     Yes        No  


As of May 7, 2021, the number of shares of the registrants Class A common stock outstanding was 147,578,989 and the number of shares of the registrant's Class B common stock outstanding was 117,514,310.

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q ("Form 10-Q"), as well as information included in oral statements or other written statements made or to be made by us, contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, that involve substantial risks and uncertainties. All statements other than statements of historical fact contained in this report, including statements regarding our future results of operations and financial condition, business strategy, and plans and objectives of management for future operations, are forward-looking statements. In some cases, forward-looking statements may be identified by words such as "anticipate," "believe," "continue," "could," "design," "estimate," "expect," "intend," "may," "plan," "potentially," "predict," "project," "should," "will," “would,” or the negative of these terms or other similar expressions. These forward-looking statements include, but are not limited to, statements concerning the following:

our expectations regarding our future revenue, expenses, and other operating results and key operating metrics;
our ability to attract additional merchants and retain and grow our relationships with our existing merchant partners;
our ability to attract new consumers and retain and grow our relationships with our existing consumers;
our ability to compete successfully in a highly competitive industry;
our ability to successfully engage new originating bank partners;
the availability of funding sources to support our network;
our ability to effectively price and score credit risk using our proprietary risk model;
the performance of loans facilitated through our platform;
our expectations regarding product launches;
the future growth rate of our revenue and related key operating metrics;
our ability to achieve or sustain profitability in the future;
our ability to remain in compliance with laws and regulations that currently apply or become applicable to our business;
our ability to protect our confidential, proprietary, or sensitive information;
past and future acquisitions, investments, and other strategic investments;
our ability to maintain, protect, and enhance our brand and intellectual property;
litigation, investigations, regulatory inquiries, and proceedings;
the impact of macroeconomic conditions on our business, including the impact of the COVID-19 pandemic; and
the size and growth rates of the markets in which we compete.
Forward-looking statements are based on our management’s beliefs and assumptions and on information currently available. These forward-looking statements are subject to a number of known and unknown risks, uncertainties and assumptions, including risks described in the section titled "Risk Factors" and elsewhere in this Form 10-Q. Other sections of this Form 10-Q may include additional factors that could harm our business and financial performance. Moreover, we operate in a very competitive and rapidly changing environment. New risk factors emerge from time to time, and it is not possible for our management to predict all risk factors nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ from those contained in, or implied by, any forward-looking statements.

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You should not rely upon forward-looking statements as predictions of future events. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance, achievements, events, or circumstances. Except as required by law, we undertake no obligation to update publicly any forward-looking statements for any reason after the date of this report or to conform these statements to actual results or to changes in our expectations. You should read this Form 10-Q and the documents that we have filed as exhibits to this report with the understanding that our actual future results, levels of activity, performance, and achievements may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements.

In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this report, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and you are cautioned not to unduly rely upon these statements.

Investors and others should note that we may announce material business and financial information to our investors using our investor relations website (investors.affirm.com), our filings with the Securities and Exchange Commission, webcasts, press releases, and conference calls. We use these mediums, including our website, to communicate with investors and the general public about our company, our products, and other issues. It is possible that the information that we make available on our website may be deemed to be material information. We therefore encourage investors and others interested in our company to review the information that we make available on our website. The contents of our website are not incorporated into this filing. We have included our investor relations website address only as an inactive textual reference and do not intend it to be an active link to our website.

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Part I - Financial Information

Item 1. Unaudited Financial Statements


AFFIRM HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(in thousands, except shares and per share amounts)
June 30, 2020March 31, 2021
Assets
Cash and cash equivalents$267,059 $1,623,672 
Restricted cash61,069 183,330 
Loans held for sale4,459 12,774 
Loans held for investment1,034,312 2,195,394 
Allowance for credit losses(95,137)(113,754)
Loans held for investment, net939,175 2,081,640 
Accounts receivable, net59,001 66,080 
Property, equipment and software, net48,140 53,444 
Goodwill and intangible assets3,751 279,198 
Commercial agreement assets 246,383 
Other assets19,597 219,868 
Total Assets$1,402,251 $4,766,389 
Liabilities, Redeemable Convertible Preferred Stock and Stockholders’ Deficit
Liabilities:
Accounts payable$18,361 $29,005 
Payable to third-party loan owners24,998 36,523 
Accrued interest payable1,860 3,891 
Accrued expenses and other liabilities27,810 291,428 
Convertible debt74,222  
Notes issued by securitization trusts 1,241,126 
Funding debt817,926 760,395 
Total liabilities965,177 2,362,368 
Commitments and contingencies (Note 8)
Redeemable convertible preferred stock, $0.00001 par value, 124,453,009 and 30,000,000 shares authorized as of June 30, 2020 and March 31, 2021, respectively; 122,115,971 and no shares issued and outstanding as of June 30, 2020 and March 31, 2021, respectively; liquidation preference of $809,032 and nil as of June 30, 2020 and March 31, 2021, respectively
804,170  
Stockholders’ (deficit) equity:
Common stock, $0.00001 par value, 232,000,000 and no shares authorized as of June 30, 2020 and March 31, 2021, respectively; 47,684,427 and no shares issued and outstanding as of June 30, 2020 and March 31, 2021, respectively
  
