Upstart Holdings, Inc. · NASDAQ:UPST
Upstart — Q4 2023 Earnings Presentation
37 slides from Upstart's earnings presentation, Feb 13, 2024
Slide 1: Q4 and FY 2023 Earnings
Q4 and FY 2023 Earnings February 13, 2024
Slide 2: Disclaimer
Disclaimer 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 presentati
Slide 3: Upstart is the leading AI lending marketplace
Upstart is the leading AI lending marketplace 2.9M $36B 100+ 1 1 2 Customers Originations Banks We connect millions of customers to 100+ banks and credit unions who leverage Upstart’s artificial intelligence (AI) models and cloud applications to deliver superior credit products. With Upstart AI, lend
Slide 4: Q4'23 Summary
Q4’23 Summary Revenue Income from Operations Contribution Profit Margin Net Income Adjusted EBITDA $140.3M ($47.5M) 63% ($42.4M) $0.6M -4% y/y from ($58.5M) in Q4’22 vs 53% in Q4’22 from ($55.3M) in Q4’22 from ($16.6M) in Q4’22 Highlights 1 89% 66% 88 Servicing HELOC Of loans fully automated, Reducti
Slide 5: FY23 Summary
FY23 Summary Revenue Income from Operations Contribution Profit Margin Net Income Adjusted EBITDA $514M ($257M) 63% ($240M) ($17.2M) -39% y/y from ($114M) in FY22 vs 49% in FY22 from ($109M) in FY22 from $37.2M in FY22 Highlights Small Dollar 49% UMI PTCC Loans HELOC of total Q4 transaction Launched
Slide 6: Key Investment Areas
1 Best rates for all Key Investment Areas 2 More efficient borrowing and lending 3 Expanding our footprint
Slide 7: Best rates for all
Best rates for all AI provides superior risk separation, leading to higher approvals and lower APRs Upstart's model is more accurate than traditional lending models; allowing lenders to Powered by more than 1,600 variables, Upstart 1 approve more applicants at lower APRs. models are trained on more
Slide 8: More efficient borrowing and lending
More efficient borrowing and lending Enabled by better AI and more sophisticated risk models 84 Net promoter score Borrowers love Upstart with 42K+ rating us ‘Excellent’ on Trustpilot1 89% of loans are instantly approved and fully automated2 92% of instantly approved borrowers fund their loan, over 3
Slide 9: Expanding our footprint
Expanding our footprint Product, borrower, and funding diversification can drive growth and provide greater resilience through market cycles 100+ 88 49% HELOC 1 1 of total Q4 transaction Banks and Credit Dealer rooftops now Now live in: volume was Unions, up from 10 at offer Upstart auto CO, WA, MI,
Slide 10: Consumer and Credit Trends
Consumer and Credit Trends
Slide 11: UMI and consumer trends
UMI and consumer trends Macroeconomic risk to consumer credit is holding steady reflecting the pause in the recovery of key consumer trends December consumer trends December UMI 3.7% Personal savings rate* 1.65 1 2 vs 4.1% in November 4.6% CPI (Inflation)* 1 vs 4.7% in November -2.9 M|M 62.5% Labor fo
Slide 12: Upstart loan performance
Upstart loan performance Most recent vintages are now expected to deliver ~13% gross returns1 If an investor invested equally in all Upstart cohorts, they would now expect inline annualized returns against a blended target of 9.0%2,3 Target cash flows Expected cash flows Over/under performance Upside/
Slide 13: Impact and Scale
Impact and Scale
Slide 14: Upstart's impact
Upstart’s impact Dedicated to expanding access to credit for all “Money is a fundamental ingredient of life, and unless you’re one of the few percent of Americans with significant wealth, the price and difficulty of borrowing affects you every day. Throughout history, affordable credit has been centra
Slide 15: Upstart risk separation
Upstart risk separation Significantly better at differentiating risk than credit scores Annualized default rates1 Upstart Risk Grades A+ B C D E- Average 700 or Upstart’s risk grades predict 1.2% 3.4% 5.9% 8.3% 12.9% 4.4% a steadily increasing default rate from Above left to right as the borrowers get
Slide 16: Upstart's marketplace
Upstart’s marketplace Total addressable market of $3T in annual loan originations $ Home $ 1.5T1 Small Business 895B4 Auto $ 707B2 Personal $ 156B3 1 Total mortgage originations using data provided by TransUnion for Q3 2022 – Q2 2023 2 Total auto loans using data provided by TransUnion for Q3 2022 –
Slide 17: Financial Summary
Financial Summary
Slide 18: Q4'23 summary P&L and non-GAAP metrics
Q4’23 summary P&L and non-GAAP metrics (in millions, except ratios and per share data) Q4’23 Q3’23 Q|Q Q4’22 Y|Y Revenue $140.3 $134.6 4% $146.9 (4%) Revenue from Fees $152.8 $146.8 4% $155.6 (2%) Income (Loss) from Operations ($47.5) ($43.8) n/a ($58.5) n/a Net Income (Loss) ($42.4) ($40.3) n/a ($5
Slide 19: FY23 summary P&L and non-GAAP metrics
FY23 summary P&L and non-GAAP metrics (in millions, except ratios and per share data) FY23 FY22 Y|Y Revenue $513.6 $907.3 (39%) Revenue from Fees $560.4 $842.4 (38%) Income (Loss) from Operations ($256.5) ($113.9) n/a Net Income (Loss) ($240.1) ($108.7) n/a Adjusted Net Income (Loss) ($46.9) $19.4 n
Slide 20: Balance Sheet items and key operating metrics
