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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

(Mark One)
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 2023

OR

 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from  __________ to __________

Commission File Number: 001-39888

Affirm Holdings, Inc.
(Exact name of registrant as specified in its charter)
Delaware
84-2224323
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
650 California Street
San Francisco, California
94108
(Address of principal executive offices)
(Zip Code)
(415) 960-1518
(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Class A common stock, par value $0.00001 per shareAFRMThe Nasdaq Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes     No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).     Yes     No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Accelerated filer
  
Non-accelerated filer  
Smaller reporting company
  
Emerging growth company
  
                
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).     Yes        No  

As of February 5, 2024, the number of shares of the registrant’s Class A common stock outstanding was 259,563,652 and the number of shares of the registrant’s Class B common stock outstanding was 47,310,468.




TABLE OF CONTENTS
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2

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q (“Form 10-Q”), as well as information included in oral statements or other written statements made or to be made by us, contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), that involve substantial risks and uncertainties. All statements other than statements of historical fact contained in this Report, including statements regarding our future results of operations and financial condition, business strategy, and plans and objectives of management regarding future operations, are forward-looking statements. In some cases, forward-looking statements may be identified by words such as “anticipate,” “believe,” “continue,” “could,” “design,” “estimate,” “expect,” “intend,” “may,” “plan,” “potentially,” “predict,” “project,” “should,” “will,” “would,” or the negative of these terms or other similar expressions. These forward-looking statements include, but are not limited to, statements concerning the following:

our expectations regarding our future revenue, expenses, and other operating results and key operating metrics;
our ability to attract new merchants and commerce partners and retain and grow our relationships with existing merchants and commerce partners;
our ability to compete successfully in a highly competitive and evolving industry;
our ability to attract new consumers and retain and grow our relationships with our existing consumers;
our expectations regarding the development, innovation, introduction of, and demand for, our products;
our ability to successfully maintain our relationship with existing originating bank partners and engage additional originating bank partners;
our ability to maintain, renew or replace our existing funding arrangements and build and grow new funding relationships;
the impact of any of our funding sources becoming unwilling or unable to provide funding to us on terms acceptable to us, or at all;
our ability to effectively price and score credit risk using our proprietary risk model;
the performance of loans facilitated and originated through our platform;
the future growth rate of our revenue and related key operating metrics;
our ability to achieve sustained profitability in the future;
our ability, and the ability of our originating bank and other partners, to comply, and remain in compliance with, laws and regulations that currently apply or become applicable to our business or the businesses of such partners;
our ability to protect our confidential, proprietary, or sensitive information;
past and future acquisitions, investments, and other strategic investments;
our ability to maintain, protect, and enhance our brand and intellectual property;
litigation, investigations, regulatory inquiries, and proceedings;
developments in our regulatory environment;
the impact of macroeconomic conditions on our business, including the impacts of inflation, an elevated interest rate environment and corresponding increases in negotiated interest rate spreads, ongoing recessionary concerns and the potential for more instability of financial institutions; and
the size and growth rates of the markets in which we compete.
Forward-looking statements, including statements such as “we believe” and similar statements, are based on our management’s current beliefs, opinions and assumptions and on information currently available as of the date
3

of this Report. Such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These forward-looking statements are subject to a number of known and unknown risks, uncertainties and assumptions, including risks described in the section titled “Risk Factors” and elsewhere in this Form 10-Q and in our most recently filed Annual Report on Form 10-K for the fiscal year ended June 30, 2023 (the Annual Report”). Other sections of this Form 10-Q may include additional factors that could harm our business and financial performance. Moreover, we operate in a very competitive, heavily regulated and rapidly changing environment. New risks emerge from time to time, and it is not possible for our management to predict all risks that we may face, nor can we assess the impact of all risks on our business or the extent to which any risk, or combination of risks, may cause our actual results to differ from those contained in, or implied by, any forward-looking statements.

