AFRM

MKT CAP $4.3BP/E 13.1DIV YIELD —FCF YIELD 23.16%REV TTM $4.3B +32.2%NET INCOME $1.9B +3597.9%NET DEBT $8.2B52W 42.53 – 92.18SEC XBRL · TTM TO Invalid Date

How AFRM rewrote its risk factors

10-K ITEM 1A · FY2025 → FY2026

Text kept

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110

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New in FY2026

These disclosures reflect the Company’s beliefs and opinions as to factors that could materially and adversely affect the Company and its securities in the future.
References to past events are provided by way of example only and are not intended to be a complete listing or a representation as to whether or not such factors have occurred in the past or their likelihood of occurring in the future.
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. • If loans facilitated through our platform do not perform, or significantly underperform, we may incur financial losses on the loans we purchase, we hold on our balance sheet, or that are subject to certain risk sharing agreements, which may adversely impact our financial condition and results of operations as well as result in the loss of confidence of our funding sources. • To the extent we seek to execute acquisitions, strategic investments, alliances, divestitures or other transactions, we may be unable to achieve the strategic objectives of these transactions, and such transactions may be disruptive to our ongoing operations. • Expansion into new international geographies presents a variety of challenges and risks. • The loss of the services of our Founder and Chief Executive Officer, as well as our inability to attract and retain highly skilled employees, could materially and adversely affect our business, results of operations, financial condition, and future prospects. • We may not be able to sustain profitability. • Our quarterly results may fluctuate significantly and may not fully reflect the underlying performance of our business. • Litigation, regulatory actions and compliance issues could subject us to fines, penalties, judgments, remediation costs, requirements resulting in increased expenses, and reputational harm. • Further increases in market interest rates and/or prolonged periods of elevated interest rates could have an adverse effect on our business. • Our revenue is impacted, to a significant extent, by the general economy, the creditworthiness of the U.S. consumer and the financial performance of our commercial partners. • If our collection efforts on delinquent loans are ineffective or unsuccessful, the performance of the loans would be adversely affected. • Any significant disruption in, or errors in, service on our platform or relating to vendors, including events beyond our control, could prevent us from processing transactions on our platform or posting payments and have a material and adverse effect on our business, results of operations, financial condition, and future prospects. • Our ability to protect our confidential, proprietary or sensitive information, including the confidential information of consumers on our platform, may be adversely affected by cyber-attacks, employee or other internal misconduct, computer viruses, physical or electronic break-ins or similar disruptions. • Our business is subject to extensive regulation, examination, oversight, and supervision in a variety of areas, all of which are subject to change and uncertain interpretation.
Our continued success also is dependent on our ability to successfully grow and develop relationships with our commercial partners, particularly early-stage relationships with large e-commerce retailers and platforms such as Intuit.
In addition, our agreements with our commercial partners generally have terms that range from approximately 12 months to 36 months (with a majority auto-renewing), and some of our partners can terminate these agreements without cause upo n 30 to 90 days’ prior written not ice.
Morgan Chase, Citibank, Bank of America, Capital One, Bread Financial and American Express; mobile wallets and other pay-over-time solutions offered by companies such as PayPal, Block and Klarna; and pay-over-time offerings by legacy financial and payments companies, including those mentioned above.
The loss of, or decrease in business with, any one of our significant commercial partner relationships, such as with Amazon or Shopify, would adversely affect our business.
We currently rely on a small number of originating bank partners, including Celtic Bank and Lead Bank (“Primary Originating Banks”), to originate substantially all of the loans facilitated through our platform, and a small number of card issuing bank partners, including Evolve Bank & Trust and Stride Bank (“Card Issuing Banks”), to issue the Affirm Card.
If our relationship with any of our Primary Originating Banks or Card Issuing Banks terminates, or if any Primary Originating Bank or Card Issuing Bank were to suspend, limit, or cease its operations or loan origination activities, as applicable, for any reason, and we are unable to engage another originating bank partner or card issuing bank partner on a timely basis or at all, our business, results of operations, financial condition, and future prospects would be materially and adversely affected.
As of the end of fiscal 2026, we relied on two Primary Originating Banks to originate a majority of the loans facilitated through our platform and to comply with various federal, state, and other laws, with the balance of the loans facilitated on our platform being originated directly under our lending, servicing, and brokering licenses in Canada and across various states in the United States through our consolidated subsidiaries.
In addition, as of the end of fiscal 2026, we relied on two Card Issuing Banks to issue the Affirm Card.
