Core Viewpoint - Upstart Holdings Inc. is experiencing a decline in stock price, trading lower after announcing a private offering of $500 million in convertible senior notes due in 2032, alongside positive financial results for the second quarter [1][2]. Financial Performance - Upstart reported adjusted earnings per share of 36 cents for the second quarter, surpassing the consensus estimate of 26 cents [2]. - The company achieved sales of $257 million, exceeding the consensus estimate of $225.28 million, marking a 102% year-over-year increase [2]. - GAAP net income improved to $5.6 million, a significant recovery from a loss of $54.5 million in the same quarter last year [3]. - The company originated 372,599 loans in the second quarter, reflecting a 159% increase from the previous year, with a conversion rate rising to 23.9% from 15.2% [3]. Future Guidance - Upstart anticipates third quarter sales of $280 million, compared to the consensus estimate of $267.47 million [3]. - The company raised its 2025 sales guidance from $1.01 billion to $1.05 billion, aligning with the consensus estimate of $1.01 billion [3]. Stock Performance - Upstart's stock has decreased by nearly 13% over the past month and is currently trading at $64.80, down 5.76% on the day of publication [1][7]. - The 200-day moving average for Upstart is $61.50, which is below the current stock price of $65.22, indicating a generally bullish signal [6].

Core Insights - Upstart achieved a remarkable Rule of 40 score of 123, surpassing Palantir's score of 94, with 102% revenue growth and a 21% adjusted EBITDA margin [2][3] - Despite strong performance, Upstart's stock fell due to a shrinking take rate, which decreased from 12% to 9% year-over-year [8] Company Performance - Upstart's transaction volume increased by 159%, with 372,599 loans approved and a conversion rate rising to 23.9% from 15.2% [5] - Revenue from fees rose by 84% to $241 million, contributing to total revenue of $257.3 million, exceeding analyst estimates of $225.4 million [6] - The company reported an adjusted EBITDA profit of $53.1 million, a significant turnaround from a loss of $9.3 million, and a GAAP profit of $5.6 million, or $0.40 per share, compared to a loss of $0.17 [6][7] Market Outlook - Upstart raised its full-year forecast and third-quarter projections, indicating strong future performance [7] - The company is expanding into the super prime loan market, which may affect the take rate but could lead to lower risk and default rates [8][9] - Auto loan originations surged over sixfold to $114 million, while home loans increased ninefold to $68 million, suggesting significant growth potential in these markets [9][10] Investment Consideration - The recent sell-off in Upstart's stock may present a buying opportunity due to its rapid growth, improving profitability, and expansion into home and auto loan markets [11]

Financial Sector Performance - The S&P 500 Financials Sector index has delivered a total return of 25% over the past year, outperforming the S&P 500 index's gain of 20% [1][2] Upstart Holdings (UPST) - Upstart's stock is down 83% from its all-time high, despite posting strong Q2 results with earnings per share of $0.05 on sales of $257 million, exceeding analyst estimates [4][5] - Revenue increased by approximately 101% year-over-year, with loans originated up 159% to 372,599 [5] - The company achieved its first quarter of profitability in years, despite an operating loss of $4.5 million, which is an improvement from a $55.5 million loss in the same quarter last year [6] - Management's comments on inflation and competitive intensity led to a sell-off, but guidance suggests sales could increase by roughly 66% annually this year [7][9] Nu Holdings (NU) - Nu Holdings, a digital bank in Brazil, has about 60% of the adult population on its platform, with 85% of this group being active users [10][11] - The company holds only about 5% of the market share of gross profit, indicating significant growth potential through cross-selling and upselling [11] - In Mexico, customer count increased by 70% over the past year, with deposits more than doubling to $5 billion and revenue nearly doubling to $245 million [12] - Nu's cost to serve remains below $1, while average revenue per active customer has increased, reaching $25 for longtime customers compared to $40 for traditional banks [13] - The stock is down 23% from its high due to economic volatility in Brazil and the sale by Berkshire Hathaway, but continued high growth is expected to drive the stock higher over time [14]

