UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, ~~2022~~2023


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to __________

Commission ~~file number~~File Number 001-39888

Affirm Holdings, Inc.

(Exact name of registrant as specified in its charter)


Delaware									84-2224323
(State or other jurisdiction of incorporation or organization)									(I.R.S. Employer Identification No.)

650 California Street
San Francisco, California									94108
(Address of principal executive offices)									(Zip Code)

(415) 984-0490

(Registrant's telephone number, including area code)

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

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Class A common stock, par value $0.00001 per share

AFRM

The Nasdaq Global Select Market

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

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☐☒	Accelerated filer	☐
Non-accelerated filer	☒☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

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

As of May ~~10, 2022,~~5, 2023, the number of shares of the registrant’s Class A common stock outstanding was ~~226,270,872~~235,833,709 and the number of shares of the ~~registrant's~~registrant’s Class B common stock outstanding was ~~60,159,497.~~59,851,818.

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TABLE OF CONTENTS


						Page
Cover						1
Table of Contents						2
Part I - Financial Information						5
Item 1. Unaudited Financial Statements						5
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)						5
CONDENSED CONSOLIDATED BALANCE SHEETS, CONT. (Unaudited)						6
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (Unaudited)						7
CONDENSED CONSOLIDATED STATEMENT OF ~~REDEEMABLE CONVERTIBLE PREFERRED STOCK AND~~ STOCKHOLDERS’ EQUITY ~~(DEFICIT)~~ (Unaudited)						8
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)						10
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS, CONT. (Unaudited)						11
1. Business Description						12
2. Summary of Significant Accounting Policies						12
3. ~~Interest Income~~Revenue						1714
4. Loans Held for Investment and Allowance for Credit Losses						1816
5. ~~Business Combinations~~Acquisitions						2018
6. Balance Sheet Components						2621
7. Leases						2925
8. Commitments and Contingencies						3026
9. Transactions with Related Parties						3127
10. Debt						3128
11. Securitization and Variable Interest Entities						3431
12. Investments						3833
~~13.~~1 3 . Derivative Financial Instrume nts						37
1 4 . Fair Value of Financial Assets and Liabilities						4139
~~14. Redeemable Convertible Preferred Stock and Stockholders'~~1 5 . Stockholders’ Equity						5249
~~15.~~1 6 . Equity Incentive Plans						50
1 7 . Restructuring						53
1 8 . Income Taxes						54
~~16. Income Taxes~~1						569
~~17.~~. Net Loss per Share Attributable to Common Stockholders						57
~~18. Segments and Geographical Information~~						59
~~19. Subsequent Events~~						5955
Item 2. ~~Management's~~Management’s Discussion and Analysis of Financial Condition and Results of Operations						6056
Item 3. Quantitative and Qualitative Disclosures About Market Risk						8574
Item 4. Controls and Procedures						8676
Part II - Other Information						8777
Item 1. Legal Proceedings						8877
Item 1A. Risk Factors						8977
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds						9379
Item 3. Defaults Upon Senior Securities						9380
Item 4. Mine Safety Disclosures						9380
Item 5. Other Information						9380
Item 6. Exhibits						9481
Signatures						9582

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

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

•our expectations regarding our future revenue, expenses, and other operating results and key operating metrics;

•our ability to attract ~~additional~~new merchants and commerce partners and retain and grow our relationships with ~~our~~ existing ~~merchant~~merchants and commerce partners;

•our ability to compete successfully in a highly competitive and evolving industry;

•our ability to attract new consumers and retain and grow our relationships with our existing consumers;

•our expectations regarding the development, innovation, introduction of, and demand for, our products;;

•our ability to successfully maintain our relationship with Celtic Bank as an originating bank partner and engage ~~new~~additional originating bank partners;

•our ability to maintain, renew or replace our existing funding arrangements and build and grow new funding relationships;

•the ~~availability~~impact of any of our funding sources becoming unwilling or unable to ~~support our business model;~~provide funding to us on terms acceptable to us, or at all;

•our ability to effectively price and score credit risk using our proprietary risk model;

•the performance of loans facilitated and originated through our platform;

•the future growth rate of our revenue and related key operating metrics;

•our ability to achieve or sustain profitability in the ~~future;~~future, including in the manner and timeframe we have previously communicated;

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

•our ability to protect our confidential, proprietary, or sensitive information;

•past and future acquisitions, investments, and other strategic investments;

•our ability to maintain, protect, and enhance our brand and intellectual property;

•litigation, investigations, regulatory inquiries, and proceedings;

•developments in our regulatory environment;

•the impact of macroeconomic conditions on our business, including the ~~impact~~impacts of inflation, a rising interest rate environment and corresponding increases in negotiated interest rate spreads, increasing recessionary concerns and the ~~COVID-19 pandemic;~~instability of financial institutions; and

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

Forward-looking statements are based on our management’s beliefs and assumptions and on information currently available. These forward-looking statements are subject to a number of known and unknown risks,

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uncertainties and assumptions, including risks described in the section titled “Risk Factors” and elsewhere in this Form 10-Q, in our Quarterly Report on Form 10-Q for the fiscal quarter ended December 31, 2022, and in our most recently filed Annual Report on Form ~~10-K.~~10-K for the fiscal year ended June 30, 2022 (the “Annual Report”). Other sections of this Form 10-Q may include additional factors that could harm our business and financial performance. Moreover, we operate in a very competitive, heavily regulated and rapidly changing environment. New risk factors emerge from time to time, and it is not possible for our management to predict all risk factors nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ from those contained in, or implied by, any forward-looking statements.

~~Table of Contents~~

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

In addition, statements such as “we believe” and similar statements reflect our current beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this report, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and you are cautioned not to unduly rely upon these statements.

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

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Part I - Financial Information

Item 1. Unaudited Financial Statements

AFFIRM HOLDINGS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(in thousands, except shares and per share amounts)


		March 31, 2022		June 30, 2021			March 31, 2023		June 30, 2022
Assets	Assets					Assets
Cash and cash equivalents	Cash and cash equivalents	$	2,261,937	$	1,466,558	Cash and cash equivalents	$	972,477	$	1,255,171
Restricted cash	Restricted cash	413,628		226,074		Restricted cash	409,015		295,636
Securities available for sale at fair value	Securities available for sale at fair value	617,023		16,170		Securities available for sale at fair value	1,059,031		1,595,373
Loans held for sale	Loans held for sale	3,618		13,030		Loans held for sale	122		2,670
Loans held for investment	Loans held for investment	2,502,860		2,022,320		Loans held for investment	3,775,542		2,503,561
Allowance for credit losses	Allowance for credit losses	(159,475)		(117,760)		Allowance for credit losses	(176,336)		(155,392)
Loans held for investment, net	Loans held for investment, net	2,343,385		1,904,560		Loans held for investment, net	3,599,206		2,348,169
Accounts receivable, net	Accounts receivable, net	124,614		91,575		Accounts receivable, net	135,816		142,052
Property, equipment and software, net	Property, equipment and software, net	141,658		62,499		Property, equipment and software, net	277,156		171,482
Goodwill	Goodwill	547,393		516,515		Goodwill	537,126		539,534
Intangible assets	Intangible assets	60,890		67,930		Intangible assets	48,267		78,942
Commercial agreement assets	Commercial agreement assets	287,129		227,377		Commercial agreement assets	198,994		263,196
Other assets	Other assets	230,451		274,679		Other assets	270,639		281,567
Total Assets	Total Assets	$	7,031,726	$	4,866,967	Total Assets	$	7,507,849	$	6,973,792
Liabilities and Stockholders’ Equity	Liabilities and Stockholders’ Equity					Liabilities and Stockholders’ Equity
Liabilities:	Liabilities:					Liabilities:
Accounts payable	Accounts payable	$	48,985	$	57,758	Accounts payable	$	30,022	$	33,072
Payable to third-party loan owners	Payable to third-party loan owners	35,962		50,079		Payable to third-party loan owners	44,187		71,383
Accrued interest payable	Accrued interest payable	2,992		2,751		Accrued interest payable	13,826		6,659
Accrued expenses and other liabilities	Accrued expenses and other liabilities	313,307		323,577		Accrued expenses and other liabilities	192,360		237,598
Convertible senior notes, net	Convertible senior notes, net	1,705,624		—		Convertible senior notes, net	1,413,345		1,706,668
Notes issued by securitization trusts	Notes issued by securitization trusts	1,447,568		1,176,673		Notes issued by securitization trusts	1,788,853		1,627,580
Funding debt	Funding debt	901,233		680,602		Funding debt	1,514,120		672,577
Total liabilities	Total liabilities	4,455,671		2,291,440		Total liabilities	4,996,713		4,355,537
Commitments and contingencies (Note 8)	Commitments and contingencies (Note 8)	0		0		Commitments and contingencies (Note 8)
Stockholders’ equity:	Stockholders’ equity:					Stockholders’ equity:
Class A common stock, par value $0.00001 per share: 3,030,000,000 shares authorized, 225,617,857 shares issued and outstanding as of March 31, 2022; 3,030,000,000 shares authorized, 181,131,728 shares issued and outstanding as of June 30, 2021		2		2
Class B common stock, par value $0.00001 per share: 140,000,000 shares authorized, 60,160,468 shares issued and outstanding as of March 31, 2022; 140,000,000 authorized, 88,226,376 shares issued and outstanding as of June 30, 2021		1		1
Class A common stock, par value $0.00001 per share: 3,030,000,000 shares authorized, 234,561,926 shares issued and outstanding as of March 31, 2023; 3,030,000,000 shares authorized, 227,255,529 shares issued and outstanding as of June 30, 2022						Class A common stock, par value $0.00001 per share: 3,030,000,000 shares authorized, 234,561,926 shares issued and outstanding as of March 31, 2023; 3,030,000,000 shares authorized, 227,255,529 shares issued and outstanding as of June 30, 2022	2		2
Class B common stock, par value $0.00001 per share: 140,000,000 shares authorized, 60,088,662 shares issued and outstanding as of March 31, 2023; 140,000,000 authorized, 60,109,844 shares issued and outstanding as of June 30, 2022						Class B common stock, par value $0.00001 per share: 140,000,000 shares authorized, 60,088,662 shares issued and outstanding as of March 31, 2023; 140,000,000 authorized, 60,109,844 shares issued and outstanding as of June 30, 2022	1		1
Additional paid in capital	Additional paid in capital	3,987,881		3,467,236		Additional paid in capital	4,918,756		4,231,303
Accumulated deficit	Accumulated deficit	(1,419,506)		(898,485)		Accumulated deficit	(2,385,285)		(1,605,902)
Accumulated other comprehensive gain (loss)		7,677		6,773
Accumulated other comprehensive loss						Accumulated other comprehensive loss	(22,338)		(7,149)
Total stockholders’ equity	Total stockholders’ equity	2,576,055		2,575,527		Total stockholders’ equity	2,511,136		2,618,255
Total Liabilities and Stockholders’ Equity	Total Liabilities and Stockholders’ Equity	$	7,031,726	$	4,866,967	Total Liabilities and Stockholders’ Equity	$	7,507,849	$	6,973,792

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

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AFFIRM HOLDINGS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS, CONT.

(Unaudited)

(in ~~thousands, except shares and per share amounts)~~thousands)

The following table presents the assets and liabilities of consolidated variable interest entities (“VIEs”), which are included in the interim condensed consolidated balance sheets above. The assets in the table below may only be used to settle obligations of consolidated VIEs and are in excess of those obligations. The liabilities in the table below include liabilities for which creditors do not have recourse to the general credit of the Company. Additionally, the assets and liabilities in the table below include third-party assets and liabilities of consolidated VIEs only and exclude intercompany balances that eliminate upon consolidation.


		March 31, 2022		June 30, 2021			March 31, 2023		June 30, 2022
Assets of consolidated VIEs, included in total assets above	Assets of consolidated VIEs, included in total assets above					Assets of consolidated VIEs, included in total assets above
Restricted cash	Restricted cash	$	290,661	$	142,385	Restricted cash	$	251,964	$	164,530
Loans held for investment	Loans held for investment	2,214,932		1,743,810		Loans held for investment	3,382,808		2,179,026
Allowance for credit losses	Allowance for credit losses	(125,115)		(94,463)		Allowance for credit losses	(149,430)		(124,052)
Loans held for investment, net	Loans held for investment, net	2,089,817		1,649,347		Loans held for investment, net	3,233,378		2,054,974
Accounts receivable, net	Accounts receivable, net	8,195		8,209		Accounts receivable, net	8,196		8,195
Other assets	Other assets	12,398		3,683		Other assets	14,506		14,570
Total assets of consolidated VIEs	Total assets of consolidated VIEs	$	2,401,071	$	1,803,624	Total assets of consolidated VIEs	$	3,508,044	$	2,242,269
Liabilities of consolidated VIEs, included in total liabilities above	Liabilities of consolidated VIEs, included in total liabilities above					Liabilities of consolidated VIEs, included in total liabilities above
Accounts payable	Accounts payable	$	2,960	$	2,927	Accounts payable	$	2,817	$	2,897
Accrued interest payable	Accrued interest payable	2,941		2,613		Accrued interest payable	13,826		6,525
Accrued expenses and other liabilities	Accrued expenses and other liabilities	12,433		3,820		Accrued expenses and other liabilities	14,119		15,494
Notes issued by securitization trusts	Notes issued by securitization trusts	1,447,568		1,176,673		Notes issued by securitization trusts	1,788,853		1,627,580
Funding debt	Funding debt	734,430		607,394		Funding debt	1,358,666		514,033
Total liabilities of consolidated VIEs	Total liabilities of consolidated VIEs	2,200,332		1,793,427		Total liabilities of consolidated VIEs	3,178,281		2,166,529
Total net assets	Total net assets	$	200,739	$	10,197	Total net assets	$	329,763	$	75,740

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

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AFFIRM HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE ~~LOSS~~INCOME (LOSS) (Unaudited)

(in thousands, except share and per share amounts)


		Three Months Ended March 31,				Nine Months Ended March 31,					Three Months Ended March 31,				Nine Months Ended March 31,
		2022		2021		2022		2021			2023		2022		2023		2022
Revenue	Revenue									Revenue
Merchant network revenue	Merchant network revenue	$	121,054	$	97,999	$	340,385	$	290,894	Merchant network revenue	$	119,013	$	121,054	$	366,181	$	340,385
Virtual card network revenue	Virtual card network revenue	23,169		13,809		69,122		30,587		Virtual card network revenue	29,469		23,169		85,294		69,122
Total network revenue	Total network revenue	144,223		111,808		409,507		321,481		Total network revenue	148,482		144,223		451,475		409,507
Interest income	Interest income	134,599		94,530		390,256		222,624		Interest income	178,270		134,599		470,393		390,256
Gain on sales of loans	Gain on sales of loans	52,484		16,350		141,153		47,344		Gain on sales of loans	32,813		52,484		156,015		141,153
Servicing income	Servicing income	23,456		7,977		44,242		17,235		Servicing income	21,413		23,456		64,277		44,242
Total Revenue, net	Total Revenue, net	$	354,762	$	230,665	$	985,158	$	608,684	Total Revenue, net	$	380,978	$	354,762	$	1,142,160	$	985,158
Operating Expenses	Operating Expenses									Operating Expenses
Loss on loan purchase commitment	Loss on loan purchase commitment	$	46,853	$	62,054	$	163,796	$	195,690	Loss on loan purchase commitment	$	31,224	$	46,853	$	105,256	$	163,796
Provision for credit losses	Provision for credit losses	66,294		(1,063)		182,581		40,389		Provision for credit losses	66,438		66,294		237,377		182,581
Funding costs	Funding costs	15,824		14,665		50,277		37,077		Funding costs	51,188		15,824		120,005		50,277
Processing and servicing	Processing and servicing	43,371		21,368		110,421		51,668		Processing and servicing	65,229		43,371		186,096		110,421
Technology and data analytics	Technology and data analytics	110,291		104,806		283,293		180,208		Technology and data analytics	161,792		110,291		463,500		283,293
Sales and marketing	Sales and marketing	156,214		58,184		363,650		119,878		Sales and marketing	140,942		156,214		493,149		363,650
General and administrative	General and administrative	142,466		179,999		419,962		253,188		General and administrative	139,266		142,466		458,877		419,962
Restructuring charges, net										Restructuring charges, net	34,934		—		34,934		—
Total Operating Expenses	Total Operating Expenses	581,313		440,013		1,573,980		878,098		Total Operating Expenses	691,013		581,313		2,099,194		1,573,980
Operating Loss	Operating Loss	$	(226,551)	$	(209,348)	$	(588,822)	$	(269,414)	Operating Loss	$	(310,035)	$	(226,551)	$	(957,034)	$	(588,822)
Other (expense) income, net		172,139		(77,773)		68,507		(48,088)
Other income, net										Other income, net	103,522		172,139		175,067		68,507
Loss Before Income Taxes	Loss Before Income Taxes	$	(54,412)	$	(287,121)	$	(520,315)	$	(317,502)	Loss Before Income Taxes	$	(206,513)	$	(54,412)	$	(781,967)	$	(520,315)
Income tax expense (benefit)		259		(70)		706		105
Income tax (benefit) expense										Income tax (benefit) expense	(836)		259		(2,584)		706
Net Loss	Net Loss	$	(54,671)	$	(287,051)	$	(521,021)	$	(317,607)	Net Loss	$	(205,677)	$	(54,671)	$	(779,383)	$	(521,021)
Other Comprehensive Income (Loss)	Other Comprehensive Income (Loss)									Other Comprehensive Income (Loss)
Foreign currency translation adjustments	Foreign currency translation adjustments	$	5,406	$	2,829	$	3,945	$	5,048	Foreign currency translation adjustments	$	31	$	5,406	$	(16,993)	$	3,945
Unrealized gain (loss) on securities available for sale, net	Unrealized gain (loss) on securities available for sale, net	(2,105)		—		(3,041)		—		Unrealized gain (loss) on securities available for sale, net	4,520		(2,105)		2,061		(3,041)
Unrealized gain (loss) on cash flow hedges										Unrealized gain (loss) on cash flow hedges	(257)		—		(257)		—
Net Other Comprehensive Income (Loss)	Net Other Comprehensive Income (Loss)	3,301		2,829		904		5,048		Net Other Comprehensive Income (Loss)	4,294		3,301		(15,189)		904
Comprehensive Loss	Comprehensive Loss	$	(51,370)	$	(284,222)	$	(520,117)	$	(312,559)	Comprehensive Loss	$	(201,383)	$	(51,370)	$	(794,572)	$	(520,117)
Per share data:	Per share data:									Per share data:
Net loss per share attributable to common stockholders for Class A and Class B	Net loss per share attributable to common stockholders for Class A and Class B									Net loss per share attributable to common stockholders for Class A and Class B
Basic	Basic	$	(0.19)	$	(1.23)	$	(1.86)	$	(2.60)	Basic	$	(0.69)	$	(0.19)	$	(2.65)	$	(1.86)
Diluted	Diluted	$	(0.19)	$	(1.23)	$	(1.86)	$	(2.80)	Diluted	$	(0.69)	$	(0.19)	$	(2.65)	$	(1.86)
Weighted average common shares outstanding	Weighted average common shares outstanding									Weighted average common shares outstanding
Basic	Basic	285,641,820		233,309,590		279,570,015		122,161,508		Basic	297,204,715		285,641,820		293,915,268		279,570,015
Diluted	Diluted	285,641,820		233,309,590		279,570,015		123,329,359		Diluted	297,204,715		285,641,820		293,915,268		279,570,015

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

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AFFIRM HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENT OF ~~REDEEMABLE CONVERTIBLE PREFERRED STOCK AND~~

STOCKHOLDERS’ EQUITY ~~(DEFICIT)~~

(Unaudited)

(in thousands, except share amounts)


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

Balance as of June 30, 2022																	Balance as of June 30, 2022					287,365,373	$	3		$	4,231,303	$	(1,605,902)	$	(7,149)	$	2,618,255
Issuance of common stock upon exercise of stock options	Issuance of common stock upon exercise of stock options		7,403,503	—			37,470		—				—		37,470		Issuance of common stock upon exercise of stock options					215,949	—			1,192		—		—		1,192

Issuance of common stock in acquisition			183,733	—			10,000		—				—		10,000
Forfeiture of common stock related to acquisitions																	Forfeiture of common stock related to acquisitions					(243,384)	—			—		—		—		—
Repurchases of Common Stock																	Repurchases of Common Stock					(12,437)	—			(109)		—		—		(109)
Vesting of restricted stock units	Vesting of restricted stock units		772,653	—			—		—				—		—		Vesting of restricted stock units					2,166,715	—			—		—		—		—
Repurchases of common stock			(821)	—			(4)		—				—		(4)

Vesting of warrants for common stock																	Vesting of warrants for common stock					—	—			108,742		—		—		108,742
Stock-based compensation	Stock-based compensation		—	—			104,879		—				—		104,879		Stock-based compensation					—	—			141,012		—		—		141,012
Tax withholding on stock-based compensation	Tax withholding on stock-based compensation		—	—			(39,817)		—				—		(39,817)		Tax withholding on stock-based compensation					—	—			(27,311)		—		—		(27,311)

Foreign currency translation adjustments	Foreign currency translation adjustments		—	—			—		—				(3,802)		(3,802)		Foreign currency translation adjustments					—	—			—		—		(21,546)		(21,546)
Unrealized gain (loss) on securities available for sale			—	—			—		—				(279)		(279)
Net Loss			—	—			—		(306,615)				—		(306,615)
Balance as of September 30, 2021			277,717,172	$	3		$	3,579,764	$	(1,205,100)			$	2,692	$	2,377,359
Unrealized loss on securities available for sale																	Unrealized loss on securities available for sale					—	—			—		—		(5,528)		(5,528)
Net loss																	Net loss					—	—			—		(251,269)		—		(251,269)
Balance as of September 30, 2022																	Balance as of September 30, 2022					289,492,216	$	3		$	4,454,829	$	(1,857,171)	$	(34,223)	$	2,563,438
Issuance of common stock upon exercise of stock options																	Issuance of common stock upon exercise of stock options					300,903	—			1,372		—		—		1,372
Issuance of common stock, employee share purchase plan																	Issuance of common stock, employee share purchase plan					500,443	—			5,921		—		—		5,921
Vesting of restricted stock units																	Vesting of restricted stock units					1,798,218	—			—		—		—		—
Vesting of warrants for common stock																	Vesting of warrants for common stock					—	—			128,054		—		—		128,054
Stock-based compensation																	Stock-based compensation					—	—			144,218		—		—		144,218
Tax withholding on stock-based compensation																	Tax withholding on stock-based compensation					—	—			(18,009)		—		—		(18,009)
Foreign currency translation adjustments																	Foreign currency translation adjustments					—	—			—		—		4,522		4,522
Unrealized loss on securities available for sale																	Unrealized loss on securities available for sale					—	—			—		—		3,069		3,069
Net loss																	Net loss					—	—			—		(322,437)		—		(322,437)
Balance as of December 31, 2022																	Balance as of December 31, 2022					292,091,780	$	3		$	4,716,385	$	(2,179,608)	$	(26,632)	$	2,510,148
Issuance of common stock upon exercise of stock options	Issuance of common stock upon exercise of stock options		4,689,973	—			21,674		—				—		21,674		Issuance of common stock upon exercise of stock options					185,225	—			716		—		—		716
Vesting of restricted stock units	Vesting of restricted stock units		803,263	—			—		—				—		—		Vesting of restricted stock units					2,373,583	—			—		—		—		—
Vesting of warrants for common stock	Vesting of warrants for common stock		—	—			198,383		—				—		198,383		Vesting of warrants for common stock					—	—			93,922		—		—		93,922
Stock-based compensation	Stock-based compensation		—	—			101,920		—				—		101,920		Stock-based compensation					—	—			125,902		—		—		125,902
Tax withholding on stock-based compensation	Tax withholding on stock-based compensation		—	—			(72,963)		—				—		(72,963)		Tax withholding on stock-based compensation					—	—			(18,169)		—		—		(18,169)
Foreign currency translation adjustments	Foreign currency translation adjustments		—	—			—		—				2,341		2,341		Foreign currency translation adjustments					—	—			—		—		31		31
Unrealized gain (loss) on securities available for sale			—	—			—		—				(657)		(657)
Net Loss			—	—			—		(159,735)				—		(159,735)
Balance as of December 31, 2021			283,210,408	$	3		$	3,828,778	$	(1,364,835)			$	4,376	$	2,468,322
Issuance of common stock upon exercise of stock options			1,258,865	—			8,171		—				—		8,171
Repurchases of Common Stock			(9,472)	—			(80)		—				—		(80)
Vesting of restricted stock units			1,318,524	—			—		—				—		—
Vesting of warrants for common stock			—	—			92,169		—				—		92,169
Stock-based compensation			—	—			113,005		—				—		113,005
Tax withholding on stock-based compensation			—	—			(54,162)		—				—		(54,162)
Foreign currency translation adjustments			—	—			—		—				5,406		5,406
Unrealized gain (loss) on securities available for sale			—	—			—		—				(2,105)		(2,105)
Net Loss			—	—			—		(54,671)				—		(54,671)
Balance as of March 31, 2022			285,778,325	$	3		$	3,987,881	$	(1,419,506)			$	7,677	$	2,576,055
Unrealized gain on securities available for sale																	Unrealized gain on securities available for sale					—	—			—		—		4,520		4,520
Unrealized loss on cash flow hedges																	Unrealized loss on cash flow hedges					—	—			—		—		(257)		(257)
Net loss																	Net loss					—	—			—		(205,677)		—		(205,677)
Balance as of March 31, 2023																	Balance as of March 31, 2023					294,650,588	$	3		$	4,918,756	$	(2,385,285)	$	(22,338)	$	2,511,136

Table of Contents

AFFIRM HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENT OF ~~REDEEMABLE CONVERTIBLE PREFERRED STOCK~~

~~AND~~ STOCKHOLDERS’ EQUITY ~~(DEFICIT), CONT.~~

(Unaudited)

(in thousands, except share amounts)

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


	Common Stock		Additional Paid-In Capital			Accumulated Deficit		Accumulated Other Comprehensive Income		Total Stockholders’ Equity
		Shares			Amount
Balance as of June 30, 2021		269,358,104	$	3		$	3,467,236	$	(898,485)	$	6,773	$	2,575,527
Issuance of common stock upon exercise of stock options		7,403,503	—			37,470		—		—		37,470
Issuance of common stock in acquisition		183,733	—			10,000		—		—		10,000
Vesting of restricted stock units		772,653	—			—		—		—		—
Repurchases of common stock		(821)	—			(4)		—		—		(4)
Stock-based compensation		—	—			104,879		—		—		104,879
Tax withholding on stock-based compensation		—	—			(39,817)		—		—		(39,817)
Foreign currency translation adjustments		—	—			—		—		(3,802)		(3,802)
Unrealized loss on securities available for sale		—	—			—		—		(279)		(279)
Net loss		—	—			—		(306,615)		—		(306,615)
Balance as of September 30, 2021		277,717,172	$	3		$	3,579,764	$	(1,205,100)	$	2,692	$	2,377,359
Issuance of common stock upon exercise of stock options		4,689,973	—			21,674		—		—		21,674
Vesting of restricted stock units		803,263	—			—		—		—		—
Vesting of warrants for common stock		—	—			198,383		—		—		198,383
Stock-based compensation		—	—			101,920		—		—		101,920
Tax withholding on stock-based compensation		—	—			(72,963)		—		—		(72,963)
Foreign currency translation adjustments		—	—			—		—		2,341		2,341
Unrealized loss on securities available for sale		—	—			—		—		(657)		(657)
Net loss		—	—			—		(159,735)		—		(159,735)
Balance as of December 31, 2021		283,210,408	$	3		$	3,828,778	$	(1,364,835)	$	4,376	$	2,468,322
Issuance of common stock upon exercise of stock options		1,258,865	—			8,171		—		—		8,171
Repurchases of Common Stock		(9,472)	—			(80)		—		—		(80)
Vesting of restricted stock units		1,318,524	—			—		—		—		—
Vesting of warrants for common stock		—	—			92,169		—		—		92,169
Stock-based compensation		—	—			113,005		—		—		113,005
Tax withholding on stock-based compensation		—	—			(54,162)		—		—		(54,162)
Foreign currency translation adjustments		—	—			—		—		5,406		5,406
Unrealized loss on securities available for sale		—	—			—		—		(2,105)		(2,105)
Net loss		—	—			—		(54,671)		—		(54,671)
Balance as of March 31, 2022		285,778,325	$	3		$	3,987,881	$	(1,419,506)	$	7,677	$	2,576,055

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

Table of Contents

AFFIRM HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(in thousands)


		Nine Months Ended March 31,					Nine Months Ended March 31,
		2022		2021			2023		2022
Cash Flows from Operating Activities	Cash Flows from Operating Activities					Cash Flows from Operating Activities
Net Loss	Net Loss	$	(521,021)	$	(317,607)	Net Loss	$	(779,383)	$	(521,021)
Adjustments to reconcile net loss to net cash used in operating activities:	Adjustments to reconcile net loss to net cash used in operating activities:					Adjustments to reconcile net loss to net cash used in operating activities:
Provision for credit losses	Provision for credit losses	182,581		40,389		Provision for credit losses	237,377		182,581
Amortization of premiums and discounts on loans, net	Amortization of premiums and discounts on loans, net	(129,714)		(60,705)		Amortization of premiums and discounts on loans, net	(103,468)		(129,714)
Gain on sales of loans	Gain on sales of loans	(141,153)		(47,344)		Gain on sales of loans	(156,015)		(141,153)
Gain on extinguishment of debt						Gain on extinguishment of debt	(89,841)		—
Changes in fair value of assets and liabilities	Changes in fair value of assets and liabilities	(38,821)		45,310		Changes in fair value of assets and liabilities	(10,017)		(38,821)
Amortization of commercial agreement assets	Amortization of commercial agreement assets	72,804		50,097		Amortization of commercial agreement assets	64,202		72,804
Amortization of debt issuance costs	Amortization of debt issuance costs	13,215		3,675		Amortization of debt issuance costs	13,198		13,215
Amortization of discount on securities available for sale	Amortization of discount on securities available for sale	968		—		Amortization of discount on securities available for sale	(23,711)		968
Commercial agreement warrant expense	Commercial agreement warrant expense	157,023		—		Commercial agreement warrant expense	330,718		157,023
Stock-based compensation	Stock-based compensation	280,113		192,363		Stock-based compensation	348,372		280,113
Depreciation and amortization	Depreciation and amortization	35,607		12,092		Depreciation and amortization	91,355		35,607
Other	Other	(5,725)		18,163		Other	294		(5,725)
Change in operating assets and liabilities:						Change in operating assets and liabilities:
Purchases of loans held for sale	Purchases of loans held for sale	(3,869,327)		(1,640,672)		Purchases of loans held for sale	(4,719,789)		(3,869,327)
Proceeds from the sale of loans held for sale	Proceeds from the sale of loans held for sale	3,868,919		1,599,554		Proceeds from the sale of loans held for sale	4,838,250		3,868,919
Change in operating assets and liabilities:
Accounts receivable, net	Accounts receivable, net	(42,467)		(6,461)		Accounts receivable, net	(1,784)		(42,467)
Other assets	Other assets	28,018		(208,798)		Other assets	(3,292)		28,018
Accounts payable	Accounts payable	(8,773)		4,064		Accounts payable	(3,618)		(8,773)
Payable to third-party loan owners	Payable to third-party loan owners	(14,117)		11,526		Payable to third-party loan owners	(27,196)		(14,117)
Accrued interest payable	Accrued interest payable	240		2,535		Accrued interest payable	8,028		240
Accrued expenses and other liabilities	Accrued expenses and other liabilities	28,545		128,602		Accrued expenses and other liabilities	(45,288)		28,545
Net Cash Used in Operating Activities	Net Cash Used in Operating Activities	(103,085)		(173,217)		Net Cash Used in Operating Activities	(31,608)		(103,085)
Cash Flows from Investing Activities	Cash Flows from Investing Activities					Cash Flows from Investing Activities
Purchases and origination of loans held for investment	Purchases and origination of loans held for investment	(7,529,324)		(4,313,834)		Purchases and origination of loans held for investment	(9,622,289)		(7,529,324)
Proceeds from the sale of loans held for investment	Proceeds from the sale of loans held for investment	1,330,341		348,195		Proceeds from the sale of loans held for investment	1,093,894		1,330,341
Principal repayments and other loan servicing activity	Principal repayments and other loan servicing activity	5,867,583		3,002,351		Principal repayments and other loan servicing activity	7,199,568		5,867,583
Acquisition, net of cash and restricted cash acquired	Acquisition, net of cash and restricted cash acquired	(5,999)		(104,776)		Acquisition, net of cash and restricted cash acquired	(16,051)		(5,999)
Acquisition of commercial agreement assets		—		(25,900)

Additions to property, equipment and software	Additions to property, equipment and software	(59,254)		(12,414)		Additions to property, equipment and software	(95,917)		(59,254)
Purchases of securities available for sale	Purchases of securities available for sale	(770,047)		—		Purchases of securities available for sale	(566,261)		(770,047)
Proceeds from maturities and repayments of securities available for sale	Proceeds from maturities and repayments of securities available for sale	191,854		—		Proceeds from maturities and repayments of securities available for sale	1,127,785		191,854
Other investing cash inflows (outflows)	Other investing cash inflows (outflows)	(10,775)		—		Other investing cash inflows (outflows)	3,375		(10,775)

Net Cash Used in Investing Activities	Net Cash Used in Investing Activities	(985,621)		(1,106,378)		Net Cash Used in Investing Activities	(875,896)		(985,621)
Cash Flows from Financing Activities	Cash Flows from Financing Activities					Cash Flows from Financing Activities
Proceeds from issuance of convertible debt, net	Proceeds from issuance of convertible debt, net	1,704,300		—		Proceeds from issuance of convertible debt, net	—		1,704,300
Extinguishment of convertible debt						Extinguishment of convertible debt	(206,567)		—
Proceeds from funding debt	Proceeds from funding debt	2,776,245		2,413,905		Proceeds from funding debt	5,048,803		2,776,245
Payment of debt issuance costs	Payment of debt issuance costs	(8,154)		(11,266)		Payment of debt issuance costs	(17,407)		(8,154)
Principal repayments of funding debt	Principal repayments of funding debt	(2,572,876)		(2,555,699)		Principal repayments of funding debt	(4,195,110)		(2,572,876)
Proceeds from issuance of notes and residual trust certificates by securitization trusts	Proceeds from issuance of notes and residual trust certificates by securitization trusts	499,494		1,396,229		Proceeds from issuance of notes and residual trust certificates by securitization trusts	750,000		499,494
Principal repayments of notes issued by securitization trusts	Principal repayments of notes issued by securitization trusts	(233,723)		(144,503)		Principal repayments of notes issued by securitization trusts	(584,634)		(233,723)
Proceeds from issuance of redeemable convertible preferred stock, net		—		434,542
Conversion of redeemable convertible preferred stock		—		(13)
Proceeds from initial public offering, net		—		1,305,301

Proceeds from exercise of common stock options and warrants and contributions to ESPP	Proceeds from exercise of common stock options and warrants and contributions to ESPP	67,740		43,815		Proceeds from exercise of common stock options and warrants and contributions to ESPP	8,909		67,740
Repurchases of common stock	Repurchases of common stock	(84)		(786)		Repurchases of common stock	(109)		(84)
Payments of tax withholding for stock-based compensation	Payments of tax withholding for stock-based compensation	(166,942)		(127,566)		Payments of tax withholding for stock-based compensation	(63,489)		(166,942)
Net Cash Provided by Financing Activities	Net Cash Provided by Financing Activities	2,066,000		2,753,959		Net Cash Provided by Financing Activities	740,396		2,066,000
Effect of exchange rate changes on cash, cash equivalents and restricted cash	Effect of exchange rate changes on cash, cash equivalents and restricted cash	5,639		4,510		Effect of exchange rate changes on cash, cash equivalents and restricted cash	(2,207)		5,639
Net Increase in Cash, Cash Equivalents and Restricted Cash	Net Increase in Cash, Cash Equivalents and Restricted Cash	982,933		1,478,874		Net Increase in Cash, Cash Equivalents and Restricted Cash	(169,315)		982,933
Cash, Cash equivalents and Restricted cash, Beginning of period	Cash, Cash equivalents and Restricted cash, Beginning of period	1,692,632		328,128		Cash, Cash equivalents and Restricted cash, Beginning of period	1,550,807		1,692,632
Cash, Cash Equivalents and Restricted Cash, End of Period	Cash, Cash Equivalents and Restricted Cash, End of Period	$	2,675,565	$	1,807,002	Cash, Cash Equivalents and Restricted Cash, End of Period	$	1,381,492	$	2,675,565

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

Table of Contents

AFFIRM HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS, CONT.

(Unaudited)

(in thousands)


		Nine Months Ended March 31,					Nine Months Ended March 31,
		2022		2021			2023		2022
Reconciliation to amounts on consolidated balance sheets (as of period end)	Reconciliation to amounts on consolidated balance sheets (as of period end)					Reconciliation to amounts on consolidated balance sheets (as of period end)
Cash and cash equivalents	Cash and cash equivalents	2,261,937		1,623,672		Cash and cash equivalents	972,477		2,261,937
Restricted cash	Restricted cash	413,628		183,330		Restricted cash	409,015		413,628
Total Cash, Cash Equivalents and Restricted Cash	Total Cash, Cash Equivalents and Restricted Cash	$	2,675,565	$	1,807,002	Total Cash, Cash Equivalents and Restricted Cash	$	1,381,492	$	2,675,565


		Nine Months Ended March 31,					Nine Months Ended March 31,
		2022		2021			2023		2022
Supplemental Disclosures of Cash Flow Information	Supplemental Disclosures of Cash Flow Information					Supplemental Disclosures of Cash Flow Information
Cash payments for interest expense	Cash payments for interest expense	$	34,325	$	28,575	Cash payments for interest expense	$	104,923	$	34,325
Cash paid for operating leases	Cash paid for operating leases	11,989		9,726		Cash paid for operating leases	8,328		11,989
Cash paid for income taxes	Cash paid for income taxes	99		81		Cash paid for income taxes	378		99
Supplemental Disclosures of Non-Cash Investing and Financing Activities	Supplemental Disclosures of Non-Cash Investing and Financing Activities					Supplemental Disclosures of Non-Cash Investing and Financing Activities
Stock-based compensation included in capitalized internal-use software	Stock-based compensation included in capitalized internal-use software	39,691		7,792		Stock-based compensation included in capitalized internal-use software	62,760		39,691
Issuance of common stock in connection with acquisition	Issuance of common stock in connection with acquisition	10,000		117,023		Issuance of common stock in connection with acquisition	—		10,000
Additions to property and equipment included in accrued expenses						Additions to property and equipment included in accrued expenses	—		107
Securities retained under unconsolidated securitization transactions	Securities retained under unconsolidated securitization transactions	22,067		—		Securities retained under unconsolidated securitization transactions	—		22,067
Right of use assets obtained in exchange for operating lease liabilities	Right of use assets obtained in exchange for operating lease liabilities	3,421		78,421		Right of use assets obtained in exchange for operating lease liabilities	494		3,421
Additions to property and equipment included in accrued expenses		107		24
Issuance of warrants in exchange for commercial agreement		—		270,579
Conversion of convertible debt		—		88,559

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

Table of Contents

1. Business Description

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

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

2. Summary of Significant Accounting Policies

Basis of Presentation and Principles of Consolidation

The accompanying interim condensed consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”), as contained in the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”), disclosure requirements for interim financial information, and the requirements of Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. The unaudited interim condensed consolidated financial statements should be read in conjunction with the audited financial statements and notes thereto for the fiscal year ended June 30, ~~2021.~~2022. The balance sheet as of June 30, ~~2021~~2022 has been derived from the audited financial statements at that date. Management believes these interim condensed consolidated financial statements reflect all adjustments, including those of a normal and recurring nature, which are necessary for a fair presentation of the results for the interim periods presented. The results of operations for the interim periods are not necessarily indicative of the results that may be expected for the full year or any other interim period.

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

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

Use of Estimates

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

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purchase commitment, the fair value of servicing assets and liabilities, discount on ~~self-originated~~directly originated loans, ~~the fair~~

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~~value and useful lives of tangible and intangible assets acquired and liabilities assumed resulting from business combinations,~~ the fair value of assets acquired and any contingent consideration ~~related to~~transferred in business combinations, the evaluation for impairment of intangible assets and goodwill, ~~the incremental borrowing rate used in discounting our lease liabilities,~~ the fair value of available for sale debt securities including retained interests in our securitization trusts, the fair value of residual certificates issued by our securitization trusts held by third parties, and stock-based compensation, including the fair value of warrants issued to nonemployees. We base our estimates on market-based inputs, historical experience, current events, and other factors we believe to be reasonable under the circumstances. ToThese estimates are subjective in nature and to the extent that there are ~~material~~ differences between these estimates and actual results, our financial condition or operating results ~~will~~in future periods may be ~~materially~~ affected.

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

~~Immaterial Correction of Prior Period Amounts~~

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

We remeasure the fair value of the contingent consideration liability recorded in connection with the PayBright, Inc. (“PayBright”) acquisition at each reporting date. An incorrect input in the Monte Carlo simulation used to estimate the fair value as of June 30, 2021, resulted in an understatement of accrued expenses and other liabilities of $5.6 million as of June 30, 2021 as previously reported.

We measure stock-based compensation based on the fair value of an award at the grant date and recognize expense over the vesting period of the award based on the estimated portion of the award that is expected to vest. An incorrect determination of the grant date and service inception dates for certain awards granted prior to our initial public offering (“IPO”), as well as incorrect treatment of expense recognition for certain terminated employees, resulted in an understatement of additional paid in capital of $4.5 million as of June 30, 2021 as previously reported.

Accordingly, we have corrected the relevant financial statements and related footnotes as of June 30, 2021 within these interim condensed consolidated financial statements from amounts previously reported. We have evaluated the materiality of these misstatements based on an analysis of quantitative and qualitative factors and concluded they were not material to the prior period financial statements, individually or in aggregate.

~~The following table provides the impact of the correction on our consolidated balance sheet as of June 30, 2021, as presented below (in thousands):~~

As of June 30, 2021
As Previously Reported Adjustments As Corrected
Accrued expenses and other liabilities 317,951 5,626 323,577
Total liabilities 2,285,814 5,626 2,291,440
Additional paid in capital 3,462,762 4,474 3,467,236
Accumulated deficit (888,381) (10,104) (898,485)
Accumulated other comprehensive income 6,769 4 6,773
Total stockholders’ equity 2,581,153 (5,626) 2,575,527

We also determined that stock based compensation previously recorded during the three and nine months ended March 31, 2021 was understated by $25.0 million, as the estimated fair value of RSUs granted during the three months ended December 31, 2020 did not reflect an increase in share value due to the anticipated IPO. Such matter was corrected and properly reported in our consolidated financial statements as of and for the year ended

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June 30, 2021, and is prospectively corrected in the accompanying unaudited interim financial statements for the three and nine months ended March 31, 2021. As a result, the accompanying unaudited interim financial information for the three and nine months ended March 31, 2021 has been corrected to reflect the total combined increase in stock based compensation expense of $40.0 million from amounts previously reported.

We determined, based on consideration of quantitative and qualitative factors, that the errors had an immaterial impact, individually and in aggregate, on our previously issued financial statements. The following tables show the affected line items (in thousands) for the periods ended March 31, 2021.

Three Months Ended March 31, 2021
As Previously Reported Adjustments As Corrected
Consolidated Statement of Operations and Comprehensive Loss
Processing and servicing 21,335 33 21,368
Technology and data analytics 98,728 6,078 104,806
Sales and marketing 57,549 635 58,184
General and administrative 146,853 33,146 179,999
Total Operating Expenses 400,121 39,892 440,013
Loss Before Income Taxes (247,229) (39,892) (287,121)
Net Loss Attributable to Common Stockholders (247,159) (39,892) (287,051)
Net loss per share attributable to common stockholders for Class A and Class B:
Basic $ (1.06) $ (0.17) $ (1.23)
Diluted $ (1.06) $ (0.17) $ (1.23)

Nine Months Ended March 31, 2021
As Previously Reported Adjustments As Corrected
Consolidated Statement of Operations and Comprehensive Loss
Processing and servicing 51,635 33 51,668
Technology and data analytics 174,130 6,078 180,208
Sales and marketing 119,243 635 119,878
General and administrative 220,042 33,146 253,188
Total Operating Expenses 838,206 39,892 878,098
Loss Before Income Taxes (277,610) (39,892) (317,502)
Net Loss Attributable to Common Stockholders (277,715) (39,892) (317,607)
Net loss per share attributable to common stockholders for Class A and Class B:
Basic $ (2.27) $ (0.33) $ (2.60)
Diluted $ (2.48) $ (0.32) $ (2.80)

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Three Months Ended March 31, 2021
As Previously Reported Adjustments As Corrected
Consolidated Statement of Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit)
Stock-based compensation - Additional Paid-In Capital 146,314 41,569 187,883
Net Loss - Accumulated Deficit (247,159) (39,892) (287,051)
Balance as of March 31, 2021 - Total Stockholders' Equity 2,404,021 1,677 2,405,698

Nine Months Ended March 31, 2021
As Previously Reported Adjustments As Corrected
Consolidated Statement of Cash Flows
Cash Flows from Operating Activities
Net Loss (277,715) (39,892) (317,607)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation 152,471 39,892 192,363
Net Cash Used in Operating Activities (173,217) — (173,217)

Significant Accounting Policies

~~Except for the addition of policies described below for securities available for sale, there~~There were no material changes to our significant accounting policies as disclosed in Note 2. Summary of Significant Accounting Policies of our Annual Report on Form 10-K for the fiscal year ended June 30, ~~2021,~~2022, which was filed with the SEC on ~~September 17, 2021.~~August 29, 2022.

~~Securities Available for Sale~~

We hold certain investments in marketable debt securities and retained interests in our unconsolidated securitization trusts which are accounted for under ASC Topic 320, “Investments - Debt Securities” (“ASC 320”). We have classified these investments as available for sale, as defined within ASC 320. These investments are held at fair value with changes in fair value recorded in unrealized gain (loss) on securities available for sale, net within other comprehensive income (loss). As of the end of each reporting period, management reviews each security where the fair value is less than the amortized cost to determine whether any portion of the decline in fair value is due to a credit loss and/or whether or not we intend to sell or will be required to sell such security before recovery of its amortized cost basis. The portion of any decline in fair value which management identifies as a credit loss will be recognized as an allowance for credit losses through other (expense) income, net rather than unrealized gain (loss) on securities available for sale, net. To the extent management intends to sell or may be required to sell a security in an unrealized loss position, we 1) reverse any previously recorded allowance for credit losses with an offsetting entry to reduce the amortized cost basis of the security and 2) write-off any remaining portion of the amortized cost basis to equal its fair value, with this change recorded through other (expense) income, net.

