Financial Data and Key Metrics Changes - Upstart reported total revenue of approximately $277 million for Q3 2025, representing a 71% year-on-year increase and an 8% sequential increase [23] - GAAP net income for Q3 was approximately $32 million, significantly ahead of expectations, reflecting strong performance in net interest income and reduced fixed costs [26] - The contribution margin, a non-GAAP metric, was 57% in Q3, down approximately one percentage point from the prior quarter due to lower conversion rates [25] Business Line Data and Key Metrics Changes - Transaction volume across Upstart's platform was approximately 428,000, up 128% year-on-year and 15% sequentially, with about 300,000 new borrowers [24] - New products, including small-dollar loans, auto, and home loans, accounted for almost 12% of originations and 22% of new borrowers in Q3, with transaction volume for these products growing around 300% year-on-year [6][9] - The auto retail business saw transaction volume grow more than 70% sequentially, with significant improvements in software and expansion into four new states [7] Market Data and Key Metrics Changes - Consumer demand remained strong, with over two million applications submitted in Q3, up over 30% from Q2, marking the highest level in over three years [5] - The Upstart Macro Index (UMI) showed a modest uptick in July and August, which led to a temporary reduction in approval rates and an increase in interest rates [5][21] - The average loan size decreased by 12% from the prior quarter, influenced by borrowers requesting lower amounts and a shift towards smaller loan products [24] Company Strategy and Development Direction - Upstart aims to leverage its AI technology to lead the trillion-dollar credit industry, focusing on rapid growth, profitability, and AI leadership [4] - The company is transitioning multiple new products from R&D to scale-up phase, with expectations of tangible outcomes from third-party capital arrangements by the end of the year [27] - Upstart's strategy includes maintaining a disciplined approach to underwriting risk while capitalizing on improving credit health indicators [21][29] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the strength of Upstart's AI models to respond to macroeconomic changes, emphasizing that recent model conservatism was a temporary adjustment [13][19] - The company anticipates a favorable economic backdrop for credit in Q4, with expectations of improved consumer financial health and lower investor return requirements [28][29] - Management highlighted the importance of maintaining credit performance as a priority for long-term business success [21] Other Important Information - Upstart's platform has generated over $50 billion in AI-powered loans since inception, showcasing the effectiveness of its AI technology [11] - The company has added seven new bank and credit union partners in Q3, achieving a new all-time high in monthly available funding [10] - Upstart's unique partnerships allow it to offer competitive rates, with some products providing rates up to 300 basis points better than other fintechs [8] Q&A Session Summary Question: Application demand and guidance - Management noted a 30% quarter-on-quarter growth in applications, highlighting that the model's conservatism impacted transaction volume despite strong demand [34][36] Question: Impact of recent credit events in the auto sector - Management confirmed that recent negative credit events did not directly impact Upstart's expansion plans, as they have rigorous underwriting processes in place [38][40] Question: Superprime segment performance - Management acknowledged that model tightness affected originations in the superprime segment, which is also highly competitive [41][42] Question: Quality of leads from marketing improvements - Management indicated that while application volume increased, the model's conservatism led to a lower likelihood of approval, affecting conversion rates [45][46] Question: Balance sheet expansion and funding partner conversations - Management expressed optimism about ongoing conversations with funding partners, noting that appetite remains strong despite longer diligence processes [57][59] Question: Factors affecting conversion rates - Management clarified that the primary driver of the conversion rate decline was the model's conservatism, with no other significant factors at play [62][63]