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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 September 30, 2023

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) 960-1518
(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 November 3, 2023, the number of shares of the registrant’s Class A common stock outstanding was 242,120,237 and the number of shares of the registrant’s Class B common stock outstanding was 59,613,337.



Table of Contents

TABLE OF CONTENTS
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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 (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), 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 regarding 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 new merchants and commerce partners and retain and grow our relationships with existing merchants and commerce partners;
our ability to compete successfully in a highly competitive and evolving industry;
our ability to attract new consumers and retain and grow our relationships with our existing consumers;
our expectations regarding the development, innovation, introduction of, and demand for, our products;
our ability to successfully maintain our relationship with existing originating bank partners and engage additional originating bank partners;
our ability to maintain, renew or replace our existing funding arrangements and build and grow new funding relationships;
the impact of any of our funding sources becoming unwilling or unable to provide funding to us on terms acceptable to us, or at all;
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 sustained 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;
developments in our regulatory environment;
the impact of macroeconomic conditions on our business, including the impacts of inflation, a rising interest rate environment and corresponding increases in negotiated interest rate spreads, increasing recessionary concerns and the instability of financial institutions; and
the size and growth rates of the markets in which we compete.
Forward-looking statements, including statements such as “we believe” and similar statements, are based on our management’s current beliefs, opinions and assumptions and on information currently available as of the date of this Report. Such information may be limited or incomplete, and our statements should not be read to indicate that
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we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. 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 in our most recently filed Annual Report on Form 10-K for the fiscal year ended June 30, 2023 (the Annual Report”). 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, heavily regulated and rapidly changing environment. New risks emerge from time to time, and it is not possible for our management to predict all risks that we may face, nor can we assess the impact of all risks on our business or the extent to which any risk, or combination of risks, may cause our actual results to differ from those contained in, or implied by, any forward-looking statements.

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 as of the date of this Report, we cannot guarantee future results, levels of activity, performance, achievements, events, outcomes, timing of results 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, outcomes, achievements and timing of results or outcomes may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary 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, conference calls, and social media. 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 for convenience and do not intend it to be an active link to our website.
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Part I - Financial Information

Item 1. Financial Statements

AFFIRM HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(in thousands, except shares and per share amounts)
September 30, 2023June 30, 2023
Assets
Cash and cash equivalents$1,079,261 $892,027 
Restricted cash409,231 367,917 
Securities available for sale at fair value1,021,630 1,174,653 
Loans held for sale145 76 
Loans held for investment4,549,422 4,402,962 
Allowance for credit losses(232,068)(204,531)
Loans held for investment, net4,317,354 4,198,431 
Accounts receivable, net236,234 199,085 
Property, equipment and software, net338,749 290,135 
Goodwill536,418 542,571 
Intangible assets19,828 34,434 
Commercial agreement assets156,115 177,672 
Other assets292,184 278,614 
Total assets
$8,407,149 $8,155,615 
Liabilities and stockholders’ equity
Liabilities:
Accounts payable$27,345 $28,602 
Payable to third-party loan owners109,498 53,852 
Accrued interest payable19,589 13,498 
Accrued expenses and other liabilities160,328 180,883 
Convertible senior notes, net1,415,080 1,414,208 
Notes issued by securitization trusts2,398,758 2,165,577 
Funding debt1,709,751 1,764,812 
Total Liabilities
5,840,349 5,621,432 
Commitments and contingencies (Note 8)
Stockholders’ equity:
Class A common stock, par value $0.00001 per share: 3,030,000,000 shares authorized, 241,468,132 shares issued and outstanding as of September 30, 2023; 3,030,000,000 shares authorized, 237,230,381 shares issued and outstanding as of June 30, 2023
2 2 
    Class B common stock, par value $0.00001 per share: 140,000,000 shares authorized, 59,613,755 shares issued and outstanding as of September 30, 2023; 140,000,000 authorized, 59,615,836 shares issued and outstanding as of June 30, 2023
1 1 
Additional paid in capital5,355,032 5,140,850 
Accumulated deficit(2,763,030)(2,591,247)
Accumulated other comprehensive loss(25,205)(15,423)
Total stockholders’ equity2,566,800 2,534,183 
Total liabilities and stockholders’ equity
$8,407,149 $8,155,615 

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)

