Affirm Holdings Inc

Previous wording

From merchants, we typically earn a fee when we help them convert a sale and facilitate a transaction. Merchant fees depend on the individual arrangement between us and each merchant and vary based on the terms of the product offering; we generally earn larger merchant fees on 0% APR financing products. For the three months ended September 30, 2024 and 2023, Pay-in-X represented 14% and 15%, respectively, of total GMV facilitated through our platform while 0% APR installment loans represented 11% for both periods.

Current wording

From merchants, we typically earn a fee when we help them convert a sale and facilitate a transaction. Merchant fees depend on the individual arrangement between us and each merchant and vary based on the terms of the product offering; we generally earn larger merchant fees on 0% APR financing products. For the three and six months ended December 31, 2024, Pay-in-X represented 15% and 14%, respectively, of total GMV facilitated through our platform while 0% APR installment loans represented 13% and 12%, respectively. For both the three and six months ended December 31, 2023, Pay-in-X represented 16%, respectively, of total GMV facilitated through our platform while 0% APR installment loans represented 11%.

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 our direct origination of a loan. For the three months ended September 30, 2024 and 2023, interest bearing loans represented 75% and 74%, respectively, of total GMV facilitated through our platform.

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 our direct origination of a loan. For the three and six months ended December 31, 2024, interest bearing loans represented 72% and 74%, respectively, of total GMV facilitated through our platform. For the three and six months ended December 31, 2023, interest bearing loans represented 73% and 73%, respectively, of total GMV facilitated through our platform

Previous wording

When a consumer applies for a loan through our platform, the loan is underwritten using our proprietary risk model. Once approved for the loan, the consumer then selects their preferred repayment option. A portion of these loans are funded and issued by our originating bank partners, which include Cross River Bank, an FDIC-insured New Jersey state-chartered bank, Celtic Bank, an FDIC-insured Utah state-chartered industrial bank, and Lead Bank, an FDIC-insured Missouri state-chartered bank. These partnerships allow us to benefit from our partners’ ability to originate loans under their banking licenses while complying with various federal, state, and other laws. Under this arrangement, we must comply with our originating bank partners' credit policies and underwriting procedures, and our originating bank partners maintain ultimate authority to decide whether to originate a loan or not. When an originating bank partner originates a loan, it funds the loan through its own funding sources and may subsequently offer and sell the loan to us. Pursuant to our agreements with these partners, we are obligated to purchase the loans facilitated through our platform that such partner offers us and our obligation is secured by cash deposits. To date, we have purchased all of the loans facilitated through our platform and originated by our originating bank partners. When we purchase a loan from an originating bank partner, the purchase price is equal to the outstanding principal balance of the loan, plus a fee and any accrued interest. The originating bank partner also retains an interest in the loans purchased by us through a loan performance fee that is payable by us on the aggregate principal amount of a loan that is paid by a consumer. Refer to Note 12. Fair Value of Financial Assets and Liabilities in the notes to the interim condensed consolidated financial statements for more information on the performance fee liability.

Current wording

Lead Bank, an FDIC-insured Missouri state-chartered bank. These partnerships allow us to benefit from our partners’ ability to originate loans under their banking licenses while complying with various federal, state, and other laws. Under this arrangement, we must comply with our originating bank partners' credit policies and underwriting procedures, and our originating bank partners maintain ultimate authority to decide whether to originate a loan or not. When an originating bank partner originates a loan, it funds the loan through its own funding sources and may subsequently offer and sell the loan to us. Pursuant to our agreements with these partners, we are obligated to purchase the loans facilitated through our platform that such partner offers us and our obligation is secured by cash deposits. To date, we have purchased all of the loans facilitated through our platform and originated by our originating bank partners. When we purchase a loan from an originating bank partner, the purchase price is equal to the outstanding principal balance of the loan, plus a fee and any accrued interest. The originating bank partner also retains an interest in the loans purchased by us through a loan performance fee that is payable by us on the aggregate principal amount of a loan that is paid by a consumer. Refer to Note 12. Fair Value of Financial Assets and Liabilities in the notes to the interim condensed consolidated financial statements for more information on the performance fee liability.

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. We directly originated approxi mately $1.3 billion, or 17%, and $0.9 billion, or 17%, of loans for thethree months ended September 30, 2024 and 2023, respectively.

Current wording

We are also able to originate loans directly under our lending, servicing, and brokering licenses in Canada, U.K, and across several states in the U.S. through ourconsolidated subsidiaries. For the three and six months ended December 31, 2024, we directly originated approximately $1.7 billion, or 17%, and $3.0 billion, or 17%, respectively, of loans compared to approximately $1.3 billion, or 17%, and $2.2 billion, or 17%, for the same period in 2023.

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. Despite the Federal Reserve’s decision to decrease the federal funds interest rate in September 2024, uncertainty remains 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:

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. Despite the Federal Reserve’s decision to begin to decrease the federal funds interest rate in September 2024, uncertainty remains 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

•Increased borrowing costs: Our borrowing costs have remained elevated due to the interest rate environment, resulting in sustained higher transaction costs. Despite the Federal Reserve decreasing the federal funds interest rate in September 2024, the interest rate environment remains elevated and, as a result, we may continue to experience higher transaction costs.

