Affirm Holdings Inc

Previous wording

From merchants, we earn a fee when we help them convert a sale and facilitate a transaction. We have two loan product offerings: Pay-in-4 and Core loans. Pay-in-4 is a short-term payment plan with four biweekly 0% APR installments, while Core loans include all monthly interest-bearing installment loans and 0% APR installment loans. While merchant fees depend on the individual arrangement between us and each merchant and vary based on the terms of the product offering, we generally earn larger merchant fees on our 0% APR financing products. For both the three and six months ended December 31, 2023, Pay-in-4 represented 16% of total GMV facilitated through our platform while 0% APR Core loans represented 11%. For the three and six months ended December 31, 2022, Pay-in-4 represented 23% and 21% of total GMV facilitated through our platform, respectively, while 0% APR Core loans represented 10% and 13%, respectively.

Current wording

From merchants, we earn a fee when we help them convert a sale and facilitate a transaction. We have two loan product offerings: Pay-in-4 and Core loans. Pay-in-4 is a short-term payment plan with four biweekly 0% APR installments, while Core loans include all monthly interest-bearing installment loans and 0% APR installment loans. While merchant fees depend on the individual arrangement between us and each merchant and vary based on the terms of the product offering, we generally earn larger merchant fees on our 0% APR financing products. For the three and nine months ended March 31, 2024, Pay-in-4 represented 14% and 15%, respectively, of total GMV facilitated through our platform while 0% APR Core loans represented 13% and 11%, respectively. For the three and nine months ended March 31, 2023, Pay-in-4 represented 16% and 19% of total GMV facilitated through our platform, respectively, while 0% APR Core loans represented 15% and 14%, respectively.

Previous wording

From consumers, we earn interest income on the simple interest loans that we originate or purchase from our originating bank partners. Interest rates charged to our consumers vary depending on the transaction risk, creditworthiness of the consumer, the repayment term selected by the consumer, the amount of the loan, and the individual arrangement with a merchant. Because our consumers are never charged deferred or compounding interest, late fees, or penalties on the loans, we are not incentivized to profit from our consumers’ hardships. In addition, interest income includes the amortization of any discounts or premiums on loan receivables created upon either the purchase of a loan from one of our originating bank partners or the origination of a loan. For the three and six months ended December 31, 2023, interest bearing loans represented 73% and 74% of total GMV facilitated through our platform, respectively. For the three and six months ended December 31, 2022, interest bearing loans represented 67% and 66% of total GMV facilitated through our platform, respectively.

Current wording

From consumers, we earn interest income on the simple interest loans that we originate or purchase from our originating bank partners. Interest rates charged to our consumers vary depending on the transaction risk, creditworthiness of the consumer, the repayment term selected by the consumer, the amount of the loan, and the individual arrangement with a merchant. Because our consumers are never charged deferred or compounding interest, late fees, or penalties on the loans, we are not incentivized to profit from our consumers’ hardships. In addition, interest income includes the amortization of any discounts or premiums on loan receivables created upon either the purchase of a loan from one of our originating bank partners or the origination of a loan. For both the three and nine months ended March 31, 2024, interest bearing loans represented 72% of total GMV facilitated through our platform. For the three and nine months ended March 31, 2023, interest bearing loans represented 69% and 67% of total GMV facilitated through our platform, respectively.

Previous wording

We are also able to originate loans directly under our lending, servicing, and brokering licenses in Canada and across several states in the U.S. through our consolidated subsidiaries. For thethree and six months ended December 31, 2023, we directly originated approximately $1.3 billion, or 17%, and $2.2 billion, or 17%, respectively, of loans compared to approximately $1.1 billion, or 19%, and $1.9 billion, or 19%, of loans for the three and six months ended December 31, 2022, respectively.

Current wording

We are also able to originate loans directly under our lending, servicing, and brokering licenses in Canada and across several states in the U.S. through our consolidated subsidiaries. For thethree and nine months ended March 31, 2024, we directly originated approxi mately $1.1 billion, or 17%, and $3.3 billion, or 17%, respectively, of loans compared to approximately $0.9 billion, or 19%, and $2.8 billion, or 19%, of loans for the three and nine months ended March 31, 2023, respectively.

Previous wording

Our capital efficient funding model is integral to the success of our platform. As we scale the number of transactions on our network and grow GMV, we maintain a variety of funding relationships in order to support our network. Our diversified funding relationships include warehouse facilities, securitization trusts, forward flow arrangements, and partnerships with banks. Given the short duration and strong performance of our assets, funding can be recycled quickly, resulting in a high-velocity, capital efficient funding model. While we have continued to improve our equity capital efficiency, the percentage of our equity capital as a percentage of our total platform portfolio slightly increased from approximately 5% as of June 30, 2023, to approximately 6% as of December 31, 2023. The increase was due to an increase in on-balance sheet loans, and a lower percentage of our on balance sheet loans funded through securitizations, which generally require a lower percentage of equity capital compared to our warehouse credit facilities. This shift in our funding mix is in response to the current market environment given our ability to allocate loans to warehouse credit facilities with better economic terms at a given time to support the growth of our business while optimizing cost of funds. The mix of on-balance sheet and off-balance sheet funding is a function of how we choose to allocate loan volume, which is determined by the economic arrangements and supply of capital available to us, both of which may also impact our results in any given period.

