Upstart Holdings, Inc.

Previous wording

Out of the total principal of loans transacted on our marketplace during the three months ended March 31, 2025, 60% were purchased by institutional investors, 29% were retained by our lending partners, and 11% were held on our balance sheet. We retain loans on our balance sheet to fill gaps in investor demand, to aid in price discovery, and for research and development purposes (“R&D Loans”), including to test and evaluate our AI models for these loans. R&D Loans are primarily our auto refinance and auto retail loan products, personal loan products issued to new categories of borrowers, and other new loan products, including small dollar loans and HELOCs. R&D Loans are not yet part of our fully-established capital markets programs with institutional investors and we continue our work on developing such programs. The remainder of loans on our balance sheet represent core personal loans, which Upstart would sell to institutional investors.

Current wording

Out of the total principal of loans transacted on our marketplace during the six months ended June 30, 2025, 53% were purchased by institutional investors, 26% were retained by our lending partners, and 21% were held on our balance sheet. We retain loans on our balance sheet to fill gaps in investor demand, to aid in price discovery, and for research and development purposes (“R&D Loans”), including to test and evaluate our AI models for these loans. R&D Loans are primarily our auto refinance and auto retail loan products, personal loan products issued to new categories of borrowers, and other new loan products, including small dollar loans and HELOCs. R&D Loans are not yet part of our fully-established capital markets programs with institutional investors and we continue our work on developing such programs. The remainder of loans on our balance sheet represent core personal loans, which Upstart would sell to institutional investors.

Previous wording

At a more granular level, all quarterly vintages of core personal loans that originated in the first quarter of 2023 through the first quarter of 2024 are currently forecasted to underperform relative to their target returns. Even though our underwriting models have over time utilized more variables and data points about borrowers which has improved model performance, they were not designed to predict the severe impact changing macroeconomic conditions, credit market volatility and interest rate fluctuations that occurred following the COVID-19 pandemic, all of which were (and still are) beyond our control. The forecasted underperformance for these vintages reflects the impact of a combination of factors that occurred during that period, including the elimination of government stimulus measures and the worsening of the macroeconomic environment, via rising inflation and the resulting sharply higher interest rates.

Current wording

An equal investment in all vintages of Upstart-powered core personal loans originated in the second quarter of 2023 through the first quarter of 2025 is currently expected to deliver annual returns in line with a blended target of approximately 11.3% after servicing fees. At a more granular level, all quarterly vintages of core personal loans originated in the second quarter of 2023 through the fourth quarter of 2023 are currently forecasted to underperform relative to their target returns. Even though our underwriting models have over time utilized more variables and data points about borrowers, which has improved model performance, they were not designed to predict the severe impact changing macroeconomic conditions, credit market volatility and interest rate fluctuations that occurred following the COVID-19 pandemic, all of which were (and still are) beyond our control. The forecasted underperformance for these vintages reflects the impact of a combination of factors that occurred during that period, including the elimination of government stimulus measures and the worsening of the macroeconomic environment, via rising inflation and the resulting sharply higher interest rates.

Previous wording

The core personal loans that originated in the second quarter of 2024 or later are currently forecasted to deliver returns in line with target yields. This reversion in performance, relative to the quarterly vintages of core personal loans that originated in the first quarter 2023 through the first quarter 2024, was driven by a combination of factors including increased conservatism in underwriting, the relative stabilization of macroeconomic conditions, and improvements in our more recent models.

Current wording

The core personal loans originated in the first quarter of 2024 or later are currently forecasted to deliver returns in line with target yields. This reversion in performance reflects a combination of factors including increased conservatism in underwriting, the relative stabilization of macroeconomic conditions, and improvements in our more recent models.

Previous wording

To respond to macroeconomic changes and provide relevant and up-to-date information to our lending partners, we introduced a new metric, the Upstart Macro Index (“UMI”), in 2023. Since its peak starting in the fourth quarter of 2023, UMI has been largely improving. As of March 31, 2025, it remains elevated but stable, measured at approximately 1.49, meaning that current macroeconomic conditions contributed an incremental risk of approximately 49% to the repayment performance of an Upstart-powered unsecured personal loan, compared to the baseline measurement of 1.0.

