Prosper Marketplace Inc.

03/26/2026 | Press release | Distributed by Public on 03/26/2026 13:31

Annual Report for Fiscal Year Ending December 31, 2025 (Form 10-K)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This management's discussion and analysis of financial condition and results of operations, or MD&A, contains forward-looking statements that involve risks and uncertainties. Please see "Forward-Looking Statements" in this Annual Report on Form 10-K for a discussion of the uncertainties, risks and assumptions associated with these statements. This discussion should be read in conjunction with historical financial statements and related notes thereto and the other disclosures contained elsewhere in this Annual Report on Form 10-K. The results of operations for the periods reflected herein are not necessarily indicative of results that may be expected for future periods, and actual results may differ materially from those discussed in the forward-looking statements as a result of various factors, including but not limited to those included in the "Risk Factors" section and elsewhere in this Annual Report on Form 10-K. This section of this Form 10-K generally discusses 2025 and 2024 items and year-to-year comparisons between 2025 and 2024. For discussions related to 2023 items and year-to-year comparisons between 2024 and 2023, see "Part II - Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Annual Report on Form 10-K for the year ended December 31, 2024.
PROSPER MARKETPLACE, INC.
Overview
Our vision is to transform lives by providing affordable financial solutions through the simplest and most trusted platform. We currently offer access to two primary lending products, each of which supports our vision: (i) unsecured Personal Loans through a personal loan marketplace which connects eligible consumer borrowers with individual and institutional investors, and (ii) a Credit Card product available to eligible borrowers. Historically, we have offered access to Home Equity lending products as well, but we made the strategic decision to discontinue offering Home Equity products in December 2025.
We believe our Personal Loan business model has key advantages relative to traditional banks, including (i) an innovative marketplace model that efficiently connects qualified supply and demand of capital, (ii) online operations that substantially reduce the need for physical infrastructure and improve convenience, and (iii) use of advanced technology and artificial intelligence to deliver simple, fast, personalized, and transparent solutions that can improve consumers' financial health as they move across the credit spectrum. We do not operate physical branches or incur expenses related to infrastructure like traditional banks or consumer finance institutions. As part of operating our marketplace, we verify the identity of borrowers and assess borrowers' credit risk profile using a combination of public and proprietary data. Our proprietary technology automates several loan origination and servicing functions, including the borrower application process, data gathering, underwriting, credit scoring, loan funding, investing and servicing, regulatory compliance and fraud detection.
For the year ended December 31, 2025, our Personal Loan marketplace facilitated $2.7 billionin Borrower Loan originations, of which $2.5 billionwere funded through our Whole Loan Channel, representing 94% of the total Borrower Loans originated through our marketplace during this period. For the quarter ended December 31, 2025, our marketplace facilitated $696.3 millionin Borrower Loan originations, of which $659.3 millionwere originated through our Whole Loan Channel, representing 95% of the total Borrower Loans originated through our marketplace during this period. From inception through December 31, 2025 our marketplace has facilitated $30.5 billionin Borrower Loan originations, of which $27.6 billionwere funded through our Whole Loan Channel, representing 90% of the total Borrower Loans originated through our marketplace during this period.
We believe our Credit Card product provides consumers working to build their credit profile with affordable access to the credit they need, when they need it, as well as tools and resources to help them stay on track with their personal finances. As with the Personal Loan product, we manage the credit risk associated with our Credit Card borrowers through a combination of public and proprietary data. From the launch of the Credit Card product through December 31, 2025, approximately 532,000Credit Card accounts have been booked through our platform, and borrowers have spent $1.3 billionon their Prosper Credit Cards.
As a company that operates a credit marketplace, and offers a Credit Card product, our customers may be highly susceptible to uncertainties and negative trends, real or perceived, in the markets driven by, among other factors, general economic conditions in the United States and abroad. These external economic conditions and resulting trends or uncertainties could adversely impact our customers' ability or desire to participate in our Personal Loan marketplace, as borrowers or investors, or maintain compliance with the repayment terms on a Prosper Credit Card. Consequently, our business and results of operations could be negatively affected.
Key Operating and Financial Metrics (in thousands)
The following table displays our key operating and financial metrics for the years ended December 31, 2025, 2024 and 2023:
Years Ended December 31,
2025 2024 2023
Personal Loan Originations $ 2,662,264 $ 2,243,346 $ 2,164,079
Transaction Fees, Net $ 233,385 $ 193,588 $ 127,838
Personal Loan Serviced Portfolio (1)
$ 4,100,938 $ 3,805,480 $ 3,831,896
Whole Loans Outstanding (1)
$ 3,847,352 $ 3,508,181 $ 3,491,788
Prosper Credit Card Portfolio (1) (2)
$ 420,466 $ 394,416 $ 286,284
Servicing Fees, Net $ 30,853 $ 23,026 $ 15,364
Total Net Revenues $ 212,549 $ 173,355 $ 137,700
Net Loss $ (35,702) $ (54,079) $ (106,462)
Adjusted Net Revenue (3)
$ 212,570 $ 175,474 $ 142,209
Adjusted EBITDA (3)
$ 29,414 $ 17,061 $ (30,628)
(1) Unpaid principal balance as of December 31
(2)Total of Prosper Allocations, Coastal Allocations and securitized PMCC 2024-1 Credit Card receivables
(3) Adjusted Net Revenue and Adjusted EBITDA are non-GAAP financial measures. For more information regarding these measures and the reconciliation to Total Net Revenue and Net (Loss) Income, respectively, the most comparable US GAAP measures, see "Non-GAAP Financial Measures."
Personal Loan Originations
From inception of the Company through December 31, 2025, a total of 2,370,714 Borrower Loans, totaling $30.5 billion, were originated through our marketplace.
For the year ended December 31, 2025, 165,037Borrower Loans totaling $2.7 billionwere originated through our marketplace, as compared to 148,518Borrower Loanstotaling $2.2 billionoriginated in 2024, which represented a unit increaseof 11%and a dollar increaseof 19%. These origination increases were primarily due to increased third-party investor demand, updated underwriting models, lower interest rates and a new customer acquisition channel.
Personal Loan origination volume by Prosper Rating was as follows for the periods presented (in millions, except percentages):
Year Ended December 31,
2025 2024 2023
Amount % Amount % Amount %
AA $ 358.0 13 % $ 298.3 13 % $ 288.8 13 %
A 512.6 19 % 374.2 17 % 293.8 14 %
B 551.0 21 % 479.7 22 % 563.0 26 %
C 258.7 10 % 223.3 10 % 304.1 14 %
D 262.1 10 % 212.3 9 % 227.6 11 %
E 335.4 13 % 318.6 14 % 268.7 12 %
HR - - % 13.1 1 % 21.7 1 %
Other (1)
384.5 14 % 323.8 14 % 196.4 9 %
Total $ 2,662.3 100 % $ 2,243.3 100 % $ 2,164.1 100 %
(1) Represents personal loans funded through the Prosper platform via the Whole Loan Channel but not assigned Prosper Ratings.
For the year ended December 31, 2025, compared to 2024, Personal Loan originations on the Prosper platform reflect increased originations across most loan ratings. Beginning in the third quarter of 2024, the Prosper platform ceased originations for loans rated HR given limited investor demand for this rating. Loans not assigned Prosper ratings are sold only to institutional investors based on specific underwriting criteria and custom risk models developed by those investors.
Personal Loan Serviced Portfolio and Whole Loans Outstanding
Our Personal Loan serviced portfolio consists of all Borrower Loans that we service both through the Note and Whole Loan Channels. Borrower Loans funded through the Whole Loan Channels include loans that we hold in consolidated trusts, as well as those sold to third parties. Our Personal Loan serviced portfolio increased $295.5 million, or 8%, from December 31, 2024 to December 31, 2025. This increase is primarily due to increased originations for the year ended December 31, 2025, as compared to 2024.
The outstanding balance of Borrower Loans sold through our Whole Loan Channel serves as a primary driver of our Servicing Assets. Whole loans outstanding increased $339.2 million, or 10%, from December 31, 2024 to December 31, 2025 due primarily to the year-over-year increase in originations discussed above.
Prosper Credit Card Portfolio
Our Credit Card portfolio consists of the outstanding principal of all Prosper-branded Credit Cards originated through our partnership with Coastal Community Bank ("Coastal"). From December 31, 2024 to December 31, 2025, the principal balance of the Credit Card portfolio increased $26.1 million, or 7%, due to increases in the number of active Credit Cards and cardholder spend during this time.
Net (Loss) Income
See the section titled "Results of Operations" below, for the discussion on significant changes in Net (Loss) Income year-over-year.
Results of Operations
Overview
The following table summarizes our net loss for the years ended December 31, 2025, 2024 and 2023 (in thousands, except percentage):
Years Ended December 31,
2025 2024 Change % Change 2024 2023 Change % Change
Total Net Revenues $ 212,549 $ 173,355 $ 39,194 23 % $ 173,355 $ 137,700 $ 35,655 26 %
Total Expenses 248,083 227,318 20,765 9 % 227,318 244,084 (16,766) (7) %
Net Loss Before Income Taxes (35,534) (53,963) 18,429 34 % (53,963) (106,384) 52,421 49 %
Income Tax Expense (168) (116) (52) 45 % (116) (78) (38) 49 %
Net Loss $ (35,702) $ (54,079) $ 18,377 34 % $ (54,079) $ (106,462) $ 52,383 49 %
Total Net Revenues for the year ended December 31, 2025, increased $39.2 million, or 23%, as compared to the year ended December 31, 2024. The increase was largely attributable to a $39.8 million increase in Transaction Fees, Net, primarily as a result of higher personal loan origination volume during this time, as discussed above, as well as a revised WebBank transaction fee starting in June 2024. There was also a $7.8 million increase in Servicing Fees, Net due primarily to increased Personal Loan and Credit Card collections income, as well as Personal Loan servicing income, generally consistent with the increase in whole loans outstanding during this time. We also lowered our Personal Loan market servicing rate in September 2025, increasing the servicing asset and Servicing Fees, Net. In addition, Total Interest Income (Expense) increased $6.1 million, due largely to a full year of net interest income generated from the PMCC 2024-1 Credit Card securitization that closed in November 2024, and Other Revenues increased $1.5 million, primarily due to increased credit referral fees. These increases were partially offset by a $9.9 million increase in Loss on Sale of Borrower Loans, primarily as a result of additional incentives provided to whole loan investors year-over-year. Finally, there was a $6.2 million decrease in Total Net Revenues from Change in Fair Value of Financial Instruments, primarily as a result of lower fair value adjustments and increased charge-offs from the Receivable from Credit Card Partner, partially offset by increased fair value gains on the Credit Card Derivative and lower charge-offs on loans held in consolidated securitization and warehouse trusts.
