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-term,” said
Dave Girouard, CEO, Upstart. “As a result, we anticipate a return
to sequential growth in the second half of the year and positive
EBITDA by the end of the year, even in the current credit
environment.”
First Quarter 2024 Financial Highlights
- Revenue. Total revenue was $128 million, an increase of
24% from the first quarter of 2023, but down 9% sequentially. Total
fee revenue was $138 million, an increase of 18%
year-over-year.
- Transaction Volume and Conversion Rate. 119,380 loans
were originated, totaling $1.1 billion across our platform in the
first quarter of 2024, up 13% from the same quarter of the prior
year. Conversion on rate requests was 14% in the first quarter of
2024, up from 8% in the same quarter of the prior year.
- Income (Loss) from Operations. Income (loss) from
operations was ($67.5) million, up from ($131.8) million in the
same quarter of the prior year.
- Net Income (Loss) and EPS. GAAP net income (loss) was
($64.6) million, up from ($129.3) million in the first quarter of
the prior year. Adjusted net income (loss) was ($27.2) million, up
from ($38.7) million in the same quarter of the prior year.
Accordingly, GAAP diluted earnings per share was ($0.74), and
diluted adjusted earnings per share was ($0.31) based on the
weighted-average common shares outstanding during the quarter.
- Contribution Profit. Contribution profit was $81.1
million in the first quarter of 2024, up 20% year-over-year, with a
contribution margin of 59% compared to a 58% contribution margin in
the same quarter of the prior year.
- Adjusted EBITDA. Adjusted EBITDA was ($20.3) million, up
from ($31.1) million in the same quarter of the prior year. The
first quarter 2024 adjusted EBITDA margin was (16%) of total
revenue, up from (30%) in the same quarter of the prior year.
Financial Outlook
For the second quarter of 2024, Upstart expects:
- Revenue of approximately $125 million
- Revenue From Fees of approximately $135 million
- Net Interest Income (Loss) of approximately ($10)
million
- Contribution Margin of approximately 56%
- Net Income (Loss) of approximately ($75) million
- Adjusted Net Income (Loss) of approximately ($36)
million
- Adjusted EBITDA of approximately ($25) million
- Basic Weighted-Average Share Count of approximately 88.4
million shares
- Diluted Weighted-Average Share Count of approximately
88.4 million shares
For the second half of 2024, Upstart expects:
- Revenue from fees of approximately $300 million,
and
- Positive EBITDA in the fourth quarter
Upstart has not reconciled the forward-looking non-GAAP measures
above to comparable forward-looking GAAP measures because of the
potential variability and uncertainty of incurring these costs and
expenses in the future. Accordingly, a reconciliation is not
available without unreasonable effort.
Key Operating Metrics and Non-GAAP Financial Measures
For a description of our key operating measures, please see the
section titled “Key Operating Metrics” below.
Reconciliations of non-GAAP financial measures to the most
directly comparable financial results as determined in accordance
with GAAP are included at the end of this press release following
the accompanying financial data. For a description of these
non-GAAP financial measures, including the reasons management uses
each measure, please see the section titled "About Non-GAAP
Financial Measures” below.
Conference Call and Webcast
- Live Conference Call and Webcast at 1:30 p.m. PT on May 7,
2024. To access the call in the United States and Canada: +1
888-256-1007, conference code 8968516. To access the call outside
of the United States and Canada: +1 313-209-4906, conference code
8968516. A webcast is available at ir.upstart.com.
- Event Replay. A webcast of the event will be archived
for one year at ir.upstart.com.
About Upstart
Upstart (NASDAQ: UPST) is the leading AI lending marketplace,
connecting millions of consumers to 100+ banks and credit unions
that leverage Upstart’s AI models and cloud applications to deliver
superior credit products. With Upstart AI, lenders can approve more
borrowers at lower rates across races, ages, and genders, while
delivering the exceptional digital-first experience customers
demand. More than 80% of borrowers are approved instantly, with
zero documentation to upload. Founded in 2012, Upstart’s platform
includes personal loans, automotive retail and refinance loans, and
small-dollar “relief” loans. Upstart is based in San Mateo,
California, and Columbus, Ohio.