You should not rely upon forward-looking statements as predictions of future events. Although we believe that the expectations reflected in the forward-looking statements are reasonable as of the date of this Report, we cannot guarantee future results, levels of activity, performance, achievements, events, outcomes, timing of results or circumstances. Except as required by law, we undertake no obligation to update publicly any forward-looking statements for any reason after the date of this Report or to conform these statements to actual results or to changes in our expectations. You should read this Form 10-Q and the documents that we have filed as exhibits to this Report with the understanding that our actual future results, levels of activity, performance, outcomes, achievements and timing of results or outcomes may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements.

Investors and others should note that we may announce material business and financial information to our investors using our investor relations website (investors.affirm.com), our filings with the Securities and Exchange Commission (“SEC”), webcasts, press releases, conference calls, and social media. We use these mediums, including our website, to communicate with investors and the general public about our company, our products, and other issues. It is possible that the information that we make available on our website may be deemed to be material information. We therefore encourage investors and others interested in our Company to review the information that we make available on our website. The contents of our website are not incorporated into this filing. We have included our investor relations website address only as an inactive textual reference for convenience and do not intend it to be an active link to our website.
4

Part I - Financial Information

Item 1. Financial Statements

AFFIRM HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(in thousands, except shares and per share amounts)
December 31, 2023June 30, 2023
Assets
Cash and cash equivalents$1,036,719 $892,027 
Restricted cash411,259 367,917 
Securities available for sale at fair value914,069 1,174,653 
Loans held for sale29 76 
Loans held for investment5,238,812 4,402,962 
Allowance for credit losses(262,204)(204,531)
Loans held for investment, net4,976,608 4,198,431 
Accounts receivable, net307,286 199,085 
Property, equipment and software, net369,854 290,135 
Goodwill541,156 542,571 
Intangible assets17,407 34,434 
Commercial agreement assets134,558 177,672 
Other assets356,044 278,614 
Total assets
$9,064,989 $8,155,615 
Liabilities and stockholders’ equity
Liabilities:
Accounts payable$59,805 $28,602 
Payable to third-party loan owners134,567 53,852 
Accrued interest payable22,181 13,498 
Accrued expenses and other liabilities150,272 180,883 
Convertible senior notes, net1,415,952 1,414,208 
Notes issued by securitization trusts2,740,656 2,165,577 
Funding debt1,906,672 1,764,812 
Total Liabilities
6,430,105 5,621,432 
Commitments and contingencies (Note 8)
Stockholders’ equity:
Class A common stock, par value $0.00001 per share: 3,030,000,000 shares authorized, 258,034,539 shares issued and outstanding as of December 31, 2023; 3,030,000,000 shares authorized, 237,230,381 shares issued and outstanding as of June 30, 2023
2 2 
Class B common stock, par value $0.00001 per share: 140,000,000 shares authorized, 47,499,807 shares issued and outstanding as of December 31, 2023; 140,000,000 authorized, 59,615,836 shares issued and outstanding as of June 30, 2023
1 1 
Additional paid in capital5,571,955 5,140,850 
Accumulated deficit(2,929,932)(2,591,247)
Accumulated other comprehensive loss(7,142)(15,423)
Total stockholders’ equity2,634,884 2,534,183 
Total liabilities and stockholders’ equity
$9,064,989 $8,155,615 

The accompanying notes are an integral part of these interim condensed consolidated financial statements.
5

AFFIRM HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS, CONT.
(Unaudited)
(in thousands)

