What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2022-08-29 compared with 2021-09-17 · 1033 added, 769 removed, 1166 unchanged (61% of the section changed)

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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firms

Report of Independent Registered Public Accounting Firms (PCAOB ID No.

Consolidated Balance Sheets

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Notes to Consolidated Financial Statements

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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We have audited the accompanying consolidated balance sheets of Affirm Holdings, Inc.

and subsidiaries (the "Company") as of June 30, 2021 and 2020, the related consolidated statements of operations and comprehensive loss, changes in redeemable convertible preferred stock and stockholders’ equity (deficit), and cash flows for the years then ended, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of June 30, 2021 and 2020, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

and subsidiaries (the "Company") as of June 30, 2022 and 2021, the related consolidated statements of operations and comprehensive loss, changes in redeemable convertible preferred stock and stockholders’ equity (deficit), and cash flows for each of the three years in the period ended June 30, 2022, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of June 30, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended June 30, 2022, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of June 30, 2022, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated August 29, 2022, expressed an unqualified opinion on the Company's internal control over financial reporting.

Basis for Opinion

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Our responsibility is to express an opinion on the Company's financial statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

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Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.

Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

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Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved especially challenging, subjective, or complex judgments.

The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

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Critical Audit Matter Description

The allowance for credit losses is a material estimate of the Company and as of June 30, 2021, the total balance was $117.8 million.

On July 1, 2020, the Company adopted ASU 2016-13, “Financial Instruments — Credit Losses (Topic 326) (“ASC 326”):

Measurement of Credit Losses on Financial Instruments , which modified the accounting for the allowance for credit losses from an incurred loss model to an expected loss model (the “Current Expected Credit Losses” or “CECL” model) The Company utilized the modified retrospective approach upon adoption, which resulted in an increase in the allowance for credit losses of $10.1 million and a cumulative effect adjustment to the beginning balance of accumulated deficit of $10.1 million.

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In estimating the allowance for credit losses, management utilizes a migration analysis of delinquent and current loan receivables.

Migration analysis is a technique used to estimate the likelihood that a loan receivable will progress through various stages of delinquency and to charge-off.

The allowance for credit losses (ACL) is a material estimate of the Company and as of June 30, 2022, the total balance was $155.4 million.

In estimating the ACL, management utilizes a migration analysis of delinquent and current loan receivables.

The analysis focuses on the pertinent factors underlying the quality of the loan portfolio.

These factors include historical performance, the age of the receivable balance, seasonality, customer credit-worthiness, changes in the size and composition of the loan portfolio, delinquency levels, bankruptcy filings, actual credit loss experience, as well as current economic conditions and expectations of future market conditions.

Management also incorporates qualitative adjustments to the quantitative model to capture the impact of events that are not easily captured in the model.

These factors include historical performance, the age of the receivable balance, customer credit-worthiness, changes in the size and composition of the loan portfolio, delinquency levels, bankruptcy filings, and actual credit loss experience.

Management also incorporates qualitative adjustments to the quantitative model to consider the inherent uncertainty regarding future economic conditions and consumer loan performance.

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Determining the appropriate level of qualitative adjustments is inherently subjective and relies on significant judgment.

Given the subjective nature and amount of judgment required in developing these estimates, performing audit procedures to evaluate the reasonableness of the allowance for credit losses required a high degree of auditor judgment, an increased extent of audit effort, and the need to involve more experienced audit professionals.

Given the subjective nature and amount of judgment required in developing these estimates, performing audit procedures to evaluate the reasonableness of the ACL required a high degree of auditor judgment, an increased extent of audit effort, credit specialists, and the need to involve more experienced audit professionals.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the allowance for credit losses included the following procedures, among others:

• We evaluated the appropriateness of the ACL modeling framework, including the use of qualitative adjustments.

• We involved our credit specialists to review the CECL model code, perform procedures to evaluate completeness of datasets, and recalculate management’s comparison of actual results with previously estimated reserves and charge-offs

• We evaluated the extent, accuracy, and completeness of the data used to develop the CECL model and to estimate the allowance for credit losses at the date of the adoption and the end of the year.

• We evaluated the qualitative adjustments to the quantitative loss rates, including assessing the basis for the adjustments and the reasonableness of the significant assumptions.

• We evaluated the reasonableness of the Company’s assumptions and judgments in estimating qualitative adjustments, including obtaining third-party macroeconomic data and evaluating any contradictory evidence.

• We evaluated the magnitude and proportion of the overall allowance, including the directional consistency and magnitude of the qualitative adjustments as of the adoption date and through the end of the year.

• In order to identify potential bias in the determination of the ACL, we performed analytical analysis, including a retrospective review, various coverage and ratio analysis to evaluate the relevance of the underlying drivers used to determine the qualitative adjustments.

• We tested the design and effectiveness of controls over the ACL, including management’s controls over the qualitative adjustments.

• We tested management’s process for estimating the ACL, which included involving our credit specialists to evaluate the appropriateness of the models and methodologies used including the use of qualitative adjustments.

• We evaluated the accuracy and completeness of the data used to estimate the allowance for credit losses.

• We evaluated the qualitative adjustments, including assessing the basis and overall magnitude of the adjustments, obtaining third party macroeconomic data, and evaluating any contradictory evidence.

/s/ Deloitte & Touche LLP

San Francisco, California

September 17, 2021

August 29, 2022

We have served as the Company's auditor since 2020.

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and Board of Directors of Affirm Holdings, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated statement of operations, changes in redeemable convertible preferred stock and stockholders’ deficit, and cash flows of Affirm Holdings, Inc.

(the Company) for the year ended June 30, 2019 and the related notes (collectively referred to as the “financial statements”).

In our opinion, the 2019 financial statements present fairly, in all material respects, the results of the Company’s operations and its cash flows for the year ended June 30, 2019, in conformity with U.S.

generally accepted accounting principles.

Basis for Opinion

These financial statements are the responsibility of the Company's management.

Our responsibility is to express an opinion on the Company’s financial statements based on our audit.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audit provides a reasonable basis for our opinion.

/s/ Ernst & Young LLP

San Francisco, California

October 7, 2020

We served as the Company’s auditor from 2017 to 2020.

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AFFIRM HOLDINGS, INC.

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Restricted cash 295,636 226,074

Securities available for sale at fair value 1,595,373 16,170

Loans held for sale 2,670 13,030

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Accounts receivable, net 142,052 91,575

Securitization notes receivable and residual certificates (at fair value) 16,170 —

Property, equipment and software, net 171,482 62,499

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Total Assets $ 6,973,792 $ 4,866,967

Liabilities, Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit)

Liabilities and Stockholders’ Equity

Accounts payable $ 33,072 $ 57,758

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Accrued expenses and other liabilities 237,598 323,577

Convertible debt — 74,222

Convertible senior notes, net 1,706,668 —

Notes issued by securitization trusts 1,627,580 1,176,673

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Commitments and contingencies (Note 9)

Redeemable convertible preferred stock, $ 0.00001 par value, 30,000,000 and 124,453,009 shares authorized as of June 30, 2021 and June 30, 2020, respectively;

zero and 122,115,971 shares issued and outstanding as of June 30, 2021 and June 30, 2020, respectively;

liquidation preference of $ 0 and $ 809,032 as of June 30, 2021 and June 30, 2020, respectively

Stockholders’ equity (deficit):

Common stock, $ 0.00001 par value, no shares authorized, issued and outstanding at June 30, 2021;

232,000,000 shares authorized, 47,684,427 shares issued and outstanding as of June 30, 2020

Stockholders’ equity:

Class A common stock, par value $ 0.00001 per share:

3,030,000,000 shares authorized, 227,255,529 shares issued and outstanding as of June 30, 2022;

no shares authorized, issued and outstanding as of June 30, 2020

3,030,000,000 shares authorized, 181,131,728 shares issued and outstanding as of June 30, 2021

Class B common stock, par value $ 0.00001 per share:

88,226,376 shares authorized, issued and outstanding as of June 30, 2021;

no shares authorized, no shares issued and outstanding as of June 30, 2020

140,000,000 shares authorized, 60,109,844 shares issued and outstanding as of June 30, 2022;

140,000,000 authorized, 88,226,376 shares issued and outstanding as of June 30, 2021

Additional paid in capital 4,231,303 3,467,236

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Accumulated other comprehensive gain (loss) ( 7,149 ) 6,773

Total stockholders’ equity (deficit) 2,581,153 ( 367,096 )

Total Liabilities, Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit) $ 4,866,967 $ 1,402,251

Total stockholders’ equity 2,618,255 2,575,527

Total Liabilities and Stockholders’ Equity $ 6,973,792 $ 4,866,967

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

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AFFIRM HOLDINGS, INC.

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Total liabilities of consolidated VIEs 2,166,529 1,793,427

Total net assets $ 10,197 $ 67,182

Total net assets of consolidated VIEs $ 75,740 $ 10,197

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

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AFFIRM HOLDINGS, INC.

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Interest income 527,880 326,417 186,730

Gain (loss) on sales of loans 89,926 31,907 ( 440 )

Gain on sales of loans 196,435 89,926 31,907

Servicing income 65,770 24,719 14,799

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Operating Loss $ ( 866,048 ) $ ( 383,667 ) $ ( 107,790 )

Other income (expense), net ( 54,073 ) ( 4,432 ) 7,022

Other (expense) income, net 141,217 ( 59,703 ) ( 4,432 )

Loss Before Income Taxes $ ( 724,831 ) $ ( 443,370 ) $ ( 112,222 )

Income tax (benefit) expense ( 2,343 ) 376 36

Income tax expense (benefit) ( 17,414 ) ( 2,343 ) 376

Net Loss $ ( 707,417 ) $ ( 441,027 ) $ ( 112,598 )

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Foreign currency translation adjustments $ ( 5,900 ) $ 7,046 $ ( 302 )

Unrealized gains on investments 29 — —

Unrealized gain (loss) on securities available for sale, net ( 8,022 ) 29 —

Net Other Comprehensive Income (Loss) ( 13,922 ) 7,075 ( 302 )

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

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AFFIRM HOLDINGS, INC.

CONSOLIDATED STATEMENT OF REDEEMABLE CONVERTIBLE PREFERRED STOCK

AND STOCKHOLDERS’ EQUITY (DEFICIT)

CONSOLIDATED STATEMENT OF REDEEMABLE CONVERTIBLE PREFERRED STOCK AND

STOCKHOLDERS’ EQUITY (DEFICIT)

(in thousands, except share amounts)

Redeemable Convertible

Preferred Stock Common Stock Additional Paid-In Capital Accumulated Deficit Accumulated Other Comprehensive Income Total Stockholders' Equity (Deficit)

Preferred Stock Common Stock Additional Paid-In Capital Accumulated Deficit Accumulated Other Comprehensive Income (Loss) Total Stockholders' Equity (Deficit)

Shares Amount Shares 1 Amount

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Repurchases of redeemable convertible preferred stock ( 1,713,605 ) ( 9,385 ) — — ( 13,205 ) — — ( 13,205 )

Stock-based compensation — — — — 36,582 — — 36,582

Net loss — — — — — ( 120,455 ) — ( 120,455 )

Balance as of June 30, 2019 122,653,704 $ 798,074 47,078,208 $ — $ 54,824 $ ( 318,238 ) $ — $ ( 263,414 )

Issuance of common stock — — 2,101,317 — 2,733 — — 2,733

Repurchases of common stock — — ( 1,495,098 ) — ( 2,522 ) ( 16,331 ) — ( 18,853 )

Issuance of redeemable convertible preferred stock, net of issuance costs of $ 0

1,175,872 15,481 — — — — — —

Repurchases of redeemable convertible preferred stock ( 1,713,605 ) ( 9,385 ) — — ( 13,205 ) — — ( 13,205 )

Convertible notes beneficial conversion option — — — — 5,998 — — 5,998

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Balance as of June 30, 2020 122,115,971 $ 804,170 47,684,427 $ — $ 80,373 $ ( 447,167 ) $ ( 302 ) $ ( 367,096 )

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

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AFFIRM HOLDINGS, INC.

CONSOLIDATED STATEMENT OF REDEEMABLE CONVERTIBLE PREFERRED STOCK

AND STOCKHOLDERS’ EQUITY (DEFICIT), CONT.

(in thousands, except share amounts)

Redeemable Convertible

Preferred Stock Common Stock Additional Paid-In Capital Accumulated Deficit Accumulated Other Comprehensive Income Total Stockholders' Equity (Deficit)

Shares Amount Shares 2 Amount

Balance as of June 30, 2020 122,115,971 $ 804,170 47,684,427 $ — $ 80,373 $ ( 447,167 ) $ ( 302 ) $ ( 367,096 )

Issuance of redeemable convertible preferred stock, net of issuance costs of $ 143

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— — 28,290,000 1 1,305,176 — — 1,305,177

Issuance of common stock upon exercise of stock options — — 12,418,931 — 46,462 — — 46,462

Issuance of common stock upon exercise of stock option — — 12,418,931 — 46,462 — — 46,462

Issuance of common stock upon exercise of warrants — — 20,651,583 — 271,156 — — 271,156

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1 The share amounts listed above combine common stock, Class A common stock and Class B common stock.

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AFFIRM HOLDINGS, INC.

CONSOLIDATED STATEMENT OF REDEEMABLE CONVERTIBLE PREFERRED STOCK AND

STOCKHOLDERS’ EQUITY (DEFICIT), CONT.

(in thousands, except share amounts)

Redeemable Convertible

Preferred Stock Common Stock Additional Paid-In Capital Accumulated Deficit Accumulated Other Comprehensive Income (Loss) Total Stockholders' Equity (Deficit)

Shares Amount Shares Amount

Balance as of June 30, 2021 — $ — 269,358,104 $ 3 $ 3,467,236 $ ( 898,485 ) $ 6,773 $ 2,575,527

Issuance of common stock upon exercise of stock option — — 13,565,397 — 69,876 — — 69,876

Issuance of common stock in acquisitions — — 488,097 — 42,109 — — 42,109

Issuance of common stock, employee share purchase plan — — 149,137 — 3,613 — — 3,613

Vesting of restricted stock units — — 3,815,156 — — — — —

Vesting of warrants for common stock — — — — 388,208 — — 388,208

Repurchases of common stock — — ( 10,518 ) — ( 86 ) — — ( 86 )

Stock-based compensation — — — — 445,525 — — 445,525

Tax withholding on stock-based compensation — — — — ( 185,178 ) — — ( 185,178 )

Foreign currency translation adjustments — — — — — — ( 5,900 ) ( 5,900 )

Unrealized loss on securities available for sale — — — — — — ( 8,022 ) ( 8,022 )

Net Loss — — — — — ( 707,417 ) — ( 707,417 )

Balance as of June 30, 2022 — $ — 287,365,373 $ 3 $ 4,231,303 $ ( 1,605,902 ) $ ( 7,149 ) $ 2,618,255

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

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AFFIRM HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

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Amortization of premiums and discounts on loans, net ( 171,965 ) ( 90,371 ) ( 27,605 )

(Gain) loss on sales of loans ( 89,926 ) ( 31,907 ) 440

Gain on sales of loans ( 196,435 ) ( 89,926 ) ( 31,907 )

Changes in fair value of assets and liabilities ( 101,789 ) 57,285 2,847

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Amortization of debt issuance costs 16,152 6,416 2,313

Amortization of discount on securities available for sale 2,192 — —

Commercial agreement warrant expense 254,679 — —

Stock-based compensation 390,983 292,507 29,625

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Other ( 73,154 ) 5,129 81

Change in operating assets and liabilities:

Purchases of loans held for sale ( 5,552,662 ) ( 2,640,734 ) ( 2,101,483 )

Proceeds from the sale of loans held for sale 5,582,035 2,594,835 2,021,938

Change in operating assets and liabilities:

Accounts receivable, net ( 62,700 ) ( 22,934 ) ( 19,049 )

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Cash Flows from Investing Activities

Purchases and originations of loans held for investment ( 5,897,252 ) ( 2,830,320 ) ( 1,892,508 )

Purchases and origination of loans held for investment ( 10,362,048 ) ( 5,897,252 ) ( 2,830,320 )

Proceeds from the sale of loans held for investment 1,898,607 824,011 303,433

Principal repayments and other loan servicing activity 8,121,583 4,324,618 2,294,833

Acquisitions, net of cash and restricted cash acquired ( 222,433 ) — —

Acquisition, net of cash and restricted cash acquired ( 5,999 ) ( 222,433 ) —

Purchases of intangible assets ( 25,415 ) — —

Additions to property, equipment and software ( 86,290 ) ( 20,252 ) ( 21,019 )

Purchases of intangibles — — ( 1,844 )

Purchases of securities available for sale ( 1,841,380 ) — —

Proceeds from maturities and repayments of securities available for sale 311,035 — —

Other investing cash inflows 14,311 1,453 —

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Cash Flows from Financing Activities

Proceeds from issuance of convertible debt, net 1,704,300 — 75,000

Proceeds from funding debt 4,101,134 2,942,254 2,132,805

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Principal repayments of funding debt ( 4,090,562 ) ( 3,165,103 ) ( 1,882,155 )

Proceeds from issuance of notes by securitization trusts 1,395,879 — —

Proceeds from issuance of notes and residual trust certificates by securitization trusts 999,394 1,395,879 —

Principal repayments of notes issued by securitization trusts ( 552,046 ) ( 210,368 ) —

Proceeds from issuance of convertible debt, net — 75,000 —

Proceeds from issuance of redeemable convertible preferred stock, net — 434,542 15,481

Repurchases and conversion of redeemable convertible preferred stock ( 13 ) ( 22,591 ) ( 14,498 )

Repurchase and conversion of redeemable convertible preferred stock — ( 13 ) ( 22,591 )

Proceeds from initial public offering, net — 1,305,176 —

Proceeds from exercise of common stock options and warrants 47,042 2,733 6,475

Proceeds from exercise of common stock options and warrants and contributions to ESPP 73,914 47,042 2,733

Repurchases of common stock ( 86 ) ( 800 ) ( 18,854 )

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Effect of exchange rate changes on cash, cash equivalents and restricted cash ( 5,412 ) 1,837 —

Net Increase (Decrease) in Cash and Cash Equivalents and Restricted Cash 1,364,504 ( 29,643 ) 120,271

Cash and cash equivalents and restricted cash, beginning of period 328,128 357,771 237,500

Cash and Cash Equivalents and Restricted Cash, end of period $ 1,692,632 $ 328,128 $ 357,771

Net Increase in Cash, Cash Equivalents and Restricted Cash ( 141,825 ) 1,364,504 ( 29,643 )

Cash, Cash equivalents and Restricted cash, Beginning of period 1,692,632 328,128 357,771

Cash, Cash Equivalents and Restricted Cash, End of Period $ 1,550,807 $ 1,692,632 $ 328,128

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

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AFFIRM HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS, CONT.

CONSOLIDATED STATEMENTS OF CASH FLOWS, CONT.

(in thousands)

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2022 2021 2020

Reconciliation to amounts on consolidated balance sheets (as of period end)

Cash and cash equivalents 1,255,171 1,466,558 267,059

Restricted cash 295,636 226,074 61,069

Total Cash, Cash Equivalents and Restricted Cash $ 1,550,807 $ 1,692,632 $ 328,128

Year ended June 30,

2022 2021 2020

Supplemental Disclosures of Cash Flow Information

Cash payments for interest $ 41,690 $ 28,085 $ 27,838

Cash paid for income taxes 219 — —

Cash payments for interest expense $ 51,524 $ 41,690 $ 28,085

Cash paid for operating leases 15,561 13,215 —

Cash paid for income taxes 220 219 —

Supplemental Disclosures of Non-Cash Investing and Financing Activities

Stock-based compensation included in capitalized internal-use software $ 54,542 $ 13,999 $ 2,921

Issuance of common stock in connection with settlement of contingent consideration liability 32,109 — —

Securities retained under unconsolidated securitization transactions 54,997 — —

Issuance of common stock in connection with acquisition 10,000 331,498 —

Right of use assets obtained in exchange for operating lease liabilities 4,604 78,421 —

Additions to property and equipment included in accrued expenses 107 6 27

Issuance of warrants in exchange for commercial agreement 270,579 — —

Acquisition of commercial agreement assets 25,900 — —

Conversion of redeemable convertible preferred stock — 1,327,271 —

Issuance of warrants in exchange for commercial agreement — 270,579 —

Conversion of convertible debt — 88,559 —

Issuance of common stock in connection with acquisition 331,498 — —

Right of use assets obtained in exchange for operating lease liabilities 78,421 — —

Acquisition of commercial agreement asset — 25,900 —

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

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AFFIRM HOLDINGS, INC.

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Our mission is to deliver honest financial products that improve lives.

Through our next-generation commerce platform and partnerships with originating banks, we enable consumers to confidently pay for a purchase over time, with terms ranging from one to sixty months .

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 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.

The majority of loans are 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 solution.

Consumers get the flexibility to buy now and make simple monthly payments for their purchases and merchants see increased average order value, repeat purchase rate, and an overall more satisfied customer base.

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.

On January 15, 2021, we closed our initial public offering ("IPO") of 28,290,000 shares of Class A common stock, including 3,690,000 shares pursuant to the option granted to the underwriters to purchase additional shares of Class A common stock, at an offering price of $ 49.00 per share.

The proceeds from the IPO, before expenses, were approximately $ 1.3 billion.

Summary of Significant Accounting Policies

Basis of Presentation and Principles of Consolidation

The consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States ("U.S.

The accompanying 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”).

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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 asset-backed securitization transactions.

Our variable interests in VIEs generally arise from contractual, ownership, or other monetary interests in the entity that value changes with fluctuations in the fair value of the entity’s net assets.

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.

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GAAP requires the use of estimates, judgments and assumptions that affect the reported amounts in the consolidated financial statements and the accompanying notes.

Material estimates that are particularly susceptible to significant change relate to determination of the variable consideration for revenue, the allowance for credit losses, capitalized internal-use software development costs, valuation allowance for deferred tax assets, convertible debt derivatives, loss on loan purchase commitment, the fair value of servicing assets and liabilities, discount on self-originated loans, the fair value and useful lives of tangible and intangible assets acquired and liabilities assumed resulting from business

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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 residual certificates issued by our securitization trusts, and stock-based compensation.

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 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.

To the extent that there are material

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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 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 as previously reported.

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 and misstatement of stock-based compensation expense as of and for the year ended June 30, 2021 as previously reported.

Accordingly, we have corrected the accompanying financial statements and related footnotes as of and for the year ended June 30, 2021 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 tables provide the impact of the correction as of and for the year ended June 30, 2021, as presented below (in thousands):

As of June 30, 2021

As Previously Reported Adjustments As Corrected

Accrued expenses and other liabilities 317,951 5,626 323,577

Total liabilities 2,285,814 5,626 2,291,440

Additional paid in capital 3,462,762 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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Year Ended June 30, 2021

As Previously Reported Adjustments As Corrected

Consolidated Statement of Operations and Comprehensive Loss

Processing and servicing 73,767 ( 189 ) 73,578

Technology and data analytics 256,082 ( 6,746 ) 249,336

Sales and marketing 184,279 ( 2,089 ) 182,190

General and administrative 370,251 13,498 383,749

Total Operating Expenses 1,249,657 4,474 1,254,131

Other expense, net ( 54,073 ) ( 5,630 ) ( 59,703 )

Loss Before Income Taxes ( 433,266 ) ( 10,104 ) ( 443,370 )

Net Loss Attributable to Common Stockholders ( 430,923 ) ( 10,104 ) ( 441,027 )

Foreign currency translation adjustments 7,042 4 7,046

Net Comprehensive Income 7,071 4 7,075

Comprehensive Loss ( 423,852 ) ( 10,100 ) ( 433,952 )

Net loss per share attributable to common stockholders for Class A and Class B:

Basic $ ( 2.72 ) $ ( 0.06 ) $ ( 2.78 )

Diluted $ ( 2.88 ) $ ( 0.06 ) $ ( 2.94 )

Year Ended June 30, 2021

As Previously Reported Adjustments As Corrected

Consolidated Statement of Redeemable Convertible Preferred Stock and Stockholders’ Equity

Stock-based compensation - Additional Paid-In Capital 302,032 4,474 306,506

Foreign currency translation adjustments - Accumulated Other Comprehensive Income (Loss)

7,042 4 7,046

Net Loss - Accumulated Deficit ( 430,923 ) ( 10,104 ) ( 441,027 )

Balance as of June 30, 2021 - Total Stockholders' Equity 2,581,153 ( 5,626 ) 2,575,527

Year Ended June 30, 2021

As Previously Reported Adjustments As Corrected

Consolidated Statement of Cash Flows

Cash Flows from Operating Activities

Net Loss ( 430,923 ) ( 10,104 ) ( 441,027 )

Adjustments to reconcile net loss to net cash used in operating activities:

Changes in fair value of assets and liabilities 51,655 5,630 57,285

Stock-based compensation 288,033 4,474 292,507

Net Cash Used in Operating Activities ( 193,130 ) — ( 193,130 )

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Segment Reporting

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however, detailed profitability information that could be used to allocate resources and assess the performance of the business is managed and reviewed for the consolidated company as a whole.

Business Combinations

Business Combination

We use the acquisition method of accounting for business combination transactions, and, accordingly, recognize the fair values of assets acquired and liabilities assumed in our consolidated financial statements.