Current wording

Our capital efficient funding model is integral to the success of our platform. As we scale the number of transactions on our network and grow GMV, we maintain a variety of funding relationships in order to support our network. Our diversified funding relationships include warehouse facilities, securitization trusts, forward flow arrangements, and partnerships with banks. Given the short duration and strong performance of our assets, funding can be recycled quickly, resulting in a high-velocity, capital efficient funding model. While we have continued to improve our equity capital efficiency, the percentage of our equity capital as a percentage of our total platform portfolio slightly increased from approximately 5% as of June 30, 2023, to approximately 6% as of March 31, 2024. The increase of less than half a percent was due to an increase in loans retained on our balance sheet, which may be funded through on-balance sheet securitizations and warehouse credit facilities. This funding mix reflects our ongoing strategy to optimize the balance between income and profitability, loan growth volume and cost of funds. The mix of on-balance sheet and off-balance sheet funding is a function of how we choose to allocate loan volume, which is determined by the economic arrangements and supply of capital available to us, both of which may also impact our results in any given period.

Previous wording

We regularly monitor the direct and indirect impacts of the current macroeconomic conditions on our business, financial condition, and results of operations. Starting in fiscal 2023, the macroeconomic environment began to present a number of challenges to our business. In response to continued inflationary pressure, the U.S. Federal Reserve rapidly raised the federal funds interest rate from March 2022 through July 2023, and there is no certainty as to whether and to what extent it will further raise the federal funds interest rate in future periods or for how long the current federal funds interest rate will remain in effect. Simultaneously, economic uncertainty and the prospect of economic recession has impacted consumer spending. These challenges have affected, and may continue to affect, our business and results of operations in the following ways:

Current wording

We regularly monitor the direct and indirect impacts of the current macroeconomic conditions on our business, financial condition, and results of operations. Starting in fiscal 2023, the macroeconomic environment began to present a number of challenges to our business. In response to continued inflationary pressure, the U.S. Federal Reserve rapidly raised the federal funds interest rate from March 2022 through July 2023, and there is no certainty as to whether and to what extent the federal funds interest rate will remain at current levels, increase or decrease in future periods. Simultaneously, economic uncertainty and the prospect of economic recession has impacted consumer spending. These challenges have affected, and may continue to affect, our business and results of operations in the following ways:

Previous wording

•Deceleration in consumer demand: During fiscal 2023, we experienced a deceleration in consumer demand for discretionary items, which adversely impacted GMV growth. Continued economic uncertainty, inflationary pressures, and a higher interest rate environment may further negatively impact consumer demand in future periods.

Current wording

•Deceleration in consumer demand: Since fiscal 2023, we continue to experience a deceleration in consumer demand for discretionary items, which has adversely impacted GMV growth. Continued economic uncertainty, inflationary pressures, and a higher interest rate environment may further negatively impact consumer demand in future periods.

Previous wording

•Volatile capital markets: In fiscal year 2024 to date, capital markets have shown improvement against recent periods, which has been evidenced by substantial additions across our funding channels due to our strong loan performance. However, despite these improvements, uncertainties remain in the macroeconomic environment, especially with regard to persistent inflation and the potential for increased unemployment rates. To address these uncertainties, we leverage our diverse funding channels and counterparties, which contribute to our resilience across various macroeconomic conditions and economic cycles.

Current wording

•Volatile capital markets: During fiscal 2024, capital markets have shown improvement against recent periods, which has been evidenced by substantial additions across our funding channels due to our strong loan performance. However, despite these improvements, uncertainties remain in the macroeconomic environment, especially with regard to persistent inflation and the potential for increased unemployment rates. To address these uncertainties, we leverage our diverse funding channels and counterparties, which contribute to our resilience across various macroeconomic conditions and economic cycles.

Previous wording

For the three and six months ended December 31, 2023, GMV was $7.5 billion and $13.1 billion, respectively, which represented an increase of approximately 32% and 30%, respectively, as compared to the same periods in 2022. Overall, the increase in GMV was primarily driven by the expansion of our active merchant base and increases in active consumers and average transactions per consumer. The increase in GMV for the three and six months ended December 31, 2023 also reflected increased consumer demand at our largest merchant partners by GMV and increased consumer demand in our travel and ticketing and general merchandise categories.

Current wording

For the three and nine months ended March 31, 2024, GMV was $6.3 billion and $19.4 billion, respectively, which represented an increase of approximately 36% and 32%, respectively, as compared to the same periods in 2023. Overall, the increase in GMV was primarily driven by the expansion of our active merchant base and increases in active consumers and average transactions per consumer. The increase in GMV for the three and nine months ended March 31, 2024 also reflected increased consumer demand at our largest merchant partners by GMV and increased consumer demand in our travel and ticketing and general merchandise categories.

Previous wording

For the three and six months ended December 31, 2023, our top five merchants and platform partners represented approximately 48% and 46%, respectively, of total GMV, as compared to 48% and 43%, respectively, for the three and six months ended December 31, 2022. GMV attributable to Amazon during both the three and six months ended December 31, 2023 represented 21% of total GMV, compared to 23% and 20%, respectively, for the same periods in 2022.

