What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2024-08-28 compared with 2023-08-25 · 429 added, 492 removed, 1490 unchanged (38% of the section changed)

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Consolidated Balance Sheets

Consolidated Statements of Operations and Comprehensive Income (Loss)

Consolidated Statement of Redeemable Convertible Preferred Stock and Stockholders' Equity (Deficit)

Consolidated Statements of Operations and Comprehensive Loss

Consolidated Statement of Stockholders' Equity (Deficit)

Consolidated Statements of Cash Flows

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

and subsidiaries (the "Company") as of June 30, 2023 and 2022, the related consolidated statements of operations and comprehensive income (loss), redeemable convertible preferred stock and stockholders’ equity (deficit), and cash flows for each of the three years in the period ended June 30, 2023, and the related notes (collectively referred to as the “financial statements”).

and subsidiaries (the "Company") as of June 30, 2024 and 2023, the related consolidated statements of operations and comprehensive loss, stockholders’ equity, and cash flows for each of the three years in the period ended June 30, 2024, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of June 30, 2024 and 2023, and the results of its operations and its cash flows for each of the three years in the period ended June 30, 2024, in conformity with accounting principles generally accepted in the United States of America.

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Critical Audit Matter Description

The allowance for credit losses (ACL) is a material estimate of the Company and as of June 30, 2023, the total balance was $204.5 million.

The allowance for credit losses (ACL) is a material estimate of the Company.

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

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

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

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

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

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

We identified the ACL for U.S.

loans as a critical audit matter given the subjective nature and amount of judgment required in developing the estimate.

Performing audit procedures to evaluate the reasonableness of the ACL required

a high degree of auditor judgment, an increased extent of audit effort, credit specialists, and the need to involve more experienced audit professionals.

How the Critical Audit Matter Was Addressed in the Audit

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

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

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

• We tested the design and effectiveness of controls over the ACL.

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

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

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

/s/ Deloitte & Touche LLP

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AFFIRM HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(in thousands, except share and per share amounts)

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Operating loss $ ( 615,847 ) $ ( 1,200,862 ) $ ( 866,048 )

Other (expense) income, net 211,617 141,217 ( 59,703 )

Other income, net 100,320 211,617 141,217

Loss before income taxes $ ( 515,527 ) $ ( 989,245 ) $ ( 724,831 )

Income tax benefit ( 3,900 ) ( 17,414 ) ( 2,343 )

Income tax expense (benefit) 2,230 ( 3,900 ) ( 17,414 )

Net loss $ ( 517,757 ) $ ( 985,345 ) $ ( 707,417 )

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Unrealized gain (loss) on securities available for sale, net 6,857 ( 882 ) ( 8,022 )

Unrealized gain on cash flow hedges 751 — —

Net other comprehensive income (loss) ( 8,274 ) ( 13,922 ) 7,075

Gain on cash flow hedges 656 751 —

Net other comprehensive loss ( 6,142 ) ( 8,274 ) ( 13,922 )

Comprehensive loss $ ( 523,899 ) $ ( 993,619 ) $ ( 721,339 )

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AFFIRM HOLDINGS, INC.

CONSOLIDATED STATEMENT OF REDEEMABLE CONVERTIBLE PREFERRED STOCK AND

STOCKHOLDERS’ EQUITY (DEFICIT)

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY

(in thousands, except share amounts)

Redeemable Convertible

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

Shares Amount Shares (1)

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

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

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

21,836,687 434,542 — — — — — —

Conversion of convertible debt 4,444,321 88,559 — — ( 42,124 ) — — ( 42,124 )

Conversion of redeemable convertible preferred stock ( 148,396,979 ) ( 1,327,271 ) 148,396,979 2 1,327,269 ( 11 ) — 1,327,260

Issuance of common stock upon initial public offering, net of issuance costs of $ 6,871

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

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

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

Issuance of common stock for acquisitions — — 9,167,515 — 331,498 — — 331,498

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

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

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

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

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

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

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

Effects of adoption of new accounting standards — — — — — ( 9,980 ) — ( 9,980 )

Deconsolidation of variable interest entity — — — — — ( 300 ) — ( 300 )

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

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

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

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

Issuance of common stock upon exercise of stock options 947,792 — 4,593 — — 4,593

Issuance of common stock in acquisition — — 13,674 — — 13,674

Issuance of common stock, employee share purchase plan 954,475 — 11,482 — — 11,482

Forfeiture of common stock related to acquisitions ( 258,905 ) — — — — —

Vesting of restricted stock units 7,849,919 — — — — —

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Unrealized loss on securities available for sale — — — — ( 882 ) ( 882 )

Unrealized gain on cash flow hedges — — — — 751 751

Net loss — — — ( 985,345 ) — ( 985,345 )

Balance as of June 30, 2023 296,846,217 $ 3 $ 5,140,850 $ ( 2,591,247 ) $ ( 15,423 ) $ 2,534,183

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

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

AFFIRM HOLDINGS, INC.

CONSOLIDATED STATEMENT OF REDEEMABLE CONVERTIBLE PREFERRED STOCK AND

STOCKHOLDERS’ EQUITY, CONT.

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY, CONT.

(in thousands, except share amounts)

Redeemable Convertible

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

Shares Amount Shares (1)

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

Balance as of June 30, 2023 296,846,217 $ 3 $ 5,140,850 $ ( 2,591,247 ) $ ( 15,423 ) $ 2,534,183

Issuance of common stock upon exercise of stock options 2,826,973 — 22,922 — — 22,922

Issuance of common stock in acquisition — — — — 13,674 — — 13,674

Issuance of common stock, employee share purchase plan 578,222 — 10,217 — — 10,217

Forfeiture of common stock related to acquisitions — — ( 258,905 ) — — — — —

Vesting of restricted stock units 10,801,619 — — — — —

Vesting of warrants for common stock — — 406,714 — — 406,714

Repurchases of common stock — — ( 12,437 ) — ( 109 ) — — ( 109 )

Stock-based compensation — — 471,021 — — 471,021

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Foreign currency translation adjustments — — — — ( 13,655 ) ( 13,655 )

Unrealized loss on securities available for sale — — — — — — ( 882 ) ( 882 )

Unrealized gain on securities available for sale — — — — 6,857 6,857

Unrealized gain on cash flow hedges — — — — 656 656

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Balance as of June 30, 2024 311,053,031 $ 3 $ 5,862,555 $ ( 3,109,004 ) $ ( 21,565 ) $ 2,731,989

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

(1) The share amounts listed above combine Class A and Class B stock.

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

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

Provision for credit losses 331,860 255,272 65,878

Amortization of premiums and discounts on loans, net ( 141,075 ) ( 171,965 ) ( 90,371 )

Provision for losses 460,628 331,860 255,272

Amortization of premiums and discounts on loans ( 187,709 ) ( 141,075 ) ( 171,965 )

Gain on sales of loans ( 197,153 ) ( 188,341 ) ( 196,435 )

Extinguishment of convertible debt ( 89,841 ) — —

Gain on extinguishment of debt ( 12,638 ) ( 89,841 ) —

Changes in fair value of assets and liabilities ( 2,776 ) ( 15,883 ) ( 101,789 )

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Change in operating assets and liabilities:

Purchases of loans held for sale ( 6,009,361 ) ( 5,552,662 ) ( 2,640,734 )

Purchases and origination of loans held for sale ( 4,212,299 ) ( 6,009,361 ) ( 5,552,662 )

Proceeds from the sale of loans held for sale 4,211,687 6,174,447 5,582,035

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Accounts payable 12,417 ( 5,038 ) ( 24,686 )

Payable to third-party loan owners ( 17,531 ) 21,304 25,082

Payable to third-party loan buyers 105,791 ( 17,531 ) 21,304

Accrued interest payable 11,138 7,915 3,907

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

Proceeds from issuance of notes and residual trust certificates by securitization trusts 1,150,000 999,394 1,395,879

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

Proceeds from issuance of notes and certificates by securitization trust 2,350,000 1,150,000 999,394

Principal repayments of funding debt ( 12,552,937 ) ( 5,801,531 ) ( 4,090,562 )

Principal repayments of notes issued by securitization trusts ( 606,299 ) ( 552,046 ) ( 210,368 )

Principal repayments of notes issued by securitization trust ( 1,276,451 ) ( 606,299 ) ( 552,046 )

Payment of debt issuance costs ( 27,302 ) ( 22,443 ) ( 13,751 )

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Repurchases of common stock — ( 109 ) ( 86 )

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

Repurchases and conversion of redeemable convertible preferred stock — — ( 13 )

Net cash provided by financing activities 913,149 1,349,945 2,037,119

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Additions to property and equipment included in accrued expenses — — 107

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

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

Conversion of convertible debt — — 88,559

Acquisition of commercial agreement asset — — 25,900

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

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

Through our next-generation commerce platform, agreements with originating banks, and capital markets partners, we enable consumers to confidently pay for a purchase over time, with terms ranging up to 60 months.

Through our next-generation commerce platform, agreements with originating banks, and capital markets partners, we enable consumers to confidently pay for a purchase over time.

When a consumer applies for a loan through our platform, the loan is underwritten using our proprietary risk model, and once approved, the consumer selects their preferred repayment option.

Loans are directly originated or funded and issued by our originating bank partners.

Merchants partner with us to transform the consumer shopping experience and to acquire and convert customers more effectively through our frictionless point-of-sale payment solutions.

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

Merchants partner with us to transform the consumer shopping experience and to acquire and convert consumers more effectively through our frictionless point-of-sale payment solutions.

Unlike legacy payment options and our competitors’ product offerings, which charge deferred or compounding interest and unexpected costs, we disclose up-front to consumers exactly what they will owe — no hidden fees, no deferred interest, no penalties.

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

Material estimates that are particularly susceptible to significant change relate to determination of the allowance for credit losses, capitalized internal-use software development costs, valuation allowance for deferred tax assets, loss on loan purchase commitment, the fair value of servicing assets and liabilities, discount on self-originated loans, the fair value of assets acquired and any contingent consideration transferred in business combinations, the evaluation for impairment of intangible assets and goodwill, the fair value of available for sale debt securities including retained interests in our securitization trusts, the fair value of residual certificates issued by our securitization trusts held by third parties, and stock-based compensation, including the fair value of warrants issued to nonemployees.

We base our estimates on historical experience, current events, and other factors

we believe to be reasonable under the circumstances.

Material estimates that are particularly susceptible to significant change relate to determination of the allowance for credit losses, capitalized internal-use software development costs, valuation allowance for deferred tax assets, loss on loan purchase commitment, discount on self-originated loans, the evaluation for impairment of intangible assets and goodwill, the fair value of available for sale debt securities including retained interests in our securitization trusts, the fair value of risk sharing arrangements, and stock-based compensation, including the fair value of warrants issued to nonemployees.

We base our estimates on historical experience, current events, and other factors we believe to be reasonable under the circumstances.

To the extent that there are material differences between these estimates and actual results, our financial condition or operating results will be materially affected.

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therefore, actual results could differ materially from those estimates.

Immaterial Correction of Prior Period Amounts

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

We measure stock-based compensation based on the fair value of an award at the grant date and recognize expense over the vesting period of the award based on the estimated portion of the award that is expected to vest.

An incorrect determination of the grant date and service inception dates for certain awards granted prior to our initial public offering (“IPO”), as well as incorrect treatment of expense recognition for certain terminated employees, resulted in an understatement of additional paid in capital and misstatement of stock-based compensation expense as of and for the year ended June 30, 2021 as previously reported.

Accordingly, we have corrected the accompanying financial statements and related footnotes as of and for the year ended June 30, 2021 from amounts previously reported.

We have evaluated the materiality of these misstatements based on an analysis of quantitative and qualitative factors and concluded they were not material to the prior period financial statements, individually or in aggregate.

The following tables provide the impact of the correction as of and for the year ended June 30, 2021, as presented below (in thousands):

Year Ended June 30, 2021

As Previously Reported Adjustments As Corrected

Consolidated statement of operations and comprehensive loss

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

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

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

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

Total operating expenses 1,249,657 4,474 1,254,131

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

Loss before income taxes ( 433,266 ) ( 10,104 ) ( 443,370 )

Net loss attributable to common stockholders ( 430,923 ) ( 10,104 ) ( 441,027 )

Foreign currency translation adjustments 7,042 4 7,046

Net comprehensive income 7,071 4 7,075

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

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

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

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

Year Ended June 30, 2021

As Previously Reported Adjustments As Corrected

Consolidated statement of redeemable convertible preferred stock and stockholders’ equity

Stock-based compensation - additional paid-in capital 302,032 4,474 306,506

Foreign currency translation adjustments - accumulated other comprehensive income (loss) 7,042 4 7,046

Net loss - accumulated deficit ( 430,923 ) ( 10,104 ) ( 441,027 )

Balance as of June 30, 2021 - total stockholders' equity 2,581,153 ( 5,626 ) 2,575,527

Year Ended June 30, 2021

As Previously Reported Adjustments As Corrected

Consolidated statement of cash flows

Cash flows from operating activities

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

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

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

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

Net cash used in operating activities ( 193,130 ) — ( 193,130 )

Segment Reporting

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

Assets acquired and liabilities assumed in a business combination that arise from contingencies are recognized at fair value.