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Cash and Cash Equivalents

Cash and cash equivalents consist of checking, money market and savings accounts held at financial institutions or highly liquid investments purchased with an original maturity of three months or less.

Cash and cash equivalents consist of checking, money market and savings accounts held at financial institutions and short term highly liquid marketable securities, including money market funds and other corporate securities purchased with an original maturity of three months or less.

Restricted Cash

Restricted cash consists primarily of:

(i) deposits restricted by standby letters of credit for office leases;

(i) deposits restricted by standby letters of credit for office leases and certain commercial agreements;

(ii) funds held in accounts as collateral for our originating bank partners;

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We have no ability to draw on such funds as long as they remain restricted under the applicable agreements.

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) , excluding the portion relating to any credit 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 .

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 .

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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.

Loans Held for Investment

We either originate loans directly or purchase our loans from our originating bank partners pursuant to the terms outlined in the respective executed loan sale program agreements.

Loan receivables that we have the intent and ability to hold for the foreseeable future or until maturity or payoff are classified as held for investment and are reported at amortized cost, which includes unpaid principal balances, any related premiums including fees paid to our originating bank partners and discounts due to loan commitment liability, where applicable, adjusted for any charge-offs and the allowance for credit losses.

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We either originate loans directly or purchase our loans from our originating bank partners pursuant to the terms outlined in the respective executed loan sale program agreements between us and our bank partners.

Loan receivables that we have the intent and ability to hold for the foreseeable future or until maturity or payoff are classified as held for investment and are reported at amortized cost, which includes unpaid principal balances, any related premiums including fees paid to our originating bank partners and discounts due to loss on loan purchase commitment for loans with a fair value below the purchase price, where applicable, adjusted for any charge-offs.

The amortized cost is adjusted for the allowance for credit losses within loans held for investment, net.

Loans Held for Sale

We sell certain loans to third-party loan buyers.

A loan is initially classified as held for sale when the whole loan is identified as for sale.

We sell certain loans to third-party loan buyers and securitization trusts.

A loan is initially classified as held for sale when the loan is identified as for sale to a third party loan buyer or to be sold to a securitization that is anticipated to be off balance sheet.

Loans classified as held for sale are recorded at the lower of amortized cost or fair value.

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When a loan held for investment is reclassified to held for sale and reported at fair value, any allowance for the credit loss related to that loan is released and any fair value adjustment to record the loan at the lower of amortized cost or fair value is recorded.

Our loans designated as held for sale are generally sold within one to three days of the balance sheet date at a gain.

As of June 30, 2021, on a portfolio level, the fair value of loans held for sale exceeds amortized cost.

Our loans designated as held for sale are generally sold within one to three days of the balance sheet date.

Fair value adjustments were not material for loans designated as held for sale as of June 30, 2022 and June 30, 2021.

Transfers of Financial Assets

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Upon the sale of a loan to a third-party loan buyer or unconsolidated securitization in which we retain servicing rights, we may recognize a servicing asset or liability.

Receiving more than adequate compensation, as defined by ASC 860, for servicing those loans results in recognition of a servicing asset.

Receiving more than adequate compensation, as

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defined by ASC 860, for servicing those loans, results in recognition of a servicing asset.

Receiving less than adequate compensation results in a servicing liability.

Servicing assets and liabilities are recorded at fair value and are presented as a component of other assets or accrued expenses and other liabilities, respectively.

The recognition of a servicing asset results in a corresponding increase to the gain (loss) on sales of loans.

The recognition of a servicing liability results in a corresponding decrease to gain (loss) on sales of loans.

The recognition of a servicing asset results in a corresponding increase to the gain on sales of loans.

The recognition of a servicing liability results in a corresponding decrease to gain on sales of loans.

The servicing rights are marked to fair value each period, with the subsequent adjustment recognized in servicing income .

The subsequent measurement includes changes in inputs or assumptions used in the valuation model.

In connection with the sale of a loan to a third-party loan buyer or unconsolidated securitization, we may also recognize a recourse liability in accordance with ASC 460, "Guarantees" ("ASC 460") as in certain circumstances we may become required to repurchase loans from third-party investors due to breaches in representations and warranties.

The recognition of a recourse liability results in a corresponding decrease to gain (loss) on sales of loans.

In connection with the sale of a loan to a third-party loan buyer or unconsolidated securitization, we may also recognize a recourse liability in accordance with ASC 460, “Guarantees” (“ASC 460”) as in certain circumstances we may become required to re-purchase loans from third-party investors due to breaches in representations and warranties.

The recognition of a recourse liability results in a corresponding decrease to gain on sales of loans.

The recourse liability is amortized over the loan term and remeasured each period based on the outstanding loan balance and changes in our expectation of future repurchase obligations.

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We immediately recognize an allowance for expected credit losses upon the origination of a loan.

Adjustments to the allowance each period for changes in our estimate of lifetime expected credit losses are recognized in earnings

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through the provision for credit losses presented on our consolidated statements of operations and comprehensive loss.

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 consolidated statements of operations and comprehensive loss.

We have made an accounting policy election to not measure an allowance for credit losses for accrued interest receivables.

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The analysis focuses on the pertinent factors underlying the quality of the loan portfolio.

We also take into consideration certain qualitative factors where we adjust our quantitative baseline using our best judgement to consider the inherent uncertainty regarding future economic conditions and consumer loan performance.

For example, the Company considers the impact of current economic and environmental factors at the reporting date that did not exist over the period from which historical experience was used.

As of June 30, 2021, we have considered the impact of government intervention and legislation in the form of stimulus checks, extended unemployment benefits, and small business relief on loan repayment and consumer behavior patterns.

We also take into consideration certain qualitative factors where we adjust our quantitative baseline using our best judgment to consider the inherent uncertainty regarding future economic conditions and consumer loan performance.

For example, the Company considers the impact of current economic factors at the reporting date that did not exist over the period from which historical experience was used.

As of June 30, 2022, we have considered the impact of Federal Reserve monetary policy, labor market trends, inflation and consumer sentiment.

When available information confirms that specific loans or portions thereof are uncollectible, identified amounts are charged against the allowance for credit losses.

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Accounts Receivable, net

Our accounts receivable consist primarily of amounts due from payment processors, merchant partners, and servicing fees due from third-party loan owners.

We evaluate accounts receivable estimated to be uncollectible and provide allowances, as necessary, for doubtful accounts.

This allowance was $ 4.1 million and $ 3.1 million as of June 30, 2021 and June 30, 2020, respectively.

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.

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, as applicable.

Our allowance for credit losses with respect to accounts receivable was $ 13.9 million and $ 4.1 million as of June 30, 2022 and June 30, 2021, respectively.

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Property, Equipment and Software, net

Property, equipment and software consist of computer and office equipment, capitalized internal-use software and website development costs and leasehold improvements.

Property, equipment and software consist of computer and office equipment, capitalized internal-use developed software and website development costs and leasehold improvements.

Property, equipment and software is stated at cost less accumulated depreciation and amortization.

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Leasehold improvements are depreciated over the shorter of the improvement’s estimated useful life or the remaining lease term.

We capitalize costs to develop internal-use software when preliminary development efforts are successfully completed, management has authorized and committed project funding, and it is probable that the project will be completed and the software or website will function and be used as intended.

We capitalize costs to develop internally developed software when preliminary development efforts are successfully completed, management has authorized and committed project funding, and it is probable that the project will be completed and the software or website will function and be used as intended.

Capitalized internal-use software costs primarily include salaries and payroll-related costs for employees directly involved in the development efforts, software licenses acquired and fees paid to external consultants.

Such costs are amortized on a straight-line basis over the estimated useful life of the related asset, which ranges from three to five years .

Such costs are amortized on a straight-line basis over the estimated useful life of the related asset, which is three years .

Costs incurred prior to meeting these criteria, together with costs incurred for training and maintenance, are expensed as incurred.

Costs incurred for enhancements that are expected to result in additional functionality are capitalized and expensed over the estimated useful life of the upgrades.

Capitalized internal-use software costs are included in property, equipment and software, and amortization expense is included in technology and data analytics expense in the consolidated statements of operations and comprehensive loss.

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Capitalized internally developed software costs are included in property, equipment and software, and amortization expense is included in technology and data analytics expense in the consolidated statements of operations and comprehensive loss.

Property, equipment and software is tested for impairment when there is an indication that the carrying value of an asset group may not be recoverable.

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Goodwill is not amortized but is reviewed for impairment annually and more frequently if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value.

We perform a quantitative goodwill impairment test by determining the fair value of the reporting unit and comparing it to the carrying value of the reporting unit.

We first perform a qualitative assessment to determine whether it is more likely than not that the fair value of the reporting unit is less than its carrying value.

If the reporting unit does not pass the qualitative assessment, then the reporting unit’s carrying value is compared to its fair value.

If the fair value of the reporting unit is greater than the reporting unit’s carrying value, then the carrying value of the reporting unit is deemed to be recoverable.

If the carrying value of the reporting unit is greater than the reporting unit’s fair value, goodwill is impaired and written down to the reporting unit’s fair value.

Identifiable intangible assets include developed technology, merchant relationships, and trade names resulting from acquisitions.

Identifiable intangible assets include developed technology, merchant relationships, assembled workforce, and trade names resulting from acquisitions, including asset acquisitions.

Acquired intangible assets are recorded at fair value on the date of acquisition and amortized over their estimated economic lives following the pattern in which the economic benefits of the assets will be consumed, which is on a straight-line basis.

Acquired intangible assets are presented net of accumulated amortization on the consolidated balance sheets.

We review the carrying amounts of intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable.

We review the carrying amounts of intangible assets group for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable.

We measure the recoverability of intangible assets by comparing the carrying amount of each asset to the future undiscounted cash flows we expect the asset to generate.

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In addition, we periodically evaluate the estimated remaining useful lives of long-lived intangible assets to determine whether events or changes in circumstances warrant a revision to the remaining period of depreciation or amortization.

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We determine whether an arrangement is a lease for accounting purposes at contract inception.

For operating leases, we record a right-of-use asset within other assets in our consolidated balance sheets, which represents our right to use an underlying asset for the lease term.

A corresponding lease liability, which represents our obligation to make lease payments arising from the lease, is recorded in accrued expenses and other liabilities in our consolidated balance sheets.

ROU assets and lease liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term.

To discount the lease payments, we use an incremental borrowing rate derived from a corporate yield curve corresponding with the lease term using information available on the commencement date.

We have the option to renew or extend our leases.

We include these periods in the lease term when a decision has been made to exercise the option.

Lease expense for operating leases is recognized on a straight-line basis over the lease term.

We have elected the practical expedient allowing the combination of lease and non-lease components by class of underlying asset.

We have also elected the short-term lease exception and will not recognize right-of-use assets or lease liabilities for qualifying leases with a term of less than 12 months from lease commencement.

Non-marketable Equity Securities

Non-marketable equity securities which do not have a readily determinable fair value are measured at cost less impairment, if any, and adjusted for changes resulting from observable price changes in orderly transactions for an identical or similar investment in the same issuer (the “measurement alternative”).

Unrealized and realized gains and losses on the investment due to impairment or observable price changes in orderly transaction for an identical or similar investment of the same issuer, if any, are recognized in other (expense) income, net on our consolidated statements of operations and comprehensive loss and a new carrying value is established for the investment upon such recognition.

Funding Debt and Debt Issuance Costs

We borrow from various lenders to finance the purchase of loans from our originating bank partner.

We borrow from various lenders through our warehouse facilities and through sale and repurchase agreements by pledging certain retained interests in our off balance sheet securitizations to finance loans we originate directly and purchase loans from our originating bank partners.

These borrowings are carried at amortized cost.

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We defer these costs and amortize them on a straight-line basis over the term of the debt.

Interest payments and amortization of debt issuance costs incurred on debt used to fund purchases of loans from our originating bank partners are presented as funding costs in the consolidated statements of operations and comprehensive loss.

Interest payments and amortization of debt issuance costs incurred on funding debt is presented as funding costs in the consolidated statements of operations and comprehensive loss.

Unamortized debt issuance costs are presented as a reduction of the associated debt.

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The effect of a change in tax rates on deferred tax assets and liabilities is recognized as an income tax expense (benefit) in the period that includes the enactment date.

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Valuation allowances are provided when necessary to reduce deferred tax assets to the amounts that are more likely than not expected to be realized based on the weighting of positive and negative evidence.

Future realization of deferred tax assets ultimately depends on the existence of sufficient taxable income of the appropriate

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character within the carryback or carryforward periods available under the applicable tax law.

Future realization of deferred tax assets ultimately depends on the existence of sufficient taxable income of the appropriate character within the carryback or carryforward periods available under the applicable tax law.

We regularly review the deferred tax assets for recoverability based on historical taxable income, projected future taxable income, the expected timing of the reversals of existing temporary differences, and tax planning strategies;

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The calculation of our tax liabilities involves dealing with uncertainties in the application of complex federal, state, and foreign tax laws and regulations, and positions taken in our tax returns may be subject to challenge by the taxing authorities upon examination.

In accordance with applicable accounting guidance, uncertain tax positions are recognized in the financial statements only when it is more likely than not the positions will be sustained upon examination by the tax authorities, assuming full knowledge of the position and all relevant facts.

In accordance with applicable accounting guidance, uncertain tax positions are recognized in the financial statements only when it is more likely than not that the positions will be sustained upon examination by the tax authorities, assuming full knowledge of the position and all relevant facts.

Interest and penalties, if any, on income tax uncertainties are classified within income tax expense in the income statement.

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Level 3 assets and liabilities include financial instruments whose value is determined using discounted cash flow methodologies, as well as instruments for which the determination of fair value requires significant management judgment or estimation.

For equity investments, including equity securities and partnership interests that do not have a “readily determinable fair value,” or are not traded in a verifiable public market or are restricted for sale in the public market by a restricted stock legend or otherwise, we present and carry our investments using the measurement alternative which is cost minus impairment, if any, plus or minus changes resulting from observable price changes in “orderly transactions,” as defined in ASC Topic 321, "Investments — Equity Securities" ("ASC 321"), for the identical or a similar investment of the same issuer.

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Revenue Recognition

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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 terms of the executed merchant agreement have been fulfilled and the merchant successfully confirms the transaction.

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.

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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).

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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 in a loss, which we record as a reduction to merchant network revenue when we estimate that these losses will be recoverable over the term of our contract with the merchant.

In order to continue to expand our consumer base, we may originate loans under certain merchant arrangements that we do not expect to achieve positive revenue.

In these instances, the loss is recorded as sales and marketing expense.

On May 5, 2021, our largest merchant partner, Peloton, announced a voluntary recall of two of its products following a report by the U.S.

In these instances, the par value of the loans originated is in excess of the fair market value of such loans, resulting in a loss, which we record as a reduction to merchant 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.

On May 5, 2021, our largest merchant partner at the time, Peloton, announced a voluntary recall of two of its products following a report by the U.S.

Consumer Product Safety Commission released on April 17, 2021.

Pursuant to ASC 606, we revised our estimate of the variable consideration associated with revenue earned on the facilitation of transactions related to the recalled products have recorded a reduction in revenue of $ 5.4 million during the year ended June 30, 2021.

Pursuant to ASC 606, we revised our estimate of the variable consideration associated with revenue earned on the facilitation of transactions related to the recalled products and recorded a reduction in revenue of $ 5.4 million during the year ended June 30, 2021.

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 commission as a percentage of the associated sale.

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.

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Consumers can apply for a virtual debit card through the Affirm app and, upon approval, receive a single-use virtual debit card to be used for their purchase online or offline at a non-integrated merchant.

The virtual debit card is funded at the time a transaction is authorized using cash held by the issuer processor in a reserve fund, which is ultimately funded and maintained by us.

The virtual debit card is funded at the time a transaction is authorized using cash held by the issuer processor in a reserve fund.

Our originating bank partner then originates a loan to the consumer once the transaction is confirmed by the merchant.

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Similarly, for these arrangements with integrated merchants, the merchant is charged interchange fees by the issuer processor and the issuer processor shares a portion of this revenue with us.

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From time to time, we offer certain integrated merchants promotional incentives to promote our platform to their customers, such as rebates of interchange fees charged by the issuer processor.

These amounts are recorded as a reduction of revenue and netted against virtual card network revenue.

Our contracts with issuer processors are defined at the transaction level and do not extend beyond the service already provided.

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We do not have any capitalized contract costs, and do not carry any material contract balances.

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Our service comprises a single performance obligation to the issuer processors to facilitate transactions with consumers.

A portion of virtual 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.

Interest Income

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Servicing Income

Servicing fees are contractual fees specified in our servicing agreements with third-party loan owners that are earned from providing professional services to manage loan portfolios on their behalf.

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.

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Loss on Loan Purchase Commitment

We purchase certain loans from our originating bank partners that are processed through our platform and our originating bank partner puts back to us.

We purchase certain loans from our originating bank partners that are processed through our platform that our originating bank partner puts back to us.

Under the terms of the agreements with our originating bank partners, we are generally required to pay the principal amount plus accrued interest for such loans.

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Upon purchase, the liability is included in the amortized cost basis of the purchased loan as a discount, which is amortized into interest income over the life of the loan.

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Customer Referral Partners

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We consider customer referral partners as vendors if we determine that we are the principal to eligible merchants in providing the facilitation of credit service.

Payments made to customer referral partners that are not considered to be our customers are expensed over the period of benefit and recorded in processing and servicing within our consolidated statements of operations and comprehensive loss.

Advertising Costs

Advertising costs are expensed as incurred and are included within sales and marketing in our consolidated statements of operations and comprehensive loss.

For the years ended June 30, 2021, 2020, and 2019, advertising costs totaled $ 48.1 million, $ 3.3 million and $ 2.6 million, respectively.

Foreign Currency

We have wholly-owned foreign subsidiaries that use the local currency of their respective country as their functional currency.

Assets and liabilities of these subsidiaries are translated into U.S.

dollars at exchange rates prevailing at the balance sheet dates.

Revenue, costs, and expenses of these subsidiaries are translated into U.S.

dollars using daily exchange rates when incurred.

Gains and losses resulting from these translations are recorded as a component of accumulated other comprehensive income (loss) (“AOCI”).

Gains and losses from the remeasurement of foreign currency transactions into the functional currency are recognized as other income (expense), net, in our consolidated statements of operations and comprehensive loss.

Payments made to customer referral partners that are considered to be our customer are recorded as a reduction of revenue, and payments made to customer referral partners that are not considered to be our customers are recorded in processing and servicing expense, respectively, over the associated period of benefit within our consolidated statements of operations and comprehensive loss.

Sales and Marketing Costs

Sales and marketing costs include the expense related to warrants and other share-based payments granted to our enterprise partners.

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 $ 74.0 million, $ 48.1 million and $ 3.3 million for the year ended June 30, 2022, 2021, and 2020, respectively.

Derivative Instruments

We mitigate the impact of changes in interest rates with various derivative instruments, including interest rate caps, constant maturity swaps, and curve efficient swaps that are accounted for as derivatives pursuant to ASC Topic 815, “Derivatives and Hedging” ("ASC Topic 815").

ASC Topic 815 requires that an entity recognize all derivatives as either assets or liabilities on the balance sheet, measure those instruments at fair value and recognize changes in the fair value of derivatives in earnings in the period of change unless the derivative qualifies as a designated hedge that offsets certain exposures.

During the periods presented, we have not designated any of our derivatives as hedging instruments.

Stock-Based Compensation

We account for stock-based compensation expense in accordance with the fair value recognition and measurement guidance, which requires compensation cost for the grant date fair value of stock-based awards to be recognized over the requisite service period.

We account for stock-based compensation expense in accordance with the fair value recognition and measurement provisions of U.S.

GAAP, which requires compensation cost for the grant date fair value of stock-based awards to be recognized over the requisite service period.

In addition, we made an accounting policy election to estimate the expected forfeiture rate for service-based awards and only recognize expense for those stock-based awards expected to vest.

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Service-Based Awards

We record stock-based compensation expense for service-based stock options and restricted stock units (“RSUs") on a straight-line basis over the requisite service period, which is generally four years .

We record stock-based compensation expense for service-based stock options and restricted stock units (“RSUs”) on a straight-line basis over the requisite service period, which is generally one to four years .

The fair value of each option on the date of grant is determined using the Black Scholes-Merton option pricing model using the single-option award approach.

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We used the simplified method to determine an estimate of the expected term of an employee stock option.

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We account for stock-based awards to non-employees, including consultants, in accordance with ASC Topic 718, “Compensation — Stock Compensation” (“ASC 718”), in which equity-classified awards are measured at the grant date fair value and recognized as expense in the period and manner as though we had paid cash in exchange for goods or services instead of granting a stock-based award.

Performance-Based Awards

We have granted RSUs that vest upon the satisfaction of both service-based and performance-based conditions.

The service-based condition for these awards generally is satisfied over four years .

The performance-based condition is satisfied upon the occurrence of a qualifying event, defined as the earlier of (i) the closing of certain specific liquidation or change in control transactions, or (ii) an IPO.

We record stock-based compensation expense for performance-based equity awards and stock on an accelerated attribution method over the requisite service period, which is generally four years , and only if performance-based conditions are considered probable of being satisfied.

Upon exercise or vesting of a stock-based award, if the tax deduction exceeds the compensation cost that was previously recorded for financial statement purposes, this will result in an excess tax benefit.

Prior to the IPO, we granted RSUs that were subject to two vesting conditions:

a service-based vesting condition (i.e., employment over a period of time) and a performance-based vesting condition (i.e., a liquidity event in the form of either certain change in control transactions or an initial public offering).

The performance-based condition was met upon the IPO.

We record stock-based compensation expense for these awards on an accelerated attribution method over the requisite service period, which is generally four years .

Upon exercise or vesting of a stock-based award, the tax effect of the difference, if any, between the cumulative compensation cost recognized for financial statement purposes and the deduction for income tax purposes, will be recognized as an income tax expense or benefit in the consolidated statement of operations.

Market-Based Awards

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Treasury rate for the period that coincides with the expected term set forth.

We record stock-based compensation expense for market-based equity awards such as RSUs and stock options on an accelerated attribution method over the requisite service period, and only if performance-based conditions are considered probable of being satisfied.

We record stock-based compensation expense for market-based equity awards on an accelerated attribution method over the requisite service period, and only if performance-based conditions are considered probable of being satisfied.

Foreign Currency

We have wholly-owned foreign subsidiaries that use the local currency of their respective country as their functional currency.

Assets and liabilities of these subsidiaries are translated into U.S.

dollars at exchange rates prevailing at the balance sheet dates.

Revenue, costs, and expenses of these subsidiaries are translated into U.S.

dollars using daily exchange rates when incurred.

Gains and losses resulting from these translations are recorded as a component of accumulated other comprehensive income (loss) (“AOCI”).

Basic and Diluted Net Loss per Common Share

We calculate net income or loss per share using the two-class method required for participating securities.

The two-class method requires income available to common stockholders for the period to be allocated between common stock and participating securities based upon their respective rights to receive dividends as if all income for the period had been distributed.

Our common stock issued upon the early exercise of stock options and redeemable convertible preferred stock are participating securities.

We calculate net income or loss per share using the two-class method.

The two-class method requires income available to common stockholders for the period to be allocated between each class of common stock and participating securities based upon their respective rights to receive dividends as if all income for the period had been distributed.

Our participating securities include common stock issued upon the early exercise of stock options and convertible senior notes.

We consider any shares issued upon early exercise of stock options, subject to repurchase, to be participating securities because holders of such shares have non-forfeitable dividend rights in the event a cash dividend is declared on our common stock.

These participating securities do not contractually require the holders of such shares to participate in our losses.

As such, net losses for the years presented were not allocated to our participating securities.

We calculate basic net loss per share attributable to common stockholders by dividing net loss attributable to common stockholders by the weighted average number of common shares outstanding for the period.

We calculate diluted net loss per share attributable to common stockholders by dividing net loss attributable to common stockholders by the weighted average number of common shares outstanding after giving consideration to the dilutive effect of our redeemable convertible preferred stock, stock options, restricted stock units, convertible debt and common stock warrants that are outstanding during the period.

We have generated a net loss in all periods

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presented, and therefore, the basic and diluted net loss per share attributable to common stockholders are the same as the inclusion of the potentially dilutive securities would be anti-dilutive.

During the years ended June 30, 2021 , 2020 and 2019, the excess of the repurchase price of preferred stock over its carrying value has been recorded as an increase to net loss to determine net loss attributable to common stockholders, basic and diluted.

As such, net losses for the years presented were not allocated

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to our participating securities.

Prior to the conversion of redeemable convertible preferred stock into shares of our common stock on January 12, 2021, these shares also represented participating securities.

We calculate basic net loss per share attributable to common stockholders for Class A and Class B common stock by dividing net loss attributable to common stockholders by the weighted average number of common shares outstanding in each class for the period.

We calculate diluted net loss per share attributable to common stockholders by dividing net loss attributable to common stockholders by the weighted average number of common shares outstanding in each class, after giving consideration to the dilutive effect of our redeemable convertible preferred stock, stock options, restricted stock units, employee stock purchase plan shares, convertible debt and common stock warrants that are outstanding during the period.

