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What changed in Upstart Holdings, Inc.'s 10-K — 2024 vs 2025

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Paragraph-level year-over-year comparison of Upstart Holdings, Inc.'s 2024 and 2025 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2025 report.

+700 added−1281 removedSource: 10-K (2026-02-10) vs 10-K (2025-02-14)

Top changes in Upstart Holdings, Inc.'s 2025 10-K

700 paragraphs added · 1281 removed · 490 edited across 9 sections

Item 1. Business

Business — how the company describes what it does

102 edited+31 added−80 removed35 unchanged
Biggest changeOur goal is to continue expanding our lending partnerships to new participants and deepen our relationships with existing lending partners. 1 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. 7 Table of Contents Institutional investors play an important role in our lending marketplace by providing capital for higher risk loans that may not be economically feasible for traditional banks and credit unions to hold.
Biggest changeInstitutional investors play an important role in our lending marketplace by providing capital for higher risk loans that may not be economically feasible for traditional banks and credit unions to hold.
Over time, in large part due to the rapid and continuing improvements to our models, our ability to offer lower rates than our competitors has improved and we have been able to extend new loan offers to applicants who were previously not eligible or were previously quoted a higher rate.
Over time, in large part due to the rapid and continuing improvements to our models, our ability to offer lower rates than our competitors has improved and we have been able to extend new loan offers to applicants who were previously not eligible or were quoted a higher rate.
Copies of our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to these reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act, are available free of charge on our investor relations website as soon as reasonably practicable after they are electronically filed with, or furnished to, the SEC.
Copies of our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to these reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act, are available free of charge on our investor relations website as soon as reasonably practicable after they are electronically filed with, or furnished to, the SEC.
We have an extremely rigorous recruiting and employee candidate screening process. For example, our machine learning team, responsible for the development and constant improvement of our AI models, is unlike any other that we are aware of in the consumer lending space.
We have an extremely rigorous recruiting and employee candidate screening process. For example, we believe our machine learning team, responsible for the development and constant improvement of our AI models, is unlike any other that we are aware of in the consumer lending space.
Because our lending partners have complete authority and control over their lending programs, they predetermine many aspects of their loan offering, including interest rate and loan size ranges, target returns for various risk profiles, minimum credit score, maximum debt-to-income ratio, fee structures and disclosures. • Servicing —While most lending partners and institutional investors choose to have us service their loans (through a branded servicing portal), each has the option of directly servicing loans itself.
Because our lending partners have complete authority and control over their lending programs, they predetermine many aspects of their loan offerings, including interest rate and loan size ranges, target returns for various risk profiles, minimum credit score, maximum debt-to-income ratio, fee structures, and disclosures. • Servicing —While most lending partners and institutional investors choose to have us service their loans (through a branded servicing portal), each has the option of directly servicing loans itself.
We have secured multiple committed capital and co-investment arrangements with institutional investors, which deliver a significant amount of loan funding to the Upstart marketplace. In these arrangements, we share some of the risk and upside in loan performance relative to our expectations.
We have secured multiple committed capital and co-investment arrangements with institutional investors, which deliver a significant amount of capital to the Upstart marketplace. In these arrangements, we share some of the risk, including the upside, in loan performance relative to our expectations.
We have pass-through certificate programs sponsored by certain financial institutions under which institutional investors can purchase securities collateralized by Upstart-powered loans from an issuer trust. 10 Table of Contents While there are minimal differences between whole loan sales and sales of pass-through certificates from Upstart’s perspective, both programs are offered to provide flexibility to institutional investors in our marketplace.
We have pass-through certificate programs sponsored by certain financial institutions under which institutional investors can purchase securities collateralized by Upstart-powered loans from an issuer trust. 10 Table of Conte nts While there are minimal differences between whole loan sales and sales of pass-through certificates from Upstart’s perspective, both programs are offered to provide flexibility to institutional investors in our marketplace.
In certain circumstances, GLBA requires financial institutions to limit the use and further disclosure of nonpublic personal information by non-affiliated third parties to whom they disclose such information and requires financial institutions to disclose certain privacy policies and practices with respect to information sharing with affiliated and non-affiliated entities.
In certain circumstances, GLBA requires limiting the use and further disclosure of nonpublic personal information by non-affiliated third parties to whom they disclose such information and requires financial institutions to disclose certain privacy policies and practices with respect to information sharing with affiliated and non-affiliated entities.
We believe we compete favorably based on the following competitive factors: • Constantly improving AI models; • Compelling loan offers to consumers that improve regularly; • Automated and user-friendly loan application process; • Cloud-native, multi-tenant architecture; • Combination of technology and customer acquisition for lending partners; • Robust and diverse lending marketplace; and 14 Table of Contents • Brand recognition and trust.
We believe we compete favorably based on the following competitive factors: • Constantly improving AI models; • Compelling loan offers to consumers that improve regularly; • Automated and user-friendly loan application process; • Cloud-native, multi-tenant architecture; • Combination of technology and customer acquisition for lending partners; • Robust and diverse lending marketplace; and • Brand recognition and trust.
From our compensation practices to how we think about talent management and team development to the perks and benefits we invest in, each decision we make and every strategy we build is considered with the lens of ensuring we create a culture that inspires the best work from all employees, and fairly and equitably rewards results from everyone.
From our compensation practices to how we think about talent management and team development to the perks and benefits we invest in, each decision we make and every strategy we build is considered with the lens of ensuring we create a culture that inspires the best work from all employees, and recognizes results fairly and equitably for everyone.
The content of our websites and information that can be accessed through our websites is not incorporated by reference into this Annual Report on Form 10-K or 23 Table of Contents in any other report or document we file with the SEC, and any references to our websites are intended to be inactive textual references only.
The content of our websites and information that can be accessed through our websites is not incorporated by reference into this Annual Report on Form 10-K or in any other report or document we file with the SEC, and any references to our websites are intended to be inactive textual references only.
The majority of the members of this team have doctorate 22 Table of Contents degrees in statistics, mathematics, computer science, economics or physics and many have extensive past experience in quantitative finance. Culture The Upstart culture is central to our talent advantage and we have carefully and thoughtfully built it as we have grown.
The majority of the members of this team have doctorate degrees in statistics, mathematics, computer science, economics or physics and many have extensive past experience in quantitative finance. Culture The Upstart culture is central to our talent advantage and we have carefully and thoughtfully built it as we have grown.
Within the construct of each lender’s self-defined lending program, our platform enables the origination of conforming and compliant loans at a low per-loan cost. Our Ecosystem Our ecosystem includes consumers, banks, credit unions and auto dealers, as well as institutional investors who purchase Upstart-powered loans directly or invest in securities issued by our pass-through and securitization programs.
Within the construct of each lender’s self-defined lending program, our platform enables the origination of conforming and compliant loans at a low per-loan cost. Our Ecosystem Our ecosystem includes consumers and auto dealers, along with banks, credit unions and institutional investors who purchase Upstart-powered loans directly or invest in securities issued by our pass-through and securitization programs.
Federal Trade Commission Act Under Section 5 of the Federal Trade Commission Act, we and our lending partners are prohibited from engaging in unfair and deceptive acts and practices, or UDAP.
Federal Trade Commission Act Under Section 5 of the Federal Trade Commission Act, we and our lending partners are prohibited from engaging in unfair or deceptive acts or practices (“UDAP”).
We believe that these employee benefits, combined with competitive salaries and an equity program that grants restricted stock units to all full-time employees, have ensured that we remain a top employer in our industry. As of December 31, 2024, we had 1,193 full-time employees. We also engage temporary employees, contractors and consultants as needed to support our operations.
We believe that these employee benefits, combined with competitive salaries and an equity program that grants restricted stock units to all full-time employees, have ensured that we remain a top employer in our industry. As of December 31, 2025, we had 1,405 full-time employees. We also engage temporary employees, contractors and consultants as needed to support our operations.
Our growth and marketing initiatives are primarily focused on bringing potential borrowers to Upstart.com, where they can learn if they qualify for a loan from one of our lending partners and the terms of the loan offer in only a few minutes. Our customer acquisition channels combine a mix of online and offline, as well as paid and unpaid, channels.
Our growth and marketing initiatives are primarily focused on bringing potential borrowers to Upstart.com, where they can learn if they qualify for a loan and the terms of the loan offer in only a few minutes. Our customer acquisition channels combine a mix of online and offline, as well as paid and unpaid, channels.
As a result, we can develop our business and our AI models faster than if we relied only on the funding capacity of our lending partners. The combination of lending partner and institutional investor funding provides our lending marketplace with competitive and diverse capital.
As a result, we can develop our business and our AI models faster than if we relied only on the funding capacity of our lending partners. The combination of lending partners and institutional investors provides our lending marketplace with competitive and diverse capital.
This process allows our lending partners to leverage our technology within the scope of their existing underwriting policies. Loan volumes exceeding lending partners’ funding capacity or risk tolerance can be flowed through our marketplace and sold to our network of institutional investors, which have a broader and more diverse appetite for risk.
This process allows our lending partners to leverage our technology within the scope of their existing underwriting policies. Loan volumes exceeding lending partners’ funding capacity or risk tolerance can be sold through our marketplace to our network of institutional investors with a broader and more diverse appetite for risk.
Federal Marketing Regulations The Telephone Consumer Protection Act, or TCPA, and similar state laws, generally prohibits robocalls, including those calls made using an auto-dialer or prerecorded or artificial voice calls made to a wireless telephone without the prior express consent of the called party (or prior express written consent, if messages constitute telemarketing).
Federal Marketing Regulations The Telephone Consumer Protection Act (“TCPA”) and similar state laws generally prohibit robocalls, including those calls made using an auto-dialer or prerecorded or artificial voice calls made to a wireless telephone without the prior express consent of the called party (or prior express written consent, if messages constitute telemarketing).
RESPA also prohibits specific practices, such as kickbacks, and places limitations upon the use of escrow accounts. It further requires disclosures for mortgage escrow accounts at closing and annually thereafter, itemizing the charges to be paid by the borrower and what is paid out of the account by the servicer.
RESPA also prohibits specific practices, such as kickbacks, and places limitations upon 17 Table of Conte nts the use of escrow accounts. It further requires disclosures for mortgage escrow accounts at closing and annually thereafter, itemizing the charges to be paid by the borrower and what is paid out of the account by the servicer.
A “raw” variable is a non-combined, conceptually distinct unit of data, such as “applicant-reported savings.” A “combined” variable is data that has been transformed, combined, or otherwise engineered from a raw variable or set of raw variables, such as “applicant-reported savings” divided by “loan amount.” 8 Table of Contents Model Applications While our first model focused on predicting the likelihood of loan default, we have since applied models throughout the process of credit origination.
A “raw” variable is a non-combined, conceptually distinct unit of data, such as “applicant-reported savings.” A “combined” variable is data that has been transformed, combined, or otherwise engineered from a raw variable or set of raw variables, such as “applicant-reported savings” divided by “loan amount.” 8 Table of Conte nts Model Applications While our first model focused on predicting the likelihood of loan default, we have since applied models across the entire process of credit origination.
For our asset-backed securitizations, we engage with investment banks to structure transactions under which we and/or certain of the purchasers of whole loans or pass-through certificates described in the preceding paragraphs sell pools of whole loans to a bankruptcy-remote special purpose entity.
For our asset-backed securitizations, we engage with investment banks to structure transactions under which we and/or certain of the purchasers of whole loans or pass-through certificates sell pools of whole loans to a bankruptcy-remote special purpose entity.
Further, we are subject to inspections, examinations, supervision and regulation by applicable agencies in each state in which we are licensed to broker, purchase, and or service loans. Regulatory oversight of our business may change over time.
Further, we are subject to inspections, examinations, supervision and regulation by applicable agencies in each state in which we are licensed to originate (in the case of HELOC), broker, purchase, and/or service loans. Regulatory oversight of our business may change over time.
The ability to analyze an individual’s credit data to target and mail prescreened offers of credit gives this channel a meaningful data advantage over other channels. • Organic traffic —As our brand recognition and reputation grow, an increasing number of potential borrowers come directly to Upstart.com. • Email marketing —We have an automated email program that sends customized messages and reminders to potential borrowers once they have created accounts to encourage them to complete their loan application. • Online advertising —Search engines and social channels enable targeted outreach to potential borrowers with specific messages.
The ability to analyze an individual’s credit data to target and mail prescreened offers of credit gives this channel a meaningful data advantage over other channels. • Email marketing —We have an automated email program that sends customized messages and reminders to potential borrowers once they have created accounts to encourage them to complete their loan application. • Organic traffic —As our brand recognition and reputation grow, an increasing number of potential borrowers come directly to Upstart.com.
Fair Credit Reporting Act The federal Fair Credit Reporting Act, or FCRA, as amended by the Fair and Accurate Credit Transactions Act, implemented by Regulation V, promotes the accuracy, fairness, and privacy of information in the files of consumer reporting agencies.
Fair Credit Reporting Act The Fair Credit Reporting Act (“FCRA”), as amended by the Fair and Accurate Credit Transactions Act, implemented by Regulation V, promotes the accuracy, fairness, and privacy of information in the files of consumer reporting agencies.
As of December 31, 2024, we had four patents issued and four patent applications in the United States related to our proprietary risk model and data engineering. We may file additional patent applications or pursue additional patent protection in the future to the extent we believe it will be beneficial.
As of December 31, 2025, we had four patents granted and six patent applications pending in the United States related to our proprietary risk model and data engineering. We may file additional patent applications or pursue additional patent protection in the future to the extent we believe it will be beneficial.
This broad ecosystem allows participants to access and benefit from our products in a variety of ways, which leads to broader adoption of our AI lending solutions. Consumers On the consumer side, we have built a mobile app and a mobile-responsive website application to aggregate demand on Upstart.com, where consumers are presented with offers from our lending partners.
This broad ecosystem allows participants to access and benefit from our products in a variety of ways, which can lead to broader adoption of our AI lending solutions. Consumers On the consumer side, we have built a mobile app and a mobile-responsive website (together, our “platform”) to aggregate demand on Upstart.com, where consumers are presented with loan offers.
We continue to invest in expansion of our product offerings. 11 Table of Contents • Access to capital markets —We have built a broad network of institutional investors who provide loan funding through purchases of whole loans, pass-through certificates and asset-backed securitizations.
We continue to invest in expansion of our product offerings. • Access to capital markets —We have built a broad and deep network of institutional investors who provide capital through purchases of whole loans, pass-through certificates, and asset-backed securitizations.
Value Proposition to Lending Partners and Institutional Investors • Competitive digital lending experience —We provide banks and credit unions with a cost effective way to compete with the technology budgets of their competitors. • Expanded customer base —We refer customers that apply for loans through Upstart.com to our lending partners, helping them grow both loan volumes and number of customers. • Upstart referral network —Once we aggregate consumer demand on our website, we pass those customers to our lending partners. • Flexible configurations —We built a configurable lending solution designed to meet the needs of our lending partners.
Value Proposition to Lending Partners and Institutional Investors • Competitive digital lending experience —We provide banks and credit unions with a cost-effective way to compete more effectively with competitors who have greater technology budgets. • Expanded borrower base —We refer borrowers that apply for loans through Upstart.com to our lending partners, helping them grow both loan volumes and number of borrowers. • Upstart referral network —Once we aggregate consumer demand on our platform, we pass those borrowers to our lending partners. • Flexible configurations —We built a configurable lending solution designed to meet the needs of our lending partners.
Electronic Signatures in Global and National Commerce Act The federal Electronic Signatures in Global and National Commerce Act, or ESIGN, and similar state laws, particularly the Uniform Electronic Transactions Act, or UETA, authorize the creation of legally binding and enforceable agreements utilizing electronic records and signatures.
Electronic Signatures in Global and National Commerce Act The federal Electronic Signatures in Global and National Commerce Act (“ESIGN”) and similar state laws, particularly the Uniform Electronic Transactions Act (“UETA”), authorize the creation of legally binding and enforceable agreements utilizing electronic records and signatures.
Our network of institutional investors includes investors that buy whole loans originated via Upstart’s platform, as well as investors that buy securities, such as pass-through certificates. We are typically retained by participating institutional investors to service the loans we help originate.
Our network of institutional investors includes investors that purchase whole loans originated via Upstart’s platform, as well as investors that purchase securities, such as pass-through certificates. We are typically retained by institutional investors to service the loans originated on our platform.
Competition Consumer lending is a vast and competitive market, and we compete in varying degrees with all other sources of unsecured and secured consumer credit, including banks, non-bank lenders (including retail-based lenders) and other financial technology lending platforms.
We also perform collections agency onsite audits annually. Competition Consumer lending is a vast and competitive market, and we compete in varying degrees with all other sources of unsecured and secured consumer credit, including banks, non-bank lenders (including retail-based lenders), and other financial technology lending platforms.
In the year ended December 31, 2024, our top three lending partners collectively originated 82% of the loans facilitated through our marketplace and revenue from fees received from these lending partners accounted for 63% of our total revenue.
In the year ended December 31, 2025, our top three lending partners collectively originated 83% of the loans facilitated through our marketplace and revenue from fees received from these lending partners accounted for 61% of our total revenue.
Personal loans are one of the fastest-growing segments of credit in the U.S. and auto financing is the second largest segment of consumer lending. Our platform helps lenders provide a product their customers want, rather than letting customers seek loans from competitors.
Personal loans are one of the fastest-growing segments of credit in the U.S. while home lending is the largest segment of consumer lending, followed by auto financing. Our platform helps lenders provide a product their borrowers want, rather than letting borrowers seek loans from competitors.
The currently active AI models within the Upstart platform—shared by and available to all Upstart’s lending partners—include: • Acquisition targeting —identifies consumers likely to qualify for and have need for a loan; • Loan stacking —identifies consumers likely to take out multiple loans in a short period of time; • Time-delimited prepayment prediction —quantifies the likelihood that a consumer will fully prepay a loan earlier than originally scheduled; • Income fraud —quantifies the risk of potential misrepresentation of borrower income; • Identity fraud —quantifies the risk that an applicant is misrepresenting their identity; • Time-delimited default prediction —quantifies the likelihood of default for each period of the loan term; and • Servicing —identifies borrowers to prioritize for servicing outreach, allowing for customized intervention and improved servicing efficiency.
