Affirm Holdings, Inc.: Form 10-Q for the period ended Mar 31, 2026

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, 2025 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.

Overview

We are building the next generation payment network. We believe that by using modern technology, strong engineering talent, and a mission-driven approach, we can reinvent payments and commerce. Our solutions, which are built on trust and transparency, are designed to make it easier for consumers to spend and save responsibly and with confidence, easier for merchants and commerce platforms 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 consumer acquisition tools. Our solutions empower merchants to more efficiently promote and sell their products, optimize their consumer 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, for consumers, our 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 a loan, manage payments, open a high-yield savings account, and access a personalized marketplace.

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

Technology and data are at the core of everything we do. Our expertise in sourcing, aggregating, and analyzing data has been what we believe to be the key competitive advantage of our platform since our founding. We believe our proprietary technology platform and data give us a unique advantage in pricing risk. We use data to inform our risk scoring in order to generate value for our consumers, merchants, and capital partners. We 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.

(in thousands, except percentages)

(1) Not meaningful (“NM”)

Our Financial Model

Our Revenue Model

We have three main loan product offerings: Pay-in-X, 0% annual percentage rate (“APR”) monthly installment loans and interest-bearing monthly installment loans. Pay-in-X primarily consists of short-term payment plans with one to four 0% APR installments.

From merchants, we typically earn a fee when we help them convert a sale and facilitate a transaction. Merchant fees depend on the individual arrangement between us and each merchant and may vary based on the terms of the product offering; we generally earn larger merchant fees on 0% APR financing products.

From consumers, we earn interest income on the simple interest loans that we originate or purchase from our originating bank partners. Interest rates charged to our consumers vary depending on the transaction risk, creditworthiness of the consumer, the repayment term selected by the consumer, the amount of the loan, and the individual arrangement with a merchant. Because our consumers are never charged deferred or compounding interest, late fees, or penalties on the loans, we are not incentivized to profit from our consumers’ hardships. In addition, interest income includes the amortization of any discounts or premiums on loan receivables created upon either the purchase of a loan from one of our originating bank partners or our direct origination of a loan.

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

Our Loan Origination and Servicing Model

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

We are also able to originate loans directly under our lending, servicing, and brokering licenses in Canada, the U.K., and across most states in the U.S. through our consolidated subsidiaries. For the three and nine months ended March 31, 2026, we directly originated approximately $2.3 billion, or 20%, and $7.0 billion, or 19%, respectively, of loans compared to approximately $1.5 billion, or 17%, and $4.5 billion, or 17%, for the same periods in 2025.

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 held by third parties, including bank partners prior to loan purchase and third-party loan buyers if subsequently sold as part of our funding strategy. In the normal course of business, we do not sell the servicing rights on any of the loans. To allow for flexible staffing to support overflow and seasonal traffic, we partner with several sub-servicers to manage consumer 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, 2025, as updated from time to time in our filings with the SEC.

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, variable funding notes, 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. As of March 31, 2026 and June 30, 2025, our equity capital as a percentage of our total platform portfolio, defined as the unpaid principal balance of all loans facilitated through our platform, was 5% and 4%, respectively. 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 merchant volumes and products offered in any period affect our operating results. These shifts impact GMV, revenue, our financial results, and our key operating metric performance for that period. Differences in loan product mix result in varying loan terms, APRs, and payment frequencies.

Product and economic terms of commercial agreements vary among our merchants, which may impact our results. 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 and product offerings, revenue as a percentage of GMV may vary.

Additionally, our operating results are impacted by the percentage of GMV related to transactions occurring through direct merchant point-of-sale integrations relative to GMV processed by our card-issuing partners, which includes transactions on the Affirm Card, our one-time-use virtual debit cards, and with merchants that integrate Affirm services through one of our platform partners or utilize one of our card-issuing partners to process transactions. While commercial and economic terms vary across these offerings, we generally earn a portion of the interchange fees paid by the merchant which are shared with us through our agreement with the card-issuing partner.

Our operating results are also impacted by the percentage and mix of loans we hold on our balance sheet versus those sold to third-party investors. This is driven by our funding strategy, prevailing capital market conditions, and the supply of capital available from our diverse funding channels and relationships. Because the majority of transactions on our platform result in a loan origination, changes in GMV product mix are generally correlated with the mix of loans purchased from our bank partner or originated through one of our subsidiaries.

The following table presents the composition of loans held for investment, less accrued interest receivable, by loan product, as of the end of each period presented (in thousands):

The following table presents the composition of the average balance of loans held for investment, less accrued interest receivable, by loan product, for each period presented (in thousands):

(in thousands, except percentages)

(1) The average balance of loans held for investment, less accrued interest receivable, is calculated based on the

ending balances as of March, December, September, and June, as applicable for the quarter-to-date and year-to-

date periods.

Loans held for investment increased by 22% and 17%, respectively, over the nine months ended March 31, 2026 and March 31, 2025. The balance and product mix of loans held for investment in a given period is driven by the volume and composition of loan purchases and originations as well as the volume, composition and timing of loan sales to third party investors and securitizations.

With respect to the three and nine months ended March 31, 2026 and March 31, 2025, loans held for investment increased primarily due to overall GMV growth. The average balance of interest-bearing monthly installment loans increased by 24% and 18%, respectively, for the three and nine months ended March 31, 2026, compared to the same periods in 2025. Over the same periods, the average balance of 0% APR monthly installment loans increased by 41% and 43%, respectively, and the average balance of Pay-in-X loans increased by 52% and 53%, respectively, compared to the same periods in 2025.

During the three and nine months ended March 31, 2026 our purchased and originated loan volume was 9.4 billion and 2.3 billion, and 28.9 billion and $7.0 billion, respectively. The purchased volume of loans originated by our bank partners during the periods primarily included a mix of interest bearing and 0% APR monthly installment products whereas the volume of loans originated through one of our subsidiaries during the periods was primarily Pay-in-X. The total volume and composition of loans purchased and originated during the periods is correlated with the volume and composition of GMV.

