What changed in this filing

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Item 1A. Risk Factors

2024-08-28 compared with 2023-08-25 · 227 added, 199 removed, 529 unchanged (45% of the section changed)

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The risks and uncertainties described below are not the only ones we face.

Additional risks and uncertainties that we are unaware of or that we currently deem immaterial may also become important factors that adversely affect our business.

Additional risks and uncertainties of which we are currently unaware or that we currently deem immaterial may also become important factors that adversely affect our business.

If any of the following risks actually occur, our business, financial condition, operating results, and future prospects could be materially and adversely affected.

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The risks and uncertainties to which our business is subject, include, but are not limited to, the following:

• If we are unable to attract additional merchant partners and/or commerce platforms (collectively “merchants” or “merchant partners,” as applicable), retain our existing merchant partners, and grow and develop our relationships with new and existing merchant partners, our business, results of operations, financial condition, and future prospects would be materially and adversely affected.

• If we are unable to attract commercial partners (as defined below), retain our existing commercial partners, and grow and develop our relationships with new and existing commercial partners, our business, results of operations, financial condition, and future prospects would be materially and adversely affected.

• If we are unable to attract new consumers and retain and grow our relationships with our existing consumers, our business, results of operations, financial condition, and future prospects would be materially and adversely affected.

• We operate in a highly competitive industry, and our inability to compete successfully would materially and adversely affect our business, results of operations, financial condition, and future prospects.

• We rely on a small number of merchant partners and e-commerce platforms, and the loss of any of these significant relationships would adversely affect our business, results of operations, financial condition, and future prospects.

• We may not be able to sustain our revenue and GMV growth rates, or our growth rate of related key operating metrics, in the future.

• We rely on a small number of commercial partners, and the loss of any of these significant relationships would adversely affect our business, results of operations, financial condition, and future prospects.

• The success of our business depends on our ability to work with originating bank partners to enable effective underwriting of loans facilitated through our platform and accurately price credit risk.

We currently rely on Celtic Bank to originate substantially all of the loans facilitated through our platform.

If our agreement with Celtic Bank is terminated, and we are unable to replace their commitments, our business, results of operations, financial condition, and future prospects would be materially and adversely affected.

We currently rely on Celtic Bank and Lead Bank to originate substantially all of the loans facilitated through our platform.

In addition, we currently rely on a single card issuing bank partner, Evolve Bank & Trust, to issue the Affirm Card.

If any of our agreements with Celtic Bank, Lead Bank and/or Evolve Bank & Trust are terminated, and we are unable to replace such agreements, our business, results of operations, financial condition, and future prospects would be materially and adversely affected.

• We may not be able to sustain our revenue and GMV growth rates, or our growth rate of related key operating metrics, in the future.

• We rely on a variety of funding sources to support our business model.

If our existing funding arrangements are not renewed or replaced or our existing funding sources are unwilling or unable to provide funding to us on terms acceptable to us, or at all, it could have a material adverse effect on our business, results of operations, financial condition, cash flows, and future prospects.

• If loans facilitated through our platform do not perform, or significantly underperform, we may incur financial losses on the loans we purchase and we hold on our balance sheet, or lose the confidence of our funding sources.

• If loans facilitated through our platform do not perform, or significantly underperform, we may incur financial losses on the loans we purchase, we hold on our balance sheet, or that are subject to certain risk sharing agreements, which may adversely impact our financial condition and results of operations as well as result in the loss of confidence of our funding sources.

• To the extent we seek to execute acquisitions, strategic investments, alliances, divestitures or other transactions, we may be unable to achieve the strategic objectives of these transactions, and such transactions may be disruptive to our ongoing operations.

• Expansion into new international geographies, including the U.K., presents a variety of challenges and risks.

• The loss of the services of our Founder and Chief Executive Officer, as well as our inability to attract and retain highly skilled employees, could materially and adversely affect our business, results of operations, financial condition, and future prospects.

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• Litigation, regulatory actions and compliance issues could subject us to fines, penalties, judgments, remediation costs, requirements resulting in increased expenses, and reputational harm.

• Further increases in market interest rates could have an adverse effect on our business.

• Further increases in market interest rates and/or prolonged periods of elevated interest rates could have an adverse effect on our business.

• Our revenue is impacted, to a significant extent, by the general economy, the creditworthiness of the U.S.

consumer and the financial performance of our merchants.

consumer and the financial performance of our commercial partners.

• If our collection efforts on delinquent loans are ineffective or unsuccessful, the performance of the loans would be adversely affected.

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• Our ability to protect our confidential, proprietary or sensitive information, including the confidential information of consumers on our platform, may be adversely affected by cyber-attacks, employee or other internal misconduct, computer viruses, physical or electronic break-ins or similar disruptions.

• Our business is subject to extensive regulation, examination, and oversight in a variety of areas, all of which are subject to change and uncertain interpretation.

Changing federal, state and local laws, as well as changing regulatory enforcement policies and priorities, including changes that may result from changes in the political landscape, may negatively impact our business, results of operations, financial condition, and future prospects.

• Our business is subject to extensive regulation, examination, oversight, and supervision in a variety of areas, all of which are subject to change and uncertain interpretation.

Changing federal, state and local laws and regulations, as well as changing regulatory enforcement policies and priorities, including changes that may result from changes in the political landscape, may negatively impact our business, results of operations, financial condition, and future prospects.

• If our originating bank partner model is successfully challenged or deemed impermissible, we could be found to be in violation of licensing, interest rate limit, lending, or brokering laws and face penalties, fines, litigation, or regulatory enforcement.

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Risks Related to Our Business and Industry

If we are unable to attract additional merchant partners, retain our existing merchant partners, and grow and develop our relationships with new and existing merchant partners, our business, results of operations, financial condition, and future prospects would be materially and adversely affected, as could the market price of our Class A common stock.

We derive a significant portion of our revenue from our relationships with merchant partners and the transactions they process through our platform, and as more merchants are integrated into our network, there are more reasons for consumers to shop with us.

Our ability to retain and grow our relationships with our merchant partners depends on the willingness of merchants to partner with us.

The attractiveness of our platform to merchants depends upon, among other things:

If we are unable to attract additional merchant partners, e-commerce platforms and payment platforms (collectively, our “commercial partners”), retain our existing commercial partners, and grow and develop our relationships with new and existing commercial partners, our business, results of operations, financial condition, and future prospects would be materially and adversely affected, as could the market price of our Class A common stock.

We derive a significant portion of our revenue from our relationships with commercial partners and the transactions they process through our platform, and as more commercial partners are integrated into our network, there are more reasons for consumers to shop with us.

Our ability to retain and grow our relationships with our commercial partners depends on the willingness of commercial partners to partner with us.

The attractiveness of our platform to commercial partners depends upon, among other things and as applicable:

the size of our consumer base;

our brand and reputation;

the amount of merchant fees that we charge;

our ability to sustain our value proposition to merchants for customer acquisition by demonstrating higher conversion at checkout and increased AOV;

the attractiveness to merchants of our technology and data-driven platform;

the amount of fees that we charge;

our ability to sustain our value proposition to commercial partners for consumer acquisition by demonstrating higher conversion at checkout and increased AOV;

the attractiveness to commercial partners of our technology and data-driven platform;

services and products offered by competitors;

and our ability to perform under, and maintain, our merchant agreements.

Furthermore, having a diversified mix of merchant partners is important to mitigate risk associated with changing consumer spending behavior, economic conditions and other factors that may affect a particular type of merchant or industry.

Our continued success also is dependent on our ability to successfully grow and develop relationships with our merchant partners, particularly early-stage relationships with large e-commerce retailers such as Amazon.

and our ability to perform under, and maintain, our commercial agreements.

Furthermore, having a diversified mix of commercial partners is important to mitigate risk associated with changing consumer spending behavior, economic conditions and other factors that may affect a particular type of commercial partner or industry.

Our continued success also is dependent on our ability to successfully grow and develop relationships with our commercial partners, particularly early-stage relationships with large e-commerce retailers and platforms such as Amazon and Apple Pay.

The pace of development, integration and rollout of these early-stage relationships is often unpredictable and is generally not within our control.

Many of our agreements with our merchant partners are non-exclusive and lack any transaction volume commitments.

Accordingly, these merchant partners may have, or may enter into in the future, similar agreements with our competitors, which could adversely affect our ability to drive the level of transaction volume and revenue growth that we seek to achieve or to otherwise satisfy the high expectations of our investors and financial analysts relating to those relationships.

While some of our agreements with our merchant partners have provided for a period of exclusivity, those periods may be limited in duration, and we may not be able to negotiate extensions of those exclusivity periods on reasonable terms, if at all.

If an exclusivity period with a merchant partner lapses, we may experience a decrease in GMV with the merchant partner, which may adversely impact our results of operations.

In addition, our agreements with our merchant partners generally have terms that range from approximately 12 months to 36 months, and our merchants can generally terminate these agreements without cause upon 30 to 90 days’ prior written notice.

We may, therefore, be compelled to renegotiate our agreements with merchant partners from time to time, possibly upon terms significantly less favorable to us than the terms included in our existing agreements with those merchant partners.

Many of our agreements with our commercial partners are non-exclusive and lack any transaction volume commitments.

Accordingly, these commercial partners may have, or may enter into in the future, similar agreements with our competitors, which could adversely affect our ability to drive the level of transaction volume and revenue growth that we seek to achieve or to otherwise satisfy the high expectations of our investors and financial analysts relating to those relationships.

While some of our agreements with our commercial partners have provided for a period of exclusivity, those periods may be limited in duration, and we may not be able to negotiate extensions of those exclusivity periods on reasonable terms, if at all.

If an exclusivity period with a commercial partner lapses, we may experience a decrease in GMV with the commercial partner, which may adversely impact our results of operations.

In addition, our agreements with our commercial partners generally have terms that range from approximately 12 months to 36 months (with a majority auto-renewing), and some of our partners can terminate these agreements without cause upon 30 to 90 days’ prior written notice.

We may, therefore, be compelled to renegotiate our agreements with commercial partners from time to time, possibly upon terms significantly less favorable to us than the terms included in our existing agreements with those commercial partners.

If we are unable to attract new consumers and retain and grow our relationships with our existing consumers, our business, results of operations, financial condition, and future prospects would be materially and adversely affected.

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The attractiveness of our platform to consumers depends upon, among other things:

the number and variety of merchants and the mix of products available through our platform;

the manner in which consumers may use our products, including the ease of use relative to competitor products;

the number and variety of commercial partners and the mix of products available through our platform;

the manner in which consumers may use our products, including the ease of use relative to competitor products and the extent of information we require consumers to provide to use our products;

our brand and reputation;

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and services and products offered by competitors.

If we fail to retain our relationship with existing consumers, if we do not attract new consumers to our platform and products, or if we do not continually expand usage and volume from consumers on our platform, our business, results of operations, financial condition, and prospects would be materially and adversely affected.