Currently active AI models within the Upstart platform include: • Acquisition targeting —identifies consumers likely to qualify for and have need for a loan; • Loan stacking —identifies consumers likely to take out multiple loans in a short period of time; • Time-delimited prepayment prediction —quantifies the likelihood that a consumer will fully prepay a loan earlier than originally scheduled; • Income fraud —quantifies the risk of potential misrepresentation of borrower income; • Identity fraud —quantifies the risk that an applicant is misrepresenting their identity; and • Time-delimited default prediction —quantifies the likelihood of default for each period of the loan term.
All loans feature a monthly repayment schedule and no prepayment penalty. 9 Table of Contents Value Proposition to Consumers • Higher approval rates and lower interest rates —An internal study, conducted and published in 2024, compared our personal loan AI model to that of a traditional underwriting credit score-based model.
All loans feature a monthly repayment schedule and no prepayment penalty. 9 Table of Conte nts Value Proposition to Consumers • Best rates —An internal study, conducted and published in 2025, compared our personal loan AI model to that of a traditional underwriting credit score-based model.
As of December 31, 2024, we had more than 100 lending partners. Our lending partners retain loans that align with their business and risk objectives. Because lenders vary with respect to program objectives, risk tolerance and funding capacity, program parameters can vary significantly across different lenders. Lending partners have access to an administrative interface for reporting and program management.
As of December 31, 2025, we had more than 100 lending partners. Our lending partners retain loans that align with their business and risk objectives. Because lenders vary with respect to program objectives, risk tolerance and funding capacity, program parameters can vary significantly across different lenders.
Real Estate Settlement Procedures Act The Real Estate Settlement Procedures Act, or RESPA, and Regulation X, its implementing regulation, requires lenders and servicers of home loans to provide borrowers with pertinent and timely disclosures regarding the nature and costs of the real estate settlement process.
Real Estate Settlement Procedures Act The Real Estate Settlement Procedures Act (“RESPA”) and Regulation X require lenders and servicers of home loans to provide borrowers with pertinent and timely disclosures regarding the nature and costs of the real estate settlement process.
We announce material information to the public about us, our products and services and other matters through a variety of means, including filings with the SEC, press releases, public conference calls, webcasts, the investor relations section of our website (ir.upstart.com), in order to achieve broad, non-exclusionary distribution of information to the public and for complying with our disclosure obligations under Regulation FD. 24 Table of Contents
We announce material information to the public about us, our products and services and other matters through a variety of means, including filings with the SEC, press releases, public conference calls, webcasts, the investor relations (ir.upstart.com) and newsroom (upstart.com/news) sections of our website, and our X (formerly known as Twitter) account @Upstart, in order to achieve broad, non-exclusionary distribution of information to the public and for complying with our disclosure obligations under Regulation FD. 20 Table of Conte nts
CAN-SPAM also requires the sender of emails set for a commercial purpose to provide a functioning mechanism that allows the recipient to opt-out of receiving future commercial e-mail messages from the sender of such messages. Our email communications with all consumers are formulated to comply with the CAN-SPAM Act.
CAN-SPAM also requires the sender of emails set for a commercial purpose to provide a functioning mechanism that allows the recipient to opt-out of receiving future commercial e-mail messages from the sender of such messages.
Borrower applications that meet a lender’s hard credit criteria are then assessed by a pricing model which takes into account the output of the Upstart risk scoring model in addition to additional pricing requirements set by lenders, such as target return objectives and maximum allowable APR limits.
Borrower applications that meet a lender’s hard credit criteria are then assessed by Upstart’s underwriting model for default and prepayment probabilities, after which a pricing engine takes into account the underwriting model output in addition to pricing requirements set by lenders, such as target return objectives and maximum allowable APR limits.
For more information regarding the various federal and state laws and regulations to which we are subject or may become subject, see Item 1A. “ Risk Factors ” of this Annual Report on Form 10-K.
Below, we summarize several of the material federal and state lending, servicing and consumer protection related laws applicable to our business. For more information regarding the various federal and state laws and regulations to which we are subject or may become subject, see Item 1A. “ Risk Factors ” of this Annual Report on Form 10-K.
Credit ratings are often publicly available, which help institutional investors and lending partners gain confidence in Upstart-powered loans. • Insights into changes in the economy —In 2023, we introduced UMI, which estimates the impact of the macroeconomy on credit performance for Upstart-powered unsecured personal loans and helps our lending partners and institutional investors better understand and account for the effect that macroeconomic conditions have on our credit performance.
Credit ratings are often publicly available, which help institutional investors and lending partners gain confidence in Upstart-powered loans. • Insights into changes in the economy —In 2023, we introduced the Upstart Macro Index (“UMI”), which estimates the impact of the macroeconomy on credit performance for Upstart-powered unsecured personal loans.
This team focuses on the minority of borrowers whose applications are not entirely automated or any applicant who has questions or issues throughout the application process, while expediting the approval process to the extent possible, and identifying and rejecting fraudulent applications. Our operations team works closely with our engineering and machine learning teams to further increase our levels of automation.
This team focuses on the small minority of borrowers whose applications are not entirely automated or any applicant who has questions or issues throughout the application process, while expediting the approval process to the extent possible, and identifying and rejecting fraudulent applications.
Fair Debt Collection Practices Act The federal Fair Debt Collection Practices Act, or FDCPA, and Regulation F, its implementing regulation, provide guidelines and limitations on the conduct of certain debt collectors in connection with the collection of consumer debts.
Fair Debt Collection Practices Act The federal Fair Debt Collection Practices Act (“FDCPA”) and Regulation F, provide guidelines and limitations on the conduct of certain debt collectors in connection with the collection of consumer debts, specifically establishing standards for abusive, deceptive or unfair collection practices.
We continue our work on expanding our relationships with institutional investors to deliver capital to our marketplace. • Continuous engagement with rating agencies —Upstart-powered personal loans are analyzed by credit rating agencies and are subject to significant and constant scrutiny from experts.
We have continued our work to expand our relationships with institutional investors to deliver greater and more diverse capital to our marketplace. 11 Table of Conte nts • Continuous engagement with rating agencies —Upstart-powered personal loans are analyzed by credit rating agencies and are subject to significant and constant scrutiny from experts.
In addition to the CFPB, the Federal Trade Commission has jurisdiction to investigate aspects of our business, including with respect to marketing practices. Other state and federal agencies, including prudential bank regulators, state departments of financial institutions, and state attorneys general have the ability to regulate aspects of our business directly or through our lending partners.
In addition, the Federal Trade Commission (“FTC”) has jurisdiction to investigate aspects of our business. Other state and federal agencies, including prudential bank regulators, state regulatory bodies, and state attorneys general have the ability to regulate aspects of our business 14 Table of Conte nts directly or through our lending partners.
Results from the study showed that our AI model approves 101% more borrowers and yields 38% lower average APR for approved loans. • Superior digital experience —Whether consumers apply for a loan through Upstart.com or directly through a lending partner’s website, the application experience is streamlined into a single application process and the loan offers provided are firm.
Results from the study showed that our AI model approves 43% more borrowers and yields 33% lower average APR for approved loans. • Best process —When consumers apply for a loan through our platform, the application experience is streamlined into a single process and the loan offers provided are firm.
In addition to compliance with federal laws, transfers performed by ACH electronic transfers are subject to detailed timing and notification rules and guidelines administered by the National Automated Clearinghouse Association, or NACHA. All transfers of funds related to our operations conform to the EFTA, its regulations and NACHA guidelines.
In addition to compliance with federal laws, transfers performed by ACH electronic transfers are subject to detailed timing and notification rules and guidelines administered by the National Automated Clearinghouse Association (“NACHA”).
We may be subject to third party claims from time to time with respect to our intellectual property. Additionally, we rely upon unpatented trade secrets and confidential know-how and continuing technological innovation to develop and maintain our competitive position. We also enter into confidentiality and intellectual property rights agreements with our employees, consultants, contractors and business partners.
We may be subject to third party claims from time to time with respect to our intellectual property. 18 Table of Conte nts Additionally, we rely upon unpatented trade secrets and confidential know-how and continuing technological innovation to develop and maintain our competitive position.
For example, while earlier versions of our models were centered on logistic regression and Monte Carlo simulations, our more recent models incorporate neural networks, Bayesian hyperparameter optimization, and gradient boosting.
Modeling Techniques Growth in our training data has enabled the development of increasingly sophisticated modeling techniques. For example, while earlier versions of our models were centered on logistic regression and Monte Carlo simulations, our more recent models incorporate neural networks, gradient boosting, Markov Chain modeling, and Bayesian hyperparameter optimization.
ESIGN and UETA require businesses that want to use electronic records or signatures in consumer transactions to get affirmative consent from consumers to receive or sign electronically any documents otherwise required by law to be “in writing”.
ESIGN and UETA require businesses that want to use electronic records or signatures in consumer transactions to get affirmative consent from consumers to receive 16 Table of Conte nts or sign electronically any documents otherwise required by law to be “in writing.” The law establishes standards for obtaining and documenting such consent and delivery of required notices.
Employees in eligible roles (which comprise the majority of our full-time roles) can work from anywhere in the United States, including in one of our five offices in Austin, Texas; Columbus, Ohio; New York, New York; or San Mateo, California.
Digital First Approach In 2020, we shifted our talent location strategy to one that focused on “digital” work first. Employees in eligible roles (which comprise the majority of our full-time roles) can work from anywhere in the United States and Canada, including in one of our offices in Austin, Texas; Columbus, Ohio; New York, New York; or San Mateo, California.
Prior to referring a consumer to an affiliate, RESPA requires the person making each referral to provide each person to whom business is referred an Affiliated Business Arrangement Disclosure Statement.
Prior to referring a consumer to an affiliate, RESPA requires the person making each referral to provide each person to whom business is referred an Affiliated Business Arrangement Disclosure Statement. Our policies are designed to support compliance with the provisions of RESPA that apply to our HELOC product.
HELOCs range from $26,000 to $250,000, at APRs up to 18.0%, with terms of 10 or 15 years.
Auto loans range from $3,000 to $60,000 in size, at APRs up to 29.99%, with terms ranging from two to seven years. HELOCs range from $26,000 to $250,000, at APRs up to 18.0%, with terms of 10 or 15 years.
We believe these are the key components to achieve both high growth rates and profitability over time. Our AI Lending Models Our AI models are central to our value proposition and unique position in the industry.
We believe these are the key components to achieve both high growth rates and profitability over time. Our AI Lending Models Our AI models are central to our value proposition for consumers and capital partners and are an important source of competitive differentiation.
Federal Trade Commissions’s Consumer Claims and Defenses Rule The Federal Trade Commission’s Consumer Claims and Defenses Rule, otherwise known as the Holder Rule, requires a seller to include a specific notice in every consumer credit contract informing consumers of their right to assert against the assignee of credit contracts, certain claims the consumer may have against the originator of a credit contract (such a dealer as the originating creditor in auto retail installment sales contracts).
The Holder Rule is designed to protect consumers that purchase goods or services with credit arranged by the seller or its assignee by requiring the seller to include a specific notice in every consumer credit contract informing consumers of their right to assert against the assignee of credit contracts, certain claims the consumer may have against the originator of a credit contract (such a dealer as the originating creditor in auto retail installment sales contracts).
The CFPB engages in consumer financial education, requests data and promotes the availability of financial services to underserved customers and communities. The CFPB has regulatory and enforcement powers over most providers of consumer financial products and services through the laws it enforces, including us.
Under the law, the CFPB has regulatory and enforcement powers over most providers of consumer financial products and services through the laws it enforces, including us.
Lending Partners and Institutional Investors On the loan funding side, we target a wide range of small, medium, and large lending partners with an appetite to invest in improved underwriting and digital originations.
This includes increasing the accuracy of our verification and fraud detection models to reduce human involvement, and removing inefficient or unnecessary processes and procedures. Lending Partners and Institutional Investors On the loan funding side, we target a wide range of small, medium, and large lending partners with an appetite to invest in improved underwriting and digital originations.
FCRA requires a permissible purpose to obtain a consumer credit report and requires that persons who report loan payment information to credit bureaus do so accurately and timely resolve disputes regarding reported information. FCRA also imposes disclosure requirements on creditors who take adverse action on credit applications based on information contained in a credit report.
The law requires a permissible purpose to obtain a consumer credit report and requires that persons who report loan payment information to credit bureaus do so accurately and timely resolve disputes regarding reported information.
Over time, we have been able to deploy and blend more sophisticated modeling techniques, leading to a more accurate system. This co-dependency presents a challenge to others who may aim to short-circuit the development of competitive models.
Over time, we have been able to deploy increasingly sophisticated modeling techniques, leading to a more accurate system. This co-dependency presents a challenge to others who may aim to short-circuit the development of competitive models. While incumbent lenders may have vast quantities of historical repayment data, their training data lacks the hundreds of non-traditional variables that power our models.
Servicing Operations Upstart-powered loans, with the exception of HELOCs, are serviced via our homegrown platform. For borrowers who miss payments, we focus on early intervention and attempt to reach them via emails, calls, texts, and mail to help bring their account current or offer hardship options in accordance with the creditor’s servicing policies.
For borrowers who miss payments, we focus on early intervention and attempt to reach them via emails, calls, texts, and mail to help bring their account current or offer hardship options in accordance with the creditor’s servicing policies. We also use AI, including agentic AI, to help with customized servicing interventions and improved servicing efficiency throughout the loan lifecycle.
The Federal Controlling the Assault of Non-Solicited Pornography and Marketing, or CAN-SPAM, Act applies to commercial messages and makes it unlawful to send electronic mail messages that contain false or deceptive information, among other requirements.
In addition, the FTC Telemarketing Sales Rule implements the FTC’s Do-Not-Call Registry and imposes numerous other requirements and limitations in connection with telemarketing. The Federal Controlling the Assault of Non-Solicited Pornography and Marketing (“CAN-SPAM”) Act applies to commercial messages and makes it unlawful to send electronic mail messages that contain false or deceptive information, among other requirements.
Our operations teams, including credit analysts, fraud specialists, customer support, payments specialists, and supporting services (like quality assurance and training) work to deliver a seamless user experience to consumers on behalf of our lending partners. 13 Table of Contents Loan Origination Operations While verification is primarily and increasingly handled by our software and AI models, we also offer Upstart-designed tools to guide credit analysts and fraud specialists in cases where our software is not yet able to sufficiently verify borrower information.
Loan Origination Operations While verification is primarily and increasingly handled by our software and AI models, we also offer Upstart-designed tools to guide credit analysts and fraud specialists in cases where our software is not yet able to sufficiently verify borrower information.
Machine Learning Platform In order to support innovation in our underwriting, fraud detection and acquisition models, we have developed proprietary technologies to enable our machine learning team to develop, train, test and deploy new model updates with minimal engineering support.
Machine Learning Platform In order to support innovation in our models, we have developed proprietary technologies to enable our machine learning team to develop, train, test and deploy new model updates with minimal engineering support. Our backend systems are designed to flexibly integrate with multiple third-party data sources to feed these models and support real-time decisioning.
As our business continues recovering from the macro-economic challenges we encountered over the last couple of years, our employees remain engaged and inspired by our mission; retention of our top talent is as high as it has been since we went public in 2020. We brought together a remarkable diversity of thinkers to build Upstart.
We have received best place to work awards in both our San Mateo and Columbus locations, and our employees remain engaged and inspired by our mission; retention of our top talent is as high as it has been since we went public in 2020. We brought together a remarkable diversity of thinkers to build Upstart.
We charge our lending partners platform and referral fees at origination and the agreements with our lending partners may contain minimum fee amounts. We also earn loan servicing revenue from contracts with lending partners and institutional investors. As a usage-based platform, we target positive unit economics on each transaction, leading to a cash efficient business model with high margins.
We view the roles of these entities as largely interchangeable and value the resilience enabled by having a network of available lending partners. We also earn loan servicing revenue from contracts with lending partners and institutional investors. As a usage-based platform, we target positive unit economics on each transaction, leading to a cash efficient business model with high margins.
In the case of whole loan purchasers, we typically enter into loan purchase agreements and loan servicing agreements with such purchasers. Institutional investors may also purchase interests in loans originated via Upstart’s platform in the form of pass-through certificates.
In the case of whole loan purchasers, we typically enter into loan purchase agreements and loan servicing agreements with such purchasers.
We continue to provide flexible “wellness” and “productivity” budgets allowing our diverse population of employees to spend in ways that will be most useful for them.
We see this as central to our brand as an employer, and to attracting the types of employees that will be passionate about our mission to serve borrowers. We continue to provide flexible wellness and productivity budgets allowing our diverse population of employees to spend in ways that will be most useful for them.
Our lending partner reporting portal provides our lending partners with a centralized console to view real time performance metrics of their lending program, view and verify their credit policy and program configuration, and on-demand access to operational reports and documents.
Our lending partner reporting portal provides our lending partners with a centralized console to view daily performance metrics for their lending programs, review and verify their credit policy and program configuration, and access operational reports and documents on demand. 12 Table of Conte nts Consumer Marketing Our growth and marketing approach is driven by the strength of our product and the interest rates we offer.
As of December 31, 2024, out of the total principal of loan originations facilitated on our marketplace in 2024, 65% were purchased by institutional investors, 25% were retained by our lending partners, and 10% were held on our balance sheet.
During the year ended December 31, 2025, out of the total principal of loan originations facilitated on our marketplace, 64% were purchased by institutional investors, 26% were retained or purchased by our lending partners, and 10% were held on our balance sheet. Investors may also invest in securities collateralized by Upstart-powered loans through our pass-through and securitization programs.
Most prospective borrowers and applicants interact with Upstart via our online platform and help center, but we also make agent-based support readily available to all borrowers. For phone support, we partner with external call center vendors and have a team of dedicated Upstart agents with specialized training.
Our operations team works closely with our engineering and machine learning teams to further increase our levels of automation. Most prospective borrowers and applicants interact with Upstart via our online platform and help center, but we also make agent-based support readily available to all borrowers.
Further, 16 Table of Contents the Federal Trade Commission’s Safeguards Rule requires us to develop, implement and maintain a written comprehensive cybersecurity program containing safeguards that are appropriate for the size and complexity of our business. Accordingly, we publish our privacy policies and terms of service, which describe our practices concerning the use, transmission, and disclosure of information.
