What changed in this filing

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Item 7. Management’s Discussion and Analysis

2024-08-28 compared with 2023-08-25 · 179 added, 184 removed, 319 unchanged (53% of the section changed)

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A discussion regarding our financial condition and results of operations for the fiscal year ended June 30, 2023 compared to the fiscal year ended June 30, 2022 that are not included in this Form 10-K can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended June 30, 2023.

We are building the next generation platform for digital and mobile-first commerce.

We believe that by using modern technology, superior engineering talent, and a mission-driven approach, we can reinvent payments and commerce.

Our solutions, which are built on trust and transparency, make it easier for consumers to spend responsibly and with confidence, easier for merchants to convert sales and grow, and easier for commerce to thrive.

We are building the next generation payment network.

We believe that by using modern technology, strong engineering talent, and a mission-driven approach, we can reinvent payments and commerce.

Our solutions, which are built on trust and transparency, are designed to make it easier for consumers to spend responsibly and with confidence, easier for merchants and commerce platforms to convert sales and grow, and easier for commerce to thrive.

Our point-of-sale solutions allow consumers to pay for purchases in fixed amounts without deferred interest, late fees, or penalties.

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Our platform facilitates both true 0% APR payment options and interest-bearing loans.

On the merchant side, we offer commerce enablement, demand generation, and customer acquisition tools.

Our solutions empower merchants to more efficiently promote and sell their products, optimize their customer acquisition strategies, and drive incremental sales.

On the merchant side, we offer commerce enablement, demand generation, and consumer acquisition tools.

Our solutions empower merchants to more efficiently promote and sell their products, optimize their consumer acquisition strategies, and drive incremental sales.

We also provide valuable product-level data and insights — information that merchants cannot easily get elsewhere — to better inform their strategies.

Finally, our consumer app unlocks the full suite of Affirm products for a delightful end-to-end consumer experience.

Finally, for consumers, our app unlocks the full suite of Affirm products for a delightful end-to-end consumer experience.

Consumers can use our app to apply for installment loans, and upon approval, they can use the Affirm Card digitally online or in-stores to complete a purchase.

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Operating loss $ (615,847) $ (1,200,862) $ (866,048) $ 585,015 (49) % $ (334,814) 39 %

Other (expense) income, net 211,617 141,217 (59,703) 70,400 50 % 200,920 (337) %

Other income, net 100,320 211,617 141,217 (111,297) (53) % 70,400 50 %

Loss before income taxes $ (515,527) $ (989,245) $ (724,831) $ 473,718 (48) % $ (264,414) 36 %

Income tax benefit (3,900) (17,414) (2,343) 13,514 (78) % (15,071) 643 %

Income tax expense (benefit) 2,230 (3,900) (17,414) 6,130 (157) % 13,514 (78) %

Net loss $ (517,757) $ (985,345) $ (707,417) $ 467,588 (47) % $ (277,928) 39 %

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Our Revenue Model

From merchants, we earn a fee when we help them convert a sale and facilitate a transaction.

While merchant fees depend on the individual arrangement between us and each merchant and vary based on the terms of the product offering, we generally earn larger merchant fees on 0% APR financing products.

For the years ended June 30, 2023, 2022, and 2021, Pay-in-4 represented 19%, 22%, and 11%, respectively, of total GMV facilitated through our platform and 0% APR Core loans represented 13%, 21%, and 32%, respectively, of total GMV facilitated through our platform.

We have three main loan product offerings:

Pay-in-4, 0% annual percentage rate (“APR”) monthly installment loans and interest-bearing monthly installment loans.

Pay-in-4 is a short-term payment plan with four biweekly 0% APR installments.

From merchants, we typically earn a fee when we help them convert a sale and facilitate a transaction.

Merchant fees depend on the individual arrangement between us and each merchant and vary based on the terms of the product offering;

we generally earn larger merchant fees on 0% APR financing products.

For the years ended June 30, 2024, 2023, and 2022, Pay-in-4 represented 15%, 19%, and 22%, respectively, of total GMV facilitated through our platform while 0% APR installment loans represented 11%, 13%, and 21%, respectively.

From consumers, we earn interest income on the simple interest loans that we originate or purchase from our originating bank partners.

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Because our consumers are never charged deferred or compounding interest, late fees, or penalties on the loans, we are not incentivized to profit from our consumers’ hardships.

In addition, interest income includes the amortization of any discounts or premiums on loan receivables created upon either the purchase of a loan from one of our originating bank partners or the origination of a loan.

For the years ended June 30, 2024, 2023, and 2022, interest bearing loans represented 74%, 68%, and 58% of total GMV facilitated through our platform, respectively.

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Once approved for the loan, the consumer then selects their preferred repayment option.

A portion of these loans are funded and issued by our originating bank partners, which include Cross River Bank, an FDIC-insured New Jersey state-chartered bank, and Celtic Bank, an FDIC-insured Utah state-chartered industrial bank.

A portion of these loans are funded and issued by our originating bank partners, which include Cross River Bank, an FDIC-insured New Jersey state-chartered bank, Celtic Bank, an FDIC-insured Utah state-chartered industrial bank, and Lead Bank, an FDIC-insured Missouri state-chartered bank.

These partnerships allow us to benefit from our partners’ ability to originate loans under their banking licenses while complying with various federal, state, and other laws.

Under this arrangement, we must comply with our originating bank partners' credit policies and underwriting procedures, and our originating bank partners maintain ultimate authority to decide whether to originate a loan or not.

originate a loan or not.

When an originating bank partner originates a loan, it funds the loan through its own funding sources and may subsequently offer and sell the loan to us.

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To date, we have purchased all of the loans facilitated through our platform and originated by our originating bank partners.

When we purchase a loan from an

originating bank partner, the purchase price is equal to the outstanding principal balance of the loan, plus a fee and any accrued interest.

When we purchase a loan from an originating bank partner, the purchase price is equal to the outstanding principal balance of the loan, plus a fee and any accrued interest.

The originating bank partner also retains an interest in the loans purchased by us through a loan performance fee that is payable by us on the aggregate principal amount of a loan that is paid by a consumer.

Fair Value of Financial Assets and Liabilities for more information on the performance fee liability.

Fair Value of Financial Assets and Liabilities of the accompanying notes to our consolidated financial statements for more information on the performance fee liability.

We are also able to originate loans directly under our lending, servicing, and brokering licenses in Canada and across several states in the U.S.

through our consolidated subsidiaries.

We directly originated approximatel y $3.7 billion, or 18%, and $3.3 billion, or 21%, of loans for the years ended June 30, 2023 and June 30, 2022, respectively.

We directly originated approximatel y $4.5 billion, or 17%, $3.7 billion, or 18%, and $3.3 billion, or 16% of loans for the years ended June 30, 2024, 2023 and 2022, respectively.

We act as the servicer on all loans that we originate directly or purchase from our originating bank partners and earn a servicing fee on loans we sell to our funding sources.

In the normal course of business, we do not sell the servicing rights on any of the loans.

To allow for flexible staffing to support overflow and seasonal traffic, we partner with several sub-servicers to manage customer care, first priority collections, and third-party collections in accordance with our policies and procedures.

To allow for flexible staffing to support overflow and seasonal traffic, we partner with several sub-servicers to manage consumer care, first priority collections, and third-party collections in accordance with our policies and procedures.

Factors Affecting Our Performance

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As we scale the number of transactions on our network and grow GMV, we maintain a variety of funding relationships in order to support our network.

Our diversified funding relationships include warehouse credit facilities, securitization trusts, forward flow arrangements, and partnerships with banks.