If we fail to retain our relationship with existing consumers, if we do not attract new consumers to our platform and products, or if we do

not continually expand usage and volume from consumers on our platform, our business, results of operations, financial condition, and prospects would be materially and adversely affected.

We operate in a highly competitive industry, and our inability to compete successfully would materially and adversely affect our business, results of operations, financial condition, and future prospects.

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technology solutions provided by payment companies such as Visa and MasterCard;

mobile wallets such as Apple and PayPal;

mobile wallets such as PayPal;

other pay-over-time solutions offered by companies such as Block and Klarna;

and new pay-over-time offerings by legacy financial and payments companies, including those mentioned above.

Additionally, merchants are increasingly offering proprietary pay-over-time options to customers, and in some cases, these are presented parallel to our offerings at checkout.

and pay-over-time offerings by legacy financial and payments companies, including those mentioned above.

Additionally, some merchants are increasingly offering proprietary pay-over-time options to consumers.

We expect competition to intensify in the future, especially as the pay-over-time industry has low barriers to entry, both as emerging technologies continue to enter the marketplace and as large financial incumbents increasingly seek to innovate the services that they offer to compete with our platform.

Technological advances and the continued growth of e-commerce activities have increased consumers’ accessibility to products and services and led to the expansion of competition in digital payment options such as pay-over-time solutions.

We expect that our pay-over-time offerings may increasingly be presented alongside competitor options at checkout.

Some of our competitors, particularly the credit issuing banks set forth above, are substantially larger than we are and have longer operating histories than we do, which gives those competitors advantages we do not have, such as a more diversified products, a broader consumer and merchant base, greater brand recognition and brand loyalty, the ability to reach more consumers, the ability to cross sell their products, operational efficiencies, the ability to cross-subsidize their offerings through their other business lines, more versatile technology platforms, broad-based local distribution capabilities, and lower-cost funding.

Our pay-over-time offerings are increasingly be presented alongside competitor options, including merchants’ proprietary pay-over-time options, at checkout, and we expect this trend to continue.

Some of our competitors, particularly the credit card issuing banks set forth above, are substantially larger than we are and have longer operating histories than we do, which gives those competitors advantages we do not have, such as more diversified products, a broader consumer and merchant base, greater brand recognition and brand loyalty, the ability to reach more consumers, the ability to cross sell their products, operational efficiencies, the ability to cross-subsidize their offerings through their other business lines, more versatile technology platforms, broad-based local distribution capabilities, and lower-cost funding.

In addition, because many of our competitors are large financial institutions that fund themselves through low-cost insured deposits and continue to own the loans that they originate, they have certain revenue and funding opportunities not available to us.

Increased competition could result in the need for us to alter the pricing we offer to merchants or consumers.

If we are unable to successfully compete, the demand for our platform and products could stagnate or substantially decline, and we could fail to retain or grow the number of consumers or merchants using our platform, which would reduce the attractiveness of our platform to other consumers and merchants, and which would materially and adversely affect our business, results of operations, financial condition, and future prospects.

We rely on a small number of merchant partners and e-commerce platforms, and the loss of any of these significant relationships would adversely affect our business, results of operations, financial condition, and future prospects.

As discussed in Part II, Item 7 – “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and as may be updated from time to time in the Company’s future periodic reports and other filings with the SEC, a single merchant partner or e-commerce platform, or a small number of merchant partners or e-commerce platforms, may represent a disproportionately large amount of our revenue and/or GMV during any given fiscal period.

The loss of, or decrease in business with, any one of our significant merchant partner or e-commerce platform relationships, such as with Amazon or Shopify, due to a lapse in exclusivity or otherwise, would adversely affect our business.

To the extent that any merchant partner or e-commerce platform constitutes a material portion of our total revenue or GMV for a fiscal period for which financial results are being reported in a Quarterly Report on Form 10-Q or Annual Report on Form 10-K, we will disclose the respective percentage contribution in our “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for that period.

The concentration of a significant portion of our business and transaction volume with a limited number of merchant partners or e-commerce platforms, or type of merchant or industry, exposes us disproportionately to any of those merchants choosing to no longer partner with us or choosing to partner with a competitor, to the economic performance of those merchants or industry or to any events, circumstances, or risks affecting such merchants or

In addition, a material modification in the production levels (including supply chain issues impacting component parts of products sold by our merchant partners) and/or financial operations of any significant merchant partner could affect the results of our operations, financial condition, and future prospects.

Increased competition could result in the need for us to alter the pricing we offer to commercial partners or consumers.

If we are unable to successfully compete, the demand for our platform and products could stagnate or substantially decline, and we could fail to retain or grow the number of consumers or commercial partners using our platform, which would reduce the attractiveness of our platform to other consumers and commercial partners, and which would materially and adversely affect our business, results of operations, financial condition, and future prospects.

We rely on a small number of commercial partners, and the loss of any of these significant relationships would adversely affect our business, results of operations, financial condition, and future prospects.

As discussed in Part II, Item 7 – “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and as may be updated from time to time in the Company’s future periodic reports and other filings with the SEC, a single commercial partner, or a small number of commercial partners, may represent a disproportionately large amount of our revenue and/or GMV during any given fiscal period.

The loss of, or decrease in business with, any one of our significant commercial partner relationships, such as with Amazon or Shopify, due to a lapse in exclusivity or otherwise, would adversely affect our business.

To the extent that any commercial partner constitutes a material portion of our total revenue or GMV for a fiscal period for which financial results are being reported in a Quarterly Report on Form 10-Q or Annual Report on Form 10-K, we will disclose the respective percentage contribution in our “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for that period.

The concentration of a significant portion of our business and transaction volume with a limited number of commercial partners, or type of partner or industry, exposes us disproportionately to any of those commercial

partners choosing to no longer partner with us or choosing to partner with a competitor, to the economic performance of those partners or industry or to any events, circumstances, or risks affecting such partners or industry.

In addition, a material modification in the production levels (including supply chain issues impacting component parts of products sold by our commercial partners) and/or financial operations of any significant commercial partner could affect the results of our operations, financial condition, and future prospects.

We currently rely on a small number of originating bank partners, including Celtic Bank and Lead Bank (“Primary Originating Banks”), to originate substantially all of the loans facilitated through our platform and a single issuing bank partner, Evolve Bank & Trust (“Card Issuing Bank”), to issue the Affirm Card.

If our relationship with any of our Primary Originating Banks or our Card Issuing Bank terminates, or if any Primary Originating Bank or our Card Issuing Bank were to suspend, limit, or cease its operations or loan origination activities, as applicable, for any reason, and we are unable to engage another originating bank partner or card issuing bank partner on a timely basis or at all, our business, results of operations, financial condition, and future prospects would be materially and adversely affected.

As of the end of fiscal 2024, we relied on two Primary Originating Banks to originate a majority of the loans facilitated through our platform and to comply with various federal, state, and other laws, with the balance of the loans facilitated on our platform being originated directly under our lending, servicing, and brokering licenses in Canada and across various states in the United States through our consolidated subsidiaries.

Our Primary Originating Banks originate substantially all partner bank originated loans facilitated through our platform.

In addition, as of the end of fiscal 2024, we relied on a single Card Issuing Bank to issue the Affirm Card.

During the fourth quarter of fiscal 2024, we began accelerating the execution of an existing strategy of identifying and engaging new card issuing bank partners in order to diversify our sources of card issuances.

Each of our Primary Originating Banks and our Card Issuing Bank handles a variety of consumer and commercial financing programs.

The Celtic Bank loan program agreement had an initial three-year term that expired in calendar year 2023.

The term automatically renewed for an additional one-year term and will continue to automatically renew in one-year terms thereafter unless either party provides notice of its intent not to renew.

The Lead Bank loan program agreement has an initial three-year term which will expire in calendar year 2026.

The term will automatically renew for additional one-year terms thereafter unless either party provides notice of its intent not to renew.

The Evolve Bank loan program agreement has an initial two-year term that expired in calendar year 2023.

The term automatically renewed for an additional one-year term and will continue to automatically renew in one-year terms thereafter unless either party provides notice of its intent not to renew.

In addition, upon the occurrence of certain early termination events, either we or any of our Primary Originating Banks or Card Issuing Bank may terminate the respective agreement immediately upon the occurrence of certain termination events.

Our agreements with our Primary Originating Banks and Card Issuing Bank do not prohibit those banks from working with our competitors or from offering competing services, and each of those banks currently offer loan programs or other issuing services, as applicable, through other competing platforms.

Each Primary Originating Bank and Card Issuing Bank could decide not to work with us for any reason upon termination of the applicable agreement, could make working with us cost-prohibitive, or could decide to enter into an exclusive or more favorable relationship with one or more of our competitors.

In addition, each Primary Originating Bank and Card Issuing Bank may not perform as expected under our respective agreement.

We could in the future have disagreements or disputes with our Primary Originating Banks or Card Issuing Bank, which could negatively impact or threaten our relationship with other banks with whom we may seek to partner.

For a further discussion of our relationship with our Primary Originating Banks, particularly the regulations applicable to this relationship, see “ Business — Regulatory Environment .”

If any of our Primary Originating Banks or our Card Issuing Bank were to suspend, limit, or cease its operations or loan origination activities, as applicable, for any reason, or if our relationship with any Primary Originating Bank or our Card Issuing Bank were to otherwise terminate for any reason (including, but not limited to, its failure to comply with regulatory actions), we may need to implement an additional substantially similar arrangement with another bank, obtain additional state licenses, or curtail our operations.

If we need to enter into alternative arrangements with a different bank to replace our existing arrangement, we may not be able to negotiate a

comparable alternative arrangement in a timely manner or at all.

In addition, with respect to our Primary Originating Banks, transitioning loan originations to a new bank may result in delays in the issuance of loans or, if our platform becomes inoperable, may result in the inability to facilitate loans through our platform.

If we are unable to enter into an alternative arrangement with different banks to fully replace or supplement our relationship with any Primary Originating Bank, we would potentially need to obtain additional state licenses to enable us to originate loans directly, as well as comply with other state and federal laws, which would be costly and time consuming, and there can be no assurances that any such licenses could be obtained in a timely manner or at all.

Moreover, with respect to our Card Issuing Bank, transitioning card issuance activities to a new bank may result in the need to replace existing virtual or physical cards, which may disrupt or delay consumer transactions.

We may not be able to sustain our revenue and GMV growth rates, or our growth rate of related key operating metrics, in the future.

There can be no assurance that our revenue and GMV will continue to grow as they have in prior periods, and we expect our revenue and GMV growth rates to decline in future periods.

Many factors may contribute to declines in our revenue and GMV growth rates, including increased competition, slowing demand for our products from existing and new consumers, transaction volume and mix (particularly with our significant merchant partners), lower sales by our merchants (particularly those with whom we have significant relationships), general economic conditions, a failure by us to continue capitalizing on growth opportunities, changes in the regulatory environment and the maturation of our business, among others.

