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

FORM 10-Q

(Mark One)
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 2022September 30, 2023

OR

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

Commission File NumberNumber: 001-39888

Affirm Holdings, Inc.
(Exact name of registrant as specified in its charter)
Delaware84-2224323
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
650 California Street
San Francisco, California94108
(Address of principal executive offices)(Zip Code)
(415) 984-0490960-1518
(Registrant's telephone number, including area code)

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

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

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated 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 FebruaryNovember 3, 2023, the number of shares of the registrant’s Class A common stock outstandingoutstanding was 233,906,114242,120,237 and the number of shares of the registrant’s Class B common stock outstanding was 60,088,662.59,613,337.



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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,Report, including statements regarding our future results of operations and financial condition, business strategy, and plans and objectives of management forregarding future operations, are forward-looking statements. In some cases, forward-looking statements may be identified by words such as “anticipate,” “believe,” “continue,” “could,” “design,” “estimate,” “expect,” “intend,” “may,” “plan,” “potentially,” “predict,” “project,” “should,” “will,” “would,” or the negative of these terms or other similar expressions. These forward-looking statements include, but are not limited to, statements concerning the following:

our expectations regarding our future revenue, expenses, and other operating results and key operating metrics;
our ability to attract new merchants and commerce partners and retain and grow our relationships with existing merchants and commerce partners;
our ability to compete successfully in a highly competitive and evolving industry;
our ability to attract new consumers and retain and grow our relationships with our existing consumers;
our expectations regarding the development, innovation, introduction of, and demand for, our products;
our ability to successfully maintain our relationship with existing originating bank partners and engage new and existingadditional originating bank partners;
our ability to maintain, renew or replace our existing funding arrangements and build and grow new funding relationships;
the availabilityimpact 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 sustainsustained profitability in the future;
the impact of any reduction in our workforce, including our ability to realize certain cost savings anticipated as a result of the reduction and our ability to continue to attract and retain highly skilled employees;
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 impacts of inflation, a rising interest rate environment and corresponding increases in negotiated interest rate spreads, increasing recessionary concerns;concerns and the instability of financial institutions; and
the size and growth rates of the markets in which we compete.
Forward-looking statements, including statements such as “we believe” and similar statements, are based on our management’s current beliefs, opinions and assumptions and on information currently available.available as of the date of this Report. Such information may be limited or incomplete, and our statements should not be read to indicate that
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we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These forward-looking statements are subject to a number of known and unknown risks, uncertainties and assumptions, including risks described in the section titled “Risk Factors” and elsewhere in this Form 10-Q and in our most recently filed Annual Report on Form 10-K for the fiscal year ended June 30, 20222023 (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
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environment. New risk factorsrisks emerge from time to time, and it is not possible for our management to predict all risk factorsrisks that we may face, nor can we assess the impact of all factorsrisks on our business or the extent to which any factor,risk, or combination of factors,risks, may cause our actual results to differ from those contained in, or implied by, any forward-looking statements.

You should not rely upon forward-looking statements as predictions of future events. Although we believe that the expectations reflected in the forward-looking statements are reasonable as of the date of this Report, we cannot guarantee future results, levels of activity, performance, achievements, events, outcomes, timing of results or circumstances. Except as required by law, we undertake no obligation to update publicly any forward-looking statements for any reason after the date of this reportReport 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 reportReport with the understanding that our actual future results, levels of activity, performance, outcomes, achievements and achievementstiming of results or outcomes 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 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 companyCompany to review the information that we make available on our website. The contents of our website are not incorporated into this filing. We have included our investor relations website address only as an inactive textual reference for convenience and do not intend it to be an active link to our website.

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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)
December 31, 2022June 30, 2022September 30, 2023June 30, 2023
AssetsAssetsAssets
Cash and cash equivalentsCash and cash equivalents$1,440,333 $1,255,171 Cash and cash equivalents$1,079,261 $892,027 
Restricted cashRestricted cash424,460 295,636 Restricted cash409,231 367,917 
Securities available for sale at fair valueSecurities available for sale at fair value914,923 1,595,373 Securities available for sale at fair value1,021,630 1,174,653 
Loans held for saleLoans held for sale344 2,670 Loans held for sale145 76 
Loans held for investmentLoans held for investment3,655,504 2,503,561 Loans held for investment4,549,422 4,402,962 
Allowance for credit lossesAllowance for credit losses(182,100)(155,392)Allowance for credit losses(232,068)(204,531)
Loans held for investment, netLoans held for investment, net3,473,404 2,348,169 Loans held for investment, net4,317,354 4,198,431 
Accounts receivable, netAccounts receivable, net201,622 142,052 Accounts receivable, net236,234 199,085 
Property, equipment and software, netProperty, equipment and software, net248,939 171,482 Property, equipment and software, net338,749 290,135 
GoodwillGoodwill527,630 539,534 Goodwill536,418 542,571 
Intangible assetsIntangible assets63,755 78,942 Intangible assets19,828 34,434 
Commercial agreement assetsCommercial agreement assets220,082 263,196 Commercial agreement assets156,115 177,672 
Other assetsOther assets289,259 281,567 Other assets292,184 278,614 
Total Assets$7,804,751 $6,973,792 
Liabilities and Stockholders’ Equity
Total assetsTotal assets$8,407,149 $8,155,615 
Liabilities and stockholders’ equityLiabilities and stockholders’ equity
Liabilities:Liabilities:Liabilities:
Accounts payableAccounts payable$28,974 $33,072 Accounts payable$27,345 $28,602 
Payable to third-party loan ownersPayable to third-party loan owners127,378 71,383 Payable to third-party loan owners109,498 53,852 
Accrued interest payableAccrued interest payable11,971 6,659 Accrued interest payable19,589 13,498 
Accrued expenses and other liabilitiesAccrued expenses and other liabilities220,619 237,598 Accrued expenses and other liabilities160,328 180,883 
Convertible senior notes, netConvertible senior notes, net1,708,779 1,706,668 Convertible senior notes, net1,415,080 1,414,208 
Notes issued by securitization trustsNotes issued by securitization trusts1,314,212 1,627,580 Notes issued by securitization trusts2,398,758 2,165,577 
Funding debtFunding debt1,882,670 672,577 Funding debt1,709,751 1,764,812 
Total liabilities5,294,603 4,355,537 
Total LiabilitiesTotal Liabilities5,840,349 5,621,432 
Commitments and contingencies (Note 8)Commitments and contingencies (Note 8)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, 232,003,118 shares issued and outstanding as of December 31, 2022; 3,030,000,000 shares authorized, 227,255,529 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 December 31, 2022; 140,000,000 authorized, 60,109,844 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, 241,468,132 shares issued and outstanding as of September 30, 2023; 3,030,000,000 shares authorized, 237,230,381 shares issued and outstanding as of June 30, 2023Class A common stock, par value $0.00001 per share: 3,030,000,000 shares authorized, 241,468,132 shares issued and outstanding as of September 30, 2023; 3,030,000,000 shares authorized, 237,230,381 shares issued and outstanding as of June 30, 2023
Class B common stock, par value $0.00001 per share: 140,000,000 shares authorized, 59,613,755 shares issued and outstanding as of September 30, 2023; 140,000,000 authorized, 59,615,836 shares issued and outstanding as of June 30, 2023 Class B common stock, par value $0.00001 per share: 140,000,000 shares authorized, 59,613,755 shares issued and outstanding as of September 30, 2023; 140,000,000 authorized, 59,615,836 shares issued and outstanding as of June 30, 2023
Additional paid in capitalAdditional paid in capital4,716,385 4,231,303 Additional paid in capital5,355,032 5,140,850 
Accumulated deficitAccumulated deficit(2,179,608)(1,605,902)Accumulated deficit(2,763,030)(2,591,247)
Accumulated other comprehensive lossAccumulated other comprehensive loss(26,632)(7,149)Accumulated other comprehensive loss(25,205)(15,423)
Total stockholders’ equityTotal stockholders’ equity2,510,148 2,618,255 Total stockholders’ equity2,566,800 2,534,183 
Total Liabilities and Stockholders’ Equity$7,804,751 $6,973,792 
Total liabilities and stockholders’ equityTotal liabilities and stockholders’ equity$8,407,149 $8,155,615 

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)

    The following table presents the assets and liabilities of consolidated variable interest entities (“VIEs”), which are included in the interim condensed consolidated balance sheets above. The assets in the table below may only be used to settle obligations of consolidated VIEs and are in excess of those obligations. The liabilities in the table below include liabilities for which creditors do not have recourse to the general credit of the Company. Additionally, the assets and liabilities in the table below include third-party assets and liabilities of consolidated VIEs only and exclude intercompany balances that eliminate upon consolidation.
December 31, 2022June 30, 2022September 30, 2023June 30, 2023
Assets of consolidated VIEs, included in total assets aboveAssets of consolidated VIEs, included in total assets aboveAssets of consolidated VIEs, included in total assets above
Restricted cashRestricted cash$248,612 $164,530 Restricted cash$216,243 $203,872 
Loans held for investmentLoans held for investment3,153,253 2,179,026 Loans held for investment4,335,514 4,151,606 
Allowance for credit lossesAllowance for credit losses(148,125)(124,052)Allowance for credit losses(198,932)(178,252)
Loans held for investment, netLoans held for investment, net3,005,128 2,054,974 Loans held for investment, net4,136,582 3,973,354 
Accounts receivable, netAccounts receivable, net8,196 8,195 Accounts receivable, net2,958 8,196 
Other assetsOther assets17,554 14,570 Other assets16,499 18,210 
Total assets of consolidated VIEsTotal assets of consolidated VIEs$3,279,490 $2,242,269 Total assets of consolidated VIEs$4,372,282 $4,203,632 
Liabilities of consolidated VIEs, included in total liabilities aboveLiabilities of consolidated VIEs, included in total liabilities aboveLiabilities of consolidated VIEs, included in total liabilities above
Accounts payableAccounts payable$2,801 $2,897 Accounts payable$2,845 $2,894 
Accrued interest payableAccrued interest payable11,937 6,525 Accrued interest payable19,588 13,498 
Accrued expenses and other liabilitiesAccrued expenses and other liabilities17,045 15,494 Accrued expenses and other liabilities19,587 17,825 
Notes issued by securitization trustsNotes issued by securitization trusts1,314,212 1,627,580 Notes issued by securitization trusts2,398,758 2,165,577 
Funding debtFunding debt1,704,812 514,033 Funding debt1,648,297 1,656,400 
Total liabilities of consolidated VIEsTotal liabilities of consolidated VIEs3,050,807 2,166,529 Total liabilities of consolidated VIEs4,089,075 3,856,194 
Total net assets$228,683 $75,740 
Total net assets of consolidated VIEsTotal net assets of consolidated VIEs$283,207 $347,438 

The accompanying notes are an integral part of these interim condensed consolidated financial statements.
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AFFIRM HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (Unaudited)
(in thousands, except share and per share amounts)
Three Months Ended December 31,Six Months Ended December 31,Three Months Ended September 30,
202220212022202120232022
RevenueRevenueRevenue
Merchant network revenueMerchant network revenue$134,019 $127,087 $247,168 $219,331 Merchant network revenue$145,950 $113,149 
Virtual card network revenue29,117 26,558 55,825 45,953 
Card network revenueCard network revenue33,476 26,708 
Total network revenueTotal network revenue163,136 153,645 302,993 265,284 Total network revenue179,426 139,857 
Interest incomeInterest income155,321 138,355 292,123 255,657 Interest income262,679 136,802 
Gain on sales of loansGain on sales of loans59,607 57,690 123,202 88,669 Gain on sales of loans34,285 63,595 
Servicing incomeServicing income21,494 11,321 42,864 20,786 Servicing income20,157 21,370 
Total Revenue, net$399,558 $361,011 $761,182 $630,396 
Operating Expenses
Total revenue, netTotal revenue, net$496,547 $361,624 
Operating expensesOperating expenses
Loss on loan purchase commitmentLoss on loan purchase commitment$38,422 $65,265 $74,032 $116,943 Loss on loan purchase commitment$34,866 $35,610 
Provision for credit lossesProvision for credit losses106,689 52,640 170,939 116,287 Provision for credit losses99,696 64,250 
Funding costsFunding costs43,751 17,700 68,817 34,453 Funding costs73,931 25,066 
Processing and servicingProcessing and servicing66,508 41,849 120,867 67,050 Processing and servicing75,671 54,359 
Technology and data analyticsTechnology and data analytics156,747 94,989 301,708 173,002 Technology and data analytics132,965 144,961 
Sales and marketingSales and marketing188,334 143,476 352,207 207,436 Sales and marketing146,866 163,873 
General and administrativeGeneral and administrative158,639 141,292 319,611 277,496 General and administrative140,334 160,972 
Total Operating Expenses759,090 557,211 1,408,181 992,667 
Operating Loss$(359,532)$(196,200)$(646,999)$(362,271)
Other income (expense), net35,527 36,741 71,545 (103,632)
Loss Before Income Taxes$(324,005)$(159,459)$(575,454)$(465,903)
Restructuring and otherRestructuring and other1,665 — 
Total operating expensesTotal operating expenses705,994 649,091 
Operating lossOperating loss$(209,447)$(287,467)
Other income, netOther income, net38,707 36,018 
Loss before income taxesLoss before income taxes$(170,740)$(251,449)
Income tax (benefit) expenseIncome tax (benefit) expense(1,568)276 (1,748)447 Income tax (benefit) expense1,043 (180)
Net Loss$(322,437)$(159,735)$(573,706)$(466,350)
Other Comprehensive Loss
Net lossNet loss$(171,783)$(251,269)
Other comprehensive lossOther comprehensive loss
Foreign currency translation adjustmentsForeign currency translation adjustments$4,522 $2,341 $(17,024)$(1,461)Foreign currency translation adjustments$(11,898)$(21,546)
Unrealized loss on securities available for sale, net3,069 (657)(2,459)(936)
Net Other Comprehensive Loss7,591 1,684 (19,483)(2,397)
Comprehensive Loss$(314,846)$(158,051)$(593,189)$(468,747)
Unrealized gain (loss) on securities available for sale, netUnrealized gain (loss) on securities available for sale, net1,353 (5,528)
Gain on cash flow hedgesGain on cash flow hedges763 — 
Net other comprehensive lossNet other comprehensive loss(9,782)(27,074)
Comprehensive lossComprehensive loss$(181,565)$(278,343)
Per share data:Per share data:Per share data:
Net loss per share attributable to common stockholders for Class A and Class BNet loss per share attributable to common stockholders for Class A and Class BNet loss per share attributable to common stockholders for Class A and Class B
BasicBasic$(1.10)$(0.57)$(1.96)$(1.70)Basic$(0.57)$(0.86)
DilutedDiluted$(1.10)$(0.57)$(1.96)$(1.70)Diluted$(0.57)$(0.86)
Weighted average common shares outstandingWeighted average common shares outstandingWeighted average common shares outstanding
BasicBasic293,683,331 281,533,888 292,306,300 273,588,094 Basic303,839,670 290,929,270 
DilutedDiluted293,683,331 281,533,888 292,306,300 273,588,094 Diluted303,839,670 290,929,270 

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 STOCKHOLDERS’ EQUITY
(Unaudited)
(in thousands, except share amounts)

Common StockAdditional Paid-In CapitalAccumulated DeficitAccumulated Other Comprehensive Loss
Total Stockholders Equity
Common StockAdditional Paid-In CapitalAccumulated DeficitAccumulated Other Comprehensive Loss
Total Stockholders Equity
SharesAmount
Shares (1)
Total Stockholders Equity
Balance as of June 30, 2022287,365,373 $3 $4,231,303 $(1,605,902)$(7,149)$2,618,255 
Balance as of June 30, 2023Balance as of June 30, 2023296,846,217 $3 $5,140,850 $(2,591,247)$(15,423)$2,534,183 
Issuance of common stock upon exercise of stock optionsIssuance of common stock upon exercise of stock options215,949 — 1,192 — — 1,192 Issuance of common stock upon exercise of stock options495,350 — 3,625 — — 3,625 
Forfeiture of common stock related to acquisitions(243,384)— — — — — 
Repurchases of Common Stock(12,437)— (109)— — (109)
Vesting of restricted stock unitsVesting of restricted stock units2,166,715 — — — — — Vesting of restricted stock units3,740,320 — — — — — 
Vesting of warrants for common stockVesting of warrants for common stock— — 108,742 — — 108,742 Vesting of warrants for common stock— — 95,910 — — 95,910 
Stock-based compensationStock-based compensation— — 141,012 — — 141,012 Stock-based compensation— — 151,162 — — 151,162 
Tax withholding on stock-based compensationTax withholding on stock-based compensation— — (27,311)— — (27,311)Tax withholding on stock-based compensation— — (36,515)— — (36,515)
Foreign currency translation adjustmentsForeign currency translation adjustments— — — — (21,546)(21,546)Foreign currency translation adjustments— — — — (11,898)(11,898)
Unrealized loss on securities available for sale— — — — (5,528)(5,528)
Net Loss— — — (251,269)— (251,269)
Balance as of September 30, 2022289,492,216 $3 $4,454,829 $(1,857,171)$(34,223)$2,563,438 
Issuance of common stock upon exercise of stock options300,903 — 1,372 — — 1,372 
Issuance of common stock, employee share purchase plan500,443 — 5,921 — — 5,921 
Vesting of restricted stock units1,798,218 — — — — — 
Vesting of warrants for common stock— — 128,054 — — 128,054 
Stock-based compensation— — 144,218 — — 144,218 
Tax withholding on stock-based compensation— — (18,009)— — (18,009)
Foreign currency translation adjustments— — — — 4,522 4,522 
Unrealized loss on securities available for sale— — — — 3,069 3,069 
Net Loss— — — (322,437)— (322,437)
Balance as of December 31, 2022292,091,780 $3 $4,716,385 $(2,179,608)$(26,632)$2,510,148 
Unrealized gain on securities available for saleUnrealized gain on securities available for sale— — — — 1,353 1,353 
Gain on cash flow hedgesGain on cash flow hedges— — — — 763 763 
Net lossNet loss— — — (171,783)— (171,783)
Balance as of September 30, 2023Balance as of September 30, 2023301,081,887 $3 $5,355,032 $(2,763,030)$(25,205)$2,566,800 


Common StockAdditional Paid-In CapitalAccumulated DeficitAccumulated Other Comprehensive Income
Total Stockholders Equity
Shares (1)
Amount
Balance as of June 30, 2022287,365,373 $3 $4,231,303 $(1,605,902)$(7,149)$2,618,255 
Issuance of common stock upon exercise of stock options215,949 — 1,192 — — 1,192 
Forfeiture of common stock related to acquisitions(243,384)— — — — — 
Repurchases of common stock(12,437)— (109)— — (109)
Vesting of restricted stock units2,166,715 — — — — — 
Vesting of warrants for common stock— — 108,742 — — 108,742 
Stock-based compensation— — 141,012 — — 141,012 
Tax withholding on stock-based compensation— — (27,311)— — (27,311)
Foreign currency translation adjustments— — — — (21,546)(21,546)
Unrealized loss on securities available for sale— — — — (5,528)(5,528)
Net loss— — — (251,269)— (251,269)
Balance as of September 30, 2022289,492,216 $3 $4,454,829 $(1,857,171)$(34,223)$2,563,438 

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AFFIRM HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY
(Unaudited)
(in thousands, exceptThe share amounts)
Common StockAdditional Paid-In CapitalAccumulated DeficitAccumulated Other Comprehensive Income
Total Stockholders Equity
SharesAmount
Balance as of June 30, 2021269,358,104 $3 $3,467,236 $(898,485)$6,773 $2,575,527 
Issuance of common stock upon exercise of stock options7,403,503 — 37,470 — — 37,470 
Issuance of common stock in acquisition183,733 — 10,000 — — 10,000 
Vesting of restricted stock units772,653 — — — — — 
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, 2021277,717,172 $3 $3,579,764 $(1,205,100)$2,692 $2,377,359 
Issuance of common stock upon exercise of stock options4,689,973 — 21,674 — — 21,674 
Vesting of restricted stock units803,263 — — — — — 
Vesting of warrants for common stock— — 198,383 — — 198,383 
Stock-based compensation— — 101,920 — — 101,920 
Tax withholding on stock-based compensation— — (72,963)— — (72,963)
Foreign currency translation adjustments— — — — 2,341 2,341 
Unrealized gain (loss) on securities available for sale— — — — (657)(657)
Net Loss— — — (159,735)— (159,735)
Balance as of December 31, 2021283,210,408 $3 $3,828,778 $(1,364,835)$4,376 $2,468,322 
amounts listed above combine common stock, Class A common stock and Class B common stock.

The accompanying notes are an integral part of these interim condensed consolidated financial statements.
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AFFIRM HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Six Months Ended December 31,Three Months Ended September 30,
2022202120232022
Cash Flows from Operating Activities
Net Loss$(573,706)$(466,350)
Cash flows from operating activitiesCash flows from operating activities
Net lossNet loss$(171,783)$(251,269)
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 lossesProvision for credit losses170,939 116,287 Provision for credit losses99,696 64,250 
Amortization of premiums and discounts on loans, netAmortization of premiums and discounts on loans, net(68,853)(87,678)Amortization of premiums and discounts on loans, net(41,138)(34,595)
Gain on sales of loansGain on sales of loans(123,202)(88,669)Gain on sales of loans(34,285)(63,595)
Changes in fair value of assets and liabilitiesChanges in fair value of assets and liabilities(11,035)104,900 Changes in fair value of assets and liabilities(4,110)3,906 
Amortization of commercial agreement assetsAmortization of commercial agreement assets43,114 43,885 Amortization of commercial agreement assets21,557 21,557 
Amortization of debt issuance costsAmortization of debt issuance costs1,752 9,568 Amortization of debt issuance costs5,534 1,076 
Amortization of discount on securities available for saleAmortization of discount on securities available for sale(14,923)— Amortization of discount on securities available for sale(12,120)(7,620)
Commercial agreement warrant expenseCommercial agreement warrant expense236,796 64,854 Commercial agreement warrant expense95,910 108,743 
Stock-based compensationStock-based compensation241,583 181,726 Stock-based compensation112,359 119,808 
Depreciation and amortizationDepreciation and amortization43,886 22,505 Depreciation and amortization40,131 20,882 
Impairment of right of use assetsImpairment of right of use assets752 — 
OtherOther1,136 (5,198)Other(4,730)2,053 
Change in operating assets and liabilities:Change in operating assets and liabilities:Change in operating assets and liabilities:
Purchases of loans held for salePurchases of loans held for sale(3,323,750)(2,614,002)Purchases of loans held for sale(1,222,224)(1,655,213)
Proceeds from the sale of loans held for saleProceeds from the sale of loans held for sale3,428,673 2,607,759 Proceeds from the sale of loans held for sale1,228,110 1,707,838 
Accounts receivable, netAccounts receivable, net(63,416)(48,117)Accounts receivable, net(42,208)(6,649)
Other assetsOther assets(13,727)65,422 Other assets(12,566)(3,000)
Accounts payableAccounts payable(4,098)(12,169)Accounts payable(1,257)1,462 
Payable to third-party loan ownersPayable to third-party loan owners55,995 21,436 Payable to third-party loan owners55,646 19,428 
Accrued interest payableAccrued interest payable5,903 (131)Accrued interest payable6,264 (1,078)
Accrued expenses and other liabilitiesAccrued expenses and other liabilities(10,400)8,868 Accrued expenses and other liabilities(20,636)3,231 
Net Cash Provided by (Used in) Operating Activities22,667 (75,104)
Cash Flows from Investing Activities
Net cash provided by operating activitiesNet cash provided by operating activities98,902 51,215 
Cash flows from investing activitiesCash flows from investing activities
Purchases and origination of loans held for investmentPurchases and origination of loans held for investment(6,535,457)(4,652,346)Purchases and origination of loans held for investment(4,229,667)(2,744,825)
Proceeds from the sale of loans held for investmentProceeds from the sale of loans held for investment702,987 780,276 Proceeds from the sale of loans held for investment899,238 326,713 
Principal repayments and other loan servicing activityPrincipal repayments and other loan servicing activity4,628,825 3,563,123 Principal repayments and other loan servicing activity3,184,851 2,206,725 
Acquisition, net of cash and restricted cash acquired— (5,999)
Additions to property, equipment and softwareAdditions to property, equipment and software(65,401)(38,159)Additions to property, equipment and software(35,817)(31,151)
Purchases of securities available for salePurchases of securities available for sale(105,629)(511,724)Purchases of securities available for sale(96,813)(104,629)
Proceeds from maturities and repayments of securities available for saleProceeds from maturities and repayments of securities available for sale798,149 59,126 Proceeds from maturities and repayments of securities available for sale262,293 464,492 
Other investing cash inflows (outflows)1,588 (13,870)
Other investing cash inflows/(outflows)Other investing cash inflows/(outflows)56 (52)
Net cash provided by (used in) investing activitiesNet cash provided by (used in) investing activities(15,859)117,273 
Cash flows from financing activitiesCash flows from financing activities
Net Cash Used in Investing Activities(574,938)(819,573)
Cash Flows from Financing Activities
Proceeds from issuance of convertible debt, net— 1,704,300 
Proceeds from funding debtProceeds from funding debt3,367,729 1,497,674 Proceeds from funding debt2,896,251 1,193,761 
Payment of debt issuance costsPayment of debt issuance costs(4,773)(8,151)Payment of debt issuance costs(10,490)(7,423)
Principal repayments of funding debtPrincipal repayments of funding debt(2,147,035)(1,527,568)Principal repayments of funding debt(2,938,674)(1,059,607)
Proceeds from issuance of notes and residual trust certificates by securitization trustsProceeds from issuance of notes and residual trust certificates by securitization trusts250,000 499,640 Proceeds from issuance of notes and residual trust certificates by securitization trusts750,000 249,931 
Principal repayments of notes issued by securitization trustsPrincipal repayments of notes issued by securitization trusts(559,383)(102,467)Principal repayments of notes issued by securitization trusts(515,377)(150,713)
Proceeds from exercise of common stock options and warrants and contributions to ESPPProceeds from exercise of common stock options and warrants and contributions to ESPP8,246 59,569 Proceeds from exercise of common stock options and warrants and contributions to ESPP3,611 1,013 
Repurchases of common stockRepurchases of common stock(109)(4)Repurchases of common stock— (109)
Payments of tax withholding for stock-based compensationPayments of tax withholding for stock-based compensation(45,320)(112,780)Payments of tax withholding for stock-based compensation(36,515)(27,311)
Net Cash Provided by Financing Activities869,355 2,010,213 
Net cash provided by financing activitiesNet cash provided by financing activities148,806 199,542 
Effect of exchange rate changes on cash, cash equivalents and restricted cashEffect of exchange rate changes on cash, cash equivalents and restricted cash(3,098)6,635 Effect of exchange rate changes on cash, cash equivalents and restricted cash(3,301)(5,299)
Net Increase in Cash, Cash Equivalents and Restricted Cash313,986 1,122,171 
Cash, Cash equivalents and Restricted cash, Beginning of period1,550,807 1,692,632 
Cash, Cash Equivalents and Restricted Cash, End of Period$1,864,793 $2,814,803 
Net increase in cash, cash equivalents and restricted cashNet increase in cash, cash equivalents and restricted cash228,548 362,731 
Cash, cash equivalents and restricted cash, beginning of periodCash, cash equivalents and restricted cash, beginning of period1,259,944 1,550,807 
Cash, cash equivalents and restricted cash, end of periodCash, cash equivalents and restricted cash, end of period$1,488,492 $1,913,538 

