Upstart Holdings, Inc.

Good afternoon and welcome to the upstart third quarter 2025 earnings call. At this time, all participants are in a listen only mode to prevent any background noise. Later, we will conduct a question and answer session and instructions will be given at that time. As a reminder, this conference call is being recorded. I would now like to turn the call over to Sonia Banerjee, head of investor relations. Sonia, please go ahead.

Thank you. Welcome to the Upstart Earnings Call for the third quarter of 2025. With me on today's call are Dave Girard, our co-founder and CEO, Paul Gu, our co-founder and CTO, and Sanjay Dutta, our CFO. During today's call, we will make forward-looking statements, which include statements about our outlook and business strategy. These statements are based on our expectations and beliefs as of today, which are subject to a variety of risks, uncertainties, and assumptions, and should not be viewed as a guarantee of future performance. Actual results may differ materially as a result of various risk factors that have been described in our SEC filings. We assume no obligation to update any forward-looking statements as a result of new information or future events, except as required by law. Our discussion will include non-GAAP financial measures, which are not a substitute for our GAAP results. Reconciliations of our historical GAAP to non-GAAP results can be found in our earnings materials, which are available on our IR website. And with that, Dave, over to you.

Thanks, Sonia. Good afternoon, everyone, and thank you for joining us. To kick things off, I'll share my perspective on our business. Upstart today is a dramatically stronger company than it was just a few years ago. Our technology, our business, and our teams have never been better. The opportunity for AI and credit is unimaginably large, and there's no one better positioned than Upstart to lead this trillion-dollar industry to this exciting and inevitable direction. Now turning to Q3, Upstart continued to execute on its 2025 game plan of rapid growth, profits, and AI leadership, all under the auspices of exceptional credit performance and precise macro handling. In addition to 80% year-on-year growth in transaction volume, and 71% revenue growth, we were nicely profitable once again. In fact, Q3 gap net income grew by a factor of six over the prior quarter. Consumer demand for Upstart continued to grow rapidly, with more than 2 million applications submitted in Q3, up over 30% from Q2, and reaching the highest level in more than three years. Despite this awesome demand, transaction volume on our platform was less than we anticipated. Our risk models responded to macroeconomic signals they observed by moderately reducing approvals and increasing interest rates. This drove a reduction in our conversion rate from 23.9% in Q2 to 20.6% in Q3. If you follow the Upstart macro index, you have seen that this macro indicator ticked up modestly in July and August, which is essentially what our model responded to over the course of the quarter. We believe this to be nothing more than a speed bump, with UMI reverting to lower numbers since. To be clear, we see no material deterioration in consumer credit strength, and in fact, we've seen recent signs of improvement. You can and should expect that our models will always do their best to price prevailing risk appropriately. Precise and rapid tuning to changing economic conditions is a foundational capability of Upstart AI. And we're confident this precision is winning hearts and minds for Upstart in the credit market right now. The system is behaving exactly as it was designed. At a minimum, our Q3 results should give you confidence that we don't sacrifice credit performance to achieve transaction volume targets. Turning to our newer products, which include small dollar loans, auto, and home. These offerings continue to improve and mature, accounting for almost 12% of originations and 22% of new borrowers in Q3. Transaction volume for auto, home, and small dollar each grew in the range of 300% year-on-year. Our auto retail business in particular has really begun to accelerate. We more than doubled the number of live lending rooftops on Upstart in Q3 compared to the prior quarter. Transaction volume for auto retail also grew more than 70% sequentially. We expanded to four new states in Q3 and made some significant improvements to our software. This is really a breakout business for us. Additionally, we've been quietly working on a hybrid product called an auto-secured personal loan that's beginning to gain traction. As it relates to our home business, beyond continued process innovation, our unique partnerships with banks and credit unions means we offer the best rates to the primest borrowers compared to other fintechs by as much as 300 basis points. Best rates and best processes are what we're all about. Our continued process and automation breakthroughs in our secured products, meaning home and auto, give us confidence that we'll be real growth drivers for Upstart in 2026. Finally, with respect to funding on the Upstart platform, we're in an exceptionally strong position in our core business with significant excess capacity. On the bank and credit union side, we added seven new partners, our best quarter for new logos this year. And we reached a new all-time high in monthly available funding from these partners in Q3. On the capital market side, we continue to have exceptionally strong execution with our institutional partners. Having signed our first agreement in 2023, we now have 10 active partners. In August, we renewed one of our largest partners for the second time. And importantly, Upstart has 100% retention of all private credit partners to date. We believe that we have the industry's best AI for responding rapidly and precisely to changes in the environment, and this is a central reason why our partners have confidence in us. In September, we also issued a securitization with strong demand, leading to significant oversubscription of all classes, despite upsizing and tightening of spreads. This ABS deal involved 30 investors, including seven first-timers, demonstrating the strength of Upstart's reputation in the market. We've also continued to make progress securing third-party funding to support our newer products. We've signed 17 partner agreements this year, including nine signed in Q3 alone, and expect to ramp these partners into production this quarter and next. All in all, we're all systems go to finish the year strong and get ready for what we think will be an amazing 2026 for Upstart. To wrap things up, we're making rapid progress as the leader in AI-powered credit. The somewhat complicated macro economy we all see today is, in my view, the perfect opportunity to demonstrate the strength of our AI platform, and we're doing just that. While legacy financial services execs continue to ponder the use of AI in credit, the Upstart platform has now generated more than $50 billion in AI-powered loans since inception. Unlike other AI platforms, we generate our own training data. with more than 98 million borrower repayment events to date, with about 105,000 more repayments due each day, driving improved separation and model accuracy. This is enabling us to build quickly toward a future of always-on credit where every American is persistently and precisely underwritten, providing them with the best rate anywhere, 24-7 credit access right from their phone, with little to no process. That is a proposition and a future that we're betting on 100%. With respect to the investor community, I feel more than ever that those who stay will be champions. With that, I'll turn things over to Paul Gu, my co-founder and Upstart's Chief Technology Officer. Paul?