    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.
September 30, 2023June 30, 2023
Assets of consolidated VIEs, included in total assets above
Restricted cash$216,243 $203,872 
Loans held for investment4,335,514 4,151,606 
Allowance for credit losses(198,932)(178,252)
Loans held for investment, net4,136,582 3,973,354 
Accounts receivable, net2,958 8,196 
Other assets16,499 18,210 
Total assets of consolidated VIEs$4,372,282 $4,203,632 
Liabilities of consolidated VIEs, included in total liabilities above
Accounts payable$2,845 $2,894 
Accrued interest payable19,588 13,498 
Accrued expenses and other liabilities19,587 17,825 
Notes issued by securitization trusts2,398,758 2,165,577 
Funding debt1,648,297 1,656,400 
Total liabilities of consolidated VIEs4,089,075 3,856,194 
Total net assets of consolidated VIEs
$283,207 $347,438 

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 September 30,
20232022
Revenue
Merchant network revenue$145,950 $113,149 
Card network revenue33,476 26,708 
Total network revenue179,426 139,857 
Interest income262,679 136,802 
Gain on sales of loans34,285 63,595 
Servicing income20,157 21,370 
Total revenue, net$496,547 $361,624 
Operating expenses
Loss on loan purchase commitment$34,866 $35,610 
Provision for credit losses99,696 64,250 
Funding costs73,931 25,066 
Processing and servicing75,671 54,359 
Technology and data analytics132,965 144,961 
Sales and marketing146,866 163,873 
General and administrative140,334 160,972 
Restructuring and other1,665  
Total operating expenses705,994 649,091 
Operating loss$(209,447)$(287,467)
Other income, net38,707 36,018 
Loss before income taxes$(170,740)$(251,449)
Income tax (benefit) expense1,043 (180)
Net loss$(171,783)$(251,269)
Other comprehensive loss
Foreign currency translation adjustments$(11,898)$(21,546)
Unrealized gain (loss) on securities available for sale, net1,353 (5,528)
Gain on cash flow hedges763  
Net other comprehensive loss(9,782)(27,074)
Comprehensive loss$(181,565)$(278,343)
Per share data:
Net loss per share attributable to common stockholders for Class A and Class B
Basic$(0.57)$(0.86)
Diluted$(0.57)$(0.86)
Weighted average common shares outstanding
Basic303,839,670 290,929,270 
Diluted303,839,670 290,929,270 

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

Common StockAdditional Paid-In CapitalAccumulated DeficitAccumulated Other Comprehensive Loss
Total Stockholders Equity
Shares (1)
Amount
Balance as of June 30, 2023296,846,217 $3 $5,140,850 $(2,591,247)$(15,423)$2,534,183 
Issuance of common stock upon exercise of stock options495,350 — 3,625 — — 3,625 
Vesting of restricted stock units3,740,320 — — — — — 
Vesting of warrants for common stock— — 95,910 — — 95,910 
Stock-based compensation— — 151,162 — — 151,162 
Tax withholding on stock-based compensation— — (36,515)— — (36,515)
Foreign currency translation adjustments— — — — (11,898)(11,898)
Unrealized gain on securities available for sale— — — — 1,353 1,353 
Gain on cash flow hedges— — — — 763 763 
Net loss— — — (171,783)— (171,783)
Balance as of September 30, 2023301,081,887 $3 $5,355,032 $(2,763,030)$(25,205)$2,566,800 

Common StockAdditional Paid-In CapitalAccumulated DeficitAccumulated Other Comprehensive Income
Total Stockholders Equity
Shares (1)
Amount
Balance as of June 30, 2022287,365,373 $3 $4,231,303 $(1,605,902)$(7,149)$2,618,255 
Issuance of common stock upon exercise of stock options215,949 — 1,192 — — 1,192 
Forfeiture of common stock related to acquisitions(243,384)— — — — — 
Repurchases of common stock(12,437)— (109)— — (109)
Vesting of restricted stock units2,166,715 — — — — — 
Vesting of warrants for common stock— — 108,742 — — 108,742 
Stock-based compensation— — 141,012 — — 141,012 
Tax withholding on stock-based compensation— — (27,311)— — (27,311)
Foreign currency translation adjustments— — — — (21,546)(21,546)
Unrealized loss on securities available for sale— — — — (5,528)(5,528)
Net loss— — — (251,269)— (251,269)
Balance as of September 30, 2022289,492,216 $3 $4,454,829 $(1,857,171)$(34,223)$2,563,438 
(1)The share amounts listed above combine common stock, Class A common stock and Class B common stock.