    The following table presents the assets and liabilities of consolidated variable interest entities (“VIEs”), which are included in the interim condensed consolidated balance sheets above. The assets in the table below may only be used to settle obligations of consolidated VIEs and are in excess of those obligations. The liabilities in the table below include liabilities for which creditors do not have recourse to the general credit of the Company. Additionally, the assets and liabilities in the table below include third-party assets and liabilities of consolidated VIEs only and exclude intercompany balances that eliminate upon consolidation.
December 31, 2023June 30, 2023
Assets of consolidated VIEs, included in total assets above
Restricted cash$206,008 $203,872 
Loans held for investment5,041,108 4,151,606 
Allowance for credit losses(230,009)(178,252)
Loans held for investment, net4,811,099 3,973,354 
Accounts receivable, net2,959 8,196 
Other assets10,842 18,210 
Total assets of consolidated VIEs$5,030,908 $4,203,632 
Liabilities of consolidated VIEs, included in total liabilities above
Accounts payable$2,916 $2,894 
Accrued interest payable22,179 13,498 
Accrued expenses and other liabilities11,222 17,825 
Notes issued by securitization trusts2,740,656 2,165,577 
Funding debt1,872,624 1,656,400 
Total liabilities of consolidated VIEs4,649,597 3,856,194 
Total net assets of consolidated VIEs
$381,311 $347,438 

The accompanying notes are an integral part of these interim condensed consolidated financial statements.
6

AFFIRM HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (Unaudited)
(in thousands, except share and per share amounts)
Three Months Ended December 31,Six Months Ended December 31,
2023202220232022
Revenue
Merchant network revenue$188,357 $134,019 $334,307 $247,168 
Card network revenue39,269 29,117 72,745 55,825 
Total network revenue227,626 163,136 407,052 302,993 
Interest income288,346 155,321 551,025 292,123 
Gain on sales of loans52,702 59,607 86,987 123,202 
Servicing income22,436 21,494 42,593 42,864 
Total revenue, net$591,110 $399,558 $1,087,657 $761,182 
Operating expenses
Loss on loan purchase commitment$53,630 $38,422 $88,496 $74,032 
Provision for credit losses120,880 106,689 220,576 170,939 
Funding costs84,617 43,751 158,548 68,817 
Processing and servicing90,203 66,508 165,874 120,867 
Technology and data analytics119,833 156,747 252,798 301,708 
Sales and marketing161,265 188,334 308,131 352,207 
General and administrative132,777 158,639 273,111 319,611 
Restructuring and other56  1,721  
Total operating expenses763,261 759,090 1,469,255 1,408,181 
Operating loss$(172,151)$(359,532)$(381,598)$(646,999)
Other income, net4,549 35,527 43,256 71,545 
Loss before income taxes$(167,602)$(324,005)$(338,342)$(575,454)
Income tax (benefit) expense(700)(1,568)343 (1,748)
Net loss$(166,902)$(322,437)$(338,685)$(573,706)
Other comprehensive income (loss)
Foreign currency translation adjustments$13,824 $4,522 $1,926 $(17,024)
Unrealized gain (loss) on securities available for sale, net4,853 3,069 6,206 (2,459)
Gain (loss) on cash flow hedges(614) 149  
Net other comprehensive income (loss)18,063 7,591 8,281 (19,483)
Comprehensive loss$(148,839)$(314,846)$(330,404)$(593,189)
Per share data:
Net loss per share attributable to common stockholders for Class A and Class B
Basic$(0.54)$(1.10)$(1.11)$(1.96)
Diluted$(0.54)$(1.10)$(1.11)$(1.96)
Weighted average common shares outstanding
Basic307,571,602 293,683,331 305,705,637 292,306,300 
Diluted307,571,602 293,683,331 305,705,637 292,306,300 

The accompanying notes are an integral part of these interim condensed consolidated financial statements.
7

AFFIRM HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY
(Unaudited)
(in thousands, except share amounts)