The accompanying notes are an integral part of these interim condensed consolidated financial statements.
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AFFIRM HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS, CONT.
(Unaudited)
(in thousands)

Three Months Ended September 30,
20232022
Reconciliation to amounts on consolidated balance sheets (as of period end)
Cash and cash equivalents1,079,261 1,530,132 
Restricted cash409,231 383,406 
Total cash, cash equivalents and restricted cash$1,488,492 $1,913,538 

Three Months Ended September 30,
20232022
Supplemental disclosures of cash flow information
Cash payments for interest expense$64,868 $22,819 
Cash paid for operating leases4,104 4,167 
Cash paid for income taxes312 138 
Supplemental disclosures of non-cash investing and financing activities
Stock-based compensation included in capitalized internal-use software38,803 21,204 

The accompanying notes are an integral part of these interim condensed consolidated financial statements.
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AFFIRM HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS, CONT.
(Unaudited)
(in thousands)

Six Months Ended December 31,
20222021
Reconciliation to amounts on consolidated balance sheets (as of period end)
Cash and cash equivalents1,440,333 2,567,401 
Restricted cash424,460 247,402 
Total Cash, Cash Equivalents and Restricted Cash$1,864,793 $2,814,803 

Six Months Ended December 31,
20222021
Supplemental Disclosures of Cash Flow Information
Cash payments for interest expense$55,900 $23,143 
Cash paid for operating leases8,244 8,232 
Cash paid for income taxes212 80 
Supplemental Disclosures of Non-Cash Investing and Financing Activities
Stock-based compensation included in capitalized internal-use software43,647 25,073 
Issuance of common stock in connection with acquisition— 10,000 
Additions to property and equipment included in accrued expenses— 107 
Right of use assets obtained in exchange for operating lease liabilities494 — 

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

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

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

2.   Summary of Significant Accounting Policies

Basis of Presentation and Principles of Consolidation

The accompanying interim condensed consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”), as contained in the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”), disclosure requirements for interim financial information, and the requirements of Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. The unaudited interim condensed consolidated financial statements should be read in conjunction with the audited financial statements and notes thereto for the fiscal year ended June 30, 2022.2023. The balance sheet as of June 30, 20222023 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 purchase commitment, the fair value of
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purchase commitment, the fair value of servicing assets and liabilities, discount on directly originatedself-originated loans, the fair value of assets acquired and any contingent consideration transferred in business combinations, the evaluation for impairment of intangible assets and goodwill, the fair value of available for sale debt securities including retained interests in our securitization trusts, the fair value of residual certificates issued by our securitization trusts held by third parties, and stock-based compensation, including the fair value of warrants issued to nonemployees. We base our estimates on market-based inputs, historical experience, current events, and other factors we believe to be reasonable under the circumstances. These estimates are subjective in nature and toTo the extent that there are material differences between these estimates and actual results, our financial condition or operating results in future periods maywill be materially affected.

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

Significant Accounting Policies

There were no material changes to our significant accounting policies as disclosed in Note 2. Summary of Significant Accounting Policies of our Annual Report on Form 10-K for the fiscal year ended June 30, 2022,2023, which was filed with the SEC on August 29, 2022.

Recently Adopted Accounting Standards

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.

Recent Accounting Pronouncements Not Yet Adopted

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.
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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 effective for all entities upon their respective issuance dates through December 31, 2024. We have reviewed all our financial agreements that utilize LIBOR as the reference rate and determined there is no impact to our interim condensed consolidated financial statements as of December 31, 2022. Throughout the 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 these amendments and will determine any impact on our consolidated financial statements and disclosures, as applicable.

25, 2023.

3.   Revenue

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

Three Months Ended December 31,Six Months Ended December 31,
2022202120222021Three Months Ended September 30,
20232022
Merchant network revenueMerchant network revenue$134,019 $127,087 $247,168 $219,331 Merchant network revenue$145,950 $113,149 
Virtual card network revenue29,117 26,558 55,825 45,953 
Card network revenueCard network revenue33,476 26,708 
Interest incomeInterest income155,321 138,355 292,123 255,657 Interest income262,679 136,802 
Gain on sales of loansGain on sales of loans59,607 57,690 123,202 88,669 Gain on sales of loans34,285 63,595 
Servicing incomeServicing income21,494 11,321 42,864 20,786 Servicing income20,157 21,370 
Total Revenue, net$399,558 $361,011 $761,182 $630,396 
Total revenue, netTotal revenue, net$496,547 $361,624 

Merchant Network Revenue — Revenue from Contracts with Customers

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

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

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

We may originate certain loans via our wholly-owned subsidiaries, with zero or below market interest rates. In these instances, the par value of the loans originated is in excess of the fair market value of such loans, resulting
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in a loss on loan origination, 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, weWe 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 six months ended December 31,September 30, 2023 and 2022, there were no merchants that exceeded 10% of total revenue. For the three and six months ended December 31, 2021, approximately 11% and 10% of total revenue, respectively, was driven by one merchant.

Virtual Card Network Revenue — Revenue from Contracts with Customers

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

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

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

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

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

Interest income consisted of the following components (in thousands):
Three Months Ended December 31,Six Months Ended December 31,Three Months Ended September 30,
202220212022202120232022
Interest income on unpaid principal balance$125,858 $88,674 $231,996 $171,615 
Contractual interest income on unpaid principal balanceContractual interest income on unpaid principal balance$226,158 $106,138 
Amortization of discount on loansAmortization of discount on loans38,838 54,965 77,807 93,410 Amortization of discount on loans45,118 38,969 
Amortization of premiums on loansAmortization of premiums on loans(4,580)(2,995)(8,954)(5,732)Amortization of premiums on loans(3,980)(4,374)
Interest receivable charged-off, net of recoveriesInterest receivable charged-off, net of recoveries(4,795)(2,289)(8,726)(3,636)Interest receivable charged-off, net of recoveries(4,617)(3,931)
Total interest incomeTotal interest income$155,321 $138,355 $292,123 $255,657 Total interest income$262,679 $136,802 

We accrue interest income using the effective interest method.method, which includes the amortization of any discounts or premiums on loan receivables created upon the purchase of a loan from our originating bank partners or upon the origination of a loan. Interest income on a loan is accrued daily, based on the finance charge disclosed to the consumer, over the term of the loan based upon the principal outstanding. The accrual of interest on a loan is suspended if a formal dispute with the consumer involving either Affirm or the merchant of record is opened, or a loan is 120 days past due. Upon the resolution of a dispute with the consumer, the accrual of interest is resumed, and any interest that would have been earned during the disputed period is retroactively accrued. As of December 31, 2022September 30, 2023 and June 30, 2022,2023, the balance of loans held for investment on non-accrual status was $1.2 million and $1.8 million, and $1.7 million, respectively.

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

Gain on Sales of Loans

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



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Servicing Income

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

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4.   Loans Held for Investment and Allowance for Credit Losses

    Loans held for investment consisted of the following (in thousands):
December 31, 2022June 30, 2022September 30, 2023June 30, 2023
Unpaid principal balanceUnpaid principal balance$3,691,398 $2,516,733 Unpaid principal balance$4,585,570 $4,451,324 
Accrued interest receivableAccrued interest receivable32,855 20,697 Accrued interest receivable46,886 41,079 
Premiums on loans held for investmentPremiums on loans held for investment9,081 8,911 Premiums on loans held for investment6,828 7,135 
Less: Discount due to loss on loan purchase commitmentLess: Discount due to loss on loan purchase commitment(38,615)(20,692)Less: Discount due to loss on loan purchase commitment(49,805)(51,190)
Less: Discount due to loss on directly originated loansLess: Discount due to loss on directly originated loans(38,381)(20,443)Less: Discount due to loss on directly originated loans(40,025)(45,145)
Less: Fair value adjustment on loans acquired through business combinationLess: Fair value adjustment on loans acquired through business combination(834)(1,645)Less: Fair value adjustment on loans acquired through business combination(32)(241)
Total loans held for investmentTotal loans held for investment$3,655,504 $2,503,561 Total loans held for investment$4,549,422 $4,402,962 

Loans held for investment includes loans originated through our originating bank partners and directly originated loans. The majority of the loans that are underwritten using our technology platform and originated by our originating bank partners are later purchased by us. We purchased loans from our originating bank partners in the amount of $4.4$4.6 billion and $7.9$3.5 billion during the three and six months ended December 31,September 30, 2023 and 2022, respectively, and $3.4 billion and $5.6 billion during the three and six months ended December 31, 2021, 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 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 consumersconsumer's attributes that are shown to be predictive of both willingness and ability to repay including, but not limited to: basic features of a consumersconsumer's credit profile, a consumersconsumer'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 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 ITACSITACs score, of the amortized cost basis excluding accrued interest receivable, by fiscal year of origination on loans held for investment and loans held for sale (in thousands) as of December 31, 2022 and JuneSeptember 30, 2022:2023:
December 31, 2022
Amortized Costs Basis by Fiscal Year of Origination
20232022202120202019PriorTotal
96+$1,900,886 $239,706 $53,982 $16,500 $10 $$2,211,085 
94-96770,581 127,269 2,079 360 900,297 
90-9486,105 40,435 530 — 127,076 
<9023,650 5,315 12 — — 28,979 
No score(1)
217,011 110,920 24,002 3,266 328 29 355,556 
Total amortized cost basis$2,998,233 $523,645 $80,605 $20,130 $348 $32 $3,622,993 

September 30, 2023
Amortized Costs Basis by Fiscal Year of Origination
20242023202220212020PriorTotal
96+$1,293,647 $1,393,864 $28,287 $8,601 $26 $10 $2,724,435 
94 – 96565,028 614,611 3,550 211 15 1,183,422 
90 – 9496,511 65,347 1,562 18 163,444 
<9012,675 2,300 1,032 — 16,013 
No score (1)
133,271 232,740 41,876 6,721 254 215 415,077 
Total amortized cost basis$2,101,132 $2,308,862 $76,307 $15,555 $299 $237 $4,502,391 
(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
20232022202120202019PriorTotal
Current period charge-offs(15,426)(131,629)(5,142)(337)(45)(19)(152,598)
Current period recoveries1,106 7,963 3,107 1,017 684 494 14,371 
Current period net charge-offs$(14,320)$(123,666)$(2,035)$680 $639 $475 $(138,227)
The following table presents net charge-offs by fiscal year of origination for the three months ended (in thousands) as of September 30, 2023:

June 30, 2022
Amortized Costs Basis by Fiscal Year of Origination
20222021202020192018PriorTotal
96+$1,218,104 $122,503 $33,458 $157 $$— $1,374,223 
94-96620,403 11,240 773 13 — 632,431 
90-94220,056 3,886 — — 223,952 
<9044,300 135 — — — 44,437 
No score186,044 20,554 3,368 444 79 210,491 
Total amortized cost basis$2,288,907 $158,318 $37,607 $618 $82 $$2,485,534 
September 30, 2023
Net Charge-offs by Fiscal Year of Origination
20242023202220212020PriorTotal
Current period charge-offs(1,329)(65,283)(3,916)(234)(46)(34)(70,842)
Current period recoveries17 2,830 2,399 275 27 5,552 
Current period net charge-offs(1,312)(62,453)(1,517)41 (41)(7)(65,290)

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

June 30, 2023
Amortized Costs Basis by Fiscal Year of Origination
20232022202120202019PriorTotal
96+$2,628,060 $39,428 $18,910 $3,439 $$$2,689,847 
94 – 961,104,553 7,755 439 77 1,112,832 
90 – 94133,940 3,116 26 — 137,088 
<9013,363 1,623 — — 14,992 
No score (1)
335,690 59,204 11,562 489 252 407,206 
Total amortized cost basis$4,215,606 $111,126 $30,941 $4,009 $271 $12 $4,361,965 
(1)This balance represents loan receivables in markets without sufficient data currently available for use by the Affirm scoring methodology including loan receivables originated in Canada.   

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Loan receivables are defined as past due if either the principal or interest have not been received within four calendars days of when they are due in accordance with the agreed upon contractual terms. The following table presents an aging analysis of the amortized cost basis excluding accrued interest receivable of loans held for investment and loans held for sale by delinquency status (in thousands):
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December 31, 2022June 30, 2022September 30, 2023June 30, 2023
Non-delinquent loansNon-delinquent loans$3,445,851 $2,322,919 Non-delinquent loans$4,270,534 $4,183,248 
4 – 29 calendar days past due4 – 29 calendar days past due79,930 77,963 4 – 29 calendar days past due120,564 92,876 
30 – 59 calendar days past due30 – 59 calendar days past due38,952 34,669 30 – 59 calendar days past due46,927 36,399 
60 – 89 calendar days past due60 – 89 calendar days past due29,261 26,919 60 – 89 calendar days past due34,279 28,171 
90 – 119 calendar days past due (1)
90 – 119 calendar days past due (1)
28,999 23,064 
90 – 119 calendar days past due(1)
30,087 21,271 
Total amortized cost basisTotal amortized cost basis$3,622,993 $2,485,534 Total amortized cost basis$4,502,391 $4,361,965 
(1)Includes $27.8$29.7 million and $22.7$20.9 million of loan receivables as of December 31, 2022September 30, 2023 and June 30, 2022,2023, respectively, that are 90 days or more past due, but are not on nonaccrual status. 

We maintain an allowance for credit losses at a level sufficient to absorb expected credit losses based on evaluating known and inherent risks in our loan portfolio. The allowance for credit losses 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-offcharged off in accordance with our charge-off policy, as the contractual principal becomes 120 days past due. Subsequent recoveries of the unpaid principal balance, if any, are credited to the allowance for credit losses.

The following table details activity in the allowance for credit losses, including charge-offs, recoveries and provision for loan losses (in thousands):
Three Months Ended
December 31,
Six Months Ended
December 31,
Three Months Ended
September 30,
202220212022202120232022
Balance at beginning of periodBalance at beginning of period$153,025 $152,021 $155,392 $117,760 Balance at beginning of period$204,531 $155,392 
Provision for credit losses103,066 49,695 164,935 110,699 
Provision for loan lossesProvision for loan losses92,827 61,869 
Charge-offsCharge-offs(81,562)(47,573)(152,598)(78,027)Charge-offs(70,842)(71,036)
Recoveries of charged-off receivablesRecoveries of charged-off receivables7,571 4,146 14,371 7,857 Recoveries of charged-off receivables5,552 6,800 
Balance at end of periodBalance at end of period$182,100 $158,289 $182,100 $158,289 Balance at end of period$232,068 $153,025 

Loan Modifications for Borrowers Experiencing Financial Difficulty

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

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

The following table presents the amortized cost basis of loans excluding accrued interest receivable that were modified for borrowers experiencing financial difficulty during the three months ended September 30, 2023, by type of modification (in thousands):

Three Months Ended September 30, 2023
Payment DeferralLoan
Re-amortization
Total% of Total Loan Receivables Outstanding
Loans receivables2,801 152 2,953 0.07 %

With respect to borrowers who received payment deferrals during the three months ended September 30, 2023, the length of each deferral period was one month.

With respect to borrowers who received loan re-amortization during the three months ended September 30, 2023, the payment amount was reduced by half and the term of the loan was extended between two and twelve months.

We closely monitor the performance of loans that are modified for borrowers experiencing financial difficulty to understand the effectiveness of our modification efforts. We hold an allowance for credit losses for modified loans classified as held for investment. Our allowance estimate considers whether a loan has been modified due to a borrower experiencing financial difficulty and the increased likelihood that such loan may become delinquent or charge-off in the future.

The following table presents the delinquency status as of September 30, 2023 (in thousands), by amortized cost basis excluding accrued interest receivable, of loan receivables that have been modified within the last 12 months where the borrower was experiencing financial difficulty at the time of modification:

September 30, 2023
Payment DeferralLoan Re-amortizationTotal
Non-delinquent loans$4,515 $268 $4,783 
4 – 29 calendar days past due1,304 112 1,416 
30 – 59 calendar days past due139 65 204 
60 – 89 calendar days past due75 81 
90 – 119 calendar days past due65 67 
Total amortized cost basis$6,098 $453 $6,551 

With respect to modifications during the last 12 months where the borrower was experiencing financial difficulty at the time of modification, the amortized cost basis of loans which have been subsequently charged off, or are delinquent by 60 days or more as of September 30, 2023, is immaterial.




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5. Acquisitions

There were no acquisitions accounted for as business combinations completed in the three and six months ended December 31,September 30, 2023 and 2022. During the three and six months ended December 31, 2021, we completed one acquisition accounted for as business combinations, discussed further below.

Acquisitions completed during the three and six monthsyear ended December 31, 2021June 30, 2023

ShopBrainButter Holdings Ltd

On JulyFebruary 1, 2021, Affirm2023, we completed the acquisitionclosing of technology and intellectual property from Yroo, Inc. andthe transaction contemplated by a share purchase agreement entered into employment arrangements with certain sellers to acquire the entire issued share capital of its employeesButter Holdings Ltd. (“the ShopBrain acquisition”Butter”). Yroo, Inc. is, a data aggregation and cataloging technologybuy now, pay later company based in Canada (“ShopBrain”).the United Kingdom. The purchase price was comprised of (i) $30.0$14.9 million in cash, subject to adjustments in accordance with the purchase agreement, and (ii) 151,745 shares$1.5 million settlement of our Class A common stock issued to the shareholders of ShopBrain at closing.subordinated secured notes.

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The acquisition date fair value of the consideration transferred for Butter was approximately $40.0$16.3 million, which consisted of the following (in thousands):

Cash$30,00014,863 
Fair valueSettlement of Class A common stock transferredsubordinated secured notes10,0001,475 
Total acquisition date fair value of the consideration transferred$40,00016,337 

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 and the value of the assembled workforce.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 $40.0$16.3 million to the fair values of the assets acquired and liabilities assumed at the acquisition date (in thousands):

Intangible assetsCash and cash equivalents$9,488287 
Loans held for investment, net172 
Accounts receivable, net11 
Intangible assets9,243 
Other assets672 
Total net assets acquired9,48810,385 
Accounts payable568 
Accrued expenses and other liabilities2,923 
Total liabilities assumed3,491 
Net assets acquired6,894 
Goodwill30,5129,443 
Total purchase price$40,00016,337 





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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 ValueUseful Life
(in years)
Developed technology$9,488 3.0

Fair ValueUseful Life
(in years)
Lending license$9,243 Indefinite


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

TheThere were no transaction costs associated with the acquisition were approximately $0.1 million and $0.2 million for the three and six months ended December 31, 2021, respectively, which are included in general and administrative expense within the interim condensed consolidated statements of operations and comprehensive loss.
September 30, 2023.

Other acquisitions

Fast

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.
The acquisition was accounted for as an asset acquisition in accordance with ASC 805 since the assets acquired do not meet the definition of a business. The acquired identifiable intangible assets have been recorded at a total cost of $25.4 million, which includes approximately $0.4 million of transaction costs associated with the acquisition. The excess of the total cost of the assets over their total fair value was allocated between the assets on the basis of their 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.
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The following table sets forth the identifiable intangible assets acquired and the cost allocated to each asset as of the date of acquisition (in thousands):

Assembled workforce$12,490 
Option to purchase developed technology$12,925 
Total$25,415 

The assembled workforce intangible asset has an expected useful life of 1.5 years. The developed technology asset will be amortized over its expected useful life if the associated assets are purchased and entered into service.


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. WeFor each of these groups, we evaluate accounts receivable to determine management’s current estimate of expected credit losses based on historical experience and future expectations and record an allowance for credit losses, as applicable.losses. Our allowance for credit losses with respect to accounts receivable was $11.8$11.0 million and $13.9$12.9 million as of December 31, 2022September 30, 2023 and June 30, 2022,2023, respectively.

Property, Equipment and Software, net

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

December 31, 2022June 30, 2022September 30, 2023June 30, 2023
Internally developed softwareInternally developed software$298,683 $200,621 Internally developed software$443,992 $377,301 
Leasehold improvementsLeasehold improvements19,394 16,169 Leasehold improvements20,279 20,214 
Computer equipmentComputer equipment12,192 10,751 Computer equipment10,252 10,187 
Furniture and equipmentFurniture and equipment6,827 4,279 Furniture and equipment6,586 6,503 
Total Property, equipment and software, at cost$337,096 $231,820 
Total property, equipment and software, at costTotal property, equipment and software, at cost$481,109 $414,205 
Less: Accumulated depreciation and amortizationLess: Accumulated depreciation and amortization(88,157)(60,338)Less: Accumulated depreciation and amortization(142,360)(124,070)
Total Property, equipment and software, net$248,939 $171,482 
Total property, equipment and software, netTotal property, equipment and software, net$338,749 $290,135 

Depreciation and amortization expense on property, equipment and software was $15.6$26.0 million and $29.1$13.5 million for the three and six months ended December 31,September 30, 2023 and 2022, respectively, and $6.5 million and $11.5 million for the three and six months ended December 31, 2021, respectively. Depreciation expense on leasehold improvements, furniture and equipment, and computer equipment is allocated between general and administrative, technology and data analytics, sales and marketing, and processing and servicing based on employee headcount in the interim condensed consolidated statements of operations and comprehensive loss. Amortization expense on internally developed software is included as a component of technology and data analytics in the interim condensed consolidated statements of operations and comprehensive loss.

No impairment losses related to property, equipment and software were recorded during the three and six months ended December 31, 2022September 30, 2023 and 2021.2022.

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Goodwill and Intangible Assets

The changes in the carrying amount of goodwill during the sixthree months ended December 31, 2022September 30, 2023 were as follows (in thousands):

Balance as of June 30, 20222023$539,534542,571 
Additions— 
Effect of foreign currency translationAdjustments (1)
(11,904)(6,152)
Balance as of December 31, 2022September 30, 2023$527,630536,418 
(1)Adjustments to goodwill during the three months ended September 30, 2023 primarily pertained to foreign currency translation adjustments.

No impairment losses related to goodwill were recorded during the three and six months ended December 31, 2022September 30, 2023 and 2021.2022.