Total expenses for the year ended December 31, 2025, increased $20.8 million, or 9%, as compared to the year ended December 31, 2024, which is primarily due to a combined $25.3 million increase in Origination and Servicing, Sales and Marketing and General and Administrative expenses, as costs increased primarily in response to higher Personal Loan originations and growth in the Credit Card portfolio. This increase was partially offset by the decrease attributable to the Change in Fair Value of Convertible Preferred Stock Warrants, which is in turn driven by changes in the fair value of the underlying Convertible Preferred Stock. Specifically, the loss for the year ended December 31, 2025 totals $42.1 million, which
compares to a loss of $46.2 million for 2024, a change of approximately $4.1 million. Accordingly, the net loss for the year ended December 31, 2025 decreased $18.4 million when compared to the net loss for the year ended December 31, 2024.
Revenues
The following table summarizes our revenues for the years ended December 31, 2025, 2024 and 2023 (in thousands, except percentages):
Years Ended December 31,
2025 2024 Change % Change 2024 2023 Change % Change
Operating Revenues:
Transaction Fees, Net $ 233,385 $ 193,588 $ 39,797 21 % $ 193,588 $ 127,838 $ 65,750 51 %
Servicing Fees, Net 30,853 23,026 7,827 34 % 23,026 15,364 7,662 50 %
Loss on Sale of Borrower Loans (55,212) (45,316) (9,896) (22) % (45,316) (12,380) (32,936) n/m
Other Revenues 9,315 7,773 1,542 20 % 7,773 6,108 1,665 27 %
Total Operating Revenues 218,341 179,071 39,270 22 % 179,071 136,930 42,141 31 %
Interest Income (Expense):
Interest Income on Financial Instruments 81,904 89,849 (7,945) (9) % 89,849 115,663 (25,814) (22) %
Interest Expense on Financial Instruments (59,770) (73,826) 14,056 (19) % (73,826) (91,983) 18,157 (20) %
Total Interest Income, Net 22,134 16,023 6,111 38 % 16,023 23,680 (7,657) (32) %
Change in Fair Value of Financial Instruments (27,926) (21,739) (6,187) (28) % (21,739) (22,910) 1,171 5 %
Total Net Revenues $ 212,549 $ 173,355 $ 39,194 23 % $ 173,355 $ 137,700 $ 35,655 26 %
n/m: not meaningful
Transaction Fees, Net
We earn a transaction fee upon the successful origination of all Borrower Loans facilitated through our marketplace. Specifically, we receive payments from WebBank as compensation for the activities we perform on behalf of WebBank. Our fee is determined by the term and credit grade of the Borrower Loans that we facilitate on our marketplace and WebBank originates. We record the transaction fee revenue net of any fees paid by us to WebBank. We also earn various program fees from our Credit Card product, such as interchange fees, annual fees and late fees, all of which are recorded within Transaction Fees, Net.
Transaction Fees increased by $39.8 million, or 21%, for the year ended December 31, 2025, as compared to 2024, primarily due to the increased Personal Loan originations discussed above. In addition, the increase is due to the revisions to the WebBank transaction fee schedule starting in June 2024. Under the revised WebBank transaction fee schedule, transaction fees now range from 1.0% to 9.99%, depending on the term and credit grade of the Borrower Loan, as compared to 1.0% to 7.99% under the previous schedule. Transaction fees above 5.0% are refundable on a pro-rated basis upon the full prepayment of the related Borrower Loan prior to maturity under Utah law, where WebBank is domiciled, and thus the impact of these increased transaction fees is reduced by expected refunds.
We recognized approximately $25.1 million in program fees under our Credit Card product for the year ended December 31, 2025, which represented a $1.0 million increase from 2024.
Servicing Fees, Net
Investors who purchase Borrower Loans through the Whole Loan Channel typically pay us a servicing fee which is generally set at 1.0% per annum of the outstanding principal balance of the Borrower Loan prior to applying the current payment, plus an additional 0.075% per annum to cover the Loan Trailing Fee. The Servicing Fee compensates us for the costs incurred in servicing the Borrower Loan, including managing payments from borrowers, payments to investors and maintaining investors' account portfolios. We record Servicing Fees from investors as a component of operating revenues when received. We also include any collection fees received, net of collection agency expenses, in Servicing Fees, Net.
In addition, we are contractually obligated to service the entire portfolio under our Credit Card product. Our banking partner, Coastal, pays us a servicing fee of 1.0% per annum of the daily outstanding principal balance of all cards designated as Coastal allocations within the non-securitized portion of the portfolio. These allocations represented approximately 10% of the portfolio through March 31, 2024, but were reduced to 5% starting April 1, 2024 as a result of an amendment to the Program Agreement executed in March 2024. To the extent these contractual fees are less than the market servicing rate that would be required by a market participant to service the portfolio, a servicing obligation is recorded. Changes to the net Credit Card servicing obligation are included in Servicing Fees, Net. We do not recognize a servicing asset or obligation related to any Credit Card receivables that are effectively consolidated on our balance sheet through the PMCC 2024-1 securitization transaction discussed in Note 5 of the accompanying consolidated financial statements.
For the year ended December 31, 2025, Servicing Fees, Net increased $7.8 million, or 34%, as compared to 2024, primarily as a result of a $6.1 million increase in net collections, debt sale and loan trailing fees, due largely to enhanced Personal Loan and Credit Card collections and recovery efforts. Additionally, there was a $2.0 million increase in Personal Loan servicing revenue from servicing fees collected, net of amortization of the Servicing Asset, reflective of both (i) the growth in the underlying servicing book discussed above, as well as (ii) the reduction in the estimated market servicing rate used to value the Servicing Asset from 63.3 basis points to 59.3 basis points in September 2025. Changes in the fair value of the net Credit Card servicing obligation contributed a $1.1 million decrease in Servicing Fees, due to growth in the portfolio year-over-year. We also generated an additional $0.8 million in miscellaneous Credit Card fees as compared to the prior year.
Loss on Sale of Borrower Loans
We recognize a Gain or Loss on Sale of Borrower Loans for the net proceeds received on a sale through the Whole Loan Channel, less the fair value of the Borrower Loans sold. The net proceeds of the sale represent the fair value of any assets obtained or liabilities incurred as part of the transaction, including, but not limited to Servicing Assets, retained securities, incentives and repurchase obligations provided or received at the time of sale. Since 2022, due to market volatility and incentives offered by competitors, we started providing additional incentives to our investors. For the year ended December 31, 2025, these incentives increased $13.0 million from the prior year. Excluding the impact of these incentives, the remaining change in Loss on Sale of Borrower Loans was an increased gain of $3.1 million for the year ended December 31, 2025, as compared to 2024, primarily due to the recognition of additional Servicing Assets upon the sale of whole loans, as well as a decrease in the market servicing rate used to value the Servicing Assets from 63.3 bps to 59.3 basis points in September 2025.
Other Revenues
Other Revenues consists primarily of credit referral fees earned from partner companies for the referral of customers on our platform, as well as incentive fees from our Credit Card network partner, based primarily on the volume of transactions generated on our Credit Cards, net of any fees paid to that network partner. Credit referral fees accounted for the majority of the $1.5 million increase in Other Revenues for the year ended December 31, 2025 as compared to 2024.
Interest Income on Financial Instruments and Interest Expense on Financial Instruments
We recognize Interest Income on Borrower Loans, Loans Held for Sale and Receivable from Credit Card Partner (consisting of the underlying securitized Credit Card receivables) using the accrual method based on the stated interest rate to the extent we believe it to be collectible. We record interest expense on the corresponding fractional Notes, at Fair Value, Notes Issued by Securitization Trusts and Warehouse Lines based on the contractual interest rates. The interest rate on fractional Notes, at Fair Value is generally 1% lower than the interest rate on the corresponding Borrower Loans to compensate us for servicing the underlying Borrower Loans.
The increase of $6.1 million, or 38%, in Total Interest Income (Expense) for the year ended December 31, 2025 as compared to 2024, was primarily due to a $13.2 million increase in Total Interest Income (Expenses), Net generated from the underlying credit card receivables included within Receivable from Credit Card Partner, less interest expense and setup cost amortization incurred on the related Notes Issued by Securitization Trust, following the PMCC 2024-1 securitization in November 2024. This increase was partially offset by a combined $6.3 million decrease in Total Interest Income (Expense), Net generated from (i) Loans Held for Sale, net of interest expense and setup cost amortization on the Warehouse Lines, and (ii) securitized Borrower Loans, net of interest expense and setup cost amortization incurred on the Notes Issued by Securitization Trust during this period. This decrease is reflective of the reduced average outstanding balance of loans held in these consolidated trusts year-over-year, as well as the related decrease in the associated financing liabilities due to principal repayments. In addition, Total Interest Income (Expense), Net from securitization and warehouse bank accounts, servicing revenue related to fractional Notes, and Borrower Loans we hold for investment decreased a combined $0.8 million from the prior year.
Change in Fair Value of Financial Instruments
We record Borrower Loans, Loans Held for Sale, Notes, the Credit Card Derivative and Receivable from Credit Card Partner at fair value on our balance sheets. Changes in the fair values of these financial instruments are presented within Change in Fair Value of Financial Instruments on our statements of operations.
Personal Loan
Changes in the fair value of Borrower Loans funded through the Note Channel are largely offset by the changes in the fair value of the Notes due to their borrower payment-dependent structure. Our obligation to pay principal and interest on Notes is equal to the loan payments, if any, that are received on the corresponding Borrower Loan, net of the servicing fee, which is generally 1.0% of the outstanding balance.
We used Warehouse Lines to finance the purchase of Loans Held for Sale for the purpose of earning net interest income and contributing to securitization transactions. Loans Held for Sale consisted primarily of loans held in warehouse trusts. Changes in the fair value of Loans Held for Sale were not offset by changes in the fair value of Warehouse Lines because Warehouse Lines were carried at amortized cost. As discussed below and in Note 11, Debt, of the accompanying condensed consolidated financial statements, we terminated our two existing Warehouse Lines in September 2023 and March 2024, respectively, and securitized the related Loans Held for Sale. Because of the securitizations, these loans are now classified as Borrower Loans on our consolidated balance sheets.
In September 2023 and March 2024, we sponsored and consolidated two Personal Loan securitization transactions, PMIT 2023-1 and PMIT 2024-1, respectively, with loans that were previously funded through our PWIIT and PWIT Warehouse Lines, respectively. Refer to Note 7, Securitizations, of the accompanying consolidated financial statements for additional information on these securitization transactions. We expect that changes in the fair value of Borrower Loans held by PMIT 2023-1 and PMIT 2024-1 will be negative due to delinquencies and charge-offs, but they could ultimately be negative or positive due to changes in fair value assumptions, such as expected credit performance, prepayment rates and implied market discount rates. Additionally, the impact from fair value adjustments on these securitized Borrower Loans may lessen as they season and the outstanding principal balances decrease. Notes issued by PMIT 2023-1 and PMIT 2024-1 are carried at amortized cost on the accompanying consolidated balance sheets and thus do not impact the Change in Fair Value of Financial Instruments.