Further, the Federal Trade 15 Table of Conte nts Commission’s Safeguards Rule requires us to develop, implement, and maintain a written, comprehensive cybersecurity program containing safeguards appropriate to the size and complexity of our business.
We also perform fairness testing on our models to help satisfy lending partners’ regulatory obligations. Our lending partners control their programs when originating loans through our platform and do not solely rely on our models alone. Each lending partner sets and approves its own underwriting policy that establishes certain credit underwriting requirements determined by the lending partner.
Lending partners have access to reporting and other tools to manage their platform usage and portfolio. We also perform fairness testing on our models to help satisfy lending partners’ regulatory obligations. Our lending partners control their programs when originating loans through our platform and do not solely rely on our models.
Unfortunately, because these legacy credit systems fail to accurately identify and quantify risk, millions of creditworthy individuals are left out of the system, and millions more pay too much to borrow money. Upstart AI remakes the lending process. We leverage AI to more accurately quantify the true risk of a loan.
While FICO is rarely the only input in a lending decision, most lenders use simple rules-based systems that consider only a limited number of variables. Unfortunately, because these legacy credit systems fail to accurately identify and quantify risk, millions of creditworthy individuals are left out of the system, and millions more pay too much to borrow money.
The federal Gramm-Leach-Bliley Act, or GLBA, and Regulation P, its implementing regulation, include limitations on financial institutions’ disclosure of nonpublic personal information about a consumer to non-affiliated third parties.
The collection, use, and protection of this data are subject to the federal Gramm-Leach-Bliley Act (“GLBA”), and Regulation P, including limitations on disclosure of nonpublic personal information to non-affiliated third parties.
Culture and Workforce We have built a very special company culture at Upstart. Building the best place for top talent to do great work has been a priority for us from day one. We have received best place to work awards in both our San Mateo and Columbus locations.
For additional information about our intellectual property and associated risks, see Item 1A. “ Risk Factors ” of this Annual Report on Form 10-K. Culture and Workforce We have built a very special company culture at Upstart. Building the best place for top talent to do great work has been a priority for us from day one.
Equal Credit Opportunity Act The Equal Credit Opportunity Act, or ECOA, prohibits creditors from discriminating against credit applicants on the basis of race, color, sex, age (provided that the applicant has the capacity to enter into a binding contract), religion, national origin, marital status, the fact that all or part of the applicant’s income derives from any public assistance program, or the fact that the applicant has in good faith exercised any right under the federal Consumer Credit Protection Act or certain state laws.
Equal Credit Opportunity Act The Equal Credit Opportunity Act (“ECOA”) and Regulation B prohibit discrimination in any aspect of a credit transaction on the basis of race, color, religion, national origin, sex, marital status, age (provided the applicant has the capacity to contract), receipt of public assistance income, or the good-faith exercise of rights under the Consumer Credit Protection Act.
Federal Securities Regulations Securities Act Upstart and certain of our subsidiaries have relied on Section 4(a)(2) of the Securities Act for placement of asset-backed securities directly to investors or to investment bank initial purchasers, which have relied on Rule 144A and Regulation S exemptions from registration to place such asset-backed securities to qualified institutional buyers and non-U.S. investors, respectively.
Asset-backed securities issued in connection with our loan financing activities have been offered pursuant to exemptions from registration under the Securities Act, including Section 4(a)(2), with placement by initial purchasers relying on Rule 144A and Regulation S to qualified institutional buyers and non-U.S. investors.
Employee Benefits In addition to providing competitive benefits like fully paid health insurance, life insurance and disability, flexible time off for our salaried employees, and fully paid parental leave, we invest in benefits that will provide financial flexibility and financial wellness for our employees - we see this as central to our brand as an employer, and to attracting the types of employees that will be passionate about our mission to serve borrowers.
This flexible approach gives Upstart the best of both worlds: meaningful in-person collaboration and team building, along with access to diverse talent across the country. 19 Table of Conte nts Employee Benefits In addition to providing competitive benefits like fully paid health insurance, life insurance and disability, flexible time off for our salaried employees, and fully paid parental leave, we invest in benefits that will provide financial flexibility and financial wellness for our employees.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeSUMMARY OF RISK FACTORS The material risks that may affect our business, financial condition or results of operations include, but are not limited to, those relating to the following: • Our business has been and will continue to be adversely affected by economic conditions and other factors that we cannot control. • If we are unable to maintain diverse and resilient loan funding to our marketplace from institutional investors or successfully manage risks associated with committed capital and other co-investment arrangements, our growth prospects, business, financial condition and results of operations could be adversely affected. • If we are unable to continue to improve our AI models or if our AI models contain errors or are otherwise ineffective, our growth prospects, business, financial condition and results of operations would be adversely affected. • If our AI models do not accurately reflect the impact of economic conditions on borrowers’ credit risk in a timely manner, the performance of Upstart-powered loans may be worse than anticipated and our AI models may be perceived as ineffective. • If we are unable to approve a significant number of borrowers for loans through our marketplace, our growth prospects, business, financial condition and results of operations would be adversely affected. • If our existing lending partners cease or limit their participation in our marketplace or if we are unable to attract new lending partners to our marketplace, our business, financial condition and results of operations will be adversely affected. • We have a relatively limited operating history, which may result in increased risks, uncertainties, expenses and difficulties, and makes it difficult to evaluate our future prospects. • If we are unable to manage the risks associated with the Upstart Macro Index (UMI), which we introduced in 2023 and which does not have a long history or proven track record, our credibility, reputation, business, financial condition and results of operations could be adversely affected. • We have incurred net losses, and we may not be able to achieve profitability in the future. • If we are unable to manage risks associated with the loans on our balance sheet, our business, financial condition and results of operations may be adversely affected. • Our revenue growth rate and financial performance in the past may not be indicative of future performance. • Our quarterly results are likely to fluctuate and as a result may adversely affect the trading price of our common stock. 25 Table of Contents • Our loan funding arrangements with institutional investors, securitization programs and warehouse credit facilities expose us to certain risks, and if we fail to successfully manage such risks, it may result in the reduced supply of loan funding capital or require us to seek more costly or less efficient financing for our marketplace. • Our top three lending partners account for a significant portion of loan originations on our marketplace and our revenue. • Our reputation and brand are important to our success, and if we are unable to continue developing our reputation and brand, our ability to retain existing and attract new lending partners, our ability to attract borrowers to our marketplace, our ability to maintain diverse and resilient loan funding and our ability to maintain and improve our relationship with regulators of our industry could be adversely affected. • Our business is subject to a wide range of laws and regulations, many of which are evolving, and failure or perceived failure to comply with such laws and regulations could harm our business, financial condition and results of operations. • If we are unable to manage the risks related to our loan servicing and collections obligations, our business, financial condition and results of operations could be adversely affected. • Substantially all of our revenue is derived from a single loan product, and we are thus particularly susceptible to fluctuations in the unsecured personal loan market. • The sales and onboarding process of new lending partners could take longer than expected, leading to fluctuations or variability in expected revenues and results of operations. • We are continuing to introduce and develop new loan products and services, and if these products and services are not successful or we are unable to manage the related risks, our growth prospects, business, financial, condition and results of operations could be adversely affected. • We rely on strategic relationships with loan aggregators to attract applicants to our marketplace, and if we cannot maintain effective relationships with loan aggregators or successfully replace their services, our business could be adversely affected.
Biggest changeSUMMARY OF RISK FACTORS The material risks that may affect our business, financial condition or results of operations include, but are not limited to, those relating to the following: • Our business has been and will continue to be adversely affected by economic conditions and other factors that we cannot control. • If we are unable to maintain diverse and resilient loan funding to our marketplace from institutional investors or successfully manage risks associated with committed capital and other co-investment arrangements, our growth prospects, business, financial condition and results of operations could be adversely affected. • Our loan funding and financing arrangements with lending partners, institutional investors, securitization programs, and warehouse credit and risk retention financing facilities expose us to certain risks, and if we fail to successfully manage such risks, our supply of capital may decrease or we may be required to seek more costly or less efficient capital for our marketplace. • If we are unable to continue to improve our artificial intelligence (“AI”) models or if our AI models are ineffective, including by failing to accurately or timely reflect changes in economic conditions on borrowers’ credit risk, our growth prospects, business, financial condition and results of operations would be adversely affected. • If we are unable to approve a significant number of borrowers for loans through our marketplace, our growth prospects, business, financial condition and results of operations would be adversely affected. • A limited number of lending partners account for a significant portion of loan originations and revenue on our marketplace, and our business depends on our ability to retain existing lending partners and attract new ones. • We have incurred net losses in the past, and we may not be able to sustain or achieve profitability in the future. • If we are unable to manage risks associated with the loans on our balance sheet, our business, financial condition and results of operations may be adversely affected. • Our quarterly results may fluctuate significantly, which could adversely affect our business and the trading price of our common stock. • If we are unable to manage the risks associated with the Upstart Macro Index (UMI), our credibility, reputation, business, financial condition and results of operations could be adversely affected. • Our reputation and brand are important to our success, and failure to maintain, protect and promote our brand may harm our business. • If we are unable to manage the risks related to our loan servicing and collections obligations, our business, financial condition and results of operations could be adversely affected. 21 Table of Conte nts • A significant portion of our business has historically depended on a single loan product, and shifts in product demand or mix could adversely affect our business. • We are continuing to introduce and develop new loan products and service offerings, and if these products are not successful or we are unable to manage the related risks, our growth prospects, business, financial condition and results of operations could be adversely affected. • Security breaches, improper access to our or borrowers’ data, or other security incidents may harm our reputation, adversely affect our results of operations and expose us to liability. • Any significant disruption of, or failure in, our technology systems, including our AI lending platform, could adversely affect our business, financial condition and results of operations. • We rely on strategic relationships with loan aggregators to attract applicants to our marketplace, and if we cannot maintain effective relationships with loan aggregators or successfully replace their services, our business could be adversely affected. • Our business is subject to a wide range of laws and regulations, many of which are evolving, and failure or perceived failure to comply with such laws and regulations could harm our business, financial condition and results of operations.
In addition, our lending partners' credit requirements and the target returns our institutional investors and lending partners demand in order to provide capital to our marketplace have, and could continue to, negatively impact our ability to extend loan offers with competitive terms or at all to certain borrowers on our marketplace.
In addition, our lending partners’ credit requirements and the target returns our lending partners and institutional investors demand in order to provide capital to our marketplace have, and could continue to, negatively impact our ability to extend loan offers with competitive terms or at all to certain borrowers on our marketplace.
These capped call transactions are expected generally to offset the potential dilution to our common stock upon any conversion of the applicable series of Notes and/or reduce any cash payments we are required to make in excess of the principal amount of such converted Notes, as the case may be, with such offset and/or reduction subject to a cap.
These capped call transactions are expected generally to reduce the potential dilution to our common stock upon any conversion of the applicable Notes and/or offset any cash payments we may be required to make in excess of the principal amount of such converted Notes, as the case may be, with such reduction and/or offset subject to a cap.
In addition, for these loans and any future loans to be held on our balance sheet, we bear the credit risk in the event of borrower default. Our exposure to rising borrower default rates and their volatility has increased, and may continue to increase, as we hold more Upstart-powered loans on our balance sheet.
In addition, for loans held on our balance sheet and any future loans to be held on our balance sheet, we bear the credit risk in the event of borrower default. Our exposure to rising borrower default rates and their volatility has increased, and may continue to increase, as we hold more Upstart-powered loans on our balance sheet.
We depend on our key personnel and other highly skilled personnel, and if we fail to attract, retain and motivate our personnel, our business, financial condition and results of operations could be adversely affected. Our success significantly depends on the continued service of our senior management team and other highly skilled personnel.
We depend on our key personnel and other highly skilled personnel, and if we fail to attract, retain and motivate our personnel, our business, financial condition and results of operations could be adversely affected. Our success depends on the continued service of our senior management team and other highly skilled personnel.
If a fundamental change (as defined in the applicable Indenture) occurs prior to the maturity date for a series of Notes, holders of the applicable series of Notes will have the right, at their option, to require us to repurchase all or a portion of such Notes.
If a fundamental change (as defined in the applicable Indenture governing the Notes) occurs prior to the maturity date for a series of Notes, holders of the applicable series of Notes will have the right, at their option, to require us to repurchase all or a portion of such Notes.
Such loan aggregators also face litigation and regulatory scrutiny for their part in the consumer lending ecosystem, and as a result, their business models may require fundamental change or may not be sustainable in the future.
Loan aggregators also face litigation and regulatory scrutiny for their part in the consumer lending ecosystem, and as a result, their business models may require fundamental change or may not be sustainable in the future.
To prevent having to litigate claims in multiple jurisdictions and the threat of inconsistent or contrary rulings by different courts, among other considerations, our amended and restated bylaws also provide that, unless we consent in writing to the selection of an alternative forum, the federal district courts of the United States of America are the sole and exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act.
To prevent having to litigate claims in multiple jurisdictions and the threat of inconsistent or contrary rulings by different courts, among other considerations, our amended and restated bylaws also provide that, unless we consent in writing to the selection of an alternative forum, the federal district courts of the United are the sole and exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act.
Our directors, officers, and each of our stockholders who own greater than 5% of our outstanding capital stock and their affiliates, in the aggregate, beneficially own a significant portion of the outstanding shares of our capital stock.
Our directors, officers, and stockholders who own greater than 5% of our outstanding capital stock and their affiliates, in the aggregate, beneficially own a significant portion of the outstanding shares of our capital stock.
Unfavorable outcomes in legal proceedings may harm our business and results of operations. We are, and may in the future become, subject to lawsuits by governmental agencies or private parties , other claims, examinations, investigations, enforcement actions, legal and administrative cases and proceedings, whether civil or criminal, all of which may affect our results of operations.
Unfavorable outcomes in legal proceedings may harm our business and results of operations. We are, and may in the future become, subject to lawsuits by private parties or governmental agencies, other claims, examinations, investigations, enforcement actions, legal and administrative cases and proceedings, whether civil or criminal, all of which may affect our financial condition and results of operations.
The long-term impact of operating with a Digital First workforce on our business, financial condition and results of operations is uncertain. Since our announcement of a Digital First work model in June 2021, remote work with less time in the office has been the primary experience for most of our employees.
The long-term impact of operating with a Digital First workforce on our business, financial condition and results of operations is uncertain. Since our announcement of a Digital First work model, remote work with less time in the office has been the primary experience for most of our employees.
We are continuing to introduce and develop new loan products and services offerings, and if these products are not successful or we are unable to manage the related risks, our growth prospects, business, financial condition and results of operations could be adversely affected.
We are continuing to introduce and develop new loan products and service offerings, and if these products are not successful or we are unable to manage the related risks, our growth prospects, business, financial condition and results of operations could be adversely affected.
If we were subject to such litigation or enforcement, then any unfavorable results of pending or future legal proceedings may result in contractual damages, usury related claims, fines, penalties, injunctions, the unenforceability, rescission or other impairment of loans originated through our marketplace or other censure that could have an adverse effect on our business, results of operations and financial condition.
If we were subject to such litigation or enforcement, then any unfavorable results of pending or future legal proceedings may result in contractual damages, fines, penalties, injunctions, the unenforceability, rescission or other impairment of loans originated through our marketplace or other censure that could have an adverse effect on our business, results of operations and financial condition.
If a significant volume of prepayments occur that our AI models do not accurately predict, the amount of our revenue from servicing fees would decline and returns targeted by our lending partners and institutional investors would be adversely affected, 50 Table of Contents which would harm our business and results or operations and our ability to attract new lending partners and institutional investors.
If a significant volume of prepayments occur that our AI models do not accurately predict, the amount of our revenue from servicing fees would decline and returns targeted by our lending partners and institutional investors would be adversely affected, which would harm our business and results or operations and our ability to attract new lending partners and institutional investors.
We cannot be sure that the existing funding sources will continue to be available, or any new funding source will become available, on commercially reasonable terms or at all. Decreased funding from institutional investors has negatively impacted our business in the past, and may negatively impact us in the future.
We cannot be sure that the existing capital sources will continue to be available, or any new capital sources will become available, on commercially reasonable terms or at all. Decreased capital from institutional investors has negatively impacted our business in the past, and may negatively impact us in the future.
RISKS RELATED TO INDEBTEDNESS We rely on borrowings under our warehouse credit facilities to fund certain aspects of our operations, and any inability to meet our obligations as they come due or to comply with various covenants or representations contained in our warehouse credit facilities could harm our business.
RISKS RELATED TO INDEBTEDNESS We rely on borrowings under our warehouse credit facilities and risk retention financing facilities to fund certain aspects of our operations, and any inability to meet our obligations as they come due or to comply with various covenants or representations contained in our warehouse credit facilities could harm our business.
The analysts’ estimates are based upon their own opinions and 85 Table of Contents are often different from our estimates or expectations. If one or more of the analysts who cover us downgrade our common stock or publish inaccurate or unfavorable research about our business, the price of our securities would likely decline.
The analysts’ estimates are based upon their own opinions and are often different from our estimates or expectations. If one or more of the analysts who cover us downgrade our common stock or publish inaccurate or unfavorable research about our business, the price of our securities would likely decline.
This seasonal slowdown is primarily attributable to high loan demand around the holidays in the fourth quarter and the general increase in borrowers’ available cash flows in the first quarter, including cash received from tax refunds, which temporarily reduces borrowing needs.
This seasonal slowdown has been primarily attributable to high loan demand around the holidays in the fourth quarter and the general increase in borrowers’ available cash flows in the first quarter, including cash received from tax refunds, which temporarily reduces borrowing needs.
A significant number of consumers that apply for a loan on Upstart.com learn about and access Upstart.com through the websites of loan aggregators, typically with hyperlinks from such loan aggregators’ websites to landing pages on our website.
A significant number of consumers that apply for a loan on our platform learn about and access our platform through the websites of loan aggregators, typically with hyperlinks from such loan aggregators’ websites to landing pages on our website.
This activity could also cause or prevent an increase or a decrease in the market price of our common stock. Certain insiders have significant voting power, which could limit your ability to influence the outcome of key transactions, including a change of control.