Intangible assets consisted of the following (in thousands):
December 31, 2022September 30, 2023
GrossAccumulated AmortizationNetWeighted Average Remaining Useful Life
(in years)
GrossAccumulated AmortizationNetWeighted Average Remaining Useful Life
(in years)
Merchant relationshipsMerchant relationships$37,932 $(14,133)$23,799 3.1Merchant relationships$37,914 $(35,129)$2,786 0.3
Developed technology (1)
Developed technology (1)
39,499 (22,173)17,326 1.4
Developed technology (1)
39,488 (34,935)4,553 0.4
Assembled workforceAssembled workforce12,490 (5,857)6,633 0.8Assembled workforce12,490 (12,079)410 0.1
Trademarks and domains, definiteTrademarks and domains, definite1,460 (884)576 2.0Trademarks and domains, definite1,458 (1,027)431 1.5
Trademarks and domains, indefinite2,146 — 2,146 Indefinite
Trademarks, licenses and domains, indefiniteTrademarks, licenses and domains, indefinite11,298 — 11,298 Indefinite
Other intangiblesOther intangibles350 — 350 IndefiniteOther intangibles350 — 350 Indefinite
Total intangible assetsTotal intangible assets$93,877 $(43,047)$50,830 Total intangible assets$102,998 $(83,170)$19,828 
June 30, 2023
GrossAccumulated AmortizationNetWeighted Average
Remaining Useful Life
(in years)
Merchant relationships$38,129 $(27,637)$10,492 0.6
Developed technology39,626 (30,653)8,973 0.6
Assembled workforce12,490 (9,983)2,507 0.3
Trademarks and domains, definite1,481 (990)491 1.7
Trademarks, licenses and domains, indefinite11,621 — 11,621 Indefinite
Other intangibles350 — 350 Indefinite
Total intangible assets$103,697 $(69,263)$34,434 

June 30, 2022
GrossAccumulated AmortizationNetWeighted Average
Remaining Useful Life
(in years)
Merchant relationships$38,371 $(10,281)$28,090 3.6
Developed technology (1)
39,782 (15,882)23,900 1.9
Assembled workforce12,490 (1,664)10,826 1.3
Trademarks and domains, definite1,507 (802)705 2.4
Trademarks and domains, indefinite2,146 — 2,146 Indefinite
Other intangibles350 — 350 Indefinite
Total intangible assets$94,646 $(28,629)$66,017 

(1)Amortization expense for intangible assets was $14.2 million and $7.4 million for the Excludes anthree months ended September 30, 2023 and 2022, respectively. No impairment losses related to intangible asset inassets were recorded during the amount of $12.9 million which represents the right to purchase developed technology in connection with the Fast asset acquisition. Amortization of this asset will begin when the purchase of the developed technology assets is completethree months ended September 30, 2023 and are placed into service. Refer to Note 5. Acquisitions for more information.2022.

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Amortization expense for intangible assets was $7.4 million and $14.8 million for the three and six months ended December 31, 2022, respectively, and $5.5 million and $11.0 million for the three and six months ended December 31, 2021, respectively. Noimpairment losses related to intangible assets were recorded during the three and six months ended December 31, 2022 and 2021.

The expected future amortization expense of these intangible assets as of December 31, 2022September 30, 2023 is as follows (in thousands):

2023 (remaining six months)$14,644 
202421,520 
2024 (remaining nine months)2024 (remaining nine months)$6,646 
202520257,167 20251,365 
202620264,988 2026155 
2027 and thereafter15 
2027202715 
2028 and thereafter2028 and thereafter— 
Total amortization expenseTotal amortization expense$48,334 Total amortization expense$8,180 

Commercial Agreement Assets

During the year ended June 30, 2022,In November 2021, 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 3.2three year term of the commercial agreement at the grant date. For the three and six months ended December 31, September 30, 2023 and 2022, we recognized amortization expense of $10.5 million and $20.9 million, respectively, and $5.8$10.4 million for both the three and six months ended December 31, 2021periods in our interim condensed consolidated statements of operations and comprehensive loss as a component of sales and marketing expense. Refer to Note 14. Stockholders’ Equity for further discussion of the warrants.

During the year ended June 30, 2021,In July 2020, 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 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 December 31, 2022.September 30, 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 six months ended December 31, September 30, 2023 and 2022, we recorded amortization expense related to the commercial agreement asset of $9.1 million and $18.1 million, respectively, and $17.0 million and $34.0$9.0 million for the three and six months ended December 31, 2021, respectively,both periods in our interim condensed consolidated statements of operations and comprehensive loss as a component of sales and marketing expense.

During the year ended June 30,In January 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 six months ended December 31, September 30, 2023 and 2022, we recorded amortization expense related to the asset of $2.1 million and $4.2 million, respectively, and $2.1 million and $4.0 million for the three and six months ended December 31, 2021, respectively,both periods in our interim condensed consolidated statements of operations and comprehensive loss as a component of sales and marketing expense.

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Other Assets

    Other assets consisted of the following (in thousands):
December 31, 2022June 30, 2022September 30, 2023June 30, 2023
Processing reservesProcessing reserves$65,421 $60,039 
Equity securities, at costEquity securities, at cost51,870 43,172 
Derivative instrumentsDerivative instruments$69,615 $49,983 Derivative instruments41,216 50,545 
Operating lease right-of-use assetsOperating lease right-of-use assets43,614 50,671 Operating lease right-of-use assets27,227 30,171 
Equity securities, at cost43,172 43,172 
Processing reserves35,411 26,483 
Prepaid payroll taxes for stock-based compensationPrepaid payroll taxes for stock-based compensation29,508 14,336 
Prepaid expensesPrepaid expenses34,306 37,497 Prepaid expenses25,544 35,626 
Prepaid payroll taxes for stock-based compensation14,338 35,172 
Other receivables21,739 17,221 
Other assetsOther assets27,064 21,368 Other assets51,398 44,725 
Total other assetsTotal other assets$289,259 $281,567 Total other assets$292,184 $278,614 

Accrued Expenses and Other Liabilities

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

December 31, 2022June 30, 2022September 30, 2023June 30, 2023
Collateral held for derivative instruments$68,374 $55,779 
Operating lease liabilityOperating lease liability57,492 65,713 Operating lease liability$49,071 $52,557 
Accrued expensesAccrued expenses52,865 67,343 Accrued expenses42,173 50,704 
Contingent consideration liability12,510 23,348 
Collateral held for derivative instrumentsCollateral held for derivative instruments41,401 53,267 
Other liabilitiesOther liabilities29,378 25,415 Other liabilities27,683 24,355 
Total accrued expenses and other liabilitiesTotal accrued expenses and other liabilities$220,619 $237,598 Total accrued expenses and other liabilities$160,328 $180,883 

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 nine months to one year. As of December 31, 2022,September 30, 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 eightseven years.

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 $8.9 million and $9.7 million as of both December 31, 2022September 30, 2023 and June 30, 2022.2023, respectively.

During the three months ended September 30, 2023, we decided to sublease a portion of our leased office space in San Francisco. As a result, we recorded a lease impairment charge of $0.8 million related to several of our operating lease ROU assets, included in general and administrativeexpense on our interim consolidated statements of operations and comprehensive loss. There was no impairment expense incurred related to leases during the three and six months ended December 31, 2022 and 2021.September 30, 2022.

The components of operating lease expenses are as follows (in thousands):




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Three Months Ended December 31,Six Months Ended December 31,
2022202120222021
Operating lease expense$3,672$3,692$7,516$7,500
Operating lease expense is as follows (in thousands):

Three Months Ended September 30,
20232022
Operating lease expense (1)
$2,986$3,800
(1)Lease expenses for our short-term leases were immaterial for the periods presented.

We have subleased a portion of our leased facilities. Sublease income totaled $0.9 million and $1.7 million during the three and six months ended December 31, 2022, respectively,September 30, 2023 and $0.9 million and $1.5 million during the three and six months ended December 31, 2021, respectively.2022.

Lease term and discount rate information are summarized as follows:
December 31, 2022September 30, 2023
Weighted average remaining lease term (in years)4.33.7
Weighted average discount rate4.7%4.8%

MaturitiesAs of September 30, 2023, future minimum lease liabilities as of December 31, 2022payments are as follows (in thousands) for the years ended::
2023 (remaining six months)$6,291 
202416,503 
2024 (remaining nine months)2024 (remaining nine months)$12,380 
2025202516,317 202516,317 
2026202615,371 202615,371 
2027 and thereafter10,368 
202720272,680 
202820282,185 
ThereafterThereafter5,503 
Total lease paymentsTotal lease payments64,850 Total lease payments54,436 
Less imputed interestLess imputed interest(7,358)Less imputed interest(5,365)
Present value of lease liabilities$57,492 
Present value of total lease liabilitiesPresent value of total lease liabilities$49,071 

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 representationrepresentations and warranties is identified. Generally, a breach in representationrepresentations and warranties wouldcould 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. This amount was not material as of December 31, 2022.September 30, 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 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. Plaintiff sought class certification, unspecified
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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 Affirms 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 directors as defendants based on allegations substantially similar to those in the Toole action. The Vallieres complaint 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.

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.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”). The Kusnier actionPlaintiff’s amended complaint filed on May 5, 2023 alleges that Defendantsdefendants: (i) caused Affirm to make materially false and/or misleading statements and/or failed to disclose that (i) Affirm’s BNPL service facilitated excessive consumer debt (including with respect to certain for-profit educational institutions), regulatory arbitrage, and data harvesting; which (ii) subjected Affirm to a heightened risk ofmade false and/or misleading statements about certain public regulatory scrutiny and enforcement action;actions; and (iii) as a result,made false and/or misleading statements about whether Affirm’s public statements were materially false and misleading.business model was vulnerable to interest rate changes. In light of the above, Plaintiffplaintiff 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 (the “Quiroga action”) 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. On May 1, 2023, the action was stayed by agreement of 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.

Jeffries v. Levchin, et al.

On May 24, 2023, plaintiff Sabrina Jeffries 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 and Quiroga actions. The Jeffries complaint purports to assert claims on Affirm's behalf for breach of fiduciary duties, making false statements under federal securities law, unjust enrichment, waste of corporate assets, and aiding and abetting breach of fiduciary duties, and seeks unspecified damages, equitable relief, and fees and costs. On August 15, 2023, the action was stayed by agreement of 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.

Vallieres v. Levchin, et al.

On September 14, 2023, plaintiff Michael Vallieres filed a shareholder derivative lawsuit in the U.S. District Court for the District of Delaware 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, Quiroga, and Jeffries actions. The Vallieres complaint purports to assert claims on Affirm's behalf for breach of fiduciary duties, gross management, abuse of control, unjust enrichment, and contribution, and seeks unspecified damages, equitable relief, and fees and costs.

We have determined, based on current knowledge, that the aggregate amount or range of losses that are 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 operations or cash flows. Amounts accrued as of December 31, 2022September 30, 2023 were not material. The ultimate outcome of legal proceedings involves judgments, estimates and inherent uncertainties, and 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 December 31, 2022, the outstanding balance and interest earned on such accounts is immaterial.


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10.9.   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):
December 31, 2022June 30, 2022September 30, 2023
2023$177,864 $158,547 
20242024520,794 421,484 2024$183,530 
20252025460,715 — 2025390,881 
20262026193,954 — 2026633,452 
2027 and thereafter541,125 103,364 
20272027— 
2028202826,660 
ThereafterThereafter490,488 
TotalTotal$1,894,452 $683,395 Total$1,725,011 
Deferred debt issuance costsDeferred debt issuance costs(11,782)(10,818)Deferred debt issuance costs(15,260)
Total funding debt, net of deferred debt issuance costsTotal funding debt, net of deferred debt issuance costs$1,882,670 $672,577 Total funding debt, net of deferred debt issuance costs$1,709,751 

Warehouse CreditSecured Borrowing Facilities

U.S.

Through subsidiaries,trusts, we entered into warehouse credit facilities with certain lenders to finance the purchase and origination of our loans.Borrowingsloans. 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 proceeds from the borrowings can only be used for the purposes of facilitating loan funding and origination, with advance rates ranging from 82% to 87%86% of the total collateralized balance. These warehouse credit facility trusts, which have been classified as VIEs, 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 20232024 and 2029,2031 and subject to covenant compliance, generally permit borrowings up to 12 months prior to the final maturity date of each respective facility. As of December 31, 2022,September 30, 2023, the aggregate commitment amount of these facilities was $3.4$4.0 billion on a revolving basis, of which $1.9$1.4 billion was drawn, with $1.6$2.6 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 $2.1$1.6 billion and $549.6 million$1.7 billion as of December 31, 2022September 30, 2023 and June 30, 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, within out VIEs represents $1.9 billion and $672.6 million, as of December 31, 2022 and June 30, 2022,2023, respectively.

We accrue monthlyBorrowings under these warehouse credit facilities bear interest expense on each warehouse based on the contractual terms set forth in the applicable credit agreement. Interest expense also includes capitalized transaction fees which are amortized on a straight-line basis over the termat an annual benchmark rate of the warehouse agreement. The contractual interest rate varies across each warehouse facility and is either based on a benchmark interest rate (such as LIBOR, SOFR, Canadian PrimeSecured Overnight Financing Rate CDOR, or the Government of Canada Central Bank Rate),(“SOFR”) or an alternative commercial paper rate (which is 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), plus a spread ranging from 1.25%1.75% to 4.25%2.20%. 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 December 31, 2022,September 30, 2023, we were in compliance with all applicable covenants in the agreements.

International


Additionally, we have 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
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debt, and proceeds from the borrowings may only be used for the purposes of facilitating loan funding and origination. These facilities are secured by Canadian loan receivables pledged to the respective facility as collateral, mature between fiscal years 2025 and 2029, and bear interest based on benchmark rates plus a spread ranging from 1.25% to 4.25%.

As of September 30, 2023, the aggregate commitment amount of these facilities was $505.5 million on a revolving basis, of which $360.4 million was drawn, with $145.1 million remaining available. The unpaid principal balance of loans pledged to these facilities totaled $429.0 million and $412.8 million as of September 30, 2023 and June 30, 2023, respectively.

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 Affirm Canada subsidiary level or the Affirm Holdings level. As of September 30, 2023, we were in compliance with all applicable covenants in the agreements.

Sales and 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 aone or more repurchase date extensionextensions, each for an additional three monththree-month term at market interest rates on such extension date. As of December 31, 2022,September 30, 2023, the interest rates were 4.06% on7.52% for both the senior pledged securities and 5.71% on the residual certificate pledged securities. We had $25.2$5.9 million and $27.0$11.0 million in debt outstanding under our repurchase agreements disclosed within funding debt on the interim condensed consolidated balance sheets as of December 31, 2022September 30, 2023 and June 30, 2022,2023, respectively. The debt will be amortized through regular principal and interest payments on the pledged securities. The outstanding debt relates to $32.8$14.0 million and $32.4$18.9 million in pledged securities disclosed within securities available for sale at fair value on the interim condensed consolidated balance sheets as of December 31, 2022September 30, 2023 and June 30, 2022,2023, 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 our 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;
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2) during the five business day period after any five 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 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.

On June 7, 2023, the Board of Directors authorized the repurchase of up to $800 million in aggregate principal amount of the 2026 Notes. Note repurchases may be made from time to time through December 31, 2023 in privately negotiated transactions. Repurchases are subject to available liquidity, general market and economic conditions, alternate uses for the capital, and other factors, and there is no minimum principal amount of 2026 Notes that the Company is obligated to repurchase. We have not executed any repurchases under this authorization to date.

The convertible senior notes outstanding as of December 31, 2022September 30, 2023 consisted of the following (in thousands):
Principal AmountUnamortized Discount and Issuance CostNet Carrying Amount
Convertible Senior Notes$1,725,000 $(16,221)$1,708,779 
Principal AmountUnamortized Discount and Issuance CostNet Carrying Amount
Convertible senior notes$1,425,900 $(10,820)$1,415,080 

The 2026 Notes do not bear interest. DuringWe recognized $0.9 million and $1.1 million during the three and six months ended December 31,September 30, 2023 and 2022, we recognized $1.1 million and $2.1 million, 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. As of December 31, 2022,September 30, 2023, the remaining life of the 2026 Notes is approximately 4738 months.

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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. 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 December 31, 2022.September 30, 2023.

11.10.  Securitization and Variable Interest Entities

Consolidated VIEs

Warehouse Credit FacilitiesFacilities

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 directly originated loans. Refer to Note 10.9. Debt
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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.

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For each securitization, the residual trust 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 the majority of consolidated securitization VIEs, we retain 100% of the residual trust certificates issued by the securitization trust. Any portion of the residual trust certificates 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 trust 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.

The following tables present the aggregate carrying value of financial assets and liabilities withinfrom our involvement with consolidated VIEs (in thousands):
December 31, 2022September 30, 2023
AssetsLiabilitiesNet AssetsAssetsLiabilitiesNet Assets
Warehouse credit facilitiesWarehouse credit facilities$1,911,540 $1,734,754 $176,786 Warehouse credit facilities$1,915,257 $1,684,638 $230,619 
SecuritizationsSecuritizations1,367,950 1,316,053 51,897 Securitizations2,457,025 2,404,437 52,588 
Total consolidated VIEsTotal consolidated VIEs$3,279,490 $3,050,807 $228,683 Total consolidated VIEs$4,372,282 $4,089,075 $283,207 

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June 30, 2022June 30, 2023
AssetsLiabilitiesNet AssetsAssetsLiabilitiesNet Assets
Warehouse credit facilitiesWarehouse credit facilities$563,207 $534,422 $28,785 Warehouse credit facilities$1,930,641 $1,686,359 $244,282 
SecuritizationsSecuritizations1,679,062 1,632,107 46,955 Securitizations2,272,991 2,169,835 103,156 
Total consolidated VIEsTotal consolidated VIEs$2,242,269 $2,166,529 $75,740 Total consolidated VIEs$4,203,632 $3,856,194 $347,438 

Unconsolidated VIEs

Our transactions with unconsolidated 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 December 31, 2022.September 30, 2023.

The following information pertains to unconsolidated VIEs where we hold a variable interest but are not the primary beneficiary (in thousands):
December 31, 2022September 30, 2023
AssetsLiabilitiesNet AssetsMaximum Exposure to LossesAssetsLiabilitiesNet AssetsMaximum Exposure to Losses
SecuritizationsSecuritizations$653,754 $635,677 $18,077 $32,719 Securitizations$281,516 $271,049 $10,467 $14,160 
Total unconsolidated VIEsTotal unconsolidated VIEs$653,754 $635,677 $18,077 $32,719 Total unconsolidated VIEs$281,516 $271,049 $10,467 $14,160 

June 30, 2022June 30, 2023
AssetsLiabilitiesNet AssetsMaximum Exposure to LossesAssetsLiabilitiesNet AssetsMaximum Exposure to Losses
SecuritizationsSecuritizations$996,242 $965,909 $30,333 $51,248 Securitizations$380,547 $367,788 $12,759 $19,149 
Total unconsolidated VIEsTotal unconsolidated VIEs$996,242 $965,909 $30,333 $51,248 Total unconsolidated VIEs$380,547 $367,788 $12,759 $19,149 

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Maximum exposure to losses represents our exposure through our continuing involvement as servicer and through our retained interests. For unconsolidated VIEs, this includes $32.814.0 million in retained notes and residual trust certificates disclosed within securities available for sale at fair value in our interim condensed consolidated balance sheets and $47.0 thousand$0.2 million related to our net servicing assets and liabilities disclosed withinother assets in our interim condensed consolidated balance sheets as of December 31, 2022.September 30, 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. This amount was not material as of December 31, 2022.September 30, 2023.

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 unconsolidated securitization trusts 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. Fair Value of Financial Assets and Liabilities for additional information on the fair value sensitivity of the notes receivable and residual trust certificates. Additionally, as of December 31, 2022September 30, 2023, we have pledged each of our retained beneficial interests as collateral in a sale and repurchase agreement as described in Note 10.9. Debt.

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12.11.   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):

December 31, 2022June 30, 2022September 30, 2023June 30, 2023
Cash and cash equivalents:Cash and cash equivalents:Cash and cash equivalents:
Money market fundsMoney market funds$899,736 $162,483 Money market funds$354,274 $97,129 
Certificates of deposit— 16,026 
Commercial paperCommercial paper— 229,272 Commercial paper31,015 54,402 
Government bonds
US29,967 58,541 
Agency bondsAgency bonds— 60,865 
Securities available for sale:Securities available for sale:Securities available for sale:
Certificates of depositCertificates of deposit181,758 300,390 Certificates of deposit86,503 97,224 
Corporate bondsCorporate bonds314,014 368,671 Corporate bonds248,394 256,772 
Commercial paperCommercial paper156,459 478,293 Commercial paper163,160 266,193 
Agency bondsAgency bonds50,552 84,276 
Municipal bondsMunicipal bonds3,213 — 
Government bondsGovernment bondsGovernment bonds
Non-USNon-US11,967 17,955 Non-US9,199 9,151 
USUS216,956 378,386 US446,626 441,096 
Securitization notes receivable and certificates (1)
Securitization notes receivable and certificates (1)
32,766 51,678 
Securitization notes receivable and certificates (1)
13,983 18,913 
OtherOther1,003 $— Other— 1,028 
Total marketable securities:Total marketable securities:$1,844,626 $2,061,695 Total marketable securities:$1,406,919 $1,387,049 
(1)These securities have been pledged as collateral in connection with sale and repurchase agreements as discussed within Note 10.9. 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 December 31, 2022September 30, 2023 and June 30, 20222023 were as follows (in thousands):
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December 31, 2022September 30, 2023
Amortized CostGross Unrealized GainsGross Unrealized LossesAllowance for Credit LossesFair ValueAmortized CostGross Unrealized GainsGross Unrealized LossesAllowance for Credit LossesFair Value
Certificates of deposit (1)
Certificates of deposit (1)
$182,547 $27 $(816)$— $181,758 
Certificates of deposit (1)
$86,580 $20 $(97)$— $86,503 
Corporate bonds (1)
Corporate bonds (1)
319,023 (5,012)— 314,014 
Corporate bonds (1)
251,642 24 (3,272)— 248,394 
Commercial paper (1)
Commercial paper (1)
156,766 12 (319)— 156,459 
Commercial paper (1)
194,294 (124)— 194,175 
Agency bondsAgency bonds50,816 (265)— 50,552 
Municipal bondsMunicipal bonds3,210 — — 3,213 
Government bondsGovernment bondsGovernment bonds
Non-US Non-US12,180 — (213)— 11,967  Non-US9,325 — (126)— 9,199 
US (1)
250,095 10 (3,182)— 246,923 
US US450,056 11 (3,441)— 446,626 
Securitization notes receivable and certificates (2)
Securitization notes receivable and certificates (2)
34,093 — (991)(336)32,766 
Securitization notes receivable and certificates (2)
14,753 — (290)(480)13,983 
Other1,003 — — — 1,003 
Total securities available for saleTotal securities available for sale$955,707 $52 $(10,533)$(336)$944,890 Total securities available for sale$1,060,676 $64 $(7,615)$(480)$1,052,645 
June 30, 2022June 30, 2023
Amortized CostGross Unrealized GainsGross Unrealized LossesAllowance for Credit LossesFair ValueAmortized CostGross Unrealized GainsGross Unrealized LossesAllowance for Credit LossesFair Value
Certificates of deposit (1)
Certificates of deposit (1)
$317,331 $$(921)$— $316,416 
Certificates of deposit (1)
$97,399 $11 $(186)$— $97,224 
Corporate bonds (1)
Corporate bonds (1)
371,907 (3,243)— 368,671 
Corporate bonds (1)
260,627 55 (3,910)— 256,772 
Commercial paper (1)
Commercial paper (1)
708,694 16 (1,145)— 707,565 
Commercial paper (1)
320,882 34 (321)— 320,595 
Agency bonds (1)
Agency bonds (1)
145,312 62 (233)— 145,141 
Government bondsGovernment bondsGovernment bonds
Non-US Non-US18,196 — (241)— 17,955 Non-US9,330 — (179)— 9,151 
US (1)
438,947 — (2,020)— 436,927 
USUS444,858 28 (3,790)— 441,096 
Securitization notes receivable and certificates (2)
Securitization notes receivable and certificates (2)
52,180 178 (659)(21)51,678 
Securitization notes receivable and certificates (2)
19,841 — (475)(453)18,913 
OtherOther1,028 — — — 1,028 
Total securities available for saleTotal securities available for sale$1,907,255 $207 $(8,229)$(21)$1,899,212 Total securities available for sale$1,299,277 $190 $(9,094)$(453)$1,289,920 
(1)Certificates of deposit, corporateCommercial paper and agency bonds US government bonds, and commercial paper include $30.0$31.0 million and $303.8$115.3 million as of December 31, 2022September 30, 2023 and June 30, 2022,2023, 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. Debt9. Debt.

