Upstart Holdings, Inc.
For the period ended Sep 30, 2025. Filed Nov 4, 2025.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Sep 30, 2025 · Filed Nov 4, 2025
UPST$21.89-1.1%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2025-06-30; filed 2025-08-05.
0001647639-25-000092
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2025-09-30; filed 2025-11-04.
0001647639-25-000134
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 143 previous paragraphs and 147 current paragraphs.
97 unchanged; 37 reworded; 13 added; 8 removed; 1 previous and 0 current paragraphs rearranged.
Tables are not compared: 16 previous and 16 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (13)
Current report
Upstart is the leading artificial intelligence (“AI”) lending marketplace. We aim to radically reduce the cost and complexity of borrowing for all Americans by using our proprietary AI models to remake the entire lending process. Today, Upstart’s platform supports personal loans, including small dollar “relief” loans, auto loans, including retail, refinance, and auto secured personal loans, and home loans in the form of home equity lines of credit (“HELOCs”). Long-term, our vision is to become the always-on, everything-store for credit, where we can automatically approve borrowers at the right prices – instantly and effortlessly.
Current report
Our platform applies AI to more accurately quantify the true risk of a loan, a capability we refer to as “risk separation.” This differentiated approach to underwriting has generally led to higher borrower approvals and lower interest rates relative to traditional lending practices, with more predictable returns to our capital partners including banks and credit unions (collectively our “lending partners”) and institutional investors. With this as the foundation, we’ve added layers of automation, macroeconomic calibration, generalization, and personalization that can support increasing scale and business resilience over time.
Current report
Beyond core underwriting, we apply our AI models to income and identity verification, loan stacking, and servicing. The result is an exceptional digital-first experience with significant levels of automation. For example, during the nine months ended September 30, 2025, 91% of loans on our platform were fully automated, with no human intervention by Upstart. We also apply our AI models to consumer acquisition and targeting, making these activities increasingly efficient. Consumers primarily access Upstart-powered loans through Upstart.com and, for automotive retail in particular, through auto dealerships that use Upstart’s Auto Finance software.
Current report
Our AI models are continuously upgraded, trained and refined - and have been for more than ten years. We believe the flywheel effects generated by our constantly improving AI models provide a significant competitive advantage both in terms of the increasing sophistication of our algorithms and the range and volume of training data that underpins our systems.
Current report
Our dynamic marketplace allows us to serve borrowers across the credit spectrum. Loans issued through our marketplace are purchased by our network of institutional investors, retained by our lending partners, or in certain instances are funded by Upstart’s balance sheet. Out of the total principal of loans transacted on our marketplace during the nine months ended September 30, 2025, 62% were purchased by institutional investors, 25% were retained or purchased by our lending partners, and 13% were held on our balance sheet. Investors may also invest in Upstart-powered loans through our pass-through and securitization programs.
Current report
Institutional investors, including those often referred to as “private credit,” play an important role in our lending marketplace. They can provide capital for higher risk loans that may not be economically feasible for traditional banks and credit unions to hold. Today, more than 50% of the loan funding on our platform is through committed capital and other co-investment arrangements with institutional investors and lending partners, which provide valuable stability and resilience on the funding side of our platform.
Current report
(2)Prior to the third quarter of 2025, home loans were included in “Transaction Volume, Number of Loans” but excluded from the rate inquiries used to calculate Conversion Rate. Beginning in the third quarter of 2025, they are included in rate inquiries. Earlier periods have not been adjusted, as the impact is immaterial and would have reduced the Conversion Rate by less than 0.5 percentage point.
Current report
Our Percentage of Loans Fully Autom ated remained flat at 91% for the three and nine months ended September 30, 2024 and 2025.
Current report
Gain on Debt Extinguishment
Current report
In August 2021, we issued $661.3 million in aggregate principal amount of 0.25% convertible senior notes due 2026 (the “2026 Notes”). Gain on debt extinguishment consists of the gain recognized from the repurchase of a portion of the outstanding 2026 Notes. Refer to“Note 8. Borrowings” in Part I, Item 1 of this Quarterly Report on Form 10-Q for further details on our Notes.
Current report
Gain on Debt Extinguishment
Current report
In the three and nine months ended September 30, 2025, gain on debt extinguishment decreased by $26.1 million, compared to the same periods in 2024, primarily due to a smaller amount of the 2026 Notes repurchased and at a higher price relative to the prior year. During the quarter ended September 30, 2024 and 2025, the Company used approximately $325.3 million and $224.2 million to repurchase $362.1 million and $232.6 million in aggregate principal amount outstanding of the 2026 Notes, respectively.
