Affirm Holdings, Inc. [AFRM] Filings

10-Q 1 afrm-20220331.htm 10-Q afrm-20220331

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 March 31, 2022


☐			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) 984-0490

(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Class A common stock, par value $0.00001 per share

AFRM

The 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 May 10, 2022, the number of shares of the registrant’s Class A common stock outstanding was 226,270,872 and the number of shares of the registrant's Class B common stock outstanding was 60,159,497.

Table of Contents

TABLE OF CONTENTS


						Page
Cover						1
Table of Contents						2
Part I - Financial Information						5
Item 1. Unaudited Financial Statements						5
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)						5
CONDENSED CONSOLIDATED BALANCE SHEETS, CONT. (Unaudited)						6
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (Unaudited)						7
CONDENSED CONSOLIDATED STATEMENT OF REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT) (Unaudited)						8
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)						10
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS, CONT. (Unaudited)						11
1. Business Description						12
2. Summary of Significant Accounting Policies						12
3. Interest Income						17
4. Loans Held for Investment and Allowance for Credit Losses						18
5. Business Combinations						20
6. Balance Sheet Components						26
7. Leases						29
8. Commitments and Contingencies						30
9. Transactions with Related Parties						31
10. Debt						31
11. Securitization and Variable Interest Entities						34
12. Investments						38
13. Fair Value of Financial Assets and Liabilities						41
14. Redeemable Convertible Preferred Stock and Stockholders' Equity						52
15. Equity Incentive Plans						54
16. Income Taxes						56
17. Net Loss per Share Attributable to Common Stockholders						57
18. Segments and Geographical Information						59
19. Subsequent Events						59
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations						60
Item 3. Quantitative and Qualitative Disclosures About Market Risk						85
Item 4. Controls and Procedures						86
Part II - Other Information						87
Item 1. Legal Proceedings						88
Item 1A. Risk Factors						89
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds						93
Item 3. Defaults Upon Senior Securities						93
Item 4. Mine Safety Disclosures						93
Item 5. Other Information						93
Item 6. Exhibits						94
Signatures						95

Table of Contents

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 for 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 additional merchants and retain and grow our relationships with our existing merchant and commerce partners;

•our ability to compete successfully in a highly competitive 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 engage new originating bank partners;

•the availability of funding sources to support our business model;

•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 or sustain profitability in the future;

•our ability to remain in compliance with laws and regulations that currently apply or become applicable to our business;

•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;

•the impact of macroeconomic conditions on our business, including the impact of the COVID-19 pandemic; and

•the size and growth rates of the markets in which we compete.

Forward-looking statements are based on our management’s beliefs and assumptions and on information currently available. 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 our most recently filed Annual Report on Form 10-K. 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 and rapidly changing environment. New risk factors emerge from time to time, and it is not possible for our management to predict all risk factors nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ from those contained in, or implied by, any forward-looking statements.

Table of Contents

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, we cannot guarantee future results, levels of activity, performance, achievements, events, 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, and achievements may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements.

In addition, statements such as “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this report, and while we believe such information forms a reasonable basis for such statements, 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 statements are inherently uncertain and you are cautioned not to unduly rely upon these 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, and conference calls. 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 as an inactive textual reference and for convenience only, and do not intend it to be an active link to our website.

Table of Contents

Part I - Financial Information

Item 1. Unaudited Financial Statements

AFFIRM HOLDINGS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(in thousands, except shares and per share amounts)