Current wording

•Increased borrowing costs: The Federal Reserve began decreasing the federal funds interest rate in late 2024, leading to a decline in our average funding costs. Despite this, the overall interest rate environment remains elevated compared to historical levels and, as a result, we may continue to experience higher transaction costs.

Previous wording

These loan modification programs also impact our delinquency rates, and such impact can vary over time. As disclosed in Note 4. Loans Held for Investment and Allowance for Credit Losses in the notes to the interim condensed consolidated financial statements, in fiscal 2024, we expanded the eligibility of our loan modification programs, which resulted in a modest benefit to delinquency rates for loans held for investment during that period. While the volume of loan modifications decreased during the fiscal quarter ended September 30, 2024 relative to the prior fiscal quarter, they remain elevated when compared to the fiscal quarter ended September 30, 2023. Loans modified within the last three and twelve months represent 0.18% and 0.42% , respectively, of the outstanding principal balance of loans held on our balance sheet as of September 30, 2024. Our reported delinquency and charge off rates include loans which have become past due or have charged off subsequent to modification. An unknown percentage of loans which have been modified and are current as of September 30, 2024 may become delinquent or charge off in the future. We continue to evaluate the effectiveness of these programs and may modify, expand, or contract their usage, which may affect the timing of reported delinquencies and charge offs in future periods.

Current wording

These loan modification programs also impact our delinquency rates, and such impact can vary over time. As disclosed in Note 4. Loans Held for Investment and Allowance for Credit Losses in the notes to the interim condensed consolidated financial statements, in fiscal 2024, we expanded the eligibility of our loan modification programs, which resulted in a modest benefit to delinquency rates for loans held for investment during that period. The volume of loan modifications during the fiscal quarter ended December 31, 2024 decreased compared to the same periods in 2023. Loans modified during the three and twelve months ended December 31, 2024, represent 0.15% and 0.29%, respectively, of the outstanding principal balance of loans held on our balance sheet. Our reported delinquency and charge off rates include loans which have become past due or have charged off subsequent to modification. An unknown percentage of loans which have been modified and are current as of December 31, 2024 may become delinquent or charge off in the future. We continue to evaluate the effectiveness of these programs and may modify, expand, or contract their usage, which may affect the timing of reported delinquencies and charge offs in future periods.

Previous wording

For the three months ended September 30, 2024, GMV was $7.6 billion which represented an increase of approximately 35% as compared to the same period in 2023. Overall, the increase in GMV was driven by an increase in volume at our top five merchants and platform partners as well as overall increases in our active merchant base, active consumers and average transactions per consumer. The increase in GMV for the three months ended September 30, 2024, was diversified across categories and products. During the three months ended September 30, 2024, growth was primarily attributable to an increase in the general and merchandise categories. Additionally, consumer demand across our travel and ticketing, electronics, and equipment and auto categories grew more than 20% year over year.

Current wording

For the three and six months ended December 31, 2024, GMV was $10.1 billion and $17.7 billion, respectively, which represented an increase of approximately 35%, as compared to the same periods in 2023. Overall, the increase in GMV was driven by an increase in volume at our top five merchants and platform partners, as well as overall increases in our active merchant base, active consumers and average transactions per consumer. During the three and six months ended December 31, 2024, growth was diversified across categories and products attributable to an increase in the general merchandise and electronics categories, which showed a growth of 40% and 43%, respectively. Additionally, consumer demand across our travel and ticketing, equipment and auto, fashion and beauty, and other categories grew more than 20% year over year.

Previous wording

For the three months ended September 30, 2024, our top five merchants and platform partners represented approximately 47% of total GMV, as compared to 42% for the three months ended September 30, 2023. GMV attributable to Amazon during the three months ended September 30, 2024 represented 23% of total GMV. GMV attributable to Amazon during the three months ended September 30, 2023 represented less than 20% of total GMV.

Current wording

For the three and six months ended December 31, 2024, our top five merchants and platform partners represented approximately 51% and 49%, respectively, of total GMV, as compared to 48% and 46%, respectively, for the three and six months ended December 31, 2023. GMV attributable to Amazon during the three and six months ended December 31, 2024 represented 25% and 24%, respectively, of total GMV. GMV attributable to Amazon during both the three and six months ended December 31, 2023 represented 21% of total GMV.

Previous wording

As of September 30, 2024, we had approximately 19.5 million active consumers, which represented an increase of 15% compared to approximately 16.9 million active consumers as of September 30, 2023. The increase was primarily due to a high retention rate of existing consumers and the acquisition of new consumers through an expansion in active merchants and platform partnerships as well as continued adoption of the Affirm Card.