Current report
Net cash provided by financing activities was $425.8 million for the nine months ended September 30, 2025 primarily due to $395.8 million proceeds received from the issuance of the 2032 Notes, net of debt issuance costs, purchase of capped calls, and partial repurchase of the 2026 Notes. The Company also received $212.8 million of proceeds from borrowings, which was partially offset by $207.5 million repayments of borrowings.
Removed paragraphs (8)
Previous report
Upstart applies artificial intelligence (“AI”) models and cloud applications to the process of underwriting consumer credit. Our AI marketplace connects consumers with our lending partners. Consumers can access Upstart-powered loans via Upstart.com, through a lender-branded product on our lending partners’ own websites, and through auto dealerships that use our Upstart Auto Retail software. We enable our lending partners to provide an exceptional digital-first experience to consumers and originate valuable credit products. As our technology continues to improve and additional lending partners adopt our platform, consumers benefit from improved access to affordable and frictionless credit.
Previous report
We believe that banks and other traditional lenders will continue to be at the forefront of consumer lending in the United States. We believe AI lending will become increasingly critical as this industry continues to undergo a broad digital transformation. Our strategy is to partner with banks and credit unions and provide them with access to an AI lending marketplace that they can configure as they originate consumer loans, according to their own business and regulatory requirements.
Previous report
Loans issued through our marketplace are retained by our lending partners, purchased by our network of institutional investors, or funded by Upstart’s balance sheet. Investors may also invest in Upstart-powered loans through our pass-through and securitization programs. We believe that institutional investors, often referred to as “private credit,” have played an increasingly large role in financing consumer lending in the United States and we have adapted our strategy to take advantage of this opportunity.
Previous report
To improve the loan funding capacity for our marketplace across business and macroeconomic cycles, we have secured multiple committed capital and other co-investment arrangements with institutional investors and lending partners beginning in 2023, which have delivered a significant amount of loan funding to the Upstart marketplace. While these efforts have strengthened the amount and resiliency of our loan funding, we continue to secure additional capital to support the growth of our business and further diversify our sources of capital and institutional investor base to ensure long-term scalability.
Previous report
Our Percentage of Loans Fully Automated increased to 92% in both the three and six months ended June 30, 2025, from 91% and 90%, respectively, in the same periods of 2024.
Previous report
The net income (loss) per share and Adjusted Net Income (Loss) Per Share in the table above are calculated using the following weighted-average common shares outstanding:
Previous report
(1)The effect of dilutive securities is due to 2029 and 2030 convertible notes.
Previous report
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.
Reworded paragraphs (37)
Previous 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.
Current wording
We retain certain loans on our balance sheet for research and development purposes (“R&D Loans”), including to test and evaluate our AI models for newer products, to fill gaps in investor demand, and to aid in price discovery. As of September 30, 2025, 71% of loans held on our balance sheet were for R&D purposes, primarily related to our auto refinance and auto retail loan products, small dollar loans and HELOCs.
Previous 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.
Current wording
An equal investment in all vintages of Upstart-powered core personal loans originated in the third quarter of 2023 through the second 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 third 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.
Previous 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.
Current wording
The core personal loans originated in the second 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 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.
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. As of September 30, 2025, UMI remained elevated, measured at approximately 1.54, meaning that current macroeconomic conditions contributed an incremental risk of approximately 54% to the repayment performance of an Upstart-powered unsecured personal loan, compared to the baseline measurement of 1.0.
Previous wording
(2)Represents a non-GAAP financial measure. See the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Reconciliation of Non-GAAP Financial Measures” for further information.
Current wording
(3)Represents a non-GAAP financial measure. See the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Reconciliation of Non-GAAP Financial Measures” for further information.
Previous wording
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. 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.
Current wording
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. Transaction Volume is dependent on the availability of platform funding which is influenced by factors such as volatility in the capital markets and macroeconomic conditions.
Previous wording
Transaction Volume, Dollars increased 154% in the three months ended June 30, 2025 compared to the same period of 2024, and increased 121% in thesix months ended June 30, 2025 compared to the same period of 2024. Transaction Volume, Number of Loans increased 159% and 133% in the three and six months ended June 30, 2025 compared to thesame period of 2024, respectively. 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 as underwriting model improvements drove higher approval rates in smaller dollar categories of loans.