As of December 31, 2022September 30, 2023 and June 30, 2022,2023, 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 December 31, 2022September 30, 2023 and June 30, 2022,2023, are as follows (in thousands):

December 31, 2022September 30, 2023
Less than or equal to 1 yearGreater than 1 yearTotalLess than or equal to 1 yearGreater than 1 yearTotal
Fair ValueUnrealized LossesFair ValueUnrealized LossesFair ValueUnrealized LossesFair ValueUnrealized LossesFair ValueUnrealized LossesFair ValueUnrealized Losses
Certificates of depositCertificates of deposit$120,276 $(816)$— $— $120,276 $(816)Certificates of deposit$59,252 $(97)$— $— $59,252 $(97)
Corporate bondsCorporate bonds258,665 (4,459)46,305 (553)304,970 (5,012)Corporate bonds76,635 (456)133,377 (2,816)210,012 (3,272)
Commercial paperCommercial paper114,004 (319)— — 114,004 (319)Commercial paper138,099 (124)— — 138,099 (124)
Agency bondsAgency bonds47,615 (265)— — 47,615 (265)
Government bondsGovernment bondsGovernment bonds
Non-USNon-US2,092 (55)9,876 (158)11,968 (213)Non-US3,060 (66)6,138 (60)9,198 (126)
USUS190,023 (3,041)26,933 (141)216,956 (3,182)US298,383 (2,095)74,151 (1,346)372,534 (3,441)
Total securities available for sale (1)
Total securities available for sale (1)
$685,060 $(8,690)$83,114 $(852)$768,174 $(9,542)
Total securities available for sale (1)
$623,044 $(3,103)$213,666 $(4,222)$836,710 $(7,325)
June 30, 2022June 30, 2023
Less than or equal to 1 yearGreater than 1 yearTotalLess than or equal to 1 yearGreater than 1 yearTotal
Fair ValueUnrealized LossesFair ValueUnrealized LossesFair ValueUnrealized LossesFair ValueUnrealized LossesFair ValueUnrealized LossesFair ValueUnrealized Losses
Certificates of depositCertificates of deposit$290,169 $(921)$— $— $290,169 $(921)Certificates of deposit$63,489 $(186)$— $— $63,489 $(186)
Corporate bondsCorporate bonds351,088 (3,243)— — 351,088 (3,243)Corporate bonds92,171 (834)131,762 (3,076)223,933 (3,910)
Commercial paperCommercial paper679,272 (1,145)— — 679,272 (1,145)Commercial paper164,037 (321)— — 164,037 (321)
Agency bondsAgency bonds44,214 (233)— — 44,214 (233)
Government bondsGovernment bondsGovernment bonds
Non-USNon-US17,955 (241)— — 17,955 (241)Non-US3,061 (58)6,089 (121)9,150 (179)
USUS431,903 (2,020)— — 431,903 (2,020)US292,333 (2,395)67,606 (1,395)359,939 (3,790)
Securitization notes receivable and certificates722 (45)— — 722 (45)
Total securities available for sale (1)
Total securities available for sale (1)
$1,771,109 $(7,615)$— $— $1,771,109 $(7,615)
Total securities available for sale (1)
$659,305 $(4,027)$205,457 $(4,592)$864,762 $(8,619)
(1)The number of positions with unrealized losses for which an allowance for credit losses has not been recorded totaled 135121 and 270142 as of December 31, 2022September 30, 2023 and June 30, 2022,2023, respectively.
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The length of time to contractual maturities of securities available for sale as of December 31, 2022September 30, 2023 and June 30, 20222023 were as follows (in thousands):
December 31, 2022
Within 1 yearGreater than 1 year, less than or equal to 5 yearsTotal
Amortized CostFair ValueAmortized CostFair ValueAmortized CostFair Value
Certificates of deposit (2)
$182,547 $181,758 $— $— $182,547 $181,758 
Corporate bonds (2)
176,257 174,773 142,766 139,241 319,023 314,014 
Commercial paper (2)
156,766 156,459 — — 156,766 156,459 
Government bonds
Non-US10,033 9,875 2,147 2,092 12,180 11,967 
US (2)
205,898 204,097 44,197 42,826 250,095 246,923 
Securitization notes receivable and certificates (1)
— — 34,093 32,766 34,093 32,766 
Other1,003 1,003 — — 1,003 1,003 
Total securities available for sale$732,504 $727,965 $223,203 $216,925 $955,707 $944,890 

September 30, 2023
Within 1 yearGreater than 1 year, less than or equal to 5 yearsTotal
Amortized CostFair ValueAmortized CostFair ValueAmortized CostFair Value
Certificates of deposit$86,580 $86,503 $— $— $86,580 $86,503 
Corporate bonds159,282 158,000 92,360 90,394 251,642 248,394 
Commercial paper (1)
194,294 194,175 — — 194,294 194,175 
Agency bonds37,596 37,534 13,220 13,018 50,816 50,552 
Municipal bonds— — 3,210 3,213 3,210 3,213 
Government bonds
Non-US6,199 6,139 3,126 3,060 9,325 9,199 
US332,026 330,869 118,030 115,757 450,056 446,626 
Securitization notes receivable and certificates (2)
— — 14,753 13,983 14,753 13,983 
Other— — — — — — 
Total securities available for sale$815,977 $813,220 $244,699 $239,425 $1,060,676 $1,052,645 

June 30, 2022June 30, 2023
Within 1 yearGreater than 1 year, less than or equal to 5 yearsTotalWithin 1 yearGreater than 1 year, less than or equal to 5 yearsTotal
Amortized CostFair ValueAmortized CostFair ValueAmortized CostFair ValueAmortized CostFair ValueAmortized CostFair ValueAmortized CostFair Value
Certificates of deposit (2)
Certificates of deposit (2)
$317,331 $316,416 $— $— $317,331 $316,416 
Certificates of deposit (2)
$97,399 $97,224 $— $— $97,399 $97,224 
Corporate bonds (2)
Corporate bonds (2)
206,208 204,614 165,699 164,057 371,907 368,671 
Corporate bonds (2)
173,523 171,634 87,104 85,138 260,627 256,772 
Commercial paper (2)(1)
Commercial paper (2)(1)
708,694 707,565 — — 708,694 707,565 
Commercial paper (2)(1)
320,882 320,595 — — 320,882 320,595 
Agency bonds (1)
Agency bonds (1)
130,176 130,165 15,136 14,976 145,312 145,141 
Government bondsGovernment bondsGovernment bonds
Non-US Non-US11,895 11,813 6,301 6,142 18,196 17,955 Non-US4,063 3,996 5,267 5,155 9,330 9,151 
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 
USUS308,179 306,656 136,679 134,440 444,858 441,096 
Securitization notes receivable and certificates (2)
Securitization notes receivable and certificates (2)
— — 19,841 18,913 19,841 18,913 
OtherOther— — 1,028 1,028 1,028 1,028 
Total securities available for saleTotal securities available for sale$1,604,885 $1,599,650 $302,370 $299,562 $1,907,255 $1,899,212 Total securities available for sale$1,034,222 $1,030,270 $265,055 $259,650 $1,299,277 $1,289,920 
(1)Based on weighted average life of expected cash flowsCommercial paper and agency bonds include $31.0 million and $115.3 million as of December 31, 2022September 30, 2023 and June 30, 2022.
(2)Certificates of deposit, corporate bonds, US government bonds, and commercial paper include $30.0 million and $303.8 million as of December 31, 2022 and June 30, 2022,2023, respectively, classified as cash and cash equivalents within the interim condensed consolidated balance sheets.
(2)Based on weighted average life of expected cash flows as of September 30, 2023 and June 30, 2023.

Gross proceeds from matured or redeemed securities were $473.3$381.8 million and $2,154.4 million$1.7 billion for the three and six months ended December 31,September 30, 2023 and 2022, respectively, and $584.9 million and $635.6 million for the three and six months ended December 31, 2021, respectively.respectively.

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For available for sale securities realized gains and losses from portfolio sales were not material for the three and six months ended December 31, 2022. There were no portfolio sales or associated realized gains or losses for the threeSeptember 30, 2023 and six months ended December 31, 2021.2022, respectively.



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Non-marketable Equity Securities

Equity investments without a readily determinable fair value held at cost were $51.9 million and $43.2 million as of both December 31, 2022September 30, 2023 and June 30, 20222023, respectively, 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 ffor tor thehe three and six months ended December 31,September 30, 2023 and 2022 and 2021.

12.   Derivative Financial Instruments

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

September 30, 2023June 30, 2023
Notional AmountDerivative AssetsDerivative LiabilitiesNotional AmountDerivative AssetsDerivative Liabilities
Derivatives designated as cash flow hedges
Interest rate contracts - cash flow hedges$500,000 $573 $— $800,000 $751 $— 
Derivatives not designated as hedges
Interest rate contracts1,894,613 40,643 — 2,102,944 49,794 — 
Total gross derivative assets/liabilities$2,394,613 $41,216 $— $2,902,944 $50,545 $— 

The following table summarizes the impact of the cash flow hedges on AOCI (in thousands):

Three Months Ended September 30, 2023
Balance at beginning of period751 
Changes in fair value1,014 
Amounts reclassified into earnings (1)
(251)
Balance at end of period (2)
$1,514 
(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 $1.1 million of net derivative gains included in AOCI into funding costs within our interim consolidated statements of operations and comprehensive loss.

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The following table summarizes the impact of the derivative instruments on income and indicates where within the interim consolidated statements of operations and comprehensive loss such impact is reported (in thousands):
Location of gains (losses) where the effects of derivatives are recordedThree Months Ended September 30,
20232022
The effects of cash flow hedging
Funding costs251 — 
The effects of derivatives not designated in hedging relationships
Other income, net3,979 30,666 

13.   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.

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 December 31, 2022September 30, 2023 and June 30, 20222023 (in thousands):
December 31, 2022September 30, 2023
Level 1Level 2Level 3TotalLevel 1Level 2Level 3Total
Assets:Assets:Assets:
Cash and cash equivalents:Cash and cash equivalents:Cash and cash equivalents:
Money market fundsMoney market funds$899,736 $— $— $899,736 Money market funds$354,274 $— $— $354,274 
Government bonds - U.S.— 29,967 — 29,967 
Securities available for sale:
Certificate of deposit— 181,758 — 181,758 
Commercial paperCommercial paper— 31,015 — 31,015 
Securities, available for sale:Securities, available for sale:
Certificates of depositCertificates of deposit— 86,503 — 86,503 
Corporate bondsCorporate bonds— 314,014 — 314,014 Corporate bonds— 248,394 — 248,394 
Commercial paperCommercial paper— 156,459 — 156,459 Commercial paper— 163,160 — 163,160 
Agency bondsAgency bonds— 50,552 — 50,552 
Municipal bondsMunicipal bonds— 3,213 — 3,213 
Government bonds:Government bonds:Government bonds:
Non-U.S.Non-U.S.— 11,967 — 11,967 Non-U.S.— 9,199 — 9,199 
U.S.U.S.— 216,956 — 216,956 U.S.— 446,626 — 446,626 
Securitization notes receivable and residual trust certificatesSecuritization notes receivable and residual trust certificates— — 32,766 32,766 Securitization notes receivable and residual trust certificates— — 13,983 13,983 
Other— — 1,003 1,003 
Servicing assetsServicing assets— — 1,093 1,093 Servicing assets— — 569 569 
Derivative instrumentsDerivative instruments— 69,615 — 69,615 Derivative instruments— 41,216 — 41,216 
Risk sharing assetRisk sharing asset— — 3,814 3,814 
Total assetsTotal assets$899,736 $980,736 $34,862 $1,915,334 Total assets$354,274 $1,079,878 $18,366 $1,452,518 
Liabilities:Liabilities:Liabilities:
Servicing liabilitiesServicing liabilities$— $— $3,680 $3,680 Servicing liabilities$— $— $1,851 $1,851 
Performance fee liabilityPerformance fee liability— — 1,876 1,876 Performance fee liability— — 1,427 1,427 
Residual trust certificates, held by third-partiesResidual trust certificates, held by third-parties— — 242 242 Residual trust certificates, held by third-parties— — 93 93 
Contingent consideration— — 12,510 12,510 
Profit share liabilityProfit share liability— — 3,697 3,697 Profit share liability— — 1,079 1,079 
Risk sharing liabilityRisk sharing liability— — 471 471 
Total liabilitiesTotal liabilities$— $— $22,005 $22,005 Total liabilities$— $— $4,921 $4,921 

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June 30, 2022June 30, 2023
Level 1Level 2Level 3TotalLevel 1Level 2Level 3Total
Assets:Assets:Assets:
Cash and cash equivalents:Cash and cash equivalents:Cash and cash equivalents:
Money market fundsMoney market funds$162,483 $— $— $162,483 Money market funds$97,129 $— $— $97,129 
Commercial paperCommercial paper— 54,402 — 54,402 
Agency bondsAgency bonds— 60,865 — 60,865 
Securities, available for sale:Securities, available for sale:
Certificates of depositCertificates of deposit— 16,026 — 16,026 Certificates of deposit— 97,224 — 97,224 
Commercial paper— 229,272 — 229,272 
Government bonds - U.S.— 58,541 — 58,541 
Securities available for sale:
Certificate of deposit— 300,390 — 300,390 
Corporate bondsCorporate bonds— 368,671 — 368,671 Corporate bonds— 256,772 — 256,772 
Commercial paperCommercial paper— 478,293 — 478,293 Commercial paper— 266,193 — 266,193 
Agency bondsAgency bonds— 84,276 — 84,276 
Government bonds:Government bonds:Government bonds:
Non-U.S.Non-U.S.— 17,955 — 17,955 Non-U.S.— 9,151 — 9,151 
U.S.U.S.— 378,386 — 378,386 U.S.— 441,096 — 441,096 
Securitization notes receivable and residual trust certificatesSecuritization notes receivable and residual trust certificates— — 51,678 51,678 Securitization notes receivable and residual trust certificates— — 18,913 18,913 
OtherOther— — 1,028 1,028 
Servicing assetsServicing assets— — 1,192 1,192 Servicing assets— — 880 880 
Derivative instrumentsDerivative instruments— 49,983 — 49,983 Derivative instruments— 50,545 — 50,545 
Total assetsTotal assets$162,483 $1,897,517 $52,870 $2,112,870 Total assets$97,129 $1,320,524 $20,821 $1,438,474 
Liabilities:Liabilities:Liabilities:
Servicing liabilitiesServicing liabilities$— $— $2,673 $2,673 Servicing liabilities$— $— $1,392 $1,392 
Performance fee liabilityPerformance fee liability— — 1,710 1,710 Performance fee liability— — 1,581 1,581 
Residual trust certificates, held by third-partiesResidual trust certificates, held by third-parties— — 377 377 Residual trust certificates, held by third-parties— — 125 125 
Contingent consideration— — 23,348 23,348 
Profit share liabilityProfit share liability— — 1,987 1,987 Profit share liability— — 1,832 1,832 
Total liabilitiesTotal liabilities$ $ $30,095 $30,095 Total liabilities$— $— $4,930 $4,930 

ThereAs of September 30, 2023 and June 30, 2023, there were no transfers between levels during the periods ended December 31, 2022 and June 30, 2022.levels.

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

Marketable Securities Available for Sale

As of December 31, 2022,September 30, 2023, we held marketable securities classified as cash and cash equivalents and 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 December 31, 2022,September 30, 2023 and June 30, 2023, we used a combination of interest rate cap agreements and interest rate swaps to manage interest costs and the riskrisks associated with variable interest rates. Neither the interest rate caps or the interest rate swaps have been designated as hedging instruments.

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As of December 31, 2022 and June 30, 2022, the interest rate caps and interest rate swapsThese derivative instruments are in a net asset position, and classified as Level 2 within the fair value hierarchy, and the fair value is estimated by using third-party pricing models, which contain certain assumptions based on prices quoted for similar financial instrumentsreadily observable market-based inputs. We validate the valuation output on a monthly basis. Refer to Note 12. Derivative Financial Instruments in markets that are not active. The fair values are presented gross within other assets and offsetting collateral received by the counterparty is presented as a liability within accrued expenses and other liabilities onnotes to the interim condensed consolidated balance sheets. Any changes in the fair valuefinancial statements for further details on our derivative instruments.
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Table of these financial instruments are reflected in other (expense) income, net, on the interim condensed consolidated statements of operations and comprehensive loss.Contents

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, and risk sharing arrangements do not trade in an active market with readily observable prices, we use significant unobservable inputs to measure fair value.value and have classified as level 3 within the fair value hierarchy. This determination requires significant judgments to be made.

Servicing Assets and Liabilities

We sold loans with an unpaid principal balance of $2.1$2.2 billion and $4.1$2.0 billion for the three and six months ended December 31,September 30, 2023 and 2022, respectively, and $2.5 billion and $3.6 billion for the three and six months ended December 31, 2021, respectively, for which we retained servicing rights.

As of December 31, 2022September 30, 2023 and June 30, 2022,2023, we serviced loans which we sold with a remaining unpaid principal balance of $4.6$4.3 billion and $4.5$4.1 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.

NetGross 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 $21.5$20.2 million and $42.9$21.4 million of servicing income for the three and six months ended December 31,September 30, 2023 and 2022, respectively, and $11.3 million and $20.8 million for the three and six months ended December 31, 2021, respectively.

As of December 31, 2022September 30, 2023 and June 30, 2022,2023, the aggregate fair value of the servicing assets was measured at $1.1$0.6 million and $1.2$0.9 million, respectively, and presented within other assets on the interim condensed consolidated balance sheets. As of December 31, 2022September 30, 2023 and June 30, 2022,2023, the aggregate fair value of the servicing
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liabilities was measured at $3.7$1.9 million and $2.7$1.4 million, respectively, and presented within accrued expenses and other liabilities on the interim condensed consolidated balance sheets.

38

The following table summarizes the activity related to the aggregate fair value of our servicing assets (in thousands):
Three Months Ended December 31,Six Months Ended December 31,Three Months Ended September 30,
202220212022202120232022
Fair value at beginning of periodFair value at beginning of period$1,142 $2,287 $1,192 $2,349 Fair value at beginning of period$880 $1,192 
Initial transfers of financial assetsInitial transfers of financial assets404 645 433 1,114 Initial transfers of financial assets— 29 
Subsequent changes in fair valueSubsequent changes in fair value(453)(754)(532)(1,285)Subsequent changes in fair value(311)(79)
Fair value at end of periodFair value at end of period$1,093 $2,178 $1,093 $2,178 Fair value at end of period$569 $1,142 

The following table summarizes the activity related to the aggregate fair value of our servicing liabilities (in thousands):
Three Months Ended December 31,Six Months Ended December 31,Three Months Ended September 30,
202220212022202120232022
Fair value at beginning of periodFair value at beginning of period$3,152 $3,610 $2,673 $3,961 Fair value at beginning of period$1,392 $2,673 
Initial transfers of financial assetsInitial transfers of financial assets2,207 6,749 4,195 8,724 Initial transfers of financial assets1,389 1,988 
Subsequent changes in fair valueSubsequent changes in fair value(1,679)(1,733)(3,188)(4,059)Subsequent changes in fair value(930)(1,509)
Fair value at end of periodFair value at end of period$3,680 $8,626 $3,680 $8,626 Fair value at end of period$1,851 $3,152 

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

December 31, 2022September 30, 2023
Unobservable InputMinimumMaximumWeighted AverageUnobservable InputMinimumMaximum
Weighted Average (3)
Servicing assetsServicing assetsDiscount rate30.00 %30.00 %30.00 %Servicing assetsDiscount rate30.00 %30.00 %30.00 %
Adequate compensation (1)
0.75 %3.00 %1.01 %
Adequate compensation (1)
0.92 %2.31 %0.92 %
Gross default rate (2)
1.84 %10.56 %4.08 %
Gross default rate (2)
2.44 %12.59 %3.81 %
Servicing liabilitiesServicing liabilitiesDiscount rate30.00 %30.00 %30.00 %Servicing liabilitiesDiscount rate30.00 %30.00 %30.00 %
Adequate compensation (1)
0.75 %3.00 %2.22 %
Adequate compensation (1)
0.92 %2.31 %2.29 %
Gross default rate (2)
6.72 %36.55 %14.22 %
Gross default rate (2)
6.02 %19.32 %13.00 %
June 30, 2022June 30, 2023
Unobservable InputMinimumMaximumWeighted AverageUnobservable InputMinimumMaximum
Weighted Average (3)
Servicing assetsServicing assetsDiscount rate30.00 %30.00 %30.00 %Servicing assetsDiscount rate30.00 %30.00 %30.00 %
Adequate compensation(1)
0.78 %1.85 %1.10 %
Adequate compensation (1)
0.92 %2.31 %0.93 %
Gross default rate (2)
0.59 %50.59 %1.59 %
Gross default rate (2)
2.15 %11.20 %3.36 %
Servicing liabilitiesServicing liabilitiesDiscount rate30.00 %30.00 %30.00 %Servicing liabilitiesDiscount rate30.00 %30.00 %30.00 %
Adequate compensation(1)
2.13 %2.34 %2.21 %
Adequate compensation (1)
0.92 %2.31 %2.27 %
Gross default rate (2)
9.03 %24.44 %13.81 %
Gross default rate (2)
9.50 %21.54 %13.64 %
(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
(3)Unobservable inputs were weighted by relative fair value

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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):
December 31, 2022June 30, 2022September 30, 2023June 30, 2023
Servicing assetsServicing assetsServicing assets
Gross default rate assumption:Gross default rate assumption:Gross default rate assumption:
Gross default rate increase of 25%Gross default rate increase of 25%$(1)$11 Gross default rate increase of 25%$— $— 
Gross default rate increase of 50%Gross default rate increase of 50%$(2)$22 Gross default rate increase of 50%$— $(1)
Adequate compensation assumption:Adequate compensation assumption:Adequate compensation assumption:
Adequate compensation increase of 10%Adequate compensation increase of 10%$(801)$— Adequate compensation increase of 10%$(266)$(382)
Adequate compensation increase of 20%Adequate compensation increase of 20%$(1,602)$— Adequate compensation increase of 20%$(531)$(764)
Adequate compensation increase of 25%$— $(3,513)
Adequate compensation increase of 50%$— $(7,026)
Discount rate assumption:Discount rate assumption:Discount rate assumption:
Discount rate increase of 25%Discount rate increase of 25%$(40)$(57)Discount rate increase of 25%$(18)$(29)
Discount rate increase of 50%Discount rate increase of 50%$(77)$(109)Discount rate increase of 50%$(34)$(55)
Servicing liabilitiesServicing liabilitiesServicing liabilities
Gross default rate assumption:Gross default rate assumption:Gross default rate assumption:
Gross default rate increase of 25%Gross default rate increase of 25%$(15)$(10)Gross default rate increase of 25%$$(9)
Gross default rate increase of 50%Gross default rate increase of 50%$(31)$(21)Gross default rate increase of 50%$(5)$(19)
Adequate compensation assumption:Adequate compensation assumption:Adequate compensation assumption:
Adequate compensation increase of 10%Adequate compensation increase of 10%$3,181 $— Adequate compensation increase of 10%$3,313 $2,798 
Adequate compensation increase of 20%Adequate compensation increase of 20%$6,363 $— Adequate compensation increase of 20%$6,608 $5,597 
Adequate compensation increase of 25%$— $6,139 
Adequate compensation increase of 50%$— $12,278 
Discount rate assumption:Discount rate assumption:Discount rate assumption:
Discount rate increase of 25%Discount rate increase of 25%$(75)$(50)Discount rate increase of 25%$(15)$(19)
Discount rate increase of 50%Discount rate increase of 50%$(145)$(98)Discount rate increase of 50%$(45)$(38)

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. 