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)
Three Months Ended September 30,
20232022
Cash flows from operating activities
Net loss$(171,783)$(251,269)
Adjustments to reconcile net loss to net cash used in operating activities:
Provision for credit losses99,696 64,250 
Amortization of premiums and discounts on loans, net(41,138)(34,595)
Gain on sales of loans(34,285)(63,595)
Changes in fair value of assets and liabilities(4,110)3,906 
Amortization of commercial agreement assets21,557 21,557 
Amortization of debt issuance costs5,534 1,076 
Amortization of discount on securities available for sale(12,120)(7,620)
Commercial agreement warrant expense95,910 108,743 
Stock-based compensation112,359 119,808 
Depreciation and amortization40,131 20,882 
Impairment of right of use assets752  
Other(4,730)2,053 
Change in operating assets and liabilities:
Purchases of loans held for sale(1,222,224)(1,655,213)
Proceeds from the sale of loans held for sale1,228,110 1,707,838 
Accounts receivable, net(42,208)(6,649)
Other assets(12,566)(3,000)
Accounts payable(1,257)1,462 
Payable to third-party loan owners55,646 19,428 
Accrued interest payable6,264 (1,078)
Accrued expenses and other liabilities(20,636)3,231 
Net cash provided by operating activities98,902 51,215 
Cash flows from investing activities
Purchases and origination of loans held for investment(4,229,667)(2,744,825)
Proceeds from the sale of loans held for investment899,238 326,713 
Principal repayments and other loan servicing activity3,184,851 2,206,725 
Additions to property, equipment and software(35,817)(31,151)
Purchases of securities available for sale(96,813)(104,629)
Proceeds from maturities and repayments of securities available for sale262,293 464,492 
Other investing cash inflows/(outflows)56 (52)
Net cash provided by (used in) investing activities(15,859)117,273 
Cash flows from financing activities
Proceeds from funding debt2,896,251 1,193,761 
Payment of debt issuance costs(10,490)(7,423)
Principal repayments of funding debt(2,938,674)(1,059,607)
Proceeds from issuance of notes and residual trust certificates by securitization trusts750,000 249,931 
Principal repayments of notes issued by securitization trusts(515,377)(150,713)
Proceeds from exercise of common stock options and warrants and contributions to ESPP3,611 1,013 
Repurchases of common stock (109)
Payments of tax withholding for stock-based compensation(36,515)(27,311)
Net cash provided by financing activities148,806 199,542 
Effect of exchange rate changes on cash, cash equivalents and restricted cash(3,301)(5,299)
Net increase in cash, cash equivalents and restricted cash228,548 362,731 
Cash, cash equivalents and restricted cash, beginning of period1,259,944 1,550,807 
Cash, cash equivalents and restricted cash, end of period$1,488,492 $1,913,538 

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)

Three Months Ended September 30,
20232022
Reconciliation to amounts on consolidated balance sheets (as of period end)
Cash and cash equivalents1,079,261 1,530,132 
Restricted cash409,231 383,406 
Total cash, cash equivalents and restricted cash$1,488,492 $1,913,538 

Three Months Ended September 30,
20232022
Supplemental disclosures of cash flow information
Cash payments for interest expense$64,868 $22,819 
Cash paid for operating leases4,104 4,167 
Cash paid for income taxes312 138 
Supplemental disclosures of non-cash investing and financing activities
Stock-based compensation included in capitalized internal-use software38,803 21,204 

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, agreements with originating banks, and capital markets partners, we enable consumers to confidently pay for a purchase over time, with terms ranging up 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 directly 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, 2023. The balance sheet as of June 30, 2023 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. All intercompany accounts and transactions have been eliminated in consolidation.

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 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
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servicing assets and liabilities, discount on self-originated loans, the fair value of assets acquired and any contingent consideration transferred in business combinations, the evaluation for impairment of intangible assets and goodwill, 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.   

Significant Accounting Policies

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, 2023, which was filed with the SEC on August 25, 2023.

3.   Revenue

The following table presents our revenue disaggregated by revenue source (in thousands):

Three Months Ended September 30,
20232022
Merchant network revenue$145,950 $113,149 
Card network revenue33,476 26,708 
Interest income262,679 136,802 
Gain on sales of loans34,285 63,595 
Servicing income20,157 21,370 
Total revenue, net$496,547 $361,624 

Merchant Network Revenue — Revenue from Contracts with Customers

Merchant network revenue consists of merchant fees. Merchant partners (or integrated merchants) are generally charged a fee based on gross merchandise volume (“GMV”) processed through the Affirm platform. The fees vary depending on the individual arrangement between us and each merchant and on the terms of the product offering. The fee is recognized at the point in time the merchant successfully confirms the transaction, which is when the terms of the executed merchant agreement are fulfilled.

Our contracts with merchants are defined at the transaction level and do not extend beyond the service already provided (i.e., each transaction represents a separate contract). The fees collected from merchants for each transaction are determined as a percentage of the value of the goods purchased by the consumer from merchants and consider a number of factors including the end consumer’s credit risk and financing term. We do not have any capitalized contract costs, and do not carry any material contract balances.

Our service comprises a single performance obligation to merchants to facilitate transactions with consumers. From time to time, we offer merchants incentives to promote our platform to their customers, such as fee reductions or rebates. These amounts are recorded as a reduction to merchant network revenue.