Current wording
Transaction Volume, Dollars increased 80% in the three months ended September 30, 2025 compared to the same period of 2024, and increased 104% in thenine months ended September 30, 2025 compared to the same period of 2024. Transaction Volume, Number of Loans increased 128% and 131% in the three and nine months ended September 30, 2025 compared to thesame period of 2024, respectively. 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 as underwriting model improvements drove higher approval rates in smaller dollar categories of loans.
Previous 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.
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 capital 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 platform and referral 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
Our Conversion Rate increased to 23.9% and 21.7% in the three and six months ended June 30, 2025, respectively, from 15.2% and 14.6% in the same periods of 2024, primarily driven by underwriting model improvements and product and pricing initiatives, coupled with continued optimization in our acquisition channels.
Current wording
Our Conversion Rate increased to 20.6% and 21.2% in the three and nine months ended September 30, 2025, respectively, from 16.3% and 15.3% in the same periods of 2024, primarily driven by underwriting model improvements and product and pricing initiatives, coupled with continued optimization in our acquisition channels.
Previous wording
Contribution Profit and Contribution Margin have limitations as an analytical tool, and should not be considered in isolation or as a substitute for analysis of our results as reported under GAAP. Contribution Profit and Contribution Margin are not GAAP financial measures of, nor do they imply, profitability. Even if our revenue exceeds variable expenses over time, we may not be able to achieve or maintain profitability, and the relationship of revenue to variable expenses is not necessarily indicative of future performance. Contribution Profit and Contribution Margin reflect all expenses that we consider to be variable, which may involve some judgment and discretion around what costs vary directly with loan volume. Other companies that present contribution profit and contribution margin may calculate it differently and, therefore, similarly titled measures presented by other companies may not be directly comparable to ours.
Current wording
Contribution Profit and Contribution Margin have limitations as analytical tools, and should not be considered in isolation or as a substitute for analysis of our results as reported under GAAP. Contribution Profit and Contribution Margin are not GAAP financial measures of, nor do they imply, profitability. Even if our revenue exceeds variable expenses over time, we may not be able to achieve or maintain profitability, and the relationship of revenue to variable expenses is not necessarily indicative of future performance. Contribution Profit and Contribution Margin reflect all expenses that we consider to be variable, which may involve some judgment and discretion around what costs vary directly with loan volume. Other companies that present contribution profit and contribution margin may calculate it differently and, therefore, similarly titled measures presented by other companies may not be directly comparable to ours.
Previous wording
The Company also recognizes fees in relation to contracts with auto dealers for the use of Upstart Auto Retail software, a cloud-based solution that facilitates dealership operations and enables them to provide consumers with access to Upstart-powered auto loans. Refer to “Note 2. Revenue” to our condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for more information.
Current wording
The Company also recognizes fees in relation to contracts with auto dealers for the use of Upstart Auto Finance software, a cloud-based solution that facilitates dealership operations and enables them to provide consumers with access to Upstart-powered auto loans. Refer to “Note 2. Revenue” in Part I, Item 1 of this Quarterly Report on Form 10-Q for more information.
Previous 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.
Current wording
Revenue from fees, net increased $90.9 million, or 54%, in the three months ended September 30, 2025, compared to the same period in 2024, which included an increase of $82.7 million in revenue from platform and referral fees, net, and an increase of $8.3 million in servicing fees, net. The increase of the platform and referral fees, net was primarily driven by a 80% increase in the Transaction Volume, Dollars from $1,582.3 million in the three months ended September 30, 2024 to $2,854.3 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 outstanding principal of serviced loans as well as the increase in net gain on servicing rights upon loan sales.
Previous wording
Revenue from fees, net increased $157.7 million, or 59%, in the six months ended June 30, 2025, compared to the same period in 2024, which included an increase of $151.4 million in revenue from platform and referral fees, net, and an increase of $6.3 million in servicing fees, net. The increase of the platform and referral fees, net was primarily driven by a 121% increase in the Transaction Volume, Dollars from $2,240.5 million in the six months ended June 30, 2024 to $4,954.0 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.
Current wording
Revenue from fees, net increased $248.6 million, or 57%, in the nine months ended September 30, 2025, compared to the same period in 2024, which included an increase of $234.0 million in revenue from platform and referral fees, net, and an increase of $14.6 million in servicing fees, net. The increase of the platform and referral fees, net was primarily driven by a 104% increase in the Transaction Volume, Dollars from $3,822.8 million in the nine months ended September 30, 2024 to $7,808.3 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 on servicing rights upon loan sales as well as the increase in outstanding principal of serviced loans.
