Subsequent Events

12 Months Ended

Dec. 31, 2022

Subsequent Events [Abstract]

Subsequent Events

Subsequent Events

The Company has evaluated events that have occurred through the filing date of this Form 10-K. Based on its evaluation, other than any items recorded or disclosed within the consolidated financial statement and related notes, including as discussed below, the Company has determined no subsequent events were required to be recognized or disclosed.

Warehouse Amendment

On January 31, 2023, Upstart Auto Warehouse Trust, the Company’s consolidated variable interest entity (“UAWT”), entered into the Omnibus Amendment to the Credit Agreement with a third-party lender which extended the last date by which UAWT may make a drawdown from its existing $200 million credit facility (the “UAWT Credit Facility”) until the earlier of June 2024 or an accelerated amortization event. The UAWT Credit Facility matures in June 2025, at which time all outstanding amounts owed must be repaid. The UAWT Credit Facility bears interest per annum at a rate equivalent to the weighted-average cost of commercial paper notes issued by the lender (the “UAWT Benchmark Rate”), plus a spread ranging from 3.0% to 4.0% and the maximum advance rate under the credit facility on outstanding principal of loans held by UAWT is 80%. All other key terms of the Amended Credit Agreement were otherwise the same as described in Note 8. Borrowings.

Reduction in Workforce

On January 31, 2023, in response to the challenging macro environment where many lenders and credit investors have significantly reduced or paused loan originations, the Company implemented a plan of reorganization (the “January 2023 Plan”). The January 2023 Plan is designed to reduce operating costs, streamline operations and return the Company to profitability. The January 2023 Plan involves a reduction of Upstart’s current workforce by approximately 20%, or approximately 365 employees.

The Company estimates that it will incur approximately $15 million in total charges in connection with the January 2023 Plan. The Company expects these charges to be in the form of future cash expenditures related to severance payments, employee benefits and taxes. In addition to these charges, the Company expects to recognize approximately $3 million of one-time non-cash savings related to the reversal of previously expensed stock-based compensation associated with forfeited stock awards. The Company expects that most of the charges and cash expenditures related to the January 2023 Plan will be incurred or completed in the quarter ending March 31, 2023. The Company intends to exclude any charges related to the January 2023 Plan from its calculation of adjusted EBITDA and adjusted net income.

When the January 2023 Plan is fully implemented, the Company expects to realize cash savings of approximately $57 million in operating expenses, primarily related to employee cash compensation and benefits, over the next 12 months. The Company also expects to realize additional non-cash savings of approximately $42 million related to stock-based compensation through 2025.

The Company may incur other charges or cash expenditures not currently contemplated as a result of or in connection with the January 2023 Plan.