We earn interest income on personal loans held in securitization trusts during the period we own or consolidate the loans, which partially offsets changes in the fair value of these loans. The following table illustrates the weighted-average composition of the loans held in consolidated securitization trusts by Prosper Rating for the periods presented, which is an indicator of their credit quality:
Year Ended December 31,
2025 2024
Borrower Loans - Securitization(1):
AA 23 % 26 %
A 30 % 28 %
B 24 % 23 %
C 11 % 12 %
D 6 % 5 %
E 5 % 5 %
HR 1 % 1 %
Total 100 % 100 %
(1) The percentages are calculated using the weighted-average of month-end principal balances of Borrower Loans by Prosper Rating.
Fair values of Borrower Loans and Notes are estimated using discounted cash flow methodologies based upon a set of valuation assumptions. The key assumptions used include default and prepayment rates derived primarily from historical performance, and discount rates based on estimates of the rates of return that market investors would require when investing in other financial instruments with similar characteristics.
Credit Card
The Credit Card Derivative is recorded at fair value and is primarily reflective of discounted future cash flows from certain features of our Credit Card program that were determined to meet the definition of freestanding derivatives, including interest income, program fees paid to our banking partner Coastal, credit losses and fraud losses. These cash flows are estimated based upon a set of valuation assumptions, including default and prepayment rates derived primarily from comparable companies and our own historical performance, and discount rates based on estimates of the rates of return that investors would require when investing in other financial instruments with similar characteristics. We also record the net impact of realized gains and losses under the Credit Card Derivative in Change in Fair Value of Financial Instruments.
In November 2024, we sponsored and consolidated a Credit Card securitization transaction, PMCC 2024-1, with existing Credit Card receivables that were previously accounted for through our Credit Card Derivative. See Notes 5 and 7 of the accompanying consolidated financial statements for further details on both the Credit Card Derivative and PMCC 2024-1. We fully consolidate PMCC 2024-1 as a VIE, as it has insufficient equity at risk and we determined that we were its primary beneficiary. Based on an analysis of the facts and circumstances surrounding the transaction, it was determined that the transfer of the Credit Card receivables from Coastal to PMCC 2024-1 did not meet the sales or participating interest criteria under Accounting Standards Codification ("ASC") 860, Transfers and Servicing, and thus could not be recognized on our consolidated balance sheets. As a result, we record a secured Receivable from Credit Card Partner, which we have elected to present at fair value on our consolidated balance sheets. Receivable from Credit Card Partner is secured by and effectively mirrors the value of the underlying Credit Card receivables.
As the sole sponsor of PMCC 2024-1, we are entitled to any residual cash flows it generates, and estimate the fair value of that residual interest using a discounted cash flow analysis based upon valuation assumptions generally similar to those used to value the Credit Card Derivative, adjusted to reflect the specific characteristics of the securitized Credit Card receivables underlying the Receivable from Credit Card Partner. That residual interest fair value is then added to the securitization advance rate applied to the outstanding balance of the Credit Card receivables to calculate the estimated fair value of Receivable from Credit Card Partner. Consistent with securitized Borrower Loans, Notes issued by PMCC 2024-1 are carried at amortized cost on the accompanying consolidated balance sheets, and thus do not impact the Change in Fair Value of Financial Instruments.
For both the Credit Card Derivative and Receivable from Credit Card Partner, changes in the fair value should generally fluctuate in line with changes in the underlying portfolio and charge-off levels, but could also be impacted by changes in fair value assumptions, such as expected credit performance, prepayment rates and implied market discount rates.
Fluctuation Analysis
For the years ended December 31, 2025 and 2024, the Change in Fair Value of Financial Instruments, Net were losses of $27.9 million and $21.7 million, respectively.
The increase in the loss for this period of $6.2 million is largely driven by the Receivable from Credit Card Partner, for which we recognized a $3.3 million loss from changes in fair value related to future cash flows and $14.0 million in net charge-offs for the year ended December 31, 2025. This compares to the prior year, when we recognized a $10.3 million gain from changes in fair value related to future cash flows and $0.9 million in net charge-offs, following the closing of the PMCC 2024-1 securitization on November 1, 2024. The fair value change in 2024 is inclusive of a $7.5 million initial gain recorded at the time the securitization closed. Because of the minimum contractual ratio of Credit Card receivables to outstanding Notes issued by PMCC 2024-1, the underlying securitized Credit Card portfolio has remained generally flat year-over-year, reducing the impact of fair value changes related to future cash flows.
The increased net losses from the Receivable from Credit Card Partner were partially offset by decreased net losses from the Credit Card Derivative, due primarily to growth in the underlying non-securitized Credit Card portfolio from the prior year. For the year ended December 31, 2025, fair value changes related to future cash flows resulted in a gain of $9.6 million, and the net impact of realized transactions resulted in a loss of $10.3 million. This compares to the prior year, when fair value changes resulted in a gain of $1.9 million, and the net impact of realized transactions resulted in a loss of $9.1 million. The fair value loss in 2024 is also reflective of the impact of the closing of the PMCC 2024-1 securitization on November 1, 2024. Specifically, we recognized an $11.4 million reduction to the Credit Card Derivative on that closing date, when approximately 25% of the outstanding Credit Card receivables were transferred to the securitization.
There was also a decrease in net losses from securitized Borrower Loans and Loans Held for Sale year-over-year, due primarily to the overall decrease in the average balance of loans held in consolidated securitization and warehouse trusts during this time, as these loans continue to season. For securitized Borrower Loans, the loss from changes in fair value for the year ended December 31, 2025 was $9.2 million, due to a $7.3 million gain from fair value adjustments, offset by $16.5 million in net charge-offs. This compares to securitized Borrower Loans and Loans Held for Sale in 2024, when there was a combined loss from changes in fair value of $22.0 million, due primarily to a $7.5 million gain from fair value adjustments, offset by $29.6 million in net charge-offs.
The net impact to the Change in Fair Value of Financial Instruments for fractional Borrower Loans and Notes (as well as the population of whole loans that are owned directly by our wholly-owned subsidiary PFL) was a $0.7 million loss for the year ended December 31, 2025, due to the borrower payment-dependent structure described above, offset by certain timing factors related to the receipt of borrower payments and the application of those payments against the corresponding Notes. For 2024, the net impact from these fractional Borrower Loans and Notes (as well as the population of whole loans that are owned directly by PFL) was a $1.9 million loss.
The following table details the change in fair value of our financial instruments for the years ended December 31, 2025, 2024 and 2023, respectively (in thousands):
Years Ended December 31,
2025 2024 2023
Assets:
Borrower Loans $ (28,702) $ (49,271) $ (48,387)
Loans Held for Sale - (2,263) (39,269)
Credit Card Derivative (includes gains and losses from settled transactions) (701) (7,247) 25,506
Receivable from Credit Card Partner (17,318) 9,462 -
SOFR rate swaption (included in Prepaid and Other Assets) - 37 (1,163)
Liabilities:
Notes 18,795 27,543 40,403
Total $ (27,926) $ (21,739) $ (22,910)
Expenses
The following table summarizes our expenses for the years ended December 31, 2025, 2024 and 2023 (dollar amounts in thousands):
Years Ended December 31,
2025 2024 $ Change % Change 2024 2023 $ Change % Change
Expenses:
Origination and Servicing $ 48,490 $ 47,628 $ 862 2 % $ 47,628 $ 46,669 $ 959 2 %
Sales and Marketing 60,513 50,638 9,875 20 % 50,638 53,585 (2,947) (5) %
General and Administrative - Research and Development 21,528 14,076 7,452 53 % 14,076 19,069 (4,993) (26) %
General and Administrative - Other 66,548 59,396 7,152 12 % 59,396 66,464 (7,068) (11) %
Change in Fair Value of Convertible Preferred Stock Warrants 42,103 46,208 (4,105) (9) % 46,208 48,695 (2,487) (5) %
Impairment of Right-of-Use Lease Assets - - - n/a - 196 (196) (100) %
Interest Expense on Term Loans 12,331 13,124 (793) (6) % 13,124 12,265 859 703 %
Other Income, Net (3,430) (3,752) 322 (9) % (3,752) (2,859) (893) 31 %
Total Expenses $ 248,083 $ 227,318 $ 20,765 9 % $ 227,318 $ 244,084 $ (16,766) (7) %
n/a: not applicable
The following table reflects full-time employees as of December 31, 2025, 2024 and 2023 by functional area:
December 31,
2025 2024 2023
Origination and Servicing 88 97 100
Sales and Marketing 26 32 28
General and Administrative - Research and Development 104 102 97
General and Administrative - Other 167 185 179
Total Headcount 385 416 404
Origination and Servicing
Origination and Servicing costs consist primarily of salaries, benefits and stock-based compensation expense related to our capital markets, collections, customer support and payment processing employees and vendor costs associated with facilitating and servicing personal loans and our Credit Card product. The increase for the year ended December 31, 2025, of $0.9 million, or 2%, as compared to 2024 is primarily due to a $2.1 million increase in depreciation due to the increase in the balance of internal-use software during this time. Additionally, there was a $1.6 million increase in compensation costs during this time, driven largely by the elimination of the 2023 corporate bonus accrual in the second quarter of 2024, which reduced expenses recognized in 2024. These increases were partially offset by a $2.7 million decrease in servicing and origination costs, particularly those related to our Credit Card product, as we continued to drive efficiencies and reduced our spend on vendors.
Sales and Marketing
Sales and Marketing costs consist primarily of affiliate marketing, search engine marketing, online and offline campaigns, email marketing, public relations and direct mail marketing, as well as compensation expenses such as wages, benefits and stock-based compensation for the employees who support these activities. For the year ended December 31, 2025, the increase of $9.9 million, or 20%, from the prior year is due to an overall increase in marketing and advertising costs associated with our Personal Loan and Credit Card products, including marketing partnership costs of $7.7 million and direct mail marketing costs of $4.1 million. This is generally in line with the increase in Personal Loan originations and growth in our Credit Card portfolio during this time. This increase was partially offset by a $1.9 million decrease in compensation expense, primarily due to the decrease in headcount from the prior year.
