8-KEarnings & ResultsMaterial AgreementsSecurities & Listing+1

Affirm Holdings, Inc. 8-K Report, Material Agreement (Nov 10, 2021)

Filed November 10, 2021For Securities:AFRM

Summary

Affirm Holdings, Inc. (AFRM) announced a significant material definitive agreement on November 10, 2021, through an Amended and Restated Installment Financing Services Agreement with Amazon.com Services LLC and Amazon Payments, Inc. This agreement positions Affirm's closed-end installment loan products to be available to eligible consumers on Amazon.com and through the Amazon Pay widget on certain third-party online channels. A key aspect for investors is Amazon's commitment, until at least January 31, 2023, to not offer similar installment loan products from certain Affirm competitors on Amazon.com. This exclusivity provides Affirm with a substantial market opportunity and strengthens its relationship with a major e-commerce player. In conjunction with this agreement, Affirm issued warrants to Amazon Services to purchase up to an aggregate of 22,000,000 shares of Class A common stock. These warrants vest in tranches based on specific conditions, including Amazon's fulfillment of certain display and availability obligations for Affirm's products and customer adoption metrics. The issuance of these warrants, coupled with the strategic partnership, signals strong mutual commitment and potential for significant future growth, though it also introduces potential dilution for existing shareholders down the line.

Key Highlights

  • 1Affirm has entered into a material agreement with Amazon to offer its installment loan products on Amazon.com and via the Amazon Pay widget.
  • 2Amazon has agreed not to offer competing closed-end installment loan products from certain competitors on Amazon.com until at least January 31, 2023.
  • 3Affirm will receive fees from merchants using the Amazon Pay widget for Affirm-financed transactions and from Amazon Services for transactions on Amazon.com.
  • 4Amazon is required to ensure Affirm's products are included in the selection mechanism for financing offers on Amazon.com product detail pages.
  • 5Affirm issued two warrants to Amazon Services to purchase up to 7 million and 15 million shares of Class A common stock, respectively, with staggered vesting based on performance and contractual obligations.
  • 6The initial term of the agreement extends to January 31, 2025, with options for annual extensions.
  • 7The warrants are subject to a beneficial ownership limitation of 4.999% to prevent Amazon from exceeding this threshold.

Frequently Asked Questions

The primary benefit is the significant expansion of Affirm's reach by making its installment loan products available to millions of eligible consumers on Amazon.com, a major e-commerce platform. Additionally, the exclusivity clause, preventing certain competitors' products from being offered on Amazon.com, provides Affirm with a key strategic advantage.

The warrants represent a potential future dilution of Affirm's Class A common stock. However, they also serve as a strong incentive for Amazon to actively promote and ensure the success of Affirm's products, as the vesting of these warrants is tied to specific performance and contractual obligations related to Affirm's services on Amazon's platform.

Affirm will generate revenue through fees charged to eligible merchants who offer Affirm's financing options via the Amazon Pay widget on their third-party online channels. Additionally, Amazon Services will pay Affirm a fee for transactions financed through Affirm's products on Amazon.com, which may include a percentage of the financed amount and, in some cases, a fixed fee.

The Commercial Agreement has an initial term ending on January 31, 2025. After this initial term, it will automatically extend for successive one-year terms unless either Affirm or Amazon provides notice not to renew. This structure provides a long-term strategic relationship with the potential for ongoing collaboration.