Many factors may contribute to declines in our revenue and GMV growth rates, including increased competition, slowing demand for our products from existing and new consumers, transaction volume and mix (particularly with our significant commercial partners), lower sales by our commercial partners (particularly those with whom we have significant relationships), general economic conditions, a failure by us to continue capitalizing on growth opportunities (including entry into new geographic markets), changes in the regulatory environment and the maturation of our business, among others.

The revenue, GMV or key operating metrics for any prior quarterly or annual period should not be relied on as an indication of our future performance.

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Our solution is a technology-driven platform that relies on innovation to remain competitive.

The process of developing new technologies and products, such as Affirm Card with pay-over-time functionality, is complex, and we seek to build our own technology using the latest in artificial intelligence and machine learning (“AI/ML”), cloud-based technologies, and other tools to differentiate our products and technologies.

The process of developing new technologies and products, such as the Affirm Card, which offers pay-over-time functionality in the Affirm App, is complex, and we seek to build our own technology using the latest in artificial intelligence and machine learning (“AI/ML”), cloud-based technologies, and other tools to differentiate our products and technologies.

In addition, our dedication to incorporating technological advancements into our platform requires significant financial and personnel resources and talent.

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We operate in an industry experiencing rapid technological change and frequent product introductions.

We may not be able to make technological improvements as quickly as demanded by our consumers and merchants, or we may not be able to accurately predict the demand or growth of our technological investments, which could harm our ability to attract consumers and merchants and have a material and adverse effect on our business, results of operations, financial condition, and future prospects.

In addition, we may not be able to effectively implement new technology-driven products and services, including Affirm Card, as quickly as competitors or be successful in marketing these products and services to consumers and merchants.

We may not be able to make technological improvements as quickly as demanded by our consumers and commercial partners, or we may not be able to accurately predict the demand or growth of our technological investments, which could harm our ability to attract consumers and commercial partners and have a material and adverse effect on our business, results of operations, financial condition, and future prospects.

In addition, we may not be able to effectively implement new technology-driven products and services, including the Affirm Card, as quickly as competitors or be successful in marketing these products and services to consumers and commercial partners.

Moreover, the profile of potential consumers using our new products and technologies also may not be as attractive as the profile of the consumers that we currently serve or have served in the past, which may lead to higher levels of delinquencies or defaults than we have historically experienced.

If we are unable to successfully and timely innovate and continue to deliver a superior merchant and consumer experience, we could experience reputational damage and decreased demand for our products and technologies and our growth, business, results of operations, financial condition, and future prospects could be materially and adversely affected.

Further, we use AI/ML in many aspects of our business, including fraud, credit risk analysis, and product personalization.

If we are unable to successfully and timely innovate and continue to deliver a superior commercial partner and consumer experience, we could experience reputational damage and decreased demand for our products and technologies and our growth, business, results of operations, financial condition, and future prospects could be materially and adversely affected.

Further, we use AI/ML in many aspects of our business, including fraud, credit risk analysis, consumer support and product personalization.

The AI/ML models that we use are trained using various data sets.

If the AI/ML models are incorrectly designed, the data we use to train them is incomplete, inadequate, or biased in some way, or we do not have sufficient rights to use the data on which our AI/ML models rely, the performance of our products, services, and business, as well as our reputation, could suffer or we could incur liability through the violation of laws, third-party privacy, or other rights, or contracts to which we are a party.

violation of laws, third-party privacy, or other rights, or contracts to which we are a party.

For instance, discrepancies between the data signals used in the AI/ML model training data set and our online decisioning environment for our risk model may lead to incorrect decisions and errors in certain scenarios.

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the product or technology not working, or not working as expected;

consumer and merchant acceptance;

consumer and commercial partner acceptance;

technological outages or failures;

increased regulatory scrutiny;

and the failure to meet consumer and merchant expectations.

and the failure to meet consumer and commercial partner expectations.

As a result of these risks, we could experience increased claims, reputational damage, or other adverse effects, which could be material.

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Failure to accurately predict demand or growth with respect to our new products and technologies could have a material and adverse effect on our business, results of operations, financial condition, and future prospects.

We currently rely on Celtic Bank to originate substantially all of the loans facilitated through our platform.

If our relationship with Celtic Bank terminates, or if Celtic Bank were to suspend, limit, or cease its operations or loan origination activities for any reason, and we are unable to engage another originating bank partner on a timely basis or at all, our business, results of operations, financial condition, and future prospects would be materially and adversely affected.

As of the end of the second quarter of fiscal 2023, we relied on Cross River Bank and Celtic Bank to originate a majority of the loans facilitated through our platform and to comply with various federal, state, and other laws, with the balance of the loans facilitated on our platform being originated directly under our lending, servicing,

and brokering licenses in Canada and across various states in the United States through our consolidated subsidiaries.

During the first half of fiscal 2023, we began accelerating the execution of an existing strategy of identifying and engaging new originating bank partners in order to diversify our sources of loan originations.

In January 2023, we made the strategic decision to begin reducing the volume of loans originated by Cross River Bank on our platform while at the same time continuing our ongoing work to identify and engage new originating bank partners.

Consequently, as of the end of the third quarter of fiscal 2023, Celtic Bank originates substantially all partner bank originated loans facilitated through our platform.

As a result, the risks discussed in the paragraphs below relating to our reliance on Celtic Bank have increased and will remain as such unless and until we complete the process of engaging, onboarding and scaling our relationship with one or more new originating bank partners.

The process of engaging, onboarding and scaling with new originating bank partners is inherently uncertain, and there can be no assurances as to when we will be able to complete that process.

For example, although we engaged and onboarded a new originating bank partner during the fourth quarter of fiscal 2023, it may take longer than we expect before this new originating bank partner becomes able to originate a meaningful percentage of loans facilitated through our platform.

Celtic Bank handles a variety of consumer and commercial financing programs.

The Celtic Bank loan program agreement has an initial three-year term, which is scheduled to expire in calendar year 2023 and will automatically renew in one-year terms thereafter unless either party provides notice of its intent not to renew.

In addition, upon the occurrence of certain early termination events, either we or Celtic Bank may terminate the loan program agreement immediately upon written notice to the other party.

Our Celtic Bank loan program agreement does not prohibit Celtic Bank from working with our competitors or from offering competing services, and Celtic Bank currently offers loan programs through other competing platforms.

Celtic Bank could decide not to work with us for any reason, could make working with us cost-prohibitive, or could decide to enter into an exclusive or more favorable relationship with one or more of our competitors.

In addition, Celtic Bank may not perform as expected under our loan program agreement.

We could in the future have disagreements or disputes with Celtic Bank, which could negatively impact or threaten our relationship with other originating banks with whom we may seek to partner.

For a further discussion of our relationship with Celtic Bank, particularly the regulations applicable to this relationship, see “ Business — Regulatory Environment.

If Celtic Bank were to suspend, limit, or cease its operations or loan origination activities for any reason, or if our relationship with Celtic Bank were to otherwise terminate for any reason (including, but not limited to, its failure to comply with regulatory actions), we may need to implement an additional substantially similar arrangement with another bank, obtain additional state licenses, or curtail our operations.

If we need to enter into alternative arrangements with a different bank to replace our existing arrangement, we may not be able to negotiate a comparable alternative arrangement in a timely manner or at all.

In addition, transitioning loan originations to a new bank may result in delays in the issuance of loans or, if our platform becomes inoperable, may result in the inability to facilitate loans through our platform.

If we are unable to enter into an alternative arrangement with different banks to fully replace or supplement our relationship with Celtic Bank, we would potentially need to obtain additional state licenses to enable us to originate loans directly, as well as comply with other state and federal laws, which would be costly and time consuming, and there can be no assurances that any such licenses could be obtained in a timely manner or at all.

We rely on a variety of funding sources to support our business model.

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We cannot guarantee that these funding arrangements will continue to be available on favorable terms or at all, and our funding strategy may change over time and depends on the availability of such funding arrangements.

Disruptions in the credit markets or other factors, such as the current inflationary environment and rising interest rates, could adversely affect the availability, diversity, cost, and terms of our funding arrangements.

Disruptions in the credit markets or other factors, such as the current inflationary environment, elevated interest rates and increasing recessionary concerns, could adversely affect the availability, diversity, cost, and terms of our funding arrangements.

Since the beginning of March 2023, there have been public reports of instability at certain financial institutions.

Despite the steps taken to date by U.S.

and foreign agencies and institutions, the follow-on effects of this instability are unknown and may lead to disruptions to the businesses and operations of our funding sources.

and foreign agencies and institutions, the follow-on effects of this instability and the potential impact of further instability are unknown and may lead to disruptions to the businesses and operations of our funding sources.

Although we are not substantially dependent on a single financing source, if multiple financing sources were to be unable to fulfill their funding obligations to us, it could have a material adverse effect on our financial condition, results of operations and cash flows.

In addition, our funding sources may reassess their exposure to our industry and either curtail access to uncommitted financing capacity, fail to renew or extend facilities, or impose higher costs to access our funding.

Further, our debt financing and loan sale forward flow facilities are generally fixed term in nature, with term lengths ranging between one to three years, during which we have access to committed capital pursuant to such facilities.

If our existing funding arrangements are not renewed or replaced or our existing funding sources are unwilling or unable to provide funding to us on terms acceptable to us, or at all, we would need to secure additional sources of funding or reduce our operations significantly.

sources of funding or reduce our operations significantly.

The availability and diversity of our funding arrangements depends on various factors and are subject to numerous risks, many of which are outside of our control.

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A breach of such covenants or other events of default under our funding agreements could result in the reduction or termination of our access to such funding, could increase our cost of such funding or, in some cases, could give our lenders the right to require repayment of the loans prior to their scheduled maturity.

Certain of these covenants are tied to our consumer default rates, which may be significantly affected by factors, such as economic downturns or general economic conditions, that are beyond our control and beyond the control of individual consumers.

Certain of these covenants are tied to our consumer default rates, which may be significantly affected by factors, such as economic downturns, inflationary conditions, elevated interest rates and/or general economic conditions, that are beyond our control and beyond the control of individual consumers.

In addition, our revolving credit facility contains (a) certain covenants and restrictions that limit our and our subsidiaries’ ability to, among other things:

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create liens on certain assets;

pay dividends on or

make distributions in respect of their capital stock or make other restricted payments;

pay dividends on or make distributions in respect of their capital stock or make other restricted payments;

consolidate, merge, sell, or otherwise dispose of all or substantially all of their assets;

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Traditional lenders rely on credit bureau scores and require large amounts of information to approve a loan.

We believe that one of our competitive advantages is the ability of our risk model, deployed in accordance with our originating bank partners’ credit model and its underwriting guidelines when loans are made, to efficiently score and price credit risk within seconds at point-of-sale based on five top-of-mind data inputs.