Current wording

For the three and nine months ended March 31, 2024, our top five merchants and platform partners represented approximately 42% and 45%, respectively, of total GMV, as compared to 40% and 42%, respectively, for the three and nine months ended March 31, 2023. GMV attributable to Amazon during the three and nine months ended March 31, 2024 represented 20% of total GMV. GMV attributable to Amazon during the three months ended March 31, 2023 represented less than 30% of total GMV.

Previous wording

As of December 31, 2023, we had approximately 17.6 million active consumers, which represented an increase of 13% compared to approximately 15.6 million active consumers as of December 31, 2022. The increase was primarily due to a high retention rate of existing consumers and the acquisition of new consumers through an expanding active merchant base, Affirm Card (our direct to consumer product) and platform partnerships.

Current wording

As of March 31, 2024, we had approximately 18.1 million active consumers, which represented an increase of 13% compared to approximately 16.0 million active consumers as of March 31, 2023. The increase was primarily due to a high retention rate of existing consumers and the acquisition of new consumers through an expanding active merchant base, Affirm Card (our direct to consumer product) and platform partnerships.

Previous wording

As of December 31, 2023, we had approximately 4.4 transactions per active consumer, an increase of 25% compared to December 31, 2022. This was primarily due to platform growth and a higher frequency of repeat users driven by consumer engagement.

Current wording

As of March 31, 2024, we had approximately 4.6 transactions per active consumer, an increase of 27% compared to March 31, 2023. This was primarily due to platform growth and a higher frequency of repeat users driven by consumer engagement.

Previous wording

Comparison of the Three and Six Months Ended December 31, 2023 and 2022

Current wording

Comparison of the Three and Nine Months Ended March 31, 2024 and 2023

Previous wording

Merchant network revenue increased by $54.3 million, or 41%, and $87.1 million, or 35%, for the three and six months ended December 31, 2023, respectively, compared to the same period in 2022. The increase is primarily attributed to an increase of $1.8 billion and $3.1 billion in GMV for the three and six months ended December 31, 2023, compared to the same period in 2022. The increase in GMV is a result of the expansion of our active merchant base and consumers, reaching approximately 279,000 and 17.6 million, respectively, as of December 31, 2023, up from approximately 243,000 and 15.6 million, respectively, as of December 31, 2022. Additionally, the average transactions per consumer increased from 3.5 as of December 31, 2022 to 4.4 as of December 31, 2023. The increase in consumers and average transactions per consumer is partially offset by a decrease in AOVs. For the three and six months ended December 31, 2023, AOV was $287 and $292, respectively, down from $307 and $317 for the same period in fiscal 2022. The decrease in AOV is due to the diversification of our merchant base and our initiative to drive repeat usage of our platform beyond one-time high AOV purchases.

Current wording

Merchant network revenue increased by $40.3 million, or 34%, and $127.4 million, or 35%, for the three and nine months ended March 31, 2024, respectively, compared to the same period in 2023. The increase is primarily attributed to an increase of $1.7 billion and $4.7 billion in GMV for the three and nine months ended March 31, 2024, compared to the same period in 2023. The increase in GMV is a result of continued growth of our active merchant base and consumers, reaching approximately 292 thousand and 18.1 million, respectively, as of March 31, 2024, up from approximately 246 thousand and 16.0 million, respectively, as of March 31, 2023. Additionally, the average transactions per consumer increased from 3.6 as of March 31, 2023 to 4.6 as of March 31, 2024. The increase in consumers and average transactions per consumer is partially offset by a decrease in AOVs. For the three and nine months ended March 31, 2024, AOV was $293 and $292, respectively, down from $323 and $319, respectively, for the same period in fiscal 2023. The decrease in AOV is due to the diversification of our merchant base and our initiative to drive repeat usage of our platform beyond one-time high AOV purchases.

Previous wording

Card network revenue increased by $10.2 million, or 35%, and $16.9 million, or 30%, for the three and six months ended December 31, 2023, respectively, compared to the same period in 2022. Card network revenue growth is correlated with the growth of GMV processed by our issuer processors. As such, the increase is primarily driven by $2.2 billion and $3.9 billion of GMV processed through our issuer processors, an increase of 52% and 44% for the three and six months ended December 31, 2023, respectively, as compared to the same period in 2022. This was driven by increased card activity through Affirm Card and our single use virtual debit cards, as well as growth in existing and new merchants utilizing our agreement with card-issuing partners as a means of integrating Affirm services, which grew from approximately 1,200 merchants as of December 31, 2022 to 1,500 merchants as of December 31, 2023. Card network revenue is also impacted by the mix of merchants as different merchants can have different interchange rates depending on their industry or size, among other factors.

Current wording

$2.0 billion and $5.9 billion of GMV processed through our issuer processors, an increase of 41% and 43% for the three and nine months ended March 31, 2024, respectively, as compared to the same period in 2023. This was driven by increased card activity through Affirm Card and our single use virtual debit cards, as well as growth in existing and new merchants utilizing our agreement with card-issuing partners as a means of integrating Affirm services, which grew from approximately 1,200 merchants as of March 31, 2023 to 1,700 merchants as of March 31, 2024. Card network revenue is also impacted by the mix of merchants as different merchants can have different interchange rates depending on their industry or size, among other factors.

