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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 December 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 every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit 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.
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 February 9, 2022, the number of shares of the registrant’s Class A common stock outstanding was 223,765,871 and the number of shares of the registrant's Class B common stock outstanding was 60,691,104.



Table of Contents

TABLE OF CONTENTS
Page



2

Table of Contents
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 compete successfully in a highly competitive industry;
our ability to attract new consumers and retain and grow our relationships with our existing consumers;
our expectations regarding product launches;
our ability to successfully engage new originating bank partners;
the availability of funding sources to support our business model;
our ability to effectively price and score credit risk using our proprietary risk model;
the performance of loans facilitated and originated through our platform;
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 and our most recently filed Annual Report on Form 10-K. 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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Table of Contents

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 such as “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 (“SEC”), 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 as an inactive textual reference and for convenience only, and do not intend it to be an active link to our website.

4

Table of Contents
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)
December 31, 2021June 30, 2021
Assets
Cash and cash equivalents$2,567,401 $1,466,558 
Restricted cash247,402 226,074 
Securities available for sale at fair value475,379 16,170 
Loans held for sale27,394 13,030 
Loans held for investment2,425,519 2,022,320 
Allowance for credit losses(158,289)(117,760)
Loans held for investment, net2,267,230 1,904,560 
Accounts receivable, net134,571 91,575 
Property, equipment and software, net113,573 62,499 
Goodwill541,399 516,515 
Intangible assets66,190 67,930 
Commercial agreement assets316,047 227,377 
Other assets195,863 274,679 
Total Assets$6,952,449 $4,866,967 
Liabilities and Stockholders’ Equity
Liabilities:
Accounts payable$45,589 $57,758 
Payable to third-party loan owners71,515 50,079 
Accrued interest payable2,621 2,751 
Accrued expenses and other liabilities436,533 323,577 
Convertible senior notes, net1,704,607  
Notes issued by securitization trusts1,577,264 1,176,673 
Funding debt645,998 680,602 
Total liabilities4,484,127 2,291,440 
Commitments and contingencies (Note 8)
Stockholders’ equity:
Class A common stock, par value $0.00001 per share: 3,030,000,000 shares authorized, 222,313,582 shares issued and outstanding as of December 31, 2021; 3,030,000,000 shares authorized, 181,131,728 shares issued and outstanding as of June 30, 2021
2 2 
Class B common stock, par value $0.00001 per share: 140,000,000 shares authorized, 60,896,826 shares issued and outstanding as of December 31, 2021; 140,000,000 authorized, 88,226,376 shares issued and outstanding as of June 30, 2021
1 1 
Additional paid in capital3,828,778 3,467,236 
Accumulated deficit(1,364,835)(898,485)
Accumulated other comprehensive gain (loss)4,376 6,773 
Total stockholders’ equity2,468,322 2,575,527 
Total Liabilities and Stockholders’ Equity$6,952,449 $4,866,967 

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.
December 31, 2021June 30, 2021
Assets of consolidated VIEs, included in total assets above
Restricted cash$163,578 $142,385 
Loans held for investment2,175,601 1,743,810 
Allowance for credit losses(127,195)(94,463)
Loans held for investment, net2,048,406 1,649,347 
Accounts receivable, net8,195 8,209 
Other assets5,636 3,683 
Total assets of consolidated VIEs$2,225,815 $1,803,624 
Liabilities of consolidated VIEs, included in total liabilities above
Accounts payable$2,896 $2,927 
Accrued interest payable2,646 2,613 
Accrued expenses and other liabilities5,103 3,820 
Notes issued by securitization trusts1,577,264 1,176,673 
Funding debt508,164 607,394 
Total liabilities of consolidated VIEs2,096,073 1,793,427 
Total net assets$129,742 $10,197 

