10-Q: Upstart Holdings Reports Q1 2025 Results: Revenue Surges, Losses Narrow

Upstart Holdings reports a significant increase in revenue and a substantial reduction in net losses for the first quarter of 2025, driven by improvements in its AI lending marketplace.

Summary

• Upstart Holdings, Inc. reported its financial results for the quarter ended March 31, 2025.
• Revenue from fees, net, increased by 34% to $185.5 million compared to $138.1 million in the same period last year.
• Total revenue reached $213.4 million, a 67% increase from $127.8 million in the first quarter of 2024.
• The company significantly reduced its net loss to $2.4 million, compared to a net loss of $64.6 million in the prior year.
• Transaction volume increased by 89% to $2.1 billion.
• The conversion rate improved to 19.1% from 14.0% in the same quarter of the previous year.
• Adjusted EBITDA was $42.6 million, a substantial improvement from an Adjusted EBITDA loss of $20.3 million in the first quarter of 2024.
• The percentage of loans fully automated increased to 92% from 90%.

Sentiment

Score: 8

Explanation: The document presents a positive outlook with strong revenue growth and reduced losses, indicating a healthy trajectory for the company. However, some risks and uncertainties remain, preventing a higher score.

Positives

• Significant revenue growth indicates strong market demand and effective business strategies.
• Substantial reduction in net loss demonstrates improved financial management and operational efficiency.
• Positive Adjusted EBITDA suggests a move towards sustainable profitability.
• Increased transaction volume and conversion rate reflect enhanced platform performance and borrower acquisition.
• Continued automation efforts contribute to operational efficiency and cost reduction.

Negatives

• Despite significant improvements, the company still reported a net loss, albeit a much smaller one.
• The company's success is heavily reliant on the unsecured personal loan market, making it vulnerable to fluctuations in that sector.

Risks

• Economic conditions and factors beyond Upstart's control could adversely affect its business.
• The company's success depends on maintaining diverse and resilient loan funding from institutional investors.
• Inaccuracies or errors in Upstart's AI models could negatively impact loan performance and investor confidence.
• The company faces competition in the consumer lending market, which could affect its ability to attract borrowers and lending partners.
• Regulatory scrutiny and compliance requirements could increase costs and limit operational flexibility.

Future Outlook

The company aims to continue improving its AI models, expanding its loan offerings, and diversifying its funding sources to ensure long-term scalability and growth.

Industry Context

Upstart operates in the competitive and rapidly evolving financial technology sector, focusing on AI-driven lending. The company's performance is influenced by broader industry trends, including digital transformation, regulatory changes, and macroeconomic conditions.

Comparison to Industry Standards

• Upstart's AI-driven lending model differentiates it from traditional lenders and some fintech competitors.
• Companies like LendingClub and SoFi also operate in the online lending space, but Upstart emphasizes its AI-driven approach.
• Upstart's ability to maintain a high level of loan automation (92%) is a key differentiator compared to competitors with more manual processes.
• The company's focus on securing committed capital and co-investment arrangements aligns with industry trends towards diversifying funding sources.