Class A common stock, par value $0.00001 per share: no shares authorized, issued and outstanding as of June 30, 2020; 3,030,000,000 shares authorized, 147,773,275 shares issued and outstanding as of March 31, 2021
 2 
Class B common stock, par value $0.00001 per share: no shares authorized, issued and outstanding as of June 30, 2020; 140,000,000 shares authorized, 116,884,843 shares issued and outstanding as of March 31, 2021
 1 
Additional paid in capital80,373 3,134,145 
Accumulated deficit(447,167)(734,873)
Accumulated other comprehensive (loss) gain(302)4,746 
Total stockholders’ (deficit) equity(367,096)2,404,021 
Total Liabilities, Redeemable Convertible Preferred Stock and Stockholders’ (Deficit) Equity$1,402,251 $4,766,389 

The accompanying notes are an integral part of these interim condensed consolidated financial statements.
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AFFIRM HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS, CONT.
(Unaudited)
(in thousands, except shares and per share amounts)

    The following table presents the assets and liabilities of consolidated variable interest entities (“VIEs”), which are included in the interim condensed consolidated balance sheets above. The assets in the table below may only be used to settle obligations of consolidated VIEs and are in excess of those obligations. The liabilities in the table below include liabilities for which creditors do not have recourse to the general credit of the Company. Additionally, the assets and liabilities in the table below include third-party assets and liabilities of consolidated VIEs only and exclude intercompany balances that eliminate upon consolidation.
June 30, 2020March 31, 2021
Assets of consolidated VIEs, included in total assets above
Restricted cash$28,788 $138,656 
Loans held for investment935,085 1,914,979 
Allowance for credit losses(87,467)(103,390)
Loans held for investment, net847,618 1,811,589 
Accounts receivable, net8,146 8,209 
Other assets3,345 4,238 
Total assets of consolidated VIEs$887,897 $1,962,692 
Liabilities of consolidated VIEs, included in total liabilities above
Accounts payable$492 $1,772 
Accrued interest payable1,732 3,762 
Accrued expenses and other liabilities565 4,648 
Notes issued by securitization trusts 1,241,126 
Funding debt817,926 701,231 
Total liabilities of consolidated VIEs820,715 1,952,539 
Total net assets$67,182 $10,153 

The accompanying notes are an integral part of these interim condensed consolidated financial statements.
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AFFIRM HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (Unaudited)
(in thousands, except share and per share amounts)
Three Months Ended March 31,Nine Months Ended March 31,
2020202120202021
Revenue
Merchant network revenue$67,350 $97,999 $171,503 $290,894 
Virtual card network revenue5,930 13,809 16,641 30,587 
Total network revenue73,280 111,808 188,144 321,481 
Interest income52,372 94,530 137,613 222,624 
Gain on sales of loans9,866 16,350 20,329 47,344 
Servicing income2,755 7,977 10,110 17,235 
Total Revenue, net$138,273 $230,665 $356,196 $608,684 
Operating Expenses
Loss on loan purchase commitment$43,519 $62,054 $106,141 $195,690 
Provision for credit losses82,216 (1,063)137,238 40,389 
Funding costs8,204 14,665 24,499 37,077 
Processing and servicing13,678 21,335 35,025 51,635 
Technology and data analytics33,654 98,728 90,634 174,130 
Sales and marketing7,108 57,549 19,978 119,243 
General and administrative31,399 146,853 89,791 220,042 
Total Operating Expenses219,778 400,121 503,306 838,206 
Operating Loss$(81,505)$(169,456)$(147,110)$(229,522)
Other income, net(4,022)(77,773)(19)(48,088)
Loss Before Income Taxes$(85,527)$(247,229)$(147,129)$(277,610)
Income tax expense (benefit)93 (70)282 105 
Net Loss$(85,620)$(247,159)$(147,411)$(277,715)
Excess return to preferred stockholders on repurchase  (13,205) 
Net Loss Attributable to Common Stockholders$(85,620)$(247,159)$(160,616)$(277,715)
Other Comprehensive Income (Loss)
Foreign currency translation adjustments$(874)$2,829 $(864)$5,048 
Net Other Comprehensive Income (Loss)(874)2,829 (864)5,048 
Comprehensive Loss$(86,494)$(244,330)$(148,275)$(272,667)
Per share data:
Net loss per share attributable to common stockholders for Class A and Class B:
Basic$(1.80)$(1.06)$(3.35)$(2.27)
Diluted$(1.80)$(1.06)$(3.35)$(2.48)
Weighted average common shares outstanding:
Basic47,435,554 233,309,590 47,974,768 122,161,508 
Diluted47,435,554 233,309,590 47,974,768 123,329,359 