	March 31, 2022		June 30, 2021
Assets
Cash and cash equivalents	$	2,261,937	$	1,466,558
Restricted cash	413,628		226,074
Securities available for sale at fair value	617,023		16,170
Loans held for sale	3,618		13,030
Loans held for investment	2,502,860		2,022,320
Allowance for credit losses	(159,475)		(117,760)
Loans held for investment, net	2,343,385		1,904,560
Accounts receivable, net	124,614		91,575
Property, equipment and software, net	141,658		62,499
Goodwill	547,393		516,515
Intangible assets	60,890		67,930
Commercial agreement assets	287,129		227,377
Other assets	230,451		274,679
Total Assets	$	7,031,726	$	4,866,967
Liabilities and Stockholders’ Equity
Liabilities:
Accounts payable	$	48,985	$	57,758
Payable to third-party loan owners	35,962		50,079
Accrued interest payable	2,992		2,751
Accrued expenses and other liabilities	313,307		323,577
Convertible senior notes, net	1,705,624		—
Notes issued by securitization trusts	1,447,568		1,176,673
Funding debt	901,233		680,602
Total liabilities	4,455,671		2,291,440
Commitments and contingencies (Note 8)
Stockholders’ equity:
Class A common stock, par value $0.00001 per share: 3,030,000,000 shares authorized, 225,617,857 shares issued and outstanding as of March 31, 2022; 3,030,000,000 shares authorized, 181,131,728 shares issued and outstanding as of June 30, 2021	2		2
Class B common stock, par value $0.00001 per share: 140,000,000 shares authorized, 60,160,468 shares issued and outstanding as of March 31, 2022; 140,000,000 authorized, 88,226,376 shares issued and outstanding as of June 30, 2021	1		1
Additional paid in capital	3,987,881		3,467,236
Accumulated deficit	(1,419,506)		(898,485)
Accumulated other comprehensive gain (loss)	7,677		6,773
Total stockholders’ equity	2,576,055		2,575,527
Total Liabilities and Stockholders’ Equity	$	7,031,726	$	4,866,967

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

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AFFIRM HOLDINGS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS, CONT.

(Unaudited)

(in thousands, except shares and per share amounts)

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.


	March 31, 2022		June 30, 2021
Assets of consolidated VIEs, included in total assets above
Restricted cash	$	290,661	$	142,385
Loans held for investment	2,214,932		1,743,810
Allowance for credit losses	(125,115)		(94,463)
Loans held for investment, net	2,089,817		1,649,347
Accounts receivable, net	8,195		8,209
Other assets	12,398		3,683
Total assets of consolidated VIEs	$	2,401,071	$	1,803,624
Liabilities of consolidated VIEs, included in total liabilities above
Accounts payable	$	2,960	$	2,927
Accrued interest payable	2,941		2,613
Accrued expenses and other liabilities	12,433		3,820
Notes issued by securitization trusts	1,447,568		1,176,673
Funding debt	734,430		607,394
Total liabilities of consolidated VIEs	2,200,332		1,793,427
Total net assets	$	200,739	$	10,197

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

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AFFIRM HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (Unaudited)

(in thousands, except share and per share amounts)


	Three Months Ended March 31,				Nine Months Ended March 31,
	2022		2021		2022		2021
Revenue
Merchant network revenue	$	121,054	$	97,999	$	340,385	$	290,894
Virtual card network revenue	23,169		13,809		69,122		30,587
Total network revenue	144,223		111,808		409,507		321,481
Interest income	134,599		94,530		390,256		222,624
Gain on sales of loans	52,484		16,350		141,153		47,344
Servicing income	23,456		7,977		44,242		17,235
Total Revenue, net	$	354,762	$	230,665	$	985,158	$	608,684
Operating Expenses
Loss on loan purchase commitment	$	46,853	$	62,054	$	163,796	$	195,690
Provision for credit losses	66,294		(1,063)		182,581		40,389
Funding costs	15,824		14,665		50,277		37,077
Processing and servicing	43,371		21,368		110,421		51,668
Technology and data analytics	110,291		104,806		283,293		180,208
Sales and marketing	156,214		58,184		363,650		119,878
General and administrative	142,466		179,999		419,962		253,188
Total Operating Expenses	581,313		440,013		1,573,980		878,098
Operating Loss	$	(226,551)	$	(209,348)	$	(588,822)	$	(269,414)
Other (expense) income, net	172,139		(77,773)		68,507		(48,088)
Loss Before Income Taxes	$	(54,412)	$	(287,121)	$	(520,315)	$	(317,502)
Income tax expense (benefit)	259		(70)		706		105
Net Loss	$	(54,671)	$	(287,051)	$	(521,021)	$	(317,607)
Other Comprehensive Income (Loss)
Foreign currency translation adjustments	$	5,406	$	2,829	$	3,945	$	5,048
Unrealized gain (loss) on securities available for sale, net	(2,105)		—		(3,041)		—
Net Other Comprehensive Income (Loss)	3,301		2,829		904		5,048
Comprehensive Loss	$	(51,370)	$	(284,222)	$	(520,117)	$	(312,559)
Per share data:
Net loss per share attributable to common stockholders for Class A and Class B
Basic	$	(0.19)	$	(1.23)	$	(1.86)	$	(2.60)
Diluted	$	(0.19)	$	(1.23)	$	(1.86)	$	(2.80)
Weighted average common shares outstanding
Basic	285,641,820		233,309,590		279,570,015		122,161,508
Diluted	285,641,820		233,309,590		279,570,015		123,329,359