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 December 31,Six Months Ended December 31,
2021202020212020
Revenue
Merchant network revenue$127,087 $99,630 $219,331 $192,895 
Virtual card network revenue26,558 10,820 45,953 16,778 
Total network revenue153,645 110,450 265,284 209,673 
Interest income138,355 73,857 255,657 128,094 
Gain on sales of loans57,690 14,560 88,669 30,994 
Servicing income11,321 5,174 20,786 9,258 
Total Revenue, net$361,011 $204,041 $630,396 $378,019 
Operating Expenses
Loss on loan purchase commitment$65,265 $67,768 $116,943 $133,636 
Provision for credit losses52,640 12,521 116,287 41,452 
Funding costs17,700 12,060 34,453 22,412 
Processing and servicing41,849 16,802 67,050 30,300 
Technology and data analytics94,989 41,634 173,002 75,402 
Sales and marketing143,476 39,112 207,436 61,694 
General and administrative141,292 40,916 277,496 73,189 
Total Operating Expenses557,211 230,813 992,667 438,085 
Operating Loss$(196,200)$(26,772)$(362,271)$(60,066)
Other (expense) income, net36,741 240 (103,632)29,685 
Loss Before Income Taxes$(159,459)$(26,532)$(465,903)$(30,381)
Income Tax Expense 276 78 447 175 
Net Loss$(159,735)$(26,610)$(466,350)$(30,556)
Other Comprehensive Income (Loss)
Foreign currency translation adjustments$2,341 $1,814 $(1,461)$2,219 
Unrealized gain (loss) on securities available for sale, net(657) (936) 
Net Other Comprehensive (Loss) Income1,684 1,814 (2,397)2,219 
Comprehensive Loss$(158,051)$(24,796)$(468,747)$(28,337)
Per share data:
Net loss per share attributable to common stockholders for Class A and Class B
Basic$(0.57)$(0.38)$(1.70)$(0.45)
Diluted$(0.57)$(0.38)$(1.70)$(0.84)
Weighted average common shares outstanding:
Basic281,533,888 70,801,521 273,588,094 67,795,598 
Diluted281,533,888 70,801,521 273,588,094 69,534,680 

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’ EQUITY (DEFICIT)
(Unaudited)
(in thousands, except share amounts)

Common StockAdditional Paid-In CapitalAccumulated DeficitAccumulated Other Comprehensive Income (Loss)Total Stockholders' Equity (Deficit)
SharesAmount
Balance as of June 30, 2021269,358,104 $3 $3,467,236 $(898,485)$6,773 $2,575,527 
Issuance of common stock upon exercise of stock options7,403,503 — 37,470 — — 37,470 
Issuance of common stock in acquisition183,733 — 10,000 — — 10,000 
Vesting of restricted stock units772,653 — — — — — 
Repurchases of common stock(821)— (4)— — (4)
Stock-based compensation— — 104,879 — — 104,879 
Tax withholding on stock-based compensation— — (39,817)— — (39,817)
Foreign currency translation adjustments— — — — (3,802)(3,802)
Unrealized gain (loss) on securities available for sale— — — — (279)(279)
Net Loss— — — (306,615)— (306,615)
Balance as of September 30, 2021277,717,172 $3 $3,579,764 $(1,205,100)$2,692 $2,377,359 
Issuance of common stock4,689,973 — 21,674 — — 21,674 
Vesting of restricted stock units803,263 — — — — — 
Vesting of warrants for common stock — — 198,383 — — 198,383 
Stock-based compensation— — 101,920 — — 101,920 
Tax withholding on stock-based compensation— — (72,963)— — (72,963)
Foreign currency translation adjustments— — — — 2,341 2,341 
Unrealized gain (loss) on securities available for sale— — — — (657)(657)
Net Loss— — — (159,735)— (159,735)
Balance as of December 31, 2021283,210,408 $3 $3,828,778 $(1,364,835)$4,376 $2,468,322 














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AFFIRM HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENT OF REDEEMABLE CONVERTIBLE PREFERRED STOCK
AND STOCKHOLDERS’ EQUITY (DEFICIT), CONT.
(Unaudited)
(in thousands, except share amounts)