We may originate certain loans via our wholly-owned subsidiaries, with zero or below market interest rates. In these instances, the par value of the loans originated is in excess of the fair market value of such loans, resulting
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in a loss on loan origination, which we record as a reduction to network revenue. In certain cases, the losses incurred on loans originated for a merchant may exceed the total network revenue earned on those loans. We record the excess loss amounts as a sales and marketing expense.

A portion of merchant network revenue relates to affiliate network revenue, which is generated when a user makes a purchase on a merchant’s website after being directed from an advertisement on Affirm’s website or mobile application. We earn a fixed placement fee and/or commission as a percentage of the associated sale. Revenue is recognized at the point in time when the performance obligation has been fulfilled, which is when the sale occurs.

For the three months ended September 30, 2023 and 2022, there were no merchants that exceeded 10% of total revenue.

Card Network Revenue — Revenue from Contracts with Customers

We have agreements with card-issuing partners to facilitate the issuance of physical and virtual debit cards to be used by consumers at checkout. Consumers can apply at Affirm.com or via the Affirm app and, upon approval, receive a single-use virtual card to use digitally online or in-store. The card is funded at the time a transaction is authorized using cash held by the card-issuing partner in a reserve fund. Eligible consumers can also use the Affirm Card, a debit card issued by a card-issuing partner to pay in full, debited from their bank account, or pay later, by using a unique post-purchase feature that allows them to instantly convert any eligible debit transaction into an installment loan. Where applicable, our originating bank partner, or wholly-owned subsidiaries, then originates a loan to the consumer after the transaction is confirmed by the merchant. The merchant is charged interchange fees for each successful debit card transaction, and a portion of this revenue is shared with us by our card-issuing partners.

Merchants may also elect to utilize our agreement with card-issuing partners as a means of integrating Affirm services. Similarly, for these arrangements with integrated merchants, the merchant is charged interchange fees for each successful debit card transaction and a portion of this revenue is shared with us. From time to time, we offer certain integrated merchants promotional incentives to promote our platform to their customers, such as rebates of interchange fees incurred by the merchant. These amounts are recorded as a reduction of card network revenue.

Our contracts with our card-issuing partners are defined at the transaction level and do not extend beyond the service already provided. The revenue collected from card-issuing partners for each transaction are determined as a percentage of the interchange fees charged on transactions facilitated on the payment processor network, and revenue is recognized at the point in time the transaction is completed successfully. The amounts collected are presented in revenue, net of associated transaction-related processing fees paid to our card-issuing partners. We have concluded that the revenue collected does not give rise to a future material right because the pricing of each transaction does not depend on the volume of prior successful transactions. We do not have any capitalized contract costs, and do not carry any material contract balances.

Our service comprises a single performance obligation to the card-issuing partner to facilitate transactions with consumers.

A portion of card network revenue relates to incentive payments from card network partners, which we are eligible to receive for reaching certain cumulative volume targets on program cards issued by the issuer processors. We earn incentive revenue as a percentage of each associated transaction and estimate the applicable percentage based on observed cumulative volume on program cards. Revenue is recognized at the point in time when the performance obligation has been fulfilled, which is when the transaction is completed successfully.
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Interest Income

Interest income consisted of the following components (in thousands):
Three Months Ended September 30,
20232022
Contractual interest income on unpaid principal balance$226,158 $106,138 
Amortization of discount on loans45,118 38,969 
Amortization of premiums on loans(3,980)(4,374)
Interest receivable charged-off, net of recoveries(4,617)(3,931)
Total interest income$262,679 $136,802 

We accrue interest income using the effective interest method, which includes the amortization of any discounts or premiums on loan receivables created upon the purchase of a loan from our originating bank partners or upon the origination of a loan. Interest income on a loan is accrued daily, based on the finance charge disclosed to the consumer, over the term of the loan based upon the principal outstanding. The accrual of interest on a loan is suspended if a formal dispute with the consumer involving either Affirm or the merchant of record is opened, or a loan is 120 days past due. Upon the resolution of a dispute with the consumer, the accrual of interest is resumed, and any interest that would have been earned during the disputed period is retroactively accrued. As of September 30, 2023 and June 30, 2023, the balance of loans held for investment on non-accrual status was $1.2 million and $1.8 million, respectively.

The account is charged-off in the period if the account becomes 120 days past due or meets other charge-off policy requirements. Past due status is based on the contractual terms of the loans. Previously recognized interest receivable from charged-off loans that is accrued but not collected from the consumer is reversed.

