Upstart Holdings Inc.

11/03/2026 | Press release | Distributed by Public on 11/03/2026 07:13

Quarterly Report for Quarter Ending September 30, 2026 (Form 10-Q)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the condensed consolidated financial statements and related notes thereto included elsewhere in this Quarterly Report on Form 10-Q. This discussion contains forward-looking statements that involve risks and uncertainties. Factors that could cause or contribute to such differences include those identified below and those discussed in the section titled "Risk Factors" and other parts of this Quarterly Report on Form 10-Q. Our historical results are not necessarily indicative of the results that may be expected for any period in the future.
Overview
Upstart is the leading AI lending marketplace. We aim to radically reduce the cost and complexity of borrowing for all Americans by using our proprietary AI models to remake the entire lending process. Upstart's marketplace supports both unsecured and secured loans. Unsecured loans include personal loans, small dollar loans, and our new unsecured revolving credit product, Cash Line. Secured loans include auto loans - including retail, refinance1, and auto secured personal loans - and HELOCs. Long-term, our vision is to become the always-on, everything-store for credit, where we can automatically approve borrowers at the right prices - instantly and effortlessly.
Our platform applies AI to more accurately quantify the true risk of a loan, a capability we refer to as "risk separation." This differentiated approach to underwriting has generally led to higher approvals and lower interest rates relative to traditional lending practices, with more predictable returns to our capital partners including banks and credit unions (collectively our "lending partners") and institutional investors. With this as the foundation, we've added layers of automation, macroeconomic calibration, and personalization that can support increasing scale and greater business resilience over time.
Beyond core underwriting, we apply our proprietary AI models to other areas of our business, such as income and identity verification, fraud detection, and identifying loan stacking behavior, among others. The result is an exceptional digital-first experience with significant levels of automation. For example, during the nine months ended September 30, 2026, 91% of loans on our platform were fully automated, with no human intervention by Upstart. Consumer acquisition is another area where we apply our AI, making these activities increasingly efficient. Consumers primarily access Upstart-powered loans through Upstart.com and, for automotive retail in particular, through auto dealerships that use Upstart's Auto Finance software.
Our dynamic marketplace allows us to serve borrowers across the credit spectrum. Loans issued through our marketplace are purchased by our network of institutional investors, retained or purchased by our lending partners, or in certain instances, held on our balance sheet. Out of the total principal of loans facilitated on our marketplace during the nine months ended September 30, 2026, 64% were purchased by institutional investors, 30% were retained or purchased by our lending partners, and 6% were held on our balance sheet as of September 30, 2026. Investors may also invest in securities collateralized by Upstart-powered loans through our pass-through and securitization programs.
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. Today, more than 50% of the loan funding on our platform is through committed capital and other co-investment arrangements with institutional investors and lending partners, which provide valuable stability and resilience on the funding side of our platform.
1 Beginning in the second quarter of 2026, auto refinance loans are no longer offered on our platform.
Upstart Holdings, Inc.
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)
We retain certain loans on our balance sheet for R&D purposes, including to test and evaluate our AI models for newer products and to aid in price discovery. As of September 30, 2026, 51% of loans held on our balance sheet were for R&D purposes, primarily related to our seasoned auto refinance, auto retail loans and HELOCs, as well as newer products including small dollar loans and auto secured personal loans. As products develop and achieve market fit, we no longer consider them as R&D. For example, beginning in the quarter ended June 30, 2026, newly originated auto refinance, auto retail loans and HELOCs were no longer classified as R&D.
We may also retain loans on our balance sheet for purposes unrelated to product development, including to bridge the timing between origination and sales of loans.
Credit Performance
We consider credit performance of Upstart-powered loans to be one of the most important measures of the effectiveness of our AI models. Credit performance is influenced by multiple factors, including certain macroeconomic conditions that are not predicted by our AI models, and affects our business in three fundamental ways.
First, credit performance impacts the value of our assets and liabilities as well as our results of operations. For example, changes in credit performance affect the fair value of the loans held on our balance sheet, as well as the related adjustments and interest income recognized in our results of operations. Actual credit performance of the loans sold to third parties and changes in expected credit losses relative to our initial estimates at the time of origination or sale also affect the fair value of beneficial interests associated with our committed capital and other co-investment arrangements. For additional information on the impact of credit risk, including the impact to the fair value of our loans and beneficial interests, refer to Part I, Item 3, "Quantitative and Qualitative Disclosures About Market Risk" of this Quarterly Report on Form 10-Q.
Second, our expectations for future credit performance inform the interest rates offered to borrowers on our marketplace and affect the number of loans we can approve on competitive terms. Because we have historically limited the maximum annual percentage rates offered on Upstart-powered loans, changes in expected credit losses can affect the number of loan offers we make and terms we offer. We use the UMI, discussed below under "Impact of Macroeconomic Environment," to quantify the macroeconomic component of this risk.
Third, the returns earned by our lending partners and institutional investors on Upstart-powered loans may affect their willingness to continue to provide capital to our marketplace. Capital providers generally evaluate these returns relative to alternative investment opportunities. As of September 30, 2026, an equal investment across the 12 recent quarterly vintages of Upstart-powered personal loans would have generated an average return, net of servicing fees, of approximately 660 basis points above yield on two-year U.S. Treasury securities, prevailing at each vintage's origination. Each individual vintage exceeded the comparable Treasury yield by approximately 500 basis points or more, net of servicing fees.
Impact of Macroeconomic Environment
In addition to impacting credit performance, the macroeconomic environment has a direct and indirect impact on our business, financial condition, and results of operations. In an economic downturn, we believe consumer lending will generally contract. Lending partners and institutional investors will generally require higher rates of return, which in turn increases the interest rates offered to borrowers, leading to lower borrower demand. Macroeconomic factors can also cause fluctuations of available capital in our lending marketplace due to shifts in the risk preferences of our lending partners and institutional investors. We expect these dynamics would generally invert in an economic upswing.
Upstart Holdings, Inc.