Our diversified funding relationships include warehouse facilities, securitization trusts, forward flow arrangements, and partnerships with banks.

Given the short duration and strong performance of our assets, funding can be recycled quickly, resulting in a high-velocity, capital efficient funding model.

While we have continued to improve our equity capital efficiency, the percentage of our equity capital as a percentage of our total platform portfolio increased from approximately 3% as of June 30, 2022, to approximately 5% as of June 30, 2023.

The increase was due to an increase in on-balance sheet loans, and a lower percentage of our on balance sheet loans funded through securitizations, which generally require a lower percentage of equity capital compared to our warehouse credit facilities.

This shift in our funding mix in response to the current market environment given our ability to allocate loans to warehouse credit facilities with better economic terms at a given time to support the growth of our business while optimizing cost of funds.

As of June 30, 2024 and June 30, 2023, our equity capital as a percentage of our total platform portfolio has remained relatively unchanged at 5%.

The mix of on-balance sheet and off-balance sheet funding is a function of how we choose to allocate loan volume, which is determined by the economic arrangements and supply of capital available to us, both of which may also impact our results in any given period.

Mix of Business on Our Platform

The shifts in volume among merchants and the products that our merchants offer and our consumers purchase in any period affects our operating results.

These mix impacts GMV, revenue, our financial results, and our key operating metric performance for that period.

The shifts in merchant volumes and products offered in any period affect our operating results.

These shifts impact GMV, revenue, our financial results, and our key operating metric performance for that period.

Differences in loan product mix result in varying loan durations, APR, and mix of 0% APR and interest-bearing financings.

Product and economic terms of commercial agreements vary among our merchants.

Product and economic terms of commercial agreements vary among our merchants, which may impact our results.

For example, our low average order value (“AOV”) products generally benefit from shorter duration, but also have lower revenue as a percentage of GMV when compared to high AOV products.

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Our revenue as a percentage of GMV in any given period varies across products.

As such, as we continue to expand our network to include more merchants, revenue as a percentage of GMV may vary.

In addition, our commercial agreement with Shopify to offer Shop Pay Installments powered by Affirm and our Pay-in-4 offering may continue to impact the mix of our shorter duration, low AOV products.

Differences in the mix of high versus low AOV may also impact our results.

For example, we expect that transactions per active consumer may increase while revenue as a percentage of GMV may decline in the medium term to the extent that a greater portion of our GMV comes from Pay-in-4 and other low-AOV offerings.

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

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.

As such, as we continue to expand our network to include more merchants and product offerings, revenue as a percentage of GMV may vary.

Additionally, our commercial agreements with our platform partners, along with the growing repeat usage of our Pay-in-4 and Affirm Card offerings, are driving an increase in low AOV transactions.

As a result, while we expect that transactions per active consumer may increase, revenue as a percentage of GMV may decline in the medium term to the extent that a greater portion of our GMV comes from Pay-in-4, Affirm Card and other low-AOV offerings.

We experience seasonal fluctuations in our business as a result of consumer spending patterns, including Affirm Card, which we expect to mimic the seasonality of our general business in the near term.

Historically, our GMV has been the strongest during our fiscal second quarter due to increases in retail commerce during the holiday season and our loan delinquencies are at their lowest during our fiscal third and fourth quarter, as consumer savings benefit from tax refunds.

Adverse events that occur during our second fiscal quarter could have a disproportionate effect on our financial results for the fiscal year.

Macroeconomic Environment

We regularly monitor the direct and indirect impacts of the current macroeconomic conditions on our business, financial condition, and results of operations.

During fiscal 2023, the macroeconomic environment presented a number of challenges to our business.

Starting in fiscal 2023, the macroeconomic environment began to present a number of challenges to our business.

In response to continued inflationary pressure, the U.S.

Federal Reserve raised, and may continue to raise, the federal funds interest rate.

Simultaneously, economic uncertainty and the prospect of economic recession impacted consumer spending.

These developments have affected, and may continue to affect, our business and results of operations in the following ways:

• Deceleration in consumer demand:

We have experienced a deceleration in consumer demand for discretionary items, which has adversely impacted GMV growth.

Federal Reserve rapidly raised the federal funds interest rate from March 2022 through July 2023, and there is no certainty as to whether and to what extent the federal funds interest rate will remain at current levels, increase or decrease in future periods.

Simultaneously, economic uncertainty and the prospect of economic recession has impacted consumer spending.

These challenges have affected, and may continue to affect, our business and results of operations in the following ways:

• Shifts in consumer demand:

Since fiscal 2023, we have experienced varying levels of consumer demand across different categories of merchandise.

While there was an increase in overall consumer demand in fiscal 2024, we continued to experience decreased demand for certain discretionary items, which has impacted GMV growth in those categories.

Continued economic uncertainty, inflationary pressures, and a higher interest rate environment may further negatively impact consumer demand in future periods.

• Increased borrowing costs:

Our costs of borrowing have increased, resulting in higher transaction costs.

Our borrowing costs have remained elevated due to the interest rate environment, resulting in sustained higher transaction costs.

Should the interest rate environment remain elevated, we may continue to experience higher transaction costs.

• Volatile capital markets:

In response to volatile capital markets conditions, we have retained more loans on our balance sheet funded through our consolidated securitizations and warehouse lines in recent fiscal quarters.

Retaining loans on our balance sheet leads to the recognition of interest income over the life of the loan, effectively delaying the revenue that would have been realized upon the loan’s sale.

• Managing delinquency rates:

We are continuously optimizing our underwriting to manage delinquency rates.

While these actions have adversely affected our GMV growth rates during fiscal 2023, as of June 30, 2023, our 30-day delinquency rates for monthly installment loans were comparable to, and our allowance rates for loan losses improved over, those experienced as of June 30, 2022.

Macroeconomic factors can also cause fluctuations of available capital in our lending marketplace due to shifts in the risk preferences of our lending partners and institutional investors or for other reasons.

For example, 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.

Restructuring Plan

On February 8, 2023, we committed to a restructuring plan designed to manage our operating expenses in response to macroeconomic conditions and ongoing business prioritization efforts.

As part of the plan, we reduced our workforce by approximately 500 employees, representing approximately 19% of our employees at that time, and vacated a portion of our leased San Francisco office.

For further information, refer to Note 16.

Restructuring and other to the consolidated financial statements in this Form 10-K.

Pricing Initiatives

We have begun implementing certain pricing initiatives that have the dual purpose of offsetting our increased funding costs while also enabling us to responsibly extend access to credit to a larger number of consumers.

These pricing initiatives include the following:

• increasing the maximum APR for loans facilitated on our platform from 30% to 36%;

• increasing the merchant fees payable by some merchants on 0% APR financing products;

• expanding the use of down payments and requested loan amounts;

• offering merchant-subsidized low APR loans (4% to 9.99%) as an alternative to monthly 0% APR programs;

• shortening loan lengths and minimum order sizes for monthly 0% APR programs.

During fiscal 2024, capital markets have shown improvement against recent periods, which has been evidenced by substantial additions across our funding channels due to our strong loan performance.

However, despite these improvements, uncertainties remain in the macroeconomic environment, especially with regard to persistent inflation and the potential for increased unemployment rates.

To address these uncertainties, we leverage our diverse funding channels and counterparties, which contribute to our resilience across various macroeconomic conditions and economic cycles.

Consumer Credit Optimization and Loan Performance

We continue to optimize our underwriting and take other actions to manage consumer loan repayment, increase collections and minimize losses.

For example, we offer loan modifications to borrowers experiencing financial difficulty to provide greater flexibility for consumers to repay their obligations, through payment deferrals or loan re-amortizations.