Redeemable Convertible
Preferred Stock
Common StockAdditional Paid-In CapitalAccumulated DeficitAccumulated Other Comprehensive Income (Loss)Total Stockholders' Equity (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 option— — 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 option— — 6,220,024 — 21,676 — — 21,676 
Repurchases of common stock— — (12,100)— (199)— — (199)
Issuance of 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, 2020148,396,979 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 STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Six Months Ended December 31,
20212020
Cash Flows from Operating Activities
Net Loss$(466,350)$(30,556)
Adjustments to reconcile net loss to net cash used in operating activities:
Provision for credit losses116,287 41,452 
Amortization of premiums and discounts on loans, net(87,678)(31,453)
Gain on sales of loans(88,669)(30,994)
Changes in fair value of assets and liabilities104,900 (30,568)
Amortization of commercial agreement assets43,885 31,300 
Amortization of debt issuance costs9,568 2,361 
Commercial agreement warrant expense64,854  
Stock-based compensation181,726 12,724 
Depreciation and amortization22,505 7,071 
Other(5,198)2,523 
Purchases of loans held for sale(2,614,002)(1,033,915)
Proceeds from the sale of loans held for sale2,607,759 1,001,673 
Change in operating assets and liabilities:
Accounts receivable, net(48,117)(9,080)
Other assets65,422 (89,509)
Accounts payable(12,169)7,862 
Payable to third-party loan owners21,436 8,046 
Accrued interest payable(131)1,799 
Accrued expenses and other liabilities8,868 89,305 
Net Cash Used in Operating Activities(75,104)(49,959)
Cash Flows from Investing Activities
Purchases and origination of loans held for investment(4,652,346)(2,691,788)
Proceeds from the sale of loans held for investment780,276 204,960 
Principal repayments and other loan servicing activity3,563,123 1,700,809 
Acquisition, net of cash and restricted cash acquired(5,999)(113,628)
Additions to property, equipment and software(38,159)(7,063)
Purchases of securities available for sale(511,724) 
Proceeds from maturities and repayments of securities available for sale59,126  
Other investing cash inflows9,872  
Other investing cash outflows(23,742) 
Net Cash Used in Investing Activities(819,573)(906,710)
Cash Flows from Financing Activities
Proceeds from issuance of convertible debt, net1,704,300  
Proceeds from funding debt1,497,674 1,533,379 
Proceeds from issuance of notes and residual trust certificates by securitization trusts499,640 896,455 
Proceeds from issuance of redeemable convertible preferred stock, net 434,542 
Payment of debt issuance costs(8,151)(6,787)
Principal repayments of funding debt(1,527,568)(1,544,502)
Principal repayments of notes issued by securitization trusts(102,467)(70,390)
Proceeds from exercise of common stock options and warrants and contributions to ESPP59,569 23,417 
Repurchases of common stock(4)(783)
Payments of tax withholding for stock-based compensation(112,780) 
Net Cash Provided by Financing Activities2,010,213 1,265,331 
Effect of exchange rate changes on cash, cash equivalents and restricted cash6,635  
Net Increase in Cash and Cash Equivalents and Restricted Cash1,122,171 308,662 
Cash and cash equivalents and restricted cash, beginning of period1,692,632 328,128 
Cash and Cash Equivalents and Restricted Cash, end of period$2,814,803 $636,790 
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 CASH FLOWS, CONT.
(Unaudited)
(in thousands)

Six Months Ended December 31,
20212020
Supplemental Disclosures of Cash Flow Information
Cash payments for interest expense$23,143 $16,716 
Cash paid for operating leases8,232 6,307 
Cash paid for income taxes80  
Supplemental Disclosures of Non-Cash Investing and Financing Activities
Stock-based compensation included in capitalized internal-use software25,073 1,225 
Issuance of common stock in connection with acquisition10,000  
Additions to property and equipment included in accrued expenses107 24 
Issuance of warrants in exchange for commercial agreement 67,645 
Conversion of convertible debt 88,559 

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

Affirm Holdings, Inc. (“Affirm,” the “Company,” “we,” “us,” or “our”), headquartered in San Francisco, California, provides consumers with a simpler, more transparent, and flexible alternative to traditional payment options. Our mission is to deliver honest financial products that improve lives. Through our next-generation commerce platform, partnerships with originating banks, and capital markets partners, we enable consumers to confidently pay for a purchase over time, with terms ranging from one to sixty months. When a consumer applies for a loan through our platform, the loan is underwritten using our proprietary risk model, and once approved, the consumer selects their preferred repayment option. Loans are self-originated or funded and issued by our originating bank partners.