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 respond to macroeconomic changes and provide relevant and up-to-date information to our lending partners, we introduced a new metric, the UMI, in 2023. As of September 30, 2026, UMI remained elevated, measured at approximately 1.50, meaning that current macroeconomic conditions contributed an incremental risk of approximately 50% to the repayment performance of an Upstart-powered unsecured personal loan, compared to the baseline measurement of 1.0. Subsequent to September 30, 2026, UMI increased to approximately 1.53, indicating an incremental increase in macroeconomic risk.
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. The following presents our key operating and financial metrics:
Three Months Ended
September 30, 		Nine Months Ended
September 30,
2025 2026 2025 2026
Originations, Dollars $ 2,854,296 $ 4,117,800 $ 7,808,302 $ 11,790,116
Originations, Number of Loans(1)
428,056 574,089 1,041,361 1,557,459
Conversion Rate(2)
19.4% 18.6% 19.4% 18.9%
Percentage of Loans Fully Automated 91% 90% 91% 91%
Contribution Profit(3)
$ 147,406 $ 217,970 $ 390,321 $ 548,375
Contribution Margin(3)
57% 60% 57% 55%
Adjusted EBITDA(3)
$ 71,162 $ 89,332 $ 166,792 $ 206,706
Adjusted EBITDA Margin(3)
26% 24% 22% 20%
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(1)Originations, Number of Loans, is shown in ones for the periods presented.
(2)Beginning in the fourth quarter of 2025, we revised the definition and underlying calculation methodology of Conversion Rate. Prior period figures have been recast to conform to the new definition and methodology. For additional information regarding this change, see "Key Operating and Non-GAAP Financial Metrics" in our Annual Report on Form 10-K for the year ended December 31, 2025.
(3)Represents a non-GAAP financial measure. See the section titled "Management's Discussion and Analysis of Financial Condition and Results of Operations-Reconciliation of Non-GAAP Financial Measures" for further information.
Originations
Beginning in the second quarter of 2026, we refer to the metrics "Transaction Volume, Dollars" and "Transaction Volume, Number of Loans" as "Originations, Dollars" and "Originations, Number of Loans," respectively, to reflect management's internal terminology. We define Originations, Dollars as the aggregate of: (i) the total principal of loan originations for personal loans, small dollar loans, and auto loans, (ii) committed amounts for HELOCs, and (iii) drawn amounts for unsecured revolving credit lines (Cash Line), in each case facilitated on our marketplace during the periods presented. We define Originations, Number of Loans as the total number of such originations, commitments, and draws, as applicable, facilitated on our marketplace during the periods presented. We believe these metrics are good proxies for our overall scale and reach as a marketplace.
For Cash Line, we count each draw, rather than the establishment of the credit line, because draws represent the customer's use of the product and more closely reflect the marketplace activity from which we generate ongoing fees.
Originations are driven by improvements in our AI models and technology, including our ability to streamline and automate the loan application and origination process. Originations can also be driven by several other factors, including borrower acceptance rates and their sensitivity to the interest rates offered through our
Upstart Holdings, Inc.
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)
platform. Originations are dependent on the availability of platform funding which is influenced by factors such as volatility in the capital markets and macroeconomic conditions.
Originations, Dollars increased 44% in the three months ended September 30, 2026 compared to the same period of 2025, and increased 51% in the nine months ended September 30, 2026 compared to the same period of 2025. Originations, Number of Loans increased 34% and 50% in the three and nine months ended September 30, 2026 compared to the same period of 2025, respectively. These increases were primarily due to model improvements, product initiatives, and increased traffic across our marketing channels. The increase in Originations, Number of Loans was lower than the increase in Originations, Dollars due to the increase in average loan size, primarily reflecting a higher proportion of auto loans and HELOCs and a lower proportion of small dollar loans in the origination mix.
Conversion Rate
We define Conversion Rate as the Originations, 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. We track this metric to understand the impact of improvements to the efficiency of our borrower funnel on our overall growth. Cash Line is excluded because those borrowers may make multiple draws after the line has been initially approved, and those subsequent draws do not represent additional conversions.
Historically, our Conversion Rate has benefited from improvements to our technology, which have made our evaluation of risk more accurate and our verification process more automated, or from the addition of capital partners that have made our offers more competitive. However, our Conversion Rate can be impacted by a variety of internal factors such as changes in the amount of platform and referral fees we charge, changes in the rate of returns we target for our lending partners and institutional investors, or changes in products we offer or borrower segments we serve. External factors such as shifts in macroeconomic conditions, including interest rate changes, also impact our Conversion Rate. Our ability to continue to improve our Conversion Rate depends in part on our ability to continue to improve our AI models and Percentage of Loans Fully Automated and the mix of marketing channels in any given period.
Our Conversion Rate decreased to 18.6% and 18.9% in the three and nine months ended September 30, 2026, respectively, from 19.4% in both the three and nine months ended September 30, 2025, primarily driven by our continued expansion into broader borrower segments, which increased application volumes at a faster rate than originations as we maintained disciplined underwriting.
We regularly evaluate the key operating metrics we use to help investors assess our business and periodically consider whether they continue to provide meaningful insight into our operating performance. As part of this evaluation, we have determined that Conversion Rate, which we have disclosed as an indicator of the efficiency of our borrower funnel dating back to our initial public offering, no longer meaningfully reflects the performance of our business, including our revenue and operating results.
This determination reflects the evolution of our business, including the expansion of our product portfolio. Accordingly, we plan to continue reporting Conversion Rate in our Forms 10-Q and 10-K through the remainder of fiscal year 2026 as a transition period, and we do not intend to report this metric beginning with our Quarterly Report on Form 10-Q for the quarter ending March 31, 2027.
As our products and services continue to evolve, we expect to continue evaluating our key operating metrics disclosures to ensure they remain aligned with how management assesses the business. We may determine to modify, add to, or eliminate certain of our current key operating metrics in future filings.
Upstart Holdings, Inc.
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)
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 Originations, Number of Loans in the same period. Cash Line is excluded because those borrowers may make multiple draws after the line has been initially approved, and those subsequent draws do not represent additional automation. Under this definition, "originated end-to-end" means (i) from initial rate request to final funding for personal loans, including small dollar loans, and (ii) from initial rate request to loan approval for auto loans and HELOCs, due to certain jurisdictions' local requirements and external dependencies that require human action prior to funding.