Previous wording

Interest income increased by $133.0 million, or 86%, and $258.9 million, or 89%, for the three and six months ended December 31, 2023, respectively, compared to the same period in 2022. Generally, interest income is correlated with the changes in the average balance of loans held for investment, which increased by 54% to $4.9 billion and 61% to $4.7 billion for the three and six months ended December 31, 2023, respectively, compared to the same period in 2022. The increase in loans held for investment on our interim consolidated balance sheet is in response to the current market environment and our ability to allocate loans to warehouse credit facilities and on balance sheet asset-backed securities transactions with better economic terms to optimize cost of funds. As a result of the increase in loans held for investment on our interim condensed consolidated balance sheet, interest income from interest-bearing loans increased from $125.9 million and $232.0 million for the three and six months ended December 31, 2022, respectively, to $248.1 million and $474.4 million for three and six months ended December 31, 2023, respectively. This increase was partially due to an increase in volume of interest bearing loans which increased to 73% of total GMV for both the three and six months ended December 31, 2023, compared to 67% and 66%, respectively, of total GMV in the same periods in 2022, in addition to recent pricing initiatives, including the increase of the maximum APR and merchant-subsidized low APR loans replacing previously non-interest bearing loans.

Current wording

Interest income increased by $137.4 million, or 77%, and $396.3 million, or 84%, for the three and nine months ended March 31, 2024, respectively, compared to the same period in 2023. Generally, interest income is correlated with the changes in the average balance of loans held for investment, which increased by 44% to $5.4 billion and 56% to $4.9 billion for the three and nine months ended March 31, 2024, respectively, compared to the same period in 2023. The increase in loans held for investment on our interim consolidated balance sheet is in response to the current market environment and our ability to allocate loans to warehouse credit facilities and on balance sheet asset-backed securities transactions with better economic terms to optimize cost of funds. As a result of the increase in loans held for investment on our interim condensed consolidated balance sheet, interest income from interest-bearing loans increased from $147.8 million and $379.8 million for the three and nine months ended March 31, 2023, respectively, to $273.6 million and $748.0 million for three and nine months ended March 31, 2024, respectively. This increase was partially due to an increase in volume of interest bearing loans which increased to 72% of total GMV for both the three and nine months ended March 31, 2024, compared to 69% and 67%, respectively, of total GMV in the same period in 2023, in addition to recent pricing initiatives, including the increase of the maximum APR and merchant-subsidized low APR loans replacing previously non-interest bearing loans.

Previous wording

Gain on sales of loans decreased by $6.9 million, or 12%, and $36.2 million, or 29%, for the three and six months ended December 31, 2023 compared to the same period in 2022. The decrease was driven by higher benchmark interest rates, which impacted pricing terms on loan sales during the period. The decrease was partially offset by an increase in loan sale volume to third-party loan buyers. We sold loans with an unpaid principal balance of $3.1 billion and $5.2 billion, respectively, for the three and six months ended December 31, 2023 compared to $2.1 billion and $4.1 billion for the same period in 2022.

Current wording

Gain on sales of loans decreased by $28.8 million, or 18%, for the nine months ended March 31, 2024 compared to the same period in 2023. The decrease was driven by higher benchmark interest rates, which impacted pricing terms on loan sales during the period. The decrease was partially offset by an increase in loan sale volume to third-party loan buyers, and the initial recognition, at fair value of risk sharing assets incurred upon loan sale. We sold loans with an unpaid principal balance of $7.3 billion for the nine months ended March 31, 2024 compared to $5.8 billion for the same period in 2023.

Previous wording

Servicing income increased by $0.9 million, or 4%, for the three months ended December 31, 2023, compared to the same period in 2022. The increase was primarily due to an increase in net servicing fee revenue which is calculated as a percentage of the unpaid principal balance of loans owned by third-party loan owners. The average unpaid principal balance of loans owned by third-party loan owners increased from $4.7 billion during the three months ended December 31, 2022, to $4.9 billion during the three months ended December 31, 2023. The increase was partially offset by a $0.6 million decrease in fair value adjustments related to servicing assets and liabilities during the three months ended December 31, 2023, compared to the same period in 2022.

Current wording

Servicing income increased by $3.9 million, or 18%, and $3.6 million, or 6%, for the three and nine months ended March 31, 2024, respectively, compared to the same period in 2023. The increase was primarily due to an increase in net servicing fee revenue which is calculated as a percentage of the unpaid principal balance of loans owned by third-party loan owners. The average unpaid principal balance of loans owned by third-party loan owners increased from $4.5 billion and $4.6 billion during the three and nine months ended March 31, 2023, respectively, to $5.1 billion and $4.7 billion, respectively, during the same period in 2024, an increase of 13% and 3%, respectively. The increase was partially offset by fair value adjustments related to servicing assets and liabilities, resulting in a $0.7 million and $1.9 million lower gain during the three and nine months ended March 31, 2024, compared to the same period in 2023.

Previous wording

Loss on loan purchase commitment increased by $15.2 million, or 40%, and $14.5 million, or 20%, for the three and six months ended December 31, 2023, respectively, compared to the same period in 2022. This increase was primarily due to an increase in total loans purchased. During the three and six months ended December 31, 2023, we purchased $5.9 billion and $10.5 billion, respectively, of loans from our originating bank partners, compared to $4.4 billion and $7.9 billion, respectively, in the same period in 2022, representing an increase of 34% and 32%, respectively.