Common StockAdditional Paid-In CapitalAccumulated DeficitAccumulated Other Comprehensive Loss
Total Stockholders Equity
Shares (1)
Amount
Balance as of June 30, 2023296,846,217 $3 $5,140,850 $(2,591,247)$(15,423)$2,534,183 
Issuance of common stock upon exercise of stock options495,350 — 3,625 — — 3,625 
Vesting of restricted stock units3,740,320 — — — — — 
Vesting of warrants for common stock— — 95,910 — — 95,910 
Stock-based compensation— — 151,162 — — 151,162 
Tax withholding on stock-based compensation— — (36,515)— — (36,515)
Foreign currency translation adjustments— — — — (11,898)(11,898)
Unrealized gain on securities available for sale— — — — 1,353 1,353 
Gain on cash flow hedges— — — — 763 763 
Net loss— — — (171,783)— (171,783)
Balance as of September 30, 2023301,081,887 $3 $5,355,032 $(2,763,030)$(25,205)$2,566,800 
Issuance of common stock upon exercise of stock options1,922,621 — 17,419 — — 17,419 
Issuance of common stock, employee share purchase plan333,847 — 4,137 — — 4,137 
Vesting of restricted stock units2,195,991 — — — — — 
Vesting of warrants for common stock— — 114,705 — — 114,705 
Stock-based compensation— — 119,821 — — 119,821 
Tax withholding on stock-based compensation— — (39,159)— — (39,159)
Foreign currency translation adjustments— — — — 13,824 13,824 
Unrealized gain on securities available for sale— — — — 4,853 4,853 
Loss on cash flow hedges— — — — (614)(614)
Net loss— — — (166,902)— (166,902)
Balance as of December 31, 2023305,534,346 $3 $5,571,955 $(2,929,932)$(7,142)$2,634,884 
(1)The share amounts listed above combine common stock, Class A common stock and Class B common stock.

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













8


AFFIRM HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY
(Unaudited)
(in thousands, except share amounts)

Common StockAdditional Paid-In CapitalAccumulated DeficitAccumulated Other Comprehensive Income
Total Stockholders Equity
Shares (1)
Amount
Balance as of June 30, 2022287,365,373 $3 $4,231,303 $(1,605,902)$(7,149)$2,618,255 
Issuance of common stock upon exercise of stock options215,949 — 1,192 — — 1,192 
Forfeiture of common stock related to acquisitions(243,384)— — — — — 
Repurchases of common stock(12,437)— (109)— — (109)
Vesting of restricted stock units2,166,715 — — — — — 
Vesting of warrants for common stock— — 108,742 — — 108,742 
Stock-based compensation— — 141,012 — — 141,012 
Tax withholding on stock-based compensation— — (27,311)— — (27,311)
Foreign currency translation adjustments— — — — (21,546)(21,546)
Unrealized loss on securities available for sale— — — — (5,528)(5,528)
Net loss— — — (251,269)— (251,269)
Balance as of September 30, 2022289,492,216 $3 $4,454,829 $(1,857,171)$(34,223)$2,563,438 
Issuance of common stock upon exercise of stock options300,903 — 1,372 — — 1,372 
Issuance of common stock, employee share purchase plan500,443 — 5,921 — — 5,921 
Vesting of restricted stock units1,798,218 — — — — — 
Vesting of warrants for common stock— — 128,054 — — 128,054 
Stock-based compensation— — 144,218 — — 144,218 
Tax withholding on stock-based compensation— — (18,009)— — (18,009)
Foreign currency translation adjustments— — — — 4,522 4,522 
Unrealized loss on securities available for sale— — — — 3,069 3,069 
Net loss— — — (322,437)— (322,437)
Balance as of December 31, 2022292,091,780 $3 $4,716,385 $(2,179,608)$(26,632)$2,510,148 
(1)The share amounts listed above combine common stock, Class A common stock and Class B common stock.

The accompanying notes are an integral part of these interim condensed consolidated financial statements.
9