Current wording

To respond to macroeconomic changes and provide relevant and up-to-date information to our lending partners, we introduced a new metric, the Upstart Macro Index (“UMI”), in 2023. Since its peak starting in the fourth quarter of 2023, UMI has been largely improving. As of June 30, 2025, it remained elevated but stable, measured at approximately 1.52, meaning that current macroeconomic conditions contributed an incremental risk of approximately 52% to the repayment performance of an Upstart-powered unsecured personal loan, compared to the baseline measurement of 1.0.

Previous wording

We define Transaction Volume, Dollars as the total principal of loan originations (or committed amounts for HELOCs) facilitated on our marketplace during the periods presented. We define Transaction Volume, Number of Loans as the number of loan originations (or commitments issued for HELOCs) facilitated on our marketplace during the periods presented. Increases in Transaction Volume are dependent on our loan funding programs having sufficient access to capital. Decreases in the availability of funding due to factors such as volatility in the capital markets and macroeconomic conditions will generally cause a decline in Transaction Volume. Transaction Volume is driven by improvements in our AI models and technology, including our ability to streamline and automate the loan application and origination process. Transaction Volume can also be driven by several other factors, including borrower acceptance rates and their sensitivity to the interest rates offered through our platform. We believe these metrics are good proxies for our overall scale and reach as a marketplace. Transaction Volume, Dollars increased 89% in thethree months ended March 31, 2025 compared to the same period of 2024 and Transaction Volume, Number of Loans increased 102% in the three months ended March 31, 2025 compared to thesame period of 2024. These increases were primarily due to model improvements and product initiatives, which resulted in an increase in the number of qualified borrowers and more attractive loan offers. The increase in Transaction Volume, Number of Loans was higher than the increase in Transaction Volume, Dollars due to the decrease in average loan size, primarily due to the increase in small dollar loans.

Current wording

We define Transaction Volume, Dollars as the total principal of loan originations (or committed amounts for HELOCs) facilitated on our marketplace during the periods presented. We define Transaction Volume, Number of Loans as the number of loan originations (or commitments issued for HELOCs) facilitated on our marketplace during the periods presented. We believe these metrics are good proxies for our overall scale and reach as a marketplace.

Previous wording

We define Conversion Rate as the Transaction Volume, Number of Loans in a period divided by the number of rate inquiries received that we estimate to be legitimate, which we record when a borrower requests a loan offer on our platform. We track this metric to understand the impact of improvements to the efficiency of our borrower funnel on our overall growth. Historically, our Conversion Rate has benefited from improvements to our technology, which have made our evaluation of risk more accurate and our verification process more automated, or from the addition of lending partners that have made our offers more competitive. However, our Conversion Rate can be impacted by a variety of internal factors such as changes in the amount of origination fees that we charge or changes in the rate of returns we target for our lending partners and institutional investors. External factors such as shifts in macroeconomic conditions, including interest rate changes, also impact our Conversion Rate. Our ability to continue to improve our Conversion Rate depends in part on our ability to continue to improve our AI models and Percentage of Loans Fully Automated and the mix of marketing channels in any given period. Our Conversion Rate increased to 19.1% in the three months ended March 31, 2025 from 14.0% in the same period of 2024, primarily driven by underwriting model improvements and product and pricing initiatives, coupled with continued optimization in our acquisition channels.

Current wording

Historically, our Conversion Rate has benefited from improvements to our technology, which have made our evaluation of risk more accurate and our verification process more automated, or from the addition of lending partners that have made our offers more competitive. However, our Conversion Rate can be impacted by a variety of internal factors such as changes in the amount of origination fees that we charge or changes in the rate of returns we target for our lending partners and institutional investors. External factors such as shifts in macroeconomic conditions, including interest rate changes, also impact our Conversion Rate. Our ability to continue to improve our Conversion Rate depends in part on our ability to continue to improve our AI models and Percentage of Loans Fully Automated and the mix of marketing channels in any given period.

