Affirm Holdings, Inc 10-Q for FY2022 Q1

Affirm Holdings, Inc. (AFRM)

10-Q 2021-11-15 For: 2021-09-30

Added on April 09, 2026

About this 10-Q

Affirm Holdings, Inc filed this 10-Q on November 15, 2021, covering the quarter ended September 30, 2021 (FY2022 Q1).

Headline figures

Quarter ended September 30, 2021, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $269.39M; up 54.8% from $173.98M a year earlier
Net loss: $306.62M; compared with a net loss of $3.95M a year earlier
Diluted EPS: -$1.13; compared with -$0.47 a year earlier

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

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


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


						Page
Cover						1
Table of Contents						2
Part I - Financial Information						5
Item 1. Unaudited Financial Statements						5
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)						5
CONDENSED CONSOLIDATED BALANCE SHEETS, CONT. (Unaudited)						6
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (Unaudited)						7
CONDENSED CONSOLIDATED STATEMENT OF REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ DEFICIT (Unaudited)						8
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)						9
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS, CONT. (Unaudited)						10
1. Business Description						11
2. Summary of Significant Accounting Policies						11
3. Interest Income						14
4. Loans Held for Investment and Allowance for Credit Losses						15
5. Business Combination						17
6. Balance Sheet Components						18
7. Leases						20
8. Commitments and Contingencies						21
9. Transactions with Related Parties						22
10. Debt						22
11. Securitization and Variable Interest Entities						24
12. Investments						28
13. Fair Value of Financial Assets and Liabilities						30
14. Redeemable Convertible Preferred Stock and Stockholders' Deficit						41
15. Equity and Cash Incentive Plans						42
16. Income Taxes						45
17. Net Loss per Share Attributable to Common Stockholders						45
18. Segments and Geographical Information						48
19. Subsequent Events						48
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations						49
Item 3. Quantitative and Qualitative Disclosures About Market Risk						72
Item 4. Controls and Procedures						73
Part II - Other Information						74
Item 1. Legal Proceedings						75
Item 1A. Risk Factors						76
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds						77
Item 3. Defaults Upon Senior Securities						78
Item 4. Mine Safety Disclosures						78
Item 5. Other Information						78
Item 6. Exhibits						82
Signatures						83


	September 30, 2021		June 30, 2021
Assets
Cash and cash equivalents	$	1,439,531	$	1,466,558
Restricted cash	236,282		226,074
Securities available for sale at fair value	456,266		16,170
Loans held for sale	1,808		13,030
Loans held for investment	2,244,826		2,022,320
Allowance for credit losses	(152,021)		(117,760)
Loans held for investment, net	2,092,805		1,904,560
Accounts receivable, net	100,951		91,575
Property, equipment and software, net	84,925		62,499
Goodwill	540,770		516,515
Intangible assets	71,378		67,930
Commercial agreement assets	207,431		227,377
Other assets	169,952		274,679
Total Assets	$	5,402,099	$	4,866,967
Liabilities and Stockholders’ Equity
Liabilities:
Accounts payable	$	425,854	$	57,758
Payable to third-party loan owners	38,462		50,079
Accrued interest payable	3,304		2,751
Accrued expenses and other liabilities	450,662		323,577

Notes issued by securitization trusts	1,621,638		1,176,673
Funding debt	484,821		680,602
Total liabilities	3,024,741		2,291,440
Commitments and contingencies (Note 8)
Stockholders’ equity:

Class A common stock, par value $0.00001 per share: 3,030,000,000 shares authorized, 200,336,842 shares issued and outstanding as of September 30, 2021; 3,030,000,000 shares authorized, 181,131,728 shares issued and outstanding as of June 30, 2021	2		2
Class B common stock, par value $0.00001 per share: 140,000,000 shares authorized, 77,380,330 shares issued and outstanding as of September 30, 2021; 140,000,000 authorized, 88,226,376 shares issued and outstanding as of June 30, 2021	1		1

Additional paid in capital	3,579,763		3,467,236
Accumulated deficit	(1,205,100)		(898,485)
Accumulated other comprehensive gain	2,692		6,773
Total stockholders’ equity	2,377,358		2,575,527
Total Liabilities and Stockholders’ Equity	$	5,402,099	$	4,866,967