During the three and nine months ended March 31, 2026, we held substantially all Pay-in-X loans on our balance sheet, while selling a percentage of our interest bearing monthly installment loans and 0% APR monthly installment loans to third party investors, either directly or through off balance sheet securitizations. During both the three and nine months ended March 31, 2026, interest-bearing monthly installment loans and 0% APR monthly installment loans represented 86% and 14%, respectively, of the total $5.0 billion and $15.9 billion unpaid principal balance of loans sold.

Refer to Key Operating Metrics for additional information on GMV for the three and nine months ended March 31, 2026, compared to the same periods in 2025.

Seasonality

We experience seasonal fluctuations in our business as a result of consumer spending patterns, including Affirm Card, which we expect to mimic the seasonality of our general business in the near term. Historically, our GMV has been the strongest during our fiscal second quarter due to increases in retail commerce during the holiday season and our loan delinquencies are at their lowest during our fiscal third and fourth quarter, as consumer savings benefit from tax refunds. 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. Following the Federal Reserve’s decision to begin reducing the federal funds interest rate in September 2024, interest rates have declined; however, uncertainty remains as to whether and to what extent the federal funds interest rate will remain at current levels, increase or decrease in future periods. Simultaneously, economic uncertainty and unpredictability, including the prospect of economic recession, persistent inflation, and the magnitude, duration and impact of tariffs on global trade, has impacted and may continue to impact both consumer spending and loan repayments. These challenges have affected, and may continue to affect, our business and results of operations in the following ways:

• Shifts in consumer demand and loan repayment: We have experienced, and may continue to experience, fluctuations in consumer demand across different merchandise categories as well as an increase in delinquencies due to economic uncertainty, persistent inflationary pressures, elevated interest rates, and other macroeconomic factors. If such conditions deteriorate in future periods, consumer demand and loan repayments may be negatively impacted.
• Managing delinquency rates: We are continuously optimizing our underwriting to manage delinquency rates. While these actions have not adversely affected our GMV growth rates during fiscal 2026, any future credit tightening could adversely impact GMV growth rates.
• Borrowing costs: The Federal Reserve began decreasing the federal funds interest rate in late 2024, leading to a decline in our average funding costs. However, there is continued uncertainty as to whether and to what extent the Federal Reserve may decrease the federal funds rate further in the future.
• Volatile capital markets: Since fiscal 2024, capital markets have shown improvement against recent periods. Strong loan performance has allowed us to add substantial capacity across funding channels.

Despite these improvements, uncertainties remain in the macroeconomic environment that may result in 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, there have been recent public reports of instability at certain private credit funds and other financial institutions. The follow-on effects of this instability are unknown and may impair our ability to access funding sources in the future.

To address these uncertainties, we leverage our diverse capital ecosystem consisting of multiple funding channels, a diverse set of counterparties, and varying maturity debt schedule to support resilience across various macroeconomic conditions and economic cycles.

Consumer Credit Optimization and Loan Performance

We continue to optimize our underwriting and take other actions to manage consumer loan repayment, increase collections and minimize losses. For example, we offer loan modifications to borrowers experiencing financial difficulty to provide greater flexibility for consumers to repay their obligations, through payment deferrals or loan re-amortizations. A payment deferral extends the next payment due date, and while a consumer may receive more than one deferral, the total deferral period may not exceed three months. A loan re-amortization lowers the monthly payments by extending the term, which may not exceed twenty-four months.

These loan modification programs also impact our delinquency rates, and such impact can vary over time. The volume of loan modifications during the fiscal quarter ended March 31, 2026 increased to 0.16% up from 0.09% in the same period in 2025. As of March 31, 2026, loans modified within the last twelve months represent 0.28% of the outstanding principal balance of loans held on our balance sheet, compared to 0.21% for the same period in 2025. Our reported delinquency and charge off rates include loans which have become past due or have charged off subsequent to modification. An unknown percentage of loans which have been modified and are current as of March 31, 2026 may become delinquent or charge off in the future. We continue to evaluate the effectiveness of these programs and may modify, expand, or contract their usage, which may affect the timing of reported delinquencies and charge offs in future periods.

Regulatory Developments

We are subject to the regulatory and enforcement authority of the Consumer Financial Protection Bureau (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.

Additionally, state regulatory agencies and state attorneys general have publicly indicated that they plan to increase oversight of financial services companies. Such state authorities may initiate legal proceedings against us under state consumer protection statutes or various federal consumer financial services statutes, subject to the jurisdiction of the CFPB and FTC. These actions may result in financial penalties, which, individually or in aggregate, may adversely impact our operations.

Affirm Bank Applications

On January 23, 2026, we submitted applications to the Nevada Financial Institutions Division and the Federal Deposit Insurance Corporation (“FDIC”) to establish Affirm Bank, a proposed Nevada-chartered industrial loan company. If approved, the proposed entity would operate as a wholly owned, Nevada-chartered, FDIC-insured bank subsidiary, and maintain its own independent governance and internal controls. The proposed bank subsidiary would complement our current business and bank partnership models, including by providing greater flexibility and diversification, to help advance responsible innovation in financial services.

U.S. Income Taxes

On July 4, 2025, the One Big Beautiful Bill Act (the “Act”) was enacted into law, which included certain modifications to U.S. tax law. The Company is currently evaluating the future impact of these provisions of the Act on our Consolidated Financial Statements.

In addition, our assessment of income taxes is influenced by our recent operating results and expectations regarding future profitability. Recent pretax earnings performance has improved the mix of positive versus negative evidence considered in evaluating the realizability of our deferred tax assets. If these trends continue, we expect that additional positive evidence may be available within our fiscal year ending June 30, 2026 to support the conclusion that a significant portion of the domestic valuation allowance is no longer needed. The timing and amount of any valuation allowance release is subject to change based on multiple factors, including our level of profitability and the extent to which we believe we can sustain it over time. Release of any portion of the valuation allowance would result in the recognition of certain deferred tax assets with a potential corresponding decrease to income tax expense for the period the release is recorded, which would represent a non-cash benefit to net income.

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 income (loss), and other results under U.S. GAAP, the following tables set forth key operating metrics we use to evaluate our business.