AFFIRM HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Six Months Ended December 31,
20232022
Cash flows from operating activities
Net loss$(338,685)$(573,706)
Adjustments to reconcile net loss to net cash used in operating activities:
Provision for credit losses220,576 170,939 
Amortization of premiums and discounts on loans, net(87,979)(68,853)
Gain on sales of loans(86,987)(123,202)
Changes in fair value of assets and liabilities(4,912)(11,035)
Amortization of commercial agreement assets43,114 43,114 
Amortization of debt issuance costs12,758 1,752 
Amortization of discount on securities available for sale(23,122)(14,923)
Commercial agreement warrant expense210,615 236,796 
Stock-based compensation202,523 241,583 
Depreciation and amortization66,643 43,886 
Other15,660 1,136 
Change in operating assets and liabilities:
Purchases of loans held for sale(2,244,895)(3,323,750)
Proceeds from the sale of loans held for sale2,262,184 3,428,673 
Accounts receivable, net(116,487)(63,416)
Other assets(41,669)(13,727)
Accounts payable31,203 (4,098)
Payable to third-party loan owners80,715 55,995 
Accrued interest payable8,963 5,903 
Accrued expenses and other liabilities(36,995)(10,400)
Net cash provided by operating activities173,223 22,667 
Cash flows from investing activities
Purchases and origination of loans held for investment(10,333,489)(6,535,457)
Proceeds from the sale of loans held for investment2,976,941 702,987 
Principal repayments and other loan servicing activity6,536,313 4,628,825 
Additions to property, equipment and software(74,564)(65,401)
Purchases of securities available for sale(193,322)(105,629)
Proceeds from maturities and repayments of securities available for sale482,029 798,149 
Other investing cash inflows/(outflows)(34,669)1,588 
Net cash used in investing activities(640,761)(574,938)
Cash flows from financing activities
Proceeds from funding debt6,439,713 3,367,729 
Payment of debt issuance costs(16,280)(4,773)
Principal repayments of funding debt(6,291,324)(2,147,035)
Proceeds from issuance of notes and residual trust certificates by securitization trusts1,101,828 250,000 
Principal repayments of notes issued by securitization trusts(528,279)(559,383)
Proceeds from exercise of common stock options and warrants and contributions to ESPP25,167 8,246 
Repurchases of common stock (109)
Payments of tax withholding for stock-based compensation(75,674)(45,320)
Net cash provided by financing activities655,151 869,355 
Effect of exchange rate changes on cash, cash equivalents and restricted cash421 (3,098)
Net increase in cash, cash equivalents and restricted cash188,034 313,986 
Cash, cash equivalents and restricted cash, beginning of period1,259,944 1,550,807 
Cash, cash equivalents and restricted cash, end of period$1,447,978 $1,864,793 

The accompanying notes are an integral part of these interim condensed consolidated financial statements.
10

AFFIRM HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS, CONT.
(Unaudited)
(in thousands)

Six Months Ended December 31,
20232022
Reconciliation to amounts on consolidated balance sheets (as of period end)
Cash and cash equivalents1,036,719 1,440,333 
Restricted cash411,259 424,460 
Total cash, cash equivalents and restricted cash$1,447,978 $1,864,793 

Six Months Ended December 31,
20232022
Supplemental disclosures of cash flow information
Cash payments for interest expense$142,449 $55,900 
Cash paid for operating leases8,251 8,244 
Cash paid for income taxes571 212 
Supplemental disclosures of non-cash investing and financing activities
Stock-based compensation included in capitalized internal-use software68,460 43,647 
Right of use assets obtained in exchange for operating lease liabilities 494 

The accompanying notes are an integral part of these interim condensed consolidated financial statements.
11

1.   Business Description

Affirm Holdings, Inc. (“Affirm,” the “Company,” “we,” “us,” or “our”), headquartered in San Francisco, California, provides consumers with a simpler, more transparent, and flexible alternative to traditional payment options. Our mission is to deliver honest financial products that improve lives. Through our next-generation commerce platform, agreements with originating banks, and capital markets partners, we enable consumers to confidently pay for a purchase over time, with terms ranging up to sixty months. When a consumer applies for a loan through our platform, the loan is underwritten using our proprietary risk model, and once approved, the consumer selects their preferred repayment option. Loans are directly originated or funded and issued by our originating bank partners.

Merchants partner with us to transform the consumer shopping experience and to acquire and convert customers more effectively through our frictionless point-of-sale payment solutions. Consumers get the flexibility to buy now and make simple regular payments for their purchases and merchants see increased average order value, repeat purchase rates, and an overall more satisfied customer base. Unlike legacy payment options and our competitors’ product offerings, which charge deferred or compounding interest and unexpected costs, we disclose up-front to consumers exactly what they will owe — no hidden fees, no deferred interest, no penalties.