Even if our relationships with our originating bank partners remain intact, these partners may lack the operational capacity, capital resources, regulatory headroom, or technological infrastructure to keep pace with our growing origination volumes.
As our GMV increases and we expand into new product categories, geographies, and merchant verticals, our originating bank partners must scale their compliance, underwriting, and loan-processing capabilities accordingly.
If one or more of our bank partners is unable or unwilling to accommodate increased origination volumes on a timely basis, we may be forced to limit loan originations, slow our growth, or allocate a disproportionate share of volume to our remaining bank partners, which would increase our concentration risk.
Adding new originating bank partners to supplement capacity requires significant lead time for regulatory approvals, systems integration, and compliance onboarding, and there is no assurance that we could do so on acceptable terms or within a timeframe that avoids disruption to our business.
Each of our Primary Originating Banks and Card Issuing Banks handles a variety of consumer and commercial financing programs: • The Celtic Bank loan program agreement had an initial three-year term that expired in calendar year 2023.
The term automatically renewed for an additional one-year term and will continue to automatically renew in one-year terms thereafter unless either party provides notice of its intent not to renew. • The Lead Bank loan program agreement had an initial three-year term which expired during fiscal 2026.
The term automatically renew ed for an additional one-year term and will continue to automatically renew for additional one-year terms thereafter unless either party provides notice of its intent not to renew. • The Evolve Bank issuing program agreement has an initial two-year term that expired in calendar year 2023.
The term automatically renewed for an additional one-year term and will continue to automatically renew in three-month terms unless either party provides notice of its intent not to renew. • The Stride Bank issuing program agreement has an initial five-year term which will expire in calendar year 2030.
In addition, upon the occurrence of certain early termination events, either we or any of our Primary Originating Banks or Card Issuing Banks may terminate the respective agreement immediately upon the occurrence of certain termination events.
Our agreements with our Primary Originating Banks and Card Issuing Banks do not prohibit those banks from working with our competitors or from offering competing services, and each of those banks currently offers loan programs or other issuing services, as applicable, through other competing platforms.
We could in the future have disagreements or disputes with our Primary Originating Banks or Card Issuing Banks, which could negatively impact or threaten our relationship with other banks with whom we may seek to partner.
For a further discussion of our relationship with our Primary Originating Banks, particularly the regulations applicable to this relationshi p, see “ Business — Regulatory Environment .” If any of our Primary Originating Banks or Card Issuing Banks were to suspend, limit, or cease its operations or loan origination activities, as applicable, for any reason, or if our relationship with any Primary Originating Bank or Card Issuing Bank were to otherwise terminate for any reason (including, but not limited to, its failure to comply with regulatory actions), we may need to implement an additional substantially similar arrangement with another bank, obtain additional state licenses, or curtail our operations.
Moreover, with respect to our Card Issuing Banks, transitioning card issuance activities to a new bank may result in the need to replace existing virtual or physical cards, which may disrupt or delay consumer transactions.
The process of developing new technologies and products, such as Affirm Edge, which embeds Affirm's pay-over-time functionality directly into customers’ primary banking and credit union apps, and AdaptAI, which is Affirm’s AI-powered personalized promotion platform, is complex, and we seek to build our own technology using the latest in artificial intelligence (“AI”) and machine learning (together, “AI/ML”), cloud-based technologies, and other tools to differentiate our products and technologies.
In addition, we may not be able to effectively implement new technology-driven products and services, such as Affirm Edge or AdaptAI, as quickly as competitors or be successful in marketing these products and services to consumers and commercial partners.
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 .
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.
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.
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.
If any of the credit risk or fraud models we use contain programming or other errors or are ineffective or the data provided by consumers or third parties is incorrect or stale, or if we are unable to obtain accurate data from consumers or third parties (such as credit reporting agencies), the loan pricing and approval process through our platform could be negatively affected, resulting in mispriced or misclassified loans or incorrect approvals or denials of loans.
We retain some loans on our balance sheet, and these loans are primarily funded through our consolidated securitizations and warehouse lines.
For these loans and any future loans facilitated through our platform that are held for investment on our balance sheet, we bear the entire credit risk in the event of consumer default with respect to these loans.
However, these measures may not be sufficient to prevent all instances of infringement or loss of IP rights.
The rapidly evolving regulatory landscape surrounding AI technologies presents additional risks.
Lastly, our employees use AI tools to perform regular job responsibilities.

and 70 more.