Gain on Sales of Loans

We sell certain loans we originate or purchase from our originating bank partners directly to third-party investors or to securitizations. We recognize a gain or loss on sale of loans sold to third parties or to unconsolidated securitizations as the difference between the proceeds received and the carrying value of the loan, adjusted for the initial recognition of any assets or liabilities incurred upon sale, which generally include a net servicing asset or liability in connection with our ongoing obligation to continue to service the loans and a recourse liability based on our estimate of future losses in connection with our obligation to repurchase loans that do not meet certain contractual requirements and such information about the loan was unknown at the time of sale.

Servicing Income

Servicing income includes contractual fees specified in our servicing agreements with third-party loan owners and unconsolidated securitizations that are earned from providing professional services to manage loan portfolios on their behalf. The servicing fee is calculated on a daily basis by multiplying a set fee percentage (as outlined in the executed agreements with third-party loan owners) by the outstanding loan principal balance. Servicing income also includes fair value adjustments for servicing assets and servicing liabilities.

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4.   Loans Held for Investment and Allowance for Credit Losses

    Loans held for investment consisted of the following (in thousands):
September 30, 2023June 30, 2023
Unpaid principal balance$4,585,570 $4,451,324 
Accrued interest receivable46,886 41,079 
Premiums on loans held for investment6,828 7,135 
Less: Discount due to loss on loan purchase commitment(49,805)(51,190)
Less: Discount due to loss on directly originated loans(40,025)(45,145)
Less: Fair value adjustment on loans acquired through business combination(32)(241)
Total loans held for investment$4,549,422 $4,402,962 

Loans held for investment includes loans originated through our originating bank partners and directly originated loans. The majority of the loans that are underwritten using our technology platform and originated by our originating bank partners are later purchased by us. We purchased loans from our originating bank partners in the amount of $4.6 billion and $3.5 billion during the three months ended September 30, 2023 and 2022, respectively.

These loans have a variety of lending terms as well as maturities ranging from one to sixty months. Given that our loan portfolio focuses on one product segment, point-of-sale unsecured installment loans, we generally evaluate the entire portfolio as a single homogeneous loan portfolio and make merchant or program specific adjustments as necessary.

We closely monitor credit quality for our loan receivables to manage and evaluate our related exposure to credit risk. Credit risk management begins with initial underwriting, where loan applications are assessed against the credit underwriting policy and procedures for our directly originated loans and originating bank partner loans, and continues through to full repayment of a loan. To assess a consumer who requests a loan, we use, among other indicators, internally developed risk models using detailed information from external sources, such as credit bureaus where available, and internal historical experience, including the consumer’s prior repayment history on our platform as well as other measures. We combine these factors to establish a proprietary score as a credit quality indicator.

Our proprietary score (“ITACs”) is assigned to most loans facilitated through our technology platform, ranging from zero to 100, with 100 representing the highest credit quality and therefore the lowest likelihood of loss. The ITACs model analyzes the characteristics of a consumer's attributes that are shown to be predictive of both willingness and ability to repay including, but not limited to: basic features of a consumer's credit profile, a consumer's prior repayment performance with other creditors, current credit utilization, and legal and policy changes. When a consumer passes both fraud and credit policy checks, the application is assigned an ITACs score. ITACs is also used for portfolio performance monitoring. Our credit risk team closely tracks the distribution of ITACs at the portfolio level, as well as ITACs at the individual loan level to monitor for signs of a changing credit profile within the portfolio. Repayment performance within each ITACs band is also monitored to support both the integrity of the risk scoring models and to measure possible changes in consumer behavior amongst various credit tiers.

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The following table presents an analysis of the credit quality, by ITACs score, of the amortized cost basis excluding accrued interest receivable, by fiscal year of origination on loans held for investment and loans held for sale (in thousands) as of September 30, 2023:

September 30, 2023
Amortized Costs Basis by Fiscal Year of Origination
20242023202220212020PriorTotal
96+$1,293,647 $1,393,864 $28,287 $8,601 $26 $10 $2,724,435 
94 – 96565,028 614,611 3,550 211 15 8 1,183,422 
90 – 9496,511 65,347 1,562 18 2 4 163,444 
<9012,675 2,300 1,032 4 2  16,013 
No score (1)
133,271 232,740 41,876 6,721 254 215 415,077 
Total amortized cost basis$2,101,132 $2,308,862 $76,307 $15,555 $299 $237 $4,502,391 
(1)This balance represents loan receivables in markets without sufficient data currently available for use by the Affirm scoring methodology including loan receivables originated in Canada.  