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

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

With respect to retained interests in our securitization trusts, we apply the guidance in ASC Topic 325, “Investments - Other” (“ASC 325”) relating to beneficial interests. Accordingly, we recognize interest income each

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period based on the effective interest rate calculated using expected cash flows. Changes in the timing of expected cash flows are accounted for prospectively through an adjustment to interest income. When fair value is below amortized cost, we record an allowance for credit losses measured based on the difference between amortized cost and projected cash flows discounted at the effective interest rate. The allowance for credit losses is capped at the difference between amortized cost and fair value.

~~Refer to Note 12. Investments for additional information.~~

~~Sales and Marketing Costs~~

Sales and marketing costs include the expense related to warrants and other share-based payments granted to our enterprise partners. See Note 6. Balance Sheet Components for more information on these arrangements. Sales and marketing costs also include salaries and personnel-related costs, as well as costs of general marketing and promotional activities, promotional event programs, sponsorships, and allocated overhead. A portion of these costs related to general marketing and promotional activities are considered advertising costs within the meaning of ASC Topic 720, “Other Expenses” (“ASC 720”), and are expensed as incurred. Advertising costs totaled $12.2 million and $55.6 million for the three and nine months ended March 31, 2022, respectively, and $9.1 million and $24.4 million for the three and nine months ended March 31, 2021, respectively.

Recently Adopted Accounting Standards

~~Convertible Debt Instruments~~

In August 2020, the FASB issued Accounting Standard Update (“ASU”) 2020-06, “Debt — Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging — Contracts in Entity’s Own Equity (Subtopic 815-40),” which simplifies the accounting for convertible instruments. The guidance removes certain accounting models that separate the embedded conversion features from the host contract for convertible instruments. Either a modified retrospective method of transition or a fully retrospective method of transition is permissible for the adoption of this standard. ASU 2020-06 is effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. Early adoption is permitted no earlier than the fiscal year beginning after December 15, 2020. We early adopted the new standard effective July 1, 2021 on a modified retrospective basis. The adoption of the new standard did not have any impact on our financial statements as of the adoption date. As further discussed in Note ~~10.Debt, the Company issued certain convertible senior notes in November 2021, and the accounting for these instruments was based on the guidance in ASU 2020-06.~~

~~Recent Accounting Pronouncements Not Yet Adopted~~

~~Reference Rate Reform~~

In March 2020, the FASB issued ASU 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” Subject to meeting certain criteria, the new guidance provides optional expedients and exceptions to applying contract modification accounting under existing U.S. GAAP, to address the expected phase out of the London Interbank Offered Rate (“LIBOR”). This ASU is effective for all entities upon issuance as of March 12, 2020 through December 31, 2022. In January 2021, the FASB also issued ASU 2021-01, “Reference Rate Reform (Topic 848),” which provides additional optional expedients and exceptions applicable to all entities that have derivative instruments that use an interest rate for margining, discounting, or contract price alignment that is modified as a result of reference rate reform. This ASU is effective for all entities upon issuance as of January 7, 2021 through December 31, 2022. We have reviewed all our financial agreements that utilize LIBOR as the reference rate and determined there is no material impact to our interim condensed consolidated financial statements as of March 31, 2022. Throughout the remaining effective period for

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ASU 2020-04 and ASU 2021-01, we will continue to evaluate the available relief measures within each of these amendments and will determine any impact on our consolidated financial statements and disclosures, as applicable.

~~Business Combinations~~

In October 2021, the FASB issued ASU 2021-08, “Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers,” which requires contract assets and contract liabilities, such as deferred revenue, acquired in a business combination to be recognized and measured in accordance with Topic 606 (Revenue from Contracts with Customers). ASU 2021-08 is expected to reduce diversity in practice and increase comparability for both the recognition and measurement of acquired revenue contracts with customers at the date of and after a business combination. The ASU is effective for fiscal years beginning after December 15, 2022 and should be applied prospectively to acquisitions occurring on or after the effective date. Early adoption is permitted, including for interim periods, and is applicable to all business combinations for which the acquisition date occurs within the beginning of the fiscal year of adoption. We are in the process of evaluating the impact of adopting this accounting standard update on our consolidated financial statements and disclosures.

Financial Instruments - Credit Losses

In March 2022, the FASB issued ASU 2022-02, “Financial Instruments— Credit Losses (Topic 326), Troubled Debt Restructurings and Vintage Disclosure” which addresses areas identified by the FASB as part of its post-implementation review of the current expected credit losses model or “CECL” previously issued in ASU 2016-13, “Financial Instruments — Credit Losses (Topic 326)”. The amendments in this ASU eliminate the accounting guidance for troubled debt restructurings by creditors while enhancing the disclosure requirements for loan refinancing and restructurings made with borrowers experiencing financial difficulty. In addition, the amendments require a public business entity to disclose current-period gross write-offs by year of origination for financing receivables and net investment in leases in the vintage disclosures. For entities that have adopted ASU 2016-13, ASU 2022-02 is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Early adoption is permitted if an entity has adopted ASU 2016-13. Amendments in this ASU should be applied prospectively except for the transition method related to the accounting for troubled debt restructurings in which an entity has the option to apply a modified retrospective transition method resulting in a cumulative-effect adjustment to retained earnings in the period of adoption. We early adopted the new standard effective July 1, 2022 on a prospective basis. The adoption of the guidance did not have a material impact on our interim condensed financial statements.

Business Combinations

In October 2021, the FASB issued ASU 2021-08, “Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers”, which requires contract assets and contract liabilities, such as deferred revenue, acquired in a business combination to be recognized and measured in accordance with Topic 606 (Revenue from Contracts with Customers). ASU 2021-08 is expected to reduce diversity in practice and increase comparability for both the recognition and measurement of acquired revenue contracts with customers at the date of and after a business combination. The ASU is effective for fiscal years beginning after December 15, 2022 and should be applied prospectively to acquisitions occurring on or after the effective date. Early adoption is permitted, including for interim periods, and is applicable to all business combinations for which the acquisition date occurs within the beginning of the fiscal year of adoption. We early adopted the new standard effective January 1, 2023 on a prospective basis. The adoption of the guidance did not have a material impact on our interim condensed financial statements.

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Recent Accounting Pronouncements Not Yet Adopted

Reference Rate Reform

In March 2020, the FASB issued ASU 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting”. Subject to meeting certain criteria, the new guidance provides optional expedients and exceptions to applying contract modification accounting under existing U.S. GAAP, to address the expected phase out of the London Interbank Offered Rate (“LIBOR”). In January 2021, the FASB also issued ASU 2021-01, “Reference Rate Reform (Topic 848): Scope”, which provides additional optional expedients and exceptions applicable to all entities that have derivative instruments that use an interest rate for margining, discounting, or contract price alignment that is modified as a result of reference rate reform. In December 2022, the FASB issued ASU 2022-06, “Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848”, to extend the temporary accounting rules under Topic 848 from December 31, 2022 to December 31, 2024. These ASUs are ineffective for all entities upon their respective issuance dates through December 31, 2024. We have reviewed all our financial agreements that utilize LIBOR as the ~~process~~reference rate and determined there is no impact to our interim condensed consolidated financial statements as of ~~evaluating~~March 31, 2023. Throughout the ~~impact~~remaining effective period for ASU 2020-04, ASU 2021-01 and ASU 2022-06, we will continue to evaluate the available relief measures within each of ~~adopting this accounting standard update~~these amendments and will determine any impact on our consolidated financial statements and ~~disclosures.~~disclosures, as applicable.

3. Revenue

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


	Three Months Ended March 31,				Nine Months Ended March 31,
	2023		2022		2023		2022

Merchant network revenue	$	119,013	$	121,054	$	366,181	$	340,385
Virtual card network revenue	29,469		23,169		85,294		69,122

Interest income	178,270		134,599		470,393		390,256
Gain on sales of loans	32,813		52,484		156,015		141,153
Servicing income	21,413		23,456		64,277		44,242
Total Revenue, net	$	380,978	$	354,762	$	1,142,160	$	985,158

Merchant Network Revenue

Merchant partners (or integrated merchants) are generally charged a fee based on gross merchandise volume (GMV) processed through the Affirm platform. The fees vary depending on the individual arrangement between us and each merchant and on the terms of the product offering. The fee is recognized at the point in time the merchant successfully confirms the transaction, which is when the terms of the executed merchant agreement are fulfilled. We may originate certain loans via our wholly-owned subsidiaries, with zero or below market interest rates. In these instances, the par value of the loans originated is in excess of the fair market value of such loans, resulting in a loss, which we record as a reduction to merchant network revenue. In certain cases, the losses incurred on loans originated for a merchant may exceed the total network revenue earned on those loans. To the extent we do not expect to recover the losses in future periods, we record the excess loss amounts as a sales and marketing expense.

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

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

Virtual Card Network Revenue

We have agreements with issuer processors to facilitate transactions through the issuance of virtual debit cards to be used by consumers at checkout. Consumers can apply for a virtual debit card through the Affirm app and, upon approval, receive a single-use virtual debit card to be used for their purchase online or offline at a non-integrated merchant. The virtual debit card is funded at the time a transaction is authorized using cash held by the issuer processor in a reserve fund. Our originating bank partner then originates a loan to the consumer once the transaction is confirmed by the merchant. The non-integrated merchants are charged interchange fees by the issuer processor for virtual debit card transactions, and the issuer processor shares a portion of this revenue with us. We also leverage this issuer processor as a means of integrating certain merchants. Similarly, for these arrangements with integrated merchants, the merchant is charged interchange fees by the issuer processor and the issuer processor shares a portion of this revenue with us.

Interest Income

Interest income consisted of the following components (in thousands):


		Three Months Ended March 31,				Nine Months Ended March 31,					Three Months Ended March 31,				Nine Months Ended March 31,
		2022		2021		2022		2021			2023		2022		2023		2022
Interest income on unpaid principal balance	Interest income on unpaid principal balance	$	95,253	$	65,921	$	266,868	162,666		Interest income on unpaid principal balance	$	147,759	$	95,253	$	379,755	$	266,868
Amortization of discount on loans	Amortization of discount on loans	45,443		31,625		138,853		68,843		Amortization of discount on loans	39,130		45,443		116,937		138,853
Amortization of premiums on loans	Amortization of premiums on loans	(3,407)		(2,373)		(9,139)		(6,449)		Amortization of premiums on loans	(4,515)		(3,407)		(13,469)		(9,139)
Interest receivable charged-off, net of recoveries	Interest receivable charged-off, net of recoveries	(2,690)		(643)		(6,326)		(2,436)		Interest receivable charged-off, net of recoveries	(4,104)		(2,690)		(12,830)		(6,326)
Total interest income	Total interest income	$	134,599	$	94,530	$	390,256	$	222,624	Total interest income	$	178,270	$	134,599	$	470,393	$	390,256

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We accrue interest income using the effective interest method. Interest income on a loan is accrued daily, based on the finance charge disclosed to the consumer, over the term of the loan based upon the principal outstanding. The accrual of interest on a loan is suspended if a formal dispute with the consumer involving either Affirm or the merchant of record is opened, or a loan is 120 days past due. Upon the resolution of a dispute with the consumer, the accrual of interest is resumed, and any interest that would have been earned during the disputed period is retroactively accrued. As of March 31, ~~2022~~2023 and June 30, ~~2021,~~2022, the balance of loans held for investment on non-accrual status was ~~$1.5~~$1.3 million and ~~$1.1~~$1.7 million, respectively.

Gain on Sales of Loans

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

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Servicing Income

Servicing income includes contractual fees specified in our servicing agreements with third-party loan owners and unconsolidated securitizations that are earned from providing professional services to manage loan portfolios on their behalf. Servicing income also includes fair value adjustments for servicing assets and servicing liabilities.

4. Loans Held for Investment and Allowance for Credit Losses

Loans held for investment consisted of the following (in thousands):

March 31, 2022 June 30, 2021
Unpaid principal balance $ 2,528,197 $ 2,058,863
Accrued interest receivable 20,390 15,466
Premiums on loans held for investment 8,580 7,071
Less: Discount due to loss on loan purchase commitment (1)
(29,196) (53,177)
Less: Discount due to loss on self-originated loans (1)
(20,305) —
Less: Fair value adjustment on loans acquired through business combination (4,806) (5,903)
Total loans held for investment $ 2,502,860 $ 2,022,320

~~(1)~~ ~~As of June 30, 2021, discount due to loss on self-originated loans, in the amount of $6.2 million, was included with discount due to loss on loan purchase commitment.~~


	March 31, 2023		June 30, 2022
Unpaid principal balance	$	3,823,038	$	2,516,733
Accrued interest receivable	33,997		20,697
Premiums on loans held for investment	7,896		8,911
Less: Discount due to loss on loan purchase commitment	(45,368)		(20,692)
Less: Discount due to loss on directly originated loans	(43,486)		(20,443)
Less: Fair value adjustment on loans acquired through business combination	(535)		(1,645)
Total loans held for investment	$	3,775,542	$	2,503,561

Loans held for investment includes loans originated through our originating bank partners and directly originated loans. The majority of the loans that are underwritten using our technology platform and originated by our originating bank partners are later purchased by us. We purchased loans from our originating bank partners in the amount of ~~$3,013.8 million~~$3.7 billion and ~~$8,631.2 million for~~$11.7 billion during the three and nine months ended March 31, ~~2022,~~2023, respectively, and ~~$2,031.2 million~~$3.0 billion and ~~$5,620.8 million for~~$8.6 billion during the three and nine months ended March 31, ~~2021,~~2022, respectively.

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

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

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

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

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The following table presents an analysis of the credit quality, by ~~ITACs~~ITACS score, of the amortized cost basis excluding accrued interest receivable, by fiscal year of origination on loans held for investment and loans held for sale (in thousands) as of March 31, ~~2022:~~2023:

Amortized Costs Basis by Fiscal Year of Origination
2022 2021 2020 2019 2018 Prior Total
96+ $ 1,162,905 $ 201,085 $ 44,799 $ 598 $ 1 $ — $ 1,409,388
94 – 96 549,083 33,978 1,192 35 2 — 584,290
90 – 94 219,475 12,631 77 4 — — 232,187
<90 59,324 426 3 — — — 59,753
No score(1)
165,593 29,002 5,115 626 127 7 200,470
Total loan receivables $ 2,156,380 $ 277,122 $ 51,186 $ 1,263 $ 130 $ 7 $ 2,486,088


March 31, 2023
	Amortized Costs Basis by Fiscal Year of Origination
	2023		2022		2021		2020		2019		Prior		Total
96+	$	2,185,767	$	94,353	$	33,450	$	9,085	$	9	$	1	$	2,322,665
94-96	865,503		38,625		933		189		6		2		905,258
90-94	95,252		12,391		136		2		4		—		107,785
<90	16,786		2,795		6		2		—		—		19,589
No score(1)	288,923		78,840		16,835		1,518		288		15		386,419
Total amortized cost basis	$	3,452,231	$	227,004	$	51,360	$	10,796	$	307	$	18	$	3,741,716

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

Net Charge-offs by Fiscal Year of Origination
2022 2021 2020 2019 2018 Prior Total
Current period charge-offs (50,207) (16,790) (250) (32) (1) — (67,280)
Current period recoveries 2,080 2,479 777 669 250 190 6,445
Current period net charge-offs $ (48,127) $ (14,311) $ 527 $ 637 $ 249 $ 190 $ (60,835)
The following table presents net charge-offs by fiscal year of origination for the nine months ended (in thousands) as of March 31, 2023:


	Net Charge-offs by Fiscal Year of Origination
	2023		2022		2021		2020		2019		Prior		Total
Current period charge-offs	(59,228)		(161,934)		(6,115)		(509)		(74)		(26)		(227,886)
Current period recoveries	2,956		13,447		4,000		1,158		753		554		22,868
Current period net charge-offs	$	(56,272)	$	(148,487)	$	(2,115)	$	649	$	679	$	528	$	(205,018)

The following table presents an analysis of the credit quality, by ITACS score, of the amortized cost basis excluding accrued interest receivable, by fiscal year of origination on loans held for investment and loans held for sale (in thousands) as of June 30, 2022:


June 30, 2022
	Amortized Costs Basis by Fiscal Year of Origination
	2022		2021		2020		2019		2018		Prior		Total
96+	$	1,218,104	$	122,503	$	33,458	$	157	$	1	$	—	$	1,374,223
94-96	620,403		11,240		773		13		2		—		632,431
90-94	220,056		3,886		6		4		—		—		223,952
<90	44,300		135		2		—		—		—		44,437
No score(1)	186,044		20,554		3,368		444		79		2		210,491
Total amortized cost basis	$	2,288,907	$	158,318	$	37,607	$	618	$	82	$	2	$	2,485,534

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

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Loan receivables are defined as past due if either the principal or interest have not been received within four calendars days of when they are due in accordance with the agreed upon contractual terms. The following table presents an aging analysis of the amortized cost basis excluding accrued interest receivable of loans held for investment and loans held for sale by delinquency status (in thousands):


		March 31, 2022		June 30, 2021			March 31, 2023		June 30, 2022
Non-delinquent loans	Non-delinquent loans	$	2,330,666	$	1,939,976	Non-delinquent loans	$	3,587,516	$	2,322,919
4 – 29 calendar days past due	4 – 29 calendar days past due	63,010		43,838		4 – 29 calendar days past due	68,344		77,963
30 – 59 calendar days past due	30 – 59 calendar days past due	33,471		17,267		30 – 59 calendar days past due	32,591		34,669
60 – 89 calendar days past due	60 – 89 calendar days past due	30,231		12,044		60 – 89 calendar days past due	27,888		26,919
90 – 119 calendar days past due(1)	90 – 119 calendar days past due(1)	28,710		6,759		90 – 119 calendar days past due(1)	25,377		23,064
Total amortized cost basis	Total amortized cost basis	$	2,486,088	$	2,019,884	Total amortized cost basis	$	3,741,716	$	2,485,534

(1)Includes $24.6 million and $22.7 million of loan receivables as of March 31, 2023 and June 30, 2022, respectively, that are 90 days or more past due, but are not on nonaccrual status.

We maintain an allowance for credit losses at a level sufficient to absorb expected credit losses based on evaluating known and inherent risks in our loan portfolio. The allowance for credit losses is determined based on our current estimate of expected credit losses over the remaining contractual term, historical credit losses, consumer payment trends, estimates of recoveries, and future expectations as of each balance sheet date. Adjustments to the allowance each period for changes in our estimate of lifetime expected credit losses are recognized in earnings through the provision for credit losses presented on our interim condensed consolidated statements of operations and comprehensive loss. When available information confirms that specific loans or portions thereof are uncollectible, identified amounts are charged against the allowance for credit losses. Loans are charged-off in accordance with our

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charge-off policy, as the contractual principal becomes 120 days past due. Subsequent recoveries of the unpaid principal balance, if any, are credited to the allowance for credit losses.

The following table details activity in the allowance for credit losses, including charge-offs, recoveries and provision for loan losses (in thousands):


		Three Months Ended March 31,				Nine Months Ended March 31,			Three Months Ended March 31,				Nine Months Ended March 31,
		2022		2021		2022	2021		2023		2022		2023		2022
Balance at beginning of period	Balance at beginning of period	$	158,289	$	124,992	117,760	95,137	Balance at beginning of period	$	182,100	$	158,289	$	155,392	$	117,760
Adjustment due to adoption of new accounting standard		—		—		—	10,083
Provision for credit losses	Provision for credit losses	62,021		(993)		172,720	39,190	Provision for credit losses	61,480		62,021		225,962		172,720
Charge-offs	Charge-offs	(67,280)		(14,537)		(145,307)	(40,377)	Charge-offs	(75,820)		(67,280)		(227,886)		(145,307)
Recoveries of charged-off receivables	Recoveries of charged-off receivables	6,445		4,292		14,302	9,721	Recoveries of charged-off receivables	8,576		6,445		22,868		14,302
Balance at end of period	Balance at end of period	$	159,475	$	113,754	159,475	113,754	Balance at end of period	$	176,336	$	159,475	$	176,336	$	159,475

5. ~~Business Combinations~~Acquisitions

During the nine months ended March 31, 2023 and 2022, there was one acquisition accounted for as business combination in each of the respective years, discussed further below.

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Acquisitions completed during the three and nine months ended March 31, 2023

Butter Holdings Ltd

On February 1, 2023, we completed the closing of the transaction contemplated by a share purchase agreement entered into with certain sellers to acquire the entire issued share capital of Butter Holdings Ltd., (“Butter”) a buy now, pay later company based in the United Kingdom. The purchase price was comprised of (i) $14.9 million in cash, subject to adjustments in accordance with the purchase agreement, and (ii) $1.5 million settlement of subordinated secured notes.

The acquisition date fair value of the consideration transferred for Butter was approximately $16.3 million, which consisted of the following (in thousands):


Cash	$	14,863
Settlement of subordinated secured notes	1,475
Total acquisition date fair value of the consideration transferred	$	16,337

The acquisition was accounted for as a business combination and reflects the application of acquisition accounting in accordance with ASC Topic 805, “Business Combinations” (“ASC 805”). The acquired identifiable intangible assets have been recorded at their estimated fair values with the excess purchase price assigned to goodwill. The goodwill was primarily attributed to future synergies from integration. The goodwill is not expected to be deductible for income tax purposes.

The following table summarizes the allocation of the consideration paid of approximately $16.3 million to the fair values of the assets acquired and liabilities assumed at the acquisition date (in thousands):


Cash and cash equivalents	$	287
Loans held for investment, net	172
Accounts Receivable, net	11
Intangible assets	9,243
Other assets	672
Total assets acquired	10,385
Accounts payable	568
Accrued expenses and other liabilities	2,923
Total liabilities assumed	3,491
Net assets acquired	6,894
Goodwill	9,443
Total purchase price	$	16,337

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

Fair Value

Useful Life
(in years)

Lending license

9,243

Indefinite

The fair value of the intangible asset was determined by applying the with-and-without method. The fair value measurements are based on significant unobservable inputs, including management estimates and assumptions, and thus represents Level 3 measurements.

The transaction costs associated with the acquisition were immaterial for the three months ended March 31, 2023 and approximately $1.7 million for the nine months ended March 31, 2023, which are included in general and administrative expense in the interim consolidated statements of operations and comprehensive loss.

Acquisitions completed during the nine months ended March 31, 2022

ShopBrain

On July 1, 2021, ~~Affirm~~we completed the acquisition of technology and intellectual property from Yroo, Inc. and entered into employment arrangements with certain of its employees (“the ShopBrain acquisition”). Yroo, Inc. is a data aggregation and cataloging technology company based in Canada (“ShopBrain”). The purchase price was comprised of (i) $30.0 million in cash and (ii) 151,745 shares of our Class A common stock issued to the shareholders of ShopBrain at closing.

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


Cash	$	30,000
Fair value of Class A common stock transferred	10,000
Total acquisition date fair value of the consideration transferred	$	40,000

The acquisition was accounted for as a business combination and reflects the application of acquisition accounting in accordance with ASC ~~Topic 805, “Business Combinations” (“ASC 805”)~~.805. The acquired identifiable intangible assets have been recorded at their estimated fair values with the excess purchase price assigned to goodwill. The goodwill was primarily attributed to future synergies from integration and the value of the assembled workforce. The goodwill is expected to be deductible for income tax purposes.

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


Intangible assets	$	9,488
Total net assets acquired	9,488
Goodwill	30,512
Total purchase price	$	40,000

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


	Fair Value		Useful Life (in years)
Developed technology	$	9,488	3.0

The fair values of the intangible assets were determined by applying the replacement cost method. The fair value measurements are based on significant unobservable inputs, including management estimates and assumptions, and thus represents Level 3 measurements.

The transaction costs associated with the acquisition were approximately $0.2 million for the nine months ended March 31, 2022, which are included in general and administrative expense within the interim condensed consolidated statements of operations and comprehensive loss. There were nono transaction costs associated with the acquisition for the three months ended March 31, 2022.

Other acquisitions

Pro forma adjustments would only include the additional amortization that would have been charged assuming the intangible assets had been recorded as of July 1, 2020. Such adjustments would not be material to the consolidated statements of operations and comprehensive loss for the three and nine months ended March 31, 2021.

~~Kite~~Fast

On ~~June 1, 2021, Affirm~~April 19, 2022, we completed the ~~acquisition~~closing of ~~technology~~the transaction contemplated by a Release and ~~intellectual property from Manhattan Engineering, Inc. and~~Waiver Agreement entered into ~~employment arrangements~~ with Fast AF, Inc., (“Fast”) relating to the hiring of certain of its employees ~~(“the Kite acquisition”).~~or service providers and an option to acquire certain of its assets. The purchase price was comprised of ~~$26.0~~(i) $10.0 million in cash ~~including $9.0~~and (ii) forgiveness of a $15.0 million ~~held~~senior secured note issued to Fast in ~~escrow and subject~~April 2022 prior to ~~forfeiture if certain employees terminate within a stipulated time period.~~

~~The acquisition date fair value of~~ the ~~consideration transferred was approximately $24.8 million which consisted of the following (in thousands):~~


~~Cash~~	$	~~26,000~~
~~Less: Fair value of contingent consideration asset~~	$	~~(1,241)~~
~~Total acquisition date fair value of consideration transferred~~	$	~~24,759~~

closing.

The acquisition was accounted for as ~~a business combination and reflects the application of~~an asset acquisition ~~accounting~~ in accordance with ASC ~~805.~~805 since the assets acquired do not meet the definition of a business. The acquired identifiable intangible assets have been recorded at ~~their estimated fair values~~a total cost of $25.4 million, which includes approximately $0.4 million of transaction costs associated with the ~~excess purchase price assigned to goodwill.~~acquisition. The ~~goodwill was primarily attributed to the value of assembled workforce. The goodwill is expected to be deductible for income tax purposes.~~

~~The following table summarizes the allocation~~excess of the ~~consideration paid of approximately $24.8 million to the fair values~~total cost of the assets ~~acquired and liabilities assumed at~~over their total fair value was allocated between the ~~acquisition date (in thousands):~~


~~Intangible assets~~	$	~~6,975~~
~~Net assets acquired~~	~~6,975~~
~~Goodwill~~	$	~~17,784~~
~~Total purchase price~~	$	~~24,759~~

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

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Fair Value Useful Life
(in years)
Developed technology $ 6,900 3.0
Trademarks 75 1.0
Total intangible assets $ 6,975

relative fair values. The fair values of the intangible assets were determined by applying the replacement cost method. The fair value measurements are based on significant unobservable inputs, including management estimates and assumptions, and thus represent Level 3 measurements.

~~During~~The following table sets forth the year ended June 30, 2021, we incurred transaction costs associated with the acquisition in the amount of approximately $0.2 million which are included in general and administrative expense in the consolidated statements of operations and comprehensive loss.

~~Pro forma adjustments would only include the additional amortization that would have been charged assuming the~~identifiable intangible assets ~~had been recorded~~acquired and the cost allocated to each asset as of ~~July 1, 2019. Such adjustments would not be material to the consolidated statements of operations and comprehensive loss for the three and nine months ended March 31, 2021.~~

~~Returnly~~

On May 1, 2021, Affirm completed a merger transaction with Returnly Technologies, Inc. (“Returnly”), a leading provider of online return experiences for direct-to-consumer brands. Prior to the merger transaction, Affirm owned approximately 1% of the outstanding shares of Returnly. By effect of the merger transaction, Affirm acquired all of the remaining outstanding shares, increasing its equity interest from approximately 1% to 100%. We have included the financial results of Returnly in our interim condensed consolidated financial statements from the date of ~~acquisition.~~

The purchase price for the remaining interest was comprised of (i) approximately $71.5 million in cash and (ii) 2,989,697 shares of our common stock issued to the shareholders of Returnly at closing. We also issued 304,364 shares of our common stock, which are held in escrow and subject to forfeiture upon the termination of certain employees or if certain revenue milestones are not met. Because the future payment of the escrowed shares is contingent on continued employment, the arrangement represents stock-based compensation in the post combination period. Refer to Note 15. Equity Incentive Plans for additional information on the escrowed share arrangement.

~~The~~ acquisition ~~date fair value of the consideration transferred for Returnly was approximately $286.0 million, which consisted of the following~~ (in thousands):


~~Cash~~Assembled workforce	$	~~71,484~~12,490
~~Fair value of common stock transferred~~Developed technology1	~~214,475~~$	12,925
Total ~~acquisition date fair value of consideration transferred~~	$	~~285,959~~25,415

The acquisition date fair value of the equity interest in Returnly held by Affirm immediately before the acquisition date was $2.1 million, resulting in the recognition of a $1.6 million gain included in other (expense) income, net in the interim condensed consolidated statements of operations and comprehensive loss.

The acquisition of Returnly was accounted for as a business combination and reflects the application of acquisition accounting in accordance with ASC 805. The acquired Returnly assets, including identifiable intangible assets and liabilities assumed, have been recorded at their estimated fair values with the excess purchase price assigned to goodwill. The goodwill was primarily attributed to future synergies from integration, new customer acquisitions, and the value of assembled workforce. ~~Goodwill is not expected to be deductible for income tax purposes.~~

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The following table summarizes the allocation of the fair value of the consideration paid and the previously held equity interest of approximately $288.1 million to the fair values of the assets acquired and liabilities assumed at the acquisition date (in thousands):


~~Cash and cash equivalents~~	$	~~3,788~~
~~Accounts receivable, net~~	~~9,585~~
~~Property, equipment and software~~	~~127~~
~~Intangible assets~~	~~45,900~~
~~Other assets~~	~~1,830~~
~~Total assets acquired~~	$	~~61,230~~
~~Accounts payable~~	~~594~~
~~Accrued expenses and other liabilities~~	~~6,205~~
~~Total liabilities assumed~~	$	~~6,799~~
~~Net assets acquired~~	$	~~54,431~~

~~Goodwill~~	~~233,623~~
~~Total fair value of consideration transferred and previously held investment~~	$	~~288,054~~

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

Fair Value Useful Life
(in years)
Developed technology $ 16,200 3.0
Merchant relationships 29,200 5.0
Trade name 500 1.0
Total intangible assets $ 45,900

The fair value of the merchant relationship intangible asset was estimated by applying the income approach, which is based upon the discounted projected future cash flows attributable to the existing merchant relationships. The fair value of the developed technology intangible asset was determined by applying the replacement cost method. The fair value measurements are based on significant unobservable inputs, including management estimates and assumptions, and thus represent Level 3 measurements.

During the year ended June 30, 2021, we incurred transaction costs associated with the acquisition costs in the amount of approximately $1.8 million which are included in general and administrative expense in the consolidated statements of operations and comprehensive loss.

~~Unaudited Pro Forma Information~~

The following table reflects the pro forma consolidated total revenue and net loss for the periods presented as if the acquisition of Returnly had occurred on July 1, 2019 and combines the historical results of Affirm and Returnly. This supplemental unaudited pro forma information is based upon accounting estimates and judgments that we believe are reasonable and includes certain adjustments to conform accounting standards to U.S. GAAP. This supplemental unaudited pro forma financial information has been prepared for illustrative purposes only and is not necessarily indicative of what actual results would have occurred, or of results that may occur in the future.

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Three Months Ended
March 31, Nine Months Ended
March 31,
2021 2021
Revenue $ 234,271 $ 618,356
Net loss $ (291,597) $ (329,540)

~~PayBright~~

On January 1, 2021, Affirm Canada Holdings Ltd. (“Affirm Canada”), a subsidiary of Affirm, and Affirm acquired all outstanding stock of PayBright, Inc., one of Canada’s leading buy now, pay later providers, for approximately $288.8 million. We have included the financial results of PayBright in our interim condensed consolidated financial statements from the date of acquisition.

The purchase price was comprised of (i) approximately $114.5 million in cash, (ii) 3,622,445 shares of our common stock issued to the shareholders of PayBright at closing and (iii) 2,587,362 shares of our common stock held in escrow and subject to forfeiture if certain revenue milestones are not met. On January 12, 2021, these shares were reclassified into an aggregate of 1,811,222 shares of our Class A common stock and 1,811,222 shares of our Class B common stock issued to the shareholders of PayBright at closing and an aggregate of 1,293,681 shares of our Class A common stock and 1,293,681 shares of our Class B common stock held in escrow.

~~The acquisition date fair value of the consideration transferred for PayBright was approximately $288.8 million, which consisted of the following (in thousands):~~


~~Cash~~	$	~~114,490~~
~~Fair value of common stock transferred~~	~~116,989~~
~~Fair value of contingent consideration~~	~~57,275~~
~~Total purchase price~~	$	~~288,754~~

~~For further details on our fair value methodology with respect to the contingent consideration, see Note 13. Fair Value of Financial Assets and Liabilities.~~

The acquisition of PayBright was accounted for as a business combination and reflects the application of acquisition accounting in accordance with ASC 805. The acquired PayBright assets, including identifiable intangible assets and liabilities assumed, have been recorded at their estimated fair values with the excess purchase price assigned to goodwill. The goodwill was primarily attributed to future synergies from integration, new customer acquisitions, and the value of assembled workforce in Canada. Goodwill is not expected to be deductible for income tax purposes.

~~Table of Contents~~

The following table summarizes the allocation of the consideration paid of approximately $288.8 million to the fair values of the assets acquired and liabilities assumed at the acquisition date (in thousands):


~~Cash and cash equivalents~~	$	~~8,219~~
~~Restricted cash~~	~~1,469~~
~~Loans held for investment~~	~~89,570~~


~~Accounts receivable, net~~	~~1,537~~
~~Property, equipment and software, net~~	~~586~~
~~Intangible assets~~	~~16,653~~
~~Other assets~~	~~5,651~~
~~Total assets acquired~~	$	~~123,685~~
~~Accounts payable~~	~~6,579~~
~~Accrued interest payable~~	23
~~Accrued expenses and other liabilities~~	~~193~~
~~Funding debt~~	~~85,310~~
~~Total liabilities assumed~~	$	~~92,105~~
~~Net assets acquired~~	$	~~31,580~~

~~Goodwill~~	~~257,174~~
~~Total purchase price~~	$	~~288,754~~

(1)

~~The following table sets forth~~On March 10, 2023, we completed the ~~components of identifiable intangible assets acquired and their estimated useful lives as~~purchase of the ~~date of acquisition (in thousands)~~

Fair Value Useful Life
(in years)
Developed technology $ 6,127 3.0
Merchant relationships 9,505 4.0
Trade name 1,021 5.0
Total intangible assets $ 16,653

developed technology intangible asset.

During the year ended June 30, 2021, we incurred transaction costs associated with the acquisition costs in the amount of approximately $2.4 million, which are included in general and administrative expense in the consolidated statements of operations and comprehensive loss.

~~Unaudited Pro Forma Information~~

~~The following table reflects the pro forma consolidated total revenue and~~
~~net loss~~for the periods presented as if the acquisition of PayBright had occurred on July 1, 2019 and combines the historical results of Affirm and PayBright. This supplemental unaudited pro forma information is based upon accounting estimates and judgments that we believe are reasonable and includes certain adjustments to conform accounting standards to U.S. GAAP. This supplemental unaudited pro forma financial information has been prepared for illustrative purposes only and is not necessarily indicative of what actual results would have occurred, or of results that may occur in the future.


	Nine Months Ended March 31,
	~~2021~~
~~Revenue~~	$	~~617,340~~
~~Net loss~~	$	~~(347,511)~~

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6. Balance Sheet Components

Accounts Receivable, net

Our accounts receivable consist primarily of amounts due from payment processors, merchant partners, affiliate network partners and servicing fees due from third-party loan owners. We evaluate accounts receivable ~~estimated~~ to ~~be uncollectible~~determine management’s current estimate of expected credit losses based on historical experience and ~~provide~~future expectations and record an allowance for credit losses, as ~~necessary,~~applicable. Our allowance for ~~doubtful accounts. This allowance~~credit losses with respect to accounts receivable was ~~$12.0~~$12.3 million and ~~$4.1~~$13.9 million as of March 31, ~~2022~~2023 and June 30, ~~2021,~~2022, respectively.

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Property, Equipment and Software, net

Property, equipment and software, net consisted of the following (in thousands):


	March 31, 2023		June 30, 2022
Internally developed software	$	344,497	$	200,621
Leasehold improvements	20,128		16,169
Computer equipment	10,797		10,751
Furniture and equipment	6,435		4,279
Total Property, equipment and software, at cost	$	381,857	$	231,820
Less: Accumulated depreciation and amortization	(104,701)		(60,338)
Total Property, equipment and software, net	$	277,156	$	171,482

Depreciation and amortization expense on property, equipment and software was $23.9 million and $53.0 million for the three and nine months ended March 31, 2023, respectively, and $7.6 million and $19.2 million for the three and nine months ended March 31, 2022, respectively.

No impairment losses related to property, equipment and software were recorded during the three and nine months ended March 31, 2023 and 2022.

Goodwill and Intangible Assets

The changes in the carrying amount of goodwill during the nine months ended March 31, ~~2022~~2023 were as follows (in thousands):


Balance as of June 30, ~~2021~~2022	$	~~516,515~~539,534
Additions(1)	~~33,410~~9,443
Effect of foreign currency translation	~~(2,532)~~(11,851)
Balance as of March 31, ~~2022~~2023	$	~~547,393~~537,126

(1)Refer to Note 5. ~~Business Combinations~~Acquisitions for a description of additions to goodwill during the nine months ended March 31, ~~2022.~~ 2023.

No impairment losses related to goodwill were recorded during the three and nine months ended March 31, ~~2022~~2023 and ~~2021.~~2022.

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Intangible assets consisted of the following (in thousands):


		March 31, 2022								March 31, 2023
		Gross		Accumulated Amortization		Net		Weighted Average Remaining Useful Life (in years)		Gross		Accumulated Amortization		Net		Weighted Average Remaining Useful Life (in years)
Merchant relationships	Merchant relationships	$	38,657	$	(8,335)	$	30,322	3.8	Merchant relationships	$	37,933	$	(19,887)	$	18,046	2.9
Developed technology	Developed technology	39,967		(12,715)		27,252		2.2	Developed technology	39,500		(26,159)		13,340		1.2
Assembled workforce									Assembled workforce	12,490		(7,909)		4,581		0.6
Trademarks and domains, definite	Trademarks and domains, definite	1,538		(718)		820		2.8	Trademarks and domains, definite	1,460		(932)		528		1.9
Trademarks and domains, indefinite		2,146		—		2,146		Indefinite
Trademarks, licenses and domains, indefinite									Trademarks, licenses and domains, indefinite	11,422		—		11,422		Indefinite
Other intangibles	Other intangibles	350		—		350		Indefinite	Other intangibles	350		—		350		Indefinite
Total intangible assets	Total intangible assets	$	82,658	$	(21,768)	$	60,890		Total intangible assets	$	103,155	$	(54,887)	$	48,267

~~Table of Contents~~

June 30, 2021
Gross Accumulated Amortization Net Weighted Average
Remaining Useful Life
(in years)
Merchant relationships $ 38,951 $ (2,192) $ 36,759 4.5
Developed technology 30,176 (2,930) 27,246 2.8
Trademarks and domains (1)
3,769 (194) 3,575 3.3
Other intangibles 350 — 350 Indefinite
Total intangible assets $ 73,246 $ (5,316) $ 67,930

~~(1)As of June 30, 2021, trademarks and domains included both definite and indefinite intangible assets.~~


	June 30, 2022
	Gross		Accumulated Amortization		Net		Weighted Average Remaining Useful Life (in years)
Merchant relationships	$	38,371	$	(10,281)	$	28,090	3.6
Developed technology	39,782		(15,882)		23,900		1.9
Assembled workforce	12,490		(1,664)		10,826		1.3
Trademarks and domains, definite	1,507		(802)		705		2.4
Trademarks and domains, indefinite	2,146		—		2,146		Indefinite
Other intangibles	350		—		350		Indefinite
Total intangible assets	$	94,646	$	(28,629)	$	66,017

Amortization expense for intangible assets was $23.6 million and $38.4 million for the three and nine months ended March 31, 2023, respectively, and $5.5 million and $16.4 million for the three and nine months ended March 31, 2022, respectively ~~and $1.2 million for both the three and nine months ended March 31, 2021.~~. No impairment losses related to intangible assets were recorded during the three and nine months ended March 31, ~~2022~~2023 and ~~2021.~~

2022.

The expected future amortization expense of these intangible assets as of March 31, ~~2022~~2023 is as follows (in thousands):


2022 (remaining three months)		$	5,406
2023		21,416
2023 (remaining three months)				2023 (remaining three months)	$	25,910
2024	2024	19,287		2024	10,260
2025	2025	7,274		2025	251
2026 and thereafter		5,011
2026				2026	59
2027 and thereafter				2027 and thereafter	15
Total amortization expense	Total amortization expense	$	58,394	Total amortization expense	$	36,495

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Commercial Agreement Assets

~~In July 2020,~~During the year ended June 30, 2022, we granted warrants in connection with our commercial agreements with certain subsidiaries of Amazon.com, Inc. (“Amazon”). The warrants were granted in exchange for certain performance provisions and the benefit of acquiring new users. We recognized an asset of $133.5 million associated with the portion of the warrants that were fully vested upon grant. The asset was valued based on the fair value of the warrants and represents the probable future economic benefit to be realized over the approximate 3.2 year term of the commercial agreement at the grant date. For the three and nine months ended March 31, 2023, we recognized amortization expense of $10.2 million and $31.1 million, respectively, and $10.2 million and $16.0 million for the three and nine months ended March 31, 2022 in our interim condensed consolidated statements of operations and comprehensive loss as a component of sales and marketing expense. Refer to Note 15. Stockholders’ Equityfor further discussion of the warrants.

During the year ended June 30, 2021, we recognized an asset in connection with a commercial agreement with Shopify Inc. (“Shopify”), in which we granted warrants in exchange for the opportunity to acquire new merchant partners. This asset represents the probable future economic benefit to be realized over the ~~four-year~~ expected benefit period and is valued based on the fair value of the warrants on the grant date. We recognized an asset of $270.6 million associated with the fair value of the warrants, which were fully vested as of March 31, ~~2022.~~2023. The expected benefit period of the asset was initially estimated to be four years, and the remaining useful life of the asset is reevaluated each reporting period. During fiscal year 2022, the remaining expected benefit period was extended by two years upon the execution of an amendment to the commercial agreement with Shopify which extended the term of the agreement. During the three and nine months ended March 31, ~~2022,~~2023, we recorded amortization expense related to the commercial agreement asset of ~~$16.7~~$8.8 million and ~~$50.7~~$26.9 million, respectively, and $16.7 million and ~~$48.0~~$50.7 million for the three and nine months ended March 31, ~~2021,~~2022, respectively, in our interim condensed consolidated statements of operations and comprehensive loss as a component of sales and marketing expense.

~~In January~~During the year ended June 30, 2021, we recognized an asset in connection with a commercial agreement with an enterprise partner, in which we granted stock appreciation rights in exchange for the benefit of acquiring access to the partner's consumers. This asset represents the probable future economic benefit to be realized over the three-year expected benefit period and is valued based on the fair value of the stock appreciation rights on the grant date. We initially recognized an asset of $25.9 million associated with the fair value of the stock appreciation rights. During the three and nine months ended March 31, ~~2022,~~2023, we recorded amortization expense related to the asset of $2.0 million and ~~$6.0~~$6.2 million, respectively, and ~~$2.1~~$2.0 million and $6.0 million for the three and nine months ended March 31, ~~2021,~~2022, respectively, in our interim condensed consolidated statements of operations and comprehensive loss as a component of sales and marketing expense.

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In November 2021, we entered into a commercial agreement with Amazon.com Services LLC and Amazon Payments, Inc. ("Amazon") and granted warrants in exchange for certain exclusivity and performance provisions and the benefit of acquiring new users. In connection with the agreements, we recognized an asset of $133.5 million associated with the portion of the warrants that were fully vested upon execution of the agreement. The asset was valued based on the fair value of the warrants on the grant date and represents the probable future economic benefit to be realized over the approximately 3.2 year remaining initial term of the commercial agreement. For the three and nine months ended March 31, 2022, we recognized amortization expense of $10.2 million and $16.0 million respectively, in our interim condensed consolidated statements of operations and comprehensive loss as a component of sales and marketing expense. Refer to Note 14. Redeemable Convertible Preferred Stock and Stockholders’ Equity~~for further discussion of the warrants.~~

Other Assets

Other assets consisted of the following (in thousands):


		March 31, 2022		June 30, 2021			March 31, 2023		June 30, 2022
Processing reserves						Processing reserves	$	53,728	$	26,483
Derivative instruments						Derivative instruments	49,459		49,983
Equity securities, at cost						Equity securities, at cost	43,172		43,172
Operating lease right-of-use assets	Operating lease right-of-use assets	$	52,391	$	57,828	Operating lease right-of-use assets	34,054		50,671
Derivative instruments		43,437		2,880
Prepaid payroll taxes for stock-based compensation		35,172		111,278
Equity securities, at cost		33,172		11,278
Prepaid expenses	Prepaid expenses	23,271		21,069		Prepaid expenses	29,878		37,497
Processing reserves		21,240		14,042
Other receivables		15,055		26,423

Other assets	Other assets	6,713		29,881		Other assets	60,348		73,761
Total other assets	Total other assets	$	230,451	$	274,679	Total other assets	$	270,639	$	281,567

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Accrued Expenses and Other Liabilities

Accrued expenses and other liabilities consisted of the following (in thousands)


		March 31, 2022		June 30, 2021			March 31, 2023		June 30, 2022
Contingent consideration liability		$	119,008	$	153,447
Operating lease liability	Operating lease liability	67,905		74,952		Operating lease liability	$	55,977	$	65,713
Collateral held for derivative instruments	Collateral held for derivative instruments	44,859		2,780		Collateral held for derivative instruments	52,219		55,779
Accrued expenses	Accrued expenses	44,493		47,674		Accrued expenses	39,967		67,343
Commercial agreement liability		—		25,357

Other liabilities	Other liabilities	37,042		19,367		Other liabilities	44,197		48,763
Total accrued expenses and other liabilities	Total accrued expenses and other liabilities	$	313,307	$	323,577	Total accrued expenses and other liabilities	$	192,360	$	237,598

Our acquisition of PayBright included consideration transferred and shares held in escrow, contingent upon the achievement of future milestones. We classified the contingent consideration as a liability and will remeasure the liability to its fair value at each reporting date until the contingency is resolved. As of March 31, 2022, the fair value of the contingent consideration liability was $119.0 million. ~~For further details on our fair value methodology with respect to the contingent consideration, see Note 13. Fair Value of Financial Assets and Liabilities.~~

~~In January 2021, we recognized a liability in connection with a commercial agreement with an enterprise partner of $25.9 million. As of March 31, 2022, we have fully settled this liability.~~

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7. Leases

We lease facilities under operating leases with various expiration dates through 2030. We have the option to renew or extend our leases. Certain lease agreements include the option to terminate the lease with prior written notice ranging from ~~180 days~~nine months to one year. As of March 31, ~~2022,~~2023, we have not considered such provisions in the determination of the lease term, as it is not reasonably certain these options will be exercised. Leases have remaining terms that range from less than one year to ~~nine~~eight years.