Current wording

As of December 31, 2024, we had approximately 21.0 million active consumers, which represented an increase of 19% compared to approximately 17.6 million active consumers as of December 31, 2023. The increase was primarily due to a high retention rate of existing consumers and the acquisition of new consumers through an expansion in active merchants and platform partnerships as well as continued adoption of the Affirm Card.

Previous wording

As of September 30, 2024, we had approximately 5.1 transactions per active consumer, an increase of 25% compared to September 30, 2023. The increase was primarily due to platform growth, a higher frequency of repeat users driven by consumer engagement and growth of Affirm Card active consumers. As of September 30, 2024, Affirm Card represented approximately 11% of the total number of transactions compared to approximately 6% as of September 30, 2023.

Current wording

As of December 31, 2024, we had approximately 5.3 transactions per active consumer, an increase of 22% compared to December 31, 2023. The increase was primarily due to platform growth, a higher frequency of repeat users driven by consumer engagement, and growth of Affirm Card active consumers. As of December 31, 2024, Affirm Card represented approximately 10% of the total number of transactions compared to approximately 4% as of December 31, 2023.

Previous wording

The following tables set forth selected interim condensed consolidated statements of operations and comprehensive loss data for each of the periods presented:

Current wording

The following tables set forth selected interim condensed consolidated statements of operations and comprehensive income (loss) data for each of the periods presented:

Previous wording

Comparison of the Three Months Ended September 30, 2024 and 2023

Current wording

Comparison of the Three and Six Months Ended December 31, 2024 and 2023

Previous wording

Merchant network revenue increased by $38.4 million, or 26%, for the three months ended September 30, 2024 compared to the same period in 2023. The increase is primarily attributed to an increase of $2.0 billion, or 35%, in GMV for the three months ended September 30, 2024, compared to the same period in 2023. The increase in GMV is a result of continued growth at our top five merchants and platform partners representing approximately 47% and 42% as of September 30, 2024 and 2023, respectively. Our active merchant base and the number of active consumers also grew, reaching approximately 323 thousand and 19.5 million, respectively, as of September 30, 2024, up from approximately 266 thousand and 16.9 million, respectively, as of September 30, 2023.

Current wording

Merchant network revenue increased by $56.5 million, or 30%, and $94.9 million, or 28%, for the three and six months ended December 31, 2024, respectively, compared to the same periods in 2023. The increase is primarily attributed to an increase of $2.7 billion, or 35%, and $4.6 billion, or 35%, in GMV for the three and six months ended December 31, 2024, respectively, compared to the same periods in 2023. The increase in GMV is a result of continued growth at our top five merchants and platform partners representing approximately 51% and 49% for the three and six months ended December 31, 2024, respectively, compared to 48% and 46% for the three and six months ended December 31, 2023, respectively. Our active merchant base and the number of active consumers also grew, reaching approximately 337 thousand and 21.0 million, respectively, as of December 31, 2024, up from approximately 279 thousand and 17.6 million, respectively, as of December 31, 2023.

Previous wording

With respect to the frequency and mix of transactions, the transactions per active consumer increased from 4.1 as of September 30, 2023 to 5.1 as of September 30, 2024, however AOV decreased for the three months ended September 30, 2024 from $299 to $279 as compared to the same period in 2023. The decrease in AOV is driven by an increase in GMV in the general and merchandise categories, which tend to have a lower AOV, and our ongoing initiative to drive repeat usage of our platform beyond one-time high AOV purchases.

Current wording

With respect to the frequency and mix of transactions, the transactions per active consumer increased from 4.4 as of December 31, 2023 to 5.3 as of December 31, 2024. The increase in active consumers and transactions per active consumer is partially offset by a decrease in AOV. For the three and six months ended December 31, 2024, AOV was $267 and $270, respectively, down from $287 and $292 for the same period in 2023. The decrease in AOV is driven by the diversification of our merchant base, with accelerated growth in some of our largest interest bearing merchant programs, and our ongoing initiative to drive repeat usage of our platform beyond one-time high AOV purchases.

Previous wording

Card network revenue increased by $14.0 million, or 42%, for the three months ended September 30, 2024 compared to the same period in 2023. Card network revenue growth is correlated with the growth of GMV processed by our card-issuing partners. As such, the increase is primarily driven by $2.5 billion of GMV processed through our card-issuing partners, an increase of 38% for the three months ended September 30, 2024 as compared to the same period in 2023. This was driven by increased card activity primarily through our single use virtual cards and Affirm Card, 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 1,400 merchants as of September 30, 2023 to 4,700 merchants as of September 30, 2024. Card network revenue is also impacted by the mix of merchants as different merchants can have different interchange rates depending on their industry or size, among other factors.