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The following table summarizes the activity related to the fair value of the performance fee liability (in thousands):
Three Months Ended December 31,Six Months Ended December 31,Three Months Ended September 30,
202220212022202120232022
Fair value at beginning of periodFair value at beginning of period$1,763 $1,335 $1,710 $1,290 Fair value at beginning of period$1,581 $1,710 
Purchases of loansPurchases of loans572 503 1,051 833 Purchases of loans376 479 
Settlements Paid(501)— (501)— 
Settlements paidSettlements paid(484)— 
Subsequent changes in fair valueSubsequent changes in fair value42 (308)(384)(593)Subsequent changes in fair value(46)(426)
Fair value at end of periodFair value at end of period$1,876 $1,530 $1,876 $1,530 Fair value at end of period$1,427 $1,763 
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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 tables present quantitative information about the significant unobservable inputs used for our Level 3 fair value measurement of the performance fee liability as of December 31, 2022September 30, 2023 and June 30, 2022:2023:

December 31, 2022September 30, 2023
Unobservable InputUnobservable InputMinimumMaximumWeighted AverageUnobservable InputMinimumMaximum
Weighted Average (1)
Discount rateDiscount rate10.00%10.00%10.00%Discount rate10.00%10.00%10.00%
Refund rateRefund rate4.50%4.50%4.50%Refund rate4.50%4.50%4.50%
Default rateDefault rate1.78%3.34%2.63%Default rate1.79%3.71%2.89%
June 30, 2022June 30, 2023
Unobservable InputUnobservable InputMinimumMaximumWeighted AverageUnobservable InputMinimumMaximum
Weighted Average (1)
Discount rateDiscount rate10.00%10.00%10.00%Discount rate10.00%10.00%10.00%
Refund rateRefund rate4.50%4.50%4.50%Refund rate4.50%4.50%4.50%
Default rateDefault rate1.78%3.10%2.42%Default rate1.79%3.34%2.86%
(1)Unobservable inputs were weighted by remaining principal balances 

Residual Trust Certificates Held by Third-Parties in Consolidated VIEs

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. 

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 December 31,Six Months Ended December 31,Three Months Ended September 30,
202220212022202120232022
Fair value at beginning of periodFair value at beginning of period$308 $745 $377 $914 Fair value at beginning of period$125 $377 
RepaymentsRepayments(78)(148)(177)(403)Repayments(38)(99)
Subsequent changes in fair valueSubsequent changes in fair value12 22 42 108 Subsequent changes in fair value30 
Fair value at end of periodFair value at end of period$242 $619 $242 $619 Fair value at end of period$93 $308 


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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.
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The following table 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 December 31, 2022September 30, 2023 and June 30, 2022:2023:

December 31, 2022September 30, 2023
Unobservable InputUnobservable InputMinimumMaximumWeighted AverageUnobservable InputMinimumMaximum
Weighted Average (1)
Discount rateDiscount rate10.00%15.00%10.00%Discount rate10.00%10.00%10.00%
Loss rateLoss rate0.71%1.07%0.71%Loss rate0.77%0.77%0.77%
Prepayment ratePrepayment rate6.50%13.00%13.00%Prepayment rate18.90%18.90%18.90%

June 30, 2022June 30, 2023
Unobservable InputUnobservable InputMinimumMaximumWeighted AverageUnobservable InputMinimumMaximum
Weighted Average (1)
Discount rateDiscount rate10.00%10.00%10.00%Discount rate10.00%10.00%10.00%
Loss rateLoss rate0.75%0.75%0.75%Loss rate0.92%0.92%0.92%
Prepayment ratePrepayment rate8.00%8.00%8.00%Prepayment rate7.70%7.70%7.70%
(1)Unobservable inputs were weighted by relative fair value

Retained Beneficial Interests in Unconsolidated VIEs

As of December 31, 2022, the CompanySeptember 30, 2023, we held notes receivable and residual trust certificates with an aggregate fair value of $32.814.0 million in connection with unconsolidated securitizations. The balances correspond to the 5% economic risk retention the Company iswe are required to maintain as the securitization sponsor.

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 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 (in thousands):
Three Months Ended December 31,Six Months Ended December 31,Three Months Ended September 30,
202220212022202120232022
Fair value at beginning of periodFair value at beginning of period$41,503 $13,744 $51,678 $16,170 Fair value at beginning of period$18,913 $51,678 
Additions— 13,695 — 13,695 
Cash received (due to payments or sales)Cash received (due to payments or sales)(9,063)(2,080)(18,835)(4,384)Cash received (due to payments or sales)(5,261)(9,772)
Change in unrealized gain (loss)Change in unrealized gain (loss)138 (73)(510)(184)Change in unrealized gain (loss)185 (648)
Accrued interestAccrued interest295 84 748 70 Accrued interest172 453 
Reversal of (impairment on) securities available for saleReversal of (impairment on) securities available for sale(107)(51)(315)(48)Reversal of (impairment on) securities available for sale(26)(208)
Fair value at end of periodFair value at end of period$32,766 $25,319 $32,766 $25,319 Fair value at end of period$13,983 $41,503 

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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.

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The following tables present quantitative information about the significant unobservable inputs used for our Level 3 fair value measurement of the residual trust certificates as of December 31, 2022September 30, 2023 and June 30, 20222023:

December 31, 2022September 30, 2023
Unobservable InputUnobservable InputMinimumMaximumWeighted AverageUnobservable InputMinimumMaximum
Weighted Average (1)
Discount rateDiscount rate4.45%37.77%7.28%Discount rate6.21%29.84%7.34%
Loss rateLoss rate0.99%15.30%3.38%Loss rate0.91%14.61%2.63%
Prepayment ratePrepayment rate6.75%26.40%18.35%Prepayment rate6.70%28.60%17.59%
June 30, 2022June 30, 2023
Unobservable InputUnobservable InputMinimumMaximumWeighted AverageUnobservable InputMinimumMaximum
Weighted Average (1)
Discount rateDiscount rate3.68%22.50%5.37%Discount rate5.72%29.84%7.30%
Loss rateLoss rate0.61%10.95%2.65%Loss rate1.25%14.96%3.02%
Prepayment ratePrepayment rate5.25%35.00%18.48%Prepayment rate5.90%29.90%18.10%
(1)Unobservable inputs were weighted by relative fair value

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):
December 31, 2022June 30, 2022
Discount rate assumption:
Discount rate increase of 25%$(417)$(1,410)
Discount rate increase of 50%$(820)$(2,295)
Loss rate assumption:
Loss rate increase of 25%$(297)$(729)
Loss rate increase of 50%$(460)$(964)
Prepayment rate assumption:
Prepayment rate decrease of 25%$(59)$(545)
Prepayment rate decrease of 50%$(119)$(519)

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 upon the achievement of future milestones. At the acquisition date, we classified the contingent consideration as a liability and estimated its fair value using a Monte Carlo simulation utilizing assumptions of simulated revenue, 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. 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 three and six months ended December 31, 2022, 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
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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.

The following table summarizes the activity related to the fair value of the PayBright contingent consideration (in thousands):
Three Months Ended December 31,Six Months Ended December 31,
2022202120222021
Fair value at beginning of period$24,269 $290,719 $23,348 $153,447 
Subsequent changes in fair value(12,062)(34,026)(9,302)107,567 
Effect of foreign currency translation303 (2,943)(1,536)(7,264)
Fair value at end of period$12,510 $253,750 $12,510 $253,750 
September 30, 2023June 30, 2023
Discount rate assumption:
Discount rate increase of 25%$(156)$(218)
Discount rate increase of 50%$(306)$(429)
Loss rate assumption:
Loss rate increase of 25%$(108)$(165)
Loss rate increase of 50%$(157)$(243)
Prepayment rate assumption:
Prepayment rate decrease of 25%$(20)$(30)
Prepayment rate decrease of 50%$(40)$(59)

Profit Share Liability

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.







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The following table summarizes the activity related to the fair value of the profit share liability (in thousands):
Three Months Ended December 31,Six Months Ended December 31,Three Months Ended September 30,
202220212022202120232022
Fair value at beginning of periodFair value at beginning of period$1,876 $1,400 $1,987 $2,464 Fair value at beginning of period$1,832 $1,987 
Facilitation of loansFacilitation of loans2,342 2,534 3,475 3,574 Facilitation of loans928 1,133 
Actual performanceActual performance612 (1,011)(2,264)(1,011)Actual performance1,672 (2,876)
Subsequent changes in fair valueSubsequent changes in fair value(1,133)(871)499 (2,975)Subsequent changes in fair value(3,353)1,632 
Fair value at end of periodFair value at end of period$3,697 $2,052 $3,697 $2,052 Fair value at end of period$1,079 $1,876 

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 tables present quantitative information about the significant unobservable inputs used for our Level 3 fair value measurement of the profit sharing liability as of December 31, 2022September 30, 2023 and June 30, 20222023:

December 31, 2022September 30, 2023
Unobservable InputUnobservable InputMinimumMaximumWeighted AverageUnobservable InputMinimumMaximum
Weighted Average (1)
Discount rateDiscount rate30.00%30.00%30.00%Discount rate30.00%30.00%30.00%
Program profitabilityProgram profitability0.07%1.82%1.72%Program profitability0.73%0.73%0.73%
June 30, 2023
Unobservable InputMinimumMaximum
Weighted Average (1)
Discount rate30.00%30.00%30.00%
Program profitability1.13%1.13%1.13%
(1)Unobservable inputs were weighted by relative fair value

Risk Sharing Arrangements

In connection with certain capital funding arrangements with third party loan buyers, we have entered into risk sharing agreements where we may be required to make a payment to the loan buyer or are entitled to receive a payment from the loan buyer, depending on the actual versus expected loan performance as contractually agreed to with the counterparty, and subject to a cap based on a percentage of the principal balance of loans sold. Loan performance is evaluated at a cohort level based on the month loans were sold. Through September 30, 2023 we have sold $1.3 billion unpaid principal balance of loans under these risk sharing arrangements, of which our maximum exposure to losses is $27.1 million.This amount includes our maximum potential loss with respect to risk sharing liabilities and the fair value of risk sharing assets of $3.8 million, as of September 30, 2023.

We account for these arrangements as derivatives measured at fair value with gains and losses recognized in Gain on sale of loans in our interim condensed consolidated statements of operations and comprehensive loss. For each counterparty, we have recognized a net asset or net liability based on the estimated fair value of future payments we expect to receive from or make to the counterparty. As of September 30, 2023, we held assets and liabilities related to these arrangements of $3.8 million and $0.5 million, respectively. As of June 30, 2023, we estimated that the fair value of risk sharing liabilities was $0 based on the limited time passed and available loan performance since entering into these agreements. We did not have any risk sharing arrangements where we had recognized an asset as of June 30, 2023.

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June 30, 2022
Unobservable InputMinimumMaximumWeighted Average
Discount rate30.00%30.00%30.00%
Program profitability1.25%3.54%1.28%
As of September 30, 2023, we estimated the fair value of future settlements using a discounted cash flow model. Significant assumptions used in the valuation of our risk sharing assets and liabilities include the discount rate, loss rate and the prepayment rate.

The following table summarizes the activity related to the fair value of the risk sharing assets (in thousands):
Three Months Ended September 30, 2023
Fair value at beginning of period$— 
Initial transfers of financial assets3,814 
Subsequent changes in fair value— 
Fair value at end of period$3,814

The following table summarizes the activity related to the fair value of the risk sharing liabilities (in thousands):
Three Months Ended September 30, 2023
Fair value at beginning of period$— 
Initial transfers of financial liabilities— 
Subsequent changes in fair value471 
Fair value at end of period$471 

The following tables present quantitative information about the significant unobservable inputs used for our Level 3 fair value measurement of the risk sharing arrangements as of September 30, 2023:

September 30, 2023
Unobservable InputMinimumMaximum
Weighted Average (1)
Risk sharing assetsDiscount rate20.00%20.00%20.00%
Loss rate9.36%9.36%9.36%
Prepayment rate31.90%31.90%31.90%
Risk sharing liabilitiesDiscount rate20.00%20.00%20.00%
Loss rate4.00%5.16%4.35%
(1)Unobservable inputs were weighted by principal balance of loans sold under each cohort

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

September 30, 2023
Risk sharing assets
Prepayment rate assumption:
Prepayment rate increase of 25%$(243,524)
Prepayment rate increase of 50%$(477,053)
Loss rate assumption:
Loss rate increase of 25%$(1,330,723)
Loss rate increase of 50%$(2,642,491)
Discount rate assumption:
Discount rate increase of 25%$(273,602)
Discount rate increase of 50%$(516,753)
Risk sharing liabilities
Loss rate assumption:
Loss rate increase of 25%$9,908,013 
Loss rate increase of 50%$16,992,497 
Discount rate assumption:
Discount rate increase of 25%$(23,519)
Discount rate increase of 50%$(45,008)

Financial Assets and Liabilities Not Recorded at Fair Value

The following tables present the fair value hierarchy for financial assets and liabilities not recorded at fair value as of December 31, 2022September 30, 2023 and June 30, 20222023 (in thousands):

December 31, 2022September 30, 2023
Carrying AmountLevel 1Level 2Level 3Balance at Fair ValueCarrying AmountLevel 1Level 2Level 3Balance at Fair Value
Assets:Assets:Assets:
Loans held for saleLoans held for sale$344 $— $344 $— $344 Loans held for sale$145 $— $145 $— $145 
Loans held for investment, netLoans held for investment, net3,473,404 — — 3,613,246 3,613,246 Loans held for investment, net4,317,354 — — 4,482,857 4,482,857 
Other assetsOther assets11,367 — 11,367 — 11,367 Other assets8,995 — 8,995 — 8,995 
Total assetsTotal assets$3,485,115 $— $11,711 $3,613,246 $3,624,957 Total assets$4,326,494 $— $9,140 $4,482,857 $4,491,996 
Liabilities:Liabilities:Liabilities:
Convertible senior notes, net (1)
Convertible senior notes, net (1)
$1,708,779 $— $948,778 $— $948,778 
Convertible senior notes, net (1)
$1,415,080 $— $1,074,772 $— $1,074,772 
Notes issued by securitization trustsNotes issued by securitization trusts1,314,212 — — 1,253,937 1,253,937 Notes issued by securitization trusts2,398,758 — — 2,383,850 2,383,850 
Funding debt (2)
Funding debt (2)
1,894,452 — — 1,894,401 1,894,401 
Funding debt (2)
1,725,011 — — 1,725,027 1,725,027 
Total liabilitiesTotal liabilities$4,917,443 $— $948,778 $3,148,338 $4,097,116 Total liabilities$5,538,849 $— $1,074,772 $4,108,877 $5,183,649 
June 30, 2022
Carrying AmountLevel 1Level 2Level 3Balance at Fair Value
Assets:
Loans held for sale$2,670 $— $2,670 $— $2,670 
Loans held for investment, net2,348,169 — — 2,412,871 2,412,871 
Other assets12,661 — 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 trusts1,627,580 — — 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 
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June 30, 2023
Carrying AmountLevel 1Level 2Level 3Balance at Fair Value
Assets:
Loans held for sale$76 $— $76 $— $76 
Loans held for investment, net4,198,431 — — 4,397,931 4,397,931 
Other assets9,325 — 9,325 — 9,325 
Total assets$4,207,832 $— $9,401 $4,397,931 $4,407,332 
Liabilities:
Convertible senior notes, net (1)
$1,414,208 $— $1,053,866 $— $1,053,866 
Notes issued by securitization trusts2,165,577 — — 1,748,772 1,748,772 
Funding debt (2)
1,775,698 — — 1,777,635 1,777,635 
Total liabilities$5,355,483 $— $1,053,866 $3,526,407 $4,580,273 
(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)As of December 31, 2022September 30, 2023 and June 30, 2022,2023, debt issuance costs in the amount of $11.8$15.3 million and $10.8$10.9 million, respectively, was included within funding debt.    


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14.   Stockholders’ Equity

Common Stock

The CompanyWe had shares of common stock reserved for issuance as follows:
December 31, 2022June 30, 2022
Available outstanding under stock option plan54,689,282 53,158,233 
Available for future grant under stock option plan39,443,744 31,156,746 
Total94,133,026 84,314,979 
September 30, 2023June 30, 2023
Available outstanding under equity compensation plans53,347,042 52,572,230 
Available for future grant under equity compensation plans47,162,302 37,245,232 
Total100,509,344 89,817,462 

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 one 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,During the year ended June 30, 2022, we granted warrants to purchase 22,000,000 shares of common stock in connection with our commercial 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
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years, respectively; volatility of 45%; and a risk-free rate of 0.93% and 1.47%, respectively. We recognized an asset of $133.5 million associated with the portion of the warrants that were fully vested 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 six months ended December 31,September 30, 2023 and 2022, a total of $138.6$106.3 million and $257.7$119.1 million, respectively, was recognized within sales and marketing expense which included $10.5$10.4 million and $20.9 million, respectively, in amortization expense of the commercial agreement asset for both periods and $128.1$95.9 million and $236.8$108.7 million, respectively, in expense based upon the grant-date fair value of the warrant shares that vested. During both the three and six months ended December 31, 2021, a total of $70.6 million was recognized within sales and marketing expense which included $5.8 million in amortization expense of the commercial agreement asset and $64.9 million in expense based upon the grant-date fair value of the warrant shares that vested.


15.   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 December 31, 2022,September 30, 2023, the maximum number of shares of common stock which may be issued under the Plan is
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146,209,197 161,051,508 Class A shares. As of December 31, 2022September 30, 2023 and June 30, 2022,2023, there were 39,443,74447,162,302 and 31,156,74637,245,232 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 sixthree months ended December 31, 2022:September 30, 2023:
Number of OptionsWeighted Average Exercise PriceWeighted Average Remaining Contractual Term (Years)Aggregate Intrinsic Value (in thousands)
Balance as of June 30, 202219,310,706 $15.22 6.94
Granted1,523,736 21.22 
Exercised(533,393)4.55 
Forfeited, expired or cancelled(908,703)39.09 
Balance as of December 31, 202219,392,346 14.87 6.67
Vested and exercisable, December 31, 202213,649,028 $10.10 5.79$43,193 
Vested and exercisable, and expected to vest thereafter(1) December 31, 2022
19,342,618 $14.87 6.64$44,086 
Number of OptionsWeighted Average Exercise PriceWeighted Average Remaining Contractual Term (Years)Aggregate Intrinsic Value (in thousands)
Balance as of June 30, 202318,505,138 $14.34 6.07
Granted1,743,514 23.35 
Exercised(496,213)7.45 
Forfeited, expired or cancelled(637,348)30.13 
Balance as of September 30, 202319,115,091 14.81 6.12
Vested and exercisable, September 30, 202314,503,031 $11.31 5.33$182,338 
Vested and exercisable, and expected to vest thereafter(1) September 30, 2023
18,565,399 $14.11 6.05$187,952 
(1)Options expected to vest reflect the application of an estimated forfeiture rate.
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The weighted-average grant date fair value of options granted during the sixthree months ended December 31, 2022September 30, 2023 was $11.81.$16.10. As of December 31, 2022,September 30, 2023, unrecognized compensation expense related to unvested stock options was approximately $58.0$56.1 million, which is expected to be recognized over a remaining weighted-average period of 2.22.7 years.

When an employee exercises stock options, we collect and remit taxes on the employee’s behalf to applicable taxing authorities. As of December 31, 2022September 30, 2023 and June 30, 2022,2023, the balance of equity exercise taxes payable was $1.9$5.8 million and $10.9$3.4 million, respectively, which is included in accounts payable on the interim condensed consolidated balance sheets.

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 Companys 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 Companys 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 six months ended December 31,September 30, 2023 and 2022, we incurred stock-based compensation expense of $27.5$19.6 million and $55.0$27.5 million, respectively, associated with the Value Creation Award as a component of general and administrative expense within the interim condensed consolidated
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statements of operations and comprehensive loss. For the three and six months ended December 31, 2021, we incurred stock-based compensation expense of $42.3 million and $84.5 million, respectively.

As of December 31, 2022,September 30, 2023, unrecognized compensation expense related to the Value Creation Award was approximately $152.5$93.3 million, which is expected to be recognized over a remaining weighted-average period of 3.02.3 years.

Restricted Stock Units

RSUs granted prior to the IPO were subject to two 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 three months ended September 30, 2023, we modified the vesting terms of approximately 5,300 RSU grants that vested on a monthly basis. Pursuant to the modified vesting schedule, these RSU grants will now vest on a quarterly basis. During the three months ended September 30, 2023, we recorded a one-time expense of $28.1 million in connection with the transition to a quarterly vesting schedule.

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The following table summarizes our RSU activity during the sixthree months ended December 31, 2022:September 30, 2023:
Number of SharesWeighted Average Grant Date Fair ValueNumber of SharesWeighted Average Grant Date Fair Value
Non-vested as of June 30, 202221,387,592 $38.41 
Non-vested at June 30, 2023Non-vested at June 30, 202321,653,196 $26.99 
GrantedGranted9,860,752 27.48 Granted6,626,710 18.25 
VestedVested(6,263,666)34.50 Vested(5,719,367)27.65 
Forfeited, expired or cancelledForfeited, expired or cancelled(2,106,144)39.77 Forfeited, expired or cancelled(828,588)26.23 
Non-vested as of December 31, 202222,878,534 $34.64 
Non-vested at September 30, 2023Non-vested at September 30, 202321,731,951 $24.18 

As of December 31, 2022,September 30, 2023, unrecognized compensation expense related to unvested RSUs was approximately $675.8$447.7 million, which is expected to be recognized over a remaining weighted-average period of 2.01.9 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 11.313.8 million shares of Class A common stock are reserved and available for issuance under the ESPP and 649,5801.1 million shares have been issued as of December 31, 2022.September 30, 2023. The ESPP provides for six-month offering periods beginning December 1 and June 1 of each year, with the initial six-month offering period beginning December 1, 2021.year. 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 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 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 December 31,Six Months Ended December 31,Three Months Ended September 30,
202220212022202120232022
General and administrativeGeneral and administrative$66,659 $61,947 $133,999 $129,689 General and administrative$70,184 $67,340 
Technology and data analyticsTechnology and data analytics48,534 21,427 91,962 41,494 Technology and data analytics35,135 43,428 
Sales and marketingSales and marketing5,549 4,633 13,677 9,657 Sales and marketing5,465 8,128 
Processing and servicingProcessing and servicing1,033 530 1,945 886 Processing and servicing1,575 912 
Total stock-based compensation in operating expensesTotal stock-based compensation in operating expenses121,775 88,537 241,583 181,726 Total stock-based compensation in operating expenses112,359 119,808 
Capitalized into property, equipment and software, netCapitalized into property, equipment and software, net22,443 13,383 43,647 25,073 Capitalized into property, equipment and software, net38,803 21,204 
Total stock-based compensation expense$144,218 $101,920 $285,230 $206,799 
Total stock-based compensationTotal stock-based compensation$151,162 $141,012 

In connection with
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16.   Restructuring and other

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 acquisition of Returnly on May 1, 2021,Plan, we issued 304,364 sharesreduced our workforce by approximately 500 employees, representing approximately 19% of our Class A common stock, which are held in escrow. Becauseemployees and incurred lease exit costs related to vacating a portion of our San Francisco office.
Restructuring and other consisted of $1.7 million of employee severance pay and related costs for 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 sixthree months ended December 31, 2022,September 30, 2023.
Our restructuring accrual activity for the arrangement was modified, resulting in the release of 45,459 shares from escrowthree months ended September 30, 2023 is summarized as follows (in thousands):

2023
Restructuring Plan
Other Exit and Disposal Activities (1)
Accrued restructuring costs, June 30, 2023$308 $2,116 
Additions200 1,633 
Cash paid(168)— 
Adjustments(90)— 
Accrued restructuring costs, September 30, 2023$250 $3,749 
(1)Includes employee severance pay and the remittance of 243,384 shares backrelated costs, contract cancellation charges, among other items, related to the Company. The modification resulted in the recognition of $2.0 million of incremental compensation cost within generalother exit and administrative expenses in our interim condensed statement of operations. As of December 31, 2022, 15,521 shares remain in escrow.disposal activities

16.17.   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’sOur 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 six months ended December 31,September 30, 2023, we recorded income tax expense (benefit) of $1.0 million which was primarily attributable to deferred tax expense recognized by our Canadian subsidiary, various U.S state and other foreign income taxes, and the tax amortization of certain intangibles. For the three months ended September 30, 2022, we recorded income tax expense (benefit) of $(1.6)$(0.2) million and $(1.7) million, respectively, which was primarily attributable to the effects of foreign income taxes ondeferred tax benefits recognized by 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 six months ended December 31, 2021, we recorded income tax expense (benefit) of $0.3 million and $0.4 million, respectively, which was primarily attributable to various U.S. state and foreign income taxes and the tax amortization of certain intangibles.

As of December 31, 2022,September 30, 2023, we continue to recognize a full valuation allowance against our U.S. federal and state and certain 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 Companyus 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.

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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 asand other objectively verifiable positive evidence available, 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 foreignCanadian 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.