Core Viewpoint - The article discusses the potential growth and market share gains of fintech companies SoFi Technologies and Remitly Global, suggesting they will outperform Upstart Holdings in the coming years [1][5][13]. Group 1: SoFi Technologies - SoFi Technologies has shown a strong recovery, generating positive earnings and reaching a customer base of 11.75 million, growing at a 51% compound annual rate since 2021 [3][4]. - The company's total revenue grew by 44% to $855 million in the last quarter, with net income increasing by 479% year over year to just under $100 million [4][5]. - SoFi's market cap is currently around $25 billion, with a price-to-earnings ratio (P/E) of 46, indicating potential for future growth as it expands its operations as an online bank [5]. Group 2: Remitly Global - Remitly Global, with a market cap of $3.3 billion, is a remittance services provider that has faced challenges but continues to show promise [8]. - The company reported a 34% year-over-year revenue growth to $334 million, with net income of $11 million, supported by strong unit economics and low fixed costs [11]. - With a revenue base of $1.356 billion, Remitly has the potential to achieve a market cap larger than Upstart if it continues to gain market share in the remittance sector [12]. Group 3: Upstart Holdings - Upstart Holdings has struggled to generate sufficient profit, projecting only $35 million in total net income for 2025, leading to a forward P/E of over 100 [14]. - The company has a high cost base due to significant spending on customer support, technology development, and marketing, limiting its ability to disrupt traditional lending methods [14][15]. - Upstart remains a niche player in the lending space, with a challenging path ahead compared to the brighter prospects of SoFi and Remitly [13][15].

Core Viewpoint - Upstart's stock price target has been raised from $50 to $70 by Morgan Stanley, maintaining a "neutral" rating, driven by loan recovery, pricing optimization, and new product diversification [1] Group 1: Financial Performance - Upstart's total loan facilitation reached approximately $2.82 billion, representing a year-over-year increase of about 154% and a quarter-over-quarter increase of about 32% [1] - The company achieved its first net profit since Q1 2022, indicating a return to profitability due to pricing optimization and improved business mix [1] - Morgan Stanley has revised its earnings per share (EPS) forecast for Upstart from $2.41 to $3.06 for 2026, reflecting confidence in the company's growth prospects [1] Group 2: Product Diversification - Upstart is actively expanding into verticals beyond personal credit loans, with new products like small loans, auto loans, and housing loans contributing over 10% to quarterly loan volume [2][3] - The management estimates the core market size to be between $8 billion and $12 billion, providing new growth opportunities through a broader product mix [3] Group 3: Pricing and Profitability - The average take rate has remained strong due to adjustments in borrower structure and pricing strategies, allowing for higher fees from a more diverse borrower base [4] - The reduction in the proportion of super-prime borrowers from 29% to 26% indicates a shift towards serving more medium-credit customers, enhancing revenue potential [4] Group 4: Market Sensitivity - Upstart's business performance is highly sensitive to macroeconomic conditions and credit cycles, with potential risks arising from economic downturns affecting borrower repayment capabilities [4][5] - The company faces challenges if inflation pressures lead to rising interest rates, which could dampen demand for consumer loans and increase funding costs [5][6] Group 5: Valuation Considerations - Despite improvements in fundamentals, Morgan Stanley maintains a cautious stance due to Upstart's high valuation, which reflects optimistic growth expectations from investors [3][6] - The current stock price suggests a balanced risk-reward scenario, with potential for volatility if future growth or profitability does not meet elevated market expectations [6]

Welcome back. Upstart, an AI powered lending platform sliding this morning, down 13 and a half% despite beating on top and bottom lines. The company partners with banks and credit unions to provide credit products and automate loans.This is banks look to further integrate AI into their business models. Joining us now, Upstart CEO Dave Gerard. Dave, uh, what do you what do you make of the stock reaction to, you know, what on the surface feels like pretty good earnings this morning.>> Uh, yeah, Lesie. Look, I ...

Core Insights - Upstart Holdings experienced significant growth in loan originations and revenues, with a 102% year-on-year revenue increase in Q2 and loan originations rising by 159% to over 372,590 [3][4] - Despite strong performance, Upstart's shares fell by 7% in after-market trading, indicating market concerns despite positive financial results [1] Financial Performance - Revenues surged to $2.6 billion, with personal loan originations increasing by 143% [3] - The company expects to achieve $1 billion in revenues for the current quarter, aligning with Wall Street consensus [4] Business Segments Growth - Auto loans saw a dramatic increase, with over 4,600 loans originated in Q2, up more than 6 times year-on-year, contributing $114 million in volume [4] - Home loans increased by 9 times year-on-year to $68 million in originations [4] - Newer business lines, including small dollar loans, attracted nearly 20% of new borrowers, with small dollar loan originations growing 40% sequentially [5] Risk Modeling and AI Enhancements - The company attributed its growth to AI-driven enhancements in risk modeling, which improved conversion rates from 19% in Q1 to 24% in Q2 [6] - Year-over-year population-adjusted delinquency rates decreased by 20%, and raw delinquency rates fell by 32% [8] Funding and Market Outlook - Upstart anticipates reaching a new all-time high for monthly available funding in Q3, indicating a robust funding pipeline [7] - The competitive landscape is intensifying, with improved funding conditions attracting more competitors [10] Consumer Behavior Insights - The CFO noted that the American consumer is likely overspending relative to income levels, which could impact future credit trends [10]

