XML 43 R25.htm IDEA: XBRL DOCUMENT
v3.22.2.2

Income Taxes | 12 Months Ended
--- | ---
Jun. 30, 2022
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes The U.S. and foreign components of income (loss) before income taxes for the years ended June 30, 2022, 2021, and 2020 are as follows (in thousands):
|  | Year Ended June 30,
|  | 2022 |  | 2021 |  | 2020
U.S. |  | $ | (780,699) |  |  | $ | (330,313) |  |  | $ | (112,080) |
Foreign |  | 55,868 |  |  | (113,057) |  |  | (142) |
Total loss before income taxes |  | $ | (724,831) |  |  | $ | (443,370) |  |  | $ | (112,222) |
Income tax expense (benefit) for the years ended June 30, 2022, 2021, and 2020 is summarized as follows (in thousands):
|  | Year Ended June 30,
|  | 2022 |  | 2021 |  | 2020
Current |  |  |  |  |  |
State |  | $ | 145 |  |  | $ | (10) |  |  | $ | 351 |
Foreign |  | 230 |  |  | (410) |  |  | 436 |
Total current expense |  | $ | 375 |  |  | $ | (420) |  |  | $ | 787 |
Deferred |  |  |  |  |  |
Federal |  | 113 |  |  | 88 |  |  | 6 |
State |  | 281 |  |  | (2,570) |  |  | 28 |
Foreign |  | (18,183) |  |  | 559 |  |  | (445) |
Total deferred expense |  | (17,789) |  |  | (1,923) |  |  | (411) |
Income tax (benefit) expense |  | $ | (17,414) |  |  | $ | (2,343) |  |  | $ | 376 |
The income tax benefit for the year ended June 30, 2022, was primarily attributable to a change in our assessment of the future realization of certain foreign deferred tax assets, while the income tax benefit for the year ended June 30, 2021 and the income tax expense for the year ended June 30, 2020 were primarily attributable to an adjustment to the Company's valuation allowance resulting from a deferred tax liability assumed with the acquisition of Returnly and to various state income taxes and the tax amortization of certain intangibles, respectively. The following is a reconciliation of the U.S. statutory federal income tax rate to our effective tax rate for the years ended June 30, 2022, 2021, and 2020:
|  | Year Ended June 30,
|  | 2022 |  | 2021 |  | 2020
U.S. statutory federal income tax rate |  | 21.0 | % |  | 21.0 | % |  | 21.0 | %
State and local income taxes, net of federal tax benefit |  | 8.3 | % |  | 9.1 | % |  | 10.5 | %
Foreign rate differential |  | (0.4) | % |  | 1.5 | % |  | — | %
Stock-based compensation |  | 64.0 | % |  | 66.4 | % |  | (0.4) | %
Non-deductible compensation expense |  | (12.4) | % |  | (8.4) | % |  | — | %
Tax benefit related to tax credits, net |  | 15.4 | % |  | 0.5 | % |  | — | %
Impact of change in fair value of contingent consideration |  | 3.3 | % |  | (5.6) | % |  | — | %
Change in unrecognized tax benefits |  | (6.2) | % |  | — | % |  | — | %
Other |  | 0.2 | % |  | 1.6 | % |  | (1.9) | %
Change in valuation allowance |  | (90.8) | % |  | (85.6) | % |  | (29.6) | %
Effective income tax rate |  | 2.4 | % |  | 0.5 | % |  | (0.4) | %
Significant components of deferred tax assets and liabilities are as follows (in thousands):
|  | Year Ended June 30,
|  | 2022 |  | 2021 |  |
Net operating loss carryforwards |  | $ | 1,056,403 |  |  | $ | 430,464 |  |  |
Allowance for credit losses |  | 55,154 |  |  | 41,155 |  |  |
Stock-based compensation |  | 51,288 |  |  | 51,126 |  |  |
Operating lease liabilities |  | 19,840 |  |  | 23,914 |  |  |
Tax credit carryforwards |  | 69,144 |  |  | 2,054 |  |  |
Other |  | 7,581 |  |  | 4,837 |  |  |
Total deferred tax assets |  | $ | 1,259,410 |  |  | $ | 553,550 |  |  |
Internally developed software |  | (47,217) |  |  | (15,214) |  |  |
Purchased intangible assets |  | (11,386) |  |  | (18,150) |  |  |
Right-of-use lease assets |  | (15,289) |  |  | (18,386) |  |  |
Stock warrants |  | (7,200) |  |  | — |  |  |
Other |  | (2,920) |  |  | (2,460) |  |  |
Total deferred tax liabilities |  | $ | (84,012) |  |  | $ | (54,210) |  |  |
Valuation allowance |  | (1,158,246) |  |  | (499,828) |  |  |
Deferred tax assets (liabilities), net of valuation allowance |  | $ | 17,152 |  |  | $ | (488) |  |  |
We continue to recognize a full valuation allowance against our U.S. federal and state net deferred tax assets. This determination was based on the assessment of the available positive and negative evidence to estimate whether sufficient future taxable income will be generated to utilize the existing deferred tax assets. A significant piece of objective negative evidence evaluated was the cumulative loss incurred by the Company for the years ended June 30, 2022, 2021, and 2020. The presence of a three-year cumulative loss limits the ability to consider other subjective evidence, such as our expectations of future taxable income and projections for growth. The domestic valuation allowance increased by $668.5 million during the year ended June 30, 2022. As a result of the integration and consolidation of our PayBright business into and with Affirm’s Canadian business and the expansion of our overall business in Canada, as well as other objectively verifiable positive evidence that became available