We have generated a net loss in all periods presented, and therefore, the basic and diluted net loss per share attributable to common stockholders are the same as the inclusion of the potentially dilutive securities would be anti-dilutive.

During the years ended June 30, 2021 and 2020, the excess of the repurchase price of preferred stock over its carrying value was recorded as an increase to net loss to determine net loss attributable to common stockholders, basic and diluted.

Recently Adopted Accounting Standards

As of March 31, 2021, we no longer qualified as an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act.

As such, we are no longer entitled to take advantage of the exemptions from various reporting requirements applicable to emerging growth companies, including extended transition periods for complying with new or revised accounting standards.

Accordingly, as discussed more fully below, we adopted certain new or revised accounting standards during the year ended June 30, 2021 for which adoption previously had been deferred.

Revenue Recognition

In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers (Topic 606)” ("ASC 606").

ASC 606 requires revenue to be recognized in an amount that reflects the consideration to which the entity expects to be entitled in exchange for goods or services and also requires additional disclosure about the nature, amount, timing, and uncertainty of revenue and cash flows from customer contracts.

Subsequent to the issuance of ASU 2014-09, the FASB issued several amendments to ASC 606 to clarify or improve the revenue recognition standard such as principal versus agent considerations in ASU 2016-08, technical corrections and improvements to ASC 606 in ASU 2016-20, and clarifying the scope of asset derecognition guidance and accounting for partial sales of nonfinancial asset in ASU 2017-05.

In June 2020, the FASB issued ASU 2020-05, “Revenue from Contracts with Customers (Topic 606) and Leases (Topic 842):

Effective Dates for Certain Entities” ("ASC 842"), which amends the effective dates of ASC 606 and ASC 842 to give immediate relief to certain entities as a result of the widespread adverse economic effects and business disruptions caused by the COVID-19 pandemic.

ASU 2020-05 permits certain entities that have not yet made statements available for issuance to adopt ASC 606 for annual reporting periods beginning after December 15, 2019, and for interim reporting periods within annual reporting periods beginning after December 15, 2020.

Under ASU 2020-05, we adopted ASC 606 on July 1, 2020 using the modified retrospective transition method.

Under this method, we evaluated contracts that were not complete as of the date of adoption as if those contracts had been accounted for under ASC 606.

Under the modified retrospective transition approach, periods prior to the adoption date were not adjusted and continue to be reported in accordance with revenue accounting literature in effect during those periods.

The adoption of ASC 606 did not have a material impact on our revenue arrangements.

ASC 606 explicitly excludes revenue generated in accordance with ASC 310, "Receivables" and ASC 860, "Transfers and Servicing." Accordingly, we have concluded that interest income, gains on loan sales and servicing income are not affected by the adoption of ASC 606 and its related amendments.

Merchant network revenue and virtual card network revenue are within the scope of ASC 606.

Stock-Based Compensation

In June 2018, the FASB issued ASU 2018-07, “Compensation — Stock Compensation (Topic 718):

Improvements to Nonemployee Share-Based Payment Accounting” that expands on the scope of ASC 718 to include stock-based payment transactions for acquiring goods and services from non-employees.

For non-public business entities, the amendments are effective for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020.

Early adoption is permitted, but no earlier than an entity’s adoption of ASC 606.

We adopted ASC 606 effective July 1, 2020 and have correspondingly adopted ASU 2018-07 as of that date.

There was no material impact to existing stock-based awards to non-employees.

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In December 2019, the FASB issued ASU 2019-12, “Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes”, which removes certain exceptions related to the approach for intraperiod tax allocation, recognizing deferred tax liabilities for outside basis differences and calculating income taxes in interim periods.

The guidance also reduces complexity in certain areas, including franchise taxes that are partially based on income and accounting for tax law changes in interim periods.

We early adopted the new standard effective July 1, 2020 on a prospective basis.

The adoption of the new standard did not have a material impact on our consolidated financial statements.

In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842)” ("ASC 842") which substantially modifies lessee accounting for leases, and requires most leases to be recognized on the balance sheet with enhanced disclosures.

ASC 842 provides that a contract is, or contains, a lease if it conveys the right to control the use of an identified asset and, accordingly, a lease liability and a related right-of-use ("ROU") asset is recognized at the commencement date.

Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement.

Subsequent to the issuance of ASC 842, the FASB issued several amendments to ASC 842 to clarify or improve the new leases standard, including the codification and targeted improvements in ASUs 2018-10 and 2019-01 and the narrow-scope improvements for lessors in ASU 2018-20.

In August 2018, the FASB issued ASU 2018-11, “Targeted Improvements to ASC 842,” which included an option to not restate comparative periods in transition and elect to use the effective date of ASU 2016-02 as the date of initial application (the “effective date” method).

Following the loss of our emerging growth company status during the third quarter of fiscal 2021, we adopted ASC 842 with an effective date of July 1, 2020 using the modified retrospective transition approach by applying the standard to all leases existing at the date of initial application and not restating comparative periods.

Refer to Note 7.

Leases for further information on the implementation of the standard.

We have elected the practical expedients permitted under the transition guidance, which allowed us not to reassess (1) whether any expired or existing contracts are or contain leases, (2) lease classification for any expired or existing leases and (3) the accounting for any initial direct costs for any expired or existing leases.

We also elected the practical expedients allowing the combination of lease and non-lease components by class of underlying asset.

In addition, we have elected the short-term lease exception and will not recognize ROU assets or lease liabilities for qualifying leases (leases with a term of less than 12 months from lease commencement).

As a result of the adoption of ASC 842, we recognized ROU assets included in other assets in the consolidated balance sheets and lease liabilities for operating leases included in accrued expenses and other liabilities in the consolidated balance sheets of $ 66.7 million and $ 71.2 million, respectively, as of July 1, 2020 with a $ 0.1 million in cumulative effect adjustment to accumulated deficit.

The aggregate lease liability differs from the ROU asset primarily due the unamortized balance of deferred rent, which, prior to July 1, 2020, was included in accrued expenses and other liabilities in the consolidated balance sheet.

ROU assets are reviewed for impairment, consistent with other long-lived assets, whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.

After an ROU asset is impaired, any remaining balance of the ROU asset is amortized on a straight-line basis over the shorter of the remaining lease term or the estimated useful life.

We currently have no finance leases.

The adoption of the new lease accounting standard had no material impact on cash provided by or used in operating, investing or financing activities in our consolidated statements of cash flows.

The adoption of the new lease accounting standard also did not have a material impact our consolidated statements of operations and comprehensive loss.

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Financial Instruments — Credit Losses

In June 2016, the FASB issued ASU 2016-13, “Financial Instruments — Credit Losses (Topic 326)” ("ASC 326").

The amendments replaced the incurred loss impairment methodology with the current expected credit loss model ("CECL").

Subsequent to the issuance of ASU 2016-13, the FASB issued several amendments to ASC 326 to clarify or improve the financial instruments credit losses standard such as codification and targeted improvements in ASUs 2018-19, 2019-04, 2019-05, 2019-11 and 2020-03.

Following the loss of our emerging growth company status, we adopted ASC 326 effective July 1, 2020 using the modified retros pective approach for our loans held for investment, which resulted in an increase in the allowance for credit losses of $ 10.1 million and a cumulative effect adjustment to the beginning balance of accumulated deficit of $ 10.1 million.

Results for reporting periods beginning on or after July 1, 2020 are presented under the new standard, while prior period results before the adoption of CECL on July 1, 2020 continue to be reported in accordance with previously applicable GAAP.

Upon adoption of ASC 326, we maintained our current allowance model and included credit loss allowance assumptions in compliance with ASC 326, which included forecasts for prepayments, recoveries, historical performance, credit rating, as well as current market conditions and expectations for future market conditions.

Effective April 1, 2021 we implemented a more granular credit loss allowance forecasting model for loans with an initial term of 18 months or less, while maintaining our existing model for loans with an initial term greater than 18 months.

Under our revised methodology, we estimate delinquency transitions at the loan-level based on current loan status, loan age, credit tier, and other loan characteristics in order to predict the likelihood that any particular loan will be charged off.

We have included the disclosures required by ASC 326 in Note 4.

Loans Held for Investment and Allowance for Credit Losses.

We have adopted all new accounting pronouncements that are in effect and applicable to us for the period ended June 30, 2021.

Convertible Debt Instruments

In August 2020, the FASB issued Accounting Standard Update (“ASU”) 2020-06, “Debt — Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging — Contracts in Entity’s Own Equity (Subtopic 815-40),” which simplifies the accounting for convertible instruments.

The guidance removes certain accounting models that separate the embedded conversion features from the host contract for convertible instruments.

Either a modified retrospective method of transition or a fully retrospective method of transition is permissible for the adoption of this standard.

ASU 2020-06 is effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years.

Early adoption is permitted no earlier than the fiscal year beginning after December 15, 2020.

We early adopted the new standard effective July 1, 2021 on a modified retrospective basis.

The adoption of the new standard did not have any impact on our financial statements as of the adoption date.

As further discussed in Note 11.

Debt , the Company issued certain convertible senior notes in November 2021, and the accounting for these instruments was based on the guidance in ASU 2020-06.

Staff Accounting Bulletin No.

In March 2022, the SEC staff released Staff Accounting Bulletin No.

121 ("SAB 121"), which expressed the views of the SEC staff regarding the accounting for obligations to safeguard crypto-assets an entity holds for users of its crypto platform.

This guidance requires entities that hold crypto-assets on behalf of platform users to recognize a liability to reflect the entity’s obligation to safeguard the crypto-assets held for its platform users, whether safeguarding is provided by the entity or by an agent acting on behalf of the entity.

The liability should be measured at initial recognition and each reporting date at the fair value of the crypto-assets that the entity is responsible for holding for its platform users, taking into account any potential loss event.

The entity should also recognize an asset at the same time that it recognizes the safeguarding liability, measured at initial recognition and each reporting date at the fair value of the crypto-assets held for its platform users taking into account any potential loss event.

The entity should also describe the asset and the corresponding liability in the footnotes to the financial statements and consider including information regarding who (e.g.

the company, its agent, or another third party) holds the cryptographic key information, maintains the internal recordkeeping of those assets, and is obligated to secure the assets and protect them from loss or theft.

This guidance is effective from the first interim period after June 15, 2022 and should be applied retrospectively.

We adopted the guidance in SAB 121 as of June 30, 2022 on a retrospective basis.

The adoption of the guidance did not have a material impact on our financial statements.

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Recent Accounting Pronouncements Not Yet Adopted

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In March 2020, the FASB issued ASU 2020-04, “Reference Rate Reform (Topic 848):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting”.

Subject to meeting certain criteria, the new guidance provides optional expedients and exceptions to applying contract modification accounting under existing U.S.

Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” Subject to meeting certain criteria, the new guidance provides optional expedients and exceptions to applying contract modification accounting under existing U.S.

GAAP, to address the expected phase out of the London Interbank Offered Rate (“LIBOR”).

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This ASU is effective for all entities upon issuance as of January 7, 2021 through December 31, 2022.

We are in the process of reviewing our derivatives agreements, revolving credit agreements and loan sale agreements that utilize LIBOR as the reference rate and evaluating the impact of Reference Rate Reform.

Throughout the remaining effective period for ASU 2020-04 and ASU 2021-01, we will continue to evaluate the applicable relief measures within each of these amendments and will determine any impact on our consolidated financial statements.

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Convertible Debt Instruments

In August 2020, the FASB issued ASU 2020-06, "Debt — Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging — Contracts in Entity’s Own Equity (Subtopic 815-40),” which simplifies the accounting for convertible instruments.

The guidance removes certain accounting models that separate the embedded conversion features from the host contract for convertible instruments.

Either a modified retrospective method of transition or a fully retrospective method of transition is permissible for the adoption of this standard.

ASU 2020-06 is effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years.

Early adoption is permitted no earlier than the fiscal year beginning after December 15, 2020.

We are in the process of evaluating the impact of this amendment on our consolidated financial statements.

We have reviewed all our financial agreements that utilize LIBOR as the reference rate and determined there is no material impact to our consolidated financial statements as of June 30, 2022.

Throughout the remaining effective period for ASU 2020-04 and ASU 2021-01, we will continue to evaluate the available relief measures within each of these amendments and will determine any impact on our consolidated financial statements and disclosures, as applicable.

Business Combinations

In October 2021, the FASB issued ASU 2021-08, “Business Combinations (Topic 805):

Accounting for Contract Assets and Contract Liabilities from Contracts with Customers,” which requires contract assets and contract liabilities, such as deferred revenue, acquired in a business combination to be recognized and measured in accordance with Topic 606 (Revenue from Contracts with Customers).

ASU 2021-08 is expected to reduce diversity in practice and increase comparability for both the recognition and measurement of acquired revenue contracts with customers at the date of and after a business combination.

The ASU is effective for fiscal years beginning after December 15, 2022 and should be applied prospectively to acquisitions occurring on or after the effective date.

Early adoption is permitted, including for interim periods, and is applicable to all business combinations for which the acquisition date occurs within the beginning of the fiscal year of adoption.

We are in the process of evaluating the impact of adopting this accounting standard update on our consolidated financial statements and disclosures.

Financial Instruments - Credit Losses

In March 2022, the FASB issued ASU 2022-02, “Financial Instruments— Credit Losses (Topic 326), Troubled Debt Restructurings and Vintage Disclosure” which addresses areas identified by the FASB as part of its post-implementation review of the current expected credit losses model or “CECL” previously issued in ASU 2016-13, “Financial Instruments — Credit Losses (Topic 326)”.

The amendments in this ASU eliminate the accounting guidance for troubled debt restructurings by creditors while enhancing the disclosure requirements for loan refinancing and restructurings made with borrowers experiencing financial difficulty.

In addition, the amendments require a public business entity to disclose current-period gross write-offs by year of origination for financing receivables and net investment in leases in the vintage disclosures.

For entities that have adopted ASU 2016-13, ASU 2022-02 is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years.

Early adoption is permitted if an entity has adopted ASU 2016-13.

Amendments in this ASU should be applied prospectively except for the transition method related to the accounting for troubled debt restructurings in which an entity has the option to apply a modified retrospective transition method resulting in a cumulative-effect adjustment to retained earnings in the period of adoption.

We are in the process of evaluating the impact of adopting this accounting standard update on our consolidated financial statements and disclosures.

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Interest Income

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Interest income on unpaid principal balance $ 365,993 237,526 163,374

Amortization of discount on loans held for investment 101,078 35,251 21,833

Amortization of premiums on loans held for investment ( 9,018 ) ( 6,157 ) ( 2,458 )

Amortization of discount on loans 185,050 101,078 35,251

Amortization of premiums on loans ( 13,085 ) ( 9,018 ) ( 6,157 )

Interest receivable charged-off, net of recoveries ( 10,078 ) ( 3,169 ) ( 5,738 )

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Discount due to loss on loan purchase commitment (1)

Discount on loans acquired through business combination ( 5,903 ) —

( 20,692 ) ( 53,177 )

Discount due to loss on self-originated loans (1)

Fair value adjustment on loans acquired through business combination ( 1,645 ) ( 5,903 )

Total loans held for investment $ 2,503,561 $ 2,022,320

(1) As of June 30, 2021, discount due to loss on self-originated loans, in the amount of $ 6.2 million, was included with discount due to loss on loan purchase commitment.

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 $ 7,927.7 million, $ 4,726.5 million, and $ 2,744.8 million for the years ended June 30, 2021, 2020, and 2019, respectively.

We purchased loans from our originating bank partners in the amount of $ 12.1 billion, $ 7.9 billion, and $ 4.7 billion for the years ended June 30, 2022, 2021, and 2020, 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 evaluate the entire portfolio as a single homogeneous loan portfolio.

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 of our originating bank partners, and continues through to full repayment

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Credit risk management begins with initial underwriting, where loan applications are assessed against the credit underwriting policy and procedures for our self-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 in turn 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.

basic features of a consumer's credit profile, a

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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 organization closely tracks the distribution of a consumer ITACs as well as the ITACs of loans to monitor for signs of a changing credit profile within the portfolio.

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.

The following table presents an analysis of the credit quality, by ITACs score, of the amortized cost basis by fiscal year of origination on loans held for investment (in thousands) as of June 30, 2021:

The following table presents an analysis of the credit quality, by ITACs score, of the amortized cost basis by fiscal year of origination on loans held for investment and loans held for sale (in thousands) as of June 30, 2022:

Amortized Costs Basis by Fiscal Year of Origination

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Total loan receivables $ 2,288,907 $ 158,318 $ 37,607 $ 618 $ 82 $ 2 $ 2,485,534

(1) This balance represents loan receivables in new markets without sufficient data currently available for use by the Affirm scoring methodology including loan receivables originated in Canada and Australia.

Net Charge-offs by Fiscal Year of Origination

2022 2021 2020 2019 2018 Prior Total

Current period charge-offs ( 133,338 ) ( 89,960 ) ( 3,783 ) ( 548 ) ( 120 ) ( 21 ) ( 227,770 )

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Current period net charge-offs $ ( 128,050 ) $ ( 80,158 ) $ 634 $ 2,404 $ 1,122 $ 876 $ ( 203,172 )

(1) This balance represents loan receivables in new markets without sufficient data currently available for use of the Affirm scoring methodology as well as loan receivables originated by PayBright.

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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 on loans held for investment by delinquency status (in thousands):

The following table presents an aging analysis of the amortized cost basis of loans held for investment and loans held for sale by delinquency status (in thousands):

June 30, 2022 June 30, 2021

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Total amortized cost basis $ 2,485,534 $ 2,019,884

We maintain an allowance for credit losses at a level that we believe is appropriate to absorb probable losses inherent in our loans.

The allowance for credit losses covers estimated losses for individually assessed loans and includes estimates which rely on economic conditions, forecasts, and historical loan performance.

When loans are charged off, we recognize this as a charge against the allowance for credit losses.

We may continue to attempt to recover amounts from the respective consumers.

The allowance for credit losses on loans is a valuation account that is deducted from the loans’ amortized cost basis to present the net amount expected to be collected on the loans.

It is comprised of specific allowance for individually assessed loans which are regularly evaluated to maintain a level adequate to absorb expected losses inherent in the loan portfolio.

Refer to Note 2.

Summary of Significant Accounting Policies for additional information.

(1) Includes $ 22.7 million of loan receivables as of June 30, 2022 that are 90 days or more past due, but are not on nonaccrual status.

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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.

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 (in thousands):

Year Ended June 30,

2022 2021 2020

Balance at beginning of period $ 95,137 $ 66,260 $ 35,949

Allowance at beginning of period 117,760 95,137 66,260

Adjustment due to adoption of new accounting standard — 10,083 —

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Recoveries of charged-off receivables 24,598 13,934 8,389

Balance at end of period $ 117,760 $ 95,137 $ 66,260

Business Combinations

On January 1, 2021, Affirm Canada Holdings Ltd.

(“Affirm Canada”), a subsidiary of Affirm, and Affirm acquired all outstanding stock of PayBright, Inc., one of Canada’s leading buy now, pay later providers, for approximately $ 288.8 million.

We have included the financial results of PayBright in our consolidated financial statements from the date of acquisition.

The purchase price was comprised of (i) approximately $ 114.5 million in cash, (ii) 3,622,445 shares of our common stock issued to the shareholders of PayBright at closing and (iii) 2,587,362 shares of our common stock held in escrow and subject to forfeiture if certain revenue milestones are not met.

On January 12, 2021, these shares were reclassified into an aggregate of 1,811,222 shares of our Class A common stock and 1,811,222 shares of our Class B common stock issued to the shareholders of PayBright at closing and an aggregate of 1,293,681 shares of our Class A common stock and 1,293,681 shares of our Class B common stock held in escrow.

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The acquisition date fair value of the consideration transferred for PayBright was approximately $ 288.8 million, which consisted of the following (in thousands):

Allowance at end of period 155,392 117,760 95,137

On April 19, 2022, Affirm completed the closing of the transaction contemplated by a Release and Waiver Agreement entered into with Fast AF, Inc., (“Fast”) relating to the hiring of certain of its employees or service providers and an option to acquire certain of its assets.

The purchase price was comprised of (i) $ 10.0 million in cash and (ii) forgiveness of a $ 15.0 million senior secured note issued to Fast in April 2022 prior to the closing.

The acquisition was accounted for as an asset acquisition in accordance with ASC Topic 805, “Business Combinations” (“ASC 805”) since the assets acquired do not meet the definition of a business.

The acquired identifiable intangible assets have been recorded at a total cost of $ 25.4 million, which includes approximately $ 0.4 million of transaction costs associated with the acquisition.

The excess of the total cost of the assets over their total fair value was allocated between the assets on the basis of their relative fair values.

The fair values of the intangible assets were determined by applying the replacement cost method.

The fair value measurements are based on significant unobservable inputs, including management estimates and assumptions, and thus represent Level 3 measurements.

The following table sets forth the identifiable intangible assets acquired and the cost allocated to each asset as of the date of acquisition (in thousands):

Assembled workforce $ 12,490

Option to purchase developed technology $ 12,925

Total $ 25,415

The assembled workforce intangible asset has an expected useful life of 1.5 years.

The developed technology asset will be amortized over its expected useful life if the associated assets are purchased and entered into service.

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On July 1, 2021, Affirm completed the acquisition of technology and intellectual property from Yroo, Inc.

and entered into employment arrangements with certain of its employees (“the ShopBrain acquisition”).

is a data aggregation and cataloging technology company based in Canada (“ShopBrain”).

The purchase price was comprised of (i) $ 30.0 million in cash and (ii) 151,745 shares of our Class A common stock issued to the shareholders of ShopBrain at closing.

The acquisition date fair value of the consideration transferred was approximately $ 40.0 million, which consisted of the following (in thousands):

Cash $ 30,000

Fair value of common stock transferred 116,989

Fair value of contingent consideration 57,275

Fair value of Class A common stock transferred 10,000

Total acquisition date fair value of the consideration transferred $ 40,000

The acquisition was accounted for as a business combination and reflects the application of acquisition accounting in accordance with 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 and the value of the assembled workforce.

The goodwill is expected to be deductible for income tax purposes.

The following table summarizes the allocation of the consideration paid of approximately $ 40.0 million to the fair values of the assets acquired and liabilities assumed at the acquisition date (in thousands):

Intangible assets $ 9,488

Total net assets acquired 9,488

Goodwill 30,512

Total purchase price $ 40,000

For further details on our fair value methodology with respect to the contingent consideration, see Note 13.

Fair Value of Financial Assets and Liabilities.

The acquisition of PayBright was accounted for as a business combination and reflects the application of acquisition accounting in accordance with ASC 805, "Business Combinations" ("ASC 805").

The acquired PayBright assets, including identifiable intangible assets and liabilities assumed, 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, new customer acquisitions, and the value of assembled workforce in Canada.

Goodwill is not expected to be deductible for income tax purposes.

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 Value Useful Life

Developed technology $ 9,488 3.0

The fair values of the intangible assets were determined by applying the replacement cost method.

The fair value measurements are based on significant unobservable inputs, including management estimates and assumptions, and thus represents Level 3 measurements.

The transaction costs associated with the acquisition were approximately $ 0.2 million for the year ended June 30, 2022, which are included in general and administrative expense within the consolidated statements of operations and comprehensive loss.

Pro forma adjustments would only include the additional amortization that would have been charged assuming the intangible assets had been recorded as of July 1, 2020.

Such adjustments would not be material to the consolidated statements of operations and comprehensive loss for the year ended June 30, 2021.

On June 1, 2021, Affirm completed the acquisition of technology and intellectual property from Manhattan Engineering, Inc.

and entered into employment arrangements with certain of its employees (“the Kite acquisition”).

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The purchase price was comprised of $ 26.0 million in cash, including $ 9.0 million held in escrow and subject to forfeiture if certain employees terminate within a stipulated time period.

The acquisition date fair value of the consideration transferred was approximately $ 24.8 million which consisted of the following (in thousands):

Cash $ 26,000

Fair value of contingent consideration asset $ ( 1,241 )

Total acquisition date fair value of consideration transferred $ 24,759

The acquisition was accounted for as a business combination and reflects the application of acquisition accounting in accordance with 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 the value of assembled workforce.

The goodwill is expected to be deductible for income tax purposes.

The following table summarizes the allocation of the consideration paid of approximately $ 24.8 million to the fair values of the assets acquired and liabilities assumed at the acquisition date (in thousands):

Cash and cash equivalents $ 8,219

Restricted cash 1,469

Loans held for investment 89,570

Accounts receivable, net 1,537

Property, equipment and software, net 586

Intangible assets $ 6,975

Other assets 5,651

Total assets acquired $ 123,685

Accounts payable 6,579

Accrued interest payable 23

Accrued expenses and other liabilities 193

Funding debt 85,310

Total liabilities assumed $ 92,105

Net assets acquired 6,975

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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 Value Useful Life (Years)

Fair Value Useful Life

Developed technology $ 6,900 3.0

Merchant relationships 9,505 4

Trade name 1,021 5

Trademarks 75 1.0

Total intangible assets $ 6,975

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The fair values of the intangible assets were determined by applying the replacement cost method.

The fair value measurements are based on significant unobservable inputs, including management estimates and assumptions, and thus represent Level 3 measurements.

The transaction costs associated with the acquisition were approximately $ 0.2 million for the year ended June 30, 2021, which are included in general and administrative expense in the consolidated statements of operations and comprehensive loss.