Previous wording

A driver of our Contribution Margin and operating efficiency is the Percentage of Loans Fully Automated, which is defined as the total number of loans in a given period originated end-to-end (from initial rate request to final funding for personal loans and small dollar loans and from initial rate request to signing of the loan agreement for auto loans) with no human involvement required by the Company divided by the Transaction Volume, Number of Loans in the same period. We have been successful in increasing the level of loan automation on the platform over the past few years while simultaneously holding fraud rates at very low levels. We believe our growth over the last several years has been driven in part by our ability to rapidly streamline and automate the loan application and origination process on our platform. We expect growth of the Percentage of Loans Fully Automated to subside in the near term. However, as we expand our loan offerings, this percentage may fluctuate from period to period depending on the loan offering mix and other external factors. Our Percentage of Loans Fully Automated increased to 92% in the three months ended March 31, 2025 from 90% in the same period of 2024.

Current wording

A driver of our Contribution Margin and operating efficiency is the Percentage of Loans Fully Automated, which is defined as the total number of loans in a given period originated end-to-end (from initial rate request to final funding for personal loans and small dollar loans and from initial rate request to signing of the loan agreement for auto loans) with no human involvement required by the Company divided by the Transaction Volume, Number of Loans in the same period.

Previous wording

To derive Contribution Profit, we subtract from revenue from fees, net our borrower acquisition costs as well as our borrower verification and servicing costs. To calculate Contribution Margin we divide Contribution Profit by revenue from fees, net.

Current wording

To derive Contribution Profit, we subtract the sum of borrower acquisition costs as well as borrower verification and servicing costs from revenue from fees, net. To calculate Contribution Margin we divide Contribution Profit by revenue from fees, net.

Previous wording

See the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Reconciliation of Non-GAAP Financial Measures” for a reconciliation of loss from operations to Contribution Profit.

Current wording

See the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Reconciliation of Non-GAAP Financial Measures” for a reconciliation of income (loss) from operations to Contribution Profit.

Previous wording

Other income, net primarily consists of dividend income earned by the Company on its unrestricted cash and cash equivalents balances in addition to coupon interest expense and amortization of the debt discount on our Notes.

Current wording

Other income, net primarily consists of dividend income earned by the Company on its unrestricted cash and cash equivalents balances in addition to coupon interest expense and amortization of the debt discount on its 2026, 2029, and 2030 convertible senior notes (collectively, the “Notes”).

Previous wording

Revenue from fees, net increased $47.4 million, or 34%, in the three months ended March 31, 2025, compared to the same period in 2024, which included an increase of $47.1 million in revenue from platform and referral fees, net, and an increase of $0.3 million in servicing fees, net. The increase of the platform and referral fees, net was primarily driven by a 89% increase in the Transaction Volume, Dollars from $1,130.8 million in the three months ended March 31, 2024 to $2,133.6 million in the same period in 2025, partially offset by a decrease in prices of our services, including those related to prime borrowers. The increase in servicing fees was primarily due to an increase in outstanding principal of serviced loans.

Current wording

Revenue from fees, net increased $110.2 million, or 84%, in the three months ended June 30, 2025, compared to the same period in 2024, which included an increase of $104.3 million in revenue from platform and referral fees, net, and an increase of $6.0 million in servicing fees, net. The increase of the platform and referral fees, net was primarily driven by a 154% increase in the Transaction Volume, Dollars from $1,109.7 million in the three months ended June 30, 2024 to $2,820.4 million in the same period in 2025, partially offset by lower fee rates, including those related to prime borrowers. The increase in servicing fees was primarily due to the increase in net gain related to loan servicing rights upon loan sales as well as the increase in outstanding principal of serviced loans.

Previous wording

Interest income, interest expense, and fair value adjustments, net increased $38.2 million, or 372% in the three months ended March 31, 2025, compared to the same period in 2024. The increase was driven by a $45.1 million decrease in unfavorable fair value adjustments and a $3.7 million decrease in interest expense, partially offset by a $10.6 million decrease in interest income. The decrease in unfavorable fair value adjustments is attributable to a $31.7 million decrease in fair value loss on beneficial interests, a $8.3 million decrease in unrealized loss and loan charge-offs, and a $5.1 million decrease in realized loss on loan sales during the three months ended March 31, 2025 compared to the same period in 2024. The decrease in interest expense resulted from the decrease in fair value of interest rate caps and a $0.9 million decrease in interest expense recognized by consolidated securitization entities due to lower payable to securitization note holders in the period. The decrease in unfavorable fair value adjustments and decrease in interest expense was partially offset by a decrease in interest income due to a $7.1 million decrease in interest income recognized by operating entities and a $3.5 million decrease in interest income recognized by consolidated securitization entities, consistent with a decrease in the average outstanding principal balance of loans held on the condensed consolidated balance sheets by operating entities during the period and a decrease in the outstanding principal balance of loans held in the consolidated securitization during the period.