General and Administrative - Research and Development
General and Administrative - Research and Development costs consist primarily of salaries, benefits and stock-based compensation expense related to our engineering and product development employees, as well as related vendor costs. For the year ended December 31, 2025, the increase of $7.5 million, or 53%, as compared to 2024, is primarily due to a $6.1 million increase in compensation costs, driven by increased average headcount and the elimination of the 2023 corporate bonus accrual in the second quarter of 2024, which reduced expenses recognized in 2024. Additionally, there was a $0.7 million increase in General and Administrative - Research and Development costs related to lower capitalized internal-use software and web development costs (which reduce the expense). Specifically, these capitalized costs were $13.8 million and $14.5 million for the years ended December 31, 2025 and 2024, respectively. Finally, there was a $0.4 million increase in cloud storage costs to support the growth in our operations.
General and Administrative - Other
General and Administrative - Other expenses consist primarily of salaries, benefits and stock-based compensation expense related to our accounting, finance, risk, legal, compliance, human resources and facilities employees; professional fees related to legal and accounting services; and facilities expenses. The increase in General and Administrative - Other for the year ended December 31, 2025 of $7.2 million, or 12%, as compared to 2024 is due primarily to a $7.5 million increase in compensation expense, driven largely by the elimination of the 2023 corporate bonus accrual in the second quarter of 2024, which reduced expenses recognized in 2024. In addition, there was an increase of $1.1 million in software and subscription costs, and a $0.7 million increase in professional services, both of which were generally related to the growth in our operations. These increases were partially offset by a $0.5 million loss on disposal of equipment recorded in April 2024, related to the exit from our former data center lease in Las Vegas, NV. As this equipment was used primarily for general operations, it was considered general and administrative in nature. There were no such significant exit activities in 2025, and no material loss on disposal of equipment was recorded. In part due to these prior year exit activities, there was also a $0.8 million decrease in depreciation and amortization, a $0.2 million decrease in data center costs, net of the associated increase in cloud computing costs, and a $0.2 million decrease in internet connectivity charges, for the year ended December 31, 2025, as compared to 2024. Finally, insurance costs decreased $0.2 million from the prior year.
Change in Fair Value of Convertible Preferred Stock Warrants
Change in Fair Value of Convertible Preferred Stock Warrants were losses of $42.1 million and $46.2 million for the years ended December 31, 2025 and 2024, respectively, due to increases in the fair value of the underlying Convertible Preferred Stock for those periods.
As disclosed in Note 13, Convertible Preferred Stock, Convertible Preferred Stock Warrant Liability and Common Stock, of the accompanying consolidated financial statements, on July 29, 2025, one warrant holder exercised 51,614,124 shares of Series F warrants for total proceeds of $0.5 million. At that time, the estimated fair value of these warrants of $73.3 million was reclassified from Convertible Preferred Stock Warrant Liability to Convertible Preferred Stock on our consolidated balance sheet.
Interest Expense on Term Loans
We entered into a $75.0 million Term Loan with a third party lender in November 2022. In November 2025, we entered into a new $75.0 million Term Loan with a different third-party lender, and simultaneously repaid the outstanding principal and interest balance of approximately $68.4 million on the old Term Loan. Refer to Note 11, Debt, of the accompanying consolidated financial statements for further information on our Term Loans. We incurred interest costs of $12.3 million between the two Term Loans for the year ended December 31, 2025, as compared to $13.1 million on the old Term Loan for the year ended December 31, 2024. This decrease is primarily reflective of the decrease in the unpaid principal on the old Term Loan following contractual quarterly repayments totaling $10.0 million from December 2024 to September 2025. Because the interest rate associated with the new Term Loan is four percentage points lower than the old Term Loan, we also incurred lower interest expense for the period that the new Term Loan was in place during 2025. We expect to continue to incur lower interest expense in the future because of this change. Finally, interest expense for the year ended December 31, 2025, is inclusive of $0.9 million in accelerated amortization of the original issue discount and debt issuance costs associated with the termination of the old Term Loan in November 2025.
Other Income, Net
Other Income, Net was $3.4 million for the year ended December 31, 2025 and primarily consists of interest income on cash and cash equivalents, sublease income and other miscellaneous items. The decrease of $0.3 million in Other Income, Net for the year ended December 31, 2025, as compared to 2024 was primarily attributable to decreases in interest income driven by lower average interest rates.
Non-GAAP Financial Measure
Adjusted Net Revenue
Adjusted Net Revenue is a non-GAAP financial measure that we define as our Total Net Revenue adjusted to exclude the impact of interest rates on the fair value of loans held in consolidated trusts and certain infrequent or unusual transactions, such as the accelerated amortization of PWIT and PWIIT debt issuance costs. As a result of the termination of the PWIT Warehouse Line in March 2024 and the PWIIT Warehouse Line in September 2023 (see Note 11, Debt), we accelerated the remaining amortization of the related deferred debt issuance costs into Interest Expense on Financial Instruments. We excluded the impact of this accelerated amortization because it is non-cash and because of the infrequent nature of the transaction. Management does not believe that it is reflective of our ongoing operating results. We believe it is useful to investors to exclude the impact of interest rates on the fair value of loans held in consolidated trusts to gain insight into the performance of our consolidated loans, independent of market factors that are beyond management's control.
Adjusted Net Revenue has limitations as a financial measure, should be considered as supplemental in nature and is not meant as a substitute for Total Net Revenue, which has been prepared in accordance with U.S. GAAP. These limitations include the following:
•Adjusted Net Revenue excludes the impact of interest rates, which may influence the price that a buyer would be willing to pay for our personal loans in a hypothetical arm's length transaction; and
•Other companies, including companies in our industry, may calculate Adjusted Net Revenue differently or not at all, which reduces its usefulness as a comparative measure.
Because of these limitations, you should consider Adjusted Net Revenue alongside other financial performance measures, including Total Net Revenue and our financial results presented in accordance with U.S. GAAP. The following table presents a reconciliation of Total Net Revenue to Adjusted Net Revenue for each of the periods indicated (in thousands):
Years Ended December 31,
2025 2024 2023
Total Net Revenue $ 212,549 $ 173,355 $ 137,700
Impact of Interest Rates on Fair Value of Loans Held in Consolidated Trusts (1)
21 1,386 2,629
Accelerated Amortization of PWIT Debt Issuance Costs (2)
- 733 -
Accelerated Amortization of PWIIT Debt Issuance Costs (2)
- - 1,880
Adjusted Net Revenue $ 212,570 $ 175,474 $ 142,209
(1) Component of Change in Fair Value of Financial Instruments on the consolidated statements of operations
(2)Component of Interest Expense on Financial Instruments on the consolidated statements of operations
Adjusted EBITDA
Adjusted EBITDA is a non-GAAP financial measure that we define as Net Income (Loss) adjusted for interest income on Cash and Cash Equivalents, Interest Expense on Term Loan, Income Tax Benefit or Expense, depreciation and amortization, impairment of long-lived assets and Goodwill, stock-based compensation expense, Change in Fair Value of Convertible Preferred Stock Warrants, impact of interest rates on the fair value of loans held in consolidated trusts, and certain infrequent or unusual transactions. The presentation of non-GAAP financial measures should not be considered in isolation or as a substitute for our financial results prepared in accordance with GAAP.
We consider Adjusted EBITDA to be a helpful indicator of the operational strength and performance of our business and a good measure of our historical operating trends. Management uses Adjusted EBITDA, among other things, to understand and compare operating results across accounting periods, to evaluate our operations and financial performance and for internal planning and forecasting purposes. Inclusion of Adjusted EBITDA is intended to provide investors with insight into the manner in which management views the performance of the Company, enhance investors' evaluation of our operating results, and to facilitate meaningful comparisons of our results between periods. This non-GAAP financial measure should not be considered an alternative to, or more meaningful than, the GAAP financial information provided herein.
Our use of Adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our results as reported under U.S. GAAP. Some of these limitations are:
•Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future, and Adjusted EBITDA does not reflect cash capital expenditure requirements for such replacements or for new capital expenditure requirements;
•Adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs;
•Adjusted EBITDA does not consider the potentially dilutive impact of equity-based charges;
•Adjusted EBITDA does not reflect interest and tax payments that may represent a reduction in cash available to us; and
•Other companies, including companies in our industry, may calculate Adjusted EBITDA differently, which reduces its usefulness as a comparative measure.
The major non-GAAP adjustments, and our basis for excluding them, are outlined below:
•Changes in the fair value of Convertible Preferred Stock Warrants: We exclude these fair value changes primarily because they are non-cash items and the fair value varies based on the fair value of the underlying preferred stock, varying valuation methodologies and subjective assumptions. Their inclusion makes the comparison of our current financial results to previous and future periods difficult to evaluate.
•Stock-based compensation expense: This consists of expenses for equity awards under our equity incentive plans. Although stock-based compensation is an important aspect of the compensation paid to our employees, the grant date fair value varies based on the stock price at the time of grant, varying valuation methodologies, subjective assumptions and the variety of award types. This makes the comparison of our current financial results to previous and future periods difficult to evaluate; therefore, we believe it is useful to exclude stock-based compensation. We also excluded these expenses because they are non-cash.
•Amortization or impairment of acquired Intangible Assets and impairment of Goodwill: We incur amortization or impairment of acquired Intangible Assets and Goodwill in connection with acquisitions and therefore exclude these amounts from our non-GAAP measures. We exclude these items because management does not believe they are reflective of our ongoing operating results.
•Impairment of operating lease right-of-use assets - We have recognized impairment on our operating lease right-of-use assets related to vacant sublease space and the expected timing of finding new subtenants. We exclude these charges because they are non-cash and because management does not believe they are reflective of our ongoing operating results.
•Impairment of long-lived assets: We incur losses on the impairment of long-lived assets that are disposed of primarily in connection with the exit of facilities. We exclude these items because management does not believe they are reflective of our ongoing operating results.
•Impact of interest rates on the fair value of loans held in consolidated trusts: See discussion on Adjusted Net Revenue, above.
•Accelerated amortization of PWIT and PWIIT debt issuance costs: See discussion on Adjusted Net Revenue, above.
•Interest Expense on Term Loans: We incur interest expense on our Term Loan, which is more fully described in Note 11, Debt, of the accompanying consolidated financial statements. This includes any amortization of original issue discount and deferred issuance costs associated with the Term Loan. Proceeds from the Term Loan are used to fund the operations of the business at our discretion, within certain limitations. This may include, but is not limited to, making investments in our Credit Card product or meeting operational obligations. We exclude the Term Loan interest expense as it is based on the overall financing structure of PMI. This differs from Interest Expense on Financial Instruments (part of Total Net Revenues), as the proceeds from those instruments are used exclusively for the purposes of purchasing loans on our marketplace and Credit Card receivables through the underlying warehouse and securitization transactions.