Unaudited Pro Forma Information

The following table reflects the pro forma consolidated total revenue and net loss for the periods presented as if the acquisition of PayBright had occurred on July 1, 2019 and combines the historical results of Affirm and PayBright.

This supplemental unaudited pro forma information is based upon accounting estimates and judgments that we believe are reasonable and includes certain adjustments to conform accounting standards to U.S.

This supplemental unaudited pro forma financial information has been prepared for illustrative purposes only and is not necessarily indicative of what actual results would have occurred, or of results that may occur in the future.

Revenue $ 886,937 $ 524,657

Net loss $ ( 447,116 ) $ ( 128,244 )

There were no transaction costs associated with the acquisition for the year ended June 30, 2022.

Pro forma adjustments would only include the additional amortization that would have been charged assuming the intangible assets had been recorded as of July 1, 2019.

Such adjustments would not be material to the consolidated statements of operations and comprehensive loss for the year ended June 30, 2021 and 2020.

On May 1, 2021, Affirm completed a merger transaction with Returnly Technologies, Inc.

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Prior to the merger transaction, Affirm owned approximately 1 % of the outstanding shares of Returnly.

By effect of the merger transaction, Affirm acquired all of the remaining outstanding shares, increasing its equity interest from approximately 1 % to 100 %.

By effect of the merger transaction, Affirm acquired

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all of the remaining outstanding shares, increasing its equity interest from approximately 1 % to 100 %.

We have included the financial results of Returnly in our consolidated financial statements from the date of acquisition.

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Refer to Note 16.

Equity and Cash Incentive Plans for additional information on the escrowed share arrangement.

Equity Incentive Plans for additional information on the escrowed share arrangement.

The acquisition date fair value of the consideration transferred for Returnly was approximately $ 286.0 million, which consisted of the following (in thousands):

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Total acquisition date fair value of consideration transferred $ 285,959

The acquisition date fair value of the equity interest in Returnly held by Affirm immediately before the acquisition date was $ 2.1 million, resulting in the recognition of a $ 1.6 million gain included in other income (expense), net in the consolidated statements of operations and comprehensive loss.

The acquisition date fair value of the equity interest in Returnly held by Affirm immediately before the acquisition date was $ 2.1 million, resulting in the recognition of a $ 1.6 million gain included in other (expense) income, net in the consolidated statements of operations and comprehensive loss.

The acquisition of Returnly was accounted for as a business combination and reflects the application of acquisition accounting in accordance with ASC 805.

The acquired Returnly assets, including identifiable intangible assets and liabilities assumed, 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, new customer

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acquisitions, and the value of assembled workforce.

The goodwill was primarily attributed to future synergies from integration, new customer acquisitions, and the value of assembled workforce.

Goodwill is not expected to be deductible for income tax purposes.

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Total fair value of consideration transferred and previously held investment $ 288,054

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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 Value Useful Life (Years)

Fair Value Useful Life

Developed technology $ 16,200 3.0

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The transaction costs associated with the acquisition were approximately $ 1.8 million for the year ended June 30, 2021, which are included in general and administrative expense in the consolidated statements of operations and comprehensive loss.

There were no transaction costs associated with the acquisition for the year ended June 30, 2022.

Unaudited Pro Forma Information

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June 30, Year ended

Revenue $ 880,603 $ 517,438

Net loss $ ( 465,875 ) $ ( 132,721 )

On June 1, 2021, Affirm completed the acquisition of technology and intellectual property from Manhattan Engineering, Inc.

and entered into employment arrangements with certain of its employees (“the Kite acquisition”).

The purchase price was comprised of $ 26.0 million in cash, including $ 9.0 million held in escrow and subject to forfeiture if certain employees terminate within a stipulated time period.

The acquisition date fair value of the consideration transferred was approximately $ 24.8 million which consisted of the following (in thousands):

On January 1, 2021, Affirm Canada Holdings Ltd.

(“Affirm Canada”), a subsidiary of Affirm, and Affirm acquired all outstanding stock of PayBright, Inc., one of Canada’s leading buy now, pay later providers, for approximately $ 288.8 million.

We have included the financial results of PayBright in our consolidated financial statements from the date of acquisition.

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The acquisition date fair value of the consideration transferred for PayBright was approximately $ 288.8 million, which consisted of the following (in thousands):

Cash $ 114,490

Fair value of contingent consideration asset ( 1,241 )

Total acquisition date fair value of consideration transferred $ 24,759

For further details on our fair value methodology with respect to the contingent consideration asset, see Note 13.

Fair value of common stock transferred 116,989

Fair value of contingent consideration 57,275

Total purchase price $ 288,754

For further details on our fair value methodology with respect to the contingent consideration, see Note 14.

Fair Value of Financial Assets and Liabilities.

The acquisition was accounted for as a business combination and reflects the application of acquisition accounting in accordance with 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 the value of assembled workforce.

The goodwill is expected to be deductible for income tax purposes.

The acquisition of PayBright was accounted for as a business combination and reflects the application of acquisition accounting in accordance with ASC 805.

The acquired PayBright assets, including identifiable intangible assets and liabilities assumed, 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, new customer acquisitions, and the value of assembled workforce in Canada.

Goodwill is not expected to be deductible for income tax purposes.

The following table summarizes the allocation of the consideration paid of approximately $ 288.8 million to the fair values of the assets acquired and liabilities assumed at the acquisition date (in thousands):

Cash and cash equivalents $ 8,219

Restricted cash 1,469

Loans held for investment 89,570

Accounts receivable, net 1,537

Property, equipment and software, net 586

Intangible assets 16,653

Other assets 5,651

Total assets acquired $ 123,685

Accounts payable 6,579

Accrued interest payable 23

Accrued expenses and other liabilities 193

Funding debt 85,310

Total liabilities assumed $ 92,105

Net assets acquired $ 31,580

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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 Value Useful Life (Years)

Fair Value Useful Life

Developed technology $ 6,127 3.0

Trademarks 75 1

Merchant relationships 9,505 4.0

Trade name 1,021 5.0

Total intangible assets $ 16,653

The fair values of the intangible assets were determined by applying the replacement cost method.

The fair value measurements are based on significant unobservable inputs, including management estimates and assumptions, and thus represent Level 3 measurements.

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The transaction costs associated with the acquisition were approximately $ 2.4 million for the year ended June 30, 2021, which are included in general and administrative expense in the consolidated statements of operations and comprehensive loss.

Pro forma adjustments would only include the additional amortization that would have been charged assuming the intangible assets had been recorded as of July 1, 2019.

Such adjustments would not be material to the consolidated statements of operations and comprehensive loss for the years ended June 30, 2021 and 2020.

There were no transaction costs associated with the acquisition for the year ended June 30, 2022.

Unaudited Pro Forma Information

June 30, Year ended

Revenue $ 886,937 $ 524,657

Net loss $ ( 447,116 ) $ ( 128,244 )

Balance Sheet Components

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Leasehold improvements 16,169 15,212

Furniture and equipment 5,284 4,713

Computer equipment 10,751 6,707

Furniture and equipment 4,279 5,284

Total Property, equipment and software, at cost $ 231,820 $ 95,400

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Depreciation expense on leasehold improvements, furniture and equipment, and computer equipment is allocated between general and administrative, technology and data analytics, sales and marketing, and processing and servicing based on employee headcount in the consolidated statements of operations and comprehensive loss.

Amortization expense on internal-use software is included as a component of technology and data analytics in the consolidated statements of operations and comprehensive loss.

We recorded impairment expense of $ 1.5 million related to leasehold improvements during the year ended June 30, 2021.

Amortization expense on internally developed software is included as a component of technology and data analytics in the consolidated statements of operations and comprehensive loss.

For the year ended June 30, 2021, we recorded impairment expense of $ 1.5 million related to leasehold improvements.

No impairment losses related to leasehold improvements were noted during both the years ended June 30, 2022 and 2020.

No impairment losses related to property, equipment and software were recorded during the years ended June 30, 2022, 2021, and 2020.

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Goodwill and Intangible Assets

The changes in the carrying amount of goodwill during the years ended June 30, 2022 and 2021 were as follows (in thousands):

Carrying Value

Balance as of June 30, 2020 $ 1,255

Additions 508,581

Effect of foreign currency translation 6,679

Balance as of June 30, 2021 $ 516,515

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Refer to Note 5.

Business Combinations for a description of additions to goodwill during the years ended June 30, 2021 and 2020.

Acquisitions for a description of additions to goodwill during the years ended June 30, 2022 and 2021.

No impairment losses related to goodwill were recorded during the years ended June 30, 2022, 2021, and 2020.

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June 30, 2022

Gross Accumulated Amortization Net Weighted Average

Remaining Useful Life

Gross Accumulated Amortization Net Weighted Average Remaining Useful Life

Merchant relationships $ 38,371 $ ( 10,281 ) $ 28,090 3.6

Developed technology 39,782 ( 15,882 ) 23,900 1.9

Trademarks and domains 3,769 ( 194 ) 3,575 3.3

Assembled workforce 12,490 ( 1,664 ) 10,826 1.3

Trademarks and domains, definite 1,507 ( 802 ) 705 2.4

Trademarks and domains, indefinite 2,146 — 2,146 Indefinite

Other intangibles 350 — 350 Indefinite

Total intangible assets $ 94,646 $ ( 28,629 ) $ 66,017

In connection with the Fast asset acquisition, we also recorded a $ 12.9 million intangible asset representing the option to purchase developed technology as of June 30, 2022.

The asset will not be amortized until the purchase is complete and the asset is placed into service.

Refer to Note 5.

Acquisitions for a description of the acquisition and assets acquired.

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June 30, 2021

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Remaining Useful Life

Merchant relationships $ 38,951 $ ( 2,192 ) $ 36,759 4.5

Developed technology 30,176 ( 2,930 ) 27,246 2.8

Trademarks and domains 2,146 — 2,146 Indefinite

Trademarks and domains (1)

3,769 ( 194 ) 3,575 3.3

Other intangibles 350 — 350 Indefinite

Total intangible assets $ 73,246 $ ( 5,316 ) $ 67,930

Amortization expense for intangible assets was $ 4.6 million for the year ended June 30, 2021 and nil for both the years ended June 30, 2020 and 2019.

(1) As of June 30, 2021, trademarks and domains included both definite and indefinite intangible assets.

Amortization expense for intangible assets was $ 23.5 million, $ 4.6 million and nil for the years ended June 30, 2022, 2021 and 2020, respectively .

No impairment losses related to intangible assets were recorded during the years ended June 30, 2022, 2021 , and 2020.

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The expected future amortization expense of these intangible assets as of June 30, 2022 is as follows (in thousands):

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Commercial Agreement Assets

During the year ended June 30, 2021, we recognized an asset in connection with a commercial agreement with Shopify Inc., in which we granted warrants in exchange for the benefit of acquiring new merchant partners.

This asset represents the probable future economic benefit to be realized over a four-year expected benefit period and is valued based on the fair value of the warrants on the grant date.

During the year ended June 30, 2022, we entered into a commercial agreement with Amazon.com Services LLC and Amazon Payments, Inc.

("Amazon") and granted warrants in exchange for certain exclusivity and performance provisions and the benefit of acquiring new users.

In connection with the agreements, we recognized an asset of $ 133.5 million associated with the portion of the warrants that were fully vested upon execution of the agreement.

The asset was valued based on the fair value of the warrants on the grant date and represents the probable future economic benefit to be realized over the approximately 3.2 year remaining initial term of the commercial agreement.

For the year ended June 30, 2022, we recognized amortization expense of $ 26.3 million in our consolidated statements of operations and comprehensive loss as a component of sales and marketing expense.

Refer to Note 15.

Redeemable Convertible Preferred Stock and Stockholders’ Deficit for further discussion of the warrants.

Redeemable Convertible Preferred Stock and Stockholders’ Equity for further discussion of the warrants.

During the year ended June 30, 2021, 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 June 30, 2021.

For the year ended June 30, 2021, we recorded amortization expense related to the commercial agreement asset of $ 64.9 million in our consolidated statements of operations and comprehensive loss as a component of sales and marketing expense.

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 the year ended June 30, 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.

W e recorded amortization expense related to the commercial agreement asset of

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$ 62.2 million and $ 64.9 million for the years ended June 30, 2022, and 2021 , respectively, in our consolidated statements of operations and comprehensive loss as a component of sales and marketing expense.

During the year ended June 30, 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.

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We initially recognized an asset of $ 25.9 million associated with the fair value of the stock appreciation rights.

During the year ended June 30, 2021, we recorded amortization expense related to the asset of $ 4.3 million in our consolidated statements of operations and comprehensive loss as a component of sales and marketing expense.

We recorded amortization expense related to the asset of $ 8.1 million, and $ 4.3 million for the years ended June 30, 2022, and 2021 , respectively, in our consolidated statements of operations and comprehensive loss as a component of sales and marketing expense.

Other assets consisted of the following (in thousands):

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Operating lease right-of-use assets $ 50,671 $ 57,828

Prepaid payroll taxes for stock-based compensation 111,278 —

Derivative instruments 49,983 2,880

Equity securities, at cost 43,172 11,278

Prepaid expenses 37,497 21,069

Investments, held at cost 11,278 1,850

Prepaid payroll taxes for stock-based compensation 35,172 111,278

Processing reserves 26,483 14,042

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Total other assets $ 281,567 $ 274,679

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Accrued Expenses and Other Liabilities

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June 30, 2022 June 30, 2021

Contingent consideration liability $ 147,820 $ —

Operating lease liability 74,952 —

Deferred lease liability — 4,492

Accrued expenses $ 67,343 $ 47,674

Operating lease liability 65,713 74,952

Collateral held for derivative instruments 55,779 —

Contingent consideration liability 23,348 153,447

Commercial agreement liability — 25,357

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Our acquisition of PayBright included consideration transferred and shares held in escrow, contingent upon the achievement of future milestones.

We classified the contingent consideration as a liability and will remeasure the liability to its fair value at each reporting date until the contingency is resolved.

We classified the contingent consideration as a liability and we will continue to remeasure the liability to its fair value at each reporting date until the contingency is resolved.

As of June 30, 2022, the fair value of the contingent consideration liability was $ 23.3 million.

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Fair Value of Financial Assets and Liabilities.

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During the year ended June 30, 2021, we recognized a liability in connection with a commercial agreement with an enterprise partner of $ 25.9 million.

Fifty percent of this liability is to be settled 180 days after the date of the final prospectus, or January 12, 2021, and the remaining 50 percent is to be settled on the first year anniversary of this date.

As of June 30, 2022, we have fully settled this liability.

We lease facilities under operating leases with various expiration dates through 2030.

We have the option to renew or extend our leases ranging from one month to ten years .

Some lease agreements include the option to terminate the lease with prior written notice ranging from 180 days to one year .

As of June 30, 2021, we have not elected to exercise renewal or termination options.

Lease terms range from one year to ten years .

We have the option to renew or extend our leases.

Certain lease agreements include the option to terminate the lease with prior written notice ranging from 180 days to one year .

As of June 30, 2022, we have not considered such provisions in the determination of the lease term, as it is not reasonably certain these options will be exercised.

Leases have remaining terms that range from less than one year to eight years .

Several leases require us to obtain standby letters of credit, naming the lessor as a beneficiary.

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The cash collateral and deposits for the letters of credit have been recognized as restricted cash in the consolidated balance sheets and totaled $ 9.7 million and $ 9.9 million as of June 30, 2022 and June 30, 2021, respectively.

The weighted average remaining lease term as of June 30, 2021 wa s 5.8 years.

The discount rate used in determining the lease liability for each individual lease was derived from a corporate yield curve which corresponded with the remaining lease term as of July 1, 2020 for leases that existed at adoption and as of the lease commencement date for leases subsequently entered into after July 1, 2020 .

As of June 30, 2021, right-of-use assets of $ 57.8 million were included in other assets , and the related operating lease liability totaled $ 75.0 million and was included in accrued expenses and other liabilities in the consolidated balance sheet.

For the year ended June 30, 2021, we recognized impairment expense of $ 11.5 million for several of our operating lease right-of-use assets, included in general and administrative expense on our consolidated statements of operations and comprehensive loss.

There was no impairment expense related to leases during the years ended June 30, 2020 and 2019.

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Total rent expense incurred for all locations totaled $ 15.3 million, $ 13.7 million, and $ 7.7 million for the years ended June 30, 2021, 2020, and 2019, respectively.

Total rent expense incurred for short term leases with a term 12 months or less totaled $ 1.1 million, $ 1.2 million, and $ 0.3 million for the years ended June 30, 2021, 2020, and 2019, respectively.

As of June 30, 2022, right-of-use assets of $ 50.7 million were included in other assets, and the related operating lease liability totaled $ 65.7 million which was included in accrued expenses and other liabilities in the consolidated balance sheet.

The impairment expense related to leases during the year ended June 30, 2022 was not material to our consolidated statements of operations.

For the year ended June 30, 2021, we recognized impairment expense of $ 11.5 million and for several of our operating lease right-of-use assets, included in general and administrative expense on our consolidated statements of operations and comprehensive loss.

There was no impairment expense related to leases during the year ended June 30, 2020.

The components of operating lease expenses are as follows (in thousands):

2022 2021 2020

Operating lease expense $ 15,200 $ 15,300 $ 13,700

Short-term lease expenses 400 1,100 1,200

We have subleased a portion of our leased facilities.

Sublease income totaled $ 3.1 million during the year ended June 30, 2022.

There was no sublease income for both the years ended June 30, 2021 and 2020.

Lease term and discount rate information are summarized as follows:

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Weighted average discount rate 4.7 %

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Maturities of operating lease liabilities as of June 30, 2022 are as follows (in thousands) for the years ended:

2023 $ 16,445

Thereafter 10,420

2028 and thereafter 7,688

Total lease payments 74,536

Less imputed interest ( 8,823 )

Present value of lease liabilities $ 74,952

Present value of total lease liabilities $ 65,713

Employee Benefits

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The expense incurred associated with these benefits was $ 20.6 million, $ 10.5 million, and $ 7.1 million for the years ended June 30, 2022, 2021, and 2020, respectively.

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Commitments and Contingencies

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Under the normal terms of our whole loans sales to third-party investors, we may become obligated to repurchase loans from investors in certain instances where a breach in representation and warranties is identified.

Generally, a breach in representation and warranties would occur where a loan has been identified as subject to verified or suspected fraud, or in cases where a loan was serviced or originated in violation of Affirm’s guidelines.

We would only experience a loss if the contractual repurchase price of the loan exceeds the fair value on the repurchase date.

Generally, this would occur where a loan has been identified as subject to verified or suspected fraud.

As of June 30, 2021, the aggregate outstanding balance of loans held by third-party investors or unconsolidated VIEs was $ 2,453.9 million, of which we have recorded a repurchase liability of $ 2.1 million within accrued expenses and other liabilities.

The aggregate outstanding balance of loans held by third-party investors or unconsolidated VIEs was $ 4,504.5 million and $ 2,453.9 million as of June 30, 2022 and June 30, 2021, respectively, of which we have recorded a repurchase liability of $ 2.0 million and $ 2.1 million as of June 30, 2022 and June 30, 2021, respectively, within accrued expenses and other liabilities in our consolidated balance sheets.

Legal Proceedings

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In accordance with applicable accounting guidance, we establish an accrued liability for legal proceedings and claims when those matters present loss contingencies which are both probable and reasonably estimable.

All such liabilities arising from current legal and regulatory matters have been recorded in accrued expenses and other liabilities in our consolidated balance sheets and these matters are immaterial.

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Affirm Holdings, Inc.

On February 28, 2022, plaintiff Jeffrey Toole filed a putative class action against Affirm and Max Levchin in the U.S.

District Court for the Northern District of California (the “Toole action”).

The Toole complaint alleges that Affirm violated Sections 10(b) and 20(a) of the Exchange Act, and Rule 10b-5 promulgated thereunder by issuing and then subsequently deleting a tweet from its official Twitter account on February 10, 2022, which omitted full details of Affirm’s second quarter fiscal 2022 financial results.

Toole seeks class certification, unspecified compensatory and punitive damages, and costs and expenses.

On June 9, 2022, the Court appointed Eric Nunez as lead plaintiff and Robbins Geller Rudman & Dowd LLP as class counsel.

Vallieres v Levchin, et al.

On April 25, 2022, plaintiff Michael Vallieres filed a derivative lawsuit in the U.S.

District Court for the Northern District of California against Affirm, as a nominal defendant, and certain of Affirm’s current officers and directors as defendants based on allegations substantially similar to those in the Toole action.

The Vallieres complaint purports to assert claims on Affirm's behalf for breach of fiduciary duty, gross mismanagement, abuse of control, unjust enrichment, and contribution under the federal securities laws, and seeks corporate reforms, unspecified damages and restitution, and fees and costs.

On June 10, 2022, the Court stayed this derivative action pending the resolution of Affirm’s anticipated motion to dismiss the Toole complaint referenced above.

We have determined, based on current knowledge, that the aggregate amount or range of losses that are estimable with respect to the our legal proceedings, including the matters described above, would not have a material adverse effect on our consolidated financial position, results of operations or cash flows.

Amounts accrued as of June 30, 2022 were not material.

The ultimate outcome of legal proceedings involves judgments, estimates and inherent uncertainties, and cannot be predicted with certainty.

Concentrations of Credit Risk

Financial instruments that potentially subject us to significant concentrations of credit risk consist principally of cash and cash equivalents and restricted cash.

We maintain our cash and cash equivalents and restricted cash in accounts at regulated domestic financial institutions and conduct ongoing evaluations of the creditworthiness of the financial institutions with which we do business.

We are exposed to default risk on both loan receivables purchased from our originating bank partners and that are self-originated.

We have substantial credit risk primarily in our consumer loans held for investment and in our cash and cash equivalents.

We maintain our cash and cash equivalents in accounts at regulated domestic financial institutions in amounts that may exceed FDIC insured amounts.

We believe we are not exposed to any significant credit risk in these accounts.

We are exposed to default risk on both loan receivables purchased from our originating bank partners and loan receivables that are self-originated.

The ultimate collectability of a substantial portion of the loan portfolio is susceptible to changes in economic and market conditions.

As of both June 30, 2021 and June 30, 2020, approximately 15 % of loan receivables related to customers residing in the state of California.

No other states or provinces exceeded 10% for either period.

Loans receivables are diversified geographically.

As of June 30, 2022 and June 30, 2021, approximately 12 % and 15 %, respectively, of loan receivables related to customers residing in the state of California.

No other states or provinces exceeded 10%.

Concentrations of Revenue

For the years ended June 30, 2021, 2020, and 2019, approximately 20 % , 28 %, and 20 % of total revenue was driven by one merchant, respectively.

For the year ended June 30, 2022, there were no merchants that exceeded 10% of total revenue, and for the years ended June 30, 2021 and 2020, approximately 20 % and 28 % , respectively, of total revenue was driven by one merchant.

Purchase Commitments

For the years ended June 30, 2022 and 2021, we recorded purchase commitments of $ 37.1 million and $ 89.3 million, respectively, primarily related to cloud and hosting services.

In February 2012, we entered into an agreement with a third-party cloud computing web services provider for our cloud computing and hosting services.

In May 2020, we entered into an addendum to our agreement which included annual spending commitments for the period between May 2020 and April 2023 with an aggregate committed spend of $ 120.0 million during such period.

Our agreement with our cloud computing web services provider will continue indefinitely until terminated by either party.

Our cloud-computing web services provider may terminate the customer agreement for convenience with 30

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days prior written notice and may, in some cases, terminate the agreement immediately for cause upon notice.

If we fail to meet the minimum purchase commitment during any year, we may be required to pay the difference.

We pay our cloud-computing web services provider monthly, and we may pay more than the minimum purchase commitment to our cloud-computing web services provider based on usage.

Transactions with Related Parties

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Some of our directors, principal officers, and their immediate families have received loans facilitated by us, in accordance with our regular consumer loan offerings.

As of June 30, 2021, the outstanding balance and interest earned on such accounts is immaterial.

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As of June 30, 2021 and June 30, 2020, outstanding debt encompasses funding debt and convertible debt.

We have unutilized funding capacity through our revolving credit facility which did not have any borrowings outstanding as of June 30, 2021.

As of June 30, 2022, the outstanding balance and interest earned on such loans is immaterial.

Debt encompasses funding debt, convertible senior notes and our revolving credit facility.

Funding debt and its aggregate future maturities consists of the following (in thousands):

Final Maturity Fiscal Year Ending June 30, 2021 June 30, 2020

June 30, 2022 June 30, 2021

2022 $ — $ 104,159

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2026 — 102,203

2027 and thereafter 103,364 —

Total $ 683,395 $ 689,356

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Each trust entered into a credit agreement and security agreement with a third-party as administrative agent and a national banking association as collateral trustee and paying agent.

Borrowings under these agreements are referred to as funding debt and these proceeds from the borrowings can only be used for the purposes of facilitating loan funding and origination, with advance rates ranging from 83 % to 88 % of the total collateralized balance.

Borrowings under these agreements are referred to as funding debt and proceeds from the borrowings can only be used for the purposes of facilitating loan funding and origination, with advance rates ranging from 83 % to 88 % of the total collateralized balance.