Gone since FY2025

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. • If loans facilitated through our platform do not perform, or significantly underperform, we may incur financial losses on the loans we purchase, we hold on our balance sheet, or that are subject to certain risk sharing agreements, which may adversely impact our financial condition and results of operations as well as result in the loss of confidence of our funding sources. • To the extent we seek to execute acquisitions, strategic investments, alliances, divestitures or other transactions, we may be unable to achieve the strategic objectives of these transactions, and such transactions may be disruptive to our ongoing operations. • Expansion into new international geographies presents a variety of challenges and risks. • The loss of the services of our Founder and Chief Executive Officer, as well as our inability to attract and retain highly skilled employees, could materially and adversely affect our business, results of operations, financial condition, and future prospects. • We have a history of operating losses and may not achieve sustained profitability. • Our quarterly results may fluctuate significantly and may not fully reflect the underlying performance of our business. • Litigation, regulatory actions and compliance issues could subject us to fines, penalties, judgments, remediation costs, requirements resulting in increased expenses, and reputational harm. • Further increases in market interest rates and/or prolonged periods of elevated interest rates could have an adverse effect on our business. • Our revenue is impacted, to a significant extent, by the general economy, the creditworthiness of the U.S. consumer and the financial performance of our commercial partners. • If our collection efforts on delinquent loans are ineffective or unsuccessful, the performance of the loans would be adversely affected. • Any significant disruption in, or errors in, service on our platform or relating to vendors, including events beyond our control, could prevent us from processing transactions on our platform or posting payments and have a material and adverse effect on our business, results of operations, financial condition, and future prospects. • Our ability to protect our confidential, proprietary or sensitive information, including the confidential information of consumers on our platform, may be adversely affected by cyber-attacks, employee or other internal misconduct, computer viruses, physical or electronic break-ins or similar disruptions. • Our business is subject to extensive regulation, examination, oversight, and supervision in a variety of areas, all of which are subject to change and uncertain interpretation.
Our continued success also is dependent on our ability to successfully grow and develop relationships with our commercial partners, particularly early-stage relationships with large e-commerce retailers and platforms such as Apple Pay.
In addition, our agreements with our commercial partners generally have terms that range from approximately 12 months to 36 months (with a majority auto-renewing), and some of our partners can terminate these agreements without cause upon 30 to 90 days’ prior written notice.
Morgan Chase, Citibank, Bank of America, Capital One, Bread Financial and American Express; technology solutions provided by payment companies such as Visa and MasterCard; mobile wallets such as PayPal; other pay-over-time solutions offered by companies such as Block and Klarna; and pay-over-time offerings by legacy financial and payments companies, including those mentioned above.
The loss of, or decrease in business with, any one of our significant commercial partner relationships, such as with Amazon or Shopify, due to a lapse in exclusivity or otherwise, would adversely affect our business.
We currently rely on a small number of originating bank partners, including Celtic Bank and Lead Bank (“Primary Originating Banks”), to originate substantially all of the loans facilitated through our platform, and a single issuing bank partner, Evolve Bank & Trust (“Card Issuing Bank”), to issue the Affirm Card.
If our relationship with any of our Primary Originating Banks or our Card Issuing Bank terminates, or if any Primary Originating Bank or our Card Issuing Bank were to suspend, limit, or cease its operations or loan origination activities, as applicable, for any reason, and we are unable to engage another originating bank partner or card issuing bank partner on a timely basis or at all, our business, results of operations, financial condition, and future prospects would be materially and adversely affected.
As of the end of fiscal 2025, we relied on two Primary Originating Banks to originate a majority of the loans facilitated through our platform and to comply with various federal, state, and other laws, with the balance of the loans facilitated on our platform being originated directly under our lending, servicing, and brokering licenses in Canada and across various states in the United States through our consolidated subsidiaries.
In addition, as of the end of fiscal 2025, we relied on a single Card Issuing Bank to issue the Affirm Card, and we had entered into a payments program partnership with Stride Bank to be an additional issuing bank of the Affirm Card upon launch of the program.
Each of our Primary Originating Banks and our Card Issuing Bank handles a variety of consumer and commercial financing programs.
The Celtic Bank loan program agreement had an initial three-year term that expired in calendar year 2023.