We have elected the practical expedient allowing the combination of lease and non-lease components by class of underlying asset. We have also elected the short-term lease exception and will not recognize right-of-use assets or lease liabilities for qualifying leases with a term of less than 12 months from lease commencement.

Several leases require us to obtain standby letters of credit, naming the lessor as a beneficiary. These letters of credit act as security for the faithful performance by us of all terms, covenants and conditions of the lease agreement. The cash collateral and deposits for the letters of credit have been recognized as restricted cash in the interim condensed consolidated balance sheets and totaled ~~$9.6 million and $9.9~~$9.7 million as of both March 31, ~~2022~~2023 and June 30, ~~2021, respectively.~~2022.

~~The discount rate used in determining the lease liability for each individual lease~~There was ~~derived from a corporate yield curve~~ which corresponded with the remaining lease term as of July 1, 2020 for leases that existed at the adoption of Leases (ASC Topic 842) (“ASC 842”) and as of the lease commencement date for leases subsequently entered into or modified after July 1, 2020.

~~The~~no impairment expense incurred related to leases during the three and nine months ended March 31, ~~2022 was not material to our interim condensed consolidated statements of operations.~~2023. For the three and nine months ended March 31, ~~2021, we recognized~~2022 the impairment expense ~~of $11.1 million for several of our operating lease right-of-use assets, included in general and administrative expense on~~related to leases was not material to our interim ~~condensed~~ consolidated ~~statements~~statement of ~~operations and comprehensive loss.~~operations.

~~Total~~Operating lease expense ~~incurred for all locations totaled $3.9 million and $11.4 million for~~is as follows (in thousands):


	Three Months Ended March 31,		Nine Months Ended March 31,
	2023	2022	2023	2022
Operating lease expense (1)	$8,325	$3,900	$15,841	$11,400

(1)During the three and nine months ended March 31, ~~2022, respectively, and $4.1~~2023, we incurred charges of $4.7 million, ~~and $12.0 million~~within restructuring charges, net, on our interim consolidated statements of operations, related to a reduction to our ROU lease assets which were attributed to certain leased space we are no longer utilizing for the three and nine months ended March 31, 2021, respectively. Total lease expense incurred for short term leases with a term 12 months or less totaled $0.1 million and $0.3 million for the three and nine months ended March 31, 2022, respectively, and $0.2 million and $1.1 million for the three and nine months ended March 31, 2021, respectively.our business operations.

We have subleased a portion of our leased facilities. Sublease income totaled $0.9 million and $2.6 million during the three and nine months ended March 31, 2023, respectively, and $0.9 million and $2.3 million during the three and nine months ended March 31, 2022, respectively. ~~There was no sublease income during the three and nine months ended March 31, 2021.~~

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Lease term and discount rate information are summarized as follows:

March 31, ~~2022~~2023

Weighted average remaining lease term (in years)

~~5.2~~4.0

Weighted average discount rate

~~4.6%~~4.8%

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Maturities of lease liabilities as of March 31, ~~2022~~2023 are as follows (in thousands) for the years ended:


2022 (remaining three months)		$	4,075
2023		15,832
2023 (remaining three months)				2023 (remaining three months)	$	4,095
2024	2024	15,812		2024	16,504
2025	2025	16,119		2025	16,317
2026 and thereafter		25,638
2026				2026	15,371
2027 and thereafter				2027 and thereafter	10,354
Total lease payments	Total lease payments	77,476		Total lease payments	62,641
Less imputed interest	Less imputed interest	(9,571)		Less imputed interest	(6,664)
Present value of lease liabilities	Present value of lease liabilities	$	67,905	Present value of lease liabilities	$	55,977

8. Commitments and Contingencies

Repurchase Obligation

Under the normal terms of our whole loans sales to third-party investors, we may become obligated to repurchase loans from investors in certain instances where a breach in representation and warranties is identified. Generally, a breach in representation and warranties would occur where a loan has been identified as subject to verified or suspected fraud, or in cases where a loan was serviced or originated in violation of Affirm’s guidelines. We would only experience a loss if the contractual repurchase price of the loan exceeds the fair value on the repurchase date. ~~The aggregate outstanding balance of loans held by third-party investors or unconsolidated VIEs~~This amount was ~~$4,036.4 million and $2,453.9 million~~not material as of March 31, 2022 and June 30, 2021, respectively, of which we have recorded a repurchase liability of $2.3 million and $2.1 million as of March 31, 2022 and June 30, 2021, respectively, within accrued expenses and other liabilities in our interim condensed consolidated balance sheets.2023.

Legal Proceedings

From time to time, we are subject to legal proceedings and claims in the ordinary course of business. The results of such matters often cannot be predicted with certainty. In accordance with applicable accounting guidance, we establish an accrued liability for legal proceedings and claims when those matters present loss contingencies which are both probable and reasonably estimable.

Toole v. Affirm Holdings, Inc.

On February 28, 2022, plaintiff Jeffrey Toole filed a putative class action against Affirm and Max Levchin in the U.S. District Court for the Northern District of California (the “Toole action”). The Toole ~~complaint alleges~~action alleged that Affirm violated Sections 10(b) and 20(a) of the Exchange Act, and Rule 10b-5 promulgated thereunder by issuing and then subsequently deleting a tweet from its official Twitter account on February 10, 2022, which omitted full details of Affirm’s second quarter fiscal 2022 financial results. ~~Toole seeks~~Plaintiff sought class certification, unspecified compensatory and punitive damages, and costs and expenses. On September 28, 2022, the Court granted Affirm’s motion to dismiss for failure to state a claim with leave to amend within 21 days. No amended complaint was filed by the deadline. On October 20, 2022, the Court dismissed the putative class action and entered judgment in Affirm’s favor.

Vallieres v Levchin, et al.

On April 25, 2022, plaintiff Michael Vallieres filed a shareholder derivative lawsuit in the U.S. District Court for the Northern District of California (the “Vallieres action”) against Affirm, as a nominal defendant, and certain of Affirm’s current officers and

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directors as defendants based on allegations substantially similar to those in the Toole action. The Vallieres complaint ~~purports~~purported to assert claims on Affirm's behalf for breach of fiduciary duty, gross mismanagement, abuse of control, unjust enrichment, and contribution under the federal securities laws, and sought corporate reforms, unspecified damages and restitution, and fees and costs. On January 12, 2023, the Court dismissed the derivative action without prejudice.

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Williams v. Levchin, et al.

On September 16, 2022, plaintiff Ron Williams filed a shareholder derivative lawsuit in the U.S. District Court for the Northern District of California (the “Williams action”) against Affirm, as a nominal defendant, and certain of Affirm’s current and former officers and directors as defendants based on allegations substantially similar to those in the Toole action and Vallieres action. The Williams complaint purported to assert six causes of action on Affirm's behalf—violation of Section 14(a) of the Exchange Act, breach of fiduciary duty, unjust enrichment, abuse of control, gross mismanagement, and waste of corporate assets. The plaintiff in the Williams action also alleged a cause of action against defendant Levchin for contribution under 10(b) and 21D of the Exchange Act. The Williams complaint sought corporate reforms, unspecified damages and restitution, and fees and costs. On December 22, 2022, the Court dismissed the derivative action without prejudice.

Kusnier v. Affirm Holdings, Inc.

On December 8, 2022, plaintiff Mark Kusnier filed a putative class action lawsuit against Affirm, Max Levchin, and Michael Linford in the U.S. District Court for the Northern District of California (the “Kusnier action”). Plaintiff’s amended complaint filed on May 5, 2023 alleges that defendants: (i) caused Affirm to make materially false and/or misleading statements and/or failed to disclose that Affirm’s BNPL service facilitated excessive consumer debt (including with respect to certain for-profit educational institutions), regulatory arbitrage, and data harvesting; (ii) made false and/or misleading statements about certain public regulatory actions; and (iii) made false and/or misleading statements about whether Affirm’s business model was vulnerable to interest rate changes. In light of the above, plaintiff asserts that Affirm violated Section 10(b) of the Exchange Act and Rule 10b-5 promulgated thereunder, and that Levchin and Linford violated Section 20(a) of the Exchange Act. Plaintiff seeks class certification, unspecified compensatory and punitive damages, and costs and expenses.

Quiroga v. Levchin, et al.

On March 29, 2023, plaintiff John Quiroga filed a shareholder derivative lawsuit in the U.S. District Court for the Northern District of California against Affirm, as a nominal defendant, and certain of Affirm's current officers and directors as defendants based on allegations substantially similar to those in the Kusnier action. The Quiroga complaint purports to assert claims on Affirm's behalf for contribution under the federal securities laws, breaches of fiduciary duty, unjust enrichment, and waste of corporate assets, and seeks corporate reforms, unspecified damages and restitution, and fees and costs.

~~Concentrations~~ On May 1, 2023, the action was stayed by agreement of ~~Credit Risk~~the parties. The stay can be lifted at the request of either party or upon certain conditions relating to the resolution of the Kusnier action.

We have substantial credit risk primarily in our consumer loans held for investment and in our cash and cash equivalents. We maintain our cash and cash equivalents in accounts at regulated domestic financial institutions in amountsdetermined, based on current knowledge, that ~~may exceed FDIC insured amounts. We believe we are not exposed to any significant credit risk in these accounts.~~

~~We are exposed to default risk on both loan receivables purchased from our originating bank partners and loan receivables~~the aggregate amount or range of losses that are ~~self-originated. The ultimate collectability~~estimable with respect to our legal proceedings, including the matters described above, would not have a material adverse effect on our consolidated financial position, results of ~~a substantial portion of the loan portfolio is susceptible to changes in economic and market conditions. Loans receivables are diversified geographically. As~~operations or cash flows. Amounts accrued as of March 31, ~~2022~~2023 were not material. The ultimate outcome of legal proceedings involves judgments, estimates and ~~June 30, 2021, approximately 12%~~inherent uncertainties, and ~~15%, respectively, of loan receivables related to customers residing in the state of California. No other states or provinces exceeded 10%.~~

~~Concentrations of Revenue~~

For the three and nine months ended March 31, 2022, there were no merchants that exceeded 10% of total revenue, and for the three and nine months ended March 31, 2021, approximately 20% and 31%, respectively, of total revenue was driven by one merchant.cannot be predicted with certainty.

9. Transactions with Related Parties

In the ordinary course of business, we may enter into transactions with directors, principal officers, their immediate families and affiliated companies in which they are principal stockholders (commonly referred to as related parties). Some of our directors, principal officers, and their immediate families have received loans facilitated by us, in accordance with our regular consumer loan offerings. As of March 31, ~~2022,~~2023, the outstanding balance and interest earned on such accounts is immaterial.

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10. Debt

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

Funding Debt

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


		March 31, 2022		June 30, 2021			March 31, 2023		June 30, 2022
2022		$	208,468	$	104,159
2023	2023	—		460,289		2023	$	17,503	$	158,547
2024	2024	393,480		22,705		2024	598,318		421,484
2025	2025	—		—		2025	419,580		—
2026 and thereafter		308,858		102,203
2026						2026	231,308		—
2027 and thereafter						2027 and thereafter	261,210		103,364
Total	Total	$	910,806	$	689,356	Total	$	1,527,919	$	683,395
Deferred debt issuance costs	Deferred debt issuance costs	(9,573)		(8,754)		Deferred debt issuance costs	(13,799)		(10,818)
Total funding debt, net of deferred debt issuance costs	Total funding debt, net of deferred debt issuance costs	$	901,233	$	680,602	Total funding debt, net of deferred debt issuance costs	$	1,514,120	$	672,577

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Warehouse Credit Facilities

Through ~~trusts,~~subsidiaries, we entered into warehouse credit facilities with certain lenders to finance the purchase and origination of our loans. ~~Each trust entered into a credit agreement and security agreement with a third-party as administrative agent and a national banking association as collateral trustee and paying agent.~~ Borrowings under these agreements are referred to as funding debt and ~~these~~ proceeds from the borrowings can only be used for the purposes of facilitating loan funding and origination, with advance rates ranging from ~~79%~~82% to 88% of the total collateralized balance. ~~These trusts are bankruptcy-remote special-purpose vehicles in which creditors do not have recourse against the general credit of Affirm.~~ These revolving facilities mature between fiscal years 2024 and 2029, and subject to covenant compliance, generally permit borrowings up to 12 months prior to the final maturity date of each respective facility. As of March 31, ~~2022,~~2023, the aggregate commitment amount of these facilities was ~~$1,975.0 million~~$4.0 billion on a revolving basis, of which ~~$702.0 million~~$1.5 billion was drawn, with ~~$1,272.7 million~~$2.5 billion remaining available. Some of the loans originated by us or purchased from the originating bank partners are pledged as collateral for borrowings in our facilities. The unpaid principal balance of these loans totaled ~~$803.7 million~~$1.8 billion and ~~$664.1 million~~$0.8 billion as of March 31, ~~2022~~2023 and June 30, ~~2021,~~2022, respectively. Our U.S. based warehouse credit facilities and certain lending facilities funding the origination of loans outside of the U.S., have been classified as VIEs and are bankruptcy-remote special-purpose vehicles in which creditors do not have recourse against the general credit of Affirm. Funding debt, net of deferred issuance costs, primarily held within our VIEs represents $1.5 billion and $0.7 billion, as of March 31, 2023 and June 30, 2022, respectively.

~~Borrowings under these~~We accrue monthly interest expense on each warehouse based on the contractual terms set forth in the applicable credit ~~facilities bear~~agreement. Interest expense also includes capitalized transaction fees which are amortized on a straight-line basis over the term of the warehouse agreement. The contractual interest ~~at an annual~~rate varies across each warehouse facility and is either based on a benchmark interest rate (such as LIBOR, SOFR, Canadian Prime Rate, CDOR, or the Government of ~~LIBOR~~Canada Central Bank Rate), or an alternative commercial paper rate (which is ~~either (i)~~ the per annum rate equivalent to the weighted-average of the per annum rates at which all commercial paper notes were issued by certain lenders to fund advances or maintain ~~loans, or (ii) the daily weighted-average of LIBOR, as set forth in the applicable credit agreement)~~loans), plus a spread ranging from ~~1.65%~~1.25% to ~~4.00%~~4.25%. ~~Interest is payable monthly.~~ In addition, these agreements require payment of a monthly unused commitment fee ranging from 0.00% to 0.75% per annum on the undrawn portion available.

These agreements contain certain customary negative covenants and financial covenants including maintaining certain levels of minimum liquidity, maximum leverage, and minimum tangible net worth. As of March 31, ~~2022,~~2023, we were in compliance with all applicable covenants in the agreements.

~~Other Funding Facilities~~

Prior to our acquisition of PayBright on January 1, 2021, PayBright entered into various credit facilities utilized to finance the origination of loan receivables in Canada. Similar to our warehouse credit facilities, borrowings under these agreements are referred to as funding debt, and proceeds from the borrowings may only be used for the purposes of facilitating loan funding and origination. These facilities are secured by PayBright loan receivables pledged to the respective facility as collateral, mature in 2022, and bear interest based on a benchmark rate plus a spread ranging from 1.25% to 4.25%.

Table of March 31, 2022, the aggregate commitment amount of these facilities was $419.0 million on a revolving basis, of which $172.3 million was drawn, with $246.8 million remaining available. The unpaid principal balance of loans pledged to these facilities totaled $199.5 million as of March 31, 2022.

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These agreements contain certain customary negative covenants and financial covenants including maintaining certain levels of minimum liquidity, maximum leverage, and minimum tangible net worth at the PayBright subsidiary level or the Affirm Holdings level. As of March 31, 2022, we were in compliance with all applicable covenants in the agreements.

Repurchase Agreements

We entered into certain sale and repurchase agreements pursuant to our retained interests in our off-balance sheet securitizations where we have sold these securities to a counterparty with an obligation to repurchase at a future date and price. The repurchase agreements each have an initial term of three months and subject to mutual agreement by Affirm and the counterparty, we may enter into a repurchase date extension for an additional three month term at market interest rates on such extension date. As of March 31, ~~2022,~~2023, the interest rates were ~~1.58%~~6.68% for ~~2022-X1 and 1.79% for 2021-Z1 and 2021-Z2 on~~both the senior pledged securities and ~~3.23% for 2022-X1and 3.44%~~

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~~for 2021-Z1 and 2021-Z2 on~~ the residual certificate pledged securities. We had ~~$36.2~~$17.5 million and ~~$13.9~~$27.0 million in debt outstanding under our repurchase agreements disclosed within funding debt on the interim condensed consolidated balance sheets as of March 31, ~~2022~~2023 and June 30, ~~2021,~~2022, respectively. The debt will be amortized through regular principal and interest payments on the pledged securities. The outstanding debt relates to ~~$42.7~~$25.2 million and ~~$16.2~~$32.4 million in pledged securities disclosed within securities available for sale at fair value on the interim condensed consolidated balance sheets as of March 31, ~~2022~~2023 and June 30, ~~2021,~~2022, respectively.

Convertible Senior Notes

On November 23, 2021, we issued $1,725 million in aggregate principal amount of 0% convertible senior notes due 2026 (the “2026 Notes”) in a private placement to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended. The total net proceeds from this offering, after deducting debt issuance costs, were approximately $1,704 million. The 2026 Notes represent senior unsecured obligations of the Company. The 2026 Notes do not bear interest except in special circumstances described below, and the principal amount of the 2026 Notes does not accrete. The 2026 Notes mature on November 15, 2026.

Each $1,000 of principal of the 2026 Notes will initially be convertible into 4.6371 shares of our common stock, which is equivalent to an initial conversion price of approximately $215.65 per share, subject to adjustment upon the occurrence of certain specified events set forth in the indenture governing the 2026 Notes (the “Indenture”). Holders of the 2026 Notes may convert their 2026 Notes at their option at any time on or after August 15, 2026 until close of business on the second scheduled trading day immediately preceding the maturity date of November 15, 2026. Further, holders of the 2026 Notes may convert all or any portion of their 2026 Notes at their option prior to the close of business on the business day immediately preceding August 15, 2026, only under the following circumstances:

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

2) during the five business day period after any 5five consecutive trading day period (the measurement period) in which the trading price (as defined in the indenture governing the 2026 Notes) per $1,000 principal amount of the 2026 Notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price of the Company’s Class A common stock and the conversion rate on each such trading day;

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

4) upon the occurrence of certain specified corporate events.

Upon conversion of the 2026 Notes, the Company will pay or deliver, as the case may be, cash, shares of our common stock or a combination of cash and shares of our common stock, at the Company’s election. If we satisfy our conversion obligation solely in cash or through payment and delivery, as the case may be, of a combination of cash and shares of our common stock, the amount of cash and shares of common stock, if any, due

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upon conversion will be based on a daily conversion value (as set forth in the Indenture) calculated on a proportionate basis for each trading day in a 40 trading day observation period.

No sinking fund is provided for the 2026 Notes. We may not redeem the notes prior to November 20, 2024. We may redeem for cash all or part of the notes on or after November 20, 2024 if the last reported sale price of our Class A common stock has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such

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

If a fundamental change (as defined in the Indenture) occurs prior to the maturity date, holders of the 2026 Notes may require us to repurchase all or a portion of their notes for cash at a repurchase price equal to 100% of the principal amount of the 2026 Notes, plus any accrued and unpaid interest to, but excluding, the repurchase date. In addition, if specific corporate events occur prior to the maturity date of the 2026 Notes, we will be required to increase the conversion rate for holders who elect to convert their 2026 Notes in connection with such corporate events.

During the three and nine months ended March 31, 2023, we entered into a series of privately negotiated transactions with certain holders of our 2026 Notes, pursuant to which we paid an aggregate amount of $206.6 million in cash for the repurchase of $299.1 million aggregate principal amount of our 2026 Notes (the “2026 Note Repurchases”). The carrying amount of the extinguished 2026 Notes was approximately $296.4 million resulting in a $89.8 million gain on early extinguishment of debt, which is reported as a component of other income, net within our interim consolidated statements of operations and comprehensive income. In exchange for paying cash pursuant to the 2026 Note Repurchases, we received and canceled the repurchased 2026 Notes.

The convertible senior notes outstanding as of March 31, ~~2022~~2023 consisted of the following (in thousands):

Principal Amount Unamortized Discount and Issuance Cost Net Carrying Amount
Convertible Senior Notes $ 1,725,000 $ (19,376) $ 1,705,624


	Principal Amount		Unamortized Discount and Issuance Cost		Net Carrying Amount
Convertible Senior Notes	$	1,425,900	$	(12,555)	$	1,413,345

The 2026 Notes do not bear interest. InWe recognized $1.0 million and $3.1 million during the three and nine months ended March 31, ~~2022, we recognized~~2023, respectively, and $1.0 million and $1.4 million during the three and nine months ended March 31, 2022, respectively, of interest expense related to the amortization of debt discount and issuance costs in the interim condensed consolidated statement of operations and comprehensive loss within other ~~(expense)~~ income, ~~net.~~net. As of March 31, ~~2022,~~2023, the remaining life of the 2026 Notes is approximately 5644 months.

Revolving Credit Facility

On January 19, 2021, we entered into a revolving credit agreement with a syndicate of commercial banks for a $185.0 million unsecured revolving credit facility. This facility bears interest at a rate equal to, at our option, either (a) a Eurodollar rate determined by reference to adjusted LIBOR for the interest period, plus an applicable margin of 2.50% per annum or (b) a base rate determined by reference to the highest of (i) the federal funds rate plus 0.50% per annum, (ii) the rate last quoted by The Wall Street Journal as the U.S. prime rate, and (iii) the one-month adjusted LIBOR plus 1.00% per annum, in each case, plus an applicable margin of 1.50% per annum. The revolving credit agreement has a final maturity date of January 19, 2024. The facility contains certain covenants and restrictions, including certain financial maintenance covenants, and requires payment of a monthly unused commitment fee of 0.35% per annum on the undrawn balance available. We executed our right to terminate the revolving credit agreement effective December 15, 2021and no early termination penalties were incurred. We had not drawn on the facility and there was no outstanding balance to be repaid. Upon termination, we accelerated $1.2 million of issuance costs which were recorded in other (expense) income, net.

On February 4, 2022, we entered into a revolving credit agreement with a syndicate of commercial banks for a $165.0 million unsecured revolving credit facility. On May 16, 2022, we increased unsecured revolving commitments under the facility to $205.0 million. This facility bears interest at a rate equal to, at our option, either (a) a Secured Overnight Financing Rate (“SOFR”) rate determined by reference to the forward-looking term SOFR rate for the interest period, plus an applicable margin of 1.85% per annum or (b) a base rate determined by reference to the highest of (i) the federal funds rate plus 0.50% per annum, (ii) the rate last quoted by the Wall Street Journal as the U.S. prime rate and (iii) the one-month forward-looking term SOFR rate plus ~~1.0%~~1.00% per annum, in each case, plus an applicable margin of 0.85% per annum. The revolving credit agreement has a final maturity date of February 4, 2025. The facility contains certain covenants and restrictions, including certain financial maintenance covenants, and requires payment of a monthly unused commitment fee of 0.20% per annum on the undrawn balance available. There are no borrowings outstanding under the facility as of March 31, ~~2022.~~2023.

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11. Securitization and Variable Interest Entities

Consolidated VIEs

~~We consolidate VIEs when we are deemed to be the primary beneficiary.~~

Warehouse Credit Facilities

We established certain entities, deemed to be VIEs, to enter into warehouse credit facilities for the purpose of purchasing loans from our originating bank partners and funding ~~self-originated~~directly originated loans. Refer to Note 10. Debt for additional information. The creditors of the VIEs have no recourse to the general credit of Affirm and the liabilities of the VIEs can only be settled by the respective VIEs’ assets; however, as the servicer of the loans pledged to our warehouse funding facilities, we have the power to direct the activities that most significantly impact the VIEs' economic performance. In addition, we retain significant economic exposure to the pledged loans and therefore, we are the primary beneficiary.

Securitizations

In connection with our asset-backed securitization program, 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. 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.

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. Through our role as the servicer, we have the power to direct the activities that most significantly affect the VIEs’ economic performance. In evaluating whether we have a variable interest that could potentially be significant to the VIE, we consider our retained interests. We also earn a servicing fee which has a senior distribution priority in the payment waterfall.

In evaluating whether we are the primary beneficiary, management considers both qualitative and quantitative factors regarding the nature, size and form of our involvement with the VIEs. Management assesses whether we are the primary beneficiary of the VIEs on an ongoing basis.

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.

As of March 31, 2022, we consolidated Affirm Asset Securitization Trust 2020-Z1 (“2020-Z1”), Affirm Asset Securitization Trust 2020-A (“2020-A”), Affirm Asset Securitization Trust 2020-Z2 (“2020-Z2”), Affirm Asset Securitization Trust 2021-A (“2021-A”) and Affirm Asset Securitization Trust 2021-B (“2021-B”). Each securitization trust issued interest-bearing notes and residual certificates to finance the purchase of the loans facilitated by our platform. At the closing of each securitization, we contributed loans, facilitated through our technology platform and purchased from our originating bank partners, with an aggregate outstanding principal balance of $2,024.3 million. The 2020-Z1 and 2020-Z2 securitizations are secured by static pools of loans contributed at closing, whereas the 2020-A, 2021-A, and 2021-B securitization are revolving and we may contribute additional loans from time to time until the end of the revolving period. For the 2020-Z2 securitization, we purchased $27.9 million of loan receivables from our third-party loan buyers which were then contributed to the trust.

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For each securitization, the residual certificates represent the right to receive excess cash on the loans each collection period after all fees and required distributions have been made to the note holders on the related payment date. For ~~2020-Z1, 2020-A, 2021-A and 2021-B, all notes were sold to third-party investors and~~the majority of consolidated securitization VIEs, we ~~retained~~retain 100% of the residual trust certificates issued by the securitization ~~trusts. For 2020-Z2, all notes were sold to third-party investors and we retained 93.3%~~trust. Any portion of the residual ~~certificates issued by the securitization trust, and a third-party investor holds the remaining 6.7% of the residual certificates in 2020-Z2. The residual~~ trust certificates ~~held by~~sold to third-party investors are measured at fair value, using a discounted cash flow model, and presented within accrued expenses and other liabilities on the interim condensed consolidated balance sheets. In addition to the retained residual certificates, our continued involvement includes loan servicing responsibilities over the life of the underlying loans.

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

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The following tables present the aggregate carrying value of financial assets and liabilities ~~from our involvement with~~within consolidated ~~VIEs.~~VIEs (in thousands):


		March 31, 2022							March 31, 2023
		Assets		Liabilities		Net Assets			Assets		Liabilities		Net Assets
Warehouse credit facilities	Warehouse credit facilities	$	839,670	$	751,419	$	88,251	Warehouse credit facilities	$	1,585,168	$	1,386,167	$	199,001
Securitizations	Securitizations	1,561,401		1,448,913		112,488		Securitizations	1,922,876		1,792,114		130,762
Total consolidated VIEs	Total consolidated VIEs	$	2,401,071	$	2,200,332	$	200,739	Total consolidated VIEs	$	3,508,044	$	3,178,281	$	329,763


		June 30, 2021							June 30, 2022
		Assets		Liabilities		Net Assets			Assets		Liabilities		Net Assets
Warehouse credit facilities	Warehouse credit facilities	$	688,197	$	614,882	$	73,315	Warehouse credit facilities	$	563,207	$	534,422	$	28,785
Securitizations	Securitizations	1,115,427		1,178,545		(63,118)		Securitizations	1,679,062		1,632,107		46,955
Total consolidated VIEs	Total consolidated VIEs	$	1,803,624	$	1,793,427	$	10,197	Total consolidated VIEs	$	2,242,269	$	2,166,529	$	75,740

Unconsolidated VIEs

As of March 31, 2022, Affirm Asset Securitization Trust 2021-Z1 (“2021-Z1”), Affirm Asset Securitization Trust 2021-Z2 (“2021-Z2”) and Affirm Asset Securitization Trust 2022-X (“2022-X1”) wereOur transactions with unconsolidated ~~VIEs. We~~VIEs include securitization trusts where we did not retain significant economic exposure through our variable interests and therefore we determined that we are not the primary beneficiary as of March 31, ~~2022.~~

~~2021-Z1~~

On May 5, 2021, the notes under 2021-Z1 securitization were issued as a single class: Class A in the amount of $320.0 million (the “2021-Z1 notes”). The 2021-Z1 notes bear interest at a fixed rate of 1.07% and have a maturity date of August 15, 2025. Principal and interest payments began in June 2021 and are payable monthly.

The 2021-Z1 securitization is secured by a static pool of loans which were contributed at the closing date to the 2021-Z1 trust. The loans contributed at closing were facilitated through our technology platform and purchased from our originating bank partners, with an aggregate outstanding principal balance of $351.0 million. Of the loans sold to the 2021-Z1 trust, we purchased $41.4 million of loan receivables from one of our third-party loan buyers, which were contributed to the trust at closing.

~~At closing, we retained 5% of the 2021-Z1 notes and 86.9% of the residual certificates issued by the 2021-Z1 trust. The third-party loan contributor received 13.1% of the re~~sidual certificates at closing. On May 17, 2021, we sold a majority of the residual certificates retained at closing, comprising 81.9% of the par value, to five third-party investors. Subsequent to this sale, we retained only a 5% vertical interest in the 2021-Z1 trust via our ownership of

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~~5% par amount of the 2021-Z1 notes and 5% par amount of the residual interests. We were required to retain these interests for compliance with U.S. risk retention rules.~~

We initially consolidated the 2021-Z1 trust at closing due to retaining a majority of the residual interest. However, upon completing the subsequent third-party sale of 81.9% of the residual certificates on May 17, 2021, we determined that we no longer had significant economic exposure through our variable interests and as such, we determined that we were no longer the primary beneficiary as of this date.

~~Upon deconsolidating the 2021-Z1 trust, we recognized a gain of $16.7 million, primarily driven by the gain on sale of the loans sold to the trust at closing.~~

~~2021-Z2~~

On November 10, 2021, the notes under 2021-Z2 securitization were issued as a single class: Class A in the amount of $260.0 million (the “2021-Z2 notes”). The 2021-Z2 notes bear interest at a fixed rate of 1.17% and have a maturity date of November 16, 2026. Principal and interest payments began in January 2022 and are payable monthly.

The 2021-Z2 securitization is secured by a static pool of loans which were contributed at the closing date to the 2021-Z2 trust. The loans contributed at closing were facilitated through our technology platform and purchased from our originating bank partners, with an aggregate outstanding principal balance of $287.5 million. Of the loans sold to the 2021-Z2 trust, we purchased $192.5 million of loan receivables from one of our third-party loan buyers, which were contributed to the trust at closing.

At closing, we retained only a 5% vertical interest in the 2021-Z2 trust via our ownership of 5% par amount of the 2021-Z2 notes and 5% par amount of the residual interests. We were required to retain these interests for compliance with U.S. risk retention rules. The third-party loan contributor received 95% of the residual certificates at closing.

~~On the closing date of the 2021-Z2 trust, we recognized a gain on sales of loans sold to the trust of $6.1 million, which is included within gain on sales of loans in our interim condensed consolidated statements of operations and comprehensive loss~~.

~~2022-X1~~

On February 9, 2022, the notes under 2022-X1 securitization were issued as a single class: Class A in the amount of $366.5 million (the “2022-X1 notes”). The 2022-X1 notes bear interest at a fixed rate of 1.75% and have a maturity date of February 16, 2027. Principal and interest payments began in April 2022 and are payable monthly.

The 2022-X1 securitization is secured by a static pool of loans which were contributed at the closing date to the 2022-X1 trust. The loans contributed at closing were facilitated through our technology platform and originated by us or purchased from our originating bank partners, with an aggregate outstanding principal balance of $406.2 million. Of the loans sold to the 2022-X1 trust, we purchased $258.3 million of loan receivables from one of our third-party loan buyers, which were contributed to the trust at closing.

At closing, we retained only a 5% vertical interest in the 2022-X1 trust via our ownership of 5% par amount of the 2022-X1 notes and 5% par amount of the residual interests. We were required to retain these interests for compliance with U.S. risk retention rules. The third-party loan contributor received 95% of the residual certificates at closing.

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On the closing date of the 2022-X1 trust, we recognized gain on sales of loans sold to the trust of $13.1 million, which is included within gain on sales of loans in our interim condensed consolidated statements of operations and comprehensive loss.2023.

The following ~~tables present the aggregate carrying value of financial assets and liabilities for~~information pertains to unconsolidated VIEs where we hold a variable interest but are not the primary ~~beneficiary:~~beneficiary (in thousands):


	March 31, 2023
	Assets		Liabilities		Net Assets		Maximum Exposure to Losses
Securitizations	$	505,301	$	489,938	$	15,363	$	25,252
Total unconsolidated VIEs	$	505,301	$	489,938	$	15,363	$	25,252

March 31, 2022
Assets Liabilities Net Assets Maximum Exposure to Losses
Securitizations $ 817,633 $ 766,651 $ 50,982 $ 44,092
Total unconsolidated VIEs $ 817,633 $ 766,651 $ 50,982 $ 44,092

June 30, 2021
Assets Liabilities Net Assets Maximum Exposure to Losses
Securitizations $ 305,414 $ 304,567 $ 847 $ 16,850
Total unconsolidated VIEs $ 305,414 $ 304,567 $ 847 $ 16,850

~~Assets of unconsolidated VIEs include the carrying value for loans held in the 2021-Z1, 2021-Z2, and~~ ~~2022-X1 trust and cash held in the collection and reserve accounts established for the trust. Liabilities include the outstanding principal balance of the 2021-Z1, 2021-Z2, and 2022-X1 notes.~~


	June 30, 2022
	Assets		Liabilities		Net Assets		Maximum Exposure to Losses
Securitizations	$	996,242	$	965,909	$	30,333	$	51,248
Total unconsolidated VIEs	$	996,242	$	965,909	$	30,333	$	51,248

Maximum exposure to losses represents our exposure through our continuing involvement as servicer and through our retained interests. For ~~2021-Z1, 2021-Z2 and 2022-X1,~~unconsolidated VIEs, this includes ~~$42.7~~$25.2 million in retained notes and residual certificates disclosed within securities available for sale at fair value in our interim condensed consolidated balance ~~sheets~~sheets and an immaterial amount re~~$1.4 million~~ ~~related~~lated to our servicing ~~asset and receivables~~assets disclosed within other assets in our interim condensed consolidated balance ~~sheets.~~sheets as of March 31, 2023.

Additionally, we may experience a loss due to future repurchase obligations resulting from breaches in representations and warranties in our securitization and third-party sale agreements. ~~In connection with 2021-Z1, 2021-Z2 and 2022-X1, this~~This amount was not material as of March 31, ~~2022.~~2023.

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Retained Beneficial Interests in Unconsolidated VIEs

The investors of the securitizations have no direct recourse to the assets of Affirm, and the timing and amount of beneficial interest payments is dependent on the performance of the underlying loan assets held within each trust. We have classified our retained beneficial interests in ~~2021-Z1, 2021-Z2 and~~unconsolidated securitization trusts ~~2022-X1~~ as “available for sale” and as such they are disclosed at fair value in our interim condensed consolidated balance sheets.

See Note 12. ~~Investments~~ ~~and Note~~ ~~13.~~14. Fair Value of Financial Assets and Liabilities for additional information on the fair value sensitivity of the notes receivable and residual certificates. Additionally, as of March 31, ~~2022~~2023, we have pledged ~~the 2021-Z1, 2021-Z2, a~~each of our~~nd 2022-X1~~ retained beneficial interests as collateral in ~~connection with~~ a sale and repurchase agreement as described in Note 10. Debt.

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12. Investments

Marketable Securities

Marketable securities include certain investments classified as cash and cash equivalents and securities available for sale, at fair value, and consist of the following as of each date presented within the interim condensed consolidated balance sheets (in thousands):


		March 31, 2022		June 30, 2021			March 31, 2023		June 30, 2022
Cash and cash equivalents:	Cash and cash equivalents:					Cash and cash equivalents:
Money market funds	Money market funds	$	1,461,956	$	143,241	Money market funds	$	204,449	$	162,483
Corporate bonds		854		—
Certificates of deposit						Certificates of deposit	—		16,026
Commercial paper	Commercial paper	73,689		—		Commercial paper	156,887		229,272
Securities, available for sale:
Government bonds						Government bonds
US						US	193,175		58,541
Securities available for sale:						Securities available for sale:
Certificates of deposit	Certificates of deposit	54,048��		—		Certificates of deposit	145,528		300,390
Corporate bonds	Corporate bonds	185,432		—		Corporate bonds	292,726		368,671
Commercial paper	Commercial paper	133,437		—		Commercial paper	186,143		478,293
Agency bonds						Agency bonds	35,194		—
Government bonds	Government bonds					Government bonds
Non-US	Non-US	35,775		—		Non-US	6,108		17,955
US	US	165,624		—		US	367,081		378,386
Securitization notes receivable and certificates (1)	Securitization notes receivable and certificates (1)	42,707		16,170		Securitization notes receivable and certificates (1)	25,235		51,678
Other						Other	1,016		—
Total marketable securities:	Total marketable securities:	$	2,153,522	$	159,411	Total marketable securities:	$	1,613,542	$	2,061,695

(1)These securities have been pledged as collateral in connection with sale and repurchase agreements as discussed within Note 10. Debt.

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Securities Available for Sale, at Fair Value

The amortized cost, gross unrealized gains and losses, allowance for credit losses, and fair value of securities available for sale as of March 31, 2023 and June 30, 2022 were as ~~follows:~~follows (in thousands):


		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Allowance for Credit Losses		Fair Value			March 31, 2023
Certificates of deposit (1)		$	54,168	$	27	$	(147)	$	—	$	54,048
Corporate bonds (1)		187,580		5		(1,299)		—		186,286
													Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Allowance for Credit Losses		Fair Value
Certificates of deposit												Certificates of deposit	$	145,813	$	21	$	(306)	$	—	$	145,528
Corporate bonds												Corporate bonds	296,186		225		(3,685)		—		292,726
Commercial paper (1)	Commercial paper (1)	207,302		11		(187)		—		207,126		Commercial paper (1)	343,077		62		(109)		—		343,030
Agency bonds												Agency bonds	35,092		102		—		—		35,194
Government bonds	Government bonds											Government bonds
Non-US (1)		36,008		—		(233)		—		35,775
US		166,285		—		(661)		—		165,624
Non-US												Non-US	6,258		—		(150)		—		6,108
US (1)												US (1)	561,761		366		(1,871)		—		560,256
Securitization notes receivable and certificates (2)	Securitization notes receivable and certificates (2)	43,394		—		(557)		(130)		42,707		Securitization notes receivable and certificates (2)	26,330		—		(616)		(479)		25,235
Other												Other	1,016		—		—		—		1,016
Total securities available for sale	Total securities available for sale	$	694,737	$	43	$	(3,084)	$	(130)	$	691,566	Total securities available for sale	$	1,415,533	$	776	$	(6,737)	$	(479)	$	1,409,093


	June 30, 2022
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Allowance for Credit Losses		Fair Value
Certificates of deposit (1)	$	317,331	$	6	$	(921)	$	—	$	316,416
Corporate bonds (1)	371,907		7		(3,243)		—		368,671
Commercial paper (1)	708,694		16		(1,145)		—		707,565
Government bonds
Non-US	18,196		—		(241)		—		17,955
US (1)	438,947		—		(2,020)		—		436,927
Securitization notes receivable and certificates (2)	52,180		178		(659)		(21)		51,678
Total securities available for sale	$	1,907,255	$	207	$	(8,229)	$	(21)	$	1,899,212

(1)Certificates of deposit, corporate bonds, ~~non-US~~commercial paper, and US government bonds include $350.1 million and ~~commercial paper include $74.5~~$303.8 million as of March 31, 2023 and June 30, 2022, respectively, classified as cash and cash equivalents within the interim condensed consolidated balance sheets.

(2)These securities have been pledged as collateral in connection with sale and repurchase agreements as discussed within Note 10. ~~Debt~~Debt.

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~~The amortized cost, gross unrealized gains and losses, allowance for credit losses, and fair value of securities available for sale as of June 30, 2021were as follows:~~

Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Allowance for Credit Losses Fair Value
Securitization notes receivable and certificates $ 16,144 $ 29 $ — $ (3) $ 16,170
Total securities available for sale $ 16,144 $ 29 $ — $ (3) $ 16,170

As of March 31, ~~2022~~2023 and June 30, ~~2021,~~2022, there were no material reversals of prior period allowance for credit losses recognized for available for sale securities.

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A summary of securities available for sale with unrealized losses for which an allowance for credit losses has not been recorded, aggregated by investment category and the length of time that individual securities have been in a continuous loss position as of March 31, ~~2022~~2023 and ~~, is~~June 30, 2022, are as ~~follows:~~follows (in thousands):


															March 31, 2023
		Less than or equal to 1 year				Greater than 1 year				Total					Less than or equal to 1 year				Greater than 1 year				Total
		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses			Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Certificates of deposit	Certificates of deposit	$	29,846	$	(147)	$	—	$	—	$	29,846	$	(147)	Certificates of deposit	$	123,816	$	(306)	$	—	$	—	$	123,816	$	(306)
Corporate bonds	Corporate bonds	177,798		(1,299)		—		—		177,798		(1,299)		Corporate bonds	243,747		(3,364)		29,672		(321)		273,419		(3,685)
Commercial paper	Commercial paper	126,289		(187)		—		—		126,289		(187)		Commercial paper	151,058		(109)		—		—		151,058		(109)
Government bonds	Government bonds													Government bonds
Non-US	Non-US	35,775		(233)		—		—		35,775		(233)		Non-US	2,089		(43)		4,018		(107)		6,107		(150)
US	US	165,624		(661)		—		—		165,624		(661)		US	201,831		(1,871)		—		—		201,831		(1,871)
Securitization notes receivable and certificates		42,707		(557)		—		—		42,707		(557)

Total securities available for sale (1)	Total securities available for sale (1)	$	578,039	$	(3,084)	$	—	$	—	$	578,039	$	(3,084)	Total securities available for sale (1)	$	722,541	$	(5,693)	$	33,690	$	(428)	$	756,231	$	(6,121)


	June 30, 2022
	Less than or equal to 1 year				Greater than 1 year				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Certificates of deposit	$	290,169	$	(921)	$	—	$	—	$	290,169	$	(921)
Corporate bonds	351,088		(3,243)		—		—		351,088		(3,243)
Commercial paper	679,272		(1,145)		—		—		679,272		(1,145)
Government bonds
Non-US	17,955		(241)		—		—		17,955		(241)
US	431,903		(2,020)		—		—		431,903		(2,020)
Securitization notes receivable and certificates	722		(45)		—		—		722		(45)
Total securities available for sale (1)	$	1,771,109	$	(7,615)	$	—	$	—	$	1,771,109	$	(7,615)

(1)The number of positions ~~with unrealized losses as of March 31, 2022 totaled 113.~~

~~There were no securities available for sale~~ with unrealized losses for which an allowance for credit losses ~~had~~has not been recorded totaled 133 and 270 as of March 31, 2023 and June 30, ~~2021.~~

2022, respectively.

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The length of time to contractual maturities of securities available for sale as of March 31, ~~2022~~2023 and ,June 30, 2022 were as ~~follows:~~follows (in thousands):

Within 1 year Greater than 1 year, less than or equal to 5 years Total
Amortized Cost Fair Value Amortized Cost Fair Value Amortized Cost Fair Value
Certificates of deposit $ 54,168 $ 54,048 $ — $ — $ 54,168 $ 54,048
Corporate bonds 153,996 153,310 33,584 32,976 187,580 186,286
Commercial paper 207,302 207,126 — — 207,302 207,126
Government bonds
Non-US 31,762 31,656 4,246 4,119 36,008 35,775
US 166,285 165,624 — — 166,285 165,624
Securitization notes receivable and certificates (1)
32,067 31,510 11,327 11,197 43,394 42,707
Total securities available for sale $ 645,580 $ 643,274 $ 49,157 $ 48,292 $ 694,737 $ 691,566


	March 31, 2023
	Within 1 year				Greater than 1 year, less than or equal to 5 years				Total
	Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value
Certificates of deposit (2)	$	145,813	$	145,528	$	—	$	—	$	145,813	$	145,528
Corporate bonds (2)	161,736		160,486		134,450		132,240		296,186		292,726
Commercial paper (2)	343,077		343,030		—		—		343,077		343,030
Agency bonds	31,411		31,511		3,681		3,683		35,092		35,194
Government bonds
Non-US	4,126		4,019		2,132		2,089		6,258		6,108
US (2)	491,446		490,718		70,315		69,538		561,761		560,256
Securitization notes receivable and certificates (1)	—		—		26,330		25,235		26,330		25,235
Other	1,016		1,016		—		—		1,016		1,016
Total securities available for sale	$	1,178,625	$	1,176,308	$	236,908	$	232,785	$	1,415,533	$	1,409,093


	June 30, 2022
	Within 1 year				Greater than 1 year, less than or equal to 5 years				Total
	Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value
Certificates of deposit (2)	$	317,331	$	316,416	$	—	$	—	$	317,331	$	316,416
Corporate bonds (2)	206,208		204,614		165,699		164,057		371,907		368,671
Commercial paper (2)	708,694		707,565		—		—		708,694		707,565
Government bonds
Non-US	11,895		11,813		6,301		6,142		18,196		17,955
US (2)	360,757		359,242		78,190		77,685		438,947		436,927
Securitization notes receivable and certificates (1)	—		—		52,180		51,678		52,180		51,678
Total securities available for sale	$	1,604,885	$	1,599,650	$	302,370	$	299,562	$	1,907,255	$	1,899,212

(1)Based on weighted average life of expected cash flows as of March 31, ~~2022.~~2023 and June 30, 2022.

(2)Certificates of deposit, corporate bonds, commercial paper, and US government bonds include $350.1 million and $303.8 million as of March 31, 2023 and June 30, 2022, respectively, classified as cash and cash equivalents within the interim condensed consolidated balance sheets.

