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Revenue
 9 Months Ended
Sep. 30, 2024
Revenue from Contract with Customer [Abstract]  
Revenue Revenue
Revenue from Fees, Net

The Company disaggregates revenue from fees by type of service for the periods presented as follows:
Three Months Ended September 30,Nine Months Ended September 30,
2023202420232024
Revenue from fees, net:
Platform and referral fees, net$112,437 $134,199 $295,859 $336,653 
Servicing and other fees, net34,318 33,391 111,726 99,537 
Total revenue from fees, net$146,755 $167,590 $407,585 $436,190 
Platform and Referral Fees, Net

Lending Partners. 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 not retained by the lending partners, the Company pays the lending partners a one-time loan premium fee upon completion of the minimum contractual holding period and a monthly loan trailing fee based on the amount and timing of principal and interest payments made by the borrowers of the underlying loans. Both the loan premium fees and loan trailing fees are consideration payable to customers, which are our lending partners, and are recorded as a reduction to platform and referral fees, net, which is part of revenue from fees, net, in the condensed consolidated statements of operations and comprehensive loss. The Company recognized $2.2 million and $5.6 million of loan premium fees and loan trailing fees as contra-revenue within platform and referral fees, net during the three and nine months ended September 30, 2023, respectively and $3.1 million and $7.5 million during the three and nine months ended September 30, 2024, respectively.

The Company recognized $4.3 million of loan trailing fee liability as of December 31, 2023 and September 30, 2024, which is recorded at fair value and included within accrued expenses and other liabilities on the Company’s condensed consolidated balance sheets. Refer to “Note 6. 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, 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 a monthly basis. As such, the Company’s contracts with customers do not include a significant financing component.
Auto Dealerships. The Company enters into subscription agreements with auto dealerships to access Upstart Auto Retail software, a cloud-based solution that facilitates dealership operations and enables them to provide consumers with access to Upstart-powered auto loans. Subscription agreements generally have a contractual term of one to six months with evergreen monthly renewals. The Company bills customers on a monthly basis. Subscription fees are recognized over the contract term as the performance obligation is satisfied, and is included within platform and referral fees, net in the condensed consolidated statements of operations and comprehensive loss. The Company recognized an immaterial amount and $2.6 million of subscription fee revenue for the three and nine months ended September 30, 2023, respectively, and an immaterial amount and $4.1 million of subscription fee revenue for the three and nine months ended September 30, 2024, respectively.

The Company had $19.5 million and $21.8 million of accounts receivable that are included in other assets on the condensed consolidated balance sheets related to contracts with customers as of December 31, 2023 and September 30, 2024, 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 periods 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, 2023 and September 30, 2024, the Company had $2.7 million and $2.9 million of contract costs, respectively, capitalized within other assets on the condensed consolidated balance sheets. The Company amortized immaterial amounts of capitalized contracts costs to sales and marketing in the condensed consolidated statements of operations and comprehensive loss for the periods presented.

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

Three Months Ended
September 30,		Nine Months Ended
September 30,
2023202420232024
Customer A33%31%30%27%
Customer B32%29%31%34%
Customer C12%*11%10%

Customers accounting for greater than 10% of accounts receivable were as follows:
December 31,September 30,
20232024
Customer D*17%
Customer C15%11%
Customer A11%*
* 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, Revenue from Contracts with Customers, and are accounted for under ASC 860, Transfers and Servicing.

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. The total fees charged by collection agencies are recognized in the period incurred and reported as part of customer operations expenses.

Servicing and other fees, net also includes 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. Refer to “Note 6. Fair Value Measurement” for additional information on changes in fair value associated with servicing assets and liabilities.

The following table presents the components of servicing and other fees, net as part of revenue from fees, net in the Company’s condensed consolidated statements of operations and comprehensive loss:

Three Months Ended September 30,Nine Months Ended September 30,
2023202420232024
Servicing fees$26,113 $21,782 $82,611 $66,975 
Borrower fees7,182 6,582 21,823 20,097 
Collection agency fees4,017 3,964 11,685 12,677 
Other fees69 88 407 301 
Net gain (loss) on servicing rights and fair value adjustments(3,063)975 (4,800)(513)
Total servicing and other fees, net$34,318 $33,391 $111,726 $99,537 
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 in the Company’s normal course of business at fair value, including loans, derivatives, beneficial interests, notes receivable and residual certificates, trailing fee liabilities, payable to securitization note holders, and line of credit receivable.
The following table presents components of the interest income, interest expense, and fair value adjustments, net presented in the Company’s condensed consolidated statements of operations and comprehensive loss:

Three Months Ended September 30,Nine Months Ended September 30,
2023202420232024
Interest income(1)
$37,692 $40,845 $116,923 $144,899 
Interest expense(1)
(9,414)(10,818)(20,828)(33,002)
Fair value and other adjustments, net:
Unrealized loss on loans, loan charge-offs, and other fair value adjustments, net(1)
(30,349)(31,579)(99,048)(92,800)
Realized loss on sale of loans, net(2,955)(2,950)(22,255)(14,565)
Fair value adjustments and realized losses on beneficial interests, net
(7,172)(948)(9,127)(23,158)
Total fair value and other adjustments, net
(40,476)(35,477)(130,430)(130,523)
Total interest income, interest expense, and fair value adjustments, net$(12,198)$(5,450)$(34,335)$(18,626)
__________
(1) Includes interest income, interest expense and unrealized loss on loans, loan charge-offs, and other fair value adjustments, net related to the consolidated securitization as follows:

Three Months Ended September 30,Nine Months Ended September 30,
2023202420232024
Interest income, interest expense, and fair value adjustments, net related to consolidated securitization:
Interest income$10,048 $6,748 $10,048 $23,086 
Interest expense(3,754)(2,272)(3,754)(7,546)
Unrealized loss on loans, loan charge-offs, and other fair value adjustments, net367 (5,726)367 (25,643)
Total interest income, interest expense, and fair value adjustments, net$6,661 $(1,250)$6,661 $(10,103)
Interest Income

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

Interest income also includes accrued interest earned on outstanding loans and line of credit receivable but not collected. Home equity lines of credit (“HELOCs”) that have reached a delinquency over 180 days and all other loans and line of credit receivable that have reached a delinquency 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, 2023 and September 30, 2024, the Company has recorded $14.2 million and $6.7 million of accrued interest income in loans on the condensed consolidated balance sheets, respectively. Accrued interest income on the line of credit receivable was immaterial as of September 30, 2024.
Interest Expense

Interest expense is primarily related to interest recorded on the Company’s borrowings on warehouse credit facilities and interest expense related to the consolidated securitization. Interest expense includes accrued interest incurred but not paid. Accrued interest expenses were immaterial as of December 31, 2023 and September 30, 2024. Interest expense also includes changes in fair value of the interest rate caps. Refer to “Note 4. Derivative Financial Instruments” for additional information.
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 and interest rate caps. These adjustments are recorded in the Company’s condensed consolidated statements of operations and comprehensive loss and include both realized and unrealized changes to the value of related assets and liabilities. Refer to “Note 6. Fair Value Measurement” for additional information.

Fair value and other adjustments, net also includes amounts received from borrowers for previously charged-off loans held on the Company’s condensed consolidated balance sheets. These amounts are recognized in the period when amounts are received. Amounts received from borrowers for previously charged-off loans were $2.6 million and $4.6 million for the three and nine months ended September 30, 2023, respectively, and $3.7 million and $10.8 million for the three and nine months ended September 30, 2024, respectively.