	September 30, 2021		June 30, 2021
Assets of consolidated VIEs, included in total assets above
Restricted cash	$	164,868	$	142,385
Loans held for investment	2,035,653		1,743,810
Allowance for credit losses	(127,744)		(94,463)
Loans held for investment, net	1,907,909		1,649,347
Accounts receivable, net	8,195		8,209
Other assets	3,501		3,683
Total assets of consolidated VIEs	$	2,084,473	$	1,803,624
Liabilities of consolidated VIEs, included in total liabilities above
Accounts payable	$	2,873	$	2,927
Accrued interest payable	3,139		2,613
Accrued expenses and other liabilities	3,627		3,820
Notes issued by securitization trusts	1,621,638		1,176,673
Funding debt	374,817		607,394
Total liabilities of consolidated VIEs	2,006,094		1,793,427
Total net assets	$	78,379	$	10,197


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


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


	Three Months Ended September 30,
	2021		2020
Revenue
Merchant network revenue	$	92,244	$	93,265
Virtual card network revenue	19,395		5,958
Total network revenue	111,639		99,223
Interest income	117,302		54,237
Gain on sales of loans	30,979		16,434
Servicing income	9,465		4,084
Total Revenue, net	$	269,385	$	173,978
Operating Expenses
Loss on loan purchase commitment	$	51,678	$	65,868
Provision for credit losses	63,647		28,931
Funding costs	16,753		10,352
Processing and servicing	25,201		13,498
Technology and data analytics	78,013		33,768
Sales and marketing	63,960		22,582
General and administrative	136,204		32,273
Total Operating Expenses	435,456		207,272
Operating Loss	$	(166,071)	$	(33,294)
Other (expense) income, net	(140,373)		29,445
Loss Before Income Taxes	$	(306,444)	$	(3,849)
Income Tax Expense	171		97
Net Loss	$	(306,615)	$	(3,946)


Other Comprehensive Income (Loss)
Foreign currency translation adjustments	$	(3,802)	$	405
Unrealized gain (loss) on securities available for sale, net	(279)		—
Net Other Comprehensive (Loss) Income	(4,081)		405
Comprehensive Loss	$	(310,696)	$	(3,541)
Per share data:
Net loss per share attributable to common stockholders for Class A and Class B:
Basic	$	(1.13)	$	(0.06)
Diluted	$	(1.13)	$	(0.47)
Weighted average common shares outstanding:
Basic	271,677,516		64,778,024
Diluted	271,677,516		68,256,189


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

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

Issuance of common stock in acquisition	—	—	183,733	—		10,000		—		—		10,000
Vesting of restricted stock units	—	—	772,653	—		—		—		—		—
Repurchases of common stock	—	—	(821)	—		(5)		—		—		(5)

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

Foreign currency translation adjustments	—	—	—	—		—		—		(3,802)		(3,802)
Unrealized gain (loss) on securities available for sale	—	—	—	—		—		—		(279)		(279)
Net Loss	—	—	—	—		—		(306,615)		—		(306,615)
Balance as of September 30, 2021	—	—	277,717,172	$	3	$	3,579,763	$	(1,205,100)	$	2,692	$	2,377,358


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


	September 30, 2021		June 30, 2021
Unpaid principal balance	$	2,280,315	$	2,058,863
Accrued interest receivable	16,817		15,466
Premiums on loans held for investment	7,175		7,071
Less: Discount due to loss on loan purchase commitment	(53,657)		(53,177)
Less: Fair value adjustment on loans acquired through business combination	(5,824)		(5,903)
Total loans held for investment	$	2,244,826	$	2,022,320


	Amortized Costs Basis by Fiscal Year of Origination
	2022		2021		2020		2019		2018		Prior		Total
96+	$	50,032	$	5,695	$	11	$	—	$	—	$	—	$	55,738
94 – 96	96,076		74,820		819		8		—		—		171,723
90 – 94	236,342		211,078		4,191		246		2		—		451,859
<90	619,067		697,268		81,346		4,583		2		—		1,402,266
No score(1)	79,039		58,216		9,484		1,201		273		18		148,231
Total loan receivables	$	1,080,556	$	1,047,077	$	95,851	$	6,038	$	277	$	18	$	2,229,817
Current period charge-offs	$	(29,454)	$	(943)	$	(56)	$	(1)	$	—	$	—	$	(30,454)
Current period recoveries	1,200		978		839		385		267		42		3,711
Current period net charge-offs	$	(28,254)	$	35	$	783	$	384	$	267	$	42	$	(26,743)


	September 30, 2021		June 30, 2021
Non-delinquent loans	$	2,111,756	$	1,939,976
4 – 29 calendar days past due	60,191		43,838
30 – 59 calendar days past due	26,499		17,267
60 – 89 calendar days past due	17,558		12,044
90 – 119 calendar days past due	13,813		6,759
Total amortized cost basis	$	2,229,817	$	2,019,884