Transaction costs related to the acquisition of the acquired company are expensed as incurred.

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Restricted cash consists primarily of:

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

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

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

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As of the end of each reporting period, management reviews each security where the fair value is less than the amortized cost to determine whether any portion of the decline in fair value is due to a credit loss and/or whether or not we intend to sell or will be required to sell such security before recovery of its amortized cost basis.

The portion of any decline in fair value which management identifies as a credit loss will be recognized as an allowance for credit losses through other (expense) income, net .

To the extent management intends to sell or may be required to sell a security in an unrealized loss position, we 1) reverse any previously recorded allowance for credit losses with an offsetting entry to reduce the amortized cost basis of the security and 2) write-off any remaining portion of the amortized cost basis to equal its fair value, with this change recorded through other (expense) income, net .

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

The portion of any decline in fair value which management identifies as a credit loss will be recognized as an allowance for credit losses through other income (expense), net .

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

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

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

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

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

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

A loan that is initially designated as held for sale or held for investment may be reclassified when our intent for that loan changes.

When a loan held for investment is reclassified to held for sale and reported at fair

value, any allowance for the credit loss related to that loan is released and any fair value adjustment to record the loan at the lower of amortized cost or fair value is recorded.

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

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

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A servicing asset or liability arises when our contractual servicing fee with a counterparty differs from the adequate compensation rate that would be required by a third party to service the same portfolio of assets, as defined by ASC 860.

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

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

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

liabilities, respectively.

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

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

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Subsequent remeasurement of the recourse liability is recognized in other income (expense), net on the consolidated statement of operations and comprehensive loss.

In addition, we may recognize a risk share asset or liability in accordance with ASC 860 in certain arrangements with a third-party loan buyer to make a payment to the loan buyer or are entitled to receive a payment from the loan buyer, depending on the actual versus expected loan performance as contractually agreed to with the counterparty, and subject to a cap based on a percentage of the principal balance of loans sold.

The recognition of a risk share asset results in a corresponding increase to gain on sale of loans.

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

The risk share asset and liability are measured at fair value in accordance with ASC 820, “Fair Value Measurements and Disclosures” and remeasured each period based on the changes in inputs and assumptions for our expectation of future obligations.

Subsequent remeasurement of the risk share asset and liability is recognized in gain on sale of loans on the consolidated statement of operations and comprehensive loss.

Allowance for Credit Losses on Loans Held for Investment

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

Migration analysis is a technique used to estimate the likelihood that a loan receivable will

progress through various stages of delinquency and to charge-off.

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

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

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

As of June 30, 2023, we have considered the impact of Federal Reserve monetary policy, labor market trends, inflation, consumer sentiment, and the end of the student loan repayment pause.

As of June 30, 2024, we have considered the impact of Federal Reserve monetary policy, labor market trends and inflation.

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

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

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

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

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

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

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

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

We measure the recoverability of the asset group by comparing its carrying amount to the future undiscounted cash flows we expect the asset group to generate.

We measure the

recoverability of the asset group by comparing its carrying amount to the future undiscounted cash flows we expect the asset group to generate.

If we consider the asset group to be impaired, the impairment to be recognized equals the amount by which the carrying value of the asset group exceeds its fair value.

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

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

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

Funding Debt and Debt Issuance Costs

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Where we consolidate the securitization trusts, the loans held in the securitization trusts are included in loans held for investment, and the notes sold to third-party investors are recorded in notes issued by securitization trusts in the consolidated balance sheets.

We defer and amortize note issuance costs, including banker fees, legal fees and other professional service fees, for consolidated securitization trusts on a straight-line basis over the expected life of the notes.

amortize note issuance costs, including banker fees, legal fees and other professional service fees, for consolidated securitization trusts on a straight-line basis over the expected life of the notes.

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

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Balance Sheet Components for more information on these arrangements.

Sales and marketing costs also include salaries and personnel-related costs, as well as costs of marketing and promotional activities, promotional event programs, sponsorships, and allocated overhead.

Sales and marketing costs also include salaries and personnel-related costs, costs of marketing and promotional activities, and certain losses on loan origination for loans originated by our wholly-owned subsidiaries.

A portion of these costs related to general marketing and promotional activities are considered advertising costs within the meaning of ASC Topic 720, “Other Expenses” (“ASC 720”), and are expensed as incurred.

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Offsetting collateral received by or paid to the counterparty is presented gross within accrued expenses and other liabilities or other assets, as applicable, on the consolidated balance sheet.

Cash flows associated with our derivative instruments are reported within cash flows from operating activities in the consolidated statements of cash flows.

Cash Flow Hedges

We have interest rate swaps designated as cash flow hedges in order to mitigate our exposure to changes in interest rates on our variable rate warehouse funding debt.

We have interest rate swaps designated as cash flow hedges in order to mitigate our exposure to changes in interest rates related to our funding activities.

Swaps that qualify as cash flow hedges are documented and designated as such when we enter into the contracts.

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We estimate the forfeiture rate based on our historical experience with stock-based awards that are granted and forfeited prior to vesting.

The fair value of stock-based awards, granted or modified, is determined on the grant date (or modification or acquisition dates, if applicable) at fair value, using appropriate valuation techniques.

The fair value of stock-based awards, granted or modified, is determined on the grant date (or the modification date, if applicable) at fair value, using appropriate valuation techniques.

Service-Based Awards

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The fair value of each RSU is equal to the closing stock price on the date of grant.

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

The fair value of each option on the date

of grant is determined using the Black Scholes-Merton option pricing model using the single-option award approach.

We estimate volatility using a weighted average of our historical volatility and the historical volatility of selected comparable publicly-traded companies due to the limited time period of historical market data for our common stock.

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

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

Market-Based Awards

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We estimated the volatility of common stock on the date of grant based on the weighted-average historical stock price volatility of comparable publicly-traded companies in our industry group.

We estimated the expected term of the

award based on various exercise scenarios.

We estimated the expected term of the award based on various exercise scenarios.

The risk-free interest rate was determined using a U.S.

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dollars at exchange rates prevailing at the balance sheet dates.

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

dollars using daily exchange rates when incurred.

Revenue, expenses, and gains or losses of these subsidiaries are translated into U.S.

dollars using average exchange rates for each period.

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

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

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

The two-class method requires income available to common stockholders for the period to be allocated between each class of common stock and

participating securities based upon their respective rights to receive dividends as if all income for the period had been distributed.

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

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

Recently Adopted Accounting Standards

Financial Instruments - Credit Losses

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

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

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

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

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

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

We early adopted the new standard effective July 1, 2022 on a prospective basis.

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

Business Combinations

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

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

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

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

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

We early adopted the new standard effective January 1, 2023 on a prospective basis.

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

Reference Rate Reform

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

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

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

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

In January 2021, the FASB also issued ASU 2021-01, “Reference Rate Reform (Topic 848):

Scope”, which provides additional optional expedients and exceptions applicable to all entities that have derivative instruments that use an interest rate for margining, discounting, or contract price alignment that is modified as a result of reference rate reform.

In December 2022, the FASB issued ASU 2022-06, “Reference Rate Reform (Topic 848):

Deferral of the Sunset Date of Topic 848”, to extend the temporary accounting rules under Topic 848 from December 31, 2022 to December 31, 2024.

These ASUs are effective for all entities upon their respective issuance dates through December 31, 2024.

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

The following table presents the company’s revenue disaggregated by revenue source (in thousands):

Recent Accounting Pronouncements Not Yet Adopted

Segment Reporting

In November 2023, the FASB issued ASU 2023-07, “ Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures”.

The new guidance modifies the existing annual and interim segment reporting disclosures.

The purpose of the update is to enable investors to better understand an entity’s overall performance and assess potential future cash flows, primarily through enhanced disclosure requirements on significant segment expenses.

The ASU is effective for annual reporting periods beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024, and should be applied retrospectively to all prior periods presented in the financial statements.

Early adoption is permitted.

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

In December 2023, the FASB issued ASU 2023-09, “ Income Taxes (Topic 740):

Improvements to Income Tax Disclosures”.

The new guidance is expected to increase transparency and usefulness of income tax disclosures through improvements to the rate reconciliation, income taxes paid, and other disclosure requirements.

The ASU is effective for fiscal years beginning after December 15, 2024 and should be applied on a prospective basis, although retrospective application is permitted.

Early adoption is permitted for annual financial statements that have not yet been issued or made available for issuance.

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

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

Year ended June 30,

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Merchant Network Revenue — Revenue from Contracts with Customers

Merchant network revenue consists of merchant fees.

Merchant network revenue primarily consists of merchant fees.

Merchant partners (or integrated merchants) are generally charged a fee based on GMV processed through the Affirm platform.

The fees vary depending on the individual arrangement between us and each merchant and on the terms of the product offering.

recognized at the point in time the merchant successfully confirms the transaction, which is when the terms of the executed merchant agreement are fulfilled.

The fee is recognized at the point in time the merchant successfully confirms the transaction, which is when the terms of the executed merchant agreement are fulfilled.

Our contracts with merchants are defined at the transaction level and do not extend beyond the service already provided (i.e., each transaction represents a separate contract).

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We may originate certain loans via our wholly-owned subsidiaries, with zero or below market interest rates.

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

In certain cases, the losses incurred on loans originated for a merchant may exceed the total network revenue earned on those loans.

In certain cases, the losses incurred on loans originated for a merchant may exceed the total merchant network revenue earned on those loans.

We record the excess loss amounts as a sales and marketing expense.

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

Consumer Product Safety Commission released on April 17, 2021.

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

A portion of merchant network revenue relates to affiliate network revenue, which is generated when a user makes a purchase on a merchant’s website after being directed from an advertisement on Affirm’s website or mobile application.

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For the years ended June 30, 2024, 2023, and 2022, there were no merchants that exceeded 10% of total revenue.

For the year ended 2021, approximately 20 % of total revenue was driven by one merchant.

Card Network Revenue — Revenue from Contracts with Customers

We have agreements with card-issuing partners to facilitate the issuance of physical and virtual debit cards to be used by consumers at checkout.

Consumers can apply at Affirm.com or via the Affirm app and, upon approval, receive a single-use virtual card to use digitally online or in-store.

The debit card is funded at the time a transaction is authorized using cash held by the card-issuing partner in a reserve fund.

Eligible consumers can also use a debit card issued by a card-issuing partner to pay in full, debited from their bank account, or pay later, by using a unique post-purchase feature that allows them to instantly convert any eligible debit transaction into an installment loan.

Prior to purchase, consumers can apply at Affirm.com or via the Affirm app and, upon approval, use a physical or virtual card to complete their purchase online or in-store.

The card is funded at the time a transaction is authorized using cash held by the card-issuing partner in a reserve fund.

Eligible consumers

can also use the Affirm Card, a debit card issued by a card-issuing partner to pay in full, via their linked bank account, or pay later, by using a unique post-purchase feature that allows them to instantly convert any eligible debit transaction into an installment loan.

Where applicable, our originating bank partner, or wholly-owned subsidiaries, then originates a loan to the consumer after the transaction is confirmed by the merchant.

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Our contracts with our card-issuing partners are defined at the transaction level and do not extend beyond the service already provided.

The revenue collected from card-issuing partners for each transaction are determined as a percentage of the interchange fees charged on transactions facilitated on the payment processor network, and

revenue is recognized at the point in time the transaction is completed successfully.

The revenue collected from card-issuing partners for each transaction are determined as a percentage of the interchange fees charged on transactions facilitated on the payment processor network, and revenue is recognized at the point in time the transaction is completed successfully.

The amounts collected are presented in revenue, net of associated transaction-related processing fees paid to our card-issuing partners.

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Upon the resolution of a dispute with the consumer, the accrual of interest is resumed, and any interest that would have been earned during the disputed period is retroactively accrued.

As of June 30, 2023, June 30, 2022, and June 30, 2021, the balance of loans held for investment on non-accrual status was $ 1.8 million, $ 1.7 million, and $ 1.1 million, respectively.

As of June 30, 2024, 2023, and 2022, the balance of loans held for investment on non-accrual status was $ 2.6 million, $ 1.8 million, and $ 1.7 million, respectively.

The account is charged-off in the period if the account becomes 120 days past due or meets other charge-off policy requirements.

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We sell certain loans we originate or purchase from our originating bank partners directly to third-party investors or to securitizations.

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

We recognize a gain or loss on sale of loans sold to third parties or to unconsolidated securitizations.

This is calculated as the difference between the proceeds received and the carrying value of the loan.

This amount is adjusted for the initial recognition of any assets or liabilities incurred upon sale.

These generally include a net servicing asset or liability in connection with our ongoing obligation to continue to service the loans.