The accompanying notes are an integral part of these interim condensed consolidated financial statements.
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AFFIRM HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENT OF REDEEMABLE CONVERTIBLE PREFERRED STOCK
AND STOCKHOLDERS’ DEFICIT
(Unaudited)
(in thousands, except share amounts)
Redeemable Convertible
Preferred Stock
Common StockAdditional Paid-In CapitalAccumulated DeficitAccumulated Other Comprehensive Income (Loss)Total Stockholders' Deficit
SharesAmountSharesAmount
Balance as of June 30, 2019
122,653,704 $798,074 47,078,208 $ $54,824 $(318,238)$ $(263,414)
Issuance of common stock— — 213,770 — 743 — — 743 
Repurchases of common stock— — (63,719)— — (865)— (865)
Issuance of redeemable convertible preferred stock, net of issuance costs of $20
1,175,872 15,481 — — — — — — 
Stock-based compensation— — — — 9,323 — — 9,323 
Foreign currency translation adjustments— — — — — — 25 25 
Net loss— — — — — (30,795)— (30,795)
Balance as of September 30, 2019123,829,576 $813,555 47,228,259 $ $64,890 $(349,898)$25 $(284,983)
Issuance of common stock $ 1,485,298  478   478 
Repurchases of common stock— — (1,385,879)— (2,123)(15,467)— (17,590)
Repurchases of redeemable convertible preferred stock(1,713,605)(9,385)— — (13,205)— — (13,205)
Stock-based compensation— — — — 9,155 — — 9,155 
Foreign currency translation adjustments— — — — — — (15)(15)
Net loss— — — — — (30,996)— (30,996)
Balance as of December 31, 2019122,115,971 $804,170 47,327,678 $ $59,195 $(396,361)$10 $(337,156)
Issuance of common stock $ 249,861  552   552 
Repurchases of common stock— — (45,500)— (400)— — (400)
Stock-based compensation— — — — 8,462 — — 8,462 
Foreign currency translation adjustments— — — — — — (874)(874)
Net loss— — — — — (85,620)— (85,620)
Balance as of March 31, 2020122,115,971 $804,170 47,532,039 $ $67,809 $(481,981)$(864)$(415,036)

The accompanying notes are an integral part of these interim condensed consolidated financial statements.







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AFFIRM HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENT OF REDEEMABLE CONVERTIBLE PREFERRED STOCK
AND STOCKHOLDERS’ DEFICIT, CONT.
(Unaudited)
(in thousands, except share amounts)
Redeemable Convertible
Preferred Stock
Common StockAdditional Paid-In CapitalAccumulated DeficitAccumulated Other Comprehensive IncomeTotal Stockholders' Deficit
SharesAmountSharesAmount
Balance as of June 30, 2020122,115,971 $804,170 47,684,427 $ $80,373 $(447,167)$(302)$(367,096)
Issuance of common stock upon exercise of stock options— — 388,246 — 1,741 — — 1,741 
Repurchases of common stock— — (115,625)— (584)— — (584)
Issuance of redeemable convertible preferred stock, net of issuance costs of $440
21,824,141 434,434 — — — — — — 
Vesting and exercise of warrants for common stock— — 5,074,398 — 67,645 — — 67,645 
Stock-based compensation— — — — 7,175 — — 7,175 
Conversion of convertible debt4,444,321 88,559 — — (42,124)— — (42,124)
Effects of adoption of new accounting standards— — — — — (9,980)— (9,980)
Foreign currency translation adjustments— — — — — — 405 405 
Net loss— — — — — (3,946)— (3,946)
Balance as of September 30, 2020148,384,433 $1,327,163 53,031,446 $ $114,226 $(461,093)$103 $(346,764)
Issuance of common stock upon exercise of stock options— — 6,220,024 — 21,676 — — 21,676 
Repurchases of common stock— — (12,100)— (199)— — (199)
Issuance of redeemable convertible preferred stock, net of issuance costs of $143
12,546 108 — — — — — — 
Stock-based compensation— — — — 6,774 — — 6,774 
Foreign currency translation adjustments— — — — — — 1,814 1,814 
Net loss— — — — — (26,610)— (26,610)
Balance as of December 31, 2020
148,396,979 $1,327,271 59,239,370 $ $142,477 $(487,703)$1,917 $(343,309)