This activity could also cause or prevent an increase or a decrease in the market price of our common stock. 47 Table of Conte nts Certain insiders have significant voting power, which could limit your ability to influence the outcome of key transactions, including a change of control.
The availability and capacity of loan funding from institutional investors depend on many factors that are outside of our control, such as economic and market conditions, interest rates, liquidity in the capital markets and regulatory requirements or restrictions, which are subject to change.
The availability and capacity of capital from institutional investors depends on many factors that are outside of our control, such as economic and market conditions, interest rates, liquidity in the capital markets and regulatory requirements or restrictions, which are subject to change.
Our success also depends on our ability to identify, hire, develop, motivate and retain highly qualified personnel for all areas of our organization. Competition is high for skilled personnel, including engineering and data analytics personnel, particularly in the San Francisco Bay Area where our headquarters is located.
Our success also depends on our ability to identify, hire, develop, motivate and retain highly qualified personnel. Competition is high for skilled personnel, including engineering and data analytics personnel, particularly in the San Francisco Bay Area where our headquarters is located.
Our amended and restated bylaws provide that, unless we consent in writing to the selection of an alternative forum, to the fullest extent permitted by law, the sole and exclusive forum for (i) any derivative action or proceeding brought on our behalf, (ii) any action asserting a claim of breach of a fiduciary duty owed by any of our directors, stockholders, officers, or other employees to us or our stockholders, (iii) any action arising pursuant to any provision of the Delaware General Corporation Law, our amended and restated certificate of incorporation, or our amended and restated bylaws, or (iv) any other action asserting a claim that is governed by the internal affairs doctrine shall be the Court of Chancery of the State of Delaware (or, if the Court of Chancery does not have jurisdiction, another state court in Delaware or the federal district court for the District of Delaware), in all cases subject to the court having jurisdiction over the claims at issue and the indispensable parties; provided that the exclusive forum provision will not apply to suits brought to enforce any liability or duty created by the Exchange Act.
Our amended and restated bylaws provide that, unless we consent in writing to the selection of an alternative forum, to the fullest extent permitted by law, the sole and exclusive forum for (i) any derivative action or proceeding brought on our behalf, (ii) any action asserting a claim of breach of a fiduciary duty owed by any of our directors, stockholders, officers, or other employees to us or our stockholders, (iii) any action arising pursuant to any provision of the Delaware General Corporation Law, our amended and restated certificate of incorporation, or our amended and restated bylaws, or (iv) any other action asserting a claim that is governed by the internal affairs doctrine shall be the Court of Chancery of the State of Delaware (or, if the Court of Chancery does not have jurisdiction, another state court in Delaware or the federal district court for the District of Delaware), in all cases subject to the court having jurisdiction over the claims at issue and the indispensable parties; provided that the exclusive forum provision will not apply to suits brought to enforce any liability or duty created by the Exchange Act. 49 Table of Conte nts Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all such Securities Act actions.
Our Digital First model could lead to a negative long-term impact on our operations, the execution of our business plans and sales and marketing efforts, our company culture, or the productivity and retention of key personnel and other employees necessary to conduct our business, or otherwise cause operational failures due to changes in our past business practices.
Our Digital First model could lead to a negative long-term impact on our operations, the execution of our business plans and sales and marketing efforts, our company culture, or the productivity and retention of key personnel and other employees necessary to conduct our business, or otherwise cause operational failures.
The terms of various open source licenses have not been interpreted by U.S. courts, and there is a risk that such licenses could be construed in a manner that limits our use of the software, inhibits certain aspects of our systems and negatively affects our business operations.
The terms of various open source licenses have not been definitively interpreted by U.S. courts, and there is a risk that such licenses could be construed in a manner that limits our use of the software, inhibits certain aspects of our systems or otherwise adversely affects our business operations.
Our involvement in any such matter also could cause significant harm to our or our lending partners’ reputations, even if the matters are ultimately determined in our favor.
Our involvement in any such matters could also cause significant harm to our or our lending partners’ reputations, even if the matters are ultimately resolved in our favor.
In addition, our amended and restated certificate of incorporation and amended and restated bylaws contain provisions that may make the acquisition of our company more difficult, including the following: • our Board of Directors is classified into three classes of directors with staggered three-year terms and directors are only able to be removed from office for cause; • vacancies and newly-created seats on our Board of Directors will be able to be filled only by our Board of Directors and not by stockholders; • only the Chair of our Board of Directors, our Chief Executive Officer, our president, or a majority of our entire Board of Directors are authorized to call a special meeting of stockholders; • certain litigation against us or our directors, stockholders, officers or employees can only be brought in Delaware; • advance notice procedures apply for stockholders to nominate candidates for election as directors or to bring matters before an annual meeting of stockholders; and • any amendment of the above anti-takeover provisions in our amended and restated certificate of incorporation or amended and restated bylaws will require the approval of at least 66 2/3% of the combined voting power of our then-outstanding shares of our capital stock. 84 Table of Contents These anti-takeover defenses could discourage, delay, or prevent a transaction involving a change in control of our company.
In addition, our amended and restated certificate of incorporation and amended and restated bylaws contain provisions that may make the acquisition of our company more difficult, including the following: • our Board of Directors is classified into three classes with staggered three-year terms and directors may only be removed for cause; • vacancies and newly-created seats on our Board of Directors will be able to be filled only by our Board of Directors and not by stockholders; • only the Chair of our Board of Directors, our Chief Executive Officer, our president, or a majority of our entire Board of Directors are authorized to call a special meeting of stockholders; • certain litigation against us or our directors, stockholders, officers or employees can only be brought in Delaware; • advance notice procedures apply for stockholders to nominate candidates for election as directors or to bring matters before an annual meeting of stockholders; and • any amendment of the above anti-takeover provisions in our amended and restated certificate of incorporation or amended and restated bylaws will require the approval of at least 66 2/3% of the combined voting power of our then-outstanding shares of our capital stock.
The capped call transactions entered into in connection with the issuance of each of the 2026 Notes and the 2029 Notes may affect the market price of our common stock. In connection with the issuance of each of the 2026 Notes and the 2029 Notes, we entered into privately negotiated capped call transactions with certain financial institutions as counterparties.
The capped call transactions entered into in connection with the issuance of certain of the Notes may affect the market price of our common stock. In connection with the issuance of certain of the Notes, we entered into privately negotiated capped call transactions with certain financial institutions as counterparties.
Although we have reserved for potential payments of 80 Table of Contents past tax liabilities on our financial statements, a successful assertion by one or more tax authorities could result in substantial tax liabilities in excess of such reserves as well as penalties and interest, and could harm our business, financial condition and results of operations.
Although we have recorded reserves for potential payments of past tax liabilities in our financial statements, a successful assertion by one or more tax authorities could result in substantial tax liabilities in excess of such reserves as well as penalties and interest, and could harm our business, financial condition and results of operations.
In addition, we typically experience seasonality in the demand for Upstart-powered loans, which is generally lower in the first quarter.
In addition, we typically experience seasonality in the demand for Upstart-powered loans, which has been generally lower in the first quarter.
Adverse developments affecting financial institutions, including bank failures, could adversely affect our liquidity and financial performance. We regularly maintain domestic cash deposits in Federal Deposit Insurance Corporation (“FDIC”) insured banks that exceed the FDIC insurance limits.
We maintain cash deposits in excess of federally insured limits, and adverse developments affecting financial institutions could adversely affect our liquidity and financial performance. We regularly maintain domestic cash deposits in Federal Deposit Insurance Corporation (“FDIC”) insured banks that exceed the FDIC insurance limits.
In addition, the terms of our existing corporate debt agreements do, and any future debt agreements may, preclude us from paying dividends. As a result, capital appreciation of our common stock, if any, will be the only way for stockholders to realize any future gains on their investment for the foreseeable future. 86 Table of Contents
In addition, the terms of our corporate debt agreements may preclude us from paying dividends. As a result, capital appreciation of our common stock, if any, will be the only way for stockholders to realize any future gains on their investment for the foreseeable future. 50 Table of Conte nts
If we are unable to successfully address these risks and challenges as we encounter them, our business, financial condition and results of operations could be adversely affected. If we are unable to manage risks associated with the loans on our balance sheet, our business, financial condition and results of operations may be adversely affected.
If we are unable to successfully address these risks and challenges as they arise, our business, financial condition and results of operations could be adversely affected. 26 Table of Conte nts If we are unable to manage risks associated with the loans on our balance sheet, our business, financial condition and results of operations may be adversely affected.
Our agreements with our lending partners are nonexclusive and may contain minimum fee amounts. Our lending partners could decide to stop working with us, ask to modify their agreement terms in a cost prohibitive manner when their agreement is up for renewal or enter into exclusive or more favorable relationships with our competitors.
We enter into a separate agreement with each of our lending partners. These agreements are non-exclusive and may contain minimum fee amounts. Lending partners may decide to stop working with us, seek to modify agreement terms in a cost-prohibitive manner when their agreement is up for renewal, or enter into exclusive or more favorable relationships with our competitors.
If few securities analysts commence coverage of us, or if one or more of these analysts cease coverage of us or fail to publish reports on us regularly, demand for our securities could decrease, which might cause the price and trading volume of our common stock to decline.
If few securities analysts commence coverage of us, or if one or more of these analysts cease coverage of us or fail to publish reports on us regularly, demand for our securities could decrease, which could cause the price and trading volume of our common stock to decline. We do not intend to pay dividends for the foreseeable future.
If the 2026 Notes, the 2029 Notes or the 2030 Notes are converted by holders of such series, we are required under the applicable Indenture to pay or deliver, as the case may be, either cash, shares of common stock, or a combination of cash and shares of common stock, at our election.
If the Notes are converted by holders, we are required under the applicable Indentures to pay or deliver, as the case may be, cash, shares of our common stock, or a combination of cash and shares of common stock, at our election.
Our ability to operate our platform depends, in part, upon our proprietary technology. We may be unable to protect our proprietary technology effectively, which would allow competitors to duplicate our AI models or AI lending marketplace and adversely affect our ability to compete with them.
We may be unable to protect our proprietary technology effectively, which may allow competitors to duplicate our AI models or AI lending marketplace and adversely affect our ability to compete with them.
If any of our third-party vendors terminates its relationship with us or refuses to renew its agreement with us on commercially reasonable terms, we would need to find an alternate provider, and may not be able to secure similar terms or replace such providers in an acceptable time frame.
If any third-party vendor terminates its relationship with us or refuses to renew its agreement on commercially reasonable terms, we would need to identify an alternative provider and may not be able to secure similar terms or replace such services in an acceptable time frame.
The counterparties to the capped call transactions entered into in connection with the 2026 Notes (as defined below) and 2029 Notes (as defined below) are financial institutions, and we are subject to the risk that one or more of the counterparties may default or otherwise fail to perform their obligations under the capped call transactions.
The counterparties to the capped call transactions entered into in connection with certain of our convertible notes (the “Notes”) are financial institutions, and we are subject to the risk that one or more of the counterparties may default or otherwise fail to perform their obligations under the capped call transactions.
Corporate and asset-backed debt ratings could adversely affect our ability to support loan funding for our marketplace at attractive rates, which could negatively affect our results of operations, financial condition and liquidity. Our unsecured senior corporate debt currently has no rating. Asset-backed securities sponsored or co-sponsored by us are currently rated by a limited number of credit rating agencies.
Corporate and asset-backed debt ratings could adversely affect our ability to support loan funding for our marketplace at attractive rates, which could negatively affect our results of operations, financial condition and liquidity. Our unsecured senior corporate debt may be unrated or rated by a limited number of credit rating agencies.
We continue to assess the realizability of our deferred tax assets in the future. Future adjustments in our valuation allowance may be required, which may have a material impact on our quarterly and annual operating results. Changes in tax laws could have a material adverse effect on our business, financial condition and results of operations.
We continue to assess the realizability of our deferred tax assets, and future adjustments to our valuation allowance may be required, which could materially affect our results of operations. 45 Table of Conte nts Changes in tax laws could have a material adverse effect on our business, financial condition and results of operations.
These factors have and may continue to negatively affect transaction volume on our marketplace and therefore our revenue. If we are not able to maintain or increase transaction volume on our marketplace, or attract and retain qualified borrowers, our growth prospects, business, financial condition and results of operations would be adversely affected.
If we are not able to maintain or increase transaction volume on our marketplace, or attract and retain qualified borrowers, our growth prospects, business, financial condition and results of operations would be adversely affected.
We currently intend to retain any future earnings to finance the operation and expansion of our business, as well as to fund our share repurchase program, and we do not expect to declare or pay any dividends in the foreseeable future.
We have never declared nor paid cash dividends on our capital stock. We currently intend to retain any future earnings to finance the operation and expansion of our business, as well as to fund our share repurchase program, and we do not expect to declare or pay any dividends in the foreseeable future.
The R&D loans make up a substantial portion of the loans held on our balance sheet and are generally more risky and more likely to default than the core personal loans.
Also, loans for research and development purposes make up a substantial portion of the loans held on our balance sheet and are generally more risky and more likely to default than the core personal loans.
New initiatives are inherently risky, as each involves unproven business strategies, new regulatory requirements and new financial products and services with which we, and in some cases our lending partners, have limited or no prior development or operating experience.
We have limited operating history with respect to certain of these products, and new initiatives are inherently risky, as each involves unproven business strategies, new regulatory 29 Table of Conte nts requirements and new financial products and services with which we, and in some cases our lending partners, have limited or no prior development or operating experience.
Any sustained decline in applicant approvability or acceptance of loan offers or loan origination volume, or any increase in delinquencies or defaults by borrowers beyond our expectation, would harm our business, financial condition and results of operations. 27 Table of Contents If we are unable to maintain diverse and resilient loan funding to our marketplace from institutional investors or successfully manage risks associated with committed capital and other co-investment arrangements, our growth prospects, business, financial condition and results of operations could be adversely affected.
Any sustained decline in borrower approvability, loan acceptance or origination volume, or any increase in delinquencies or defaults beyond our expectations, could materially adversely affect our business, financial condition and results of operations. 22 Table of Conte nts If we are unable to maintain diverse and resilient loan funding to our marketplace from institutional investors or successfully manage risks associated with committed capital and other co-investment arrangements, our growth prospects, business, financial condition and results of operations could be adversely affected.
While we continue to improve the accuracy of our AI models, which we believe is key to our long-term success, such improvements may not lead to more borrowers being approved on our platform.
While we continue to improve the accuracy of our AI models, which we believe is key to our long-term success, such improvements may not result in an increase in the number of borrowers approved on our platform.
In addition, if a make-whole fundamental change (as defined in the applicable Indenture) occurs prior to the maturity date of the applicable series of Notes, we will in some cases be required to increase the conversion rate for a holder that elects to convert its Notes of such series in connection with such make-whole fundamental change in the manner specified in the applicable Indenture.
In addition, if a make-whole fundamental change (as defined in the applicable Indenture governing the Notes) occurs prior to the maturity date of the applicable series of Notes, we may be required to increase the conversion rate for holders that elect to convert their Notes in connection with such make-whole fundamental change, in the manner specified in the applicable Indenture.
We may also experience declines in revenue and transaction volume if existing committed capital or other capital arrangements do not provide funding on the agreed upon terms or we fail to secure additional committed capital or other capital arrangements in the future on commercially reasonable terms or at all.
We may also experience declines in revenue and transaction volume if existing arrangements do not provide funding on agreed terms or if we are unable to secure additional arrangements on commercially reasonable terms or at all.
RISKS RELATED TO OWNERSHIP OF OUR COMMON STOCK The trading price of our common stock may be volatile, and you could lose all or part of your investment. The trading price of our common stock may be volatile and could be subject to fluctuations in response to various factors, some of which are beyond our control.
The trading price of our common stock may be volatile and could fluctuate significantly in response to various factors, many of which are beyond our control. These fluctuations could cause you to lose all or part of your investment.
We have facilitated securitizations, and may in the future facilitate additional securitizations, of Upstart-powered loans to allow our institutional investors, certain lending partners and/or ourselves to liquidate or finance such loans through the asset-backed securities markets or through other capital markets products. In asset-backed securities transactions, we sell and convey pools of loans to a special purpose entity, or SPE.
We have facilitated securitizations, and may in the future facilitate additional securitizations, of Upstart-powered loans to allow institutional investors, certain lending partners, and/or us to liquidate or finance such loans through the asset-backed securities markets or other capital markets products.
Our proprietary AI models rely in part on the use of loan applicant and borrower data and other third-party data, and if we lose the ability to use such data, or if such data contain inaccuracies, our business could be adversely affected. We rely on our proprietary AI models, which are statistical models built using a variety of data-sets.
RISKS RELATED TO OUR DEPENDENCE ON THIRD PARTIES Our proprietary AI models rely in part on the use of loan applicant and borrower data and other third-party data, and if we lose the ability to use such data, or if such data contain inaccuracies, our business could be adversely affected.
As a result, we are limited in our ability to collect on such loans on behalf of our lending partners and institutional investors if a borrower is unwilling or unable to repay them.
As a result, our ability to collect amounts owed on such loans on behalf of lending partners, Upstart, institutional investors, and financing lenders is limited if borrowers are unwilling or unable to repay.
While we are continuing to expand our direct acquisition channels, we anticipate that we will continue to depend in significant part on relationships with loan aggregators to maintain and grow our business. For example, a significant amount of our loan originations was derived from traffic from Credit Karma, one of the loan aggregators with whom we partner.
While we are continuing to expand our direct acquisition channels, we expect to remain significantly dependent on relationships with loan aggregators to maintain and grow our business. For example, a significant amount of our loan originations has been derived from traffic from Credit Karma, one of the loan aggregators with whom we partner.
There is also no assurance that Credit Karma or other loan aggregators will continue to partner with us on commercially reasonable terms or at all. Our competitors may be effective in providing incentives to loan aggregators to favor their products or services or in reducing the volume of loans facilitated through our marketplace.
There is no assurance that loan aggregators will continue to partner with us on commercially reasonable terms or at all, and our competitors may be effective in providing incentives to loan aggregators to favor their products or services.
Even if we adequately address the issues raised by an investigation or proceeding or successfully defend a third-party lawsuit or counterclaim, we may have to devote significant financial and management resources to address these issues, which could harm our business, financial condition and results of operations.