	Three Months Ended September 30,
	2021		2020
Balance at beginning of period	$	117,760	$	95,137
Adjustment due to adoption of new accounting standard	—		10,083
Provision for credit losses	61,004		29,121
Charge-offs	(30,454)		(14,074)
Recoveries of charged-off receivables	3,711		2,754
Balance at end of period	$	152,021	$	123,021


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


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


	September 30, 2021
	Gross		Accumulated Amortization		Net		Weighted Average Remaining Useful Life
Merchant relationships	$	38,510	$	(4,200)	$	34,310	4.5
Developed technology	39,577		(6,166)		33,411		2.8
Trademarks and domains	3,668		(361)		3,307		3.3
Other intangibles	350		—		350		Indefinite
Total intangible assets	$	82,105	$	(10,727)	$	71,378


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



2022 (remaining nine months)	$	16,295
2023	21,286
2024	19,173
2025	7,193
2026 and thereafter	4,936
Total amortization expense	$	68,883


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





Balance as of June 30, 2021	516,515
Additions	30,792
Effect of foreign currency translation	(6,537)
Balance as of September 30, 2021	$	540,770


	September 30, 2021		June 30, 2021

Operating lease right-of-use assets	$	58,562	$	57,828

Prepaid payroll taxes for stock-based compensation	23,291		111,278
Prepaid expenses	17,917		21,069
Equity securities, at cost	11,278		11,278
Processing reserves	25,021		14,042
Other receivables	24,692		26,423
Other assets	9,191		32,761
Total other assets	$	169,952	$	274,679


	September 30, 2021		June 30, 2021
Contingent consideration liability	$	290,719	$	153,446
Operating lease liability	74,360		74,952

Accrued expenses	51,247		47,674
Commercial agreement liability	12,627		25,357
Other liabilities	21,709		22,148
Total accrued expenses and other liabilities	$	450,662	$	323,577


												September 30, 2021
Weighted average remaining lease term (in years)												5.6
Weighted average discount rate												4.7%



2022 (remaining nine months)	$	11,728
2023	16,117
2024	16,029
2025	16,132
2026	15,283
Thereafter	10,419
Total lease payments	85,708
Less imputed interest	(11,348)
Present value of lease liabilities	$	74,360


	September 30, 2021

2022	$	137,153
2023	—
2024	246,647
2025	—
2026	—
Thereafter	111,266
Total	$	495,066
Deferred debt issuance costs	(10,245)
Total funding debt, net of deferred debt issuance costs	$	484,821


	September 30, 2021
	Assets		Liabilities		Net Assets
Warehouse credit facilities	$	433,661	$	381,909	$	51,752
Securitizations	1,650,812		1,624,185		26,627
Total consolidated VIEs	$	2,084,473	$	2,006,094	$	78,379


	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Allowance for Credit Losses		Fair Value
Certificates of deposit (1)	$	46,714	$	1	$	(1)	$	—	$	46,714
Corporate bonds (1)	202,204		9		(128)		—		202,085
Commercial paper (1)	316,424		2		(4)		—		316,422
Government bonds
Non-US	50,111		—		(38)		—		50,073
US	63,730		—		(9)		—		63,721
Securitization notes receivable and certificates	13,827		23		(105)		(1)		13,744
Other	2,003		—		—		—		2,003
Total securities available for sale	$	695,013	$	35	$	(285)	$	(1)	$	694,762


	Less than 12 months				Greater than 12 months				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Certificates of deposit	$	26,702	$	(1)	$	—	$	—	$	26,702	$	(1)
Corporate bonds	192,765		(128)		—		—		192,765		(128)
Commercial paper	203,958		(4)		—		—		203,958		(4)
Government bonds
Non-US	50,073		(38)		—		—		50,073		(38)
US	60,617		(9)		—		—		60,617		(9)
Securitization notes receivable and certificates	689		(105)		—		—		689		(105)
Other	—		—		—		—		—		—
Total securities available for sale	$	534,804	$	(285)	$	—	$	—	$	534,804	$	(285)


	Less than 1 year				1 year through 5 years					Total
	Net Carrying Value		Fair Value		Net Carrying Value		Fair Value			Net Carrying Value		Fair Value
Certificates of deposit	$	46,714	$	46,714	$	—	$	—		$	46,714	$	46,714
Corporate bonds	138,172		138,115		64,032		63,970		63,970	202,204		202,085
Commercial paper	316,424		316,422		—		—			316,424		316,422
Government bonds
Non-US	39,805		39,782		10,306		10,291			50,111		50,073
US	31,292		31,288		32,438		32,433			63,730		63,721
Securitization notes receivable and certificates (1)	—		—		13,826		13,744			13,826		13,744
Other	2,003		2,003		—		—			2,003		2,003
Total securities available for sale	$	574,410	$	574,324	$	120,602	$	120,438		$	695,012	$	694,762


