Upstart Holdings, Inc. (NASDAQ:UPST) Q1 2024 Earnings Conference Call May 7, 2024 4:30 PM ET Company Participants Jason Schmidt - VP, Head, IR Dave Girouard - Co Founder and CEO Sanjay Datta - CFO Conference Call Participants John Coffey - Barclays Kyle Peterson - Needham Peter Christiansen - Citi Dan Dolev - Mizuho David Scharf - Citizens JMP Securities Rob Wildhack - Autonomous Research John Hecht - Jefferies Nate Richam - Bank of America Giuliano Bologna - Compass Point Simon Clinch - Redburn Atlantic Re ...

Upstart Holdings, Inc. (UPST) came out with a quarterly loss of $0.31 per share versus the Zacks Consensus Estimate of a loss of $0.38. This compares to loss of $0.47 per share a year ago. These figures are adjusted for non-recurring items.This quarterly report represents an earnings surprise of 18.42%. A quarter ago, it was expected that this company would post a loss of $0.15 per share when it actually produced a loss of $0.11, delivering a surprise of 26.67%.Over the last four quarters, the company has s ...

If you are in the business of providing loans, there will always be a demand for your product. As for the customers that need to be served, the total addressable market (TAM) for annual loan originations is a whopping $3 trillion.Artificial intelligence (AI)-powered lending platform Upstart has originated $38 billion in loans across its 3 million customers — leaving lots of room to grow. That’s why, on Tuesday’s (May 7) first quarter 2024 earnings call, Upstart executives stressed to investors that the comp ...