(in billions)

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, it is an indicator of the success of our merchants and the strength of our platform.

For the three and nine months ended March 31, 2026, GMV was $11.6 billion and $36.1 billion, respectively, which represented an increase of approximately 35% and 37%, respectively, as compared to the same periods in 2025. Overall, the increase in GMV was driven by growth in our direct to consumer products, including Affirm Card, and overall increases in active consumers and average transactions per consumer. In addition, for the three and nine months ended March 31, 2026, GMV from our top five merchants and platform partners collectively grew 26% and 27%, respectively, as compared to the same periods in 2025. The composition of our top five merchants and platform partners is determined based on GMV for each reporting period and, accordingly, the specific merchants and/or platform partners included in the top five may change period-over-period. During the three and nine months ended March 31, 2026, the concentration of GMV derived from our top five partners declined slightly to 42% and 44%, respectively, compared to 45% and 48% for the same periods in 2025 as a result of the continued diversification of GMV across merchants, platform partners and through our direct to consumer products. GMV attributable to Amazon represented 20% and 22% of total GMV for the three and nine months ended March 31, 2026, respectively, compared to 21% and 23% for the same periods in 2025.

During the three and nine months ended March 31, 2026, GMV increased for interest-bearing installment loans, 0% APR monthly installment loans and Pay-in-X, compared to the same periods in 2025; however, the rate of GMV growth varied by product type over the same periods. The variance in growth varied by product is due to seasonality and the timing of certain promotions and campaigns.

GMV from interest-bearing installment loans grew 33% and 31%, respectively, for the three and nine months ended March 31, 2026, as compared to the same periods in 2025. Interest-bearing installment loans represented 70% and 69% of total GMV, respectively, for the three and nine months ended March 31, 2026.

GMV from Pay-in-X grew 52% and 54%, respectively, for the three and nine months ended March 31, 2026, as compared to the same periods in 2025. Pay-in-X represented 16% of total GMV, for both the three and nine months ended March 31, 2026.

GMV from 0% APR monthly installment loans grew 30% and 55%, respectively, for the three and nine months ended March 31, 2026, as compared to the same periods in 2025. 0% APR monthly installment loans represented 13% and 14% of total GMV, respectively, for the three and nine months ended March 31, 2026.

(in thousands, except per consumer data)

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 completes at least one transaction on our platform during the 12 months prior to the measurement date.

As of March 31, 2026, we had approximately 26.8 million active consumers, which represented an increase of 22% compared to approximately 21.9 million active consumers as of March 31, 2025. The increase was primarily due to a high retention rate of existing consumers and the acquisition of new consumers through an expansion in active merchants and platform partnerships.

Transactions per Active Consumer

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

As of March 31, 2026, we had approximately 6.7 transactions per active consumer, an increase of 20% compared to March 31, 2025. The increase was primarily due to platform growth and a higher frequency of repeat users driven by consumer engagement, including growth of Affirm Card active consumers. As of March 31, 2026 and March 31, 2025, Affirm Card represented approximately 14% and 10%, respectively, of the total number of transactions.

Results of Operations

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

(in thousands, except percentages)

(1) Not meaningful (“NM”)

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

(in thousands)

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

(in thousands)

Comparison of the Three and Nine Months Ended March 31, 2026 and 2025

Merchant network revenue

Merchant network revenue is impacted by both GMV and the mix of loans originated on our platform, including the distribution of loans by product. While we generally earn higher merchant fees on 0% versus interest-bearing loan products, merchant fee rates on each transaction are also impacted by the existence of a commercial agreement and negotiated pricing with each merchant, which may vary depending on loan term, loan size, borrower credit risk, pricing incentives and whether the consumer transacts with the merchant through one of our direct to consumer products, including Affirm Card.

Merchant network revenue increased by $54.1 million, or 25%, and $204.3 million, or 32%, for the three and nine months ended March 31, 2026, respectively, compared to the same periods in 2025. The increase is primarily attributed to an increase in GMV of $3.0 billion, or 35%, and $9.8 billion, or 37%, for the three and nine months ended March 31, 2026, respectively, compared to the same periods in 2025. The volume-driven increase in merchant network revenue was offset by an increase in the loss on loan originations by $10.5 million, or 44%, and $46.7 million, or 69%, for the three and nine months ended March 31, 2026, respectively. Additionally, merchant incentives, recorded as a reduction of revenue, increased by $4.3 million and $5.7 million for the three and nine months ended March 31, 2026, respectively, compared to the same periods in 2025.

Merchant network revenue as a percentage of GMV decreased to 2.3% and 2.4%, respectively, for the three and nine months ended March 31, 2026 from 2.5% for both the three and nine months ended March 31, 2025. The portion of GMV attributed to 0% APR loans, including Pay-in-X, increased by 41% and 55%, respectively, for the three and nine months ending March 31, 2026, compared to the same periods in 2025; however, the impact of a higher percentage of GMV attributed to 0% APR loans was offset by an increase in direct to consumer transactions as a percentage of GMV, led by the growth of Affirm Card.

Card network revenue

Card network revenue increased by $7.9 million, or 13%, and $44.6 million, or 27%, for the three and nine months ended March 31, 2026, respectively, compared to the same periods in 2025. Card network revenue growth is correlated with the growth of GMV processed by our card-issuing partners. As such, the increase is primarily driven by $4.1 billion and $12.3 billion of GMV processed through our card-issuing partners, an increase of approximately 43% and 46% for the three and nine months ended March 31, 2026, respectively, as compared to the same periods in 2025. This was driven by increased card activity primarily through Affirm Card and our one-time-use virtual debit cards, as well as GMV generated by merchants utilizing our agreement with card-issuing partners as a means of integrating Affirm services. 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.

The volume-driven increase in card network revenue was partially offset by an increase in merchant incentives, which are recorded as a reduction to card network revenue. For the three and nine months ended March 31, 2026, merchant incentives increased by $6.6 million, or 190%, and $10.6 million, or 123%, respectively, compared to the same periods in 2025.