We also recognize a recourse liability based on our estimate of future losses in connection with our obligation to repurchase loans that do not meet certain contractual requirements and such information about the loan was unknown at the time of sale.

Additionally, we recognize a risk sharing asset or liability in certain arrangements where payments are made or received based on the actual versus expected loan performance, as contractually agreed with the third party.

Servicing Income

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The servicing fee is calculated on a daily basis by multiplying a set fee percentage (as outlined in the executed agreements with third-party loan owners) by the outstanding loan principal balance.

We recognize this revenue on a monthly basis.

Servicing income also includes fair value adjustments for servicing assets and servicing liabilities.

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We purchased loans from our originating bank partners in the amount of $ 21.5 billion, $ 16.2 billion, and $ 12.1 billion for the years ended June 30, 2024, 2023, and 2022, respectively.

We directly originated $ 3.7 billion, $ 3.3 billion, and $ 0.6 billion of loans for the years ended June 30, 2023, 2022, and 2021, respectively.

These loans have a variety of lending terms as well as maturities ranging from one to sixty months .

Given that our loan portfolio focuses on one product segment, point-of-sale unsecured installment loans, we generally evaluate the entire portfolio as a single homogeneous loan portfolio and make merchant or program specific adjustments as necessary.

We directly originated $ 4.5 billion, $ 3.7 billion, and $ 3.3 billion of loans for the June 30, 2024, 2023, and 2022, respectively.

Our portfolio consists of interest bearing and non-interest bearing consumer loans with original term lengths of up to sixty months originated in markets including the U.S.

and Canada, with the majority of loans originated within the U.S.

Given that our loan portfolio focuses on one product segment, unsecured consumer installment loans, we generally evaluate the entire portfolio as a single homogeneous loan portfolio considering factors such as country of origin, loan product, origination channel, merchant and various borrower characteristics, to predict future losses.

We closely monitor credit quality for our loan receivables to manage and evaluate our related exposure to credit risk.

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Our credit risk team closely tracks the distribution of ITACs at the portfolio level, as well as ITACs at the individual loan level to monitor for signs of a changing credit profile within the portfolio.

Repayment performance within each ITACs band is also monitored to support both the

integrity of the risk scoring models and to measure possible changes in consumer behavior amongst various credit tiers.

Repayment performance within each ITACs band is also monitored to support both the integrity of the risk scoring models and to measure possible changes in consumer behavior amongst various credit tiers.

The following table presents an analysis of the credit quality, by ITACs score, of the amortized cost basis excluding accrued interest receivable, by fiscal year of origination on loans held for investment and loans held for sale as of June 30, 2024 (in thousands):

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Total amortized cost basis $ 5,300,448 $ 282,738 $ 23,452 $ 416 $ 108 $ 134 $ 5,607,296

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

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

(1) This balance represents loan receivables without sufficient data available for use by the Affirm scoring methodology including new markets and certain developing products.

The following table presents net charge-offs by fiscal year of origination as of year ended June 30, 2024 (in thousands):

Net Charge-offs by Fiscal Year of Origination

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Total amortized cost basis $ 5,607,296 $ 4,361,965

(1) Includes $ 20.9 million and $ 22.7 million of loan receivables as of June 30, 2023 and June 30, 2022, respectively, that are 90 days or more past due, but are not on nonaccrual status.

(1) Includes $ 38.6 million and $ 20.9 million of loan receivables as of June 30, 2024 and June 30, 2023, respectively, that are 90 days or more past due, but are not on non-accrual status.

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

The allowance for credit losses is determined based on our current estimate of expected credit losses over the remaining contractual term, historical credit losses, consumer payment trends, estimates of recoveries, and future expectations as of each balance sheet date.

Adjustments to the allowance each period for changes in our estimate of lifetime expected credit losses are recognized in earnings through the provision for credit losses presented on our consolidated statements of operations and comprehensive loss.

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

The allowance for credit losses reflects our estimate of expected lifetime credit losses, which consider the remaining contractual term, historical credit losses, consumer payment trends, estimated recoveries, and future payment expectations as of each balance sheet date.

Adjustments to the allowance for changes in our estimate of lifetime expected credit losses are recognized in earnings through the provision for credit losses presented on our consolidated statements of operations and comprehensive loss.

When available information confirms that specific loans or portions thereof are uncollectible, identified amounts are charged off 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.

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Balance at beginning of period $ 204,531 $ 155,392 $ 117,760

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

Provision for credit losses 439,581 318,188 240,804

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Balance at end of period $ 309,097 $ 204,531 $ 155,392

During the years ended June 30, 2023 and 2022, there was one acquisition accounted for as a business combination in each of the respective years, discussed further below.

Loan Modifications for Borrowers Experiencing Financial Difficulty

We have a loan modification program for borrowers experiencing financial difficulty if certain eligibility criteria are met.

A loan is evaluated for modification program eligibility when a borrower self-reports financial hardship, either when a borrower contacts us directly or upon making contact with the borrower to determine eligibility when a loan payment is past due.

The objectives of the loan modification program are to offer borrowers assistance during times of financial stress, increase collections, and minimize losses.

We have two primary loan modification strategies:

payment deferrals and loan re-amortization.

A payment deferral provides the borrower relief by extending the due date for the next payment due.

While a borrower may obtain more than one deferral, the total deferral period may not exceed three months .

A loan re-amortization provides the borrower relief by lowering monthly payments through extending the term length of the loan;

however, the total remaining term may not exceed twenty-four months .

In addition, the total interest due from the consumer will not exceed the initial total interest due prior to modification, and a loan may not be re-amortized more than once.

The following tables present the amortized cost basis of loans excluding accrued interest receivable that were modified for borrowers experiencing financial difficulty during the years ended June 30, 2024 and 2023, by type of modification (in thousands):

Year ended June 30,

Payment Deferral $ 33,409 $ 6,503

Loan Re-amortization 931 94

Total $ 34,340 $ 6,597

% of Total Loan Receivables Outstanding 0.61 % 0.15 %

With respect to borrowers who received payment deferrals during the years ended June 30, 2024 and 2023, the length of each deferral period was one month .

With respect to borrowers who received a loan re-amortization during the years ended June 30, 2024 and 2023, the payment amount was reduced by half and the term of the loan was extended between one month and twelve months .

During the modification process, the loans are made current, and payment schedules for these loans are updated according to the modified terms.

We closely monitor the performance of loans that are modified for borrowers experiencing financial difficulty to understand the effectiveness of our modification efforts.

We hold an allowance for credit losses for modified loans classified as held for investment.

Our allowance estimate considers

whether a loan has been modified, the delinquency status of the loan on the date of modification, and the increased likelihood that such loan may become delinquent or charge-off in the future.

The following table presents the delinquency status as of June 30, 2024 and June 30, 2023, by amortized cost basis excluding accrued interest receivable, of loan receivables that have been modified within the last 12 months where the borrower was experiencing financial difficulty at the time of modification (in thousands):

June 30, 2024

Payment Deferral Loan Re-amortization Total

Non-delinquent loans $ 17,479 $ 373 $ 17,852

4 – 29 calendar days past due 5,826 175 6,001

30 – 59 calendar days past due 2,152 99 2,251

60 – 89 calendar days past due 3,936 145 4,081

90 – 119 calendar days past due 4,016 139 4,155

Total amortized cost basis $ 33,409 $ 931 $ 34,340

June 30, 2023

Payment Deferral Loan Re-amortization Total

Non-delinquent loans $ 4,813 $ 58 $ 4,871

4 – 29 calendar days past due 717 13 730

30 – 59 calendar days past due 354 7 361

60 – 89 calendar days past due 346 7 353

90 – 119 calendar days past due 273 9 282

Total amortized cost basis $ 6,503 $ 94 $ 6,597

With respect to modifications during the 12 months preceding June 30, 2024 and June 30, 2023, respectively, where the borrower was experiencing financial difficulty at the time of modification, the amortized cost basis of loans which have been charged off was $ 12.4 million and $ 1.8 million, respectively.

During the year ended June 30, 2024, there were no acquisitions accounted for as business combinations and there was one acquisition accounted for during the same period in 2023.

Acquisitions completed during the year ended June 30, 2023

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The transaction costs associated with the acquisition were approximately $ 1.8 million for the year ended June 30, 2023, which are included in general and administrative expense in the consolidated statements of operations and comprehensive loss.

Acquisitions completed during the year ended June 30, 2022

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

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

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

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

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

Cash $ 30,000

Fair value of Class A common stock transferred 10,000

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

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

The acquired identifiable intangible assets have been recorded at their estimated fair values with the excess purchase price assigned to goodwill.

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

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

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

Intangible assets $ 9,488

Total net assets acquired 9,488

Goodwill 30,512

Total purchase price $ 40,000

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

Fair Value Useful Life (in years)

Developed technology $ 9,488 3.0

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

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

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

There were no transaction costs associated with the acquisition for the year ended June 30, 2023.

Other acquisitions

On April 19, 2022, Affirm completed the closing of the transaction contemplated by a Release and Waiver Agreement entered into with Fast AF, Inc.

(“Fast”) relating to the hiring of certain of its employees or service providers and an option to acquire certain of its assets.

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

The acquisition was accounted for as an asset acquisition in accordance with ASC 805 since the assets acquired do not meet the definition of a business.

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

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

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

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

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

Assembled workforce $ 12,490

Developed technology (1)

Total $ 25,415

(1) During the year ended June 30, 2023, we completed the purchase of the developed technology intangible asset.

Balance Sheet Components

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No impairment losses related to property, equipment and software were recorded during the years ended June 30, 2024, 2023, and 2022.

For the year ended June 30, 2021, we recorded impairment expense of $ 1.5 million related to property, equipment and software.

Goodwill and Intangible Assets

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Balance as of June 30, 2023 $ 542,571

Additions (1)

Adjustments (2)

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(1) Refer to Note 5.

Acquisitions for a description of additions to goodwill during the years ended June 30, 2023 and 2022.

Acquisitions for a description of additions to goodwill during the year ended June 30, 2023.

(2) Adjustments to goodwill during the years ended June 30, 2024 and 2023 primarily pertained to foreign currency translation adjustments.

No impairment losses related to goodwill were recorded during the years ended June 30, 2023, 2022, and 2021.

During the year ended June 30, 2024, we recognized goodwill disposal losses of $ 1.0 million included in general and administrative expenses on our consolidated statements of operations and comprehensive loss.

No impairment or disposal losses related to goodwill were recorded during the years ended June 30, 2023 and 2022.

Intangible assets consisted of the following (in thousands):

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Trademarks and domains, definite 1,481 ( 990 ) 491 1.7

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

Trademarks, licenses and domains, indefinite 11,621 — 11,621 Indefinite

Other intangibles 350 — 350 Indefinite

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The expected future amortization expense of these intangible assets as of June 30, 2024 is as follows (in thousands):

2024 $ 20,895

2029 and thereafter —

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Commercial Agreement Assets

During the year ended June 30, 2022, we granted warrants in connection with our commercial agreements with certain subsidiaries of Amazon.com, Inc.

In November 2021, we granted warrants in connection with our commercial agreements with certain subsidiaries of Amazon.com, Inc.

The warrants were granted in exchange for certain performance provisions and the benefit of acquiring new users.

We recognized an asset of $ 133.5 million associated with the portion of the warrants that were fully vested upon grant.

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

For the years ended June 30, 2023 and 2022, we recognized amortization expense of $ 41.4 million and $ 26.3 million, respectively, in our consolidated statements of operations and comprehensive loss as a component of sales and marketing expense.

The asset was valued based on the fair value of the warrants and represents the probable future economic benefit to be realized over the expected benefit period.

expected benefit period of the asset was initially estimated to be approximately three years .

During the year ended June 30, 2024, the remaining expected benefit period was extended by one year upon the renewal of the commercial agreement, which extended the agreement term.

For the years ended June 30, 2024, 2023, and 2022, we recognized amortization expense of $ 32.9 million, $ 41.4 million, and $ 26.3 million, respectively, in our consolidated statements of operations and comprehensive loss as a component of sales and marketing expense.

Refer to Note 14.

Stockholders’ Equity for further discussion of the warrants.

During the year ended June 30, 2021, we recognized an asset in connection with a commercial agreement with Shopify Inc.

In January 2021, we recognized an asset in connection with a commercial agreement with an enterprise partner, in which we granted stock appreciation rights in exchange for the benefit of acquiring access to the partner's consumers.

The asset was valued at $ 25.9 million based on the fair value of the stock appreciation rights on the grant date and represents the probable future economic benefit to be realized over the three-year expected benefit period.

During the year ended June 30, 2024, the expected benefit period ended and the asset has been fully amortized.

For the years ended June 30, 2024, 2023, and 2022, we recorded amortization expense related to the asset of $ 4.2 million, $ 8.3 million, and $ 8.1 million, respectively, in our consolidated statements of operations and comprehensive loss as a component of sales and marketing expense.