We believe that one of our competitive advantages is the ability of our risk model, deployed in accordance with our originating bank partners’ credit model and their underwriting guidelines when loans are made, to efficiently score and price credit risk within seconds at point-of-sale based on five top-of-mind data inputs.

However, these inputs may be inaccurate or may not accurately reflect a consumer’s creditworthiness or credit risk.

In addition, our ability to enable the effective underwriting of the loans we originate directly or purchase from our originating bank partners and accurately price credit risk (and, as a result, the performance of such loans) is significantly dependent on the ability of our proprietary, learning-based scoring system, and the underlying data, to quickly and accurately evaluate a customer’s credit profile and risk of default.

ability of our proprietary, learning-based scoring system, and the underlying data, to quickly and accurately evaluate a consumer’s credit profile and risk of default.

The information we use in developing the risk model and price risk may be inaccurate or incomplete as a result of error or fraud, both of which may be difficult to detect and avoid.

Numerous factors, many of which can be unexpected or beyond our control, can adversely affect a customer’s credit risk and our risks.

Numerous factors, many of which can be unexpected or beyond our control, can adversely affect a consumer’s credit risk and our risks.

There may be risks that exist, or that develop in the future, including market risks, economic risks, and other external events, that we have not appropriately anticipated, identified, or mitigated, such as risks from inadequate or failed processes, people or systems, natural disasters, and compliance, reputational, or legal matters, both as they relate directly to us as well as that relate to third parties with whom we contract or otherwise do business.

Any changes to our risk model may be ineffective and the performance of our risk model may decline.

If our risk model does not effectively and accurately model the credit risk of potential loans facilitated

through our platform, greater than expected losses may result on such loans and, as a result, our business, results of operations, financial condition, and future prospects could be materially and adversely affected.

In addition, if the risk model we use contains errors or is otherwise ineffective, our reputation and relationships with consumers, our funding sources, our originating bank partners, and our merchants could be harmed, we may be subject to liability, and our ability to access our funding sources may be inhibited.

If our risk model does not effectively and accurately model the credit risk of potential loans facilitated through our platform, greater than expected losses may result on such loans and, as a result, our business, results of operations, financial condition, and future prospects could be materially and adversely affected.

In addition, if the risk model we use contains errors or is otherwise ineffective, our reputation and relationships with consumers, our funding sources, our originating bank partners, and our commercial partners could be harmed, we may be subject to liability, and our ability to access our funding sources may be inhibited.

Our ability to attract consumers to our platform and to build trust in our platform and products is significantly dependent on our ability to effectively evaluate consumer credit profiles and likelihoods of default.

If any of the credit risk or fraud models we use contain programming or other errors or is ineffective or the data provided by consumers or third parties is incorrect or stale, or if we are unable to obtain accurate data from consumers or third parties (such as credit reporting agencies), the loan pricing and approval process through our platform could be negatively affected, resulting in mispriced or misclassified loans or incorrect approvals or denials of loans.

This could damage our reputation and relationships with consumers, our funding sources, our originating bank partners, and our merchants, which could have a material and adverse effect on our business, results of operations, financial condition, and future prospects.

This could damage our reputation and relationships with consumers, our funding sources, our originating bank partners, and our commercial partners, which could have a material and adverse effect on our business, results of operations, financial condition, and future prospects.

Additionally, if we make errors in the development, validation, or implementation of any of the models or tools used in connection with the loans facilitated through our platform, and those that we purchase and securitize or sell to investors, those investors may experience higher delinquencies and losses.

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If loans facilitated through our platform do not perform, or significantly underperform, we may incur financial losses on the loans we purchase, we hold on our balance sheet, or that are subject to certain risk sharing agreements, which may adversely impact our financial condition and results of operations as well as result in the loss of confidence of our funding sources.

In recent fiscal quarters, we have retained more loans on our balance sheet funded through our consolidated securitizations and warehouse lines.

Since fiscal 2023, we have retained more loans on our balance sheet than we have historically, and these loans are funded through our consolidated securitizations and warehouse lines.

For these loans and any future loans facilitated through our platform that we purchase from our originating bank partners that may be held for investment on our balance sheet, we bear the entire credit risk in the event of consumer default with respect to these loans.

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Fair Value of Financial Assets and Liabilities” for additional information.

underperformance, which may have a material adverse effect on our business, results of operations, financial condition, and our relationships with existing and prospective third party loan buyers.

If the loans subject to any existing or future risk sharing agreements underperform the expectations set forth in those agreements, we would be required to make payments under the agreements in proportion to the loan underperformance, which may have a material adverse effect on our business, results of operations, financial condition, and our relationships with existing and prospective third-party loan buyers.

Any acquisitions, strategic investments, alliances, divestitures and other transactions could fail to achieve strategic objectives, disrupt our ongoing operations or result in operating difficulties, liabilities and expenses, harm our business, and negatively impact our results of operations.

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We have in the past acquired or invested in, and we continue to seek to acquire or invest in, businesses, technologies, or other assets that we believe could complement or expand our business.

The identification, evaluation, and negotiation of potential acquisition or strategic investment transactions may divert the attention of management and entail various expenses, whether or not such transactions are ultimately completed.

There can be no assurance that we will be successful in identifying, negotiating, and consummating favorable transaction opportunities.

The identification, evaluation, and negotiation of potential acquisition or strategic investment or other transactions may divert the attention of management and entail various expenses, whether or not such transactions are ultimately completed.

There can be no assurance that we will be successful in identifying, negotiating, consummating and integrating favorable transaction opportunities.

In addition to transaction and opportunity costs, these transactions involve large challenges and risks, whether or not such transactions are completed, any of which could harm our business and negatively impact our results of operations, including risks that:

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Additionally, we may experience difficulty separating out portions of, or entire, businesses, incur loss of revenue or experience negative impact on margins, or we may not achieve the desired strategic and financial benefits.

Such potential transactions may also delay achievement of our strategic objectives, cause us to incur additional expenses, disrupt customer or employee relationships, and expose us to unanticipated or ongoing obligations and liabilities, including as a result of our indemnification obligations.

Further, during the pendency of a divestiture, we may be subject to risks such as a decline in the business to be divested, loss of employees, customers, or suppliers and the risk that the transaction may not close, any of which would have a material adverse effect on the business to be divested and our retained business.

Such potential transactions may also delay achievement of our strategic objectives, cause us to incur additional expenses, disrupt consumer or employee relationships, and expose us to unanticipated or ongoing obligations and liabilities, including as a result of our indemnification obligations.

Further, during the pendency of a divestiture, we may be subject to risks such as a decline in the business to be divested, loss of employees, consumers, or suppliers and the risk that the transaction may not close, any of which would have a material adverse effect on the business to be divested and our retained business.

If a divestiture is not completed for any reason, we may not be able to find another buyer on the same terms, and we may have incurred significant costs without the corresponding benefit.

Further expansion of our operations internationally will subject us to new challenges and risks.

We currently operate in the United States, Canada, the United Kingdom, Poland and Spain (we do not currently facilitate loans in the United Kingdom, Poland or Spain) and may further expand our business internationally in the future.

Managing new and existing international operations requires us to comply with new regulatory frameworks and additional resources and controls.

We currently operate in the United States, Canada, the United Kingdom, Spain and Poland (we do not currently facilitate loans in the United Kingdom, Spain or Poland, though we expect to begin facilitating loans in the

United Kingdom during fiscal 2025) and may further expand our business internationally in the future.

Managing new and existing international operations, including our planned commencement of facilitating loans in the U.K., requires us to comply with new regulatory frameworks and additional resources and controls.

International expansion subjects our business to risks associated with international operations, including:

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• difficulties in staffing and managing foreign operations in an environment of diverse culture, laws, and consumers and merchants, and the increased travel, infrastructure, and legal and compliance costs associated with international operations;

• compliance with multiple, potentially conflicting, and changing governmental laws and regulations, including banking, anti-money laundering, securities, employment, tax, privacy, and data protection laws and regulations, such as the EU General Data Protection Regulation;

• compliance with multiple, potentially conflicting, and changing governmental laws and regulations, including banking, anti-money laundering, securities, employment, tax, privacy, data protection laws and regulations, such as the EU General Data Protection Regulation (GDPR), and climate disclosure frameworks, such as the Corporate Sustainability Reporting Directive (CSRD);

• compliance with financial system regulations, including the U.K.

Financial Conduct Authority;

• compliance with U.S.

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• regional economic and political conditions.

As a result of these risks, we may not be successful in managing our existing international operations, and our future international expansion efforts also may not be successful.

In addition to the risks of various taxing jurisdictions stated above, the Organisation for Economic Co-operation and Development (“OECD”) continues to put forth various initiatives, including a framework to implement a global minimum corporate tax of 15% for certain multinational enterprises with global revenues and profits above certain thresholds (referred to as “Pillar Two”).

While it is uncertain whether the United States will enact legislation to adopt Pillar Two, certain countries in which we operate have adopted legislation, and other countries are in the process of introducing legislation to implement Pillar Two.

As of June 30, 2024, based on the countries in which we do business that have enacted legislation, we do not currently expect Pillar Two to have a material impact on our financial statements.

However, this may change as other countries enact similar legislation and further guidance is released.

As a result of these risks, we may not be successful in managing our existing international operations, and our future international expansion efforts, including our planned commencement of facilitating loans in the U.K., also may not be successful.

The loss of the services of our Founder and Chief Executive Officer could materially and adversely affect our business, results of operations, financial condition, and future prospects.

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Our business benefits from our ability to attract and retain highly skilled employees.

Our future success is aided by on our ability to identify, hire, develop, motivate, and retain highly qualified personnel for all areas of our organization, in particular, a highly experienced sales force, data scientists, and engineers.

Our future success is aided by our ability to identify, hire, develop, motivate, and retain highly qualified personnel for all areas of our organization, in particular, a highly experienced sales force, data scientists, and engineers.

Competition for these types of highly skilled employees is extremely intense, particularly in the San Francisco Bay Area.

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If we are unable to maintain and build our highly experienced sales force, or are unable to continue to attract experienced engineering and technology personnel, our business, results of operations, financial condition, and future prospects could be materially and adversely affected.

In addition, in March 2020, we transitioned our entire staff to a remote working environment.

We maintain a remote working environment.

Over time such remote operations may decrease the cohesiveness of our teams and our ability to maintain our culture, both of which contribute to our success.

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These efforts may prove more expensive than we currently anticipate, and we may not succeed in increasing our revenue sufficiently to offset these higher expenses.

In August 2023, we announced that we achieved adjusted operating income profitability in the fourth quarter of fiscal 2023.

If we are not able to achieve sustained profitability due to the potential for operating expense increases, challenges in the macroeconomic environment, and factors discussed elsewhere in this Report, our reputation may be harmed and the market price of our Class A common stock could be materially and adversely impacted.

