Affirm Holdings (AFRM) risk factors, FY2025 10-K

Risks Related to Our Business and Industry

1. 01We derive a significant portion of our revenue from our relationships with commercial partners and the transactions they process through our platform, and as more commercial partners are integrated into our network, there are more reasons for consumers to shop with us
2. 02If we are unable to attract new consumers and retain and grow our relationships with our existing consumers, our business, results of operations, financial condition, and future prospects would be materially and adversely affected
3. 03We operate in a highly competitive industry, and our inability to compete successfully would materially and adversely affect our business, results of operations, financial condition, and future prospects
4. 04We rely on a small number of commercial partners, and the loss of any of these significant relationships would adversely affect our business, results of operations, financial condition, and future prospects
5. 05We may not be able to sustain our revenue and GMV growth rates, or our growth rate of related key operating metrics, in the future
6. 06The success and growth of our business depends upon our ability to continuously innovate and develop new products and technologies
7. 07The success of our business depends on our ability to work with an originating bank partner to enable effective underwriting of loans facilitated through our platform and accurately price credit risk
8. 08termination of our existing funding arrangements, which would have a material adverse effect on our business, results of operations, financial condition, and future prospects
9. 09Our use and provision of generative AI-powered solutions could lead to operational or reputational damage, competitive harm, legal and regulatory risk and additional costs
10. 10Any 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
11. 11Any delay or failure on our part to identify, negotiate, finance on favorable terms, consummate, and integrate any acquisition or other strategic investment opportunity could impede our growth
12. 12Further expansion of our operations internationally will subject us to new challenges and risks
13. 13The loss of the services of our Founder and Chief Executive Officer could materially and adversely affect our business, results of operations, financial condition, and future prospects
14. 14Our business benefits from our ability to attract and retain highly skilled employees
15. 15We have a history of operating losses and may not achieve sustained profitability
16. 16Our quarterly results may fluctuate significantly and may not fully reflect the underlying performance of our business
17. 17We have experienced in the past, and expect to continue to experience, seasonal fluctuations in our business
18. 18Negative publicity about us or our industry could adversely affect our business, results of operations, financial condition, and future prospects
19. 19Litigation, regulatory actions, and compliance issues could subject us to fines, penalties, judgments, remediation costs, and/or other requirements resulting in increased expenses and reputational harm
20. 20Determining our allowance for credit losses requires many assumptions and complex analyses. If our estimates prove incorrect, we may incur net charge-offs in excess of our reserves, or we may be required to increase our provision for credit losses, either of which would adversely affect our results of operations
21. 21Increases in market interest rates have had and could continue to have an adverse effect on our business
22. 22Our 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
23. 23affect the ability and willingness of consumers to pay amounts owed under the loans facilitated through our platform, each of which would have an adverse effect on our business, results of operations, financial condition, and future prospects
24. 24We are subject to both natural and man-made events that may unexpectedly disrupt our operations and adversely impact our business
25. 25Borrowers may not view the loans facilitated through our platform as having the same significance as other credit obligations arising under more traditional circumstances
26. 26If our collection efforts on delinquent loans are ineffective or unsuccessful, the performance of the loans would be adversely affected
27. 27While we take precautions to prevent consumer identity fraud, it is possible that identity fraud may still occur or has occurred, which may adversely affect the performance of the loans facilitated through our platform
28. 28If we fail to maintain effective internal control over financial reporting or disclosure controls and procedures, we may be unable to report our financial results on a timely and accurate basis, and our business, operating results and market price of our Class A common stock may be adversely affected
29. 29Increased scrutiny from regulators, investors and other stakeholders regarding our sustainability responsibilities, strategy and related disclosures could result in additional costs or risks and adversely impact our reputation, employee retention, and willingness of consumers and merchants to do business with us
30. 30Our results depend on prominent presentation, integration, and support of our platform by our commercial partners
31. 31If our commercial partners fail to fulfill their obligations to consumers or comply with applicable law, we may incur remediation costs
32. 32Our business could be adversely affected by any unsoundness of our financial institution counterparties

Risks Related to Our Intellectual Property and Platform Development

1. 33Real or perceived software errors, failures, bugs, defects, or outages could adversely affect our business, results of operations, financial condition, and future prospects
2. 34Our 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
3. 35If we are unable to protect our intellectual property, or if third parties are successful in claiming that we are infringing, misappropriating, or violating the intellectual property of others, we may incur significant expense and our business may be adversely affected
4. 36intellectual property and other proprietary rights as those in the United States, and the mechanisms for enforcement of intellectual property and other proprietary rights may be inadequate
5. 37We may be subject to claims brought by third parties for alleged infringement, misappropriation, or other violation of their intellectual property or other proprietary rights
6. 38Some aspects of our platform include open source software, and our use of open source software could negatively affect our business, results of operations, financial condition, and future prospects

Risks Related to Our Regulatory Environment

1. 39We are subject to various international, federal and state consumer protection laws
2. 40of licenses, class action lawsuits, administrative enforcement actions, and civil and criminal liability, which may harm our business
3. 41which may require us to implement certain changes to our business practices, provide remediation to certain individuals or make a settlement payment to a given party or regulatory body
4. 42If our originating bank partner model is successfully challenged or deemed impermissible, we could be found to be in violation of licensing, interest rate limit, lending, or brokering laws and face penalties, fines, litigation, or regulatory enforcement
5. 43The highly regulated environment in which our originating bank partners operate could have an adverse effect on our business, results of operations, financial condition, and future prospects
6. 44Our use of vendors and our other ongoing third-party business relationships are subject to increasing regulatory requirements and attention
7. 45Stringent and changing laws and regulations relating to privacy and data protection could result in claims, harm our results of operations, financial condition, and future prospects, or otherwise harm our business
8. 46We have an obligation to comply with anti-money laundering and anti-terrorism financing laws, and failure to comply with this obligation could have significant adverse consequences for us
9. 47If we fail to comply with applicable requirements for our high-yield savings account product, our consumers’ deposits may not qualify for FDIC insurance and they may withdraw their funds, which could adversely affect our brand, business, results of operations, financial condition, and future prospects
10. 48States and consumer advocacy groups are highly focused on potential discrimination resulting from the use of machine learning and "black-box" algorithms

Risks Related to our Class A Common Stock

1. 49The market price of our Class A common stock has been and may continue to be volatile, which could cause the value of your investment to decline
2. 50The issuance by us of additional equity securities may dilute your ownership and adversely affect the market price of our Class A common stock
3. 51Nevada law and certain provisions of our articles of incorporation and bylaws could make a merger, tender offer, or proxy contest difficult, thereby adversely affecting the market price of our common stock
4. 52Our bylaws contain exclusive forum provisions for certain claims, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, or employees

Risks Related to Our Indebtedness

1. 53Servicing our debt requires a significant amount of cash, and we may not have sufficient cash flow from our business to pay our substantial debt