Upstart(UPST) - 2025 Q1 - Quarterly Results

Executive Summary & Business Overview First Quarter 2025 Highlights Upstart achieved significant financial and operational growth in Q1 2025, with substantial year-over-year increases in transaction volume and total revenue, alongside a notable narrowing of operating and net losses, and a positive adjusted EBITDA | Metric | Q1 2024 | Q1 2025 | Change (YoY) | | :-------------------------------- | :-------- | :-------- | :---------- | | Transaction Volume (Loans) | 119,380 | 240,706 | +102% | | Transaction Volume (USD Million) | $113 Million | $210 Million | +89% | | Conversion Rate | 14.0% | 19.1% | +5.1% | | Total Revenue | $127.8 Million | $213 Million | +67% | | Fee Revenue | $138.1 Million | $185 Million | +34% | | GAAP Operating Loss | ($67.5) Million | ($4.5) Million | Significantly Improved | | GAAP Net Loss | ($64.6) Million | ($2.4) Million | Significantly Improved | | Contribution Profit | $81.1 Million | $102 Million | +26% | | Contribution Margin | 59% | 55% | -4% | | Adjusted EBITDA | ($20.3) Million | $42.6 Million | Turned Positive | | Adjusted EBITDA Margin | (16)% | 20% | +36% | Financial Outlook Upstart provides financial expectations for Q2 and full-year 2025, anticipating continued revenue growth and a projected GAAP net profit in the second half of the year 2025 Second Quarter Financial Outlook | Metric | Expected Amount | | :-------------------------------- | :------------- | | Total Revenue | Approximately $225 Million | | Fee Revenue | Approximately $210 Million | | Net Interest Income (Loss) | Approximately $15 Million | | Contribution Margin | Approximately 55% | | GAAP Net Income (Loss) | Approximately ($10) Million | | Adjusted Net Income (Loss) | Approximately $25 Million | | Adjusted EBITDA | Approximately $37 Million | | Basic Weighted Average Shares | Approximately 96 Million Shares | | Diluted Weighted Average Shares | Approximately 104 Million Shares | 2025 Full Year Financial Outlook | Metric | Expected Amount | | :-------------------------------- | :------------- | | Total Revenue | Approximately $1.01 Billion | | Fee Revenue | Approximately $920 Million | | Net Interest Income (Loss) | Approximately $90 Million | | GAAP Net Income | Positive in H2, Positive for Full Year | | Adjusted EBITDA Margin | Approximately 19% | About Upstart Upstart is a leading AI lending marketplace connecting consumers with banks and credit unions through its AI models and cloud applications to provide superior credit products - Upstart is a leading AI lending marketplace, connecting consumers with over 100 banks and credit unions, leveraging AI models and cloud applications to offer superior credit products[7] - Upstart AI enables lenders to approve more borrowers at lower interest rates and provide a superior digital-first customer experience[7] - Over 90% of loans are fully automated without Upstart human intervention; platform products include personal loans, auto retail and refinancing loans, home equity lines of credit, and small "relief" loans[7] Upcoming Events Upstart will host an earnings call and webcast on May 6, 2025, and plans an "Upstart AI Day" investor event in New York City on May 14, 2025, to discuss its technology, business model, and strategy - Upstart will host its Q1 2025 earnings call and webcast on May 6, 2025, at 1:30 PM PT[2][5] - The company will host an "Upstart AI Day" investor event in New York City on May 14, 2025, at 9:00 AM ET, where the leadership team will discuss the company's technology, business model, and strategy[6] Forward-Looking Statements & Risk Factors This press release contains forward-looking statements regarding the Q2 and full-year 2025 outlook, based on current expectations and assumptions, subject to various risks and uncertainties that could cause actual results to differ materially - Forward-looking statements involve expectations and projections regarding future operating or financial performance, including revenue, contribution profit, net income, and adjusted EBITDA[8] - These statements are based on current information and management's good faith beliefs and assumptions