Merchants partner with us to transform the consumer shopping experience and to acquire and convert customers more effectively through our frictionless point-of-sale payment solutions. Consumers get the flexibility to buy now and make simple regular payments for their purchases and merchants see increased average order value, repeat purchase rates, and an overall more satisfied customer base. Unlike legacy payment options and our competitors’ product offerings, which charge deferred or compounding interest and unexpected costs, we disclose up-front to consumers exactly what they will owe — no hidden fees, no deferred interest, no penalties.

2.   Summary of Significant Accounting Policies

Basis of Presentation and Principles of Consolidation

The accompanying interim condensed consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”), as contained in the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”), disclosure requirements for interim financial information, and the requirements of Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. The unaudited interim condensed consolidated financial statements should be read in conjunction with the audited financial statements and notes thereto for the fiscal year ended June 30, 2021. The balance sheet as of June 30, 2021 has been derived from the audited financial statements at that date. Management believes these interim condensed consolidated financial statements reflect all adjustments, including those of a normal and recurring nature, which are necessary for a fair presentation of the results for the interim periods presented. The results of operations for the interim periods are not necessarily indicative of the results that may be expected for the full year or any other interim period.

Our interim condensed financial statements have been prepared on a consolidated basis. Under this basis of presentation, our financial statements consolidate all wholly owned subsidiaries and variable interest entities (“VIEs”), in which we have a controlling financial interest. These include various business trust entities and limited partnerships established to enter into warehouse credit agreements with certain lenders for funding debt facilities and certain asset-backed securitization transactions.

Our variable interest arises from contractual, ownership, or other monetary interests in the entity, which changes with fluctuations in the fair value of the entity’s net assets. We consolidate a VIE when we are deemed to be the primary beneficiary. We assess whether or not we are the primary beneficiary of a VIE on an ongoing basis.

Use of Estimates

The preparation of interim condensed consolidated financial statements in conformity with U.S. GAAP requires the use of estimates, judgments and assumptions that affect the reported amounts in the interim condensed consolidated financial statements and the accompanying notes. Material estimates that are particularly susceptible to significant change relate to determination of variable consideration for revenue, the allowance for credit losses, capitalized internal-use software development costs, valuation allowance for deferred tax assets, loss on loan purchase commitment, the fair value of servicing assets and liabilities, discount on self-originated loans, the fair
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value and useful lives of tangible and intangible assets acquired and liabilities assumed resulting from business combinations, the fair value of contingent consideration related to business combinations, the evaluation for impairment of intangible assets and goodwill, the incremental borrowing rate used in discounting our lease liabilities, the fair value of available for sale debt securities including retained interests in our securitization trusts, the fair value of residual certificates issued by our securitization trusts held by third parties, and stock-based compensation, including the fair value of warrants issued to nonemployees. We base our estimates on historical experience, current events, and other factors we believe to be reasonable under the circumstances. To the extent that there are material differences between these estimates and actual results, our financial condition or operating results will be materially affected.

These estimates are based on information available as of the date of the interim condensed consolidated financial statements; therefore, actual results could differ materially from those estimates. 

Immaterial Correction of Prior Period Amounts

Subsequent to the issuance of our financial statements included in our Annual Report on Form 10-K for the fiscal year ended June 30, 2021, which was filed with the SEC on September 17, 2021, we identified understatements in certain prior period amounts related to the fair value measurement of contingent consideration and stock-based compensation.