Gross proceeds from matured or redeemed securities were $709.5 million and $2,863.9 million for the three and nine months ended March 31, 2023, respectively, and $949.3 million and $1,584.8 million for the three and nine months ended March 31, 2022, respectively ~~were $949.3 million and $1,584.8 million, respectively.~~.

For available for sale securities realized gains and losses from portfolio sales were not material for the three and nine months ended March 31, 2023. There were no portfolio sales or associated realized gains or losses ~~for available for sale securities~~ for the three and nine months ended March 31, 2022.

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Non-marketable Equity Securities

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

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

Equity investments without a readily determinable fair value held at cost were ~~$33.2 million and $11.3~~$43.2 million as of both March 31, ~~2022~~2023 and June 30, ~~2021, respectively,~~2022 and are included in other assets within the interim condensed consolidated balance sheets.

There have been no unrealized or realized gains and losses due to observable changes in orderly transactions and we did not record any impairment f~~for~~or the three and nine months ended March 31, 2023 and 2022 ~~or March 31, 2021~~.

13. Derivative Financial Instruments

We use derivative financial instruments (“derivatives”) to manage exposure to variable interest rates. Our primary objective in holding derivatives is to reduce the volatility in cash flows associated with our funding activities, arising from changes in interest rates. We do not employ derivatives for trading or speculative purposes.

As of March 31, 2023, we used a combination of interest rate cap agreements and interest rate swaps to manage interest costs and the risk associated with variable interest rates. FASB ASC 815-10 requires that an entity recognize all derivative instruments as either assets or liabilities in the statement of financial position. In accordance with that Subtopic, we designate certain derivative instruments as cash flow hedges, while others are not designated as hedges. Certain of our derivative agreements provide for netting arrangements for contracts that settle with the same counterparty, however, we do not offset assets and liabilities under these arrangements for financial statement presentation purposes. As such, the fair values are presented gross within other assets and accrued expenses and other liabilities. Offsetting collateral received by or paid to the counterparty is presented gross within accrued expenses and other liabilities or other assets, as applicable, on the interim condensed consolidated balance sheets.

Cash Flow Hedges

We have interest rate swaps designated as cash flow hedges in order to mitigate our exposure to changes in interest rates on our variable rate warehouse funding debt. The interest rate swaps involve the receipt of variable-rate amounts from a counterparty in exchange for fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. These swaps that qualify as cash flow hedges are documented and designated as such when we enter into the contracts. In accordance with our risk management policies, we structure our hedges with terms similar to that of the item being hedged. We formally assess, at inception of the hedge accounting relationship and on a quarterly basis, whether derivatives designated as cash flow hedges are highly effective in offsetting changes to the forecasted cash flows of the hedged items.

The gain or loss on the derivatives is recorded in other comprehensive income (loss) (“OCI”) and reclassified into earnings when the hedged cash flows are recognized in funding costs within the interim consolidated statements of operations and comprehensive income. The amount that is reclassified into earnings is presented in the interim consolidated statements of income in funding costs, the same line item in which the hedged transaction is recognized.

Derivatives Not Designated as Hedges

We have interest rate caps and interest rate swaps that are not designated as hedging instruments. We enter into these contracts to manage interest rate risk. Any changes in the fair value of these financial instruments are reflected in other income, net, on the interim condensed consolidated statements of operations and comprehensive loss.

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Derivative Activity

The following table summarizes the total fair value, including interest accruals, and outstanding notional amounts of derivative instruments as of March 31, 2023 and June 30, 2022 (in thousands):


	March 31, 2023						June 30, 2022
	Notional Amount		Derivative Assets		Derivative Liabilities		Notional Amount		Derivative Assets		Derivative Liabilities
Derivatives designated as cash flow hedges
Interest rate contracts - cash flow hedges	$	1,100,000	$	27	$	(284)	$	—	$	—	$	—
Derivatives not designated as hedges
Interest rate contracts	2,066,660		49,432		—		1,690,000		49,983		—
Total gross derivative assets/liabilities	$	3,166,660	$	49,459	$	(284)	$	1,690,000	$	49,983	$	—

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


	Three Months Ended March 31,		Nine Months Ended March 31,
	2023		2023
Balance at beginning of period	$	—	$	—
Changes in fair value	(303)		(303)
Amounts reclassified into earnings (1)	(46)		(46)
Balance at end of period (2)	$	(257)	$	(257)

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

(2)Over the next 12 months, we expect to reclassify $0.3 million of net pre-tax losses from AOCI into funding costs within our interim consolidated statements of operations and comprehensive income.

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


Location of Gains (Losses) where the Effects of Derivatives are recorded	Three Months Ended March 31,		Nine Months Ended March 31,
	2023	2022	2023	2022
The effects of cash flow hedging
Funding Costs	(46)		(46)
The effects of derivatives not designated in hedging relationships
Other Income, net	(3,691)	35,145	33,819	38,416

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14. Fair Value of Financial Assets and Liabilities

ASC Topic 820, “Fair Value Measurement” (“ASC 820”) establishes a fair value hierarchy that prioritizes the use of inputs used in valuation methodologies into the following three levels:

•Level 1: Inputs to the valuation methodology are quoted prices, unadjusted, for identical assets or liabilities in active markets. A quoted price in an active market provides the most reliable evidence of fair value and shall be used to measure fair value whenever available.

~~Table of Contents~~

•Level 2: Inputs to the valuation methodology include quoted prices for similar assets or liabilities in active markets; inputs to the valuation methodology include quoted prices for identical or similar assets or liabilities in markets that are not active; or inputs to the valuation methodology that are derived principally from or can be corroborated by observable market data by correlation or other means.

•Level 3: Inputs to the valuation methodology are unobservable and significant to the fair value measurement. Level 3 assets and liabilities include financial instruments whose value is determined using discounted cash flow methodologies, as well as instruments for which the determination of fair value requires significant management judgment or estimation.

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Financial Assets and Liabilities Recorded at Fair Value

The following tables present information about our assets and liabilities that are measured at fair value on a recurring basis as of March 31, 2023 and June 30, 2022 (in thousands):


											March 31, 2023
		Level 1		Level 2		Level 3		Total			Level 1		Level 2		Level 3		Total
Assets:	Assets:									Assets:
Cash and cash equivalents:	Cash and cash equivalents:									Cash and cash equivalents:
Money market funds	Money market funds	$	1,461,956	$	—	$	—	$	1,461,956	Money market funds	$	204,449	$	—	$	—	$	204,449
Corporate bonds		—		852		—		852

Commercial paper	Commercial paper	—		73,689		—		73,689		Commercial paper	—		156,887		—		156,887

Government bonds - U.S.										Government bonds - U.S.	—		193,175		—		193,175

Restricted cash:
Securities available for sale:	Securities available for sale:									Securities available for sale:
Certificate of deposit	Certificate of deposit	—		54,048		—		54,048		Certificate of deposit	—		145,528		—		145,528
Corporate bonds	Corporate bonds	—		185,434		—		185,434		Corporate bonds	—		292,726		—		292,726
Commercial paper	Commercial paper	—		133,437		—		133,437		Commercial paper	—		186,143		—		186,143
Agency bonds										Agency bonds	—		35,194		—		35,194
Government bonds:	Government bonds:									Government bonds:
Non-U.S.	Non-U.S.	—		35,775		—		35,775		Non-U.S.	—		6,108		—		6,108
U.S.	U.S.	—		165,624		—		165,624		U.S.	—		367,081		—		367,081
Securitization notes receivable and residual trust certificates	Securitization notes receivable and residual trust certificates	—		—		42,707		42,707		Securitization notes receivable and residual trust certificates	—		—		25,235		25,235
Total securities available for sale		—		574,318		42,707		617,025
Other										Other	—		—		1,016		1,016
Servicing assets	Servicing assets	—		—		4,620		4,620		Servicing assets	—		—		771		771
Derivative instruments	Derivative instruments	—		43,437		—		43,437		Derivative instruments	—		49,459		—		49,459
Total assets	Total assets	$	1,461,956	$	692,296	$	47,327	$	2,201,579	Total assets	$	204,449	$	1,432,301	$	27,022	$	1,663,772
Liabilities:	Liabilities:									Liabilities:
Servicing liabilities	Servicing liabilities	$	—	$	—	$	5,606	$	5,606	Servicing liabilities	$	—	$	—	$	3,674	$	3,674
Performance fee liability	Performance fee liability	—		—		1,584		1,584		Performance fee liability	—		—		1,697		1,697
Residual trust certificates, held by third-parties	Residual trust certificates, held by third-parties	—		—		489		489		Residual trust certificates, held by third-parties	—		—		178		178
Contingent consideration	Contingent consideration	—		—		119,008		119,008		Contingent consideration	—		—		14,580		14,580
Profit share liability	Profit share liability	—		—		1,878		1,878		Profit share liability	—		—		2,190		2,190
Derivative instruments										Derivative instruments	—		284		—		284
Total liabilities	Total liabilities	$	—	$	—	$	128,565	$	128,565	Total liabilities	$	—	$	284	$	22,319	$	22,603

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~~The following tables present information about our assets and liabilities that are measured at fair value on a recurring basis as of June 30, 2021 (in thousands):~~


											June 30, 2022
		Level 1		Level 2		Level 3		Total			Level 1		Level 2		Level 3		Total
Assets:	Assets:									Assets:
Cash and cash equivalents:	Cash and cash equivalents:									Cash and cash equivalents:
Money market funds	Money market funds	$	143,241	$	—	$	—	$	143,241	Money market funds	$	162,483	$	—	$	—	$	162,483
Restricted cash:
Certificates of deposit										Certificates of deposit	—		16,026		—		16,026
Commercial paper										Commercial paper	—		229,272		—		229,272
Government bonds - U.S.										Government bonds - U.S.	—		58,541		—		58,541

Securities available for sale:										Securities available for sale:
Certificate of deposit										Certificate of deposit	—		300,390		—		300,390
Corporate bonds										Corporate bonds	—		368,671		—		368,671
Commercial paper										Commercial paper	—		478,293		—		478,293
Government bonds:										Government bonds:
Non-U.S.										Non-U.S.	—		17,955		—		17,955
U.S.										U.S.	—		378,386		—		378,386
Securitization notes receivable and residual trust certificates	Securitization notes receivable and residual trust certificates	—		—		16,170		16,170		Securitization notes receivable and residual trust certificates	—		—		51,678		51,678
Servicing assets	Servicing assets	—		—		2,349		2,349		Servicing assets	—		—		1,192		1,192
Derivative instruments	Derivative instruments	—		2,880		—		2,880		Derivative instruments	—		49,983		—		49,983
Total assets	Total assets	$	143,241	$	2,880	$	18,519	$	164,640	Total assets	$	162,483	$	1,897,517	$	52,870	$	2,112,870
Liabilities:	Liabilities:									Liabilities:

Servicing liabilities	Servicing liabilities	$	—	$	—	$	3,961	$	3,961	Servicing liabilities	$	—	$	—	$	2,673	$	2,673
Performance fee liability	Performance fee liability	—		—		1,290		1,290		Performance fee liability	—		—		1,710		1,710
Residual trust certificates, held by third-parties	Residual trust certificates, held by third-parties	—		—		914		914		Residual trust certificates, held by third-parties	—		—		377		377
Contingent consideration	Contingent consideration	—		—		153,447		153,447		Contingent consideration	—		—		23,348		23,348
Profit share liability	Profit share liability	—		—		2,464		2,464		Profit share liability	—		—		1,987		1,987
Total liabilities	Total liabilities	$	—	$	—	$	162,076	$	162,076	Total liabilities	$	—	$	—	$	30,095	$	30,095

There were no transfers between levels during the periods ended March 31, ~~2022~~2023 and June 30, ~~2021.~~2022.

Assets and Liabilities Measured at Fair Value on a Recurring Basis (Level 2)

Securities Available for Sale

As of March 31, ~~2022,~~2023, we held marketable securities classified as available for sale. Management obtains pricing from one or more third-party pricing services for the purpose of determining fair value. Whenever available, the fair value is based on quoted bid prices as of the end of the trading day. When quoted prices are not available, other methods may be utilized including evaluated prices provided by third-party pricing services.

Derivative Instruments

Our primary objective in holding derivatives is to reduce the volatility in cash flows associated with our funding activities, arising from changes in interest rates. We do not employ derivatives for trading or speculative purposes.

As of March 31, 2022, we used a combination of interest rate cap agreements and interest rate swaps to manage interest costs and the risk associated with variable interest rates. Neither the interest rate caps or the interest rate swaps have been designated as hedging instruments.

~~As of March 31, 2022~~2023 and June 30, ~~2021, the interest rate caps and interest rate swaps~~2022, our derivative instruments are ~~in a net asset position, and~~ classified as Level 2 within the fair value hierarchy, based on prices quoted for similar financial instruments in markets that are not active. ~~The fair values are presented gross within other assets and offsetting collateral received by~~Refer to Note 13. Derivative Financial Instruments in the ~~counterparty is presented as a liability within accrued expenses and other liabilities on~~notes to the interim condensed consolidated ~~balance sheets. Any changes in the fair value of these~~ financial ~~instruments are reflected in other (expense) income, net,~~statements for further details on ~~the interim condensed consolidated statements of operations and comprehensive loss.~~our derivative instruments.

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Assets and Liabilities Measured at Fair Value on a Recurring Basis using Significant Unobservable Inputs (Level 3)

We evaluate our financial assets and liabilities subject to fair value measurements on a recurring basis to determine the appropriate level at which to classify them each reporting period. Since our servicing assets and liabilities, performance fee liability, securitization notes and residual trust certificates, contingent consideration, and profit share liability do not trade in an active market with readily observable prices, we use significant unobservable inputs to measure fair value. This determination requires significant judgments to be made.

Servicing Assets and Liabilities

We sold loans with an unpaid balance of ~~$2,042.5 million~~$1.7 billion and ~~$5,647.5 million~~$5.8 billion for the three and nine months ended March 31, ~~2022,~~2023, respectively, and ~~$756.7 million~~$2.0 billion and ~~$2,013.2 million~~$5.6 billion for the three and nine months ended March 31, ~~2021,~~2022, respectively, for which we retained servicing rights.

As of March 31, ~~2022~~2023 and June 30, ~~2021,~~2022, we serviced loans which we sold with a remaining unpaid principal balance of ~~$4,036.4 million~~$4.2 billion and ~~$2,453.9 million,~~$4.5 billion, respectively.

We use discounted cash flow models to arrive at an estimate of fair value. Significant assumptions used in the valuation of our servicing rights are as follows:

Adequate Compensation

We estimate adequate compensation as the rate a willing market participant would require for servicing loans with similar characteristics as those in the serviced portfolio.

Discount Rate

Estimated future payments to be received under servicing agreements are discounted as a part of determining the fair value of the servicing rights. For servicing rights on loans, the discount rate reflects the time value of money and a risk premium intended to reflect the amount of compensation market participants would require.

Net Default Rate

We estimate the timing and probability of early loan payoffs, loan defaults and write-offs, thus affecting the projected unpaid principal balance and expected term of the loan, which are used to project future servicing revenue and expenses.

We earned ~~$23.5~~$21.4 million and ~~$44.2~~$64.3 million of servicing income for the three and nine months ended March 31, ~~2022,~~2023, respectively, and ~~$8.0~~$23.5 million and ~~$17.2~~$44.2 million for the three and nine months ended March 31, ~~2021,~~2022, respectively.

As of March 31, ~~2022~~2023 and June 30, ~~2021,~~2022, the aggregate fair value of the servicing assets was measured at ~~$4.6~~$0.8 million and ~~$2.3~~$1.2 million, respectively, and presented within other assets on the interim condensed consolidated balance sheets. As of March 31, ~~2022~~2023 and June 30, ~~2021,~~2022, the aggregate fair value of the servicing liabilities was measured at ~~$5.6~~$3.7 million and ~~$4.0~~$2.7 million, respectively, and presented within accrued expenses and other liabilities on the interim condensed consolidated balance sheets.

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The following table summarizes the activity related to the aggregate fair value of our servicing assets (in thousands):


		Servicing Assets
		Three Months Ended March 31,				Nine Months Ended March 31,					Three Months Ended March 31,				Nine Months Ended March 31,
		2022		2021		2022		2021			2023		2022		2023		2022
Fair value at beginning of period	Fair value at beginning of period	$	2,178	$	1,923	$	2,349	$	2,132	Fair value at beginning of period	$	1,093	$	2,178	$	1,192	$	2,349
Initial transfers of financial assets	Initial transfers of financial assets	1,991		202		3,105		1,732		Initial transfers of financial assets	—		1,991		433		3,105
Subsequent changes in fair value	Subsequent changes in fair value	451		(5)		(834)		(1,744)		Subsequent changes in fair value	(322)		451		(854)		(834)
Fair value at end of period	Fair value at end of period	$	4,620	$	2,120	$	4,620	$	2,120	Fair value at end of period	$	771	$	4,620	$	771	$	4,620

The following table summarizes the activity related to the aggregate fair value of our servicing liabilities (in thousands):


		Servicing Liabilities
		Three Months Ended March 31,				Nine Months Ended March 31,					Three Months Ended March 31,				Nine Months Ended March 31,
		2022		2021		2022		2021			2023		2022		2023		2022
Fair value at beginning of period	Fair value at beginning of period	$	8,626	$	2,826	$	3,961	$	1,540	Fair value at beginning of period	$	3,680	$	8,626	$	2,673	$	3,961
Initial transfers of financial assets	Initial transfers of financial assets	2,940		1,972		13,826		5,185		Initial transfers of financial assets	1,954		2,940		6,149		13,826
Subsequent changes in fair value	Subsequent changes in fair value	(5,960)		(2,550)		(12,181)		(4,477)		Subsequent changes in fair value	(1,960)		(5,960)		(5,148)		(12,181)
Fair value at end of period	Fair value at end of period	$	5,606	$	2,248	$	5,606	$	2,248	Fair value at end of period	$	3,674	$	5,606	$	3,674	$	5,606

The following ~~table~~tables presents quantitative information about the significant unobservable inputs used for our Level 3 fair value measurement of servicing assets and liabilities as of March 31, 2023 and June 30, 2022:


											March 31, 2023
		Unobservable Input	Minimum		Maximum		Weighted Average			Unobservable Input	Minimum		Maximum		Weighted Average
Servicing assets	Servicing assets	Discount rate	30.00	%	30.00	%	30.00	%	Servicing assets	Discount rate	30.00	%	30.00	%	30.00	%
		Adequate compensation (1)	0.84	%	1.65	%	1.29	%		Adequate compensation (1)	0.75	%	3.00	%	0.97	%
		Net default rate	0.87	%	9.25	%	4.56	%		Gross default rate (2)	1.90	%	10.64	%	3.73	%
Servicing liabilities	Servicing liabilities	Discount rate	30.00	%	30.00	%	30.00	%	Servicing liabilities	Discount rate	30.00	%	30.00	%	30.00	%
		Adequate compensation (1)	2.12	%	4.26	%	3.13	%		Adequate compensation (1)	0.75	%	3.00	%	2.23	%
		Net default rate	1.50	%	29.18	%	13.76	%		Gross default rate (2)	10.25	%	27.14	%	13.35	%


		June 30, 2022
	Unobservable Input	Minimum		Maximum		Weighted Average
Servicing assets	Discount rate	30.00	%	30.00	%	30.00	%
	Adequate compensation(1)	0.78	%	1.85	%	1.10	%
	Gross default rate (2)	0.59	%	50.59	%	1.59	%
Servicing liabilities	Discount rate	30.00	%	30.00	%	30.00	%
	Adequate compensation(1)	2.13	%	2.34	%	2.21	%
	Gross default rate (2)	9.03	%	24.44	%	13.81	%

(1)Estimated ~~cost of servicing a loan as a percentage of unpaid principal balance~~

~~Table of Contents~~

~~The following table presents quantitative information about the significant unobservable inputs used for our Level 3 fair value measurement of servicing assets and liabilities as of June 30, 2021:~~

Unobservable Input Minimum Maximum Weighted Average
Servicing assets Discount rate 30.00 % 30.00 % 30.00 %
Adequate compensation(1)
0.70 % 0.84 % 0.81 %
Net default rate 0.53 % 0.95 % 0.64 %
Servicing liabilities Discount rate 30.00 % 30.00 % 30.00 %
Adequate compensation(1)
1.29 % 3.70 % 2.71 %
Net default rate 0.80 % 8.42 % 7.12 %

~~(1)Estimated~~annual cost of servicing a loan as a percentage of unpaid principal balance

(2)Annualized estimated gross charge-offs as a percentage of unpaid principal balance

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


		March 31, 2022		June 30, 2021			March 31, 2023		June 30, 2022
Servicing assets	Servicing assets					Servicing assets
Net default rate assumption:
Net default rate increase of 25%		$	(41)	$	(7)
Net default rate increase of 50%		$	(75)	$	(15)
Gross default rate assumption:						Gross default rate assumption:
Gross default rate increase of 25%						Gross default rate increase of 25%	$	—	$	11
Gross default rate increase of 50%						Gross default rate increase of 50%	$	(1)	$	22
Adequate compensation assumption:	Adequate compensation assumption:					Adequate compensation assumption:
Adequate compensation increase of 10%						Adequate compensation increase of 10%	$	(578)	$	—
Adequate compensation increase of 20%						Adequate compensation increase of 20%	$	(1,156)	$	—
Adequate compensation increase of 25%	Adequate compensation increase of 25%	$	(4,587)	$	(2,006)	Adequate compensation increase of 25%	$	—	$	(3,513)
Adequate compensation increase of 50%	Adequate compensation increase of 50%	$	(9,173)	$	(4,011)	Adequate compensation increase of 50%	$	—	$	(7,026)
Discount rate assumption:	Discount rate assumption:					Discount rate assumption:
Discount rate increase of 25%	Discount rate increase of 25%	$	(64)	$	(4)	Discount rate increase of 25%	$	(26)	$	(57)
Discount rate increase of 50%	Discount rate increase of 50%	$	(129)	$	(1)	Discount rate increase of 50%	$	(51)	$	(109)
Servicing liabilities	Servicing liabilities					Servicing liabilities
Net default rate assumption:
Net default rate increase of 25%		$	(26)	$	(40)
Net default rate increase of 50%		$	(49)	$	(61)
Gross default rate assumption:						Gross default rate assumption:
Gross default rate increase of 25%						Gross default rate increase of 25%	$	(14)	$	(10)
Gross default rate increase of 50%						Gross default rate increase of 50%	$	(28)	$	(21)
Adequate compensation assumption:	Adequate compensation assumption:					Adequate compensation assumption:
Adequate compensation increase of 10%						Adequate compensation increase of 10%	$	3,104	$	—
Adequate compensation increase of 20%						Adequate compensation increase of 20%	$	6,207	$	—
Adequate compensation increase of 25%	Adequate compensation increase of 25%	$	4,370	$	3,060	Adequate compensation increase of 25%	$	—	$	6,139
Adequate compensation increase of 50%	Adequate compensation increase of 50%	$	8,739	$	6,119	Adequate compensation increase of 50%	$	—	$	12,278
Discount rate assumption:	Discount rate assumption:					Discount rate assumption:
Discount rate increase of 25%	Discount rate increase of 25%	$	(512)	$	(137)	Discount rate increase of 25%	$	(77)	$	(50)
Discount rate increase of 50%	Discount rate increase of 50%	$	(663)	$	(263)	Discount rate increase of 50%	$	(149)	$	(98)

Performance Fee Liability

In accordance with our agreements with our originating bank partners, we pay a fee for each loan that is fully repaid by the consumer, due at the end of the period in which the loan is fully repaid. We recognize a liability upon the purchase of a loan for the expected future payment of the performance fee. This liability is measured using a discounted cash flow model and recorded at fair value and presented within accrued expenses and other liabilities on the interim condensed consolidated balance sheets. Any changes in the fair value of the liability are reflected in other ~~(expense)~~ income, net, on the interim condensed consolidated statements of operations and comprehensive loss.

~~Table of Contents~~

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


		Performance Fee Liability
		Three Months Ended March 31,				Nine Months Ended March 31,					Three Months Ended March 31,				Nine Months Ended March 31,
		2022		2021		2022		2021			2023		2022		2023		2022
Fair value at beginning of period	Fair value at beginning of period	$	1,530	$	1,205	$	1,290	$	875	Fair value at beginning of period	$	1,876	$	1,530	$	1,710	$	1,290
Purchases of loans	Purchases of loans	432		349		1,265		1,070		Purchases of loans	337		432		1,388		1,265
Settlements Paid	Settlements Paid	(418)		—		(418)		—		Settlements Paid	(997)		(418)		(1,498)		(418)
Subsequent changes in fair value	Subsequent changes in fair value	40		(312)		(553)		(703)		Subsequent changes in fair value	481		40		97		(553)
Fair value at end of period	Fair value at end of period	$	1,584	$	1,242	$	1,584	$	1,242	Fair value at end of period	$	1,697	$	1,584	$	1,697	$	1,584

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Significant unobservable inputs used for our Level 3 fair value measurement of the performance fee liability are the discount rate, refund rate, and default rate. Significant increases or decreases in any of the inputs in isolation could result in a significantly lower or higher fair value measurement.

The following ~~table presents~~tables present quantitative information about the significant unobservable inputs used for our Level 3 fair value measurement of the performance fee liability as of March 31, 2023 and June 30, 2022:


						March 31, 2023
Unobservable Input	Unobservable Input	Minimum	Maximum	Weighted Average	Unobservable Input	Minimum	Maximum	Weighted Average
Discount rate	Discount rate	10.00%	10.00%	10.00%	Discount rate	10.00%	10.00%	10.00%
Refund rate	Refund rate	4.50%	4.50%	4.50%	Refund rate	1.50%	1.50%	1.50%
Default rate	Default rate	1.78%	2.98%	2.30%	Default rate	1.78%	3.34%	2.77%

~~The following table presents quantitative information about the significant unobservable inputs used for our Level 3 fair value measurement of the performance fee liability as of June 30, 2021:~~


						June 30, 2022
Unobservable Input	Unobservable Input	Minimum	Maximum	Weighted Average	Unobservable Input	Minimum	Maximum	Weighted Average
Discount rate	Discount rate	10.00%	10.00%	10.00%	Discount rate	10.00%	10.00%	10.00%
Refund rate	Refund rate	4.50%	4.50%	4.50%	Refund rate	4.50%	4.50%	4.50%
Default rate	Default rate	1.78%	2.83%	1.80%	Default rate	1.78%	3.10%	2.42%

Residual Trust Certificates Held by Third-Parties in Consolidated VIEs

~~Refer to Note 11. Securitization and Variable Interest Entities for a description of the 2020-Z2 securitization trust.~~ Residual trust certificates held by third-party investor(s) are measured at fair value, using a discounted cash flow model, and presented within accrued expenses and other liabilities on the interim condensed consolidated balance sheets. Any changes in the fair value of the liability are reflected in other ~~(expense)~~ income, net, on the interim condensed consolidated statements of operations and comprehensive loss.

~~Table of Contents~~

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


							Three Months Ended March 31,				Nine Months Ended March 31,
		Three Months Ended March 31, 2022		Nine Months Ended March 31, 2022			2023		2022		2023		2022
Fair value at beginning of period	Fair value at beginning of period	$	619	$	914	Fair value at beginning of period	$	242	$	619	$	377	$	914
Repayments	Repayments	(146)		(549)		Repayments	(71)		(146)		(248)		(549)
Subsequent changes in fair value	Subsequent changes in fair value	16		124		Subsequent changes in fair value	7		16		49		124
Fair value at end of period	Fair value at end of period	$	489	$	489	Fair value at end of period	$	178	$	489	$	178	$	489

Significant unobservable inputs used for our Level 3 fair value measurement of the residual trust certificates held by third-parties are the discount rate, loss rate, and prepayment rate. Significant increases or decreases in any of the inputs in isolation could result in a significantly lower or higher fair value measurement.

Table of Contents

The following table ~~presents~~present quantitative information about the significant unobservable inputs used for our Level 3 fair value measurement of the residual trust certificates held by third-parties as of March 31, 2023 and June 30, 2022:


						March 31, 2023
Unobservable Input	Unobservable Input	Minimum	Maximum	Weighted Average	Unobservable Input	Minimum	Maximum	Weighted Average
Discount rate	Discount rate	10.00%	10.00%	10.00%	Discount rate	10.00%	15.00%	10.00%
Loss rate	Loss rate	0.75%	0.75%	0.75%	Loss rate	0.75%	1.13%	0.75%
Prepayment rate	Prepayment rate	8.00%	8.00%	8.00%	Prepayment rate	4.00%	8.00%	8.00%

The following table summarizes the effect that adverse changes in estimates would have on the fair value of the securitization residual certificates held by third-party investor(s) given hypothetical changes in significant unobservable inputs (in thousands):


	~~March 31, 2022~~
~~Discount rate assumption:~~
~~Discount rate increase of 25%~~	$	~~(8)~~
~~Discount rate increase of 50%~~	$	~~(16)~~
~~Loss rate assumption:~~
~~Loss rate increase of 25%~~	$	~~(12)~~
~~Loss rate increase of 50%~~	$	~~(23)~~
~~Prepayment rate assumption:~~
~~Prepayment rate decrease of 25%~~	$	~~(3)~~
~~Prepayment rate decrease of 50%~~	$	~~(6)~~


	June 30, 2022
Unobservable Input	Minimum	Maximum	Weighted Average
Discount rate	10.00%	10.00%	10.00%
Loss rate	0.75%	0.75%	0.75%
Prepayment rate	8.00%	8.00%	8.00%

Retained Beneficial Interests in Unconsolidated VIEs

As of March 31, ~~2022,~~2023, the Company held notes receivable and residual trust certificates with an aggregate fair value of ~~$42.7~~$25.2 million in connection with th~~e 2021-Z1, 2021-Z2 and 2022-X1 securitizations, which are~~ unconsolidated securitizations. The balances correspond to the 5% economic risk retention the Company is required to maintain as the securitization sponsor. ~~Refer to~~ ~~Note 11. Securitization and Variable Interest Entities~~ ~~for a further description of the~~ ~~2021-Z1, 2021-Z2 and 2022-X1securitization trusts.~~

These assets are measured at fair value using a discounted cash flow model, and presented within securities available for sale at fair value on the interim condensed consolidated balance sheets. Changes in the fair value, other than declines in fair value due to credit recognized as an allowance, are reflected in other comprehensive income (loss) on the interim condensed consolidated statements of operations and comprehensive loss. Declines in fair value

~~Table of Contents~~

due to credit are reflected in other ~~(expense)~~ income, net on the interim condensed consolidated statements of operations and comprehensive loss.

The following table summarizes the activity related to the fair value of the notes and residual trust certificates ~~during the three and nine months ended March 31, 2022~~ ~~(in~~(in thousands):


							Three Months Ended March 31,				Nine Months Ended March 31,
		Three Months Ended March 31, 2022		Nine Months Ended March 31, 2022			2023		2022		2023		2022
Fair value at beginning of period	Fair value at beginning of period	$	25,319	$	16,170	Fair value at beginning of period	$	32,766	$	25,319	$	51,678	$	16,170
Additions	Additions	22,067		35,762		Additions	—		22,067		—		35,762
Cash received (due to payments or sales)	Cash received (due to payments or sales)	(4,414)		(8,798)		Cash received (due to payments or sales)	(8,012)		(4,414)		(26,847)		(8,798)
Change in unrealized loss		(402)		(586)
Change in unrealized gain (loss)						Change in unrealized gain (loss)	374		(402)		(136)		(586)
Accrued interest	Accrued interest	215		285		Accrued interest	249		215		997		285
Reversal of (impairment on) securities available for sale	Reversal of (impairment on) securities available for sale	(78)		(126)		Reversal of (impairment on) securities available for sale	(143)		(78)		(458)		(126)
Fair value at end of period	Fair value at end of period	$	42,707	$	42,707	Fair value at end of period	$	25,235	$	42,707	$	25,235	$	42,707

Significant unobservable inputs used for our Level 3 fair value measurement of the notes and residual trust certificates are the discount rate, loss rate, and prepayment rate. Significant increases or decreases in any of the inputs in isolation could result in a significantly lower or higher fair value measurement.

Table of Contents

The following ~~table presents~~tables present quantitative information about the significant unobservable inputs used for our Level 3 fair value measurement of the residual trust certificates as of March 31, ~~2022:~~2023 and June 30, 2022:


						March 31, 2023
Unobservable Input	Unobservable Input	Minimum	Maximum	Weighted Average	Unobservable Input	Minimum	Maximum	Weighted Average
Discount rate	Discount rate	2.13%	20.25%	3.81%	Discount rate	4.45%	29.84%	6.96%
Loss rate	Loss rate	0.61%	10.95%	4.15%	Loss rate	1.16%	17.39%	3.58%
Prepayment rate	Prepayment rate	5.25%	35.00%	23.45%	Prepayment rate	7.00%	30.30%	19.72%


	June 30, 2022
Unobservable Input	Minimum	Maximum	Weighted Average
Discount rate	3.68%	22.50%	5.37%
Loss rate	0.61%	10.95%	2.65%
Prepayment rate	5.25%	35.00%	18.48%

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


	~~March 31, 2022~~
~~Discount rate assumption:~~
~~Discount rate increase of 25%~~	$	~~(319)~~
~~Discount rate increase of 50%~~	$	~~(628)~~
~~Loss rate assumption:~~
~~Loss rate increase of 25%~~	$	~~(298)~~
~~Loss rate increase of 50%~~	$	~~(588)~~
~~Prepayment rate assumption:~~
~~Prepayment rate decrease of 25%~~	$	53
~~Prepayment rate decrease of 50%~~	$	~~117~~


	March 31, 2023		June 30, 2022
Discount rate assumption:
Discount rate increase of 25%	$	(288)	$	(1,410)
Discount rate increase of 50%	$	(566)	$	(2,295)
Loss rate assumption:
Loss rate increase of 25%	$	(243)	$	(729)
Loss rate increase of 50%	$	(368)	$	(964)
Prepayment rate assumption:
Prepayment rate decrease of 25%	$	(45)	$	(545)
Prepayment rate decrease of 50%	$	(91)	$	(519)

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Contingent Consideration

Our acquisition of PayBright, Inc. (“PayBright”) on January 1, 2021 included consideration transferred and 2,587,362 shares of our common stock held in escrow, ~~contingent~~contingent upon the achievement of future milestones. WeAt the acquisition date, we classified the contingent consideration as a ~~liability. The acquisition date~~liability and estimated its fair value ~~of the contingent consideration liability was estimated~~ using a Monte Carlo simulation ~~in which the fair value is equal to the estimated number~~utilizing assumptions of ~~shares to be released from escrow, which are determined based on~~ simulated revenue, ~~multiplied by the simulated share price, discounted at the risk-free~~equity volatility, and a discount rate. The liability is remeasured to its fair value at each reporting date, utilizing a Monte Carlo simulation for periods in which actual revenues are unknown, until the contingency is ~~resolved.~~ resolved. During the year ended June 30, 2022, one of these milestones was achieved and 1,293,681 shares of our Class A common stock were released from escrow, resulting in a reduction to the contingent liability. During the nine months ended March 31, 2023, an additional milestone was achieved and the fair value was estimated based on the shares expected to be released from escrow multiplied by the estimated share price. The fair value estimate represents a Level 3 measurement, as the revenue milestone represents a significant unobservable input. The change in fair value of the contingent consideration at each reporting date is recognized as a component of other ~~(expense)~~ income, net in the interim condensed consolidated statements of operations and comprehensive loss for the respective period.

Table of Contents

The following table summarizes the activity related to the fair value of the PayBright contingent consideration ~~during the three and nine months ended March 31, 2022~~ (in thousands):


							Three Months Ended March 31,				Nine Months Ended March 31,
		Three Months Ended March 31, 2022		Nine Months Ended March 31, 2022			2023		2022		2023		2022
Fair value at beginning of period	Fair value at beginning of period	$	253,750	$	153,447	Fair value at beginning of period	$	12,510	$	253,750	$	23,348	$	153,447
Subsequent changes in fair value	Subsequent changes in fair value	(136,248)		(28,682)		Subsequent changes in fair value	2,109		(136,248)		(7,193)		(28,682)
Effect of foreign currency translation	Effect of foreign currency translation	1,506		(5,757)		Effect of foreign currency translation	(39)		1,506		(1,575)		(5,757)
Fair value at end of period	Fair value at end of period	$	119,008	$	119,008	Fair value at end of period	$	14,580	$	119,008	$	14,580	$	119,008

Significant unobservable inputs used for our Level 3 fair value measurement of the PayBright contingent consideration are the discount rate, equity volatility, and revenue volatility. Significant increases or decreases in any of the inputs in isolation could result in a significantly lower or higher fair value measurement.

~~The following table presents quantitative information about the significant unobservable inputs used for our Level 3 fair value measurement of the contingent consideration as of March 31, 2022:~~

Unobservable Input Minimum Maximum Weighted Average
Discount rate 13.00% 13.00% 13.00%
Equity volatility 19.00% 103.00% 86.00%
Revenue volatility 11.00% 134.00% 33.00%

The Kite acquisition included $9.0 million of cash held in escrow, the release of which is determined based on employee retention. The acquisition date fair value of the contingent consideration was estimated using a probability-weighted approach in which the likelihoods of potential employee retention outcomes were applied to the respective payout amounts and discounted to present value. The contingent consideration asset is remeasured to fair value at each reporting date based on the remaining amount held in escrow, passage of time, and any changes in expectations regarding employee retention outcomes until the contingency is resolved. The change in fair value of the contingent consideration asset at each reporting date is recognized as a component of ~~other (expense) income, net~~ in the consolidated statements of operations and comprehensive loss for the respective period. During the three months ended March 31, 2022, the contingency was resolved and the fair value of the contingent consideration asset was reduced to zero. For the three and nine months ended March 31, 2022, the change in fair value of the contingent consideration asset was not material.

~~Table of Contents~~

Profit Share Liability

~~During the fiscal year ended June 30,~~On January 1, 2021, we entered into a commercial agreement with an enterprise partner, in which we are obligated to share in the profitability of transactions facilitated by our platform. Upon capture of a loan under this program, we record a liability associated with the estimated future profit to be shared over the life of the loan based on estimated program profitability levels. This liability is measured using a discounted cash flow model and recorded at fair value and presented within accrued expenses and other liabilities on the interim condensed consolidated balance sheets.

The following table summarizes the activity related to the fair value of the profit share liability ~~during the three and nine months ended March 31, 2022~~ (in thousands):


							Three Months Ended March 31,				Nine Months Ended March 31,
		Three Months Ended March 31, 2022		Nine Months Ended March 31, 2022			2023		2022		2023		2022
Fair value at beginning of period	Fair value at beginning of period	$	2,053	$	2,465	Fair value at beginning of period	$	3,697	$	2,053	$	1,987	$	2,465
Facilitation of loans	Facilitation of loans	1,098		4,672		Facilitation of loans	1,045		1,098		4,520		4,672
Actual performance	Actual performance	(2,918)		(3,929)		Actual performance	(3,890)		(2,918)		(6,154)		(3,929)
Subsequent changes in fair value	Subsequent changes in fair value	1,645		(1,330)		Subsequent changes in fair value	1,338		1,645		1,837		(1,330)
Fair value at end of period	Fair value at end of period	$	1,878	$	1,878	Fair value at end of period	$	2,190	$	1,878	$	2,190	$	1,878

Significant unobservable inputs used for our Level 3 fair value measurement of the profit share liability are the discount rate and estimated program profitability. Significant increases or decreases in any of the inputs in isolation could result in a significantly lower or higher fair value measurement.

The following ~~table presents~~tables present quantitative information about the significant unobservable inputs used for our Level 3 fair value measurement of the profit sharing liability as of March 31, ~~2022:~~2023 and June 30, 2022:

Unobservable Input Minimum Maximum Weighted Average
Discount rate 30.00% 30.00% 30.00%
Program profitability 1.25% 3.54% 1.26%


	March 31, 2023
Unobservable Input	Minimum	Maximum	Weighted Average
Discount rate	30.00%	30.00%	30.00%
Program profitability	0.07%	1.81%	1.30%


	June 30, 2022
Unobservable Input	Minimum	Maximum	Weighted Average
Discount rate	30.00%	30.00%	30.00%
Program profitability	1.25%	3.54%	1.28%

5148

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Financial Assets and Liabilities Not Recorded at Fair Value

The following ~~table presents~~tables present the fair value hierarchy for financial assets and liabilities not recorded at fair value as of March 31, 2023 and June 30, 2022 (in thousands):


													March 31, 2023
		Carrying Amount		Level 1		Level 2		Level 3		Balance at Fair Value			Carrying Amount		Level 1		Level 2		Level 3		Balance at Fair Value
Assets:	Assets:											Assets:
Loans held for sale	Loans held for sale	$	3,618	$	—	$	3,618	$	—	$	3,618	Loans held for sale	$	122	$	—	$	122	$	—	$	122
Loans held for investment, net	Loans held for investment, net	2,343,385		—		—		2,410,903		2,410,903		Loans held for investment, net	3,599,206		—		—		3,816,941		3,816,941
Other assets	Other assets	11,807		—		11,807		—		11,807		Other assets	9,637		—		9,637		—		9,637
Total assets	Total assets	$	2,358,810	$	—	$	15,425	$	2,410,903	$	2,426,328	Total assets	$	3,608,965	$	—	$	9,759	$	3,816,941	$	3,826,700
Liabilities:	Liabilities:											Liabilities:
Convertible senior notes, net (1)	Convertible senior notes, net (1)	$	1,705,624	$	—	$	1,213,020	$	—	$	1,213,020	Convertible senior notes, net (1)	$	1,413,345	$	—	$	923,270	$	—	$	923,270
Notes issued by securitization trusts	Notes issued by securitization trusts	1,447,568		—		—		1,406,390		1,406,390		Notes issued by securitization trusts	1,788,853		—		—		1,743,862		1,743,862
Funding debt		910,806		—		—		910,847		910,847
Funding debt (2)												Funding debt (2)	1,527,919		—		—		1,527,869		1,527,869
Total liabilities	Total liabilities	$	4,063,998	$	—	$	1,213,020	$	2,317,237	$	3,530,257	Total liabilities	$	4,730,117	$	—	$	923,270	$	3,271,731	$	4,195,001


	June 30, 2022
	Carrying Amount		Level 1		Level 2		Level 3		Balance at Fair Value
Assets:
Loans held for sale	$	2,670	$	—	$	2,670	$	—	$	2,670
Loans held for investment, net	2,348,169		—		—		2,412,871		2,412,871
Other assets	12,661		—		12,661		—		12,661
Total assets	$	2,363,500	$	—	$	15,331	$	2,412,871	$	2,428,202
Liabilities:
Convertible senior notes, net (1)	$	1,706,668	$	—	$	984,285	$	—	$	984,285
Notes issued by securitization trusts	1,627,580		—		—		1,529,401		1,529,401
Funding debt (2)	683,395		—		—		683,388		683,388
Total liabilities	$	4,017,643	$	—	$	984,285	$	2,212,789	$	3,197,074

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

(2)

~~The following table presents the fair value hierarchy for financial assets~~As of March 31, 2023 and ~~liabilities not recorded at fair value as of~~ June 30, ~~2021 (in thousands):~~2022, debt issuance costs in the amount of $13.8 million and $10.8 million, respectively, was included within funding debt.

Carrying Amount Level 1 Level 2 Level 3 Balance at Fair Value
Assets:
Loans held for sale $ 13,030 $ — $ 13,030 $ — $ 13,030
Loans held for investment, net 1,904,560 — — 1,883,364 1,883,364
Accounts receivable, net 91,575 — 91,575 — 91,575
Other assets 171,250 — 171,250 — 171,250
Total assets $ 2,180,415 $ — $ 275,855 $ 1,883,364 $ 2,159,219
Liabilities:
Accounts payable $ 57,758 $ — $ 57,758 $ — $ 57,758
Payable to third-party loan owners 50,079 — 50,079 — 50,079
Accrued interest payable 2,751 — 2,751 — 2,751
Accrued expenses and other liabilities 161,502 — 159,387 2,115 161,502
Notes issued by securitization trusts 1,176,673 — — 1,184,663 1,184,663
Funding debt 689,356 — — 689,356 689,356
Total liabilities $ 2,138,119 $ — $ 269,975 $ 1,876,134 $ 2,146,109

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~~14. Redeemable Convertible Preferred Stock and~~15. Stockholders’ Equity

~~Redeemable Convertible Preferred Stock~~

In September 2020, we issued 21,836,687 shares of Series G redeemable convertible preferred stock at $19.93 per share for an aggregate purchase amount of $434.9 million. These shares had a liquidation preference of $435.1 million. As part of this equity financing round, the convertible notes converted into 4,444,321 shares of Series G-1 redeemable convertible preferred stock. These shares had a liquidation preference of $75.3 million prior to conversion.

On January 12, 2021, prior to our IPO, all outstanding shares of redeemable convertible preferred stock were converted into shares of our common stock on a one-to-one basis and their carrying value of $1,327.3 million was reclassified into stockholders' deficit. Following this conversion, we amended and restated our certificate of incorporation to effect a reclassification of each share of our outstanding common stock into ½ share of Class A common stock and ½ share of Class B common stock, with cash paid for fractional shares. As of March 31, 2022 and June 30, 2021, there were no shares of redeemable convertible preferred stock issued and outstanding.

Common Stock

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


		March 31, 2022	June 30, 2021		March 31, 2023	June 30, 2022

Available outstanding under stock option plan	Available outstanding under stock option plan	46,442,672	58,417,514	Available outstanding under stock option plan	54,341,564	53,158,233
Available for future grant under stock option plan	Available for future grant under stock option plan	39,309,914	29,793,755	Available for future grant under stock option plan	37,230,979	31,156,746
Total	Total	85,752,586	88,211,269	Total	91,572,543	84,314,979

The common stock is not redeemable. We have two classes of common stock: Class A common stock and Class B common stock. Each holder of Class A common stock has the right to 1one vote per share of common stock. Each holder of Class B common stock has the right to 15 votes and can be converted at any time into one share of Class A common stock. Holders of Class A and Class B common stock are entitled to notice of any stockholders’ meeting in accordance with the bylaws of the corporation, and are entitled to vote upon such matters and in such manner as may be provided by law. Subject to the prior rights of holders of all classes of stock at the time outstanding having prior rights as to dividends, the holders of the common stock are entitled to receive, when and as declared by the Board of Directors, out of any assets of the corporation legally available therefore, such dividends as may be declared from time to time by the Board of Directors.