about future events, but are subject to risks and uncertainties that could cause actual performance or results to differ materially from expectations[8] - Key risks include macroeconomic conditions, disruptions in banking and credit markets, ability to access loan funding, effectiveness of credit decision models, ability to retain and attract lending partners, balance sheet loan risk management, and ability to operate successfully in a highly regulated industry[9][10] Key Operating Metrics and Non-GAAP Financial Measures Definitions of Key Metrics This section defines Upstart's key operating metrics used to measure market scale, efficiency, and automation, including transaction volume (USD and loan count), conversion rate, and percentage of fully automated loans - Transaction volume (USD) is defined as the total principal amount of loans (or committed amount for HELOCs) originated on the marketplace[11] - Transaction volume (loan count) is defined as the number of loans (or committed number for HELOCs) originated on the marketplace[11] - Conversion rate is defined as the loan count transaction volume for the period divided by the estimated number of legitimate rate inquiries[12] - Fully automated loan percentage is defined as the number of loans in a given period that required no human intervention from the company, from initial rate request to final disbursement (or loan agreement signing), as a percentage of total loans[13] Non-GAAP Financial Measures Definitions This section provides definitions for Upstart's non-GAAP financial metrics, including contribution profit, contribution margin, adjusted EBITDA, adjusted EBITDA margin, and adjusted net income (loss), designed to offer a clearer view of core business performance - Contribution profit is derived by subtracting borrower acquisition costs and borrower verification and servicing costs from fee revenue[14] - Adjusted EBITDA is net income (loss) adjusted to exclude stock-based compensation expense, certain payroll tax expenses, depreciation and amortization, convertible note expenses, provision for income taxes, gain on debt extinguishment, and restructuring charges[15] - Adjusted net income (loss) is net income (loss) excluding stock-based compensation expense, certain payroll tax expenses, and certain items unrelated to core business and ongoing operations (such as gain on debt extinguishment and restructuring charges)[16] Financial Statements Condensed Consolidated Balance Sheets As of March 31, 2025, Upstart's total assets slightly decreased, primarily due to lower cash and cash equivalents, while loans (at fair value) and beneficial interests assets increased; total liabilities and stockholders' equity both decreased Condensed Consolidated Balance Sheets Summary (As of March 31) | Metric | Dec 31, 2024 ($ Thousand) | Mar 31, 2025 ($ Thousand) | Change | | :-------------------------------- | :----------------------- | :----------------------- | :----- | | Cash and Cash Equivalents | 788,422 | 599,778 | -23.9% | | Restricted Cash | 187,841 | 239,750 | +27.6% | | Loans (at Fair Value) | 806,304 | 814,677 | +1.0% | | Beneficial Interests Assets (at Fair Value) | 176,848 | 216,578 | +22.5% | | Total Assets | 2,366,958 | 2,296,277 | -3.0% | | Borrowings | 1,402,168 | 1,334,863 | -4.8% | | Payable to Holders of Securitization Notes | 87,321 | 75,904 | -13.1% | | Total Liabilities | 1,733,740 | 1,619,635 | -6.6% | | Total Stockholders' Equity | 633,218 | 676,642 | +6.9% | Condensed Consolidated Statements of Operations and Comprehensive Loss In Q1 2025, Upstart's total revenue significantly increased by 67% year-over-year, driven by higher fee revenue and substantial improvements in net interest income, interest expense, and fair value adjustments, leading to a significant narrowing of both operating and net losses Condensed Consolidated Statements of Operations and Comprehensive Loss Summary (As of March 31) | Metric ($ Thousand) | Q1 2024 | Q1 2025 | Change (YoY) | | :-------------------------------- | :--------- | :--------- | :---------- | | Fee Revenue, Net | 138,068 | 185,475 | +34.3% | | Net Interest Income, Interest