The accompanying notes are an integral part of these interim condensed consolidated financial statements.
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AFFIRM HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENT OF REDEEMABLE CONVERTIBLE PREFERRED STOCK
AND STOCKHOLDERS’ DEFICIT, CONT.
(Unaudited)
(in thousands, except share amounts)

Redeemable Convertible
Preferred Stock
Common StockAdditional Paid-In CapitalAccumulated DeficitAccumulated Other Comprehensive IncomeTotal Stockholders' Deficit
SharesAmountShares1Amount
Balance as of December 31, 2020
148,396,979 $1,327,271 59,239,370 $ $142,477 $(487,703)$1,917 $(343,309)
Conversion of redeemable convertible preferred stock(148,396,979)(1,327,271)148,396,979 2 1,327,269 (11)— 1,327,260 
Issuance of common stock upon initial public offering, net of issuance costs of $6,746
— — 28,290,000 1 1,305,301 — — 1,305,302 
Issuance of common stock upon exercise of stock options— — 4,721,033 — 19,819 — — 19,819 
Issuance of common stock upon exercise of warrants— — 15,577,185 — 203,511 — — 203,511 
Issuance of common stock for acquisition— — 6,209,806 — 117,023 — — 117,023 
Vesting of restricted stock units— — 2,225,411 — — — — — 
Repurchases of common stock— — (1,666)— (3)— — (3)
Stock-based compensation— — — — 146,314 — — 146,314 
Tax withholding for stock-based compensation— — — — (127,566)— — (127,566)
Foreign currency translation adjustments— — — — — — 2,829 2,829 
Net loss— — — — — (247,159)— (247,159)
Balance as of March 31, 2021 $ 264,658,118 $3 $3,134,145 $(734,873)$4,746 $2,404,021 

The accompanying notes are an integral part of these interim condensed consolidated financial statements.
1 The share amounts listed above combine common stock, Class A common stock and Class B common stock.
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AFFIRM HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Nine Months Ended March 31,
20202021
Cash Flows from Operating Activities
Net Loss$(147,411)$(277,715)
Adjustments to reconcile net loss to net cash used in operating activities:
Provision for credit losses137,238 40,389 
Amortization of premiums and discounts on loans, net(20,668)(60,705)
Gain on sales of loans(20,329)(47,344)
Changes in fair value of servicing assets and liabilities(706)(2,733)
Changes in fair value and extinguishment of convertible debt derivative (30,106)
Change in fair value of residual trust certificates (350)
Change in fair value of contingent consideration 78,499 
Amortization of commercial agreement assets 50,097 
Amortization of debt issuance costs1,661 3,675 
Stock-based compensation24,589 152,471 
Depreciation and amortization7,421 12,092 
Income tax expense (benefit)282 105 
Impairment of right of use assets 11,141 
Loss on disposal of property, equipment and software 4,563 
Other(862)2,354 
Purchases of loans held for sale(1,635,950)(1,640,672)
Proceeds from the sale of loans held for sale1,575,767 1,599,554 
Change in operating assets and liabilities:
Accounts receivable, net(4,013)(6,461)
Other assets24,475 (208,798)
Accrued interest payable793 2,535 
Accounts payable1,564 4,064 
Accrued expenses and other liabilities7,054 128,602 
Payable to third-party loan owners6,240 11,526 
Net Cash Used in Operating Activities(42,855)(173,217)
Cash Flows from Investing Activities
Purchases of loans held for investment(2,033,286)(4,007,881)
Origination of loans (305,953)
Proceeds from the sale of loans211,703 348,195 
Principal repayments of loans1,607,887 3,002,351 
Acquisition, net of cash and restricted cash acquired (104,776)
Acquisition of commercial agreement assets (25,900)
Additions to property, equipment and software(18,704)(12,414)
Net Cash Used in Investing Activities(232,400)(1,106,378)
Cash Flows from Financing Activities