The following table presents net charge-offs by fiscal year of origination for the three months ended (in thousands) as of September 30, 2023:

September 30, 2023
Net Charge-offs by Fiscal Year of Origination
20242023202220212020PriorTotal
Current period charge-offs(1,329)(65,283)(3,916)(234)(46)(34)(70,842)
Current period recoveries17 2,830 2,399 275 5 27 5,552 
Current period net charge-offs(1,312)(62,453)(1,517)41 (41)(7)(65,290)

The following table presents an analysis of the credit quality, by ITACs score, of the amortized cost basis excluding accrued interest receivable, by fiscal year of origination on loans held for investment and loans held for sale (in thousands) as of June 30, 2023:

June 30, 2023
Amortized Costs Basis by Fiscal Year of Origination
20232022202120202019PriorTotal
96+$2,628,060 $39,428 $18,910 $3,439 $9 $1 $2,689,847 
94 – 961,104,553 7,755 439 77 6 2 1,112,832 
90 – 94133,940 3,116 26 2 4  137,088 
<9013,363 1,623 4 2   14,992 
No score (1)
335,690 59,204 11,562 489 252 9 407,206 
Total amortized cost basis$4,215,606 $111,126 $30,941 $4,009 $271 $12 $4,361,965 
(1)This balance represents loan receivables in markets without sufficient data currently available for use by the Affirm scoring methodology including loan receivables originated in Canada.   

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Loan receivables are defined as past due if either the principal or interest have not been received within four calendars days of when they are due in accordance with the agreed upon contractual terms. The following table presents an aging analysis of the amortized cost basis excluding accrued interest receivable of loans held for investment and loans held for sale by delinquency status (in thousands):
September 30, 2023June 30, 2023
Non-delinquent loans$4,270,534 $4,183,248 
4 – 29 calendar days past due120,564 92,876 
30 – 59 calendar days past due46,927 36,399 
60 – 89 calendar days past due34,279 28,171 
90 – 119 calendar days past due(1)
30,087 21,271 
Total amortized cost basis$4,502,391 $4,361,965 
(1)Includes $29.7 million and $20.9 million of loan receivables as of September 30, 2023 and June 30, 2023, respectively, that are 90 days or more past due, but are not on nonaccrual status. 

We maintain an allowance for credit losses at a level sufficient to absorb expected credit losses based on evaluating known and inherent risks in our loan portfolio. The allowance for credit losses is determined based on our current estimate of expected credit losses over the remaining contractual term, historical credit losses, consumer payment trends, estimates of recoveries, and future expectations as of each balance sheet date. Adjustments to the allowance each period for changes in our estimate of lifetime expected credit losses are recognized in earnings through the provision for credit losses presented on our interim condensed consolidated statements of operations and comprehensive loss. When available information confirms that specific loans or portions thereof are uncollectible, identified amounts are charged against the allowance for credit losses. Loans are charged off in accordance with our charge-off policy, as the contractual principal becomes 120 days past due. Subsequent recoveries of the unpaid principal balance, if any, are credited to the allowance for credit losses.

The following table details activity in the allowance for credit losses, including charge-offs, recoveries and provision for loan losses (in thousands):
Three Months Ended
September 30,
20232022
Balance at beginning of period$204,531 $155,392 
Provision for loan losses92,827 61,869 
Charge-offs(70,842)(71,036)
Recoveries of charged-off receivables5,552 6,800 
Balance at end of period$232,068 $153,025 

Loan Modifications for Borrowers Experiencing Financial Difficulty

We have a loan modification program for eligible borrowers facing financial difficulty if they have at least one outstanding loan with Affirm and certain other eligibility criteria are met. We consider a borrower to be experiencing financial difficulty when a loan is between 30 and 120 days past due at the time of modification. The objective of the loan modification program is to offer borrowers assistance during times of financial stress, increase recovery rates, and minimize losses.

We have two primary loan modification strategies: payment deferrals and loan re-amortization. A payment deferral provides the borrower relief by extending the due date for the next payment due. While a borrower may obtain more than one deferral, the total deferral period may not exceed three months. A loan re-amortization
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provides the borrower relief by lowering monthly payments through extending the term length of the loan. The total interest due from the consumer will not exceed the initial total interest due prior to modification. A loan may not be re-amortized more than once.

The following table presents the amortized cost basis of loans excluding accrued interest receivable that were modified for borrowers experiencing financial difficulty during the three months ended September 30, 2023, by type of modification (in thousands):

Three Months Ended September 30, 2023
Payment DeferralLoan
Re-amortization
Total% of Total Loan Receivables Outstanding
Loans receivables2,801 152 2,953 0.07 %

With respect to borrowers who received payment deferrals during the three months ended September 30, 2023, the length of each deferral period was one month.

With respect to borrowers who received loan re-amortization during the three months ended September 30, 2023, the payment amount was reduced by half and the term of the loan was extended between two and twelve months.