2.   Summary of Significant Accounting Policies

Basis of Presentation and Principles of Consolidation

The accompanying interim condensed consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”), as contained in the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”), disclosure requirements for interim financial information, and the requirements of Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. The unaudited interim condensed consolidated financial statements should be read in conjunction with the audited financial statements and notes thereto for the fiscal year ended June 30, 2023. The balance sheet as of June 30, 2023 has been derived from the audited financial statements at that date. Management believes these interim condensed consolidated financial statements reflect all adjustments, including those of a normal and recurring nature, which are necessary for a fair presentation of the results for the interim periods presented. The results of operations for the interim periods are not necessarily indicative of the results that may be expected for the full year or any other interim period.

Our interim condensed financial statements have been prepared on a consolidated basis. Under this basis of presentation, our financial statements consolidate all wholly owned subsidiaries and variable interest entities (“VIEs”), in which we have a controlling financial interest. These include various business trust entities and limited partnerships established to enter into warehouse credit agreements with certain lenders for funding debt facilities and certain asset-backed securitization transactions. All intercompany accounts and transactions have been eliminated in consolidation.

Our variable interest arises from contractual, ownership, or other monetary interests in the entity, which changes with fluctuations in the fair value of the entity’s net assets. We consolidate a VIE when we are deemed to be the primary beneficiary. We assess whether or not we are the primary beneficiary of a VIE on an ongoing basis.

Use of Estimates

The preparation of interim condensed consolidated financial statements in conformity with U.S. GAAP requires the use of estimates, judgments and assumptions that affect the reported amounts in the interim condensed consolidated financial statements and the accompanying notes. Material estimates that are particularly susceptible to significant change relate to determination of the allowance for credit losses, capitalized internal-use software development costs, valuation allowance for deferred tax assets, loss on loan purchase commitment, the fair value of
12

servicing assets and liabilities, 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 residual certificates issued by our securitization trusts held by third parties, and stock-based compensation, including the fair value of warrants issued to nonemployees. We base our estimates on historical experience, current events, and other factors we believe to be reasonable under the circumstances. To the extent that there are material differences between these estimates and actual results, our financial condition or operating results will be materially affected.

These estimates are based on information available as of the date of the interim condensed consolidated financial statements; therefore, actual results could differ materially from those estimates.   

Significant Accounting Policies

There were no material changes to our significant accounting policies as disclosed in Note 2. Summary of Significant Accounting Policies of our Annual Report on Form 10-K for the fiscal year ended June 30, 2023, which was filed with the SEC on August 25, 2023.

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 fiscal years beginning after December 15, 2023 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.

Income Taxes

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The amendments require disclosure of specific categories in the rate reconciliation and provide additional information for reconciling items that meet a quantitative threshold and further disaggregation of income taxes paid for individually significant jurisdictions. The ASU is effective for fiscal years beginning after December 15, 2024, with early adoption permitted. We are in the process of evaluating the impact of adopting this accounting standard update on our consolidated financial statements and disclosures.

3.   Revenue

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

Three Months Ended December 31,Six Months Ended December 31,
2023202220232022
Merchant network revenue$188,357 $134,019 $334,307 $247,168 
Card network revenue39,269 29,117 72,745 55,825 
Interest income288,346 155,321 551,025 292,123 
Gain on sales of loans52,702 59,607 86,987 123,202 
Servicing income22,436 21,494 42,593 42,864 
Total revenue, net$591,110 $399,558 $1,087,657 $761,182 
13

Merchant Network Revenue — Revenue from Contracts with Customers

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

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

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

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

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

For the three and six months ended December 31, 2023 and 2022, there were no merchants that exceeded 10% of total revenue.