We have been profitable on a non-GAAP adjusted operating income basis each completed fiscal quarter since the fourth quarter of fiscal 2023.

In August 2024, we announced that, based on our then-current forecast, we

expected to achieve operating income profitability on a GAAP basis in our fourth quarter of fiscal 2025.

Our ability to operate our business profitably on a GAAP operating income basis is subject to many risks and uncertainties, including the potential for incurring operating expense increases and/or other charges and expenses not reflected in that forecast.

If we are not able to achieve operating income profitability on a GAAP basis by that date, or if we do not operate the business on a consistently profitable basis thereafter, our reputation may be harmed and the market price of our Class A common stock could be materially and adversely impacted.

Our quarterly results may fluctuate significantly and may not fully reflect the underlying performance of our business.

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We have experienced in the past, and expect to continue to experience, seasonal fluctuations in our business.

We experience seasonal fluctuations in our business as a result of consumer spending patterns.

We experience seasonal fluctuations in our business as a result of consumer spending and savings patterns.

Historically, our GMV has been the strongest during the second quarter of our fiscal year due to increases in retail commerce during the holiday season.

Despite these higher GMV levels, in fiscal 2024, 2023 and 2022, we generated less in period revenue as a percentage of GMV during our second fiscal quarter due to the comparatively higher proportion of interest bearing loans originated in the latter half of the period, which typically results in lower merchant network revenue, which is recognized in period, and higher levels of interest income, which is recognized over a longer time horizon.

In addition, historically, our loan delinquencies are at their lowest during our fiscal third and fourth quarter, as consumer savings benefit from tax refunds.

We expect these seasonal patterns to continue in future periods, and any adverse events that occur during our second fiscal quarter could have a disproportionate effect on our financial results for the fiscal year.

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Litigation, regulatory actions, and compliance issues could subject us to fines, penalties, judgments, remediation costs, and/or other requirements resulting in increased expenses and reputational harm.

Our business is subject to increased risks of litigation and regulatory actions as a result of a number of factors and from various sources, including as a result of the highly regulated nature of the financial services industry and the focus of state and federal enforcement agencies on the financial services industry in general and consumer financial services in particular.

industry and the focus of state and federal enforcement agencies on the financial services industry in general and consumer financial services in particular.

In the ordinary course of business, we have been named as a defendant in various legal actions, including arbitrations and other litigation.

In addition, we are currently a defendant in a putative securities class action, Kusnier v.

Affirm Holdings, Inc., et al., and two related derivative actions, Quiroga v.

Levchin, et al., and Jeffries v.

Affirm Holdings, Inc., et al., and three related derivative actions, Quiroga v.

Levchin, et al., Jeffries v.

Levchin, et al., and Vallieres v.

Levchin, et al.

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Any such prohibitions or limitations on or discontinuation of the use of, such arbitration or class action waiver provisions could subject us to additional lawsuits, including additional consumer class action litigation, and significantly limit our ability to avoid exposure from consumer class action litigation.

From time to time, we may also be involved in, or the subject of, reviews, requests for information, investigations, and proceedings (both formal and informal) by state and federal governmental agencies, both domestic and abroad, including banking regulators, the FTC, the CFPB, and the SEC, regarding our business activities and related disclosure practices and our qualifications to conduct our business in certain jurisdictions, which could subject us to fines, penalties, obligations to change our business and/or disclosure practices, and other requirements resulting in increased expenses and diminished earnings.

From time to time, we are involved in, or the subject of, reviews, requests for information, regulatory examinations, investigations, and proceedings (both formal and informal) by state and federal governmental agencies, both domestic and abroad, including banking regulators, the FTC, the CFPB, and the SEC, regarding our business activities and related disclosure practices and our qualifications to conduct our business in certain jurisdictions, which could subject us to fines, penalties, obligations to change our business and/or disclosure practices, and other requirements resulting in increased expenses and diminished earnings.

Our involvement in any such matter also could cause harm to our reputation and divert management attention from the operation of our business, even if the matters are ultimately determined in our favor.

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federal regulatory enforcement actions, including actions relating to alleged unfair, deceptive, or abusive acts or practices;

violations of state

licensing and lending laws, including state interest rate limits;

violations of state licensing and lending laws, including state interest rate limits;

actions alleging discrimination on the basis of race, ethnicity, gender, or other prohibited bases;

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We maintain an allowance for credit losses at a level sufficient to estimate expected credit losses based on evaluating known and inherent risks in our loan portfolio.

This estimate is highly dependent upon the reasonableness of our assumptions and the predictability of the relationships that drive the results of our valuation methodologies.

This estimate is highly dependent upon the reasonableness

of our assumptions and the predictability of the relationships that drive the results of our valuation methodologies.

Management has processes in place to monitor these judgments and assumptions, including review by our credit committee and our asset-liability committee, but these processes may not ensure that our judgments and assumptions are correct.

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Increases in market interest rates have had and could continue to have an adverse effect on our business.

In March 2022 in response to elevated inflationary conditions, the U.S.

Federal Reserve began raising the federal funds interest rate and continued to do so through July 2023.

Increased interest rates have had, and may continue to have, an adverse impact on the spending levels of consumers and their ability and willingness to borrow money.

In March 2022, in response to inflationary conditions, the U.S.

Federal Reserve began raising the federal funds interest rate and continued to do so through July 2023, with the federal funds interest rate remaining elevated compared to March 2022 rates as of August 2024.

Elevated interest rates have had, and may continue to have, an adverse impact on the spending levels of consumers and their ability and willingness to borrow money.

Higher interest rates often lead to higher payment obligations, which may reduce the ability of consumers to remain current on their obligations and, therefore, lead to increased delinquencies, defaults, consumer bankruptcies and charge-offs, and decreasing recoveries, all of which could have an adverse effect on our business.

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Any significant required repurchases would have an adverse effect on our ability to operate and fund our business.

In our asset-backed securitizations, warehouse credit facilities, and forward flow agreements, we make numerous representations and warranties concerning the characteristics of the loans we transfer and/or sell (depending on the type of facility), including representations and warranties that the loans meet certain eligibility requirements of those facilities and investors.

If those representations and warranties are incorrect, we may be

required to repurchase certain of the financed loans.

In our asset-backed securitizations, warehouse credit facilities, and forward flow agreements, we make numerous representations and warranties concerning the characteristics of the loans we pledge and/or sell (depending on the type of facility), including representations and warranties that the loans meet certain eligibility requirements of those facilities and investors.

If those representations and warranties are incorrect, we may be required to repurchase certain of the financed loans.

Failure to repurchase so-called “ineligible loans” when required could constitute an event of default under our financing agreements and lead to the potential termination of the applicable facility.

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Our revenue is impacted, to a significant extent, by the general economy, the creditworthiness of the U.S.

consumer and the financial performance of our merchants.

Our business, the consumer financial services industry, and our merchants’ businesses are sensitive to macroeconomic conditions.

consumer and the financial performance of our commercial partners.

Our business, the consumer financial services industry, and our commercial partners’ businesses are sensitive to macroeconomic conditions.

Economic factors such as interest rates, changes in monetary and related policies, market volatility, inflationary conditions, student loan obligations, consumer confidence, and unemployment rates are among the most significant factors that impact consumer spending behavior.

Weak economic conditions or a significant deterioration in economic conditions, including the current inflationary environment and possibility of a recession, reduce the amount of disposable income consumers have, which in turn reduces consumer spending and the willingness of qualified consumers to take out loans.

reduces consumer spending and the willingness of qualified consumers to take out loans.

Such conditions are also likely to affect the ability and willingness of consumers to pay amounts owed under the loans facilitated through our platform, each of which would have an adverse effect on our business, results of operations, financial condition, and future prospects.

The generation of new loans facilitated through our platform, and the transaction fees and other fee income due to us associated with such loans, depends upon sales of products and services by our merchants.

Our merchants’ sales may decrease or fail to increase as a result of factors outside of their control, such as the macroeconomic conditions referenced above, or business conditions affecting a particular merchant, industry vertical, or region.

Weak economic conditions also could extend the length of our merchants’ sales cycle and cause consumers to delay making (or not make) purchases of our merchants’ products and services.

The decline of sales by our merchants for any reason will generally result in lower credit sales and, therefore, lower loan volume and associated fee income for us.

In addition, if a merchant closes some or all of its locations, ceases its e-commerce operations, or becomes subject to a voluntary or involuntary bankruptcy proceeding (or if there is a perception that it may become subject to a bankruptcy proceeding), consumers may have less incentive to pay their outstanding balances on loans facilitated through our platform, which could result in higher charge-off rates than anticipated.

Moreover, if the financial condition of a merchant deteriorates significantly or a merchant becomes subject to a bankruptcy proceeding, we may not be able to recover amounts due to us from the merchant.

Our commercial partners’ sales may decrease or fail to increase as a result of factors outside of their control, such as the macroeconomic conditions referenced above, or business conditions affecting a particular commercial partner, industry vertical, or region.

Weak economic conditions also could extend the length of our commercial partners’ sales cycles and cause consumers to delay making (or not make) purchases of our commercial partners’ products and services.

The decline of sales by our commercial partners for any reason will generally result in lower credit sales and, therefore, lower loan volume and associated fee income for us.

In addition, if a commercial partner closes some or all of its locations, ceases its e-commerce operations, or becomes subject to a voluntary or involuntary bankruptcy proceeding (or if there is a perception that it may become subject to a bankruptcy proceeding), consumers may have less incentive to pay their outstanding balances on loans facilitated through our platform, which could result in higher charge-off rates than anticipated.

Moreover, if the financial condition of a commercial partner deteriorates significantly or a commercial partner becomes subject to a bankruptcy proceeding, we may not be able to recover amounts due to us from the commercial partner.

We are subject to both natural and man-made events that may unexpectedly disrupt our operations and adversely impact our business.

Our systems and operations are vulnerable to damage or interruption from earthquakes, fires, floods, hurricanes, tornadoes, and other natural disasters (including those caused by climate change), power losses, telecommunications failures, strikes, health pandemics, such as the COVID-19 pandemic, and similar events.

For example, a significant natural disaster in the San Francisco Bay Area or any other location in which we have offices or facilities or employees working remotely, such as an earthquake, fire, flood, hurricane or tornado, could have a material adverse effect on our business, results of operations, financial condition, and future prospects, and our insurance coverage may be insufficient to compensate us for losses that may occur.

Our systems and operations are vulnerable to damage or interruption from earthquakes, wildfires, floods, heatwaves, hurricanes, tornadoes, severe winter weather and other natural disasters (including those caused by climate change), power losses, telecommunications failures, strikes, health pandemics, such as the COVID-19 pandemic, and similar events.

For example, a significant natural disaster in the San Francisco Bay Area or any other location in which we have offices or facilities or employees working remotely, such as an earthquake, wildfire, heatwave, flood, hurricane, tornado or severe winter storm, could have a material adverse effect on our business, results of operations, financial condition, and future prospects, and our insurance coverage may be insufficient to compensate us for losses that may occur.