We closely monitor the performance of loans that are modified for borrowers experiencing financial difficulty to understand the effectiveness of our modification efforts. We hold an allowance for credit losses for modified loans classified as held for investment. Our allowance estimate considers whether a loan has been modified due to a borrower experiencing financial difficulty and the increased likelihood that such loan may become delinquent or charge-off in the future.

The following table presents the delinquency status as of September 30, 2023 (in thousands), by amortized cost basis excluding accrued interest receivable, of loan receivables that have been modified within the last 12 months where the borrower was experiencing financial difficulty at the time of modification:

September 30, 2023
Payment DeferralLoan Re-amortizationTotal
Non-delinquent loans$4,515 $268 $4,783 
4 – 29 calendar days past due1,304 112 1,416 
30 – 59 calendar days past due139 65 204 
60 – 89 calendar days past due75 6 81 
90 – 119 calendar days past due65 2 67 
Total amortized cost basis$6,098 $453 $6,551 

With respect to modifications during the last 12 months where the borrower was experiencing financial difficulty at the time of modification, the amortized cost basis of loans which have been subsequently charged off, or are delinquent by 60 days or more as of September 30, 2023, is immaterial.




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5. Acquisitions

There were no acquisitions accounted for as business combinations completed in the three months ended September 30, 2023 and 2022.

Acquisitions completed during the year ended June 30, 2023

Butter Holdings Ltd

On February 1, 2023, we completed the closing of the transaction contemplated by a share purchase agreement entered into with certain sellers to acquire the entire issued share capital of Butter Holdings Ltd. (“Butter”), a buy now, pay later company based in the United Kingdom. The purchase price was comprised of (i) $14.9 million in cash, subject to adjustments in accordance with the purchase agreement, and (ii) $1.5 million settlement of subordinated secured notes.

The acquisition date fair value of the consideration transferred for Butter was approximately $16.3 million, which consisted of the following (in thousands):

Cash$14,863 
Settlement of subordinated secured notes1,475 
Total acquisition date fair value of the consideration transferred$16,337 

The acquisition was accounted for as a business combination and reflects the application of acquisition accounting in accordance with ASC Topic 805, “Business Combinations” (“ASC 805”). The acquired identifiable intangible assets have been recorded at their estimated fair values with the excess purchase price assigned to goodwill. The goodwill was primarily attributed to future synergies from integration. The goodwill is not expected to be deductible for income tax purposes.

The following table summarizes the allocation of the consideration paid of approximately $16.3 million to the fair values of the assets acquired and liabilities assumed at the acquisition date (in thousands):

Cash and cash equivalents$287 
Loans held for investment, net172 
Accounts receivable, net11 
Intangible assets9,243 
Other assets672 
Total assets acquired10,385 
Accounts payable568 
Accrued expenses and other liabilities2,923 
Total liabilities assumed3,491 
Net assets acquired6,894 
Goodwill9,443 
Total purchase price$16,337 





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The following table sets forth the components of identifiable intangible assets acquired and their estimated useful lives as of the date of acquisition (in thousands):

Fair ValueUseful Life
(in years)
Lending license$9,243 Indefinite


The fair value of the intangible asset was determined by applying the with-and-without method. The fair value measurements are based on significant unobservable inputs, including management estimates and assumptions, and thus represents Level 3 measurements.

There were no transaction costs associated with the acquisition for the three months ended September 30, 2023.

6.   Balance Sheet Components

Accounts Receivable, net

Our accounts receivable consist primarily of amounts due from payment processors, merchant partners, affiliate network partners and servicing fees due from third-party loan owners. For each of these groups, we evaluate accounts receivable to determine management’s current estimate of expected credit losses based on historical experience and future expectations and record an allowance for credit losses. Our allowance for credit losses with respect to accounts receivable was $11.0 million and $12.9 million as of September 30, 2023 and June 30, 2023, respectively.

Property, Equipment and Software, net

Property, equipment and software, net consisted of the following (in thousands):

September 30, 2023June 30, 2023
Internally developed software$443,992 $377,301 
Leasehold improvements20,279 20,214 
Computer equipment10,252 10,187 
Furniture and equipment6,586 6,503 
Total property, equipment and software, at cost$481,109 $414,205 
Less: Accumulated depreciation and amortization(142,360)(124,070)
Total property, equipment and software, net$338,749 $290,135 

Depreciation and amortization expense on property, equipment and software was $26.0 million and $13.5 million for the three months ended September 30, 2023 and 2022, respectively.

No impairment losses related to property, equipment and software were recorded during the three months ended September 30, 2023 and 2022.

