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United States securities and exchange commission logo
November 4, 2020
Max Levchin
Chief Executive Officer
Affirm Holdings, Inc.
650 California Street
San Francisco, CA 94108
Re: Affirm Holdings,
Inc.
Draft Registration
Statement on Form S-1
Submitted October
8, 2020
CIK 0001820953
Dear Mr. Levchin:
We have reviewed your draft registration statement and have the
following comments. In
some of our comments, we may ask you to provide us with information so
we may better
understand your disclosure.
Please respond to this letter by providing the requested
information and either submitting
an amended draft registration statement or publicly filing your
registration statement on
EDGAR. If you do not believe our comments apply to your facts and
circumstances or do not
believe an amendment is appropriate, please tell us why in your
response.
After reviewing the information you provide in response to these
comments and your
amended draft registration statement or filed registration statement, we
may have additional
comments.
Draft Registration Statement on Form S-1 filed October 8, 2020
Prospectus Summary, page 1
1. Please consider using
comparable periods of time when you describe the performance of
your business or tell
us why your use of different periods of time is appropriate. For
example, it appears
that you are using your total number of consumers since inception
when comparing GMV
since July 1, 2016 on page 2. As another example, you depict
your proprietary risk
model for February 2020, however, it is not clear why you have
selected this period.
Also, on page 75, you discuss monthly cohort information since
February 2016, however,
it is not clear why you have selected this period.
2. On page 9, please
provide an explanation that accompanies your Portfolio Net Charge-off
chart to explain how to
interpret the data depicted. Similarly, on page 82 please quantify
Max Levchin
FirstName LastNameMax Levchin
Affirm Holdings, Inc.
Comapany 4,
November NameAffirm
2020 Holdings, Inc.
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the GMV for each merchant cohort. And on page 84, please provide
additional narrative
disclosure to explain the "Portfolio DQ" depicted.
Summary Consolidated Financial and Other Data
Key Operating Metrics and Non-GAAP Financial Measures, page 20
3. You define your non-GAAP measure "contribution profit" as total
revenue less the direct
costs of achieving that revenue. You disclose that since there is a
timing difference in the
income statement recognition of the amortization or release of
discount on loans held for
investment versus loans sold, adjusting out these items is a useful
measure of your
performance during the current period. It is not clear why you believe
this measure is
informative of the economic return generated from the payments volume
facilitated
through your platform. Please help us better understand how this
measure is useful to
investors. In your response, please also address:
The timing difference cited above;
Why technology and data analytics are excluded from the measure
considering these
costs appear to be directly related to revenue generation;
The basis for the following adjustments made in the reconciliation
to operating loss to
arrive at contribution profit: (i) loss on loan purchase
commitments; (ii) amortization
of discount, which is included in GAAP interest income, and (iii)
unamortized
discount released on loans sold to third-party loan buyers; and
Why only certain components of interest income are excluded from
contribution
profit, and a description of the remaining components included as
part of contribution
profit and why.
Risk Factors
"We identified a material weakness in our internal control over financial
reporting...", page 44
4. Please identify the COSO framework used in your evaluation of internal
control over
financial reporting.
Management's Discussion and Analysis of Financial Condition and Results of
Operation
Key Operating Metrics and Non-GAAP Financial Measures, page 78
5. Tell us whether you track new consumers and, if so, please quantify
this amount for recent
periods here. In this regard, we note your risk factor on page 22
indicating your need to
attract new consumers.
Factors Affecting Our Performance, page 80
6. We note that your disclosure indicates that you have recently
partnered with Shopify and
Adyen. Please elaborate upon why these partnerships are considered key
ones and, if
material to an understanding of these partnerships, revise your
disclosure to discuss the
material terms of any agreements with these entities. In this regard,
we also note that you
highlight your top merchant partner, Peloton, in your risk factor
disclosure. Please revise
Max Levchin
Affirm Holdings, Inc.
November 4, 2020
Page 3
to explain how you would characterize your relationship with Peloton,
as compared to the
ones disclosed in this section, and disclose the material terms of any
agreements you have
with Peloton. If your business is substantially dependent upon any of
these arrangements,
please file any agreements as exhibits pursuant to Item 601(b)(10) of
Regulation S-K.
Results of Operations, page 88
7. Please expand your discussion of your results of operations for the
periods presented to
provide greater analysis to the reasons why increases in total
revenue, merchant network
revenue, virtual card network revenue, and interest income occurred.
Also, please revise
to specifically discuss the change in total revenue, merchant network
revenue, virtual card
network revenue, and interest income attributable to new and existing
customers. In this
regard, we note your disclosure that "[a]pproximately 70% of the loans
in the second half
of fiscal year 2020 were taken out by repeat users."
Liquidity and Capital Resources
Cash Flows
Operating Activities, page 95
8. Your analysis appears to emphasize how cash used in operating
activities was derived for
each period presented and the noncash items therein. Please note your
analysis should
discuss the material factors causing a material change in operating
cash
between comparable periods pursuant to Instruction 4 to Item 303(a) of
Regulation S-K.
In this regard, cash used in operating activities decreased in fiscal
2020 compared to
fiscal 2019, yet the only factor cited is an increase in net cash
outflows from sales and
purchases of loans held for sale in 2020 versus 2019. In performing
your analysis, refer to
section IV.B.1 of Release No. 33-8350 for guidance, and quantify all
variance factors
cited pursuant to section 501.04 of the staff s Codification of
Financial Reporting
Releases.