A payment deferral extends the next payment due date, and while a consumer may receive more than one deferral, the total deferral period may not exceed three months.

A loan re-amortization lowers the monthly payments by extending the term, which may not exceed twenty-four months.

These loan modification programs also impact our delinquency rates, and such impact can vary over time.

As disclosed in Note 4.

Loans Held for Investment and Allowance for Credit Losses of the accompanying notes to our consolidated financial statements during the year ended June 30, 2024, we expanded the eligibility of our loan

modification programs, which resulted in a modest benefit to delinquency rates for loans held for investment as of June 30, 2024.

As we continue to evaluate the effectiveness of these programs, we may modify, expand, or contract the usage of these programs, which may impact our delinquency rates in future periods.

As of June 30, 2024, taking into account the loan modifications discussed above, our 30-day delinquency rates for monthly installment loans were comparable to our delinquency rates as of June 30, 2023.

However, our allowance rates for loan losses as of June 30, 2024 increased over our allowance rates as of June 30, 2023 due primarily to adjustments in our credit criteria in light of increasing interest income generated by our loans.

In future fiscal quarters, on a comparative basis, delinquency rates may vary with seasonal trends as well as due to other actions, including underwriting and profitability optimizations and the level of loan modifications implemented in the current or preceding fiscal quarters.

Regulatory Developments

We are subject to the regulatory and enforcement authority of the Consumer Financial Protection Board (the “CFPB”) as a facilitator, servicer, acquirer or originator of consumer credit.

We are subject to the regulatory and enforcement authority of the Consumer Financial Protection Bureau (the “CFPB”) as a facilitator, servicer, acquirer or originator of consumer credit.

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 supervised by the CFPB, which enables it, among other things, to conduct comprehensive and rigorous examinations to assess our compliance with consumer financial protection laws, which in turn could result in matters requiring attention, enforcement investigations and actions, regulatory fines and mandated changes to our business products, policies and procedures.

On May 22, 2024, the CFPB issued the Truth in Lending Interpretive Rule, effective July 30, 2024, that extended to Buy Now, Pay Later (BNPL) providers certain dispute and refund requirements applicable to credit card providers.

The Interpretive Rule is an interpretation of existing law, thereby applying to past operations.

The Interpretive Rule may result in operational and compliance challenges and new litigation risks and scrutiny by federal and state regulators.

Key Operating Metrics

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For the year ended June 30, 2024, GMV was $26.6 billion, an increase of approximately 32% from $20.2 billion for the year ended June 30, 2023, and an increase of approximately 72% from $15.5 billion for the year ended June 30, 2022.

Overall, the increase in GMV was primarily driven by the expansion of our active merchant base and increases in active consumers and the average number of transactions per consumer.

For the years ended June 30, 2023, 2022, and 2021, our top five merchants, including our largest platform partner represented approximately 42%, 32%, and 30%, respectively, of total GMV.

GMV attributable to Amazon increased during each period but represented less than 20% of total GMV for all such periods.

No other single merchant or platform partner exceeded 20% of total GMV for the year ended June 30, 2023.

Overall, the increase in GMV was driven by an increase in volume at our top five merchants and platform partners as well as overall increases in our active merchant base, active consumers and average transactions per consumer.

The increase in GMV for the year ended June 30, 2024 also reflected increased consumer demand at our largest merchant partners by GMV and increased consumer demand in our travel and ticketing, electronics and general merchandise categories.

For the years ended June 30, 2024, 2023, and 2022, our top five merchants and platform partners represented approximately 47%, 42%, and 32%, respectively, of total GMV.

For the year ended June 30, 2024,

GMV attributable to Amazon represented 21% of total GMV.

For both the years ended June 30, 2023 and 2022, GMV attributable to Amazon represented less than 20% of total GMV.

June 30, 2024 June 30, 2023 June 30, 2022

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Active consumers 18,713 16,469 13,980

Transactions per active consumer (x) 3.9 3.0 2.3

Transactions per active consumer 4.9 3.9 3.0

Active Consumers

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We define an active consumer as a consumer who engages in at least one transaction on our platform during the 12 months prior to the measurement date.

As of June 30, 2023, we had approximately 16.5 million active consumers inclusive of 1.0 million active consumers who only transacted on Returnly, which represented an increase of 18% compared to approximately 14.0 million as of June 30, 2022, and 131% compared to approximately 7.1 million as of June 30, 2021.

The increase was primarily due to a high retention rate of existing consumers and the acquisition of new consumers through an expanding active merchant base.

As of June 30, 2024, we had approximately 18.7 million active consumers, which represented an increase of 14% compared to approximately 16.5 million as of June 30, 2023, and 34% compared to approximately 14.0 million as of June 30, 2022.

The increase was primarily due to a high retention rate of existing consumers and the acquisition of new consumers through an expanding active merchant base, Affirm Card and platform partnerships.

Transactions per Active Consumer

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As of June 30, 2024, we had approximately 4.9 transactions per active consumer, an increase of 26% compared to June 30, 2023 and an increase of 64% compared to June 30, 2022.

This was primarily due to platform growth and a higher frequency of repeat users driven by consumer engagement.

The increase was primarily due to platform growth, a higher frequency of repeat users driven by consumer engagement and growth of Affirm Card active consumers.

As of June 30, 2024, Affirm Card represented approximately 8% of the total number of transactions compared to approximately 2% as of June 30, 2023.

Results of Operations

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General and administrative 525,291 586,398 577,493 (61,107) (10) % 8,905 2 %

Restructuring and other 35,870 — —

Restructuring and other 6,768 35,870 — (29,102) (81) % 35,870 NM *

Total operating expenses 2,938,846 2,788,847 2,215,340 149,999 5 % 573,507 26 %

Operating loss $ (615,847) $ (1,200,862) $ (866,048) $ 585,015 (49) % $ (334,814) 39 %

Other (expense) income, net 211,617 141,217 (59,703) 70,400 50 % 200,920 (337) %

Other income, net 100,320 211,617 141,217 (111,297) (53) % 70,400 50 %

Loss before income taxes $ (515,527) $ (989,245) $ (724,831) $ 473,718 (48) % $ (264,414) 36 %

Income tax benefit (3,900) (17,414) (2,343) 13,514 (78) % (15,071) 643 %

Income tax expense (benefit) 2,230 (3,900) (17,414) 6,130 (157) % 13,514 (78) %

Net loss $ (517,757) $ (985,345) $ (707,417) $ 467,588 (47) % $ (277,928) 39 %

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When a loan is sold to a third-party loan buyer or off-balance sheet securitization trust, the unamortized discount is released in full at the time of sale and recognized as part of the gain or loss on sales of loans.

However, the cumulative value of the loss on loan purchase commitment or loss on loan origination, the interest income recognized over time from the amortization of discount while retained, and the release of discount into gain on sales of loans, together net to zero over the life of the loan.

However, the cumulative value of the loss on loan purchase commitment or loss on origination, the interest income recognized over time from the amortization of discount while retained, and the release of discount into gain on sales of loans, together net to zero over the life of the loan.

The following table details activity for the discount, included in loans held for investment, for the periods indicated:

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Balance at the end of the period $ 98,527 $ 96,576 $ 42,780

* Prior period balances have been adjusted to include impact of foreign currency translation.

(2) Amounts include stock-based compensation as follows:

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Merchant network revenue for the year ended June 30, 2024 increased by $167.0 million, or 33%, compared to the same period in 2023.

The increase is primarily attributed to an increase of $4.7 billion in GMV for the year ended June 30, 2023.