In addition, strikes, wars, terrorism, and other geopolitical unrest could cause disruptions in our business and lead to interruptions, delays, or loss of critical data.

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Therefore, if we purchase the loans from our originating bank partners after they are originated, we are limited in our ability to collect on these loans if a consumer is unwilling or unable to repay them.

A consumer’s ability to repay their loans can be negatively impacted by increases in their payment obligations to other lenders under mortgage, credit card, and other loans resulting from increases in base lending rates or structured increases in payment obligations.

A consumer’s ability to repay their loans can be negatively impacted by increases in their payment obligations to other lenders under mortgage, credit card, and other loans resulting from

increases in base lending rates or structured increases in payment obligations.

If a consumer neglects his or her payment obligations on a loan facilitated through our platform or chooses not to repay his or her loan entirely, it will have an adverse effect on our business, results of operations, financial condition, future prospects, and cash flows.

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While we take precautions to prevent consumer identity fraud, it is possible that identity fraud may still occur or has occurred, which may adversely affect the performance of the loans facilitated through our platform.

There is risk of fraudulent activity associated with our platform, originating bank partners, consumers, and third-parties handling consumer information.

There is risk of fraudulent activity associated with our platform, originating bank partners, card issuing banks, consumers, and third parties handling consumer information.

Our resources, technologies, and fraud prevention tools may be insufficient to accurately detect and prevent fraud.

We are obligated to repurchase the loans facilitated through our

platform in certain cases of confirmed identity theft.

We are obligated to repurchase the loans facilitated through our platform in certain cases of confirmed identity theft.

The level of fraud related charge-offs on the loans facilitated through our platform could be adversely affected if fraudulent activity were to significantly increase.

We bear the risk of consumer fraud in a transaction involving us, a consumer, and a merchant, and we generally have no recourse to the merchant to collect the amount owed by the consumer.

We bear the risk of consumer fraud in a transaction involving us, a consumer, and a commercial partner, and we generally have no recourse to the commercial partner to collect the amount owed by the consumer.

Significant amounts of fraudulent cancellations or chargebacks could adversely affect our business or financial condition.

High profile fraudulent activity or significant increases in fraudulent activity could also lead to regulatory intervention, negative publicity, and the erosion of trust from our consumers and merchants, and could materially and adversely affect our business, results of operations, financial condition, future prospects, and cash flows.

materially and adversely affect our business, results of operations, financial condition, future prospects, and cash flows.

If we fail to maintain effective internal control over financial reporting or disclosure controls and procedures, we may be unable to report our financial results on a timely and accurate basis, and our business, operating results and market price of our Class A common stock may be adversely affected.

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These parties have placed increased importance on the implications of the social cost of their investments.

We may incur additional costs and require additional resources as we evolve our ESG strategy, practices and related disclosures.

We may incur additional costs and require additional resources as we prepare for enhanced climate disclosure requirements from regulators, such as California and the SEC, and as we otherwise evolve our ESG strategy, practices and related disclosures.

If our ESG strategy, practices and related disclosures, including the impact of our business on climate change, do not meet (or are viewed as not meeting) regulator, investor or other industry stakeholder expectations and standards, which continue to evolve, our brand, reputation and employee retention may be negatively impacted.

Risks Related to Our Reliance on Third Parties

Our results depend on prominent presentation, integration, and support of our platform by our merchants.

We depend on our merchants, which generally accept most major credit cards and other forms of payment (which may include pay-over-time solutions offered by our competitors), to present our platform as a payment option and to integrate our platform into their website or in their store, such as by prominently featuring our platform on their websites or in their stores and not just as an option at website checkout.

We may not have any recourse against merchants if they do not prominently present our platform as a payment option or if they more prominently

present solutions offered by our competitors.

In addition, as we add new merchants, it could take a significant amount of time for these merchants, particularly larger e-commerce retailers such as Amazon, to fully integrate our platform and for these merchants’ customers to accept our pay-over-time solution.

The failure by our merchants to effectively present, integrate, and support our platform would have a material and adverse effect on our business, results of operations, financial condition, and future prospects.

If our merchants fail to fulfill their obligations to consumers or comply with applicable law, we may incur remediation costs.

Although our merchants are obligated to fulfill their contractual commitments to consumers and to comply with applicable law, including in marketing our products, from time to time, they might not, or a consumer might allege that they did not.

Additional Risks Related to Our Reliance on Third Parties

Our results depend on prominent presentation, integration, and support of our platform by our commercial partners.

We depend on our commercial partners, which generally accept most major credit cards and other forms of payment (which may include pay-over-time solutions offered by our competitors), to present our platform as a payment option and to integrate our platform into their website or in their store, such as by prominently featuring our platform on their websites or in their stores and not just as an option at website checkout.

We may not have any recourse against commercial partners if they do not prominently present our platform as a payment option or if they more prominently present solutions offered by our competitors.

In addition, as we add new commercial partners, it could take a significant amount of time for these commercial partners, particularly larger platforms such as Apple Pay, to fully integrate our platform and for these commercial partners’ consumers to accept our pay-over-time

The failure by our commercial partners to effectively present, integrate, and support our platform would have a material and adverse effect on our business, results of operations, financial condition, and future prospects.

If our commercial partners fail to fulfill their obligations to consumers or comply with applicable law, we may incur remediation costs.

Although our commercial partners are obligated to fulfill their contractual commitments to consumers and to comply with applicable law, including in marketing our products, from time to time, they might not, or a consumer might allege that they did not.

This, in turn, can result in claims or defenses against our originating bank partners and us, or a loan purchaser, or in loans being uncollectible due to the Federal Trade Commission’s Holder in Due Course Rule (“Holder Rule”), or equivalent state laws.

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Historically, the cost of remediation has not been material to our business, but we make no assurance that it will not be in the future.

Our vendor relationships subject us to a variety of risks, and the failure of third-parties to comply with legal or regulatory requirements or to provide various services that are important to our operations could have an adverse effect on our business, results of operations, financial condition, and future prospects.

We have significant vendors that, among other things, provide us with financial, technology, and other services to support our products and other activities, including, for example, credit ratings and reporting, cloud-based data storage and other IT solutions, and payment processing.

Our third-party supplier relationships subject us to a variety of risks, and the failure of third parties to comply with legal or regulatory requirements or to provide various services that are important to our operations could have an adverse effect on our business, results of operations, financial condition, and future prospects.

We have significant third-party partners that, among other things, provide us with financial, technology, and other services to support our products and other activities, including, for example, credit ratings and reporting, cloud-based data storage and other IT solutions, and payment processing.

The CFPB has issued guidance stating that institutions under its supervision may be held responsible for the actions of the companies with which they contract.

Accordingly, we could be adversely impacted to the extent our vendors fail to comply with the legal requirements applicable to the particular products or services being offered.

In some cases, vendors are the sole source, or one of a limited number of sources, of the services they provide to us.

Accordingly, we could be adversely impacted to the extent our third-party partners fail to comply with the legal requirements applicable to the particular products or services being offered.

In some cases, third-party partners are the sole source, or one of a limited number of sources, of the services they provide to us.

For example, we are solely reliant on our agreement with our cloud computing web services provider for the provision of cloud infrastructure services to support our platform.

Most of our vendor agreements are terminable by the vendor on little or no notice, and if our current vendors were to terminate their agreements with us or otherwise stop providing services to us on acceptable terms, we may be unable to procure alternatives from other vendors in a timely and efficient manner and on acceptable terms (or at all).

If any vendor fails to provide the services we require, fails to meet contractual requirements (including compliance with applicable laws and regulations), fails to maintain adequate data privacy controls and electronic security systems, or suffers a cyber-attack or other security breach, we could be subject to CFPB, FTC and other regulatory enforcement actions, claims from third-parties, including our consumers, and suffer economic and reputational harm that could have an adverse effect on our business.

In addition, we rely on a single third-party partner to provide a number of issuing and processing services across several of our products.

Most of our third-party partner agreements are terminable by the third party on little or no notice, and if our current third-party partners were to terminate their agreements with us or otherwise stop providing services to us on acceptable terms, we may be unable to procure alternatives from other vendors in a timely and efficient manner and on acceptable terms (or at all).

If any third-party partner fails to provide the services we require, fails to meet contractual requirements (including compliance with applicable laws and regulations), fails to maintain adequate data privacy controls and electronic security systems, or suffers a cyber-attack or other security breach, such as the Evolve Bank & Trust cybersecurity incident reported in June 2024, we could be subject to CFPB, FTC and other federal and state regulatory enforcement actions, claims from third parties, including our consumers, and suffer economic and reputational harm that could have an adverse effect on our business.

Further, we may incur significant costs to resolve any such disruptions in service, which could adversely affect our business.

For example, certain installment loans are originated by our originating bank partners and then disbursed to merchants via single-use virtual cards facilitated through our partnership with an issuer processor.

This issuer processor issues single-use virtual cards through its issuing bank partner which allow loans facilitated through our platform to be processed over the card network.

Such loans facilitated through our platform can be used at merchants where we are not integrated at checkout, allowing consumers to complete purchases with virtual cards just as they would with a standard credit or debit card.

In the event that our issuer processor becomes unable or

unwilling to facilitate the disbursements to merchants and we are unable to reach an agreement with another vendor, such loans would no longer be able to be facilitated through our platform.

We partially rely on card issuers or payment processors.

If we fail to comply with the applicable requirements of Visa or other payment processors, those payment processors could seek to fine us, suspend us or terminate our registrations, which could have a material adverse effect on our business, results of operations, financial condition, and future prospects.

We partially rely on card issuers or payment processors, and must pay a fee for this service.

From time to time, payment processors such as Visa may increase the interchange fees that they charge for each transaction using one of their cards.

The payment processors routinely update and modify their requirements.

This issuer processor issues single-use virtual cards through Evolve Bank & Trust, its issuing bank partner, which allow loans facilitated through our platform to be processed over the card network.

Such loans facilitated through our platform can be used at merchants where we are not integrated at checkout, allowing consumers to complete purchases with

virtual cards just as they would with a standard credit or debit card.

In the event that our issuer processor becomes unable or unwilling to facilitate the disbursements to merchants and we are unable to reach an agreement with another third-party partner, such loans would no longer be able to be facilitated through our platform.

For certain transactions, we partially rely on card issuers, payment processors, or third-party payment networks.

If we fail to comply with the applicable requirements set forth in our agreements with Visa and other such counterparties, such counterparties may seek to fine us, suspend us, or terminate our registrations, which could have a material adverse effect on our business, results of operations, financial condition, and future prospects.

For certain transactions, we partially rely on card issuers, payment processors, or third-party payment networks, and must pay a fee for their services.

From time to time, payment networks, such as Visa, may increase the interchange fees that they charge for each transaction using one of their cards.