Common Stock Warrants

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

In November 2021, we granted warrants to purchase 22,000,000 shares of common stock in connection with aour commercial ~~agreement~~agreements with Amazon. 7,000,000 of the warrant shares have an exercise price of $0.01 per share and a term of 3.5 years, while the remaining 15,000,000 warrant shares have an exercise price of $100 per share and a term of 7.5 years. We valued the warrants at the grant date using the Black-Scholes-Merton option pricing model with the following assumptions: a dividend yield of zero; years to maturity of 3.5 and 7.5 years, respectively; volatility of 45%; and a risk-free rate of 0.93% and 1.47%, respectively. ~~In connection~~We recognized an asset of $133.5 million associated with the portion of ~~these~~the warrants that were fully vested ~~upon execution, we recognized a commercial agreement asset of $133.5 million as of December 31, 2021.~~at the grant date. Refer to Note 6. Balance Sheet Components for more information on the asset and related amortization during the period. The remaining grant-date fair value of the warrants will be recognized within our interim condensed consolidated statements of operations and comprehensive loss as a component of sales and marketing expense as the warrants vest, based upon Amazon’s satisfaction of the vesting conditions. During the three and nine months ended March 31, 2023, a total of $104.1 million and $361.8 million, respectively, was recognized within sales and marketing expense which included $10.2 million and $31.1 million, respectively, in amortization expense of the commercial agreement asset and $93.9 million and $330.7 million, respectively, in expense based upon the grant-date fair value of the warrant shares that vested. During the three and nine months ended March 31, 2022, a total of $102.4 million and $173.0 million, respectively, was recognized within

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sales and marketing expense which included $10.2 million and $16.0 million, respectively, in amortization expense of the commercial agreement asset ~~in the three and nine months ended March 31, 2022, respectively,~~ and $92.2 million and $157.0 million, respectively, in expense based upon the grant-date fair value ~~for~~of the warrant shares that ~~vested during the three and nine months ended March 31, 2022, respectively.~~vested.

~~15.~~16. Equity Incentive Plans

2012 Stock Plan

Under our Amended and Restated 2012 Stock Plan (the “Plan”), we may grant incentive and nonqualified stock options, restricted stock, and restricted stock units (“RSUs”) to employees, officers, directors, and consultants. As of March 31, ~~2022,~~2023, the maximum number of shares of common stock which may be issued under the Plan is ~~118,374,202~~

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146,209,197 Class A shares. As of March 31, ~~2022~~2023 and June 30, ~~2021,~~2022, there were ~~39,309,914~~37,230,979 and ~~29,793,755~~31,156,746 shares of Class A common stock, respectively, available for future grants under the Plan.

Stock Options

For stock options granted before our IPO in January 2021, the minimum expiration period is seven years after termination of employment or 10 years from the date of grant. For stock options granted after our IPO, the minimum expiration period is three months after termination of employment or 10 years from the date of grant. Stock options generally vest over a period of four years or with 25% vesting on the 12 month anniversary of the vesting commencement date, and the remainder vesting on a pro-rata basis each month over the next three years.

The following table summarizes our stock option activity for the nine months ended March 31, ~~2022:~~2023:

Number of Options Weighted Average Exercise Price Weighted Average Remaining Contractual Term (Years) Aggregate Intrinsic Value (in thousands)
Balance as of June 30, 2021 31,662,750 $ 10.42 6.30
Granted 164,748 58.01
Exercised (12,986,539) 5.14
Forfeited, expired or cancelled (1,193,026) 23.59
Balance as of March 31, 2022 17,647,933 13.84 6.78
Vested and exercisable, March 31, 2022 11,118,698 $ 6.81 6.10 $ 442,482
Vested and exercisable, and expected to vest thereafter(1) March 31, 2022
17,195,165 $ 12.92 6.73 $ 586,036


	Number of Options	Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value (in thousands)
Balance as of June 30, 2022	19,310,706	$	15.22	6.94
Granted	1,991,427	19.10
Exercised	(726,425)	4.39
Forfeited, expired or cancelled	(993,984)	37.14
Balance as of March 31, 2023	19,581,724	14.92		6.27
Vested and exercisable, March 31, 2023	14,385,171	$	10.14	5.61	$	62,657
Vested and exercisable, and expected to vest thereafter(1) March 31, 2023	19,341,889	$	14.66	6.25	$	64,261

(1)Options expected to vest reflect the application of an estimated forfeiture rate.

The weighted-average grant date fair value of options granted during the nine months ended March 31, 2023 was $10.92. As of March 31, 2023, unrecognized compensation expense related to unvested stock options was approximately $50.2 million, which is expected to be recognized over a remaining weighted-average period of 2.3 years.

When an employee exercises stock options, we collect and remit taxes on the employee’s behalf to applicable taxing authorities. As of March 31, ~~2022~~2023 and June 30, ~~2021,~~2022, the balance of equity exercise taxes payable was ~~$19.9~~$3.2 million and ~~$23.7~~$10.9 million, respectively, which is included in accounts payable on the interim condensed consolidated balance sheets.

~~Stock Options with Early Exercise Rights~~

In accordance with the Plan, for certain stock options issued prior to the IPO, we allow for early exercise of the options while retaining the right to repurchase any unvested options upon termination of employment at the original exercise price. The proceeds received from early exercise of stock options have been recorded within

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~~accrued expenses and other liabilities on the interim condensed consolidated balance sheets. As of March 31, 2022, the early exercise liability totaled $0.5 million.~~

Value Creation Award

In November 2020, in connection with an overall review of the compensation of Max Levchin, our Chief Executive Officer, in advance of the IPO, and taking into account Mr. Levchin’s leadership since the inception of the Company, the comparatively modest level of cash compensation he had received from the Company during his many years of service, and that he did not hold any unvested equity awards, the ~~Company's~~Company’s Board of Directors approved a long-term, multi-year performance-based stock option grant providing Mr. Levchin with the opportunity to earn the right to purchase up to 12,500,000 shares of the ~~Company's~~Company’s Class A common stock (the “Value Creation Award”). We recognize stock-based compensation on these awards based on the grant date fair value using an accelerated attribution method over the requisite service period, and only if performance-based conditions are considered probable of being satisfied. During the three and nine months ended March 31, ~~2022,~~2023, we incurred stock-based compensation expense of ~~$29.0~~$20.3 million and ~~$113.5~~$75.2 million, respectively, associated with the Value Creation Award as a component of general and administrative expense within the interim condensed consolidated statements

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of operations and comprehensive loss. For ~~both~~ the three and nine months ~~ending~~ended March 31, ~~2021,~~2022, we incurred stock-based compensation expense of ~~$38.5 million.~~$29.0 million and $113.5 million, respectively.

As of March 31, ~~2022,~~2023, unrecognized compensation expense related to the Value Creation Award was approximately ~~$120.5 million. The period over~~$132.2 million, which ~~such compensation expense will~~is expected to be recognized ~~is approximately 3.8~~over a remaining weighted-average period of 2.8 years.

Restricted Stock Units

RSUs granted prior to the IPO were subject to 2two vesting conditions: a service-based vesting condition (i.e., employment over a period of time) and a performance-based vesting condition (i.e., a liquidity event in the form of either a change of control or an initial public offering, each as defined in the Plan), both of which must be met in order to vest. The performance-based condition was met upon the IPO. We record stock-based compensation expense for those RSUs on an accelerated attribution method over the requisite service period, which is generally four years.

RSUs granted after IPO are subject to a service-based vesting condition. We record stock-based compensation expense for service-based RSUs on a straight-line basis over the requisite service period, which is generally one to four years.

~~During the nine months ended March 31, 2022, we awarded 8,530,480 RSUs to certain employees under the Plan.~~

The following table summarizes our RSU activity during the nine months ended March 31, ~~2022:~~2023:


		Number of Shares	Weighted Average Grant Date Fair Value			Number of Shares	Weighted Average Grant Date Fair Value
Non-vested as of June 30, 2021		14,242,111	$	37.93
Non-vested as of June 30, 2022					Non-vested as of June 30, 2022	21,387,592	$	38.41
Granted	Granted	8,530,480	58.29		Granted	15,977,301	23.18
Vested	Vested	(4,780,097)	37.69		Vested	(10,118,647)	34.01
Forfeited, expired or cancelled	Forfeited, expired or cancelled	(1,640,873)	33.57		Forfeited, expired or cancelled	(4,911,072)	37.43
Non-vested as of March 31, 2022		16,351,621	$	45.23
Non-vested as of March 31, 2023					Non-vested as of March 31, 2023	22,335,174	$	29.72

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As of March 31, ~~2022,~~2023, unrecognized compensation expense related to unvested RSUs was approximately ~~$632.9 million. The~~$574.3 million, which is expected to be recognized over a remaining weighted-average period ~~over which such compensation expense will be recognized is approximately 2.2~~of 1.8 years.

2020 Employee Stock Purchase Plan

On November 18, 2020, our Board of Directors adopted and approved the 2020 Employee Stock Purchase Plan (“ESPP”). The purpose of the ESPP is to secure the services of new employees, to retain the services of existing employees and to provide incentives for such individuals to exert maximum effort towards the success of the Company and that of its affiliates. A total of ~~9.1~~11.3 million shares of Class A common stock ~~were~~are reserved and available for issuance under the ESPP and 649,580 shares have been issued as of March 31, ~~2022.~~2023. The ESPP provides for six-month offering periods beginning December 1 and June 1 of each ~~year. The first~~year, with the initial six-month offering period ~~began on~~beginning December 1, 2021. At the end of each offering period, shares of our Class A common stock are purchased on behalf of each ESPP participant at a price per share equal to 85% of the lesser of (1) the fair market value of the Class A common stock on first day of the offering period (the grant date) or (2) the fair market value of the Class A common stock on the ~~on the~~ last day of the offering period (the purchase date). We use the Black-Scholes-Merton option pricing model to measure the fair value of the purchase rights issued under the ~~ESPP.~~ESPP at the first day of the offering period, which represents the grant date. We record stock-based compensation expense on a straight-line basis over each six-month offering period, the requisite service period of the award.

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Stock-Based Compensation Expense

The following table presents the components and classification of stock-based compensation (in thousands):


		Three Months Ended March 31,				Nine Months Ended March 31,					Three Months Ended March 31,				Nine Months Ended March 31,
		2022		2021		2022		2021			2023		2022		2023		2022
General and administrative	General and administrative	$	58,100	$	115,566	$	187,789	$	121,867	General and administrative	$	54,789	$	58,100	$	188,788	$	187,789
Technology and data analytics	Technology and data analytics	33,639		52,058		75,133		56,827		Technology and data analytics	45,040		33,639		137,002		75,133
Sales and marketing	Sales and marketing	5,998		10,568		15,655		11,909		Sales and marketing	5,840		5,998		19,517		15,655
Processing and servicing	Processing and servicing	650		1,447		1,536		1,760		Processing and servicing	1,120		650		3,065		1,536
Total stock-based compensation in operating expenses	Total stock-based compensation in operating expenses	98,387		179,639		280,113		192,363		Total stock-based compensation in operating expenses	106,789		98,387		348,372		280,113
Capitalized into property, equipment and software, net	Capitalized into property, equipment and software, net	14,618		6,567		39,691		7,792		Capitalized into property, equipment and software, net	19,113		14,618		62,760		39,691
Total stock-based compensation expense	Total stock-based compensation expense	$	113,005	$	186,206	$	319,804	$	200,155	Total stock-based compensation expense	$	125,902	$	113,005	$	411,132	$	319,804

In connection with the acquisition of Returnly on May 1, 2021, we issued 304,364 shares of our Class A common stock, which are held in escrow. Because the future payment of the escrowed shares is contingent on continued employment of certain employees, the arrangement represents stock-based compensation in the post combination period. The grant-date fair value was estimated based on the value of the shares at the date of closing. The escrowed shares have a requisite service period of two years and contain a performance-based vesting condition (i.e., the achievement of certain revenue targets). We record stock-based compensation expense on a straight-line basis for each tranche over the requisite service period, as long as the performance-based conditions are considered probable of being satisfied. During the nine months ended March 31, 2023, the arrangement was modified, resulting in the release of 45,459 shares from escrow and the remittance of 243,384 shares back to the Company. The modification resulted in the recognition of $2.0 million of incremental compensation cost within general and administrative expenses in our interim condensed statement of operations. As of March 31, 2023, 15,521 shares remain in escrow.

17. Restructuring charges, net

~~We estimate the grant date fair value based on the probability of achievement~~

On February 8, 2023, we committed to a restructuring plan (the “Plan”) designed to manage our operating expenses in response to current macroeconomic conditions and ongoing business prioritization efforts. As part of the ~~revenue targets at each~~ plan, we reduced our workforce by approximately 500 employees, representing approximately 19% of our employees and incurred lease exit

costs related to vacating a portion of our San Francisco office. Restructuring charges, net consists of employee severance pay and related costs and accelerations of amortization expense for the lease asset associated with the exit of certain of our office space.

For the three and nine months ended March 31, 2023, restructuring charges, net was comprised of the following (in thousands):


	March 31, 2023

Employee severance pay and related costs	$	28,753

Non-cash accelerations of depreciation and amortization expense (1)	6,181

Restructuring charges, net	$	34,934

(1)~~reporting period.~~At March 31, 2023, we had a remaining right-of-use asset of $5.2 million related to the office closure that we expect to be fully amortized in the fourth quarter of fiscal 2023 upon fully vacating this space. For further information, refer to Note 7. Leases.

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The Company’s restructuring accrual activity for the nine months ended March 31, 2023 is summarized as follows (in thousands):



Accrued restructuring costs, June 30, 2022	$	—
Additions	26,297
Cash paid	(25,642)
Adjustment	2,548
Foreign currency translation and other adjustments	(5)
Accrued restructuring costs, March 31, 2023	$	3,198

~~16.~~18. Income Taxes

The quarterly provision for income taxes is based on the current estimate of the annual effective income tax rate and the tax effect of discrete items occurring during the quarter. The Company’s quarterly provision and the estimate of the annual effective tax rate are subject to significant variation due to several factors, including variability in the pre-tax jurisdictional mix of earnings and the impact of discrete items.

For the three and nine months ended March 31, 2023, we recorded income tax expense (benefit) of $(0.8) million and $(2.6) million, respectively, which was primarily attributable to the effects of foreign income taxes on our Canadian subsidiary and partially offset by various U.S state and other foreign income taxes, as well as the tax amortization of certain intangibles. For the three and nine months ended March 31, 2022, we recorded income tax expense (benefit) of $0.3 million and $0.7 million, respectively, which was primarily attributable to various ~~U.S~~U.S. state and foreign income taxes and the tax amortization of certain intangibles. ~~For three and nine months ended March 31, 2021, we recorded~~

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~~income tax expense (benefit) of $(0.1) million and $0.1 million, respectively, which was primarily attributable to the effects of foreign income taxes and various U.S. state income taxes.~~

As of March 31, ~~2022,~~2023, we continue to recognize a full valuation allowance against our U.S. federal and state ~~as well as the majority of our foreign~~ net deferred tax assets. This determination was based on the assessment of the available positive and negative evidence to estimate whether sufficient future taxable income will be generated to utilize the existing deferred tax assets. A significant piece of objective negative evidence evaluated was the cumulative loss incurred by the Company for the prior three fiscal years. The presence of a three-year cumulative loss limits the ability to consider other subjective evidence, such as our expectations of future taxable income and projections for growth.

As a result of the integration and consolidation of our PayBright business into and with Affirm’s Canadian business and the expansion of our overall business in Canada, as well as other objectively verifiable positive evidence, all of which we have concluded is sufficient to outweigh the existing negative evidence – including the presence of a three-year cumulative loss attributable to the related foreign jurisdiction, we have determined that it is more likely than not that our Canadian deferred tax assets will be realized and a valuation allowance is not required.

~~17.~~

On August 16, 2022, the Inflation Reduction Act was enacted into U.S. federal law. The Company does not currently expect that the Inflation Reduction Act will have a material impact on its income taxes.

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19. Net Loss per Share Attributable to Common Stockholders

On January 12, 2021, we amended and restated our certificate of incorporation to effect a reclassification of each share of our outstanding common stock into ½ share of Class A common stock and ½ share of Class B common stock, with cash paid for fractional shares. Therefore, we have two classes of common stock: Class A common stock and Class B common stock. The rights, including the dividends and distributions, of the holders of our Class A and Class B common stock are identical, except with respect to voting. Additionally, the conversion of all outstanding shares of redeemable convertible preferred stock into shares of our common stock occurred immediately prior to the reclassification.

The following ~~tables present~~table presents basic and diluted net loss per share attributable to common stockholders for Class A and Class B common stock (in thousands, except share and per share data):

Three Months Ended March 31, 2022 Nine Months Ended March 31, 2022
Class A Class B Class A Class B
Numerator:
Basic and Diluted
Net Loss $ (43,061) $ (11,610) $ (389,424) $ (131,597)
Net Loss Attributable to Common Stockholders $ (43,061) $ (11,610) $ (389,424) $ (131,597)
Denominator:
Basic
Weighted average shares outstanding, basic 224,980,598 60,661,222 208,957,734 70,612,281
Total-basic 224,980,598 60,661,222 208,957,734 70,612,281
Diluted
Weighted average common shares outstanding, diluted 224,980,598 60,661,222 208,957,734 70,612,281
Total-diluted 224,980,598 60,661,222 208,957,734 70,612,281
Net loss per share attributable to common stockholders:
Basic $ (0.19) $ (0.19) $ (1.86) $ (1.86)
Diluted $ (0.19) $ (0.19) $ (1.86) $ (1.86)

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	Three Months Ended March 31,				Nine Months Ended March 31,
	2023				2023
	Class A		Class B		Class A		Class B
Numerator:
Net loss	$	(164,093)	$	(41,584)	$	(620,015)	$	(159,368)
Net loss attributable to common stockholders - basic and diluted	$	(164,093)	$	(41,584)	$	(620,015)	$	(159,368)
Denominator:

Weighted average shares of common stock - basic	237,116,053		60,088,662		233,815,676		60,099,592


Weighted average shares of common stock - diluted	237,116,053		60,088,662		233,815,676		60,099,592


Net loss per share:
Basic	$	(0.69)	$	(0.69)	$	(2.65)	$	(2.65)
Diluted	$	(0.69)	$	(0.69)	$	(2.65)	$	(2.65)

Three Months Ended March 31, 2021 Nine Months Ended March 31, 2021
Class A Class B Class A Class B
Numerator:
Basic
Net Loss $ (150,953) $ (136,098) $ (152,148) $ (165,459)
Net Loss Attributable to Common Stockholders $ (150,953) $ (136,098) $ (152,148) $ (165,459)
Diluted
Net Loss $ (150,953) $ (136,098) $ (152,148) $ (165,459)
Excess return to preferred stockholders on repurchase — — (14,428) (15,677)
Gain on conversion of convertible debt — — 191 207
Interest on convertible debt prior to conversion — — 859 933
Net Loss Attributable to Common Stockholders $ (150,953) $ (136,098) $ (165,526) $ (179,996)
Denominator:
Basic
Weighted average shares outstanding, basic 122,691,770 110,617,820 58,520,980 63,640,528
Total-basic 122,691,770 110,617,820 58,520,980 63,640,528
Diluted
Weighted average common shares outstanding, diluted 122,691,770 110,617,820 58,520,980 63,640,528
Weighted average common shares attributable to convertible debt prior to conversion — — 583,925 583,925
Total-diluted 122,691,770 110,617,820 59,104,905 64,224,453
Net loss per share attributable to common stockholders:
Basic $ (1.23) $ (1.23) $ (2.60) $ (2.60)
Diluted $ (1.23) $ (1.23) $ (2.80) $ (2.80)


	Three Months Ended March 31,				Nine Months Ended March 31,
	2022				2022
	Class A		Class B		Class A		Class B
Numerator:
Net loss	$	(43,061)	$	(11,610)	$	(389,424)	$	(131,597)
Net loss attributable to common stockholders - basic and diluted	$	(43,061)	$	(11,610)	$	(389,424)	$	(131,597)
Denominator:

Weighted average shares of common stock - basic	224,980,598		60,661,222		208,957,734		70,612,281


Weighted average shares of common stock - diluted	224,980,598		60,661,222		208,957,734		70,612,281


Net loss per share:
Basic	$	(0.19)	$	(0.19)	$	(1.86)	$	(1.86)
Diluted	$	(0.19)	$	(0.19)	$	(1.86)	$	(1.86)

The following common stock equivalents, presented based on amounts outstanding, were excluded from the calculation of diluted net loss per share attributable to common stockholders because their inclusion would have been anti-dilutive:


		As of March 31,			As of March 31,
		2022	2021		2023	2022
Restricted stock units				Restricted stock units	22,335,174	16,351,621
Stock options, including early exercise of options	Stock options, including early exercise of options	17,195,165	33,342,527	Stock options, including early exercise of options	19,581,724	17,195,165
Restricted stock units		16,351,621	13,975,457
Common stock warrants	Common stock warrants	5,909,896	350,000	Common stock warrants	6,036,813	5,909,896

Employee stock purchase plan shares	Employee stock purchase plan shares	161,300	—	Employee stock purchase plan shares	640,075	161,300

Total	Total	39,617,982	47,667,984	Total	48,593,786	39,617,982

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~~18. Segments and Geographical Information~~

~~We conduct our operations through a single operating segment and, therefore, 1 reportable segment.~~

~~Revenue~~

Revenue by geography is based on the billing addresses of the borrower or the location of the merchant’s national headquarters. The following table sets forth revenue by geographic area (in thousands):

Three Months Ended March 31, Nine Months Ended March 31,
2022 2021 2022 2021
United States $ 344,731 $ 224,863 $ 956,789 $ 603,048
Canada 9,975 5,802 28,282 5,636
Other 56 — 87 —
Total $ 354,762 $ 230,665 $ 985,158 $ 608,684

~~Long-Lived Assets~~

~~The following table sets forth our long-lived assets, consisting of property, equipment and software, net and operating lease right-of-use assets, by geographic area (in thousands):~~

March 31, 2022 June 30, 2021
United States $ 190,659 $ 118,076
Canada 3,240 2,251
Other $ 150 $ —
Total $ 194,049 $ 120,327

~~19. Subsequent Events~~

~~Fast Transaction~~

On April 19, 2022, Affirm completed the closing of the transaction contemplated by a Release and Waiver Agreement entered into with Fast AF, Inc., (“Fast”) relating to the hiring of certain of its employees or service providers and an option to acquire certain of its assets. The purchase price was comprised of (i) $10.0 million in cash and (ii) forgiveness of a $15.0 million senior secured note issued to Fast in April 2022 prior to the closing. Due to the timing of the transaction, the initial accounting for the transaction is incomplete. As a result, the Company is not able to disclose certain information relating to the transaction, including the preliminary fair value of the assets acquired.

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Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the interim condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q (“Form 10-Q”) and our audited consolidated financial statements and the related notes and the discussion under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for the fiscal year ended June 30, ~~2021~~2022 included in our Annual Report on Form ~~10-K (our “Annual Report”).~~10-K. Some of the information contained in this discussion and analysis, including information with respect to our planned investments to drive future growth, includes forward-looking statements that involve risks and uncertainties. You should review the sections titled “Cautionary Note Regarding Forward-Looking Statements” and “Risk Factors” of this Form 10-Q and our most recently filed Annual Report on Form 10-K for a discussion of forward-looking statements and important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis. For the periods presented, references to originating bank partners are to Cross River Bank and Celtic Bank.

Overview

We are building the next generation platform for digital and mobile-first commerce. We believe that by using modern technology, the very best engineering talent, and a mission-driven approach, we can reinvent payments and commerce. Our solutions, which are built on trust and transparency, make it easier for consumers to spend responsibly and with confidence, easier for merchants to convert sales and grow, and easier for commerce to thrive.

Our point-of-sale solutions allow consumers to pay for purchases in fixed amounts without deferred interest, ~~hidden~~late fees, or penalties. We empower consumers to pay over time rather than paying for a purchase entirely upfront. This increases consumers’ purchasing power and gives them more control and flexibility. Our platform facilitates both true 0% APR payment options and interest-bearing loans. On the merchant side, we offer commerce enablement, demand generation, and customer acquisition tools. Our solutions empower merchants to more efficiently promote and sell their products, optimize their customer acquisition strategies, and drive incremental sales. We also provide valuable product-level data and insights — information that merchants cannot easily get elsewhere — to better inform their strategies. Finally, our consumer app unlocks the full suite of Affirm products for a delightful end-to-end consumer experience. Consumers can use our app to manage payments, open a high-yield savings account, and access a personalized marketplace.

Our company is predicated on the principles of simplicity, transparency, and putting people first. By adhering to these principles, we have built enduring, trust-based relationships with consumers and merchants that we believe will set us up for long-term, sustainable success. We believe our innovative approach uniquely positions us to define the future of commerce and payments.

Technology and data are at the core of everything we do. Our expertise in sourcing, aggregating, and analyzing data has been what we believe to be the key competitive advantage of our platform since our founding. We believe our proprietary technology platform and data give us a unique advantage in pricing risk. We use data to inform our risk scoring in order to generate value for our consumers, merchants, and capital partners. We collect and store petabytes of information that we carefully structure and use to regularly recalibrate and revalidate our models, thereby getting to risk scoring and pricing faster, more efficiently, and with a higher degree of confidence. We also prioritize building our own technology and investing in product and engineering talent as we believe these are enduring competitive advantages that are difficult to replicate. Our solutions use the latest in machine learning, artificial intelligence, cloud-based technologies, and other modern tools to create differentiated and scalable products.

We have achieved significant growth in recent periods. Our total revenue, net was approximately $354.8 million and $985.2 million for the three and nine months ended March 31, 2022, respectively, and $230.7

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million and $608.7 million for the three and nine months ended March 31, 2021, respectively. We incurred net losses of $54.7 million and $521.0 million for the three and nine months ended March 31, 2022, respectively, and $287.1 million and $317.6 million for the three and nine months ended March 31, 2021, respectively.

~~The combination of our differentiated product offerings, efficient go-to-market strategy, and strong monetization engine has resulted in fast growth.~~

•~~Rapid GMV growth.~~ We grew our Gross Merchandise Volume (“GMV”) by approximately 73% period-over-period to $3.9 billion during the three months ended March 31, 2022 from $2.3 billion during the three months ended March 31, 2021. During the nine months ended March 31, 2022, GMV was $11.1 billion, which represented 91% growth over the nine months ended March 31, 2021.

•~~Increased consumer engagement.~~ ~~The number of active consumers on our platform grew by 7.4 million consumers from March 31, 2021 to March 31, 2022, an increase of 137%, to a total of 12.7 million.~~

•~~Expanded merchant network.~~ We have also continued to scale the breadth and reach of our platform. From March 31, 2021 to March 31, 2022, our merchant base expanded from 11,513 to 207,049 active merchants due primarily to continued expansion to merchants related to the Shopify partnership.

Our business is designed to scale efficiently. Our partnerships with banks and other funding relationships have allowed us to remain equity capital efficient. Since July 1, 2016, we have processed approximately $28.6 billion of GMV on our platform. As of March 31, 2022, we had over $9.0 billion in funding capacity from a diverse set of capital partners, including through our warehouse facilities, securitization trusts, and forward flow arrangements, an increase of $2.5 billion from $6.5 billion as of June 30, 2021.

Through the diversity of these funding relationships, the equity capital required to build our total platform portfolio has declined from approximately 4% of the total platform portfolio as of June 30, 2021, to approximately 2% as of March 31, 2022. This metric measures the equity intensity of our business or the amount of capital used in relation to the scale of our enterprise. We define our total platform portfolio as the unpaid principal balance outstanding of all loans facilitated through our platform as of the balance sheet date, including both those loans held for investment and those loans owned by third-parties. This amount totaled $6.7 billion and $4.7 billion as of March 31, 2022 and June 30, 2021, respectively. Additionally, we define the equity capital required as the balance of loans held for investment plus loans held for sale less funding debt and notes issued by securitization trusts, per our interim condensed consolidated balance sheet. This amount totaled $157.7 million and $178.1 million as of March 31, 2022 and June 30, 2021, respectively. Equity capital required as a percent of the last twelve months’ GMV was 1% and 2% as of March 31, 2022 and June 30, 2021, respectively.

We believe that our continued success will depend on many factors, including our ability to attract additional merchant partners, retain our existing merchant partners, and grow and develop our relationships with new and existing merchant partners, help our merchants grow their revenue on our platform, and develop new innovative solutions to establish the ubiquity of our network and breadth of our platform. For a further discussion of trends, uncertainties and other factors that could impact our operating results, see the section entitled “Risk Factors” in Item 1A, which is incorporated herein by reference.


	Three Months Ended March 31,								Nine Months Ended March 31,
	2023		2022		$		%		2023		2022		$		%
	(in thousands, except percentages)
Total Revenue, net	$	380,978	$	354,762	$	26,216	7	%	$	1,142,160	$	985,158	$	157,002	16	%
Total Operating Expenses	691,013		581,313		109,700		19	%	2,099,194		1,573,980		525,214		33	%
Operating Loss	$	(310,035)	$	(226,551)	$	(83,484)	37	%	$	(957,034)	$	(588,822)	$	(368,212)	63	%
Other income, net	103,522		172,139		(68,617)		(40)	%	175,067		68,507		106,560		156	%
Loss Before Income Taxes	$	(206,513)	$	(54,412)	$	(152,101)	280	%	$	(781,967)	$	(520,315)	$	(261,652)	50	%
Income tax (benefit) expense	(836)		259		(1,095)		(423)	%	(2,584)		706		(3,290)		(466)	%
Net Loss	$	(205,677)	$	(54,671)	$	(151,006)	276	%	$	(779,383)	$	(521,021)	$	(258,362)	50	%

~~Table of Contents~~

Our Financial Model

Our Revenue Model

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 interest bearing installment loans and 0% APR monthly 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 0% APR financing products. For ~~both~~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. For the three and nine months ended March 31, 2022, ~~0% APR financing~~Pay-in-4 represented ~~43%~~18% and 17% of total GMV facilitated through our ~~platform. For the three and nine months ended March 31, 2021,~~platform, respectively, while 0% APR ~~financing~~Core loans represented ~~43%~~24% and ~~45%~~26%, ~~respectively, of total GMV facilitated through our platform.~~respectively.

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.

In order to accelerate our ubiquity, we facilitate the issuance of virtual cards directly to consumers through our app, allowing them to shop with merchants that may not yet be fully integrated with Affirm. When these virtual cards are used over established card networks, we earn a portion of the interchange fee from the transaction.

Our Loan Origination and Servicing Model

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 ~~his/her~~their preferred repayment option. ~~The substantial majority~~A portion of these loans are funded and issued by ~~our originating bank partners.~~

~~A substantial majority of the loans facilitated through our platform are originated through~~ our originating bank partners: Cross River Bank, an FDIC-insured New Jersey state-chartered bank, and Celtic Bank, an FDIC-insured Utah state-chartered industrial 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 ~~our~~such partner offers us and our

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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. See Note ~~13.~~14. Fair Value of Financial Assets and Liabilities for more information on the performance fee liability.

We are also able to originate loans directly under our lending, servicing, and brokering licenses in Canada and across various states in the U.S. through our consolidated subsidiaries. For the three and nine months ended March 31, ~~2022~~,2023, we originated approximately ~~$216.0~~$187.9 million, or 4%, and ~~$645.7~~$618.3 million, or 4%, respectively, of loans in Canada ~~respectively,~~ compared to approximately ~~$103.4~~$216.0 million, or 6%, and ~~$164.7~~$645.7 million, for 6%, of loans for the three and ninemonths ended March 31, ~~2021, respectively~~. 2022, respectively. For the three and nine months ended March 31, ~~2022,~~2023, we directly originated ~~$659.7~~$690.8 million, or 15%, and ~~$1,774.4~~$2,203.1 million, or 15%, respectively, of loans in the U.S. pursuant to our state licenses, compared to approximately ~~$108.1~~$659.7 million, or 17%, and ~~$180.7~~$1,774.4 million, for ~~the three and ninemonths ended March 31, 2021, respectively~~. ~~For both~~16%, of loans for the three and nine months ended March 31, 2022, ~~we self-originated 22% of total loans~~ ~~through our state and other licenses, compared to 9% and 6% for~~ ~~the three and ninemonths ended March 31, 2021,~~ respectively.

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We act as the servicer on all loans that we originate directly or purchase from our originating bank partners and earn a servicing fee on loans we sell to our funding sources. WeIn the normal course of business, we do not sell the servicing rights on any of the ~~loans, allowing us to control the consumer experience end-to-end.~~loans. To allow for flexible staffing to support overflow and seasonal traffic, we partner with several sub-servicers to manage customer care, first priority collections, and third-party collections in accordance with our policies and procedures.

Factors Affecting Our Performance

Our performance has been and may continue to be affected by many factors, including those identified below, as well as the factors discussed in the section titled “Risk Factors” in this Form 10-Q, our Form 10-Q for the fiscal quarter ended December 31, 2022, and in our most recently filed Annual Report on Form 10-K for the fiscal year ended June 30, 2022.

Expanding our Network, Diversity, and Mix of Funding ~~Sources~~Relationships

WeOur 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 ~~capital-efficient model through a diverse set~~variety of funding ~~sources. When we originate a loan directly or purchase a loan originated by~~relationships in order to support our ~~originating bank partners, we often utilize~~network. Our diversified funding relationships include warehouse facilities, ~~with certain lenders to finance our lending activities or loan purchases. We sell the loans we originate or purchase from our originating bank partners to whole loan buyers and~~ securitization ~~investors through~~trusts, forward flow arrangements, and ~~securitization~~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 required as a percent of the last twelve months’ GMV increased from approximately 1% as of June 30, 2022, to approximately 2% as of March 31, 2023. The increase is 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. We have elected this shift in our funding mix in response to the current market environment given our ability to allocate loans to warehouse 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.

Mix of Business on Our Platform

The shifts in volume among merchants and the mix of products that our merchants offer and our consumers purchase in any period affects our operating results. These mix impacts affect GMV, revenue, our financial results, and our key operating metric performance for that period. Differences in product mix relate to different loan durations, APR mix, and varying proportion of 0% APR versus interest-bearing financings.

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Product and economic terms of commercial agreements vary among our merchants. For example, our low average order value (“AOV”) products generally benefit from shorter duration, but also have lower revenue as a percentage of GMV when compared to high AOV products. Merchant mix shifts are driven in part by the products offered by the merchant, the economic terms negotiated with the merchant, merchant-side activity relating to the marketing of their products, whether the merchant is fully integrated within our network, and general economic conditions affecting consumer demand. Our revenue as a percentage of GMV in any given period varies across products. As such, as we continue to expand our network to include more merchants, revenue as a percentage of GMV will vary. In addition, our commercial agreement with Shopify to offer Shop Pay Installments powered by Affirm and our Pay-in-4 offering will continue to impact the mix of our shorter duration, low AOV products. Differences in the mix of high versus low AOV will also impact our results. For example, we expect that transactions per active consumer may increase while revenue as a percentage of GMV may decline in the medium term to the extent that a greater portion of our GMV comes from Pay-in-4and ~~earn servicing~~other low-AOV offerings.

Seasonality

We experience seasonal fluctuations in our revenue as a result of consumer spending patterns. Historically, our revenue has been the strongest during the second quarter of our fiscal year due to increases in retail commerce during the holiday season. Adverse events that occur during these months could have a disproportionate effect on our financial results for the fiscal year.

Macroeconomic Environment

We regularly monitor the direct and indirect impacts of the current macroeconomic conditions on our business, financial condition, and results of operations. During fiscal 2023, the macroeconomic environment has presented a number of challenges to our business. In response to continued inflationary pressure, the U.S. Federal Reserve has raised, and may continue to raise, the federal funds interest rate. Simultaneously, economic uncertainty and the prospect of economic recession has impacted consumer spending. These developments have affected, and may continue to affect, our business and results of operations in the following ways:

•Deceleration in consumer demand: We have experienced a deceleration in consumer demand for discretionary items, which has adversely impacted GMV growth.

•Increased borrowing costs: Our costs of borrowing have increased, resulting in higher transaction costs.

•Volatile capital markets: In response to volatile capital markets conditions, we have retained more loans on our balance sheet funded through our consolidated securitizations and warehouse lines in recent fiscal quarters. Retaining loans on our balance sheet effectively delays the recognition of revenue associated with those loans.

•Managing delinquency rates: We are continuously optimizing our underwriting to manage delinquency rates. While these actions have adversely affected our GMV growth rates during fiscal 2023, for the quarter ended March 31, 2023, our 30-day delinquency rates for monthly installment loans were comparable to, and our allowance rates for loan losses improved over, those experienced during the quarter ended March 31, 2022.

Macroeconomic factors can also cause fluctuations of available capital in our lending marketplace due to shifts in the risk preferences of our lending partners and institutional investors or for other reasons. For example, since the beginning of March 2023, there have been public reports of instability at certain financial institutions. Despite the steps taken to date by U.S. and foreign agencies and institutions, the follow-on effects of this instability are unknown and may lead to disruptions to the businesses and operations of our funding sources.

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Restructuring Plan

On February 8, 2023, we committed to a restructuring plan designed to manage our operating expenses in response to macroeconomic conditions and ongoing business prioritization efforts. As part of the plan, we reduced our workforce by approximately 500 employees, representing approximately 19% of our employees at that time, and vacated a portion of our leased San Francisco office. The implementation of the restructuring plan is now substantially complete. For further information, refer to Note 17. Restructuring charges, net to the interim condensed consolidated financial statements in this Form 10-Q.

Pricing Initiatives

We have begun implementing certain pricing initiatives that have the dual purpose of offsetting our increased funding costs while also enabling us to responsibly extend access to credit to a larger number of consumers. These pricing initiatives include the following:

•increasing the maximum APR for loans facilitated on our platform from 30% to 36%;

•increasing the merchant fees payable by some merchants on 0% APR financing products;

•expanding the use of down payments and fine-tuning the requested amounts;

•offering merchant-subsidized low APR loans (4-9.99%) as an alternative to monthly 0% APR programs; and

•shortening loan lengths and minimum order sizes for monthly 0% APR programs.

Regulatory Developments

We are subject to the regulatory and enforcement authority of the Consumer Financial Protection Board (the “CFPB”) as a facilitator, servicer, acquirer or originator of consumer credit. In December 2021, the CFPB issued a Request for Information to five of the largest BNPL providers, including us, requesting information by March 1, 2022. We timely complied with that request but expect to receive additional CFPB requests for information from ~~continuing~~time to ~~act as~~time in the ~~servicer~~future.

In September 2022, the CFPB published a report on the ~~loans.~~“buy now, pay later” (“BNPL”) industry. At the time that report was published, the CFPB indicated that it may seek to subject BNPL companies to supervisory examinations. In March 2023, certain members of the U.S. Senate wrote to the director of the CFPB encouraging the CFPB to “move quickly towards bringing the largest [BNPL] lenders under Federal Supervision….” In addition, based on our own communications with the CFPB, we expect the CFPB to begin to supervise companies in the BNPL industry, including, in the foreseeable future, us.

Key Operating Metrics

We ~~collect and analyze~~focus on several key operating ~~and financial data~~metrics to measure the performance of our business ~~to assess our performance, formulate financial projections,~~ and ~~make~~help determine strategic ~~decisions.~~direction. In addition to revenue, net ~~(loss) income,~~loss, and other results under ~~accounting principles generally accepted in the United States (“~~U.S. ~~GAAP”),~~GAAP, the following tables set forth key operating metrics we use to evaluate our business.

Three Months Ended
March 31, Nine Months Ended
March 31,
2022 2021 2022 2021
(in thousands)
Gross Merchandise Volume (GMV) $ 3,916,253 $ 2,257,374 $ 11,086,766 $ 5,808,415


	Three Months Ended March 31,						Nine Months Ended March 31,
	2023		2022		% Change		2023		2022		% Change
	(in thousands, except per consumer data)
Gross Merchandise Volume (GMV)	$	4,638,580	$	3,916,253	18	%	$	14,686,275	$	11,086,766	32	%

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GMV

We measure ~~gross merchandise volume~~GMV to assess the volume of transactions that take place on our platform. We define GMV as the total dollar amount of all transactions on ~~the Affirm~~our platform during the ~~applicable~~ period, net of refunds. GMV does not represent revenue earned by ~~us. However, the GMV processed through our platform~~us, however, it is an indicator of the success of our merchants and the strength of our platform.

For the three and nine months ended March 31, ~~2022,~~2023, GMV was ~~$3.9~~$4.6 billion and $14.7 billion, respectively, which ~~represented~~represents an increase of approximately ~~73%~~18% and 32%, respectively, as compared to ~~$2.3 billion~~the same periods in fiscal 2022. Overall, the increase in GMV in both periods 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 months ended March 31, ~~2021. For the nine months ended March 31, 2022,~~2023 also reflects increased consumer demand at our largest merchant partner by GMV, ~~was $11.1 billion, which represents an~~Amazon, and increased consumer demand in our travel and ticketing category. The increase ~~of approximately 91% as compared to $5.8 billion~~in GMV for the nine months ended March 31, ~~2021.~~2023 was positively impacted by Affirm being an available payment option to Amazon consumers throughout fiscal 2023, while Affirm was a payment option to Amazon consumers only during a portion of fiscal 2022.

For the three and nine months ended March 31, 2023, our top five merchants and platform partners represented approximately 40% and 42%, respectively, of total GMV, as compared to 34% and 33%, respectively, for the three and nine months ended March 31, 2022. GMV attributable to Amazon increased during both the three and nine months ended March 31, 2023 as compared to the same periods in fiscal 2022 but represented less than 20% of total GMV for all such periods.


		March 31, 2022	June 30, 2021	March 31, 2021		March 31, 2023	March 31, 2022	% Change
		(in thousands, except per consumer data)				(in thousands, except per consumer data)
Active Consumers	Active Consumers	12,733	7,121	5,364	Active Consumers	16,006	12,733	26	%
Transactions per Active Consumer (x)	Transactions per Active Consumer (x)	2.7	2.3	2.3	Transactions per Active Consumer (x)	3.6	2.7	34	%

Active Consumers

We assess consumer adoption and engagement by the number of active consumers across our platform. Active consumers are the primary measure of the size of our network. We define an active consumer as a consumer who engages in at least one transaction on our platform during the 12 months prior to the measurement date.

As of March 31, ~~2022,~~2023, we had ~~12.7~~16.0 million active consumers, representing an increase of approximately ~~79%~~26% compared to ~~7.1 million as of June 30, 2021, and approximately 137% compared to 5.4~~12.7 million as of March 31, ~~2021.~~

~~Table~~2022 reflecting the continued growth of ~~Contents~~our network.

Transactions per Active Consumer

We believe the value of our network is amplified with greater consumer engagement and repeat usage, highlighted by increased transactions per active consumer. Transactions per active consumer is defined as the average number of transactions that an active consumer has conducted on our platform during the 12 months prior to the measurement date.

As of March 31, ~~2022,~~2023, we had approximately ~~2.7~~3.6 transactions per active consumer, an increase of approximately ~~19%~~34% compared to both June 30, 2021 and March 31, 2021. Transactions per active consumer includes incremental transactions completed by active consumers on the PayBright and Returnly platforms during the twelve months prior to the measurement date and prior to the acquisitions of PayBright and Returnly by Affirm.

~~Factors Affecting Our Performance~~

~~Expanding our Network, Diversity, and Mix of Funding Relationships~~

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. We have continued to reduce the percentage of our equity capital required to fund our total platform portfolio from approximately 4% as of June 30, 2021, to approximately 2% as of March 31, 2022. The mix of on-balance sheet and off-balance sheet funding is a function of both how we choose to allocate loan volume and the available supply of capital, both of which may also impact our results in any given period.

~~Mix of Business on Our Platform~~

The mix of products that our merchants offer and our consumers purchase in any period affects our operating results. In addition, shifts in volume among merchants in any period also affects our operating results. These mix impacts affect GMV, revenue, our financial results, and our key operating metric performance for that period. Differences in product mix relate to different loan durations, APR mix, and varying proportion of 0% APR versus interest-bearing financings.

Differences in merchant mix relate to the variations in the product and economic terms of the commercial agreements among our merchants. For example, our low average order value (“AOV”) products generally benefit from shorter duration, but also have lower revenue as a percentage of GMV when compared to high AOV products. Merchant mix shifts are driven in part by the products offered by the merchant, the economic terms negotiated with the merchant, merchant-side activity relating to the marketing of their products, whether the merchant is fully integrated within our network, and general economic conditions affecting consumer demand. Our revenue as a percentage of GMV in any given period varies across products. As such, as we continue to expand our network to include more merchants, revenue as a percentage of GMV will vary. In addition, our commercial agreement with Shopify to offer Shop Pay Installments powered by Affirm and our recent Split Pay offering, a short-term payment plan with 0% APR, will continue to increase the mix of our shorter duration, low AOV products. Differences in the mix of high versus low AOV will also impact our results. For example, we expect that transactions per active consumer may increase while revenue as a percentage of GMV may decline in the medium term to the extent that a greater portion of our GMV comes from Split Pay and other low-AOV offerings.

~~Sales and Marketing Investment~~

~~We rely on the strength of our merchant relationships and positive user experience to develop our consumer brand and grow the ubiquity of our platform. During the three and nine months ended~~ March 31, 2022, ~~we increased our investment in sales~~primarily as a result of platform growth and marketing channels that we believe will drive further brand awareness and preference among both consumers and merchants. Given the nature of our revenue, our investment in sales and marketing in a given period may not impact results until subsequent periods. Additionally, given the increasingly competitivehigher frequency repeat users driven by consumer engagement.

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nature of merchant acquisition, we have previously made, and expect that we may make, significant investments in retaining and acquiring new merchants. We are focused on the effectiveness of sales and marketing spending and will continue to be strategic in maintaining efficient consumer and merchant acquisition.

~~Seasonality~~

~~Impact of COVID-19~~

The COVID-19 pandemic has had, and continues to have, a significant impact on the U.S. economy and the markets in which we operate. Our positive performance during this period demonstrates the value and effectiveness of our platform, the resiliency of our business model, and the capabilities of our risk management and underwriting approach. As we enter a new phase of the pandemic, our focus will turn to both changing macro-economic conditions and individual consumer spending habits. As we observe new behavior, we will rely on our flexible and robust risk infrastructure to make appropriate decisions for our business.

~~Diversified Mix of Merchant Partners~~

We have a diversified set of merchant partners across industries, which allows us to capitalize on industry tailwinds and changing consumer spending behavior, economic conditions, and other factors that may affect a particular type of merchant or industry. For example, following the onset of the COVID-19 pandemic, our revenue from merchant partners in the travel, hospitality, and entertainment industries declined significantly, but we saw a significant increase in revenue from merchant partners offering home fitness equipment, home office products, and home furnishings. As we move past the period of extended lock-downs due to COVID-19, we have observed strong changes in consumer preferences. Industries impacted by the lock-down such as travel and hospitality have seen a strong resurgence and have either replaced or offset the spending decreases we experienced in the aforementioned categories.