The increase in GMV is a result of the expansion of our active merchant base and consumers, reaching approximately 254,000 and 16.5 million, respectively, as of June 30, 2023, up from approximately 235,000 and 14.0 million, respectively, as of June 30, 2022.

Additionally, the average transactions per consumer increased from 3.0 as of June 30, 2022 to 3.9 as of June 30, 2023.

The increase in consumers and average transactions per consumer is partially offset by a decrease in AOVs.

The increase is primarily attributed to an increase of $6.4 billion or 32% in GMV for the year ended June 30, 2024.

GMV increased from $20.2 billion as of June 30, 2023 to $26.6 billion as of June 30, 2024.

The increase in GMV is a result of continued growth at our top five merchants and platform partners representing approximately 47% and 42% as of June 30, 2024 and 2023, respectively, as well as growth in our active merchant base and active consumers, reaching approximately 303 thousand and 18.7 million, respectively, as of June 30, 2024, up from approximately 254 thousand and 16.5 million, respectively, as of June 30, 2023.

Additionally, the average transactions per active consumer increased from 3.9 as of June 30, 2023 to 4.9 as of June 30, 2024.

The increase in consumers and average transactions per active consumer is partially offset by a decrease in AOVs.

For the year ended June 30, 2024 AOV was $292 down from $318 for the same period in fiscal 2023.

The decrease in AOV due to the diversification of our merchant base and our initiative to drive repeat usage of our platform beyond one-time high AOV purchases.

The decrease in AOV is due to the diversification of our merchant base and our initiative to drive repeat usage of our platform beyond one-time high AOV purchases.

Card Network Revenue

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Card network revenue growth is correlated with the growth of GMV processed by our issuer processors.

As such, the increase is primarily driven by the $5.9 billion of GMV processed through our issuer processors, an increase of 25% for the year ended June 30, 2023, as compared to the same period in 2022.

This was driven by increased card activity as well as growth in existing and new merchants using our card platform, growing from approximately 1,100 merchants as of June 30, 2022 to approximately 1,300 merchants as of June 30, 2023.

As such, the increase is primarily driven by $8.2 billion of GMV processed through our issuer processors, an increase of 40% for the year ended June 30, 2024, as compared to the same period in 2023.

driven by increased card activity through Affirm Card and our single use virtual debit cards, as well as growth in existing and new merchants utilizing our agreement with card-issuing partners as a means of integrating Affirm services, which grew from approximately 1,300 merchants as of June 30, 2023 to 1,900 merchants as of June 30, 2024.

Card network revenue is also impacted by the mix of merchants as different merchants can have different interchange rates depending on their industry or size, among other factors.

Interest Income

Interest income for the year ended June 30, 2023 increased by $157.3 million, or 30%, compared to the year ended June 30, 2022.

Generally, interest income is correlated with changes in the average balance of loans held for investment, as we recognize interest on loans held for investment using the effective interest method over the life of the loan.

The average balance of loans held for investment increased by 50% to $3.4 billion for the year ended June 30, 2023, compared to the same period in fiscal 2022.

The increase in loans held for investment on our consolidated balance sheet was in response to the current market environment and our ability to allocate loans to warehouse credit facilities with better economic terms while optimizing cost of funds.

As a result of the increase in loans held for investment on our consolidated balance sheet, interest income from interest-bearing loans increased by $195.2 million, or 53%, compared to the same period in 2022.

This increase was partially due to our recent pricing initiatives, including the increase of the maximum APR for loans facilitated on our platform from 30% to 36% and the introduction of merchant-subsidized low APR loans (4% to 9.99%) as an alternative to monthly 0% APR programs.

Interest income for the year ended June 30, 2024 increased by $519.1 million, or 76%, compared to the same period in 2023.

Generally, interest income is correlated with the changes in the average balance of loans held for investment, which increased by 49% to $5.1 billion for the year ended June 30, 2024, compared to the same period in 2023.

As a result, interest income from interest-bearing loans increased $481.8 million, or 86%, compared to the same period in 2023.

This increase was partially due to an increase in the volume of interest bearing loans originated, which increased to 74% of total GMV for the year ended June 30, 2024, compared to 68% of total GMV in the same period in 2023, in addition to recent pricing initiatives, including the increase of the maximum APR and merchant-subsidized low APR loans replacing previously non-interest bearing loans.

Gain on Sale of Loans

Gain on sales of loans for the year ended June 30, 2023 decreased by $8.1 million, or 4%, compared to the same period in 2022 .

The decrease was partially driven by higher benchmark interest rates and a more conservative credit outlook, which impacted pricing terms for loan sales.

The decrease was partially offset by an increase in loan sale volume to third-party loan buyers.

We sold loans with a unpaid principal balance of $7.5 billion for the year ended June 30, 2023, compared to $7.1 billion for the year ended June 30, 2022.

Gain on sales of loans for the year ended June 30, 2024 increased by $8.8 million, or 5%, compared to the same period in 2023.

The increase was driven by an increase in loan sale volume to third-party loan buyers.

We sold loans with an unpaid principal balance of $10.2 billion for the year ended June 30, 2024, compared to $7.5 billion for the year ended June 30, 2023.

Servicing Income

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We discuss our valuation methodology and significant Level 3 inputs for servicing assets and liabilities within Note 13.

Fair Value of Financial Assets and Liabilities.

Fair Value of Financial Assets and Liabilities of the accompanying notes to our consolidated financial statements.

Servicing income for the year ended June 30, 2024 increased by $8.0 million, or 9%, compared to the same period in 2023.

The increase was primarily due to the average unpaid principal balance of loans owned by third-party loan owners, which increased from $3.6 billion during the year ended June 30, 2022 to $4.5 billion during the year ended June 30, 2023.

In addition to the increase in servicing income related to the unpaid principal balance of loans outstanding, we recognized a gain of $8.3 million related to changes in fair value of servicing assets and liabilities during the year ended June 30, 2023, an increase of $2.0 million, compared to the same period in 2022.

The increase was primarily due to an increase in net servicing fee revenue which is calculated as a percentage of the unpaid principal balance of loans owned by third-party loan owners.

The average unpaid principal balance of loans owned by third-party loan owners increased from $4.5 billion during the year ended June 30, 2023 to $4.9 billion during the year ended June 30, 2024, an increase of 7%.

The increase was partially offset by fair value adjustments related to servicing assets and liabilities, resulting in a $2.5 million lower gain during the year ended June 30, 2024, compared to the same period in 2023.

Loss on Loan Purchase Commitment

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

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

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

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

In certain instances, our originating bank partners may originate loans with zero or below market interest rates that we are required to purchase.

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These costs are incurred on a per loan basis.

Loss on loan purchase commitment for the year ended June 30, 2023 decreased by $63.8 million, or 31%, compared to the same period in 2022.

The decrease was due to a decrease in the volume of long-term 0% APR loans purchased from our originating bank partners compared to the prior period, which are purchased above fair market value.

The difference between fair value and purchase price for our loans is generally correlated with the term length and APR of the loans.

Additionally, as the percentage of our portfolio shifts towards more interest-bearing loans, loss on loan purchase commitment is expected to decrease as a percentage of the originated principal amount.

During the year ended June 30, 2023, we purchased $1.4 billion, of long-term 0% APR loan receivables from our originating bank partners, which represented a decrease of $0.7 billion, or 33%, compared to the same period in 2022 .

Loss on loan purchase commitment for the year ended June 30, 2024 increased by $40.1 million, or 29%, compared to the same period in 2023, primarily due to an increase in total loans purchased.