The payment processors and payment networks routinely update and modify their requirements.

Changes in the requirements, including changes to risk management and collateral requirements, may impact our ongoing cost of doing business and we may not, in every circumstance, be able to pass through such costs to our merchants or associated participants.

Furthermore, if we do not comply with the payment processors’ requirements (e.g., their rules, bylaws, and charter documentation), the payment processors could seek to fine us, suspend us or terminate our registrations that allow us to process transactions on their networks.

The termination of our registration due to failure to comply with the applicable requirements of Visa or other payment processors, or any changes in the payment processors’ rules that would impair our registration, could require us to stop providing payment services to Visa or other payment processors, which could have a material adverse effect on our business, results of operations, financial condition, and future prospects.

Furthermore, if we do not comply with the payment processors’ or payment networks’ requirements (e.g., their rules, bylaws, and charter documentation), the payment processors or payment networks, as applicable, could seek to fine us, suspend us or terminate our registrations that allow us to process transactions on their networks.

The termination of our registration due to failure to comply with the applicable requirements of Visa or other payment networks or payment processors, or any changes in the payment networks’ or payment processors’ rules that would impair our registration, could require us to stop providing payment services to Visa or other payment networks or payment processors, which could have a material adverse effect on our business, results of operations, financial condition, and future prospects.

Our business could be adversely affected by any unsoundness of our financial institution counterparties.

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We use vendors, such as our cloud computing web services provider, virtual card processing companies, and third-party software providers (including companies that provide our risk scoring models), in the operation of our platform.

The satisfactory performance, reliability, and availability of our technology and our underlying network and infrastructure are critical to our operations and reputation and the ability of our platform to attract new and retain existing merchants and consumers.

We rely on these vendors to protect their systems and facilities against damage or service interruptions from natural disasters, power or telecommunications failures, air quality issues, environmental conditions, computer viruses or attempts to harm these systems, criminal acts, and similar events.

We may also be harmed if data, technology, or software becomes non-compliant with existing regulations or industry standards, becomes subject to third-party claims of intellectual property infringement, misappropriation, or other violation, or malfunctions or functions in a way we did not anticipate.

We rely on these vendors to protect their systems and facilities against damage or service interruptions from natural disasters, power or telecommunications failures, air quality issues, environmental conditions, computer viruses or malicious attempts to harm or compromise these systems, criminal acts, and similar events.

We may also be harmed if data, technology, or software becomes non-compliant with existing regulations or industry standards, becomes subject to third-party claims of intellectual property infringement, misappropriation, or other violation, is breached by unauthorized third parties, or malfunctions or functions in a way we did not anticipate.

If our arrangement with a vendor is terminated or if there is a lapse of service or damage to its systems or facilities, we could experience interruptions in our ability to operate our platform.

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Our ability to protect our confidential, proprietary, or sensitive information, including the confidential information of consumers on our platform, may be adversely affected by cyber-attacks, employee or other internal misconduct, computer viruses, physical or electronic break-ins, or similar disruptions.

Our business involves the collection, storage, use, disclosure, processing, transfer, and other handling (collectively, “processing”) of a wide variety of information, including personally identifiable information, for various purposes in our business, including to help support the integrity of our services and to provide features and functionality to our consumers and merchants.

The processing of the information we acquire in connection with our consumers’ and merchants’ use of our services, particularly on our internet applications for consumers, is subject to numerous privacy, data protection, cybersecurity, and other laws and regulations in the United States and foreign jurisdictions.

The processing of the information we acquire in connection with our consumers’ and commercial partners’ use of our services, particularly on our internet applications for consumers, is subject to numerous privacy, data protection, cybersecurity, and other laws and regulations in the United States and foreign jurisdictions.

The automated nature of our business and our reliance on digital technologies may make us an attractive target for, and potentially vulnerable to, cyber-attacks, computer malware, computer viruses, social engineering (including phishing and ransomware attacks), general hacking, physical or electronic break-ins, or similar disruptions.

In addition, our remote working environment may exacerbate these risks.

While we and our vendors have taken steps to protect the confidential, proprietary, and sensitive information to which we have access and to prevent data loss, our security measures or those of our vendors could be breached resulting in the loss of, or unauthorized access to, our or our consumers’ data, our intellectual property, or other confidential, proprietary, or sensitive business information and could expose us to liability related to the loss of the information, time-consuming and expensive litigation, potential regulatory scrutiny and negative publicity.

hacking into our or our partners’ or consumers’ systems or facilities, or attempting to fraudulently induce our employees, partners, consumers or others into disclosing usernames, passwords, or other sensitive information, which may in turn be used to access our information technology systems and gain access to our or our consumers’ data or other confidential, proprietary, or sensitive information.

While we and our third-party partners have taken steps to protect the confidential, proprietary, and sensitive information to which we have access and to prevent data loss, our security measures or those of our third-party partners could be breached, such as the Evolve Bank & Trust cybersecurity incident reported in June 2024, resulting in the loss of, or unauthorized access to, our or our consumers’ data, our intellectual property, or other confidential,

proprietary, or sensitive business information and could expose us to liability related to the loss of the information, time-consuming and expensive litigation, potential regulatory scrutiny and negative publicity.

As is common in our industry, and with technology-focused companies more broadly, unauthorized parties regularly attempt to gain access to our systems and facilities through various means, including, among others, hacking into our or our partners’ or consumers’ systems or facilities, or attempting to fraudulently induce our employees, partners, consumers or others into disclosing usernames, passwords, or other sensitive information, which may in turn be used to access our information technology systems and gain access to our or our consumers’ data or other confidential, proprietary, or sensitive information.

In the past, such attempts have, at times, been successful but with minimal impact on or disruption to our business, and there is no guarantee that our continuous monitoring efforts will be effective in preventing similar or more impactful incidents in the future.

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Moreover, our contractual arrangements may be breached or may otherwise not effectively prevent disclosure of, or control access to, our confidential or otherwise proprietary information or provide an adequate remedy in the event of an unauthorized disclosure.

The measures we have put in place may not prevent misappropriation, infringement, or other violation of our intellectual property or other proprietary rights or information and any resulting loss of competitive advantage, and we may be required to litigate to protect our intellectual property or other proprietary rights or information from misappropriation, infringement, or other violation by others, which is expensive, could cause a diversion of resources, and may not be successful, even when our rights have been infringed, misappropriated, or otherwise violated.

our rights have been infringed, misappropriated, or otherwise violated.

Our efforts to enforce our intellectual property and other proprietary rights may be met with defenses, counterclaims, and countersuits attacking the validity and enforceability of our intellectual property and other proprietary rights, and if such defenses, counterclaims, or countersuits are successful, it could diminish or we could otherwise lose valuable intellectual property and other proprietary rights.

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In addition to the previously mentioned impacts of intellectual property-related litigation, while in some cases a third party may have agreed to indemnify us for costs associated with intellectual property-related litigation, such indemnifying third party may refuse or be unable to uphold its contractual obligations.

In other cases, our insurance may not cover potential claims of this type adequately or at all, and we may be required to pay monetary damages, which may be significant.

In other cases, our insurance may not cover

potential claims of this type adequately or at all, and we may be required to pay monetary damages, which may be significant.

Some aspects of our platform include open source software, and our use of open source software could negatively affect our business, results of operations, financial condition, and future prospects.

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The terms of various open source licenses have not been interpreted by United States courts, and there is a risk that such licenses could be construed in a manner that imposes unanticipated conditions or restrictions on our platform.

In such an event, we could be required to re-engineer all or a portion of our technologies, seek licenses from third-parties in order to

continue offering our products, discontinue the use of our platform in the event re-engineering cannot be accomplished, or otherwise be limited in the licensing of our technologies, each of which could reduce or eliminate the value of our technologies and loan products.

In such an event, we could be required to re-engineer all or a portion of our technologies, seek licenses from third parties in order to continue offering our products, discontinue the use of our platform in the event re-engineering cannot be accomplished, or otherwise be limited in the licensing of our technologies, each of which could reduce or eliminate the value of our technologies and loan products.

If portions of our proprietary software are determined to be subject to an open source license, we could also be required to, under certain circumstances, publicly release or license, at no cost, our products that incorporate the open source software or the affected portions of our source code, which could allow our competitors or other third parties to create similar products and services with lower development effort, time, and costs, and could ultimately result in a loss of transaction volume for us.

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federal consumer protection requirements .”

In addition, the U.S., U.K.

and other international governments, states, and provinces may pass new laws, or may amend existing laws, to further regulate the consumer finance industry or loans of the type provided through our platform, or to reduce the finance charges or other fees that may be imposed with respect to consumer loans.

In addition, the U.S., Canadian and other international governments (including the U.K.

upon our commencement of facilitating loans in that jurisdiction), states, and provinces may pass new laws, or may amend

existing laws, to further regulate the consumer finance industry or loans of the type provided through our platform, or to reduce the finance charges or other fees that may be imposed with respect to consumer loans.

This could make the provision and collection of consumer loans more difficult or costly, which may negatively impact our business.

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New laws or regulations could also require us to incur significant expenses and devote significant management attention to ensure compliance.

In addition, our failure to comply (or to ensure that our agents and third-party service providers comply) with these laws or regulations may result in litigation or enforcement actions, the penalties for which could include:

For example, in May 2024, the CFPB issued an interpretive rule that extended certain provisions of Subpart B and Subpart G of Regulation Z to “lenders that issue digital user accounts used to access credit, including to those lenders that market loans as ‘Buy Now, Pay Later’ (BNPL).” However, the interpretive rule is an interpretation of existing law that “does not impose any new or revise any existing recordkeeping, reporting, or disclosure requirements,” thereby applying to past operations.

Our failure to comply (or to ensure that our agents and third-party service providers comply) with these laws or regulations may result in litigation or enforcement actions, the penalties for which could include:

revocation of licenses;

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As such, the CFPB has in the past requested reports concerning our organization, business conduct, markets, and activities, and we expect that the CFPB will continue to do so from time to time in the future.

In addition, we expect the CFPB to begin to supervise us in the immediate future.

The CFPB’s supervision of us will enable it, among other things, to conduct comprehensive and rigorous examinations to assess our compliance with consumer financial protection laws, which could result in investigations, enforcement actions, regulatory fines and mandated changes to our business products, policies and procedures.

In addition, we are now supervised by the CFPB.

The CFPB’s supervision of us enables it, among other things, to conduct comprehensive and rigorous examinations to assess our compliance with consumer financial protection laws, which could result in investigations, enforcement actions, regulatory fines and mandated changes to our business products, policies and procedures.

The CFPB, through its supervision and enforcement authority, could increase our compliance costs, potentially hinder our ability to respond to marketplace changes, impose requirements to alter products and services that would make them less attractive to consumers and impair our ability

to offer products and services profitably.

For further discussion on the CFPB's enforcement authority, see “ Business — Regulatory Environment — U.S.

