Prosper Funding's Q2 Loss Widens Amid Soaring Expenses

TL;DR

**Prosper Funding's Q2 loss is a red flag; the massive jump in expenses, especially warrant revaluation, makes this a clear 'sell' for now.**

AI Summary

Prosper Funding LLC reported a net loss of $57.7 million for the three months ended June 30, 2025, a significant increase from the $0.465 million net loss in the same period of 2024. For the six months ended June 30, 2025, the company posted a net loss of $7.35 million, contrasting sharply with a net income of $21.83 million in the prior year. Total net revenue for the three months ended June 30, 2025, increased to $51.65 million from $30.18 million year-over-year, driven by a rise in transaction fees to $61.25 million from $40.86 million. However, this was offset by a substantial increase in total expenses, which surged to $109.35 million from $30.62 million, primarily due to a $59.36 million change in fair value of convertible preferred stock warrants. Borrower Loans at fair value decreased to $376.29 million as of June 30, 2025, from $461.78 million at December 31, 2024, while Notes Issued by Securitization Trust also declined to $194 million from $258.96 million. The company's accumulated deficit widened to $651.56 million by June 30, 2025, from $644.21 million at December 31, 2024, indicating continued financial challenges.

Why It Matters

Prosper Funding's escalating net loss and widening accumulated deficit signal significant financial headwinds, which could impact investor confidence and future capital raising efforts. The substantial increase in expenses, particularly related to convertible preferred stock warrants, suggests potential valuation pressures or strategic shifts that could affect long-term profitability. For employees, this financial performance might raise concerns about job security or compensation. Customers could face changes in loan product availability or terms if the company seeks to improve its financial standing. In the competitive fintech lending market, these results could weaken Prosper's position against more stable rivals.

Risk Assessment

Risk Level: high — The company reported a net loss of $57.7 million for the three months ended June 30, 2025, a significant deterioration from the $0.465 million loss in the prior year. This was largely driven by a $59.36 million expense from the change in fair value of convertible preferred stock warrants. The accumulated deficit also expanded to $651.56 million, indicating persistent unprofitability and a weak equity position.

Analyst Insight

Investors should exercise extreme caution and consider reducing exposure to Prosper Funding LLC. The substantial net loss and increasing accumulated deficit, coupled with the volatility in convertible preferred stock warrant valuation, suggest significant financial instability. Await clearer signs of profitability and expense control before considering any new investment.

Financial Highlights

debt To Equity

N/A

revenue

$51.65M

operating Margin

N/A

total Assets

$815.17M

total Debt

$1.01B

net Income

-$57.7M

eps

N/A

gross Margin

N/A

cash Position

$38.15M

revenue Growth

+71.1%

Revenue Breakdown

Key Numbers

• $57.7M — Net Loss (Q2 2025) (Increased significantly from $0.465M in Q2 2024)
• $7.35M — Net Loss (YTD June 30, 2025) (Shift from $21.83M net income in YTD June 30, 2024)
• $51.65M — Total Net Revenue (Q2 2025) (Increased from $30.18M in Q2 2024)
• $109.35M — Total Expenses (Q2 2025) (Surged from $30.62M in Q2 2024)
• $59.36M — Change in Fair Value of Convertible Preferred Stock Warrants (Q2 2025) (Major contributor to increased expenses, compared to a gain of $10.66M in Q2 2024)
• $376.29M — Borrower Loans, at Fair Value (June 30, 2025) (Decreased from $461.78M at December 31, 2024)
• $194M — Notes Issued by Securitization Trust (June 30, 2025) (Decreased from $258.96M at December 31, 2024)
• $651.56M — Accumulated Deficit (June 30, 2025) (Widened from $644.21M at December 31, 2024)
• $61.25M — Transaction Fees, Net (Q2 2025) (Increased from $40.86M in Q2 2024)

Key Players & Entities

• Prosper Funding LLC (company) — Registrant and primary focus of the 10-Q filing
• Prosper Marketplace, Inc. (company) — Parent company and co-registrant of the 10-Q filing
• WebBank (company) — Lender for Borrower Loans originated through Prosper's marketplace
• SEC (regulator) — Securities and Exchange Commission, where filings are made
• BillGuard, Inc. (company) — Wholly owned subsidiary of Prosper Marketplace, Inc.
• Prosper Healthcare Lending LLC (company) — Wholly owned subsidiary of Prosper Marketplace, Inc.
• Prosper Depositor LLC (company) — Wholly owned subsidiary of Prosper Funding LLC
• Delaware (other) — State of incorporation for Prosper Marketplace, Inc. and Prosper Funding LLC