The following table presents a reconciliation of Net (Loss) Income to Adjusted EBITDA for each of the periods indicated (in thousands):
Years Ended December 31,
2025 2024 2023
Net Loss $ (35,702) $ (54,079) $ (106,462)
Depreciation expense:
Origination and Servicing 11,292 9,200 8,774
General and Administrative -Other
836 1,531 2,108
Amortization of Intangible Assets - 85 107
Stock-Based Compensation 1,307 1,616 1,575
Change in Fair Value of Convertible Preferred Stock Warrants 42,103 46,208 48,695
Impact of Interest Rates on Fair Value of Loans Held in Consolidated Trusts 21 1,386 2,629
Impairment of Long-Lived Assets - 463 -
Impairment of Right-of-Use Lease Assets - - 196
Interest Income on Cash and Cash Equivalents (2,942) (3,322) (2,473)
Interest Expense on Term Loans 12,331 13,124 12,265
Accelerated Amortization of PWIT Debt Issuance Costs - 733 -
Accelerated Amortization of PWIIT Debt Issuance Costs - - 1,880
Income Tax Expense 168 78 295
Adjusted EBITDA $ 29,414 $ 17,061 $ (30,628)
The increase in Adjusted EBITDA for the year ended December 31, 2025, as compared to 2024, of $12.4 million is primarily reflective of increased Transaction Fees, Net, driven by the increase in Personal Loan originations during this time and the revised WebBank transaction fee schedule starting in June 2024, higher Servicing Fees, Net, due to growth in the Personal Loan serviced portfolio, increased collections fees and higher Total Interest Income, Net, generated by the Credit Card product from the PMCC 2024-1 securitization that closed in November 2024. These were partially offset by increased incentives provided to whole loan investors, and increased fair value losses, primarily related to the Credit Card product. Additionally, expenses for the period increased in response to the higher Personal Loan originations, growth in the Credit Card portfolio and the elimination of the 2023 bonus accrual in the second quarter of 2024, which reduced expenses recognized in 2024.
Expenses on the consolidated statements of operations include the following amounts of stock-based compensation expense for the periods presented (in thousands):
Years Ended December 31,
2025 2024 2023
Origination and Servicing $ 109 $ 86 $ 83
Sales and Marketing 68 446 304
General and Administrative 1,130 1,084 1,188
Total Stock-Based Compensation Expense $ 1,307 $ 1,616 $ 1,575
Segment Net Revenues, Adjusted Net Revenue and Adjusted EBITDA
Refer to Note 21, Segments, of the accompanying consolidated financial statements for information on our segment reporting, including reconciliations of segment net revenues to segment Adjusted Net Revenue, and segment Adjusted EBITDA to Net Income (Loss) Before Income Taxes, as well as details on segment operating expenses.
Effective in the fourth quarter of 2025, we updated our operating and reportable segments to align with recent strategic business and management reporting changes. This realignment is reflected in the periodic financial reports provided to our Chief Executive Officer, who serves as the chief operating decision maker, for the purposes of evaluating performance, making operating decisions and allocating resources. As a result of these changes, our former Home Equity segment was eliminated and the related products and services are now combined with the Personal Loan segment, which includes both Personal Loan products and services, as well as general corporate expenses. We now have two reportable and operating segments: Personal Loan and Credit Card. Periods prior to the fourth quarter of 2025 have been recast to conform to the current reportable segment presentation.
The following table summarizes our segment net revenues, segment Adjusted Net Revenue and segment Adjusted EBITDA for the years ended December 31, 2025, 2024 and 2023 (in thousands, except percentages).
Years Ended December 31,
2025 2024 Change % Change 2024 2023 Change % Change
Segment Net Revenues
Personal Loan $ 192,197 $ 146,016 $ 46,181 32 % $ 146,016 $ 102,796 $ 43,220 42 %
Credit Card 20,352 27,339 (6,987) (26) % 27,339 34,904 (7,565) (22) %
Total Net Revenues $ 212,549 $ 173,355 $ 39,194 23 % $ 173,355 $ 137,700 $ 35,655 26 %
Segment Adjusted Net Revenues
Personal Loan $ 192,218 $ 148,135 $ 44,083 30 % $ 148,135 $ 107,305 $ 40,830 38 %
Credit Card 20,352 27,339 (6,987) (26) % 27,339 34,904 (7,565) (22) %
Total Adjusted Net Revenues $ 212,570 $ 175,474 $ 37,096 21 % $ 175,474 $ 142,209 $ 33,265 23 %
Segment Adjusted EBITDA
Personal Loan $ 40,753 $ 20,209 $ 20,544 102 % $ 20,209 $ (34,510) $ 54,719 n/m
Credit Card (11,339) (3,148) (8,191) n/m (3,148) 3,882 (7,030) n/m
Total Adjusted EBITDA $ 29,414 $ 17,061 $ 12,353 72 % $ 17,061 $ (30,628) $ 47,689 n/m
n/m: not meaningful
Segment Adjusted EBITDA is our primary segment profitability metric, and is calculated as segment revenues less operating expenses that are directly attributable to the segments' products. Segment Adjusted Net Revenue is calculated as segment revenue less the impact of changes in interest rates on the fair value of loans held in consolidated trusts and certain unusual or infrequent transactions. For the periods presented above, these adjustments only impact the Personal Loan segment.
Personal Loan
Personal Loan segment net revenues increased $46.2 million, or 32%, for the year ended December 31, 2025, as compared to 2024, primarily as a result of (a) a $38.8 million increase in Transaction Fees, Net, due to the impact from higher Personal Loan originations during this time, as well as the revised WebBank transaction fee schedule starting in June 2024; (b) a $14.0 million increase in net revenues from Change in Fair Value of Financial Instruments related to Borrower Loans, Loans Held for Sale and Notes, as described above, (c) a $9.0 million increase in Servicing Fees, Net, due primarily to the year-over-year increase in net collections fees, as well as Personal Loan servicing revenues (including the impact of reducing the estimated market servicing rate applied to the Servicing Asset starting in September 2025), as discussed above; and (d) a $1.4 million increase in Other Revenues, due primarily to additional credit referral fees generated from our partners. These increases were partially offset by (e) a $9.9 million decrease in net revenues from Loss on Sale of Borrower Loans, due primarily to an increase in incentives provided to whole loan investors, partially offset by gains from increased Personal Loan sales during this time; and (f) an $7.1 million decrease in Total Interest Income (Expense) Net, due primarily to the decrease in the average outstanding principal balance of Borrower Loans held in consolidated securitization and warehouse trusts.
Segment Adjusted Net Revenue associated with the Personal Loan segment increased $44.1 million, or 30%, for the year ended December 31, 2025, as compared to 2024. This is reflective of the same factors that drove the increase in net revenues discussed above, excluding the impact of (a) interest rates on the fair value of loans held in consolidated trusts, and (b) accelerated recognition of debt issuance costs upon the termination of the PWIT Warehouse Line in March 2024 (impacted 2024 only).
Adjusted EBITDA associated with the Personal Loan segment increased $20.5 million for the year ended December 31, 2025, as compared to 2024. This is primarily reflective of the same factors that drove the increases in net revenues and Adjusted Net Revenue discussed above, partially offset by an increase of $23.5 million in segment operating expenses. This increase in segment operating expenses was largely driven by personnel costs, primarily as a result of the reversal of the 2023 bonus accrual in the second quarter of 2024, which reduced expenses recognized in 2024. It was also reflective of increased marketing, software and cloud computing costs, in response to the increase in Personal Loan originations during this time.
Credit Card
For the year ended December 31, 2025, Credit Card segment net revenues and segment Adjusted Net Revenues decreased $7.0 million, or 26%, as compared to 2024, primarily as a result of an $20.2 million decrease in net revenues from Change in Fair Value of Financial Instruments, related to the Receivable from Credit Card Partner, partially offset by the Credit Card Derivative, as discussed above. Generally, this decrease in net revenues from fair value losses is reflective of increased charge-offs within the securitized Credit Card portfolio, which was established in November 2024. The impact from Change in Fair Value of Financial Instruments, was partially offset by a $13.2 million increase in Total Interest Income (Expense), Net, from the securitized Credit Card receivables underlying the Receivable from Credit Card Partner, less the interest expense on the related Notes Issued by Securitization Trust.
Adjusted EBITDA associated with Credit Card decreased $8.2 million in 2025, as compared to 2024, which is primarily reflective of the decrease in net revenues and Adjusted Net Revenue discussed above, as well as increased segment operating expenses of approximately $1.2 million. This increase in segment operating expenses was largely driven by personnel costs, primarily as a result of the reversal of the 2023 bonus accrual in the second quarter of 2024, which reduced expenses recognized in 2024, as well as reduced capitalized internal-use software and web development costs. It was also reflective of increased marketing costs, in response to the increase in the underlying Credit Card portfolio during this time. These increases were partially offset by decreased third-party Credit Card servicing costs, as we continued to drive efficiencies and reduced our spend on vendors.
LIQUIDITY AND CAPITAL RESOURCES
We have incurred operating losses in prior years and may continue to incur net losses in the future. For the years ended December 31, 2025 and 2024, we incurred net losses of $35.7 million and $54.1 million, respectively. Additionally, from our inception through December 31, 2025, we have an accumulated deficit of $679.9 million.
We believe our liquidity needs for the next twelve months, and for the foreseeable future beyond that period, can be met through transaction fees, servicing fees, net interest income, other revenue, proceeds from sales of loans and securitizations, realized gains from the Credit Card portfolio and Cash and Cash Equivalents. Management monitors our financial results and operations. If the anticipated financial results are not achieved or we fail to maintain compliance with the debt covenants under our Term Loan, our sources of liquidity may not be sufficient to meet our operating and liquidity requirements without obtaining additional liquidity, which may not be available on favorable terms or at all. For further details related to our Term Loan, see Note 11, Debt, of the accompanying consolidated financial statements.
The following table summarizes our cash flow activities for the periods presented (in thousands):
Year Ended December 31,
2025 2024 2023
Net Loss $ (35,702) $ (54,079) $ (106,462)
Net cash provided by operating activities $ 134,341 $ 219,951 $ 47,845
Net cash used in investing activities (7,420) (99,040) (56,951)
Net cash used in financing activities (130,890) (131,092) (32,235)
Net decrease in Cash, Cash Equivalents and Restricted Cash (3,969) (10,181) (41,341)
Cash, Cash Equivalents and Restricted Cash at the beginning of the period 145,087 155,268 196,609
Cash, Cash Equivalents and Restricted Cash at the end of the period $ 141,118 $ 145,087 $ 155,268
Cash, Cash Equivalents and Restricted Cash decreased by $4.0 million for the year ended December 31, 2025, based on the following components:
Operating Activities: $134.3 million in cash was provided by operating activities, due to (a) $101.5 million in net proceeds from Loans Held for Sale, including securitized Borrower Loans that were previously classified as Loans Held for Sale and (b) $51.3 million in net income, net of non-cash items, partially offset by (c) $18.5 million in cash used for working capital, primarily due to the timing of payments to investors and third-party vendors.