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Further, we may not be able to respond quickly or effectively to regulatory, legislative, and other developments, and these changes may in turn impair our ability to offer our existing or planned features, products, and services and/or increase our cost of doing business.

In addition, if our practices are not consistent or viewed as

not consistent with legal and regulatory requirements, we may become subject to audits, inquiries, whistleblower complaints, adverse media coverage, investigations, or criminal or civil sanctions, all of which may have an adverse effect on our reputation, business, results of operations, and financial condition.

In addition, if our practices are not consistent or viewed as not consistent with legal and regulatory requirements, we may become subject to audits, inquiries, whistleblower complaints, adverse media coverage, investigations, or criminal or civil sanctions, all of which may have an adverse effect on our reputation, business, results of operations, and financial condition.

If our originating bank partner model is successfully challenged or deemed impermissible, we could be found to be in violation of licensing, interest rate limit, lending, or brokering laws and face penalties, fines, litigation, or regulatory enforcement.

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In particular, regulatory requirements affect our originating bank partners’ lending practices and investment practices, among other aspects of their businesses, and restrict transactions between us and our originating bank partners.

For example, from time to time, regulatory agencies for our bank partners may re-evaluate the information we are required to collect from consumers in order to facilitate loans through our platform.

Any change in the nature or amount of personal information that we are required to collect from consumers may cause some consumers to choose not to complete their purchases — or purchase less frequently — with us, which may adversely impact our conversion rates, and, as a result, adversely impact our revenue, GMV, and other of our key operating metrics.

These requirements may constrain the operations of our originating bank partners, and the adoption of new laws and changes to, or repeal of, existing laws may have a further impact on our business.

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We regularly use vendors and subcontractors as part of our business.

We also depend on our substantial ongoing business relationships with our originating bank partners, merchants, and other third-parties.

We also depend on our substantial ongoing business relationships with our originating bank partners, commercial partners, and other third parties.

These types of third-party relationships, including with our originating bank partners, are subject to increasingly demanding regulatory requirements and oversight by federal bank regulators (such as the Federal Reserve Board, the Office of the Comptroller of the Currency, and the Federal Deposit Insurance Corporation), the CFPB, state and international regulators.

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Although we endeavor to comply with our published policies and documentation, we may at times fail to do so or be alleged to have failed to do so.

Our failure, or the failure of any third-party with whom we work, to comply with privacy and data protection laws could result in potentially significant regulatory investigations and government actions, litigation, fines, or sanctions, consumer, funding source, bank partner, or merchant actions, and damage to our reputation and brand, all of which could have a material adverse effect on our business.

Our failure, or the failure of any third party with whom we work, to comply with privacy and data protection laws could result in potentially significant regulatory investigations and government actions, litigation, fines, or sanctions, consumer, funding source, bank partner, or commercial partner actions, and damage to our reputation and brand, all of which could have a material adverse effect on our business.

Complying with privacy and data protection laws and regulations may cause us to incur substantial operational costs or require us to change our business practices.

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Because the interpretation and application of many privacy and data protection laws are uncertain, it is possible that these laws may be interpreted and applied in a manner that is inconsistent with our existing data management practices or the features of our products and services.

addition to the possibility of fines, lawsuits, regulatory investigations, and other claims and penalties, we could be required to change our business activities and practices or modify our products or services, any of which could have an adverse effect on our business.

If so, in addition to the possibility of fines, lawsuits, regulatory investigations, and other claims and penalties, we could be required to change our business activities and practices or modify our products or services, any of which could have an adverse effect on our business.

Any claims regarding our inability to adequately address privacy and security concerns, even if unfounded, or to comply with applicable privacy and data security laws, regulations, contractual requirements, and policies, could result in additional cost and liability to us, damage our reputation, and adversely affect our business.

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We have an obligation to comply with anti-money laundering and anti-terrorism financing laws, and failure to comply with this obligation could have significant adverse consequences for us.

We cannot provide any assurance that our programs and controls designed to enable us to comply with all applicable anti-money laundering and anti-terrorism financing laws and regulations will be effective to ensure compliance with all such anti-money laundering and anti-terrorism financing laws and regulations we are required to comply with, and our failure to comply with these laws and regulations could result in a breach and termination of our agreements with our originating bank partners or criticism by international or state governmental agencies, which would have a material adverse effect on our business, results of operations, financial condition, and future prospects.

If our controls designed to enable us to comply with all applicable anti-money laundering and anti-terrorism financing laws and regulations are ineffective in ensuring compliance with all such laws and regulations, our failure to comply with these laws and regulations could result in a breach and termination of our agreements with our originating bank partners or criticism by international or state governmental agencies, which would have a material adverse effect on our business, results of operations, financial condition, and future prospects.

If we fail to comply with applicable requirements for our high-yield savings account product, our consumers’ deposits may not qualify for FDIC insurance and they may withdraw their funds, which could adversely affect our brand, business, results of operations, financial condition, and future prospects.

We offer an FDIC-insured, interest-bearing savings account, which is provided by Cross River Bank, on the Affirm app.

Under the terms of our program agreement with Cross River Bank as well as the deposit account agreements between participating consumers and Cross River Bank, the savings account is opened and maintained by Cross River Bank.

Under the terms of our program agreement with Cross River Bank as well as the deposit account

agreements between participating consumers and Cross River Bank, the savings account is opened and maintained by Cross River Bank.

We act as the service provider to, among other things, facilitate communication between consumers and Cross River Bank via the Affirm app.

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We face the risk that one or more of the variables included in our loan decisioning model may be deemed a proxy for a protected characteristic such as race, ethnicity, or sex in violation of the ECOA or other anti-discrimination laws, and therefore need to be revised or eliminated to ensure compliance with ECOA, which could result in lower approval rates or higher credit losses.

We may also be required to support the variables used in our

loan decisioning model with documented, legitimate business justifications in the event the model results in a disproportionate effect on applicants or consumers of certain demographic groups.

We may also be required to support the variables used in our loan decisioning model with documented, legitimate business justifications in the event the model results in a disproportionate effect on applicants or consumers of certain demographic groups.

In addition, our use of machine learning in our models could inadvertently result in a “disparate impact” on protected groups, which would require a review of the model’s underlying data and algorithms.

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In addition, this may prevent or discourage unsolicited acquisition proposals or offers for our capital stock.

Holders of our Class B common stock may have interests that differ from those of the holders of our Class A common stock and may vote in a way with which the Class A holders disagree or which may be adverse to the Class A holders' interests.

Holders of our Class B common stock may have interests that differ from those of the holders of our Class A common stock and may vote in a way with which the Class A holders

disagree or which may be adverse to the Class A holders' interests.

This control may adversely affect the trading price of our Class A common stock.

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additions or departures of key management personnel;

the loss of an originating bank partner or key funding sources or merchants;

the loss of an originating bank partner or key funding sources or commercial partner;

adverse economic conditions resulting in decreased consumer demand;

the growth and development of key merchant partner relationships, including our relationship with Amazon;

the growth and development of key commercial partner relationships, including our relationship with Amazon;

material cybersecurity incidents;

and changes in our earnings estimates (if provided).

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Certain of our stockholders have rights, subject to some conditions, to require us to file registration statements covering their shares that we may file for ourselves or our stockholders.

In addition, as of June 30, 2023, we had stock options and restricted stock units outstanding that, if fully exercised or settled, would result in the issuance of an aggregate of 52,572,230 shares of our Class A common stock.

In addition, as of June 30, 2024, we had stock options and restricted stock units outstanding that, if fully exercised or settled, would result in the

issuance of an aggregate of 47,622,117 shares of our Class A common stock.

All of the shares of our Class A common stock issuable upon the exercise of stock options and settlement of restricted stock units, and the shares reserved for future issuance under our equity incentive plans, are registered for public resale under the Securities Act.

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Any Class A common stock or securities convertible into shares of our Class A common stock that we issue from time to time, including in connection with a financing, acquisition, investment or under any equity incentive plans or otherwise that we may adopt in the future, will dilute your percentage ownership.

In the future, we may attempt to obtain financing or to further increase our capital resources by issuing additional shares of our Class A common stock or securities convertible into shares of our Class A common stock or

offering debt or other securities.

We could also issue shares of our Class A common stock or securities convertible into our Class A common stock or debt or other securities in connection with acquisitions or other strategic transactions.

In addition, as we did when we initially formed our partnership with Shopify and when we entered into the Amended and Restated Installment Financing Services Agreement with Amazon, we may issue additional shares of our Class A common stock or securities convertible into shares of Class A common stock as a means of initiating, developing, strengthening or preserving key merchant relationships.

Issuing additional shares of our Class A common stock or securities convertible into shares of our Class A common stock or debt or other securities may dilute the economic and voting rights of our existing stockholders and would likely reduce the market price of our Class A common stock both upon issuance and conversion, in the case of securities convertible into shares of our Class A common stock.

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These anti-takeover defenses could discourage, delay or prevent a transaction involving a change in control of our company.

These provisions could also discourage proxy contests and make it more difficult for stockholders to elect directors of their choosing and to cause us to take other corporate actions they desire, any of which, under certain circumstances, could limit the opportunity for our stockholders to receive a premium for their shares of our Class A common stock, and could also affect the price that some investors are willing to pay for our Class A common stock.

Class A common stock, and could also affect the price that some investors are willing to pay for our Class A common stock.

Our amended and restated bylaws contain exclusive forum provisions for certain claims, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, or employees.

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This provision does not apply to suits brought to enforce any duty or liability created by the Securities Act, or rules and regulations thereunder.

however, the U.S.

District Court for Delaware is the sole and exclusive forum for actions brought to enforce any duty or liability created by the Exchange Act, or rules and regulations thereunder.

Any person or entity purchasing or otherwise acquiring or holding any interest in any of our securities is deemed to have notice of and consented to our exclusive forum provisions, including the federal forum provision.

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In addition, upon conversion of the 2026 Notes, we will be required to make cash payments for each $1,000 in principal amount of 2026 Notes converted of at least the lesser of $1,000 and the sum of the daily conversion values as described in the indenture governing the 2026 Notes.

However, we may not have enough available cash or be able to obtain financing at the time we are required to make repurchases of notes surrendered therefor or pay cash with respect to the 2026 Notes being converted.

However, we may not have enough available cash or be able to obtain financing at the time we are

required to make repurchases of notes surrendered therefore or pay cash with respect to the 2026 Notes being converted.

In addition, our ability to repurchase the 2026 Notes or to pay cash upon conversions of the 2026 Notes may be limited by law, by regulatory authority or by agreements governing our future indebtedness.

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If the repayment of the related indebtedness were to be accelerated after any applicable notice or grace periods, we may not have sufficient funds to repay the indebtedness and repurchase the 2026 Notes or make cash payments upon conversions thereof.

UNRESOLVED STAFF COMMENTS

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 1A. Risk Factors