Current wording

Card network revenue increased by $18.9 million, or 48%, and $32.9 million, or 45%, for the three and six months ended December 31, 2024, respectively, compared to the same periods in 2023. Card network revenue growth is correlated with the growth of GMV processed by our card-issuing partners. As such, the increase is primarily driven by $3.1 billion and $5.5 billion of GMV processed through our card-issuing partners, an increase of 43% and 41% for the three and six months ended December 31, 2024, respectively, as compared to the same periods in 2023. This was driven by increased card activity primarily through our single use virtual cards and Affirm Card, 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 1,500 merchants as of December 31, 2023 to 19,900 merchants as of December 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 $114.4 million, or 44%, for the three months ended September 30, 2024, 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 34% to $6.0 billion for the three months ended September 30, 2024 compared to the same period in 2023. As a result, interest income from interest-bearing loans increased by $111.0 million, or 49%, compared to the same period in 2023.

Current wording

Interest income increased by $121.0 million, or 42%, and $235.4 million, or 43%, for the three and six months ended December 31, 2024, respectively, compared to the same periods in 2023. Generally, interest income is correlated with the changes in the average balance of loans held for investment, which increased by 34% to $6.6 billion and 32% to $6.3 billion for the three and six months ended December 31, 2024, respectively, compared to the same periods in 2023. As a result, interest income from interest-bearing loans increased by $127.8 million, or 52%, and $238.7 million, or 50%, for the three and six months ended December 31, 2024, respectively, compared to the same periods in 2023.

Previous wording

Gain on sales of loans increased by $29.3 million, or 86%, for the three months ended September 30, 2024 compared to the same period in 2023. The increase is driven by factors including higher loan sale volume to third-party loan buyers and favorable transaction economics which are impacted by the composition of our loan portfolio sold, investor demand for our product, and other market factors. We sold loans with an unpaid principal balance of $2.8 billion for the three months ended September 30, 2024 compared to $2.2 billion for the same period in 2023.

Current wording

Gain on sales of loans increased by $72.6 million, or 138%, and $101.9 million, or 117%, for the three and six months ended December 31, 2024, respectively, compared to the same periods in 2023. The increase is driven by factors including higher loan sale volume to third-party loan buyers and favorable transaction economics which are impacted by the composition of our loan portfolio sold and other market factors. We sold loans with an unpaid principal balance of $4.6 billion and $7.4 billion for the three and six months ended December 31, 2024, respectively, compared to $3.1 billion and $5.2 billion for the same period in 2023.

Previous wording

Servicing income increased by $5.8 million, or 29%, for the three months ended September 30, 2024, compared to the same period in 2023. The increase is primarily due to an increase in net servicing fee revenue which is calculated as a percentage of the unpaid principal balance of off-balance sheet loans. The average unpaid principal balance of off-balance sheet loans increased from $4.4 billion during the three months ended September 30, 2023 to $5.4 billion during the same period in 2024, an increase of 23%.

Current wording

Servicing income increased by $6.3 million, or 28%, and $12.1 million, or 28%, for the three and six months ended December 31, 2024, respectively, compared to the same periods in 2023. The increase is primarily due to an increase in net servicing fee revenue which is calculated as a percentage of the unpaid principal balance of off-balance sheet loans. The average unpaid principal balance of off-balance sheet loans increased from $4.9 billion and $4.7 billion during the three and six months ended December 31, 2023, respectively, to $6.3 billion and $6.0 billion, respectively, during the same period in 2024, an increase of 29% and 28%, respectively.

Previous wording

We purchase certain loans from our originating bank partners that are processed through our platform and put back to us by our originating bank partners. Under the terms of the agreements with our originating bank partners, we are generally required to pay the principal amount plus accrued interest for such loans and fees. In certain instances, our originating bank partners may originate loans with zero or below market interest rates that we are required to purchase. In these instances, we may be required to purchase the loan for a price in excess of the fair market value of such loans, which results in a loss. These losses are recognized as loss on loan purchase commitment in our consolidated statements of operations and comprehensive loss. These costs are incurred on a per loan basis.

Current wording

We purchase certain loans from our originating bank partners that are processed through our platform and put back to us by our originating bank partners. Under the terms of the agreements with our originating bank partners, we are generally required to pay the principal amount plus accrued interest for such loans and fees. In certain instances, our originating bank partners may originate loans with zero or below market interest rates that we are required to purchase. In these instances, we may be required to purchase the loan for a price in excess of the fair market value of such loans, which results in a loss. These losses are recognized as loss on loan purchase commitment in our interim condensed consolidated statements of operations and comprehensive income (loss). These costs are incurred on a per loan basis.

Previous wording

Loss on loan purchase commitment increased by $19.4 million, or 56%, for the three months ended September 30, 2024 compared to the same period in 2023, primarily due to an increase in total volume of loans purchased. During the three months ended September 30, 2024, we purchased $6.4 billion of loans from our originating bank partners, compared to $4.6 billion in the same period in 2023, representing an increase of 40%.

Current wording

Loss on loan purchase commitment increased by $16.6 million, or 31%, and $36.0 million, or 41%, for the three and six months ended December 31, 2024, respectively, compared to the same periods in 2023, primarily due to an increase in total volume of loans purchased. During the three and six months ended December 31, 2024, we purchased $8.1 billion and $14.5 billion, respectively, of loans from our originating bank partners, compared to $5.9 billion and $10.5 billion, respectively, in the same period in 2023, representing an increase of 36% and 38%, respectively.