We have been successful in increasing the level of loan automation on the platform over the years while simultaneously holding fraud rates at very low levels. We believe this growth has been driven in part by our ability to streamline and automate the loan application and origination process on our platform. As we expand our loan offerings, however, this percentage may fluctuate from period to period depending on the loan offering mix and other factors.
Our Percentage of Loans Fully Automated decreased to 90% for the three months ended September 30, 2026 from 91% for the same period in 2025, and remained unchanged at 91% for the nine months ended September 30, 2025 and 2026.
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. We believe Contribution Profit and Contribution Margin are useful to investors for year-to-year comparisons of our business and in evaluating and understanding our operating results and ability to scale. Contribution Profit and Contribution Margin are also useful to investors because our management uses Contribution Profit and Contribution Margin, in conjunction with financial measures prepared in accordance with GAAP, to evaluate our operating results and financial performance and the effectiveness of our strategies.
Contribution Profit and Contribution Margin have limitations as analytical tools, and should not be considered in isolation or as a substitute for analysis of our results as reported under GAAP. Contribution Profit and Contribution Margin are not GAAP financial measures of, nor do they imply, profitability. Even if our revenue exceeds variable expenses over time, we may not be able to achieve or maintain profitability, and the relationship of revenue to variable expenses is not necessarily indicative of future performance. Contribution Profit and Contribution Margin reflect all expenses that we consider to be variable, which may involve some judgment and discretion around what costs vary directly with loan volume. Other companies that present contribution profit and contribution margin may calculate it differently and, therefore, similarly titled measures presented by other companies may not be directly comparable to ours.
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. Contribution Profit and Contribution Margin may fluctuate between periods due to various factors, including changes in the product mix of loans originated on our platform and marketing efforts.
Upstart Holdings, Inc.
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 following table provides a calculation of Contribution Profit and Contribution Margin:
Three Months Ended
September 30, 		Nine Months Ended
September 30,
2025 2026 2025 2026
Revenue from fees, net $ 258,539 $ 364,030 $ 684,791 $ 989,112
Borrower acquisition costs(1)
(67,262) (91,197) (176,759) (285,738)
Borrower verification and servicing costs(2)
(43,871) (54,863) (117,711) (154,999)
Total direct expenses (111,133) (146,060) (294,470) (440,737)
Contribution Profit $ 147,406 $ 217,970 $ 390,321 $ 548,375
Contribution Margin 57 % 60 % 57 % 55 %
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(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. These costs do not include reorganization expenses.
(2)Borrower verification and servicing costs consist of payroll and other personnel-related expenses for personnel engaged in loan onboarding, verification and servicing, as well as servicing system costs. It excludes payroll and personnel-related expenses and stock-based compensation for certain members of our customer operations team whose work is not directly attributable to onboarding and servicing loans. These costs do not include reorganization expenses.
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 from operations to Contribution Profit.
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 notes, gain on debt extinguishment, net gain on lease modification and reorganization expenses, as applicable, that may obscure trends in the underlying performance of our business; and
•Adjusted EBITDA and Adjusted EBITDA Margin provide consistency and comparability with our past financial performance, and facilitate comparisons with other companies, many of which use similar non-GAAP financial measures to supplement their GAAP results.
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, as applicable. We calculate Adjusted EBITDA Margin as Adjusted EBITDA divided by total revenue. Adjusted EBITDA and Adjusted EBITDA Margin include interest expense from warehouse and risk retention facilities which is incurred in the course of earning corresponding interest income. 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 net income (loss) to Adjusted EBITDA and Adjusted EBITDA Margin.
Upstart Holdings, Inc.
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)
Components of Results of Operations
Revenue from Fees, Net
Platform and Referral Fees, Net
We charge our lending partners platform fees in exchange for usage of our AI lending marketplace, which includes collection of loan application data, underwriting of credit risk, verification and fraud detection, and the delivery of electronic loan offers and associated documentation. We also charge referral fees to our lending partners in exchange for the referral of borrowers from Upstart.com. Referral fees are charged to lending partners on a per borrower basis upon origination of a loan. These fees are charged net of any fees the lending partner charges Upstart. 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.
We recognize subscription 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. In addition, we recognize origination fees charged to our borrowers on HELOCs that we originate. Refer to "Note 2. Revenue" in Part I, Item 1 of this Quarterly Report on Form 10-Q for more information.
Servicing and Other Fees, Net
Servicing fees are calculated as a percentage of outstanding principal and are charged monthly to lending partners and institutional investors, including securitization trusts and pass-through entities, that hold loans facilitated through our marketplace. These fees compensate us for servicing activities performed throughout the loan term, including collection, processing and reconciliations of payments received, institutional investor reporting and borrower customer support. Servicing fees are recorded net of any gains, losses or changes to fair value recognized in the underlying servicing rights and obligations, which are carried as assets and liabilities on our condensed consolidated balance sheets. Upstart currently acts as servicer for substantially all outstanding loans facilitated through our marketplace. Borrower payment collections for loans that are more than 30 days past due or charged off may be 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.
Loan Sales Fees
We charge our third-party loan purchasers fees for facilitating certain forward-flow loan sales. These fees are recognized as part of the sales proceeds received and represent the difference between the net assets received and the par value of the loans sold.
Upstart Holdings, Inc.
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)
Interest Income, Interest Expense, and Fair Value Adjustments, Net
Interest income, interest expense, and fair value adjustments, net is comprised of interest income, interest expense and net changes in the fair value of financial instruments held on our condensed consolidated balance sheets as part of our ongoing operating activities, excluding loan servicing assets and liabilities. Interest income, interest expense, and fair value adjustments, net includes realized gain or loss on the sale of loans. For the three and nine months ended September 30, 2026, interest income, interest expense, and fair value adjustments, net also includes coupon interest expense and amortization of debt issuance costs related to our convertible senior notes and dividend income earned on certain cash accounts, which were previously included in other income, net. Refer to "Note 1. Description of Business and Significant Accounting Policies" in Part I, Item 1 of this Quarterly Report on Form 10-Q for additional information. Interest income, interest expense, and fair value adjustments, net can fluctuate based on the fair value of financial instruments held on our condensed consolidated balance sheets. This amount has historically been a small percentage of our total revenue, and we do not manage our business with a focus on growing this component of revenue.