Legal Proceedings

• The company is involved in various litigation and legal proceedings arising from the ordinary course of business activities.
• A lawsuit was filed in United States District Court, Southern District of Ohio, captioned Crain v. Upstart Holdings, Inc. et al., Case No. 2:22-cv-02935-ALM-EPD (S.D. Ohio) against the Company, the Companys Chief Executive Officer, and Chief Financial Officer, alleging that the defendants made false and/or misleading statements or omissions about the Companys business, operations, and prospects in violation of Section 10(b) of the Securities Exchange Act of 1934, as amended, or the Exchange Act, and Rule 10b-5 promulgated thereunder, as well as Section 20(a) of the Exchange Act.
• The Crain lawsuit claims unspecified damages and legal fees.
• On August 16, 2022, the court appointed a lead plaintiff and approved lead counsel in the Crain action.
• On December 5, 2022, the lead plaintiff filed a consolidated amended complaint, which names the same defendants as the previous complaint, along with two Company executives, as well as Third Point LLC and its CEO and Third Point Ventures LLC and its managing partner (also a former Upstart board member).
• The consolidated amended complaint brings the same claims as the previous complaint but adds a claim under Section 20A of the Exchange Act.
• On February 24, 2023, the Upstart defendants filed a motion to dismiss the consolidated amended complaint.
• On September 29, 2023, the Court issued an order, granting in part and denying in part the Upstart defendants motion.
• On November 7, 2023, the Upstart defendants filed a motion for reconsideration, which the Court denied on August 5, 2024.
• On February 2, 2024, Lead Plaintiff, Universal-Investment-Gesellschaft mbH, and plaintiffs, Kathy Brooks and Kevin Crain, filed a motion for an order to certify this matter, now captioned In re Upstart Holdings Securities Litigation, as a class action, appoint themselves as class representatives, and approve their selection of Motley Rice LLC and Robbins Geller Rudman & Dowd LLP as co-class counsel, which motion the Court granted on March 27, 2025.
• On December 6, 2024, plaintiffs filed a motion for leave to file a first amended complaint.
• On January 21, 2025, Third Point Ventures LLC, Third Point LLC, and its CEO filed a motion to intervene for the limited purpose of opposing plaintiffs motion for leave to file a first amended complaint, and on February 18, 2025 plaintiffs filed a reply in support of their motion for leave to file a first amended complaint.
• No hearing has been set on the motion.
• The Company believes the remaining claims in the action are without merit and intends to defend itself vigorously.
• On July 28, 2022, a derivative lawsuit was filed in United States District Court, Southern District of Ohio, captioned OConnor v. Huber et al., Case No. 2:22-cv-02961-EAS-KAJ (S.D. Ohio).
• The OConnor action includes allegations similar to those in the Crain complaint, and names as defendants each of the Companys current board members and its Chief Financial Officer.
• The Company is named as a nominal defendant.
• The OConnor action includes claims for violation of Section 10(b) of the Exchange Act and Rule 10b-5 promulgated thereunder, breach of fiduciary duty, aiding and abetting breach of fiduciary duty, unjust enrichment, and waste of corporate assets.
• The OConnor action seeks unspecified monetary damages and an accounting from the individual defendants.
• The OConnor action also seeks unspecified corporate governance and internal procedure modifications, punitive damages, and legal fees.
• On October 7, 2022, a second derivative lawsuit was filed in United States District Court, Southern District of Ohio, captioned Chung v. Huber et al., No. 2:22-cv-03620-MHW-CMV (S.D. Ohio).
• The Chung action includes allegations similar to those in the OConnor complaint, and names as defendants each of the Companys current board members, a former board member, and its Chief Financial Officer.
• The Company is named as a nominal defendant.
• The Chung action includes claims for violation of Section 10(b), 14(a), and 21D of the Exchange Act, breach of fiduciary duties, unjust enrichment, abuse of control, gross mismanagement, and waste of corporate assets.
• The Chung action seeks unspecified monetary damages, restitution, and attorneys fees and costs from the individual defendants.
• It also seeks corporate governance and internal procedure modifications.
• On December 12, 2022, in response to a joint motion by the parties, the Court consolidated the OConnor and Chung matters, appointed co-lead counsel, and stayed the consolidated case until resolution of the related securities class action.
• On April 24, 2024, the plaintiffs in the consolidated action filed an amended complaint.
• The amended complaint includes allegations similar to those in the initial complaint in the OConnor action, and names the same defendants as the initial complaint, along with an additional Company executive and another former board member.
• The amended complaint brings the same claims as the initial complaint in the OConnor action but adds claims under Section 14(a) of the Exchange Act and Rule 14a-9 promulgated thereunder, for contribution under Sections 10(b) and 21D of the Exchange Act, and for abuse of control and gross mismanagement.
• The amended complaint seeks similar relief to that sought in the initial complaint in the OConnor action.
• On February 3, 2023, a third derivative lawsuit was filed, in the United States District Court, District of Delaware, captioned Hsu v. Girouard, et al., 1:23-cv-00132-UNA (D. Del.).
• The Hsu action includes allegations similar to those in the consolidated derivative matter pending in Ohio, and names as defendants each of the Companys current board members, a former board member, and its Chief Financial Officer.
• The Company is named as a nominal defendant.
• The Hsu action includes claims for violation of Section 14(a) of the Exchange Act as well as breach of fiduciary duties, and seeks unspecified monetary damages, restitution, and attorneys fees and costs from the individual defendants.
• It also seeks corporate governance and internal procedure modifications.
• On February 16, 2023, in response to a joint stipulation and proposed order submitted by the parties, the Court stayed the Hsu action until resolution of the related securities class action.
• On March 8, 2023, a fourth derivative lawsuit was filed, in the United States District Court, District of Delaware, captioned Sornchai et al. v. Girouard, et al., 1:23-cv-00253-MN (D. Del).