Interest income

Interest income increased by $129.7 million, or 32%, and $291.1 million, or 24%, for the three and nine months ended March 31, 2026, respectively, compared to the same periods in 2025. Generally, interest income is correlated with the changes in the average balance of loans held for investment, which increased by 29% to $8.7 billion and 24% to $7.9 billion for the three and nine months ended March 31, 2026, respectively, compared to the same periods in 2025.

The increase was primarily driven by contractual interest income for interest-bearing loans, which grew approximately $110.8 million and $241.2 million for the three and nine months ended March 31, 2026, respectively, compared to the same periods in 2025, comprising 85% and 83%, respectively, of the total increase. Interest income from the amortization of the discount on 0% and below market APR loans grew approximately $22.9 million and $59.4 million, respectively, over the same periods, comprising 18% and 20%, respectively, of the total increase.

The average loan balance of interest bearing loans held for investment increased during the three and nine months ended March 31, 2026, compared to the same periods in 2025. However, the rate of loan growth varied by product type over the same periods, as the average balance of 0% APR loans grew more on a percentage basis than the average balance of interest bearing loans. Therefore, the increase in contractual interest income during the period was further accelerated by an increase in interest income from the amortization of loan discount.

Gain on sales of loans

Gain on sales of loans increased by $51.4 million, or 68%, and $166.7 million, or 63%, for the three and nine months ended March 31, 2026, respectively, compared to the same periods in 2025. The increase is driven by higher loan sale volume to third-party loan buyers and favorable transaction economics, which are primarily driven by market conditions. We sold loans with an unpaid principal balance of $5.0 billion and $15.9 billion for the three and nine months ended March 31, 2026, respectively, compared to $3.6 billion and $11.0 billion for the same periods in 2025, respectively, an increase of 40% and 44%, respectively.

The volume-driven increase in gain on sales of loans, for the three and nine months ended March 31, 2026, was further accelerated by a decrease in our repurchase liability to third-party investors of $7.3 million, or 62%, and $11.5 million, or 43%, respectively, compared to the same periods in 2025.

Servicing income

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

With respect to fair value adjustments, we remeasure the fair value of servicing assets and liabilities each period and recognize the change in fair value in servicing income. We utilize a discounted cash flow approach to remeasure the fair value of servicing rights. Because we earn servicing income based on the outstanding principal balance of the portfolio, fair value adjustments are impacted by the timing and amount of loan repayments. As such, over the term of each loan portfolio sold, fair value adjustments for servicing assets will decrease servicing income and fair value adjustments for servicing liabilities will increase servicing income. We discuss our valuation methodology and significant Level 3 inputs for servicing assets and liabilities within Note 12. Fair Value of Financial Assets and Liabilities in the notes to the interim condensed consolidated financial statements.

Servicing income increased by $12.6 million, or 39%, and $40.3 million, or 47%, for the three and nine months ended March 31, 2026, respectively, compared to the same periods in 2025. The increase was primarily due to an increase in servicing fee revenue which is calculated as a percentage of the unpaid principal balance of off-balance sheet loans. The average unpaid principal balance of loans held by third-party investors and off-balance sheet securitizations increased to $9.5 billion and $8.8 billion for the three and nine months ended March 31, 2026, respectively, compared to the same periods in 2025, an increase of 39% and 47%, respectively.

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

Loss on loan purchase commitment increased by $10.7 million, or 19%, and $53.8 million, or 30%, for the three and nine months ended March 31, 2026, respectively, compared to the same periods in 2025, primarily due to an increase in total volume of loans purchased. During the three and nine months ended March 31, 2026, we purchased $9.4 billion and $28.9 billion, respectively, of loans from our originating bank partners, compared to $7.1 billion and $21.6 billion in the same periods in 2025, respectively, representing an increase of 33% and 34%, respectively. Of the total loans purchased, 0% APR installment loans represented $1.4 billion and $4.5 billion during the three and nine months ended March 31, 2026, respectively, and $1.1 billion and $3.1 billion for the same periods in 2025, respectively, an increase of 30%, and 48%, respectively. The impact of higher loan purchase volume period over period was offset by a decrease in the average loan discount percentage period over period, due to lower benchmark interest rates.

Provision for credit losses

Provision for credit losses generally represents the amount of expense required to maintain the allowance for credit losses within our interim condensed consolidated balance sheet, which represents management’s estimate of future losses on loans and other receivables. In the event that our loans and receivables outperform our 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 based on our estimate of expected future losses on loans originated during the period and held for investment on our balance sheet, changes in our estimate of future losses on loans outstanding as of the end of the period and the net charge-offs incurred in the period.

Provision for credit losses increased by $49.3 million, or 33%, and $113.4 million, or 25%, for the three and nine months ended March 31, 2026, respectively, compared to the same periods in 2025. Provision expense is primarily related to loans held for investment, where the amount of provision expense recognized during the period will depend on the balance and composition of loans held for investment, future loss expectations and net charge-offs realized during the period. For the three and nine months ended March 31, 2026, the provision expense for loans held for investment increased by $51.8 million, or 37%, and $114.5 million, or 26%, respectively. Additionally, the average balance of loans held for investment increased by $2.0 billion, or 29%, and $1.5 billion, or 24%, for the three and nine months ended March 31, 2026, respectively, compared to the same periods in 2025.

Funding costs

Funding costs consist of interest expense and the amortization of fees for certain borrowings collateralized by our loans including 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 driven by the average outstanding balance of funding debt and notes issued by securitization 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.

Funding costs increased by $6.1 million, or 6%, and $16.0 million, or 5%, for the three and nine months ended March 31, 2026, respectively, compared to the same periods in 2025. The increase is primarily due to an increase of funding debt and notes issued by securitization trusts during the three and nine months ended March 31, 2026, partially offset by favorable pricing terms. The average total of funding debt from warehouses and securitizations for the three and nine months ended March 31, 2026 was $7.8 billion and $7.2 billion, respectively, compared to $6.1 billion and $5.7 billion during the same periods in 2025, an increase of $1.7 billion, or 29%, and $1.4 billion, or 25%.