These trusts are bankruptcy-remote special-purpose vehicles in which creditors do not have recourse against the general credit of Affirm.

These revolving facilities mature between 2023 and 2026, and subject to covenant compliance, generally permit borrowings up to 12 months prior to the final maturity date of each respective facility.

These revolving facilities mature between fiscal years 2024 and 2029, and subject to covenant compliance, generally permit borrowings up to 12 months prior to the final maturity date of each respective facility.

As of June 30, 2022, the aggregate commitment amount of these facilities was $ 2,450.0 million on a revolving basis, of which $ 473.3 million was drawn, with $ 1,976.7 million remaining available.

Some of the loans purchased from the originating bank partners are pledged as collateral for borrowings in our facilities.

Some of the loans originated by us or purchased from the originating bank partners are pledged as collateral for borrowings in our facilities.

The unpaid principal balance of these loans totaled $ 549.6 million and $ 664.1 million as of June 30, 2022 and June 30, 2021, respectively.

Borrowings under these warehouse credit facilities bear interest at an annual benchmark rate of LIBOR or at an alternative commercial paper rate (which is either (i) the per annum rate equivalent to the weighted-average of the per annum rates at which all commercial paper notes were issued by certain lenders to fund advances or maintain loans, or (ii) the daily weighted-average of LIBOR, as set forth in the applicable credit agreement), plus a spread ranging from 1.70 % to 4.00 %.

Borrowings under these warehouse credit facilities bear interest at an annual benchmark rate of LIBOR or an alternative commercial paper rate (which is either (i) the per annum rate equivalent to the weighted-average of the per annum rates at which all commercial paper notes were issued by certain lenders to fund advances or maintain

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loans, or (ii) the daily weighted-average of LIBOR, as set forth in the applicable credit agreement), plus a spread ranging from 1.65 % to 4.00 %.

Interest is payable monthly.

In addition, these agreements require payment of a monthly unused commitment fee ranging from 0.00 % to 0.75 % per annum on the undrawn portion available.

These agreements contain certain customary negative covenants and financial covenants including maintaining certain levels of liquidity, leverage, and tangible net worth.

These agreements contain certain customary negative covenants and financial covenants including maintaining certain levels of minimum liquidity, maximum leverage, and minimum tangible net worth.

As of June 30, 2022, we were in compliance with all applicable covenants in the agreements.

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Prior to our acquisition of PayBright on January 1, 2021, PayBright entered into various credit facilities utilized to finance the origination of loan receivables in Canada.

Similar to our warehouse credit facilities,

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borrowings under these agreements are referred to as funding debt, and proceeds from the borrowings may only be used for the purposes of facilitating loan funding and origination.

These facilities are secured by PayBright loan receivables pledged to the respective facility as collateral, mature in 2022, and bear interest based on a commercial paper rate plus a spread ranging from 1.25 % to 4.25 %.

Similar to our warehouse credit facilities, borrowings under these agreements are referred to as funding debt, and proceeds from the borrowings may only be used for the purposes of facilitating loan funding and origination.

These facilities are secured by PayBright loan receivables pledged to the respective facility as collateral, mature in 2024, and bear interest based on a benchmark rate plus a spread ranging from 1.25 % to 4.25 %.

As of June 30, 2022, the aggregate commitment amount of these facilities was $ 484.0 million on a revolving basis, of which $ 183.1 million was drawn, with $ 300.9 million remaining available.

The unpaid principal balance of loans pledged to these facilities totaled $ 74.1 million as of June 30, 2021.

These agreements contain certain customary negative covenants and financial covenants including maintaining certain levels of liquidity, leverage, and tangible net worth at the PayBright subsidiary level.

The unpaid principal balance of loans pledged to these facilities totaled $ 210.1 million and $ 74.1 million as of June 30, 2022 and June 30, 2021, respectively.

These agreements contain certain customary negative covenants and financial covenants including maintaining certain levels of minimum liquidity, maximum leverage, and minimum tangible net worth at the PayBright subsidiary level or the Affirm Holdings level.

As of June 30, 2022, we were in compliance with all applicable covenants in the agreements.

Repurchase Agreement

On June 16, 2021, we entered into a sale and repurchase agreement pursuant to which we sold securities to a counterparty with an obligation to repurchase at a future date and price.

As of June 30, 2021, we had $ 13.9 million in debt outstanding under our repurchase agreement disclosed within funding debt on the consolidated balance sheets.

The outstanding debt relates to $ 16.2 million in pledged securities disclosed within securitization notes receivable and residual certificates (at fair value) on the consolidated balance sheets and will be amortized through regular principal and interest payments on the pledged securities.

The interest rate is 1.07 % on the senior pledged securities and 2.62 % on the residual certificate pledged securities.

The contractual repurchase date is in September 2021.

Prior to the repurchase date and subject to mutual agreement by Affirm and the counterparty, we may enter into a repurchase date extension subject to market interest rates on such extension date.

Convertible Debt

In April 2020, we entered into an agreement with various investors pursuant to which we issued convertible notes in an aggregate principal amount of $ 75.0 million with maturity dates in April 2021 and bearing interest at a rate of 1.00 % per annum.

The principal and any unpaid accrued interest of each convertible note automatically converts into shares of redeemable convertible preferred stock upon the closing of financing in which we receive no less than $ 50.0 million in proceeds from the issuance of redeemable convertible preferred stock.

Upon completion of the Series G equity financing in September 2020, the convertible notes were redeemed under the next equity financing feature, in which the proceeds from the issuance of redeemable convertible preferred stock was not less than $ 50.0 million.

The aggregate outstanding principal and accrued interest balance of the convertible notes of $ 75.5 million was converted into 4,444,321 shares of Series G-1 redeemable convertible preferred stock at a conversion price of $ 16.9374 per share.

This conversion resulted in issuance of $ 88.6 million of Series G-1 redeemable convertible preferred stock at a fair value of $ 19.9263 per share.

The total proceeds were allocated between the liability component of $ 46.5 million and equity component of $ 42.1 million.

The conversion of the convertible notes was accounted for as a debt extinguishment, which resulted in a gain of $ 30.1 million.

This gain represented the difference between the carrying value of the debt at the time of extinguishment and the allocated proceeds.

This gain was recorded in other income (expense), net on the consolidated statements of operations and comprehensive loss.

The reacquisition of the beneficial conversion feature was measured using the intrinsic value of the conversion option at the extinguishment date, which totaled $ 42.1 million, and was recorded in equity.

Repurchase Agreements

We entered into certain sale and repurchase agreements pursuant to our retained interests in our off-balance sheet securitizations where we have sold these securities to a counterparty with an obligation to repurchase at a future date and price.

The repurchase agreements each have an initial term of three months and subject to mutual agreement by Affirm and the counterparty, we may enter into a repurchase date extension for an additional three month term at market interest rates on such extension date.

As of June 30, 2022, the interest rates were 2.68 % on the senior pledged securities for 2022-X1, 2021-Z1 and 2021-Z2 and 4.33 % on the residual certificate pledged securities for 2022-X1, 2021-Z1 and 2021-Z2 .

We had $ 27.0 million and $ 13.9 million in debt outstanding under our repurchase agreements disclosed within funding debt on the consolidated balance sheets as of June 30, 2022 and June 30, 2021, respectively.

The debt will be amortized through regular principal and interest payments on the pledged securities.

The outstanding debt relates to $ 32.4 million and $ 16.2 million in pledged securities disclosed within securities available for sale at fair value on the consolidated balance sheets as of June 30, 2022 and June 30, 2021, respectively.

Convertible Senior Notes

On November 23, 2021, we issued $ 1,725 million in aggregate principal amount of 0% convertible senior notes due 2026 (the “2026 Notes”) in a private placement to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended.

The total net proceeds from this offering, after deducting debt issuance costs, were approximately $ 1,704 million.

The 2026 Notes represent senior unsecured obligations of the Company.

The 2026 Notes do not bear interest except in special circumstances described below, and the principal amount of the 2026 Notes does not accrete.

The 2026 Notes mature on November 15, 2026.

Each $1,000 of principal of the 2026 Notes will initially be convertible into 4.6371 shares of our common stock, which is equivalent to an initial conversion price of approximately $ 215.65 per share, subject to adjustment

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upon the occurrence of certain specified events set forth in the indenture governing the 2026 Notes (the “Indenture”).

Holders of the 2026 Notes may convert their 2026 Notes at their option at any time on or after August 15, 2026 until close of business on the second scheduled trading day immediately preceding the maturity date of November 15, 2026.

Further, holders of the 2026 Notes may convert all or any portion of their 2026 Notes at their option prior to the close of business on the business day immediately preceding August 15, 2026, only under the following circumstances:

1) during any calendar quarter commencing after March 31, 2022 (and only during such calendar quarter), if the last reported sale price of the Class A common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than or equal to 130 % of the conversion price on each applicable trading day;

2) during the five business day period after any five consecutive trading day period (the measurement period) in which the trading price (as defined in the indenture governing the 2026 Notes) per $1,000 principal amount of the 2026 Notes for each trading day of the measurement period was less than 98 % of the product of the last reported sale price of the Company’s Class A common stock and the conversion rate on each such trading day;

3) if the Company calls any or all of the notes for redemption, at any time prior to the close of business on the scheduled trading day immediately preceding the redemption date;

4) upon the occurrence of certain specified corporate events.

Upon conversion of the 2026 Notes, the Company will pay or deliver, as the case may be, cash, shares of our common stock or a combination of cash and shares of our common stock, at the Company’s election.

If we satisfy our conversion obligation solely in cash or through payment and delivery, as the case may be, of a combination of cash and shares of our common stock, the amount of cash and shares of common stock, if any, due upon conversion will be based on a daily conversion value (as set forth in the Indenture) calculated on a proportionate basis for each trading day in a 40 trading day observation period.

No sinking fund is provided for the 2026 Notes.

We may not redeem the notes prior to November 20, 2024.

We may redeem for cash all or part of the notes on or after November 20, 2024 if the last reported sale price of our Class A common stock has been at least 130 % of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such period) ending on, and including, the trading day immediately preceding the date on which we provide notice of redemption at a redemption price equal to 100% of the principal amount of the notes to be redeemed, plus accrued and unpaid special interest, if any.

If a fundamental change (as defined in the Indenture) occurs prior to the maturity date, holders of the 2026 Notes may require us to repurchase all or a portion of their notes for cash at a repurchase price equal to 100% of the principal amount of the 2026 Notes, plus any accrued and unpaid interest to, but excluding, the repurchase date.

In addition, if specific corporate events occur prior to the maturity date of the 2026 Notes, we will be required to increase the conversion rate for holders who elect to convert their 2026 Notes in connection with such corporate events.

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The net carrying amount of the liability component of the convertible senior notes outstanding as of June 30, 2022 consisted of the following (in thousands):

June 30, 2022

Principal $ 1,725,000

Unamortized discount and issuance costs ( 18,332 )

Net carrying amount $ 1,706,668

The 2026 Notes do not bear interest.

For the year ended June 30, 2022, we recognized $ 2.4 million, of interest expense related to the amortization of debt discount and issuance costs in the consolidated statement of operations and comprehensive loss within other (expense) income, net .

As of June 30, 2022, the remaining life of the 2026 Notes is approximately 53 months.

Revolving Credit Facility

On January 19, 2021, we entered into a revolving credit agreement with a syndicate of commercial banks for a $ 185.0 million unsecured revolving credit facility.

This facility bears interest at a rate equal to, at our option, either (a) a Eurodollar rate determined by reference to adjusted LIBOR for the interest period, plus an applicable

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margin of 2.50 % per annum or (b) a base rate determined by reference to the highest of (i) the federal funds rate plus 0.50 % per annum, (ii) the rate last quoted by The Wall Street Journal as the U.S.

prime rate, and (iii) the one-month adjusted LIBOR plus 1.00 % per annum, in each case, plus an applicable margin of 1.50 % per annum.

The revolving credit agreement has a final maturity date of January 19, 2024.

On January 19, 2021, we entered into a revolving credit agreement with a syndicate of commercial banks for a $ 185.0 million unsecured revolving credit facility with a final maturity date of January 19, 2024.

Effective December 15, 2021, we executed our right to terminate the revolving credit agreement and no early termination penalties were incurred.

As of December 15, 2021, we had not drawn on the facility and there was no outstanding balance to be repaid.

Upon termination, we accelerated the amortization of $ 1.2 million of issuance costs which were recorded in other (expense) income, net .

On February 4, 2022, we entered into a new revolving credit agreement with a syndicate of commercial banks for a $ 165.0 million unsecured revolving credit facility.

On May 16, 2022, we increased unsecured revolving commitments under the facility to $ 205.0 million.

This facility bears interest at a rate equal to, at our option, either (a) a Secured Overnight Financing Rate (“SOFR”) rate determined by reference to the forward-looking term SOFR rate for the interest period, plus an applicable margin of 1.85 % per annum or (b) a base rate determined by reference to the highest of (i) the federal funds rate plus 0.50 % per annum, (ii) the rate last quoted by the Wall Street Journal as the U.S.

prime rate and (iii) the one-month forward-looking term SOFR rate plus 1.0 % per annum, in each case, plus an applicable margin of 0.85 % per annum.

The revolving credit agreement has a final maturity date of February 4, 2025.

The facility contains certain covenants and restrictions, including certain financial maintenance covenants, and requires payment of a monthly unused commitment fee of 0.20 % per annum on the undrawn balance available.

There are no borrowings outstanding under the facility at June 30, 2021.

Securitizations and Variable Interest Entities

There are no borrowings outstanding under the facility as of June 30, 2022.

Securitization and Variable Interest Entities

Consolidated VIEs

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Warehouse Credit Facilities

We established certain entities, deemed to be VIEs, to enter into warehouse credit facilities for the purpose of purchasing loans from our originating bank partners.

We established certain entities, deemed to be VIEs, to enter into warehouse credit facilities for the purpose of purchasing loans from our originating bank partners and funding self-originated loans.

Refer to Note 11.

Debt for additional information.

The creditors of the VIEs have no recourse to the general credit of Affirm and the liabilities of the VIEs can only be settled by the respective VIE’s assets;

The creditors of the VIEs have no recourse to the general credit of Affirm and the liabilities of the VIEs can only be settled by the respective VIEs’ assets;

however, as the servicer of the loans pledged to our warehouse funding facilities, we have the power to direct the activities that most significantly impact the VIEs' economic performance.

In addition, we retain significant economic exposure to the pledged loans and therefore, we are the primary beneficiary.

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Securitizations

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We consolidate securitization VIEs when we are deemed to be the primary beneficiary and therefore have the power to direct the activities that most significantly affect the VIEs’ economic performance and a variable interest that could potentially be significant to the VIE.

Through our role as the servicer, we have both the power to direct the activities that most significantly affect the VIEs’ economic performance.

Through our role as the servicer, we have the power to direct the activities that most significantly affect the VIEs’ economic performance.

In evaluating whether we have a variable interest that could potentially be significant to the VIE, we consider our retained interests.

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Where we consolidate the securitization trusts, the loans held in the securitization trusts are included in loans held for investment, and the notes sold to third-party investors are recorded in notes issued by securitization trusts in the consolidated balance sheets.

For the year ended June 30, 2021, we consolidated Affirm Asset Securitization Trust 2020-Z1 (“2020-Z1”), Affirm Asset Securitization Trust 2020-A (“2020-A”), Affirm Asset Securitization Trust 2020-Z2 ("2020-Z2") and

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Affirm Asset Securitization Trust 2021-A (“2021-A”).

Each securitization trust issued senior notes and residual certificates to finance the purchase of the loans facilitated by our platform.

As of June 30, 2022, we consolidated Affirm Asset Securitization Trust 2020-Z1 (“2020-Z1”), Affirm Asset Securitization Trust 2020-A (“2020-A”), Affirm Asset Securitization Trust 2020-Z2 (“2020-Z2”), Affirm Asset Securitization Trust 2021-A (“2021-A”), Affirm Asset Securitization Trust 2021-B (“2021-B”), and Affirm Asset Securitization Trust 2022-A (“2022-A”).

Each securitization trust issued interest-bearing notes and residual certificates to finance the purchase of the loans facilitated by our platform.

At the closing of each securitization, we contributed loans, facilitated through our technology platform and purchased from our originating bank partners, with an aggregate outstanding principal balance of $ 2,554.3 million.

The 2020-Z1 and 2020-Z2 securitizations are secured by static pools of loans contributed at closing, whereas the 2020-A and 2021-A securitization are revolving and we may contribute additional loans from time to time until the end of the revolving period.

The 2020-Z1 and 2020-Z2 securitizations are secured by static pools of loans contributed at closing, whereas the 2021-A, 2021-B, and 2022-A securitizations are revolving and we may contribute additional loans from time to time until the end of the revolving period.

For the 2020-Z2 securitization, we purchased $ 27.9 million of loan receivables from our third-party loan buyers which were then contributed to the trust.

For each securitization, the residual certificates represent the right to receive all the residual cash collected on the loans held by the securitization trust after paying off the senior notes.

All the senior notes were sold to third-party investors.

For 2020-Z1, 2020-A and 2021-A, we retained 100 % of the residual certificates issued by the securitization trusts.

For 2020-Z2, we retained 93.3 % of the residual certificates issued by the securitization trust, and a third-party investor holds the remaining 6.7 % of the residual certificates in 2020-Z2.

For each securitization, the residual certificates represent the right to receive excess cash on the loans each collection period after all fees and required distributions have been made to the note holders on the related payment date.

For 2020-Z1, 2020-A, 2021-A, 2021-B, and 2022-A, all notes were sold to third-party investors and we retained 100 % of the residual certificates issued by the securitization trusts.

For 2020-Z2, all notes were sold to third-party investors and we retained 93.3 % of the residual certificates issued by the securitization trust, and a third-party investor holds the remaining 6.7 % of the residual certificates in 2020-Z2.

The residual trust certificates held by third-party investors are measured at fair value, using a discounted cash flow model, and presented within accrued expenses and other liabilities on the consolidated balance sheets.

In addition to the retained residual certificates, our continued involvement includes loan servicing responsibilities over the life of the underlying loans.

We defer and amortize debt issuance costs for consolidated securitization trusts on a straight-line basis over the expected life of the notes.

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On July 8, 2020, the notes under the 2020-Z1 securitization were issued as a single class:

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These 2021-Z1 notes are recorded at amortized cost on the consolidated balance sheet.

The associated debt issuance costs, which totaled $ 0.7 million as of June 30, 2021, are deferred and amortized into interest expense over the contractual life of the notes.

The 2020-Z1 notes held by third-party investors and the unamortized debt issuance costs are included in notes issued by securitization trusts with a balance of $ 30.5 million on the consolidated balance sheets at June 30, 2022 and are secured by loan receivables at amortized cost of $ 30.3 million included in loans held for investment on the consolidated balance sheets at June 30, 2022.

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Class A in the amount of $ 330.0 million, Class B in the amount of $ 16.2 million, and Class C in the amount of $ 22.1 million (collectively, the “2020-A notes”).

The Class A, Class B, and Class C notes bear interest at a fixed rate of 2.10 %, 3.54 %, and 6.23 %, respectively, and each class has a maturity date of February 18, 2025.

Principal and interest payments began in September 2020 and are payable monthly.

These notes are recorded at amortized cost on the consolidated balance sheet.

The associated debt issuance costs, which totaled $ 2.6 million as of June 30, 2021, are deferred and amortized into interest expense over the contractual life of the notes.

The 2020-A notes held by third-party investors and the unamortized debt issuance costs are included in notes issued by securitization trusts with a balance of $ 368.2 million on the consolidated balance sheets at June 30, 2021 and are secured by loan receivables at amortized cost of $ 384.9 million included in loans held for investment on the consolidated balance sheets as of June 30, 2021.

On April 15, 2022, we exercised the optional redemption right under the 2020-A securitization where Affirm as the 100 % residual certificate owner repurchased the outstanding receivables at a repurchase price of $ 234.0 million which was equal to the fair market value of the receivables as of the last day of the related collection period.

All of the outstanding 2020-A notes were paid at the aggregate redemption price of $ 280.4 million.

The Class A, Class B, and Class C notes previously bore interest at a fixed rate of 2.10 %, 3.54 %, and 6.23 %, respectively, and each class had a final maturity date of February 18, 2025.

On October 22, 2020, the notes under the 2020-Z2 securitization were issued as a single class:

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These 2020-Z2 notes are recorded at amortized cost on the consolidated balance sheet.

The associated debt issuance costs, which totaled $ 1.3 million as of June 30, 2021, are deferred and amortized into interest expense over

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the contractual life of the notes.

The notes held by third-party investors and the unamortized debt issuance costs are included in the 2020-Z2 notes issued by securitization trusts with a balance of $ 102.0 million on the consolidated balance sheets at June 30, 2022 and are secured by loan receivables at amortized cost of $ 101.2 million included in loans held for investment on the consolidated balance sheets at June 30, 2022.

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These notes are recorded at amortized cost on the consolidated balance sheet.

The associated debt issuance costs, which totaled $ 3.1 million as of June 30, 2021, are deferred and amortized into interest expense over the contractual life of the notes.

The associated debt issuance costs totaled $ 0.3 million as of June 30, 2022.

The 2021-A notes held by third-party investors and the unamortized debt issuance costs are included in notes issued by securitization trusts with a balance of $ 500.0 million on the consolidated balance sheets at June 30, 2022 and are secured by loan receivables at amortized cost of $ 498.5 million included in loans held for investment on the consolidated balance sheets as of June 30, 2022.

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On August 4, 2021, the notes under the 2021-B securitization were issued in five classes:

Class A in the amount of $ 418.8 million, Class B in the amount of $ 28.0 million, Class C in the amount of $ 19.8 million, Class D in the amount of $ 22.5 million, and Class E in the amount of $ 11.0 million (collectively, the “2021-B notes”).

The Class A, Class B, Class C, Class D, and Class E notes bear interest at a fixed rate of 1.03 %, 1.24 %, 1.40 %, 2.54 %, and 4.61 %, respectively, and each class has a maturity date of August 17, 2026.

Principal and interest payments began in October 2021 and are payable monthly.

These notes are recorded at amortized cost on the consolidated balance sheet.

The associated debt issuance costs totaled $ 1.8 million as of June 30, 2022.

The 2021-B notes held by third-party investors and the unamortized debt issuance costs are included in notes issued by securitization trusts with a balance of $ 500.0 million on the consolidated balance sheets at June 30, 2022 and are secured by loan receivables at amortized cost of $ 511.1 million included in loans held for investment on the consolidated balance sheets as of June 30, 2022.

On May 4, 2022 the notes under the 2022-A securitization issued in five classes:

Class A in the amount of $ 405.6 million, Class B in the amount of $ 27.6 million, Class C in the amount of $ 26.8 million, Class D in the amount of $ 18.2 million, and Class E in the amount of $ 21.8 million (collectively, the “2022-A notes”).

The Class A, Class B, Class C, Class D, and Class E notes bear interest at a fixed rate of 4.30 %, 4.64 %, 4.89 %, 5.53 %, and 8.04 %, respectively and each class has a maturity date of May 17, 2027.

Principal and interest payments will begin July 2022 and are payable monthly.

These notes are recorded at amortized cost on the consolidated balance sheet.

The associated debt issuance costs totaled $ 2.7 million as of June 30, 2022.

The 2022-A notes held by third-party investors and the unamortized debt issuance costs are included in notes issued by securitization trusts with a balance of $ 499.9 million on the consolidated balance sheets at June 30, 2022 and are secured by loan receivables at amortized cost of $ 519.6 million included in loans held for investment on the consolidated balance sheets as of June 30, 2022.

The following tables present the aggregate carrying value of financial assets and liabilities from our involvement with consolidated VIEs.

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Unconsolidated VIEs

For the year ended June 30, 2021, Affirm Asset Securitization Trust 2021-Z1 (“2021-Z1”) was an unconsolidated VIE.

As the servicer of the loans held within the trust, we have the power to direct the activities that are most significant to the performance of the VIE.

However, we did not retain significant economic exposure through our variable interests and therefore we determined that we are not the primary beneficiary as of June 30, 2021.

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As of June 30, 2022, Affirm Asset Securitization Trust 2021-Z1 (“2021-Z1”), Affirm Asset Securitization Trust 2021-Z2 (“2021-Z2”), Affirm Asset Securitization Trust 2022-X1 (“2022-X1”), and Affirm Asset Securitization Trust 2022-Z1 (“2022-Z1”) were unconsolidated VIEs.

We did not retain significant economic exposure through our variable interests and therefore we determined that we are not the primary beneficiary as of June 30, 2022.

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For 2021-Z1, 2021-Z2, 2022-X1, and 2022-Z1, we retained a 5 % vertical interest in each trust, respectively, via our ownership of 5 % par amount of each class of notes, and 5 % par amount of residual interests.

The remaining 95 % of notes and residual interests were sold to third-party investors .

On May 5, 2021, the notes under 2021-Z1 securitization were issued as a single class:

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However, upon completing the subsequent third-party sale of 81.9 % of the residual certificates on May 17, 2021, we determined that we no longer had significant economic exposure through our variable interests and as such, we determined that we were no longer the primary beneficiary as of this date.

Upon consolidating the 2021-Z1 trust, we recognized a gain of $ 16.7 million, primarily driven by the gain on sale of the loans sold to the trust at closing.