During the year ended June 30, 2024, we purchased $21.5 billion of loans from our originating bank partners, compared to $16.2 billion in the same period in 2023, representing an increase of 33%.Additionally, discount rate assumption used to calculate the fair market value of loans increased during the period, which contributed to higher losses on loan purchase commitments.

Provision for Credit Losses

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The provision is determined based on our estimate of expected future losses on loans originated during the period and held for investment on our balance sheet, changes in our estimate of future losses on loans outstanding as of the end of the period and the net charge-offs incurred in the period.

Provision for credit losses increased by $76.6 million, or 30%, for the year ended June 30, 2023 compared to the same period in 2022, driven by growth in the volume of loans held for investment and partially offset by improvements in the credit quality of loans outstanding.

Provision for credit losses increased by $128.8 million, or 39%, for the year ended June 30, 2024 compared to the same period in 2023, driven by growth in the volume of loans held for investment.

Loans held for investment as of June 30, 2024 was $5.7 billion, an increase of $1.3 billion, or 29% as compared to the same period in 2023.

The allowance for credit losses as a percentage of loans held for investment decreased from 6.2% as of June 30, 2022 to 4.6% as of June 30, 2023, primarily driven by improvements in credit quality of loans outstanding and repayment trends.

The allowance for credit losses as a percentage of loans held for investment increased from 4.6% as of June 30, 2023 to 5.5% as of June 30, 2024.

The increase in the allowance rate from June 30, 2023 is primarily driven by an increase in loans held on our balance sheet as well as adjustments in our credit criteria in light of increasing interest income generated by our loans and changes in the loan mix.

Funding Costs

Funding costs consist of interest expense and the amortization of fees for certain borrowings collateralized by our loans including warehouse credit facilities and consolidated securitizations, sale and repurchase agreements collateralized by our retained securitization interests, and other costs incurred in connection with funding the purchases and originations of loans.

Funding costs for a given period are driven by the average outstanding balance of funding debt and notes issued by securitization trusts as well as our contractual interest expense, net of the impact of any designated cash flow hedges.

Funding costs for a given period are driven by the average outstanding balance of funding debt and notes issued by securitization trusts as well as our contractual interest rate and distribution of loans across funding facilities, net of the impact of any designated cash flow hedges.

Funding costs for the year ended June 30, 2024 increased by $161.2 million or 88%, compared to the same period in 2023.

The increase was primarily due to higher benchmark interest rates and an increase of funding debt and notes issued by securitization trusts during the year ended June 30, 2024.

The average total of funding debt from warehouses and securitizations for the year ended June 30, 2023 was $2.5 billion compared to $2.2 billion during the same period in 2022, an increase of $326.0 million, or 15%.

The average total of funding debt from warehouses and securitizations for the year ended June 30, 2024 was $4.5 billion compared to $2.5 billion during the same period in 2023, an increase of $2.0 billion, or 81%.

The increase was also attributable to a larger volume of on-balance sheet loans being retained during the period.

The average loan balance on-balance sheet was $3.4 billion for the year ended June 30, 2023, an increase of 53% compared to $2.2 billion during the same period in 2022.

The average on-balance sheet loan balance was $5.1 billion for the year ended June 30, 2024, respectively, an increase of 49% compared to$3.4 billion during the same periods in 2023, respectively.

Processing and Servicing

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Processing and servicing expense for the year ended June 30, 2024 increased by $85.9 million, or 33%, compared to the same period in 2023.

This increase was primarily due to a $46.0 million, or 51%, increase in payment processing fees related to increased servicing activity and payment volume for the year ended June 30, 2023.

Additionally, our platform fees increased by $30.8 million, or 290%, for the year ended June 30, 2023 due to an increase in our platform partner volume with a large enterprise partner.

Third-party customer support and collections spend increased by $13.7 million, or 36%, compared to the same period in 2022 due to increased loan volume and transaction growth during the period.

This increase was primarily driven by an increase in payment processing fees of $55.4 million, or 41%, related to increased payment volume for the year ended June 30, 2024.

Additionally, our platform fees increased by $37.5 million, or 91%, for the year ended June 30, 2024 due to an increase in our volume with a large enterprise partner.

The increase was partially offset by a $7.6 million, or 34%, decrease in personnel-related costs, for the year ended June 30, 2024 compared to the same period in 2023 as a result of our reduction in force and cost management plans.

Technology and Data Analytics

Technology and data analytics expense consists primarily of the salaries, stock-based compensation, and personnel-related costs of our engineering, product, and credit and analytics employees, as well as the amortization of internally-developed software and technology intangible assets, and our infrastructure and hosting costs.

Technology and data analytics expense for the year ended June 30, 2023 increased by $197.2 million or 47%, compared to the same period in 2022.

This increase is primarily driven by an increase of $100.4 million, or 39%, in stock-based compensation and payroll and personnel-related costs for the year ended June 30, 2023, compared to the same period in 2022, partially due to an increased average headcount as we continue to support our growth and technology platform, despite a reduction in force in connection with the 2023 Restructuring Plan .

Additionally, amortization of internally-developed software and intangible assets increased by $70.8 million or 184%, compared to the same period in 2022, primarily as a result of an increase in the number of capitalized projects and our periodic reassessment of the remaining useful lives of those assets.

Technology and data analytics expense for the year ended June 30, 2024 decreased by $114.0 million or 19%, compared to the same period in 2023.

The decrease is primarily driven by a decrease of $138.1 million, or 39%, in stock-based compensation and payroll and personnel-related costs for the year ended June 30, 2024, compared to the same period in 2023, due to higher capitalized compensation costs related to internally-developed software and a reduction in force.

Additionally, data infrastructure and hosting costs decreased by $26.0 million, or 23%, for the year ended June 30, 2024 compared to the same period in 2023, due to cost optimization initiatives as a result of improved contractual terms with several key vendors.

The decrease is partially offset by amortization of internally-developed software which increased by $44.0 million, or 40%, for the year ended June 30, 2024 compared to the same period in 2023, as a result of an increase in the number of capitalized projects.

Capitalized projects grew by 36% from approximately 660 projects as of June 30, 2023 to 890 projects as of June 30, 2024.

Infrastructure and hosting costs increased by $20.6 million, or 23%, and data provider costs increased by $11.5 million, or 38%, for the year ended June 30, 2023, compared to the same period in 2022, due to increased capacity requirements of our technology platform driven by increases in active users and transactions per active consumer.

Sales and Marketing

Sales and marketing costs consist of the expense related to warrants and other share-based payments granted to our enterprise partners, salaries and personnel-related costs, as well as costs of general marketing and promotional activities, promotional event programs, sponsorships, and allocated overhead.

Sales and marketing expense for the year ended June 30, 2023 increased by $105.9 million or 20%, compared to the same period in 2022.

The increase was primarily driven by Amazon warrant expense which increased from $281.0 million for the year ended June 30, 2022 to $463.3 million for the year ended June 30, 2023, as fiscal 2023 was the first full year of the Amazon warrants vesting.

The increase was partially offset by a $36.1 million, or 65%, decrease in brand and consumer marketing spend, as well as a decrease of $15.2 million, or 84%, in business-to-business marketing spend during the year ended June 30, 2023, compared to the same period in 2022, primarily due to a reduced number of paid brand marketing campaigns and brand partnerships.

Additionally, the amortization of our commercial agreement with Shopify decreased by $26.4 million, or 42%, during the year ended June 30, 2023, compared to the same period in 2022 due to an amendment made in our partnership agreement, which extended the period of benefit over which we amortize the commercial agreement asset.