	Level 1		Level 2		Level 3		Total
Assets:
Servicing assets	$	—	$	—	$	2,287	$	2,287
Securities available for sale:
Certificate of deposit (1)	—		46,714		—		46,714
Corporate bonds (1)	—		202,085		—		202,085
Commercial paper (1)	—		316,422		—		316,422
Government bonds:
Non-U.S.	—		50,073		—		50,073
U.S.	—		63,721		—		63,721
Securitization notes receivable and residual trust certificates	—		—		13,744		13,744
Other	—		—		2,003		2,003
Total securities available for sale	—		679,015		15,747		694,762
Interest rate cap agreements	—		4,035		—		4,035
Total assets	$	—	$	683,050	$	18,034	$	701,084
Liabilities:
Servicing liabilities	$	—	$	—	$	3,610	$	3,610
Performance fee liability	—		—		1,335		1,335
Residual trust certificates, held by third-parties	—		—		745		745
Contingent consideration	—		—		290,719		290,719
Profit share liability	—		—		1,400		1,400
Total liabilities	$	—	$	—	$	297,809	$	297,809


	Unobservable Input	Minimum		Maximum		Weighted Average
Servicing assets	Discount rate	30.00	%	30.00	%	30.00	%
	Adequate compensation (1)	0.60	%	1.75	%	0.97	%
	Net default rate	0.70	%	4.43	%	1.59	%
Servicing liabilities	Discount rate	30.00	%	30.00	%	30.00	%
	Adequate compensation (1)	1.55	%	3.48	%	2.75	%
	Net default rate	1.05	%	13.54	%	10.60	%


	Three Months Ended September 30, 2021
Fair value at beginning of period	$	914

Repayments	(255)
Subsequent changes in fair value	86
Fair value at end of period	$	745


	September 30, 2021
Discount rate assumption:
Discount rate increase of 25%	$	(16)
Discount rate increase of 50%	$	(32)
Loss rate assumption:
Loss rate increase of 25%	$	(22)
Loss rate increase of 50%	$	(43)
Prepayment rate assumption:
Prepayment rate decrease of 25%	$	(7)
Prepayment rate decrease of 50%	$	(14)


	Three Months Ended September 30, 2021
Fair value at beginning of period	$	16,170
Cash received (due to payments or sales)	(2,304)
Change in unrealized gain (loss)	(111)
Accrued interest	(14)
Reversal of (impairment on) securities available for sale	3
Fair value at end of period	$	13,744


	Three Months Ended September 30, 2021
Fair value at beginning of period	$	153,447

Subsequent changes in fair value	141,592
Effect of foreign currency translation	(4,320)
Fair value at end of period	$	290,719


	Three Months Ended September 30, 2021
Fair value at beginning of period	$	2,464
Facilitation of loans	1,040
Actual performance	—
Subsequent changes in fair value	(2,104)
Fair value at end of period	$	1,400


	Carrying Amount		Level 1		Level 2		Level 3		Balance at Fair Value
Assets:
Cash and cash equivalents	$	1,439,531	$	1,439,531	$	—	$	—	$	1,439,531
Restricted cash	236,282		236,282		—		—		236,282
Loans held for sale	1,808		—		1,808		—		1,808
Loans held for investment, net	2,092,805		—		—		2,034,563		2,034,563
Accounts receivable, net	100,951		—		100,951		—		100,951
Other assets	89,452		—		89,452		—		89,452
Total assets	$	3,960,829	$	1,675,813	$	192,211	$	2,034,563	$	3,902,587
Liabilities:
Accounts payable	$	425,854	$	—	$	425,854	$	—	$	425,854
Payable to third-party loan owners	38,462		—		38,462		—		38,462
Accrued interest payable	3,304		—		3,304		—		3,304
Accrued expenses and other liabilities	152,853		—		150,787		2,066		152,853
Notes issued by securitization trusts	1,621,638		—		—		1,889,744		1,889,744
Funding debt	495,066		—		—		495,066		495,066
Total liabilities	$	2,737,177	$	—	$	618,407	$	2,386,876	$	3,005,283


	September 30, 2021	June 30, 2021


Available outstanding under stock option plan	50,358,651	58,417,514
Available for future grant under stock option plan	43,127,440	29,793,755
Total	93,486,091	88,211,269