[PART I. FINANCIAL INFORMATION](index=7&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [Financial Statements](index=7&type=section&id=Item%201.%20Financial%20Statements) Upstart reported increased Q1 2024 revenue and a narrowed net loss, with improved operating cash flow and a slight decrease in total assets and liabilities [Condensed Consolidated Balance Sheets](index=7&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of March 31, 2024, total assets decreased to $1.93 billion, primarily due to lower loans held at fair value, while total liabilities also declined to $1.31 billion Condensed Consolidated Balance Sheet Data (in thousands) | | March 31, 2024 | December 31, 2023 | | :--- | :--- | :--- | | **Assets** | | | | Cash | $300,529 | $368,405 | | Loans (at fair value) | $1,080,865 | $1,156,413 | | Total assets | $1,927,667 | $2,017,100 | | **Liabilities and Stockholders' Equity** | | | | Borrowings | $1,005,277 | $1,040,424 | | Total liabilities | $1,314,869 | $1,381,795 | | Total stockholders' equity | $612,798 | $635,305 | [Condensed Consolidated Statements of Operations and Comprehensive Loss](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Loss) Q1 2024 total revenue increased to $127.8 million, leading to a narrowed net loss of $64.6 million, primarily due to higher revenue and reduced operating expenses Q1 2024 vs Q1 2023 Statement of Operations (in thousands, except per share data) | | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :--- | :--- | :--- | | Revenue from fees, net | $138,068 | $117,141 | | Total revenue | $127,794 | $102,927 | | Total operating expenses | $195,262 | $234,762 | | Loss from operations | ($67,468) | ($131,835) | | Net loss | ($64,598) | ($129,254) | | Net loss per share, diluted | ($0.74) | ($1.58) | [Condensed Consolidated Statements of Cash Flows](index=11&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash from operating activities significantly improved to $52.6 million in Q1 2024, despite cash and restricted cash decreasing by $28.6 million overall due to investing and financing activities Q1 2024 vs Q1 2023 Cash Flow Summary (in thousands) | | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $52,622 | ($75,727) | | Net cash used in investing activities | ($37,547) | ($25,852) | | Net cash provided by (used in) financing activities | ($43,711) | $20,971 | | **Change in cash and restricted cash** | **($28,636)** | **($80,608)** | [Notes to the Condensed Consolidated Financial Statements](index=13&type=section&id=Notes%20to%20the%20Condensed%20Consolidated%20Financial%20Statements) Detailed notes explain accounting policies, revenue concentration, fair value measurements, significant borrowings, loan purchase commitments, and the impact of a 2023 reorganization Revenue from Fees, Net (in thousands) | | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Platform and referral fees, net | $77,657 | $103,859 | | Servicing and other fees, net | $39,484 | $34,209 | | **Total revenue from fees, net** | **$117,141** | **$138,068** | - The company has significant customer concentration. In Q1 2024, Customers A, B, and C accounted for **39%**, **24%**, and **11%** of total revenue, respectively[53](index=53&type=chunk) - As of March 31, 2024, the company had total borrowings of **$1.005 billion**, comprising **$351.5 million** from warehouse credit facilities and **$653.8 million** (carrying value) from convertible senior notes[152](index=152&type=chunk)[173](index=173&type=chunk) - The company has a loan purchase commitment of **$32.5 million** as of March 31, 2024. The maximum potential future repurchase obligation for loans sold to institutional investors is **$11.5 billion**[202](index=202&type=chunk)[207](index=207&type=chunk) - In January 2023, the company implemented a reorganization plan, reducing its workforce by approximately **20%** (**365 employees**) and incurring **$15.5 million** in related expenses in Q1 2023[228](index=228&type=chunk)[229](index=229&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)](index=57&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Q1 2024 revenue growth driven by transaction volume and funding, while navigating macroeconomic challenges and utilizing the balance sheet to fund loans [Overview and Key Metrics](index=57&type=section&id=Overview%20and%20Key%20Metrics) Upstart's AI lending marketplace focuses on securing committed capital, with Q1 2024 showing improved transaction volume and conversion rates despite macroeconomic influences Key Operating and Non-GAAP Metrics | Metric | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Transaction Volume, Dollars | $1,130,799 thousand | $997,447 thousand | | Transaction Volume, Number of Loans | 119,380 | 84,084 | | Conversion Rate | 14.0% | 8.2% | | Percentage of Loans Fully Automated | 90% | 84% | | Contribution Profit | $81,142 thousand | $67,623 thousand | | Contribution Margin | 59% | 58% | | Adjusted EBITDA | ($20,339) thousand | ($31,061) thousand | - The Upstart Macro Index (UMI) was approximately **1.60** as of March 31, 2024, indicating an incremental risk of about **60%** to loan repayment performance compared to a baseline environment[261](index=261&type=chunk) [Results of Operations](index=67&type=section&id=Results%20of%20Operations) Q1 2024 total revenue increased 24% to $127.8 million, while operating expenses decreased 17% to $195.3 million, largely due to a significant reduction in Engineering and Product Development costs Operating Expenses Change (Q1 2024 vs Q1 2023, in thousands) | Expense Category | Q1 2024 | Q1 2023 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Sales and marketing | $35,150 | $31,438 | $3,712 | 12% | | Customer operations | $39,408 | $40,590 | ($1,182) | (3)% | | Engineering and product development | $63,091 | $110,071 | ($46,980) | (43)% | | General, administrative, and other | $57,613 | $52,663 | $4,950 | 9% | | **Total operating expenses** | **$195,262** | **$234,762** | **($39,500)** | **(17)%** | [Liquidity and Capital Resources](index=75&type=section&id=Liquidity%20and%20Capital%20Resources) Upstart's liquidity relies on $300.5 million cash and warehouse facilities, with $1.08 billion in loans held on its balance sheet to manage marketplace funding - As of March 31, 2024, the company held **$1,080.9 million** of loans on its balance sheet, composed of **$394.0 million** for R&D, **$529.6 million** of core personal loans, and **$157.3 million** of loans held by consolidated securitization[353](index=353&type=chunk) - The company has a loan purchase commitment of **$32.5 million** and capital co-invested at risk of **$169.6 million** under its committed capital arrangements as of March 31, 2024[341](index=341&type=chunk)[342](index=342&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=78&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Upstart faces market risks including discount rate, credit, and interest rate fluctuations, impacting loan portfolio fair value and borrower demand, partially mitigated by interest rate caps - A hypothetical **100 basis point** increase in the discount rate would decrease the fair value of loans (excluding those in consolidated securitization) by **$12.6 million** as of March 31, 2024[362](index=362&type=chunk) - A hypothetical **10%** increase in credit risk would result in a **$12.7 million** decrease in the fair value of loans (excluding those in consolidated securitization) as of March 31, 2024[368](index=368&type=chunk) - The company is exposed to interest rate risk on **$351.5 million** of borrowings under its floating-rate warehouse credit facilities as of March 31, 2024, partially hedged by interest rate cap agreements with a notional amount of **$283.8 million**[374](index=374&type=chunk) [Controls and Procedures](index=81&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of March 31, 2024, with no material changes to internal control over financial reporting during the quarter - The Chief Executive Officer and Chief Financial Officer concluded that as of March 31, 2024, the company's disclosure controls and procedures were designed and function effectively[378](index=378&type=chunk) - No changes in internal control over financial reporting occurred during the quarter ended March 31, 2024, that have materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[380](index=380&type=chunk) [PART II. OTHER INFORMATION](index=82&type=section&id=PART%20II.%20OTHER%20INFORMATION) [Legal Proceedings](index=82&type=section&id=Item%201.%20Legal%20Proceedings) The company's material pending legal proceedings, including a securities class action and derivative lawsuits, are detailed in Note 12 of the financial statements - For a description of material pending legal proceedings, the report refers to "Note 12. Commitments and Contingencies" and "Risk Factors"[382](index=382&type=chunk) [Risk Factors](index=83&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant risks from adverse economic conditions, constrained loan funding, AI model effectiveness, regulatory scrutiny, customer concentration, and cybersecurity threats - The business is adversely affected by economic conditions, with high inflation and interest rates decreasing loan funding from partners, reducing borrower demand, and increasing delinquencies[390](index=390&type=chunk)[391](index=391&type=chunk)[395](index=395&type=chunk) - A significant risk is the inability to maintain diverse and resilient loan funding from institutional investors, which has been constrained by the macroeconomic environment, leading Upstart to use its own balance sheet for funding[396](index=396&type=chunk)[397](index=397&type=chunk)[398](index=398&type=chunk) - The effectiveness of the company's AI models is crucial, as failure to accurately predict creditworthiness, especially in changing economic conditions, could lead to higher losses and reduced trust from funding partners[402](index=402&type=chunk)[405](index=405&type=chunk) - The company has significant concentration risk, with its top three lending partners accounting for **74%** of total revenue and **88%** of loan volume in Q1 2024[436](index=436&type=chunk) - The business is subject to a wide range of evolving laws and regulations, including potential challenges to the "true lender" status of its bank partners and increased scrutiny of AI in lending by regulators like the CFPB[446](index=446&type=chunk)[568](index=568&type=chunk)[610](index=610&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=148&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company reported no repurchases of its common stock during the three months ended March 31, 2024 - There were no repurchases of the Company's common stock during the three months ended March 31, 2024[676](index=676&type=chunk) [Other Information](index=149&type=section&id=Item%205.%20Other%20Information) During Q1 2024, several executive officers, including the CFO, CTO, and CLO, adopted or terminated Rule 10b5-1 trading plans for company securities - During Q1 2024, CFO Sanjay Datta, CTO Paul Gu, and CLO Scott Darling each adopted a new Rule 10b5-1 trading plan for the sale of company stock[681](index=681&type=chunk) [Exhibits and Financial Statement Schedules](index=150&type=section&id=Item%206.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section lists the exhibits filed as part of the Quarterly Report on Form 10-Q, including officer certifications and XBRL data files - The report includes standard exhibits such as CEO and CFO certifications (Exhibits 31.1, 31.2, 32.1) and Inline XBRL documents[682](index=682&type=chunk)[684](index=684&type=chunk)