Even if we adequately address the issues raised by an investigation or proceeding or successfully defend a third-party lawsuit or counterclaim, we may have to devote significant financial and management resources to address these issues, which could harm our business, financial condition and results of operations. 32 Table of Conte nts We may pursue acquisitions or investments in other businesses or technologies, which could disrupt our business and may not achieve anticipated benefits.
We rely on a combination of copyright, trade secret, patent, trademark laws and other rights, as well as confidentiality procedures, contractual provisions and our information security infrastructure to protect our proprietary technology, processes and other intellectual property.
We rely on a combination of copyright, trade secret, patent, trademark laws and other rights, as well as confidentiality procedures and contractual provisions, to protect our proprietary technology, processes and other intellectual property. We have limited patent protection, and our current patent applications may not be successful.
Sales of our shares may make it more difficult for us to sell equity securities in the future at a time and at a price that we deem appropriate. These sales also could cause the trading price of our common stock to fall and make it more difficult for you to sell shares of our common stock.
Sales of our shares could make it more difficult for us to sell equity securities in the future at times and prices that we deem appropriate, could cause the trading price of our common stock to decline, and could make it more difficult for stockholders to sell their shares.
Delaware law and provisions in our amended and restated certificate of incorporation and amended and restated bylaws could make a merger, tender offer, or proxy contest difficult, thereby depressing the market price of our common stock.
Anticipated future issuances of shares of our common stock upon conversion of the Notes could depress the price of our common stock. 48 Table of Conte nts Delaware law and provisions in our amended and restated certificate of incorporation and amended and restated bylaws could make a merger, tender offer, or proxy contest difficult, thereby depressing the market price of our common stock.
We have introduced auto loan, small dollar loan, and home equity lines of credit products and are continuing to invest in developing these products and other new loan products and service offerings.
We have introduced auto loans, retail installment contracts purchased from motor vehicle dealers, small dollar loans, and home equity lines of credit products and are continuing to invest in developing these products and other new credit products and service offerings.
If the profile of borrowers using any new products and services is different from that of those currently served by the existing loan products offered through our marketplace, our AI models may not be able to accurately evaluate the credit risk of such borrowers, and we may not be able to obtain loan funding for new products and services on commercially reasonable terms, or at all.
If the borrower profile for new products differs from that of existing products, our AI models may not accurately evaluate credit risk and we may not be able to obtain loan funding for such products on commercially reasonable terms, or at all.
We may continue to make investments to support our business growth and may require additional funds to respond to business challenges, including the need to develop new loan products, enhance our AI models, supplement loan funding, improve our operating infrastructure, acquire complementary businesses and technologies, or make strategic investments.
We may continue to make investments to support our business growth and may require additional funds to respond to business challenges, including developing new loan products, enhancing our AI models, supplementing loan funding, improving our operating infrastructure, acquiring complementary businesses or technologies, or making strategic investments.
If resolved against us, legal actions could result in excessive verdicts and judgments, injunctive relief, equitable relief, and other adverse consequences that may affect our financial condition and how we operate our business.
If resolved against us, such actions could result in significant monetary damages, injunctive or equitable relief, remediation requirements or other adverse consequences that may affect our financial condition and how we operate our business.
While we require loan aggregators to make certain disclosures in connection with our lending partners’ offers and restrict how loan aggregators may display such loan offers, loan aggregators may nevertheless alter or even remove these required disclosures without notifying us, which may result in liability to us.
While we require loan aggregators to make certain disclosures in connection with our lending partners’ offers and restrict how loan aggregators may display such loan offers, loan aggregators may fail to comply with these requirements, which could result in liability to us.
This can include banks, non-bank lenders, retail-based lenders and other financial technology lending platforms. Because personal loans often serve as a replacement for credit cards, we also compete with the convenience and ubiquity that credit cards and buy now, pay later products represent.
We compete to varying degrees with other sources of consumer credit, including banks, non-bank lenders, retail-based lenders and other financial technology platforms. Because personal loans may serve as a replacement for credit cards, we also compete with the convenience and ubiquity of credit cards and buy now, pay later products.
Our loan funding arrangements with institutional investors, securitizations and warehouse credit facilities expose us to certain risks, and if we fail to successfully manage such risks, it may result in the reduced supply of loan funding capital or require us to seek more costly or less efficient financing for our marketplace.
Our loan funding and financing arrangements with lending partners, institutional investors, securitization programs, and warehouse credit and risk retention financing facilities expose us to certain risks, and if we fail to successfully manage such risks, our supply of capital may decrease or we may be required to seek more costly or less efficient capital for our marketplace.
There can be no assurance that our deposits in excess of the FDIC or other comparable insurance limits will be backstopped by the U.S. treasury, or that any bank or financial institution with which we do business will be able to obtain needed liquidity from other banks, government institutions or by acquisition in the event of a failure or liquidity crisis. 56 Table of Contents RISKS RELATED TO OUR INTELLECTUAL PROPERTY AND PLATFORM DEVELOPMENT It may be difficult and costly to protect our intellectual property rights, and we may not be able to ensure their protection.
There can be no assurance that our deposits in excess of the FDIC or other 33 Table of Conte nts comparable insurance limits will be backstopped by the U.S. treasury, or that any bank or financial institution with which we do business will be able to obtain needed liquidity from other banks, government institutions or by acquisition in the event of a failure or liquidity crisis.
In addition, due to the consumer-oriented nature of our business and the application of certain laws and regulations, participants in our industry are regularly named as defendants in litigation alleging violations of federal and state laws and regulations, including consumer protection laws .
Commitments and Contingencies ” in Part II, Item 8 of this Annual Report on Form 10-K. In addition, due to the consumer-oriented nature of our business and the application of certain laws and regulations, participants in our industry are regularly named as defendants in litigation alleging violations of federal and state laws and regulations, including consumer protection laws.
Moreover, it has become common in recent years for individuals and groups to purchase intellectual property assets for the sole purpose of making claims of infringement and attempting to extract settlements from companies such as ours.
Moreover, it has become common in recent years for individuals and groups to purchase intellectual property assets for the sole purpose of making claims of infringement and attempting to extract settlements from companies such as ours. Even where we believe such claims are without merit, defending against them may be expensive and time-consuming.
Tax authorities may raise questions about or challenge or disagree with our calculation, reporting or collection of taxes and may require us to collect taxes in jurisdictions in which we do not currently do so or to remit additional taxes and interest, and could impose associated penalties and fees.
We have faced, and may face in the future, indirect tax audits in various U.S. jurisdictions. Tax authorities may challenge our calculation, reporting or collection of taxes and may require us to collect taxes in jurisdictions in which we do not currently do so or to remit additional taxes and interest, and could impose associated penalties and fees.
The large number of shares of our capital stock eligible or registered for public sale could depress the market price of our common stock.
The large number of shares of our capital stock eligible or registered for public sale could depress the market price of our common stock. The market price of our common stock could decline as a result of sales of a large number of shares of our common stock, or the perception that such sales could occur.
In the event that our AWS service agreements are terminated, or there is a 57 Table of Contents lapse of service, interruption of internet service provider connectivity or damage to AWS data centers, we could experience interruptions in access to our platform as well as delays and additional expense in the event we must secure alternative cloud infrastructure services.
In the event that our AWS service agreements are terminated, there is a lapse of service, interruption of internet service provider connectivity, or damage to AWS data centers, we could experience interruptions in access to our platform, as well as delays and additional expense if we must secure alternative cloud infrastructure services, which could reduce confidence in the reliability of our platform and cause lending partners or institutional investors to reduce, suspend or cease funding or other participation on our marketplace.
Further, debt financing, if available, may involve protective provisions or covenants restricting our operations or our ability to incur additional debt. Any additional financing that we raise may contain terms that are not favorable to us or our stockholders.
Debt financing, if available, may involve protective provisions or covenants that restrict our operations or financial flexibility, and any financing we obtain may contain terms that are not favorable to us or our stockholders.
If we are unsuccessful, such claims or litigation could result in a requirement that we pay significant damages or licensing fees, or we could in some circumstances be required to make changes to our business to avoid such infringement, which would negatively impact our financial performance.
If we are unsuccessful, such claims or litigation could result in a requirement that we pay significant damages or licensing fees, be required to cease using certain technology, or make changes to our business to avoid such infringement, which could negatively impact our financial performance. Defending such claims could also be costly, time-consuming and divert management attention.
Further, we do not have control over any content on loan aggregator websites unrelated to our product, and it is possible that our brand and reputation may be adversely affected by being associated with such content. An unsatisfied borrower could also seek to bring claims against us based on the content presented on a loan aggregator’s website.
Further, we do not have control over any content on loan aggregator websites unrelated to our product, and it is possible that our brand and reputation may be adversely affected by being associated with such content.
Because the loans facilitated by our marketplace are originated by our lending partners, many state consumer financial regulatory requirements, including usury restrictions (other than the restrictions of the state in which a lending partner originating the loans is located) and many licensing requirements and substantive requirements under state consumer credit laws, are inapplicable to the loans, based on principles of federal preemption or express exemptions provided in relevant state laws .
Because the loans facilitated by our marketplace are originated by our lending partners, many state consumer financial regulatory requirements, including state usury restrictions, licensing requirements and certain requirements under state consumer credit laws, are inapplicable to the loans, based on principles of federal preemption.
We have been in the past and may in the future be subject to federal and state regulatory inquiries regarding our business.
We have been in the past and may in the future be subject to federal and state regulatory inquiries, investigations or enforcement actions, which could adversely affect our business.
While we have transitioned to a Digital First work model which allows us to recruit nationwide, we have experienced, and expect to continue to face, some difficulty identifying and hiring qualified personnel, especially as we pursue our growth strategy.
While we have transitioned to what we call a “Digital First” work model that allows us to recruit from a wider talent pool, we have experienced, and expect to continue to face, difficulty identifying and hiring qualified personnel, especially as we pursue our growth strategy.
To serve more consumer demand for credit and increase transaction volume on our marketplace, we must have an adequate supply of capital from lending partners and institutional investors, we must drive sufficient demand from potential borrowers seeking loans, and the borrowers must satisfy the requirements for approval established by our models and our lending partners.
To increase the number of loans facilitated through our marketplace, we must have an adequate supply of capital from lending partners and institutional investors, and borrowers must satisfy the requirements for approval established by our models and our lending partners.
Furthermore, the Indentures prohibit us from engaging in certain mergers or acquisitions unless, among other things, the surviving entity assumes our obligations under the Notes. These and other provisions in the Indentures could deter or prevent a third party from acquiring us even when the acquisition may be favorable to you.
Furthermore, the Indentures restrict our ability to engage in certain mergers, consolidations or similar transactions unless, among other things, the surviving entity assumes our obligations under the Notes. These and other provisions in the Indentures could discourage, delay or prevent a third party from acquiring us or otherwise engaging in a transaction that may be favorable to our stockholders.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeOur Chief Information Security Officer oversees our cybersecurity policies and processes, including those described in “ Risk Management and Strategy ” above.
Biggest changeOur Chief Information Security Officer began her career as a network engineer and has held security engineering roles at large technology organizations. Our Chief Information Security Officer oversees our cybersecurity policies and processes, including those described in “ Risk Management and Strategy ” above.
We have a set of company-wide policies and procedures concerning cybersecurity matters that include security risk assessment, identity and access control, vendor security and vulnerability management. There are other policies related to cybersecurity involving employees' use of company equipment and resources, generative AI, remote work and workplace security and safety.
We have a set of company-wide policies and procedures concerning cybersecurity matters that include security risk assessment, identity and access management, third-party and vendor risk, vulnerability management, and data protection. There are other policies related to cybersecurity involving employees' use of company equipment and resources, generative AI, remote work and workplace security and safety.
“ Risk Factors ” of this Annual Report on Form 10-K, including the risk factors titled “ —Security breaches and incidents compromising borrowers’ confidential information that we store may harm our reputation, adversely affect our results of operations and expose us to liability ”. 87 Table of Contents Governance One of the key functions of our Board of Directors is informed oversight of our risk management process, including risks from cybersecurity threats.
“ Risk Factors ” of this Annual Report on Form 10-K, including the risk factors titled “ —Security breaches, improper access to our borrowers’ data, or other security incidents may harm our reputation, adversely affect our results of operations and expose us to liability ”. 51 Table of Conte nts Governance One of the key functions of our Board of Directors is informed oversight of our risk management process, including risks from cybersecurity threats.
Our Board of Directors administers its cybersecurity risk oversight function directly as a whole, as well as through the audit committee. Our Chief Information Security Officer has more than 20 years of information security expertise and is primarily responsible to identify, assess and manage our material risks from cybersecurity threats.
Our Board of Directors administers its cybersecurity risk oversight function directly as a whole, as well as through the audit committee. Our Chief Information Security Officer has more than 15 years of experience in network and software engineering, including domain expertise in security, and is primarily responsible for identifying, assessing, and managing our material risks from cybersecurity threats.
Following these risk assessments, we re-design, implement, and maintain reasonable safeguards to mitigate identified risks; reasonably address any identified gaps in existing safeguards; and monitor the effectiveness of our safeguards. We devote resources and designate high-level personnel, including our Chief Information Security Officer who reports to our Chief Risk Officer, to manage the risk assessment and mitigation process.
Following these risk assessments, we implement, test, and continuously improve reasonable safeguards to mitigate identified risks; address control gaps; and measure safeguard effectiveness through ongoing monitoring, metrics, and validation. We devote resources and designate high-level personnel, including our Chief Information Security Officer who reports to our Chief Risk Officer, to manage the risk assessment and mitigation process.
We conduct risk assessments to identify cybersecurity threats annually as well as in the event of a material change in our business practices that may affect information systems that are vulnerable to such cybersecurity threats.
We conduct annual and event-driven risk assessments to identify cybersecurity threats or material business changes that may affect systems exposed to such threats.
Removed
Our Chief Information Security Officer started his career as a security engineer and has held various leadership positions in the security function at Microsoft, Netflix, Bridgewater Associates and, most recently, Robinhood. He received a bachelor degree in management information systems and holds an industry certification.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeWe lease all of our facilities and do not own any real property. We believe our facilities are adequate and suitable for our current needs and that, should it be needed, suitable additional or alternative space will be available to accommodate our operations.
Biggest changeWe believe our facilities are adequate and suitable for our current needs and that, should we need additional space in the future, suitable additional or alternative space will be available to accommodate our operations.
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ITEM 2. PROPERTIES Our corporate headquarters is located in San Mateo, California and consists of 108,015 square feet of space under leases that expire in February 2028.
Added
ITEM 2. PROPERTIES Our corporate headquarters is currently located in San Mateo, California. In addition to our headquarters, we lease facilities in other parts of the United States, including Columbus, Ohio, Austin, Texas, and New York, NY. We lease all of our facilities and do not own any real property.
Removed
In addition to our headquarters, we lease 54,870 square feet of office space in Columbus, Ohio expiring in June 2027, 146,024 square feet of office space for origination and servicing operations in Columbus, Ohio expiring in August 2029, 12,493 square feet of office space in Austin, Texas expiring in March 2028, and have an agreement to use 507 square feet of office space in New York, New York expiring in March 2025.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeMINE SAFETY DISCLOSURES Not applicable. 88 Table of Contents PART II
Biggest changeMINE SAFETY DISCLOSURES Not applicable. 52 Table of Conte nts PART II
ITEM 3. LEGAL PROCEEDINGS For a description of our material pending legal proceedings, please see “ Note 12. Commitments and Contingencies ” in Part II, Item 8 of this Annual Report on Form 10-K and “ Risk Factors ” in Part I, Item 1A of this Annual Report on Form 10-K incorporated herein by reference. ITEM 4.
ITEM 3. LEGAL PROCEEDINGS For a description of our material pending legal proceedings, please see “ Note 11. Commitments and Contingencies ” in Part II, Item 8 of this Annual Report on Form 10-K and “ Risk Factors ” in Part I, Item 1A of this Annual Report on Form 10-K incorporated herein by reference. ITEM 4.

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeItem 4. Mine Safety Disclosures 88 PART II. Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 89 Item 6. [RESERVED] 91 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 92 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 112 Item 8.
Biggest changeItem 4. Mine Safety Disclosures 52 PART II. Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 53 Item 6. [RESERVED] 55 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 56 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 73 Item 8.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThe returns shown are based on historical results and are not intended to suggest future performance. 89 Table of Contents This performance graph shall not be deemed “soliciting material” or to be “filed” with the SEC for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (Exchange Act), or otherwise subject to the liabilities under that Section, and shall not be deemed to be incorporated by reference into any filing of Upstart Holdings, Inc. under the Securities Act of 1933, as amended, or the Exchange Act. 90 Table of Contents
Biggest changeThe returns shown are based on historical results and are not intended to suggest future performance. 53 Table of Conte nts This performance graph shall not be deemed “soliciting material” or to be “filed” with the SEC for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (Exchange Act), or otherwise subject to the liabilities under that Section, and shall not be deemed to be incorporated by reference into any filing of Upstart Holdings, Inc. under the Securities Act of 1933, as amended, or the Exchange Act. 54 Table of Conte nts
An investment of $100 (with reinvestment of all dividends) is assumed to have been made in our common stock and in each index on December 16, 2020, the date our common stock began trading on the Nasdaq Global Select Market, and its relative performance is tracked through December 31, 2024.
An investment of $100 (with reinvestment of all dividends) is assumed to have been made in our common stock and in each index on December 16, 2020, the date our common stock began trading on the Nasdaq Global Select Market, and its relative performance is tracked through December 31, 2025.
Unregistered Sales of Equity Securities None. Issuer Purchases of Equity Securities There were no repurchases of the Company’s common stock during the three months ended December 31, 2024.
Unregistered Sales of Equity Securities None. Issuer Purchases of Equity Securities There were no repurchases of the Company’s common stock during the three months ended December 31, 2025.
Holders of Record As of February 6, 2025, we had 159 holders of record of our common stock.