Forward-Looking Statements
This press release contains forward-looking statements,
including but not limited to, statements regarding our outlook for
the second quarter of 2024 and the second half of 2024, and return
to sequential growth in the second half of 2024 and positive EBITDA
by the end of 2024. You can identify forward-looking statements by
the fact that they do not relate strictly to historical or current
facts. These statements may include words such as "anticipate",
"estimate", "expect", "project", "plan", "intend", “target”, “aim”,
"believe", "may", "will", "should", “becoming”, “look forward”,
“could”, "can have", "likely" and other words and terms of similar
meaning in connection with any discussion of the timing or nature
of future operating or financial performance or other events.
Forward-looking statements give our current expectations and
projections relating to our financial condition; macroeconomic
factors; plans; objectives; product development; growth
opportunities; assumptions; risks; future performance; business;
investments; and results of operations, including revenue
(including revenue from fees and net interest income (loss)),
contribution margin, net income (loss), non-GAAP adjusted net
income (loss), adjusted EBITDA, adjusted EBITDA margin, basic
weighted-average share count and diluted weighted-average share
count. Neither we nor any other person assumes responsibility for
the accuracy and completeness of any of these forward-looking
statements. The forward-looking statements included in this press
release and on the related teleconference call relate only to
events as of the date hereof. Upstart undertakes no obligation to
update or revise any forward-looking statement as a result of new
information, future events or otherwise, except as otherwise
required by law.
All forward-looking statements are subject to risks and
uncertainties that may cause actual results to differ materially
from those that we expected. More information about factors that
could affect our results of operations and risks and uncertainties
are provided in our public filings with the Securities and Exchange
Commission, copies of which may be obtained by visiting our
investor relations website at www.upstart.com or the SEC’s website
at www.sec.gov. These risks and uncertainties include, but are not
limited to, our ability to manage the adverse effects of
macroeconomic conditions and disruptions in the banking sector and
credit markets, including inflation and related monetary policy
changes, such as increasing interest rates; our ability to access
sufficient loan funding, including through securitizations,
committed capital arrangements, whole loan sales and warehouse
credit facilities; the effectiveness of our credit decisioning
models and risk management efforts, including reflecting the impact
of economic conditions on borrowers’ credit risk; our ability to
retain existing, and attract new, lending partners; our future
growth prospects and financial performance; our ability to manage
risks associated with the loans on our balance sheet; our ability
to improve and expand our platform and products; and our ability to
operate successfully in a highly-regulated industry.
Key Operating Metrics
We review a number of operating metrics, including transaction
volume, dollars; transaction volume, number of loans; and
conversion rate to evaluate our business, measure our performance,
identify trends affecting our business, formulate business plans
and make strategic decisions.
We define “transaction volume, dollars” as the total principal
of loan originations (or committed amounts for HELOCs) facilitated
on our marketplace during the periods presented. We define
“transaction volume, number of loans” as the number of loan
originations (or commitments issued for HELOCs) facilitated on our
marketplace during the periods presented. We believe these metrics
are good proxies for our overall scale and reach as a platform.
We define “conversion rate” as the number of loans transacted in
a period divided by the number of rate inquiries received that we
estimate to be legitimate, which we record when a borrower requests
a loan offer on our platform. We track this metric to understand
the impact of improvements to the efficiency of our borrower funnel
on our overall growth.
About Non-GAAP Financial Measures
In addition to our results determined in accordance with
generally accepted accounting principles in the United States
(“GAAP”), we believe the non-GAAP measures of contribution profit,
contribution margin, adjusted EBITDA, adjusted EBITDA margin,
adjusted net income (loss), and adjusted net income (loss) per
share are useful in evaluating our operating performance. Certain
of these non-GAAP measures exclude stock-based compensation and
certain payroll tax expense, expense on convertible notes,
depreciation, amortization, as well as certain items that are not
related to core business and ongoing operations, such as
reorganization expenses. We exclude stock-based compensation,
expense on convertible notes and other non-operating expenses
because they are non-cash in nature and are excluded in order to
facilitate comparisons to other companies’ results.