Sales and Marketing
Sales and marketing expenses primarily consist of costs incurred across various advertising channels, including expenses for partnerships with third parties providing borrower referrals, direct mail and digital advertising campaigns, as well as other expenses associated with building overall brand awareness and experiential marketing costs. Sales and marketing expenses also include payroll and other personnel-related costs, including stock-based compensation expense. These costs are recognized in the period incurred. We expect that our sales and marketing expenses will generally fluctuate as a percentage of our total revenue from period to period and may increase as we hire additional sales and marketing personnel, increase our marketing activities and build greater brand awareness.
Customer Operations
Customer operations expenses include payroll and other personnel-related expenses, including stock-based compensation expense, for personnel engaged in borrower onboarding, loan servicing, customer support and other operational teams. These costs also include systems, third-party services and tools we use as part of loan servicing, information verification, fraud detection and payment processing activities. These costs are recognized in the period incurred. We expect that our customer operations 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 portfolio.
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 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.
General, Administrative and Other
General, administrative and other expenses consist primarily of payroll and other personnel-related expenses, including stock-based compensation expense, for legal and compliance, finance and accounting, human resources and facilities teams, as well as depreciation and amortization of property, equipment, software, and intangibles, professional services fees, facilities and travel expenses. These costs are recognized in the period incurred. 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.
Upstart Holdings, Inc.
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)
Other Income, Net
Other income, net primarily consists of dividend income earned on certain restricted cash balances. For the three and nine months ended September 30, 2025, other income, net included dividend income earned on all unrestricted cash and cash equivalents and restricted cash balances, as well as expense on convertible notes, comprised of coupon interest expense and amortization of debt issuance costs related to our convertible senior notes. For the three and nine months ended September 30, 2026, dividend income earned on certain cash accounts and expense on convertible notes are presented within interest income, interest expense, and fair value adjustments, net. Refer to "Note 1. Description of Business and Significant Accounting Policies" in Part I, Item 1 of this Quarterly Report on Form 10-Q for additional information.
Gain on Debt Extinguishment
In August 2021, we issued $661.3 million in aggregate principal amount of 0.25% convertible senior notes due 2026 (the "2026 Notes"). Gain on debt extinguishment consists of the gain recognized from the repurchase of a portion of the outstanding 2026 Notes during the third quarter of 2025. Refer to "Note 8. Borrowings" in Part I, Item 1 of this Quarterly Report on Form 10-Q for further details on our Notes.
Results of Operations
The following table summarizes our historical condensed consolidated statements of operations data:
Three Months Ended
September 30, 		Nine Months Ended
September 30,
2025 2026 2025 2026
Revenue:
Revenue from fees, net $ 258,539 $ 364,030 $ 684,791 $ 989,112
Interest income, interest expense, and fair value adjustments, net:
Interest income(1)
57,203 56,561 143,394 169,673
Interest expense(1)
(8,794) (12,879) (23,586) (35,780)
Fair value and other adjustments, net
(29,843) (37,190) (56,832) (79,561)
Total interest income, interest expense, and fair value adjustments, net
18,566 6,492 62,976 54,332
Total revenue 277,105 370,522 747,767 1,043,444
Operating expenses(2):
Sales and marketing 78,844 102,080 210,919 321,047
Customer operations 49,790 63,339 136,537 179,753
Engineering and product development 64,026 92,652 190,689 266,624
General, administrative, and other 60,779 76,452 185,910 232,900
Total operating expenses 253,439 334,523 724,055 1,000,324
Income from operations 23,666 35,999 23,712 43,120
Other income, net 1,017 1,244 4,209 4,714
Gain on debt extinguishment 7,246 - 7,246 -
Net income before income taxes 31,929 37,243 35,167 47,834
Provision for income taxes 124 665 202 1,363
Net income $ 31,805 $ 36,578 $ 34,965 $ 46,471
Upstart Holdings, Inc.
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)
________
(1)For the three and nine months ended September 30, 2026, interest income and interest expense include dividend income earned on certain cash accounts and expense on convertible notes, respectively, which were previously included in other income, net. Refer to "Note 1. Description of Business and Significant Accounting Policies" in Part I, Item 1 of this Quarterly Report on Form 10-Q for additional information.
(2)Includes stock-based compensation expense as follows:
Three Months Ended
September 30, 		Nine Months Ended
September 30,
2025 2026 2025 2026
Sales and marketing $ 3,371 $ 2,630 $ 9,680 $ 9,034
Customer operations 1,677 1,820 5,348 5,779
Engineering and product development 17,243 18,180 49,493 58,140
General, administrative, and other 11,864 17,325 34,976 46,279
Total stock-based compensation $ 34,155 $ 39,955 $ 99,497 $ 119,232
Revenue
Revenue from Fees, Net
The following table sets forth our revenue from fees, net in the periods shown:
Three Months Ended
September 30, 		Change Nine Months Ended
September 30, 		Change
2025 2026 $ % 2025 2026 $ %
Platform and referral fees, net $ 216,882 $ 283,139 $ 66,257 31 % $ 570,702 $ 791,823 $ 221,121 39 %
Servicing and other fees, net 41,657 69,807 28,150 68 % 114,089 173,726 59,637 52 %
Loan sales fees - 11,084 11,084 100 % - 23,563 23,563 100 %
Total revenue from fees, net $ 258,539 $ 364,030 $ 105,491 41 % $ 684,791 $ 989,112 $ 304,321 44 %
Revenue from fees, net increased $105.5 million, or 41%, in the three months ended September 30, 2026, compared to the same period in 2025, which included an increase of $66.3 million in revenue from platform and referral fees, net, an increase of $28.2 million in servicing and other fees, net, and an increase of $11.1 million in loan sales fees. The increase in platform and referral fees, net was primarily driven by a 44% increase in Originations, Dollars from $2,854.3 million in the three months ended September 30, 2025 to $4,117.8 million in the same period in 2026, partially offset by higher loan premium fees and loan trailing fees. The increase in servicing and other fees, net was primarily driven by an increase in the outstanding principal of serviced loans, an increase in net gain on servicing rights upon loan sales, as well as an increase in borrower fees. The increase in loan sales fees was driven by increased volumes of forward-flow sales subject to these fees, which are recognized as part of the sales proceeds received during the three months ended September 30, 2026.