Holders of Record As of February 3, 2026, we had 159 holders of record of our common stock.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

109 edited+34 added−78 removed40 unchanged
Biggest changeResults of Operations The following table summarizes our historical consolidated statements of operations and comprehensive loss: Year Ended December 31, 2022 2023 2024 Revenue: Revenue from fees, net $ 907,272 $ 560,431 $ 635,466 Interest income, interest expense, and fair value adjustments, net: Interest income 105,580 168,996 186,360 Interest expense (10,843) (34,894) (40,433) Fair value and other adjustments, net (159,565) (180,971) (144,865) Total interest income and fair value adjustments, net (64,828) (46,869) 1,062 Total revenue 842,444 513,562 636,528 Operating expenses (1) : Sales and marketing 345,776 127,143 166,800 Customer operations 187,994 150,418 157,996 Engineering and product development 237,247 280,138 253,653 General, administrative, and other 185,290 212,388 230,935 Total operating expenses 956,307 770,087 809,384 Loss from operations (113,863) (256,525) (172,856) Other income, net 9,473 21,206 18,793 Expense on convertible notes (4,684) (4,706) (7,694) Gain on debt extinguishment — — 33,361 Net loss before income taxes (109,074) (240,025) (128,396) (Benefit) provision for income taxes (409) 107 185 Net loss $ (108,665) $ (240,132) $ (128,581) ________ (1) Includes stock-based compensation expense as follows: 101 Table of Contents Upstart Holdings, Inc.
Biggest changeManagement’s Discussion and Analysis of Financial Condition and Results of Operations (Tabular Amounts in Thousands, Except Share and Per Share Data and Ratios, or as Noted) Results of Operations The following table summarizes our historical consolidated statements of operations and comprehensive income (loss): Year Ended December 31, 2023 2024 2025 Revenue: Revenue from fees, net $ 560,431 $ 635,466 $ 950,011 Interest income, interest expense, and fair value adjustments, net: Interest income 168,996 186,360 204,230 Interest expense (34,894) (40,433) (31,664) Fair value and other adjustments, net (180,971) (144,865) (78,720) Total interest income and fair value adjustments, net (46,869) 1,062 93,846 Total revenue 513,562 636,528 1,043,857 Operating expenses (1) : Sales and marketing 127,143 166,800 301,507 Customer operations 150,418 157,996 188,377 Engineering and product development 280,138 253,653 257,602 General, administrative, and other 212,388 230,935 253,740 Total operating expenses 770,087 809,384 1,001,226 Income (loss) from operations (256,525) (172,856) 42,631 Other income, net 21,206 18,793 24,324 Expense on convertible notes (4,706) (7,694) (19,872) Gain on debt extinguishment — 33,361 7,246 Net income (loss) before income taxes (240,025) (128,396) 54,329 Provision for income taxes 107 185 728 Net income (loss) $ (240,132) $ (128,581) $ 53,601 ________ (1) Includes stock-based compensation expense as follows: Year Ended December 31, 2023 2024 2025 Sales and marketing $ 8,166 $ 11,705 $ 12,679 Customer operations 10,683 7,038 7,200 Engineering and product development 110,381 70,786 65,691 General, administrative, and other 45,809 43,871 46,380 Total stock-based compensation $ 175,039 $ 133,400 $ 131,950 Revenue Revenue from Fees, Net The following table sets forth our revenue from fees, net in the years presented: 64 Table of Contents Upstart Holdings, Inc.
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.
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 special-purpose trusts and corporate cash.
Fair value of beneficial interests, which represent the Company’s right to receive cash payments or an obligation to make cash payments as part of its committed capital and other co-investment arrangements with third parties, is based on discount rates and credit risk rate spreads.
Fair value of beneficial interests, which represent the Company’s right to receive cash payments or an obligation to make cash payments as part of its committed capital and other co-investment arrangements with third parties, is based on discount rates, credit risk rate spreads, and prepayment rate spreads.
Conversion Rate 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.
Conversion Rate We define Conversion Rate as the Transaction Volume, Number of Loans in a period divided by the total number of rate inquiries received that we estimate to be legitimate, which we record when a borrower actively requests a loan offer on our platform.
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.
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.
Some of these limitations are as follows: • Although depreciation expense is a non-cash charge, the assets being depreciated may have to be replaced in the future, and Adjusted EBITDA and Adjusted EBITDA Margin do not reflect cash capital expenditure requirements for such replacements or for new capital expenditure requirements; • Adjusted EBITDA and Adjusted EBITDA Margin exclude stock-based compensation expense and certain employer payroll taxes on employee stock transactions.
In particular, some of the limitations with respect to Adjusted EBITDA and Adjusted Margin are as follows: • Although depreciation expense is a non-cash charge, the assets being depreciated may have to be replaced in the future, and Adjusted EBITDA and Adjusted EBITDA Margin do not reflect cash capital expenditure requirements for such replacements or for new capital expenditure requirements; • Adjusted EBITDA and Adjusted EBITDA Margin exclude stock-based compensation expense and certain employer payroll taxes on employee stock transactions.
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.
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.
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. 98 Table of Contents Upstart Holdings, Inc.
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. 60 Table of Contents Upstart Holdings, Inc.
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.
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.
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.
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.
Upstart pays these lending partners a one-time loan premium fee upon completion of the minimum holding periods. Upstart also pays certain lending partners monthly loan trailing fees based on the amount and timing of principal and interest payments made by borrowers of the underlying loans.
Upstart pays these lending partners a one-time loan premium fee upon completion of the minimum holding periods. Upstart also pays certain lending partners monthly loan trailing fees based on the amount and timing of principal and interest payments made by borrowers of the underlying loans. 61 Table of Contents Upstart Holdings, Inc.
(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. Transaction Volume We define Transaction Volume, Dollars as the total principal of loan originations (or committed amounts for HELOCs) facilitated on our marketplace during the years presented.
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. Transaction Volume 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.
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 of recent changes to macroeconomic conditions, credit market volatility and interest rate fluctuations that have occurred, all of which were (and still are) beyond our control.
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.
Adjusted EBITDA and Adjusted EBITDA Margin We believe that Adjusted EBITDA and Adjusted EBITDA Margin are useful for investors to use in comparing our financial performance with the performance of other companies for the following reasons: • Adjusted EBITDA and Adjusted EBITDA Margin are widely used by investors and securities analysts to measure a company’s operating performance without regard to items such as depreciation, and interest expense, that can vary substantially from company to company depending upon their financing and capital structures, and the method by which assets were acquired; and • Adjusted EBITDA and Adjusted EBITDA Margin eliminate the impact of certain items such as stock-based compensation expense and certain payroll tax expense, expense on convertible n otes, gain on debt extinguishment, net gain on lease modification and reorganization expenses that may obscure trends in the underlying performance of our business; and • Adjusted EBITDA and Adjusted EBITDA Margin provide consistency and comparability with o ur past financial performance, and facilitate comparisons with other companies, many of which use similar non-GAAP financial measures to supplement their GAAP results.
Management’s Discussion and Analysis of Financial Condition and Results of Operations (Tabular Amounts in Thousands, Except Share and Per Share Data and Ratios, or as Noted) Adjusted EBITDA and Adjusted EBITDA Margin We believe that Adjusted EBITDA and Adjusted EBITDA Margin are useful for investors to use in comparing our financial performance with the performance of other companies for the following reasons: • Adjusted EBITDA and Adjusted EBITDA Margin are widely used by investors and securities analysts to measure a company’s operating performance without regard to items such as depreciation, and interest expense, that can vary substantially from company to company depending upon their financing and capital structures, and the method by which assets were acquired; and • Adjusted EBITDA and Adjusted EBITDA Margin eliminate the impact of certain items such as stock-based compensation expense and certain payroll tax expense, expense on convertible n otes, gain on debt extinguishment, net gain on lease modification and reorganization expenses that may obscure trends in the underlying performance of our business; and • Adjusted EBITDA and Adjusted EBITDA Margin provide consistency and comparability with o ur past financial performance, and facilitate comparisons with other companies, many of which use similar non-GAAP financial measures to supplement their GAAP results.
Contribution Profit and Contribution Margin do not reflect all of our variable expenses and 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.
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.
We encourage investors and others to review our financial information in its entirety, not to rely on any single financial measure and to view Contribution Profit, Contribution Margin, Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Net Income (Loss), and Adjusted Net Income (Loss) Per Share in conjunction with their respective related GAAP financial measures.
We encourage investors and others to review our financial information in its entirety, not to rely on any single financial measure and to view Contribution Profit, Contribution Margin, Adjusted EBITDA, and Adjusted EBITDA Margin in conjunction with their respective related GAAP financial measures.
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. 106 Table of Contents Upstart Holdings, Inc.
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.
We expect to increase the size of our general and administrative function to support the further growth of our business. As a result, we expect that our general, administrative and other expenses will increase in absolute dollars but may fluctuate as a percentage of our total revenue from period to period. 100 Table of Contents Upstart Holdings, Inc.
We expect to increase the size of our general and administrative function to support the further growth of our business. As a result, we expect that our general, administrative and other expenses will increase in absolute dollars but may fluctuate as a percentage of our total revenue from period to period.
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. 93 Table of Contents Upstart Holdings, Inc.
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.
While we believe that the macroeconomic environment started to improve in 2024, disruption in financial markets could impair our lending partners and result in constrained funding, which would adversely impact our business, financial condition and operating results.
While we believe that the macroeconomic environment started to improve in 2024, disruption in financial markets could once again lower borrower demand or impair our lending partners and result in constrained funding, which would adversely impact our business, financial condition and operating results.
In order to create greater stability for our business, beginning in 2023, we secured several committed capital and co-investment arrangements with institutional investors and other third-parties that provide loan funding over longer durations.
In order to create greater stability for our business, we began securing committed capital and co-investment arrangements with institutional investors and other third parties that provide loan funding over longer durations.
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.
Contribution Profit and Contribution Margin 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. 68 Table of Contents Upstart Holdings, Inc.
Engineering and Product Development Engineering and product development expenses primarily consist of payroll and other personnel-related expenses, including stock-based compensation expense, for the engineering and product development teams as well as the costs of systems and tools used by these teams. These costs are recognized in the period incurred.
Engineering and Product Development Engineering and product development expenses primarily consist of payroll and other personnel-related expenses, including stock-based compensation expense, for the engineering and product development teams as well as the costs of systems and tools used by these teams. These costs are recognized in the period incurred. We expect 62 Table of Contents Upstart Holdings, Inc.
Credit risk rate spreads are the measurement of estimated credit performance of underlying loan portfolios as of the reporting date against set expectations. For further information on fair value measurement refer to “ Note 5. Fair Value Measurement ” in Part II, Item 8 of this Annual Report on Form 10-K. 112 Table of Contents Upstart Holdings, Inc.
Credit risk rate spreads and prepayment rate spreads are the measurement of estimated credit performance and principal prepayments, respectively, of the underlying loan portfolios as of the reporting date against set expectations. For further information on fair value measurement refer to “ Note 5. Fair Value Measurement ” in Part II, Item 8 of this Annual Report on Form 10-K.
As a result, non-GAAP financial measures should be viewed as supplementing, and not as an alternative or substitute for, our consolidated financial statements prepared and presented in accordance with GAAP. 105 Table of Contents Upstart Holdings, Inc.
As a result, non-GAAP financial measures should be viewed as supplementing, and not as an alternative or substitute for, our consolidated financial statements prepared and presented in accordance with GAAP.
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.
Our warehouse credit facilities, which mature between August 2027 and June 2028, allow us to borrow up to an aggregate of $325.0 million to purchase unsecured personal loans, $100.0 million to purchase small dollar loans, and up to $150.0 million to purchase auto loans.
The following table provides a calculation of Contribution Profit and Contribution Margin: Year Ended December 31, 2022 2023 2024 Revenue from fees, net $ 907,272 $ 560,431 $ 635,466 Borrower acquisition costs (1) (302,713) (90,517) (125,017) Borrower verification and servicing costs (2) (157,808) (116,620) (128,916) Total direct expenses (460,521) (207,137) (253,933) Contribution Profit $ 446,751 $ 353,294 $ 381,533 Contribution Margin 49 % 63 % 60 % _______ (1) 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.
The following table provides a calculation of Contribution Profit and Contribution Margin: Year Ended December 31, 2023 2024 2025 Revenue from fees, net $ 560,431 $ 635,466 $ 950,011 Borrower acquisition costs (1) (90,517) (125,017) (256,237) Borrower verification and servicing costs (2) (116,620) (128,916) (162,680) Total direct expenses (207,137) (253,933) (418,917) Contribution Profit $ 353,294 $ 381,533 $ 531,094 Contribution Margin 63 % 60 % 56 % _______ (1) 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.
We calculate Adjusted EBITDA Margin as Adjusted EBITDA divided by total revenue. Adjusted EBITDA and Adjusted EBITDA Margin includes interest expense from corporate debt and warehouse credit facilities which is incurred in the course of earning corresponding interest income.
Adjusted EBITDA and Adjusted EBITDA Margin includes interest expense from corporate debt and warehouse credit facilities which is incurred in the course of earning corresponding interest income.
Transaction Volume, Dollars increased 28% in the year ended December 31, 2024 compared to the prior year and Transaction Volume, Number of Loans increased 59% in the year ended December 31, 2024 compared to the prior year.
Transaction Volume, Dollars increased 86% in the year ended December 31, 2025 compared to the prior year and Transaction Volume, Number of Loans increased 115% in the year ended December 31, 2025 compared to the prior year .
Revenue ” to our consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K for more information.
Refer to “ Note 2. Revenue ” in Part II, Item 8 of this Annual Report on Form 10-K for more information.
Percentage of Loans Fully Automated 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.
Percentage of Loans Fully Automated 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 with no human involvement required by the Company divided by the Transaction Volume, Number of Loans in the same period.
Composition of Balance Sheet Loan Portfolio As of December 31, 2024, we held $806.3 million of loans on our consolidated balance sheet. $455.2 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 111 Table of Contents Upstart Holdings, Inc.
Composition of Balance Sheet Loan Portfolio As of December 31, 2025, we held $984.6 million of loans on our consolidated balance sheet. $647.2 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.
Fair value of loans and payable to securitization note holders is based on inputs, such as discount rates, credit risk rates, and expected prepayment rates. These inputs are based on historical performance of loans facilitated through our platform, as well as the consideration of market participant requirements and use of observable market data for notes payable held in consolidated securitization.
These inputs are based on historical performance of loans facilitated through our platform, as well as the consideration of market participant requirements and use of observable market data for notes payable held in consolidated securitization.
Management’s Discussion and Analysis of Financial Condition and Results of Operations (Tabular Amounts in Thousands, Except Share and Per Share Data and Ratios, or as Noted) Year Ended December 31, 2022 2023 2024 Total revenue $ 842,444 $ 513,562 $ 636,528 Net loss (108,665) (240,132) (128,581) Net Loss Margin (13) % (47) % (20) % Adjusted to exclude the following: Stock-based compensation and certain payroll tax expenses (1) $ 128,038 $ 178,400 $ 139,726 Depreciation and amortization 13,513 24,903 20,549 Reorganization expenses — 15,536 4,382 Expense on convertible notes 4,684 4,706 7,694 Gain on debt extinguishment — — (33,361) Net gain on lease modification — (737) — Provision for income taxes (409) 107 185 Adjusted EBITDA $ 37,161 $ (17,217) $ 10,594 Adjusted EBITDA Margin 4 % (3) % 2 % _________ (1) Payroll tax expenses include the employer payroll tax-related expense on employee stock transactions, as the amount is dependent on our stock price and other factors that are beyond our control and do not correlate to the operation of our business. 108 Table of Contents Upstart Holdings, Inc.
Year Ended December 31, 2023 2024 2025 Total revenue $ 513,562 $ 636,528 $ 1,043,857 Net income (loss) (240,132) (128,581) 53,601 Net Income (Loss) Margin (47) % (20) % 5 % Adjusted to exclude the following: Stock-based compensation and certain payroll tax expenses (1) $ 178,400 $ 139,726 $ 138,696 Depreciation and amortization 24,903 20,549 24,835 Reorganization expenses 15,536 4,382 — Expense on convertible notes 4,706 7,694 19,872 Gain on debt extinguishment — (33,361) (7,246) Net gain on lease modification (737) — — Provision for income taxes 107 185 728 Adjusted EBITDA $ (17,217) $ 10,594 $ 230,486 Adjusted EBITDA Margin (3) % 2 % 22 % _________ (1) Payroll tax expenses include the employer payroll tax-related expense on employee stock transactions, as the amount is dependent on our stock price and other factors that are beyond our control and do not correlate to the operation of our business. 69 Table of Contents Upstart Holdings, Inc.
Our Conversion Rate increased to 16.5% in the year ended December 31, 2024 fr om 9.7% in t he year ended December 31, 2023, primarily driven by underwriting model improvements and product initiatives, coupled with continued optimization in our acquisition channels.
Our Conversion Rate increased to 19.4% in the year ended December 31, 2025 fr om 15.1% in the year ended December 31, 2024, primarily driven by underwriting model improvements and product and pricing initiatives, coupled with continued optimization in our acquisition channels.
Reconciliation of Non-GAAP Financial Measures To supplement our consolidated financial statements prepared and presented in accordance with GAAP, we use the non-GAAP financial measures of Contribution Profit, Contribution Margin, Adjusted EBITDA, Adjusted EBITDA Margin, and Adjusted Net Income (Loss) and Adjusted Net Income (Loss) Per Share to provide investors with additional information about our financial performance and to enhance the overall understanding of our past performance and future prospects.
Management’s Discussion and Analysis of Financial Condition and Results of Operations (Tabular Amounts in Thousands, Except Share and Per Share Data and Ratios, or as Noted) Reconciliation of Non-GAAP Financial Measures To supplement our consolidated financial statements prepared and presented in accordance with GAAP, we use the non-GAAP financial measures of Contribution Profit, Contribution Margin, Adjusted EBITDA, and Adjusted EBITDA Margin to provide investors with additional information about our financial performance and to enhance the overall understanding of our past performance and future prospects.
Our cash requirements related to these lease agreements are $55.9 million, of which $15.4 million is expected to be paid within the next 12 months. Refer to “ Note 11. Leases ” in Part II, Item 8 of this Annual Report on Form 10-K for further details on our operating lease obligations.
Our cash requirements related to leases entered into that have not yet commenced is $66.2 million, none of which is expected to be paid within the next 12 months. Refer to “ Note 10. Leases ” in Part II, Item 8 of this Annual Report on Form 10-K for further details on our operating lease obligations.