In July 2020, we recognized an asset in connection with a commercial agreement with Shopify Inc.

(“Shopify”), in which we granted warrants in exchange for the opportunity to acquire new merchant partners.

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W e recorded amortization expense related to the commercial agreement asset of $ 35.9 million, $ 35.8 million, and $ 62.2 million for the years ended June 30, 2024, 2023, and 2022, respectively, in our consolidated statements of operations and comprehensive loss as a component of sales and marketing expense.

During the year ended June 30, 2021, we recognized an asset in connection with a commercial agreement with an enterprise partner, in which we granted stock appreciation rights in exchange for the benefit of acquiring access to the partner's consumers.

This asset represents the probable future economic benefit to be realized over the three-year expected benefit period and is valued based on the fair value of the stock appreciation rights on the grant date.

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

We recorded amortization expense related to the asset of $ 8.3 million, $ 8.1 million, and $ 4.3 million for the years ended June 30, 2023, 2022, and 2021, respectively, in our consolidated statements of operations and comprehensive loss as a component of sales and marketing expense.

Other assets consisted of the following (in thousands):

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Processing reserves $ 55,754 $ 60,039

Derivative instruments 50,545 49,983

Equity securities, at cost 37,806 43,172

Fixed term deposit 35,203 —

Risk sharing assets 33,884 —

Prepaid expenses 28,799 35,626

Operating lease right-of-use assets 21,863 30,171

Prepaid payroll taxes for stock-based compensation 21,395 14,336

Foreign deferred tax asset 21,206 23,270

Other receivables 18,263 17,214

Derivative instruments 17,207 50,545

Other assets 7,960 4,241

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June 30, 2024 June 30, 2023

Collateral held for derivative instruments $ 53,267 $ 55,779

Operating lease liability 52,557 65,713

Accrued expenses $ 59,613 $ 50,704

Operating lease liability 39,493 52,557

Collateral held for derivative instruments 17,643 53,267

Other liabilities 30,680 24,355

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We have the option to renew or extend our leases.

Certain lease agreements include the option to terminate the lease with prior written notice ranging from 9 months to one year .

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

As of June 30, 2024, we have not considered such provisions in the determination of the lease term, as it is not reasonably certain these options will be exercised.

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

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

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

These letters of credit act as security for the faithful performance by us of all terms, covenants and conditions of the lease agreement.

The cash collateral and deposits for the letters of credit have been recognized as restricted cash in the consolidated balance sheets and totaled $ 9.7 million as of both June 30, 2023 and June 30, 2022.

During the years ended June 30, 2023 and June 30, 2021, we decided to sublease a portion of our leased office space in San Francisco.

As a result, we recorded a lease impairment charge of $ 1.2 million and $ 11.5 million, respectively related to several of our operating lease ROU assets, included in general and administrative expense on our consolidated statements of operations and comprehensive loss.

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

Operating lease expense was as follows (in thousands):

We are required to post collateral for the letters of credit in the form of cash or eligible securities.

As of June 30, 2024, the collateral totaled $ 8.8 million, of which $ 2.0 million was in the form of cash that was classified as restricted cash, and $ 6.8 million was in the form of securities which was classified as securities available for sale at fair value on our consolidated balance sheets.

As of June 30, 2023, the collateral and deposits for the letters of credit was $ 9.7 million in the form cash and was classified as restricted cash on our consolidated balance sheets.

During the years ended June 30, 2024 and 2023 , we decided to sublease a portion of our leased office space in San Francisco, resulting in an impairment charge of $ 0.8 million and $ 1.2 million, respectively, included in general and administrative expense on our consolidated statements of operations and comprehensive loss.

For the year ended June 30, 2022, the impairment expense related to leases was not material to our consolidated statements of operations and comprehensive loss.

Operating lease expense are as follows (in thousands):

Year ended June 30,

2024 2023 2022

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$ 11,549 $ 18,954 $ 15,200

(1) During the year ended June 30, 2023, we incurred charges of $ 4.7 million, within restructuring and other, on our consolidated statements of operations, related to a reduction to our ROU lease assets.

(1) Lease expenses for our short-term leases were immaterial for the years presented.

(2) During the year ended June 30, 2023, we incurred charges of $ 4.7 million, within restructuring and other, on our consolidated statements of operations and comprehensive loss, related to a reduction to our ROU lease assets which were attributed to certain leased space we were no longer utilizing for our business operations.

We have subleased a portion of our leased facilities.

Sublease income totaled $ 3.4 million and $ 3.1 million during the years ended June 30, 2023 and 2022, respectively .

There was no sublease income for the year ended June 30, 2021.

Sublease income totaled $ 4.6 million, $ 3.4 million, and $ 3.1 million during the years ended June 30, 2024, 2023, and 2022 , respectively .

Lease term and discount rate information are summarized as follows:

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Weighted average discount rate 5.0 %

Maturities of operating lease liabilities as of June 30, 2023 are as follows (in thousands) for the years ended:

As of June 30, 2024, future minimum lease payments are as follows (in thousands):

2025 $ 16,742

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Commitments and Contingencies

Repurchase Obligation

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

Loan Repurchase Obligations

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

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

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The results of such matters often cannot be predicted with certainty.

In accordance with applicable accounting guidance,

we establish an accrued liability for legal proceedings and claims when those matters present loss contingencies which are both probable and reasonably estimable.

Affirm Holdings, Inc.

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

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

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

Plaintiff sought class certification, unspecified compensatory and punitive damages, and costs and expenses.

On September 28, 2022, the Court granted Affirm’s motion to dismiss for failure to state a claim with leave to amend within 21 days.

No amended complaint was filed by the deadline.

On October 20, 2022, the Court dismissed the putative class action and entered judgment in Affirm’s favor.

Vallieres v Levchin, et al.

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

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

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

On January 12, 2023, the Court dismissed the derivative action without prejudice.

Levchin, et al.

On September 16, 2022, plaintiff Ron Williams filed a shareholder derivative lawsuit in the U.S.

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

The Williams complaint purported to assert six causes of action on Affirm's behalf—violation of Section 14(a) of the Exchange Act, breach of fiduciary duty, unjust enrichment, abuse of control, gross mismanagement, and waste of corporate assets.

The plaintiff in the Williams action also alleged a cause of action against defendant Levchin for contribution under 10(b) and 21D of the Exchange Act.

The Williams complaint sought corporate reforms, unspecified damages and restitution, and fees and costs.

On December 22, 2022, the Court dismissed the derivative action without prejudice.

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

Affirm Holdings, Inc.

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

Plaintiff’s amended complaint filed on May 5, 2023 alleges that defendants:

(i) caused Affirm to make materially false and/or misleading statements and/or failed to disclose that Affirm’s BNPL service facilitated excessive consumer debt (including with respect to certain for-profit educational institutions), regulatory arbitrage, and data harvesting;

On May 5, 2023, plaintiffs Kusnier and Chris Meinsen filed their first amended complaint alleging that the defendants (i) caused Affirm to make materially false and/or misleading statements and/or failed to disclose that Affirm’s BNPL service facilitated excessive consumer debt (including with respect to certain for-profit educational institutions), regulatory arbitrage, and data harvesting;

(ii) made false and/or misleading statements about certain public regulatory actions;

and (iii) made false and/or misleading statements about whether Affirm’s business model was vulnerable to interest rate changes.

In light of the above, plaintiff asserts that Affirm violated Section 10(b) of the Exchange Act and Rule 10b-5 promulgated thereunder, and that Levchin and Linford violated Section 20(a) of the Exchange Act.

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

On December 20, 2023, the Court granted Affirm’s motion to dismiss the first amended complaint with leave to amend.

On January 19, 2024, plaintiffs filed their second amended complaint, which contains only the allegations from the first amended complaint relating to false and/or misleading statements about whether Affirm’s business model was vulnerable to interest rate changes.

In light of the above, plaintiffs assert that Affirm violated Section 10(b) of the Exchange Act and Rule 10b-5 promulgated thereunder, and that Levchin and Linford violated Section 20(a) of the Exchange Act.

Plaintiffs seek class certification, unspecified compensatory

and punitive damages, and costs and expenses.

Affirm filed its motion to dismiss the second amended complaint on February 2, 2024.

On August 26, 2024, the Court granted Affirm’s motion to dismiss with leave to amend by September 25, 2024.

Levchin, et al.

On March 29, 2023, plaintiff John Quiroga filed a shareholder derivative lawsuit in the U.S.

District Court for the Northern District of California (the “Quiroga action”) against Affirm, as a nominal defendant, and certain of

Affirm's current officers and directors as defendants based on allegations substantially similar to those in the Kusnier action.

District Court for the Northern District of California (the “Quiroga action”) against Affirm, as a nominal defendant, and certain of Affirm’s current officers and directors as defendants based on allegations substantially similar to those in the Kusnier action at the time of filing.

The Quiroga complaint purports to assert claims on Affirm’s behalf for contribution under the federal securities laws, breaches of fiduciary duty, unjust enrichment, and waste of corporate assets, and seeks corporate reforms, unspecified damages and restitution, and fees and costs.

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On May 24, 2023, plaintiff Sabrina Jeffries filed a shareholder derivative lawsuit in the U.S.

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

District Court for the Northern District of California (the “Jeffries action”) against Affirm, as a nominal defendant, and certain of Affirm's current officers and directors as defendants based on allegations substantially similar to those in the Kusnier and Quiroga actions at the time of filing.

The Jeffries complaint purports to assert claims on Affirm's behalf for breach of fiduciary duties, making false statements under federal securities law, unjust enrichment, waste of corporate assets, and aiding and abetting breach of fiduciary duties, and seeks unspecified damages, equitable relief, and fees and costs.

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The stay can be lifted at the request of either party or upon certain conditions relating to the resolution of the Kusnier action.

Levchin, et al.

On September 14, 2023, plaintiff Michael Vallieres filed a shareholder derivative lawsuit in the U.S.

District Court for the District of Delaware against Affirm, as a nominal defendant, and certain of Affirm’s current officers and directors as defendants based on allegations substantially similar to those in the Kusnier, Quiroga, and Jeffries actions at the time of filing.

The Vallieres complaint purports to assert claims on Affirm's behalf for breach of fiduciary duties, gross management, abuse of control, unjust enrichment, and contribution, and seeks unspecified damages, equitable relief, and fees and costs.

On November 30, 2023, the case was stayed by agreement of the parties.

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

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Purchase Commitments

During the year ended June 30, 2023, we entered into non-cancelable purchase obligations with our third-party cloud computing web services provider, which included annual purchase commitments for the period from March 2023 through February 2030, and an additional aggregate purchase commitment of $ 650.0 million during such period.

We have entered into non-cancelable purchase obligations with our third-party cloud computing web services provider, which included annual purchase commitments for the period from March 2023 through February 2030 with an aggregate committed spend of $ 650.0 million during such period.

For the years ended June 30, 2024 and 2023, we had remaining purchase commitments of $ 575.9 million and $ 659.2 million, respectively, primarily related to cloud and hosting services.

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

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

June 30, 2023

Secured Borrowing Facilities

The following table summarizes the components of our U.S.

and International secured borrowing facilities as of June 30, 2024 (in thousands):

Total Capital Capacity Advance Rate Interest Rate Spread (2)

Unused Commitment Fees Maturity Pledged Collateral (3)

Total Outstanding

Weighted Average Min - Max Weighted Average

US facilities 4,975,000 70 % - 86 %

84 % 1.75 % - 2.20 %

1.95 % 0.00 % - 0.75 %

Thereafter 428,660

2025 - 2027 1,661,521 1,429,243

International facilities (1)

665,126 67 % - 88 %

83 % 1.25 % - 4.25 %

1.69 % 0.30 % - 0.45 %

2028 - 2030 472,086 387,931

Total, before unamortized debt issuance costs, premiums and discounts $ 1,817,174

unamortized debt issuance costs, premiums and discounts ( 14,790 )

Total $ 1,802,384

Deferred debt issuance costs ( 10,886 )

Total funding debt, net of deferred debt issuance costs $ 1,764,812

Secured Borrowing Facilities

Through trusts, we entered into warehouse credit facilities with certain lenders to finance the purchase and origination of our loans.

(1) As of June 30, 2024, international facilities finance the origination of loan receivables in Canada and are denominated in CAD.

(2) Reference rates as of June 30, 2024 under our U.S.

facilities bear interest at an annual benchmark rate of Secured Overnight Financing Rate (“SOFR”) or an alternative commercial paper rate plus an applicable spread.

Reference rates as of June 30, 2024 under our international facilities bear interest at an annual benchmark rate of the Canadian Overnight Repo Rate Average (“CORRA”), Government of Canadian benchmark bond yields, or an alternative commercial paper rate plus an applicable spread.

As debt arrangements are renewed, the reference rate and/or spread are subject to change.

(3) As of June 30, 2024, represents the unpaid principal balance of loans, directly originated by us or purchased from the originating bank partner, pledged as collateral for borrowings in our facilities.