We believe non-GAAP information is useful in evaluating the
operating results, ongoing operations, and for internal planning
and forecasting purposes. We also believe that non-GAAP financial
measures provide consistency and comparability with past financial
performance and assist investors with comparing Upstart to other
companies, some of which use similar non-GAAP financial measures to
supplement their GAAP results. However, non-GAAP financial measures
are presented for supplemental informational purposes only and
should not be considered a substitute for, or superior to,
financial information presented in accordance with GAAP and may be
different from similarly titled non-GAAP financial measures used by
other companies.
Key limitations of our non-GAAP financial measures include:
- Contribution Profit is not a GAAP financial measure of, nor
does it imply, profitability. Even if our revenue exceeds variable
expenses over time, we may not be able to achieve or maintain
profitability, and the relationship of revenue to variable expenses
is not necessarily indicative of future performance;
- Contribution Profit does not reflect all of our variable
expenses and involves some judgment and discretion around what
costs vary directly with loan volume. Other companies that present
contribution profit calculate it differently and, therefore,
similarly titled measures presented by other companies may not be
directly comparable to ours;
- Although depreciation expense is a non-cash charge, the assets
being depreciated 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 excludes stock-based compensation expense,
certain employer payroll taxes on employee stock transactions,
expense on convertible notes, and reorganization expenses as well
as certain items that are not related to core business and ongoing
operations. Stock-based compensation expense has been, and will
continue to be for the foreseeable future, a significant recurring
expense for our business and an important part of our compensation
strategy. The amount of employer payroll tax-related expense on
employee stock transactions is dependent on our stock price and
other factors that are beyond our control and which may not
correlate to the operation of the business;
- Adjusted EBITDA does not reflect: (1) changes in, or cash
requirements for, our working capital needs; (2) interest expense,
or the cash requirements necessary to service interest or principal
payments on our debt, which reduces cash available to us; or (3)
tax payments that may represent a reduction in cash available to
us;
- The expenses and other items that we exclude in our calculation
of Adjusted EBITDA may differ from the expenses and other items, if
any, that other companies may exclude from Adjusted EBITDA when
they report their operating results.
Reconciliation tables of the most comparable GAAP financial
measures to the non-GAAP financial measures used in this press
release are included below.
UPSTART HOLDINGS, INC.
CONSOLIDATED BALANCE
SHEETS
(In Thousands, Except Share
and Per Share Data)
(Unaudited)
December 31,
March 31,
2023
2024
Assets
Cash
$
368,405
$
300,529
Restricted cash
99,382
138,622
Loans (at fair value) (1)
1,156,413
1,080,865
Property, equipment, and software, net
42,655
40,555
Operating lease right of use assets
54,694
51,936
Beneficial interest assets (at fair
value)
41,012
62,214
Non-marketable equity securities
41,250
41,250
Goodwill
67,062
67,062
Other assets (includes $48,897 and $46,079
at fair value as of December 31, 2023 and March 31, 2024,
respectively)
146,227
144,634
Total assets
$
2,017,100
$
1,927,667
Liabilities and Stockholders’
Equity
Liabilities:
Payable to investors
$
53,580
$
59,081
Borrowings
1,040,424
1,005,277
Payable to securitization note holders (at
fair value)
141,416
129,092
Accrued expenses and other liabilities
(includes $10,510 and $14,314 at fair value as of December 31, 2023
and March 31, 2024, respectively)
84,051
62,055
Operating lease liabilities
62,324
59,364
Total liabilities
1,381,795
1,314,869
Stockholders’ equity:
Common stock, $0.0001 par value;
700,000,000 shares authorized; 86,330,303 and 87,805,393 shares
issued and outstanding as of December 31, 2023 and March 31, 2024,
respectively
9
9
Additional paid-in capital
917,872
959,963
Accumulated deficit
(282,576
)
(347,174
)
Total stockholders’ equity
635,305
612,798
Total liabilities and stockholders’
equity
$
2,017,100
$
1,927,667
(1) As of December 31, 2023, and March 31,
2024, includes $179.1 million and $157.3 million of loans, at fair
value, contributed as collateral for the consolidated
securitization, respectively.