Current wording

Loss on loan purchase commitment increased by $12.9 million, or 41%, and $27.4 million, or 26%, for the three and nine months ended March 31, 2024, respectively, compared to the same period in 2023. This increase was primarily due to an increase in total loans purchased. During the three and nine months ended March 31, 2024, we purchased $5.1 billion and $15.6 billion, respectively, of loans from our originating bank partners, compared to $3.7 billion and $11.7 billion, respectively, in the same period in 2023, representing an increase of 37% and 34%, respectively.

Previous wording

Provision for credit losses increased by $14.2 million, or 14%, and $49.6 million, or 29%, for the three and six months ended December 31, 2023, respectively, compared to the same period in 2022, driven by growth in the volume of loans held for investment and partially offset by improvements in credit quality of loans outstanding. Loans held for investment as of December 31, 2023 was $5.2 billion, an increase of $1.6 billion, or 43%, as compared to the same period in 2022. The allowance for credit losses as a percentage of loans held for investment was 5.0% as of both December 31, 2023 and 2022 and 4.6% as of June 30, 2023. The increase in the allowance rate from June 30, 2023 is primarily driven by changes in the loan mix, including holding a higher percentage of seasoned and longer term loans on our balance sheet as of December 31, 2023.

Current wording

Provision for credit losses increased by $56.0 million, or 85%, and $105.6 million, or 45%, for the three and nine months ended March 31, 2024, respectively, compared to the same period in 2023, driven by growth in the volume of loans held for investment. Loans held for investment as of March 31, 2024 was $5.5 billion, an increase of $1.7 billion, or 45%, as compared to the same period in 2023. The allowance for credit losses as a percentage of loans held for investment was 5.3% as of March 31, 2024, 5.0% as of December 31, 2023, and 4.7% as of March 31, 2023. The increase in the allowance rate from March 31, 2023 is primarily driven by adjustments in our credit criteria in light of increasing interest income generated by our loans and changes in the loan mix, including holding a higher percentage of seasoned and longer term loans on our balance sheet as of March 31, 2024.

Previous wording

Funding costs increased by $40.9 million, or 93%, and $89.7 million, or 130%, for the three and six months ended December 31, 2023, respectively, compared to the same period in 2022. The increase was primarily due to higher benchmark interest rates and an increase of funding debt and notes issued by securitization trusts during the three and six months ended December 31, 2023. The average total of funding debt from warehouses and securitizations for the three and six months ended December 31, 2023 was $4.4 billion and $4.2 billion, respectively, compared to $2.9 billion and $2.7 billion during the same period in 2022, an increase of $1.5 billion, or 53%, and $1.6 billion, or 58%, respectively. The increase was also attributable to a larger volume of on-balance sheet loans being retained during the period. The average on-balance sheet loan balance was $4.9 billion and $4.7 billion for the three and six months ended December 31, 2023, respectively, an increase of 54% and 60% compared to $3.2 billion and $3.0 billion during the same periods in 2022, respectively.

Current wording

Funding costs increased by $39.3 million, or 77%, and $129.0 million, or 107%, for the three and nine months ended March 31, 2024, respectively, compared to the same period in 2023. The increase was primarily due to higher benchmark interest rates and an increase of funding debt and notes issued by securitization trusts during the three and nine months ended March 31, 2024. The average total of funding debt from warehouses and securitizations for the three and nine months ended March 31, 2024 was $4.8 billion and $4.4 billion, respectively, compared to $3.2 billion and $2.8 billion during the same period in 2023, an increase of $1.5 billion, or 46%, and $1.6 billion, or 55%, respectively. The increase was also attributable to a larger volume of on-balance sheet loans being retained during the period. The average on-balance sheet loan balance was $5.4 billion and $4.9 billion for the three and nine months ended March 31, 2024, respectively, an increase of 44% and 56% compared to $3.7 billion and $3.2 billion during the same periods in 2023, respectively.

Previous wording

Processing and servicing expense increased by $23.7 million, or 36%, and $45.0 million, or 37%, for the three and six months ended December 31, 2023, respectively, compared to the same period in 2022. This increase was driven primarily by an increase in payment processing fees of $13.1 million, or 39%, and $24.7 million, or 39%, for the three and six months ended December 31, 2023, respectively, related to increased payment volume. Additionally, during the three and six months ended December 31, 2023, our platform fees increased by $12.6 million, or 119%, and $20.4 million, or 114%, respectively, due to an increase in volume with a large enterprise partner.

Current wording

Processing and servicing expense increased by $23.0 million, or 35%, and $68.0 million, or 37%, for the three and nine months ended March 31, 2024, respectively, compared to the same period in 2023. This increase was driven primarily by an increase in payment processing fees of $16.7 million, or 47%, and $41.4 million, or 42%, for the three and nine months ended March 31, 2024, respectively, related to increased payment volume. Additionally, during the three and nine months ended March 31, 2024, our platform fees increased by $9.7 million, or 107%, and $30.1 million, or 111%, respectively, due to an increase in volume with a large enterprise partner. The increase was partially offset by a $2.9 million, or 50%, and $4.0 million, or 23%, decrease in personnel-related costs, for the three and nine months ended March 31, 2024, respectively, compared to the same period in 2023 as a result of our reduction in force and cost management plans.