Revenue from fees, net increased $304.3 million, or 44%, in the nine months ended September 30, 2026, compared to the same period in 2025, which included an increase of $221.1 million in revenue from platform and referral fees, net, an increase of $59.6 million in servicing and other fees, net, and an increase of $23.6 million in loan sales fees. The increase in platform and referral fees, net was primarily driven by a 51% increase in the Originations, Dollars from $7,808.3 million in the nine months ended September 30, 2025 to $11,790.1 million in the same period in 2026, partially offset by higher loan premium fees and loan trailing fees. The increase in servicing and other fees, net was primarily driven by an increase in outstanding principal of serviced loans, an increase in net gain on servicing rights upon loan sales, as well as an increase in borrower fees. The increase in loan
Upstart Holdings, Inc.
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)
sales fees was driven by increased volumes of forward-flow sales subject to these fees, which are recognized as part of the sales proceeds received during the nine months ended September 30, 2026.
Interest Income, Interest Expense, and Fair Value Adjustments, Net
Three Months Ended
September 30, 		Change Nine Months Ended
September 30, 		Change
2025 2026 $ % 2025 2026 $ %
Operating entities(1):
Interest income $ 53,327 $ 54,743 $ 1,416 3 % $ 129,941 $ 162,968 $ 33,027 25 %
Interest expense (7,305) (12,070) (4,765) (65) % (18,580) (32,817) (14,237) (77) %
Fair value adjustments, net (27,873) (36,276) (8,403) (30) % (47,844) (76,628) (28,784) (60) %
Consolidated securitization entities:
Interest income 3,876 1,818 (2,058) (53) % 13,453 6,705 (6,748) (50) %
Interest expense (1,489) (809) 680 46 % (5,006) (2,963) 2,043 41 %
Fair value adjustments, net (1,970) (914) 1,056 54 % (8,988) (2,933) 6,055 67 %
Total Company:
Interest income 57,203 56,561 (642) (1) % 143,394 169,673 26,279 18 %
Interest expense (8,794) (12,879) (4,085) (46) % (23,586) (35,780) (12,194) (52) %
Fair value adjustments, net (29,843) (37,190) (7,347) (25) % (56,832) (79,561) (22,729) (40) %
Total interest income, interest expense, and fair value adjustments, net $ 18,566 $ 6,492 $ (12,074) (65) % $ 62,976 $ 54,332 $ (8,644) (14) %
_________
(1)Consists of balances recognized by entities participating in ongoing operating activities of the Company, excluding entities associated with the UPST 2023-2 consolidated securitization.
Interest income, interest expense, and fair value adjustments, net decreased $12.1 million, or 65% in the three months ended September 30, 2026, compared to the same period in 2025. The decrease was driven by a $7.3 million increase in unfavorable fair value adjustments, a $4.1 million increase in interest expense, and a $0.6 million decrease in interest income. The increase in unfavorable fair value adjustments is attributable to an $11.3 million increase in unrealized losses and loan charge-offs, and a $2.9 million increase in realized losses on loan sales during the three months ended September 30, 2026 compared to the same period in 2025, partially offset by a $6.9 million decrease in fair value and realized losses on beneficial interests. The increase in interest expense was due to $5.0 million expense on convertible senior notes incurred during the three months ended September 30, 2026, which was previously included in other income, net, partially offset by a $0.7 million decrease in interest expense recognized by consolidated securitization entities due to lower payable to securitization note holders during the period, and a $0.2 million net decrease in interest expense on borrowing facilities and loans recognized by operating entities. The decrease in interest income was primarily due to the decrease in the balance of loans held on the condensed consolidated balance sheets, as well as a decrease in the balance of loans held in the consolidated securitization during the period, partially offset by dividend income earned on certain cash accounts during the three months ended September 30, 2026, which was previously included in other income, net, and an increase in balance of notes receivable and residual certificates held on the condensed consolidated balance sheets by operating entities.
Upstart Holdings, Inc.
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)
Interest income, interest expense, and fair value adjustments, net decreased $8.6 million, or 14% in the nine months ended September 30, 2026, compared to the same period in 2025. The decrease was driven by a $22.7 million increase in unfavorable fair value adjustments and a $12.2 million increase in interest expense, partially offset by a $26.3 million increase in interest income. The increase in unfavorable fair value adjustments is attributable to an $18.1 million increase in realized losses on loan sales, a $4.9 million increase in unrealized losses and loan charge-offs, partially offset by a $0.3 million decrease in fair value and realized losses on beneficial interests during the nine months ended September 30, 2026 compared to the same period in 2025. The increase in interest expense was primarily due to $15.2 million expense on convertible senior notes incurred during the nine months ended September 30, 2026, which was previously included in other income, net, partially offset by a $2.0 million decrease in interest expense recognized by consolidated securitization entities due to lower payable to securitization note holders during the period, and a $0.8 million net decrease in interest expense on borrowing facilities and loans recognized by operating entities. The increase in interest income was primarily due to the dividend income earned on certain cash accounts during the nine months ended September 30, 2026, which was previously included in other income, net, as well as the increase in balances of notes receivable and residual certificates held on the condensed consolidated balance sheets by operating entities, partially offset by a decrease in the balance of loans held in the consolidated securitization during the period.
Operating Expenses
Sales and Marketing
Three Months Ended
September 30, 		Change Nine Months Ended
September 30, 		Change
2025 2026 $ % 2025 2026 $ %
Sales and marketing $ 78,844 $ 102,080 $ 23,236 29 % $ 210,919 $ 321,047 $ 110,128 52 %
% of revenue 28 % 28 % 28 % 31 %
Sales and marketing expenses increased by $23.2 million, or 29%, in the three months ended September 30, 2026 compared to the same period in 2025, which was driven primarily by a $23.9 million increase in advertising and borrower acquisition costs, partially offset by a $0.6 million decrease in payroll and other personnel-related expenses. As a percentage of total revenue, sales and marketing expenses remained unchanged at 28%.