Interest income, interest expense, and fair value adjustments, net increased $47.9 million, or 102%, in the year ended December 31, 2024, compared to the prior year. The increase was driven by a $36.1 million decrease in unfavorable fair value adjustments, net, and a $17.4 million increase in interest income, partially offset by a $5.5 million increase in interest expense.
Interest income, interest expense, and fair value adjustments, net increased $92.8 million, or 8,737%, in the year ended December 31, 2025, compared to the prior year. The increase was driven by a $66.1 million decrease in unfavorable fair value adjustments, net, a $17.9 million increase in interest income, and an $8.8 million decrease in interest expense.
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 December 31, 2024, the total loan purchase commitment was $72.8 million.
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 December 31, 2025, the total loan purchase commitment was $116.9 million. The Company also has commitments to fund future advances on HELOCs.
We expect these dynamics would generally invert in an economic upswing. For example, loan funding provided by institutional investors started to become constrained in 2022, largely due to concerns about the macroeconomic environment. In response to inflationary pressure, the U.S. Federal Reserve raised interest rates through 2023, leading to more expensive loan offers across borrower categories, which impacted our business.
We expect these dynamics would generally invert in an economic upswing. For example, loan funding provided by institutional investors started to become constrained in 2022, largely due to concerns about the macroeconomic environment. Rising interest rates also led to more expensive loan offers across borrower categories, which decreased borrower demand.
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.
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.
The decrease in unfavorable fair value adjustments is primarily attributable to a $19.3 million decrease in negative mark-to-market adjustments and loan charge-offs, an $8.8 million decrease in fair value loss on beneficial interests, and an $8.1 million decrease in realized losses on loan sales.
The decrease in unfavorable fair value adjustments, net is primarily attributable to a $34.3 million increase in fair value gain on beneficial interests, a $28.1 million decrease in unrealized losses and loan charge-offs, and a $3.7 million decrease in realized loss on loan sales.
Operating Expenses Sales and Marketing Year Ended December 31, Change 2023 2024 $ % Sales and marketing $ 127,143 $ 166,800 $ 39,657 31 % % of revenue 25 % 26 % Sales and marketing expenses increased by $39.7 million, or 31%, in the year ended December 31, 2024 compared to the prior year.
Operating Expenses Sales and Marketing Year Ended December 31, Change 2024 2025 $ % Sales and marketing $ 166,800 $ 301,507 $ 134,707 81 % % of revenue 26 % 29 % Sales and marketing expenses increased by $134.7 million, or 81%, in the year ended December 31, 2025 compared to the prior year.
The increase in net changes in operating assets and liabilities was primarily related to $192.9 million in principal payments received for loans held-for-sale, $48.0 million in principal payments received for loans held in consolidated securitization, and $44.1 million of changes in accrued expenses and other liabilities, partially offset by $207.3 million of net payments from purchase and sale of loans held-for-sale, $8.7 million of changes in other assets, and $6.7 million of payments on beneficial interest liabilities.
The decrease in net changes in operating assets and liabilities was primarily related to $393.4 million of net payments from purchase and sale of loans held-for-sale, $21.6 million of settlements of beneficial interest liabilities (derivatives), and $10.8 million of changes in other assets, partially offset by $187.7 million in principal payments received for loans held-for-sale, $39.6 million decrease in accrued expenses and other liabilities, and $37.9 million in principal payments received for loans held in consolidated securitization.
We expect that our engineering and product development expenses will generally fluctuate as a percentage of our total revenue from period to period, and may increase in absolute dollars as we expand our engineering and product development team to continue to improve our AI models and develop new products and product enhancements.
Management’s Discussion and Analysis of Financial Condition and Results of Operations (Tabular Amounts in Thousands, Except Share and Per Share Data and Ratios, or as Noted) that our engineering and product development expenses will generally fluctuate as a percentage of our total revenue from period to period, and may increase in absolute dollars as we expand our engineering and product development team to continue to improve our AI models and develop new products and product enhancements.
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.
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.
Contribution Profit and Contribution Margin We use Contribution Profit and Contribution Margin as part of our overall assessment of performance, including the preparation of our annual operating budget and quarterly forecasts, to evaluate the effectiveness of our business strategies, and to communicate with our Board of Directors concerning our financial performance.
Management’s Discussion and Analysis of Financial Condition and Results of Operations (Tabular Amounts in Thousands, Except Share and Per Share Data and Ratios, or as Noted) Contribution Profit and Contribution Margin We use Contribution Profit and Contribution Margin as part of our overall assessment of performance, including the preparation of our annual operating budget and quarterly forecasts, to evaluate the effectiveness of our business strategies, and to communicate with our Board of Directors concerning our financial performance.
As of December 31, 2024, we have drawn an aggregate of $195.6 million on our warehouse credit facilities. Refer to “ Note 8. Borrowings ” in Part II, Item 8 of this Annual Report on Form 10-K for further details on our warehouse credit facilities. We lease office facilities under operating lease agreements which expire between 2027 and 2029.
As of December 31, 2025, we have drawn an aggregate of $97.3 million on our warehouse credit facilities and $75.6 million on our risk retention financing facility. Refer to “ Note 8. Borrowings ” in Part II, Item 8 of this Annual Report on Form 10-K for further details on our borrowings.
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.
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 58 Table of Contents Upstart Holdings, Inc.
The increase was primarily due to a $34.5 million increase in advertising and other traffic acquisition costs and a $5.2 million increase in payroll and other personnel related expenses. As a percentage of total revenue, sales and marketing expenses increased from 25% to 26%. 103 Table of Contents Upstart Holdings, Inc.
The increase was primarily due to a $131.2 million increase in advertising and borrower acquisition costs, a $2.2 million increase in marketing operation expense, 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 26% to 29%.
Expense on Convertible Notes Year Ended December 31, Change 2023 2024 $ % Expense on convertible notes $ 4,706 $ 7,694 $ 2,988 63 % In the year ended December 31, 2024, expense on convertible notes increased by $3.0 million, or 63%, compared to the prior year.
Expense on Convertible Notes Year Ended December 31, Change 2024 2025 $ % Expense on convertible notes $ 7,694 $ 19,872 $ 12,178 158 % In the year ended December 31, 2025, expense on convertible notes increased by $12.2 million, or 158%, compared to the prior year.
The following presents our key operating and financial metrics: Year Ended December 31, 2022 2023 2024 Transaction Volume, Dollars $ 11,204,274 $ 4,645,669 $ 5,930,029 Transaction Volume, Number of Loans (1) 1,129,672 437,659 697,092 Conversion Rate 14.1% 9.7% 16.5% Percentage of Loans Fully Automated 75% 87% 91% Contribution Profit (2) $ 446,751 $ 353,294 $ 381,533 Contribution Margin (2) 49% 63% 60% Adjusted EBITDA (2) $ 37,161 $ (17,217) $ 10,594 Adjusted EBITDA Margin (2) 4% (3)% 2% Adjusted Net Income (Loss) (2) $ 19,373 $ (46,933) $ (17,834) Adjusted Net Income (Loss) Per Share: Basic (2) $ 0.23 $ (0.56) $ (0.20) Diluted (2) $ 0.21 $ (0.56) $ (0.20) _______ (1) Transaction Volume, Number of Loans is shown in ones for the years presented.
The following presents our key operating and financial metrics: Year Ended December 31, 2023 2024 2025 Transaction Volume, Dollars $ 4,645,669 $ 5,930,029 $ 11,003,995 Transaction Volume, Number of Loans (1) 437,659 697,092 1,497,149 Conversion Rate (2) 9.8% 15.1% 19.4% Percentage of Loans Fully Automated (3) 87% 91% 91% Contribution Profit (4) $ 353,294 $ 381,533 $ 531,094 Contribution Margin (4) 63% 60% 56% Adjusted EBITDA (4) $ (17,217) $ 10,594 $ 230,486 Adjusted EBITDA Margin (4) (3)% 2% 22% _______ (1) Transaction Volume, Number of Loans, is shown in ones for the years presented.
Further, if we are unable to raise additional capital when our cash and cash equivalents balances and cash generated by operations are insufficient to satisfy liquidity needs, our results of operations and financial condition would be materially and adversely impacted. 110 Table of Contents Upstart Holdings, Inc.
Any debt or equity financing that we raise may contain terms that are not favorable to us or our stockholders. Further, if we are unable to raise additional capital when our cash and cash equivalents balances and cash generated by operations are insufficient to satisfy liquidity needs, our results of operations and financial condition would be materially and adversely impacted.
However, the quarterly vintages of core personal loans that originated in the first quarter of 2021 through the first quarter of 2024 are currently forecasted to underperform relative to their target returns.
At a more granular level, all quarterly vintages of core personal loans originated in the fourth quarter of 2023 and the first quarter of 2024 are currently forecasted to underperform relative to their target returns.
Management’s Discussion and Analysis of Financial Condition and Results of Operations (Tabular Amounts in Thousands, Except Share and Per Share Data and Ratios, or as Noted) Cash Flows The following table summarizes our cash flows during the years indicated: Year Ended December 31, 2023 2024 Net cash provided by (used in) operating activities $ (111,712) $ 186,331 Net cash used in investing activities (118,455) (237,726) Net cash provided by financing activities 165,487 559,871 Change in cash, cash equivalents and restricted cash $ (64,680) $ 508,476 Net Cash from Operating Activities Our main sources of cash provided by operating activities are our revenue from fees earned under contracts with lending partners and institutional investors and interest income we receive for loans held on our balance sheet.
Cash Flows The following table summarizes our cash flows during the years indicated: Year Ended December 31, 2024 2025 Net cash provided by (used in) operating activities $ 186,331 $ (147,725) Net cash used in investing activities (237,726) (177,171) Net cash provided by financing activities 559,871 405,645 Change in cash, cash equivalents and restricted cash $ 508,476 $ 80,749 Net Cash from Operating Activities Our main sources of cash provided by operating activities is revenue from fees earned under contracts with lending partners and institutional investors and interest income we receive for loans held on our balance sheet.
Engineering and Product Development Year Ended December 31, Change 2023 2024 $ % Engineering and product development $ 280,138 $ 253,653 $ (26,485) (9) % % of revenue 55 % 40 % Engineering and product development expenses decreased by $26.5 million, or 9%, for the year ended December 31, 2024, compared to the prior year.
Engineering and Product Development Year Ended December 31, Change 2024 2025 $ % Engineering and product development $ 253,653 $ 257,602 $ 3,949 2 % % of revenue 40 % 25 % Engineering and product development expenses increased by $3.9 million, or 2%, for the year ended December 31, 2025, compared to the prior year.
Management’s Discussion and Analysis of Financial Condition and Results of Operations (Tabular Amounts in Thousands, Except Share and Per Share Data and Ratios, or as Noted) Adjusted EBITDA and Adjusted EBITDA Margin We calculate Adjusted EBITDA as net income (loss) adjusted to exclude stock-based compensation expense and certain payroll tax expenses, depreciation and amortization, expense on convertible notes, provision for income taxes, gain on debt extinguishment, net gain on lease modification and reorganization expenses.
We calculate Adjusted EBITDA as net income (loss) adjusted to exclude stock-based compensation expense and certain payroll tax expenses, depreciation and amortization, expense on convertible notes, provision for income taxes, gain on debt extinguishment, net gain on lease modification and reorganization expenses. We calculate Adjusted EBITDA Margin as Adjusted EBITDA divided by total revenue.
Out of the total principal of loans transacted on our marketplace during the year ended December 31, 2024, 65% were purchased by institutional investors, 25% were retained by our lending partners, and 10% were held on our balance sheet.
Out of the total principal of loans transacted on our marketplace during the year ended December 31, 2025, 64% were purchased by institutional investors, 26% were retained or purchased by our lending partners, and 10% were held on our balance sheet. Investors may also invest in securities collateralized by Upstart-powered loans through our pass-through and securitization programs.
Year Ended December 31, 2022 2023 2024 Revenue from fees, net $ 907,272 $ 560,431 $ 635,466 Loss from operations (113,863) (256,525) (172,856) Operating Margin (13) % (46) % (27) % Sales and marketing, net of borrower acquisition costs (1) $ 43,063 $ 36,626 $ 41,783 Customer operations, net of borrower verification and servicing costs (2) 30,186 33,798 29,080 Engineering and product development 237,247 280,138 253,653 General, administrative, and other 185,290 212,388 230,935 Interest income, interest expense, and fair value adjustments, net 64,828 46,869 (1,062) Contribution Profit $ 446,751 $ 353,294 $ 381,533 Contribution Margin 49 % 63 % 60 % _________ (1) Borrower acquisition costs were $302.7 million, $90.5 million, and $125.0 million for the years ended December 31, 2022, 2023 and 2024, respectively.
Management’s Discussion and Analysis of Financial Condition and Results of Operations (Tabular Amounts in Thousands, Except Share and Per Share Data and Ratios, or as Noted) Year Ended December 31, 2023 2024 2025 Revenue from fees, net $ 560,431 $ 635,466 $ 950,011 Income (loss) from operations (256,525) (172,856) 42,631 Operating Margin (46) % (27) % 4 % Sales and marketing, net of borrower acquisition costs (1) $ 36,626 $ 41,783 $ 45,270 Customer operations, net of borrower verification and servicing costs (2) 33,798 29,080 25,697 Engineering and product development 280,138 253,653 257,602 General, administrative, and other 212,388 230,935 253,740 Interest income, interest expense, and fair value adjustments, net 46,869 (1,062) (93,846) Contribution Profit $ 353,294 $ 381,533 $ 531,094 Contribution Margin 63 % 60 % 56 % _________ (1) Borrower acquisition costs were $90.5 million, $125.0 million, and $256.2 million for the years ended December 31, 2023, 2024 and 2025, respectively.
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.
Management’s Discussion and Analysis of Financial Condition and Results of Operations (Tabular Amounts in Thousands, Except Share and Per Share Data and Ratios, or as Noted) 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.
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 97 Table of Contents Upstart Holdings, Inc.
We track this metric to understand the impact of improvements to the efficiency of our borrower funnel on our overall growth.
The decrease in servicing fees was primarily due to a decrease in the outstanding principal of serviced loans, partially offset by an increase in net gain related to loan servicing rights upon loan sales. 102 Table of Contents Upstart Holdings, Inc.
The increase in servicing fees was primarily due to an increase in net gain on servicing rights upon loan sales as well as the increase in outstanding principal of serviced loans.
We evaluate the credit performance of core personal loans by comparing the target returns expected at the time of origination to the returns received by our lending partners and institutional investors.
However, credit performance is impacted by multiple factors, including factors that our models do not predict, such as macroeconomic conditions. We evaluate the credit performance of core personal loans by comparing the target returns expected at the time of origination to the returns received by our lending partners, institutional investors, or us.
Management’s Discussion and Analysis of Financial Condition and Results of Operations (Tabular Amounts in Thousands, Except Share and Per Share Data and Ratios, or as Noted) Customer Operations Year Ended December 31, Change 2023 2024 $ % Customer operations $ 150,418 $ 157,996 $ 7,578 5 % % of revenue 29 % 25 % Customer operations expenses increased by $7.6 million, or 5%, in the year ended December 31, 2024, compared to the prior year.
Management’s Discussion and Analysis of Financial Condition and Results of Operations (Tabular Amounts in Thousands, Except Share and Per Share Data and Ratios, or as Noted) General, Administrative, and Other Year Ended December 31, Change 2024 2025 $ % General, administrative, and other $ 230,935 $ 253,740 $ 22,805 10 % % of revenue 36 % 24 % General, administrative, and other expenses increased by $22.8 million, or 10%, for the year ended December 31, 2025, compared to the prior year.
As a percentage of total revenue, general, administrative, and other expenses decreased from 41% to 36%. 104 Table of Contents Upstart Holdings, Inc.
As a percentage of total revenue, engineering and product development expenses decreased from 40% to 25%. 66 Table of Contents Upstart Holdings, Inc.
Borrowings” in Part II, Item 8 of this Annual Report on Form 10-K for further details on our Notes .
Beneficial Interests ” in Part II, Item 8 of this Annual Report on Form 10-K for further details. Our cash requirements 70 Table of Contents Upstart Holdings, Inc.
We provide additional information regarding transactions with unconsolidated VIEs in “ Note 3. Variable Interest Entities ” in Part II, Item 8 of this Annual Report on Form 10-K.
If we are the retaining sponsor of a securitization transaction, we are required by law to retain at least 5% of the credit risk of the securities issued in these securitizations. We provide additional information regarding transactions with unconsolidated VIEs in “ Note 3. Variable Interest Entities ” in Part II, Item 8 of this Annual Report on Form 10-K.
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.
Loans issued through our marketplace are purchased by our network of institutional investors, retained or purchased by our lending partners, or in certain instances, held on our balance sheet.
Net cash provided by operating activities was $186.3 million for the year ended December 31, 2024, which consisted of adjustments for non-cash items of $253.4 million, $61.5 million in net changes in operating assets and liabilities, and net loss of $128.6 million.
Net cash used in operating activities was $147.7 million for the year ended December 31, 2025, which consisted of $162.8 million change in net changes in operating assets and liabilities, net income of $53.6 million, and adjustments for non-cash items of $38.5 million.
Management’s Discussion and Analysis of Financial Condition and Results of Operations (Tabular Amounts in Thousands, Except Share and Per Share Data and Ratios, or as Noted) Key Operating and Non-GAAP Financial Metrics We focus on several key operating and Non-GAAP financial metrics to measure the performance of our business and help determine strategic direction.
Key Operating and Non-GAAP Financial Metrics We focus on several key operating and Non-GAAP financial metrics to measure the performance of our business and help determine strategic direction.
Net Cash from Investing Activities Net cash used in investing activities was $237.7 million for the year ended December 31, 2024 as a result of $323.1 million purchases and originations of loans held-for-investment and $63.3 million acquisition of beneficial interest assets, partially offset by $145.3 million in principal payments received for loans held-for-investment.
Net Cash from Investing Activities Net cash used in investing activities was $177.2 million for the year ended December 31, 2025 as a result of $637.3 million of net payments from purchase and sale of loans held-for-investment, partially offset by $320.4 million of principal payments received for loans held-for-investment and $142.9 million of proceeds from beneficial interest assets (hybrid instruments). 71 Table of Contents Upstart Holdings, Inc.