Previous wording

Provision for credit losses increased by $60.1 million, or 60%, for the three months ended September 30, 2024 compared to the same period in 2023, primarily driven by growth in the volume of loans held for investment. Loans held for investment as of September 30, 2024 was $6.3 billion, an increase of $1.8 billion, or 39%, as compared to the same period in 2023. The allowance for credit losses as a percentage of loans held for investment increased from 5.1% as of September 30, 2023 to 5.6% as of September 30, 2024. The increase in the allowance rate from September 30, 2023 is primarily driven by an increase in loans held on our balance sheet as well as adjustments in our credit criteria in light of increasing interest income generated by our loans and changes in the loan mix.

Current wording

Provision for credit losses increased by $32.1 million, or 27%, and $92.2 million, or 42%, for the three and six months ended December 31, 2024, respectively, compared to the same periods in 2023, primarily driven by growth in the volume of loans held for investment. Loans held for investment as of December 31, 2024 was $6.8 billion, an increase of $1.6 billion, or 30%, as compared to the same periods in 2023. The allowance for credit losses as a percentage of loans held for investment increased from 5.0% as of December 31, 2023 to 5.4% as of December 31, 2024. The increase in the allowance rate from December 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.

Previous wording

Funding costs increased by $30.2 million, or 41%, for the three months ended September 30, 2024 compared to the same period in 2023. The increase is primarily due to an increase of funding debt and notes issued by securitization trusts during the three months ended September 30, 2024. The average total of funding debt from warehouses and securitizations for the three months ended September 30, 2024 was $5.4 billion compared to $4.0 billion during the same period in 2023, an increase of $1.4 billion, or 34%. 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 $6.0 billion for the three months ended September 30, 2024, an increase of 34% compared to $4.5 billion during the same period in 2023.

Current wording

Funding costs increased by $23.1 million, or 27%, and $53.4 million, or 34%, for the three and six months ended December 31, 2024, respectively, compared to the same periods in 2023. The increase is primarily due to an increase of funding debt and notes issued by securitization trusts during the three and six months ended December 31, 2024. The average total of funding debt from warehouses and securitizations for the three and six months ended December 31, 2024 was $5.9 billion and $5.7 billion, respectively, compared to $4.4 billion and $4.2 billion, respectively, during the same period in 2023, an increase of $1.6 billion, or 36%, and $1.4 billion, or 34%, 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 $6.6 billion and $6.3 billion for the three and six months ended December 31, 2024, respectively, an increase of 34% and 32% compared to $4.9 billion and $4.7 billion during the same period in 2023, respectively.

Previous wording

Processing and servicing expense increased by $19.5 million, or 26%, for the three months ended September 30, 2024 compared to the same period in 2023. This increase is driven primarily by an increase in payment processing fees of $15.4 million, or 38%, related to increased payment volume for the three months ended September 30, 2024. Additionally, during the three months ended September 30, 2024, our platform fees increased by $6.0 million, or 39%, due to an increase in volume with a large enterprise partner.

Current wording

Processing and servicing expense increased by $25.8 million, or 29%, and $45.2 million, or 27%, for the three and six months ended December 31, 2024, respectively, compared to the same periods in 2023. This increase is driven primarily by an increase in payment processing fees of $17.0 million, or 36%, and $32.4 million, or 37%, related to increased payment volume for the three and six months ended December 31, 2024, respectively. Additionally, during the three and six months ended December 31, 2024, our platform fees increased by $8.9 million, or 38%, and $14.9 million, or 39%, respectively, due to an increase in volume with a large enterprise partner.

Previous wording

Technology and data analytics expense increased by $1.3 million, or 1%, for the three months ended September 30, 2024 compared to the same period in 2023. The increase is primarily driven by amortization of internally-developed software which increased by $13.5 million, or 44%, for the three months ended September 30, 2024 compared to the same period in 2023, as a result of an increase in the number of capitalized projects. Capitalized projects in service grew by 127% from approximately 440 projects as of September 30, 2023 to 1,000 projects as of September 30, 2024. The increase is partially offset by a decrease of $13.0 million, or 19%, in stock-based compensation and payroll and personnel-related costs for the three months ended September 30, 2024 compared to the same period in 2023, due to higher capitalized compensation costs related to internally-developed software.