We remeasure the fair value of the contingent consideration liability recorded in connection with the PayBright, Inc. (“PayBright”) acquisition at each reporting date. An incorrect input in the Monte Carlo simulation used to estimate the fair value as of June 30, 2021, resulted in an understatement of accrued expenses and other liabilities of $5.6 million as of June 30, 2021.
We measure stock-based compensation based on the fair value of an award at the grant date and recognize expense over the vesting period of the award based on the estimated portion of the award that is expected to vest. An incorrect determination of the grant date and service inception dates for certain awards granted prior to our initial public offering (“IPO”), as well as incorrect treatment of expense recognition for certain terminated employees, resulted in an understatement of additional paid in capital of $4.5 million as of June 30, 2021.

Accordingly, we have corrected the relevant financial statements and related footnotes as of June 30, 2021 within these interim condensed consolidated financial statements from amounts previously reported. We have evaluated the materiality of these misstatements based on an analysis of quantitative and qualitative factors and concluded they were not material to the prior period financial statements, individually or in aggregate.

The following table provides the impact of the correction on our consolidated balance sheet as of June 30, 2021, as presented below (in thousands):

As of June 30, 2021
As Previously ReportedAdjustmentsAs Corrected
Accrued expenses and other liabilities 317,951 5,626 323,577 
Total liabilities2,285,814 5,626 2,291,440 
Additional paid in capital3,462,762 4,474 3,467,236 
Accumulated deficit(888,381)(10,104)(898,485)
Accumulated other comprehensive income 6,769 4 6,773 
Total stockholders’ equity 2,581,153 (5,626)2,575,527 




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Significant Accounting Policies

Except for the addition of policies described below for securities available for sale, there were no material changes to our significant accounting policies as disclosed in Note 2. Summary of Significant Accounting Policies of our Annual Report on Form 10-K for the fiscal year ended June 30, 2021, which was filed with the SEC on September 17, 2021.

Securities Available for Sale

We hold certain investments in marketable debt securities and retained interests in our unconsolidated securitization trusts which are accounted for under ASC Topic 320, “Investments - Debt Securities” (“ASC 320”). We have classified these investments as available for sale, as defined within ASC 320. These investments are held at fair value with changes in fair value recorded in unrealized gain (loss) on securities available for sale, net within other comprehensive income (loss). As of the end of each reporting period, management reviews each security where the fair value is less than the amortized cost to determine whether any portion of the decline in fair value is due to a credit loss and/or whether or not we intend to sell or will be required to sell such security before recovery of its amortized cost basis. The portion of any decline in fair value which management identifies as a credit loss will be recognized as an allowance for credit losses through other (expense) income, net rather than unrealized gain (loss) on securities available for sale, net. To the extent management intends to sell or may be required to sell a security in an unrealized loss position, we 1) reverse any previously recorded allowance for credit losses with an offsetting entry to reduce the amortized cost basis of the security and 2) write-off any remaining portion of the amortized cost basis to equal its fair value, with this change recorded through other (expense) income, net.

Interest income for available for sale securities is recorded within other (expense) income, net.

Available for sale securities initially purchased with less than 90 days until maturity with quoted transaction prices in an active market are classified as cash and cash equivalents.

With respect to retained interests in our securitization trusts, we apply the guidance in ASC Topic 325, “Investments - Other” (“ASC 325”) relating to beneficial interests. Accordingly, we recognize interest income each period based on the effective interest rate calculated using expected cash flows. Changes in the timing of expected cash flows are accounted for prospectively through an adjustment to interest income. When fair value is below amortized cost, we record an allowance for credit losses measured based on the difference between amortized cost and projected cash flows discounted at the effective interest rate. The allowance for credit losses is capped at the difference between amortized cost and fair value.

Refer to Note 12. Investments for additional information.

Sales and Marketing Costs

Sales and marketing costs include the expense related to warrants and other share-based payments granted to our enterprise partners. See Note 6. Balance Sheet Components for more information on these arrangements. Sales and marketing costs also include salaries and personnel-related costs, as well as costs of general marketing and promotional activities, promotional event programs, sponsorships, and allocated overhead. A portion of these costs related to general marketing and promotional activities are considered advertising costs within the meaning of ASC Topic 720, “Other Expenses” (“ASC 720”), and are expensed as incurred. Advertising costs totaled $25.5 million and $