Current wording

Interest income, interest expense, and fair value adjustments, net increased $19.4 million, or 669% in the three months ended June 30, 2025, compared to the same period in 2024. The increase was driven by a $23.0 million decrease in unfavorable fair value adjustments and a $3.7 million decrease in interest expense, partially offset by a $7.3 million decrease in interest income. The decrease in unfavorable fair value adjustments is attributable to a $1.6 million decrease in fair value loss on beneficial interests, a $13.1 million decrease in unrealized loss and loan charge-offs, and a $8.3 million increase in realized gain on loan sales during the three months ended June 30, 2025 compared to the same period in 2024. The decrease in interest expense resulted from the decrease in average borrowings during the period, including a $0.8 million decrease in interest expense recognized by consolidated securitization entities due to lower payable to securitization note holders in the period, partially offset by a decrease in fair value of interest rate caps. The decrease in unfavorable fair value adjustments and decrease in interest expense was partially offset by a decrease in interest income due to a $4.0 million decrease in interest income recognized by operating entities and a $3.2 million decrease in interest income recognized by consolidated securitization entities. The decrease in interest income is consistent with a decrease in the average outstanding principal balance of loans held on the condensed consolidated balance sheets by operating entities and a decrease in the outstanding principal balance of loans held in the consolidated securitization during the period, partially offset by an increase in loan premium amortization and an increase in the outstanding principal balance of the line of credit during the period.

Previous wording

Sales and marketing expenses increased by $23.8 million, or 68%, in the three months ended March 31, 2025 compared to the same period in 2024, which was driven primarily by a $23.7 million increase in advertising and borrower acquisition costs. As a percentage of total revenue, sales and marketing expenses remained flat at 28%.

Current wording

Sales and marketing expenses increased by $40.1 million, or 122%, in the three months ended June 30, 2025 compared to the same period in 2024, which was driven primarily by a $37.7 million increase in advertising and borrower acquisition costs, and a $1.4 million increase in payroll and other personnel-related expenses. As a percentage of total revenue, sales and marketing expenses increased from 26% to 28%.

Previous wording

Customer operations expenses increased by $1.1 million, or 3%, in the three months ended March 31, 2025, compared to the same period in 2024. The increase was primarily due to a $3.2 million increase in information verification expenses and a $1.7 million increase in servicing expenses. The increase was partially offset by a $3.7 million decrease in payroll and other personnel-related expenses due to a decrease in headcount and a $0.2 million decrease in refunds due to overpayment. As a percentage of total revenue, customer operations expenses decreased from 31% to 19%.

Current wording

Customer operations expenses increased by $7.6 million, or 20%, in the three months ended June 30, 2025, compared to the same period in 2024. The increase was primarily due to a $6.1 million increase in information verification expenses, and a $2.0 million increase in servicing expenses. The increase was partially offset by a $0.7 million decrease in payroll and other personnel-related expenses due to a decrease in headcount. As a percentage of total revenue, customer operations expenses decreased from 30% to 18%.

Previous wording

Engineering and product development expenses decreased by $5.3 million, or 8%, for the three months ended March 31, 2025, compared to the same period in 2024. The decrease was primarily due to a $8.0 million decrease in payroll and other personnel-related expenses from capitalization of internal-use software development costs, offset by a $2.7 million increase in other engineering operating expenses. As a percentage of total revenue, engineering and product development expenses decreased from 49% to 27%.

Current wording

Engineering and product development expenses increased by $5.1 million, or 4%, for the six months ended June 30, 2025, compared to the same period in 2024. The increase was primarily due to a $6.7 million in other engineering operating expenses driven by data and infrastructure costs, partially offset by a $1.6 million decrease in payroll and other personnel-related expenses from capitalization of internal-use software development costs. As a percentage of total revenue, engineering and product development expenses decreased from 48% to 27%.

