XML 28 R11.htm IDEA: XBRL DOCUMENT v3.22.4
Revenue
 12 Months Ended
Dec. 31, 2022
Revenue from Contract with Customer [Abstract]  
Revenue Revenue
Revenue from fees, net

The Company disaggregates revenue from fees by type of service for the years presented as follows:
Year Ended December 31,
202020212022
Revenue from fees, net:
Platform and referral fees, net$200,257 $726,161 $732,237 
Servicing and other fees, net28,343 75,114 175,035 
Total revenue from fees, net$228,600 $801,275 $907,272 
Platform and referral fees, net

The Company enters into contracts with lending partners to provide access to a cloud-based artificial intelligence lending marketplace developed by the Company (the “Upstart platform”) to enable lending partners to originate unsecured personal and secured auto loans. The Upstart platform includes a cloud-based application (through Upstart.com or a lending partner-branded program) for submitting loan applications, verifying information provided within submitted applications, risk underwriting (through a series of proprietary technology solutions), delivery of electronic loan offers, and if the offer is accepted by the borrower, electronic loan documentation signed by the borrower. Lending partners can specify certain parameters of loans they are willing to originate. Under these contracts, lending partners can choose to use Upstart’s referral services, which allow them to access new borrowers through Upstart’s marketing channels.

After origination, Upstart-powered loans are either retained by lending partners, purchased by the Company for immediate resale to institutional investors under loan sale agreements, or purchased and held by the Company. For loans purchased by the Company, Upstart pays lending partners a one-time loan premium fee upon completion of the minimum contractual holding period. Upstart also pays lending partners monthly loan trailing fees based on the amount and timing of principal and interest payments made by borrowers of the underlying loans. Both the loan premium fees and loan trailing fees are consideration payable to customers and are recorded as a reduction to platform and referral fees, net, which is part of revenue from fees, net, in the consolidated statements of operations and comprehensive income (loss). The Company recognized $8.3 million, $23.6 million, and $27.7 million of loan premium fees and loan trailing fees as contra-revenue within platform and referral fees, net during the year ended December 31, 2020, 2021 and 2022 respectively.

As of December 31, 2021 and 2022, the Company recognized $4.3 million and $4.9 million of loan trailing fee liability, respectively, which is recorded at fair value and included within accrued expenses and other liabilities on the Company’s consolidated balance sheets. Refer to “Note 4. Fair Value Measurement” for additional information on changes in fair value associated with trailing fee liabilities.

The Company’s arrangements for platform and referral services typically consist of an obligation to provide one or both of these services to customers, which are our lending partners, on a when and if needed basis (a stand-ready obligation), and revenue is recognized as such services are performed. Additionally, the services have the same pattern and period of transfer, and when provided individually or together, are accounted for as a single combined performance obligation representing a series of distinct services.

Platform and referral services are typically provided under a fixed or variable price per unit based on a percentage of the value of loans originated each period with certain lending partners subject to minimum fees; however, pricing for these services may also be based on usage fees, calculated as a percentage of each loan originated. The nature of the Company’s promise is to stand-ready and provide continuous access to and process transactions through the platform. Platform and referral fees represent variable consideration as loan origination volume is not known at contract inception. These fees are determined each time a loan is originated. Fees for platform and referral services are typically billed and paid on either a daily or monthly basis. As such, the Company’s contracts with customers do not include a significant financing component.

The Company had no material contract assets, contract liabilities, or deferred contract costs recorded as of December 31, 2021 and 2022. The Company had $44.8 million and $31.1 million of accounts receivable that are
included in other assets on the consolidated balance sheets related to contracts with customers as of December 31, 2021 and 2022, respectively. The standard payment terms on accounts receivable are 30 days. The Company’s allowance for bad debt and bad debt expense were immaterial for the years presented.

The Company capitalizes incremental costs of obtaining a contract with a customer, which are certain sales commissions paid to employees in connection with the acquisition of lending partners. Capitalized costs are amortized over the expected period of benefit, which we have determined, based on an analysis, to be three years. The Company applies the practical expedient to expense costs to obtain contracts with customers if the amortization period is one year or less. As of December 31, 2021 and 2022, the Company had an immaterial amount of contract costs capitalized within other assets on the consolidated balance sheets. The Company amortized an immaterial amount of capitalized contracts costs to sales and marketing in the consolidated statements of operations and comprehensive income (loss) for the years presented.