Processing and servicing

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 $43.9 million, or 37%, and $125.2 million, or 38%, for the three and nine months ended March 31, 2026, respectively, compared to the same periods in 2025. This increase is driven partially by an increase in payment processing fees of $28.9 million, or 42%, and $82.1 million, or 43%, related to an increase of $3.2 billion, or 36%, and $9.2 billion, or 39%, in payment volume for the three and nine months ended March 31, 2026, respectively, compared to the same periods in 2025. Platform fees increased by $14.8 million, or 62%, and $31.9 million, or 41%, respectively, primarily due to an increase in volume with a large enterprise partner. Additionally, our customer service and collection costs increased by $6.2 million, or 36%, and $21.8 million, or 44%, for the three and nine months ended March 31, 2026, respectively, compared to the same periods in 2025. Our average loans held for investment and average loans serviced for third parties increased by $4.6 billion, or 34%, and $4.4 billion, or 35%, for the three and nine months ended March 31, 2026, respectively, compared to the same periods in 2025.

Technology and data analytics

Technology and data analytics expense consists primarily of the salaries, stock-based compensation, and personnel-related costs of our engineering, product, and credit and analytics employees, as well as the amortization of internally-developed software and technology intangible assets, and our infrastructure and hosting costs.

Technology and data analytics expense increased by $39.0 million, or 26%, and $109.5 million, or 25%, for the three and nine months ended March 31, 2026, respectively, compared to the same periods in 2025. The increase is partially driven by amortization of internally-developed software which increased by $15.7 million, or 27%, and

$56.1 million, or 36%, for the three and nine months ended March 31, 2026, respectively, compared to the same periods in 2025, as a result of an increase in the number of capitalized projects. Capitalized projects in service grew by 19% from approximately 1,430 projects as of March 31, 2025 to 1,710 projects as of March 31, 2026. Data infrastructure and hosting costs increased by $10.5 million, or 37%, and $28.4 million, or 36%, for the three and nine months ended March 31, 2026, respectively, compared to the same periods in 2025. The increase in data infrastructure and hosting costs was primarily driven by an increase in the number of consumer transactions. For the three and nine months ended March 31, 2026, the number of consumer transactions increased by 45% and 47%, respectively, from continued growth at our merchants and platform partners when compared to the same periods in 2025. Payroll and personnel-related expenses increased by $7.2 million, or 13%, and $13.2 million, or 8%, for the three and nine months ended March 31, 2026, respectively, compared to the same periods in 2025, primarily due to an increase in headcount.

Sales and marketing

Sales and marketing costs consist of the expense related to warrants and other share-based payments granted to our enterprise partners, salaries and personnel-related costs, and costs of marketing and promotional activities.

Sales and marketing expense decreased by $1.2 million, or 2%, and $105.2 million, or 30% during the three and nine months ended March 31, 2026, respectively, compared to the same periods in 2025. During the nine months ended March 31, 2026, the decrease was primarily driven by a $95.6 million, or 39%, decrease in Amazon warrant expense compared to the same period in 2025, primarily due to a portion of the warrants becoming fully vested as of December 2024. Additionally, the decrease was also driven by a $15.4 million, or 65%, decrease in Shopify warrant expense during the nine months ended March 31, 2026, compared to the same period in 2025, primarily due to an amendment made in our partnership agreement, which extended the period of benefit over which we amortize the commercial agreement asset from six to nine years.

General and administrative

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

General and administrative expense increased by $11.0 million, or 8%, and $19.3 million, or 5%, during the three and nine months ended March 31, 2026, respectively, compared to the same periods in 2025. The increase is primarily due to growth in payroll and personnel costs, excluding stock-based compensation, and software and subscription expense.

Other income, net

Other income, net includes interest earned on our money market funds included in cash and cash equivalents and restricted cash, interest earned on securities available for sale, impairment or other adjustments to the cost basis of non-marketable equity securities held as cost, gains and losses on derivative agreements not designated within a hedging relationship, amortization of convertible debt issuance cost as well as gains (losses) on extinguishment, revolving credit facility issuance costs, fair value adjustments related to contingent liabilities, and other income or expense arising from activities that are unrelated to our primary business.

Other income, net, increased by $5.2 million, or 38%, for the three months ended March 31, 2026 and decreased by $81.3 million, or 60%, for the nine months ended March 31, 2026, compared to the same periods in 2025. The increase for the three months ended March 31, 2026 was primarily driven by a gain of $1.2 million related to the fair value of our derivative instruments not designated as hedges, compared to a loss of $2.2 million during the same period in 2025. The decrease for the nine months ended March 31, 2026, was primarily driven by a $80.9 million, or 98% reduction in the gain recognized on the early extinguishment of convertible debt, reflecting fewer repurchases compared to the same period in 2025.

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. Despite ongoing macroeconomic uncertainty, including recent reports of stress to certain private credit funds and other institutional investors, we believe 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, securitization trusts, forward flow loan sale arrangements, and certain cash flows from our operations. As of March 31, 2026, we had $2.5 billion in cash and cash equivalents and available for sale securities, $5.1 billion in available funding debt capacity, excluding our purchase commitments from third party loan buyers, and $330.0 million in borrowing capacity available under our revolving credit facility. We believe our principal sources of liquidity are sufficient to meet both our existing operating, working capital, and capital expenditure requirements and our currently planned growth for at least the next 12 months.

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

(1) Cash and cash equivalents consist of checking, money market and savings accounts held at financial institutions and short-term highly liquid marketable securities, including money market funds, agency bonds, corporate bonds, commercial paper, and government bonds purchased with an original maturity of three months or less.

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

Debt

Debt as of March 31, 2026 primarily includes funding debt, notes issued by securitization trusts, convertible senior notes and our revolving credit facilities. A detailed description of each of our borrowing arrangements is included in Note 8. Debt in the notes to the interim condensed consolidated financial statements.