UPSTART HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF
OPERATIONS and COMPREHENSIVE LOSS
(In Thousands, Except Share
and Per Share Data)
(Unaudited)
Three Months Ended March
31,
2023
2024
Revenue:
Revenue from fees, net
$
117,141
$
138,068
Interest income, interest expense, and
fair value adjustments, net:
Interest income (1)
45,315
51,171
Interest expense (1)
(7,132
)
(10,714
)
Fair value and other adjustments (1)
(52,397
)
(50,731
)
Total interest income, interest expense,
and fair value adjustments, net
(14,214
)
(10,274
)
Total revenue
102,927
127,794
Operating expenses:
Sales and marketing
31,438
35,150
Customer operations
40,590
39,408
Engineering and product development
110,071
63,091
General, administrative, and other
52,663
57,613
Total operating expenses
234,762
195,262
Loss from operations
(131,835
)
(67,468
)
Other income, net
2,597
2,884
Net loss before income taxes
(129,238
)
(64,584
)
Provision for income taxes
16
14
Net loss
$
(129,254
)
$
(64,598
)
Net loss per share, basic
$
(1.58
)
$
(0.74
)
Net loss per share, diluted
$
(1.58
)
$
(0.74
)
Weighted-average number of shares
outstanding used in computing net loss per share, basic
81,911,433
87,030,695
Weighted-average number of shares
outstanding used in computing net loss per share, diluted
81,911,433
87,030,695
(1) Balances for the three months ended
March 31, 2024 include $8.6 million of interest income, $(2.8)
million of interest expense, and $(10.7) million of fair value and
other adjustments, net related to the consolidated
securitization.
UPSTART HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF
CASH FLOWS
(In Thousands)
(Unaudited)
Three Months Ended March
31,
2023
2024
Cash flows from operating
activities
Net loss
$
(129,254
)
$
(64,598
)
Adjustments to reconcile net loss to net
cash provided by (used in) operating activities:
Change in fair value of loans
54,924
54,017
Change in fair value of servicing
assets
5,479
4,286
Change in fair value of servicing
liabilities
(875
)
(454
)
Change in fair value of beneficial
interest assets
-
(4,481
)
Change in fair value of beneficial
interest liabilities
-
4,973
Change in fair value of other financial
instruments
(482
)
1,551
Stock-based compensation
74,109
35,777
Gain on loan servicing rights, net
(3,613
)
(2,946
)
Depreciation and amortization
6,441
5,632
Non-cash interest expense
766
768
Other
(974
)
(2,539
)
Net changes in operating assets and
liabilities:
Purchases of loans held-for-sale
(510,003
)
(796,543
)
Proceeds from sale of loans
held-for-sale
449,339
772,690
Principal payments received for loans
held-for-sale
57,949
52,841
Principal payments received for loans held
by consolidated securitization
-
12,338
Payments on beneficial interest
liabilities
-
(710
)
Other assets
306
(825
)
Operating lease liability and right-of-use
asset
1,216
(202
)
Payable to investors
(49,730
)
6,893
Accrued expenses and other liabilities
(31,325
)
(25,846
)
Net cash provided by (used in) operating
activities
(75,727
)
52,622
UPSTART HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF
CASH FLOWS
(In Thousands)
(Unaudited)
Three Months Ended March
31,
2023
2024
Cash flows from investing
activities
Purchases and originations of loans
held-for-investment
(46,382
)
(46,152
)
Principal payments received for loans
held-for-investment
24,422
27,242
Principal payments received for notes
receivable and repayments of residual certificates
1,566
1,225
Purchases of property and equipment
(1,111
)
(684
)
Capitalized software costs
(4,347
)
(1,065
)
Acquisition of beneficial interest
assets
-
(16,940
)
Payments on beneficial interest assets
-
(1,173
)
Net cash used in investing activities
(25,852
)
(37,547
)
Cash flows from financing
activities
Proceeds from borrowings
60,673
74,260
Repayments of borrowings
(46,962
)
(110,175
)
Principal payments made on securitization
notes
-
(13,564
)
Proceeds from issuance of common stock
under employee stock purchase plan
5,728
4,565
Proceeds from exercise of stock
options
1,537
1,204
Taxes paid related to net share settlement
of equity awards
(5
)
(1
)
Net cash provided by (used in) financing
activities
20,971
(43,711
)
Change in cash and restricted
cash
(80,608
)
(28,636
)
Cash and restricted cash at beginning of
period
532,467
467,787
Cash and restricted cash at end of
period
$
451,859
$
439,151
UPSTART HOLDINGS, INC.