Sales and marketing expense for the year ended June 30, 2024 decreased by $61.9 million or 10%, compared to the same period in 2023.

The decrease was primarily driven by a decrease of $26.0 million, or 37%, in payroll and personnel-related costs during the year ended June 30, 2024 compared to the same period in 2023, as a result of our reduction in force and cost management plans.

Amazon warrant expense decreased by $23.7 million, or 5%, during the year ended June 30, 2024 compared to the same period in 2023, primarily due to the renewal of the commercial partnership agreement in February 2024, which extended the amortization period of the commercial agreement asset, as well as a decrease in the number of new users to the Amazon program during the year ended June 30, 2024, which is the basis for a portion of the warrant expense.

Additionally, amortization of intangible assets decreased by $8.1 million, or 46%, for the year ended June 30, 2024 compared to the same period in 2023, as a result of one-time acceleration of amortization of Returnly’s intangibles assets related to the wind down of our returns management platform during fiscal 2023.

General and Administrative

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General and administrative expenses also include costs related to fees paid for professional services, including legal, tax and accounting services, allocated overhead, and certain discretionary expenses incurred from operating our technology platform.

General and administrative expense for the year ended June 30, 2023 increased by $8.9 million or 2%, compared to the same period in 2022.

The increase was primarily driven by a $28.5 million, or 7%, increase in payroll and personnel-related costs due to an increase in average headcount compared to the same period in 2022, despite a reduction in force in connection with the 2023 Restructuring Plan.

The increase was partially offset by a $9.7 million, or 24%, decrease in professional service fees due to reduced spend related to acquisitions and international expansion programs.

Additionally, recruitment costs decreased by $9.8 million, or 78%, in line with our restructuring and cost management plans.

General and administrative expense for the year ended June 30, 2024 decreased by $61.1 million or 10%, compared to the same period in 2023.

The decrease was primarily due to a $28.5 million, or 6%, decrease in payroll

and personnel-related costs compared to the same period in 2023, as a result of our reduction in force and cost management plans.

Additionally, insurance expense decreased by $7.9 million, or 42%, driven by a rate reduction during policy contract renewals for the year ended June 30, 2024 compared to the same period in 2023.

Software subscription and license costs decreased by $5.3 million, or 14%, during the year ended June 30, 2024 and development service costs decreased by $4.2 million, or 45%, during the year ended June 30, 2024 compared to the same period in 2023, primarily as a result of efficiency improvements, contract renegotiations, and discontinuance of certain software and subscriptions.

Restructuring and Other

Restructuring and other for the year ended June 30, 2023 increased by $35.9 million compared to the same period in 2022.

During the year ended June 30, 2023, we committed to a restructuring plan designed to manage our operating expenses in response to current macroeconomic conditions and ongoing business prioritization efforts.

The associated restructuring charges during the year ended June 30, 2023 were approximately $35.9 million, which included expenditures of $29.7 million relating to employee severance and other employment termination benefits and $6.2 million of accelerated amortization expense due to a reduction of right-of-use lease assets resulting from our exiting leased office space.

For further information on the associated restructuring liability, refer to Note 16.

Restructuring and other in the notes to the consolidated financial statements in this Form 10-K.

Other (Expense) Income, net

Other (expense) income, net includes interest earned on our money market funds included in cash and cash equivalents and restricted cash, interest earned on securities available for sale, gains on derivative agreements driven by increases in fair value, amortization of convertible debt issuance cost as well as gains (losses) on extinguishment, revolving credit facility issuance costs, and fair value adjustments resulting from changes in the fair value of our contingent consideration liability, primarily driven by changes in the market price of our Class A common stock.

Other (expense) income, net increased by $70.4 million, or 50%, during the year ended June 30, 2023, compared to the same period in 2022.

The increase is primarily driven by a gain of $89.8 million recognized on the early extinguishment of our convertible debt resulting from a repurchase of a portion of our 2026 Notes during the year ended June 30, 2023, as well as an increase of $65.9 million in interest income from cash and investments due to higher interest rates.

The increase was partially offset by a gain of $8.2 million recognized on the change in fair value of the contingent consideration liability associated with our acquisition of PayBright, driven by changes in the value of our common stock, as compared to a gain of $89.3 million in the same period in 2022, a decrease of $81.1 million.

Restructuring and other for the year ended June 30, 2024 decreased by $29.1 million compared to the same period in 2023.

The restructuring and other expenses during the year ended June 30, 2024 included employee severance and related costs as a result of certain exit and disposal activities.

The restructuring and other expenses during the year ended June 30, 2023 primarily related to the restructuring plan we committed to in February 2023, which is complete.

We do not expect future costs or payments related to the plan.

Other Income, net

Other income, net includes interest earned on our money market funds included in cash and cash equivalents and restricted cash, interest earned on securities available for sale, impairment or other adjustments to the cost basis of non-marketable equity securities held as cost, gains and losses on derivative agreements not designated within a hedging relationship, amortization of convertible debt issuance cost as well as gains (losses) on extinguishment, revolving credit facility issuance costs, fair value adjustments related to contingent liabilities, and other income or expense arising from activities that are unrelated to our primary business.

Other income, net decreased by $111.3 million, or 53%, during the year ended June 30, 2024, compared to the same period in 2023, primarily driven by a decrease in income related to our convertible note repurchases.

We repurchased a portion of our 2026 convertible notes with a principal balance of $76.7 million and $299.1 million as of June 30, 2024 and 2023, respectively, resulting in a gain on repurchase of our convertible debt of $12.6 million and $89.8 million, respectively, a decrease of $77.2 million year-over-year.

Additionally, income from derivative instruments not designated in a hedge accounting relationship decreased by $43.6 million year-over-year primarily driven by a decrease in the notional balance of the derivative instruments and less volatility in interest rates.

Income Tax Expense (Benefit)

The income tax benefit for the year ended June 30, 2023 decreased by $13.5 million, or 78%, compared to the same period in 2022.

The tax benefit recognized for the year ended June 30, 2022 was primarily attributable to a change in our assessment of the future realization of certain Canadian deferred tax assets during the period, which resulted in a one-time income tax benefit for the release of all of the valuation allowance against our Canadian deferred tax assets.

The income tax expense / (benefit) for the year ended June 30, 2024 of $2.2 million changed from $(3.9) million for the same period in 2023, an overall increase to income tax expense (or decrease to income tax benefit) of $6.1 million, or 157%.

This increase to income tax expense (decrease of income tax benefit) was primarily attributable to the increase in pretax book income in certain foreign jurisdictions for the year ended June 30, 2024 and its related income tax effects, whereas the income tax benefit recognized for the year ended June 30, 2023 was primarily attributable to the income tax effects of pretax book losses for that period in the same foreign jurisdictions.

Liquidity and Capital Resources

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We proactively manage the allocation of loans on our platform across various funding channels based on several factors including, but not limited to, internal risk limits and policies, capital market conditions and channel economics.

With rising interest rates and inflation, our excess funding capacity and committed and long-term relationships with a diverse group of existing funding partners help provide flexibility as we optimize our funding to support the growth in loan volume.

Our principal sources of liquidity are cash and cash equivalents, available for sale securities, available capacity from warehouse and revolving credit facilities, revolving securitizations, forward flow loan sale arrangements, and certain cash flows from our operations.

Our excess funding capacity and committed and long-term relationships with a diverse group of existing funding partners help provide flexibility as we optimize our funding to support the growth in loan volume.

Our principal sources of liquidity are cash and cash equivalents, available for sale securities, available capacity from warehouse and revolving credit facilities, securitization trusts, forward flow loan sale arrangements, and certain cash flows from our operations.