Previous wording

Technology and data analytics expense decreased by $36.9 million, or 24%, and $48.9 million, or 16%, for the three and six months ended December 31, 2023, respectively, compared to the same period in 2022. The decrease is primarily driven by a decrease of $43.9 million, or 47%, and $62.0 million, or 35%, in stock-based compensation and payroll and personnel-related costs for the three and six months ended December 31, 2023, respectively, compared to the same period in 2022, due to higher capitalized expenses related to internally-developed software and a reduction in headcount. Additionally, data infrastructure and hosting costs decreased by $11.5 million, or 35%, and $19.7 million, or 31%, for the three and six months ended December 31, 2023, respectively, compared to the same period in 2022, due to cost improvements achieved as a result improved contractual terms with several key vendors. The decrease is partially offset by amortization of internally-developed software and intangible assets which increased by $17.3 million, or 86%, and $29.0 million, or 74%, for the three and six months ended December 31, 2023, respectively, compared to the same period in 2022, as a result of an increase in the number of capitalized projects. Capitalized projects grew by 95% from approximately 390 projects as of December 31, 2022 to 760 projects as of December 31, 2023.

Current wording

Technology and data analytics expense decreased by $37.0 million, or 23%, and $85.9 million, or 19%, for the three and nine months ended March 31, 2024, respectively, compared to the same period in 2023. The decrease is primarily driven by a decrease of $40.4 million, or 44%, and $102.4 million, or 38%, in stock-based compensation and payroll and personnel-related costs for the three and nine months ended March 31, 2024, respectively, compared to the same period in 2023, due to higher capitalized compensation costs related to internally-developed software and a reduction in headcount. Additionally, data infrastructure and hosting costs decreased by $6.0 million, or 23%, and $25.7 million, or 28%, for the three and nine months ended March 31, 2024, respectively, compared to the same period in 2023, due to cost optimization initiatives as a result of improved contractual terms with several key vendors. The decrease is partially offset by amortization of internally-developed software which increased by $7.0 million, or 19%, and $36.0 million, or 48%, for the three and nine months ended March 31, 2024, respectively, compared to the same period in 2023, as a result of an increase in the number of capitalized projects. Capitalized projects grew by 86% from approximately 470 projects as of March 31, 2023 to 880 projects as of March 31, 2024.

Previous wording

Sales and marketing expense decreased by $27.1 million, or 14%, and $44.1 million, or 13%, during the three and six months ended December 31, 2023, respectively, compared to the same period in 2022. The decrease was primarily driven by Amazon warrant expense which decreased from $138.5 million and $257.7 million for the three and six months ended December 31, 2022, respectively, to $125.1 million and $231.5 million for the three and six months ended December 31, 2023, respectively, due to a lower number of new users to the Amazon program in the current period, which is the basis for a portion of the warrant expense. Additionally, personnel-related costs decreased by $8.0 million, or 40%, and $17.9 million, or 43%, for the three and six months ended December 31, 2023, respectively, compared to the same period in 2022 as a result of our reduction in force and cost management plans. Brand and consumer marketing decreased by $4.8 million, or 53%, and $4.6 million, or 37%, for the three and six months ended December 31, 2023, respectively, compared to the same period in 2022, primarily due to a reduced number of paid brand marketing campaigns and brand partnerships.

Current wording

Sales and marketing expense decreased by $8.0 million, or 6%, and $52.1 million, or 11% during the three and nine months ended March 31, 2024 compared to the same period in 2023. The decrease was primarily driven by a decrease of $4.4 million, or 28%, and $22.2 million, or 39%, in payroll and personnel-related costs during the three and nine months ended March 31, 2024, respectively, compared to the same period in 2023, as a result of our reduction in force and cost management plans. Amazon warrant expense decreased by $1.2 million, or 1%, and $27.4 million, or 8%, during the three and nine months ended March 31, 2024, respectively, compared to the same period in 2023. The decrease is primarily due to the renewal of the commercial partnership agreement in February 2024, which extended the amortization of the commercial agreement asset, as well as a decrease in the number of new users to the Amazon program in the current period, which is the basis for a portion of the warrant expense. Additionally, amortization of intangible assets decreased by $5.2 million, or 90%, and $1.0 million, or 10%, respectively, for the three and nine months ended March 31, 2024, compared to the same period in 2023, as a result of one-time acceleration of amortization of Returnly’s intangibles assets related to the wind down of our returns management platform during the three months ended March 31, 2023.

Previous wording

General and administrative expense decreased by $25.9 million, or 16%, and $46.5 million, or 15%, during the three and six months ended December 31, 2023, respectively, compared to the same period in 2022. The decrease was primarily due to a $11.8 million, or 10%, and $15.1 million, or 6%, decrease in payroll and personnel-related costs during the three and six months ended December 31, 2023, respectively, compared to the same period in 2022, as a result of our reduction in force and cost management plans. Additionally insurance expense decreased by $2.4 million, or 45%, and $4.4 million, or 42%, driven by a rate reduction during policy renewals for the three and six months ended December 31, 2023, respectively, compared to the same period in 2022.