In the U.S., through trusts, we have entered into warehouse credit facilities with certain lenders to finance the purchase and origination of our loans.

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

Borrowings under these agreements are referred to as funding debt and proceeds from the borrowings can only be used for the purposes of facilitating loan funding and origination, with advance rates ranging from 82 % to 86 % of the total collateralized balance.

Borrowings under these agreements are classified as funding debt on the consolidated balance sheets and proceeds from the borrowings can only be used for the purposes of facilitating loan funding and origination.

These warehouse credit facility trusts, which have been classified as VIEs, are bankruptcy-remote special-purpose vehicles in which creditors do not have recourse against the general credit of Affirm.

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

As of June 30, 2023, the aggregate commitment amount of these facilities was $ 3.3 billion on a revolving basis, of which $ 1.4 billion was drawn, with $ 1.9 billion remaining available.

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

The unpaid principal balance of these loans totaled $ 1.7 billion and $ 0.5 billion as of June 30, 2023 and June 30, 2022, respectively.

Borrowings under these warehouse credit facilities bear interest at an annual benchmark rate of Secured Overnight Financing Rate (“SOFR”) or an alternative commercial paper rate (which is the per annum rate equivalent to the weighted-average of the per annum rates at which all commercial paper notes were issued by certain lenders to fund advances or maintain loans), plus a spread ranging from 1.75 % to 2.20 %.

Interest is payable monthly.

In addition, these agreements require payment of a monthly unused commitment fee ranging from 0.00 % to 0.75 % per annum on the undrawn portion available.

These agreements contain certain customary negative covenants and financial covenants including maintaining certain levels of minimum liquidity, maximum leverage, and minimum tangible net worth.

As of June 30, 2023, we were in compliance with all applicable covenants in the agreements.

International

Additionally, we have various credit facilities utilized to finance the origination of loan receivables in Canada.

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

These facilities are secured by Canadian loan receivables pledged to the respective facility as collateral, mature between fiscal years 2025 and 2029, and bear interest based on benchmark rates plus a spread ranging from 1.25 % to 4.25 %.

As of June 30, 2023, the aggregate commitment amount of these facilities was $ 548.4 million on a revolving basis, of which $ 349.6 million was drawn, with $ 198.8 million remaining available.

The unpaid principal balance of loans pledged to these facilities totaled $ 412.8 million and $ 210.1 million as of June 30, 2023 and June 30, 2022, respectively.

These agreements contain certain customary negative covenants and financial covenants including maintaining certain levels of minimum liquidity, maximum leverage, and minimum tangible net worth at the Affirm Canada subsidiary level or the Affirm Holdings level.

Similar to our warehouse credit facilities in the U.S., borrowings under these agreements are classified as funding debt on the consolidated balance sheets, and proceeds from the borrowings may only be used for the purposes of facilitating loan funding and origination.

Financing terms, including the advance rate and financing spread, vary across these revolving facilities and generally depend on the types of collateral that may be pledged and respective concentration limits.

The revolving period for each facility generally ends 4 - 12 months prior to the final maturity date, after which additional borrowings are not permitted.

Our funding debt agreements contain certain customary negative covenants and financial covenants including maintaining certain levels of minimum liquidity, maximum leverage, and minimum tangible net worth.

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

The aggregate future maturities of our secured borrowing facilities consists of the following (in thousands):

June 30, 2024

2025 $ 328,921

Thereafter 126,347

Total $ 1,851,699

Deferred debt issuance costs ( 14,790 )

Total funding debt, net of deferred debt issuance costs $ 1,836,909

Sales and Repurchase Agreements

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

The repurchase agreements each have an initial term of three months and subject to mutual agreement by Affirm and the counterparty, we may enter into one or more repurchase date extensions, each for an

additional three-month term at market interest rates on such extension date.

As of June 30, 2024, the interest rates were 7.33 % for both the senior pledged securities and the residual certificate pledged securities.

We had $ 11.0 million and $ 27.0 million in debt outstanding under our repurchase agreements disclosed within funding debt on the consolidated balance sheets as of June 30, 2023 and June 30, 2022, respectively.

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

The debt will be amortized through regular principal and interest payments on the pledged securities.

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The total net proceeds from this offering, after deducting debt issuance costs, were approximately $ 1,704 million.

The 2026 Notes represent senior unsecured obligations of the Company.

The 2026 Notes represent our senior unsecured obligations of the Company.

The 2026 Notes do not bear interest except in special circumstances described below, and the principal amount of the 2026 Notes does not accrete.

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1) during any calendar quarter commencing after March 31, 2022 (and only during such calendar quarter), if the last reported sale price of the Class A common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than or equal to 130 % of the conversion price on each applicable trading day;

2) during the five business day period after any five consecutive trading day period (the measurement period) in which the trading price (as defined in the indenture governing the 2026 Notes) per $1,000 principal amount of the 2026 Notes for each trading day of the measurement period was less than 98 % of the product of the last reported sale price of the Company’s Class A common stock and the conversion rate on each such trading day;

principal amount of the 2026 Notes for each trading day of the measurement period was less than 98 % of the product of the last reported sale price of the Company’s Class A common stock and the conversion rate on each such trading day;

3) if the Company calls any or all of the notes for redemption, at any time prior to the close of business on the scheduled trading day immediately preceding the redemption date;

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We may not redeem the notes prior to November 20, 2024.

period) ending on, and including, the trading day immediately preceding the date on which we provide notice of redemption at a redemption price equal to 100 % of the principal amount of the notes to be redeemed, plus accrued and unpaid special interest, if any.

We may redeem for cash all or part of the notes on or after November 20, 2024 if the last reported sale price of our Class A common stock has been at least 130 % of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such period) ending on, and including, the trading day immediately preceding the date on which we provide notice of redemption at a redemption price equal to 100 % of the principal amount of the notes to be redeemed, plus accrued and unpaid special interest, if any.

If a fundamental change (as defined in the Indenture) occurs prior to the maturity date, holders of the 2026 Notes may require us to repurchase all or a portion of their notes for cash at a repurchase price equal to 100 % of the principal amount of the 2026 Notes, plus any accrued and unpaid interest to, but excluding, the repurchase date.

In addition, if specific corporate events occur prior to the maturity date of the 2026 Notes, we will be required to increase the conversion rate for holders who elect to convert their 2026 Notes in connection with such corporate events.

During the year ended June 30, 2023, we entered into a series of privately negotiated transactions with certain holders of our 2026 Notes, pursuant to which we paid an aggregate amount of $ 206.6 million in cash for the repurchase of $ 299.1 million aggregate principal amount of our 2026 Notes (the “2026 Note Repurchases”).

The carrying amount of the extinguished 2026 Notes was approximately $ 296.4 million resulting in a $ 89.8 million gain on early extinguishment of debt, which is reported as a component of other (expense) income, net within our consolidated statement of operations and comprehensive loss.

In exchange for paying cash pursuant to the 2026 Note Repurchases, we received and canceled the repurchased 2026 Notes.

On June 7, 2023, the Board of Directors authorized the repurchase of up to $ 800 million in aggregate principal amount of the 2026 Notes.

Note repurchases may be made from time to time through December 31, 2023 in privately negotiated transactions.

On December 6, 2023, the Board of Directors authorized the repurchase of up to $ 800.0 million in aggregate principal amount of the 2026 Notes.

This authorization succeeds the $ 800.0 million repurchase authorization approved by the Board of Directors on June 7, 2023.

Note repurchases under the December 2023 authorization may be made from time to time through December 31, 2024 through open market purchases, privately negotiated purchases, purchase plans under Rule 10b5-1 of the Securities Exchange Act of 1934, as amended (“Rule 10b5-1”), or through a combination thereof.

Repurchases are subject to available liquidity, general market and economic conditions, alternate uses for the capital, and other factors, and there is no minimum principal amount of 2026 Notes that the Company is obligated to repurchase.

We have not executed any repurchases under this authorization to date.

T he convertible senior notes outstanding as of June 30, 2023 consisted of the following (in thousands):

During the year ended June 30, 2024, we paid $ 63.6 million in cash for the repurchase of $ 76.7 million aggregate principal amount of our 2026 Notes under the December 2023 authorization.

The carrying amount of the extinguished 2026 Notes was approximately $ 76.2 million resulting in a $ 12.6 million gain on early extinguishment of debt, which is reported as a component of other income (expense), net within our consolidated statements of operations and comprehensive loss.

The repurchased 2026 Notes were received and canceled.

The convertible senior notes outstanding as of June 30, 2024 consisted of the following (in thousands):

Principal Amount Unamortized Discount and Issuance Cost Net Carrying Amount

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The 2026 Notes do not bear interest.

We recognized $ 3.9 million and $ 2.4 million during the years ended June 30, 2023 and 2022, respectively, of interest expense related to the amortization of debt discount and issuance costs in the consolidated statement of operations and comprehensive loss within other (expense) income, net .

We recognized $ 3.4 million, $ 3.9 million and $ 2.4 million during the years ended June 30, 2024, 2023 and 2022, respectively, of interest expense related to the amortization of debt discount and issuance costs in the consolidated statements of operations and comprehensive loss within other income (expense), net .

As of June 30, 2024, the remaining life of the 2026 Notes is approximately 29 months.

Revolving Credit Facility

On February 4, 2022, we entered into a revolving credit agreement with a syndicate of commercial banks for a $ 165.0 million unsecured revolving credit facility.

On May 16, 2022, we increased unsecured revolving commitments under the facility to $ 205.0 million.

This facility bears interest at a rate equal to, at our option, either (a) a Secured Overnight Financing Rate (“SOFR”) rate determined by reference to the forward-looking term SOFR rate for the interest period, plus an applicable margin of 1.85 % per annum or (b) a base rate determined by reference to the highest of (i) the federal funds rate plus 0.50 % per annum, (ii) the rate last quoted by the Wall Street Journal as the U.S.

On June 26, 2024, we entered into an amendment to our Revolving Credit Agreement, where we increased the unsecured revolving commitments under the facility from $ 205.0 million to $ 330.0 million.

This facility bears interest at a rate equal to, at our option, either (a) a SOFR rate determined by reference to the forward-looking term SOFR rate for the interest period, plus an applicable margin of 1.75 % per annum or (b) a base rate determined by reference to the highest of (i) the federal funds rate plus 0.50 % per annum, (ii) the rate last quoted by the Wall Street Journal as the U.S.

prime rate and (iii) the one-month forward-looking term SOFR rate plus 1.00 % per annum, in each case, plus an applicable margin of 0.75 % per annum.

The revolving credit agreement has a final maturity date of February 4, 2025.

The facility contains certain covenants and restrictions, including certain financial maintenance covenants, and requires payment of a monthly unused commitment fee of 0.20 % per annum on the undrawn balance available.

There are no borrowings outstanding under the facility as of June 30, 2023.

Under the terms of amendment the final maturity date was extended from February 4, 2025 to June 26, 2027.

The facility contains certain financial covenants which may result in an acceleration of the maturity if not maintained, and requires payment of a monthly unused commitment fee of 0.20 % per annum on the undrawn balance available.

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

Securitization and Variable Interest Entities

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For each securitization, the residual certificates represent the right to receive excess cash on the loans each collection period after all fees and required distributions have been made to the note holders on the related payment date.

For the majority of consolidated securitization VIEs, we retain 100 % of the residual certificates issued by the securitization trust.

Any portion of the residual trust certificates sold to third-party investors are measured at fair value, using a discounted cash flow model, and presented within accrued expenses and other liabilities on the consolidated balance sheets.

In addition to the retained residual certificates, our continued involvement includes loan servicing responsibilities over the life of the underlying loans.

For each securitization, the residual trust certificates represent the right to receive excess cash on the loans each collection period after all fees and required distributions have been made to the note holders on the related payment date.

In addition to the retained residual trust certificates, our continued involvement includes loan servicing responsibilities over the life of the underlying loans.

We defer and amortize debt issuance costs for consolidated securitization trusts on a straight-line basis over the expected life of the notes.

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Maximum exposure to losses represents our exposure through our continuing involvement as servicer and through our retained interests.

For unconsolidated VIEs, this includes $ 18.9 million in retained notes and residual certificates disclosed within securities available for sale at fair value in our consolidated balance sheets and $ 0.2 million related to our servicing assets disclosed within other assets in our consolidated balance sheets as of June 30, 2023.

For unconsolidated VIEs, this includes $ 51.7 million in retained notes and residual trust certificates disclosed within securities available for sale at fair value in our consolidated balance sheets and $ 0.2 million related to our net servicing assets disclosed within our consolidated balance sheets as of June 30, 2024.

Additionally, we may experience a loss due to future repurchase obligations resulting from breaches in representations and warranties in our securitization and third-party sale agreements.

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Fair Value of Financial Assets and Liabilities for additional information on the fair value sensitivity of the notes receivable and residual certificates.