Sales and marketing expenses increased by $110.1 million, or 52%, in the nine months ended September 30, 2026 compared to the same period in 2025, which was driven primarily by a $109.0 million increase in advertising and borrower acquisition costs and a $1.7 million increase in payroll and other personnel-related expenses, partially offset by a $0.6 million decrease in marketing operation expenses. As a percentage of total revenue, sales and marketing expenses increased from 28% to 31%.
Customer Operations
Three Months Ended
September 30, 		Change Nine Months Ended
September 30, 		Change
2025 2026 $ % 2025 2026 $ %
Customer operations $ 49,790 $ 63,339 $ 13,549 27% $ 136,537 $ 179,753 $ 43,216 32%
% of revenue 18 % 17 % 18 % 17 %
Customer operations expenses increased by $13.5 million, or 27%, in the three months ended September 30, 2026, compared to the same period in 2025. The increase was primarily due to an $8.1 million increase in information verification expenses and systems expenses, a $4.0 million increase in servicing expenses, and a $1.1
Upstart Holdings, Inc.
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)
million increase in payroll and other personnel-related expenses. As a percentage of total revenue, customer operations expenses decreased from 18% to 17%.
Customer operations expenses increased by $43.2 million, or 32%, in the nine months ended September 30, 2026, compared to the same period in 2025. The increase was primarily due to a $25.2 million increase in information verification expenses and systems expenses, a $9.7 million increase in servicing expenses, and a $7.9 million increase in payroll and other personnel-related expenses. As a percentage of total revenue, customer operations expenses decreased from 18% to 17%.
Engineering and Product Development
Three Months Ended
September 30, 		Change Nine Months Ended
September 30, 		Change
2025 2026 $ % 2025 2026 $ %
Engineering and product development $ 64,026 $ 92,652 $ 28,626 45% $ 190,689 $ 266,624 $ 75,935 40%
% of revenue 23 % 25 % 26 % 26 %
Engineering and product development expenses increased by $28.6 million, or 45%, for the three months ended September 30, 2026, compared to the same period in 2025. The increase was primarily due to a $14.4 million increase in other engineering operating expenses driven by data and infrastructure costs and a $14.2 million increase in payroll and other personnel-related expenses consistent with the increase in headcount. As a percentage of total revenue, engineering and product development expenses increased from 23% to 25%.
Engineering and product development expenses increased by $75.9 million, or 40%, for the nine months ended September 30, 2026, compared to the same period in 2025. The increase was primarily due to a $41.8 million increase in payroll and other personnel-related expenses consistent with the increase in headcount and a $34.1 million increase in other engineering operating expenses driven by data and infrastructure costs. As a percentage of total revenue, engineering and product development expenses remained unchanged at 26%.
General, Administrative, and Other
Three Months Ended
September 30, 		Change Nine Months Ended
September 30, 		Change
2025 2026 $ % 2025 2026 $ %
General, administrative, and other $ 60,779 $ 76,452 $ 15,673 26 % $ 185,910 $ 232,900 $ 46,990 25 %
% of revenue 22 % 21 % 25 % 22 %
General, administrative, and other expenses increased by $15.7 million, or 26%, in the three months ended September 30, 2026, compared to the same period in 2025. The increase was primarily due to an $11.6 million increase in payroll and other personnel-related expenses consistent with the increase in headcount, a $2.4 million increase in professional fees and a $1.2 million increase in office and administrative operating related expenses. As a percentage of total revenue, general, administrative, and other expenses decreased from 22% to 21%.
General, administrative, and other expenses increased by $47.0 million, or 25%, in the nine months ended September 30, 2026, compared to the same period in 2025. The increase was primarily due to a $37.1 million increase in payroll and other personnel-related expenses consistent with the increase in headcount, a $6.3 million increase in professional fees, and a $3.2 million increase in office and administrative operating related expenses. As a percentage of total revenue, general, administrative, and other expenses decreased from 25% to 22%.
Upstart Holdings, Inc.
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)
Other Income, Net
Three Months Ended
September 30, 		Change Nine Months Ended
September 30, 		Change
2025 2026 $ % 2025 2026 $ %
Other income, net
$ 1,017 $ 1,244 $ 227 22 % $ 4,209 $ 4,714 $ 505 12 %
In the three months ended September 30, 2026, other income, net increased by $0.2 million, or 22%, compared to the same period in 2025. The increase was primarily driven by dividend income earned on certain cash accounts and expense on convertible notes, which were included within other income, net, for the three months ended September 30, 2025 compared to interest income and interest expense, for the three months ended September 30, 2026. Excluding the impact of this change, other income, net remained relatively consistent for the periods presented.
In the nine months ended September 30, 2026, other income, net increased by $0.5 million, or 12%, compared to the same period in 2025. The increase was primarily driven by dividend income earned on certain cash accounts and expense on convertible notes, which were included within other income, net, for the nine months ended September 30, 2025 compared to interest income and interest expense, for the nine months ended September 30, 2026. Excluding the impact of this change, other income, net remained relatively consistent for the periods presented.
Gain on Debt Extinguishment
Three Months Ended September 30, Change Nine Months Ended September 30, Change
2025 2026 $ % 2025 2026 $ %
Gain on debt extinguishment
$ 7,246 $ - $ (7,246) (100) % $ 7,246 $ - $ (7,246) (100) %
In the three and nine months ended September 30, 2026, gain on debt extinguishment decreased by $7.2 million, or 100%, compared to the same periods in 2025. The decrease was due to a gain recognized on the repurchase of a portion of our 2026 Notes in 2025, with no gain on debt extinguishment recognized in 2026.
Reconciliation of Non-GAAP Financial Measures
To supplement our condensed 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. We are presenting these non-GAAP financial measures because we believe they provide an additional tool for investors to use in comparing our core financial performance over multiple years with the performance of other companies.
However, non-GAAP financial measures have limitations in their usefulness to investors because they have no standardized meaning prescribed by GAAP and are not prepared under any comprehensive set of accounting rules or principles. In addition, non-GAAP financial measures may be calculated differently from, and therefore may not be directly comparable to, similarly titled measures used by other companies. As a result, non-GAAP financial measures should be viewed as supplementing, and not as an alternative or substitute for, our condensed consolidated financial statements prepared and presented in accordance with GAAP.