Current wording

General and administrative expense decreased by $10.5 million, or 8%, and $57.0 million, or 12%, during the three and nine months ended March 31, 2024, respectively, compared to the same period in 2023. The decrease was primarily due to a $5.6 million, or 5%, and $20.7 million, or 6%, decrease in payroll and personnel-related costs during the three and nine months ended March 31, 2024, respectively, compared to the same period in 2023, as a result of our reduction in force and cost management plans. Additionally insurance expense decreased by $2.0 million, or 40%, and $6.4 million, or 41%, driven by a rate reduction during policy contract renewals for the three and nine months ended March 31, 2024, respectively, compared to the same period in 2023. Software subscription and license costs decreased by $1.9 million, or 20%, and $4.0 million, or 14%, during the three and nine months ended March 31, 2024, respectively, and development service costs decreased by $3.9 million, or 50%, during the nine months ended March 31, 2024 compared to the same period in 2023, primarily as a result of efficiency improvements, contract renegotiations, and discontinuance of some software and subscriptions.

Previous wording

Our principal sources of liquidity are cash and cash equivalents, available for sale securities, available capacity from warehouse and revolving credit facilities, revolving securitizations, forward flow loan sale arrangements, and certain cash flows from our operations. As of December 31, 2023, we had $2.0 billion in cash and cash equivalents and available for sale securities, $3.8 billion in available funding debt capacity, excluding our purchase commitments from third party loan buyers, and $205.0 million in borrowing capacity available under our revolving credit facility. We believe our principal sources of liquidity are sufficient to meet both our existing operating, working capital, and capital expenditure requirements and our currently planned growth for at least the next 12 months.

Current wording

Our principal sources of liquidity are cash and cash equivalents, available for sale securities, available capacity from warehouse and revolving credit facilities, revolving securitizations, forward flow loan sale arrangements, and certain cash flows from our operations. As of March 31, 2024, we had $2.1 billion in cash and cash equivalents and available for sale securities, $4.0 billion in available funding debt capacity, excluding our purchase commitments from third party loan buyers, and $205.0 million in borrowing capacity available under our revolving credit facility. We believe our principal sources of liquidity are sufficient to meet both our existing operating, working capital, and capital expenditure requirements and our currently planned growth for at least the next 12 months.

Previous wording

Our funding debt as of December 31, 2023 primarily includes warehouse credit facilities and sale and repurchase agreements. A detailed description of each of our borrowing arrangements is included in Note 9. Debt in the notes to the interim condensed consolidated financial statements. The following table summarizes our funding debt facilities as of December 31, 2023.

Current wording

Funding debt as of March 31, 2024 primarily includes our warehouse credit facilities. A detailed description of each of our borrowing arrangements is included in Note 9. Debt in the notes to the interim condensed consolidated financial statements. The following table summarizes our funding debt facilities as of March 31, 2024.

Previous wording

Our warehouse credit facilities allow us to borrow up to an aggregate of $5.1 billion, mature between 2024 and 2031 and subject to covenant compliance, generally permit borrowings up to 12 months prior to the final maturity date. As of December 31, 2023, we have drawn an aggregate of $1.5 billion on our warehouse credit facilities. As of December 31, 2023, we were in compliance with all applicable covenants in the agreements.

Current wording

Our warehouse credit facilities allow us to borrow up to an aggregate of $5.1 billion, mature between 2025 and 2031 and subject to covenant compliance, generally permit borrowings up to 12 months prior to the final maturity date. As of March 31, 2024, we have drawn an aggregate of $1.2 billion on our warehouse credit facilities. As of March 31, 2024, we were in compliance with all applicable covenants in the agreements.

Previous wording

We use various credit facilities to finance the origination of loan receivables in Canada. Similar to our U.S. warehouse credit facilities, borrowings under these agreements are referred to as funding debt, and proceeds from the borrowings may only be used for the purposes of facilitating loan funding and origination. These facilities are secured by Canadian loan receivables pledged to the respective facility as collateral, mature between 2025 and 2029. As of December 31, 2023, the aggregate commitment amount of these facilities was $668.7 million on a revolving basis, of which $409.2 million was drawn.

Current wording

We use various credit facilities to finance the origination of loan receivables in Canada. Similar to our U.S. 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 2026 and 2030. As of March 31, 2024, the aggregate commitment amount of these facilities was $590.0 million on a revolving basis, of which $385.2 million was drawn.

Previous wording

We have various sale and repurchase agreements pursuant to our retained interests in our off-balance sheet securitizations where we have sold these securities to a counterparty with an obligation to repurchase at a future date and price. These agreements have an initial term of three months and subject to mutual agreement by Affirm and the counterparty, we may enter into one or more repurchase date extensions, each for an additional three month term at market interest rates on such extension date. We had $1.9 million and $11.0 million in debt outstanding under our sale and repurchase agreements disclosed within funding debt on the interim consolidated balance sheets as of December 31, 2023 and June 30, 2023, respectively.

Current wording

We entered into various sale and repurchase agreements pursuant to our retained interests in our off-balance sheet securitizations where we have sold these securities to a counterparty with an obligation to repurchase at a future date and price. These agreements have an initial term of three months and subject to mutual agreement by Affirm and the counterparty, we may enter into one or more repurchase date extensions, each for an additional three month term at market interest rates on such extension date. As of March 31, 2024, the obligation under the sales and repurchase agreements was fully paid down and no securities were pledged as collateral. We had $11.0 million in debt outstanding under our sale and repurchase agreements disclosed within funding debt on the interim consolidated balance sheets as of June 30, 2023.