The term automatically renewed for an additional one-year term and will continue to automatically renew in one-year terms thereafter unless either party provides notice of its intent not to renew.
The Lead Bank loan program agreement has an initial three-year term which will expire in calendar year 2026.
The term will automatically renew for additional one-year terms thereafter unless either party provides notice of its intent not to renew.
The Evolve Bank loan program agreement has an initial two-year term that expired in calendar year 2023.
The Stride Bank loan program agreement has an initial five-year term which will expire in calendar year 2030.
In addition, upon the occurrence of certain early termination events, either we or any of our Primary Originating Banks or Card Issuing Bank may terminate the respective agreement immediately upon the occurrence of certain termination events.
Our agreements with our Primary Originating Banks and Card Issuing Bank do not prohibit those banks from working with our competitors or from offering competing services, and each of those banks currently offer loan programs or other issuing services, as applicable, through other competing platforms.
We could in the future have disagreements or disputes with our Primary Originating Banks or Card Issuing Bank, which could negatively impact or threaten our relationship with other banks with whom we may seek to partner.
For a further discussion of our relationship with our Primary Originating Banks, particularly the regulations applicable to this relationshi p, see “ Business — Regulatory Environment .” If any of our Primary Originating Banks or our Card Issuing Bank were to suspend, limit, or cease its operations or loan origination activities, as applicable, for any reason, or if our relationship with any Primary Originating Bank or our Card Issuing Bank were to otherwise terminate for any reason (including, but not limited to, its failure to comply with regulatory actions), we may need to implement an additional substantially similar arrangement with another bank, obtain additional state licenses, or curtail our operations.
Moreover, with respect to our Card Issuing Bank, transitioning card issuance activities to a new bank may result in the need to replace existing virtual or physical cards, which may disrupt or delay consumer transactions.
The process of developing new technologies and products, such as the Affirm Card, which offers pay-over-time functionality in the Affirm App, is complex, and we seek to build our own technology using the latest in artificial intelligence (“AI”) and machine learning (together, “AI/ML”), cloud-based technologies, and other tools to differentiate our products and technologies.
In addition, we may not be able to effectively implement new technology-driven products and services, including the Affirm Card or AdaptAI (Affirm’s AI-powered personalized promotion platform), as quickly as competitors or be successful in marketing these products and services to consumers and commercial partners.
The profile of potential consumers using our new products and technologies also may not be as attractive as the profile of the consumers that we currently serve or have served in the past, which may lead to higher levels of delinquencies or defaults than we have historically experienced.
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.
In addition, our funding sources may reassess their exposure to our industry and either curtail access to uncommitted financing capacity, fail to renew or extend facilities, or impose higher costs to access our funding.
If our existing funding arrangements are not renewed or replaced or our existing funding sources are unwilling or unable to provide funding to us on terms acceptable to us, or at all, we would need to secure additional sources of funding or reduce our operations significantly.
If any of the credit risk or fraud models we use contain programming or other errors or is ineffective or the data provided by consumers or third parties is incorrect or stale, or if we are unable to obtain accurate data from consumers or third parties (such as credit reporting agencies), the loan pricing and approval process through our platform could be negatively affected, resulting in mispriced or misclassified loans or incorrect approvals or denials of loans.
In recent fiscal years, we have retained more loans on our balance sheet than we have historically, and these loans are funded through our consolidated securitizations and warehouse lines.
For these loans and any future loans facilitated through our platform that we purchase from our originating bank partners that may be held for investment on our balance sheet, we bear the entire credit risk in the event of consumer default with respect to these loans.
However, these measures may not be sufficient to prevent all instances of infringement or loss of IP rights, The rapidly evolving regulatory landscape surrounding AI technologies presents additional risks.
Any acquisitions, strategic investments, alliances, divestitures and other transactions could fail to achieve strategic objectives, disrupt our ongoing operations or result in operating difficulties, liabilities and expenses, harm our business, and negatively impact our results of operations.
In pursuing our business strategy, we routinely conduct discussions and evaluate opportunities for possible acquisitions, strategic investments, joint ventures and other transactions.
We have in the past acquired or invested in, and we continue to seek to acquire or invest in, businesses, technologies, or other assets that we believe could complement or expand our business.