~~Dynamic Changes to Risk Model~~

As part of our risk mitigation platform, we closely track data and trends to measure risk and manage exposure, leveraging our flexibility to quickly adjust and adapt. In response to the macroeconomic impact of the COVID-19 pandemic, we initiated a series of refinements to our risk model based on our real-time data observations and analysis. We were able to respond, implement, and test the updates to our model quickly due to the adaptability of our infrastructure, underwriting, and risk management models. This resulted in continued decreases across both charge-offs and delinquencies. As macroeconomic conditions improved, the embedded flexibility of the model allowed our risk tolerances to return closer to pre-pandemic levels while still maintaining low losses. Our proprietary risk model was not designed to take into account the longer-term impacts of social, economic, and financial disruptions caused by the COVID-19 pandemic, and while we continue to make refinements to our risk model as new information becomes available to us, any changes to our risk model may be ineffective and the performance of our risk model may decline.

~~Resilient Allowance Model~~

At the onset of the COVID-19 pandemic in March 2020, we factored in updated loss multiples using macroeconomic data to reflect stressed expected loss scenarios emerging from forecasted delinquencies and defaults. This stressing of the model resulted in an increase of the allowance for credit losses as a percentage of loans held for investment to a high of 14.8% as of March 31, 2020. In the months subsequent to this and during fiscal year 2021, we saw stronger than expected repayment history in the portfolio and increased credit quality of loans held on our balance sheet from credit tightening, resulting in a release of the allowance over time. As the economic reopening

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and recovery continues, we believe our allowance model is well equipped to forecast expected loss scenarios resulting from both the shifting product mix of loans on our balance sheet as well as a return to pre-pandemic credit levels over time. The allowance for credit losses as a percentage of loans held for investment increased from 5.8% as of June 30, 2021 to 6.4% as of March 31, 2022 due to a shift in the composition of loans retained on balance sheet. Should macroeconomic factors or expected losses change, we may increase or decrease the allowance for credit losses.

~~Components of~~ Results of Operations

~~Revenue~~

~~Merchant Network Revenue~~

~~Merchant partners are generally charged a fee based on GMV processed through the Affirm platform.~~ The ~~fees vary depending on the individual arrangement between us~~following tables set forth selected interim condensed consolidated statements of operations and comprehensive loss data for each ~~merchant and on the terms~~ of the ~~product offering. The fee is recognized~~periods presented in dollars:


	Three Months Ended March 31,								Nine Months Ended March 31,
	2023		2022		$		%		2023		2022		$		%
	(in thousands, except percentages)
Revenue
Merchant network revenue	$	119,013	$	121,054	$	(2,041)	(2)	%	$	366,181	$	340,385	$	25,796	8	%
Virtual card network revenue	29,469		23,169		6,300		27	%	85,294		69,122		16,172		23	%
Total network revenue	148,482		144,223		4,259		3	%	451,475		409,507		41,968		10	%
Interest income (1)	178,270		134,599		43,671		32	%	470,393		390,256		80,137		21	%
Gain on sales of loans (1)	32,813		52,484		(19,671)		(37)	%	156,015		141,153		14,862		11	%
Servicing income	21,413		23,456		(2,043)		(9)	%	64,277		44,242		20,035		45	%
Total Revenue, net	$	380,978	$	354,762	$	26,216	7	%	$	1,142,160	$	985,158	$	157,002	16	%
Operating Expenses (2)
Loss on loan purchase commitment	$	31,224	$	46,853	$	(15,629)	(33)	%	$	105,256	$	163,796	$	(58,540)	(36)	%
Provision for credit losses	66,438		66,294		144		—	%	237,377		182,581		54,796		30	%
Funding costs	51,188		15,824		35,364		223	%	120,005		50,277		69,728		139	%
Processing and servicing	65,229		43,371		21,858		50	%	186,096		110,421		75,675		69	%
Technology and data analytics	161,792		110,291		51,501		47	%	463,500		283,293		180,207		64	%
Sales and marketing	140,942		156,214		(15,272)		(10)	%	493,149		363,650		129,499		36	%
General and administrative	139,266		142,466		(3,200)		(2)	%	458,877		419,962		38,915		9	%
Restructuring charges, net	34,934		—		34,934		NM*		34,934		—		34,934		NM*
Total Operating Expenses	691,013		581,313		109,700		19	%	2,099,194		1,573,980		525,214		33	%
Operating Loss	$	(310,035)	$	(226,551)	$	(83,484)	37	%	$	(957,034)	$	(588,822)	$	(368,212)	63	%
Other income, net	103,522		172,139		(68,617)		(40)	%	175,067		68,507		106,560		156	%
Loss Before Income Taxes	$	(206,513)	$	(54,412)	$	(152,101)	280	%	$	(781,967)	$	(520,315)	$	(261,652)	50	%
Income tax (benefit) expense	(836)		259		(1,095)		(423)	%	(2,584)		706		(3,290)		(466)	%
Net Loss	$	(205,677)	$	(54,671)	$	(151,006)	276	%	$	(779,383)	$	(521,021)	$	(258,362)	50	%

* Not meaningful

(1)Upon purchase of a loan from our originating bank partners at a price above the point in time the terms of the executed merchant agreement have been fulfilled and the merchant successfully confirms the transaction. We may originate certain loans via our wholly-owned subsidiaries, with zero or belowfair market ~~interest rates. In these instances, the par~~ value of the ~~loans originated is~~loan or upon the origination of a loan with a par value in excess of the fair market value of ~~such~~the loan, a discount is included in the amortized cost basis of the loan. For loans ~~resulting~~held for investment, this discount is amortized over

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the life of the loan into interest income. When a loan is sold to a third-party loan buyer or off-balance sheet securitization trust, the unamortized discount is released in afull at the time of sale and recognized as part of the gain or loss ~~which we record~~on sales of loans. However, the cumulative value of the loss on loan purchase commitment or loss on origination, the interest income recognized over time from the amortization of discount while retained, and the release of discount into gain on sales of loans, together net to zero over the life of the loan. The following table details activity for the discount, included in loans held for investment, for the periods indicated:


	Three Months Ended March 31,				Nine Months Ended March 31,
	2023		2022		2023		2022
	(in thousands)
Balance at the beginning of the period	$	77,830	$	47,960	$	42,780	$	53,177
Additions from loans purchased or originated, net of refunds	58,909		87,161		201,953		286,034
Amortization of discount	(39,130)		(45,443)		(116,937)		(138,853)
Unamortized discount released on loans sold	(8,203)		(40,177)		(37,156)		(150,857)
Impact of foreign currency translation	(17)		—		(1,251)		—
Balance at the end of the period	$	89,389	$	49,501	$	89,389	$	49,501

(2)Amounts include stock-based compensation as ~~a reduction to~~follows:


	Three Months Ended March 31,				Nine Months Ended March 31,
	2023		2022		2023		2022
	(in thousands)
General and administrative	$	54,789	$	58,100	$	188,788	$	187,789
Technology and data analytics	45,040		33,639		137,002		75,133
Sales and marketing	5,840		5,998		19,517		15,655
Processing and servicing	1,120		650		3,065		1,536
Total stock-based compensation in operating expenses	106,789		98,387		348,372		280,113
Capitalized into property, equipment and software, net	19,113		14,618		62,760		39,691
Total stock-based compensation expense	$	125,902	$	113,005	$	411,132	$	319,804

Comparison of the Three and Nine Months Ended March 31, 2023 and 2022

Merchant network revenue

Merchant network revenue is impacted by both GMV and the mix of loans originated on our platform as merchant fees vary based on loan characteristics. In particular, merchant network revenue ~~and/~~as a percentage of GMV typically increases with longer-term, non interest-bearing loans with higher AOVs, and decreases with shorter-term, interest-bearing loans with lower AOVs.

Merchant network revenue decreased by $2.0 million, or virtual card network revenue. In order to continue to expand our consumer base, we may originate loans under certain merchant arrangements that we do not expect to achieve positive revenue. In these instances, the loss is recorded as sales and marketing expense unless it is determined as recoverable in future periods. During2%, for the three ~~and~~months ended March 31, 2023 compared to the same period in fiscal 2022. The decrease is primarily attributed to a decrease of $274.2 million in long-term non-interest bearing loans, our highest merchant fee category, for the three months ended March 31, 2023. The decrease was partially offset by an increase of $742.8 million in short term interest bearing loans, which typically have lower merchant fees, in line with the decline in merchant network revenue as a percentage of GMV discussed below.

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Merchant network revenue increased by $25.8 million, or 8%, for the nine months ended March 31, ~~2022, we generated 33% and 35%~~2023, compared to the same period in fiscal 2022. The increase is primarily attributed to an increase of ~~our revenue from merchant network fees, respectively. During~~$3.6 billion in GMV for the ~~three and~~ nine months ended March 31, ~~2021, we generated 43% and 47%~~2023. The increase in GMV is a result of the expansion of our ~~revenue~~active merchant base from 207,049 as of March 31, 2022 to 245,652 as of March 31, 2023, an increase in active consumers from 12.7 million as of March 31, 2022 to 16.0 million as of March 31, 2023, and an increase in average transactions per consumer from 2.7 as of March 31, 2022 to 3.6 as of March 31, 2023. Despite the increase in merchant network ~~fees, respectively.~~

~~Virtual Card Network Revenue~~

~~A smaller portion of our~~ revenue, comes from our Virtual Card product. We have an agreement with an issuer processor to facilitate transactions through the issuance of virtual debit cards to be used by consumers at checkout. Consumers can apply for a virtual debit card through the Affirm app and, upon approval, receive a single-use virtual debit card to be used for their purchase online or offline at a non-integrated merchant. The virtual debit card is funded at the time a transaction is authorized using cash held by the issuer processor in a reserve fund, which is ultimately funded and maintained by us. We, or our originating bank partner, then originate a loan to the consumer once the transaction is confirmed by the merchant. The non-integrated merchants are charged interchange fees by the issuer processor for virtual debit card transactions, as with all debit card purchases, and the issuer processor shares a portion of thismerchant network revenue with us. We also leverage this issuer processor as a means of integrating certain merchants. Similarly, for these arrangements with integrated merchants, the merchant is charged interchange fees by the issuer processor and the issuer processor shares a portion of this revenue with us. This revenue is recognized as a percentage of ~~both our captured volume transacted on~~GMV contracted and AOVs decreased during the ~~payment processor~~period. Merchant network ~~and net interchange income, and this~~ revenue ~~is presented net~~as a percentage of ~~associated processing fees. We generated 7% of our revenue from virtual card network fees~~GMV was 2% for ~~both~~ the ~~three and~~ nine months ended March 31, ~~2022, and 6% and 5%~~2023, down from 3% for the same period in fiscal 2022. AOV was $319 for the nine months ended March 31, 2023, down from $377 for the same period in fiscal 2022. These decreases are the result of ~~our revenue from virtual~~a higher frequency of consumers choosing Affirm as their payment option with merchants that offer shorter-term, interest-bearing loans with lower AOVs, resulting in lower merchant fees.

Virtual card network ~~fees~~revenue

Virtual card network revenue increased by $6.3 million, or 27%, and $16.2 million, or 23%, for the three and nine months ended March 31, ~~2021, respectively.~~2023, respectively, compared to the same period in 2022. Virtual card network revenue growth is correlated with the growth of GMV processed by our issuer processors. As such, the increase is primarily driven by $1.4 billion and $4.2 billion of GMV processed through our issuer processors, an increase of 22% and 27% for the three and nine months ended March 31, 2023, respectively, as compared to the same period in 2022. This is the result of increased activity on our virtual card-enabled mobile application, as well as growth in existing and new merchants using our virtual card platform, growing from 1,053 merchants as of March 31, 2022 to 1,226 merchants as of March 31, 2023. Virtual 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.

Interest ~~Income~~income

~~We also earn revenue through interest earned on loans facilitated by our platform.~~ Interest income ~~includes interest charged~~increased by $43.7 million, or 32%, and $80.1 million, or 21%, for the three and nine months ended March 31, 2023, respectively, compared to ~~consumers over~~ the ~~term of the consumers’ loans based on the principal outstanding and is calculated using the effective interest method. In addition,~~same period in fiscal 2022. Generally, interest income ~~includes~~is correlated with the ~~amortization~~changes in the average balance of ~~any discounts or premiums~~loans held for investment. The average balance of loans held for investment increased by 51% to $3.7 billion and 39% to $3.2 billion for the three and nine months ended March 31, 2023, respectively, compared to the same period in fiscal 2022. The increase in loans held for investment on ~~loan receivables created upon either~~our interim consolidated balance sheet is in response to the ~~purchase~~current market environment and our ability to allocate loans to warehouse facilities with better economic terms while optimizing cost of ~~a loan~~funds. Coupled with the increase in loans held for investment on our interim consolidated balance sheet, interest income from ~~our originating bank partners or the origination of a loan. These discounts~~interest bearing loans increased from $95.3 million and ~~premiums are accreted or amortized over the life of the loan using the effective interest method and represented 34% and 36% of total interest income~~$266.9 million for the three and nine months ended March 31, 2022 ~~respectively, compared~~ to ~~33%~~$147.8 million and ~~31%~~$379.8 million for ~~the~~ three and nine months ended March 31, ~~2021. During~~2023, respectively. This increase was in part due to recent pricing initiatives including increasing the maximum APR for loans facilitated on our platform from 30% to 36% and introducing merchant-subsidized low APR loans (4-9.99%) as an alternative to monthly 0% APR programs.

Gain on sales of loans

Gain on sales of loans decreased by $19.7 million, or 37%, for the three months ended March 31, 2023 compared to the same period in 2022, primarily due to a decrease in loan sale volume as we retain more loans on balance sheet in response to the current market environment. We sold loans with an unpaid balance of $1.7 billion for the three months ended March 31, 2023 compared to $2.0 billion for the same period in 2022.

Gain on sales of loansincreased by $14.9 million, or 11%, for the nine months ended March 31, 2023, compared to the same period in 2022, mainly driven by increased loan sale activity. We sold loans with an unpaid balance of $5.8 billion for the nine months ended March 31, 2023 compared to $5.6 billion for the same period in 2022. This increase was driven by higher loan sale volume to third-party loan buyers and optimizing the allocation of loans to loan buyers with more favorable pricing terms.

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Servicing income

Servicing income includes net servicing fee revenue and fair value adjustments for servicing assets and liabilities, and is recognized for loan portfolios sold to third party loan buyers and for loans held within our off balance sheet securitizations. Servicing fee revenue varies by contractual servicing fee arrangement and is earned as a percentage of the average unpaid principal balance of loans held by each counterparty where we have a servicing agreement. We reduce servicing income for certain fees we are required to pay per our contractual servicing arrangement.

With respect to fair value adjustments, we remeasure the fair value of servicing assets and liabilities each period and recognize the change in fair value in servicing income. We utilize a discounted cash flow approach to remeasure the fair value of servicing rights. Because we earn servicing income based on the outstanding principal balance of the portfolio, fair value adjustments are impacted by the timing and amount of loan repayments. As such, over the term of each loan portfolio sold, fair value adjustments for servicing assets will decrease servicing income and fair value adjustments for servicing liabilities will increase servicing income. We discuss our valuation methodology and significant level 3 inputs for servicing assets and liabilities within Note 14. Fair Value of Financial Assets and Liabilities.

Servicing income decreased by $2.0 million, or 9%, for the three months ended March 31, 2023, compared to the same period in 2022, primarily driven by changes in fair value of servicing assets and liabilities. The decrease related to changes in fair value of servicing assets and liabilities was partially offset by an increase in servicing fee revenue driven by an increase in the average unpaid principal balance of loans owned by third-party loan owners, which increased from $4.0 billion during the three months ended March 31, 2022 to $4.5 billion during the three months ended March 31, 2023.

Servicing income increased by $20.0 million, or 45%, for the nine months ended March 31, 2023, compared to the same period in 2022, driven primarily by an increase in servicing fee revenue driven by an increase in the average unpaid principal balance of loans owned by third-party loan owners, which increased from $3.0 billion during the nine months ended March 31, 2022 ~~we generated 38% and 40% of our revenue from interest~~

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~~income, respectively. During~~to $4.1 billion during the ~~three and~~ nine months ended March 31, ~~2021, we generated 41% and 37%~~2023, combined with increased servicing fees. Additionally, during the nine months ended March 31, 2023, an increase of ~~our revenue from interest income, respectively.~~

~~Gain on Sales of Loans~~

~~We sell a portion of~~$0.6 million related to the loans we originate or purchase from our originating bank partners to third-party investors. We recognize a gain or loss on sale of such loans as the difference between the proceeds received, adjusted for initial recognitionchanges in fair value of servicing assets and liabilities ~~obtained at the date of sale, and the carrying value of the loan. During the three and nine months ended March 31, 2022, gain on sale was reduced by $0.9 million and $3.1 million due~~contributed to the ~~net impact of the~~overall increase in servicing assets and liabilities of the loans sold, respectively. During both the three and nine months ended March 31, 2022, we generated 15% of our revenue from gain on sales of loans. During the three and nine months ended March 31, 2021, we generated 7% and 8% of our revenue from gain on sales of loans, respectively.

~~Servicing Income~~

We earn a specified fee from providing professional services to manage loan portfolios on behalf of our third-party loan owners. Under the servicing agreements with our third-party loan owners, we are entitled to collect servicing fees on the loans that we service, which are paid monthly based upon an annual fixed percentage of the outstanding loan portfolio balance. During the three and nine months ended March 31, 2022, we generated 7% and 4% of our revenue from servicing fees, respectively. During both the three and nine months ended March 31, 2021, we generated 3% of our revenue from servicing fees.

We expect our revenue may vary from period to period based on, among other things, the timing of onboarding and size of new merchants, the mix of 0% APR loans versus interest-bearing loans with simple interest, loan funding strategy and mix, type and mix of products that our merchants offer to their customers, the rate of repeat transactions, transaction volume, and seasonality of or fluctuations in usage of our platform.

~~Operating Expenses~~

Our operating expenses consist of the loss on loan purchase commitment made to our originating bank partners, the provision for credit losses, funding costs, processing and servicing, technology and data analytics, sales and marketing, and general and administrative expenses. Salaries and personnel-related costs, including benefits, bonuses, stock-based compensation expense and occupancy, comprise a significant component of several of these expense categories. An allocation of overhead, such as rent and other overhead, is based on employee headcount and included in processing and servicing, technology and data analytics, sales and marketing, and general and administrative expenses.

~~As of March 31, 2022, we had 2,233 employees,~~income, compared to ~~1,641 employees as of June 30, 2021. We increased our headcount and personnel related costs across our business~~the same period in ~~order to support our growth expansion strategy. We expect headcount to continue to increase during fiscal year 2022 given our focus on growth and expansion.~~2022.

~~Loss on Loan Purchase Commitment~~Results of Operations

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


	Three Months Ended March 31,								Nine Months Ended March 31,
	2023		2022		$		%		2023		2022		$		%
	(in thousands, except percentages)
Revenue
Merchant network revenue	$	119,013	$	121,054	$	(2,041)	(2)	%	$	366,181	$	340,385	$	25,796	8	%
Virtual card network revenue	29,469		23,169		6,300		27	%	85,294		69,122		16,172		23	%
Total network revenue	148,482		144,223		4,259		3	%	451,475		409,507		41,968		10	%
Interest income (1)	178,270		134,599		43,671		32	%	470,393		390,256		80,137		21	%
Gain on sales of loans (1)	32,813		52,484		(19,671)		(37)	%	156,015		141,153		14,862		11	%
Servicing income	21,413		23,456		(2,043)		(9)	%	64,277		44,242		20,035		45	%
Total Revenue, net	$	380,978	$	354,762	$	26,216	7	%	$	1,142,160	$	985,158	$	157,002	16	%
Operating Expenses (2)
Loss on loan purchase commitment	$	31,224	$	46,853	$	(15,629)	(33)	%	$	105,256	$	163,796	$	(58,540)	(36)	%
Provision for credit losses	66,438		66,294		144		—	%	237,377		182,581		54,796		30	%
Funding costs	51,188		15,824		35,364		223	%	120,005		50,277		69,728		139	%
Processing and servicing	65,229		43,371		21,858		50	%	186,096		110,421		75,675		69	%
Technology and data analytics	161,792		110,291		51,501		47	%	463,500		283,293		180,207		64	%
Sales and marketing	140,942		156,214		(15,272)		(10)	%	493,149		363,650		129,499		36	%
General and administrative	139,266		142,466		(3,200)		(2)	%	458,877		419,962		38,915		9	%
Restructuring charges, net	34,934		—		34,934		NM*		34,934		—		34,934		NM*
Total Operating Expenses	691,013		581,313		109,700		19	%	2,099,194		1,573,980		525,214		33	%
Operating Loss	$	(310,035)	$	(226,551)	$	(83,484)	37	%	$	(957,034)	$	(588,822)	$	(368,212)	63	%
Other income, net	103,522		172,139		(68,617)		(40)	%	175,067		68,507		106,560		156	%
Loss Before Income Taxes	$	(206,513)	$	(54,412)	$	(152,101)	280	%	$	(781,967)	$	(520,315)	$	(261,652)	50	%
Income tax (benefit) expense	(836)		259		(1,095)		(423)	%	(2,584)		706		(3,290)		(466)	%
Net Loss	$	(205,677)	$	(54,671)	$	(151,006)	276	%	$	(779,383)	$	(521,021)	$	(258,362)	50	%

* Not meaningful

(1)Upon purchase ~~certain loans~~of a loan from our originating bank partners ~~that are processed through our platform and our originating bank partner puts back to us. Under~~at a price above the ~~terms~~fair market value of the ~~agreements~~loan or upon the origination of a loan with our originating bank partners, we are generally required to pay the principal amount plus accrued interest for such loans. 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~~par value in excess of the fair market value of ~~such~~the loan, a discount is included in the amortized cost basis of the loan. For 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 loss. These costs are incurred on a per loan basis.

held for investment, this discount is amortized over

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~~Provision for Credit Losses~~

~~Provision for credit losses consists of amounts charged against income during~~ the ~~period to maintain an allowance for credit losses. Our allowance for credit losses represents our estimate~~life of the ~~credit losses inherent~~loan into interest income. When a loan is sold to a third-party loan buyer or off-balance sheet securitization trust, the unamortized discount is released in ~~our~~full at the time of sale and recognized as part of the gain or loss on sales of loans. However, the cumulative value of the loss on loan purchase commitment or loss on origination, the interest income recognized over time from the amortization of discount while retained, and the release of discount into gain on sales of loans, together net to zero over the life of the loan. The following table details activity for the discount, included in loans held for investment, for the periods indicated:


	Three Months Ended March 31,				Nine Months Ended March 31,
	2023		2022		2023		2022
	(in thousands)
Balance at the beginning of the period	$	77,830	$	47,960	$	42,780	$	53,177
Additions from loans purchased or originated, net of refunds	58,909		87,161		201,953		286,034
Amortization of discount	(39,130)		(45,443)		(116,937)		(138,853)
Unamortized discount released on loans sold	(8,203)		(40,177)		(37,156)		(150,857)
Impact of foreign currency translation	(17)		—		(1,251)		—
Balance at the end of the period	$	89,389	$	49,501	$	89,389	$	49,501

(2)Amounts include stock-based compensation as follows:


	Three Months Ended March 31,				Nine Months Ended March 31,
	2023		2022		2023		2022
	(in thousands)
General and administrative	$	54,789	$	58,100	$	188,788	$	187,789
Technology and data analytics	45,040		33,639		137,002		75,133
Sales and marketing	5,840		5,998		19,517		15,655
Processing and servicing	1,120		650		3,065		1,536
Total stock-based compensation in operating expenses	106,789		98,387		348,372		280,113
Capitalized into property, equipment and software, net	19,113		14,618		62,760		39,691
Total stock-based compensation expense	$	125,902	$	113,005	$	411,132	$	319,804

Comparison of the Three and Nine Months Ended March 31, 2023 and 2022

Merchant network revenue

Merchant network revenue is impacted by both GMV and the mix of loans originated on our platform as merchant fees vary based on loan characteristics. In particular, merchant network revenue as a ~~variety~~percentage of ~~factors, including~~GMV typically increases with longer-term, non interest-bearing loans with higher AOVs, and decreases with shorter-term, interest-bearing loans with lower AOVs.

Merchant network revenue decreased by $2.0 million, or 2%, for the ~~composition and quality~~three months ended March 31, 2023 compared to the same period in fiscal 2022. The decrease is primarily attributed to a decrease of $274.2 million in long-term non-interest bearing loans, our highest merchant fee category, for the three months ended March 31, 2023. The decrease was partially offset by an increase of $742.8 million in short term interest bearing loans, which typically have lower merchant fees, in line with the decline in merchant network revenue as a percentage of GMV discussed below.

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Merchant network revenue increased by $25.8 million, or 8%, for the nine months ended March 31, 2023, compared to the same period in fiscal 2022. The increase is primarily attributed to an increase of $3.6 billion in GMV for the nine months ended March 31, 2023. The increase in GMV is a result of the ~~portfolio, loan specific information gathered~~expansion of our active merchant base from 207,049 as of March 31, 2022 to 245,652 as of March 31, 2023, an increase in active consumers from 12.7 million as of March 31, 2022 to 16.0 million as of March 31, 2023, and an increase in average transactions per consumer from 2.7 as of March 31, 2022 to 3.6 as of March 31, 2023. Despite the increase in merchant network revenue, merchant network revenue as a percentage of GMV contracted and AOVs decreased during the period. Merchant network revenue as a percentage of GMV was 2% for the nine months ended March 31, 2023, down from 3% for the same period in fiscal 2022. AOV was $319 for the nine months ended March 31, 2023, down from $377 for the same period in fiscal 2022. These decreases are the result of a higher frequency of consumers choosing Affirm as their payment option with merchants that offer shorter-term, interest-bearing loans with lower AOVs, resulting in lower merchant fees.

Virtual card network revenue

Virtual card network revenue increased by $6.3 million, or 27%, and $16.2 million, or 23%, for the three and nine months ended March 31, 2023, respectively, compared to the same period in 2022. Virtual card network revenue growth is correlated with the growth of GMV processed by our issuer processors. As such, the increase is primarily driven by $1.4 billion and $4.2 billion of GMV processed through our ~~collection efforts,~~issuer processors, an increase of 22% and 27% for the three and nine months ended March 31, 2023, respectively, as compared to the same period in 2022. This is the result of increased activity on our virtual card-enabled mobile application, as well as growth in existing and new merchants using our virtual card platform, growing from 1,053 merchants as of March 31, 2022 to 1,226 merchants as of March 31, 2023. Virtual 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.

Interest income

Interest incomeincreased by $43.7 million, or 32%, and $80.1 million, or 21%, for the three and nine months ended March 31, 2023, respectively, compared to the same period in fiscal 2022. Generally, interest income is correlated with the changes in the average balance of loans held for investment. The average balance of loans held for investment increased by 51% to $3.7 billion and 39% to $3.2 billion for the three and nine months ended March 31, 2023, respectively, compared to the same period in fiscal 2022. The increase in loans held for investment on our interim consolidated balance sheet is in response to the current ~~economic conditions, future reasonable and supportable forecasts,~~market environment and our ~~historical net charge-off and loss experience. These costs are incurred~~ability to allocate loans to warehouse facilities with better economic terms while optimizing cost of funds. Coupled with the increase in loans held for investment on ~~a per loan basis.~~

~~Funding Costs~~

~~Funding costs consist of interest expense and the amortization of fees for certain borrowings including on~~our interim consolidated balance sheet, ~~VIEs and sale and repurchase agreements, and other costs incurred in connection with funding the purchases and originations of loans. Amortization of debt issuance costs totaled $3.6~~interest income from interest bearing loans increased from $95.3 million and ~~$13.2~~$266.9 million for the three and nine months ended March 31, 2022 ~~respectively, and $1.3~~to $147.8 million and ~~$3.7~~$379.8 million for ~~the~~ three and nine months ended March 31, ~~2021,~~2023, respectively. This increase was in part due to recent pricing initiatives including increasing the maximum APR for loans facilitated on our platform from 30% to 36% and introducing merchant-subsidized low APR loans (4-9.99%) as an alternative to monthly 0% APR programs.

~~Processing~~Gain on sales of loans

Gain on sales of loansincreased by $14.9 million, or 11%, for the nine months ended March 31, 2023, compared to the same period in 2022, mainly driven by increased loan sale activity. We sold loans with an unpaid balance of $5.8 billion for the nine months ended March 31, 2023 compared to $5.6 billion for the same period in 2022. This increase was driven by higher loan sale volume to third-party loan buyers and ~~Servicing~~optimizing the allocation of loans to loan buyers with more favorable pricing terms.

~~Processing~~

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Servicing income

Servicing income includes net servicing fee revenue and fair value adjustments for servicing ~~expense consists primarily~~assets and liabilities, and is recognized for loan portfolios sold to third party loan buyers and for loans held within our off balance sheet securitizations. Servicing fee revenue varies by contractual servicing fee arrangement and is earned as a percentage of ~~payment processing~~the average unpaid principal balance of loans held by each counterparty where we have a servicing agreement. We reduce servicing income for certain fees ~~third-party customer support~~we are required to pay per our contractual servicing arrangement.

With respect to fair value adjustments, we remeasure the fair value of servicing assets and ~~collection expense, salaries~~liabilities each period and ~~personnel-related costs~~recognize the change in fair value in servicing income. We utilize a discounted cash flow approach to remeasure the fair value of servicing rights. Because we earn servicing income based on the outstanding principal balance of the portfolio, fair value adjustments are impacted by the timing and amount of loan repayments. As such, over the term of each loan portfolio sold, fair value adjustments for servicing assets will decrease servicing income and fair value adjustments for servicing liabilities will increase servicing income. We discuss our ~~customer care team, platform fees,~~valuation methodology and ~~allocated overhead. Payment processing costs are~~significant level 3 inputs for servicing assets and liabilities within Note 14. Fair Value of Financial Assets and Liabilities.

Servicing income decreased by $2.0 million, or 9%, for the three months ended March 31, 2023, compared to the same period in 2022, primarily driven by ~~the number and dollar~~changes in fair value of ~~consumer repayments which grow as the number of transactions~~servicing assets and ~~GMV processed on our platform increases. Customer care loan servicing costs are primarily staffing costs~~liabilities. The decrease related to changes in fair value of servicing assets and liabilities was partially offset by an increase in servicing fee revenue driven by an increase in the average unpaid principal balance of loans owned by third-party ~~and in-house~~ loan ~~servicing agents,~~owners, which increased from $4.0 billion during the ~~demand for which generally increases with~~three months ended March 31, 2022 to $4.5 billion during the number of transactions on our platform. Collection fees are fees paid to agencies as percentages of the dollars of repayment they recuperate from borrowers whose loans had previously been charged off. Platform fees are revenue sharing fees paid to our e-commerce platform partners.three months ended March 31, 2023.

~~Technology and Data Analytics~~

Technology and data analytics expense consists primarily of the salaries, stock-based compensation, and personnel-related costs of our engineering and product employees as well as our credit and analytics employees who develop our proprietary risk model, which totaled $68.5Servicing income increased by $20.0 million, ~~and $172.4 million~~or 45%, for the ~~three and~~nine months ended March 31, 2023, compared to the same period in 2022, driven primarily by an increase in servicing fee revenue driven by an increase in the average unpaid principal balance of loans owned by third-party loan owners, which increased from $3.0 billion during the nine months ended March 31, 2022 ~~respectively, and $77.5 million and $123.5 million for~~to $4.1 billion during the ~~three and~~ nine months ended March 31, ~~2021, respectively.~~

2023, combined with increased servicing fees. Additionally, ~~for~~during the ~~three and~~ nine months ended March 31, ~~2022, $34.4~~2023, an increase of $0.6 million and $95.2 million, respectively, of salaries and personnel costs that relate to the creation of internally-developed software were capitalized into property, equipment and software, net on our interim condensed consolidated balance sheets, and we recorded amortization expense of $6.4 million and $15.3 million for the three and nine months ended March 31, 2022, respectively. For the three and nine months ended March 31, 2021, $11.2 million and $18.8 million, respectively, of salaries and personnel costs that relate to the creation of internally-developed software were capitalized into property, equipment and software, net on the interim condensed consolidated balance sheets, and amortized into technology and data analytics expense over the useful life of the developed software. This amortization expense totaled $2.2 million and $7.4 million for the three and nine months ended March 31, 2021, respectively. Additional technology and data analytics expenses include platform infrastructure and hosting costs, third-party data acquisition expenses, and expenses related to the ~~maintenance of existing technology assets and our technology platform as a whole.~~

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~~Sales and Marketing~~

Sales and marketing costs consist of the expense related to warrants and other share-based payments granted to our enterprise partners, salaries and personnel-related costs, as well as costs of general marketing and promotional activities, promotional event programs, sponsorships, and allocated overhead. In July 2020, we recognized an assetchanges in connection with a commercial agreement with Shopify in which we granted warrants in exchange for their promotion of the Affirm platform with potential new merchant partners. This asset represents the probable future economic benefit to be realized over the four-year expected benefit period and is valued based on the fair value of ~~the warrants at the grant date. This value is amortized on a straight-line basis over the four-year expected benefit period into sales~~servicing assets and ~~marketing expense, due~~liabilities contributed to the ~~nature of the expected benefit. In November 2021, we entered into a commercial agreement with Amazon and granted warrants~~overall increase in exchange for certain exclusivity provisions and the benefit of acquiring new users. In connection with the agreements, we recognized an asset associated with the portion of the warrants that were fully vested upon execution of the agreement. The asset is valued based on the fair value of the warrants on the grant date and represents the probable future economic benefit to be realized over the approximately 3.2 year remaining initial term of the commercial agreement. For the three and nine months ended March 31, 2022, we recognized $102.4 million and $173.0 million of expenses relatedservicing income, compared to the warrants within sales and marketing expense, respectively, which included the amortization expense of the commercial agreement asset and the expense based upon the grant-date fair value for the warrant shares that vested during the period. For the three and nine months ended March 31, 2022, the expense related to warrants and other share-based payments comprised 76% and 62% of sales and marketing expenses, respectively, compared to 29% and 40% for the three and nine months ended March 31, 2021, respectively.

~~Additionally,~~same period in order to continue to expand our consumer base, we may originate certain loans via our wholly-owned subsidiaries with zero or below market interest rates under certain merchant arrangements that we do not expect to achieve positive revenue. In these instances, the par value of the loans originated is in excess of the fair market value of such loans, which results in a loss. These losses are recorded as sales and marketing expense. These losses totaled $3.3 million and $19.1 million, respectively, during the three and nine months ended March 31, 2022, compared to $3.1 million and $4.1 million for the three and nine months ended March 31, 2021, respectively. We expect that our sales and marketing expense will continue to increase as we expand our sales and marketing efforts to drive our growth, expansion, and diversification.2022.

~~General and Administrative~~

General and administrative expenses consist primarily of expenses related to our finance, legal, risk operations, human resources, and administrative personnel. General and administrative expenses also include costs related to fees paid for professional services, including legal, tax and accounting services, and allocated overhead.

We continue to incur additional expenses as a result of operating as a public company, including costs to comply with the rules and regulations applicable to companies listed on a national securities exchange, costs related to compliance and reporting obligations pursuant to the rules and regulations of the SEC, and increased expenses for insurance, investor relations, and professional services. We expect that our ~~general and administrative~~ ~~expense will increase in absolute dollars as our business grows.~~

~~Other Income and Expenses~~

~~Other (Expense) Income, Net~~

Other (expense) income, net consists primarily of interest earned on our money market funds included in cash and cash equivalents and restricted cash, interest earned on securities available for sale, gains and losses incurred on derivative agreements, amortization of convertible debt issuance cost and revolving debt facility issuance costs, and fair value adjustments resulting from changes in the fair value of our contingent consideration liability, primarily driven by changes in the market price of our Class A common stock.

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~~Income Tax Expense~~

~~Our income tax expense (benefit) consists of U.S. federal and state income taxes, Canadian federal and provincial income taxes, and income taxes attributable to other foreign jurisdictions.~~

Results of Operations

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

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


	Three Months Ended March 31,								Nine Months Ended March 31,
	2023		2022		$		%		2023		2022		$		%
	(in thousands, except percentages)
Revenue
Merchant network revenue	$	119,013	$	121,054	$	(2,041)	(2)	%	$	366,181	$	340,385	$	25,796	8	%
Virtual card network revenue	29,469		23,169		6,300		27	%	85,294		69,122		16,172		23	%
Total network revenue	148,482		144,223		4,259		3	%	451,475		409,507		41,968		10	%
Interest income (1)	178,270		134,599		43,671		32	%	470,393		390,256		80,137		21	%
Gain on sales of loans (1)	32,813		52,484		(19,671)		(37)	%	156,015		141,153		14,862		11	%
Servicing income	21,413		23,456		(2,043)		(9)	%	64,277		44,242		20,035		45	%
Total Revenue, net	$	380,978	$	354,762	$	26,216	7	%	$	1,142,160	$	985,158	$	157,002	16	%
Operating Expenses (2)
Loss on loan purchase commitment	$	31,224	$	46,853	$	(15,629)	(33)	%	$	105,256	$	163,796	$	(58,540)	(36)	%
Provision for credit losses	66,438		66,294		144		—	%	237,377		182,581		54,796		30	%
Funding costs	51,188		15,824		35,364		223	%	120,005		50,277		69,728		139	%
Processing and servicing	65,229		43,371		21,858		50	%	186,096		110,421		75,675		69	%
Technology and data analytics	161,792		110,291		51,501		47	%	463,500		283,293		180,207		64	%
Sales and marketing	140,942		156,214		(15,272)		(10)	%	493,149		363,650		129,499		36	%
General and administrative	139,266		142,466		(3,200)		(2)	%	458,877		419,962		38,915		9	%
Restructuring charges, net	34,934		—		34,934		NM*		34,934		—		34,934		NM*
Total Operating Expenses	691,013		581,313		109,700		19	%	2,099,194		1,573,980		525,214		33	%
Operating Loss	$	(310,035)	$	(226,551)	$	(83,484)	37	%	$	(957,034)	$	(588,822)	$	(368,212)	63	%
Other income, net	103,522		172,139		(68,617)		(40)	%	175,067		68,507		106,560		156	%
Loss Before Income Taxes	$	(206,513)	$	(54,412)	$	(152,101)	280	%	$	(781,967)	$	(520,315)	$	(261,652)	50	%
Income tax (benefit) expense	(836)		259		(1,095)		(423)	%	(2,584)		706		(3,290)		(466)	%
Net Loss	$	(205,677)	$	(54,671)	$	(151,006)	276	%	$	(779,383)	$	(521,021)	$	(258,362)	50	%

* Not meaningful

(1)Upon purchase of a loan from our originating bank partners at a price above the fair market value of the loan or upon the origination of a loan with a par value in excess of the fair market value of the loan, a discount is included in the amortized cost basis of the loan. For loans held for investment, this discount is amortized over

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the life of the loan into interest income. When a loan is sold to a third-party loan buyer or off-balance sheet securitization trust, the unamortized discount is released in full at the time of sale and recognized as part of the gain or loss on sales of loans. However, the cumulative value of the loss on loan purchase commitment or loss on origination, the interest income recognized over time from the amortization of discount while retained, and the release of discount into gain on sales of loans, together net to zero over the life of the loan. The following table details activity for the discount, included in loans held for investment, for the periods indicated:


		Three Months Ended March 31,				Nine Months Ended March 31,					Three Months Ended March 31,				Nine Months Ended March 31,
		2022		2021		2022		2021			2023		2022		2023		2022
		(in thousands)									(in thousands)
Balance at the beginning of the period	Balance at the beginning of the period	$	47,960	$	71,571	$	53,177	$	28,659	Balance at the beginning of the period	$	77,830	$	47,960	$	42,780	$	53,177
Additions from loans purchased or originated, net of refunds	Additions from loans purchased or originated, net of refunds	87,161		71,294		286,034		201,531		Additions from loans purchased or originated, net of refunds	58,909		87,161		201,953		286,034
Amortization of discount	Amortization of discount	(45,443)		(31,625)		(138,853)		(68,843)		Amortization of discount	(39,130)		(45,443)		(116,937)		(138,853)
Unamortized discount released on loans sold	Unamortized discount released on loans sold	(40,177)		(29,357)		(150,857)		(79,464)		Unamortized discount released on loans sold	(8,203)		(40,177)		(37,156)		(150,857)
Impact of foreign currency translation										Impact of foreign currency translation	(17)		—		(1,251)		—
Balance at the end of the period	Balance at the end of the period	$	49,501	$	81,883	$	49,501	$	81,883	Balance at the end of the period	$	89,389	$	49,501	$	89,389	$	49,501

(2) Amounts include stock-based compensation as follows:


		Three Months Ended March 31,				Nine Months Ended March 31,					Three Months Ended March 31,				Nine Months Ended March 31,
		2022		2021		2022		2021			2023		2022		2023		2022
		(in thousands)									(in thousands)
General and administrative	General and administrative	$	58,100	$	115,566	$	187,789	$	121,867	General and administrative	$	54,789	$	58,100	$	188,788	$	187,789
Technology and data analytics	Technology and data analytics	33,639		52,058		75,133		56,827		Technology and data analytics	45,040		33,639		137,002		75,133
Sales and marketing	Sales and marketing	5,998		10,568		15,655		11,909		Sales and marketing	5,840		5,998		19,517		15,655
Processing and servicing	Processing and servicing	650		1,447		1,536		1,760		Processing and servicing	1,120		650		3,065		1,536
Total stock-based compensation in operating expenses	Total stock-based compensation in operating expenses	98,387		179,639		280,113		192,363		Total stock-based compensation in operating expenses	106,789		98,387		348,372		280,113
Capitalized into property, equipment and software, net	Capitalized into property, equipment and software, net	14,618		6,567		39,691		7,792		Capitalized into property, equipment and software, net	19,113		14,618		62,760		39,691
Total stock-based compensation expense	Total stock-based compensation expense	$	113,005	$	186,206	$	319,804	$	200,155	Total stock-based compensation expense	$	125,902	$	113,005	$	411,132	$	319,804

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Comparison of the Three and Nine Months Ended March 31, ~~2022~~2023 and ~~2021~~2022

~~Total Revenue, net~~

Three Months Ended March 31, Change Nine Months Ended March 31, Change
2022 2021 $ % 2022 2021 $ %
(in thousands, except percentage)
Merchant network revenue $ 121,054 $ 97,999 $ 23,055 24 % $ 340,385 $ 290,894 $ 49,491 17 %
Virtual card network revenue 23,169 13,809 9,360 68 % 69,122 30,587 38,535 126 %
Total network revenue 144,223 111,808 32,415 29 % 409,507 321,481 88,026 27 %
Interest income 134,599 94,530 40,069 42 % 390,256 222,624 167,632 75 %
Gain on sales of loans 52,484 16,350 36,134 221 % 141,153 47,344 93,809 198 %
Servicing income 23,456 7,977 15,479 194 % 44,242 17,235 27,007 157 %
Total Revenue, net $ 354,762 $ 230,665 124,097 54 % $ 985,158 $ 608,684 376,474 62 %

~~Total Revenue, net~~ for the three and nine months ended March 31, 2022 increased by $124.1 million or 54% and $376.5 million or 62%, respectively, compared to the three and nine months ended March 31, 2021. The increase is primarily due to an increase of $1.7 billion or 73% and $5.3 billion or 91% in GMV on our platform during the quarter, from $2.3 billion and $5.8 billion for the three and nine months ended March 31, 2021, respectively, to $3.9 billion and $11.1 billion for the three and nine months ended March 31, 2022, respectively. This increase in GMV was driven by the strong network effects of the expansion of our active merchant base from 11,513 as of March 31, 2021 to 207,049 as of March 31, 2022, an increase in active consumers from 5.4 million as of March 31, 2021 to 12.7 million as of March 31, 2022, and an increase in average transactions per consumer from 2.3 as of March 31, 2021 to 2.7 as of March 31, 2022.

~~Merchant network revenue~~ for the three and nine months ended March 31, 2022 increased by $23.1 million or 24% and $49.5 million or 17%, compared to the three and nine months ended March 31, 2021, respectively. Merchant network revenue as a percentage of GMV for the three months ended March 31, 2022 decreased to 3.1% compared to 4.3% for the three months ended March 31, 2021, and decreased to 3.1% for the nine months ended March 31, 2022 compared to 5.0% for the nine months ended March 31, 2021.

Merchant network revenue ~~growth~~

Merchant network revenue is ~~generally correlated with~~impacted by both GMV ~~growth~~ and the mix of loans originated on our platform as ~~different~~merchant fees vary based on loan ~~characteristics are positively or negatively correlated with merchant fee revenue as a percentage of GMV.~~characteristics. In particular, merchant network revenue as a percentage of GMV typically increases with ~~the term length~~longer-term, non interest-bearing loans with higher AOVs, and ~~AOV of our loans, and typically~~ decreases with ~~shorter duration and higher APR loans. Specifically,~~shorter-term, interest-bearing loans with lower AOVs.

Merchant network revenue decreased by $2.0 million, or 2%, for the three months ended March 31, 2023 compared to the same period in fiscal 2022. The decrease is primarily attributed to a decrease of $274.2 million in long-term ~~0% APR~~non-interest bearing loans, our highest merchant fee category, for the three months ended March 31, 2023. The decrease was partially offset by an increase of $742.8 million in short term interest bearing loans, which typically ~~carry higher~~have lower merchant fees, in line with the decline in merchant network revenue as a percentage of GMV discussed below.

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~~The~~an increase in average transactions per consumer from 2.7 as of March 31, 2022 to 3.6 as of March 31, 2023. Despite the increase in merchant network revenue, merchant network revenue as a percentage of GMV contracted and AOVs decreased during the ~~three and nine month period~~period. Merchant network revenue as a percentage of GMV was ~~primarily driven by an increase in GMV, partially offset by reductions in~~2% for the ~~concentration of long-term 0% APR loans, our highest merchant fee category. For the three and~~ nine months ended March 31, ~~2022, approximately 8% and 10%, respectively, of total revenue~~2023, down from 3% for the same period in fiscal 2022. AOV was ~~driven by our largest merchant partner by merchant network revenue, Peloton,~~$319 for ~~which we facilitate long-term 0% APR loans with a higher merchant fee, compared with 20% and 31% of total revenue in~~ the ~~comparative periods. More broadly, for both the three and~~ nine months ended March 31, ~~2022,~~2023, down from $377 for the same period in fiscal 2022. These decreases are the result of a higher frequency of consumers choosing Affirm as their payment option with merchants that offer shorter-term, interest-bearing loans with ~~term lengths greater than 12 months accounted for 21% of GMV, compared to 30%~~lower AOVs, resulting in lower merchant fees.