We did not have any unconsolidated VIEs in prior periods.

The following table presents the aggregate carrying value of financial assets and liabilities for unconsolidated VIEs where we hold a variable interest but are not the primary beneficiary as of June 30, 2021 :

Upon deconsolidating the 2021-Z1 trust, we recognized a gain of $ 16.7 million, which is included within gain on sale of loans in our consolidated statements of operations and comprehensive loss.

On November 10, 2021, the notes under 2021-Z2 securitization were issued as a single class:

Class A in the amount of $ 260.0 million (the “2021-Z2 notes”).

The 2021-Z2 notes bear interest at a fixed rate of 1.17 % and have a maturity date of November 16, 2026.

Principal and interest payments began in January 2022 and are payable monthly.

The 2021-Z2 securitization is secured by a static pool of loans which were contributed at the closing date to the 2021-Z2 trust.

The loans contributed at closing were facilitated through our technology platform and purchased from our originating bank partners, with an aggregate outstanding principal balance of $ 287.5 million.

Of the loans sold to the 2021-Z2 trust, we purchased $ 192.5 million of loan receivables from one of our third-party loan buyers, which were contributed to the trust at closing.

At closing, we retained only a 5 % vertical interest in the 2021-Z2 trust via our ownership of 5 % par amount of the 2021-Z2 notes and 5 % par amount of the residual interests.

We were required to retain these interests for compliance with U.S.

risk retention rules.

The third-party loan contributor received 95 % of the residual certificates at closing.

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On the closing date of the 2021-Z2 trust, we recognized a gain on sales of loans sold to the trust of $ 6.1 million, w hich is included within gain on sales of loans in our consolidated statements of operations and comprehensive loss .

On February 9, 2022, the notes under 2022-X1 securitization were issued as a single class:

Class A in the amount of $ 366.5 million (the “2022-X1 notes”).

The 2022-X1 notes bear interest at a fixed rate of 1.75 % and have a maturity date of February 16, 2027.

Principal and interest payments began in April 2022 and are payable monthly.

The 2022-X1 securitization is secured by a static pool of loans which were contributed at the closing date to the 2022-X1 trust.

The loans contributed at closing were facilitated through our technology platform and originated by us or purchased from our originating bank partners, with an aggregate outstanding principal balance of $ 406.2 million.

Of the loans sold to the 2022-X1 trust, we purchased $ 258.3 million of loan receivables from two of our third-party loan buyers, which were contributed to the trust at closing.

At closing, we retained only a 5 % vertical interest in the 2022-X1 trust via our ownership of 5 % par amount of the 2022-X1 notes and 5 % par amount of the residual interests.

We were required to retain these interests for compliance with U.S.

risk retention rules.

The remaining 95 % of the residual certificates were sold to third-party investors at closing.

On the closing date of the 2022-X1 trust, we recognized gain on sales of loans sold to the trust of $ 13.1 million, which is included within gain on sales of loans in our consolidated statements of operations and comprehensive loss.

On June 22, 2022, the notes under 2022-Z1 securitization were issued in two classes:

Class A in the amount of $ 356.0 million and Class B in the amount of $ 15.5 million (collectively the “2022-Z1 notes”).

The 2022-Z1 notes bear interest at a fixed rate of 4.55 % and 6.49 %, respectively and each class has a maturity date of June 15, 2027.

Principal and interest payments begin in August 2022 and are payable monthly.

The 2022-Z1 securitization is secured by a static pool of loans which were contributed at the closing date to the 2022-Z1 trust.

Of the loans sold to the 2022-Z1 trust, we purchased $ 251.7 million of loan receivables from one of our third-party loan buyers, which were contributed to the trust at closing.

At closing, we retained only a 5 % vertical interest in the 2022-Z1 trust via our ownership of 5 % par amount of the 2022-Z1 notes and 5 % par amount of the residual interests.

We were required to retain these interests for compliance with U.S.

risk retention rules.

The remaining 95 % of the residual certificates were sold to third-party investors at closing.

On the closing date of the 2022-Z1 trust, the amount recognized within gain on sale of loans sold to the trust was immaterial, this is included within gain on sales of loans in our consolidated statements of operations and comprehensive loss.

The following information pertains to unconsolidated VIEs where we hold a variable interest but are not the primary beneficiary (in thousands):

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June 30, 2022

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Total unconsolidated VIEs $ 996,242 $ 965,909 $ 30,333 $ 51,248

Assets of unconsolidated VIEs include the carrying value for loans held in the 2021-Z1 trust and cash held in the collection and reserve accounts established for the trust.

Liabilities include the outstanding principal balance of the 2021-Z1 notes.

June 30, 2021

Assets Liabilities Net Assets Maximum Exposure to Losses

Securitizations $ 305,414 $ 304,567 $ 847 $ 16,850

Total unconsolidated VIEs $ 305,414 $ 304,567 $ 847 $ 16,850

Assets of unconsolidated VIEs include the carrying value for loans held in the 2021-Z1, 2021-Z2, 2022-X1, and 2022-Z1 trust and cash held in the collection and reserve accounts established for the trust.

Liabilities include the outstanding principal balance of the 2021-Z1, 2021-Z2, 2022-X1, and 2022-Z1 n otes.

Maximum exposure to losses represents our exposure through our continuing involvement as servicer and through our retained interests.

For 2021-Z1, this includes $ 16.2 million in retained 2021-Z1 notes and residual certificates disclosed within securitization notes receivable and residual certificates (at fair value) in our consolidated balance sheets and $ 0.7 million related to our 2021-Z1 servicing asset and receivables disclosed within other assets in our consolidated balance sheets.

For 2021-Z1, 2021-Z2, 2022-X1 and 2022-Z1, this includes $ 51.7 million in retained notes and residual certificates disclosed within securities available for sale at fair value in our consolidated balance sheets and $ 0.4 million related to our servicing liabilities and receivables disclosed within other assets in our consolidated balance sheets as of June 30, 2022.

Additionally, we may experience a loss due to future repurchase obligations resulting from breaches in representations and warranties in our securitization and third-party sale agreements.

In connection with 2021-Z1, this amount was not material as of June 30, 2021.

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In connection with 2021-Z1, 2021-Z2, 2022-X1 and 2022-Z1, this amount was not material as of June 30, 2022.

Retained Beneficial Interests in Unconsolidated VIEs

The investors of the securitizations have no direct recourse to the assets of Affirm, and the timing and amount of beneficial interest payments is dependent on the performance of the underlying loan assets held within each trust.

We have classified our retained beneficial interests in 2021-Z1 as “available-for-sale” and as such they are disclosed at fair value in our consolidated balance sheets.

The following table contains the amortized cost basis, effect of allowance for credit losses recorded in other income (expense), net, and unrealized gains and losses recorded in other comprehensive income (loss) as of June 30, 2021 (in thousands) :

June 30, 2021

Amortized Cost Allowance for Credit Losses Total Unrealized Gains Total Unrealized Losses Fair Value

Securitization notes receivable and residual certificates $ 16,144 $ ( 3 ) $ 29 $ — $ 16,170

Total $ 16,144 $ ( 3 ) $ 29 $ — $ 16,170

Fair Value of Financial Assets and Liabilities for additional information on the fair value sensitivity of the residual certificates.

Additionally, as of June 30, 2021 , we have pledged the 2021-Z1 retained beneficial interests as collateral in connection with a repurchase agreement as described in Note 11.

We have classified our retained beneficial interests in 2021-Z1, 2021-Z2, 2022-X1, and 2022-Z1 as “available for sale” and as such they are disclosed at fair value in our consolidated balance sheets.

See Note 13 .

Investments and Note 14.

Fair Value of Financial Assets and Liabilities for additional information on the fair value sensitivity of the notes receivable and residual certificates.

Additionally, as of June 30, 2022 , we have pledged the 2021-Z1, 2021-Z2, a nd 2022-X1 ret ained beneficial interests as collateral in connection with a sale and repurchase agreement as described in Note 11.

Marketable Securities

Marketable securities include certain investments classified as cash and cash equivalents and securities available for sale, at fair value, and consist of the following as of each date presented within the consolidated balance sheets (in thousands):

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June 30, 2022 June 30, 2021

Cash and cash equivalents:

Money market funds $ 162,483 $ 143,241

Certificates of deposit 16,026 —

Commercial paper 229,272 —

Government bonds

Securities, available for sale:

Certificates of deposit 300,390 —

Corporate bonds 368,671 —

Commercial paper 478,293 —

Government bonds

Non-US 17,955 —

Securitization notes receivable and certificates (1)

51,678 16,170

Total marketable securities:

$ 2,061,695 $ 159,411

(1) These securities, excluding 2022-Z1, have been pledged as collateral in connection with sale and repurchase agreements as discussed within Note 11.

Securities Available for Sale, at Fair Value

The amortized cost, gross unrealized gains and losses, allowance for credit losses, and fair value of securities available for sale as of June 30, 2022 were as follows (in thousands):

Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Allowance for Credit Losses Fair Value

Certificates of deposit (1)

$ 317,331 $ 6 $ ( 921 ) $ — $ 316,416

Corporate bonds (1)

371,907 7 ( 3,243 ) — 368,671

Commercial paper (1)

708,694 16 ( 1,145 ) — 707,565

Government bonds

Non-US 18,196 — ( 241 ) — 17,955

438,947 — ( 2,020 ) — 436,927

Securitization notes receivable and certificates (2)

52,180 178 ( 659 ) ( 21 ) 51,678

Total securities available for sale $ 1,907,255 $ 207 $ ( 8,229 ) $ ( 21 ) $ 1,899,212

(1) Certificates of deposit, corporate bonds, commercial paper, and US government bonds include $ 303.8 million classified as cash and cash equivalents within the consolidated balance sheets.

(2) These securities, excluding 2022-Z1 , have been pledged as collateral in connection with sale and repurchase agreements as discussed within Note 11.

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The amortized cost, gross unrealized gains and losses, allowance for credit losses, and fair value of securities available for sale as of June 30, 2021 were as follows (in thousands):

Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Allowance for Credit Losses Fair Value

Securitization notes receivable and certificates $ 16,144 $ 29 $ — $ ( 3 ) $ 16,170

Total securities available for sale $ 16,144 $ 29 $ — $ ( 3 ) $ 16,170

As of June 30, 2022 and June 30, 2021, there were no material reversals of prior period allowance for credit losses recognized for available for sale securities.

A summary of securities available for sale with unrealized losses for which an allowance for credit losses has not been recorded, aggregated by investment category and the length of time that individual securities have been in a continuous loss position as of June 30, 2022 , is as follows (in thousands):

Less than or equal to 1 year Greater than 1 year Total

Fair Value Unrealized Losses Fair Value Unrealized Losses Fair Value Unrealized Losses

Certificates of deposit $ 290,169 $ ( 921 ) $ — $ — $ 290,169 $ ( 921 )

Corporate bonds 351,088 ( 3,243 ) — — 351,088 ( 3,243 )

Commercial paper 679,272 ( 1,145 ) — — 679,272 ( 1,145 )

Government bonds

Non-US 17,955 ( 241 ) — — 17,955 ( 241 )

US 431,903 ( 2,020 ) — — 431,903 ( 2,020 )

Securitization notes receivable and certificates 722 ( 45 ) — — 722 ( 45 )

Total securities available for sale (1)

$ 1,771,109 $ ( 7,615 ) $ — $ — $ 1,771,109 $ ( 7,615 )

(1) The number of positions with unrealized losses as of June 30, 2022 totaled 270 .

There were no securities available for sale with unrealized losses for which an allowance for credit losses had not been recorded as of June 30, 2021.

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The length of time to contractual maturities of securities available for sale as of June 30, 2022 , were as follows (in thousands):

Within 1 year Greater than 1 year, less than or equal to 5 years Total

Amortized Cost Fair Value Amortized Cost Fair Value Amortized Cost Fair Value

Certificates of deposit $ 317,331 $ 316,416 $ — $ — $ 317,331 $ 316,416

Corporate bonds 206,208 204,614 165,699 164,057 371,907 368,671

Commercial paper 708,694 707,565 — — 708,694 707,565

Government bonds

Non-US 11,895 11,813 6,301 6,142 18,196 17,955

US 360,757 359,242 78,190 77,685 438,947 436,927

Securitization notes receivable and certificates (1)

— — 52,180 51,678 52,180 51,678

Total securities available for sale $ 1,604,885 $ 1,599,650 $ 302,370 $ 299,562 $ 1,907,255 $ 1,899,212

(1) Based on weighted average life of expected cash flows as of June 30, 2022.

Gross proceeds from matured or redeemed securities for the year ended June 30, 2022 were $ 2,187.8 million.

For available for sale securities realized gains and losses from portfolio sales were not material for the year ended June 30, 2022 and there were no portfolio sales or associated realized gains or losses for the year ended June 30, 2021 .

Non-marketable Equity Securities

Equity investments without a readily determinable fair value held at cost were $ 43.2 million and $ 11.3 million as of June 30, 2022 and June 30, 2021, respectively, and are included in other assets within the consolidated balance sheets.

There have been no unrealized or realized gains and losses due to observable changes in orderly transactions and we did not record any impairment for the years ended June 30, 2022 or June 30, 2021 .

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Fair Value of Financial Assets and Liabilities

ASC 820, "Fair Value Measurement" ("ASC 820") establishes a fair value hierarchy that prioritizes the use of inputs used in valuation methodologies into the following three levels:

Inputs to the valuation methodology are quoted prices, unadjusted, for identical assets or liabilities in active markets.

A quoted price in an active market provides the most reliable evidence of fair value and shall be used to measure fair value whenever available.

Inputs to the valuation methodology include quoted prices for similar assets or liabilities in active markets;

inputs to the valuation methodology include quoted prices for identical or similar assets or liabilities in markets that are not active;

or inputs to the valuation methodology that are derived principally from or can be corroborated by observable market data by correlation or other means.

Inputs to the valuation methodology are unobservable and significant to the fair value measurement.

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Financial Assets and Liabilities Recorded at Fair Value

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Level 1 Level 2 Level 3 Total

Securitization notes receivable $ — $ — $ 15,224 $ 15,224

Residual trust certificates — — 946 946

Cash and cash equivalents:

Money market funds $ 162,483 $ — $ — $ 162,483

Certificates of deposit — 16,026 — 16,026

Commercial paper — 229,272 — 229,272

Government bonds - U.S.

— 58,541 — 58,541

Restricted cash:

Securities available for sale:

Certificate of deposit — 300,390 — 300,390

Corporate bonds — 368,671 — 368,671

Commercial paper — 478,293 — 478,293

Government bonds:

— 17,955 — 17,955

— 378,386 — 378,386

Securitization notes receivable and residual trust certificates — — 51,678 51,678

Total securities available for sale — 1,543,695 51,678 1,595,373

Servicing assets — — 1,192 1,192

Interest rate cap agreement — 2,880 — 2,880

Derivative instruments — 49,983 — 49,983

Total assets $ 162,483 $ 1,897,517 $ 52,870 $ 2,112,870

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Total liabilities $ — $ — $ 30,095 $ 30,095

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The following tables present information about our assets and liabilities that are measured at fair value on a recurring basis as of June 30, 2021 (in thousands):

Level 1 Level 2 Level 3 Total

Cash and cash equivalents:

Money market funds $ 143,241 $ — $ — $ 143,241

Restricted cash:

Securitization notes receivable and residual trust certificates — — 16,170 16,170

Servicing assets — — 2,349 2,349

Derivative instruments — 2,880 — 2,880

Total assets $ 143,241 $ 2,880 $ 18,519 $ 164,640

Constant maturity swaps $ — $ 3,297 $ — $ 3,297

Servicing liabilities $ — $ — $ 3,961 $ 3,961

Performance fee liability — — 1,290 1,290

Convertible debt derivative — — 6,607 6,607

Residual trust certificates, held by third-parties — — 914 914

Contingent consideration — — 153,447 153,447

Profit share liability — — 2,464 2,464

Total liabilities $ — $ — $ 162,076 $ 162,076

There were no transfers between levels during the years ended June 30, 2021 and June 30, 2020.

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There were no transfers between levels during the periods ended June 30, 2022 and June 30, 2021.

Assets and Liabilities Measured at Fair Value on a Recurring Basis (Level 2)

Securitization Notes Receivable

As of the year ended June 30, 2021, we held a retained interest in senior notes issued by our 2021-Z1 securitization.

Refer to Note 12.

Securitizations and Variable Interest Entities for a description of the securitization notes receivable.

As of the year ended June 30, 2021, the securitization notes receivables are recorded at fair value based on an observable market-based transaction price and are classified as Level 2.

Derivative Instruments (Interest Rate Cap Agreement and Constant Maturity Swaps)

As of the year ended June 30, 2021, we had one interest rate cap agreement outstanding to manage interest costs and the risk associated with variable interest rates.

This derivative has not been designated as a hedging instrument.

As of the year June 30, 2021 the interest rate cap is classified as Level 2 and recorded at fair value, based on prices quoted for similar financial instruments in markets that are not active.

The interest rate cap is presented within other assets or accrued expenses and other liabilities on the consolidated balance sheets.

Any changes in the fair value of the financial instrument is reflected in other income (expense), net, on the consolidated statements of operations and comprehensive loss.

During the year ended June 30, 2020, we acquired a series of constant maturity swaps from an institutional bank for the purpose of offsetting variable cash flows related to loan sale pricing fluctuations with a third-party loan buyer.

These derivatives have not been designated as hedging instruments.

The constant maturity swaps are recorded at fair value, based on prices quoted for similar financial instruments in markets that are not active, and are presented within other assets or accrued expenses and other liabilities on the consolidated balance sheets, together with the collateral amount required by the agreements.

Any changes in the fair value of these financial instruments are reflected in other income (expense), net, on the consolidated statements of operations and comprehensive loss.

Securities Available for Sale

As of June 30, 2022, we held marketable securities classified as available for sale.

Management obtains pricing from one or more third-party pricing services for the purpose of determining fair value.

Whenever available, the fair value is based on quoted bid prices as of the end of the trading day.

When quoted prices are not available, other methods may be utilized including evaluated prices provided by third-party pricing services.

Derivative Instruments

Our primary objective in holding derivatives is to reduce the volatility in cash flows associated with our funding activities, arising from changes in interest rates.

We do not employ derivatives for trading or speculative purposes.

As of June 30, 2022 and June 30, 2021, we used a combination of interest rate cap agreements and interest rate swaps to manage interest costs and the risk associated with variable interest rates.

Neither the interest rate caps or the interest rate swaps have been designated as hedging instruments.

As of June 30, 2022 and June 30, 2021, the interest rate caps and interest rate swaps are in a net asset position, and classified as Level 2 within the fair value hierarchy, based on prices quoted for similar financial instruments in markets that are not active.

The fair values are presented gross within other assets and offsetting collateral received by the counterparty is presented as a liability within accrued expenses and other liabilities on the consolidated balance sheets.

Any changes in the fair value of these financial instruments are reflected in other (expense) income, net , on the consolidated statements of operations and comprehensive loss.

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Assets and Liabilities Measured at Fair Value on a Recurring Basis using Significant Unobservable Inputs (Level 3)

We evaluate our financial assets and liabilities subject to fair value measurements on a recurring basis to determine the appropriate level at which to classify them each reporting period.

Since our servicing assets and liabilities, performance fee liability, residual trust certificates, contingent consideration, and profit share liability do not trade in an active market with readily observable prices, we use significant unobservable inputs to measure fair value.

Since our servicing assets and liabilities, performance fee liability, securitization notes and residual trust certificates, contingent consideration, and profit share liability do not trade in an active market with readily observable prices, we use significant unobservable inputs to measure fair value.

This determination requires significant judgments to be made.

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We estimate adequate compensation as the rate a willing market participant would require for servicing loans with similar characteristics as those in the serviced portfolio.

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Discount Rate

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We estimate the timing and probability of early loan payoffs, loan defaults and write-offs, thus affecting the projected unpaid principal balance and expected term of the loan, which are used to project future servicing revenue and expenses.

We earned $ 24.7 million, $ 14.8 million, and $ 5.1 million of servicing income for the years ended June 30, 2021, 2020, and 2019, respectively.

We earned $ 65.8 million, $ 24.7 million, and $ 14.8 million of servicing income for the year ended June 30, 2022, 2021, and 2020, respectively.

As of June 30, 2022 and June 30, 2021, the aggregate fair value of the servicing assets was measured at $ 1.2 million and $ 2.3 million, respectively, and presented within other assets on the consolidated balance sheets.

As of June 30, 2022 and June 30, 2021, the aggregate fair value of the servicing liabilities was measured at $ 2.7 million and $ 4.0 million, respectively, and presented within accrued expenses and other liabilities on the consolidated balance sheets.

The following table summarizes the activity related to the aggregate fair value of our servicing assets (in thousands):

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The following table summarizes the activity related to the aggregate fair value of our servicing assets during the years ended June 30, 2022 and June 30, 2021 (in thousands):

Servicing Assets

3 unchanged sentences

Fair value at end of period $ 1,192 $ 2,349

The following table summarizes the activity related to the aggregate fair value of our servicing liabilities (in thousands):

The following table summarizes the activity related to the aggregate fair value of our servicing liabilities during the years ended June 30, 2022 and June 30, 2021 (in thousands):

Servicing Liabilities

3 unchanged sentences

Fair value at end of period $ 2,673 $ 3,961

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The following table presents quantitative information about the significant unobservable inputs used for our Level 3 fair value measurement of servicing assets and liabilities as of June 30, 2022:

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(1) Estimated cost of servicing a loan as a percentage of unpaid principal balance

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The following table summarizes the effect that adverse changes in estimates would have on the fair value of the servicing assets and liabilities given hypothetical changes in significant unobservable inputs (in thousands):

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This liability is measured using a discounted cash flow model and recorded at fair value and presented within accrued expenses and other liabilities on the consolidated balance sheets.

Any changes in the fair value of the liability are reflected in other income (expense), net, on the consolidated statements of operations and comprehensive loss.

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The following table summarizes the activity related to the fair value of the performance fee liability (in thousands):

Year Ended June 30,

Any changes in the fair value of the liability are reflected in other (expense) income, net , on the consolidated statements of operations and comprehensive loss.

The following table summarizes the activity related to the fair value of the performance fee liability during the years ended June 30, 2022 and June 30, 2021 (in thousands):

Performance Fee Liability

Fair value at beginning of period $ 1,290 $ 875

Purchases of loans 1,764 1,372

Settlements Paid ( 418 ) —

Subsequent changes in fair value ( 926 ) ( 957 )

Fair value at end of period $ 1,710 $ 1,290

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Significant unobservable inputs used for our Level 3 fair value measurement of the performance fee liability are the discount rate, refund rate, and default rate.

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Default rate 1.78 % 3.10 % 2.42 %

The following table presents quantitative information about the significant unobservable inputs used for our Level 3 fair value measurement of the performance fee liability as of June 30, 2020:

Level 3 fair value measurement of the performance fee liability as of June 30, 2021:

Unobservable Input Minimum Maximum Weighted Average

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Default rate 1.78 % 2.83 % 1.80 %

Convertible Debt Derivative

Refer to Note 11.

Debt for a description of the convertible debt derivative liability.

On September 11, 2020, the convertible notes were converted into 4,444,321 shares of Series G-1 redeemable convertible preferred stock.

The conversion of the notes was accounted for as a debt extinguishment and as such the convertible debt derivative liability was extinguished.

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Residual Trust Certificates Held by Third-Parties in Consolidated VIEs

Refer to Note 12.

Securitizations and Variable Interest Entities for a description of the 2020-Z2 securitization trust.

Securitization and Variable Interest Entities for a description of the 2020-Z2 securitization trust.

Residual trust certificates held by third-party investor(s) are measured at fair value, using a discounted cash flow model, and presented within accrued expenses and other liabilities on the consolidated balance sheets.

Any changes in the fair value of the liability are reflected in other income (expense), net, on the consolidated statements of operations and comprehensive loss.

The following table summarizes the activity related to the fair value of the residual trust certificates held by third-parties (in thousands):

June 30, 2021

Any changes in the fair value of the liability are reflected in other (expense) income, net , on the consolidated statements of operations and comprehensive loss.

The following table summarizes the activity related to the fair value of the residual trust certificates held by third-parties during the years ended June 30, 2022 and June 30, 2021 (in thousands):

Fair value at beginning of period $ 914 $ —

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Significant increases or decreases in any of the inputs in isolation could result in a significantly lower or higher fair value measurement.

The following table presents quantitative information about the significant unobservable inputs used for our Level 3 fair value measurement of the residual trust certificates held by third-parties as of June 30, 2021:

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Unobservable Input Minimum Maximum Weighted Average

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The following table summarizes the effect that adverse changes in estimates would have on the fair value of the securitization residual certificates held by third-party investor(s) given hypothetical changes in significant unobservable inputs (in thousands):

June 30, 2021

June 30, 2022 June 30, 2021

Discount rate assumption:

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Prepayment rate decrease of 50% $ ( 3 ) $ ( 20 )

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Retained Beneficial Interests in Unconsolidated VIEs

As of June 30, 2021 , the Company held residual trust certificates with an aggregate fair value of $ 0.9 million in connection with the 2021-Z1 securitization, which is an unconsolidated securitization.

