Upstart(US:UPST)2025-11-04 21:09Financial Performance - Transaction Volume, Dollars increased by 80% in Q3 2025 compared to Q3 2024, reaching $2,854,296, and increased by 104% in the nine months ended September 30, 2025, totaling $7,808,302[324]. - Transaction Volume, Number of Loans rose by 128% in Q3 2025 and 131% in the nine months ended September 30, 2025, with 428,056 loans in Q3 2025 and 1,041,361 loans in the nine months[324]. - The Conversion Rate improved to 20.6% in Q3 2025 and 21.2% in the nine months ended September 30, 2025, up from 16.3% and 15.3% in the same periods of 2024[327]. - Contribution Profit for Q3 2025 was $147,406, with a Contribution Margin of 57%[316]. - Adjusted EBITDA for Q3 2025 was $71,162, reflecting an Adjusted EBITDA Margin of 26%[316]. - Adjusted Net Income for Q3 2025 was $59,963, compared to a loss of $5,325 in Q3 2024[316]. - Total revenue for the nine months ended September 30, 2025, was $747.8 million, a $248.6 million increase, or 57%, compared to the same period in 2024[362]. - Net income for Q3 2025 was $31.8 million, compared to a net loss of $6.8 million in Q3 2024[365]. - Adjusted Net Income for the three months ended September 30, 2025, was $60.0 million, compared to an Adjusted Net Loss of $5.3 million in the same period of 2024[399]. Revenue Generation - Revenue from fees, net for the three months ended September 30, 2024, was $167.59 million, a significant increase from $258.54 million for the same period in 2025[335]. - Revenue from fees, net increased by $90.9 million, or 54%, in Q3 2025 compared to Q3 2024, driven by an 80% increase in transaction volume from $1,582.3 million to $2,854.3 million[361]. - Platform and referral fees, net increased by $82.7 million, or 62%, in Q3 2025 compared to Q3 2024[361]. - The company recognizes fees from auto dealers for using Upstart Auto Finance software, contributing to revenue generation[347]. Expenses and Costs - Operating expenses for Q3 2025 were $253.4 million, an increase from $207.3 million in Q3 2024[365]. - Sales and marketing expenses increased by $35.6 million, or 82%, in Q3 2025 compared to Q3 2024, driven primarily by a $34.5 million increase in advertising and borrower acquisition costs[371]. - Borrower acquisition costs for the three months ended September 30, 2024, were $32.75 million, while borrower verification and servicing costs were $32.47 million, totaling direct expenses of $65.21 million[335]. - Customer operations expenses increased by $10.5 million, or 27%, in Q3 2025 compared to Q3 2024, primarily due to a $6.6 million increase in information verification expenses[373]. - General, administrative, and other expenses increased by $0.9 million, or 2%, in Q3 2025 compared to Q3 2024, primarily due to a $1.0 million increase in payroll and other personnel-related expenses[378]. Cash Flow and Financing - Cash and cash equivalents as of September 30, 2025, totaled $489.8 million, providing a strong liquidity position for the company[401]. - Net cash provided by financing activities for the nine months ended September 30, 2025, was $425.8 million, a significant increase compared to $50.5 million in the same period of 2024[412]. - Net cash used in operating activities was $256.3 million for the nine months ended September 30, 2025, with a net income of $35.0 million[414]. - Net cash used in investing activities was $308.9 million, primarily due to $666.0 million in purchases and originations of loans held-for-investment[415]. - The company has entered into an "at the market" offering program with an aggregate offering price of up to $500 million, providing potential for future capital raising[402]. Loan and Investment Management - As of September 30, 2025, the company held $1,230.0 million of loans on its balance sheet, with $871.3 million originated for research and development purposes[418]. - The total loan purchase commitment as of September 30, 2025, was $113.7 million, indicating ongoing investment in loan purchases from lending partners[408]. - The company plans to sell loans held on its balance sheet to institutional investors over time through secondary sales or securitizations[418]. - The company has an aggregate principal balance of $1.69 billion in convertible senior notes, with varying interest rates and maturities between 2026 and 2032[405]. Risk Management - The Upstart Macro Index (UMI) was measured at approximately 1.54, indicating an incremental risk of 54% to repayment performance compared to the baseline[315]. - As of September 30, 2025, the company was exposed to market discount rate risk on $1,165.9 million of loans held on its balance sheet[426]. - A hypothetical 100 basis point increase in the discount rate would result in a $14.0 million decrease in the fair value of loans as of September 30, 2025[426]. - As of September 30, 2025, the company was exposed to credit risk on $1,165.9 million of loans held on its balance sheet[432]. - A hypothetical 10% increase in credit risk would result in a $13.1 million decrease in the fair value of loans as of September 30, 2025[432]. Impairment and Valuation - The company assesses its non-marketable equity securities for impairment on a quarterly basis, considering both qualitative and quantitative factors[442]. - Impairment analysis includes evaluation of the investee's financial metrics, market acceptance of the investee's product or technology, general market conditions, and liquidity considerations[442]. - Adjustments and impairments are recorded in other expense on the condensed consolidated statements of operations and comprehensive income (loss) upon recognition[442]. - The complexity of assessing fair values is due to the lack of readily available market data for privately-held companies[442].