Expense, and Fair Value Adjustments | (10,274) | 27,896 | Significantly Improved | | Total Revenue | 127,794 | 213,371 | +67.0% | | Sales and Marketing Expense | 35,150 | 58,970 | +67.8% | | Customer Operations Expense | 39,408 | 40,501 | +2.8% | | Engineering and Product Development Expense | 63,091 | 57,838 | -8.3% | | General, Administrative, and Other Expense | 57,613 | 60,558 | +5.1% | | Total Operating Expenses | 195,262 | 217,867 | +11.6% | | Operating Loss | (67,468) | (4,496) | Significantly Narrowed | | Net Loss | (64,598) | (2,447) | Significantly Narrowed | | Basic Net Loss Per Share | (0.74) | (0.03) | Significantly Narrowed | Revenue from Fees Disaggregation In Q1 2025, net platform and referral fees were the primary component of Upstart's fee revenue, increasing significantly by 45.4% year-over-year, while net servicing and other fees remained relatively stable Revenue from Fees Disaggregation (As of March 31) | Fee Type ($ Thousand) | Q1 2024 | Q1 2025 | Change (YoY) | | :-------------------------------- | :--------- | :--------- | :---------- | | Platform and Referral Fees, Net | 103,859 | 150,975 | +45.4% | | Servicing and Other Fees, Net | 34,209 | 34,500 | +0.8% | | Total Fee Revenue, Net | 138,068 | 185,475 | +34.3% | Fair Value Adjustments Components In Q1 2025, Upstart's net fair value adjustments significantly improved, shifting from a substantial loss in the prior year to a minor loss, primarily due to fair value adjustments and realized gains/losses on beneficial interests turning positive Fair Value Adjustments Components (As of March 31) | Adjustment Type ($ Thousand) | Q1 2024 | Q1 2025 | Change | | :-------------------------------- | :--------- | :--------- | :---------- | | Unrealized Loss on Loans, Loan Write-offs, and Other Fair Value Adjustments, Net | (29,593) | (21,326) | Improved | | Realized Loss on Loan Sales, Net | (7,104) | (1,991) | Improved | | Fair Value Adjustments and Realized Gains/Losses on Beneficial Interests, Net | (14,034) | 17,665 | Turned Positive | | Total Fair Value and Other Adjustments, Net | (50,731) | (5,652) | Significantly Improved | Condensed Consolidated Statements of Cash Flows In Q1 2025, Upstart's cash flow from operating activities turned from positive to negative, mainly due to changes in net loan purchase and sale activities and a decrease in accrued expenses and other liabilities; cash outflow from investing activities increased, while cash outflow from financing activities slightly increased Condensed Consolidated Statements of Cash Flows Summary (As of March 31) | Cash Flow Type ($ Thousand) | Q1 2024 | Q1 2025 | Change | | :-------------------------------- | :--------- | :--------- | :---------- | | Net Cash from Operating Activities | 44,337 | (13,486) | Turned from Positive to Negative | | Net Cash from Investing Activities | (37,547) | (78,569) | Outflow Increased | | Net Cash from Financing Activities | (35,426) | (44,680) | Outflow Increased | | Change in Cash, Cash Equivalents, and Restricted Cash | (28,636) | (136,735) | Decrease Widened | | Cash, Cash Equivalents, and Restricted Cash at End of Period | 439,151 | 839,528 | Increased | - Net cash flow from operating activities turned from a $44.337 million inflow in Q1 2024 to a $13.486 million outflow in Q1 2025[27] - Cash outflow from investing activities increased from $37.547 million in Q1 2024 to $78.569 million in Q1 2025, primarily due to increased loan purchases and capitalized software costs[27] - Cash outflow from financing activities increased from $35.426 million in Q1 2024 to $44.680 million in Q1 2025, mainly influenced by increased warehouse borrowing repayments[29] Reconciliation of GAAP to Non-GAAP Financial Measures Key Operating and Non-GAAP Financial Metrics Summary In Q1 2025, Upstart's key operating and non-GAAP financial metrics showed strong growth and significant improvement, notably a doubling of transaction volume, and both adjusted EBITDA and adjusted net income turning positive Key Operating and Non-GAAP Financial Metrics (As of March 31) | Metric | Q1 2024 | Q1 2025 | Change (YoY) | | :-------------------------------- | :--------- | :--------- | :---------- | | Transaction Volume (USD) | $1,130,799 | $2,133,608 | +88.7% | | Transaction Volume (Loans) | 119,380 | 240,706 | +101.6% | | Conversion Rate | 14.0% | 19.1% | +5.1% | | Fully Automated Loan Percentage | 90% | 92% | +2% | | Contribution Profit ($ Thousand) | $81,142 | $102,372 | +26.2% | | Contribution Margin | 59% | 55% | -4% | | Adjusted EBITDA ($ Thousand) | ($20,339) | $42,577 | Turned Positive | | Adjusted EBITDA Margin | (16)% | 20% | +36% | | Adjusted Net Income (Loss) ($ Thousand) | ($27,165) | $31,189 | Turned Positive | | Adjusted Net Income Per Share (Basic) | ($0.31) | $0.33 | Turned Positive | Contribution Profit Reconciliation In Q1 2025, Upstart's contribution profit increased by 26.2% year-over-year to $102.4 million, despite a slight decrease in contribution margin, primarily driven by growth in fee revenue alongside increased borrower acquisition and verification/servicing costs Contribution Profit Reconciliation (As of March 31) | Metric ($ Thousand) | Q1 2024 | Q1 2025 | Change (YoY) | | :-------------------------------- | :--------- | :--------- | :---------- | | Fee Revenue, Net | 138,068 | 185,475 | +34.3% | | Operating Loss | (67,468) | (4,496) | Significantly Improved | | Operating Margin | (49)% | (2)% | +47% | | Sales and Marketing, excluding Borrower Acquisition Costs | 10,331 | 10,408 | +0.7% | | Customer Operations, excluding Borrower Verification and Servicing Costs | 7,301 | 5,960 | -18.3% | | Net Interest Income, Interest Expense, and Fair Value Adjustments | 10,274 | (27,896) | Significant Change | | Contribution Profit | 81,142 | 102,372 | +26.2% | | Contribution Margin | 59% | 55% | -4% | - Borrower acquisition costs increased from $24.8 million in Q1 2024 to $48.6 million in Q1 2025[34] - Borrower verification and servicing costs increased from $32.1 million in Q1 2024 to $34.5 million in Q1 2025[35] Adjusted EBITDA Reconciliation Upstart achieved an adjusted EBITDA of $42.6 million in Q1 2025, a significant improvement from the negative value in the prior year, with an adjusted EBITDA margin of 20%, primarily due to a substantial narrowing of net loss and adjustments for stock-based compensation, depreciation, amortization, and convertible note expenses Adjusted EBITDA Reconciliation (As of March 31) | Metric ($ Thousand) | Q1 2024 | Q1 2025 | Change (YoY) | | :-------------------------------- | :--------- | :--------- | :---------- | | Total Revenue | 127,794 | 213,371 | +67.0% | | Net Loss | (64,598) | (2,447) | Significantly Narrowed | | Net Loss Margin | (51)% | (1)% | +50% | | Stock-Based Compensation and Certain Payroll Tax Expenses | 37,433 | 33,636 | -10.1% | | Depreciation and Amortization | 5,632 | 6,400 | +13.6% | | Convertible Note Expenses | 1,180 | 4,959 | +319.9% | | Provision for Income Taxes | 14 | 29 | +107.1% | | Adjusted EBITDA | (20,339) | 42,577 | Turned Positive | | Adjusted EBITDA Margin | (16)% | 20% | +36% | Adjusted Net Income (Loss) Reconciliation In Q1 2025, Upstart's adjusted net income turned profitable at $31.2 million from a loss in the prior year, with basic adjusted net income per share at $0.33, primarily achieved by excluding stock-based compensation and certain payroll tax expenses Adjusted Net Income (Loss) Reconciliation (As of March 31) | Metric | Q1 2024 | Q1 2025 | Change (YoY) | | :-------------------------------- | :--------- | :--------- | :---------- | | Net Loss ($ Thousand) | ($64,598) | ($2,447) | Significantly Narrowed | | Stock-Based Compensation and Certain Payroll Tax Expenses ($ Thousand) | 37,433 | 33,636 | -10.1% | | Adjusted Net Income (Loss) ($ Thousand) | ($27,165) | $31,189 | Turned Positive | | Basic Net Loss Per Share | ($0.74) | ($0.03) | Significantly Narrowed | | Diluted Net Loss Per Share | ($0.74) | ($0.03) | Significantly Narrowed | | Adjusted Net Income Per Share (Basic) | ($0.31) | $0.33 | Turned Positive | | Adjusted Net Income Per Share (Diluted) | ($0.31) | $0.30 | Turned Positive | | Basic Weighted Average Common Shares | 87,030,695 | 94,274,538 | +8.3% | | Diluted Weighted Average Common Shares | 87,030,695 | 103,569,446 | +19.0% |