Company Performance - Upstart Holdings, Inc. reported quarterly earnings of $0.36 per share, exceeding the Zacks Consensus Estimate of $0.27 per share, and compared to a loss of $0.17 per share a year ago, representing an earnings surprise of +33.33% [1] - The company posted revenues of $257.29 million for the quarter ended June 2025, surpassing the Zacks Consensus Estimate by 14.20%, and showing a significant increase from year-ago revenues of $127.63 million [2] - Over the last four quarters, Upstart has consistently surpassed consensus EPS estimates and revenue estimates [2] Stock Performance - Upstart shares have increased approximately 34.5% since the beginning of the year, significantly outperforming the S&P 500's gain of 7.6% [3] - The current consensus EPS estimate for the upcoming quarter is $0.43 on revenues of $266.18 million, and for the current fiscal year, it is $1.56 on revenues of $945.68 million [7] Industry Outlook - The Financial - Miscellaneous Services industry, to which Upstart belongs, is currently ranked in the top 26% of over 250 Zacks industries, indicating a favorable outlook [8] - Empirical research suggests a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can impact stock performance [5]

Financial Data and Key Metrics Changes - Total revenue for Q2 was approximately $257 million, up 102% year-on-year, including fee revenue of approximately $241 million, which was up 84% year-on-year [28][30] - GAAP net income for Q2 was approximately positive $6 million, ahead of expectations, marking a return to profitability a quarter earlier than anticipated [31] - Adjusted EBITDA was $53 million, reflecting strong operating leverage [31] - Average loan size was approximately $7,570, which was 15% lower than the prior quarter due to model advancements driving higher approval rates for smaller loan amounts [29] Business Line Data and Key Metrics Changes - Originations on the Upstart platform in Q2 reached $2.8 billion, the highest volume in three years [9] - The auto business grew 87% sequentially, while the home business grew 67% sequentially [9] - More than 10% of originations came from newer businesses, including small dollar loans, which grew 40% sequentially [9][12] Market Data and Key Metrics Changes - The Upstart Macro Index has been largely stable for several months, indicating no significant macro improvements or Fed rate decreases impacting growth [10] - The volume of loan transactions across the platform was approximately 373,000, up 159% from the prior year [29] Company Strategy and Development Direction - The company aims for market share leadership in home and auto lending, with significant investments in these areas expected to yield fast growth and strong credit performance [17] - The strategy includes transitioning most funding for newer products off the balance sheet by 2025 [12][33] - The company is focused on creating a differentiated experience in home and auto lending, leveraging AI to reduce origination costs and improve consumer experience [72] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the ongoing growth of the core personal loan business, despite the scaling of new products [27] - The macro environment is expected to remain steady, with no significant changes anticipated in interest rates or labor market conditions [34] - The company plans to continue launching model enhancements to improve conversion rates and maintain robust take rates and contribution margins [34] Other Important Information - The company has made significant advancements in AI technology, with Model 22 improving separation accuracy by 17 percentage points [18] - Year-over-year population-adjusted delinquency rates are down 20%, and raw delinquency rates are down 32% due to servicing optimizations [20] Q&A Session Summary Question: Discussion on ABS market and competitive pressure - Management noted that the ABS market is constructive, but the equity tranche market is opportunistic with buyers picking and choosing deals [39] - Increased competition is expected as funding markets improve, but the company remains focused on maintaining strong offers and growing market share [40] Question: Transition to external funding and balance sheet impact - Management indicated a timeline for transitioning to external funding between now and the end of the year, with expectations for the balance sheet to start releasing as new flows are secured [44] Question: Contribution margin improvement - The contribution margin improved due to a mix benefit from more core borrower segment loans and improved take rates driven by model enhancements [52] Question: Macro assumptions and guidance - Management expects a steady macro environment with no significant changes in interest rates or default rates, planning conservatively for the remainder of the year [55] Question: Average loan size and strategic shifts - The decrease in average loan size is strategic, reflecting rapid growth in the small dollar product, which is intended to increase the number of users on the platform [67] Question: Funding partners for new products - The company plans to secure a combination of bank and credit union partners for home and auto products, leveraging their familiarity with these offerings [77] Question: Conversion rate improvement and Walmart partnership - Management did not provide specific forecasts for conversion rates but noted that the Walmart partnership continues to be successful [82]

Q2 2025 earnings August 5, 2025 Forward looking statements This presentation contains "forward-looking" statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including but not limited to, information or predictions concerning our future financial performance, including our financial outlook for Q3 2025 and the full fiscal year 2025 under the heading "Outlook" and management's estimates under the heading "Ma ...