Previous wording

General, administrative, and other expenses increased by $2.9 million, or 5%, in the three months ended March 31, 2025, compared to the same period in 2024. The increase was primarily due to a $3.1 million increase in payroll and other personnel-related expenses, $1.7 million increase in professional expenses, and $0.8 million increase in depreciation expenses, partially offset by a $2.7 million decrease in legal and compliance expenses. As a percentage of total revenue, general, administrative, and other expenses decreased from 45% to 28%.

Current wording

General, administrative, and other expenses increased by $11.6 million, or 22%, in the three months ended June 30, 2025, compared to the same period in 2024. The increase was primarily due to a $9.0 million increase in payroll and other personnel-related expenses, a $3.2 million increase in office and administrative operating related expenses, and a $1.0 million increase in depreciation expenses, partially offset by a $1.0 million decrease in legal and compliance expenses, and a $0.6 million decrease in professional fees. As a percentage of total revenue, general, administrative, and other expenses decreased from 42% to 25%.

Previous wording

In the three months ended March 31, 2025, other income, net decreased by $0.8 million, or 28%, compared to the same period in 2024, due to a $3.8 million increase in interest expense related to our Notes as a result of issuances of 2029 and 2030 Notes and a $0.1 million decrease in miscellaneous other income, net, partially offset by a $3.1 million increase in dividend income.

Current wording

In the three months ended June 30, 2025, other income, net increased by $0.1 million, or 8%, compared to the same period in 2024, due to a $2.0 million increase in dividend income and a $1.8 million increase in miscellaneous other income, net, partially offset by a $3.7 million increase in interest expense related to our Notes as a result of issuances of 2029 and 2030 Notes.

Previous wording

The following table presents a reconciliation of loss from operations to Contribution Profit and Contribution Margin. We define Operating Margin as our loss from operations divided by revenue from fees, net.

Current wording

The following table presents a reconciliation of income (loss) from operations to Contribution Profit and Contribution Margin. We define Operating Margin as our income (loss) from operations divided by revenue from fees, net.

Previous wording

(1)Borrower acquisition costs were $24.8 million and $48.6 million for the three months ended March 31, 2024 and 2025, respectively. Borrower acquisition costs consist of our sales and marketing expenses adjusted to exclude costs not directly attributable to attracting a new borrower, such as payroll-related expenses for our business development and marketing teams, as well as other operational, brand awareness and marketing activities. These costs do not include reorganization expenses.

Current wording

(1)Borrower acquisition costs were $23.2 million and $60.9 million for the three months ended June 30, 2024 and 2025, respectively, and were $48.0 million and $109.5 million for the six months ended June 30, 2024 and 2025, respectively. Borrower acquisition costs consist of our sales and marketing expenses adjusted to exclude costs not directly attributable to attracting a new borrower, such as payroll-related expenses for our business development and marketing teams, as well as other operational, brand awareness and marketing activities. These costs do not include reorganization expenses.

Previous wording

(2)Borrower verification and servicing costs were $32.1 million, and $34.5 million for the three months ended March 31, 2024 and 2025, respectively. Borrower verification and servicing costs consist of payroll and other personnel-related expenses for personnel engaged in loan onboarding, verification and servicing, as well as servicing system costs. It excludes payroll and personnel-related expenses and stock-based compensation for certain members of our customer operations team whose work is not directly attributable to onboarding and servicing loans. These costs do not include reorganization expenses.

Current wording

(2)Borrower verification and servicing costs were $31.2 million and $39.3 million for the three months ended June 30, 2024 and 2025, respectively, and were $63.3 million and $73.8 million for the six months ended June 30, 2024 and 2025, respectively. Borrower verification and servicing costs consist of payroll and other personnel-related expenses for personnel engaged in loan onboarding, verification and servicing, as well as servicing system costs. It excludes payroll and personnel-related expenses and stock-based compensation for certain members of our customer operations team whose work is not directly attributable to onboarding and servicing loans. These costs do not include reorganization expenses.

Previous wording

The following table provides a reconciliation of net loss and Net Loss Margin to Adjusted EBITDA and Adjusted EBITDA Margin. We define Net Loss Margin as net loss divided by total revenue.