Upstart Holdings, Inc.
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)
In particular, some of the limitations with respect to Adjusted EBITDA and Adjusted EBITDA 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. Stock-based compensation expense has been, and will continue to be for the foreseeable future, a significant recurring expense for our business and an important part of our compensation strategy. The amount of employer payroll tax-related expense on employee stock transactions is dependent on our stock price and other factors that are beyond our control and do not correlate to the operation of the business;
•Adjusted EBITDA and Adjusted EBITDA Margin do not reflect: (1) changes in, or cash requirements for, our working capital needs; (2) interest expense, or the cash requirements necessary to service interest or principal payments on our debt, which reduces cash available to us; or (3) tax payments that may represent a reduction in cash available to us; and
•The expenses and other items that we exclude in our calculation of Adjusted EBITDA and Adjusted EBITDA Margin may differ from the expenses and other items, if any, that other companies may exclude from adjusted EBITDA and adjusted EBITDA margin when they report their operating results.
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 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.
Contribution Profit and Contribution Margin
The following table presents a reconciliation of income from operations to Contribution Profit and Contribution Margin. We define Operating Margin as our income from operations divided by revenue from fees, net.
Three Months Ended
September 30, 		Nine Months Ended
September 30,
2025 2026 2025 2026
Revenue from fees, net $ 258,539 $ 364,030 $ 684,791 $ 989,112
Income from operations 23,666 35,999 23,712 43,120
Operating Margin 9 % 10 % 3 % 4 %
Sales and marketing, net of borrower acquisition costs(1)
$ 11,582 $ 10,883 $ 34,160 $ 35,309
Customer operations, net of borrower verification and servicing costs(2)
5,919 8,476 18,826 24,754
Engineering and product development 64,026 92,652 190,689 266,624
General, administrative, and other 60,779 76,452 185,910 232,900
Interest income, interest expense, and fair value adjustments, net (18,566) (6,492) (62,976) (54,332)
Contribution Profit $ 147,406 $ 217,970 $ 390,321 $ 548,375
Contribution Margin 57 % 60 % 57 % 55 %
Upstart Holdings, Inc.
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)
_________
(1)Borrower acquisition costs were $67.3 million, and $91.2 million for the three months ended September 30, 2025 and 2026, respectively, and were $176.8 million and $285.7 million for the nine months ended September 30, 2025 and 2026, respectively. Borrower acquisition costs consist of our sales and marketing expenses adjusted to exclude costs not directly attributable to attracting a new borrower, such as payroll-related expenses for our business development and marketing teams, as well as other operational, brand awareness and marketing activities. These costs do not include reorganization expenses.
(2)Borrower verification and servicing costs were $43.9 million, and $54.9 million for the three months ended September 30, 2025 and 2026, respectively, and were $117.7 million and $155.0 million for the nine months ended September 30, 2025 and 2026, respectively. Borrower verification and servicing costs consist of payroll and other personnel-related expenses for personnel engaged in loan onboarding, verification and servicing, as well as servicing system costs. It excludes payroll and personnel-related expenses and stock-based compensation for certain members of our customer operations team whose work is not directly attributable to onboarding and servicing loans. These costs do not include reorganization expenses.
Adjusted EBITDA and Adjusted EBITDA Margin
The following table provides a reconciliation of net income and Net Income Margin to Adjusted EBITDA and Adjusted EBITDA Margin. We define Net Income Margin as net income divided by total revenue.
Three Months Ended
September 30, 		Nine Months Ended
September 30,
2025 2026 2025 2026
Total revenue $ 277,105 $ 370,522 $ 747,767 $ 1,043,444
Net income 31,805 36,578 34,965 46,471
Net Income Margin 11 % 10 % 5 % 4 %
Adjusted to exclude the following:
Stock-based compensation and certain payroll tax expenses(1)
$ 35,404 $ 40,945 $ 105,681 $ 122,938
Depreciation and amortization 6,131 6,119 18,374 19,103
Reorganization expenses - - - 1,678
Expense on convertible notes 4,944 5,025 14,816 15,153
Gain on debt extinguishment (7,246) - (7,246) -
Provision for income taxes 124 665 202 1,363
Adjusted EBITDA $ 71,162 $ 89,332 $ 166,792 $ 206,706
Adjusted EBITDA Margin 26 % 24 % 22 % 20 %
_________
(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.
Liquidity and Capital Resources
Sources and Uses of Cash and Cash Equivalents
As of September 30, 2026, our primary source of liquidity was cash and cash equivalents of $461.5 million. 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. We also rely on our risk retention credit facility to finance certain notes receivable retained in our capacity as the risk retention sponsor.
Upstart Holdings, Inc.
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)
During the nine months ended September 30, 2026, we repurchased 3.2 million shares of common stock for $100.1 million. As of September 30, 2026, $122.1 million remains available for future purchases of our common stock under our share repurchase program. Refer to "Note 9. Stockholders' Equity" in Part I, Item 1 of this Quarterly Report on Form 10-Q for further details on our share repurchase program.
We entered into an "at the market" offering program pursuant to which we may offer and sell, from time to time, shares of our common stock with an aggregate offering price of up to $500.0 million, as described in the prospectus supplement dated February 14, 2025 filed with the SEC. As of September 30, 2026, no shares were issued under the program.
Our convertible senior notes have an aggregate principal balance of $1,621.3 million which matures between 2029 to 2032, unless earlier converted, redeemed, or repurchased in accordance with their terms. Refer to "Note 8. Borrowings" in Part I, Item 1 of this Quarterly Report on Form 10-Q for further details on our Notes.
Our warehouse credit facilities, which mature between October 2027 and June 2029, allow us to borrow up to an aggregate of $650.0 million. Subsequent to September 30, 2026, Upstart Auto Warehouse Trust 2 was amended to set the scheduled maturity date to March 2027. Our risk retention financing facility, which allows us to borrow up to $200.0 million, has a maturity which aligns with the stated maturities of the underlying securitization notes receivable pledged as collateral, which range from 2033 to 2036. As of September 30, 2026, we have drawn an aggregate of $327.6 million on our warehouse credit facilities and $105.3 million on our risk retention financing facility. Refer to "Note 8. Borrowings" in Part I, Item 1 of this Quarterly Report on Form 10-Q for further details on our borrowings.