FAQ

Risk Factors

• Deteriorating Financial Performance [high — financial]: The company reported a net loss of $57.7 million for Q2 2025, a significant increase from $0.465 million in the prior year. The accumulated deficit widened to $651.56 million as of June 30, 2025, indicating ongoing financial challenges and a need for improved profitability.
• Fair Value Fluctuations of Warrants [high — financial]: A substantial increase in total expenses was driven by a $59.36 million change in the fair value of convertible preferred stock warrants in Q2 2025, compared to a gain of $10.66 million in Q2 2024. This volatility significantly impacts net income and operational results.
• Declining Asset Values [medium — financial]: Borrower Loans at fair value decreased to $376.29 million as of June 30, 2025, from $461.78 million at December 31, 2024. Similarly, Notes Issued by Securitization Trust declined to $194 million from $258.96 million, suggesting a potential contraction in core business activities or asset valuations.
• Regulatory Compliance [medium — regulatory]: As a financial services company, Prosper is subject to various federal and state regulations. Changes in these regulations or failure to comply could result in significant penalties, operational disruptions, and reputational damage.
• Economic Downturn Impact [medium — market]: The company's performance is sensitive to macroeconomic conditions. An economic downturn could lead to increased borrower defaults, reduced loan origination, and lower demand for its services, negatively impacting revenue and increasing credit losses.
• Technology and Platform Risk [medium — operational]: Prosper relies heavily on its technology platform for loan origination, servicing, and investor matching. Any disruptions, cybersecurity breaches, or system failures could impair operations and damage customer trust.

Industry Context

Prosper operates in the online lending (fintech) sector, facilitating peer-to-peer loans. The industry is characterized by increasing competition from traditional financial institutions and other fintech platforms, evolving regulatory scrutiny, and sensitivity to economic cycles. Technological innovation and customer acquisition costs are key competitive factors.

Regulatory Implications

The fintech lending space faces ongoing regulatory attention regarding consumer protection, data privacy, and fair lending practices. Prosper must navigate these evolving regulations, which could impact its business model, operational costs, and ability to serve certain customer segments.

What Investors Should Do

1. Monitor expense structure closely, particularly the impact of warrant fair value changes.
2. Evaluate the trend in Borrower Loans and Notes Issued by Securitization Trust.
3. Assess the company's path to profitability given the widening accumulated deficit.

Glossary

Fair Value

The price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. (Crucial for valuing assets like Borrower Loans and liabilities like the Convertible Preferred Stock Warrant Liability, directly impacting the company's reported financial position and performance.)

Convertible Preferred Stock Warrant Liability

A financial instrument that gives the holder the right, but not the obligation, to purchase shares of convertible preferred stock at a specified price within a certain timeframe. It is recognized as a liability due to its potential for cash settlement or conversion. (A significant liability for Prosper, its fair value fluctuations heavily influenced the net loss in Q2 2025.)

Securitization

The process of pooling various types of contractual debt (such as mortgages, auto loans, credit card debt) and selling their related cash flows to third-party investors as securities. (Notes Issued by Securitization Trust are a key component of Prosper's financing structure, and their decline indicates changes in securitization activity.)

Variable Interest Entities (VIEs)

Entities in which equity investors do not have sufficient voting interest or equity at risk to finance the entity's activities without additional financial support. The primary beneficiary consolidates the VIE. (Prosper consolidates VIEs, meaning their assets and liabilities are included in Prosper's financial statements, impacting the overall balance sheet.)

Accumulated Deficit

The cumulative net losses of a corporation that have not been offset by net income or other gains since its inception. (Indicates the company's historical unprofitability and its ongoing struggle to achieve sustainable earnings.)

Year-Over-Year Comparison

Compared to the prior year's comparable period, Prosper Funding LLC has experienced a dramatic shift in financial performance. While total net revenue for Q2 2025 surged by 71.1% to $51.65 million from $30.18 million in Q2 2024, this was overshadowed by an even larger increase in total expenses, which quadrupled from $30.62 million to $109.35 million. This expense surge, primarily driven by a significant negative change in the fair value of convertible preferred stock warrants, resulted in a net loss of $57.7 million for Q2 2025, a stark contrast to the $0.465 million net loss in the prior year. The accumulated deficit also continued to widen, indicating ongoing financial challenges.