Current wording

The following table provides a reconciliation of net income (loss) and Net Income (Loss) Margin to Adjusted EBITDA and Adjusted EBITDA Margin. We define Net Income (Loss) Margin as net income (loss) divided by total revenue.

Previous wording

The following table presents a reconciliation of net loss to Adjusted Net Income (Loss) and Adjusted Net Income (Loss) Per Share.

Current wording

The following table presents a reconciliation of net income (loss) to Adjusted Net Income (Loss) and Adjusted Net Income (Loss) Per Share.

Previous wording

As of March 31, 2025, our primary source of liquidity was cash and cash equivalents of $599.8 million. We also held $5.0 million of investments in certificates of deposit with maturities greater than three months as of March 31, 2025. Changes in the balance of cash and cash equivalents are generally a result of working capital fluctuations and the timing of purchases and sales of loans facilitated through our marketplace. To finance purchases of certain loans facilitated through our lending marketplace, we rely on our warehouse credit facilities through the special-purpose trusts and corporate cash.

Current wording

As of June 30, 2025, our primary source of liquidity was cash and cash equivalents of $395.9 million. We also held $5.0 million of investments in certificates of deposit with maturities greater than three months as of June 30, 2025. Changes in the balance of cash and cash equivalents are generally a result of working capital fluctuations and the timing of purchases and sales of loans facilitated through our marketplace. To finance purchases of certain loans facilitated through our lending marketplace, we rely on our warehouse credit facilities through the special-purpose trusts and corporate cash.

Previous wording

We have also entered into an “at the market” offering program pursuant to which we may offer and sell, from time to time, shares of our common stock with an aggregate offering price of up to $500 million, as described in the prospectus supplement dated February 14, 2025 filed with the U.S. Securities and Exchange Commission.

Current wording

We entered into an “at the market” offering program pursuant to which we may offer and sell, from time to time, shares of our common stock with an aggregate offering price of up to $500.0 million, as described in the prospectus supplement dated February 14, 2025 filed with the U.S. Securities and Exchange Commission. As of June 30, 2025, no shares were issued under the program.

Previous wording

Our warehouse credit facilities, which mature between December 2025 and June 2028, allow us to borrow up to an aggregate of $475.0 million to purchase unsecured personal loans, $100.0 million to purchase small dollar loans, and up to $50.0 million to purchase auto loans. As of June 14, 2024, the revolving period ended for Upstart Auto Warehouse Trust, and we may no longer draw from the facility. The Upstart Auto Warehouse Trust facility matures in December 2025, by which time all outstanding amounts owed must be repaid. As of March 31, 2025, we have drawn an aggregate of $127.0 million on our warehouse credit facilities. Refer to “Note 8. Borrowings” in Part I, Item 1 of this Quarterly Report on Form 10-Q for further details on our warehouse credit facilities.

Current wording

Our warehouse credit facilities, which mature between August 2026 and June 2028, allow us to borrow up to an aggregate of $475.0 million to purchase unsecured personal loans, $100.0 million to purchase small dollar loans, and up to $50.0 million to purchase auto loans. Our risk retention financing facility, the maturity of which aligns with the stated maturities of the underlying notes pledged as collateral, which range from June 2033 to April 2035, allows us to borrow up to $100.0 million. As of June 30, 2025, we have drawn an aggregate of $189.5 million on our warehouse credit facilities and $29.7 million on our risk retention financing facility. Refer to “Note 8. Borrowings” in Part I, Item 1 of this Quarterly Report on Form 10-Q for further details on our borrowings.

Previous wording

We lease office facilities under operating lease agreements which expire between 2027 and 2029. Our cash requirements related to these lease agreements are $52.0 million, of which $15.5 million is expected to be paid within the next 12 months. Refer to “Note 10. Leases” in Part I, Item 1 of this Quarterly Report on Form 10-Q for further details on our operating lease obligations.

Current wording

We lease office facilities under operating lease agreements which expire between 2027 and 2029. Our cash requirements related to these lease agreements are $48.2 million, of which $15.6 million is expected to be paid within the next 12 months. Refer to “Note 10. Leases” in Part I, Item 1 of this Quarterly Report on Form 10-Q for further details on our operating lease obligations.