The following table summarizes the future maturities of our warehouse credit facilities, variable funding notes, sale and repurchase agreements, and notes issued by securitization trusts as of March 31, 2026:

(in thousands)

Warehouse Credit Facilities

Our U.S. warehouse credit facilities allow us to borrow up to an aggregate of $5.4 billion, and mature between fiscal years 2027 and 2032. We may continue to pledge new receivables to allow us to borrow up to the commitment amount throughout the revolving period for each facility. The length of the revolving period, the maximum amount we may borrow against pledged collateral balance during the revolving period, and the length of the amortization period prior to the maturity date varies across borrowing facilities depending on negotiated loan terms. As of March 31, 2026, we have drawn an aggregate of $1.7 billion on our warehouse credit facilities.

We use various credit facilities to finance the origination of loan receivables in Canada and the U.K. Similar to our U.S. warehouse credit facilities, borrowings under these agreements are referred to as funding debt, and proceeds from the borrowings may only be used for the purposes of facilitating loan funding and origination. These facilities are secured by Canadian and British loan receivables pledged to the respective facility as collateral, maturing between fiscal years 2028 and 2031. As of March 31, 2026, the aggregate commitment amount of these facilities was $814.4 million on a revolving basis, of which $552.3 million was drawn.

As we continue to expand in new geographies, we intend to add the necessary funding capacity to support our growth objectives. As of March 31, 2026, we were in compliance with all applicable covenants in the agreements.

Variable Funding Note

We entered into a syndicated revolving loan agreement through a securitization master trust which funds loans. In connection with the loan agreement, the master trust issued a variable funding note (“VFN”), where borrowings are secured by loan collateral sold to the master trust. Throughout the reinvestment period of the VFN, the master trust periodically issues asset-backed securities, where securitization note proceeds affect the level of utilization of the VFN. Our VFN allows us to borrow up to an aggregate of $1.4 billion and matures in fiscal year 2032. As of March 31, 2026, we have drawn an aggregate of $192.3 million on our VFN. As of March 31, 2026, we were in compliance with all applicable covenants in the agreements.

Sale 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. These repurchase agreements have a term equaling the contractual life of the securitization notes pledged. We had $8.2 million in debt outstanding under our sale and repurchase agreements disclosed within funding debt in the interim condensed consolidated balance sheets as of March 31, 2026.

Securitizations

We finance the origination and purchase of loans through our asset-backed securitization program using a combination of term, amortizing, revolving and variable funding structures. In connection with our program, we sponsor and establish trusts (deemed to be VIEs) which issue securities collateralized by the loans we sell to the trust. Securities issued from our asset-backed securitizations are senior or subordinated, based on the waterfall criteria of loan payments to each security class. The subordinated residual interests issued from these transactions are first to absorb credit losses in accordance with the waterfall criteria. For these VIEs, the creditors have no recourse to the general credit of Affirm and the liabilities of the VIEs can only be settled by the respective VIEs’ assets. Additionally, the assets of the VIEs can be used only to settle obligations of the VIEs. 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. In addition to the retained residual trust certificates, our continued involvement includes loan servicing responsibilities over the life of the underlying loans. Refer to Note 9. Securitization and Variable Interest Entities in the notes to the interim condensed consolidated financial statements for further details.

Revolving Credit Facility

We have a Revolving Credit Agreement with a syndicate of banks for a $330.0 million unsecured revolving credit facility, with a final maturity date of June 26, 2027. Proceeds from the borrowings under this facility will be used for general corporate purposes in the ordinary course of business. As of March 31, 2026, there are no borrowings outstanding under the facility. The facility contains certain covenants and restrictions, including certain financial maintenance covenants. As of March 31, 2026, we were in compliance with all applicable covenants in the agreements. Refer to Note 8. Debt in the notes to the interim condensed consolidated financial statements for further details on our revolving credit facility.

Convertible Senior Notes

As of March 31, 2026, we had outstanding: (i) $221.3 million aggregate principal amount of our 0.00% 2026 Notes due November 15, 2026 and (ii) $920.0 million principal amount of our 0.75% 2029 Notes due December 15, 2029, in each case unless earlier converted, redeemed, or repurchased in accordance with their terms. Refer to Note 8. Debt in the notes to the interim condensed consolidated financial statements for further details.

Other Funding Sources

Forward Flow Loan Sale Arrangements

We have forward flow loan sale arrangements that facilitate the sale of whole loans across a diverse third-party investor base. Forward flow arrangements are generally fixed term in nature, with term lengths ranging between one to three years, during which we periodically sell loans to each counterparty based on the terms of our negotiated agreement. As part of our capital strategy, we seek to partner with counterparties that can provide long-term, stable funding to support the ongoing growth and diversification of our loan portfolio.

Cash Flow Analysis

The following table provides a summary of cash flow data during the periods indicated:

(in thousands)

75

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.

Net cash provided by operating activities was $934.8 million for the nine months ended March 31, 2026, which reflected adjustments for significant non-cash items, including provision for losses, amortization of premiums and discounts on loans, gain on sale of loans, commercial agreement warrant expense, stock-based compensation, depreciation and amortization, and changes in operating assets and liabilities. Total adjustments and changes in operating assets and liabilities collectively resulted in a net increase in operating cash flows of $621.6 million.

Net cash provided by operating activities was $719.3 million for the nine months ended March 31, 2025, which reflected adjustments for significant non-cash items, including provision for credit losses, amortization of premiums and discounts on loans, gain on sale of loans, commercial agreement warrant expense, stock-based compensation, depreciation and amortization, and changes in operating assets and liabilities. Total adjustments and changes in operating assets and liabilities collectively resulted in a net increase in operating cash flows of $736.3 million.

Cash Flows from Investing Activities

Net cash used in investing activities was $1.4 billion for the nine months ended March 31, 2026. Cash outflows were primarily driven by purchases and origination of loans held for investment of $33.4 billion, purchases of securities available for sale of $544.9 million, and property, equipment and software additions of $171.5 million. Cash inflows included $17.9 billion from principal repayments and other loan servicing activity, $14.1 billion in proceeds from the sale of loans held for investment, and $730.2 million of proceeds from maturities and repayments of securities available for sale.