Current wording

Technology and data analytics expense increased by $28.4 million, or 24%, and $29.7 million, or 12%, for the three and six months ended December 31, 2024, respectively, compared to the same periods in 2023. The increase is primarily driven by amortization of internally-developed software which increased by $15.5 million, or 41%, and $29.0 million, or 42%, for the three and six months ended December 31, 2024, respectively, compared to the same periods in 2023, as a result of an increase in the number of capitalized projects. Capitalized projects in service grew by 91% from approximately 640 projects as of December 31, 2023 to 1,230 projects as of December 31, 2024. Data infrastructure and hosting costs increased by $5.8 million, or 27%, and $6.8 million, or 15%, for the three and six months ended December 31, 2024, respectively, compared to the same periods in 2023. The increase in data infrastructure and hosting costs was primarily driven by the number of consumer transactions increasing over the same time periods. During the three months ended December 31, 2024 the number of consumer transactions increased by 46% from continued growth at our merchants and platform partners. Stock-based compensation and payroll and personnel-related costs increased by $4.9 million, or 10%, for the three months ended December 31, 2024 but decreased by $8.1 million, or 7%, for the six months ended December 31, 2024 compared to the same periods in 2023, primarily due to an increase in headcount, offset by higher capitalized compensation costs related to internally-developed software.

Previous wording

Other income, net, decreased by $4.4 million, or 11%, during the three months ended September 30, 2024 compared to the same period in 2023, primarily driven by a decrease of $9.8 million in other non-operating income related to the wind-down of the Returnly business and our partnership with a third-party return provider during the three months ended September 30, 2023. Additionally, income from derivative instruments not designated in a hedge accounting relationship decreased by $7.9 million primarily driven by a decrease in the notional balance of the derivative instruments and a decrease in interest rates. We recognized a loss of $1.8 million on the change in fair value of liabilities, primarily related to our profit sharing liability, during the three months ended September 30, 2024 compared to a gain of $3.5 million during the same period in 2023, a decrease of $5.3 million. The decrease driven by each of these factors combined is partially offset by a $19.6 million gain recognized upon the repurchase of a portion of our 2026 Notes during the three months ended September 30, 2024.

Current wording

Other income, net, increased by $82.6 million, or 1,816%, and $78.2 million, or 181%, during the three and six months ended December 31, 2024, respectively, compared to the same periods in 2023, primarily driven by a $62.8 million and $82.4 million gain recognized upon the repurchase of a portion of our 2026 Notes during the three and six months ended December 31, 2024, respectively. Additionally, impairment expense related to our non-marketable equity investments held at cost decreased by $14.1 million and $11.1 million during the three and six months ended December 31, 2024, respectively, compared to the same periods in 2023. The increase is partially offset by a decrease of $9.5 million in other non-operating income related to the wind-down of the Returnly business and our partnership with a third-party return provider during the six months ended December 31, 2023.

Previous wording

Our principal sources of liquidity are cash and cash equivalents, available for sale securities, available capacity from warehouse and revolving credit facilities, securitization trusts, forward flow loan sale arrangements, and certain cash flows from our operations. As of September 30, 2024, we had $2.1 billion in cash and cash equivalents and available for sale securities, $3.9 billion in available funding debt capacity, excluding our purchase commitments from third party loan buyers, and $330.0 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, securitization trusts, forward flow loan sale arrangements, and certain cash flows from our operations. As of December 31, 2024, we had $1.9 billion in cash and cash equivalents and available for sale securities, $3.6 billion in available funding debt capacity, excluding our purchase commitments from third party loan buyers, and $330.0 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

(2)Securities available for sale at fair value primarily consist of certificates of deposits, corporate bonds, commercial paper, agency bonds, and government bonds. Short-term securities have maturities less than or equal to one year, and long-term securities range from greater than one year to less than five years.

Current wording

(2)Securities available for sale at fair value primarily consist of certificates of deposits, corporate bonds, municipal bonds, commercial paper, agency bonds, and government bonds. Short-term securities have maturities less than or equal to one year, and long-term securities range from greater than one year to less than five years.

Previous wording

Funding debt as of September 30, 2024 primarily includes our warehouse credit facilities and sale and repurchase agreements. A detailed description of each of our borrowing arrangements is included in Note 8. Debt in the notes to the interim condensed consolidated financial statements. The following table summarizes our funding debt facilities as of September 30, 2024.

Current wording

Debt as of December 31, 2024 primarily includes funding debt, notes issued by securitization trust, convertible senior notes and our revolving credit facilities. A detailed description of each of our borrowing arrangements is included in Note 8. Debt in the notes to the interim condensed consolidated financial statements.

Previous wording

Our warehouse credit facilities allow us to borrow up to an aggregate of $5.0 billion, mature between 2025 and 2027 and subject to covenant compliance, generally permit borrowings up to 4 -12 months prior to the final maturity date. As of September 30, 2024, we have drawn an aggregate of $1.3 billion on our warehouse credit facilities. As of September 30, 2024, 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 $4.7 billion, mature between 2025 and 2028 and subject to covenant compliance, generally permit borrowings up to 4 -12 months prior to the final maturity date. As of December 31, 2024, we have drawn an aggregate of $1.7 billion on our warehouse credit facilities. As of December 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, maturing between 2028 and 2030. As of September 30, 2024, the aggregate commitment amount of these facilities was $652.9 million on a revolving basis, of which $407.0 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, maturing between 2028 and 2030. As of December 31, 2024, the aggregate commitment amount of these facilities was $598.7 million on a revolving basis, of which $372.1 million was drawn.