Additionally, as of June 30, 2023 , we have pledged each of our ret ained beneficial interests as collateral in a sale and repurchase agreement as described in Note 9.

Additionally, as of June 30, 2024, we have pledged certain of our retained beneficial interests as collateral in a sale and repurchase agreement as described in Note 9.

Marketable Securities

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Money market funds $ 63,389 $ 97,129

Certificates of deposit — 16,026

Commercial paper 57,964 54,402

Agency bonds — 60,865

Government bonds

Government bonds - US 3,492 —

Securities, available for sale:

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Agency bonds 15,159 84,276

Municipal bonds 3,953 —

Government bonds

Non-US 5,275 9,151

US 441,096 378,386

538,556 441,096

Securitization notes receivable and certificates (2)

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$ 1,256,473 $ 1,387,049

(1) These securities have been pledged as collateral in connection with sale and repurchase agreements as discussed within Note 9.

(1) As of June 30, 2024 , these securities include $ 54.1 million pledged as collateral in connection with our standby letters of credit for office leases and certain commercial agreements.

As of June 30, 2023 , no securities were pledged as collateral.

(2) These securities include $ 46.7 million and $ 18.9 million as of June 30, 2024 and 2023, respectively, pledged as collateral in connection with sale and repurchase agreements discussed within Note 9.

Securities Available for Sale, at Fair Value

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Agency bonds 15,283 — ( 124 ) — 15,159

145,312 62 ( 233 ) — 145,141

Municipal bonds 3,943 10 — — 3,953

Government bonds

Non-US 5,310 — ( 35 ) — 5,275

US 444,858 28 ( 3,790 ) — 441,096

543,421 33 ( 1,406 ) — 542,048

Securitization notes receivable and certificates (3)

51,726 699 ( 91 ) ( 664 ) 51,670

Other 1,028 — — — 1,028

Total securities available for sale $ 1,195,795 $ 853 $ ( 2,900 ) $ ( 664 ) $ 1,193,084

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Certificates of deposit $ 97,399 $ 11 $ ( 186 ) $ — $ 97,224

$ 317,331 $ 6 $ ( 921 ) $ — $ 316,416

Corporate bonds 260,627 55 ( 3,910 ) — 256,772

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320,882 34 ( 321 ) — 320,595

Agency bonds (1)

145,312 62 ( 233 ) — 145,141

Government bonds

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19,841 — ( 475 ) ( 453 ) 18,913

Other 1,028 — — — 1,028

Total securities available for sale $ 1,299,277 $ 190 $ ( 9,094 ) $ ( 453 ) $ 1,289,920

(1) Certificates of deposit, commercial paper, agency bonds, and US government bonds include $ 115.3 million and $ 303.8 million as of June 30, 2023 and 2022, respectively, classified as cash and cash equivalents within the consolidated balance sheets.

(2) These securities have been pledged as collateral in connection with sale and repurchase agreements as discussed within Note 9.

(1) Commercial paper, agency bonds, and US government bonds include $ 61.5 million and $ 115.3 million as of June 30, 2024 and 2023, respectively, classified as cash and cash equivalents within the consolidated balance sheets.

(2) As of June 30, 2024 , these securities include $ 54.1 million pledged as collateral in connection with our standby letters of credit for office leases and certain commercial agreements.

As of June 30, 2023 , no securities were pledged as collateral.

(3) Approximately $ 46.7 million and $ 18.9 million as of June 30, 2024 and 2023, respectively, of these securities have been pledged as collateral in connection with sale and repurchase agreements discussed within Note 9.

As of June 30, 2024 and June 30, 2023, there were no material reversals of prior period allowance for credit losses recognized for available for sale securities.

18 unchanged sentences

Commercial paper 164,037 ( 321 ) — — 164,037 ( 321 )

Agency bonds 44,214 ( 233 ) — — 44,214 ( 233 )

Government bonds

1 unchanged sentence

US 292,333 ( 2,395 ) 67,606 ( 1,395 ) 359,939 ( 3,790 )

Securitization notes receivable and certificates 722 ( 45 ) — — 722 ( 45 )

Total securities available for sale (1)

10 unchanged sentences

Agency bonds 10,457 10,416 4,826 4,743 15,283 15,159

130,176 130,165 15,136 14,976 145,312 145,141

Municipal bonds — — 3,943 3,953 3,943 3,953

Government bonds

Non-US 2,150 2,150 3,160 3,125 5,310 5,275

US 308,179 306,656 136,679 134,440 444,858 441,096

465,338 464,298 78,083 77,750 543,421 542,048

Securitization notes receivable and certificates (2)

— — 51,726 51,670 51,726 51,670

Other — — 1,028 1,028 1,028 1,028

Total securities available for sale $ 928,965 $ 927,222 $ 266,830 $ 265,862 $ 1,195,795 $ 1,193,084

3 unchanged sentences

Certificates of deposit $ 97,399 $ 97,224 $ — $ — $ 97,399 $ 97,224

$ 317,331 $ 316,416 $ — $ — $ 317,331 $ 316,416

Corporate bonds 173,523 171,634 87,104 85,138 260,627 256,772

1 unchanged sentence

320,882 320,595 — — 320,882 320,595

Agency bonds (1)

130,176 130,165 15,136 14,976 145,312 145,141

Government bonds

Non-US 4,063 3,996 5,267 5,155 9,330 9,151

360,757 359,242 78,190 77,685 438,947 436,927

US 308,179 306,656 136,679 134,440 444,858 441,096

Securitization notes receivable and certificates (2)

— — 19,841 18,913 19,841 18,913

Other — — 1,028 1,028 1,028 1,028

Total securities available for sale $ 1,034,222 $ 1,030,270 $ 265,055 $ 259,650 $ 1,299,277 $ 1,289,920

(2) Based on weighted average life of expected cash flows as of June 30, 2024 and June 30, 2023 .

2 unchanged sentences

Non-marketable Equity Securities

Equity investments without a readily determinable fair value held at cost were $ 43.2 million as of both June 30, 2023 and June 30, 2022 and are included in other assets within the consolidated balance sheets.

There have been no unrealized or realized gains and losses due to observable changes in orderly transactions and we did not record any impairment for the years ended June 30, 2023 or June 30, 2022 .

Equity investments without a readily determinable fair value held at cost were $ 37.8 million and $ 43.2 million as of June 30, 2024 and June 30, 2023, respectively, and are included in other assets within the consolidated balance sheets.

We recognized an impairment of $ 14.1 million during the year ended June 30, 2024 within other income (expense), net in the consolidated statements of operations and comprehensive loss in connection with one of our non-marketable equity security investments.

We determined an impairment indicator existed upon receiving a tender offer to repurchase all outstanding equity securities at a substantial discount relative to the cost basis of our investment.

We determined the tender offer price was a reasonable estimate of fair value and therefore we recognized an impairment equal to the difference between our costs basis and the implied fair value based on the tender offer price.

We did not record any impairment for the year ended June 30, 2023.

There have been no upward or downward adjustments due to observable changes in orderly transactions for the years ended June 30, 2024 or June 30, 2023 .

Fixed Term Deposits

Fixed term deposits were $ 35.2 million as of June 30, 2024 and consist of interest bearing deposits held at financial institutions with an original maturities greater than three months but no more than twelve months.

These deposits are carried at cost, which approximates fair value, and are included in other assets within the consolidated balance sheets.

We did not have any fixed term deposits as of June 30, 2023 .

Derivative Financial Instruments

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Total gross derivative assets/liabilities $ 1,004,589 $ 17,207 $ 38 $ 2,902,944 $ 50,545 $ —

The following table summarizes the impact of the cash flow hedges on AOCI (in thousands):

Year ended June 30, 2023

The following table summarizes the impact of the cash flow hedges on Accumulated Other Comprehensive Income (“AOCI”) (in thousands):

Balance at beginning of period $ 751 $ —

1 unchanged sentence

Amounts reclassified into earnings (1)

( 1,344 ) ( 54 )

Balance at end of period (2)

(1) The amounts reclassified into earnings is presented in the consolidated statements of income within funding costs.

(2) Over the next 12 months, we expect to reclassify $ 0.8 million of net derivative gains included in AOCI into funding costs within our consolidated statement of operations and comprehensive loss.

The following table summarizes the impact of the derivative instruments on income and indicates where within the consolidated statement of operations and comprehensive loss such impact is reported (in thousands):

Location of gains (losses) where the effects of derivatives are recorded Year ended

$ 1,407 $ 751

(1) The amounts reclassified into earnings is presented in our consolidated statements of operations and comprehensive loss within funding costs.

(2) Over the next 12 months, we expect to reclassify $ 1.0 million of net derivative gains included in AOCI into funding costs within our consolidated statements of operations and comprehensive loss.

The following table summarizes the impact of the derivative instruments on income (loss) and indicates where within the consolidated statements of operations and comprehensive loss such impact is reported (in thousands):

Location of gains (losses) where the effects of derivatives are recorded

The effects of cash flow hedging

2 unchanged sentences

Other income, net 4,479 48,074

Refer to Note 2.

Summary of Significant Accounting Policies and Note 13.

Fair Value of Financial Assets and Liabilities for additional information on our derivative instruments.

Fair Value of Financial Assets and Liabilities

6 unchanged sentences

Commercial paper — 57,964 — 57,964

Agency bonds — 60,865 — 60,865

Government bonds- US — 3,492 — 3,492

Securities, available for sale:

3 unchanged sentences

Agency bonds — 15,159 — 15,159

Municipal bonds — 3,953 — 3,953

Government bonds:

— 9,151 — 9,151

— 441,096 — 441,096

Non-US — 5,275 — 5,275

US — 538,556 — 538,556

Securitization notes receivable and residual trust certificates — — 51,670 51,670

Other — — 1,028 1,028

Servicing assets — — 574 574

Derivative instruments — 17,207 — 17,207

Risk sharing asset — — 33,884 33,884

Total assets $ 63,389 $ 1,158,621 $ 86,128 $ 1,308,138

1 unchanged sentence

Performance fee liability — — 1,503 1,503

Residual trust certificates, held by third-parties — — 125 125

Profit share liability — — 1,974 1,974

Risk sharing liability — — 918 918

Derivative Instruments — 38 — 38

Total liabilities $ — $ 38 $ 5,138 $ 5,176

3 unchanged sentences

Money market funds $ 97,129 $ — $ — $ 97,129

Certificates of deposit — 16,026 — 16,026

Commercial paper — 54,402 — 54,402

Government bonds - U.S.

— 58,541 — 58,541

Agency bonds — 60,865 — 60,865

Securities, available for sale:

2 unchanged sentences

Commercial paper — 266,193 — 266,193

Agency bonds — 84,276 — 84,276

Government bonds:

— 17,955 — 17,955

— 378,386 — 378,386

Non-US — 9,151 — 9,151

US — 441,096 — 441,096

Securitization notes receivable and residual trust certificates — — 18,913 18,913

Other — — 1,028 1,028

Servicing assets — — 880 880

4 unchanged sentences

Residual trust certificates, held by third-parties — — 125 125

Contingent consideration — — 23,348 23,348

Profit share liability — — 1,832 1,832

3 unchanged sentences

Marketable Securities

As of June 30, 2023, we held marketable securities classified as cash and cash equivalents and available for sale.

As of June 30, 2024, we held marketable securities classified as cash and cash equivalents and securities available for sale.

Management obtains pricing from one or more third-party pricing services for the purpose of determining fair value.

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We evaluate our assets and liabilities subject to fair value measurements on a recurring basis to determine the appropriate level at which to classify them each reporting period.

Since our servicing assets and liabilities, performance fee liability, securitization notes and residual trust certificates, contingent consideration, profit share liability, and credit enhancement liability do not trade in an active market with readily observable prices, we use significant unobservable inputs to measure fair value and have classified as level 3 within the fair value hierarchy.

Since our servicing assets and liabilities, performance fee liability, securitization notes and residual trust certificates, profit share liability, and risk sharing arrangements do not trade in an active market with readily observable prices, we use significant unobservable inputs to measure fair value and have classified as level 3 within the fair value hierarchy.

This determination requires significant judgments to be made.

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Adequate compensation increase of 20% $ ( 1,961 ) $ ( 764 )

Adequate compensation increase of 25% $ — $ ( 3,513 )

Adequate compensation increase of 50% $ — $ ( 7,026 )

Discount rate assumption:

8 unchanged sentences

Adequate compensation increase of 20% $ 6,305 $ 5,597

Adequate compensation increase of 25% $ — $ 6,139

Adequate compensation increase of 50% $ — $ 12,278

Discount rate assumption:

5 unchanged sentences

This liability is measured using a discounted cash flow model and recorded at fair value and presented within accrued expenses and other liabilities on the consolidated balance sheets.

Any changes in the fair value of the liability are reflected in other (expense) income, net , on the consolidated statements of operations and comprehensive loss.

Any changes in the fair value of the liability are reflected in other income (expense), net , on the consolidated statements of operations and comprehensive loss.