A Upstart This presentation contains "forward-looking" statements that are based on our management's beliefs and assumptions and on information currently available to management. Forward-looking statements include all statements, other than statements of historical fact contained in this presentation, including but not limited to, information or predictions concerning our future financial performance, including our financial outlook for Q2 2024 and the second half of 2024 under the heading "Outlook" and our ...

SAN MATEO, Calif. – May 7, 2024 – Upstart Holdings, Inc. (NASDAQ: UPST), the leading artificial intelligence (AI) lending marketplace, today announced financial results for its first quarter of fiscal year 2024 ended March 31, 2024. Upstart will host a conference call and webcast at 1:30 p.m. Pacific Time today. An earnings presentation and link to the webcast are available at ir.upstart.com. "We continue to focus on improving our efficiency and financial performance while investing responsibly for the long ...

Upstart Holdings (UPST) is slated to report first-quarter 2024 results on May 7, after market close.For the first quarter, the company expects revenues of approximately $125 million. The Zacks Consensus Estimate is currently pegged at $124.8 million, suggesting growth of 21.3% year over year.The consensus mark for earnings is pegged at a loss of 38 cents per share, suggesting a significant improvement from the year-ago quarter’s loss of 47 cents.UPST’s earnings beat the Zacks Consensus Estimate in three of ...

The AI-powered consumer lender looks to upend the industry, but its business continues to face headwinds.Upstart (UPST 2.76%) has taken shareholders for a roller coaster ride since going public in 2020. The company started with a bang, and the stock climbed to $355 per share at one point. However, high interest rates and low demand for its loans weighed on the company.Last year, things showed signs of turning around, but it continued to see slower demand for its loans compared to pandemic levels. Upstart's ...

Upstart Holdings, Inc. (UPST) closed the most recent trading day at $23.12, moving +0.78% from the previous trading session. The stock's performance was ahead of the S&P 500's daily gain of 0.02%. Elsewhere, the Dow saw a downswing of 0.11%, while the tech-heavy Nasdaq appreciated by 0.1%.Heading into today, shares of the company had lost 13.7% over the past month, lagging the Computer and Technology sector's loss of 5.13% and the S&P 500's loss of 3.01% in that time.The upcoming earnings release of Upstart ...

Upstart (UPST) has partnered with PriorityONE Credit Union to provide an improved digital personal lending experience with affordable credit for the latter’s community.PriorityONE is a community-driven credit union based in Florida. In April 2023, it collaborated with UPST to become an Upstart Referral Network lending partner. The new personal loan offering will be available on Upstart.com. This can be availed by the applicants who meet PriorityONE's credit policies.The applicants will receive tailored offe ...