Previous 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. We had $22.4 million and $34.5 million in debt outstanding under our sale and repurchase agreements disclosed within funding debt in the interim condensed consolidated balance sheets as of September 30, 2024 and June 30, 2024, 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 repurchase agreements can have an initial term of either three months or a term equaling the contractual life of the securitization notes pledged. When applicable, 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 $48.8 million and $34.5 million in debt outstanding under our sale and repurchase agreements disclosed within funding debt in the interim condensed consolidated balance sheets as of December 31, 2024 and June 30, 2024, respectively.

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 9. Securitization and Variable Interest Entities in the notes to the interim condensed consolidated financial statements for further details.

Current wording

We finance the origination and purchase of loans though our asset-backed securitization program using a combination of amortizing, revolving and variable funding structures. In connection with our program, we sponsor and establish trusts (deemed to be VIEs) which issue securities collateralized by the loans we sell to the trust. 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. For these VIEs, the creditors have no recourse to the general credit of Affirm and the liabilities of the VIEs can only be settled by the respective VIEs’ assets. Additionally, the assets of the VIEs can be used only to settle obligations of the VIEs. Refer to Note 9.

Previous wording

On June 26, 2024, we entered into an amendment to our revolving credit agreement under the terms of which the aggregate commitment was increased to $330.0 million and the final maturity date was extended three years to June 26, 2027. As of September 30, 2024, there are no borrowings outstanding under the facility. The facility contains certain covenants and restrictions, including certain financial maintenance covenants. As of September 30, 2024, we were in compliance with all applicable covenants in the agreements. Refer to Note 8. Debt in the notes to the interim condensed consolidated financial statements for further details on our revolving credit facility.

Current wording

On December 16, 2024, we entered into an amendment to our revolving credit facility in order to permit the incurrence of indebtedness pursuant to the 2029 Senior Convertible Notes. Our revolving credit facility, has an aggregate commitment amount of $330.0 million, with a final maturity date of June 26, 2027. As of December 31, 2024, there are no borrowings outstanding under the facility. The facility contains certain covenants and restrictions, including certain financial maintenance covenants. As of December 31, 2024, we were in compliance with all applicable covenants in the agreements. Refer to Note 8. Debt in the notes to the interim condensed consolidated financial statements for further details on our revolving credit facility.

Previous wording

Net cash provided by operating activities was $98.9 million for the three months ended September 30, 2023. Net loss of $171.8 million was adjusted for the add back of net non-cash items and other adjustments increasing operating cash flows by $279.6 million, and changing operating assets liabilities resulting in a net increase of $8.9 million. The non-cash item adjustments are primarily attributable to $99.7 million provision for credit losses, $95.9 million commercial agreement warrant expense, $112.4 million stock-based compensation expense, and $40.1 million depreciation and amortization expense, which were partially offset by $34.3 million gain on sale of loans and $41.1 million amortization of premiums and discounts on loans. The net increase in cash from changes in operating assets and liabilities was primarily driven by net cash proceeds generated from the origination or purchase and sale of loans held for sale of $5.9 million and an increase in payable to third party loans owners of $55.6 million, which was partially offset by a decrease in accrued expenses and other liabilities of $20.6 million and an increase in accounts receivable of $42.2 million.

Current wording

Net cash provided by operating activities was $508.9 million for the six months ended December 31, 2024. Net loss of $19.9 million was adjusted for the add back of non-cash items and other adjustments increasing operating cash flows by $423.5 million, and changing operating assets net of operating liabilities resulting in a net increase in operating cash flows of $105.2 million. The non-cash item adjustments are primarily attributable to $312.8 million provision for credit losses, $194.0 million commercial agreement warrant expense, $180.3 million stock-based compensation expense, and $101.6 million depreciation and amortization expense, which were partially offset by $188.9 million gain on sale of loans, and $111.3 million amortization of premiums and discounts on loans. The net increase in cash from changes in operating assets and liabilities was primarily driven by a decrease in accounts receivable of $143.8 million, and an increase in accounts payable of $9.6 million, which were partially offset by net cash outflows from the origination or purchase and sale of loans held for sale of $— million and a decrease in accrued expenses and other liabilities of $20.3 million.

Previous wording

Net cash provided by operating activities was $196.9 million for the three months ended September 30, 2024. Net loss of $100.2 million was adjusted for the add back of non-cash items and other adjustments increasing operating cash flows by $276.7 million, and changing operating assets liabilities resulting in a net increase in operating cash flows of $20.3 million. The non-cash item adjustments are primarily attributable to $159.8 million provision for credit losses, $107.3 million commercial agreement warrant expense, $94.2 million stock-based compensation expense, and $46.7 million depreciation and amortization expense, which were partially offset by $63.6 million gain on sale of loans and $52.1 million amortization of premiums and discounts on loans. The net increase in cash from changes in operating assets and liabilities was primarily driven by cash proceeds generated from the sale of loans held for sale of $1.2 billion which was offset by cash used for the purchase and origination of loans held for sale of $1.2 billion, a decrease in accounts receivable of $41.1 million, and an increase in accounts payable of $16.5 million, which were partially offset by a decrease in accrued expenses and other liabilities of $23.8 million.