Balance Sheet items and key operating metrics (in millions, except Transaction Volume (number of loans), % fully automated, ratios and conversion rate) Q4’23 Q3’23 Q4’22 Cash and Restricted Cash $467.8 $615.0 $532.5 Loans, Notes, and Residuals $1,171.3 $975.1 $1,016.6 Total Assets $2,017.1 $2,001.8
Slide 21: Loans Held on Balance Sheet
Loans Held on Balance Sheet Fair Value (in millions, except ratios) Q4’23 Q3’23 Q4’22 Testing and Evaluation (R&D)1 $411 $447 $492 In Q3, we completed an asset-backed securitization and Auto $343 $380 $398 retained the full residual equity, which required us to consolidate Other $68 $67 $94 the secu
Slide 22: Committed Capital Co-Investment Summary
Committed Capital Co-Investment Summary in millions, except ratios Q4’23 Q3’23 Q4’22 As of December 31, Upstart has Capital co-invested $98.5 $66.1 - invested $98.5M linked to credit performance as part of our committed capital arrangements. Current assessed value $95.0 $73.1 - (undiscounted) The va
Slide 23: Lending by Product
Lending by Product (in millions, except number of loans and ratios) Personal Unsecured Q4’23 Q3’23 Q|Q Q4’22 Y|Y Number of Loans 129,078 113,252 14% 152,120 (15%) Transaction Dollars $1,238 $1,190 4% $1,485 (17%) Auto Secured Q4’23 Q3’23 Q|Q Q4’22 Y|Y Number of Loans 542 1,208 (55%) 2,358 (77%) Tran
Slide 24: Outlook
Outlook Q1’24 Revenue approximately $125 million Revenue From Fees approximately $133 million Net Interest Income (Loss) approximately ($8) million Contribution Margin approximately 61% Net Income (Loss) approximately ($75) million Non-GAAP Adjusted Net Income (Loss)1 approximately ($33) million Adj
Slide 25: Financial Appendix
Financial Appendix
Slide 26: Financial Statements
Financial Statements (in thousands, except share and per share data) December 31, 2022 December 31, 2023 Assets Cash $ 422,411 $ 368,405 Restricted cash 110,056 99,382 Loans (at fair value) (1) 1,010,421 1,156,413 Property, equipment, and software, net 44,168 42,655 Operating lease right of use asse
Slide 27: Financial Statements
Financial Statements (in thousands, except share and per share data) Three Months Ended December 31, Year Ended December 31, 2022 2023 2022 2023 Revenue: Revenue from fees, net $ 155,597 $ 152,846 $ 907,272 $560,431 Interest income, interest expense, and fair value adjustments, net: Interest income
Slide 28: Financial Statements
Financial Statements (in thousands, except share and per share data) Year Ended December 31, 2022 2023 Cash flows from operating activities Net loss $ (108,665) $ (240,132) Adjustments to reconcile net loss to net cash used in operating activities: Change in fair value of financial instruments 168,878
Slide 29: Financial Statements
Financial Statements (in thousands, except share and per share data) Year Ended December 31, 2022 2023 Cash flows from investing activities Purchases and originations of loans held-for-investment $ (149,298) $ (157,223) Proceeds from sale of loans held-for-investment 14,289 972 Principal payments rec
Slide 30: Financial Statements
Financial Statements (in thousands, except share and per share data) Year Ended December 31, 2022 2023 Cash flows from financing activities Proceeds from borrowings $ 688,813 $ 626,910 Repayments of borrowings (400,898) (575,937) Principal payments made on securitization notes — (23,320) Proceeds from
Slide 31: Reconciliation of non-GAAP financial measures
Reconciliation of non-GAAP financial measures (in thousands, except ratios) Three Months Ended December 31, Year Ended December 31, 2022 2023 2022 2023 Revenue from fees, net $ 155,597 $ 152,846 $ 907,272 $ 560,431 Loss from operations (58,498) (47,501) (113,863) (256,525) Operating Margin (38)% (31)
Slide 32: Reconciliation of non-GAAP financial measures
Reconciliation of non-GAAP financial measures (in thousands, except ratios) Three Months Ended December 31, Year Ended December 31, 2022 2023 2022 2023 Total revenue $ 146,913 $ 140,312 $ 842,444 $ 513,562 Net loss (55,263) (42,398) (108,665) (240,132) Net Loss Margin (38)% (30)% (13)% (47)% Adjusted
Slide 33: Reconciliation of non-GAAP financial measures
Reconciliation of non-GAAP financial measures (in thousands, except ratios, and per share data) Three Months Ended December 31, Year Ended December 31, 2022 2023 2022 2023 Net loss $ (55,263) $ (42,398) $ (108,665) $ (240,132) Adjusted to exclude the following: Stock-based compensation and certain pa
Slide 34: Key Operating Metrics
Key Operating Metrics Key Operating Metrics We review a number of operating metrics, including transaction volume, $; transaction volume, number of loans; conversion rate; and percentage of loans fully automated, to evaluate our business, measure our performance, identify trends affecting our busines
Slide 35: Non-GAAP Financial Metrics
Non-GAAP Financial Metrics 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
Slide 36: Upstart loan performance
Upstart loan performance Most recent vintages are now expected to deliver ~13% gross returns1 Previous versions of this chart contained an error in the calculations of expected cash flows/returns and overstated certain of these numbers. The error had the largest impact on Q2’21 through Q4’22 vintages
Slide 37: Thank You
Thank You