Filing Documents

• prosper-20250630.htm (10-Q) — 3608KB
• prosper10q063025ex101.htm (EX-10.1) — 99KB
• prosper10q063025ex311.htm (EX-31.1) — 9KB
• prosper10q063025ex312.htm (EX-31.2) — 9KB
• prosper10q063025ex313.htm (EX-31.3) — 9KB
• prosper10q063025ex314.htm (EX-31.4) — 9KB
• prosper10q063025ex321.htm (EX-32.1) — 6KB
• prosper10q063025ex322.htm (EX-32.2) — 6KB
• 0001416265-25-000028.txt ( ) — 17969KB
• prosper-20250630.xsd (EX-101.SCH) — 100KB
• prosper-20250630_cal.xml (EX-101.CAL) — 103KB
• prosper-20250630_def.xml (EX-101.DEF) — 713KB
• prosper-20250630_lab.xml (EX-101.LAB) — 972KB
• prosper-20250630_pre.xml (EX-101.PRE) — 892KB
• prosper-20250630_htm.xml (XML) — 3824KB

Forward-Looking Statements

Forward-Looking Statements 4 PART I. FINANCIAL INFORMATION Item 1. Condensed Consolidated Financial Statements 6 Prosper Marketplace, Inc. 6 Condensed Consolidated Balance Sheets (Unaudited) 6 Condensed Consolidated Statements of Operations (Unaudited) 8 Condensed Consolidated Statements of Convertible Preferred Stock and Stockholders' Deficit 9 Condensed Consolidated Statements of Cash Flows (Unaudited) 12 Notes to Condensed Consolidated Financial Statements (Unaudited) 14 Prosper Funding LLC 55 Condensed Consolidated Balance Sheets (Unaudited) 55 Condensed Consolidated Statements of Operations (Unaudited) 56 Condensed Consolidated Statements of Member's Equity 57 Condensed Consolidated Statements of Cash Flows (Unaudited) 58 Notes to Condensed Consolidated Financial Statements (Unaudited) 59 Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations

Management's Discussion and Analysis of Financial Condition and Results of Operations 72 Item 3.

Quantitative and Qualitative Disclosures About Market Risk

Quantitative and Qualitative Disclosures About Market Risk 98 Item 4.

Controls and Procedures

Controls and Procedures 99 PART II. OTHER INFORMATION 99 Item 1.

Legal Proceedings

Legal Proceedings 99 Item 1A.

Risk Factors

Risk Factors 99 Item 2. Unregistered Sale of Equity Securities and Use of Proceeds 100 Item 3. Defaults upon Senior Securities 100 Item 4. Mine Safety Disclosures 100 Item 5. Other Information 100 Item 6. Exhibit Index 100

Signatures

Signatures 102 Except as the context requires otherwise, as used herein, "Registrants" refers to Prosper Marketplace, Inc. ("PMI"), a Delaware corporation, and its wholly owned subsidiary, Prosper Funding LLC ("PFL"), a Delaware limited liability company; "we," "us," "our," "Prosper," and the "Company" refers to (i) PMI, (ii) its wholly owned subsidiaries, PFL, BillGuard, Inc. ("BillGuard"), a Delaware corporation, and Prosper Healthcare Lending LLC ("PHL"), a Delaware limited liability company, and (iii) its variable interest entities, Prosper Warehouse I Trust ("PWIT," terminated March 28, 2024), a Delaware statutory trust, Prosper Warehouse II Trust ("PWIIT," terminated September 25, 2023), a Delaware statutory trust, Prosper Marketplace Issuance Trust, Series 2023-1 ("PMIT 2023-1"), a Delaware statutory trust, Prosper Marketplace Issuance Trust, Series 2024-1 ("PMIT 2024-1"), Prosper Credit Card Issuer LLC ("PMCC 2024-1"), a Delaware limited liability company, a Delaware statutory trust and Prosper Grantor Trust ("PGT"), a Delaware statutory trust, on a consolidated basis; and "Prosper Funding" refers to PFL and its wholly owned subsidiary, Prosper Depositor LLC, a Delaware limited liability company, on a consolidated basis. In addition, the unsecured personal loans originated through our marketplace are referred to as "Borrower Loans," and the borrower payment dependent notes issued through our marketplace, whether issued by PMI or PFL, are referred to as "Notes." Investors currently invest in Borrower Loans through two channels: (i) the "Note Channel," which allows investors to purchase Notes from PFL, the payments of which are dependent on the payments made on the corresponding Borrower Loan; and (ii) the "Whole Loan Channel," which allows accredited and institutional investors to purchase Borrower Loans in their entirety directly from PFL. The Notes available to Note Channel investors are distinguishable from notes held by certain third party investors pu