Investing Activities: $7.4 million in cash was used in investing activities due to (a) $164.6 million in purchases of Borrower Loans, (b) $75.2 million in purchases of Credit Card receivables from our Credit Card Partner that were sold to the PMCC 2024-1 securitization and (c) $14.8 million in purchases of property and equipment, primarily consisting of internal-use software, partially offset by (d) $184.9 million from sales and principal payments of Borrower Loans, and (e) $62.3 million from principal payments on Credit Card Receivable from Credit Card Partner.
Financing Activities: $130.9 million in cash was used in financing activities, due primarily to (a) $110.8 million in payments on Notes Issued by Securitization Trusts and (b) $19.9 million in payments, net of proceeds, on Notes, at Fair Value, partially offset by (c) $0.5 million in proceeds from the exercise of Series F Convertible Preferred Stock Warrants, as discussed above. Cash flows from financing activities are also inclusive of the impact of refinancing our old Term Loan with a new lender in November 2025, which is more fully described in Note 11, Debt, of the accompanying consolidated financial statements. Specifically, principal repayments on the old Term Loan totaled $75.5 million, which were partially offset by $75.0 million in proceeds from the new Term Loan.
Cash, Cash Equivalents and Restricted Cashdecreased by $10.2 millionfor the year ended December 31, 2024, based on the following components:
Operating Activities: $220.0 million in cash was provided by operating activities, driven by (a) $180.9 millionin net proceeds from Loans Held for Sale, (b) $33.2 millionin net income, net of non-cash items, and (c) $5.9 millionin cash provided by working capital, primarily due to the timing of payments to investors and third-party vendors.
Investing Activities: $99.0 millionin cash was used in investing activities due to (a) $186.1 millionin purchases of Borrower Loans, (b) $106.2 million in transfers of Credit Card Receivables from Credit Card Partner, and (c) $15.3 millionin purchases of property and equipment, primarily consisting of internal-use software, partially offset by (d) $196.6 millionfrom sales and principal payments of Borrower Loans, and (e) $11.9 million from principal payments on Credit Card Receivable from Credit Card Partner.
Financing Activities: $131.1 million in cash was used in financing activities, due primarily to (a) $129.4 million paid for the extinguishment of principal and interest on the PWIT Warehouse Line in March 2024, (b) $28.6 millionin principal payments on Warehouse Lines, (c) $11.0 million in payments on Notes, at Fair Value, net of proceeds, (d) $4.3 millionin debt issuance costs related to the PMIT 2024-1 and PMCC 2024-1 securitizations executed in March 2024 and November 2024, respectively, and (e) $2.5 million in principal repayments on the Term Loan, partially offset by (f) $44.7 millionin proceeds, net of payments, from the issuance of PMIT 2024-1 and PMCC 2024-1 securitization notes.
Income Taxes
We use the liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are recognized by applying the statutory tax rates in effect in the years in which the differences between the financial reporting and tax filing bases of existing assets and liabilities are expected to reverse. We have considered future taxable income and ongoing prudent and feasible tax planning strategies in assessing the need for a valuation allowance against our deferred tax assets.
Based on the weight of available evidence, which includes our historical operating performance and the reported cumulative net losses in prior years, we have provided a full valuation allowance against our net deferred tax assets.
We report a liability for unrecognized tax benefits resulting from uncertain tax positions taken or expected to be taken in a tax return. The application of income tax law is inherently complex. Laws and regulations in this area are voluminous and are often ambiguous. We are required to make subjective assumptions and judgments regarding our income tax exposures. Interpretations and guidance surrounding income tax laws and regulations change over time. As such, changes in our subjective assumptions and judgments can materially affect amounts recognized in the consolidated balance sheets and statements of operations.
On July 4, 2025, the One Big Beautiful Bill Act ("OBBBA") was signed into law, extending key provisions of the 2017 Tax Cuts and Jobs Act including, but not limited to, federal bonus depreciation and deductions for domestic research and development expenditures. The enactment of OBBBA did not have a material impact on our financial statements for the year ended December 31, 2025.
Off-Balance Sheet Arrangements
As a result of retaining servicing rights on the sale of Borrower Loans, we are an interest holder in certain special purpose entities that purchase these Borrower Loans. None of these special purpose entities are consolidated as we are not the primary beneficiary. Other than these special purpose entities, as of December 31, 2025, we did not have any relationships with unconsolidated entities or financial partnerships, such as structured finance or special purpose entities that were established for the purpose of facilitating off-balance sheet arrangements or other purposes.
Contractual Obligations
As of December 31, 2025, the following table summarizes our contractual obligations and the effect such obligations are expected to have on our liquidity and cash flow in future periods (in thousands):
Payments Due by Period
Total Less Than 1 Year 1 - 3 Years 3 - 5 Years More Than 5 Years
Term Loan principal $ 75,000 $ - $ - $ 75,000 $ -
Operating lease obligations 10,840 4,648 6,192 - -
WebBank purchase obligations 32,078 32,078 - - -
WebBank minimum origination fees 1,300 1,200 100 - -
Total contractual obligations $ 119,218 $ 37,926 $ 6,292 $ 75,000 $ -
Term Loan
As discussed in Note 11, Debt, of the accompanying consolidated financial statements, we repaid the outstanding balance of principal and interest on our Term Loan from 2022 in November 2025, using proceeds from a new $75.0 million Term Loan with a different third-party lender. Under the terms of the new Term Loan, the full principal balance and any unpaid interest are payable upon maturity in November 2030. Interest is payable in cash at the end of each quarter.
WebBank Purchase Obligations
Under our loan account program with WebBank, a Utah-charted industrial bank that serves as our primary issuing bank, WebBank retains ownership of loans facilitated through our marketplace for two business days after origination. As part of this arrangement, we have committed to purchase the loans at the conclusion of the two business days.
WebBank Minimum Origination Fees
We are required to pay WebBank a minimum fee to the extent monthly loan originations due to not meeting certain contractual thresholds. This obligation is more fully discussed inNote 17, Commitments and Contingencies, of the accompanying consolidated financial statements.
CRITICAL ACCOUNTING POLICIES
The accounting policies discussed below reflect our most significant judgments, assumptions and estimates which we believe are critical in understanding and evaluating our reported financial results, including fair value measurements of (i) Borrower Loans and Notes; (ii) Loan Servicing Asset; (iii) Credit Card Derivative and Credit Card Servicing Obligation; (iv) Receivable from Credit Card Partner (as well as the related accounting treatment); and (v) Convertible Preferred Stock
Warrants, as well as the estimate of our transaction fee refund liability. These judgments, estimates and assumptions are inherently subjective in nature and actual results may differ from these estimates and assumptions, and the differences could be material. For a full description of all accounting policies adopted by us, please see Note 2, Summary of Significant Accounting Policies, to our consolidated financial statements.
Valuation of Borrower Loans and Notes
We have elected the fair value option for Borrower Loans and Notes. We primarily use a discounted cash flow model to estimate the fair value of these financial instruments. The key assumptions used in the valuation include default rates and prepayment rates derived from historical performance and discount rates that reflect estimates of the rates of return that investors would require when investing in financial instruments with similar characteristics. All these assumptions require significant management judgment. For further information on fair value measurement of Borrower Loans and Notes, refer to Note 8, Fair Value of Assets and Liabilities, of the accompanying notes to our consolidated financial statements.
Valuation of Loan Servicing Asset
We have elected to adopt the fair value method to measure the loan Servicing Asset for all classes of Servicing Assets subsequent to initial recognition. We use a discounted cash flow model to estimate the fair value of the loan Servicing Assets, which incorporates observable inputs such as the contractual servicing fee revenue that we earn on the Borrower Loans and the current principal balances of the loans, as well as significant unobservable inputs such as the estimated market servicing rate to service such loans, the prepayment rates, the default rates and the discount rate. For further information on fair value measurement of the loan Servicing Assets, refer to Note 6, Servicing Assets, and Note 8, Fair Value of Assets and Liabilities, of the accompanying notes to our consolidated financial statements.
Effective September 2025, as a result of an updated assessment of market rates, we lowered the estimated base market servicing rate used to value the Servicing Asset associated with our Personal Loans from 63.3 basis points to 59.3 basis points. This change resulted in a $1.5 million increase to Servicing Assets, Net as of September 30, 2025.
Valuation of Credit Card Derivative and Credit Card Servicing Obligation
We evaluated the terms of the Credit Card program agreement and determined that it contained features that met the definition of derivatives under U.S. GAAP. These features are freestanding financial instruments and have been valued separately as derivatives. A right of offset exists between the derivatives, and they are presented net on the accompanying consolidated balance sheets. We use a discounted cash flow model to estimate the fair value of the various components of the Credit Card Derivative. The key assumptions used in the valuation include average portfolio interest rates, as well as default and prepayment rates derived primarily from relevant market data and historical performance, adjusted as necessary based on the perceived credit risk of the underlying cardholders. In addition, a single discount rate (see Changes in Estimates in 2024discussion, below) based on the estimate of the rate of return that investors would require when investing in similar credit card portfolios, is applied to the individual freestanding derivatives. For further information on fair value measurement of the Credit Card Derivative, refer to Note 5, Credit Card, and Note 8, Fair Value of Assets and Liabilities, of the accompanying notes to our consolidated financial statements.
We are also responsible for servicing our entire Credit Card portfolio and recognize a servicing obligation liability for the portion of Credit Card receivables that we do not effectively consolidate through the Receivable from Credit Card Partner (see below). This Credit Card servicing obligation is measured and recorded to the extent servicing fees we expect to earn do not exceed the estimated market servicing rate a market participant would require to service the portfolio. We use a discounted cash flow model to estimate the fair value of the Credit Card servicing obligation which incorporates observable inputs such as the contractual servicing fee revenue that we earn on the Credit Card portfolio and the current outstanding principal balances of the related Credit Card receivables, as well as significant unobservable inputs such as the estimated market servicing rate to service the portfolio, the prepayment rates, the default rates and the discount rate. For further information on fair value measurement of the Credit Card servicing obligation, refer to Note 5, Credit Card, and Note 8, Fair Value of Assets and Liabilities, of the accompanying notes to our consolidated financial statements.