In October 2026, we entered into a $200.0 million senior secured revolving credit facility and borrowed $175.0 million under the facility. Refer to "Note 15. Subsequent Events" in Part I, Item 1 of this Quarterly Report on Form 10-Q for further details.
Our cash requirements related to operating lease agreements are $80.8 million, of which $7.8 million is expected to be paid within the next 12 months. Refer to "Note 10. Leases" in Part I, Item 1 of this Quarterly Report on Form 10-Q for further details on our operating lease obligations.
We have committed to purchase loans from certain lending partners at the conclusion of the required holding period, which is generally three business days. As of September 30, 2026, the total loan purchase commitment was $152.5 million. The Company also has commitments to fund future advances on HELOCs. As of September 30, 2026, these commitments were $21.2 million; however, since we can limit these commitments under certain conditions or these commitments could expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. See "Note 11. Commitments and Contingencies" in Part I, Item 1 of this Quarterly Report on Form 10-Q for further details on our commitments.
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 our maximum exposure to losses under severe, hypothetical circumstances, for which we believe the possibility is remote. As of September 30, 2026, our aggregate maximum exposure to losses was $1,499.1 million. Refer to "Note 4. Beneficial Interests" in Part I, Item 1 of this Quarterly Report on Form 10-Q for further details. Our cash requirements for the next 12 months related to investments in these existing arrangements is estimated to be up to $354.7 million from cash and cash equivalents and up to $26.2 million from restricted cash.
While we believe that our cash and cash equivalents on hand will be sufficient to meet our liquidity needs for at least the next 12 months, our future capital requirements will depend on multiple factors, including our revenue growth, working capital requirements, volume of loan purchases for product development purposes or during market downturns, and our capital expenditures. Additionally, we have repurchased, and may in the future repurchase, shares of our common stock under our share repurchase program. We may decide to raise additional
Upstart Holdings, Inc.
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)
capital through the sale of equity, equity-linked or debt securities or other debt financing arrangements. If we raise additional funds by issuing equity or equity-linked securities, our stockholders may experience dilution. Future debt financing, if available, may involve covenants restricting our operations or our ability to incur additional debt. 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.
Cash Flows
The following table summarizes our cash flows during the periods indicated:
Nine Months Ended
September 30,
2025 2026
Net cash used in operating activities $ (256,277) $ (289,681)
Net cash provided by (used in) investing activities (308,909) 212,144
Net cash provided by financing activities 425,828 148,993
Change in cash, cash equivalents and restricted cash $ (139,358) $ 71,456
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.
Our main uses of cash in our operating activities include payments to marketing partners, vendor payments, payroll and other personnel-related expenses, payments for facilities, and other general business expenditures.
Net cash used in operating activities was $289.7 million for the nine months ended September 30, 2026, which consisted of $542.3 million net changes in operating assets and liabilities, adjustments for non-cash items of $206.1 million, and net income of $46.5 million. The increase in non-cash adjustments was primarily related to $119.2 million of stock-based compensation expense, $111.0 million of changes in fair value of loans, and $17.8 million of changes in fair value of servicing assets, partially offset by $37.5 million net gain on loan servicing rights from loan sales. The decrease in net changes in operating assets and liabilities was primarily related to $683.3 million net purchases and originations of loans held-for-sale, partially offset by $163.5 million in principal payments received for loans held-for-sale and loans held in consolidated securitization.
Net Cash from Investing Activities
Net cash provided by investing activities was $212.1 million for the nine months ended September 30, 2026 as a result of $289.8 million of principal payments received for loans held-for-investment and notes receivable, $180.9 million of net proceeds from beneficial interest assets (hybrid instruments), partially offset by $241.9 million of net purchase and origination of loans held-for-investment, and $13.0 million of capitalized software costs.
Net Cash from Financing Activities
Net cash provided by financing activities was $149.0 million for the nine months ended September 30, 2026 primarily due to $259.8 million of net proceeds from borrowings, and $59.1 million change in payables to investors, partially offset by $100.1 million of common stock repurchases and $66.5 million in repayments of the 2026 Notes at their maturity.
Upstart Holdings, Inc.
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)
Composition of Balance Sheet Loan Portfolio
As of September 30, 2026, we held $940.7 million of loans on our condensed consolidated balance sheet. Of this amount, $429.2 million consisted of non-R&D Loans, the majority of which would otherwise be purchased by third parties. We also held $482.6 million of R&D Loans originated primarily to test and evaluate our AI models for new products and borrower segments and to aid in price discovery. In addition, we held $28.9 million of loans through the consolidated securitization. We will continue to utilize our capital to support R&D activities and, at times, as a funding source for loans during periods of marketplace funding constraints or to bridge the timing between origination and sales of loans. 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 lending partners and institutional investors over time in the form of secondary sales or securitizations and pass through issuances.
Off-Balance Sheet Arrangements
In the ordinary course of business, we engage in activities that are not reflected on our condensed 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 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. 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 I, Item 1 of this Quarterly Report on Form 10-Q.
Critical Accounting Policies and Estimates
The preparation of our condensed consolidated financial statements requires us to make judgments, estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, costs and expenses and related disclosures. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results could differ significantly from our estimates. To the extent that there are differences between our estimates and actual results, our future financial statement presentation, financial condition, results of operations and cash flows will be affected.
Our critical accounting policies are described in Part II, Item 7, "Critical Accounting Policies and Estimates" in our Annual Report on Form 10-K for the year ended December 31, 2025. There have been no material changes to these policies during the nine months ended September 30, 2026.
Recent Accounting Pronouncements
Refer to "Note 1. Description of Business and Significant Accounting Policies" in Part I, Item 1 of this Quarterly Report on Form 10-Q for recently adopted accounting pronouncements and recently issued accounting pronouncements not yet adopted when applicable.
Upstart Holdings, Inc.
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