Customers accounting for greater than 10% of total revenue were as follows:

Year Ended December 31,
202020212022
Customer A63%56%45%
Customer B18%27%28%

Customers accounting for greater than 10% of accounts receivable were as follows:
December 31,December 31,
20212022
Customer C25%23%
Customer D33%*
* Less than 10%

Servicing and other fees, net

The Company also enters into contracts with lending partners and institutional investors to provide loan servicing for the life of Upstart-powered loans. These services commence upon origination of these loans by lending partners and include collection, processing and reconciliations of payments received, institutional investor reporting and borrower customer support as well as distribution of funds to the holders of the loans. The Company charges the loan holder a monthly servicing fee calculated based on a predetermined percentage of the outstanding principal balance. Servicing fees also include certain ancillary fees charged on a per transaction basis for processing late payments and payments declined due to insufficient funds. Servicing fees are recognized in the period the services are provided. Loan servicing fees are not within the scope of ASC 606 and are accounted for under ASC 860, Transfers and Servicing.

Servicing and other fees, net also include gains and losses on assets and liabilities recognized under loan servicing arrangements for loans retained by lending partners or loans sold to institutional investors. Such gains or losses are recognized based on whether the benefits of servicing are expected to be more or less than adequate compensation for servicing obligations performed by the Company. Servicing fees also include changes in fair value of loan servicing assets and liabilities in the years presented. Refer to “Note 4. Fair Value Measurement” for additional information on changes in fair value associated with servicing assets and liabilities.

The Company recognized a net gain related to loan servicing rights upon loan sales for the years presented as follows:
Year Ended December 31,
202020212022
Net gain related to loan servicing rights$1,530 $6,916 $28,739 

The Company charges lending partners and institutional investors for collection agency fees related to their outstanding loan portfolio. The Company either performs borrower collection activities in-house, or outsources to third-party collection agencies particularly for loans that are more than 30 days past due or charged off. The Company has discretion in hiring the collection agencies and determining the scope of their work. As the principal in the arrangement, the Company recognizes gross revenue from collection agency fees in the period that the services are provided. Upstart also receives certain ancillary borrower fees inclusive of late payment fees and ACH fail fees. Revenue from collection agency fees and borrower fees are included in servicing and other fees, net as part of revenue from fees, net in the Company’s consolidated statements of operations and comprehensive income (loss). The total fees charged by collection agencies are also recognized in the period incurred and reported as part of customer operations expenses.

The Company recognized collection agency fees and borrower fees, which are included in servicing and other fees, net for the years presented as follows:

Year Ended December 31,
202020212022
Collection agency fees$2,777 $4,473 $10,519 
Borrower fees$2,093 $7,289 $25,208 
Interest Income and Fair Value Adjustments, Net

Interest income and fair value adjustments, net is comprised of interest income, interest expense and net changes in the fair value of financial instruments, held in the Company’s normal course of business at fair value, including loans and notes receivable and residual certificates.

The following table presents components of the interest income and fair value adjustments, net presented in the Company’s consolidated statements of operations and comprehensive income (loss):

Year Ended December 31,
202020212022
Interest income26,408 $20,634 $105,580 
Interest expense(8,026)(3,274)(10,843)
Fair value and other adjustments
Unrealized gain (loss), charge-offs, and other adjustments, net(11,459)1,894 (101,422)
Realized gain (loss) on sale of loans, net(1)
(2,107)28,060 (58,143)
Total fair value and other adjustments(13,566)29,954 (159,565)
Total interest income and fair value adjustments, net$4,816 $47,314 $(64,828)
_________
1.Includes $(2.1) million and $28.1 million of income (loss) from capital market programs, net for the year ended December 31, 2020 and 2021, respectively. There was no income (loss) recognized from capital market programs, net for the year ended December 31, 2022.
Interest income

Interest income is recognized based on the terms of the underlying agreements with borrowers for loans held on the Company’s consolidated balance sheets and is earned over the life of a loan.

Interest income also includes accrued interest earned on outstanding loans but not collected. Loans that have reached a delinquency of over 120 days are classified as non-accrual status and any accrued interest recorded in relation to these loans is reversed in the respective period. The Company does not record an allowance for credit losses on accrued interest receivable. As of December 31, 2021 and 2022, the Company has recorded $2.6 million and $12.8 million of accrued interest income in loans on the consolidated balance sheets, respectively.
Interest expense

Interest expense is primarily related to interest recorded on the Company’s borrowings on warehouse credit facilities. Interest expense includes accrued interest incurred but not paid. Accrued interest expenses were immaterial as of December 31, 2021 and 2022.
Fair value and other adjustments, net

Fair value and other adjustments, net include changes in fair value of financial instruments, other than loan servicing assets and liabilities. These adjustments are recorded in the Company’s consolidated statements of operations and comprehensive income (loss) and include both realized and unrealized changes to the value of related assets and liabilities. Refer to “Note 4. Fair Value Measurement” for additional information.
Fair value and other adjustments, net also includes gain (loss) recognized through our capital markets programs and amounts received from borrowers for previously charged-off loans held on the Company’s consolidated balance sheets. These amounts are recognized in the period when amounts are received or the transaction is completed.