The balances consist of residual trust certificates corresponding to the 5 % economic risk retention the Company is required to maintain as the securitization sponsor.

As of June 30, 2022, the Company held notes receivable and residual trust certificates with an aggregate fair value of $ 51.7 million in connection with th e 2021-Z1, 2021-Z2, 2022-X1, and 2022-Z1 securitizations, which are unconsolidated securitizations.

The balances correspond to the 5 % economic risk retention the Company is required to maintain as the securitization sponsor.

Refer to Note 12.

Securitizations and Variable Interest Entities for further description of the 2021-Z1 securitization trust.

These assets are measured at fair value using a discounted cash flow model, and presented within securitization notes receivable and residual certificates (at fair value) on the consolidated balance sheets.

Changes in the fair value, other than declines in fair value due to credit recognized as an impairment, are reflected in other comprehensive income (loss) on the consolidated statements of operations and comprehensive loss.

Declines in fair value due to credit are reflected in other income (expense), net on the consolidated statements of operations and comprehensive loss.

The following table summarizes the activity related to the fair value of the residual trust certificates (in thousands):

June 30, 2021

Securitization and Variable Interest Entities for a further description of the 2021-Z1, 2021-Z2, 2022-X1and 2022-Z1 securitization trusts.

These assets are measured at fair value using a discounted cash flow model, and presented within securities available for sale at fair value on the consolidated balance sheets.

Changes in the fair value, other than declines in fair value due to credit recognized as an allowance, are reflected in other comprehensive income (loss) on the consolidated statements of operations and comprehensive loss.

Declines in fair value due to credit are reflected in other (expense) income, net on the consolidated statements of operations and comprehensive loss.

The following table summarizes the activity related to the fair value of the notes receivable and residual trust certificates during the years ended June 30, 2022 and June 30, 2021 (in thousands):

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Fair value at beginning of period $ 16,170 $ —

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Prepayment rate 5.25 % 35.00 % 18.48 %

The following table presents quantitative information about the significant unobservable inputs used for our Level 3 fair value measurement of the residual trust certificates as of June 30, 2021 :

Unobservable Input Minimum Maximum Weighted Average

Discount rate 11.46 % 11.46 % 11.46 %

Loss rate 0.61 % 0.61 % 0.61 %

Prepayment rate 10.50 % 10.50 % 10.50 %

The following table summarizes the effect that adverse changes in estimates would have on the fair value of the securitization residual trust certificates given hypothetical changes in significant unobservable inputs (in thousands):

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June 30, 2021

Discount rate assumption:

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Prepayment rate decrease of 50% $ ( 519 ) $ ( 27 )

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Contingent Consideration

Our acquisition of PayBright included consideration transferred and shares held in escrow where the shares released from escrow are contingent upon the achievement of future milestones.

We classified the contingent consideration as a liability and will remeasure the liability to its fair value at each reporting date until the contingency is resolved.

The acquisition date fair value of the contingent consideration liability was estimated using a Monte Carlo simulation.

The number of shares released from escrow is determined based on simulated revenue, and the acquisition date fair value of the contingent consideration is equal to the number of shares released from escrow multiplied by the simulated share price, discounted at the risk-free rate.

The change in fair value of the contingent consideration at each reporting date is recognized as a component of other income (expense), net in the consolidated statements of operations and comprehensive loss for the respective period.

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The following table summarizes the activity related to the fair value of the PayBright contingent consideration (in thousands):

June 30, 2021

Our acquisition of PayBright included consideration transferred and shares held in escrow, contingent upon the achievement of future milestones.

We classified the contingent consideration as a liability.

The acquisition date fair value of the contingent consideration liability was estimated using a Monte Carlo simulation in which the fair value is equal to the estimated number of shares to be released from escrow, which are determined based on simulated revenue, multiplied by the simulated share price, discounted at the risk-free rate.

The liability is remeasured to its fair value at each reporting date, utilizing a Monte Carlo simulation for periods in which actual revenues are unknown, until the contingency is resolved.

During the year ended June 30, 2022 one of these milestones was achieved and a portion of the shares were released from escrow, resulting in a reduction to the contingent liability.

The change in fair value of the contingent consideration at each reporting date is recognized as a component of other (expense) income, net in the consolidated statements of operations and comprehensive loss for the respective period.

The following table summarizes the activity related to the fair value of the PayBright contingent consideration during the years ended June 30, 2022 and June 30, 2021 (in thousands):

Fair value at beginning of period $ 153,447 $ —

Acquisition date fair value 57,275

Subsequent changes in fair value ( 89,313 ) 150,135

Fair value of shares released from escrow ( 32,110 ) —

Effect of foreign currency translation ( 8,676 ) 3,312

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Significant increases or decreases in any of the inputs in isolation could result in a significantly lower or higher fair value measurement.

The following table presents quantitative information about the significant unobservable inputs used for our Level 3 fair value measurement of the PayBright contingent consideration as of June 30, 2021:

The following table presents quantitative information about the significant unobservable inputs used for our Level 3 fair value measurement of the contingent consideration as of June 30, 2022:

Unobservable Input Minimum Maximum Weighted Average

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Revenue volatility 11.00 % 144.00 % 34.00 %

Level 3 fair value measurement of the contingent consideration as of June 30, 2021 :

Unobservable Input Minimum Maximum Weighted Average

Discount rate 12.00 % 12.00 % 12.00 %

Equity volatility 37.00 % 97.00 % 62.00 %

Revenue volatility 8.00 % 98.00 % 37.00 %

The Kite acquisition included $ 9.0 million of cash held in escrow, the release of which is determined based on employee retention.

The acquisition date fair value of the contingent consideration was estimated using a probability-weighted approach in which the likelihoods of potential employee retention outcomes were applied to the respective payout amounts and discounted to present value.

The contingent consideration asset will be remeasured to fair value at each reporting date based on the remaining amount held in escrow, passage of time, and any changes in expectations regarding employee retention outcomes until the contingency is resolved.

The change in fair value of the contingent consideration asset at each reporting date is recognized as a component of other income (expense), net in the consolidated statements of operations and comprehensive loss for the respective period.

The acquisition date fair value as of June 1, 2021 was $ 1.2 million.

For the year ended June 30, 2021, the change in fair value of the contingent consideration asset related to the Kite acquisition was not material.

The acquisition date fair value of the contingent consideration of $ 1.2 million was estimated using a probability-weighted approach in which the likelihoods of potential employee retention outcomes were applied to the respective payout amounts and discounted to present value.

The contingent consideration asset is remeasured to fair value at each reporting date based on the remaining amount held in escrow, passage of time, and

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any changes in expectations regarding employee retention outcomes until the contingency is resolved.

The change in fair value of the contingent consideration asset at each reporting date is recognized as a component of other (expense) income, net in the consolidated statements of operations and comprehensive loss for the respective period.

During the year ended June 30, 2022, the contingency was resolved and the fair value of the contingent consideration asset was reduced to zero .

For the years ended June 30, 2022 and 2021, respectively, the change in fair value of the contingent consideration asset was not material.

Profit Share Liability

During the year ended June 30, 2021, we entered into a commercial agreement with an enterprise partner, pursuant to which we are obligated to share in the profitability of transactions facilitated by our platform on their properties.

During the fiscal year ended June 30, 2021, we entered into a commercial agreement with an enterprise partner, in which we are obligated to share in the profitability of transactions facilitated by our platform.

Upon capture of a loan under this program, we record a liability associated with the estimated future profit to be shared over the life of the loan based on estimated program profitability levels.

This liability is measured using a discounted cash flow model and recorded at fair value and presented within accrued expenses and other liabilities on the consolidated balance sheets.

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The following table summarizes the activity related to the fair value of the profit share liability (in thousands):

June 30, 2021

The following table summarizes the activity related to the fair value of the profit share liability during the years ended June 30, 2022 and June 30, 2021 (in thousands):

Fair value at beginning of period $ 2,464 $ —

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Program profitability 1.25 % 3.54 % 1.28 %

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The following table presents quantitative information about the significant unobservable inputs used for our Level 3 fair value measurement of the profit sharing liability as of June 30, 2021:

Unobservable Input Minimum Maximum Weighted Average

Discount rate 30.00 % 30.00 % 30.00 %

Program profitability 1.79 % 3.75 % 3.75 %

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Financial Assets and Liabilities Not Recorded at Fair Value

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Carrying Amount Level 1 Level 2 Level 3 Balance at Fair Value

Cash and cash equivalents $ 1,466,558 $ 1,466,558 $ — $ — $ 1,466,558

Restricted cash 226,074 226,074 — — 226,074

Loans held for sale $ 2,670 $ — $ 2,670 $ — $ 2,670

Loans held for investment, net 2,348,169 — — 2,412,871 2,412,871

Accounts receivable, net 91,575 — 91,575 — 91,575

Other assets 12,661 — 12,661 — 12,661

Total assets $ 2,363,500 $ — $ 15,331 $ 2,412,871 $ 2,428,202

Accounts payable $ 57,758 $ — $ 57,758 $ — $ 57,758

Payable to third-party loan owners 50,079 — 50,079 — 50,079

Accrued interest payable 2,751 — 2,751 — 2,751

Accrued expenses and other liabilities 161,502 — 159,387 2,115 161,502

Convertible senior notes, net (1)

$ 1,706,668 $ — $ 984,285 $ — $ 984,285

Notes issued by securitization trusts 1,627,580 — — 1,529,401 1,529,401

Funding debt (2)

683,395 — — 683,388 683,388

Total liabilities $ 4,017,643 $ — $ 984,285 $ 2,212,789 $ 3,197,074

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(1) The estimated fair value of the convertible senior notes is determined based on a market approach, using the estimated or actual bids and offers of the notes in an over-the-counter market on the last business day of the period.

(2) As of June 30, 2022 , debt issuance costs in the amount of $ 10.8 million, was included within funding debt.

The following table presents the fair value hierarchy for financial assets and liabilities not recorded at fair value as of June 30, 2021 (in thousands):

Carrying Amount Level 1 Level 2 Level 3 Balance at Fair Value

Cash and cash equivalents $ 267,059 $ 267,059 $ — $ — $ 267,059

Restricted cash 61,069 61,069 — — 61,069

Loans held for sale $ 13,030 $ — $ 13,030 $ — $ 13,030

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Accrued expenses and other liabilities 161,502 — 159,387 2,115 161,502

Convertible debt 67,615 — — 67,615 67,615

Notes issued by securitization trusts 1,176,673 — — 1,184,663 1,184,663

Funding debt 689,356 — — 689,356 689,356

Total liabilities $ 2,138,119 $ — $ 269,975 $ 1,876,134 $ 2,146,109

Redeemable Convertible Preferred Stock and Stockholders’ Deficit

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Redeemable Convertible Preferred Stock and Stockholders’ Equity

Redeemable Convertible Preferred Stock

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These shares had a liquidation preference of $ 75.3 million prior to conversion.

During the year ended June 30, 2020, we issued 75,872 shares of Series F redeemable convertible preferred stock at $ 13.18 per share for an aggregate purchase amount of $ 1.0 million.

Additionally, we reissued 1,100,000 shares of our Series A redeemable convertible preferred stock at $ 13.18 per share for gross proceeds of $ 14.5 million and repurchased 1,326,611 shares of our Series C redeemable convertible preferred stock at $ 13.18 per share for an aggregate purchase price of $ 17.5 million and 386,994 shares of our Series D redeemable convertible preferred stock at $ 13.18 per share for an aggregate purchase price of $ 5.1 million.

The repurchases were recorded as a decrease to the carrying value of redeemable convertible preferred stock and the excess of the purchase price over the carrying amount of redeemable convertible preferred stock was recorded to additional paid in capital.

During the year ended June 30, 2019, we issued 23,310,166 shares of Series F redeemable convertible preferred stock at $ 13.18 per share for an aggregate purchase amount of $ 307.3 million.

Additionally, we repurchased 1,100,000 shares of our Series A redeemable convertible preferred stock at $ 13.18 per share for an aggregate purchase price of $ 14.5 million.

The repurchase was recorded as a decrease to the carrying value of

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redeemable convertible preferred stock and the excess of the purchase price over the carrying amount of the redeemable convertible preferred stock was recorded to additional paid in capital.

On January 12, 2021, prior to our initial public offering, all outstanding shares of redeemable convertible preferred stock were converted into shares of our common stock on a one-to-one basis and their carrying value of $ 1.3 billion was reclassified into stockholders' deficit.

On January 12, 2021, prior to our IPO, all outstanding shares of redeemable convertible preferred stock were converted into shares of our common stock on a one-to-one basis and their carrying value of $ 1.3 billion was reclassified into stockholders' deficit.

Following this conversion, we amended and restated our certificate of incorporation to effect a reclassification of each share of our outstanding common stock into ½ share of Class A common stock and ½ share of Class B common stock, with cash paid for fractional shares.

As of June 30, 2021, there were no shares of redeemable convertible preferred stock issued and outstanding.

A summary of the authorized, issued and outstanding redeemable convertible preferred stock as of June 30, 2020 is as follows:

Shares Carrying Value (in thousands) Liquidation Preference (in thousands)

Series Authorized Issued and

A 21,428,572 21,428,572 $ 21,598 $ 21,616

B 19,788,417 19,788,417 25,941 26,000

C 15,129,141 13,802,530 72,661 72,905

D 22,705,526 22,318,532 137,471 137,614

E 21,391,882 21,391,882 242,435 242,597

F 24,009,471 23,386,038 304,064 308,300

Total 124,453,009 122,115,971 $ 804,170 $ 809,032

Significant terms of the redeemable convertible preferred stock were as follows:

Liquidation Preference

In the event of any liquidation event, either voluntary or involuntary, the holders of each series of redeemable convertible preferred stock shall be entitled to receive on a pari passu basis, prior and in preference to any distributions of any assets of the Company to the holders of the common stock by reason of their ownership thereof, an amount per share equal to the sum of one times the applicable original issuance price plus any declared but unpaid dividends.

The original issuance price for Series A redeemable convertible preferred stock, Series B redeemable convertible preferred stock, Series C redeemable convertible preferred stock, Series D redeemable convertible preferred stock, Series E redeemable convertible preferred stock, Series F redeemable convertible preferred stock, Series G redeemable convertible preferred stock, and Series G-1 redeemable convertible preferred stock is $ 0.3500 , $ 1.3139 , $ 5.2766 , $ 6.1659 , $ 11.3406 , $ 13.1831 , $ 19.9263 , and $ 16.9374 per share, respectively.

If the proceeds distributed among the holders of the redeemable convertible preferred shares are insufficient to permit the payment to such holders of the full preferential amounts, the entire assets and funds of the Company legally available for distribution shall be distributed ratably among the holders of the redeemable convertible preferred stock in proportion to the preferential amount that each such holder is otherwise entitled to receive.

After payment has been made to the holders of the redeemable convertible preferred stock of their full respective preferential amounts, all of the remaining assets of the Company shall be distributed ratably among the holders of common stock.

The holders of each series of redeemable convertible preferred stock shall be entitled to receive dividends, out of any funds legally available the rate of $ 1.3550 per annum for each share of Series G-1 redeemable preferred stock, $ 1.5941 per annum for each share of Series G redeemable convertible preferred stock, $ 1.0546 per annum for each share of Series F redeemable convertible preferred stock, $ 0.9072 per annum for each share of Series E

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redeemable convertible preferred stock, $ 0.4933 per annum for each share of Series D redeemable convertible preferred stock, $ 0.4221 per annum for each share of Series C redeemable convertible preferred stock, $ 0.1051 per annum for each share of Series B redeemable convertible preferred stock and $ 0.0280 per annum for each share of Series A redeemable convertible preferred stock (each as adjusted for stock splits, stock dividends, reclassification and the like) payable quarterly when, as, and if declared by the Board of Directors.

Such dividends shall not be cumulative.

Following the payment in full of any dividends to the holders of redeemable convertible preferred stock, any additional dividends shall be distributed first to the holders of the common stock until each holder of common stock has received an amount equal to $ 0.0280 per share (as adjusted for stock splits, stock dividends, reclassification and the like) and then among the holders of Series A redeemable convertible preferred stock and common stock pro rata based on the number of shares of common stock then held by each holder (assuming conversion of all such Series A redeemable convertible preferred stock into common stock), until each such holder of common stock or Series A redeemable convertible preferred stock has received an additional $ 0.0771 per share (as adjusted for stock splits, stock dividends, reclassification and the like) and then among the holders of Series A redeemable convertible preferred stock, the Series B redeemable convertible preferred stock and common stock pro rata based on the number of shares of common stock then held by each holder (assuming conversion of all such Series A redeemable convertible preferred stock into common stock), until each such holder of common stock, Series A redeemable convertible preferred stock or Series B redeemable convertible preferred stock has received an additional $ 0.3170 per share (as adjusted for stock splits, stock dividends, reclassification and the like) and then among the holders of Series A redeemable convertible preferred stock, the Series B redeemable convertible preferred stock, the Series C redeemable convertible preferred stock and common stock pro rata based on the number of shares of common stock then held by each holder (assuming conversion of all such Series A redeemable convertible preferred stock, Series B redeemable convertible preferred stock and Series C redeemable convertible preferred stock into Common Stock), until each holder of common stock, Series A redeemable convertible preferred stock, Series B redeemable convertible preferred stock or Series C redeemable convertible preferred stock has received an additional $ 0.0712 per share (as adjusted for stock splits, stock dividends, reclassification and the like) and then among holders of Series A redeemable convertible preferred stock, the Series B redeemable convertible preferred stock, the Series C redeemable convertible preferred stock, the Series D redeemable convertible preferred stock and common stock pro rata based on the number of shares of common stock then held by each holder (assuming conversion of all such Series A redeemable convertible preferred stock, Series B redeemable convertible preferred stock, Series C redeemable convertible preferred stock and Series D redeemable convertible preferred stock into Common Stock) until each such holder of common stock, Series A redeemable convertible preferred stock, Series B redeemable convertible preferred stock, Series C redeemable convertible preferred stock or Series D redeemable convertible preferred stock has received an additional $ 0.4139 per share (as adjusted for stock splits, stock dividends, reclassification and the like), and then among the holders of Series A redeemable convertible preferred stock, Series B redeemable convertible preferred stock, Series C redeemable convertible preferred stock, Series D redeemable convertible preferred stock, Series E redeemable convertible preferred stock, Series F redeemable convertible preferred stock, Series G redeemable convertible preferred stock, Series G-1 redeemable convertible preferred stock and common stock pro rata based on the number of shares of common stock then held by each holder (assuming conversion of all such Series A redeemable convertible preferred stock, Series B redeemable convertible preferred stock, Series C redeemable convertible preferred stock, Series D redeemable convertible preferred stock, Series E redeemable convertible preferred stock, Series F redeemable convertible preferred stock, Series G redeemable convertible preferred stock, and Series G-1 redeemable convertible preferred stock into common stock).

The holders of redeemable convertible preferred stock have the same voting rights as a holder of common stock.

The holders of common stock and redeemable convertible preferred stock vote together as a single class in all matters.

Each holder of common stock is entitled to one vote for each share of common stock held, and each holder of redeemable convertible preferred stock is entitled to the number of votes equal to the number of shares of common stock into which such shares of redeemable convertible preferred stock could then be converted.

The holders of the common stock, voting separately as a single class, are entitled to elect three directors of the

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The holders of the Series B redeemable convertible preferred stock, voting separately as a single class, are entitled to elect two of the corporation.

The holders of the Series C redeemable convertible preferred stock, voting separately as a single class, are entitled to elect one director of the corporation.

The holders of the Series D redeemable convertible preferred stock, voting separately as a single class, are entitled to elect one director of the corporation.

The holders of the Series F redeemable convertible preferred stock, voting separately as a single class, are entitled to elect one director of the corporation.

The holders of the common stock and redeemable convertible preferred stock (excluding the Series E redeemable convertible preferred stock), voting together as a single class, on an as converted basis, are entitled to elect all other directors of the corporation.

Each share of redeemable convertible preferred stock is convertible to common stock at the option of the holder.

Such conversion is determined by dividing the original issue price by the then-effective conversion price (adjusted for any stock dividends, combinations, or splits with respect to such shares).

As of June 30, 2020, each share of redeemable convertible preferred stock was convertible into one share of common stock.

Each share of redeemable convertible preferred stock is automatically converted into shares of common stock at the conversion rate then in effect for such series of redeemable convertible preferred stock immediately upon the earlier of (i) the Company’s sale of its common stock in a firm commitment underwritten public offering pursuant to a registration statement under the Securities Act of 1933, as amended, resulting in a post-offering market capitalization of the Company of at least $ 2 billion and for the total offering with gross proceeds to the Company of not less than $ 100 million or (ii) the date or upon the occurrence of an event, specified by written consent or agreement of each of (A) the holders of at least sixty percent of the Series B redeemable convertible preferred stock then outstanding, voting as a separate series, (B) the holders of at least seventy-five percent of the Series C redeemable convertible preferred stock then outstanding, voting as a separate series and (C) the holders of at least a majority of the Series D redeemable convertible preferred stock then outstanding, voting as a separate series, (D) the holders of a majority of the Series E redeemable convertible preferred stock then outstanding, voting as separate series, and (E) either (x) the holders of at least eighty-five percent of the then outstanding shares of Series F redeemable convertible preferred stock, voting as a separate series, or (y) the holders of a majority of the then outstanding shares of Series F redeemable convertible preferred stock, voting as a separate series, provided that such majority includes the Special Series F Investor Vote, and (F) the holders of a majority of the Series G redeemable convertible preferred stock then outstanding, voting as a separate series.

The redeemable convertible preferred stock does not have any redemption rights that are at the election of the holders.

However, the redeemable convertible preferred stock is entitled to payment upon the occurrence of certain contingent liquidity events that do not cause the entire entity to be liquidated, such as certain change of control provisions.

As it relates to payment upon the occurrence of a contingent event, we evaluated the redeemable convertible preferred stock in accordance with the guidance in ASC 480, “Distinguishing Liabilities from Equity,” and determined that the payment of liquidation amounts due upon the occurrence of a contingent event is not solely within our control and accordingly the redeemable convertible preferred stock is classified in temporary equity in the consolidated balance sheet.

As it relates to the accretion to redemption value, the redeemable convertible preferred stock is not currently redeemable, nor is it probable that the instrument will become redeemable, as it is only redeemable upon the occurrence of a contingent event that is not probable to occur.

Accordingly, no accretion has been recognized for the redeemable convertible preferred stock and it will not be accreted until it is probable that the shares will become redeemable.

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As of June 30, 2022 and June 30, 2021, there were no shares of redeemable convertible preferred stock issued and outstanding.

The Company had shares of common stock reserved for issuance as follows:

June 30, 2022 June 30, 2021

Conversion of redeemable convertible preferred stock — 122,115,971

Exercise of warrants — 706,065

Available outstanding under stock option plan 58,417,514 50,771,657

Available for future grant under stock option plan 29,793,755 4,904,531

Available outstanding under stock plan 53,158,233 58,417,514

Available for future grant under stock plan 31,156,746 29,793,755

Total 84,314,979 88,211,269

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Common stock warrants are included as a component of additional paid in capital within the consolidated balance sheets.

During the year ended June 30, 2022, we granted warrants to purchase 22,000,000 shares of common stock in connection with a commercial agreement with Amazon.

7,000,000 of the warrant shares have an exercise price of $ 0.01 per share and a term of 3.5 years, while the remaining 15,000,000 warrant shares have an exercise price of $ 100 per share and a term of 7.5 years.

We valued the warrants at the grant date using the Black-Scholes-Merton option pricing model with the following assumptions:

a dividend yield of zero ;

years to maturity of 3.5 and 7.5 years, respectively;

volatility of 45 %;

and a risk-free rate of 0.93 % and 1.47 %, respectively.

In connection with the portion of these warrants that were fully vested upon execution, we recognized a commercial agreement asset of $ 133.5 million upon execution of the agreement in November 2021.

Refer to Note 6.

Balance Sheet Components for more information on the asset and related amortization during the period.

The remaining grant-date fair value of the warrants will be recognized within our consolidated statements of operations and comprehensive loss as a component of sales and marketing expense as the warrants vest, based upon Amazon’s satisfaction of the vesting conditions.

In connection with the warrants, a total of $ 281.0 million was recognized within sales and marketing

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expense during the year ended June 30, 2022, which included $ 26.3 million in amortization expense of the commercial agreement asset and $ 254.7 million in expense based upon the grant-date fair value of the warrant shares that vested during the period.

During the year ended June 30, 2021, we granted warrants to purchase 20,297,595 shares of common stock in connection with a commercial agreement with Shopify Inc.

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In connection with these warrants, we recognized an asset of $ 270.6 million at June 30, 2021 associated with the fair value of the warrants, which were fully vested as of June 30, 2021.

This asset is recorded in our consolidated balance sheets within other assets.

Refer to Note 6.

Balance Sheet Components for more information on the asset and related amortization.

During the year ended June 30, 2020, we issued warrants to purchase 400,000 shares of common stock in connection with an agreement with a merchant partner.

The exercise price was $ 3.80 per share and the term of the warrants was 10 years.

We valued the warrants at issuance using the Black-Scholes-Merton option pricing model with the following assumptions:

a dividend yield of zero , years to maturity of 10 years, volatility of 55 % and a risk-free rate of 1.54 %.