Changes in Estimates in 2024
Effective March 31, 2024, we applied a single discount rate to all of the projected cash flows that comprise the Credit Card Derivative and Credit Card servicing obligation, in order to better align with how we believe a market participant would estimate the fair value of those cash flows. This single discount rate reflects the expected market rate of return from an investment in residual cash flows derived from a credit card portfolio. Previously, separate discount rates were applied to different cash flows reflecting assumptions around counterparty credit risk.
Additionally, effective December 31, 2024, to calculate the relevant portfolio interest rate for the Credit Card Derivative valuation, we implemented a forward projection for the attrition of cardholders enrolled in hardship and settlement
programs. These programs were launched in the second quarter of 2024 and we believe they should be segregated from the base population of cardholders for the purposes of analyzing the fair value of the Credit Card Derivative cash flows.
Valuation of Receivable from Credit Card Partner
On November 1, 2024, we completed a securitization of Credit Card receivables from our Credit Card portfolio, which is maintained on the balance sheet of our banking partner, Coastal. On that date, Credit Card receivables with an outstanding principal balance of $94.7 million were purchased and contributed to the securitization entity, PMCC 2024-1, which we fully consolidate as a VIE. Based on an analysis of the facts and circumstances of the transaction, including the revolving nature of the underlying financial instruments, it was determined that the transfer of these Credit Card receivables did not meet the criteria for sales or participating interest accounting under ASC 860, Transfers and Servicing. As a result, we have recorded a secured Receivable from Credit Card Partner that effectively consists of the unpaid principal balance of the securitized Credit Card receivables.
We have elected to account for the Receivable from Credit Card Partner at fair value, and use a discounted cash flow model to estimate the fair value of the residual interest, given that we are the sole sponsor of the securitization and entitled to all residual cash flows it generates. We use certain assumptions similar to those used to value the Credit Card Derivative, including the discount rate that reflects the expected market rate of return from an investment in residual cash flows derived from a credit card portfolio, and the prepayment rate. Additional assumptions are adjusted to reflect the specific characteristics of the securitized Credit Card receivables, including the average portfolio interest rate and the default rate. This residual interest fair value is then added to the applicable securitization advance rate applied to the outstanding balance of Credit Card receivables to calculate the estimated fair value of Receivable from Credit Card Partner.
Valuation of Convertible Preferred Stock Warrants
Convertible Preferred Stock Warrants primarily consist of warrants to purchase Series E-1 and Series F Convertible Preferred Stock. Series F Warrants were issued to an investor Consortium and vested when the Consortium purchased whole loans under the Consortium Purchase Agreement, which ended in May 2019. The Series E-1 warrants expire in December 2026, and the Series F warrants expire in February 2027.
We estimate the fair value of the Series E-1 and Series F Warrants using valuation methods appropriate at each balance sheet or exercise date. Generally, this includes determining the equity value of the Company using methods that may include a discounted cash flow model, comparable public company analysis, and comparable acquisition analysis, which require significant management judgment. Additionally, we review and consider any recent transactions involving the Company's equity in determining whether such transactions should be considered in the valuation. Once the equity value has been estimated, an option pricing model is used to allocate the value to the various classes of our equity. The concluded per share value for the Series E-1 and Series F Convertible Preferred Stock Warrant is then determined using a Black-Scholes option pricing model that requires us to make key assumptions such as volatility and expected warrant term. For further information on fair value measurement of the Convertible Preferred Stock Warrants, refer to Note 8, Fair Value of Assets and Liabilities, and Note 13, Convertible Preferred Stock, Convertible Preferred Stock Warrant Liability and Common Stock, of the accompanying notes to our consolidated financial statements.
PROSPER FUNDING LLC
Overview
Prosper Funding LLC ("PFL") was formed in the state of Delaware in February 2012 as a limited liability company with PMI as its sole equity member. PFL was formed by PMI to hold Borrower Loans originated through the Note Channel and issue related Notes. Although PFL is consolidated with PMI for accounting and tax purposes, PFL has been organized and is operated in a manner that is intended to minimize the likelihood that it would be substantively consolidated with PMI in a bankruptcy proceeding. PFL's intention is to minimize the likelihood that its assets would be subject to claims by PMI's creditors if PMI were to file for bankruptcy, as well as to minimize the likelihood that PFL will become subject to bankruptcy proceedings directly. PFL seeks to achieve this by placing certain restrictions on its activities and by implementing certain formal procedures designed to expressly reinforce its status as a distinct corporate entity from PMI.
As a credit marketplace, we believe our customers are more highly susceptible to uncertainties and negative trends, real or perceived, in the markets driven by, among other factors, general economic conditions in the United States and abroad. These external economic conditions and resulting trends or uncertainties could adversely impact our customers' ability or desire to participate in our marketplace as borrowers or investors, and consequently could negatively affect our business and results of operations.
On November 14, 2025, PFL and PMI executed Amendment 7 to the Administration Agreement, which dictates the performance of platform services by the two entities and the related compensation for those services. The primary changes
resulting from Amendment 7 were (a) PMI will now reimburse PFL for any whole loan investor performance-based payments and transaction fee refunds issued each month, and (b) PFL will now compensate PMI 59.3% of servicing fees collected each month, down from 62.5%. This change in the servicing fee percentage aligns the compensation with the market servicing rate used to value PFL's Servicing Asset.
Results of Operations
Overview
The following table summarizes PFL's net (loss) income for the years ended December 31, 2025, 2024 and 2023 (in thousands):
Year Ended December 31,
2025 2024 Change % Change 2024 2023 Change % Change
Total Net Revenues $ 75,650 $ 61,915 $ 13,735 22 % $ 61,915 $ 63,224 $ (1,309) (2) %
Total Expenses 89,728 72,859 16,869 23 % 72,859 65,290 7,569 12 %
Net Loss $ (14,078) $ (10,944) $ (3,134) 29 % $ (10,944) $ (2,066) $ (8,878) n/m
n/m: not meaningful
Total revenues for the year ended December 31, 2025 increased $13.7 million, or 22%, from 2024, primarily due to a $7.6 million increase in Servicing Fees, Net, generally related to increased net collections and loan servicing fees, due to the growth in the underlying servicing book and the impact of lowering our estimated market servicing rate in September 2025. There were also additional gains on the sale of borrower loans due to the increase in Personal Loan originations for the year, and a corresponding increase in Administration Fee Revenue - Related Party, as a result of an increase in loan listings on the platform. There was also an increase to Administration Fee Revenue - Related Party related to the compensation changes in Amendment 7 to the Administration Agreement discussed above, particularly from billing PMI for transaction fee refunds issued starting in November 2025. Additionally, Changes in Fair Value of Financial Instruments contributed to an increase in net revenues, primarily due to changes in the timing of borrower payments received close to quarter-end, and the application of those payments against the related Notes. These increases were partially offset by an increase in the investor performance-based payment liability due to the growth in the portfolio. Under the terms of the Administration Agreement between PFL and PMI, incentives provided to whole loan investors, which are recorded in Loss on Sale of Borrower Loans, are billed back to PMI through the Administration Fee Revenue - Related Party. As a result, fluctuations in these incentives do not have a direct impact on net revenues.
Total expenses for the year ended December 31, 2025 increased $16.9 million, or 23%, from 2024, largely due to a $15.5 million increase in Administration Fee Expense - Related Party resulting primarily from an increase in estimated transaction fee refunds following revisions to our pricing schedule with WebBank in June 2024. This liability also increased due to the higher Personal Loan originations from the prior year. As discussed above, under Amendment 7 to the Administration Agreement, transaction fee refunds issued to borrowers are now billed back to PMI through Administration Fee Revenue - Related Party, starting in November 2025. Administration Fee Expense - Related Party also increased due to an increase in the number of loans funded on the platform during this time.
Revenues
The following table summarizes PFL's revenue for the years ended December 31, 2025, 2024 and 2023 (dollars in thousands):
Year Ended December 31,
2025 2024 Change % Change 2024 2023 Change % Change
Revenues:
Operating Revenues:
Administration Fee Revenue - Related Party $ 93,941 $ 78,376 $ 15,565 20 % $ 78,376 $ 44,211 $ 34,165 77 %
Servicing Fees, Net 34,567 26,921 7,646 28 % 26,921 26,208 713 3 %
Loss on Sale of Borrower Loans (55,212) (45,316) (9,896) (22) % (45,316) (11,285) (34,031) n/m
Other Revenues 407 890 (483) (54) % 890 356 534 150 %
Total Operating Revenues 73,703 60,871 12,832 21 % 60,871 59,490 1,381 2 %
Interest Income (Expense):
Interest Income on Borrower Loans 42,733 49,986 (7,253) (15) % 49,986 52,188 (2,202) (4) %
Interest Expense on Notes (40,045) (47,033) 6,988 (15) (47,033) (48,572) 1,539 (3) %
Total Interest Income (Expense), Net 2,688 2,953 (265) (9) % 2,953 3,616 (663) (18) %
Change in Fair Value of Financial Instruments, Net (741) (1,909) 1,168 61 % (1,909) 118 (2,027) n/m
Total Net Revenues $ 75,650 $ 61,915 $ 13,735 22 % $ 61,915 $ 63,224 $ (1,309) (2) %
n/m: not meaningful
Administration Fee Revenue - Related Party
We primarily generate revenues through license fees we earn under our Administration Agreement with PMI. The Administration Agreement contains a license we grant to PMI that entitles PMI to use the marketplace for, and in relation to: (i) PMI's performance of its duties and obligations under the Administration Agreement, and (ii) PMI's performance of its duties and obligations to WebBank under the Loan Account Program Agreement. The Administration Agreement requires PMI to pay us a monthly license fee that is partially based on the number of personal loan listings posted on the marketplace in that month, as well as a fee based on incentives provided to investors to incentivize the purchase of Borrower Loans from PFL. As discussed above, as a result of Amendment 7 to the Administration Agreement starting in November 2025, we are also reimbursed by PMI for whole loan investor performance-based payments and transaction fee refunds issued each month. The increase in Administrative Fee Revenue - Related Party of $15.6 million for the year ended December 31, 2025 as compared to 2024 was primarily due to increased reimbursements received from PMI for incentives provided to whole loan investors, which resulted in an increase of $11.0 million in Administration Fee Revenue - Related Party during this time. There was also a $2.5 million increase related to reimbursed transaction fee refunds, and a $2.0 million increase from higher Personal Loan listings posted on the marketplace year-over-year, consistent with the increase in Personal Loan originations during this time.
Servicing Fees, Net
Investors who purchase Borrower Loans through the Whole Loan Channel typically pay us a servicing fee which is currently set at 1.0% per annum of the outstanding principal balance of the Borrower Loan prior to applying the current payment, plus an additional 0.075% per annum to cover the Loan Trailing Fee. The Servicing Fee compensates us for the costs incurred in servicing the Borrower Loans, including managing payments from borrowers, managing payments to investors and maintaining investors' account portfolios. We record Servicing Fees from investors as a component of operating revenues when received. We also include any collection fees received, net of collection agency expenses, and debt sale fees in Servicing Fees, Net.