Virtual card network revenue

Virtual card network revenue increased by $6.3 million, or 27%, and ~~32%~~$16.2 million, or 23%, for the three and nine months ended March 31, ~~2021,~~2023, respectively, ~~primarily due~~compared to the ~~increased adoption~~same period in 2022. Virtual card network revenue growth is correlated with the growth of GMV processed by our ~~Split Pay product. AOV was lower at $374~~issuer processors. As such, the increase is primarily driven by $1.4 billion and ~~$377~~$4.2 billion of GMV processed through our issuer processors, an increase of 22% and 27% for the three and nine months ended March 31, ~~2022,~~2023, respectively, ~~compared to $564 and $577 for the three and nine months ended March 31, 2021, respectively, primarily due to the increased adoption of our Split Pay product.~~

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Additionally, we recorded reductions to merchant network revenue of $21.7 million and $63.9 million for the three and nine months ended March 31, 2022, respectively, associated with the creation of discounts upon origination of loans with par values in excess of the fair value of such loans, compared to $5.4 million and $12.4 million during the three and nine months ended March 31, 2021, respectively. These reductions to merchant network revenue are primarily due to our Split Pay product and our 0% APR lending programs outside of the United States.

~~Virtual card network revenue~~ ~~for the three and nine months ended March 31, 2022 increased by $9.4 million or 68% and $38.5 million or 126%,~~as compared to the ~~three and nine months ended March 31, 2021, respectively.~~same period in 2022. This ~~increase was driven by an increase in GMV processed through our issuer processor~~is the result of ~~75% and 122% for the three and nine months March 31, 2022, respectively, due to~~ increased activity on our virtual card-enabled mobile application, as well as growth in existing and new merchants ~~integrated~~ using our virtual card ~~platform.~~platform, growing from 1,053 merchants as of March 31, 2022 to 1,226 merchants as of March 31, 2023. Virtual 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.

Interest income

Interest incomeincreased by $43.7 million, or 32%, and $80.1 million, or 21%, for the three and nine months ended March 31, ~~2022 increased by $40.1 million or 42% and $167.6 million or 75%,~~2023, respectively, compared to the ~~three and nine months ended March 31, 2021.~~same period in fiscal 2022. Generally, interest income is correlated with the changes in the average balance of loans held for ~~investment, as we recognize interest on loans held for investment using the effective interest method over the life of the loan.~~investment. The average balance of loans held for investment increased by ~~21%~~51% to ~~$2,464.2~~$3.7 billion and 39% to $3.2 billion for the three and nine months ended March 31, 2023, respectively, compared to the same period in fiscal 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 facilities with better economic terms while optimizing cost of funds. Coupled with the increase in loans held for investment on our interim consolidated balance sheet, interest income from interest bearing loans increased from $95.3 million and ~~by 39% to $2,262.6~~$266.9 million for the three and nine months ended March 31, 2022 ~~respectively, compared~~ to ~~the same period in the prior fiscal year.~~

~~As an annualized percentage of average loans held~~$147.8 million and $379.8 million for investment, total interest income increased from approximately 19% during the three months ended March 31, 2021 to 22% during the three months ended March 31, 2022. This change was driven by a decrease in the average proportion of 0% APR loans being held on our interim condensed consolidated balance sheet as a percentage of the total loans held for investment, which decreased from 51% and 47% during the three and nine months ended March 31, 2021 to 39% and 41% during the three and nine months ended March 31, 2022. The shift was largely due to increased concentration of loans with large enterprise merchant partners; those loans tend to be interest-bearing.

We recognize interest income on 0% APR loans via the amortization of the loan discount. Short term 0% APR loans, including Split Pay loans, carry higher annualized discounts as percentages of annualized loan balances than longer term loans, and thus amortize more discount into interest income as percentages of unpaid principal balance than longer term loans. Therefore, the change in the mix of 0% APR loans held for investment is also contributing to the increase in interest income as an annualized percentage of average loans held for investment. The total amortization of discounts on loans held for investment increased by $13.8 million or 44% and $70.0 million or 102% for the three and nine months ended March 31, 2022, respectively, compared with the three and nine months ended March 31, 2021. The amortization of discounts represented 34% and 36% of total interest income for the three and nine months ended March 31, 2022, compared to 33% and 31% for the three and nine months ended March 31, 2021,2023, respectively. This increase ~~included~~was in part due to recent pricing initiatives including increasing the ~~amortization~~maximum APR for loans facilitated on our platform from 30% to 36% and introducing merchant-subsidized low APR loans (4-9.99%) as an alternative to monthly 0% APR programs.

Gain on sales of ~~discounts arising from self-originated~~ loans held for investment of $33.2 million and $79.7 million during the three and nine months ended March 31, 2022, respectively, which was $7.8 million and $9.7 million for the three and nine months ended March 31, 2021, respectively.

Gain on sales of loans decreased by $19.7 million, or 37%, for the three ~~and nine~~ months ended March 31, ~~2022 increased by $36.1 million or 221%, and $93.8 million or 198%,~~2023 compared to the ~~three and nine months ended March 31, 2021.~~same period in 2022, primarily due to a decrease in loan sale volume as we retain more loans on balance sheet in response to the current market environment. We sold loans with an unpaid balance of ~~$756.7 million and $2,013.2 million~~$1.7 billion for the three ~~and~~months ended March 31, 2023 compared to $2.0 billion for the same period in 2022.

Gain on sales of loansincreased by $14.9 million, or 11%, for the nine months ended March 31, ~~2021, respectively, and $2,042.5 million and $5,647.5 million~~2023, compared to the same period in 2022, mainly driven by increased loan sale activity. We sold loans with an unpaid balance of $5.8 billion for the ~~three and~~ nine months ended ~~and~~ March 31, ~~2022,~~2023 compared to $5.6 billion for ~~which we retained servicing rights.~~the same period in 2022. This increase was ~~primarily due to~~driven by higher loan sale volume ~~favorable~~to third-party loan ~~sale pricing terms,~~buyers and optimizing the allocation of loans to loan buyers with ~~higher~~more favorable pricing terms.

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Servicing income

Servicing income decreased by $2.0 million, or 9%, for the three ~~and nine~~ months ended March 31, ~~2022 increased by $15.5 million or 194%~~ ~~and $27.0 million or 157%,~~2023, compared to the ~~three~~same period in 2022, primarily driven by changes in fair value of servicing assets and ~~nine~~ ~~months ended March 31, 2021, respectively. This~~liabilities. The decrease related to changes in fair value of servicing assets and liabilities was partially offset by an increase ~~was primarily~~ ~~due to~~in servicing fee revenue driven by an increase in the average unpaid principal balance of loans owned by third-party loan owners, ~~and increases~~which increased from $4.0 billion during the three months ended March 31, 2022 to $4.5 billion during the three months ended March 31, 2023.

Servicing income increased by $20.0 million, or 45%, for the nine months ended March 31, 2023, compared to the same period in ~~negotiated~~2022, driven primarily by an increase in servicing ~~rates with new and existing~~fee revenue driven by an increase in the average unpaid principal balance of loans owned by third-party loan ~~owners.~~owners, which increased from $3.0 billion during the nine months ended March 31, 2022 to $4.1 billion during the nine months ended March 31, 2023, combined with increased servicing fees. Additionally, ~~we recognized~~during the nine months ended March 31, 2023, an increase of ~~servicing income of $6.4~~$0.6 million related to the changes in fair value of servicing assets and liabilities ~~during~~contributed to the ~~three months ended March 31, 2022, compared with an~~overall increase toin servicing income, ~~of $0.9~~

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~~million during~~compared to the three months ended March 31, 2021. Similarly, during the nine months ended March 31, 2022, we recognized an increase of $3.7 million compared with a reduction of $0.2 million during the nine months ended March 31, 2021.

~~Operating Expenses~~
Three Months Ended March 31, Nine Months Ended March 31,
2022 2021 2022 2021
(in thousands)
Loss on loan purchase commitment $ 46,853 $ 62,054 $ 163,796 $ 195,690
Provision for credit losses 66,294 (1,063) 182,581 40,389
Funding costs 15,824 14,665 50,277 37,077
Processing and servicing 43,371 21,368 110,421 51,668
Total transaction costs 172,342 97,024 507,075 324,824
Technology and data analytics 110,291 104,806 283,293 180,208
Sales and marketing 156,214 58,184 363,650 119,878
General and administrative 142,466 179,999 419,962 253,188
Total operating expenses $ 581,313 $ 440,013 $ 1,573,980 $ 878,098
same period in 2022.

Loss on Loan Purchase Commitment

Three Months Ended
March 31, Change Nine Months Ended March 31, Change
2022 2021 $ % 2022 2021 $ %
(in thousands, except percentage)
Loss on loan purchase commitment $ 46,853 $ 62,054 $ (15,201) (24) % $ 163,796 $ 195,690 $ (31,894) (16) %
Percentage of total revenue, net 13 % 27 % 17 % 32 %
We purchase certain loans from our originating bank partners that are processed through our platform and our originating bank partners put back to us. 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. 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 loss. These costs are incurred on a per loan basis.

Loss on loan purchase commitment decreased by $15.6 million, or 33%, and $58.5 million, or 36%, for the three and nine months ended March 31, ~~2022 decreased by $15.2 million or 24% and $31.9 million or 16%,~~2023, respectively, compared to the ~~three and nine months ended March 31, 2021, respectively.~~same period in 2022. This decrease was due to a decrease in the volume and concentration of long-term 0% APR loans purchased from our originating bank partners ~~compared to the prior period,~~ which are purchased above fair market value. The difference between fair value ~~The decrease~~and purchase price for our loans is generally correlated with the term length and APR of the loans. As such, the reduction in the long term 0% loans purchased from our bank partner contributed to the decline in loss on loan purchase commitment. Additionally, as the percentage of our portfolio shifts towards more interest bearing loans, loss on loan purchase commitment ~~is also impacted by changes in the estimate of fair value of the loans driven primarily by the mix of loan terms.~~decreases. During the three and nine months ended March 31, ~~2022,~~2023, we purchased ~~$790.6~~$306.5 million and ~~$2,432.8~~$1,056.9 million, respectively, of long-term 0% APR loan receivables from our originating bank partners, representing a decrease of ~~$35.7~~$224.6 million, or 4%42%, and ~~$58.3~~$559.6 million, or 2%35%, respectively, compared to the ~~three and nine months ended March 31, 2021, respectively.~~same period in 2022.

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Provision for Credit Losses
Three Months Ended
March 31, Change Nine Months Ended March 31, Change
2022 2021 $ % 2022 2021 $ %
(in thousands, except percentage)
Provision for credit losses $ 66,294 $ (1,063) $ 67,357 (6,337) % $ 182,581 $ 40,389 $ 142,192 352 %
Percentage of total revenue, net 19 % — % 19 % 7 %
Allowance as a percentage of loans held for investment 6.4 % 5.2 % 6.4 % 5.2 %

Provision for credit losses generally represents the amount of expense required to maintain the allowance for credit losses on our interim condensed consolidated balance sheet, which represents management’s estimate of future losses. In the event that our loans outperform expectation and/or we reduce our expectation of credit losses in future periods, we may release reserves and thereby reduce the allowance for credit losses, yielding income in the provision for credit losses. The provision is determined by the change in estimates for future losses and the net charge-offs incurred in the period. We record provision expense for each loan we retain as loans held for investment, whether we originate the loan or purchase it from one of our originating bank partners.

Provision for credit losses increased by $0.1 million, or less than 1%, for the three months ended March 31, 2023 compared to the same period in 2022, driven by growth in the volume of loans held for investment. Loans held for investment increased by $120.0 million during the three months ended March 31, 2023 compared to a $78.0 million increase during the same period in 2022. The increase was almost entirely offset by improvements in credit quality of loans outstanding and updates to the assumptions used in our credit loss valuation model, including a refinement to the application of our stress loss multiple.

Provision for credit losses increased by $54.8 million, or 30%, for the nine months ended March 31, 2023 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 increased by $1,272.0 million during the nine months ended March 31, 2023 compared to a $481.2 million increase during the same period in 2022.

Total loans held for investment was $3,775.5 million and $2,502.9 million as of March 31, 2023 and 2022, respectively. The allowance for credit losses as a percentage of loans held for investment ~~increased~~decreased from ~~5.2% as of March 31, 2021 to~~ 6.4% as of March 31, 2022 to 4.7% as of March 31, 2023, primarily ~~due~~driven by improvements in credit quality of loans outstanding and updates to ~~a deconcentration~~the assumptions used in our credit loss valuation model.

Funding Costs

Funding costs consist of ~~long-term, lower-credit-risk 0% APR~~interest expense and the amortization of fees for certain borrowings collateralized by our loans including on ~~our~~ balance sheet VIEs, sale and ~~rapid growth of new platforms~~repurchase agreements collateralized by our retained securitization interests, and ~~partnerships~~other costs incurred in connection with ~~higher expected losses.~~

~~Additionally, during~~funding the prior fiscal year, following the loss of our emerging growth company status, we adopted ASU 2016-13, “Financial Instruments — Credit Losses (Topic 326)” using the modified retrospective approach. The amendments replaced the incurred loss impairment methodology for computing our allowance for credit losses with the current expected credit loss model ("CECL"), effective July 1, 2020. As part of this modified retrospective approach to adoption, we recorded an adjustment reducing the provision for credit losses by $16.3 million for the nine months ended March 31, 2021.

~~During the~~ ~~three~~ ~~months ended~~ ~~March 31, 2022, provision for credit losses expense increased $67.4 million compared to the~~ $1.1 million provision for credit losses income recognized for the three months ended March 31, 2021. Prior year provision for credit losses was recognized as income due to a combination of factors reducing the allowance for credit losses during the three months ended March 31, 2021. Firstly, continued stronger than expected repayment performance of the portfolio resulted in a decrease of approximately $12.3 million. Secondly, we began transitioning to a new underlying data model which incorporates internal improvements to our underwriting and collections processes. This change in model resulted in a decrease of approximately $48.2 million. These decreases were largely offset by allowances recognized on new purchases and originations of ~~loans held for investment in the period with generally higher credit quality. For the nine months ended March 31, 2022, provision for credit losses increased $142.2 million or 352% compared to the~~ ~~nine months ended March 31, 2021~~. ~~The discrete adjustments in 2021 resulted in prior year provision being unusually low while this year’s figures reflect the intentional normalization of credit.~~

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~~Funding Costs~~
Three Months Ended
March 31, Change Nine Months Ended March 31, Change
2022 2021 $ % 2022 2021 $ %
(in thousands, except percentage)
Funding costs $ 15,824 $ 14,665 $ 1,159 8 % $ 50,277 $ 37,077 $ 13,200 36 %
Percentage of total revenue, net 4 % 6 % 5 % 6 %

Funding costs for the three and nine months ended March 31, 2022 increased by $1.2 million or 8%, and $13.2 million or 36%, compared to the three and nine months ended March 31, 2021, respectively.loans. Funding costs for a given period are correlated with the sum of the average balance of funding debt and the average balance of notes issued by securitization trusts. ~~This~~

Funding costs increased by $35.4 million, or 223%, and $69.7 million, or 139%, for the three and nine months ended March 31, 2023, respectively, compared to the same period in 2022. The increase was primarily due to ~~the~~higher benchmark interest rates, increased utilization fees and an increase of ~~notes issued by securitization trusts~~funding debt during the current fiscal ~~year, which bear interest at fixed rates.~~year. Additionally, the increase is attributable to a larger volume of on-balance sheet loans being retained during the period. The average balance of notes issued by securitization trusts during both the three and nine months ended March 31, ~~2022~~2023 was ~~$1,512.4 million and $1,415.3 million,~~$1.6 billion, respectively, compared with ~~$1,029.8 million~~$1.5 billion and ~~$639.6 million, respectively,~~$1.4 billion during the ~~three and nine months ended March 31, 2021.~~same periods in 2022, respectively. The average balance of funding debt for the three and nine months ended March 31, ~~2022~~2023 was $1.7 billion and $1.2 billion, respectively, compared with $773.6 million and $688.9 million ~~respectively, compared with $782.7 million and $770.5 million, respectively,~~ during the ~~three~~same periods in 2022, respectively. Additionally, the average loan balance on-balance sheet was $3.7 billion and ~~nine months ended March 31, 2021. Combined, average total debt~~$3.2 billion for the three and nine months ended March 31, ~~2022 increased by $473.6 million or 26% and $694.0 million or 49%,~~2023, respectively, compared to $2.5 billion and $2.3 billion during the ~~three~~same period in 2022, respectively. Average total funding debt from warehouses and ~~nine months ended March 31, 2021 while the average reference interest rate increased by 89% and decreased by 4% during each period, respectively.~~

~~Processing and Servicing~~
Three Months Ended
March 31, Change Nine Months Ended March 31, Change
2022 2021 $ % 2022 2021 $ %
(in thousands, except percentage)
Processing and servicing $ 43,371 $ 21,368 $ 22,003 103 % $ 110,421 $ 51,668 $ 58,753 114 %
Percentage of total revenue, net 12 % 9 % 11 % 8 %

~~Processing and servicing expense~~securitizations for the three and nine months ended March 31, ~~2022~~2023 increased by ~~$22.0~~$963.9 million, or ~~103%~~42%, and ~~$58.8~~$724.2 million, or ~~114%~~34%, respectively, compared to the ~~three~~same period in 2022.

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Processing and ~~nine months ended March 31, 2021. This increase was~~Servicing

Processing and servicing expense consists primarily ~~due to a $15.4 million or 152% and $39.8 million or 169%, increase in~~of payment processing fees, ~~due to increased payments volume for the three~~third-party customer support and ~~nine months ended March 31, 2022, respectively. Additionally, processing fees paid to~~collection expense, salaries and personnel-related costs of our customer ~~referral partners~~care team, platform fees, and allocated overhead.

Processing and servicing expense increased by ~~$1.9~~$21.9 million, or ~~133%~~50%, and ~~$3.5~~$75.7 million, or ~~117%~~69%, for the three and nine months ended March 31, ~~2022, respectively. Personnel costs decreased~~2023, respectively, compared to the same period in 2022. This increase was driven primarily by ~~$0.4~~an increase in payment processing fees of $9.9 million, or ~~8% for the three months ended March 31, 2022 primarily due to employee equity vesting during the three months ended March 31, 2021 as the company went public. Personnel costs increased by $4.1~~39%, and $34.9 million, or ~~48%~~55%, for ~~the nine months ended March 31, 2022 driven by growth in headcount. For~~ the three and nine months ended March 31, ~~2022, third-party loan~~2023, respectively, related to increased merchant payment volume. Additionally, during the three and nine months ended March 31, 2023, our platform fees and servicing costs increased by $5.8 million and ~~collections spend increased 109% and 80%,~~$20.5 million, respectively, due to ~~increased loan volume.~~an increase in our platform partner fee with a large enterprise partner.

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Technology and Data Analytics

Three Months Ended
March 31, Change Nine Months Ended March 31, Change
2022 2021 $ % 2022 2021 $ %
(in thousands, except percentage)
Technology and data analytics $ 110,291 $ 104,806 $ 5,485 5 % $ 283,293 $ 180,208 $ 103,085 57 %
Percentage of total revenue, net 31 % 45 % 29 % 30 %
Technology and data analytics expense consists primarily of the salaries, stock-based compensation, and personnel-related costs of our engineering and product employees as well as our credit and analytics employees who develop our proprietary risk model and internally-developed software.

Technology and data analytics expense increased by $51.5 million, or 47%, and $180.2 million, or 64%, for the three and nine months ended March 31, ~~2022 increased by $5.5 million or 5% and $103.1 million or 57%,~~2023, respectively, compared to the ~~three and nine months ended March 31, 2021. For the three months ended March 31, 2022, we saw a $9.0~~same period in 2022. This increase is primarily driven by an increase of $22.5 million, or ~~12% decrease in engineering, product,~~33%, and data science personnel costs, net of capitalized costs for internally developed software, primarily due to employee equity vesting during the three months ended March 31, 2021 as the company went public. For the nine months ended March 31, 2022, we saw a $48.9$97.1 million, or ~~40% increase~~56%, in ~~personnel costs compared to the nine months ended March 31, 2021 as we continue to support our growth and technology platform as a whole. The largest component of these personnel costs was~~ stock-based compensation ~~which accounted for an $18.4 million decrease~~ and ~~an $18.3 million increase compared to the three~~payroll and ~~nine months ended March 31, 2021, respectively, largely due to vesting of RSUs.~~

~~Additionally, there was a $14.0 million or 146% and $36.5 million or 137%, increase in data infrastructure and hosting~~personnel-related costs for the three and nine months ended March 31, ~~2022,~~2023, respectively, compared to the ~~three~~same period in 2022, resulting from efforts to continue to support our growth and ~~nine months ended March 31, 2021, due to increased capacity requirements of our~~ technology platform. ~~There was a $3.4~~Additionally, data infrastructure and hosting costs increased by $3.1 million, or ~~72%~~13%, and ~~a $9.1~~$27.2 million, or ~~78%~~43%, ~~increase in underwriting data provider costs~~ for the three and nine months ended March 31, ~~2022,~~2023, respectively, compared to the ~~three and nine months ended March 31, 2021, respectively,~~same period in 2022, due to ~~an increase~~increased capacity requirements of our technology platform driven by increases in ~~applications, partially offset~~active users and transactions per active consumer.

Furthermore, amortization of internally-developed software and intangible assets increased by ~~cost improvements achieved as a result of contract renegotiations.~~

~~Sales~~$24.6 million, or 257%, and ~~Marketing~~

Three Months Ended
March 31, Change Nine Months Ended March 31, Change
2022 2021 $ % 2022 2021 $ %
(in thousands, except percentage)
Sales and marketing $ 156,214 $ 58,184 $ 98,030 168 % $ 363,650 $ 119,878 $ 243,772 203 %
Percentage of total revenue, net 44 % 25 % 37 % 20 %

~~Sales and marketing expense~~$46.0 million, or 184%, for the three and nine months ended March 31, ~~2022 increased by $98.0 million or 168% and $243.8 million or 203%,~~2023, respectively, compared to the ~~three~~same period in 2022, primarily as a result of an increase in the number of capitalized projects and ~~nine months ended~~our periodic reassessment of the remaining useful lives of those assets. Capitalized projects grew by 121% from 213 projects to 471 projects as of March 31, ~~2021, respectively. This increase was primarily due~~2023, compared to ~~$102.4 million~~the same period in 2022.

Sales and ~~$173.0 million~~Marketing

Sales and marketing costs consist of the expense related to warrants and other share-based payments granted to ~~Amazon during the three~~our enterprise partners, salaries and ~~nine months ended March 31, 2022, respectively. Additionally, stock-based compensation related to employees in the sales~~personnel-related costs, as well as costs of general marketing and promotional activities, promotional event programs, sponsorships, and allocated overhead.

Sales and marketing ~~functions~~ expensedecreased ~~$4.6~~by $15.3 million, or ~~43% compared to the three months ended March 31, 2021, as a result of employee equity vesting~~10%, during the three months ended March 31, ~~2021 as~~2023, compared to the ~~company went public. Stock-based compensation increased $3.7~~same period in 2022. The decrease was primarily driven by a $6.2 million, or ~~31%~~70%, decrease in brand and consumer marketing spend, as well as a decrease of $3.3 million, in business-to-business marketing spend during the three months ended March 31, 2023, compared to the same period in 2022. Additionally, the sales and marketing expenses related to our Shopify commercial agreement decreased by $7.8 million, or 47%, during the three months ended March 31, 2023 compared to the same period in 2022, driven by an extension of our partnership agreement, which also extended the amortization period.

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Sales and marketing expenseincreased by $129.5 million, or 36%, during the nine months ended March 31, ~~2021 largely due to an increased headcount. Loss on loan originations increased $0.2 million or 6% and $19.1 million or 367%,~~2023, compared to the ~~three and~~same period in 2022. The increase was primarily driven by amortization on our commercial agreements with Amazon which increased from $173.0 million for the nine months ended March 31, ~~2021, respectively, primarily due~~2022 to an$361.8 million for the same period 2023. The increase ~~in self-originated loans.~~

~~Furthermore, there~~ was partially offset by a ~~$3.7~~$27.2 million, or ~~71% and $23.9 million or 131%~~64%, ~~increase~~decrease in brand and consumer marketing spend ~~during the three and nine months ended March 31, 2022, respectively, compared to the three and nine months ended March 31, 2021,~~ associated with our ~~expanded~~ brand-activation, holiday shopping, lifestyle, and travel marketing campaigns, as well as a ~~$0.6~~decrease of $11.0 million, or ~~16% decrease and $7.2 million or 118% increase~~82%, in business-to-business marketing spend ~~compared to~~during the ~~three and~~ nine months ended March 31, ~~2021, respectively.~~

~~Table~~2023 compared to the same period in 2022. Additionally, the sales and marketing expenses related to our Shopify commercial agreement decreased by $23.8 million, or 47%, during the nine months ended March 31, 2023, compared to the same period in 2022 driven by an extension of ~~Contents~~our partnership agreement, which also extended the amortization period.

General and Administrative

Three Months Ended
March 31, Change Nine Months Ended March 31, Change
2022 2021 $ % 2022 2021 $ %
(in thousands, except percentage)
General and administrative $ 142,466 $ 179,999 $ (37,533) (21) % $ 419,962 $ 253,188 $ 166,774 66 %
Percentage of total revenue, net 40 % 78 % 43 % 42 %
General and administrative expenses consist primarily of expenses related to our finance, legal, risk operations, human resources, and administrative personnel. General and administrative expenses also include costs related to fees paid for professional services, including legal, tax and accounting services, allocated overhead, and certain discretionary expenses incurred from operating our technology platform.

General and administrative expense~~for the three months ended March 31, 2022~~ decreased by ~~$37.5~~$3.2 million, or ~~21% compared to the three months ended March 31, 2021. This decrease was primarily due to a decrease of $57.5 million or 50% in stock-based compensation~~2%, during the three months ended March 31, ~~2022~~2023 compared to the same period in 2022, driven in part by a $5.4 million, or 46%, decrease in professional service fees and a $2.5 million, or 82%, decrease in recruiting expenses, which was offset by an increase of $4.4 million, or 4%, in payroll and personnel-related related costs.

General and administrative expense increased by $38.9 million, or 9%, during the nine months ended March 31, 2023 compared to the same period in 2022, primarily due to an increase of $39.7 million in payroll and personnel-related costs partially offset by a $9.5 million, or 32%, decrease in professional service fees.

Restructuring Charges, net

During the three months ended March 31, ~~2021, as~~2023, we committed to a ~~result~~restructuring plan designed to manage our operating expenses in response to current macroeconomic conditions and ongoing business prioritization efforts. The associated restructuring charges during the three and nine ended March 31, 2023 were approximately $34.9 million, which included expenditures of $28.8 million relating to employee ~~equity vesting~~severance and other employment termination benefits and $6.2 million of accelerations of amortization expense which primarily related to the lease asset associated with the exit of certain of our office space. For further information, refer to Note 17. Restructuring charges, net to the interim condensed consolidated financial statements in this Form 10-Q.

Other Income (Expense), net

Other income, net consists primarily of interest earned on our money market funds included in cash and cash equivalents and restricted cash, interest earned on securities available for sale, gains on derivative agreements driven by increases in fair value, amortization of convertible debt issuance cost and revolving credit facility issuance costs, and fair value adjustments resulting from changes in the fair value of our contingent consideration liability, primarily driven by changes in the market price of our Class A common stock.

Other income (expense), net decreased by $68.6 million, or 40%, during the three months ended March 31, ~~2021~~2023 compared to the same period in 2022. The decrease is primarily driven by a $2.1 million loss related to a decrease in the fair value of our contingent consideration liability, as compared to a gain of $136.2 million in the ~~company went public. The decrease~~same period in 2022, a change of $138.4 million, primarily due to changes in the fair value of our common stock. Additionally, we had a $3.7 million loss on derivative instruments compared to a $35.1 million gain during the same period in 2022. This was partially offset by ~~a $22.6 million~~an increase in ~~payroll~~interest income on investments of $21.0 million and a gain of $89.8 million on the extinguishment of convertible debt.

Other income (expense), net increased by $106.6 million, or 156%, during ~~the three months ended March 31, 2022 compared to the three months ended March 31, 2021 primarily due to an increased headcount. General and administrative expensefor~~ the nine months ended March 31, ~~2022 increased~~2023 compared to the same period in 2022. The increase is primarily driven by ~~$166.8~~a gain of $89.8 million ~~or 66%, compared to~~on the extinguishment of convertible debt during the nine months ended March 31, ~~2021 primarily due to~~2023 and an ~~increased headcount as we continue to grow our finance, legal, operations, and administrative organizations.~~

Additionally, professional fees increased by $2.7 million or 35% and $7.5 million or 37%, during the three and nine months ended March 31, 2022, respectively, compared to the three and nine months ended March 31, 2021, to support our acquisitions, international expansion, and regulatory compliance programs.

~~Other (Expense) Income, net~~

Three Months Ended
March 31, Change Nine Months Ended March 31, Change
2022 2021 $ % 2022 2021 $ %
(in thousands, except percentage)
Other (expense) income, net $ 172,139 $ (77,773) $ 249,912 (321) % $ 68,507 $ (48,088) $ 116,595 (242) %
Percentage of total revenue, net 49 % (34) % 7 % (8) %

For the three and nine months ended March 31, 2022, other (expense) income, net, was largely comprised of a gain of $136.2 million and a gain of $28.7 million, respectively, recognized based on the changeincrease in ~~fair value of the contingent consideration liability associated with our acquisition of PayBright, driven by decreases in the value of our common stock.~~

For both the three and nine months ended March 31, 2021, other (expense) income, net was primarily comprised of a loss of $78.5 million recognized based on the change in fair value of the contingent consideration liability associated with our acquisition of PayBright, driven by changes in the value of our common stock. Additionally, for the nine months ended March 31, 2021, other (expense) income, net included a gain of $30.1 million recognized upon the conversion of convertible notes into shares of Series G-1 preferred stock. The conversion of convertible notes was accounted for as a debt extinguishment since the number of shares of Series G-1 preferred stock issued upon conversion was variable and this gain represented the difference between the carrying value of the debt at the time of extinguishment and the allocated proceeds.interest

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income on investments of $48.3 million compared to the same period 2022. This increase is partially offset by a $7.2 million gain related to the fair value of our contingent consideration liability as compared to a loss of $28.7 million in the same period in 2022, a decrease of $21.5 million.

Liquidity and Capital Resources

Sources and Uses of Funds

We ~~have incurred losses since~~maintain a capital-efficient model through a diverse set of funding sources. When we originate a loan directly or purchase a loan originated by our ~~inception, accumulating a deficit of $1.4 billion~~originating bank partners, we often utilize warehouse facilities with certain lenders to finance our lending activities or loan purchases. We sell the loans we originate or purchase from our originating bank partners to whole loan buyers and ~~$0.9 billion as of March 31, 2022 and June 30, 2021, respectively. We have historically financed the majority of our operating and capital needs~~securitization investors through ~~the sales of equity securities, borrowings from debt facilities and convertible debt, third-party loan sale~~forward flow arrangements and ~~cash flows~~securitization transactions, and earn servicing fees from ~~operations. In September~~continuing to act as the servicer on the loans. We proactively manage the allocation of loans on our platform across various funding channels based on several factors including, but not limited to, internal risk limits and ~~October 2020,~~policies, capital market conditions and channel economics. With rising interest rates and inflation, our excess funding capacity and committed and long-term relationships with a diverse group of existing funding partners help provide flexibility as we ~~issued an aggregate of 21,836,687 shares of Series G preferred stock for aggregate cash proceeds of $435.1 million. On January 15, 2021, we closed an initial public offering of~~optimize our ~~Class A common stock with cash proceeds, before expenses, of $1.3 billion. On November 23, 2021, we issued~~funding to support the ~~2026 Notes, generating cash proceeds of $1.7 billion.~~growth in loan volume.

~~As of March 31, 2022, our~~Our principal sources of liquidity ~~were available for sale securities and~~are cash and cash equivalents, available for sale securities, available capacity from warehouse and revolving ~~debt~~credit facilities, revolving securitizations, forward flow loan sale arrangements, and certain cash flows from our operations. As of March 31, 2023, we had $2.0 billion in cash and cash equivalents and available for sale securities, $2.5 billion in funding capacity remaining across our warehouse funding channels and $205.0 million in borrowing capacity available under our revolving credit facility.

The following table summarizes our cash, cash equivalents and investments in debt securities (in thousands):


	March 31, 2023		June 30, 2022
Cash and cash equivalents (1)	$	972,477	$	1,255,171
Investments in short-term debt securities (2)	826,246		1,295,811
Investments in long-term debt securities (2)	232,785		299,562
Cash, cash equivalent and investments in debt securities	$	2,031,508	$	2,850,544

(1)Cash and cash equivalents consist of bank accounts, money market funds, certificates of deposits, other commercial paper, and government bonds with maturities less than three months.

(2)Securities available for sale at fair value primarily consist of certificates of deposits, corporate bonds, commercial paper, 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.

Available Credit and Funding Debt

Our available capacity as of March 31, 2023 primarily include warehouse credit facilities, convertible senior notes, revolving credit facilities and repurchase liabilities. A detailed description of each of our borrowing arrangements is included in Note 10. Debt in the notes to the interim condensed consolidated financial statements.

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The following table summarizes our funding credit facilities as of March 31, 2023. The funding debt consists of warehouse credit facilities, revolving credit facilities, and repurchase liabilities:


Maturity Fiscal Year	Borrowing Capacity		Principal Outstanding
	(in thousands)
2023	$	—	$	17,503
2024	1,048,938		598,318
2025	960,740		419,580
2026	834,566		231,308
2027 and thereafter	1,150,000		261,210
Total	$	3,994,244	$	1,527,919

Warehouse Credit Facilities

Our warehouse credit facilities, which allow us to borrow up to an aggregate of $4.0 billion, mature between 2023 and 2029 and subject to covenant compliance, generally permit borrowings up to 12 months prior to the final maturity date. As of March 31, 2023, we have drawn an aggregate of $1.5 billion on our warehouse facilities. As of March 31, 2023, we were in compliance with all applicable covenants in the agreements. Refer to Note 10. Debt in the notes to the interim condensed consolidated financial statements included elsewhere in this Form 10-Q for further details on our warehouse credit facilities.

Convertible Senior Notes

In November 2021, we closed on the issuance of $1.7 billion aggregate principal amount of a convertible senior note which does not bear regular interest, and will mature on November 15, 2026 unless earlier converted, redeemed, or repurchased in accordance with their terms. During the period ended March 31, 2023, we entered into a series of privately negotiated transactions with certain holders of our 2026 Notes, pursuant to which we paid an aggregate amount of $206.6 million in cash for the repurchase of $299.1 million aggregate principal amount of our 2026 Notes. Refer to Note 10. Debt in the notes to the interim condensed consolidated financial statements for further details on our convertible debt note.

Revolving Credit Facility

In February 2022, we entered into a revolving credit agreement for a $165.0 million unsecured revolving credit facility, maturing on February 4, 2025, which was subsequently amended to increase the unsecured revolving commitments to $205.0 million. The facility contains certain covenants and restrictions, including certain financial maintenance covenants. As of March 31, 2023, we were in compliance with all applicable covenants in the agreements. To date, there are no borrowings outstanding under the facility. Refer to Note 10. Debt in the notes to the interim condensed consolidated financial statements for further details on our revolving credit facility.

Securitizations

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 11. Securitization and Variable Interest Entities.

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Factors Impacting Liquidity

We believe ~~that~~ our ~~existing~~current levels of cash, ~~balances,~~cash equivalents, marketable debt securities, available borrowing capacity under our revolving ~~debt~~credit facilities ~~revolving securitizations~~ and ~~off-balance sheet loan sale arrangements, and cash from operations,~~other liquidity actions currently available to us are sufficient to meet ~~both~~ our ~~existing operating, working capital, and capital expenditure~~liquidity requirements ~~and our currently planned growth~~ for at least the next 12 months. WeHowever, we cannot provide assurance ~~however,~~ that our business will generate sufficient cash flows from operations or that future borrowings will be available to us in an amount sufficient to enable us to fund our liquidity needs in the long-term. Our ability to do so depends on prevailing economic conditions and other factors, many of which are beyond our control. ~~Our on-~~

The principal factors that could impact our liquidity and ~~off-balance sheet facilities provide~~capital needs are customer delinquencies and defaults, a prolonged inability to adequately access capital market funding, declines in loan purchases and therefore revenue, fluctuations in our financial performance and instability of certain financial institutions. If our available cash balances are insufficient to satisfy our liquidity requirements, we will seek additional equity or debt financing. In a rising interest rate environment, our ability to issue additional equity or incur debt may be impaired and our borrowing costs may increase. Additionally, we may be subject to ~~various constraining limits on the financed portfolios. These limits are generally tied to loan-level attributes such as loan term, credit quality,~~restrictions and ~~interest rate, as well as borrower- and merchant-level attributes.~~

~~Cash and Cash Equivalents~~

As of March 31, 2022, we had approximately $2.3 billion of cash and cash equivalents to fund our future operations compared to approximately $1.5 billion as of June 30, 2021. This increase is primarily due to the proceeds of the 2026 Notes issuance on November 23, 2021. Our cash and cash equivalents were comprised of operating bank accounts, money market funds, certificates of deposits, corporate bonds, and other commercial paper with maturities less than three months. Cash and cash equivalents are held primarily for continued investment in our business, for working capital purposes, and to facilitate a portion of our lending activities. Our policy is to invest cash in excess of our immediate working capital requirements in liquid investments and deposit accounts to preserve the principal balance and maintain adequate liquidity.

~~Restricted Cash~~

Restricted cash consists primarily of: (i) deposits restricted by standby letters of credit for office leases and merchant partnership agreements; (ii) funds held in accounts as collateral for our originating bank partners; and (iii) servicing funds held in accounts contractually restricted by agreements with warehouse credit facilities and third-party loan owners. We have no ability to draw on such funds as long as they remain restricted under the applicable arrangements.

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~~Funding Debt~~

~~The following table summarizes our funding debt facilities as of March 31, 2022:~~

Maturity Fiscal Year Borrowing Capacity Principal Outstanding
(in thousands)
2022 $ 419,018 $ 208,468
2023 — —
2024 1,325,000 393,480
2025 — —
2026 and thereafter 650,000 308,858
Total $ 2,394,018 $ 910,806

~~Warehouse Credit Facilities~~

Through trusts, we entered into warehouse credit facilities with certain lenders to finance the purchase and origination of our loans. These trusts are consolidated variable interest entities (“VIEs”), and each trust entered into a credit agreement and security agreement with a commercial bank as administrative agent and a national banking association as collateral trustee and paying agent. Borrowings under these agreements are referred to as funding debt. These credit agreements contain operating covenants, including limitations on the incurrence of certain indebtedness and liens, restrictions on certain intercompany transactions, and limitations on the amount of dividends and stock repurchases. Our funding debt facilities include concentration limits for various loan characteristics including credit quality, product mix, geography, and merchant concentration. As of March 31, 2022, we were in compliance with all applicable covenants in the ~~agreements. Refer to Note 10. Debt in the notes to the interim consolidated financial statements included elsewhere in this Form 10-Q for additional information.~~

These revolving facilities mature between 2022 and 2029, and subject to covenant compliance generally permit borrowings up to 12 months prior to the final maturity date. Borrowings under these facilities generally occur multiple times per week, and generally coincide with the purchase of loans from our originating bank partners. We manage liquidity by accessing diversified pools of capital and avoid concentration with any single counterparty; we are diversified across different types of investors including investment banks, asset managers, and insurance companies.

Borrowings under these facilities bear interest at an annual benchmark rate of LIBOR or at an alternative commercial paper rate (which is either (i) the per annum rate equivalent to the weighted-average of the per annum rates at which all commercial paper notes were issued by certain lenders to fund advances or maintain loans, or (ii) the daily weighted-average of LIBOR, as set forth in the applicable credit agreement), plus a spread ranging from 1.65% to 4.00%. Interest is payable monthly. In addition, these agreements ~~require payment of a monthly unused commitment fee ranging from 0% to 0.75% per annum on the undrawn portion available.~~

~~Other Funding Facilities~~

Prior to our acquisition of PayBright on January 1, 2021, PayBright entered into various credit facilities utilized to finance the origination of loans in Canada. Similar to our warehouse credit facilities, borrowings under these agreements are referred to as funding debt, and proceeds from the borrowings may only be used for the purposes of facilitating loan funding and origination. These facilities are secured by PayBright loan receivables pledged to the respective facility as collateral, mature in 2022, and bear interest based on a benchmark rate plus a spread ranging from 1.25% to 4.25%.

~~Revolving Credit Facility~~

On February 4, 2022, we entered into a revolving credit agreement with a syndicate of commercial banks for a $165.0 million unsecured revolving credit facility, maturing on February 4, 2025. This facility bears interest at

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a rate equal to, at our option, either (a) a SOFR rate determined by reference to the forward-looking term SOFR rate for the interest period, plus an applicable margin of 1.85% per annum or (b) a base rate determined by reference to the highest of (i) the federal funds rate plus 0.50% per annum, (ii) the rate last quoted by the Wall Street Journal as the U.S. prime rate and (iii) the one-month forward-looking term SOFR rate plus 1.0% per annum, in each case, plus an applicable margin of 0.85% per annum. The facility contains certain covenants and restrictions, including certain financial maintenance covenants, and requires payment of a monthly unused commitment fee of 0.20% per annum on the undrawn balance available. There are no borrowings outstanding under the facility. Refer to Note 10. Debt.

~~Securitizations~~

In connection with asset-backed securitizations, we sponsor and establish trusts 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 fromgoverning these transactions ~~are first to absorb credit losses in accordance with the waterfall criteria. The assets are transferred into a trust such~~ that the assets are legally isolated from the creditors of Affirm and are not available to satisfy our obligations. These assets can only be used to settle obligations of the underlying trusts. Each securitization trust issued senior notes and residual certificates to finance the purchase of the loans facilitated by our platform. The 2020-Z1, 2020-Z2, 2021-Z1, 2021-Z2 and 2022-X1 securitizations are secured by static pools of loans contributed at closing, whereas the 2020-A, 2021-A and 2021-B securitizations are revolvingmay place limitations on us, and we may ~~contribute~~be required to pledge additional ~~loans from time~~collateral as security. If we are unable to ~~time until~~raise additional capital or generate the ~~end~~necessary cash flows, our results of ~~the respective revolving period. Refer to Note 11. Securitization~~operations and ~~Variable Interest Entities.~~financial condition could be materially and adversely impacted.

Cash ~~Flows~~Flow Analysis

The following table ~~summarizes our~~provides a summary of cash ~~flows for~~flow data during the periods ~~presented:~~indicated:

Nine Months Ended
March 31,
2022 2021
(in thousands)
Net Cash Used in Operating Activities (103,085) (173,217)
Net Cash Used in Investing Activities (985,621) (1,106,378)
Net Cash Provided by Financing Activities(1)
2,066,000 2,753,959


	Nine Months Ended March 31,
	2023	2022
	(in thousands)
Net Cash Used in Operating Activities	(31,608)	(103,085)
Net Cash Used in Investing Activities	(875,896)	(985,621)
Net Cash Provided by Financing Activities(1)	740,396	2,066,000

(1)Amounts include net cash provided by the issuance of ~~redeemable convertible preferred stock and~~ convertible debt as follows:

Nine Months Ended
March 31,
2022 2021
(in thousands)
Proceeds from issuance of convertible debt, net $ 1,704,300 $ —
Proceeds from issuance of common stock, net of repurchases 67,656 43,029
Proceeds from initial public offering, net — 1,305,301
Proceeds from issuance and conversion of redeemable convertible preferred stock, net of repurchases and issuance costs — 434,529
Net cash provided by equity-related financing activities $ 1,771,956 $ 1,782,859
Net cash provided by debt-related financing activities 460,986 1,098,666
Payments of tax withholding for stock-based compensation (166,942) (127,566)
Net cash provided by financing activities $ 2,066,000 $ 2,753,959


	Nine Months Ended March 31,
	2023		2022
	(in thousands)


Repurchase of convertible debt	(206,567)		—
Proceeds from issuance of convertible debt, net	—		1,704,300
Proceeds from issuance of common stock, net of repurchases	8,800		67,656
Net cash provided by equity-related financing activities	$	(197,767)	$	1,771,956
Net cash provided by debt-related financing activities	1,001,652		460,986
Payments of tax withholding for stock-based compensation	(63,489)		(166,942)
Net cash provided by financing activities	$	740,396	$	2,066,000

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Cash Flows from Operating Activities

Our largest sources of operating cash are fees charged to merchant partners on transactions processed through our platform and interest income from consumers’ loans. Our primary uses of cash from operating activities are for general and administrative, technology and data analytics, funding costs, processing and servicing, and sales and marketing expenses.

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For the nine months ended March 31, 2023, net cash used in operating activities of $31.6 million stemmed from a net loss of $779.4 million, partially offset by a positive adjustment for non-cash items of $702.5 million, favorable change in our operating assets net of operating liabilities of $45.3 million, including net proceeds from sale and purchase of loans of $118.5 million. The change in operating assets net of operating liabilities was primarily a result of our purchase and sale of loans held for sale activities. We purchased loans of $4.7 billion, which was offset by proceeds from loan sales of $4.8 billion. The positive adjustment for non-cash items was primarily driven by commercial agreement assets of $330.7 million which increased compared to the third quarter of the prior year as a result of amortization on our commercial agreements with Amazon, provision for credit losses of $237.4 million which increased by $54.8 million compared to the third quarter of the prior year, and stock-based compensation of $348.4 million which increased by $68.3 million compared to the third quarter of the prior year resulting from year over year increased headcount.

For the nine months ended March 31, 2022, ~~was $103.1 million, a decrease of $70.1 million from~~net cash used in operating activities ~~of $173.2 million for the nine months ended March 31, 2021.~~was $103.1 million. This reflects ~~our~~a net loss of ~~$520.3~~$521.0 million, adjusted for non-cash charges of $426.9 ~~million. Additionally, we had~~million, and net cash outflows of ~~$8.6~~$9.0 million provided by changes in our operating assets and liabilities.