As of June 30, 2024, we had $2.1 billion in cash and cash equivalents and available for sale securities, $3.8 billion in available funding debt capacity, excluding our purchase commitments from third-party loan buyers, and $330 million in borrowing capacity available under our revolving credit facility.

We believe our principal sources of liquidity are sufficient to meet both our existing operating, working capital, and capital expenditure requirements and our currently planned growth for at least the next 12 months.

The following table summarizes our cash, cash equivalents and investments in debt securities (in thousands):

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Short-term securities have maturities less than or equal to one year, and long-term securities range from greater than one year to less than five years.

Our funding debt as of June 30, 2023 primarily include warehouse credit facilities and sale and repurchase agreements.

Funding debt as of June 30, 2024 primarily includes our warehouse credit facilities and sale and repurchase agreements.

A detailed description of each of our borrowing arrangements is included in Note 9.

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2028 409,520 207,038

2029 54,546 54,546

Thereafter 201,060 126,347

Total $ 5,640,126 $ 1,851,699

Our warehouse credit facilities allow us to borrow up to an aggregate of $3.3 billion, mature between 2024 and 2029 and subject to covenant compliance, generally permit borrowings up to 12 months prior to the final maturity date.

Our warehouse credit facilities allow us to borrow up to an aggregate of $5.0 billion, mature between 2025 and 2027 and subject to covenant compliance, generally permit borrowings from to 4 - 12 months prior to the final maturity date.

As of June 30, 2024, we have drawn an aggregate of $1.4 billion on our warehouse credit facilities.

As of June 30, 2024, we were in compliance with all applicable covenants in the agreements.

Refer to Note 9.

Debt in the notes to the consolidated financial statements for further details on our warehouse credit facilities.

International

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warehouse credit facilities, borrowings under these agreements are referred to as funding debt, and proceeds from the borrowings may only be used for the purposes of facilitating loan funding and origination.

These facilities are secured by Canadian loan receivables pledged to the respective facility as collateral, mature between 2025 and 2029.

These facilities are secured by Canadian loan receivables pledged to the respective facility as collateral, maturing between 2028 and 2030.

As of June 30, 2024, the aggregate commitment amount of these facilities was $665.1 million on a revolving basis, of which $387.9 million was drawn.

Refer to Note 9.

Debt in the notes to the consolidated financial statements for further details on our other funding facilities.

Sale and Repurchase Agreements

We have various sale and repurchase agreements pursuant to our retained interests in our off-balance sheet securitizations where we have sold these securities to a counterparty with an obligation to repurchase at a future date and price.

We entered into various sale and repurchase agreements pursuant to our retained interests in our off-balance sheet securitizations where we have sold these securities to a counterparty with an obligation to repurchase at a future date and price.

These agreements have an initial term of three months and subject to mutual agreement by Affirm and the counterparty, we may enter into one or more repurchase date extensions, each for an additional three month term at market interest rates on such extension date.

We had $34.5 million and $11.0 million in debt outstanding under our sale and repurchase agreements disclosed within funding debt on the consolidated balance sheets as of June 30, 2024 and June 30, 2023, respectively.

Refer to Note 9.

Debt in the notes to the consolidated financial statements for further details on our sale and repurchase agreements.

Other Funding Sources

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Securities issued from our asset-backed securitizations are senior or subordinated, based on the waterfall criteria of loan payments to each security class.

The subordinated

residual interests issued from these transactions are first to absorb credit losses in accordance with the waterfall criteria.

The subordinated residual interests issued from these transactions are first to absorb credit losses in accordance with the waterfall criteria.

We consolidate securitization VIEs when we are deemed to be the primary beneficiary and therefore have the power to direct the activities that most significantly affect the VIEs’ economic performance and a variable interest that could potentially be significant to the VIE.

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Revolving Credit Facility

In February 2022, we entered into a revolving credit agreement for a $165.0 million unsecured revolving credit facility, maturing on February 4, 2025, which was subsequently amended to increase the unsecured revolving commitments to $205.0 million.

On June 26, 2024, we entered into an amendment to our revolving credit agreement under the terms of which the aggregate commitment was increased to $330.0 million and the final maturity date was extended three years to June 26, 2027.

As of June 30, 2024, there are no borrowings outstanding under the facility.

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Forward Flow Loan Sale Arrangements

We have forward flow loan sale arrangements that facilitates the sale of whole loans to counterparties.

Forward flow arrangements are generally fixed term in nature, with term lengths ranging between one to three years, during which we periodically sell loans to our counterparties.

The following table summarizes our cash flows for the periods presented:

We have forward flow loan sale arrangements that facilitate the sale of whole loans across a diverse third-party investor base.

Forward flow arrangements are generally fixed term in nature, with term lengths ranging between one to three years, during which we periodically sell loans to each counterparty based on the terms of our negotiated agreement.

Cash Flow Analysis

The following table provides a summary of cash flow data during the periods indicated:

Year ended June 30,

(in thousands)

Net cash provided by (used in) operating activities $ 12,181 $ (162,194)

Net cash provided by operating activities $ 450,138 $ 12,181

Net cash used in investing activities $ (1,325,149) $ (1,653,070)

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Our largest sources of operating cash are fees charged to merchant partners on transactions processed through our platform and interest income from consumers’ loans.

Our primary uses of cash from operating activities are for general and administrative expenses, technology and data analytics expenses, funding costs, processing and servicing costs, and sales and marketing expenses.

Cash provided by operating activities for the year ended June 30, 2023, was $12.2 million, an increase of $174.4 million from cash used in operating activities of $162.2 million for the year ended June 30, 2022.

This reflects our net loss of $985.3 million, adjusted for non-cash charges of $967.4 million and net cash inflows of $30.1 million provided by changes in our operating assets net of operating liabilities.

Non-cash charges primarily consisted of:

commercial agreement expense, which increased by $167.3 million primarily as a result of an increase of $182.3 million related to Amazon warrant expenses, partially offset by a decrease of $26.4 million related to amortization expense associated with our commercial agreement asset with Shopify, provision for credit losses, which increased by $76.6 million driven by growth in the volume of loans held for investment and partially offset by improvements in the credit quality of loans outstanding, stock-based compensation, which increased by $60.7 million driven by an increase in amortization of internally developed software and intangible assets primarily as a result of an increase in the number of capitalized projects, which

increased by $81.9 million as a result of accelerated amortization related to property, equipment and software, and an adjustment in fair value of assets and liabilities of $85.9 million, primarily as a result of the gain of $8.2 million recognized based on a change in the fair value of the contingent consideration liability associated with our acquisition of PayBright, driven by changes in the market price of our common stock, as compared to a gain of $89.3 million in the same period in 2022, a decrease of $81.1 million .

This was partially offset by a decrease due to a gain on early extinguishment of debt of $89.8 million related to the convertible note repurchases during the period.

Our net cash inflows resulting from changes in operating assets and liabilities increased by $40.0 million for the year ended June 30, 2023 compared to the same period in 2022.

This change was primarily driven by net proceeds from the sale and purchase of loans of $165.1 million which increased by $135.7 million compared to the same period in 2022.

We also purchased loans of $6.0 billion, which was offset by proceeds from loan sales of $6.2 billion.

Our primary uses of cash from operating activities are for general and administrative, technology and data analytics, funding costs, processing and servicing, and sales and marketing expenses.

Net cash provided by operating activities was $450.1 million for the year ended June 30, 2024.

Net loss of $517.8 million was adjusted for the add back of net non-cash items increasing operating cash flows by $1.0 billion, offset by a net decrease in operating cash flows from net changes in our operating assets and liabilities of $63.0 million.