Net cash used in investing activities was $628.6 million for the nine months ended March 31, 2025. Cash outflows were primarily driven by purchases and origination of loans held for investment of $22.7 billion, purchases of securities available for sale of $553.6 million, and property, equipment and software additions of $141.1 million. Cash inflows included $13.6 billion of principal repayments and other loan servicing activity, $8.1 billion in proceeds from the sale of loans held for investment, and $984.4 million of proceeds from maturities and repayments of securities available for sale.

Cash Flows from Financing Activities

Net cash provided by financing activities was $1.1 billion for the nine months ended March 31, 2026. Cash inflows were driven by $30.2 billion in proceeds from the issuance of secured debt, including funding debt and securitization notes and certificates, and $142.7 million from the exercise of common stock options and warrants and employee contributions to ESPP. Cash outflows included $28.9 billion related to principal repayments of secured debt and $251.2 million for taxes paid on vested equity awards.

Net cash provided by financing activities was $364.2 million for the nine months ended March 31, 2025. Cash inflows were primarily driven by $15.8 billion in proceeds from the issuance of secured debt, including funding debt and securitization notes and certificates. Cash outflows included $14.8 billion related to principal repayments on secured debt, $1.0 billion related to the extinguishment of a portion of our 2026 Notes, $250.0 million related to the repurchase of shares of our Class A common stock in connection with the issuance of the 2029 Notes, and $241.6 million related to taxes paid on vested equity awards.

Contractual Obligations

There were no material changes outside of the ordinary course of business in our commitments and contractual obligations for the three and nine months ended March 31, 2026 from the commitments and contractual obligations disclosed in the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Contractual Obligations,” set forth in our Annual Report on Form 10-K for the fiscal year ended June 30, 2025, which was filed with the SEC on August 28, 2025.

Off-Balance Sheet Arrangements

In the ordinary course of business, we engage in activities that are not reflected within our interim condensed consolidated balance sheets, generally referred to as off-balance sheet arrangements. These activities involve transactions with unconsolidated VIEs, including securitization and forward flow transactions. Across these transactions, ongoing involvement typically includes contractual loan servicing arrangements and loan repurchase obligations in connection with breaches in ordinary course of business representations and warranties.

We have entered into unconsolidated securitization transactions where Affirm is the sponsor and risk retention holder; accordingly, Affirm could experience a loss of up to 5% of both the senior notes and residual trust certificates. In the unlikely event principal payments on the loans backing any off-balance sheet securitization are insufficient to pay holders of senior notes and residual trust certificates, including any retained interests held by Affirm, then any amounts we contributed to the securitization reserve accounts may be depleted.

Under certain other forward flow loan sale 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.

In addition to risk sharing arrangements, we may hold beneficial interests in certain off-balance sheet VIEs that have been established by third-party loan buyers in connection with structured transactions. These beneficial interests represent our right to receive a portion of the residual cash flows from the underlying loans sold in connection with these transactions.

Risk sharing arrangements and beneficial interests are considered variable interests in the unconsolidated VIEs holding the loan assets transferred, as their value is exposed to the performance of those loans. For off-balance sheet VIEs where we hold variable interest, we have determined that our exposure to transaction economics is insignificant relative to the expected losses or residual returns.

As of March 31, 2026, the aggregate outstanding balance of loans held by third-party investors and off-balance sheet securitizations was $9.4 billion. Refer to Note 9. Securitization and Variable Interest Entities and Note 12. Fair Value of Financial Assets and Liabilities of the accompanying notes to our interim condensed consolidated financial statements for more information.

Critical Accounting Policies and Estimates

Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with U.S. GAAP and requires us to make certain estimates and judgments that affect the amounts reported in our consolidated financial statements. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Because certain of these accounting policies require significant judgment, our actual results may differ materially from our estimates. To the extent that there are differences between our estimates and actual results, our future consolidated financial statement presentation, financial condition, results of operations, and cash flows may be affected.

We evaluate our critical accounting policies and estimates on an ongoing basis and update them as necessary based on changes in market conditions or factors specific to us. There have been no material changes in our significant accounting policies or critical accounting estimates during the three and nine months ended March 31, 2026.

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, 2025 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.”

We have operations within the United States, Canada and U.K., 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 our current operations are primarily in the U.S.

Interest Rate Risk

Our securities available for sale at fair value as of March 31, 2026, included $752.1 million of marketable debt securities with maturities greater than three months. An 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 inflation, which may persist longer than previously expected, may adversely impact our consumers’ spending levels, and ability and willingness to pay outstanding amounts owed to us. Elevated interest rates may lead to higher payment obligations on our future credit products but also for consumers’ other financial commitments, including their mortgages, credit cards, and other types of loans. Therefore, elevated 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. For future securitization issuances, higher interest rates could have several outcomes. For consolidated securitizations, higher interest rates may result in higher coupons paid and therefore higher funding costs. For transactions that are not consolidated, higher interest rates may impact overall deal economics which are a function of numerous transaction terms.

We maintain an interest rate risk management program which measures and manages the potential volatility of earnings that may arise from changes in interest rates. We use interest rate derivatives to mitigate the effects of changes in interest rates on our variable rate debt which eliminates some, but not all, of the interest rate risk. Some of these contracts are designated as cash flow hedges for accounting purposes. For those contracts designated as cash flow hedges, the effective portion of the gain or loss on the derivatives is recorded in other comprehensive income (loss) and is reclassified into funding costs in the same period the hedged transaction affects earnings. Factoring in the interest rate risk management program and the repricing of investment securities, as of March 31, 2026, we estimate that a hypothetical instantaneous 100 basis point upward parallel shock to interest rates would have a less than $80.0 million adverse impact on our cash 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.

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 proprietary underwriting models to 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 determine the likelihood of a consumer being able to pay.

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 consumer segment, typically split by ITACs model score at the time of origination, financial product originated, age of loan, and delinquency status. Internal performance trendlines are measured against external factors such as unemployment, CPI, and consumer sentiment to determine what changes, if any, in risk strategy is warranted.

As of March 31, 2026 and June 30, 2025, we were exposed to credit risk on $8.6 billion and $7.0 billion, respectively, of loans held within our interim condensed consolidated balance sheet. Loan receivables are diversified geographically. As of both March 31, 2026 and June 30, 2025, approximately 11% and 10% of loan receivables related to customers residing in the states of California and Texas, respectively. No other states or provinces represent 10% or more of total loan receivables.