Card Network Revenue — Revenue from Contracts with Customers

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

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

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

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

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

Interest Income

Interest income consisted of the following components (in thousands):
Three Months Ended December 31,Six Months Ended December 31,
2023202220232022
Contractual interest income on unpaid principal balance$248,083 $125,858 $474,374 $231,996 
Amortization of discount on loans51,024 38,838 96,142 77,807 
Amortization of premiums on loans(4,183)(4,580)(8,163)(8,954)
Interest receivable charged-off, net of recoveries(6,578)(4,795)(11,328)(8,726)
Total interest income$288,346 $155,321 $551,025 $292,123 

We accrue interest income using the effective interest method, which includes the amortization of any discounts or premiums on loan receivables created upon the purchase of a loan from our originating bank partners or upon the origination of a loan. Interest income on a loan is accrued daily, based on the finance charge disclosed to the consumer, over the term of the loan based upon the principal outstanding. The accrual of interest on a loan is suspended if a formal dispute with the consumer involving either Affirm or the merchant of record is opened, or a loan is 120 days past due. Upon the resolution of a dispute with the consumer, the accrual of interest is resumed, and any interest that would have been earned during the disputed period is retroactively accrued. As of December 31, 2023 and June 30, 2023, the balance of loans held for investment on non-accrual status was $0.9 million and $1.8 million, respectively.

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

Gain on Sales of Loans

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

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

4.   Loans Held for Investment and Allowance for Credit Losses

    Loans held for investment consisted of the following (in thousands):
December 31, 2023June 30, 2023
Unpaid principal balance$5,276,809 $4,451,324 
Accrued interest receivable55,499 41,079 
Premiums on loans held for investment7,404 7,135 
Less: Discount due to loss on loan purchase commitment(59,833)(51,190)
Less: Discount due to loss on directly originated loans(41,041)(45,145)
Less: Fair value adjustment on loans acquired through business combination(26)(241)
Total loans held for investment$5,238,812 $4,402,962 

Loans held for investment includes loans originated through our originating bank partners and directly originated loans. The majority of the loans that are underwritten using our technology platform and originated by our originating bank partners are later purchased by us. We purchased loans from our originating bank partners in the amount of $5.9 billion and $10.5 billion during the three and six months ended December 31, 2023 and $4.4 billion and $7.9 billion during the three and six months ended December 31, 2022, respectively.

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

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

Our proprietary score (“ITACs”) is assigned to most loans facilitated through our technology platform, ranging from zero to 100, with 100 representing the highest credit quality and therefore the lowest likelihood of loss. The ITACs model analyzes the characteristics of a consumer's attributes that are shown to be predictive of both willingness and ability to repay including, but not limited to: basic features of a consumer's credit profile, a consumer's prior repayment performance with other creditors, current credit utilization, and legal and policy changes. When a consumer passes both fraud and credit policy checks, the application is assigned an ITACs score. ITACs is also used for portfolio performance monitoring. Our credit risk team closely tracks the distribution of ITACs at the portfolio level, as well as ITACs at the individual loan level to monitor for signs of a changing credit profile within the portfolio. Repayment performance within each ITACs band is also monitored to support both the
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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 (in thousands) as of December 31, 2023:

December 31, 2023
Amortized Costs Basis by Fiscal Year of Origination
20242023202220212020PriorTotal
96+$2,317,427 $673,456 $18,542 $963 $15 $10 $3,010,413 
94 – 961,135,744 273,060 1,506 43 14 7 1,410,374 
90 – 94206,747 30,972 777 16 2 4 238,518 
<9017,968 588 694 4 2  19,256 
No score (1)
303,489 168,422 29,480 3,089 165 157 504,802 
Total amortized cost basis$3,981,375 $1,146,498 $50,999 $4,115 $198 $178 $5,183,363 
(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 (in thousands) as of December 31, 2023:

December 31, 2023
Net Charge-offs by Fiscal Year of Origination
20242023202220212020PriorTotal
Current period charge-offs(13,946)(142,605)(5,398)(409)(73)(45)(162,476)
Current period recoveries134 6,364 4,065 522 25 51 11,161 
Current period net charge-offs(13,812)(136,241)(1,333)113 (48)6 (151,315)