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

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AFFIRM HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENT OF REDEEMABLE CONVERTIBLE PREFERRED STOCK AND

STOCKHOLDERS’ EQUITY (DEFICIT)

(Unaudited)

(in thousands, except share amounts)


	Common Stock		Additional Paid-In Capital			Accumulated Deficit		Accumulated Other Comprehensive Income (Loss)		Total Stockholders' Equity (Deficit)
		Shares			Amount
Balance as of June 30, 2021		269,358,104	$	3		$	3,467,236	$	(898,485)	$	6,773	$	2,575,527

Issuance of common stock upon exercise of stock options		7,403,503	—			37,470		—		—		37,470

Issuance of common stock in acquisition		183,733	—			10,000		—		—		10,000
Vesting of restricted stock units		772,653	—			—		—		—		—
Repurchases of common stock		(821)	—			(4)		—		—		(4)

Stock-based compensation		—	—			104,879		—		—		104,879
Tax withholding on stock-based compensation		—	—			(39,817)		—		—		(39,817)

Foreign currency translation adjustments		—	—			—		—		(3,802)		(3,802)
Unrealized gain (loss) on securities available for sale		—	—			—		—		(279)		(279)
Net Loss		—	—			—		(306,615)		—		(306,615)
Balance as of September 30, 2021		277,717,172	$	3		$	3,579,764	$	(1,205,100)	$	2,692	$	2,377,359
Issuance of common stock upon exercise of stock options		4,689,973	—			21,674		—		—		21,674
Vesting of restricted stock units		803,263	—			—		—		—		—
Vesting of warrants for common stock		—	—			198,383		—		—		198,383
Stock-based compensation		—	—			101,920		—		—		101,920
Tax withholding on stock-based compensation		—	—			(72,963)		—		—		(72,963)
Foreign currency translation adjustments		—	—			—		—		2,341		2,341
Unrealized gain (loss) on securities available for sale		—	—			—		—		(657)		(657)
Net Loss		—	—			—		(159,735)		—		(159,735)
Balance as of December 31, 2021		283,210,408	$	3		$	3,828,778	$	(1,364,835)	$	4,376	$	2,468,322
Issuance of common stock upon exercise of stock options		1,258,865	—			8,171		—		—		8,171
Repurchases of Common Stock		(9,472)	—			(80)		—		—		(80)
Vesting of restricted stock units		1,318,524	—			—		—		—		—
Vesting of warrants for common stock		—	—			92,169		—		—		92,169
Stock-based compensation		—	—			113,005		—		—		113,005
Tax withholding on stock-based compensation		—	—			(54,162)		—		—		(54,162)
Foreign currency translation adjustments		—	—			—		—		5,406		5,406
Unrealized gain (loss) on securities available for sale		—	—			—		—		(2,105)		(2,105)
Net Loss		—	—			—		(54,671)		—		(54,671)
Balance as of March 31, 2022		285,778,325	$	3		$	3,987,881	$	(1,419,506)	$	7,677	$	2,576,055

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AFFIRM HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENT OF REDEEMABLE CONVERTIBLE PREFERRED STOCK

AND STOCKHOLDERS’ EQUITY (DEFICIT), CONT.

(Unaudited)

(in thousands, except share amounts)