Previous wording

In connection with asset-backed securitizations, we sponsor and establish trusts (deemed to be VIEs) to ultimately purchase loans facilitated by our platform. Securities issued from our asset-backed securitizations are senior or subordinated, based on the waterfall criteria of loan payments to each security class. The subordinated residual interests issued from these transactions are first to absorb credit losses in accordance with the waterfall criteria. We consolidate securitization VIEs when we are deemed to be the primary beneficiary and therefore have the power to direct the activities that most significantly affect the VIEs’ economic performance and a variable interest that could potentially be significant to the VIE. 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 interim condensed consolidated balance sheets. Refer to Note

Current wording

In connection with asset-backed securitizations, we sponsor and establish trusts (deemed to be VIEs) to ultimately purchase loans facilitated by our platform. Securities issued from our asset-backed securitizations are senior or subordinated, based on the waterfall criteria of loan payments to each security class. The subordinated residual interests issued from these transactions are first to absorb credit losses in accordance with the waterfall criteria. We consolidate securitization VIEs when we are deemed to be the primary beneficiary and therefore have the power to direct the activities that most significantly affect the VIEs’ economic performance and a variable interest that could potentially be significant to the VIE. 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 interim condensed consolidated balance sheets. Refer to Note 10. Securitization and Variable Interest Entities in the notes to the interim condensed consolidated financial statements for further details.

Previous wording

For the six months ended December 31, 2022, net cash used in investing activities of $574.9 million was primarily attributable to purchases and origination of loans held for investment of $6.5 billion, partially offset by loan repayments and sale of loans of $5.3 billion and net proceeds from maturities of securities available for sale of $692.5 million. During the period, we originated loans of $1.9 billion and purchased loans of $4.7 billion.

Current wording

Net cash used in investing activities was $787.5 million for the nine months ended March 31, 2024, which consisted of outflows related to $15.6 billion of purchases and origination of loans held for investment, including originated and purchased loans of $3.2 billion and $12.4 billion, respectively, during the period, $461.2 million of purchases of securities available for sale, and $121.0 million of our investment in purchases of property, equipment and software. Inflows related to $10.3 billion of principal repayments of loans, $4.2 billion of proceeds from sale of loans held for investment, and $891.9 million of proceeds from maturities of securities available for sale.

Previous wording

For the six months ended December 31, 2022, net cash provided by financing activities of $869.4 million, was primarily attributable to net cash inflows from funding debt of $1.2 billion, partially offset by net cash outflows from the issuance and repayment of notes and certificates issued by securitization trust of $309.4 million. Our payments of debt issuance costs were in the normal course of business and reflective of our recurring warehouse credit facility activity, which involves securing new warehouse credit facilities and extending existing warehouse credit facilities. Finally, we paid taxes related to RSU vesting of $45.3 million.

Current wording

Net cash provided by financing activities was $740.4 million for the nine months ended March 31, 2023, primarily consisted of net cash inflows of $165.4 million from the new issuance and repayment of notes and residual trust certificates issued by securitization trusts and by net cash inflows of $836.3 million related to borrowing and repayment of funding debt. This was partially offset by net cash outflows of $206.6 million related to the extinguishment of a portion of our 2026 Notes.

Previous wording

There were no material changes outside of the ordinary course of business in our commitments and contractual obligations for the three and six months ended December 31, 2023 from the commitments and contractual obligations disclosed in the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Contractual Obligations,” set forth in 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.

Current wording

There were no material changes outside of the ordinary course of business in our commitments and contractual obligations for the three and nine months ended March 31, 2024 from the commitments and contractual obligations disclosed in the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Contractual Obligations,” set forth in 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.

Previous wording

As of December 31, 2023, the aggregate outstanding balance of loans held by third-party investors and off balance sheet securitizations was $5.2 billion.

Current wording

As of March 31, 2024, the aggregate outstanding balance of loans held by third-party investors and off balance sheet securitizations was $4.7 billion.

Previous wording

Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with U.S. GAAP and requires us to make certain estimates and judgments that affect the amounts reported in our consolidated financial statements. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Because certain of these accounting policies require significant judgment, our actual results may differ materially from our estimates. To the extent that there are differences between our estimates and actual results, our future consolidated financial statement presentation, financial condition, results of operations, and cash flows may be affected. We evaluate our critical accounting policies and estimates on an ongoing basis and update them as necessary based on changes in market conditions or factors specific to us. There have been no material changes in our significant accounting policies or critical accounting estimates during the three and six months ended December 31, 2023.

Current wording

Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with U.S. GAAP and requires us to make certain estimates and judgments that affect the amounts reported in our consolidated financial statements. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Because certain of these accounting policies require significant judgment, our actual results may differ materially from our estimates. To the extent that there are differences between our estimates and actual results, our future consolidated financial statement presentation, financial condition, results of operations, and cash flows may be affected. We evaluate our critical accounting policies and estimates on an ongoing basis and update them as necessary based on changes in market conditions or factors specific to us. There have been no material changes in our significant accounting policies or critical accounting estimates during the three and nine months ended March 31, 2024.