The increase in Servicing Fees, Net of $7.6 million for the year ended December 31, 2025, as compared to 2024, is largely due to a combined $6.7 million increase in net collections and debt sale fees, as we continue to enhance our Borrower Loan collection and recovery efforts, which includes entering into more settlement agreements with borrowers. Servicing fees collected and amortization of the Servicing Asset contributed to a $1.0 million increase in Servicing Fees, Net, for the year ended December 31, 2025, as compared to 2024, which is generally in line with the increases in Personal Loan originations and the underlying servicing book during this time. It is also reflective of the impact of lowering the estimated market servicing rate used to value the Servicing Asset from 63.3 basis points to 59.3 basis points in September 2025. Personal Loan servicing fees may increase or decrease net revenues depending on various factors, including timing and the valuation of the underlying Servicing Asset, but are generally reflective of additional servicing fees collected, offset by the continued seasoning of the underlying servicing book.
Loss on Sale of Borrower Loans
Loss on Sale of Borrower Loans consists primarily of incentives provided to investors at the time Borrower Loans are sold through the Whole Loan Channel, net of any gains recognized on those sales, primarily due to the recognition of additional Servicing Assets. Since 2022, due to market volatility and incentives offered by competitors, we started providing additional incentives to our whole loan investors. We also record changes in any estimated investor performance-based payment liabilities in Loss on Sale of Borrower Loans. For the year ended December 31, 2025, the Loss on Sale of Borrower Loans increased $9.9 million from the loss recognized in 2024. This increased loss was primarily due to these incentives and changes in the performance-based payment liability, which accounted for $11.5 million and $1.5 million, respectively, of the total year-over-year increase. As discussed above, PFL is reimbursed for the incentives and, effective with Amendment 7 to the Administration Agreement in November 2025, any performance-based payments by PMI through the Administration Fee Revenue - Related Party account. These increases to the loss were partially offset by net gains from the volume of whole loans sold of approximately $3.0 million for the year ended December 31, 2025, as a result of higher Personal Loan originations during this time.
Other Revenues
Other Revenues have historically consisted primarily of miscellaneous fees, including incentive fees earned from partner companies through our incentive programs, or securitization fees earned from sponsoring or facilitating securitization transactions with loans from our marketplace. We also record changes to the reserve for the repurchase of Borrower Loans in Other Revenues, which accounted for the majority of the $0.5 million decrease for the year ended December 31, 2025, as compared to 2024.
Interest Income on Borrower Loans and Interest Expense on Notes
We recognize Interest Income on Borrower Loans using the accrual method based on the stated interest rate to the extent we believe it to be collectible. We record Interest Expense on the corresponding Notes based on the contractual interest rates. The interest rate on Notes is generally 1% lower than the interest rate on the corresponding Borrower Loans to compensate us for servicing the underlying Borrower Loans.
Overall, the $0.3 million decrease in Net Interest Income for the year ended December 31, 2025, as compared to 2024, is reflective of the decrease in the outstanding principal balance of Borrower Loans and Notes from the prior year.
Change in Fair Value of Financial Instruments, Net
Change in Fair Value of Financial Instruments, Net captures gains (losses) in fair value estimates using discounted cash flow methodologies that are based upon a set of valuation assumptions. The key assumptions used in valuations include default and prepayment rates derived from historical performance and discount rates that reflect estimates of the rates of return that investors would require when investing in other financial instruments with similar characteristics. Changes in fair value of Borrower Loans funded through the Note Channel are largely offset by the changes in fair value of the corresponding Notes due
to the borrower payment-dependent structure, though differences will arise due to the actual and projected impact of cash flows related to charge-offs, debt sales and miscellaneous fees, as well as certain timing differences.
The following table summarizes the fair value adjustments for the years ended December 31, 2025, 2024 and 2023 respectively (in thousands):
Year Ended December 31,
2025 2024 2023
Borrower Loans $ (19,536) $ (29,452) $ (40,285)
Notes 18,795 27,543 40,403
Total $ (741) $ (1,909) $ 118
The decrease in the net loss recognized from Change in Fair Value of Financial Instruments for the year ended December 31, 2025, as compared to 2024, was primarily due to changes in the timing of borrower payments received close to year-end, and the application of those payments against the related Notes. Other fair value changes are generally not material, which is consistent with the borrower payment-dependent structure described above.
Expenses
The following table summarizes PFL's expenses for the years ended December 31, 2025, 2024 and 2023 (in thousands):
Year Ended December 31,
2025 2024 Change % Change 2024 2023 Change % Change
Expenses:
Administration Fee Expense - Related Party $ 81,325 $ 65,869 $ 15,456 23 % $ 65,869 $ 57,683 $ 8,186 14 %
Servicing and Other, Net 8,403 6,990 1,413 20 % 6,990 7,607 (617) (8) %
Total Expenses $ 89,728 $ 72,859 $ 16,869 23 % $ 72,859 $ 65,290 $ 7,569 12 %
Administration Fee Expense - Related Party
Pursuant to our Administration Agreement with PMI, PMI manages the marketplace on our behalf. Accordingly, each month we are required to pay PMI (a) a corporate administration fee of $500,000 per month, (b) a fee for each Borrower Loan originate d through the marketplace, (c) 59.3% of all Servicing Fees collected by us or on our behalf (was 62.5% prior to executing Amendment 7 to the Administration agreement in November 2025) and (d) all nonsufficient funds fees collected by us or on our behalf. In general, the Administrative Fee Expense - Related Party will not fluctuate directly in line with the Administrative Fee Revenue - Related Party due to both the flat corporate administrative fee, as well as the fact that we pay fees for three different services, but receive a fee that fluctuates based only on the number of personal loans listed on the platform and incentives or, effective with Amendment 7 to the Administration Agreement in November 2025, any performance-based payments provided to investors. We also include WebBank transaction costs, loan trailing fees and, effective with Amendment 7 to the Administration Agreement in November 2025, refund liabilities for transaction fees above 5%, based on our revised pricing schedule with WebBank starting in October 2023 and revised in June 2024, in Administration Fee Expense - Related Party.
The increase in Administration Fee Expense - Related Party of $15.5 million, or 23%, for the year ended December 31, 2025, as compared to 2024, is due primarily to a $11.9 million increase in changes in actual and estimated refunds for transactions fees above 5% of Borrower Loan principal, as the total of refundable transaction fees continues to increase since the revisions to the WebBank pricing schedule referenced above and growth in origination volume. As discussed above, actual transaction fee refunds issued are reimbursed by PMI through Administrative Fee Revenue - Related Party account following the execution of Amendment 7 to the Administration Agreement in November 2025. There was also a $2.3 million increase in administration fee expense due primarily to a year-over-year increase in loans funded on the platform, and a $1.2 million combined increase in WebBank transaction costs and net loan trailing fees due to the increase in Personal Loan originations discussed above.
Servicing and Other, Net
Servicing costs consist primarily of vendor and borrower costs, as well as depreciation of internal-use software associated with servicing Borrower Loans. Other items consist primarily of interest income earned on cash invested on our platform, as well as bank service charges and professional fees. The increase in Servicing and Other, Net of $1.4 million, or 20%, for the year ended December 31, 2025, as compared to 2024, was primarily due to a $1.2 million increase in depreciation as a result of the growth in internal-use software during this time.
LIQUIDITY AND CAPITAL RESOURCES
We anticipate that our available funds and cash flows from operations, including reimbursements from PMI under the Administration Agreement, will be sufficient to meet our operational cash needs for at least the next 12 months.
The following table summarizes our cash flow activities for the years ended December 31, 2025, 2024and 2023 (in thousands):
Years Ended December 31,
2025 2024 2023
Net Loss $ (14,078) $ (10,944) $ (2,066)
Net cash (used in) provided by operating activities $ (6,210) $ 7,555 $ 3,664
Net cash provided by (used in) investing activities 11,228 3,115 (47,324)
Net cash (used in) provided by financing activities (19,861) (10,969) 42,850
Net decrease in Cash, Cash Equivalents and Restricted Cash (14,843) (299) (810)
Cash, Cash Equivalents and Restricted Cash at the beginning of the period 96,740 97,039 97,849
Cash, Cash Equivalents and Restricted Cash at the end of the period $ 81,897 $ 96,740 $ 97,039
Cash, Cash Equivalents and Restricted Cash decreased by $14.8 million for the year ended December 31, 2025, based on the following components:
Operating Activities: $6.2 million was used in operating activities, driven by net loss, net of non-cash adjustments, of $8.7 million, partially offset by cash provided in working capital of $2.4 million, primarily due to the timing of payments to PMI and whole loan investors.
Investing Activities: $11.2 million was provided by investing activities, due to $184.9 million of principal payments from Borrower Loans, partially offset by $164.6 million in purchases of Borrower Loans and $9.0 million in purchases of property and equipment, consisting primarily of internal-use software.
Financing Activities: $19.9 million was used in financing activities, due to $183.8 million in payments for Notes, at Fair Value, partially offset by $163.9 million in proceeds from the issuance of Notes, at Fair Value.
Cash, Cash Equivalents and Restricted Cash decreased by $0.3 million for the year ended December 31, 2024, based on the following components:
Operating Activities: $7.6 millionwas provided by operating activities, driven by cash provided in working capital of $10.3 million, primarily due to the timing of payments to PMI and investors, partially offset by net loss, net of non-cash adjustments of $2.8 million.
Investing Activities: $3.1 millionwas provided by investing activities, due to $196.6 millionof principal payments under Borrower Loans, partially offset by $186.1 millionin purchases of Borrower Loans and $7.4 million in purchases of property and equipment, consisting primarily of internal-use software.
Financing Activities: $11.0 millionwas used in financing activities, due to $195.2 million in payments for Notes, at Fair Value, partially offset by $184.2 million in proceeds from the issuance of Notes, at Fair Value.
Income Taxes
We incurred no income tax provision for the years ended December 31, 2025 and 2024. We are a US disregarded entity for income tax purposes and our income and loss is included in the return of our parent, PMI. Given PMI's history of taxable losses, it is difficult to accurately forecast how PMI's and our results will be affected by the realization and use of net operating loss carry forwards.
Off-Balance Sheet Arrangements
As a result of retaining servicing rights on the sale of Borrower Loans, we are a variable interest holder in certain special purposes entities that purchase these Borrower Loans. None of these special interest entities are consolidated as we are not the primary beneficiary. Otherwise, we have not engaged in any off-balance sheet financing activities for the year ended December 31, 2025.
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