during the year ended June 30, 2022, all of which we have concluded is sufficient to outweigh the existing negative evidence – including the presence of a three-year cumulative loss attributable to the related foreign jurisdiction, we have determined that it is more likely than not that our foreign deferred tax assets will be realized and a valuation allowance is not required. Accordingly, the foreign valuation allowance decreased by $10.1 million during the year ended June 30, 2022. As of June 30, 2022, we had pretax U.S. federal net operating loss ("NOL") carryforwards of approximately $3,405.9 million, state NOL carryforwards of $3,590.4 million, and foreign NOL carryforwards of $65.8 million. If not utilized, certain U.S. federal and state NOL carryforwards will begin to expire in 2029, whereas others have an unlimited carryforward period, and foreign NOL carryforwards will begin to expire in 2039. Additionally, as of June 30, 2022, we also had U.S. federal and state research and development tax credit carryforwards of $82.0 million and $37.7 million, respectively. The U.S. federal research and development tax credit carryforwards will begin to expire in 2041 while the state research and development tax credits may be carried forward indefinitely. As of June 30, 2022, the Company also had other state tax credit carryforwards of $2.6 million, which will begin to expire in 2024 if not utilized. Of the above NOL carryforwards, approximately $42.0 million pretax U.S. federal NOL carryforwards and $36.4 million state NOL carryforwards are from domestic acquisitions, which may be subject to an annual utilization limitation under Internal Revenue Code Section 382. The future utilization of all domestic NOL and tax credit carryforwards may be subject to an annual limitation, pursuant to Internal Revenue Code Sections 382 and 383 and similar state provisions, due to ownership changes that may have occurred previously or that could occur in the future. Any limitation may result in the expiration of all or a portion of the NOL carryforwards before utilization. The Company accounts for uncertainties in income taxes in accordance with ASC 740, Income Taxes (“ASC 740”). The following table provides a reconciliation of the beginning and ending amounts of gross unrecognized tax benefits (in thousands):
|  | Year ended June 30,
|  | 2022 |  | 2021 |  | 2020
Beginning balance |  | $ | — |  |  | $ | — |  |  | $ | — |
Gross increase for tax positions related to the current year |  | 28,407 |  |  | — |  |  | — |
Gross increase for tax positions related to prior years |  | 19,460 |  |  | — |  |  | — |
Ending balance |  | $ | 47,867 |  |  | $ | — |  |  | $ | — |
As of June 30, 2022, the Company had no unrecognized tax benefits related to uncertain tax positions that, if recognized, would impact the effective tax rate. The Company does not expect the total amount of unrecognized tax benefits to significantly increase or decrease within the next twelve months. Interest and penalties on unrecognized tax benefits are recorded as a component of tax expense. During the years ended June 30, 2022, 2021, and 2020, we did not recognize accrued interest and penalties related to unrecognized tax benefits. We file U.S. federal and state income tax returns as well as various foreign income tax returns with varying statutes of limitation. With respect to the Company’s major tax filings, all tax years remain open to examination due to the carryover of unused net operating losses.

X
- References No definition available. + Details
Name: | us-gaap_IncomeTaxDisclosureAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 21 -URI https://asc.fasb.org/extlink&oid=121826272&loc=d3e32857-109319 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 2 -Subparagraph (SAB Topic 11.C) -URI https://asc.fasb.org/extlink&oid=122134291&loc=d3e330215-122817 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 17 -Subparagraph (b) -URI https://asc.fasb.org/extlink&oid=121826272&loc=d3e32809-109319 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SAB TOPIC 6.I.5.Q1) -URI https://asc.fasb.org/extlink&oid=122134291&loc=d3e330036-122817 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 14 -URI https://asc.fasb.org/extlink&oid=121826272&loc=d3e32705-109319 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 270 -Section 50 -Paragraph 1 -URI https://asc.fasb.org/extlink&oid=6424409&loc=d3e44925-109338 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI https://asc.fasb.org/topic&trid=2144680 Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 30 -Section 50 -Paragraph 2 -Subparagraph (a) -URI https://asc.fasb.org/extlink&oid=6424122&loc=d3e41874-109331 Reference 9: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08(h)(2)) -URI https://asc.fasb.org/extlink&oid=120395691&loc=d3e23780-122690 + Details
Name: | us-gaap_IncomeTaxDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | dtr-types:textBlockItemType
Balance Type: | na
Period Type: | duration