In addition, we have credit risk exposure in relation to certain off-balance sheet loans sold to third parties where we have entered into risk sharing arrangements, retained interests in unconsolidated securitization trusts and our residual interests in structured transactions. As of March 31, 2026 and June 30, 2025, we have sold $11.2 billion and $8.6 billion, respectively, in unpaid principal balance loans which are subject to risk sharing arrangements, of which our maximum exposure to losses was $65.6 million and $91.1 million, respectively. The fair value of notes receivable and residual trust certificate retained interests in unconsolidated securitization trusts was $56.5 million and $50.9 million as of March 31, 2026 and March 31, 2025, respectively. The fair value of residual interests in structured transactions was $5.8 million as of March 31, 2026, of which our maximum exposure to losses was $17.0 million.

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

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 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 March 31, 2026 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 such improvements will be subject to the same inherent limitations outlined in this section.

The risks described under the heading “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended June 30, 2025 could materially and adversely affect our business, financial condition, results of operations, cash flows, future prospects, and the trading price of our Class A common 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, 2025, 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 factor included below, there have been no material changes from the risk factors previously disclosed under the heading “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended June 30, 2025.

Risks Related to Our Business and Industry

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

Our high-velocity, capital efficient funding model is integral to the success of our commerce platform. To support this model and the growth of our business, we must maintain a variety of funding arrangements, including warehouse credit facilities, securities repurchase agreements, securitization trusts, pass-through securitizations, master trust facilities, and forward flow arrangements with a diverse set of funding sources, including private credit funds and other institutional investors. If we are unable to maintain access to, or to expand, our network and diversity of funding arrangements, our business, results of operations, financial condition, and future prospects could be materially and adversely affected.

We cannot guarantee that these funding arrangements will continue to be available on favorable terms or at all, and our funding strategy may change over time and depends on the availability of such funding arrangements. Disruptions in the credit markets or other factors, such as the current inflationary environment, elevated interest rates and increasing recessionary concerns, could adversely affect the availability, diversity, cost, and terms of our funding arrangements.

In addition, our funding sources may reassess their exposure to our industry and either curtail access to uncommitted financing capacity, fail to renew or extend facilities, or impose higher costs to access funding. While most of our facilities are committed capital, some facilities are uncommitted, which may allow such funding providers to, among other things, reduce available funding limits, subject to certain structural protections (including penalty fees in certain transactions). Further, our debt financing and loan sale forward flow facilities are generally fixed term in nature, with term lengths ranging between one to three years, during which we have access to committed and uncommitted capital pursuant to such facilities. If our existing funding arrangements are not renewed or replaced or our existing funding sources are unwilling or unable to provide funding to us on terms acceptable to us, or at all, we may need to secure additional sources of funding or reduce our operations. The availability and diversity of our funding arrangements depends on various factors and are subject to numerous risks, many of which are outside of our control.

A portion of our funding is provided by private credit funds and other institutional investors through forward flow arrangements. These counterparties are subject to their own liquidity, fundraising, leverage, and market conditions. In particular, certain of these counterparties may be structured as pooled investment vehicles whose investors may request redemptions or be unable to meet capital calls, which could limit the funds available to purchase loans from us. One or more of these counterparties have experienced redemption pressures in the past, and if additional counterparties experience redemption pressures, fundraising shortfalls, or have other constraints on available capital, they may be unable to fulfill purchase commitments (which may constitute a default under the respective forward flow arrangement), seek to renegotiate commercial terms, or fail to renew existing arrangements. Any such reduction in participation could reduce our funding capacity, increase our cost of funds, require us to retain more loans on our balance sheet, or constrain our ability to originate loans, any of which could adversely affect our business, financial condition, and results of operations.

The agreements governing our funding arrangements require us to comply with certain covenants. A breach of such covenants or other events of default under our funding agreements could result in the reduction or termination of our access to such funding, could increase our cost of such funding or, in some cases, could give our lenders the right to require repayment of such funding prior to its scheduled maturity. Certain of these covenants are tied to our consumer default rates, which may be significantly affected by factors, such as economic downturns, inflationary conditions, elevated interest rates and/or general economic conditions, that are beyond our control and beyond the control of individual consumers. In addition, our revolving credit facility contains (a) certain covenants and restrictions that limit our and our subsidiaries’ ability to, among other things: incur additional debt; create liens on certain assets; pay dividends on or make distributions in respect of their capital stock or make other restricted payments; consolidate, merge, sell, or otherwise dispose of all or substantially all of their assets; and enter into certain transactions with their affiliates, and (b) certain financial maintenance covenants that require us and our subsidiaries to not exceed a specified leverage ratio, to maintain a minimum tangible net worth, and to maintain a minimum level of unrestricted cash while any borrowings under the revolving credit facility are outstanding.

In the future, we may seek to further access the capital markets to obtain capital to finance growth. However, our future access to the capital markets could be restricted due to a variety of factors, including a deterioration of our earnings, cash flows, balance sheet quality, or overall business or industry prospects, adverse regulatory changes, a disruption to or volatility or deterioration in the state of the capital markets, or a negative bias toward our industry by market participants. Due to the negative bias toward our industry, certain financial institutions have restricted access to available financing by participants in our industry, and we may have more limited access to institutional capital than other businesses. Future prevailing capital market conditions and potential disruptions in the capital markets may adversely affect our efforts to arrange additional financing on terms that are satisfactory to us, if at all. If adequate funds are not available, or are not available on acceptable terms, we may not have sufficient liquidity to fund our operations, make future investments, take advantage of acquisitions or other opportunities, or respond to competitive challenges and this, in turn, could adversely affect our ability to advance our strategic plans. In addition, if the capital and credit markets experience volatility, and the availability of funds is limited, third parties with whom we do business may incur increased costs or business disruption and this could adversely affect our business relationships with such third parties, which in turn could have a material adverse effect on our business, results of operations, financial condition, cash flows, and future prospects.