Current wording

Net cash provided by operating activities was $173.2 million for the six months ended December 31, 2023. Net loss of $338.7 million was adjusted for the add back of net non-cash items and other adjustments increasing operating cash flows by $568.9 million, and changing operating assets net of operating liabilities resulting in a decrease in operating cash flows of $57.0 million. The non-cash item adjustments are primarily attributable to $220.6 million provision for credit losses, $210.6 million commercial agreement warrant expense, and $202.5 million stock-based compensation expense. The net decrease in cash from changes in operating assets and liabilities was primarily driven by an increase in accounts receivable of $116.5 million, an increase in payables to third party loan owners of $37.0 million, and an increase in accounts payable of $31.2 million, which was partially offset by cash proceeds generated from the sale of loans held for sale of $2.3 billion which was offset by cash used for the purchase and origination of loans held for sale of $2.2 billion.

Previous wording

Net cash used in investing activities was $575.0 million for the three months ended September 30, 2024, which consisted of outflows related to $6.4 billion of purchases and origination of loans held for investment, including originated and purchased loans of $1.2 billion and $5.1 billion, respectively, during the period, $136.7 million of purchases of securities available for sale, and $44.2 million of property, equipment and software additions. Inflows related to $4.1 billion of principal repayments of loans, $1.6 billion of proceeds from sale of loans held for investment, and $215.7 million of proceeds from maturities of securities available for sale.

Current wording

Net cash used in investing activities was $664.1 million for the six months ended December 31, 2024, which consisted of outflows related to $15.1 billion of purchases and origination of loans held for investment, including originated and purchased loans of $3.0 billion and $12.1 billion, respectively, during the period, $184.9 million of purchases of securities available for sale, and $88.1 million of property, equipment and software additions. Inflows related to $8.7 billion of principal repayments of loans, $5.3 billion of proceeds from sale of loans held for investment, and $720.6 million of proceeds from maturities of securities available for sale.

Previous wording

Net cash used in investing activities was $15.9 million for the three months ended September 30, 2023, which consisted of outflows related to $4.2 billion of purchases and origination of loans held for investment, including originated and purchased loans of $0.9 billion and $3.3 billion, respectively, during the period, $96.8 million of purchases of securities available for sale, and $35.8 million of property, equipment and software additions. Inflows related to $3.2 billion of principal repayments of loans, $0.9 billion of proceeds from sale of loans held for investment, and $262.3 million of proceeds from maturities of securities available for sale.

Current wording

Net cash used in investing activities was $640.8 million for the six months ended December 31, 2023, which consisted of outflows related to $10.3 billion of purchases and origination of loans held for investment, including originated and purchased loans of $2.2 billion and $8.2 billion, respectively, during the period, $193.3 million of purchases of securities available for sale, and $74.6 million of property, equipment and software additions. Inflows related to $6.5 billion of principal repayments of loans, $3.0 billion of proceeds from sale of loans held for investment, and $482.0 million of proceeds from maturities of securities available for sale.

Previous wording

Net cash provided by financing activities was $465.6 million for the three months ended September 30, 2024, and primarily consisted of net cash inflows of $750.0 million from the new issuance and repayment of notes and residual trust certificates issued by securitization trusts. This was partially offset by net cash outflows of $104.7 million related to borrowing and repayment of funding debt, $120.1 million related to the extinguishment of a portion of our 2026 Notes, and net cash outflows of $63.2 million related to taxes paid on vested RSUs.

Current wording

Net cash provided by financing activities was $609.7 million for the six months ended December 31, 2024, and primarily consisted of net cash inflows of $750.0 million from the new issuance and repayment of notes and residual trust certificates issued by securitization trusts, $920.0 million from proceeds, net of debt issuance costs, related to the issuance of the 2029 Notes, and $321.7 million related to borrowing and repayment of funding debt. This was partially offset by net cash outflows of $1,012.9 million related to the extinguishment and repurchase of a portion of our 2026 Notes, $250.0 million related to repurchase of common stock shares in connection with the issuance of the 2029 Notes, and net cash outflows of $158.5 million related to taxes paid on vested RSUs.

Previous wording

Net cash provided by financing activities was $148.8 million for the three months ended September 30, 2023, and primarily consisted of net cash inflows of $234.6 million from the new issuance and repayment of notes and residual trust certificates issued by securitization trusts. This was partially offset by net cash outflows of $52.9 million related to borrowing and repayment of funding debt and $36.5 million related to taxes paid on vested RSUs.

Current wording

Net cash provided by financing activities was $655.2 million for the six months ended December 31, 2023, and primarily consisted of net cash inflows of $573.5 million from the new issuance and repayment of notes and residual trust certificates issued by securitization trusts, and $132.1 million related to borrowing and repayment of funding debt. This was partially offset by net cash outflows of $75.7 million related to taxes paid on vested RSUs.