• The Sornchai action includes allegations similar to those in the consolidated derivative matter pending in Ohio, and names as defendants each of the Companys current board members, a former board member, its Chief Financial Officer, and a Company executive.
• The Company is named as a nominal defendant.
• The Sornchai action includes claims for violations of Sections 10(b), 14(a) and 21D of the Exchange Act, breach of fiduciary duties, breach of fiduciary duty through misappropriation of material non-public information, and unjust enrichment, and seeks unspecified monetary damages, restitution, and attorneys fees and costs from the individual defendants.
• It also seeks corporate governance and internal procedure modifications.
• On March 24, 2023, in response to a joint stipulation and proposed order submitted by the parties, the Court stayed the Sornchai action until resolution of the related securities class action.
• On April 5, 2023, a fifth derivative lawsuit was filed, in the Court of Chancery of the State of Delaware, captioned Okhai v. Girouard, et al., C.A. No. 2023-0401-BWD (Del. Ch.).
• The Okhai action includes allegations similar to those in the consolidated derivative matter pending in Ohio, and names as defendants the Companys current board members, two former board members, its Chief Financial Officer, and two current or former Company executives, as well as Third Point LLC and Third Point Ventures LLC.
• The Okhai action includes claims for breach of fiduciary, aiding and abetting such alleged breaches, and unjust enrichment, and seeks equitable and/or injunctive relief, restitution, and attorneys fees and costs from the individual defendants.
• On August 3, 2023, in response to a motion to stay by the defendants in the Okhai action, the Court stayed the Okhai action until resolution of the motion to dismiss in the related securities class action.
• Following the issuance of the September 29, 2023 order on the motion to dismiss in the related securities class action, on November 16, 2023, in response to a joint stipulation and proposed order submitted by the parties, the Court stayed the Okhai action until resolution of the motion for reconsideration of the September 29, 2023 order on the motion to dismiss in the related securities class action.
• Following denial of the motion for reconsideration in the related securities class action, the parties in the Okhai action finished briefing and argued the defendants motion to continue the stay.
• On October 24, 2024, the Court continued the stay until February 1, 2025.
• On January 31, 2025, the parties submitted to the Court a proposed schedule for briefing Defendants motion to continue the stay.
• On April 11, 2025, in response to a joint stipulation and proposed order submitted by the parties, the Court ordered that the case remain stayed pending plaintiffs filing a consolidated amended complaint on or before May 7, 2025, after which Defendants shall file a renewed motion to stay.
• On October 13, 2023, a sixth derivative lawsuit was filed, in the Court of Chancery of the State of Delaware, captioned Romanyshyn v. Girouard, et al., C.A. No. 2023-1029-BWD (Del. Ch.).
• The Romanyshyn action includes allegations similar to those in the consolidated derivative matter pending in Ohio, and names as defendants current and former directors and Company executives, as well as Third Point LLC and its CEO, and Third Point Ventures LLC.
• The Romanyshyn action includes claims for breach of fiduciary, and seeks unspecified monetary damages, restitution, and attorneys fees and costs from the individual defendants.
• It also seeks corporate governance and internal procedure modifications.
• On November 3, 2023, in response to a joint stipulation and proposed order submitted by the parties, the Court stayed the Romanyshyn action pending the outcome of the motion to stay in the related Okhai derivative action (which stay will be briefed, consistent with the above).
• On October 24, 2023, a seventh derivative lawsuit was filed, in the Court of Chancery of the State of Delaware, captioned Agarwal v. Girouard, et al., C.A. No. 2023-1075-BWD (Del. Ch.).
• The Agarwal action includes allegations similar to those in the consolidated derivative matter pending in Ohio, and names as defendants current and former directors and Company executives, as well as Third Point LLC and its CEO, and Third Point Ventures LLC.
• The Agarwal action includes claims for breach of fiduciary, and seeks unspecified monetary damages, restitution, and attorneys fees and costs from the individual defendants.
• It also seeks corporate governance and internal procedure modifications.
• On November 3, 2023, in response to a joint stipulation and proposed order submitted by the parties, the Court stayed the Agarwal action pending the outcome of the motion to stay in the related Okhai derivative action (which stay will be briefed, consistent with the above).
• On November 22, 2024, in response to a joint stipulation and proposed order submitted by the parties, the Court consolidated the Okhai, Romanyshyn, and Agarwal matters under the consolidated caption In re Upstart Holdings, Inc. Derivative Litigation, Consolidated C.A. No. 2023-0401-BWD and appointed co-lead plaintiffs and co-lead counsel.
• The consolidated action remains stayed consistent with the above.
• On November 17, 2023, we received a subpoena from the SEC seeking various documents and information regarding our disclosures, including the use of our AI models and loans, among other things.
• We cooperated with the SEC in its investigation and, on March 10, 2025, the SEC notified the Company that it was closing the investigation and would not pursue an enforcement action against the Company.

Stakeholder Impact

• Shareholders: Positive results may increase investor confidence and potentially raise the stock price.
• Employees: Improved financial performance could lead to increased job security and potential bonuses.
• Customers: Enhanced AI models and platform improvements could result in better loan terms and user experience.
• Lending Partners: Increased transaction volume and improved loan performance could strengthen partnerships.
• Institutional Investors: Positive returns on Upstart-powered loans could attract more investment.

Next Steps

• Continue to improve AI models for better credit risk assessment.
• Expand loan offerings to attract a wider range of borrowers.
• Diversify funding sources to ensure long-term scalability.
• Monitor and adapt to evolving regulatory requirements.

Key Dates

Keywords

Upstart, financial results, AI lending, revenue, net loss, transaction volume, Adjusted EBITDA, loan origination, financial technology, lending partners, institutional investors, automation, credit risk, loan funding