Previous wording

We have committed to purchase loans from certain lending partners at the conclusion of the required holding period, which is generally equal to three business days. As of March 31, 2025, the total loan purchase commitment was $89.3 million. We have also extended a line of credit to a third-party in connection with one of our committed capital and other co-investment arrangements. As of March 31, 2025, the Company had unfunded commitments related to the line of credit of $7.8 million. The Company also has commitments to fund future advances on HELOCs. As of March 31, 2025, these commitments were $11.2 million, however since we can limit these commitments under certain conditions or these commitments could expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. See “Note 11. Commitments and Contingencies” in Part I, Item 1 of this Quarterly Report on Form 10-Q for further details on our commitments.

Current wording

We have committed to purchase loans from certain lending partners at the conclusion of the required holding period, which is generally equal to three business days. As of June 30, 2025, the total loan purchase commitment was $116.4 million. We have also extended a line of credit to a third-party in connection with one of our committed capital and other co-investment arrangements. As of June 30, 2025, the Company had unfunded commitments related to the line of credit of $7.9 million. The Company also has commitments to fund future advances on HELOCs. As of June 30, 2025, these commitments were $16.2 million, however since we can limit these commitments under certain conditions or these commitments could expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. See “Note 11. Commitments and Contingencies” in Part I, Item 1 of this Quarterly Report on Form 10-Q for further details on our commitments.

Previous wording

In connection with our committed capital and other co-investment arrangements, we are obligated to put a certain amount of our assets at risk in relation to the credit performance of the underlying loans. The risk in these arrangements is subject to a dollar cap, which represents the Company’s maximum exposure to losses in a particular arrangement under severe, hypothetical circumstances, for which the Company believes the possibility is remote. As of March 31, 2025, the Company’s aggregate maximum exposure to losses was $553.6 million. Refer to “Note 4. Beneficial Interests” in Part I, Item 1 of this Quarterly Report on Form 10-Q for further details on our committed capital and co-investment arrangements. Our cash requirements for the next 12 months related to investments in these existing arrangements is estimated to be up to $154.0 million.

Current wording

In connection with our committed capital and other co-investment arrangements, we are obligated to put a certain amount of our assets at risk in relation to the credit performance of the underlying loans. The risk in these arrangements is subject to a dollar cap, which represents the Company’s maximum exposure to losses in a particular arrangement under severe, hypothetical circumstances, for which the Company believes the possibility is remote. As of June 30, 2025, the Company’s aggregate maximum exposure to losses was $660.2 million. Refer to “Note 4. Beneficial Interests” in Part I, Item 1 of this Quarterly Report on Form 10-Q for further details on our committed capital and co-investment arrangements. Our cash requirements for the next 12 months related to investments in these existing arrangements is estimated to be up to $233.6 million.

Previous wording

Net cash used in operating activities was $13.5 million for the three months ended March 31, 2025, which consisted of adjustments for non-cash items of $17.4 million, $28.5 million in net changes in operating assets and liabilities, and net loss of $2.4 million. The increase in non-cash adjustments was primarily related to $29.8 million of stock-based compensation, $7.1 million of changes in fair value of loans, $6.4 million of depreciation and amortization, and $4.1 million of changes in fair value of servicing assets, partially offset by $17.6 million of changes in fair value of beneficial interest assets, $8.4 million of loan premium amortization, and a $4.9 million gain on loan servicing rights. The decrease in net changes in operating assets and liabilities was primarily related to a $48.8 million decrease in accrued expenses and other liabilities, $28.6 million of net payments from purchase and sale of loans held-for-sale, and $6.0 million of settlements of beneficial interest liabilities, partially offset by $38.3 million in principal payments received for loans held-for-sale, $10.3 million in principal payments received for loans held in consolidated securitization, and $6.4 million of changes in other assets.