Contractual Obligations, page 97
9. In note 3 to your contractual obligations table you disclose that "[i]n
May 2020,
[you] entered into a three year agreement with a third-party services
provider for cloud
computing and hosting services which included annual spending
commitments." Based
on this table, it appears that you have an annual spending commitment
with your web
services provider in the amount of $31,667. As a related matter, in your
risk factor
disclosure on page 32, you disclose that you are "solely reliant on
[y]our agreement with
[y]our cloud computing web services provider for the provision of cloud
infrastructure
FirstName LastNameMax Levchin
services to support [y]our platform." Please revise your disclosure to
discuss the material
Comapany
termsNameAffirm Holdings,
of your agreement withInc.
your web services provider and, as
applicable, file your
agreement
November 4, 2020asPage
an exhibit.
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FirstName LastName
Max Levchin
FirstName LastNameMax Levchin
Affirm Holdings, Inc.
Comapany 4,
November NameAffirm
2020 Holdings, Inc.
November
Page 4 4, 2020 Page 4
FirstName LastName
Choice of Forum, page 149
10. Clarify whether your exclusive forum provision appears in your amended
and restated
certificate of incorporation or bylaws or both. Please ensure that the
exclusive forum
provision clearly states that your provision does not apply to
Securities Act claims and
does not apply to Exchange Act claims, or tell us how you will inform
future investors of
the provision's limited applicability.
Consolidated Financial Statements
Consolidated Statements of Operations and Comprehensive Loss, page F-5
11. Please tell us your basis for including the "gain (loss) on sales of
loans" as total revenue.
Notes to Consolidated Financial Statements
Note 2. Summary of Significant Accounting Policies
Unaudited Pro Forma Presentation, page F-10
12. You disclose here the unaudited pro forma basic and diluted net loss
per share attributable
to common stockholders in the consolidated statements of operation for
the year ended
June 30, 2020 have been prepared as if the proposed IPO and noted
effects had occurred
on June 30, 2020. Please explain to us why reflecting these as if they
occurred at the end
of the fiscal year rather than at the beginning is appropriate. In
connection with this,
please provide us with how the pro forma weighted average number of
shares shown in
note 19 for each of the items in the denominator was computed.
General
13. Please supplementally provide us with copies of all written
communications, as defined in
Rule 405 under the Securities Act, that you, or anyone authorized to
do so on your behalf,
present to potential investors in reliance on Section 5(d) of the
Securities Act, whether or
not they retain copies of the communications. Please contact the staff
member associated
with the review of this filing to discuss how to submit the materials,
if any, to us for our
review.
14. Please disclose the basis for all your assertions about your
competitive position within
your industry. If you do not have appropriate independent support for
a statement, please
revise the language to make clear that this is your belief based upon
your experience in the
industry, if true. For example, please disclose the basis for your
assertion that "[y]our
ability to effectively price credit risk is one of [y]our core
competitive advantages."
15. Please disclose the source of the following assertions in your
prospectus or revise to
describe them as your belief, if true:
"The spending power of this new generation of consumers continues
to expand
significantly, reaching over $2.5 trillion in 2020. Most
importantly, these consumers
are also increasingly looking to solutions like 'buy now pay
later' as superior, more
Max Levchin
Affirm Holdings, Inc.
November 4, 2020
Page 5
transparent payment options that match their demand for technology
and mobile first-
solutions. This trend has been accelerated by an erosion of trust in
legacy financial
institutions as consumers look to mission-driven technology
companies for new
financial products" (see pages 2 and 103);
"A lack of transparency by traditional financial and payments
institutions, ranging
from hidden penalties, hard to understand 'fine print,' and unwanted
bundling of
products, has led to an erosion of trust and a poor consumer
experience. These views
are particularly acute for the over 160 million Gen Z and
Millennials in the U.S., who
prefer to build trusted relationships with the brands with whom they
engage and from
whom they buy products and services" (see pages 3 and 104);
"[A]pproximately 25% of Millennials do not carry credit cards"
(see pages 3 and
105);
"Debit cards also do not meet the buying needs of many consumers"
(see pages 3 and
105); and
"U.S. e-commerce sales were approximately $600 billion in 2019,
growing at 15%
compared to the previous year" (see pages 12 and 115).
16. Your disclosures indicate that you have entered into agreements with
Cross River Bank
and that you originate a substantial majority of the loans through your
platform with Cross
River Bank. Please revise your disclosures to provide the material terms
of this
arrangement. Please also file any such agreements as exhibits. See Item
601(b)(10) of
Regulation S-K.
You may contact Amy Geddes at (202) 551-3304 or Doug Jones at (202)
551-3309 if you
have questions regarding comments on the financial statements and related
matters. Please
contact Nicholas Lamparski at (202) 551-4695 or Mara Ransom at (202) 551-3264
with any
other questions.
Sincerely,
FirstName LastNameMax Levchin
Division of
Corporation Finance
Comapany NameAffirm Holdings, Inc.
Office of Trade &
Services
November 4, 2020 Page 5
cc: Gregg A. Noel
FirstName LastName