The increase was primarily due to higher outstanding convertible debt balances resulting from 2029 Notes and 2030 Notes issued during the year ended December 31, 2024.
The increase was primarily due to higher outstanding convertible note balances resulting from the issuance of 2029 Notes and 2030 Notes during the latter half of 2024 as well as higher amortization of issuance costs from the issuance of 2029 Notes, 2030 Notes, and 2032 Notes.
Our Percentage of Loans Fully Automated increased to 91% in the year ended December 31, 2024 from 87% in the year ended December 31, 2023 . Contribution Profit and Contribution Margin 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 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.
Borrower payment collections for loans that are more than 30 days past due or charged off are generally outsourced to third-party collection agencies. Upstart charges lending partners and 99 Table of Contents Upstart Holdings, Inc.
Borrower payment collections for loans that are more than 30 days past due or charged off are generally outsourced to third-party collection agencies. Upstart charges lending partners and institutional investors for collection agency fees related to their outstanding loan portfolio. Upstart also receives certain ancillary fees on a per transaction basis inclusive of late payment fees and ACH fail fees.
Management’s Discussion and Analysis of Financial Condition and Results of Operations (Tabular Amounts in Thousands, Except Share and Per Share Data and Ratios, or as Noted) To address these limitations, we provide a reconciliation of Contribution Profit, Contribution Margin, Adjusted EBITDA, Adjusted EBITDA Margin, and Adjusted Net Income (Loss) and Adjusted Net Income (Loss) Per Share to income (loss) from operations and net income (loss), respectively.
To address these limitations, we provide a reconciliation of Contribution Profit, Contribution Margin, Adjusted EBITDA, and Adjusted EBITDA Margin to income (loss) from operations and net income (loss).
We define Transaction Volume, Number of Loans as the number of loan originations (or commitments issued for HELOCs) facilitated on our marketplace during the years presented. Increases in Transaction Volume are dependent on our loan funding programs having sufficient access to capital.
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.
The increase was primarily due to a $14.2 million increase in servicing expenses, $2.9 million increase in information verification expenses, and a $1.2 million removal of an operational contingency reserve in the prior year. The increase was partially offset by a $11.3 million decrease in payroll and other personnel-related expenses due to a decrease in headcount.
The increase was primarily due to a $24.1 million increase in information verification and systems expenses and a $7.2 million increase in servicing expenses, partially offset by a $0.9 million decrease in payroll and other personnel-related expenses. As a percentage of total revenue, customer operations expenses decreased from 25% to 18%.
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.
Commitments and Contingencies ” in Part II, Item 8 of this Annual Report on Form 10-K for further details on our commitments. 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.
Lending is a cyclical industry, and we believe it is important to take a long-term view of credit performance. An equal investment in all vintages of Upstart-powered core personal loans that originated in the first quarter of 2018 through the third quarter of 2024 is currently expected to deliver returns in line with a blended target of 9.6%.
An equal investment in all vintages of Upstart-powered core personal loans originated in the fourth quarter of 2023 through the third quarter of 2025 is currently expected to deliver annual returns in line with a blended target of approximately 11.3% after servicing fees.
Off-Balance Sheet Arrangements In the ordinary course of business, we engage in activities that are not reflected on our consolidated balance sheets, generally referred to as off-balance sheet arrangements. These activities involve transactions with unconsolidated VIEs, including sale of whole loans, committed capital and other co-investment arrangements, and sponsored and co-sponsored securitization transactions, which we contractually service.
These activities involve transactions with unconsolidated VIEs, including sale of whole loans, committed capital and other co-investment arrangements, and securitization transactions, which we contractually service. We use these transactions to provide a source of liquidity to finance our business and to diversify our institutional investor base.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeA hypothetical 100 basis point and 200 basis point increase in the discount rate would result in a $2.4 million and $4.8 million decrease, respectively, in the fair value of loans held in the consolidated securitization as of December 31, 2023, and a $1.1 million and $2.3 million decrease, respectively, as of December 31, 2024.
Biggest changeAs the Company retained all residual certificates issued by the consolidated securitization, their value is eliminated as part of the consolidation process. A hypothetical 100 basis point and 200 basis point increase in the discount rate does not result in a material impact to the fair value of loans held in consolidated securitization as of December 31, 2024 and 2025.
The changes in the discount rates for loans held on our balance sheet reflect the expected returns of similar financial instruments available in the market and can be caused by changes in the market interest rates, expected loan performance, and other factors. Any gains and losses from discount rate changes are recorded in earnings.
Changes in the discount rates for loans held on our balance sheet reflect the expected returns of similar financial instruments available in the market and can be caused by changes in the market interest rates, expected loan performance, and other factors. Any gains and losses from discount rate changes are recorded in earnings.
The fair value of these loans is determined by the sum of the fair value of the related securitization notes and residual certificates issued as part of the consolidated securitization, and uses the same projected net cash flows as the underlying collateral loan pool.
The fair value of these loans is determined by the sum of the fair value of the related securitization notes receivable and residual certificates issued as part of the consolidated securitization, and uses the same projected net cash flows as the underlying collateral loan pool.
The fair value of these loans is determined by the sum of the fair value of the related securitization notes and residual certificates issued by the consolidated entities, and uses the same projected net cash flows as the underlying collateral loan pool.
The fair value of these loans is determined by the sum of the fair value of the related securitization notes receivable and residual certificates issued by the consolidated entities, and uses the same projected net cash flows as the underlying collateral loan pool.
Adjustments and impairments are recorded in other expense on the consolidated statements of operations and comprehensive loss upon recognition of such adjustments or impairments. As of December 31, 2023 and 2024, the carrying value of our non-marketable equity securities, which do not have readily determinable fair values, totaled $41.3 million. 115
Adjustments and impairments are recorded in other expense on the consolidated statements of operations and comprehensive income (loss) upon recognition of such adjustments or impairments. As of December 31, 2024 and 2025, the carrying value of our non-marketable equity securities, which do not have readily determinable fair values totaled $41.3 million. 76
As of December 31, 2023 and 2024, $62.7 million and $137.4 million, respectively, of the Company’s cash was held by one of our institutional investors in relation to the line of credit receivable and the beneficial interest asset. We mitigate our risk exposure through corporate guarantees provided by the investor.
As of December 31, 2024 and 2025, $137.4 million and $191.6 million, respectively, of the Company’s cash was held by one of our institutional investors in relation to the line of credit receivable and beneficial interest asset. We mitigate our risk exposure through corporate guarantees provided by the investor.
We also assess our non-marketable equity securities for impairment on a quarterly basis. Our impairment analysis encompasses an assessment of both qualitative and quantitative factors including the investee's financial metrics, market acceptance of the investee's product or technology, general market conditions and liquidity considerations.
We also assess our non-marketable equity securities for impairment on a quarterly basis. Our impairment analysis encompasses an assessment of both qualitative and quantitative factors including the investee's financial metrics, market acceptance of the investee's product or technology, general market conditions and liquidity 75 Table of Contents Upstart Holdings, Inc. considerations.
A hypothetical 10% and 20% adverse change in credit risk spread would result in a $44.4 million and $89.6 million decrease, respectively, in the fair value of beneficial interest assets, and would result in a $4.7 million and $10.3 million increase in the fair value of beneficial interest liabilities, respectively, as of December 31, 2024.
A hypothetical 10% and 20% adverse change in the credit risk spread would result in a $44.4 million and $89.6 million decrease, respectively, in the fair value of beneficial interest assets held on our consolidated balance sheet, and $4.7 million and $10.3 million increase in the fair value of beneficial interest liabilities on our consolidated balance sheet, respectively, as of December 31, 2024.
As of December 31, 2023 and 2024, we were exposed to interest rate risk on $387.4 million and $195.6 million, respectively, under our warehouse credit facilities, which bear floating interest rates. Changes in interest rates may impact our cost of borrowing.
As of December 31, 2024 and 2025, we were exposed to interest rate risk on $195.6 million and $97.3 million, respectively, under our warehouse credit facilities, which bear floating interest rates. Changes in interest rates may impact our cost of borrowing.
We manage this risk by selecting only counterparties that we believe to be financially strong, spreading the risk among multiple such counterparties, and placing contractual limits on the amount of dependence on any single counterparty. 114 Table of Contents Upstart Holdings, Inc.
We manage this risk by selecting only counterparties that we believe to be financially strong, spreading the risk among multiple such counterparties, and placing contractual limits on the amount of dependence on any single counterparty.
As of December 31, 2023 and 2024, we held $467.8 million and $976.3 million, respectively, related to cash, cash equivalents and restricted cash in business checking accounts and interest-bearing deposit accounts as well as money market accounts at various financial institutions in the United States.
As of December 31, 2024 and 2025, we held $976.3 million and $1,057.0 million, respectively, related to cash, cash equivalents and restricted cash in business checking accounts and interest-bearing deposit accounts as well as money market accounts at various financial institutions in the United States.
We are also exposed to credit risk through credit risk rate spreads on beneficial interest assets and beneficial interest liabilities held on the consolidated balance sheet of $41.0 million and $4.2 million, respectively, as of December 31, 2023, and $176.8 million and $10.1 million, respectively, as of December 31, 2024.
We are also exposed to credit risk through credit risk rate spreads on beneficial interest assets and beneficial interest liabilities held on the consolidated balance sheet of $176.8 million and $10.1 million, respectively, as of December 31, 2024, and $396.2 million and $5.1 million, respectively, as of December 31, 2025.
As of December 31, 2023 and 2024, we were also exposed to market discount rate risk on other financial instruments, including $41.0 million and $176.8 million of beneficial interest assets, respectively.
As of December 31, 2024 and 2025, we were also exposed to market discount rate risk on other financial instruments, including $176.8 million and $396.2 million of beneficial interest assets, respectively.
The performance of certain financial instruments, including loans, beneficial interests, securitization notes and residual certificates, and payable to securitization note holders on our consolidated balance sheets are dependent on the credit performance of loans facilitated by us.
The fair value of certain financial instruments, including loans, beneficial interests, securitization notes receivable and residual certificates, and payable to securitization note holders on our consolidated balance sheets are dependent on credit performance of the loans.
As of December 31, 2023, a hypothetical 10% and 20% increase in credit risk would result in a $12.5 million and $25.0 million decrease, and as of December 31, 2024, a hypothetical 10% and 20% increase in credit risk would result in a $9.1 million and $18.1 million decrease in the fair value of loans, respectively.
As of December 31, 2024, a hypothetical 10% and 20% increase in credit risk would result in a $9.1 million and $18.1 million decrease, and as of December 31, 2025, a hypothetical 10% and 20% increase in credit risk would result in a $10.5 million and $20.4 million decrease in the fair value of loans, respectively.
As of December 31, 2023 and 2024, we held $179.1 million and $102.9 million, respectively, of loans held in the consolidated securitization which are included in loans, at fair value, on the consolidated balance sheets.
As of December 31, 2024 and 2025, we held $102.9 million and $53.8 million, respectively, of loans held in the consolidated securitization which are included in loans, at fair value, on the consolidated balance sheets.
As of December 31, 2023 and 2024, we held $179.1 million and $102.9 million, respectively, of loans held in the consolidated securitization which are included in loans, at fair value, on the consolidated balance sheets.
As of December 31, 2024 and 2025, we held $102.9 million and $53.8 million, respectively, of loans held in the consolidated securitization which are included in loans, at fair value, on the consolidated balance sheets.
A hypothetical 100 basis point and 200 basis point increase in the discount rate would result in a $11.7 million and $23.1 million decrease, respectively, in the fair value of loans as of December 31, 2023 and a $9.0 million and $17.9 million decrease, respectively, as of December 31, 2024.
A hypothetical 100 basis point and 200 basis point increase in the discount rate would result in a $9.0 million and $17.9 million decrease, respectively, in the fair value of loans as of December 31, 2024 and a $12.0 million and $23.6 million decrease, respectively, as of December 31, 2025.
As of December 31, 2023 and 2024, we were exposed to market discount rate risk on $977.3 million and $703.4 million, respectively, of loans held on our consolidated balance sheets, excluding loans held in consolidated securitization.
As of December 31, 2024 and 2025, we were exposed to market discount rate risk on $703.4 million and $930.8 million, respectively, of loans held on our consolidated balance sheets, excluding loans held in the consolidated securitization.
As of December 31, 2023 and 2024, we were also exposed to market discount rate risk on payable to securitization note holders of $141.4 million and $87.3 million, respectively.
As of December 31, 2024 and 2025, we were also exposed to market discount rate risk on payable to securitization note holders of $87.3 million and $46.5 million, respectively.
As of December 31, 2023 and 2024, we were exposed to credit risk on $977.3 million and $703.4 million, respectively, of loans held on our consolidated balance sheets, excluding loans held in consolidated securitization. Loans bear fixed interest rates and are carried on our consolidated balance sheets at fair value.
These instruments are sensitive to changes in credit risk. As of December 31, 2024 and 2025, we were exposed to credit risk on $703.4 million and $930.8 million, respectively, of loans held on our consolidated balance sheets, excluding loans held in the consolidated securitization. Loans bear fixed interest rates and are carried on our consolidated balance sheets at fair value.
A hypothetical 100 basis point and 200 basis point increase in the discount rate would result in a $1.2 million and $2.4 million decrease, respectively, in the fair value of beneficial interest assets as of December 31, 2023, and a $3.2 million and $6.4 million decrease, respectively, as of December 31, 2024. 113 Table of Contents Upstart Holdings, Inc.
A hypothetical 100 basis point and 200 basis point increase in the discount rate would result in a $3.2 million and $6.4 million decrease, respectively, in the fair value of beneficial interest assets as of December 31, 2024, and a $4.9 million and $9.7 million decrease, respectively, as of December 31, 2025.
These assets and liabilities are associated with committed capital and other co-investment arrangements with institutional investors and lending partners, in which the Company puts certain amounts of assets at risk. See “ Note 4. Beneficial Interests ” for additional information on maximum exposure to losses from these arrangements.
These assets and liabilities are associated with committed capital and other co-investment arrangements with third parties, in which the Company puts certain amounts of assets at risk. See “ Note 4. Beneficial Interests ” in Part II, Item 8 of this Annual Report on Form 10-K for additional information on maximum exposure to losses from these arrangements.
A hypothetical 10% and 20% increase in the credit risk would result in a $2.7 million and $5.2 million decrease, respectively, in the fair value of loans held in consolidated securitization as of December 31, 2023 and a $1.8 million and $3.6 million decrease, respectively, as of December 31, 2024.
As the Company retained all residual certificates issued by the consolidated securitization, the residual certificates value is eliminated as part of the consolidation process. A hypothetical 10% and 20% increase in the credit risk would result in a $1.8 million and $3.6 million decrease, respectively, in the fair value of loans held in consolidated securitization as of December 31, 2024.
To manage this risk, we monitor borrower payment performance through our lending marketplace and utilize our AI capabilities to price loans in a manner that we believe is reflective of their credit risk.
To manage this risk, we monitor borrower payment performance through our lending marketplace and utilize our AI capabilities to price loans in a manner that we believe is reflective of their credit risk. The fair values of loans and beneficial interests are estimated based on a discounted cash flow model which involves the use of significant unobservable inputs and assumptions.
A hypothetical 100 basis point and 200 basis point increase in the discount rate would result in a $1.9 million and $3.7 million decrease, respectively, in the fair value of payable to securitization holders on the consolidated balance sheet as of December 31, 2023, and do not result in a material impact to the fair value of payable to securitization note holders as of December 31, 2024.
A hypothetical 100 basis point and 200 basis point increase in the discount rate does not result in a material impact to the fair value of payable to securitization note holders as of December 31, 2024 and 2025. 73 Table of Contents Upstart Holdings, Inc.
A hypothetical 10% and 20% adverse change in credit risk spread would result in a $9.1 million and $16.7 million decrease, respectively, in the fair value of beneficial interest assets held on our consolidated balance sheet, and would result in a $5.6 million and $11.2 million increase in the fair value of beneficial interest liabilities on our consolidated balance sheet, respectively, as of December 31, 2023.
A hypothetical 10% and 20% adverse change in the credit risk spread would result in a $80.1 million and $158.2 million decrease, respectively, in the fair value of 74 Table of Contents Upstart Holdings, Inc. beneficial interest assets, and $22.4 million and $44.4 million increase in the fair value of beneficial interest liabilities, respectively, as of December 31, 2025.
If a counterparty were to default or otherwise fail to perform, we could potentially be exposed to loss if such counterparty were unable to meet its obligations to us.
These activities generally involve an exchange of obligations with unaffiliated lenders or other individuals or entities, referred to in such transactions as “counterparties.” If a counterparty were to default or otherwise fail to perform, we could potentially be exposed to loss if such counterparty were unable to meet its obligations to us.
Counterparty Risk We are subject to risk that arises from our derivative financial instruments, line of credit receivable, beneficial interests, warehouse facilities, and third-party custodians. These activities generally involve an exchange of obligations with unaffiliated lenders or other individuals or entities, referred to in such transactions as “counterparties”.
Counterparty Risk We are subject to risk that arises from our line of credit receivable, beneficial interests, warehouse facilities, and third-party custodians.
Removed
As the Company retained all residual certificates issued by the consolidated securitization, their value is eliminated as part of the consolidation process.
Added
A hypothetical 10% and 20% increase in the credit risk does not result in a material impact to the fair value of loans held in the consolidated securitization as of December 31, 2025.
Removed
The fair values of these loans, beneficial interests, securitization notes and residual certificates, and payable to securitization note holders are estimated based on a discounted cash flow model which involves the use of significant unobservable inputs and assumptions. These instruments are sensitive to changes in credit risk.
Removed
As the Company retained all residual certificates issued by the consolidated securitization, the residual certificates value is eliminated as part of the consolidation process.
Removed
We have entered into interest rate cap agreements in connection with certain warehouse credit facilities with an aggregate notional amount of $241.1 million. The interest rate caps provide protection for certain credit facilities against exposure to changes in cash flows to the extent the 1-month SOFR exceeds the strike rate.
Removed
The Upstart Auto Warehouse Trust interest rate cap matures in April 2029 and the Upstart Loan Trust interest rate cap matures June 2025. Refer to “Note 9. Interest Rate Cap Arrangements” for further details.

Other UPST 10-K year-over-year comparisons