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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18.   Net Loss per Share Attributable to Common Stockholders

The following 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 December 31,Six Months Ended December 31,Three Months Ended September 30,
2022202220232022
Class AClass BClass AClass BClass AClass BClass AClass B
Numerator:Numerator:Numerator:
Net lossNet loss$(256,451)$(65,986)$(455,739)$(117,967)Net loss$(138,078)$(33,705)$(199,355)$(51,914)
Net loss attributable to common stockholders - basic and dilutedNet loss attributable to common stockholders - basic and diluted$(256,451)$(65,986)$(455,739)$(117,967)Net loss attributable to common stockholders - basic and diluted$(138,078)$(33,705)$(199,355)$(51,914)
Denominator:Denominator:Denominator:
Weighted average shares of common stock - basicWeighted average shares of common stock - basic233,581,678 60,101,653 232,201,361 60,104,939 Weighted average shares of common stock - basic244,224,777 59,614,893 230,821,045 60,108,225 
Weighted average shares of common stock - dilutedWeighted average shares of common stock - diluted233,581,678 60,101,653 232,201,361 60,104,939 Weighted average shares of common stock - diluted244,224,777 59,614,893 230,821,045 60,108,225 
Net loss per share:Net loss per share:Net loss per share:
BasicBasic$(1.10)$(1.10)$(1.96)$(1.96)Basic$(0.57)$(0.57)$(0.86)$(0.86)
DilutedDiluted$(1.10)$(1.10)$(1.96)$(1.96)Diluted$(0.57)$(0.57)$(0.86)$(0.86)

Three Months Ended December 31,Six Months Ended December 31,
20212021
Class AClass BClass AClass B
Numerator:
Net loss$(121,609)$(38,126)$(332,251)$(134,099)
Net loss attributable to common stockholders - basic and diluted$(121,609)$(38,126)$(332,251)$(134,099)
Denominator:
Weighted average shares of common stock - basic214,335,757 67,198,131 194,918,082 78,670,012 
Weighted average shares of common stock - diluted214,335,757 67,198,131 194,918,082 78,670,012 
Net loss per share:
Basic$(0.57)$(0.57)$(1.70)$(1.70)
Diluted$(0.57)$(0.57)$(1.70)$(1.70)
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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 December 31,
20222021
Restricted stock units22,878,534 13,345,552 
Stock options, including early exercise of options19,392,346 18,851,935 
Common stock warrants6,178,730 6,075,005 
Employee stock purchase plan shares1,121,878 123,093 
Total49,571,488 38,395,585 

18.   Segments and Geographical Information

We conduct our operations through a single operating segment and, therefore, one 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 December 31,Six Months Ended December 31,
2022202120222021
United States$390,389 $350,486 $742,974 $612,089 
Canada9,121 10,525 18,135 18,307 
Other48 — 73 — 
Total$399,558 $361,011 $761,182 $630,396 

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):
December 31, 2022June 30, 2022
United States$288,989 $217,532 
Canada3,195 4,390 
Other$369 $231 
Total$292,553 $222,153 
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19.   Subsequent Events

The Company has evaluated the impact of events that have occurred subsequent to December 31, 2022, through the date of the interim condensed consolidated financial statements were filed with the SEC. There were no significant subsequent events identified other than the matters described below.
Business Combination

On February 1, 2023, we completed the closing of the transaction contemplated by a share purchase agreement entered into with certain sellers (as set forth therein) to acquire the entire issued share capital of Butter Holdings Ltd., a buy now, pay later company based in the United Kingdom. The purchase price was comprised of $14.9 million in cash, subject to adjustments in accordance with the purchase agreement, and $1.5 million settlement of subordinated secured notes. The initial accounting for the business combination is incomplete at the time of this filing due to the limited amount of time between the acquisition date and the date that these financial statements are issued. As a result, it is impracticable for us to provide all of the disclosures required for a business combination pursuant to ASC 805.
Restructuring

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. The Plan provides for a reduction of our workforce by approximately 500 employees, representing approximately 19% of our employees. In connection with the Plan, we are reevaluating our need for leased office space and have made the decision to fully vacate a portion of our San Francisco office. We expect implementation of the Plan to be substantially complete by the end of fiscal 2023.
We expect to incur approximately $35 million to $39 million in total restructuring costs, which includes cash expenditures of $24 million to $28 million relating to one-time employee severance and other employment termination benefits and non-cash expenditures of approximately $11 million relating to the acceleration of amortization expense for the lease asset that we expect to incur in connection with the partial office closure. We expect to record the majority of the associated charges and the majority of the associated cash expenditures in the third fiscal quarter of 2023.
The estimates of the costs and expenses that we expect to incur are subject to a number of assumptions and actual expenses may differ materially from the estimates disclosed above. We may also incur costs and expenses not currently contemplated due to unanticipated events that may occur with the implementation of the Plan.
As of September 30,
20232022
Restricted stock units21,731,951 23,341,125 
Stock options, including early exercise of options19,115,091 20,235,040 
Common stock warrants5,743,523 5,870,677 
Employee stock purchase plan shares476,156 524,596 
Total47,066,721 49,971,438 

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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, 20222023 included in our Annual Report on Form 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 bestsuperior 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, 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 apply for installment loans, and upon approval, they can use the Affirm Card digitally online or in-stores to complete a purchase. Additionally, consumers can manage the pre- and post purchase split of Affirm Card transactions into loan, manage payments, open a high-yield savings account, and access a personalized marketplace.
Our companyCompany 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.

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Our total revenue, net was approximately $399.6 million and $761.2 million for the three and six months ended December 31, 2022, respectively, and $361.0 million and $630.4 million for the three and six months ended December 31, 2021, respectively. We incurred net losses of $322.4 million and $573.7 million for the three and six months ended December 31, 2022, respectively, and $159.7 million and $466.4 million for the three and six months ended December 31, 2021, respectively.
Our business is designed to scale efficiently. Our partnerships with a diverse set of capital partners, including our warehouse facilities, securitization trusts and forward flow arrangements, have allowed us to remain equity capital efficient though market cycles. Since July 1, 2016, we have processed approximately $43.0 billion of GMV on our platform. As of December 31, 2022, we had over $10.5 billion in funding capacity from our capital partners, a decrease of $0.1 billion from $10.6 billion as of June 30, 2022.
The equity capital required to build our total platform portfolio has increased from approximately 3% of the total platform portfolio as of June 30, 2022, to approximately 5% as of December 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 loans held for investment, loans held for sale, and loans owned by third-parties. This amount totaled $8.4 billion and $7.1 billion as of December 31, 2022 and June 30, 2022, 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 $459.0 million and $206.1 million as of December 31, 2022 and June 30, 2022, respectively. Equity capital required as a percent of the last twelve months’ GMV was 2% and 1% as of December 31, 2022 and June 30, 2022, respectively.
We believe that our continued success will depend on many factors, including our ability to attract additional merchant partners, retain our existing merchant partners, and grow and develop our relationships with new and existing merchant partners, help our merchants grow their revenue on our platform, and develop new innovative solutions to establish the ubiquity of our network and breadth of our platform.
Three Months Ended September 30,
20232022$%
(in thousands, except percentages)
Total revenue, net$496,547 $361,624 $134,923 37 %
Total operating expenses705,994 649,091 56,903 9 %
Operating loss$(209,447)$(287,467)$78,020 (27)%
Other income, net38,707 36,018 2,689 %
Loss before income taxes$(170,740)$(251,449)$80,709 (32)%
Income tax (benefit) expense1,043 (180)1,223 (679)%
Net loss$(171,783)$(251,269)$79,486 (32)%
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 our 0% APR financing products. For the three and six months ended December 31,September 30, 2023 and 2022, Pay-in-4 represented 23%15% and 21%18% of total GMV facilitated through our platform, respectively, while 0% APR Core loans represented 10%11% and 13%19%, respectively. For the three and six months ended December 31, 2021, Pay-in-4 represented 18% and 17% of total GMV facilitated through our platform, respectively, while 0% APR Core loans represented 26% and 27%, 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. For the three months ended September 30, 2023 and 2022, interest bearing loans represented 74% and 64% of total GMV facilitated through our platform, respectively.
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. Similarly, we also facilitate the issuance of the Affirm Card, a debit card that can be used physically or virtually and which allows consumers to link a bank account to pay in full, or pay later by accessing credit through the Affirm App. When these virtual cards are used over established card networks, we earn a portion of the interchange fee from the transaction.
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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. A portion of these loans are funded and issued by our originating bank partners:partners, which include Cross River Bank, an FDIC-insured New Jersey state-chartered bank, and Celtic Bank, an FDIC-insured Utah state-chartered industrial bank, and Lead Bank, an FDIC-insured Missouri state-chartered bank. These partnerships allow us to benefit from our partners’ ability to originate loans under their banking licenses while complying with various federal, state, and other laws. Under this arrangement, we must comply with our originating bank partners' credit policies and underwriting procedures, and our originating bank partners maintain ultimate authority to decide whether to originate a loan or not. When an originating bank partner originates a loan, it funds the loan through its own funding sources and may subsequently offer and sell the loan to us. Pursuant to our agreements with these partners, we are obligated to purchase the loans facilitated through our platform that such partner offers us and our obligation is secured by cash deposits. To date, we have purchased all of the loans facilitated through our platform and originated by our originating bank partners. When we purchase a loan from an originating bank partner, the purchase price is equal to the outstanding principal balance of the loan, plus a fee and any accrued interest. The originating bank
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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. 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 variousseveral states in the U.S. through our consolidated subsidiaries. We directly originated approximatelFor the three and six months ended December 31, 2022, we originated approximately $261.3y $938.3 million, or 5%17%, and $430.4$874.5 million, or 4%, respectively, of loans in Canada compared to approximately $293.4 million, or 7%, and $429.7 million, or 6%20%, of loans for the three and six months ended December 31, 2021, respectively. For the threeSeptember 30, 2023 and six months ended December 31, 2022, we directly originated $807.7 million, or 14%, and $1,512.4 million, or 15%, respectively, of loans in the U.S. pursuant to our state licenses, compared to approximately $728.3 million and $1,114.6 million, or 16%, of loans for both the three and six months ended December 31, 2021, respectively.
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 and in our most recently filed Annual Report on Form 10-K for the fiscal year ended June 30, 2023.
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. While we have continued to improve our equity capital efficiency, the percentage of our equity capital as a percentage of our total platform portfolio has remained relatively unchanged at 5% as of September 30, 2023 and June 30, 2023. 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 products that our merchants offer and our consumers purchase in any period affects our operating results. This mix impacts GMV, revenue, our financial results, and our key operating metric performance for that period. Differences in loan product mix result in varying loan durations, APR, and mix of 0% APR and interest-bearing financings.
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 or not 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 may vary. In addition, our commercial agreement with Shopify to offer Shop Pay Installments powered by Affirm and our Pay-in-4 offering may continue to impact the mix of our shorter duration, low AOV products. Differences in the mix of high versus low AOV may 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-4 and other low-AOV offerings.
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Seasonality
We experience seasonal fluctuations in our business as a result of consumer spending patterns. Historically, our GMV has been the strongest during the second quarter of our fiscal year due to increases in retail commerce during the holiday season. Despite these higher GMV levels, in fiscal 2023 and 2022, we generated less in period revenue as a percentage of GMV during our second fiscal quarter due to the comparatively higher proportion of interest bearing loans originated in the latter half of the period, which typically results in lower merchant network revenue, which is recognized in period, and higher levels of interest income, which is recognized over a longer time horizon. We expect these seasonal patterns to continue in future periods, and any adverse events that occur during our second fiscal quarter 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. Since 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 raised, and may continue to raise, the federal funds interest rate. Simultaneously, economic uncertainty and the prospect of economic recession 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 leads to the recognition of interest income over the life of the loan, effectively delaying the revenue that would have been realized upon the loan’s sale.

Managing delinquency rates: We continue to optimize our underwriting to manage delinquency rates. As of September 30, 2023, our 30-day delinquency rates for monthly installment loans and our allowance rates for loan losses improved over, those experienced as of September 30, 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.

Pricing Initiatives

We have substantially implemented 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 requested loan amounts;

offering merchant-subsidized low APR loans (4% to 9.99%) as an alternative to monthly 0% APR programs; and
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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. As such, the CFPB has in the past requested reports concerning our organization, business conduct, markets, and activities, and we expect that the CFPB will continue to do so from time to time in the future.
In addition, we are subject to supervision by the CFPB, which enables it, among other things, to conduct comprehensive and rigorous examinations to assess our compliance with consumer financial protection laws, which in turn could result in matters requiring attention, investigations, enforcement actions, regulatory fines and mandated changes to our business products, policies and procedures.
Key Operating Metrics

We focus on several key operating metrics to measure the performance of our business and help determine our strategic direction. In addition to revenue, net (loss) income,loss, and other results under U.S. GAAP, the following tables set forth key operating metrics we use to evaluate our business.
Three Months Ended
December 31,
Six Months Ended December 31,
20222021% Change20222021% Change
(in thousands, except per consumer data)
Gross Merchandise Volume (GMV)$5,658,286 $4,457,574 27 %$10,047,703 $7,170,513 40 %
Three Months Ended September 30,
20232022% Change
(in billions)
Gross merchandise volume (GMV)$5.6 $4.4 28 %
GMV
We measure 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 platform during the applicable period, net of refunds. GMV does not represent revenue earned by us. However, the GMV processed through our platformus; however, it is an indicator of the success of our merchants and the strength of our platform.
For the three months ended December 31, 2022,September 30, 2023, GMV was $5.7$5.6 billion, which represented an increase of approximately 27%28% as compared to $4.5 billion for the same period in 2021.
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For2022. Overall, the six months ended December 31, 2022, GMV was $10.0 billion, which represented an increase of approximately 40% as compared to $7.2 billion for the same period in 2021. The increase in GMV was primarily driven by the strong network effects of the expansion of our active merchant base an increaseand increases in active consumers and an increase in average transactions per consumer. The increase in GMV for the three months ended September 30, 2023 also reflected increased consumer demand at our largest merchant partners by GMV and increased consumer demand in our travel and ticketing and general merchandise categories.
For the three months ended September 30, 2023, our top five merchants and platform partners represented approximately 42% of total GMV, as compared to 38% for the three months ended September 30, 2022. GMV attributable to Amazon increased during the three months ended September 30, 2023 as compared to the same period in 2022 but represented less than 20% of total GMV for all such periods.

December 31, 2022December 31, 2021% Change
(in thousands, except per consumer data)
Active Consumers15,615 11,231 39 %
Transactions per Active Consumer (x)3.5 2.538 %
September 30, 2023September 30, 2022% Change
(in thousands, except per consumer data)
Active consumers16,933 14,722 15 %
Transactions per active consumer4.1 3.325 %


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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 December 31, 2022,September 30, 2023, we had 15.6approximately 16.9 million active consumers representinginclusive of 0.8 million active consumers who only transacted on Returnly, which represented an increase of approximately 39%15% compared to 11.2approximately 14.7 million active consumers as of December 31, 2021.September 30, 2022. The increase was primarily due to a high retention rate of existing consumers and the acquisition of new consumers through an expanding active merchant base.
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 December 31, 2022,September 30, 2023, we had approximately 3.54.1 transactions per active consumer, an increase of approximately 38%25% compared to December 31, 2021,September 30, 2022. This was primarily as a result ofdue to platform growth and a higher frequency of repeat users driven by consumer engagement.
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. 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 December 31, 2022. 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-4 and 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.
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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:presented:

Three Months Ended September 30,
20232022$%
(in thousands, except percentages)
Revenue
Merchant network revenue$145,950 $113,149 $32,801 29 %
Card network revenue33,476 26,708 6,768 25 %
Total network revenue179,426 139,857 39,569 28 %
Interest income (1)
262,679 136,802 125,877 92 %
Gain on sales of loans (1)
34,285 63,595 (29,310)(46)%
Servicing income20,157 21,370 (1,213)(6)%
Total revenue, net$496,547 $361,624 $134,923 37 %
Operating expenses (2)
Loss on loan purchase commitment$34,866 $35,610 $(744)(2)%
Provision for credit losses99,696 64,250 35,446 55 %
Funding costs73,931 25,066 48,865 195 %
Processing and servicing75,671 54,359 21,312 39 %
Technology and data analytics132,965 144,961 (11,996)(8)%
Sales and marketing146,866 163,873 (17,007)(10)%
General and administrative140,334 160,972 (20,638)(13)%
Restructuring and other1,665 — 1,665 
NM*
Total operating expenses705,994 649,091 56,903 9 %
Operating loss$(209,447)$(287,467)$78,020 (27)%
Other income, net38,707 36,018 2,689 %
Loss before income taxes$(170,740)$(251,449)$80,709 (32)%
Income tax (benefit) expense1,043 (180)1,223 (679)%
Net loss$(171,783)$(251,269)$79,486 (32)%
Three Months Ended December 31,Six Months Ended December 31,
20222021$%20222021$%
(in thousands, except percentages)
Revenue
Merchant network revenue$134,019 $127,087 $6,932 %$247,168 $219,331 $27,837 13 %
Virtual card network revenue29,117 26,558 2,559 10 %55,825 45,953 9,872 21 %
Total network revenue163,136 153,645 9,491 %302,993 265,284 37,709 14 %
Interest income (1)
155,321 138,355 16,966 12 %292,123 255,657 36,466 14 %
Gain on sales of loans (1)
59,607 57,690 1,917 %123,202 88,669 34,533 39 %
Servicing income21,494 11,321 10,173 90 %42,864 20,786 22,078 106 %
Total Revenue, net$399,558 $361,011 $38,547 11 %$761,182 $630,396 $130,786 21 %
Operating Expenses (2)
Loss on loan purchase commitment$38,422 $65,265 $(26,843)(41)%$74,032 $116,943 $(42,911)(37)%
Provision for credit losses106,689 52,640 54,049 103 %170,939 116,287 54,652 47 %
Funding costs43,751 17,700 26,051 147 %68,817 34,453 34,364 100 %
Processing and servicing66,508 41,849 24,659 59 %120,867 67,050 53,817 80 %
Technology and data analytics156,747 94,989 61,758 65 %301,708 173,002 128,706 74 %
Sales and marketing188,334 143,476 44,858 31 %352,207 207,436 144,771 70 %
General and administrative158,639 141,292 17,347 12 %319,611 277,496 42,115 15 %
Total Operating Expenses759,090 557,211 201,879 36 %1,408,181 992,667 415,514 42 %
Operating Loss$(359,532)$(196,200)$(163,332)83 %$(646,999)$(362,271)$(284,728)79 %
Other income (expense), net35,527 36,741 (1,214)(3)%71,545 (103,632)175,177 (169)%
Loss Before Income Taxes$(324,005)$(159,459)$(164,546)103 %$(575,454)$(465,903)$(109,551)24 %
Income tax (benefit) expense(1,568)276 (1,844)(668)%(1,748)447 (2,195)(491)%
Net Loss$(322,437)$(159,735)$(162,702)102 %$(573,706)$(466,350)$(107,356)23 %
* 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 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
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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 detailstables detail activity for the discount, included in loans held for investment, for the periods indicated:

Three Months Ended December 31,Six Months Ended December 31,
2022202120222021
(in thousands)
Balance at the beginning of the period$57,477 $53,657 $42,780 $53,177 
Additions from loans purchased or originated, net of refunds72,650 121,603 143,044 198,873 
Amortization of discount(38,838)(54,965)(77,807)(93,410)
Unamortized discount released on loans sold(13,779)(72,335)(28,953)(110,680)
Impact of foreign currency translation320 — (1,234)— 
Balance at the end of the period$77,830 $47,960 $77,830 $47,960 
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Three Months Ended September 30,
20232022
(in thousands)
Balance at the beginning of the period$96,576 $42,780 
Additions from loans purchased or originated, net of refunds52,420 70,394 
Amortization of discount(45,118)(38,969)
Unamortized discount released on loans sold(13,060)(15,174)
Impact of foreign currency translation(956)(1,554)
Balance at the end of the period$89,862 $57,477 
(2) Amounts include stock-based compensation as follows:
Three Months Ended December 31,Six Months Ended December 31,Three Months Ended September 30,
202220212022202120232022
(in thousands)(in thousands)
General and administrativeGeneral and administrative$66,659 $61,947 $133,999 $129,689 General and administrative$70,184 $67,340 
Technology and data analyticsTechnology and data analytics48,534 21,427 91,962 41,494 Technology and data analytics35,135 43,428 
Sales and marketingSales and marketing5,549 4,633 13,677 9,657 Sales and marketing5,465 8,128 
Processing and servicingProcessing and servicing1,033 530 1,945 886 Processing and servicing1,575 912 
Total stock-based compensation in operating expensesTotal stock-based compensation in operating expenses121,775 88,537 241,583 181,726 Total stock-based compensation in operating expenses112,359 119,808 
Capitalized into property, equipment and software, netCapitalized into property, equipment and software, net22,443 13,383 43,647 25,073 Capitalized into property, equipment and software, net38,803 21,204 
Total stock-based compensation expense$144,218 $101,920 $285,230 $206,799 
Total stock-based compensationTotal stock-based compensation$151,162 $141,012 
Comparison of the Three and Six Months Ended December 31,September 30, 2023 and 2022 and 2021