Non-cash charges primarily consisted of: provision for credit losses, which increased by $142.2 million or 352% due to a change in product mix for on-balance sheet loans and an unusually low provision expense in the prior comparative period driven by the ~~release of stressed expected loss scenarios and the adoption of CECL; gain on sales of loans, which increased by $93.8 million~~Cash Flows from ~~$47.3 million for~~Investing Activities

For the nine months ended March 31, ~~2021~~2023, net cash used in investing activities of $875.9 million was primarily attributable to purchases and origination of loans held for investment of $9.6 billion, partially offset by repayments of loans and proceeds from sale of loans of $8.3 billion. During the period we originated loans of $2.7 billion and purchased loans of $7.0 billion, representing a combined increase of $2.2 billion compared to the same period in 2022, due partly to ~~improved loan~~continued growth in GMV. Loan repayments and sale ~~economics and increased loan sales since~~of loans of $8.3 billion during the ~~third quarter~~period, represented an increase of $1.1 billion, compared to the same period in 2022, due in part to shifting of the ~~prior fiscal year; and amortization~~length of ~~premiums and discounts, which increased~~loan terms on our balance sheet netted of by ~~$69.0 million or 114% due~~higher average balance of loans held for investment compared to ~~increased amortization of discounts~~the same period in 2022. The additional offset during the nine months ended March 31, 2023 related to ~~loans purchased~~the net proceeds from ~~our originating bank partners at a price above fair market value. Furthermore, we incurred $280.1 million~~maturities of ~~stock-based compensation, up from $192.4 million due to accelerated vesting~~securities available for sale of ~~RSUs for which the service-based condition had been met prior~~$0.6 billion, representing an increase of $1.1 billion compared to the ~~IPO and the performance-based condition was met on the IPO date, and gains of $136.2 million due to the decrease~~same period in ~~the fair value of our contingent consideration liability, driven by changes in the value of our common stock.~~2022.

~~Our net cash outflows resulting from changes in operating assets and liabilities decreased to $8.6 million for~~For the nine months ended March 31, 2022, ~~compared to~~ net cash outflows of $68.5 million for the nine months ended March 31, 2021. This change was primarily driven by a decrease in other assets due to a reduction of prepaid payroll taxes during the nine months ended March 31, 2022.

~~Investing Activities~~

~~Cash~~ used in investing activities ~~for the nine months ended March 31, 2022 was~~of $985.6 million ~~a decrease~~was primarily attributable to $7.5 billion of ~~$120.8~~purchases and originations of loans, due partly to continued growth in GMV. We recorded cash outflows of approximately $770.0 million ~~from $1,106.4 million~~related to purchases of available for sale securities in the ~~nine months ended March 31, 2021. The main driver of this was $5,867.6 million of~~current period. These cash outflows were partially offset by repayments of loans ~~representing an increase~~ of ~~$2,865.2 million, or 95%, compared to the third quarter of the prior year,~~$5.9 billion, due to a higher average balance of loans held for investment and generally increasing credit quality of the portfolio. Additionally, we ~~sold $1,330.3~~obtained $1.3 billion in cash from selling loans to whole loan buyers and securitization investors.

Cash Flows from Financing Activities

For the nine months ended March 31, 2023, net cash provided by financing activities of $740.4 million, was primarily attributable to net cash inflows from funding debt of $853.7 million, and the issuance and repayment of notes and certificates issued by securitization trust of $165.4 million, partially offset by net cash outflows related to the repayment of a portion of our convertible senior notes of $206.6 million. Our payments of debt issuance costs were in the normal course of business and reflective of our recurring debt warehouse facility activity, which involves securing new warehouse facilities and extending existing warehouse facilities. Finally, we paid taxes related to RSU vesting of $63.5 million.

For the nine months ended March 31, 2022, net cash provided by financing activities of $2.1 billion, was primarily driven by the issuance of convertible debt which resulted in net cash inflows of $1.7 billion, net of debt issuance costs. Additionally, the issuance of notes by securitization trusts resulted in net cash inflows of $265.8 million, net of in-period principal repayments, and our funding debt resulted in $203.4 million of ~~loans, representing an increase of $982.1 million or 282% compared to~~net cash inflows as draws on our revolving credit facilities exceeded principal repayments on the ~~third quarter of the prior year.~~debt. These cash inflows were partially offset by $7,529.3 million of purchases of loans, representing an increase of $3,215.5 million or 75% compared to the third quarter of the prior year, due partly to continued growth in GMV. Additionally, we recorded cash outflows of approximately $770.0 milliontax payments related to ~~purchases of available for sale securities in the current period.~~

~~Financing Activities~~

Cash provided by financing activities for the nine months ended March 31, 2022 was $2,066.0 million, a decrease of $688.0 million from $2,754.0 million during the nine months ended March 31, 2021. A main driver of this wasRSU vesting of warrants for common stock of $1,305.3 million during the nine months ended March 31, 2021 compared to no activity during the nine months ended March 31, 2022. Additionally, during the nine months ended March 31, 2022, we saw a $986.0 million decrease in cash inflows from the issuance of notes by our securitization trusts, net of in-period principal repayments, from $1,251.7 million during the nine months ended March 31, 2021. This decrease in net cash inflows was partially offset by the issuance of convertible debt during the nine months ended March 31, 2022, which resulted in net cash inflows of $1,704.3 million, net of debt issuance costs.$166.9 million.

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~~Liquidity and Capital Risks and Requirements~~

There are numerous risks to our financial results, liquidity, capital raising, and debt refinancing plans, some of which may not be quantified in our current liquidity forecasts. The principal factors that could impact our liquidity and capital needs are customer delinquencies and defaults, a prolonged inability to adequately access capital market funding, declines in loan purchases and therefore revenue, fluctuations in our financial performance, the timing and extent of spending to support development efforts, the expansion of sales and marketing activities, the introduction of new and enhanced products, and the continuing market adoption of our platform. We intend to support our liquidity and capital position by pursuing diversified debt financings (including new securitizations and revolving debt facilities) and extending existing secured revolving facilities to provide committed liquidity in case of prolonged market fluctuations.

We may, in the future, enter into arrangements to acquire or invest in complementary businesses, products, and technologies. We may be required to seek additional equity or debt financing in connection with those efforts. In the event that we require additional financing, we may not be able to raise such financing on terms acceptable to us or at all. Additionally, as a result of any of these actions, we may be subject to restrictions and covenants in the agreements governing these transactions that may place limitations on us, and we may be required to pledge additional collateral as security. If we are unable to raise additional capital or generate cash flows necessary to expand our operations and invest in continued innovation, we may not be able to compete successfully, which would harm our business, operations, and financial condition. It is also possible that the actual outcome of one or more of our plans could be materially different than expected or that one or more of our significant judgments or estimates could prove to be materially incorrect.

~~Concentrations of Revenue~~

For the three and nine months ended March 31, 2022, there were no merchants that exceeded 10% of total revenue. For the three and nine months ended March 31, 2021 approximately 20% and 31% of total revenue, respectively, was driven by one merchant partner, Peloton. We believe we have a strong relationship with Peloton and, in September 2020, we entered into a renewed merchant agreement with Peloton with an initial three-year term ending in September 2023, which automatically renews for additional and successive one-year terms until terminated. While we believe our growth will facilitate both revenue growth and merchant diversification as we continue to integrate with a wide range of merchants, changes in merchant loan volume and revenue concentration may cause our financial and operating performance to fluctuate significantly from period to period. Our revenue as a percentage of GMV in any given period varies across products. As such, as we continue to expand our network to include more merchants, revenue as a percentage of GMV will vary.

Contractual Obligations

On November 23, 2021, the Company issued $1.7 billion in aggregate principal amount of 0% convertible senior notes due 2026 (the “2026 Notes”). The 2026 Notes represent senior unsecured obligationsThere were no material changes outside of the ~~Company. The 2026 Notes do not bear interest except~~ordinary course of business in ~~special circumstances,~~our commitments and contractual obligations for the ~~principal amount~~three and nine months ended March 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 ~~2026 Notes does not accrete. The 2026 Notes mature~~fiscal year ended June 30, 2022, which was filed with the SEC on ~~November 15, 2026.~~August 29, 2022.

Off-Balance Sheet Arrangements

~~Off-balance~~In the ordinary course of business, we engage in activities that are not reflected on our condensed consolidated balance sheets, generally referred to as off-balance sheet ~~loans relate to~~arrangements. These activities involve transactions with unconsolidated VIEs, including our sponsored securitization transactions, ~~and loans sold to third-party investors for~~ which we ~~have some form of continuing involvement, including as servicer.~~ contractually service.

For off-balance sheet loan sales where servicing is the only form of continuing involvement, we would only experience a loss if we were required to repurchase such a loan due to a breach in representations and warranties associated with our loan sale or servicing contracts. For unconsolidated securitization transactions where Affirm is the sponsor and risk retention holder, Affirm could experience a loss of up to 5% of both the senior notes and residual certificates. As of March 31, ~~2022,~~2023, the aggregate outstanding balance of loans held by third-party investors orfor off-balance sheet VIEs was ~~$4.0~~$4.2 billion. ~~As of March 31, 2022, we had three off-balance sheet VIEs, the 2021-Z1, 2021-Z2, and 2022-X1~~

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~~securitization trusts.~~ In the unlikely event principal payments on the loans backing any off-balance sheet securitization are insufficient to pay ~~senior~~ note holders, including any retained interest, then any amounts the Company contributed to the securitization reserve accounts may be depleted. ~~See~~Refer to Note 11. Securitization and Variable Interest Entities of the accompanying notes to our interim condensed consolidated financial statements included elsewhere in this Form 10-Q for more information.

Critical Accounting Policies and Estimates

Our ~~discussion and analysis of our financial condition and results of operations are based upon our~~condensed consolidated financial statements ~~which~~ have been prepared in accordance with ~~U.S. GAAP. U.S. GAAP requires us to~~accounting principles generally accepted in the United States. In preparing our condensed consolidated financial statements, we make ~~certain~~judgments, estimates and ~~judgments~~assumptions that affect ~~the~~reported amounts ~~reported in consolidated financial statements.~~of assets and liabilities, as well as revenues and expenses. We base our assumptions, judgments and estimates on historical experience and on various other ~~assumptions~~factors that we believe to be reasonable under the circumstances. ~~Because certain~~The results involve judgments about the carrying values of ~~these accounting policies require significant judgment, our actual~~assets and liabilities not readily apparent from other sources. Actual results ~~may~~could differ materially from ~~our estimates. To the extent that there are differences between~~these estimates under different assumptions or conditions. We regularly evaluate our estimates, assumptions and ~~actual results, our future consolidated financial statement presentation, financial condition, results of operations,~~judgments, particularly those that include the most difficult, subjective or complex judgments and ~~cash flows will be affected.~~

are often about matters that are inherently uncertain. We evaluate our ~~significant~~critical accounting policies and estimates on an ongoing basis ~~including, but not limited~~and update them as necessary based on changes in market conditions or factors specific to estimates related to merchant network revenue, loss on loan purchase commitment, allowance for credit losses, stock-based compensation, including warrants granted to nonemployees, and income taxes. We believe these estimatesus. There have ~~the greatest potential effect on our consolidated financial statements. Therefore, we consider these to be our critical accounting policies and estimates.~~

~~For further information,~~been no material changes in our significant accounting policies ~~are described in~~ or critical accounting estimates during the three and nine months ended March 31, 2023.

For a complete discussion of our significant accounting policies and critical accounting estimates, refer to our Annual Report on Form 10-K for the year ended June 30, 2022 within Note 2 to the Notes to Consolidated Financial Statements and “~~Note 2. Summary~~Management’s Discussion and Analysis of ~~Significant~~Financial Condition and Results of Operations— Critical Accounting Policies ~~within the notes to the interim condensed consolidated financial statements.~~and Estimates”.

Recent Accounting ~~Pronouncements~~Standards Issued, But Not Yet Adopted

Refer to Note 2. Summary of Significant Accounting Policies within the notes to the interim condensed consolidated financial statements.

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Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We have operations within the United States, Canada, and ~~Australia,~~the United Kingdom, and we are exposed to market risks in the ordinary course of our business. Market risk represents the risk of loss that may impact our financial position due to adverse changes in financial market prices and interest rates. Our market risk exposure is primarily the result of fluctuations in interest rates. Foreign currency exchange rates do not pose a material market risk exposure, as most of our revenue is earned in U.S. dollars.

Interest Rate Risk

Our cash and cash equivalents and certain of our restricted cash as of March 31, 2022 were held primarily in checking, money market, and savings accounts. As of March 31, 2022, we had $1,462.0 million of cash equivalents invested in money market funds, certificates of deposit, corporate bonds, and other commercial paper with maturities less than three months. Our cash and cash equivalents are held for working capital purposes. The fair value of our cash and cash equivalents and certain restricted cash would not be significantly affected by a change in interest rates due to their short-term nature.

~~Our~~ securities available for sale at fair value as of March 31, ~~2022~~2023 included ~~$617.0 million~~$1.1 billion of marketable debt securities with maturities greater than three months. A rise in interest rates would have an adverse impact on the fair market value of our fixed rate securities while floating rate securities would produce less income than expected if interest rates were to decrease. Because our investment policy is to invest in conservative, liquid investments and because our business strategy does not rely on generating material returns from our investment portfolio, we do not expect our market risk exposure on marketable debt securities to be ~~material.~~significant.

Continued volatility in interest rates and potentially inflation, which may persist longer than previously expected, may adversely impact our customers’ spending levels and ability and willingness to pay outstanding amounts owed to us. Higher interest rates may lead to higher payment obligations on our future credit products, or to their lenders under mortgage, credit card, and other loans. Therefore, higher interest rates may lead to increased delinquencies, charge-offs, and allowances for loans and interest receivable, which could have an adverse effect on our operating results.

We rely on a variety of funding sources with varying degrees of interest rate sensitivities. Certain of our funding arrangements bear a variable interest rate. Given the fixed interest rates charged on the loans that we purchase from our originating bank partners or originate ourselves, a rising variable interest rate would reduce our interest margin earned in these funding arrangements. Additionally, certain of our loan sale agreements are repriced on a recurring basis using a mechanism tied to interest rates as well as loan performance. Increases in interest rates could reduce our loan sale economics. We also rely on securitization transactions, with notes typically bearing a fixed coupon. Increases in interest rates may result in higher coupons ~~using refinancing.~~ and therefore lower interest income received on securitizations where we retain the residual interest and a lower gain on sale for securitizations in which we sell the equity interest.

We maintain an interest rate ~~hedging~~risk management program which measures and manages the potential volatility of earnings that may arise from changes in interest rates. We use interest rate derivatives to mitigate the effects of changes in interest rates on our variable rate debt which eliminates some, but not all, of the interest rate risk. Some of these contracts are designated as cash flow hedges for accounting purposes. For those contracts designated as cash flow hedges, the effective portion of the gain or loss on the derivatives is recorded in other comprehensive income (loss) and is reclassified into funding costs in the same period the hedged transaction affects earnings. Factoring in ~~this~~the interest rate risk management program, as of March 31, ~~2022,~~2023, we estimate that a hypothetical instantaneous 100 basis point upward parallel shock to interest rates would have a less than $30.0 million adverse impact on our annual financial results over the next 12 months.

Credit Risk

We have credit risk primarily related to our consumer loans held for investment. We are exposed to default risk on both loan receivables purchased from our originating bank partners and loan receivables that are directly originated. The ultimate collectability of a substantial portion of the loan portfolio is susceptible to changes in economic and market conditions. To manage this risk, we utilize our ITACs models to underwrite, score, and price loans in a manner that we believe is reflective of the credit risk. Other credit levers such as user limits and/or down payment requirements are used to determine the likelihood of a consumer being able to pay.

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To monitor portfolio performance, we utilize a wide range of internal and external metrics to review user and loan populations. Each week management reviews performance for each customer segment, typically split by ITACs model score, financial product originated, age of loan, and delinquency status. Internal performance trendlines are measured against external factors such as unemployment, CPI, and consumer sentiment to determine what changes, if any, in risk strategy is warranted.

As of March 31, 2023 and June 30, 2022, we were exposed to credit risk on $3.8 billion and $2.5 billion, respectively, of loans held on our interim condensed consolidated balance sheet. Loan receivables are diversified geographically. As of March 31, 2023 and June 30, 2022, approximately 11% and 12% of loan receivables related to customers residing in the state of California, respectively. No other states or provinces exceeded 10%.

We are also exposed to credit risk in the event of nonperformance by the financial institutions holding our cash and the issuers of our cash equivalents and available for sale securities. We maintain our cash deposits and cash equivalents in highly-rated, federally-insured financial institutions in excess of federally insured limits. We manage this risk by conducting business with well established financial institutions, diversifying our counterparties and having guidelines regarding credit rating and investment maturities to safeguard liquidity. Although, we are not substantially dependent on a single financing source and have not historically experienced any credit losses related to these financial institutions, since the beginning of March 2023, there have been public reports of instability at certain financial institutions. If multiple financing sources were to be unable to fulfill their funding obligations to us, it could have a material adverse effect on our financial condition, results of operations and cash flows.

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Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer (“CEO”) and our Chief Financial Officer (“CFO”), has evaluated the effectiveness of our disclosure controls and procedures as(as defined in Rules 13a-15(e) and 15d-15(e) under the ~~Securities~~ Exchange ~~Act of 1934, as amended (the “Exchange Act”)~~Act). Based on that evaluation, our CEO and CFO concluded that such disclosure controls and procedures were effective as of the end of the period covered by this Quarterly Report on Form ~~10-Q. Disclosure controls~~10-Q and ~~procedures are~~ designed to ~~provide reasonable assurance~~ensure that information required to be disclosed ~~by a company~~ in ~~the~~our reports ~~that it files~~filed or ~~submits~~submitted under the Exchange Act is recorded, processed, summarized and reported within the requisite time periods specified in the ~~SEC’s~~applicable rules and ~~forms. Disclosure controls~~forms, and ~~procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports~~ that it ~~files or submits under the Exchange Act~~ is accumulated and communicated to ~~the company’s~~our management, including ~~its principal executive~~our CEO and ~~principal financial officers, or persons performing similar functions,~~CFO, as appropriate, to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

~~Based on this evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that our disclosure controls and procedures were effective as of March 31, 2022.~~

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the quarter ended March 31, ~~2022~~2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Inherent Limitation on the Effectiveness of Internal Control

The effectiveness of any system of internal control over financial reporting is subject to inherent limitations, including the exercise of judgment in designing, implementing, operating, and evaluating the controls and procedures, and the inability to eliminate misconduct completely. Accordingly, any system of internal control over financial reporting, no matter how well designed and operated, can only provide reasonable, not absolute assurance that its objectives will be met. In addition, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. We intend to continue to monitor and upgrade our internal controls as necessary or appropriate for our business, but cannot assure you that such improvements will be sufficient to provide us with effective internal control over financial reporting.

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Part II - Other Information

~~Table of Contents~~

Item 1. Legal Proceedings

Please refer to Note 8. “Commitments and Contingencies” of the accompanying notes to our interim condensed consolidated financial statements.

From time to time, we may be subject to other legal proceedings and claims in the ordinary course of business. We are not presently a party to any such other legal proceedings that, if determined adversely to us, would individually or taken together have a material adverse effect on our business, results of operations, financial condition, or cash flows. The results of any current or future litigation cannot be predicted with certainty, and regardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources, and other factors.

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Item 1A. Risk Factors

The risks described under the heading “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended June 30, ~~2021~~2022 and in our Quarterly Report on Form 10-Q for the fiscal quarter ended December 31, 2022 could materially and adversely affect our business, financial condition, and results of operations, future prospects, and the trading price of our Class A common stock could decline. ~~Those~~The risks and uncertainties described therein are not the only ones we face. Additional risks and uncertainties that we ~~face—our operations could also be affected by factors that~~ are ~~not presently known to us~~unaware of or that we currently ~~consider to be~~deem immaterial tomay also become important factors that adversely affect our ~~operations. In addition, you~~business.

You should carefully read and consider such risks, together with all of the other information in our Annual Report on Form 10-K for the fiscal year ended June 30, ~~2021,~~2022, in this Quarterly Report on Form 10-Q (including the disclosures ~~below,~~ in the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and in our interim condensed consolidated financial statements and related notes), and in the other documents that we file with the SEC.

Except as may be reflected in the updated risk factors included below, there have been no material changes from the risk factors previously disclosed under the heading “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended June 30, ~~2021.~~2022 and in our Quarterly Report on Form 10-Q for the fiscal quarter ended December 31, 2022.

~~Risks Related~~The success of our business depends on our ability to ~~Our Business~~work with our originating bank partners to enable effective underwriting of loans facilitated through our platform and ~~Industry~~

accurately price credit risk. We currently rely on Celtic Bank to originate a majority of the loans facilitated through our platform. If our relationship with Celtic Bank terminates, or if Celtic Bank were to suspend, limit, or cease its operations or loan origination activities for any reason, and we are unable to ~~attract additional merchant partners, retain our existing merchant partners, and grow and develop our relationships with new and existing merchant partners,~~engage another originating partner on a timely basis or at all, our business, results of operations, financial condition, and future prospects would be materially and adversely ~~affected, as could the market price~~affected.

We believe that one of our ~~Class A common stock.~~

~~Our continued success~~core competitive advantages, and a core tenet of our platform, is ~~dependent on~~ our ability to ~~expand~~work with originating bank partners to use our ~~merchant base~~data-driven risk model to enable the effective underwriting of loans facilitated through our platform and to grow our merchants’ revenue on our platform. We derive a significant portion of our revenue from merchant network fees earned from our merchant partners. The network fees are generally charged as a percentageaccurately and effectively price credit risk. Any deterioration in the performance of the ~~transaction volume on our platform. In addition, as more merchants are integrated into our network, there are more reasons for consumers to shop with us.~~

If we are not able to attract additional merchants and to expand revenue and volume of transactions from existing merchants, we will not be able to continue to attract consumers or grow our business. Our ability to retain and grow our relationships with our merchant partners depends on the willingness of merchants to partner with us. The attractiveness ofloans facilitated through our platform, ~~to merchants depends upon, among other things: the size of our consumer base; our brand~~or unexpected losses on such loans, would materially and reputation; the amount of merchant fees that we charge; our ability to sustain our value proposition to merchants for customer acquisition by demonstrating higher conversion at checkout and increased AOV; the attractiveness to merchants of our technology and data-driven platform; services and products offered by competitors; and our ability to perform under, and maintain, our merchant agreements. Furthermore, having a diversified mix of merchant partners is important to mitigate risk associated with changing consumer spending behavior, economic conditions and other factors that may affect a particular type of merchant or industry. For example, following the onset of the COVID-19 pandemic, our revenue from merchant partners in the travel, hospitality, and entertainment industries declined, but we saw a significant increase in revenue from merchant partners offering home fitness equipment, home office products, and home furnishings. We have begun to see these trends reverse as access to COVID-19 vaccinations has increased, but it is difficult to predict the impact that the continuing spread of the various variants and potential additional waves of the pandemic will have on our merchant partners and our business.

Our continued success also is dependent on our ability to successfully grow and develop relationships with our merchant partners, particularly early-stage relationships with large e-commerce retailers such as Amazon. The pace of development, integration and rollout of these early-stage relationships is often unpredictable and is generally not within our control. Many of our agreements with our merchant partners are non-exclusive and lack any transaction volume commitments. Accordingly, these merchant partners may have, or may enter into in the future, similar agreements with our competitors, which could adversely affect our ~~ability to drive the level~~business and results of operations. Loan repayment underperformance would impact our interest-related and gain-on-sale income generated from loans we purchase from our originating bank partners, which are underwritten in accordance with each bank’s credit policy. Additionally, incremental charge-offs may affect future credit decisioning, growth of transaction volume, and ~~revenue growth that~~the amount of provisions for underperforming loans we ~~seek~~will need to ~~achieve or~~take.

As of the end of the second quarter of fiscal 2023, we relied on Cross River Bank and Celtic Bank to ~~otherwise satisfy~~originate a majority of the ~~high expectations~~loans facilitated through our platform and to comply with various federal, state, and other laws, with the balance of the loans facilitated on our ~~investors and financial analysts relating to those relationships. While some of~~platform being originated directly under our ~~agreements with our merchant partners,~~lending, servicing,

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~~including Amazon, do provide~~and brokering licenses in Canada and across various states in the United States through our consolidated subsidiaries. During the first half of fiscal 2023, we began accelerating the execution of an existing strategy of identifying and engaging new originating bank partners in order to diversify our sources of loan originations. In January 2023, we made the strategic decision to begin reducing the volume of loans originated by Cross River Bank on our platform while at the same time continuing our ongoing work to identify and engage new originating bank partners. Consequently, as of March 31, 2023, Celtic Bank originates substantially all partner bank originated loans facilitated through our platform. As a result, the risks discussed in the paragraphs below relating to our reliance on Celtic Bank have increased and will remain as such unless and until we complete the process of engaging and onboarding one or more new originating bank partners. The process of engaging and onboarding new originating bank partners is inherently uncertain, and there can be no assurances as to when we will be able to complete that process.

Celtic Bank handles a variety of consumer and commercial financing programs. The Celtic Bank loan program agreement has an initial three-year term, which is scheduled to expire in calendar year 2023. In addition, upon the occurrence of certain early termination events, either we or Celtic Bank may terminate the loan program agreement immediately upon written notice to the other party. Our Celtic Bank loan program agreement does not prohibit Celtic Bank from working with our competitors or from offering competing services, and Celtic Bank currently offers loan programs through other competing platforms. Celtic Bank could decide not to work with us for any reason, could make working with us cost-prohibitive, or could decide to enter into an exclusive or more favorable relationship with one or more of our competitors. In addition, Celtic Bank may not perform as expected under our loan program agreement. We could in the future have disagreements or disputes with Celtic Bank, which could negatively impact or threaten our relationship with other originating banks with whom we may seek to partner. For a ~~period~~further discussion of ~~exclusivity, those periods~~our relationship with Celtic Bank, particularly the regulations applicable to this relationship, see “Business — Regulatory Environment” in the Annual Report on Form 10-K we filed with the SEC on August 29, 2022.

If Celtic Bank were to suspend, limit, or cease its operations or loan origination activities for any reason, or if our relationship with Celtic Bank were to otherwise terminate for any reason (including, but not limited to, its failure to comply with regulatory actions), we may ~~be limited in duration, and~~need to implement an additional substantially similar arrangement with another bank, obtain additional state licenses, or curtail our operations. If we need to enter into alternative arrangements with a different bank to replace our existing arrangement, we may not be able to negotiate ~~extensions of those exclusivity periods on reasonable terms, if~~a comparable alternative arrangement in a timely manner or at all. In addition, transitioning loan originations to a new bank is untested and may result in delays in the issuance of loans or, if our ~~agreements~~platform becomes inoperable, may result in the inability to facilitate loans through our platform. If we are unable to enter into an alternative arrangement with different banks to fully replace or supplement our ~~merchant partners generally have terms~~relationship with Celtic Bank, we would potentially need to obtain additional state licenses to enable us to originate loans directly, as well as comply with other state and federal laws, which would be costly and time consuming, and there can be no assurances that ~~range from approximately 12 months to 36 months, and our merchants can generally terminate these agreements without cause upon 30 to 90 days’ prior written notice. We may, therefore,~~any such licenses could be ~~compelled to renegotiate our agreements with merchant partners from time to time, possibly upon terms significantly less favorable to us than the terms included~~obtained in ~~our existing agreements with those merchant partners.~~a timely manner or at all.

We rely on a variety of funding sources to support our business model. If our existing funding arrangements are not renewed or replaced or our existing funding sources are unwilling or unable to provide funding to us on terms acceptable to us, or at all, it could have a material adverse effect on our business, results of operations, financial condition, cash flows, and future prospects.

Our high-velocity, capital efficient funding model is integral to the success of our commerce platform. To support this model and the growth of our business, we must maintain a variety of funding arrangements, including warehouse facilities, securities repurchase agreements, securitization trusts, and forward flow arrangements with a diverse set of funding sources. If we ~~fail~~are unable to ~~retain any~~maintain access to, or to expand, our network and diversity of our larger merchant partners or a substantial number of our smaller merchant partners, if we do not acquire new merchant partners, if we do not successfully grow and develop our relationships with our larger merchant partners, if we do not continually expand revenue and volume from the merchants on our platform, or if we do not attract and retain a diverse mix of merchant partners,funding arrangements, our business, results of operations, financial condition, and future prospects ~~would~~could be materially and adversely affected. In addition, should investor expectations relating to the growth, development and retention of our merchant partners, particularly those expectations relating to our relationships with Amazon and Shopify Inc., not be achieved, the market price of our Class A common stock could decline.

~~Risks Related to Our Class A Common Stock~~

~~The market price of our Class A common stock has been and may~~We cannot guarantee that these funding arrangements will continue to be ~~volatile, which could cause~~available on favorable terms or at all, and our funding strategy may change over time and depends on the ~~value~~availability of ~~your investment to decline.~~

The market price of our Class A common stock has been and may continue to be highly volatile and could be subject to wide fluctuations. In addition, the trading volume in our Class A common stock may fluctuate and cause significant price variations to occur. Securities markets worldwide experience significant price and volume fluctuations. This market volatility, as well as general economic, market, and political conditions, could reduce the market price of shares of our Class A common stock in spite of our operating performance.

In addition, our results of operations could be below the expectations of public market analysts and investors due to a number of potential factors, including: variations in our quarterly or annual results of operations; additions or departures of key management personnel; the loss of an originating bank partner or keysuch funding sources or merchants; the growth and development of key merchant partner relationships, including our relationship with Amazon; and changes in our earnings estimates (if provided). Also, the publication of research reports about our industry, litigation and government investigations, changes or proposed changes in laws or regulations or differing interpretations or enforcement thereof affecting our business, adverse market reaction to any indebtedness we may incur or securities we may issue in the future, changes in market valuations of similar companies or speculation in the press or the investment community with respect to us or our industry, adverse announcements by us or others and developments affecting us, announcements by our competitors of significant contracts, acquisitions, dispositions, strategic partnerships, joint ventures or capital commitments, actions by institutional stockholders, and increases in market interest rates that may lead investors in our shares to demand a higher yield, could result in the significant decrease of the market price of shares of our Class A common stock.

These broad market and industry factors may decrease the market price of our Class A common stock, regardless of our actual operating performance. The stock market in general has, from time to time, experienced extreme price and volume fluctuations. In addition, in the past, following periods of volatility in the overall market and the market price of a company’s securities, securities class action litigation has often been instituted against these companies. We are subject to securities litigation, as described further in Note 8. “Commitments and Contingencies” ~~of the accompanying notes to our interim condensed consolidated financial statements~~ and incorporated by reference in Part II, Item 1-Legal Proceedings. This litigation, and any other securities class actions that may be brought against us, could result in substantial costs and a diversion of our management’s attention and resources.

arrangements.

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~~The issuance by us of additional equity securities may dilute your ownership~~Disruptions in the credit markets or other factors, such as the current inflationary environment and rising interest rates, could adversely affect the ~~market price~~availability, diversity, cost, and terms of our ~~Class A common stock.~~funding arrangements.

~~Our amended~~Since the beginning of March 2023, there have been public reports of instability at certain financial institutions. Despite the steps taken to date by U.S. and ~~restated certificate~~foreign agencies and institutions, the follow-on effects of ~~incorporation authorizes~~this instability are unknown and may lead to disruptions to the businesses and operations of our funding sources. Although we are not substantially dependent on a single financing source, if multiple financing sources were to be unable to fulfill their funding obligations to us, it could have a material adverse effect on our financial condition, results of operations and cash flows.

In addition, our funding sources may reassess their exposure to our industry and either curtail access to uncommitted financing capacity, fail to renew or extend facilities, or impose higher costs to access our funding. Further, our debt financing and loan sale forward flow facilities are generally fixed term in nature, with term lengths ranging between one to three years, during which we have access to committed capital pursuant to such facilities. If our existing funding arrangements are not renewed or replaced or our existing funding sources are unwilling or unable to provide funding to us on terms acceptable to us, or at all, we would need to secure additional sources of funding or reduce our operations significantly. The availability and diversity of our funding arrangements depends on various factors and are subject to numerous risks, many of which are outside of our control.

The agreements governing our funding arrangements require us to ~~issue~~comply with certain covenants. A breach of such covenants or other events of default under our funding agreements could result in the reduction or termination of our access to such funding, could increase our cost of such funding or, in some cases, could give our lenders the right to require repayment of the loans prior to their scheduled maturity. Certain of these covenants are tied to our consumer default rates, which may be significantly affected by factors, such as economic downturns or general economic conditions, that are beyond our control and beyond the control of individual consumers. In addition, our revolving credit facility contains (a) certain covenants and restrictions that limit our and our subsidiaries’ ability to, among other things: incur additional ~~shares~~debt; create liens on certain assets; pay dividends on or make distributions in respect of Class A common stock and rights relating to Class A common stock for the consideration and on the terms and conditions established by our board of directors in its sole discretion, whether in connection with acquisitions or otherwise. Any Class A commontheir capital stock or ~~securities convertible into shares of our Class A common stock that we issue from time to time, including in connection with a financing, acquisition, investment or under any equity incentive plans~~make other restricted payments; consolidate, merge, sell, or otherwise dispose of all or substantially all of their assets; and enter into certain transactions with their affiliates, and (b) certain financial maintenance covenants that ~~we may adopt in~~require us and our subsidiaries to not exceed a specified leverage ratio, to maintain a minimum tangible net worth, and to maintain a minimum level of unrestricted cash while any borrowings under the ~~future, will dilute your percentage ownership.~~revolving credit facility are outstanding.

In the future, we may ~~attempt~~seek to further access the capital markets to obtain ~~financing or~~capital to ~~further increase~~finance growth. However, our future access to the capital ~~resources by issuing additional shares~~markets could be restricted due to a variety of factors, including a deterioration of our ~~Class A common stock~~earnings, cash flows, balance sheet quality, or ~~securities convertible into shares~~overall business or industry prospects, adverse regulatory changes, a disruption to or volatility or deterioration in the state of the capital markets, or a negative bias toward our ~~Class A common stock or offering debt or other securities. We could also issue shares of~~industry by market participants. Due to the negative bias toward our ~~Class A common stock or securities convertible into~~industry, certain financial institutions have restricted access to available financing by participants in our ~~Class A common stock or debt or other securities in connection with acquisitions or other strategic transactions. In addition, as we did when we initially formed our partnership with Shopify~~industry, and ~~when we entered into the Amended and Restated Installment Financing Services Agreement with Amazon,~~ we may issue additional shares of our Class A common stock or securities convertible into shares of Class A common stock as a means of initiating, developing, strengthening or preserving key merchant relationships. Issuing additional shares of our Class A common stock or securities convertible into shares of our Class A common stock or debt orhave more limited access to institutional capital than other securities may dilute the economic and voting rights of our existing stockholders and would likely reduce the market price of our Class A common stock. Upon liquidation, holders of debt securities and preferred shares, if issued, and lenders with respect to other borrowings would receive a distribution on our distributable assets prior to the holders of our common stock. Debt securities convertible into equity securities could be subject to adjustments in the conversion ratio pursuant to which certain events may increase the number of equity securities issuable upon conversion. Preferred shares, if issued, could have a preference with respect to liquidating distribution or preferences with respect to dividend payments that could limit our ability to pay dividends to the holders of our common stock. Our decision to issue securities in any future offering will depend onbusinesses. Future prevailing capital market conditions and ~~other factors beyond our control, which~~potential disruptions in the capital markets may adversely affect ~~the amount, timing, and nature of~~ our ~~future offerings. As a result, holders of our Class A common stock bear the risk~~efforts to arrange additional financing on terms that ~~our future offerings may reduce the market price of our Class A common stock and dilute their stockholdings in us.~~

~~Risks Related~~are satisfactory to ~~Our Indebtedness~~

~~Servicing our debt requires a significant amount of cash, and~~us, if at all. If adequate funds are not available, or are not available on acceptable terms, we may not have sufficient ~~cash flow from~~liquidity to fund our ~~business~~operations, make future investments, take advantage of acquisitions or other opportunities, or respond to ~~pay our substantial debt.~~

Our ability to make scheduled payments of the principal of, to pay interest on or to refinance our indebtedness, including our 2026 Notes, depends on our future performance, which is subject to economic, financial, competitive challenges and ~~other factors beyond our control. Our business may not continue to generate cash flow from operations~~this, in the future sufficient to service our debt and make necessary capital expenditures. If we are unable to generate such cash flow, we may be required to adopt one or more alternatives, such as selling assets, restructuring debt or obtaining additional equity capital on terms that may be onerous or highly dilutive. Our ability to refinance our indebtedness will depend on the capital markets and our financial condition at such time.We may not be able to engage in any of these activities or engage in these activities on desirable terms, which could result in a default on our debt obligations.

We may not have the ability to raise the funds necessary to settle conversions of the 2026 Notes, to repay the 2026 Notes at maturity or to repurchase the 2026 Notes upon a fundamental change, and our future debt may contain limitations on our ability to pay cash upon conversion or repurchase of the 2026 Notes.

Holders will have the right to require us to repurchase their 2026 Notes upon the occurrence of a fundamental change at a fundamental change repurchase price equal to 100% of the principal amount of the 2026 Notes to be repurchased, plus accrued and unpaid special interest, if any. In addition, upon conversion of the 2026 Notes, we will be required to make cash payments for each $1,000 in principal amount of 2026 Notes converted of

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at least the lesser of $1,000 and the sum of the daily conversion values as described in the indenture governing the 2026 Notes. However, we may not have enough available cash or be able to obtain financing at the time we are required to make repurchases of notes surrendered therefor or pay cash with respect to the 2026 Notes being converted. In addition, our ability to repurchase the 2026 Notes or to pay cash upon conversions of the 2026 Notes may be limited by law, by regulatory authority or by agreements governing our future indebtedness. Our failure to repurchase 2026 Notes at a time when the repurchase is required or to pay any cash payable on future conversions of the 2026 Notes would constitute a default under the indenture governing the 2026 Notes. A default under the indenture governing the 2026 Notes or the fundamental change itself could also lead to a default under agreements governing our future indebtedness. If the repayment of the related indebtedness were to be accelerated after any applicable notice or grace periods, we may not have sufficient funds to repay the indebtedness and repurchase the 2026 Notes or make cash payments upon conversions thereof.

~~The conditional conversion feature of the 2026 Notes, if triggered, may adversely affect our financial condition and operating results.~~

In the event the conditional conversion feature of the 2026 Notes is triggered, holders will be entitled to convert their 2026 Notes at any time during specified periods at their option. If one or more holders elect to convert their 2026 Notes, we would be required to settle any converted principal amount of such notes through the payment of cash, whichturn, could adversely affect our ~~liquidity.~~ability to advance our strategic plans. In addition, ~~even~~ if ~~holders~~the capital and credit markets experience volatility, and the availability of funds is limited, third-parties with whom we do ~~not elect to convert their 2026 Notes, we~~business may incur increased costs or business disruption and this could be required under applicable accounting rules to reclassify all or a portion of the outstanding principal of the 2026 Notes as a current rather than long-term liability, which would result in a material reduction of our net working capital.

The accounting method for reflecting the 2026 Notes on our balance sheet, accruing interest expense for the 2026 Notes and reflecting the underlying shares of our Class A common stock in our reported diluted earnings per share may adversely affect our ~~reported earnings and financial condition.~~

~~In August 2020, the Financial Accounting Standards Board published an Accounting Standards Update,~~business relationships with such third-parties, which we refer to as ASU 2020-06, which simplifies certain of the accounting standards that apply to convertible notes. ASU 2020-06 will be effective for SEC-reporting entities for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. However, early adoption is permitted in ~~certain circumstances for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. We early adopted ASU 2020-06 effective July 1, 2021~~ ~~on a modified retrospective basis. The adoption of the new standard did not have any impact on our financial statements as of the adoption date.~~

In accordance with ASU 2020-06, the 2026 Notes will be reflected as a liability on our balance sheets, with the initial carrying amount equal to the principal amount of the 2026 Notes, net of issuance costs. The issuance costs will be treated as a debt discount for accounting purposes, which will be amortized into other (expense) income, net over the term of the 2026 Notes. As a result of this amortization, the interest expense that we expect to recognize for the 2026 Notes for accounting purposes will be greater than the cash interest payments we will pay on the 2026 Notes, which will result in lower reported income.

In addition, the shares underlying the 2026 Notes are reflected in our diluted earnings per share using the “if converted” method, in accordance with ASU 2020-06. Under that method, if the conversion value of the 2026 Notes exceeds their principal amount for a reporting period, then we will calculate our diluted earnings per share assuming that all of the 2026 Notes were converted at the beginning of the reporting period and that we issued shares of our Class A common stock to settle the excess. However, if reflecting the notes in diluted earnings per share in this manner is anti-dilutive, or if the conversion value of the notes does not exceed their principal amount for a reporting period, then the shares underlying the 2026 Notes will not be reflected in our diluted earnings per share. The application of the if-converted method may reduce our reported diluted earnings per share. We cannot be sure whether other changes may be made to the current accounting standards related to the 2026 Notes, or otherwise, thatturn could have a material adverse effect on our ~~reported~~business, results of operations, financial ~~results.~~condition, cash flows, and future prospects.

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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

~~Unregistered Sales of Equity Securities~~

None.

~~Purchases~~

Table of ~~Equity Securities~~

Contents

~~The following table presents information with respect to the Company’s repurchases of shares of Class A common stock during the quarter ended March 31, 2022.~~

Period
Total Number of Shares Purchased(1)
Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs
January 1 - 31 1,659 $ 6.49 — —
February 1 - 28 — — — —
March 1 - 31 7,813 8.80 — —
Total 9,472 $ 8.40 — —

~~(1)~~The shares purchased were repurchases of unvested shares of our Class A common stock that had been issued upon early exercise of stock options. Pursuant to the associated option award agreements, upon termination of employment of a person holding unvested shares, we were entitled to repurchase the unvested shares.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

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Item 6. Exhibits

Incorporated by Reference
Exhibit Number Description Form File No. Exhibit Filing Date Filed Herewith
3.1
Amended and Restated Certificate of Incorporation
8-K 001-39888 3.1 January 15, 2021
3.2
Amended and Restated Bylaws
8-K 001-39888 3.2 September 8, 2021
31.1
Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Exchange Act, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
X
31.2
Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Exchange Act, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
X
32.1
Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
X
32.2
Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
X
101.INS XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document X
101.SCH Inline XBRL Taxonomy Extension Schema Document X
101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document X
101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document X
101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document X
101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document X
104 Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101) X

Incorporated by Reference

Exhibit Number

Description

Form

File No.

Exhibit

Filing Date

Filed Herewith

10.1

Amendment No. 5 to Customer Installment Program Agreement, dated as of March 31, 2023, by and between Shopify Inc. and Affirm, Inc.

31.1

Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Exchange Act, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2

Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Exchange Act, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1

Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2

Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.INS

XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document

101.SCH

Inline XBRL Taxonomy Extension Schema Document

101.CAL

Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF

Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB

Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE

Inline XBRL Taxonomy Extension Presentation Linkbase Document

104

Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)

Portions of the exhibit have been omitted as the Company has determined that: (i) the omitted information is not material; and (ii) the omitted information would likely cause competitive harm to the Company if publicly disclosed.

9481

Table of Contents

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized,


	AFFIRM HOLDINGS, INC.

Date: May ~~13, 2022~~9, 2023	By:	/s/ Max Levchin
		Max Levchin
		Chief Executive Officer
		(Principal Executive Officer)

	By:	/s/ Michael Linford
		Michael Linford
		Chief Financial Officer
		(Principal Financial Officer)

9582


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


	As of June 30, 2021
	As Previously Reported	Adjustments	As Corrected
Accrued expenses and other liabilities	317,951	5,626	323,577
Total liabilities	2,285,814	5,626	2,291,440
Additional paid in capital	3,462,762	4,474	3,467,236
Accumulated deficit	(888,381)	(10,104)	(898,485)
Accumulated other comprehensive income	6,769	4	6,773
Total stockholders’ equity	2,581,153	(5,626)	2,575,527


	Three Months Ended March 31, 2021
	As Previously Reported		Adjustments		As Corrected
Consolidated Statement of Operations and Comprehensive Loss
Processing and servicing	21,335		33		21,368
Technology and data analytics	98,728		6,078		104,806
Sales and marketing	57,549		635		58,184
General and administrative	146,853		33,146		179,999
Total Operating Expenses	400,121		39,892		440,013
Loss Before Income Taxes	(247,229)		(39,892)		(287,121)
Net Loss Attributable to Common Stockholders	(247,159)		(39,892)		(287,051)
Net loss per share attributable to common stockholders for Class A and Class B:
Basic	$	(1.06)	$	(0.17)	$	(1.23)
Diluted	$	(1.06)	$	(0.17)	$	(1.23)


	Nine Months Ended March 31, 2021
	As Previously Reported		Adjustments		As Corrected
Consolidated Statement of Operations and Comprehensive Loss
Processing and servicing	51,635		33		51,668
Technology and data analytics	174,130		6,078		180,208
Sales and marketing	119,243		635		119,878
General and administrative	220,042		33,146		253,188
Total Operating Expenses	838,206		39,892		878,098
Loss Before Income Taxes	(277,610)		(39,892)		(317,502)
Net Loss Attributable to Common Stockholders	(277,715)		(39,892)		(317,607)
Net loss per share attributable to common stockholders for Class A and Class B:
Basic	$	(2.27)	$	(0.33)	$	(2.60)
Diluted	$	(2.48)	$	(0.32)	$	(2.80)


	Three Months Ended March 31,				Change				Nine Months Ended March 31,				Change
	2022		2021		$		%		2022		2021		$		%
	(in thousands, except percentage)
Merchant network revenue	$	121,054	$	97,999	$	23,055	24	%	$	340,385	$	290,894	$	49,491	17	%
Virtual card network revenue	23,169		13,809		9,360		68	%	69,122		30,587		38,535		126	%
Total network revenue	144,223		111,808		32,415		29	%	409,507		321,481		88,026		27	%
Interest income	134,599		94,530		40,069		42	%	390,256		222,624		167,632		75	%
Gain on sales of loans	52,484		16,350		36,134		221	%	141,153		47,344		93,809		198	%
Servicing income	23,456		7,977		15,479		194	%	44,242		17,235		27,007		157	%
Total Revenue, net	$	354,762	$	230,665	124,097		54	%	$	985,158	$	608,684	376,474		62	%


Period	Total Number of Shares Purchased(1)	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs
January 1 - 31	1,659	$	6.49	—	—
February 1 - 28	—	—		—	—
March 1 - 31	7,813	8.80		—	—
Total	9,472	$	8.40	—	—