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

June 30, 2023
Amortized Costs Basis by Fiscal Year of Origination
20232022202120202019PriorTotal
96+$2,628,060 $39,428 $18,910 $3,439 $9 $1 $2,689,847 
94 – 961,104,553 7,755 439 77 6 2 1,112,832 
90 – 94133,940 3,116 26 2 4  137,088 
<9013,363 1,623 4 2   14,992 
No score (1)
335,690 59,204 11,562 489 252 9 407,206 
Total amortized cost basis$4,215,606 $111,126 $30,941 $4,009 $271 $12 $4,361,965 
(1)This balance represents loan receivables in markets without sufficient data currently available for use by the Affirm scoring methodology including loan receivables originated in Canada.   
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Loan receivables are defined as past due if either the principal or interest have not been received within four calendars days of when they are due in accordance with the agreed upon contractual terms. The following table presents an aging analysis of the amortized cost basis excluding accrued interest receivable of loans held for investment and loans held for sale by delinquency status (in thousands):
December 31, 2023June 30, 2023
Non-delinquent loans$4,919,077 $4,183,248 
4 – 29 calendar days past due136,005 92,876 
30 – 59 calendar days past due52,381 36,399 
60 – 89 calendar days past due39,048 28,171 
90 – 119 calendar days past due(1)
36,852 21,271 
Total amortized cost basis$5,183,363 $4,361,965 
(1)Includes $36.5 million and $20.9 million of loan receivables as of December 31, 2023 and June 30, 2023, respectively, that are 90 days or more past due, but are not on nonaccrual status. 

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

The following table details activity in the allowance for credit losses, including charge-offs, recoveries and provision for loan losses (in thousands):
Three Months Ended December 31,Six Months Ended
December 31,
2023202220232022
Balance at beginning of period$232,068 $153,025 $204,531 $155,392 
Provision for loan losses116,160 103,066 208,988 164,935 
Charge-offs(91,633)(81,562)(162,476)(152,598)
Recoveries of charged-off receivables5,609 7,571 11,161 14,371 
Balance at end of period$262,204 $182,100 $262,204 $182,100 

Loan Modifications for Borrowers Experiencing Financial Difficulty

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

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

The following tables present the amortized cost basis of loans excluding accrued interest receivable that were modified for borrowers experiencing financial difficulty during the three and six months ended December 31, 2023, by type of modification (in thousands):

Three Months Ended December 31, 2023
Payment DeferralLoan
Re-amortization
Total% of Total Loan Receivables Outstanding
Loans receivables7,367 408 7,775 0.15 %

Six Months Ended December 31, 2023
Payment DeferralLoan
Re-amortization
Total% of Total Loan Receivables Outstanding
Loans receivables12,457 701 13,158 0.25 %

With respect to borrowers who received payment deferrals during the three and six months ended December 31, 2023, the length of each deferral period was one month.

With respect to borrowers who received loan re-amortization during the three and six months ended December 31, 2023, the payment amount was reduced by half and the term of the loan was extended between one month and twelve months.
We closely monitor the performance of loans that are modified for borrowers experiencing financial difficulty to understand the effectiveness of our modification efforts. We hold an allowance for credit losses for modified loans classified as held for investment. Our allowance estimate considers whether a loan has been modified due to a borrower experiencing financial difficulty and the increased likelihood that such loan may become delinquent or charge-off in the future. During the payment deferral process, the loans are made current, and payment schedules for these loans are updated according to the deferral terms.

The following table presents the delinquency status as of December 31, 2023 (in thousands), by amortized cost basis excluding accrued interest receivable, of loan receivables that have been modified within the last 12 months where the borrower was experiencing financial difficulty at the time of modification:

December 31, 2023
Payment DeferralLoan Re-amortizationTotal
Non-delinquent loans$6,742 $280 $7,022 
4 – 29 calendar days past due2,667