The non-cash item adjustments are primarily attributable to $460.6 million provision for credit losses, $406.7 million commercial agreement warrant expense, $344.5 million stock-based compensation expense, and $169.0 million depreciation and amortization expense, which were partially offset by $197.2 million gain on sale of loans and $187.7 million amortization of premiums and discounts on loans.

The net decrease in cash from changes in operating assets and liabilities was primarily driven by an increase of accounts receivable of $167.8 million, a decrease in accrued expenses and other liabilities of $55.2 million, which was partially offset by an increase in payable to third party loans owners of $105.8 million.

In addition, cash used for the purchase and origination of loans held for sale was $4.2 billion, which was offset by cash proceeds generated from the sale of loans held for sale of $4.2 billion.

Net cash provided by operating activities was $12.2 million for the year ended June 30, 2023.

Net loss of $985.3 million was adjusted for the add back of net non-cash items increasing operating cash flows by $967.4 million, and a net increase in operating cash flows from net changes in our operating assets and liabilities of $30.1 million.

The non-cash item adjustments are primarily attributable to $331.9 million provision for credit losses, $421.9 million commercial agreement warrant expense, $451.7 million stock-based compensation expense, and $134.6 million depreciation and amortization expense, which were partially offset by $188.3 million gain on sale of loans and $141.1 million amortization of premiums and discounts on loans.

The net increase in cash from changes in operating assets and liabilities was primarily driven by cash proceeds generated from the sale of loans held for sale of $6.2 billion which was offset by cash used for the purchase and origination of loans held for sale of $6.0 billion, an increase of accounts receivable of $67.7 million, a decrease in accrued expenses and other liabilities of $38.2 million, and a decrease in payable to third party loans owners of $17.5 million.

Investing Activities

For the year ended June 30, 2023, net cash used in investing activities o f $1.7 billion was primarily attributable to purchases and origination of loans held for investment of $13.6 billion , partially offset by repayments of loans and proceeds from sale of loans of $11.6 billion.

During the period, we originated loans of $3.6 billion and purchased loans of $10.0 billion, representing a combined increase of $3.2 billion compared to the same period in 2022, due partly to continued growth in GMV.

Loan repayments and sale of loans of $11.6 billion during the year ended June 30, 2023, represented an increase of $1.6 billion, compared to the same period in 2022, due in part to the shifting of the length of loan terms on our consolidated balance sheet netted off by higher average balance of loans held for investment compared to the same period in 2022.

The additional offset during the year ended June 30, 2023 was related to the net proceeds from maturities of securities available for sale of $0.5 billion, representing an increase of $2.0 billion compared to the same period in 2022.

Net cash used in investing activities was $1.3 billion for the year ended June 30, 2024, which consisted of outflows related to $21.5 billion of purchases and origination of loans held for investment, including originated and purchased loans of $4.3 billion and $17.2 billion, respectively, during the period, $1.0 billion of purchases of securities available for sale, and $159.3 million of property, equipment and software additions.

Inflows related to $14.1 billion of principal repayments of loans, $6.1 billion of proceeds from sale of loans held for investment, and $1.1 billion of proceeds from maturities of securities available for sale.

Net cash used in investing activities was $1.7 billion for the year ended June 30, 2023, which consisted of outflows related to $13.6 billion of purchases and origination of loans held for investment, including originated and purchased loans of $3.6 billion and $10.0 billion, respectively, during the period, $1.1 billion of purchases of securities available for sale, and $120.8 million of our investment in purchases of property, equipment and software.

Inflows related to $10.0 billion of principal repayments of loans, $1.6 billion of proceeds from sale of loans, and $1.5 billion of proceeds from maturities and repayments of securities available for sale.

Financing Activities

For the year ended June 30, 2023, net cash provided by financing activities of $1.3 billion, was primarily attributable to net cash inflows from funding debt of $1.1 billion, and the issuance and repayment of notes and certificates issued by securitization trust of $0.5 billion, partially offset by net cash outflows related to the repayment of a portion of our convertible senior notes of $206.6 million.

Additionally, we paid taxes related to RSU vesting of $73.8 million for the year ended June 30, 2023.

Net cash provided by financing activities was $0.9 billion for the year ended June 30, 2024, primarily consisted of net cash inflows of $1.1 billion from the new issuance and repayment of notes and residual trust certificates issued by securitization trusts as well as net cash inflows of $59.2 million related to borrowing and repayment of funding debt.

This was partially offset by net cash outflows of $189.2 million related to taxes paid on vested RSUs.

Net cash provided by financing activities was $1.3 billion for the year ended June 30, 2023, primarily consisted of net cash inflows of $0.5 billion from the new issuance and repayment of notes and residual trust certificates issued by securitization trusts, and by net cash inflows of $1.1 billion related to borrowing and repayment of funding debt.

This was partially offset by net cash outflows of $206.6 million related to the extinguishment of a portion of our 2026 Notes.

Contractual Obligations

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The amounts presented are consistent with contractual terms and are not expected to differ significantly from actual results under our existing leases.

(2) Purchase obligations amounts include minimum purchase commitments for cloud computing web services entered into in the ordinary course of business.

(3) The 2026 Notes have an aggregated principal balance of $1,425.9 million and do not bear interest.

(2) Purchase obligations amounts primarily include minimum purchase commitments for cloud computing web services entered into in the ordinary course of business.

(3) The 2026 Notes have an aggregated principal balance of $1.3 billion and do not bear interest.

The 2026 Notes mature on November 15, 2026.

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For off-balance sheet loan sales where servicing is the only form of continuing involvement, we could experience a loss if we were required to repurchase a loan due to a breach in representations and warranties associated with our loan sale or servicing contracts.

For unconsolidated securitization transactions where Affirm is the sponsor and risk retention holder, Affirm could experience a loss of up to 5% of both the senior notes and residual certificates.

As of June 30, 2023, the aggregate outstanding balance of loans held by third-party investors for off-balance sheet VIEs was $4.1 billion.

In the unlikely event principal payments on the loans backing any off-balance sheet securitization are insufficient to pay holders of senior notes and residual certificates, including any retained interests held by Affirm, then any amounts the Company contributed to the securitization reserve accounts may be depleted.

For unconsolidated securitization transactions where Affirm is the sponsor and risk retention holder, Affirm could experience a loss of up to 5% of both the senior notes and residual trust certificates.

In the unlikely event principal payments on the loans backing any off-balance sheet securitization are insufficient to pay holders of senior notes and residual trust certificates, including any retained interests held by Affirm, then any amounts we contributed to the securitization reserve accounts may be depleted.

Securitization and Variable Interest Entities of the accompanying notes to our consolidated financial statements for more information.

As of June 30, 2024, the aggregate outstanding balance of loans held by third-party investors and off balance sheet securitizations was $5.1 billion.

Critical Accounting Policies and Estimates

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We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances.

Because certain of these accounting policies require significant judgment, our actual results may

differ materially from our estimates.

Because certain of these accounting policies require significant judgment, our actual results may differ materially from our estimates.

To the extent that there are differences between our estimates and actual results, our future consolidated financial statement presentation, financial condition, results of operations, and cash flows may be affected.

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

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

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

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

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

Loans are charged-off in accordance with our charge-

off policy, as the contractual principal becomes 120 days past due or meets other charge-off policy requirements.

Loans are charged-off in accordance with our charge-off policy, as the contractual principal becomes 120 days past due or meets other charge-off policy requirements.

Subsequent recoveries of the unpaid principal balance, if any, are credited to the allowance for credit losses.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis