[Special Note Regarding Forward-Looking Statements](index=4&type=section&id=SPECIAL%20NOTE%20REGARDING%20FORWARD-LOOKING%20STATEMENTS) The report contains forward-looking statements subject to substantial risks and uncertainties, cautioning against undue reliance - Forward-looking statements relate to future financial performance, AI model improvements, loan volume, funding strategy, capital allocation, competitive interest rates, brand building, marketing, macroeconomic events, credit performance, banking industry impact, growth management, regulatory compliance, strategic investments, new markets, third-party relationships, fraud protection, loan servicing, competition, intellectual property, corporate funding, employee retention, internal controls, and litigation[10](index=10&type=chunk)[14](index=14&type=chunk) - Readers are cautioned that **actual results may differ materially** from forward-looking statements due to risks, including those detailed in the "Risk Factors" section[12](index=12&type=chunk) [PART I. FINANCIAL INFORMATION](index=7&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements](index=7&type=section&id=Item%201.%20Financial%20Statements) This section presents the company's unaudited condensed consolidated financial statements and related notes [Condensed Consolidated Balance Sheets](index=7&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) The balance sheets show a decrease in total assets and liabilities, resulting in an increase in total stockholders' equity Condensed Consolidated Balance Sheet Highlights (in thousands) | Metric | Dec 31, 2024 (in thousands) | Mar 31, 2025 (in thousands) | Change (in thousands) | | :--- | :--- | :--- | :--- | | Cash and cash equivalents | $788,422 | $599,778 | $(188,644) | | Restricted cash | $187,841 | $239,750 | $51,909 | | Loans (at fair value) | $806,304 | $814,677 | $8,373 | | Total assets | $2,366,958 | $2,296,277 | $(70,681) | | Borrowings | $1,402,168 | $1,334,863 | $(67,305) | | Total liabilities | $1,733,740 | $1,619,635 | $(114,105) | | Total stockholders' equity | $633,218 | $676,642 | $43,424 | - Loans at fair value contributed as collateral for consolidated securitization **decreased from $102.9 million to $88.9 million**[23](index=23&type=chunk) [Condensed Consolidated Statements of Operations and Comprehensive Loss](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Loss) The company reported a significant increase in total revenue and a substantial reduction in net loss for Q1 2025 year-over-year Condensed Consolidated Statements of Operations Highlights (in thousands) | Metric | Three Months Ended Mar 31, 2024 (in thousands) | Three Months Ended Mar 31, 2025 (in thousands) | Change (in thousands) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Revenue from fees, net | $138,068 | $185,475 | $47,407 | 34% | | Total interest income, interest expense, and fair value adjustments, net | $(10,274) | $27,896 | $38,170 | 372% | | Total revenue | $127,794 | $213,371 | $85,577 | 67% | | Total operating expenses | $195,262 | $217,867 | $22,605 | 12% | | Loss from operations | $(67,468) | $(4,496) | $62,972 | -93% | | Net loss | $(64,598) | $(2,447) | $62,151 | -96% | | Net loss per share, basic | $(0.74) | $(0.03) | $0.71 | -96% | - Fair value and other adjustments, net, **improved significantly from a loss of $(50,731) thousand in Q1 2024 to a loss of $(5,652) thousand in Q1 2025**[30](index=30&type=chunk) [Condensed Consolidated Statements of Stockholders' Equity](index=10&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity) Stockholders' equity increased due to higher additional paid-in capital and a significantly reduced net loss Condensed Consolidated Statements of Stockholders' Equity Highlights (in thousands) | Metric | Dec 31, 2024 (in thousands) | Mar 31, 2025 (in thousands) | Change (in thousands) | | :--- | :--- | :--- | :--- | | Common Stock (Amount) | $9 | $10 | $1 | | Additional Paid-in Capital | $1,044,366 | $1,090,236 | $45,870 | | Accumulated Deficit | $(411,157) | $(413,604) | $(2,447) | | Total Stockholders' Equity | $633,218 | $676,642 | $43,424 | - Issuance of common stock upon exercise of stock options contributed **$8.2 million to additional paid-in capital in Q1 2025**, up from $1.2 million in Q1 2024[33](index=33&type=chunk) - Stock-based compensation expense was **$32.9 million in Q1 2025**, a decrease from $36.3 million in Q1 2024[33](index=33&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=11&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) The company shifted from net cash provided by operations to net cash used, resulting in a significant decrease in total cash Condensed Consolidated Statements of Cash Flows Highlights (in thousands) | Cash Flow Activity | Three Months Ended Mar 31, 2024 (in thousands) | Three Months Ended Mar 31, 2025 (in thousands) | Change (in thousands) | | :--- | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $44,337 | $(13,486) | $(57,823) | | Net cash used in investing activities | $(37,547) | $(78,569) | $(41,022) | | Net cash used in financing activities | $(35,426) | $(44,680) | $(9,254) | | Change in cash, cash equivalents and restricted cash | $(28,636) | $(136,735) | $(108,099) | | Cash, cash equivalents and restricted cash at end of period | $439,151 | $839,528 | $400,377 | - Purchases and originations of loans held-for-investment **increased significantly from $46.1 million in Q1 2024 to $149.9 million in Q1 2025**[35](index=35&type=chunk) - Proceeds from warehouse borrowings **decreased from $74.3 million in Q1 2024 to $53.7 million in Q1 2025**, while repayments increased from $110.2 million to $122.3 million[37](index=37&type=chunk) [Notes to the Condensed Consolidated Financial Statements](index=13&type=section&id=Notes%20to%20the%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed disclosures and explanations for the figures presented in the financial statements [1. Description of Business and Significant Accounting Policies](index=13&type=section&id=1.%20Description%20of%20Business%20and%20Significant%20Accounting%20Policies) Upstart applies AI models to consumer credit underwriting via a cloud-based lending marketplace in the U.S - Upstart uses AI models and cloud applications for consumer credit underwriting, connecting consumers with lending partners through its proprietary marketplace[39](index=39&type=chunk) - The company reclassified a portion of "payable to investors" from operating to financing activities in the condensed consolidated statement of cash flows, related to fiduciary cash held for institutional investors[42](index=42&type=chunk)[44](index=44&type=chunk) - The company adopted ASU 2023-08 on crypto assets, which had no impact, and is evaluating ASU 2023-09 (income tax disclosures), ASU 2024-03/2025-01 (expense disaggregation), and ASU 2024-04 (convertible debt) for future impact[48](index=48&type=chunk)[49](index=49&type=chunk)[51](index=51&type=chunk)[52](index=52&type=chunk)[53](index=53&type=chunk) [2. Revenue](index=16&type=section&id=2.%20Revenue) Total revenue from fees increased by 34% year-over-year, driven by higher transaction volume Revenue from Fees, Net (in thousands) | Revenue Component | Three Months Ended Mar 31, 2024 (in thousands) | Three Months Ended Mar 31, 2025 (in thousands) | Change (in thousands) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Platform and referral fees, net | $103,859 | $150,975 | $47,116 | 45% | | Servicing and other fees, net | $34,209 | $34,500 | $291 | 1% | | Total revenue from fees, net | $138,068 | $185,475 | $47,407 | 34% | Interest Income, Interest Expense, and Fair Value Adjustments, Net (in thousands) | Interest & Fair Value Component | Three Months Ended Mar 31, 2024 (in thousands) | Three Months Ended Mar 31, 2025 (in thousands) | Change (in thousands) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Interest income | $51,171 | $40,568 | $(10,603) | -21% | | Interest expense | $(10,714) | $(7,020) | $3,694 | 34% | | Fair value and other adjustments, net | $(50,731) | $(5,652) | $45,079 | 89% | | Total interest income, interest expense, and fair value adjustments, net | $(10,274) | $27,896 | $38,170 | 372% | - The decrease in unfavorable fair value adjustments was primarily due to a **$31.7 million decrease in fair value loss on beneficial interests**, an $8.3 million decrease in unrealized loss and loan charge-offs, and a $5.1 million decrease in realized loss on loan sales[333](index=333&type=chunk) [3. Variable Interest Entities](index=22&type=section&id=3.%20Variable%20Interest%20Entities) The company consolidates VIEs where it is the primary beneficiary, with total consolidated VIE assets decreasing Consolidated VIEs Financial Summary (in thousands) | Consolidated VIEs (in thousands) | Dec 31, 2024 | Mar 31, 2025 | | :--- | :--- | :--- | | Total assets | $812,109 | $789,988 | | Total liabilities | $287,574 | $205,496 | | Total net assets | $524,535 | $584,492 | - The company completed a private securitization securities offering (UPST 2023-2) on July 6, 2023, retaining eligible vertical interests and consolidating associated entities as the primary beneficiary[82](index=82&type=chunk)[85](index=85&type=chunk) - Unconsolidated VIEs associated with securitizations had total assets of **$449.8 million** and maximum exposure to losses of **$23.2 million** as of March 31, 2025[93](index=93&type=chunk)[98](index=98&type=chunk) [4. Beneficial Interests](index=25&type=section&id=4.%20Beneficial%20Interests) Beneficial interest assets increased in fair value, while liabilities decreased, and maximum exposure to losses grew Beneficial Interests Fair Value (in thousands) | Beneficial Interest (in thousands) | Dec 31, 2024 | Mar 31, 2025 | | :--- | :--- | :--- | | Total beneficial interest assets | $176,848 | $216,578 | | Beneficial interest liabilities | $10,089 | $4,032 | - Fair value adjustments and realized gains (losses) on beneficial interests, net, **shifted from a loss of $(14,034) thousand in Q1 2024 to a gain of $17,665 thousand in Q1 2025**[102](index=102&type=chunk) Maximum Exposure to Losses from Beneficial Interests (in thousands) | Maximum Exposure to Losses (in thousands) | Dec 31, 2024 | Mar 31, 2025 | | :--- | :--- | :--- | | Cash and cash equivalents | $85,105 | $90,726 | | Restricted cash | $84,065 | $111,458 | | Beneficial interests | $204,814 | $228,291 | | Other assets - Line of credit receivable | $54,780 | $79,636 | | Loans | $30,579 | $43,455 | | Total | $459,343 | $553,566 | [5. Fair Value Measurement](index=30&type=section&id=5.%20Fair%20Value%20Measurement) The company measures various assets and liabilities at fair value, primarily classified as Level 3 [Fair Value Measured Items](index=30&type=section&id=Fair%20Value%20Measured%20Items) Assets and Liabilities Measured at Fair Value (in thousands) | Fair Value Measured Items (in thousands) | Dec 31, 2024 | Mar 31, 2025 | | :--- | :--- | :--- | | Assets: | | | | Loans | $806,304 | $814,677 | | Beneficial interest assets | $176,848 | $216,578 | | Line of credit receivable | $56,269 | $81,780 | | Loan servicing assets | $27,439 | $28,886 | | Notes receivable and residual certificates | $22,055 | $19,471 | | Total assets | $1,090,779 | $1,162,521 | | Liabilities: | | | | Payable to securitization note holders | $87,321 | $75,904 | | Trailing fee liabilities | $4,614 | $4,574 | | Beneficial interest liabilities | $10,089 | $4,032 | | Loan servicing liabilities | $1,180 | $1,487 | | Total liabilities | $103,204 | $85,997 | - All listed financial instruments measured at fair value are **classified as Level 3**, indicating significant unobservable inputs[106](index=106&type=chunk)[107](index=107&type=chunk) [Loans](index=30&type=section&id=Loans) The fair value of total loans increased slightly, with a notable shift from held-for-sale to held-for-investment loans Fair Value of Loans by Classification (in thousands) | Loan Type (in thousands) | Dec 31, 2024 | Mar 31, 2025 | | :--- | :--- | :--- | | Loans held-for-sale | $405,812 | $347,749 | | Loans held-for-investment | $297,543 | $378,012 | | Loans held in consolidated securitization | $102,949 | $88,916 | | Total | $806,304 | $814,677 | - Loans held-for-sale **decreased by $58.1 million**, while loans held-for-investment **increased by $80.5 million**[110](index=110&type=chunk) - The fair value of loans is sensitive to changes in discount and credit loss rates, with a **10% adverse change in credit loss rates leading to a $7.8 million decrease in fair value** as of March 31, 2025[121](index=121&type=chunk) [Line of Credit Receivable](index=35&type=section&id=Line%20of%20Credit%20Receivable) The fair value of the line of credit receivable increased primarily due to new issuances Line of Credit Receivable Fair Value (in thousands) | Line of Credit Receivable (in thousands) | Dec 31, 2024 | Mar 31, 2025 | | :--- | :--- | :--- | | Fair value | $56,269 | $81,780 | - **Issuances of $24.9 million** contributed to the increase in fair value during Q1 2025[135](index=135&type=chunk) [Assets and Liabilities related to Securitization Transactions](index=36&type=section&id=Assets%20and%20Liabilities%20related%20to%20Securitization%20Transactions) Notes receivable and payables to securitization note holders both decreased in fair value, reflecting repayments Securitization Assets and Liabilities Fair Value (in thousands) | Securitization Items (in thousands) | Dec 31, 2024 | Mar 31, 2025 | | :--- | :--- | :--- | | Notes receivable and residual certificates | $22,055 | $19,471 | | Payable to securitization note holders | $87,321 | $75,904 | - Repayments and settlements for notes receivable and residual certificates were **$2.7 million in Q1 2025**[143](index=143&type=chunk) - Repayments and settlements for payable to securitization note holders were **$11.4 million in Q1 2025**[143](index=143&type=chunk) [Loan Servicing Assets and Liabilities](index=39&type=section&id=Loan%20Servicing%20Assets%20and%20Liabilities) Loan servicing assets and liabilities both increased and are sensitive to market-servicing rates Loan Servicing Assets and Liabilities Fair Value (in thousands) | Loan Servicing (in thousands) | Dec 31, 2024 | Mar 31, 2025 | | :--- | :--- | :--- | | Assets | $27,439 | $28,886 | | Liabilities | $1,180 | $1,487 | - A **10% increase in market-servicing rates** would decrease the fair value of loan servicing assets by **$7.1 million** as of March 31, 2025[155](index=155&type=chunk) [Beneficial Interests](index=41&type=section&id=Beneficial%20Interests) Beneficial interest assets increased while liabilities decreased, with high sensitivity to credit risk rate spreads Beneficial Interests Fair Value (in thousands) | Beneficial Interests (in thousands) | Dec 31, 2024 | Mar 31, 2025 | | :--- | :--- | :--- | | Assets | $176,848 | $216,578 | | Liabilities | $10,089 | $4,032 | - A **10% adverse change in expected credit risk rate spreads** would decrease beneficial interest assets by **$53.9 million** and increase liabilities by **$11.4 million** as of March 31, 2025[167](index=167&type=chunk) [Trailing Fee Liabilities](index=46&type=section&id=Trailing%20Fee%20Liabilities) Trailing fee liabilities remained stable with immaterial sensitivity to changes in key assumptions Trailing Fee Liabilities Fair Value (in thousands) | Trailing Fee Liabilities (in thousands) | Dec 31, 2024 | Mar 31, 2025 | | :--- | :--- | :--- | | Fair value | $4,614 | $4,574 | - The fair value sensitivity of trailing fee liabilities to adverse changes in key assumptions **does not result in a material impact**[173](index=173&type=chunk) [6. Goodwill and Intangible Assets](index=48&type=section&id=6.%20Goodwill%20and%20Intangible%20Assets) Goodwill remained unchanged, while net intangible assets decreased slightly due to amortization Intangible Assets, Net (in thousands) | Intangible Assets (in thousands) | Dec 31, 2024 (Net Carrying Value) | Mar 31, 2025 (Net Carrying Value) | | :--- | :--- | :--- | | Developed technology | $0 | $0 | | Customer relationships | $9,419 | $9,133 | | Total intangible assets | $9,419 | $9,133 | - **Goodwill remained constant at $67.1 million** for both periods[178](index=178&type=chunk) - Amortization expense for intangible assets was immaterial for both periods[179](index=179&type=chunk) [7. Balance Sheet Components](index=50&type=section&id=7.%20Balance%20Sheet%20Components) This section details changes in other assets, property, and accrued expenses and other liabilities Other Assets (in thousands) | Other Assets (in thousands) | Dec 31, 2024 | Mar 31, 2025 | | :--- | :--- | :--- | | Line of credit receivable (at fair value) | $56,269 | $81,780 | | Receivables | $48,233 | $43,008 | | Loan servicing assets (at fair value) | $27,439 | $28,886 | | Prepaid expenses | $28,830 | $28,129 | | Notes receivable and residual certificates (at fair value) | $22,055 | $19,471 | | Other assets | $17,457 | $17,083 | | Intangible assets, net | $9,431 | $9,145 | | Deposits | $5,185 | $5,587 | | Interest rate caps (at fair value) | $1,864 | $1,129 | | Total other assets | $216,763 | $234,218 | Property, Equipment, and Software, Net (in thousands) | Property, Equipment, and Software, Net (in thousands) | Dec 31, 2024 | Mar 31, 2025 | | :--- | :--- | :--- | | Internally developed software | $68,481 | $77,784 | | Total property, equipment, and software, net | $39,013 | $42,407 | Accrued Expenses and Other Liabilities (in thousands) | Accrued Expenses and Other Liabilities (in thousands) | Dec 31, 2024 | Mar 31, 2025 | | :--- | :--- | :--- | | Accrued expenses | $37,781 | $38,321 | | Accounts payable | $12,381 | $13,344 | | Accrued payroll | $64,514 | $12,846 | | Trailing fee liability (at fair value) | $4,614 | $4,574 | | Other liabilities | $3,241 | $4,076 | | Beneficial interest liabilities (at fair value) | $10,089 | $4,032 | | Loan servicing liabilities (at fair value) | $1,180 | $1,487 | | Total accrued expenses and other liabilities | $133,800 | $78,680 | [8. Borrowings](index=52&type=section&id=8.%20Borrowings) Total borrowings decreased due to repayments of warehouse credit facilities Total Borrowings (in thousands) | Borrowings (in thousands) | Dec 31, 2024 | Mar 31, 2025 | | :--- | :--- | :--- | | Warehouse credit facilities | $195,605 | $126,975 | | Convertible senior notes | $1,230,379 | $1,230,379 | | Total borrowings | $1,402,168 | $1,334,863 | - Warehouse credit facilities **decreased by $68.6 million**, while convertible senior notes remained constant[187](index=187&type=chunk) - The company was **in compliance with all applicable covenants** for its warehouse credit facilities as of March 31, 2025[195](index=195&type=chunk) - The company issued **$431.3 million in 2.00% convertible senior notes due 2029** and **$500.0 million in 1.00% convertible senior notes due 2030**, and repurchased $334.2 million of 2026 Notes[196](index=196&type=chunk) [9. Stockholders' Equity](index=58&type=section&id=9.%20Stockholders'%20Equity) Common stock reserved for future issuance increased, while no stock was repurchased in Q1 2025 Common Stock Reserved for Future Issuance | Common Stock Reserved for Future Issuance | Dec 31, 2024 | Mar 31, 2025 | | :--- | :--- | :--- | | Options issued and outstanding | 10,709,898 | 10,122,309 | | Restricted stock units outstanding | 3,703,631 | 3,826,545 | | Shares available for future issuance under 2020 plan | 7,669,374 | 11,353,410 | | Shares available for issuance under employee stock purchase plan | 3,425,952 | 4,209,172 | | Total | 25,508,855 | 29,511,436 | - **No common stock repurchases were made in Q1 2025**, with **$222.1 million remaining available** under the share repurchase program[210](index=210&type=chunk) - An "at the market" offering program for up to **$500 million of common stock** was initiated on February 14, 2025, with no shares issued as of March 31, 2025[211](index=211&type=chunk)[212](index=212&type=chunk) - Total unrecognized stock-based compensation expense related to unvested stock options was **$50.8 million**, expected over 2.5 years, and for RSUs was **$143.7 million**, expected over 1.4 years[215](index=215&type=chunk)[216](index=216&type=chunk) [10. Leases](index=64&type=section&id=10.%20Leases) Operating lease liabilities totaled $47.1 million with a weighted-average remaining lease term of 3.36 years Operating Lease Liabilities (in thousands) | Lease Liabilities (in thousands) | Mar 31, 2025 | | :--- | :--- | | Total undiscounted lease payments | $52,012 | | Operating lease liabilities | $47,074 | Operating Lease Expense (in thousands) | Lease Expense (in thousands) | Three Months Ended Mar 31, 2024 | Three Months Ended Mar 31, 2025 | | :--- | :--- | :--- | | Rent expense | $3,542 | $3,571 | | Variable lease payments | $917 | $960 | - The weighted-average remaining lease term was **3.36 years**, and the weighted-average discount rate was **5.25%** as of March 31, 2025[229](index=229&type=chunk) [11. Commitments and Contingencies](index=67&type=section&id=11.%20Commitments%20and%20Contingencies) The company has various funding commitments and is involved in several ongoing legal proceedings Commitments (in thousands) | Commitments (in thousands) | Dec 31, 2024 | Mar 31, 2025 | | :--- | :--- | :--- | | Total loan purchase commitment | $72,800 | $89,300 | | Unfunded line of credit commitments | $7,600 | $7,800 | | Commitments to fund future HELOC advances | $7,600 | $11,200 | - Maximum potential amount of future payments for loan repurchase and indemnification obligations was **$11.5 billion** as of March 31, 2025[239](index=239&type=chunk) - The **SEC closed its investigation** into the company's disclosures, including the use of AI models and loans, on March 10, 2025, and will not pursue enforcement action[253](index=253&type=chunk) - The company is a defendant in **multiple securities class action and derivative lawsuits**, with the class action certified on March 27, 2025[241](index=241&type=chunk)[242](index=242&type=chunk)[243](index=243&type=chunk)[244](index=244&type=chunk)[245](index=245&type=chunk)[246](index=246&type=chunk)[247](index=247&type=chunk)[248](index=248&type=chunk)[249](index=249&type=chunk)[250](index=250&type=chunk)[251](index=251&type=chunk)[252](index=252&type=chunk) [12. Income Taxes](index=71&type=section&id=12.%20Income%20Taxes) The company's effective tax rate was (1.20)% for Q1 2025 due to state tax liabilities and a full valuation allowance Income Tax Metrics | Income Tax Metric | Three Months Ended Mar 31, 2024 | Three Months Ended Mar 31, 2025 | | :--- | :--- | :--- | | Provision for income taxes | $14 | $29 | | Effective tax rate | (0.02)% | (1.20)% | - The effective tax rate differs from the U.S. statutory tax rate primarily due to a **full valuation allowance on deferred tax assets**[256](index=256&type=chunk) [13. Net Loss Per Share](index=72&type=section&id=13.%20Net%20Loss%20Per%20Share) Net loss per share improved significantly to $(0.03) in Q1 2025 from $(0.74) in Q1 2024 Net Loss Per Share Data | Net Loss Per Share Metric | Three Months Ended Mar 31, 2024 | Three Months Ended Mar 31, 2025 | | :--- | :--- | :--- | | Net loss | $(64,598) | $(2,447) | | Weighted-average common shares outstanding, basic | 87,030,695 | 94,274,538 | | Net loss per share, basic | $(0.74) | $(0.03) | | Net loss per share, diluted | $(0.74) | $(0.03) | - Potentially dilutive securities, including stock options, RSUs, ESPP purchase rights, and convertible debt, were **excluded from diluted EPS calculation due to the net loss**[260](index=260&type=chunk) [14. Segment Information](index=73&type=section&id=14.%20Segment%20Information) The company operates in three segments, with Personal Lending being the only reportable segment - The company has three operating segments: Personal Lending (unsecured personal loans and small dollar loans), Auto Lending (auto refinance and auto retail loans), and Other (HELOCs and other)[261](index=261&type=chunk) - **Only Personal Lending meets the definition of a reportable segment**[261](index=261&type=chunk) Personal Lending Segment Performance (in thousands) | Personal Lending Metrics (in thousands) | Three Months Ended Mar 31, 2024 | Three Months Ended Mar 31, 2025 | Change (in thousands) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Revenue from fees, net | $135,414 | $182,580 | $47,166 | 34.8% | | Borrower acquisition costs | $(23,194) | $(45,141) | $(21,947) | 94.6% | | Borrower verification and servicing costs | $(26,950) | $(29,474) | $(2,524) | 9.4% | | Contribution Profit | $85,270 | $107,965 | $22,695 | 26.6% | [15. Subsequent Events](index=75&type=section&id=15.%20Subsequent%20Events) No subsequent events requiring recognition or disclosure were identified after the reporting period - No material subsequent events were identified that required additional recognition or disclosure[271](index=271&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=76&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses financial results, highlighting AI's role, funding strategy, and improved operating metrics - Upstart uses AI models and cloud applications to underwrite consumer credit, connecting consumers with lending partners through its marketplace[276](index=276&type=chunk) - In Q1 2025, **60% of loan principal was purchased by institutional investors**, 29% retained by lending partners, and 11% held on Upstart's balance sheet[279](index=279&type=chunk) - Core personal loans originated in Q2 2024 or later are **forecasted to deliver returns in line with target yields**, a reversion from underperformance in earlier vintages[287](index=287&type=chunk) - The Upstart Macro Index (UMI) was approximately **1.49** as of March 31, 2025, indicating an incremental risk of approximately **49%** to repayment performance compared to baseline[293](index=293&type=chunk) Key Operating & Non-GAAP Financial Metrics | Key Operating & Non-GAAP Financial Metrics | Three Months Ended Mar 31, 2024 | Three Months Ended Mar 31, 2025 | Change (%) | | :--- | :--- | :--- | :--- | | Transaction Volume, Dollars (in thousands) | $1,130,799 | $2,133,608 | 89% | | Transaction Volume, Number of Loans | 119,380 | 240,706 | 102% | | Conversion Rate | 14.0% | 19.1% | 5.1 pp | | Percentage of Loans Fully Automated | 90% | 92% | 2 pp | | Contribution Profit (in thousands) | $81,142 | $102,372 | 26% | | Contribution Margin | 59% | 55% | -4 pp | | Adjusted EBITDA (in thousands) | $(20,339) | $42,577 | N/A | | Adjusted EBITDA Margin | (16)% | 20% | 36 pp | | Adjusted Net Income (Loss) (in thousands) | $(27,165) | $31,189 | N/A | | Adjusted Net Income (Loss) Per Share, Basic | $(0.31) | $0.33 | N/A | | Adjusted Net Income (Loss) Per Share, Diluted | $(0.31) | $0.30 | N/A | - **Transaction Volume, Dollars increased 89%** and **Number of Loans increased 102% YoY**, driven by model improvements and product initiatives[299](index=299&type=chunk) - **Conversion Rate increased to 19.1% from 14.0% YoY**, primarily due to underwriting model improvements and optimization in acquisition channels[300](index=300&type=chunk) - **Percentage of Loans Fully Automated increased to 92%** from 90% YoY[301](index=301&type=chunk) - **Total revenue increased by 67% to $213.4 million**, and **net loss decreased by 96% to $(2.4) million** in Q1 2025 compared to Q1 2024[329](index=329&type=chunk) - Sales and marketing expenses **increased by 68% to $59.0 million**, primarily due to a $23.7 million increase in advertising and borrower acquisition costs[336](index=336&type=chunk) - Engineering and product development expenses **decreased by 8% to $57.8 million**, mainly due to an $8.0 million decrease in payroll and personnel-related expenses from capitalized software development costs[338](index=338&type=chunk) - Net cash used in operating activities was **$13.5 million in Q1 2025**, a decrease from $44.3 million provided in Q1 2024[370](index=370&type=chunk) - Net cash used in investing activities increased to **$78.6 million**, primarily due to **$149.9 million in purchases and originations of loans held-for-investment**[373](index=373&type=chunk) - As of March 31, 2025, the company held **$814.7 million in loans on its balance sheet**, with $538.2 million for R&D purposes and $187.6 million in core personal loans[375](index=375&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=93&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company is exposed to market risks including discount rate, credit, counterparty, and interest rate risk - The company is exposed to market discount rate risk on **$725.8 million of loans** as of March 31, 2025; a **100 basis point increase in discount rate would decrease fair value by $8.8 million**[384](index=384&type=chunk) - Loans held in consolidated securitization (**$88.9 million** as of March 31, 2025) are not materially sensitive to discount rate changes[385](index=385&type=chunk) - Beneficial interest assets (**$216.6 million** as of March 31, 2025) are sensitive to discount rate changes; a **100 basis point increase would decrease fair value by $3.7 million**[387](index=387&type=chunk) - The company is exposed to credit risk on **$725.8 million of loans** as of March 31, 2025; a **10% increase in credit risk would decrease fair value by $7.8 million**[390](index=390&type=chunk) - Beneficial interest assets and liabilities are highly sensitive to credit risk rate spreads; a **10% adverse change would decrease assets by $53.9 million and increase liabilities by $11.4 million** as of March 31, 2025[392](index=392&type=chunk) - The company held **$839.5 million in cash, cash equivalents, and restricted cash** as of March 31, 2025, with $162.3 million held by an institutional investor, mitigated by corporate guarantees[394](index=394&type=chunk)[395](index=395&type=chunk) - The company is exposed to interest rate risk on **$127.0 million under warehouse credit facilities**, which bear floating interest rates[397](index=397&type=chunk) [Item 4. Controls and Procedures](index=96&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of March 31, 2025 - Disclosure controls and procedures were evaluated and **deemed effective** as of March 31, 2025[400](index=400&type=chunk) - **No material changes** in internal control over financial reporting occurred during Q1 2025[401](index=401&type=chunk) - Management acknowledges inherent limitations in control systems, which can only provide **reasonable assurance** against errors and fraud[402](index=402&type=chunk) [PART II. OTHER INFORMATION](index=97&type=section&id=PART%20II.%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=97&type=section&id=Item%201.%20Legal%20Proceedings) This section refers to Note 11 for a description of material pending legal proceedings - Material pending legal proceedings are detailed in "Note 11. Commitments and Contingencies" and "Risk Factors"[403](index=403&type=chunk) [Item 1A. Risk Factors](index=98&type=section&id=Item%201A.%20Risk%20Factors) Investing in the company's common stock involves a high degree of risk related to economic conditions, funding, and regulations - Business is adversely affected by uncontrollable economic conditions (interest rates, inflation, recession, banking disruptions)[410](index=410&type=chunk) - Inability to maintain **diverse and resilient loan funding** from institutional investors or manage committed capital risks could harm growth[414](index=414&type=chunk)[415](index=415&type=chunk) - **AI models' ineffectiveness or errors**, especially in predicting economic impacts, could lead to higher losses and reduced demand[418](index=418&type=chunk)[420](index=420&type=chunk) - Reliance on a few top lending partners (**83% of Q1 2025 transaction volume from top three**) poses concentration risk[453](index=453&type=chunk) - Reputation and brand are critical; **negative publicity, regulatory scrutiny (e.g., AI bias, "true lender" challenges)**, or misconduct could adversely affect the business[454](index=454&type=chunk)[455](index=455&type=chunk)[461](index=461&type=chunk)[462](index=462&type=chunk)[463](index=463&type=chunk) - The business is subject to a wide range of evolving federal, state, and local laws and regulations, with **non-compliance potentially leading to fines, penalties, and operational restrictions**[466](index=466&type=chunk)[467](index=467&type=chunk)[468](index=468&type=chunk)[469](index=469&type=chunk)[471](index=471&type=chunk)[472](index=472&type=chunk) - **Substantially all revenue is from unsecured personal loans**, making the company susceptible to fluctuations in that market[480](index=480&type=chunk) - **Security breaches, improper data access**, or other security incidents could harm reputation, operations, and expose the company to liability[505](index=505&type=chunk)[506](index=506&type=chunk)[507](index=507&type=chunk)[509](index=509&type=chunk)[510](index=510&type=chunk) - The company relies on third-party vendors and loan aggregators; their inadequate performance or termination of relationships could increase costs and adversely affect the business[568](index=568&type=chunk)[570](index=570&type=chunk) - The company's **convertible senior notes and warehouse credit facilities** expose it to indebtedness risks, including repayment obligations and covenant compliance[649](index=649&type=chunk)[650](index=650&type=chunk)[652](index=652&type=chunk)[659](index=659&type=chunk)[660](index=660&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=160&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) No unregistered sales of equity securities or repurchases of common stock occurred during Q1 2025 - **No repurchases of common stock** were made during Q1 2025[694](index=694&type=chunk) [Item 3. Defaults Upon Senior Securities](index=160&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This item is not applicable to the company for the reporting period - Not applicable[695](index=695&type=chunk) [Item 4. Mine Safety Disclosures](index=160&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company for the reporting period - Not applicable[696](index=696&type=chunk) [Item 5. Other Information](index=161&type=section&id=Item%205.%20Other%20Information) The Chief Technology Officer adopted a Rule 10b5-1 trading arrangement during the quarter - **Paul Gu, CTO, adopted a Rule 10b5-1 trading arrangement** on February 26, 2025, to sell up to 656,500 shares by May 31, 2026[698](index=698&type=chunk) - No other officers or directors modified or terminated trading arrangements during Q1 2025[699](index=699&type=chunk) [Item 6. Exhibits](index=162&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed as part of the Quarterly Report on Form 10-Q - The Sales Agreement dated February 14, 2025, between the company and BTIG, LLC is listed as Exhibit 10.1[702](index=702&type=chunk) - Certifications of the Principal Executive Officer and Principal Financial Officer (Exhibits 31.1, 31.2, 32.1) and Inline XBRL documents are filed[702](index=702&type=chunk) - Exhibit 32.1 certifications are not deemed filed with the SEC and are not incorporated by reference into other filings[703](index=703&type=chunk) [Signatures](index=163&type=section&id=Signatures) The report is signed by the Chief Executive Officer and Chief Financial Officer on May 6, 2025 - The report was signed by **Dave Girouard (CEO)** and **Sanjay Datta (CFO)** on May 6, 2025[707](index=707&type=chunk)

Exhibit 99.1 Upstart Announces Results for First Quarter 2025 SAN MATEO, Calif. – May 6, 2025 – Upstart Holdings, Inc. (NASDAQ: UPST), the leading artificial intelligence (AI) lending marketplace, today announced financial results for the quarter ended March 31, 2025. Upstart will host a conference call and webcast at 1:30 p.m. Pacific Time today. An earnings presentation and link to the webcast are available at ir.upstart.com. "With an unparalleled pace of innovation, we continue to raise the bar in AI-ena ...

Despite macro uncertainty, Upstart Holdings, Inc. (NASDAQ: UPST ) appears to be an undervalued fintech with promising potential this year. The company’s AI models and increasing investments in automation are leading to better loan performance and less delinquencies, while improving its profitability profile. TheAs a former managing editor at a financial media publication focused on mid and small caps, I am using my experience to present investment opportunities in undervalued companies. My experience, combi ...

Wall Street analysts forecast that Upstart Holdings, Inc. (UPST) will report quarterly earnings of $0.19 per share in its upcoming release, pointing to a year-over-year increase of 161.3%. It is anticipated that revenues will amount to $200.74 million, exhibiting an increase of 57.1% compared to the year-ago quarter.The consensus EPS estimate for the quarter has remained unchanged over the last 30 days. This reflects how the analysts covering the stock have collectively reevaluated their initial estimates d ...

Upstart Holdings (UPST) is slated to report first-quarter 2025 results on May 6, after market close.The company expects revenues of approximately $200 million for the quarter. The Zacks Consensus Estimate is currently pegged at $200.7 million, suggesting an improvement of 57.1% year over year.The consensus mark for earnings is pegged at 19 cents per share, indicating a robust turnaround from the year-ago quarter’s loss of 31 cents per share. The consensus mark for the bottom line has remained unchanged over ...

Core Insights - Upstart Holdings, Inc. (NASDAQ: UPST) has faced significant market backlash due to its failure to meet growth expectations, which has impacted its reputation among growth investors [1] Company Overview - Upstart was previously regarded as a promising growth company due to its innovative approach in the financial technology sector [1] Market Reaction - The market is known for its harsh treatment of companies that do not fulfill their growth promises, as evidenced by the situation with Upstart [1]

Explore the exciting world of Upstart Holdings (UPST -1.15%) with our expert analysts in this Motley Fool Scoreboard episode. Check out the video below to gain valuable insights into market trends and potential investment opportunities!*Stock prices used were the prices of March 19, 2025. The video was published on April 28, 2025. ...

Core Viewpoint - Upstart Holdings, Inc. (UPST) has experienced a significant decline in stock price, dropping 20% over the past month, which raises questions about whether investors should hold or exit the stock. Despite near-term challenges, the long-term growth potential of Upstart remains strong, suggesting that holding the stock may be advisable [1][8]. Market Context - The recent decline in Upstart Holdings' stock is attributed more to broader market weaknesses rather than specific company issues. A tech sell-off driven by fears of a global economic slowdown and trade tensions has negatively impacted high-growth stocks, including UPST [2]. Valuation Insights - Upstart Holdings is currently trading at a forward 12-month price/sales (P/S) multiple of 3.73X, which is higher than the industry average of 3.2X. Compared to major fintech competitors, UPST trades at a premium to LendingClub (1.19X) and Enova International (0.76X), but at a discount to SoFi Technologies (3.79X) [3][6]. Stock Performance - Shares of Upstart Holdings have decreased by 54.4% from their 52-week high of $96.43, reached on February 13. Year-to-date, the stock is down 28.6%, contrasting with a 36.7% gain at its peak in February [7]. Operational Performance - Upstart Holdings reported a 56% year-over-year increase in net revenues, reaching $219 million, and a 30% year-over-year increase in revenue from fees, totaling $199 million. Loan origination volume surged by 89% year-over-year, with 246,000 loan transactions, including 162,000 new borrowers [15][16]. Technological Advancements - The company utilizes AI and machine learning to assess creditworthiness, moving beyond traditional FICO scores. In Q4 2024, 91% of loans were fully automated, enhancing efficiency and competitiveness in the personal lending market [9][10]. The introduction of advanced AI models, such as Model 19, has improved risk assessment and loan performance predictions [12][13]. Future Growth Potential - Upstart Holdings is expanding into auto lending, home equity lines of credit (HELOC), and small-dollar relief loans, with significant growth reported in these areas. Auto originations and HELOCs both grew by 60%, while small-dollar loans surged by 115% quarter-over-quarter [11]. Financial Strength - The company achieved adjusted EBITDA of $39 million and is close to GAAP profitability, with a net loss of only $2.8 million. The non-GAAP EPS improved to 29 cents, a significant turnaround from previous losses [17][18]. Revenue growth guidance for 2025 indicates a continued upward trajectory, with a projected 59% increase [19].

A tariff is a financial penalty imposed on imported products to protect or promote domestic manufacturing. For example, some countries produce steel at a far lower cost than American manufacturers, so the U.S. could place a high tariff on imported steel from every country in the world to level the playing field for domestic producers. The Trump administration says it wants to encourage companies to manufacture more products in America, so a sweeping 10% tariff was imposed on all imported most goods from eve ...

Upstart Holdings, Inc. (UPST) closed the most recent trading day at $38.99, moving +1.14% from the previous trading session. The stock's change was less than the S&P 500's daily gain of 1.81%. Elsewhere, the Dow saw an upswing of 1.56%, while the tech-heavy Nasdaq appreciated by 2.06%.The the stock of company has fallen by 16.76% in the past month, lagging the Finance sector's loss of 4.82% and the S&P 500's loss of 6.14%.Market participants will be closely following the financial results of Upstart Holding ...