Total Revenue, net

Total Revenue, net increased by $38.5 million, or 11%, and $130.8 million, or 21%, for the three and six months ended December 31, 2022, respectively, compared to the same period in 2021. The increase is primarily attributable to an increase of $1.2 billion and $2.9 billion in GMV on our platform, from $4.5 billion and $7.2 billion for the three and six months ended December 31, 2021 to $5.7 billion and $10.0 billion for the three and six months ended December 31, 2022. The increase in GMV was driven by the strong network effects of the expansion of our active merchant base from 168,030 as of December 31, 2021 to 243,371 as of December 31, 2022, an increase in active consumers from 11.2 million as of December 31, 2021 to 15.6 million as of December 31, 2022, and an increase in average transactions per consumer from 2.5 as of December 31, 2021 to 3.5 as of December 31, 2022.
No single merchant partner represented 10% or more of total revenue during the three or the six months ended December 31, 2022 or during the three and six months ended December 31, 2021. However, GMV from loans facilitated on our platform relating to consumer purchases from Amazon, our largest merchant partner based on fiscal 2023 GMV, represented approximately 23% and 20% of total GMV during the three and six months ended December 31, 2022, respectively, while GMV from such loans represented less than 10% of total GMV during both
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the three and six months ended December 31, 2021. The year-over-year increase in Amazon GMV is due primarily to Affirm being an available payment option to Amazon consumers throughout the first half of fiscal 2023, while Affirm was a payment option to Amazon consumers only during a portion of the first half of fiscal 2022.
Merchant network revenueincreased by $6.9 million, or 5%, and $27.8 million, or 13%, for the three and six months ended December 31, 2022, respectively, compared to the same period in 2021.
Merchant network revenue growth is generally correlated withimpacted by both GMV growth and the mix of loans originated on our platform as differentmerchant 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 and AOV of our loans, and typically decreases with shorter duration and higher APR loans. Specifically, long-term 0% APR loans typically carry higher merchant fees as a percentage of GMV and have higher AOVs.
The increase in merchant network revenue during the three and six month period was primarily driven by an increase in GMV, partially offset by reductions in the concentration of long-term 0% APR loans, our highest merchant fee category, which decreased from 13% of total GMV during both the three and six months ended December 31, 2021, to 4% and 5% during the three and six months ended December 31, 2022, respectively, driven by the increased adoption of our Pay-in-4 product and a more diversified merchant base with a larger concentration of GMV coming from partnerships with merchants that primarily offer interest-bearing loans. During the three and six months ended December 31, 2022, approximately 2% of total revenue was associated with one of our largest merchant partners by merchant network revenue for which we facilitate long-term 0% APR and long-termlonger-term, non interest-bearing loans with higher merchant fees, comparedAOVs, and decreases with 11% and 10% of total revenue in the prior-year periods, respectively. More broadly, for the three and six months ended December 31, 2022,shorter-term, interest-bearing loans with term lengths greater than 12 months accounted for 18% of GMV compared to 21% for the same period in 2021. AOV was lower at $307 and $317 for the three and six months ended December 31, 2022, respectively, compared to $365 and $379 for the same period in 2021, respectively, primarily as a result of the increased adoption of our Pay-in-4 product during the period.AOVs.
Additionally, during the three and six months ended December 31, 2022, the reduction of merchant fee revenue was $16.1 million and $29.6 million, respectively, associated with the creation of discounts upon direct origination of loans with par values in excess of the fair value of such loans, compared to $28.7 million and $42.2 million during the same period in 2021. For the three and six months ended December 31, 2022, we directly originated $1.1 billion and $1.9 billion of loans, an increase of 4.6% and 25.9%, respectively, compared to $1.0 billion and $1.5 billion for the same period in 2021. While the discounts created upon the direct origination of a loan reduce merchantMerchant network revenue at the time of origination, the discounts are amortized into interest income over the life of the respective loans when retained on the balance sheet and any unamortized discount is reflected in the cost basis when determining gain on sale of loans.
Virtual card network revenue increased by $2.6$32.8 million, or 10%, and $9.9 million, or 21%29%, for the three and six months ended December 31, 2022, respectively,September 30, 2023, compared to the same period in 2021,2022. The increase is primarily attributed to an increase of $1.2 billion in GMV for the three months ended September 30, 2023, compared to the same time period in 2022. The increase in GMV is a result of the expansion of our active merchant base and consumers, reaching approximately 266,000 and 16.9 million, respectively, as of September 30, 2023, up from approximately 245,000 and 14.7 million, respectively, as of September 30, 2022. Additionally, the average transactions per consumer increased from 3.3 as of September 30, 2022 to 4.1 as of September 30, 2023. The increase in consumers and average transactions per consumer is partially offset by a decrease in AOVs. For the three months ended September 30, 2023 AOV was $299, down from $331 for the same period in fiscal 2022. The decrease in AOV is due to the diversification of our merchant base and our initiative to drive repeat usage of our platform beyond one-time high AOV purchases.
Card network revenue
Card network revenue increased by $6.8 million, or 25%, for the three months ended September 30, 2023 compared to the same period in 2022. Card network revenue growth is correlated with the growth of GMV processed by our issuer processors. As such, the increase is primarily driven by an increase in$1.8 billion of GMV processed through our issuer processorprocessors, an increase of 35% for the three months ended September 30, 2023 as a result ofcompared to the same period in 2022. This was driven by increased card activity on our virtual card-enabled mobile application, as well as growth in existing and new merchants integrated using our virtual card platform, growing from 966approximately 1,100 merchants as of December 31, 2021September 30, 2022 to 1,1751,400 merchants
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as of December 31, 2022. Virtual cardSeptember 30, 2023. Card network revenue is also impacted by the mix of merchants as different merchants can have different interchange rates depending on their industry or size, among other factors.
Interest income
Interest income increased by $17.0$125.9 million, or 12%, and 36.5 million, or 14%92%, for the three and six months ended December 31, 2022, respectively,September 30, 2023, compared to the same period in 2021.2022. 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 36%73% to $3.2 billion and 33% to $2.9$4.5 billion for the three and six months ended December 31, 2022, respectively,September 30, 2023 compared to the same period in 2021.2022. The increase was partially offset by a decrease in the average concentration of 0% APR loans held for investment on our interim consolidated balance sheet which decreasedis in response to the current market environment and our ability to allocate loans to warehouse credit facilities with better economic terms while optimizing cost of funds. As a result of the increase in loans held for investment on our consolidated balance sheet, interest income from 41%interest-bearing loans increased from $106.1 million for the three and six months ended December 31, 2021September 30, 2022 to 36% and 37%$226.2 million for three and six months ended December 31, 2022.September 30, 2023. This increase was partially due to an increase in volume of interest bearing loans which increased to 74% of total GMV for the three months ended September 30, 2023 compared to 64% of total GMV in the same period in 2022, in addition to recent pricing initiatives, including the increase of the maximum APR and merchant-subsidized low APR loans replacing previously non-interest bearing loans.
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loans
Gain on sales of loans increaseddecreased by $1.9$29.3 million, or 3%46%, for the three months ended December 31, 2022September 30, 2023 compared to the same period in 2021. We sold loans with an unpaid balance of $2.1 billion for2022. The decrease was partially driven by higher benchmark interest rates, which impacted pricing terms on loan sales during the three months ended December 31, 2022 compared to $2.5 billion for the same period in 2021, for which we retained servicing rights. Thisperiod. The decrease in volume was partially offset by favorablean increase in loan sale pricing terms.
Gain on sales of loansincreased by $34.5 million, or 39%, for the six months ended December 31, 2022, compared to the same period in 2021, mainly driven by increased loan sale activityvolume to third-party loan buyers. We sold loans with an unpaid principal balance of $4.1$2.2 billion for the sixthree months ended December 31, 2022September 30, 2023 compared to $3.6$2.0 billion for the same period in 2021,2022.
Servicing income
Servicing income includes net servicing fee revenue and fair value adjustments for whichservicing 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 retainedhave 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. ThisBecause 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 was driven by higher loan sale volume to third-party loan buyers, favorable loan sale pricing terms,servicing income. We discuss our valuation methodology and optimizing the allocationsignificant Level 3 inputs for servicing assets and liabilities within Note 13. Fair Value of loans to loan buyers with higher pricing terms.Financial Assets and Liabilities.
Servicing income increaseddecreased by $10.2$1.2 million, or 90%, and 22.1 million, or 106%6%, for the three and six months ended December 31, 2022, respectively,September 30, 2023, compared to the same period in 2021, driven2022. The decrease was primarily by an increase indue to the average unpaid principal balance of loans owned by third-party loan owners, which increaseddecreased from $3.3 billion and $3.0$4.6 billion during the three and six months ended December 31, 2021, respectively,September 30, 2022 to $4.7 billion and $4.0$4.4 billion during the three and six months ended December 31, 2022, respectively. Additionally, during the three and six months ended December 31, 2022, an increaseSeptember 30, 2023.
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Table of $2.5 million and $3.7 million, respectively, related to the changes in fair value of servicing assets and liabilities contributed to the overall increase in servicing income, compared to the same period in 2021.Contents
Loss on Loan Purchase Commitmentloan purchase commitment
We purchase certain loans from our originating bank partners that are processed through our platform and put back to us by our originating bank partners 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 $26.8$0.7 million, or 41%, and $42.9 million, or 37%2%, for the three and six months ended December 31, 2022, respectively,September 30, 2023 compared to the same period in 2021.2022. 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.value, in contrast to an increase in total loans purchased. The difference between fair value and purchase price for our loans is generally correlated with the term length and APR of the loan. As such,loans. Additionally, as the reduction in long term 0%percentage of our portfolio shifts towards more interest bearing loans, purchased from our bank partner contributed to the decline in loss on loan purchase commitment.commitment is expected to decrease as a percentage of the originated principal amount. During the three and six months ended December 31, 2022,September 30, 2023, we purchased $353.8$4.6 billion of loans from our originating bank partners, compared to $3.5 billion in the same period in 2022, representing an increase of 31%. Of those loans, $278.8 million and $750.4 million, respectively, ofwere long-term 0% APR loan receivables from our originating bank partners,for the three months ended September 30, 2023, representing a decrease of $273.5$117.8 million, or 44%30%, and $335.0 million, or 31%, respectively, compared to the same period in 2021.2022.
Provision for Credit Lossescredit losses
Provision for credit losses generally represents the amount of expense required to maintain the allowance for credit losses on our interim 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 bybased on our estimate of expected future losses on loans originated during the changeperiod and held for investment on our balance sheet, changes in estimates forour estimate of future losses on loans outstanding as of the end of the period 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.

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Provision for credit losses increased by $54.0$35.4 million, or 103%, and $54.7 million, or 47%55%, for the three and six months ended December 31, 2022, respectively,September 30, 2023 compared to the same period in 2021,2022, driven by growth in the volume of loans held for investment and partially 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. Total loansoutstanding. Loans held for investment was $3.7 billion and $2.4 billion as of December 31, 2022 and 2021, respectively. September 30, 2023 was $4.5 billion, an increase of $1.9 billion, or 70%, as compared to the same period in 2022.
The allowance for credit losses as a percentage of loans held for investment decreased from 6.3%was 5.1% as of December 31, 2021September 30, 2023 compared to 5.0%5.7% in the same period in 2022 and 4.6% as of December 31,June 30, 2023. The decrease from September 30, 2022, was primarily driven by enhancements to our credit underwriting models and collection processes for loans in early stage delinquency. This has allowed us to better predict and mitigate losses and has resulted in stronger performing loans normalized for the same credit quality. The increase in the allowance rate from June 30, 2023 is primarily driven by changes in the loan mix, including holding a decrease in allowance loss rate.higher percentage of seasoned and longer term loans on our balance sheet as of September 30, 2023.
Funding Costscosts
Funding costs consist of interest expense and the amortization of fees for certain borrowings collateralized by our loans including on balance sheet VIEs,warehouse credit facilities and consolidated securitizations, sale and repurchase agreements collateralized by our retained securitization interests, and other costs incurred in connection with funding the purchases and originations of loans. Funding costs for a given period are correlated withdriven by the sum of the average outstanding balance of funding debt and the average balance of notes issued by securitization trusts.trusts as well as our contractual interest rate and distribution of loans across funding facilities, net of the impact of any designated cash flow hedges.
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Funding costs increased by $26.1$48.9 million, or 147%, and $34.4 million, or 100%195%, for the three and six months ended December 31, 2022,September 30, 2023, respectively, compared to the same period in 2021.2022. The increase was primarily due to higher benchmark interest rates increased utilization fees and an increase of funding debt and notes issued by securitization trustsduring the current fiscal year. Additionally,three months ended September 30, 2023. The average total of funding debt from warehouses and securitizations for the three months ended September 30, 2023 was $4.0 billion compared to $2.4 billion during the same period in 2022, an increase isof $1.6 billion, or 67%. The increase was also 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 the three and six months ended December 31, 2022 was $1.5 billion and $1.6 billion, respectively, compared with $1.6 billion and $1.5 billion during the same periods in 2021, respectively. The average balance of funding debt for the three and six months ended December 31, 2022 was $1.3 billion and $1.1 billion, respectively, compared with $565.4 million and $603.8 million during the same periods in 2021, respectively. Additionally, the averageon-balance sheet loan balance on-balance sheet was $3.2 billion and $3.0$4.5 billion for the three and six months ended December 31, 2022, respectively,September 30, 2023, an increase of 72% compared to $2.3 billion and $2.2$2.6 billion during the same period in 2021, respectively. Average total funding debt from warehouses and securitizations for the three and six months ended December 31, 2022 increased by $690.3 million, or 32%, and $607.8 million, or 29%, respectively, compared to the same period in 2021

2022.
Processing and Servicingservicing

Processing and servicing expense consists primarily of payment processing fees, third-party customer support and collection expense, salaries and personnel-related costs of our customer care team, platform fees, and allocated overhead.
Processing and servicing expense increased by $24.7$21.3 million, or 59%, and $53.8 million, or 80%39%, for the three and six months ended December 31, 2022, respectively,September 30, 2023 compared to the same period in 2021.2022. This increase was driven primarily driven by an increase in payment processing fees of $11.6 million, or 40%, for the three months ended September 30, 2023 related to increased payment volume of $11.1 million, or 49%, and $39.3 million, or 167%, for the three and six months ended December 31, 2022, respectively, and an increase of $6.6 million and $15.0 million, respectively, in processing fees paid to our platform partners due to platform integrations, as well as short term promotions during the period.volume. Additionally, during the three and six months ended December 31, 2022, third-party customer support and collections spendSeptember 30, 2023, our platform fees increased by $4.9$7.8 million, or 50%107%, and $11.7 million, or 77%, respectively, compared to the same period in 2021 due to increased loanan increase in volume and transaction growth during the period.with a large enterprise partner.
Technology and Data Analyticsdata analytics
Technology and data analytics expense consists primarily of the salaries, stock-based compensation, and personnel-related costs of our engineering, product, and productcredit and analytics employees, as well as the amortization of internally-developed software and technology intangible assets, and our creditinfrastructure and analytics employees who develop our proprietary risk model and internally-developed software.

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hosting costs.
Technology and data analytics expense increaseddecreased by $61.8$12.0 million, or 65%, and $128.7 million, or 74%8%, for the three and six months ended December 31, 2022, respectively,September 30, 2023 compared to the same period in 2021. This increase2022. The decrease is primarily driven by an increasea decrease of $39.5$18.1 million, or 74%, and $74.6 million, or 72%21%, in stock-based compensation and payroll and personnel-related costs for the three and six months ended December 31, 2022, respectively,September 30, 2023 compared to the same period in 2021, resulting from increased headcount as we continue2022, due to support our growth and technology platform.higher capitalized expenses related to internally-developed software. Additionally, data infrastructure and hosting costs decreased by $8.1 million, or 27%, for the three months ended September 30, 2023 compared to the same period in 2022, due to cost improvements achieved as a result of contract renegotiation. The decrease is partially offset by amortization of internally-developed software and intangible assets which increased by $8.4 million, or 34%, and $24.3$11.8 million, or 61%, for the three and six months ended December 31, 2022, respectively,September 30, 2023 compared to the same period in 2021, due to increased capacity requirements of our technology platform driven by increases in active users and transactions per active consumer.
Furthermore, amortization of internally-developed software increased by $8.9 million, or 168%, and $17.2 million, or 194%, for the three and six months ended December 31, 2022, respectively, compared to the same period in 2021, primarily as a result of an increase in the number of capitalized projects during the period due to our ongoing investment in software development.projects. Capitalized projects grew by 129%83% from 170 projects to 389approximately 330 projects as of December 31,September 30, 2022 to 610 projects as of September 30, 2023. Additionally, data provider costs increased by $1.7 million, or 19%, for the three months ended September 30, 2023, compared to the same period in 2021.2022, due to an increase in transactions on our platform.
Sales and Marketingmarketing
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.
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Sales and marketing expenseincreased decreased by $44.9$17.0 million, or 31%, and $144.8 million, or 70%10%, during the three and six months ended December 31, 2022, respectively,September 30, 2023 compared to the same period in 2021.2022. The increasedecrease was primarily driven by Amazon warrant expense related to warrants which was $138.5 million and $257.7decreased from $119.2 million for the three and six months ended December 31,September 30, 2022 respectively. During the prior year period, we recognized expense associated with the warrants of $70.6to $106.3 million for both the three and six months ended December 31, 2021. The increase was partially offsetSeptember 30, 2023 due to a decrease in the number of new users to the Amazon program in the current period, which is the basis for a portion of the warrant expense. Additionally, personnel-related costs decreased by a $12.5$9.9 million, or 58%46%, and $21.0 million, or 63%, decrease in brand and consumer marketing spend associated with our brand-activation, holiday shopping, lifestyle, and travel marketing campaigns, as well as a decrease of $3.1 million, or 79%, and $7.6 million, or 76%, in business-to-business marketing spend duringfor the three and six months ended December 31, 2022, respectively,September 30, 2023 compared to the same period in 2021. Additionally,2022 as a result of our reduction in force and cost management plans. The decrease is partially offset by a $5.6 million increase in the sales and marketing expenses related to our Shopify commercial agreement decreased by $8.0 million and $16.0 million, or 47%, during bothamortization of intangible assets for the three and six months ended December 31, 2022, respectively,September 30, 2023 compared to the same period in 2021 driven by an extension2022 due to accelerated amortization of Returnly’s intangibles assets related to the wind down of our partnership agreement, which also extended the amortization period.returns management platform.
General and Administrativeadministrative
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 increaseddecreased by $17.3$20.6 million, or 12% and $42.1 million, or 15%13%, during the three and six months ended December 31, 2022September 30, 2023 compared to the same period in 2021,2022. The decrease was primarily due to an increase of $17.2a $3.3 million, and $35.3 million, respectivelyor 3%, decrease in payroll and personnel-related costs, resulting from an increased headcounta $6.6 million, or 45%, decrease in professional service fees and contractor expenses, and a $2.9 million, or 38%, decrease in bonuses during the period. The largest component of these personnel costs was stock-based compensation, which increased by $4.7 million, or 8%, and $4.3 million, or 3%, for the three and six months ended December 31, 2022, respectively,September 30, 2023 compared to the same period in 2021. For2022, as a result of our reduction in force and cost management plans. Additionally insurance expense decreased by $2.0 million, or 39%, driven by a rate reduction during policy renewals.
Restructuring and other
Restructuring and other for the three months ended December 31, 2022,September 30, 2023 increased by $1.7 million compared to the increase was partially offset by a $6.6 million, or 76%, decreasesame period in professional service fees.

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Table2022. The associated restructuring and other expenses during the three months ended September 30, 2023 related to employee severance and other employment termination benefits offered in connection with the wind down of Contentsour returns management platform, Returnly.

Other Income (Expense),(expense) income, net
Other income, (expense), net consists primarily ofincludes 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 on derivative agreements and other liabilities driven by increaseschanges in fair value, amortization of convertible debt issuance cost andas well as gains (losses) on extinguishment, 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.costs.
Other income, (expense), net decreasedincreased by $1.2$2.7 million, or 3%7%, during the three months ended December 31, 2022September 30, 2023 compared to the same period in 2021.2022. The decreaseincrease is primarily driven by a $12.1 million gain related to a decrease in the fair value of our contingent consideration liability, as compared to a gain of $34.0 million in the same period in 2021, a change of $22.0 million. The gain in both periods was primarily due to changes in the fair value of our common stock. This was partially offset by an increase in interest income onfrom cash and investments of $15.9$10.5 million andduring the three months ended September 30, 2023 compared to the same period in 2022 due to higher interest rates. Additionally, we recognized a gain of $3.5 million on derivative instruments.
Other income (expense), net increased by $175.2 million, or 169%, during the six months ended December 31, 2022 compared to the same periodchanges in 2021. The increase is primarily drive by a $9.3 million gain related to the fair value of liabilities, primarily related to our contingent considerationprofit sharing liability, asduring the three months ended September 30, 2023 compared to a loss of $107.6$5.3 million on other liabilities in the same period in 2021,2022, an increase of $8.8 million. We also had a change$9.9 million increase in other income related to the wind down of $116.9 million.Returnly and our partnership with a third party returns provider. The gain in both periods was primarily due to changes in the fair value of our common stock. Additionally, interest income on investments increasedincrease is partially offset by $27.3a $4.0 million and the gain on derivative instruments increased byduring the three months ended September 30, 2023 compared to a $30.7 million compared to the prior year period, primarily due to additional derivative instruments being entered intogain during the same period and increases in their fair value associated with upward shifts in forward curves and positive market adjustments.2022, a decrease of $26.7 million, primarily driven by more stable interest rates.
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Liquidity and Capital Resources

Sources and Uses of Funds
We 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 originating bank partners, we often utilize warehouse credit 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 forward flow arrangements and securitization transactions, and earn servicing fees from 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 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 optimize our funding to support the growth in loan volume.
Our principal sources of liquidity are cash and cash equivalents, available for sale securities, available capacity from warehouse and revolving credit facilities, revolving securitizations, forward flow loan sale arrangements, and certain cash flows from our operations. As of December 31, 2022,September 30, 2023, we had $2.4$2.1 billion in cash and cash equivalents and available for sale securities, $1.6$2.8 billion in available funding debt capacity, remaining acrossexcluding our primary funding channelspurchase commitments from third party loan buyers, and $205.0 million in borrowing capacity available under our revolving credit facility.




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The following table summarizes our cash, cash equivalents and investments in debt securities (in thousands):
December 31, 2022June 30, 2022September 30, 2023June 30, 2023
Cash and cash equivalents (1)
Cash and cash equivalents (1)
$1,440,333 $1,255,171 
Cash and cash equivalents (1)
$1,079,261 $892,027 
Investments in short-term debt securities (2)
Investments in short-term debt securities (2)
697,998 1,295,811 
Investments in short-term debt securities (2)
782,205 915,003 
Investments in long-term debt securities (2)
Investments in long-term debt securities (2)
216,925 299,562 
Investments in long-term debt securities (2)
239,425 259,650 
Cash, cash equivalent and investments in debt securities Cash, cash equivalent and investments in debt securities$2,355,256 $2,850,544  Cash, cash equivalent and investments in debt securities$2,100,891 $2,066,680 
(1)Cash and cash equivalents consist of bankchecking, money market and savings accounts held at financial institutions and short term highly liquid marketable securities, including money market funds, certificates of deposits, other commercial paper, and government bonds, and other corporate securities purchased with maturities less thanan original maturity of three months.months or less.
(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






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Funding Debt
Our available capacityfunding debt as of December 31, 2022September 30, 2023 primarily includeincludes warehouse credit facilities convertible senior notes, revolving credit facilitiesand sale and repurchase liabilities.agreements. A detailed description of each of our borrowing arrangements is included in Note 10.9. Debt in the notes to the interim condensed consolidated financial statements.
The following table summarizes our funding creditdebt facilities as of December 31, 2022. The funding debt consists of warehouse credit facilities, revolving credit facilities, and repurchase liabilities:September 30, 2023.
Maturity Fiscal YearMaturity Fiscal YearBorrowing CapacityPrincipal OutstandingMaturity Fiscal YearBorrowing CapacityPrincipal Outstanding
(in thousands)(in thousands)
2023$184,551 $177,864 
20242024953,006 520,794 2024$700,000 $183,530 
20252025850,000 460,715 2025842,092 390,881 
20262026584,551 193,954 20261,634,184 633,452 
2027 and thereafter850,000 541,125 
20272027— — 
2028202826,660 26,660 
ThereafterThereafter1,302,602 490,488 
TotalTotal$3,422,108 $1,894,452 Total$4,505,538 $1,725,011 
Warehouse Credit FacilitiesU.S.
Our warehouse credit facilities which allow us to borrow up to an aggregate of $3.4$4.0 billion, mature between 20232024 and 20292031 and subject to covenant compliance, generally permit borrowings up to 12 months prior to the final maturity date. As of December 31, 2022,September 30, 2023, we have drawn an aggregate of $1.9$1.4 billion on our warehouse credit facilities. As of December 31, 2022,September 30, 2023, we were in compliance with all applicable covenants in the agreements. Refer
International
We use various credit facilities to Note 10. Debtfinance the origination of loan receivables in Canada. Similar to our U.S. warehouse credit facilities, borrowings under these agreements are referred to as funding debt, and proceeds from the notesborrowings may only be used for the purposes of facilitating loan funding and origination. These facilities are secured by Canadian loan receivables pledged to the interim condensed consolidated financial statements included elsewhererespective facility as collateral, mature between 2025 and 2029. As of September 30, 2023, the aggregate commitment amount of these facilities was $505.5 million on a revolving basis, of which $360.4 million was drawn.
Sale and Repurchase Agreements
We have various sale and repurchase agreements pursuant to our retained interests in this Form 10-Qour off-balance sheet securitizations where we have sold these securities to a counterparty with an obligation to repurchase at a future date and price. These agreements have an initial term of three months and subject to mutual agreement by Affirm and the counterparty, we may enter into one or more repurchase date extensions, each for further detailsan additional three month term at market interest rates on such extension date. We had $5.9 million and $11.0 million in debt outstanding under our warehouse credit facilities.
Convertible Senior Notes
In November 2021, we closedsale and repurchase agreements disclosed within funding debt on the issuanceinterim consolidated balance sheets as of $1.7 billion aggregate principal amount of a convertible senior note which does not bear regular interest,September 30, 2023 and will mature on November 15, 2026 unless earlier converted, redeemed, or repurchased in accordance with their terms. Refer to Note 10. Debt in the notes to the interim condensed consolidated financial statements for further details on our convertible debt note.June 30, 2023, respectively.
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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 December 31, 2022, 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.Other Funding Sources
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
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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 11.10. Securitization and Variable Interest Entities.Entities for further details.
Factors Impacting LiquidityRevolving Credit Facility
We believe our current levelsIn 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. As of cash, cash equivalents, marketable debt securities, available borrowing capacitySeptember 30, 2023, there were no borrowings outstanding under the facility. The facility contains certain covenants and restrictions, including certain financial maintenance covenants. As of September 30, 2023, we were in compliance with all applicable covenants in the agreements. Refer to Note 9. Debt in the notes to the interim condensed consolidated financial statements for further details on our revolving credit facilities and other liquidity actions currently availablefacility.
Forward Flow Loan Sale Arrangements
We have forward flow loan sale arrangements that facilitate the sale of whole loans to uscounterparties. Forward flow arrangements are sufficientgenerally fixed term in nature, with term lengths ranging between one to meetthree years, during which we periodically sell loans to our liquidity requirements for at least the next 12 months. However, we cannot provide assurance 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.
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, and fluctuations in our financial performance. 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 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 the necessary cash flows, our results of operations and financial condition could be materially and adversely impacted.counterparties.