In addition to transaction and opportunity costs, these transactions involve large challenges and risks, whether or not such transactions are completed, any of which could harm our business and negatively impact our results of operations, including risks that: • the transaction may not advance our business strategy or may harm our growth (or profitability); • we may not be able to secure required regulatory approvals or otherwise satisfy closing conditions for a proposed transaction in a timely manner, or at all; • the transaction may subject us to additional regulatory burdens that affect our business in potentially unanticipated and significantly negative ways; • we may not realize a satisfactory return or increase our revenue; • we may experience difficulty, and may not be successful in, integrating technologies, IT or business enterprise systems, culture, or management or other personnel of the acquired business; • we may incur significant acquisition costs and transition costs, including in connection with the assumption of ongoing expenses of the acquired business; • we may not realize the expected benefits or synergies from the transaction in the expected time period, or at all; • we may be unable to retain key personnel; • acquired businesses or businesses that we invest in may not have adequate controls, processes, and procedures to ensure compliance with laws and regulations, including with respect to data privacy, data protection, and data security, and our due diligence process may not identify compliance issues or other liabilities; • we may fail to identify or assess the magnitude of certain liabilities, shortcomings, or other circumstances prior to acquiring or investing in a business, which could result in additional financial, legal, regulatory, or tax exposure and may subject us to additional controls, policies, procedures, liabilities, litigation, costs of compliance or remediation, or other adverse effects on our business, operating results, or financial condition; • we may have difficulty entering into new geographic territories; • we may be unable to retain the consumers, vendors, and partners of acquired businesses; • there may be lawsuits or regulatory actions resulting from the transaction; • there may be risks associated with undetected security weaknesses, cyberattacks, or security breaches or incidents at companies that we acquire or with which we may combine or partner; • there may be local and foreign regulations applicable to the international activities of our business and the businesses we acquire; and • acquisitions could result in dilutive issuances of equity securities or the incurrence of debt.
We currently operate in the United States, Canada, the U.K., Spain and Poland (we do not currently facilitate loans in Spain or Poland) and plan to further expand our business internationally in the future.
Managing new and existing international operations, including our planned expansion into the Netherlands, France, Germany and Australia, requires us to comply with new regulatory frameworks and additional resources and controls.
International expansion subjects our business to risks associated with international operations, including: • adjusting the proprietary risk algorithms that we use to account for the differences in information available in different jurisdictions on consumers; • conformity of our platform with applicable business customs, including translation into foreign languages and associated expenses; • potential changes to our established business model; • the need to support and integrate with local vendors and service providers; • competition with vendors and service providers that have greater experience in the local markets than we do or that have pre-existing relationships with potential consumers and investors in those markets; • difficulties in staffing and managing foreign operations in an environment of diverse culture, laws, and consumers and merchants, and the increased travel, infrastructure, and legal and compliance costs associated with international operations; • difficulties in obtaining required licenses and/or authorizations to do business in new countries and territories; • compliance with multiple, potentially conflicting, and changing governmental laws and regulations, including those relating to banking, anti-money laundering, securities, employment, tax, privacy, data protection, such as the EU General Data Protection Regulation (GDPR), artificial intelligence, such as the EU Artificial Intelligence Act, and climate disclosure, such as the Corporate Sustainability Reporting Directive (CSRD); • compliance with financial system regulations, including the U.K.
In addition to the risks of various taxing jurisdictions stated above, the Organisation for Economic Co-operation and Development (“OECD”) continues to put forth various initiatives, including a framework to implement a global minimum corporate tax of 15% for certain multinational enterprises with global revenues and profits above certain thresholds (referred to as “Pillar Two”).
While it is uncertain whether the United States will enact legislation to adopt Pillar Two, certain countries in which we operate have adopted legislation, and other countries are in the process of introducing legislation to implement Pillar Two.

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Sentence-level comparison of Item 1A in the two most recent 10-Ks (FY2025 ↗, FY2026 ↗). A reworded sentence counts as one dropped and one added, so heavy edits read as low “kept”. Headings and page furniture are stripped; nothing is summarised by a model.

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