RECONCILIATION OF GAAP TO
NON-GAAP FINANCIAL MEASURES
(In Thousands, Except Share
and Per Share Data)
(Unaudited)
Three Months Ended March
31,
2023
2024
Revenue from fees, net
$
117,141
$
138,068
Loss from operations
(131,835
)
(67,468
)
Operating Margin
(113
)%
(49
)%
Sales and marketing, net of borrower
acquisition costs(1)
$
11,726
$
10,331
Customer operations, net of borrower
verification and servicing costs(2)
10,784
7,301
Engineering and product development
110,071
63,091
General, administrative, and other
52,663
57,613
Interest income, interest expense, and
fair value adjustments, net
14,214
10,274
Contribution Profit
$
67,623
$
81,142
Contribution Margin
58
%
59
%
(1) Borrower acquisition costs were $19.7 million and $24.8 million
for the three months ended March 31, 2023 and 2024, respectively.
Borrower acquisition costs consist of our sales and marketing
expenses adjusted to exclude costs not directly attributable to
attracting a new borrower, such as payroll-related expenses for our
business development and marketing teams, as well as other
operational, brand awareness and marketing activities. These costs
do not include reorganization expenses associated with the January
2023 Plan. (2) Borrower verification and servicing costs
were $29.8 million and $32.1 million for the three months ended
March 31, 2023 and 2024, respectively. Borrower verification and
servicing costs consist of payroll and other personnel-related
expenses for personnel engaged in loan onboarding, verification and
servicing, as well as servicing system costs. It excludes payroll
and personnel-related expenses and stock-based compensation for
certain members of our customer operations team whose work is not
directly attributable to onboarding and servicing loans. These
costs do not include reorganization expenses associated with the
January 2023 Plan.
UPSTART HOLDINGS, INC.
RECONCILIATION OF GAAP TO
NON-GAAP FINANCIAL MEASURES
(In Thousands, Except Share
and Per Share Data)
(Unaudited)
Three Months Ended March
31,
2023
2024
Total revenue
$
102,927
$
127,794
Net loss
(129,254
)
(64,598
)
Net Loss Margin
(126
)%
(51
)%
Adjusted to exclude the following:
Stock-based compensation and certain
payroll tax expenses(1)
$
75,026
$
37,433
Depreciation and amortization
6,441
5,632
Reorganization expenses
15,536
-
Expense on convertible notes
1,174
1,180
Provision for income taxes
16
14
Adjusted EBITDA
$
(31,061
)
$
(20,339
)
Adjusted EBITDA Margin
(30
)%
(16
)%
(1) Payroll tax expenses include the
employer payroll tax-related expense on employee stock
transactions, as the amount is dependent on our stock price and
other factors that are beyond our control and do not correlate to
the operation of our business.
UPSTART HOLDINGS, INC.
RECONCILIATION OF GAAP TO
NON-GAAP FINANCIAL MEASURES
(In Thousands, Except Share
and Per Share Data)
(Unaudited)
Three Months Ended March
31,
2023
2024
Net loss
$
(129,254
)
$
(64,598
)
Adjusted to exclude the following:
Stock-based compensation and certain
payroll tax expenses(1)
75,026
37,433
Reorganization expenses
15,536
-
Adjusted Net Loss
$
(38,692
)
$
(27,165
)
Net loss per share:
Basic
$
(1.58
)
$
(0.74
)
Diluted
$
(1.58
)
$
(0.74
)
Adjusted Net Loss per Share:
Basic
$
(0.47
)
$
(0.31
)
Diluted
$
(0.47
)
$
(0.31
)
Weighted-average common shares
outstanding:
Basic
81,911,433
87,030,695
Diluted
81,911,433
87,030,695
(1) Payroll tax expenses include the
employer payroll tax-related expense on employee stock
transactions, as the amount is dependent on our stock price and
other factors that are beyond our control and do not correlate to
the operation of our business.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240507243454/en/
Press press@upstart.com
Investors Jason Schmidt Vice President, Investor
Relations ir@upstart.com
Upstart (NASDAQ:UPST)
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