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Goodwill and Intangible Assets

The changes in the carrying amount of goodwill during the three months ended September 30, 2023 were as follows (in thousands):

Balance as of June 30, 2023$542,571 
Adjustments (1)
(6,152)
Balance as of September 30, 2023$536,418 
(1)Adjustments to goodwill during the three months ended September 30, 2023 primarily pertained to foreign currency translation adjustments.

No impairment losses related to goodwill were recorded during the three months ended September 30, 2023 and 2022.

Intangible assets consisted of the following (in thousands):
September 30, 2023
GrossAccumulated AmortizationNetWeighted Average Remaining Useful Life
(in years)
Merchant relationships$37,914 $(35,129)$2,786 0.3
Developed technology39,488 (34,935)4,553 0.4
Assembled workforce12,490 (12,079)410 0.1
Trademarks and domains, definite1,458 (1,027)431 1.5
Trademarks, licenses and domains, indefinite 11,298 — 11,298 Indefinite
Other intangibles350 — 350 Indefinite
Total intangible assets$102,998 $(83,170)$19,828 
June 30, 2023
GrossAccumulated AmortizationNetWeighted Average
Remaining Useful Life
(in years)
Merchant relationships$38,129 $(27,637)$10,492 0.6
Developed technology39,626 (30,653)8,973 0.6
Assembled workforce12,490 (9,983)2,507 0.3
Trademarks and domains, definite1,481 (990)491 1.7
Trademarks, licenses and domains, indefinite11,621 — 11,621 Indefinite
Other intangibles350 — 350 Indefinite
Total intangible assets$103,697 $(69,263)$34,434 

Amortization expense for intangible assets was $14.2 million and $7.4 million for the three months ended September 30, 2023 and 2022, respectively. No impairment losses related to intangible assets were recorded during the three months ended September 30, 2023 and 2022.

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The expected future amortization expense of these intangible assets as of September 30, 2023 is as follows (in thousands):

2024 (remaining nine months)$6,646 
20251,365 
2026155 
202715 
2028 and thereafter 
Total amortization expense$8,180 

Commercial Agreement Assets

In November 2021, we granted warrants in connection with our commercial agreements with certain subsidiaries of Amazon.com, Inc. (“Amazon”). The warrants were granted in exchange for certain performance provisions and the benefit of acquiring new users. We recognized an asset of $133.5 million associated with the portion of the warrants that were fully vested upon grant. The asset was valued based on the fair value of the warrants and represents the probable future economic benefit to be realized over the approximate three year term of the commercial agreement at the grant date. For the three months ended September 30, 2023 and 2022, we recognized amortization expense of $10.4 million for both periods in our interim condensed consolidated statements of operations and comprehensive loss as a component of sales and marketing expense. Refer to Note 14. Stockholders’ Equity for further discussion of the warrants.

In July 2020, we recognized an asset in connection with a commercial agreement with Shopify Inc. (“Shopify”), in which we granted warrants in exchange for the opportunity to acquire new merchant partners. This asset represents the probable future economic benefit to be realized over the expected benefit period and is valued based on the fair value of the warrants on the grant date. We recognized an asset of $270.6 million associated with the fair value of the warrants, which were fully vested as of September 30, 2023. The expected benefit period of the asset was initially estimated to be four years, and the remaining useful life of the asset is reevaluated each reporting period. During fiscal year 2022, the remaining expected benefit period was extended by two years upon the execution of an amendment to the commercial agreement with Shopify which extended the term of the agreement. During the three months ended September 30, 2023 and 2022, we recorded amortization expense related to the commercial agreement asset of $9.0 million for both periods in our interim condensed consolidated statements of operations and comprehensive loss as a component of sales and marketing expense.

In January 2021, we recognized an asset in connection with a commercial agreement with an enterprise partner, in which we granted stock appreciation rights in exchange for the benefit of acquiring access to the partner's consumers. This asset represents the probable future economic benefit to be realized over the three-year expected benefit period and is valued based on the fair value of the stock appreciation rights on the grant date. We initially recognized an asset of $25.9 million associated with the fair value of the stock appreciation rights. During the three months ended September 30, 2023 and 2022, we recorded amortization expense related to the asset of $2.1 million for both periods in our interim condensed consolidated statements of operations and comprehensive loss as a component of sales and marketing expense.

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Other Assets

    Other assets consisted of the following (in thousands):
September 30, 2023June 30, 2023
Processing reserves$65,421 $60,039 
Equity securities, at cost51,870 43,172 
Derivative instruments41,216 50,545 
Operating lease right-of-use assets27,227 30,171 
Prepaid payroll taxes for stock-based compensation29,508 14,336 
Prepaid expenses25,544 35,626 
Other assets51,398 44,725 
Total other assets$292,184 $278,614 

Accrued Expenses and Other Liabilities

Accrued expenses and other liabilities consisted of the following (in thousands)