The following table summarizes the activity related to the fair value of the performance fee liability (in thousands):

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Residual trust certificates held by third-party investor(s) are measured at fair value, using a discounted cash flow model, and presented within accrued expenses and other liabilities on the consolidated balance sheets.

Any changes in the fair value of the liability are reflected in other (expense) income, net , on the consolidated statements of operations and comprehensive loss.

Any changes in the fair value of the liability are reflected in other income (expense), net , on the consolidated statements of operations and comprehensive loss.

As of June 30, 2024 , we no longer have any residual trust certificates held by third parties.

The following table summarizes the activity related to the fair value of the residual trust certificates held by third-parties (in thousands):

3 unchanged sentences

Fair value at end of period $ — $ 125

Significant unobservable inputs used for our Level 3 fair value measurement of the residual trust certificates held by third-parties are the discount rate, loss rate, and prepayment rate.

Significant increases or decreases in any of the inputs in isolation could result in a significantly lower or higher fair value measurement.

The following tables present quantitative information about the significant unobservable inputs used for our Level 3 fair value measurement of the residual trust certificates held by third-parties as of June 30, 2023 and June 30, 2022:

June 30, 2023

Unobservable Input Minimum Maximum Weighted Average (1)

Discount rate 10.00 % 10.00 % 10.00 %

Loss rate 0.92 % 0.92 % 0.92 %

Prepayment rate 7.70 % 7.70 % 7.70 %

June 30, 2022

Unobservable Input Minimum Maximum Weighted Average (1)

Discount rate 10.00 % 10.00 % 10.00 %

Loss rate 0.75 % 0.75 % 0.75 %

Prepayment rate 8.00 % 8.00 % 8.00 %

(1) Unobservable inputs were weighted by relative fair value

Retained Beneficial Interests in Unconsolidated VIEs

As of June 30, 2024, we held notes receivable and residual trust certificates with an aggregate fair value of $ 51.7 million in connection with unconsolidated securitizations.

The balances correspond to the 5 % economic risk retention the Company is required to maintain as the securitization sponsor.

The balances correspond to the 5 % economic risk retention we are required to maintain as the securitization sponsor.

These assets are measured at fair value using a discounted cash flow model, and presented within securities available for sale at fair value on the consolidated balance sheets.

Changes in the fair value, other than declines in fair value due to credit recognized as an allowance, are reflected in other comprehensive income (loss) on the consolidated statements of operations and comprehensive loss.

Declines in fair value due to credit are reflected in other (expense) income, net on the consolidated statements of operations and comprehensive loss.

Changes in the fair value, other than declines in

fair value due to credit recognized as an allowance, are reflected in other comprehensive income (loss) on the consolidated statements of operations and comprehensive loss.

Declines in fair value due to credit are reflected in other income (expense), net on the consolidated statements of operations and comprehensive loss.

The following table summarizes the activity related to the fair value of the notes receivable and residual trust certificates (in thousands):

1 unchanged sentence

Additions 58,508 —

Cash received (due to payments or sales) ( 33,544 ) ( 19,559 )

Cash received (due to payments) ( 28,738 ) ( 33,544 )

Change in unrealized gain (loss) 1,083 6

4 unchanged sentences

Significant increases or decreases in any of the inputs in isolation could result in a significantly lower or higher fair value measurement.

The following table presents quantitative information about the significant unobservable inputs used for our Level 3 fair value measurement of the residual trust certific ates as of June 30, 2023 and June 30, 2022:

The following tables present quantitative information about the significant unobservable inputs used for our Level 3 fair value measurement of t he notes receivable and residual trust certificates as o f June 30, 2024 and June 30, 2023:

June 30, 2024

9 unchanged sentences

(1) Unobservable inputs were weighted by relative fair value

The following table summarizes the effect that adverse changes in estimates would have on the fair value of the securitization residual trust certificates given hypothetical changes in significant unobservable inputs (in thousands):

The following table summarizes the effect that adverse changes in estimates would have on the fair value of the notes receivable and residual trust certificates given hypothetical changes in significant unobservable inputs (in thousands):

Discount rate assumption:

7 unchanged sentences

Prepayment rate decrease of 50% $ 116 $ ( 59 )

Contingent Consideration

Our acquisition of PayBright, Inc.

(“PayBright”) on January 1, 2021 included consideration transferred and 2,587,362 shares of our common stock held in escrow, contingent upon the achievement of future milestones.

At the acquisition date, we classified the contingent consideration as a liability and estimated its fair value using a Monte Carlo simulation utilizing assumptions of simulated revenue, equity volatility, and a discount rate.

The liability is remeasured to its fair value at each reporting date, until the contingency is resolved.

For periods in which actual revenues are unknown, the fair value is estimated using a Monte Carlo simulation.

For periods in which revenue is known, the fair value is estimated based on the shares expected to be released from escrow multiplied by the estimated share price.

The fair value estimate represents a Level 3 measurement, as the revenue milestone represents a significant unobservable input.

During the year ended June 30, 2022, one of these milestones was achieved and 1,293,681 shares of our Class A common stock were released from escrow, resulting in a reduction to the contingent liability.

During the year ended June 30, 2023, an additional milestone was achieved, resulting in the release of the remaining 1,293,681 shares of our Class A and Class B common stock from escrow and settlement of the remaining contingent liability.

The change in fair value of the contingent consideration at each reporting date is recognized as a component of other (expense) income, net in the consolidated statements of operations and comprehensive loss for the respective period.

The following table summarizes the activity related to the fair value of the PayBright contingent consideration (in thousands):

Fair value at beginning of period $ 23,348 $ 153,447

Subsequent changes in fair value ( 8,172 ) ( 89,313 )

Fair value of shares released from escrow ( 13,674 ) ( 32,110 )

Effect of foreign currency translation ( 1,502 ) ( 8,676 )

Fair value at end of period $ — $ 23,348

Profit Share Liability

10 unchanged sentences

Significant increases or decreases in any of the inputs in isolation could result in a significantly lower or higher fair value measurement.

The following tables present quantitative information about the significant unobservable inputs used for our Level 3 fair value measurement of the profit sharing liab ility as of June 30, 2023 and June 30, 2022:

June 30, 2024

8 unchanged sentences

Risk Sharing Arrangements

In connection with certain capital funding arrangements with third party loan buyers, we have entered into risk sharing agreements where we may be required to make a payment to the loan buyer if actual losses on the loans sold exceed agreed-upon expected losses, subject to a cap based on a percentage of the principal balance of loans sold.

Losses are calculated at a cohort level based on the sale date.

For a given cohort where actual losses are below the contractual loss threshold, we may earn credits that reduce our liability with respect to cohorts where losses have exceeded the contractual loss threshold.

The Company accounts for these arrangements as derivatives measured at fair value with gains and losses recognized in the income statement through Gain on sale of loans.

Given the recency of loan sales in connection with these arrangements, which were in close proximity to the end of the period, there have not been any significant changes in our loss expectations since the time of sale.

At the time of sale and as of June 30, 2023, we estimated that the fair value of these loss sharing arrangements was $ 0 , in each case using forward looking loss assumptions which are derived based on historical loan performance for loans with similar contractual terms and credit characteristics.

Through June 30, 2023 we have sold $ 381.1 million unpaid principal balance of loans under these risk sharing arrangements, of which our maximum exposure to losses is $ 8.2 million.

As of June 30, 2024 and June 30, 2023, we have sold $ 4.2 billion and $ 0.4 billion, respectively, unpaid principal balance of loans under these risk sharing arrangements, of which our maximum exposure to losses was $ 81.2 million and $ 8.2 million, respectively.

This amount includes our maximum potential loss with respect to risk sharing liabilities of $ 47.3 million and the fair value of risk sharing assets of $ 33.9 million, as of June 30, 2024.

As of June 30, 2024, we held assets and liabilities related to these arrangements of $ 33.9 million and $ 0.9 million, respectively.

As of June 30, 2023, we estimated that the fair value of risk sharing liabilities was $ 0 based on the limited time passed and available loan performance since entering into these agreements.

We did not have any risk sharing arrangements where we had recognized an asset as of June 30, 2023.

As of June 30, 2024, we estimated the fair value of future settlements using a discounted cash flow model.

Significant assumptions used in the valuation of our risk sharing assets and liabilities are as follows:

Discount Rate

Estimated future cash flow to be received or paid under the agreements are discounted as a part of determining the fair value of the risk sharing arrangements.The discount rate reflects the time value of money and a risk premium intended to reflect the amount of compensation market participants would require.

We estimate the loss rate as the probability of loan defaults and write-offs, which are used to project future risk-sharing cash flows.

Prepayment Rate

We estimated the annualized prepayment rate as the expected excess loan payment received in a given month as a percentage of the outstanding principal balance at the beginning of the month minus the scheduled principal payment.

The following table summarizes the activity related to the fair value of the risk sharing assets (in thousands):

June 30, 2024

Fair value at beginning of period $ —

Initial transfers of financial assets 41,669

Subsequent changes in fair value ( 7,785 )

Fair value at end of period $ 33,884

The following table summarizes the activity related to the fair value of the risk sharing liabilities (in thousands):

June 30, 2024

Fair value at beginning of period $ —

Subsequent changes in fair value 918

Fair value at end of period $ 918

The following tables present quantitative information about the significant unobservable inputs used for our Level 3 fair value measurement of the risk sharing arrangements as of June 30, 2024:

June 30, 2024

Unobservable Input Minimum Maximum Weighted Average (1)

Risk sharing assets Discount rate 20.00 % 20.00 % 20.00 %

Loss rate 3.00 % 4.69 % 3.66 %

Prepayment rate 23.36 % 33.29 % 28.48 %

Risk sharing liabilities Discount rate 20.00 % 20.00 % 20.00 %

Loss rate 3.25 % 5.29 % 4.28 %

(1) Unobservable inputs were weighted by principal balance of loans sold under each cohort

The following table summarizes the effect that adverse changes in estimates would have on the fair value of the risk sharing assets and liabilities given hypothetical changes in significant unobservable inputs (in thousands):

June 30, 2024

Risk sharing assets

Prepayment rate assumption:

Prepayment rate increase of 25% $ 572

Prepayment rate increase of 50% $ 1,131

Loss rate assumption:

Loss rate increase of 25% $ ( 7,315 )

Loss rate increase of 50% $ ( 14,528 )

Discount rate assumption:

Discount rate increase of 25% $ ( 1,211 )

Discount rate increase of 50% $ ( 2,323 )

Risk sharing liabilities

Loss rate assumption:

Loss rate increase of 25% $ 22,333

Loss rate increase of 50% $ 41,677

Discount rate assumption:

Discount rate increase of 25% $ ( 19 )

Discount rate increase of 50% $ ( 37 )

Financial Assets and Liabilities Not Recorded at Fair Value

3 unchanged sentences

Loans held for sale (1)

$ 36 $ — $ 36 $ — $ 36

Loans held for investment, net 5,360,959 — — 5,616,973 5,616,973

Other assets (1)

43,212 — 43,212 — 43,212

Total assets $ 5,404,207 $ — $ 43,248 $ 5,616,973 $ 5,660,221

8 unchanged sentences

Loans held for sale (1)

$ 76 $ — $ 76 $ — $ 76

Loans held for investment, net 4,198,431 — — 4,397,931 4,397,931

Other assets (1)

9,325 — 9,325 — 9,325

Total assets $ 4,207,832 $ — $ 9,401 $ 4,397,931 $ 4,407,332

5 unchanged sentences

Total liabilities $ 5,355,483 $ — $ 1,053,866 $ 3,526,407 $ 4,580,273

(1) Amortized cost approximates fair value for loans held for sale and other assets.

(2) The estimated fair value of the convertible senior notes is determined based on a market approach, using the estimated or actual bids and offers of the notes in an over-the-counter market on the last business day of the period.

1 unchanged sentence

Stockholders’ Equity

The Company had shares of common stock reserved for issuance as follows:

We had shares of common stock reserved for issuance as follows:

June 30, 2024 June 30, 2023

Available outstanding under stock option plan 52,572,230 53,158,233

Available for future grant under stock option plan 37,245,232 31,156,746

Available outstanding under equity compensation plans 47,622,117 52,572,230

Available for future grant under equity compensation plans 43,492,755 37,245,232

Total 91,114,872 89,817,462

8 unchanged sentences

Common stock warrants are included as a component of additional paid in capital within the consolidated balance sheets.

During the year ended June 30, 2022, we granted warrants to purchase 22,000,000 shares of common stock in connection with our commercial agreements with Amazon.

7,000,000 of the warrant shares have an exercise price of $ 0.01 per share and a term of 3.5 years, while the remaining 15,000,000 warrant shares have an exercise price of $ 100 per share and a term of 7.5 years.

In November 2021, we granted warrants to purchase 22,000,000 shares of common stock in connection with our commercial agreements with Amazon.