In connection with these warrants issued during the year ended June 30, 2020, we recorded an expense of $ 2.8 million representing the fair value of these warrants which is recorded in our consolidated statements of operations as a component of sales and marketing within operating expenses.

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The following table summarizes the warrant activity for the years ended June 30, 2021 and June 30, 2020:

The following table summarizes the warrants activity during the years ended June 30, 2022 and June 30, 2021:

Number of Shares Weighted Average Exercise Price ($) Weighted Average Remaining Life (years)

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Warrants outstanding, June 30, 2021

Equity and Cash Incentive Plans

2012 Equity Incentive Plan

Under our 2012 Equity Incentive Plan (the “Plan”), we may grant incentive and nonqualified stock options, restricted stock, and RSUs to employees, officers, directors, and consultants.

As of June 30, 2021, the maximum number of shares of common stock reserved for issuance under the Plan is 118,374,202 shares.

As of June 30, 2021 and June 30, 2020, there were 29,793,755 and 4,904,531 shares of common stock, respectively, available for future grants under the Plan.

Granted 22,000,000 68.19 5.60

Exercised — — 0.00

Cancelled — — 0.00

Warrants outstanding, June 30, 2022

22,000,000 $ 68.19 5.60

Warrants exercisable, June 30, 2022

3,382,419 $ 32.52 4.20

The weighted-average grant date fair values of warrants granted during the years ended June 30, 2022 and June 30, 2021, were $ 94.20 and $ 13.34 , respectively.

On June 30, 2022, the weighted-average grant date fair values for outstanding warrants and exercisable warrants, were $ 94.20 and $ 114.77 , respectively.

Equity Incentive Plans

2012 Stock Plan

Under our Amended and Restated 2012 Stock Plan (the “Plan”), we may grant incentive and nonqualified stock options, restricted stock, and restricted stock units (“RSUs”) to employees, officers, directors, and consultants.

As of June 30, 2022, the maximum number of shares of common stock which may be issued under the Plan is 118,374,202 Class A shares.

As of June 30, 2022 and June 30, 2021, there were 31,156,746 and 29,793,755 shares of Class A common stock, respectively, available for future grants under the Plan.

Stock Options

Under the Plan, stock options may be granted at a price per share not less than 100 % of the fair market value at the date of grant.

If the option is granted to a stockholder who holds 10% of our common stock or more, then the exercise price per share shall not be less than 110 % of the fair market value per share of common stock on the grant date.

For stock options granted before our IPO in January 2021, the minimum expiration period is 7 years or 10 years from the date of grant.

For stock options granted after our IPO, the minimum expiration period is 3 months after termination or 10 years from the date of grant.

Stock options generally vest over a period of 4 years or with 25 % vesting on the 12 month anniversary of the employment commencement date, and the remaining on a pro-rata basis each month over the next 3 years.

For stock options granted before our IPO in January 2021, the minimum expiration period is seven years after termination of employment or 10 years from the date of grant.

For stock options granted after our IPO, the minimum expiration period is three months after termination of employment or 10 years from the date of grant.

Stock options generally vest over a period of four years or with 25 % vesting on the 12 month anniversary of the vesting commencement date, and the remainder vesting on a pro-rata basis each month over the next three years .

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The following table summarizes our stock option activity for the year ended June 30, 2022:

Number of Options Weighted Average Exercise Price Weighted Average Remaining Contractual Term (Years) Aggregate Intrinsic Value (in thousands)

Balance, June 30, 2020

Balance as of June 30, 2021

31,662,750 $ 10.42 6.30

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Forfeited, expired or cancelled ( 1,261,099 ) 23.68

Balance, June 30, 2021

Balance as of June 30, 2022

19,310,706 15.22 6.94

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11,792,367 $ 7.61 5.98 $ 139,121

Vested and expected to vest thereafter (1) June 30, 2021

Vested and exercisable, and expected to vest thereafter (1) June 30, 2022

18,922,009 $ 14.53 6.91 $ 164,796

(1) Options expected to vest reflect the application of an estimated forfeiture rate.

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The weighted-average grant date fair value of employee options granted for the years ended June 30, 2022, 2021, and 2020, was $ 13.29 , $ 59.83 , and $ 3.26 , respectively.

The aggregate intrinsic value of options exercised was approximately $ 706.7 million, $ 3.1 million, and $ 24.3 million for the years ended June 30, 2021, 2020, and 2019, respectively.

The aggregate intrinsic value of options exercised was approximately $ 1.4 billion, $ 706.7 million, and $ 3.1 million for the years ended June 30, 2022, 2021, and 2020, respectively.

The total fair value of stock options vested during the years ended June 30, 2022, 2021, and 2020 was $ 30.3 million, $ 97.4 million, and $ 53.9 million, respectively.

Stock-based compensation expense for all stock-based awards is based on the grant-date fair value on a straight-line basis over the requisite service period of the awards, which is generally the option vesting term of four years .

The fair value of each option on the date of grant is determined using the Black Scholes-Merton option pricing model using the single-option award approach with the weighted-average assumptions set forth in the table below.

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Expected term (in years) 5.56 6.35 5.87

Expected dividend — — —

Expected dividend yield — — —

As of June 30, 2022, unrecognized compensation expense related to unvested stock options was approximately $ 67.0 million.

The weighted-average period over which such compensation expense will be recognized is approximately 1.9 years.

Stock Options for Non-Employees

In accounting for stock options to non-employees, the fair value of services related to the options granted is recorded as an expense as these services are provided to the Company over the relevant service periods.

We remeasure any non-vested, non-employee options to fair value at the end of each reporting period using the Black Scholes-Merton option pricing model.

When an employee exercises stock options, we collect and remit taxes on the employee’s behalf to applicable taxing authorities.

As of June 30, 2022 and June 30, 2021, the balance of equity exercise taxes payable was $ 10.9 million and $ 23.7 million, respectively, which is included in accounts payable on the consolidated balance sheets.

Stock Options with Early Exercise Rights

In accordance with the Plan, we allow for early exercise of stock options while retaining the right to repurchase any unvested options upon termination at the original exercise price.

The proceeds received from early exercise of stock options has been recorded within accrued expenses and other liabilities on the consolidated balance sheets.

For the years ended June 30, 2021 and 2020, the early exercise liability totaled $ 0.9 million and $ 0.2 million, respectively.

In accordance with the Plan, for certain stock options issued prior to the IPO, we allow for early exercise of the options while retaining the right to repurchase any unvested options upon termination of employment at the

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original exercise price.

The proceeds received from early exercise of stock options have been recorded within accrued expenses and other liabilities on the consolidated balance sheets.

As of June 30, 2022 and June 30, 2021, the early exercise liability totaled $ 0.3 million and $ 0.9 million, respectively.

Value Creation Award

In connection with an overall review of the compensation of Max Levchin, our Chief Executive Officer, in advance of the IPO, and taking into account Mr.

In November 2020, in connection with an overall review of the compensation of Max Levchin, our Chief Executive Officer, in advance of the IPO, and taking into account Mr.

Levchin’s leadership since the inception of the Company, the comparatively modest level of cash compensation he had received from the Company during his many years of service, and that he did not hold any unvested equity awards, the Company's Board of Directors approved a long-term, multi-year performance-based stock option grant providing Mr.

Levchin with the opportunity to earn the right to purchase up to 12,500,000 shares of the Company's Class A common stock (the “Value Creation Award”).

As discussed below, the Value Creation Award will only be earned, if at all, in the event the price of our Class A

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common stock attains stock price hurdles that are significantly in excess of the Company's IPO price per share, over a period of five years , subject to Mr.

As discussed below, the Value Creation Award will only be earned, if at all, in the event the price of our Class A common stock attains stock price hurdles that are significantly in excess of the Company's IPO price per share, over a period of five years , subject to Mr.

Levchin’s continued service to the Company.

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We estimated the fair value of the Value Creation Award granted with market conditions on the grant date using a Monte Carlo simulation model.

We recognize stock-based compensation on these awards on an accelerated attribution method over the requisite service period, and only if performance-based conditions are considered probable of being satisfied.

During the year ended June 30, 2021, we incurred stock-based compensation expense of $ 83.9 million associated with the Value Creation Award as a component of general and administrative expense within the consolidated statements of operations and comprehensive loss.

We recognize stock-based compensation on these awards based on the grant date fair value using an accelerated attribution method over the requisite service period, and only if performance-based conditions are considered probable of being satisfied.

During the years ended June 30, 2022 and June 30, 2021, we incurred stock-based compensation expense of $ 140.7 million and $ 83.9 million, respectively, associated with the Value Creation Award as a component of general and administrative expense within the consolidated statements of operations and comprehensive loss.

During the year ended June 30, 2022, based on achievement of the

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stock price hurdles and time-based service conditions, 1,875,000 shares vested.

As of June 30, 2022, none of these awards have been exercised.

As of June 30, 2022, unrecognized compensation expense related to the Value Creation Award was approximately $ 207.5 million.

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Restricted Stock Units

During the year ended June 30, 2021, we awarded 11,860,237 RSUs to certain employees under the Plan.

RSUs granted prior to the IPO were subject to two vesting conditions:

a service-based vesting condition (i.e., employment over a period of time) and a performance-based vesting condition (i.e., a liquidity event in the form of either a change of control or an initial public offering, each as defined in the Plan), both of which must be met in order to vest.

The performance-based condition was met upon the IPO.

We record stock-based compensation expense for those RSUs on an accelerated attribution method over the requisite service period, which is generally four years .

RSUs granted after IPO are subject to a service-based vesting condition.

We record stock-based compensation expense for service-based RSUs on a straight-line basis over the requisite service period, which is generally four years .

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We record stock-based compensation expense for service-based RSUs on a straight-line basis over the requisite service period, which is generally one to four years .

The following table summarizes our RSU activity during the year ended June 30, 2022:

Number of Shares Weighted Average Grant Date Fair Value

Non-vested at June 30, 2020

Non-vested as of June 30, 2021

14,242,111 $ 36.69

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Forfeited, expired or cancelled ( 2,506,666 ) 36.94

Non-vested at June 30, 2021

Non-vested as of June 30, 2022

21,387,592 $ 38.41

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The weighted-average period over which such compensation expense will be recognized is approximately 2.0 years.

2020 Employee Stock Purchase Plan

On November 18, 2020, our Board of Directors adopted and approved the 2020 Employee Stock Purchase Plan (“ESPP”).

The purpose of the ESPP is to secure the services of new employees, to retain the services of existing employees and to provide incentives for such individuals to exert maximum effort towards the success of the Company and that of its affiliates.

A total of 8.9 million shares of Class A common stock were reserved and available for issuance under the ESPP and 149,137 shares have been issued as of June 30, 2022.

The ESPP provides for six-month offering periods beginning December 1 and June 1 of each year.

The first offering period began on December 1, 2021, and the second offering period began on June 1, 2022.

At the end of each offering period, shares of our Class A common stock are purchased on behalf of each ESPP participant at a price per share equal to 85 % of the lesser of (1) the fair market value of the Class A common stock on first day of the offering period (the grant date) or (2) the fair market value of the Class A common stock on the last day of the offering period (the purchase date).

We use the Black-Scholes-Merton option pricing model to measure the fair value of the purchase rights issued under the ESPP at the first day of the offering period, which represents the grant date.

The Black-Scholes-Merton model incorporates assumptions including the dividend yield, expected stock price volatility, expected term, and risk-free interest rates.

We utilized the following assumptions:

a dividend yield of zero ;

a 0.5 year expected term based on the six-month offering period;

the historical stock price volatility of comparable publicly-traded companies in our industry group;

and a risk-free rate corresponding to a

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Treasury rate which coincides with the expected term.

We record stock-based compensation expense on a straight-line basis over each six-month offering period, the requisite service period of the award.

Stock-Based Compensation Expense

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Total stock-based compensation expense $ 445,525 $ 306,506 $ 33,010

Upon our IPO, we recognized $ 77.8 million of stock-based compensation expense for awards with a performance-based vesting condition satisfied at IPO.

Shares were then issued related to the vesting of the RSUs with such performance-based vesting conditions.

To meet the related tax withholding requirements, we withheld approximately 1.0 million of the 2.6 million shares of common stock issued.

Based on the closing trading market price on the day of IPO of $ 97.24 per share, the tax withholding obligation was approximately $ 102.5 million.

As a result of stock-based compensation expense for vested and unvested RSUs upon the IPO, we recorded an additional deferred tax asset that is offset by a full valuation allowance.

In connection with the acquisition of Returnly on May 1, 2021, we issued 304,364 shares of our common stock which are held in escrow.

In connection with the acquisition of Returnly on May 1, 2021, we issued 304,364 shares of our Class A common stock, which are held in escrow.

Because the future payment of the escrowed shares is contingent on continued employment of certain employees, the arrangement represents stock-based compensation in the post combination period.

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We record stock-based compensation expense on a straight-line basis for each tranche over the requisite service period, as long as the performance-based conditions are considered probable of being satisfied.

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Cash Incentive Plan

On March 4, 2021, the Compensation Committee of the Board of Directors approved the terms of a cash incentive plan (the “Fiscal 2021 Cash Incentive Plan”) for its senior executives who do not participate in a Company sales incentive plan.

The Fiscal 2021 Cash Incentive Plan provides such individuals with the opportunity to earn cash incentive plan awards based upon the achievement of Company performance goals during the second half of the Company’s 2021 fiscal year (the “Performance Period”).

The target incentive plan award for each senior executive is determined by multiplying the senior executive’s target percentage by the total amount of his or her base pay received during the Performance Period.

We recorded expense related to the cash incentive plan of $ 1.9 million f or the year ended June 30, 2021.

As of June 30, 2021, we had accrued $ 1.9 million related to the cash incentive plan.

and foreign components of loss before income taxes for the years ended June 30, 2021, 2020, and 2019 are as follows (in thousands):

As of June 30, 2022, we have not recognized any stock-based compensation expense for these awards.

We estimate the grant date fair value based on the probability of achievement of the revenue targets at each reporting period.

and foreign components of income (loss) before income taxes for the years ended June 30, 2022, 2021, and 2020 are as follows (in thousands):

Year Ended June 30,

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Total loss before income taxes $ ( 724,831 ) $ ( 443,370 ) $ ( 112,222 )

Income tax (benefit) expense for the years ended June 30, 2021, 2020, and 2019 is summarized as follows (in thousands):

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Income tax expense (benefit) for the years ended June 30, 2022, 2021, and 2020 is summarized as follows (in thousands):

Year Ended June 30,

2022 2021 2020

Federal $ — $ — $ —

State $ 145 $ ( 10 ) $ 351

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Income tax (benefit) expense $ ( 17,414 ) $ ( 2,343 ) $ 376

The income tax benefit for the year ended June 30, 2021 was primarily attributable to a $ 2.8 million adjustment to the Company's valuation allowance resulting from a deferred tax liability assumed with the acquisition of Returnly, while the income tax expense for the years ended June 30, 2020 and June 30, 2019 was primarily attributable to various state income taxes and the tax amortization of certain intangibles, respectively.

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The income tax benefit for the year ended June 30, 2022, was primarily attributable to a change in our assessment of the future realization of certain foreign deferred tax assets, while the income tax benefit for the year ended June 30, 2021 and the income tax expense for the year ended June 30, 2020 were primarily attributable to an adjustment to the Company's valuation allowance resulting from a deferred tax liability assumed with the acquisition of Returnly and to various state income taxes and the tax amortization of certain intangibles, respectively.

The following is a reconciliation of the U.S.

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Foreign rate differential ( 0.4 ) % 1.5 % — %

Non-deductible expenses ( 9.1 ) % ( 1.1 ) % ( 0.4 ) %

Impact of change in fair value of contingent consideration ( 5.4 ) % — % — %

Stock-based compensation 64.0 % 66.4 % ( 0.4 ) %

Impact of convertible debt extinguishment 2.4 % — % — %

Non-deductible compensation expense ( 12.4 ) % ( 8.4 ) % — %

Tax benefit related to tax credits, net 15.4 % 0.5 % — %

Impact of change in fair value of contingent consideration 3.3 % ( 5.6 ) % — %

Change in unrecognized tax benefits ( 6.2 ) % — % — %

Other 0.2 % 1.6 % ( 1.9 ) %

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Effective income tax rate 2.4 % 0.5 % ( 0.4 ) %

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Significant components of deferred tax assets and liabilities are as follows (in thousands):

June 30, 2021 June 30, 2020

Year Ended June 30,

Net operating loss carryforwards $ 1,056,403 $ 430,464

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Internally developed software ( 47,217 ) ( 15,214 )

Fixed assets ( 1,860 ) —

Purchased intangible assets ( 11,386 ) ( 18,150 )

Right-of-use lease assets ( 15,289 ) ( 18,386 )

Convertible debt discount — ( 2,209 )

Mark to market adjustment — ( 9,657 )

Stock warrants ( 7,200 ) —

Other ( 2,920 ) ( 2,460 )

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We continue to recognize a full valuation allowance against our U.S.

federal and state as well as the majority of our foreign net deferred tax assets.

federal and state net deferred tax assets.

This determination was based on the assessment of the available positive and negative evidence to estimate whether sufficient future taxable income will be generated to utilize the existing deferred tax assets.

A significant piece of objective negative evidence evaluated was the cumulative loss incurred by the Company for the years ended June 30, 2022, 2021, and 2020.

The presence of a three-year cumulative loss limits the ability to consider other subjective evidence, such as our expectations of future taxable

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income and projections for growth.

The valuation allowance increased by $ 387.7 million during the year ended June 30, 2021.

At June 30, 2021, we had pretax U.S.

federal net operating loss ("NOL") carryforwards of approximately $ 1,335.9 million, state NOL carryforwards of $ 1,608.8 million, and foreign NOL carryforwards of $ 41.4 million from the acquisition of PayBright.

The presence of a three-year cumulative loss limits the ability to consider other subjective evidence, such as our expectations of future taxable income and projections for growth.

The domestic valuation allowance increased by $ 668.5 million during the year ended June 30, 2022.

As a result of the integration and consolidation of our PayBright business into and with Affirm’s Canadian business and the expansion of our overall business in Canada, as well as other objectively verifiable positive evidence that became available during the year ended June 30, 2022, all of which we have concluded is sufficient to outweigh the existing negative evidence – including the presence of a three-year cumulative loss attributable to the related foreign jurisdiction, we have determined that it is more likely than not that our foreign deferred tax assets will be realized and a valuation allowance is not required.

Accordingly, the foreign valuation allowance decreased by $ 10.1 million during the year ended June 30, 2022.

As of June 30, 2022, we had pretax U.S.

federal net operating loss ("NOL") carryforwards of approximately $ 3,405.9 million, state NOL carryforwards of $ 3,590.4 million, and foreign NOL carryforwards of $ 65.8 million.

If not utilized, certain U.S.

federal and state NOL carryforwards will begin to expire in 2029, whereas others have an unlimited carryforward period, and foreign NOL carryforwards will begin to expire in 2039.

Additionally, as of June 30, 2021, we also had state tax credit carryforwards of $ 2.6 million, which will begin to expire in 2024 if not utilized.

Additionally, as of June 30, 2022, we also had U.S.

federal and state research and development tax credit carryforwards of $ 82.0 million and $ 37.7 million, respectively.

federal research and development tax credit carryforwards will begin to expire in 2041 while the state research and development tax credits may be carried forward indefinitely.

As of June 30, 2022, the Company also had other state tax credit carryforwards of $ 2.6 million, which will begin to expire in 2024 if not utilized.

Of the above NOL carryforwards, approximately $ 42.0 million pretax U.S.

federal NOL carryforwards and $ 36.4 million state NOL carryforwards are from domestic acquisitions, which may be subject to an annual utilization limitation under Internal Revenue Code Section 382.

The future utilization of all NOL and tax credit carryforwards may be subject to an annual limitation, pursuant to Internal Revenue Code Sections 382 and 383 and similar state provisions, due to ownership changes that may have occurred previously or that could occur in the future.

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The future utilization of all domestic NOL and tax credit carryforwards may be subject to an annual limitation, pursuant to Internal Revenue Code Sections 382 and 383 and similar state provisions, due to ownership changes that may have occurred previously or that could occur in the future.

Any limitation may result in the expiration of all or a portion of the NOL carryforwards before utilization.

We did not have any material unrecognized tax benefits for the years ended June 30, 2021, 2020, and 2019.

We do not expect the total amount of unrecognized tax benefits to significantly increase or decrease in the next twelve months.

The Company accounts for uncertainties in income taxes in accordance with ASC 740, Income Taxes (“ASC 740”) .

The following table provides a reconciliation of the beginning and ending amounts of gross unrecognized tax benefits (in thousands):

Year ended June 30,

2022 2021 2020

Beginning balance $ — $ — $ —

Gross increase for tax positions related to the current year 28,407 — —

Gross increase for tax positions related to prior years 19,460 — —

Ending balance $ 47,867 $ — $ —

As of June 30, 2022, the Company had no unrecognized tax benefits related to uncertain tax positions that, if recognized, would impact the effective tax rate.

The Company does not expect the total amount of unrecognized tax benefits to significantly increase or decrease within the next twelve months.

Interest and penalties on unrecognized tax benefits are recorded as a component of tax expense.

During the years ended June 30, 2022, 2021, and 2020, we did not recognize accrued interest and penalties related to unrecognized tax benefits.

federal and state income tax returns as well as Canadian federal and provincial income tax returns with varying statutes of limitation.

We also expect to file Spain income tax returns due to the acquisition of a Spanish subsidiary during the year ended June 30, 2021.

All tax years remain open to examination due to the carryover of unused net operating losses.

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federal and state income tax returns as well as various foreign income tax returns with varying statutes of limitation.

With respect to the Company’s major tax filings, all tax years remain open to examination due to the carryover of unused net operating losses.

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Net Loss per Share Attributable to Common Stockholders

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Additionally, the conversion of all outstanding shares of redeemable convertible preferred stock into shares of our common stock occurred immediately prior to the reclassification.

The following table presents basic and diluted net loss per share attributable to common stockholders for common stock (in thousands, except share and per share data):

The following tables present basic and diluted net loss per share attributable to common stockholders for Class A and Class B common stock (in thousands, except share and per share data):

Year ended June 30, 2022

Net Loss $ ( 112,598 ) $ ( 120,455 )

Excess return to preferred stockholders on repurchase ( 13,205 ) ( 14,113 )

Net Loss Attributable to Common Stockholders $ ( 125,803 ) $ ( 134,568 )

Class A Class B

Basic and diluted

Net Loss $ ( 536,654 ) $ ( 170,763 )

Excess return to preferred stockholders on repurchase ( 13,205 ) ( 14,113 )

Net loss attributable to common stockholders $ ( 536,654 ) $ ( 170,763 )

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Diluted $ ( 2.51 ) $ ( 2.51 )

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The following table presents basic and diluted net loss per share attributable to common stockholders for Class A and Class B common stock (in thousands, except share and per share data):

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Year ended June 30, 2021

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The following common stock equivalents, presented based on amounts outstanding, were excluded from the calculation of diluted net loss per share attributable to common stockholders because their inclusion would have been anti-dilutive:

June 30, 2021 June 30, 2020 June 30, 2019

Redeemable convertible preferred stock — 122,115,971 122,653,704

Year ended June 30,

2022 2021 2020

Stock options, including early exercise of options 18,922,009 44,178,776 42,573,405

Restricted stock units 21,387,592 14,238,738 8,235,170

Convertible debt — 7,182,478 —

Common stock warrants 5,817,203 350,000 706,065

Employee stock purchase plan shares 614,659 — —

Convertible debt — — 7,182,478

Redeemable convertible preferred stock — — 122,115,971

Total 46,741,463 58,767,514 180,813,089

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Segments and Geographical Information

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Canada 44,852 13,242 3,316

Other 136 — —

Total $ 1,349,292 $ 870,464 $ 509,528

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Canada 4,390 2,251

Other $ 231 $ —

Total $ 222,153 $ 120,327

Subsequent Events

We have evaluated subsequent events through September 17, 2021, which is the date that these consolidated financial statements were available to be issued.

There were no significant subsequent events identified other than the matters described below.

Business Combination

On July 1, 2021, Affirm Canada Holdings Ltd.

(“Affirm Canada”), a subsidiary of Affirm, and Affirm completed the closing of the transaction contemplated by an Asset Purchase Agreement entered into with Yroo Inc., a developer of technologies that enable and enhance consumer e-commerce shopping intelligence and experience (“Shopbrain”), and the shareholder representative party thereto to acquire certain assets and assume certain liabilities of Shopbrain.

The purchase price was comprised of (i) $ 30.0 million in cash and (ii) 151,745 shares of our Class A common stock issued to the shareholders of Shopbrain at closing.

The initial accounting for the business combination is incomplete at the time of this filing due to the limited amount of time between the acquisition date and the date that these financial statements are issued.

It is impracticable for us to provide all of the disclosures required for a business combination pursuant to ASC 805, Business Combinations.

2021-B Securitization

On August 4, 2021, Affirm Asset Securitization Trust 2021-B (“2021-B”) entered into a note purchase agreement to issue $ 500.0 million of fixed rate asset-backed notes with a maturity date of August 17, 2026.

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CHANGES IN AND DISAGREEMENT WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data