Previous wording
$33.3 million decrease in fair value loss on beneficial interests, a $21.3 million decrease in unrealized loss and loan charge-offs, and a $13.5 million increase in realized gain on loan sales during the six 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 $1.8 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 $11.1 million decrease in interest income recognized by operating entities and a $6.8 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.
Current wording
Interest income, interest expense, and fair value adjustments, net increased $24.0 million, or 441% in the three months ended September 30, 2025, compared to the same period in 2024. The increase was driven by a $16.4 million increase in interest income, a $5.6 million decrease in unfavorable fair value adjustments and a $2.0 million decrease in interest expense. The increase in interest income is consistent with an increase in the average outstanding principal balance of loans and the line of credit held on the condensed consolidated balance sheets by operating entities as well as an increase in loan premium amortization, partially offset by a decrease in the outstanding principal balance of loans held in the consolidated securitization during the period. The decrease in unfavorable fair value adjustments is attributable to a $16.0 million decrease in unrealized loss and loan charge-offs, and a $2.6 million decrease in realized loss on loan sales during the three months ended September 30, 2025 compared to the same period in 2024, partially offset by a $13.0 million increase in fair value loss on beneficial interests. 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 during the period, and a decrease in fair value of interest rate caps.
Previous 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.
Current wording
Interest income, interest expense, and fair value adjustments, net increased $81.6 million, or 438% in the nine months ended September 30, 2025, compared to the same period in 2024. The increase was driven by a $73.7 million decrease in unfavorable fair value adjustments and a $9.4 million decrease in interest expense, partially offset by a $1.5 million decrease in interest income. The decrease in unfavorable fair value adjustments is attributable to a $37.1 million decrease in unrealized loss and loan charge-offs, a $20.6 million decrease in fair value loss on beneficial interests, and a $16.1 million increase in realized gain on loan sales during the nine months ended September 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 $2.5 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 interest expense was partially offset by a decrease in interest income due to a $9.6 million decrease in interest income recognized by consolidated securitization entities partially offset by a $8.1 million increase in interest income recognized by operating entities. Such decrease and increase of interest income is consistent with the decrease and increase of outstanding principal balance of loans held by consolidated securitization and operating entities, respectively, during the period. In addition, interest income by operating entities further increased due to 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 $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%.
Current wording
Sales and marketing expenses increased by $35.6 million, or 82%, in the three months ended September 30, 2025 compared to the same period in 2024, which was driven primarily by a $34.5 million increase in advertising and borrower acquisition costs, a $0.9 million increase in marketing operation expense, and a $0.2 million increase in payroll and other personnel-related expenses. As a percentage of total revenue, sales and marketing expenses increased from 27% to 28%.
Previous wording
Sales and marketing expenses increased by $64.0 million, or 94%, in the six months ended June 30, 2025 compared to the same period in 2024, which was driven primarily by a $61.5 million increase in advertising and borrower acquisition costs, a $1.4 million increase in marketing operation expenses, and a $1.1 million increase in payroll and other personnel-related expenses. As a percentage of total revenue, sales and marketing expenses increased from 27% to 28%.
Current wording
Sales and marketing expenses increased by $99.6 million, or 89%, in the nine months ended September 30, 2025 compared to the same period in 2024, which was driven primarily by a $96.0 million increase in advertising and borrower acquisition costs, a $2.3 million increase in marketing operation expenses, and a $1.3 million increase in payroll and other personnel-related expenses. As a percentage of total revenue, sales and marketing expenses increased from 27% to 28%.
Previous wording
Customer operations expenses increased by $8.7 million, or 11%, in the six months ended June 30, 2025, compared to the same period in 2024. The increase was primarily due to a $9.4 million increase in information verification expenses and a $3.8 million increase in servicing expenses. The increase was partially offset by a $4.4 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 31% to 18%.
Current wording
Customer operations expenses increased by $10.5 million, or 27%, in the three months ended September 30, 2025, compared to the same period in 2024. The increase was primarily due to a $6.6 million increase in information verification expenses, a $2.3 million increase in servicing expenses, and a $1.5 million increase in payroll and other personnel-related expenses. As a percentage of total revenue, customer operations expenses decreased from 24% to 18%.
Previous 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%.