7,000,000 of the warrant shares have an exercise price of $ 0.01 per share and a term of 3.5 years, while the remaining 15,000,000 warrant shares have an exercise price of $ 100 per

share and a term of 7.5 years.

We valued the warrants at the grant date using the Black-Scholes-Merton option pricing model with the following assumptions:

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The remaining grant-date fair value of the warrants will be recognized within our consolidated statements of operations and comprehensive loss as a component of sales and marketing expense as the warrants vest, based upon Amazon’s satisfaction of the vesting conditions.

During the years ended June 30, 2023 and June 30, 2022, a total of $ 463.3 million and $ 281.0 million, respectively, was recognized within sales and marketing expense which included $ 41.4 million and $ 26.3 million, respectively, in amortization expense of the commercial agreement asset and $ 421.9 million and $ 254.7 million, respectively, in expense based upon the grant-date fair value of the warrant shares that vested.

The following table summarizes the warrants activity during the years ended June 30, 2023 and June 30, 2022:

During the years ended June 30, 2024, 2023, and 2022, a total of $ 439.6 million, $ 463.3 million, and $ 281.0 million, respectively, was recognized within sales and marketing expense which included $ 32.9 million, $ 41.4 million, and $ 26.3 million, respectively, in amortization expense of the commercial agreement asset, and $ 406.7 million, $ 421.9 million, and $ 254.7 million, respectively, in expense based upon the grant-date fair value of the warrant shares that vested.

The following table summarizes the warrants activity during the year ended June 30, 2024:

Number of Shares Weighted Average Exercise Price ($) Weighted Average Remaining Life (years)

4 unchanged sentences

Warrants outstanding, June 30, 2024 22,000,000 $ 68.19 3.60

Granted — — 0.00

Exercised — — 0.00

Cancelled — — 0.00

Warrants outstanding, June 30, 2023 22,000,000 $ 68.19 4.60

Warrants exercisable, June 30, 2024 11,265,803 $ 44.24 2.60

There were no warrants granted during the year ended June 30, 2023.

The weighted-average grant date fair values of warrants granted during the years ended June 30, 2022 and 2021 were $ 94.20 and $ 13.34 , respectively.

There were no warrants granted during the year ended June 30, 2023, and the weighted-average grant date fair values of warrants granted during the year ended June 30, 2022 was $ 94.20 .

On June 30, 2024, the weighted-average grant date fair values for outstanding warrants and exercisable warrants were $ 94.20 and $ 108.01 , respectively.

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The weighted-average grant date fair value of employee options granted for the years ended June 30, 2024, 2023, and 2022, was $ 16.37 , $ 10.92 , and $ 13.29 , respectively.

The aggregate intrinsic value of options exercised was approximately $ 12.6 million, $ 1.4 billion, and $ 0.7 billion for the years ended June 30, 2023, 2022, and 2021, respectively.

The aggregate intrinsic value of options exercised was approximately $ 79.0 million, $ 12.6 million, and $ 1.4 billion for the years ended June 30, 2024, 2023, and 2022, respectively.

The total fair value of stock options vested during the years ended June 30, 2024, 2023, and 2022 was $ 24.3 million, $ 39.5 million, and $ 30.3 million, respectively.

12 unchanged sentences

Expected dividend yield — — —

As of June 30, 2023, unrecognized compensation expense related to unvested stock options was approximately $ 36.2 million.

The weighted-average period over which such compensation expense will be recognized is approximately 2.2 years.

When an employee exercises stock options, we collect and remit taxes on the employee’s behalf to applicable taxing authorities.

As of June 30, 2023 and June 30, 2022, the balance of equity exercise taxes payable was $ 3.4 million and $ 10.9 million, respectively, which is included in accounts payable on the consolidated balance sheets.

As of June 30, 2024, unrecognized compensation expense related to unvested stock options was approximately $ 37.3 million, which is expected to be recognized over a remaining weighted-average period of 2.5 years.

Value Creation Award

In November 2020, in connection with an overall review of the compensation of Max Levchin, our Chief Executive Officer, in advance of the IPO, and taking into account Mr.

Levchin’s leadership since the inception of the Company, the comparatively modest level of cash compensation he had received from the Company during his many years of service, and that he did not hold any unvested equity awards, the Company's Board of Directors approved a long-term, multi-year performance-based stock option grant providing Mr.

In November 2020, the Company ’ s Board of Directors approved a long-term, multi-year performance-based stock option grant providing Mr.

Levchin with the opportunity to earn the right to purchase up to 12,500,000 shares of the Company ’ s Class A common stock (the “Value Creation Award”).

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We recognize stock-based compensation on these awards based on the grant date fair value using an accelerated attribution method over the requisite service period, and only if performance-based conditions are considered probable of being satisfied.

During the years ended June 30, 2023 and June 30, 2022, we incurred stock-based compensation expense of $ 94.6 million and $ 140.7 million, respectively, associated with the Value Creation Award as a component of general and administrative expense within the consolidated statements of operations and comprehensive loss.

Based on achievement of the stock price hurdles and time-based service conditions, 1,875,000 shares vested during both years ended June 30, 2023 and 2022.

During the years ended June 30, 2024, 2023, and 2022, we incurred stock-based compensation expense of $ 64.6 million, $ 94.6 million, and $ 140.7 million, respectively, associated with the Value Creation Award as a component of general and administrative expense within the consolidated statements of operations and comprehensive loss.

Based on achievement of the stock price hurdles and time-based service conditions, 250,000 shares vested during the year ended June 30, 2024, bringing the total shares vested to 4,000,000 .

As of June 30, 2024, none of these awards have been exercised.

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Total stock-based compensation $ 471,021 $ 531,817 $ 445,525

In connection with the acquisition of Returnly on May 1, 2021, we issued 304,364 shares of our Class A common stock, which were held in escrow.

Because the future payment of the escrowed shares was contingent on continued employment of certain employees, the arrangement represents stock-based compensation in the post combination period.

The grant-date fair value was estimated based on the value of the shares at the date of closing.

The escrowed shares had a requisite service period of two years and contained a performance-based vesting condition (i.e., the achievement of certain revenue targets).

We recorded stock-based compensation expense on a straight-line basis for each tranche over the requisite service period, as long as the performance-based conditions were considered probable of being satisfied.

During the year ended June 30, 2023, the arrangement was modified and subsequently terminated.

The modification and subsequent termination resulted in the recognition of $ 2.0 million of incremental compensation cost within general and administrative expense in our consolidated statement of operations and comprehensive loss, as well as the release of 45,459 shares from escrow and the remittance of 258,905 shares back to the Company.

Restructuring and other

On February 8, 2023, we committed to a restructuring plan (the “2023 Restructuring Plan”) designed to manage our operating expenses in response to current 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 and incurred lease exit costs related to vacating a portion of our San Francisco office.

Restructuring and other consists of employee severance pay and related costs and accelerations of amortization expense for the lease asset associated with certain of our office spaces.

For the year ended June 30, 2023, restructuring and other was comprised of the following (in thousands):

June 30, 2023

Employee severance pay and related costs $ 29,654

Non-cash accelerations of depreciation and amortization expense 6,216

Restructuring and other $ 35,870

The Company’s restructuring accrual activity for the year ended June 30, 2023 is summarized as follows (in thousands):

During the year ended June 30, 2024, we incurred exit and disposal costs in connection with certain actions we have taken to manage our operating expenses in response to the current macroeconomic conditions and ongoing business prioritization efforts.

In February 2023, we committed to a restructuring plan (the “February 2023 Plan”) that included reducing our workforce and vacating a portion of our San Francisco office.

As of June 30, 2024, the February 2023 Plan is completed and we do not expect future costs or payments related to the plan.

Exit and disposal costs were $ 6.8 million for the year ended June 30, 2024.

Exit and disposal costs were $ 35.9 million for the year ended June 30, 2023, primarily relating to the February 2023 Plan.

Our restructuring accrual activity for the year ended June 30, 2024 is summarized as follows (in thousands):

Restructuring Plan Other Exit and Disposal Activities (1)

3 unchanged sentences

Adjustments ( 140 ) ( 155 )

Impact of foreign currency translation 62 —

Accrued restructuring costs, June 30, 2024

$ 308 $ 2,116

(1) Includes employee severance pay and related costs, contract cancellation charges, among other items, related to other exit and disposal activities

16 unchanged sentences

Income tax (benefit) expense $ 2,230 $ ( 3,900 ) $ ( 17,414 )

The income tax benefit for the year ended June 30, 2023 was primarily attributable to the effects of foreign income taxes on our Canadian subsidiary and partially offset by various U.S.

state and other foreign income taxes, while the income tax benefits for the years ended June 30, 2022 and June 30, 2021 were primarily attributable to a change in our assessment of the future realization of our Canadian deferred tax assets and to an adjustment to the Company's valuation allowance resulting from a deferred tax liability assumed with the acquisition of Returnly, respectively.

The income tax expense for the year ended June 30, 2024 was primarily attributable to various U.S state and foreign income taxes and the tax amortization of certain intangibles, while the income tax benefits for the years ended June 30, 2023 and June 30, 2022 were primarily attributable to deferred taxes recognized by certain foreign subsidiaries and partially offset by various U.S.

state and other foreign income taxes.

The following is a reconciliation of the U.S.

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Operating lease liabilities 11,457 15,253

Purchased intangible assets 315 —

Capitalized R&E including internally developed software 6,977 —

Tax credit carryforwards 88,190 74,589

2 unchanged sentences

Capitalized R&E including internally developed software — ( 21,304 )

Purchased intangible assets — ( 11,386 )

Right-of-use lease assets ( 6,330 ) ( 8,751 )

Stock warrants — ( 7,200 )

Other ( 3,921 ) ( 2,670 )

6 unchanged sentences

A significant piece of objective negative evidence evaluated was the cumulative loss incurred by the Company for the years ended June 30, 2024, 2023, and 2022.

The presence of a three-year cumulative loss limits the

ability to consider other subjective evidence, such as our expectations of future taxable income and projections for growth.

The presence of a three-year cumulative loss limits the ability to consider other subjective evidence, such as our expectations of future taxable income and projections for growth.

The valuation allowance increased by $ 111.4 million during the year ended June 30, 2024.

As a result of the integration and consolidation of our PayBright business into and with Affirm’s Canadian business, the expansion of our overall business in Canada, and other objectively verifiable positive evidence available, all of which we have concluded is sufficient to outweigh the existing negative evidence – including the presence of a three-year cumulative loss attributable to the Canadian jurisdiction, we have determined that it is more likely than not that our Canadian deferred tax assets will be realized and a valuation allowance is not required.

As of June 30, 2024, we had pretax U.S.

federal net operating loss ("NOL") carryforwards of approximately $ 3,393.3 million, state NOL carryforwards of $ 4,706.7 million, Canadian NOL carryforwards of $ 77.4 million, and U.K.

federal net operating loss ("NOL") carryforwards of approximately $ 3.3 billion, state NOL carryforwards of $ 4.8 billion, Canadian NOL carryforwards of $ 52.0 million, and U.K.

NOL carryforwards of $ 20.0 million.

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With respect to the Company’s major tax filings, all tax years remain open to examination due to the carryover of unused net operating losses.

On August 16, 2022, the Inflation Reduction Act was enacted into U.S.

The Company does not currently expect that the Inflation Reduction Act will have a material impact on its income taxes.

Net Loss per Share Attributable to Common Stockholders

The following tables present basic and diluted net loss per share attributable to common stockholders for Class A and Class B common stock (in thousands, except share and per share data):

Year ended June 30, 2023

Class A Class B

Net loss $ ( 785,080 ) $ ( 200,265 )

Net loss attributable to common stockholders - basic and diluted $ ( 785,080 ) $ ( 200,265 )

Weighted average shares of common stock - basic 235,316,821 60,026,645

Weighted average shares of common stock - diluted 235,316,821 60,026,645

Net loss per share:

Basic $ ( 3.34 ) $ ( 3.34 )

Diluted $ ( 3.34 ) $ ( 3.34 )

The following table presents basic and diluted net loss per share attributable to common stockholders for Class A and Class B common stock (in thousands, except share and per share data):

Year ended June 30,

Class A Class B

2024 2023 2022

Class A Class B Class A Class B Class A Class B

Net loss $ ( 430,789 ) $ ( 86,968 ) $ ( 785,080 ) $ ( 200,265 ) $ ( 536,654 ) $ ( 170,763 )

30 unchanged sentences

Total $ 449,549 $ 320,306

Subsequent Events

Subsequent to June 30, 2024 through the date the consolidated financial statements were filed with the SEC, we paid $ 120.1 million in cash for the repurchase of $ 140.5 million aggregate principal amount of our 2026 Notes under the December 2023 authorization.

The carrying amount of the extinguished 2026 Notes was approximately $ 139.7 million resulting in a $ 19.6 million gain on early extinguishment of debt.

The repurchased 2026 Notes were received and canceled.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

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

What changed 10-K

Item 8. Financial Statements and Supplementary Data