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Cash Flow Analysis

The following table provides a summary of cash flow data during the periods indicated:
Six Months Ended
December 31,
20222021
(in thousands)
Net Cash Provided by (Used in) Operating Activities22,667 (75,104)
Net Cash Used in Investing Activities(574,938)(819,573)
Net Cash Provided by Financing Activities(1)
869,355 2,010,213 
(1)Amounts include net cash provided by the issuance of convertible debt as follows:
Six Months Ended December 31,
20222021
(in thousands)
Proceeds from issuance of common stock, net of repurchases8,137 59,565 
Proceeds from issuance of convertible debt, net— 1,704,300 
Net cash provided by equity-related financing activities$8,137 $1,763,865 
Net cash provided by debt-related financing activities906,538 359,128 
Payments of tax withholding for stock-based compensation(45,320)(112,780)
Net cash provided by financing activities$869,355 $2,010,213 

Three Months Ended September 30,
20232022
(in thousands)
Net cash provided by (used in) operating activities98,902 51,215 
Net cash provided by investing activities(15,859)117,273 
Net cash provided by financing activities148,806 199,542 
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.
For the sixthree months ended December 31,September 30, 2023, net cash used in operating activities of $98.9 million stemmed from a net loss of $171.8 million, an unfavorable change in our operating assets net of operating liabilities of $8.9 million, including net cash outflows from the sale and purchase of loans of $5.9 million, partially offset by a positive adjustment for non-cash items of $279.6 million. The change in operating assets net of operating liabilities was primarily a result of an increase of our purchase and sale of loans held for sale activities. We purchased loans of $1.2 billion, which was offset by proceeds from loan sales of $1.2 billion. The positive adjustment for non-cash items primarily consisted of provision for credit losses of $99.7 million, which increased by $35.4 million as a result of the growth in the volume of loans held for investment and gain on sale of loans of $34.3 million which increased by $29.3 million driven by the increase in loan sale volume to third-party loan buyer, partially offset by the amortization expense of $40.1 million associated with our commercial agreement asset with Shopify, which decreased by $12.8 million.
For the three months ended September 30, 2022, net cash provided by operating activities was $51.2 million. This reflects a net loss of $22.7$251.4 million, stemmed fromoffset by a favorable change in our operating assets net of operating liabilities of $13.4 million, a favorable change in net proceeds from sale and purchase of loans of $104.9 $52.6
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million and a positive adjustment for non-cash items of $521.2 million, offset by a net loss of $573.7 million and change in our operating assets net of operating liabilities of $75.2$236.5 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 $3.3$1.7 billion, which was offset by proceeds from loan sales of $3.4$1.7 billion. The positive adjustment for non-cash items was primarily driven by commercial agreement assets of $236.8$108.7 million, which increased compared to the second quarter of the prior year as a result of our commercial agreements with Amazon, provision for credit losses of $170.9 million which increased by $54.7 million compared to the second quarter of the prior year, and stock-based compensation of $241.6$119.8 million, which increased by $59.9 million compared to the second quarter of the prior year saw an increase resulting from incremental compensation recognized from award modifications and increased headcount.
For the six months ended December 31, 2021, net cash used in operating activities was $75.1 million. This reflectsheadcount, offset by a net loss of $466.4 million, adjusted for non-cash charges of $362.2 million, net cash outflows of $6.2 million from the purchase andon sale of loans held for sale, partially offset by net cash inflows of $35.3$63.6 million, provided by changes in our operating assets and liabilities.
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Cash Flows from Investing Activities
For the sixthree months ended December 31, 2022,September 30, 2023, net cash used inprovided by investing activities of $574.9$15.9 million was primarily attributable to purchases and origination of loans held for investment of $6.5 billion, partially offset by repayments of loans and proceeds from sale of loans of $5.3 billion. During the period we originated loans of $1.9$4.1 billion and purchasedproceeds from maturities and repayments of securities available for sale of $262.3 million, partially offset by purchases and origination of loans held for investment of $4.7 billion, representing a combined increase of $1.9 billion compared to the same period in 2021, due partly to continued growth in GMV.$4.2 billion. Loan repayments and sale of loans of $5.3$4.1 billion during the period represented an increase of $1.0$1.6 billion, compared to the same period in 2021,2022, due in part to shifting of the length of loan terms on our balance sheet netted ofoff by higher average balance of loans held for investment. The additional offset during the six months ended December 31, 2022 relatedinvestment compared to the net proceeds from maturitiessame period in 2022. During the period we originated loans of securities available for sale$913.6 million and purchased loans of $0.7$3.3 billion, representing an increasea combined decrease of $1.1$1.5 billion compared to the same period in 2021.2022.
For the sixthree months ended December 31, 2021,September 30, 2022, net cash used inprovided by investing activities of $819.6$117.3 million was primarily attributable $4.7to purchases and origination of loans held for investment of $2.7 billion, of purchasespartially offset by repayments of loans of $2.5 billion. During the period, we originated loans of $836.8 million and purchased loans of $1.9 billion, representing an increase compared to the same quarter of the prior year, due partly to continued growth in GMV. We recorded cash outflows of approximately $511.7 million related to purchases of available for sale securities in the current period. These cash outflows were partially offset byThe repayments ofon loans of $3.6$2.5 billion during the period represented an increase compared to the same quarter of the prior year, due to a higher average balance of loans held for investment and generally increasing credit quality of the portfolio. Additionally, we obtained $780.3The additional offset during the three months ended September 30, 2022 related to the net proceeds from maturities of securities available for sale of $359.9 million, in cash from selling loansrepresenting an increase compared to whole loan buyers and securitization investors.the same quarter of the prior year.
Cash Flows from Financing Activities
For the sixthree months ended December 31, 2022,September 30, 2023, net cash provided by financing activities of $869.4$148.8 million, was primarily attributable to net cash inflows from funding debt of $1.2 billion, partially offset by net cash outflows from the issuance and repayment of notes and certificates issued byfor the securitization trust of $309.4$234.6 million, and partially offset by net cash outflows related to the repayment of funding debt of $42.4 million. Our payments of debt issuance costs were in the normal course of business and reflective of our recurring debt warehouse credit facility activity, which involves securing new warehouse credit facilities and extending existing warehouse facilities. Finally, we paid taxes related to RSU vesting of $45.3 million.
For the six months ended December 31, 2021, net cash provided by financing activities of $2,010.2 million, was primarily driven by the issuance of convertible debt which resulted in net cash inflows of $1,704.3 million, net of debt issuance costs. Additionally, the issuance of notes by securitization trusts resulted in net cash inflows of $397.2 million, net of in-period principal repayments. These cash inflows were partially offset by $29.9 million of net cash outflows from funding debt as principal repayments on debt exceeded proceeds from draws on these revolving credit facilities. Additionally, we paid taxes related to RSU vesting of $112.8$36.5 million.
For the three months ended September 30, 2022, net cash provided by financing activities of $199.5 million, was primarily attributable to proceeds from funding debt and notes and residual trust certificates for the securitization trusts of $1.4 billion. These were partially offset by our debt repayments related to our lending activities of $1.2 billion, of which $1.1 billion were related to our warehouse credit facilities. Our payments of debt issuance costs were in the normal course of business and reflective of our recurring warehouse credit facility activity, which involves securing new warehouse credit facilities and extending existing warehouse credit facilities. Finally, we paid taxes related to RSU vesting of $27.3 million.
Contractual Obligations

There were no material changes outside of the ordinary course of business in our commitments and contractual obligations for the three and six months ended December 31, 2022September 30, 2023 from the commitments and contractual obligations disclosed in the section titled “Managements Discussion and Analysis of Financial Condition and Results of Operations — Contractual Obligations,” set forth in our Annual Report on Form 10-K for the fiscal year ended June 30, 2022,2023, which was filed with the SEC on August 29, 2022.25, 2023.
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Off-Balance Sheet Arrangements

In the ordinary course of business, we engage in activities that are not reflected on our interim condensed consolidated balance sheets, generally referred to as off-balance sheet arrangements. These activities involve transactions with unconsolidated VIEs, including our sponsored securitization transactions, which we contractually service.

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For off-balance sheet loan sales where servicing is the only form of continuing involvement, we would onlycould 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 trust certificates. As of December 31, 2022,September 30, 2023, the aggregate outstanding balance of loans held by third-party investors orfor off-balance sheet VIEs was $4.6$4.3 billion. In the unlikely event principal payments on the loans backing any off-balance sheet securitization are insufficient to pay note holders of senior notes and residual trust certificates, including any retained interest,interests held by Affirm, then any amounts the Companywe contributed to the securitization reserve accounts may be depleted. Refer to Note 11.10. Securitization and Variable Interest Entities for further detailsof the accompanying notes to our interim condensed consolidated financial statements for more information..
Critical Accounting Policies and Estimates

Our condenseddiscussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally acceptedU.S. GAAP and requires us to make certain estimates and judgments that affect the amounts reported in the United States. In preparing our condensed consolidated financial statements, we make judgments, estimates and assumptions that affect reported amounts of assets and liabilities, as well as revenues and expenses.statements. We base our assumptions, judgments and estimates on historical experience and on various other factorsassumptions that we believe to be reasonable under the circumstances. TheBecause certain of these accounting policies require significant judgment, our actual results involve judgments about the carrying values of assets and liabilities not readily apparent from other sources. Actual results couldmay differ materially from these estimates under different assumptions or conditions. We regularly evaluateour estimates. To the extent that there are differences between our estimates assumptions and judgments, particularly those that include the most difficult, subjective or complex judgmentsactual results, our future consolidated financial statement presentation, financial condition, results of operations, and are often about matters that are inherently uncertain.cash flows may be affected. We evaluate our critical accounting policies and estimates on an ongoing basis and update them as necessary based on changes in market conditions or factors specific to us. There have been no material changes in our significant accounting policies or critical accounting estimates during the three and six months ended December 31, 2022.September 30, 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, 20222023 within Note 2 to the Notes to Consolidated Financial Statements and “Management’s Discussion and Analysis of Financial Condition and Results of Operations— Critical Accounting Policies and Estimates”.
Recent Accounting 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,Canada, 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 earnedcurrent operations are primarily in the U.S. dollars.
Interest Rate Risk
Our cash and cash equivalents and certain of our restricted cash as of December 31, 2022 were held primarily in checking, money market, and savings accounts. As of December 31, 2022, we had $929.7 million of cash equivalents invested in money market funds, certificates of deposit, government 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 December 31, 2022September 30, 2023 included $913.9 million$1.0 billion of marketable debt securities with maturities greater than three months. A riseAn increase 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 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 tobut also for consumers’ other financial commitments, including their lenders under mortgage,mortgages, credit card,cards, and other types of 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 inFor future securitization issuances, higher interest rates could have several outcomes. For consolidated securitizations, higher interest rates may result in higher coupons paid and therefore lowerhigher funding costs. For transactions that are not consolidated, higher interest income received on securitizations where we retain the residual interest andrates may impact overall deal economics which are a lower gain on sale for securitizations in which we sell the equity interest. function of numerous transaction terms.
We maintain an interest rate hedgingrisk 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 thisthe interest rate risk management program and the repricing of investment securities, as of December 31, 2022,September 30, 2023, we estimate that a hypothetical instantaneous 100 basis point upward parallel shock to interest rates would have a less than $20.0$40.0 million adverse impact on our annual financial resultscash flows associated with our market risk sensitive instruments over the next 12 months. This measure projects the changes in cash flows associated with all assets and liabilities, including derivatives, based on contractual market rate-based repricing conditions over a twelve-month time horizon. It considers forecasted business growth and anticipated future funding mix.
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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 ITACsproprietary underwriting models to underwrite,make lending decisions, 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 ensure a sufficient expectationdetermine the likelihood of a customer’s abilityconsumer being able to repay.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 December 31, 2022September 30, 2023 and June 30, 2022,2023, we were exposed to credit risk on $3.7$4.5 billion and $2.5$4.4 billion, respectively, of loans held on our interim condensed consolidated balance sheet. Loan receivables are diversified geographically. As of December 31, 2022both September 30, 2023 and June 30, 2022,2023, approximately 11% and 12% of loan receivables related to customers residing in the state of California, respectively.California. 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 establishedwell-established financial institutions, diversifying our counterparties and having guidelines regarding credit rating and investment maturities to safeguard liquidity. WeAlthough, we are not substantially dependent on a single financing source and have not historically experienced any credit losses related to these financial instrumentsinstitutions, 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 do not believe we are exposed to significant credit risk in these accounts.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 defined in Rules 13a-15(e) and 15d-15(e) under the Exchange 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 and designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the requisite time periods specified in the applicable rules and forms and that it is accumulated and communicated to our management, including our CEO and 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.

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 December 31, 2022September 30, 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 sufficientsubject to provide us with effective internal control over financial reporting.the same inherent limitations outlined in this section.

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Part II - Other Information
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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, 20222023 could materially and adversely affect our business, financial condition, and results of operations, cash flows, future prospects, and the trading price of our Class A common stock could decline.stock. The risks and uncertainties described therein are not the only ones we face. Additional risks and uncertainties that we are unaware of or that we currently deem immaterial may also become important factors that adversely affect our 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, 2022,2023, in this Quarterly Report on Form 10-Q (including the disclosures 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, thereThere 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, 2022.

We operate in a highly competitive industry, and our inability to compete successfully would materially and adversely affect our business, results of operations, financial condition, and future prospects.

We operate in a highly competitive and dynamic industry. Our technology platform faces competition from a variety of players, including those who enable transactions and commerce via digital payments. Our primary competition consists of: legacy payment methods, such as credit and debit cards, including those provided by card issuing banks such as Synchrony, J.P. Morgan Chase, Citibank, Bank of America, Capital One, Goldman Sachs and American Express; technology solutions provided by payment companies such as Visa and MasterCard; mobile wallets such as Apple and PayPal; other pay-over-time solutions offered by companies such as Block and Klarna; and new pay-over-time offerings by legacy financial and payments companies, including those mentioned above. Additionally, merchants are increasingly offering proprietary pay-over-time options to customers, and in some cases, these are presented parallel to our offerings at checkout. We expect competition to intensify in the future, especially as the pay-over-time industry has low barriers to entry, both as emerging technologies continue to enter the marketplace and as large financial incumbents increasingly seek to innovate the services that they offer to compete with our platform. Technological advances and the continued growth of e-commerce activities have increased consumers’ accessibility to products and services and led to the expansion of competition in digital payment options such as pay-over-time solutions. We expect that our pay-over-time offerings may increasingly be presented alongside competitor options at checkout.

Some of our competitors, particularly the credit issuing banks set forth above, are substantially larger than we are and have longer operating histories than we do, which gives those competitors advantages we do not have, such as a more diversified products, a broader consumer and merchant base, greater brand recognition and brand loyalty, the ability to reach more consumers, the ability to cross sell their products, operational efficiencies, the ability to cross-subsidize their offerings through their other business lines, more versatile technology platforms, broad-based local distribution capabilities, and lower-cost funding. In addition, because many of our competitors are large financial institutions that fund themselves through low-cost insured deposits and continue to own the loans that they originate, they have certain revenue and funding opportunities not available to us.

Increased competition could result in the need for us to alter the pricing we offer to merchants or consumers. If we are unable to successfully compete, the demand for our platform and products could stagnate or substantially decline, and we could fail to retain or grow the number of consumers or merchants using our platform, which would reduce the attractiveness of our platform to other consumers and merchants, and which would materially and adversely affect our business, results of operations, financial condition, and future prospects.2023.


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We rely on a small number of merchant partners and e-commerce platforms, and the loss of any of these significant relationships would adversely affect our business, results of operations, financial condition, and future prospects.

As discussed in Part II, Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations, and as may be updated from time to time in the Company’s future periodic reports and other filings with the SEC, a single merchant partner or e-commerce platform, or a small number of merchant partners or e-commerce platforms, may represent a disproportionately large amount of our revenue and/or GMV during any given fiscal period. The loss of, or decrease in business with, any one of our significant merchant partner or e-commerce platform relationships, such as with Amazon or Shopify, due to a lapse in exclusivity or otherwise, would adversely affect our business. To the extent that any merchant partner or e-commerce platform constitutes a material portion of our total revenue or GMV for a fiscal period for which financial results are being reported in a Quarterly Report on Form 10-Q or Annual Report on Form 10-K, we will disclose the respective percentage contribution in our Management’s Discussion and Analysis of Financial Condition and Results of Operations for that period.

The concentration of a significant portion of our business and transaction volume with a limited number of merchant partners or e-commerce platforms, or type of merchant or industry, exposes us disproportionately to any of those merchants choosing to no longer partner with us or choosing to partner with a competitor, to the economic performance of those merchants or industry or to any events, circumstances, or risks affecting such merchants or industry. In addition, a material modification in the production levels (including supply chain issues impacting component parts of products sold by our merchant partners) and/or financial operations of any significant merchant partner could affect the results of our operations, financial condition, and future prospects.

The success of our business depends on our ability to work with our originating bank partners to enable effective underwriting of loans facilitated through our platform and accurately price credit risk. We currently rely on Celtic Bank to originate a majority of the loans facilitated through our platform. If our agreement with Celtic Bank is terminated, and we are unable to 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.

We believe that one of our core competitive advantages, and a core tenet of our platform, is our ability to work with originating bank partners to use our data-driven risk model to enable the effective underwriting of loans facilitated through our platform and to accurately and effectively price credit risk. Any deterioration in the performance of the loans facilitated through our platform, or unexpected losses on such loans, would materially and adversely affect our 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 the amount of provisions for underperforming loans we will need to take.

As of the end of the second quarter of fiscal 2023, we relied on Cross River Bank and Celtic Bank to originate a majority of the loans facilitated through our platform and to comply with various federal, state, and other laws, with the balance of the loans facilitated on our platform being originated directly under our lending, servicing, 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 January 31, 2023, a majority of the loans facilitated through our platform are originated by Celtic Bank. 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, if at all.

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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 further discussion of 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 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 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 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 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 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 any such licenses could be obtained in a timely manner or at all.

Our business depends on our ability to attract and retain highly skilled employees.

Our future success depends on our ability to identify, hire, develop, motivate, and retain highly qualified personnel for all areas of our organization, in particular, a highly experienced sales force, data scientists, and engineers. Competition for these types of highly skilled employees is extremely intense, particularly in the San Francisco Bay Area. Trained and experienced personnel are in high demand and may be in short supply. Many of the companies with which we compete for experienced employees have greater resources than we do and may be able to offer more attractive terms of employment. In addition, we invest significant time and expense in training our employees, which increases their value to competitors that may seek to recruit them. We may not be able to attract, develop, and maintain the skilled workforce necessary to operate our business, and labor expenses may increase as a result of a shortage in the supply of qualified personnel. If we are unable to maintain and build our highly experienced sales force, or are unable to continue to attract experienced engineering and technology personnel, our business, results of operations, financial condition, and future prospects could be materially and adversely affected.
In addition, in March 2020, we transitioned our entire staff to a remote working environment. Over time such remote operations may decrease the cohesiveness of our teams and our ability to maintain our culture, both of which are critical to our success. Additionally, a remote working environment may impede our ability to undertake new business projects, to foster a creative environment, to hire new team members, and to retain existing team members. Such effects may adversely affect the productivity of our team members and overall operations, which could have a material adverse effect on our business, results of operations, financial condition, and future prospects.

Furthermore, we have at times undertaken workforce reductions to better align our operations with our strategic priorities. For example, to manage operating expenses in response to current macroeconomic conditions and ongoing business prioritization efforts, we recently took certain cost-saving measures, including a reduction of our workforce. There can be no assurance that these actions will not adversely affect employee morale, our culture, our ability to attract and retain employees and our ability to grow in accordance with our overall strategy. If we are not able to maintain our culture, our business, results of operations, financial condition, and future prospects could be materially and adversely affected.
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Our business is subject to extensive regulation, examination, and oversight in a variety of areas, all of which are subject to change and uncertain interpretation. Changing international, federal, state, and local laws, as well as changing regulatory enforcement policies and priorities, including changes that may result from changes in the political landscape, may negatively impact our business, results of operations, financial condition, and future prospects.

We are subject to extensive regulation, supervision, and examination by federal and state governmental authorities under United States federal and state laws and regulations. As we continue to expand our operations internationally, we may also become subject to extensive regulation, supervision, and examination by international authorities. We are required to comply with constantly changing international, federal, state, and local laws and regulations that regulate, among other things, the terms of the loans that we and our originating bank partners originate and the associated fees that may be charged. A change in these laws that enables our credit scoring and pricing model, including our ability to export interest rates across state lines, could have a material impact on our business model and financial position.

New laws or regulations could also require us to incur significant expenses and devote significant management attention to ensure compliance. In addition, our failure to comply (or to ensure that our agents and third-party service providers comply) with these laws or regulations may result in litigation or enforcement actions, the penalties for which could include: revocation of licenses; fines and other monetary penalties; civil and criminal liability; substantially reduced payments by borrowers; modification of the original terms of loans, permanent forgiveness of debt, or inability to, directly or indirectly, collect all or a part of the principal of or interest on loans; and increased purchases of loan receivables for loans originated by our originating bank partners and indemnification claims.

We are subject to the regulatory and enforcement authority of 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 Affirm, requesting information by March 1, 2022. Affirm timely complied with that Request for Information, but Affirm expects to receive additional Requests for Information from time to time in the future. For further discussion on the CFPB's enforcement authority, see “ Business — Regulatory Environment — U.S. federal consumer protection requirements” included in our Annual Report on Form 10-K filed with the SEC on August 29, 2022.

In conducting an investigation, the CFPB or state attorneys general may issue a civil investigative demand requiring a target company to prepare and submit, among other items, documents, written reports, answers to interrogatories, and deposition testimony. If we become subject to such investigation, the required response could result in substantial costs and a diversion of the attention and resources of our management.

Further, we are regulated by many international and state regulatory agencies through licensing and other supervisory or enforcement authority, which includes regular examination by international and state governmental authorities.

Such regulatory actions could result in penalties and reputational harm to us and a loss of consumers participating in our platform, and our compliance costs and litigation exposure could increase if the CFPB, for instance, or other regulatory agencies enact new regulations, change regulations that were previously adopted, modify, through supervision or enforcement, past regulatory guidance, or interpret existing regulations in a manner different or stricter than have been previously interpreted, any of which could adversely affect our ability to perform. Further, in some cases, regardless of fault, it may be less time-consuming or costly to settle these matters, which may require us to implement certain changes to our business practices, provide remediation to certain individuals or make a settlement payment to a given party or regulatory body.

Further, we may not be able to respond quickly or effectively to regulatory, legislative, and other developments, and these changes may in turn impair our ability to offer our existing or planned features, products, and services and/or increase our cost of doing business. In addition, if our practices are not consistent or viewed as not consistent with legal and regulatory requirements, we may become subject to audits, inquiries, whistleblower
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complaints, adverse media coverage, investigations, or criminal or civil sanctions, all of which may have an adverse effect on our reputation, business, results of operations, and financial condition.


Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3. Defaults Upon Senior Securities

None.
Item 4. Mine Safety Disclosures

Not applicable.
Item 5. Other Information

None.Rule 10b5-1 Trading Plans
During the quarter ended September 30, 2023, the following officer, as defined in Rule 16a-1(f), adopted or terminated a “Rule 10b5-1 trading arrangement” as defined in Regulation S-K Item 408, as follows:

On September 15, 2023, Michael Linford, our Chief Financial Officer, adopted a Rule 10b5-1 trading arrangement providing for the sale of the Company's Class A common stock (a "Rule 10b5-1 Trading Plan") that is intended to satisfy the affirmative defense conditions of Exchange Act Rule 10b5-1(c). Mr. Linford's Rule 10b5-1
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Trading Plan provides for the exercise of up to 315,000 employee stock options and sale of the underlying shares of our Class A common stock pursuant to one or more limit orders until April 30, 2024, or earlier if all transactions under the trading arrangement are completed.

No other officers or directors, as defined in Rule 16a-1(f), adopted and/or terminated a “Rule 10b5-1 trading arrangement” or a “non-Rule 10b5-1 trading arrangement,” as defined in Regulation S-K Item 408, during the quarter ended September 30, 2023.

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Item 6. Exhibits

Incorporated by Reference
Exhibit NumberDescriptionFormFile No.ExhibitFiling DateFiled Herewith
10.1X
10.2X
10.3X
31.1X
31.2X
32.1X
32.2X
101.INSXBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL documentX
101.SCHInline XBRL Taxonomy Extension Schema DocumentX
101.CALInline XBRL Taxonomy Extension Calculation Linkbase DocumentX
101.DEFInline XBRL Taxonomy Extension Definition Linkbase DocumentX
101.LABInline XBRL Taxonomy Extension Label Linkbase DocumentX
101.PREInline XBRL Taxonomy Extension Presentation Linkbase DocumentX
104Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)X
*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.
Incorporated by Reference
Exhibit NumberDescriptionFormFile No.ExhibitFiling DateFiled Herewith
3.18-K001-398883.1January 15, 2021
3.28-K001-398883.1October 20, 2023
10.1X
10.2X
31.1X
31.2X
32.1X
32.2X
101.INSXBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL documentX
101.SCHInline XBRL Taxonomy Extension Schema DocumentX
101.CALInline XBRL Taxonomy Extension Calculation Linkbase DocumentX
101.DEFInline XBRL Taxonomy Extension Definition Linkbase DocumentX
101.LABInline XBRL Taxonomy Extension Label Linkbase DocumentX
101.PREInline XBRL Taxonomy Extension Presentation Linkbase DocumentX
104Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)X
*Portions of the exhibit have been omitted as the Company has determined that: (i) the omitted information is not material; and (ii) the Company customarily and actually treats the omitted information as private or confidential.
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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: FebruaryNovember 8, 2023By:/s/ Max Levchin
Max Levchin
Chief Executive Officer
(Principal Executive Officer)
By:/s/ Michael Linford
Michael Linford
Chief Financial Officer
(Principal Financial Officer)

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