Current wording
Customer operations expenses increased by $19.1 million, or 16%, in the nine months ended September 30, 2025, compared to the same period in 2024. The increase was primarily due to a $15.9 million increase in information verification expenses and a $6.1 million increase in servicing expenses. The increase was partially offset by a $2.9 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 28% to 18%.
Previous wording
Engineering and product development expenses increased by $10.4 million, or 18%, for the three months ended June 30, 2025, compared to the same period in 2024. The increase was primarily due to a $6.4 million increase in payroll and other personnel-related expenses and a $4.0 million increase in other engineering operating expenses driven by data and infrastructure costs. As a percentage of total revenue, engineering and product development expenses decreased from 46% to 27%.
Current wording
Engineering and product development expenses decreased by $0.9 million, or 1%, for the three months ended September 30, 2025, compared to the same period in 2024. The decrease was primarily due to a $4.6 million decrease in payroll and other personnel-related expenses, partially offset by a $3.7 million increase in other engineering operating expenses driven by data and infrastructure costs. As a percentage of total revenue, engineering and product development expenses decreased from 40% to 23%.
Previous 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%.
Current wording
Engineering and product development expenses increased by $4.3 million, or 2%, for the nine months ended September 30, 2025, compared to the same period in 2024. The increase was primarily due to a $10.4 million increase in other engineering operating expenses driven by data and infrastructure costs, partially offset by a $6.1 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 45% to 26%.
Previous 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%.
Current wording
General, administrative, and other expenses increased by $0.9 million, or 2%, in the three months ended September 30, 2025, compared to the same period in 2024. The increase was primarily due to a $1.0 million increase in payroll and other personnel-related expenses, a $0.9 million increase in office and administrative operating related expenses, a $0.7 million increase in depreciation expenses, and a $0.4 million increase in professional fees, partially offset by a $2.2 million decrease in legal and compliance expenses. As a percentage of total revenue, general, administrative, and other expenses decreased from 37% to 22%.
Previous wording
General, administrative, and other expenses increased by $14.5 million, or 13%, in the six months ended June 30, 2025, compared to the same period in 2024. The increase was primarily due to a $12.1 million increase in payroll and other personnel-related expenses, a $3.5 million increase in office and administrative operating related expenses, a $1.8 million increase in depreciation expenses, and a $1.1 million increase in professional fees, partially offset by a $3.7 million decrease in legal and compliance expenses. As a percentage of total revenue, general, administrative, and other expenses decreased from 43% to 27%.
Current wording
General, administrative, and other expenses increased by $15.4 million, or 9%, in the nine months ended September 30, 2025, compared to the same period in 2024. The increase was primarily due to a $13.0 million increase in payroll and other personnel-related expenses, a $4.4 million increase in office and administrative operating related expenses and office rent and other facility expenses, a $2.5 million increase in depreciation expenses, and a $1.8 million increase in professional fees, partially offset by a $6.3 million decrease in legal and compliance expenses. As a percentage of total revenue, general, administrative, and other expenses decreased from 41% to 25%.
Previous wording
In the six months ended June 30, 2025, other income, net decreased by $0.7 million, or 18%, compared to the same period in 2024, due to a $7.5 million increase in interest expense related to our Notes as a result of issuances of 2029 and 2030 Notes, partially offset by a $5.2 million increase in dividend income and a $1.6 million increase in miscellaneous other income, net.
Current wording
In the three months ended September 30, 2025, other income, net decreased by $4.1 million, or 80%, compared to the same period in 2024, due to a $3.6 million increase in interest expense primarily resulting from the 2029 and 2030 Notes issued in 2024 and the related amortization of issuance costs, and a $1.6 million decrease in miscellaneous other income, net, partially offset by a $1.2 million increase in dividend income.
Previous 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.
Current wording
In the nine months ended September 30, 2025, other income, net decreased by $4.8 million, or 53%, compared to the same period in 2024, due to a $11.2 million increase in interest expense primarily resulting from the 2029 and 2030 Notes issued in 2024 and the related amortization of issuance costs, partially offset by a $6.3 million increase in dividend income earned on higher cash balances.
Previous 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.
Current wording
(1)Borrower acquisition costs were $32.7 million and $67.3 million for the three months ended September 30, 2024 and 2025, respectively, and were $80.8 million and $176.8 million for the nine months ended September 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 $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.
Current wording
(2)Borrower verification and servicing costs were $32.5 million and $43.9 million for the three months ended September 30, 2024 and 2025, respectively, and were $95.8 million and $117.7 million for the nine months ended September 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
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.