Current wording

Net cash used in operating activities was $133.6 million for the six months ended June 30, 2025, which consisted of adjustments for non-cash items of $22.2 million, $159.0 million in net changes in operating assets and liabilities, and net income of $3.2 million. The increase in non-cash adjustments was primarily related to $65.3 million of stock-based compensation, $12.2 million of depreciation and amortization, and $8.6 million of changes in fair value of servicing assets, partially offset by $23.5 million of changes in fair value of beneficial interest assets, $21.1 million of changes in fair value of loans, and $19.2 million of loan premium amortization. The decrease in net changes in operating assets and liabilities was primarily related to $246.1 million of net payments from purchase and sale of loans held-for-sale, $11.7 million of settlements of beneficial interest liabilities, and $7.5 million decrease in accrued expenses and other liabilities, partially offset by $83.1 million in principal payments received for loans held-for-sale, $19.9 million in principal payments received for loans held in consolidated securitization, and $4.1 million of changes in other assets.

Previous wording

Net cash used in investing activities was $78.6 million for the three months ended March 31, 2025 as a result of $149.9 million purchases and originations of loans held-for-investment and $6.2 million of capitalized software costs, partially offset by $57.4 million principal payments received for loans held-for-investment, $16.4 million proceeds from beneficial interest assets, and $2.7 million of principal payments received for notes receivable and repayments of residual certificates.

Current wording

Net cash used in investing activities was $188.4 million for the six months ended June 30, 2025 as a result of $377.9 million purchases and originations of loans held-for-investment, partially offset by $129.9 million principal payments received for loans held-for-investment, $44.9 million proceeds from beneficial interest assets, and $20.2 million of proceeds from sale of loans held-for-investment.

Previous wording

Net cash used in financing activities was $44.7 million for the three months ended March 31, 2025 primarily due to $122.3 million repayments of warehouse borrowings and $11.4 million of principal payments made on securitization notes, partially offset by $53.7 million proceeds from warehouse borrowings, $22.9 million increase in amounts payable to investors, $8.2 million proceeds from exercise of stock options, and $4.7 million in proceeds from issuance of common stock under ESPP.

Current wording

Net cash provided by financing activities was $47.2 million for the six months ended June 30, 2025 primarily due to $176.4 million proceeds from borrowings, $31.5 million increase in amounts payable to investors, and $9.9 million proceeds from exercise of stock options, partially offset by $152.7 million repayments of borrowings and $22.0 million of principal payments made on securitization notes.

Previous wording

As of March 31, 2025, we held $814.7 million of loans on our condensed consolidated balance sheet. $538.2 million of these loans were originated for research and development purposes, primarily in support of our auto lending products, HELOCs, and expansion of our unsecured personal loan product to new categories of borrowers. We also held $187.6 million of core personal loans which would otherwise be immediately purchased by institutional investors and $88.9 million of core personal loans held by the consolidated securitization. We will continue to utilize our capital to support research and development activities and, at times, as a funding source for core personal loans during periods of marketplace funding constraints. The extent and timing of utilizing our capital as a funding source for loans will largely depend on the availability of capital in our marketplace relative to the demand from qualified borrowers and our business priorities. We plan to sell loans held on our balance sheet to institutional investors over time in the form of secondary sales or securitizations.

Current wording

As of June 30, 2025, we held $1,019.5 million of loans on our condensed consolidated balance sheet. $699.5 million of these loans were originated for research and development purposes, primarily in support of our auto lending products, HELOCs, and expansion of our unsecured personal loan product to new categories of borrowers. We also held $244.1 million of core personal loans, the majority of which would otherwise be purchased by institutional investors, and $75.9 million of core personal loans held by the consolidated securitization. We will continue to utilize our capital to support research and development activities and, at times, as a funding source for core personal loans during periods of marketplace funding constraints. The extent and timing of utilizing our capital as a funding source for loans will largely depend on the availability of capital in our marketplace relative to the demand from qualified borrowers and our business priorities. We plan to sell loans held on our balance sheet to institutional investors over time in the form of secondary sales or securitizations and pass through issuances.

Previous wording

Our critical accounting policies are described in Part II, Item 7, “Critical Accounting Policies and Estimates” in our Annual Report on Form 10-K for the year ended December 31, 2024. There have been no material changes to these policies for the three months ended March 31, 2025.

Current wording

Our critical accounting policies are described in Part II, Item 7, “Critical Accounting Policies and Estimates” in our Annual Report on Form 10-K for the year ended December 31, 2024. There have been no material changes to these policies for the six months ended June 30, 2025.