Forward-Looking Statements

Forward-Looking Statements This Quarterly Report on Form 10-Q includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act") and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Forward-looking statements include all statements that do not relate solely to historical or current facts, and can generally be identified by the use of words such as "may," "believe," "expect," "project," "estimate," "intend," "anticipate," "plan," "continue" or similar expressions. These statements may appear throughout this Quarterly Report on Form 10-Q, including the sections titled "Business," "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations." Forward-looking statements inherently involve many risks and uncertainties that could cause actual results to differ materially from those projected in these statements. Where, in any forward-looking statement, PFL or PMI expresses an expectation or belief as to future results or events, such expectation or belief is based on the current plans and expectations of their respective managements, expressed in good faith and is believed to have a reasonable basis. Nevertheless, there can be no assurance that the expectation or belief will result or be achieved or accomplished. The following include some but not all of the factors that could cause actual results or events to differ materially from those anticipated: the performance of the Notes, which, in addition to being speculative investments, are special, limited obligations that are not guaranteed or insured; PFL's ability to make payments on the Notes, including in the event that borrowers fail to make payments on the corresponding Borrower Loans; our ability to attract potential borrowers and investors to our personal loan marketplace, and borrowers to our unsecured credit card ("Credit Card") product, and secured digital home

FINANCIAL INFORMATION

PART I. FINANCIAL INFORMATION

Condensed Consolidated Financial Statements

Item 1. Condensed Consolidated Financial Statements Prosper Marketplace, Inc . Condensed Consolidated Balance Sheets (Unaudited) (in thousands, except for share and per share amounts) June 30, 2025 December 31, 2024 Assets: Cash and Cash Equivalents $ 38,154 $ 30,334 Restricted Cash (1) 129,522 114,753 Accounts Receivable 9,784 7,545 Borrower Loans, at Fair Value 376,294 461,785 Receivable from Credit Card Partner, at Fair Value (1) 102,491 104,153 Property and Equipment, Net 45,527 44,273 Prepaid and Other Assets (1) 26,150 25,362 Credit Card Derivative 36,443 38,739 Servicing Assets 14,438 13,718 Goodwill 36,368 36,368 Total Assets $ 815,171 $ 877,030 Liabilities, Convertible Preferred Stock and Stockholders' Deficit: Accounts Payable and Accrued Liabilities $ 70,884 $ 58,558 Payable to Investors 110,756 91,945 Notes, at Fair Value 264,001 283,030 Notes Issued by Securitization Trust (1) 194,000 258,960 Term Loan 69,301 73,857 Other Liabilities 33,654 33,749 Convertible Preferred Stock Warrant Liability 263,382 261,249 Total Liabilities $ 1,005,978 $ 1,061,348 Commitments and Contingencies (Note 17) Convertible Preferred Stock – $ 0.01 par value; 444,760,848 shares authorized as of June 30, 2025 and December 31, 2024; 209,613,570 issued and outstanding as of June 30, 2025 and December 31, 2024. Aggregate liquidation preference of $ 370,456 as of June 30, 2025 and December 31, 2024. $ 322,748 $ 322,748 Less: Convertible Preferred Stock Held by Consolidated VIE (Note 13), 51,247,915 shares issued and outstanding as of June 30, 2025 and December 31, 2024 ( 2,381 ) ( 2,381 ) Stockholders' Deficit: Common Stock – $ 0.01 par value; 625,000,000 shares authorized; 78,719,490 shares issued and 77,783,555 shares outstanding, as of June 30, 2025; 78,401,384 shares issued and 77,465,449 shares outstanding, as of December 31, 2024 303 300 Additional Paid-In Capital 163,503 162,643 Less: Treasury Stock ( 23,417 ) ( 23,417 ) Accumulated

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. Basis of Presentation Prosper Marketplace, Inc. ("PMI" or the "Company") was incorporated in the state of Delaware on March 22, 2005. Except as the context requires otherwise, as used in these notes to the condensed consolidated financial statements of PMI, "Prosper," "we," "us," and "our" refer to PMI and its wholly-owned subsidiaries, on a consolidated basis. The unaudited interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("US GAAP") and disclosure requirements for interim financial information and the requirements of Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by US GAAP for complete financial statements. The unaudited interim condensed consolidated financial statements should be read in conjunction with the audited financial statements and notes thereto for the year ended December 31, 2024. The balance sheet at December 31, 2024 has been derived from the audited financial statements at that date. Management believes these unaudited interim condensed consolidated financial statements reflect all adjustments, consisting of a normal recurring nature, which are necessary for a fair presentation of the results for the interim periods presented. The results of operations for the interim periods are not necessarily indicative of the results that may be expected for the full year or any other interim period. PMI did not have any items of other comprehensive income or loss for any of the periods presented in the condensed consolidated financial statements as of and for the six months ended June 30, 2025 and 2024. The preparation of Prosper's condensed consolidated financial statements and related disclosures in conformity with US GAAP requires management to make judgments, assumptions and estimates that affect the amounts reported i

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