Current wording
As of September 30, 2025, our primary source of liquidity was cash and cash equivalents of $489.8 million. We also held $5.0 million of investments in certificates of deposit that mature in December 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
Our convertible senior notes have an aggregate principal balance of $1,230.4 million and bear interest at a rate of 0.25% per year in the case of the 2026 Notes, 2.00% per year in the case of the 2029 Notes, and 1.00% per year in the case of the 2030 Notes, in each case payable semiannually. The 2026 Notes mature on August 15, 2026, the 2029 Notes mature on October 1, 2029, and the 2030 Notes mature on November 15, 2030, in each case unless earlier converted, redeemed, or repurchased in accordance with their terms. Refer to “Note 8. Borrowings” in Part I, Item 1 of this Quarterly Report on Form 10-Q for further details on our Notes.
Current wording
Our convertible senior notes have an aggregate principal balance of $1,687.8 million and bear interest at a rate of 0.25% per year in the case of the 2026 Notes, 2.00% per year in the case of the 2029 Notes, and 1.00% per year in the case of the 2030 Notes, in each case payable semiannually. The 2032 Notes do not bear regular interest. The Notes mature between 2026 to 2032, unless earlier converted, redeemed, or repurchased in accordance with their terms. The 2026 Notes have a principal balance of $66.5 million and are current and due August 2026. Refer to “Note 8. Borrowings” in Part I, Item 1 of this Quarterly Report on Form 10-Q for further details on our Notes.
Previous 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.
Current wording
Our warehouse credit facilities, which mature between December 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 $150.0 million to purchase auto loans. Our risk retention financing facility, which allows us to borrow up to $100.0 million, has a maturity which aligns with the stated maturities of the underlying notes pledged as collateral, which range from 2026 to 2035. As of September 30, 2025, we have drawn an aggregate of $140.5 million on our warehouse credit facilities and $60.7 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 $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.
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 $44.3 million, of which $15.7 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 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.
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 September 30, 2025, the total loan purchase commitment was $113.7 million. The Company also has commitments to fund future advances on HELOCs. As of September 30, 2025, these commitments were $20.5 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 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.
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 September 30, 2025, the Company’s aggregate maximum exposure to losses was $797.3 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 $221.9 million from cash and cash equivalents and up to $7.0 million from restricted cash.
Previous 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.
Current wording
Net cash used in operating activities was $256.3 million for the nine months ended September 30, 2025, which consisted of $278.6 million change in net changes in operating assets and liabilities, net income of $35.0 million, and adjustments for non-cash items of $12.7 million. The decrease in non-cash adjustments was primarily related to $83.4 million of changes in fair value of loans, $33.6 million loan premium amortization, and $7.2 million gain related to the partial extinguishment of the 2026 Notes, partially offset by $99.5 million stock-based compensation expense and $12.8 million changes in fair value of servicing assets primarily as a result of new loans added to the servicing portfolio. The decrease in net changes in operating assets and liabilities was primarily related to $415.6 million of net payments from purchase and sale of loans held-for-sale, $20.9 million decrease in accrued expenses and other liabilities, and $15.7 million of settlements of beneficial interest liabilities, partially offset by $138.5 million in principal payments received for loans held-for-sale, $29.8 million in principal payments received for loans held in consolidated securitization, and $3.8 million of changes in other assets.
Previous 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.
Current wording
Net cash used in investing activities was $308.9 million for the nine months ended September 30, 2025 as a result of $666.0 million of purchases and originations of loans held-for-investment, partially offset by $222.0 million of principal payments received for loans held-for-investment, $94.2 million of proceeds from beneficial interest assets, and $51.2 million of proceeds from sale of loans held-for-investment.
Previous 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.
Current wording
As of September 30, 2025, we held $1,230.0 million of loans on our condensed consolidated balance sheet. $871.3 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 $294.6 million of core personal loans, the majority of which would otherwise be purchased by institutional investors, and $64.1 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 six months ended June 30, 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 during the nine months ended September 30, 2025.
Rearranged previous paragraphs (1)
Previous report — wording carried elsewhere
Interest income, interest expense, and fair value adjustments, net increased $57.6 million, or 437% in the six months ended June 30, 2025, compared to the same period in 2024. The increase was driven by a $68.1 million decrease in unfavorable fair value adjustments and a $7.4 million decrease in interest expense, partially offset by a $17.9 million decrease in interest income. The decrease in unfavorable fair value adjustments is attributable to a