	Redeemable Convertible Preferred Stock			Common Stock			Additional Paid-In Capital		Accumulated Deficit		Accumulated Other Comprehensive Income (Loss)		Total Stockholders' Equity (Deficit)
	Shares	Amount		Shares	Amount
Balance as of June 30, 2020	122,115,971	$	804,170	47,684,427	—		80,373		(447,167)		(302)		$	(367,096)
Issuance of common stock upon exercise of stock option	—	—		388,246	—		1,741		—		—		1,741
Repurchases of common stock	—	—		(115,625)	—		(584)		—		—		(584)
Issuance of redeemable convertible preferred stock, net of issuance costs of $440	21,824,141	434,434		—	—		—		—		—		—
Vesting and exercise of warrants for common stock	—	—		5,074,398	—		67,645		—		—		67,645
Stock-based compensation	—	—		—	—		7,175		—		—		7,175
Conversion of convertible debt	4,444,321	88,559		—	—		(42,124)		—		—		(42,124)
Effects of adoption of new accounting standards	—	—		—	—		—		(9,980)		—		(9,980)
Foreign currency translation adjustments	—	—		—	—		—		—		405		405
Net Loss	—	—		—	—		—		(3,946)		—		(3,946)
Balance as of September 30, 2020	148,384,433	1,327,163		53,031,446	$	—	$	114,226	$	(461,093)	$	103	$	(346,764)
Issuance of common stock upon exercise of stock option	—	—		6,220,024	—		21,676		—		—		21,676
Repurchases of common stock	—	—		(12,100)	—		(199)		—		—		(199)
Issuance of preferred stock, net of issuance costs of $143	12,546	108		—	—		—		—		—		—
Stock-based compensation	—	—		—	—		6,774		—		—		6,774
Foreign currency translation adjustments	—	—		—	—		—		—		1,814		1,814
Net Loss	—	—		—	—		—		(26,610)		—		(26,610)
Balance as of December 31, 2020	148,396,979	1,327,271		59,239,370	$	—	$	142,477	$	(487,703)	$	1,917	$	(343,309)
Issuance of common stock upon initial public offering, net	—	—		28,290,000	1		1,305,301		—		—		1,305,302
Issuance of common stock upon exercise of stock options	—	—		4,721,033	—		19,819		—		—		19,819
Issuance of common stock upon exercise of warrants	—	—		15,577,185	—		203,511		—		—		203,511
Issuance of common stock in acquisition	—	—		6,209,806	—		117,023		—		—		117,023
Vesting of restricted stock units	—	—		2,225,411	—		—		—		—		—
Repurchases of common stock	—	—		(1,666)	—		(3)		—		—		(3)
Conversion of redeemable convertible preferred stock	(148,396,979)	(1,327,271)		148,396,979	2		1,327,269		(11)		—		1,327,260
Stock-based compensation	—	—		—	—		187,883		—		—		187,883
Tax withholding on stock-based compensation	—	—		—	—		(127,566)		—		—		(127,566)
Foreign currency translation adjustments	—	—		—	—		—		—		2,829		2,829
Net Loss	—	—		—	—		—		(287,051)		—		(287,051)
Balance as of March 31, 2021	—	—		264,658,118	$	3	$	3,175,714	$	(774,765)	$	4,746	$	2,405,698

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

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AFFIRM HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(in thousands)


	Nine Months Ended March 31,
	2022		2021
Cash Flows from Operating Activities
Net Loss	$	(521,021)	$	(317,607)
Adjustments to reconcile net loss to net cash used in operating activities:
Provision for credit losses	182,581		40,389
Amortization of premiums and discounts on loans, net	(129,714)		(60,705)
Gain on sales of loans	(141,153)		(47,344)
Changes in fair value of assets and liabilities	(38,821)		45,310
Amortization of commercial agreement assets	72,804		50,097
Amortization of debt issuance costs	13,215		3,675
Amortization of discount on securities available for sale	968		—
Commercial agreement warrant expense	157,023		—
Stock-based compensation	280,113		192,363
Depreciation and amortization	35,607		12,092
Other	(5,725)		18,163
Purchases of loans held for sale	(3,869,327)		(1,640,672)
Proceeds from the sale of loans held for sale	3,868,919		1,599,554
Change in operating assets and liabilities:
Accounts receivable, net	(42,467)		(6,461)
Other assets	28,018		(208,798)
Accounts payable	(8,773)		4,064
Payable to third-party loan owners	(14,117)		11,526
Accrued interest payable	240		2,535
Accrued expenses and other liabilities	28,545		128,602
Net Cash Used in Operating Activities	(103,085)		(173,217)
Cash Flows from Investing Activities
Purchases and origination of loans held for investment	(7,529,324)		(4,313,834)
Proceeds from the sale of loans held for investment	1,330,341		348,195
Principal repayments and other loan servicing activity	5,867,583		3,002,351
Acquisition, net of cash and restricted cash acquired	(5,999)		(104,776)
Acquisition of commercial agreement assets	—		(25,900)
Additions to property, equipment and software	(59,254)		(12,414)
Purchases of securities available for sale	(770,047)		—
Proceeds from maturities and repayments of securities available for sale

Affirm Holdings, Inc. [AFRM] Filings
10-Q	[2022-05-13]
10-Q	[2022-02-14]
10-Q	[2021-11-15]
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S-1	[2020-11-18]