Upstart Holdings, Inc. · NASDAQ:UPST
Upstart — Q3 2023 Earnings Presentation
33 slides from Upstart's earnings presentation, Nov 7, 2023
Slide 1: Q3 2023 Earnings
Q3 2023 Earnings November 7, 2023
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 2.8M+ $35B+ 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, le
Slide 4: Q3'23 Summary
Q3’23 Summary Revenue Income from Operations Contribution Profit Margin Net Income Adjusted EBITDA $134.6M ($43.8M) 64% ($40.3M) $2.3M -14% y/y from ($58.1M) in Q3’22 vs 54% in Q3’22 from ($56.2M) in Q3’22 from ($14.4M) in Q3’22 Highlights Seasonality 88% 70% 1 integrated to 15% HELOC Of loans fully
Slide 5: Key Investment Areas
1 Best rates for all Key Investment Areas 2 More efficient borrowing and lending 3 Expanding our footprint
Slide 6: 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 Upstart models train on over 120 billion cells 1 approve more applicants at lower APRs. of performance data with a
Slide 7: More efficient borrowing and lending
More efficient borrowing and lending Enabled by better AI and more sophisticated risk models 85 1 Net promoter score Borrowers love Upstart with 42K+ rating us ‘Excellent’ on Trustpilot2 88% of loans are instantly approved and fully automated3 70% of borrowers apply through a mobile phone4 1 as of 9/
Slide 8: Expanding our footprint
Expanding our footprint Product, borrower, and funding diversification can drive growth and provide greater resilience through market cycles Auto 100+ HELOC 1 1 Signed two of the OEM nation's largest non-prime auto Banks and Credit Unions, Partnership to power lenders as newest Live in: up from 10 at
Slide 9: Consumer and Credit Trends
Consumer and Credit Trends
Slide 10: 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 September consumer trends September UMI 3.4% Personal savings rate* 1.64 1 2 vs 4.9% in June 5.0% CPI (Inflation)* 1 vs 5.6% in June -1.9% M|M 62.8% Labor force p
Slide 11: Upstart loan performance
Upstart loan performance Most recent vintages are now expected to deliver ~12%+ gross returns1 Expected gross realized returns have increased from 5.5% in Q2’22 to 12.5% for Q2’231 If an investor invested equally in all Upstart cohorts, they would now expect a 9.9% gross annualized return against a
Slide 12: Impact and Scale
Impact and Scale
Slide 13: 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 14: 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 Upstart’s risk grades predict 700 or Above 1.1% 3.3% 6.0% 8.3% 12.9% 4.4% a steadily increasing default rate from left to right as the borrowers get
Slide 15: Upstart's marketplace
Upstart’s marketplace Total addressable market of $4T in annual loan originations $ Home $ 1.8T1 Small Business 895B4 Auto $ 731B2 Personal $ 160B3 1 Total mortgage originations using data provided by TransUnion for Q2 2022 – Q1 2023 2 Total auto loans using data provided by TransUnion for Q2 2022 –
Slide 16: Financial Summary
Financial Summary
Slide 17: Q3'23 summary P&L and non-GAAP metrics
Q3’23 summary P&L and non-GAAP metrics (in millions, except ratios and per share data) Q3’23 Q2’23 Q|Q Q3’22 Y|Y Revenue $134.6 $135.8 (1%) $157.2 (14%) Revenue from Fees $146.8 $143.7 2% $179.3 (18%) Income (Loss) from Operations ($43.8) ($33.3) n/a ($58.1) n/a Net Income (Loss) ($40.3) ($28.2) n/a
Slide 18: 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) Q3’23 Q2’23 Q3’22 Cash and Restricted Cash $615.0 $509.9 $829.9 Loans, Notes, and Residuals $975.1 $841.5 $703.9 Total Assets $2,001.8 $1,763.7 $1,9
Slide 19: Loans Held on Balance Sheet
Loans Held on Balance Sheet Fair Value (in millions, except ratios) Q3’23 Q2’23 Q3’22 Testing and Evaluation (R&D)1 $447 $493 $451 Auto $380 $413 $398 In Q3, we completed an asset-backed securitization and Other $67 $80 $53 retained the full residual equity, which required us to consolidate Core Per
Slide 20: Committed Capital Co-Investment Summary
Committed Capital Co-Investment Summary in millions, except ratios Q3’23 Q2’23 Q3’22 As of September 30, Upstart has Capital co-invested $66.1 $40.2 - invested $66.1M linked to credit performance as part of our committed capital arrangements. Current assessed value $73.1 $51.7 - (undiscounted) The v
Slide 21: Lending by Product
Lending by Product (in millions, except number of loans and ratios) Personal Unsecured Q3’23 Q2’23 Q|Q Q3’22 Y|Y Number of Loans 113,252 106,919 6% 185,663 (39%) Transaction Dollars $1,190 $1,120 6% $1,794 (33%) Auto Secured Q3’23 Q2’23 Q|Q Q3’22 Y|Y Number of Loans 1,208 2,528 (52%) 2,856 (58%) Tra
Slide 22: Outlook
Outlook Q4’23 Revenue approximately $135 million Revenue From Fees approximately $150 million Net Interest Income (Loss) approximately ($15) million Contribution Margin Approximately 62% Net Income (Loss) approximately ($48) million Non-GAAP Adjusted Net Income (Loss)1 approximately ($14) million Ad
Slide 23: Financial Appendix
Financial Appendix
Slide 24: Financial Statements
Financial Statements (in thousands, except share and per share data) December 31, 2022 September 30, 2023 Assets Cash $ 422,411 $ 516,581 Restricted cash 110,056 98,447 Loans (at fair value) (1) 1,010,421 972,336 Property, equipment, and software, net 44,168 48,010 Operating lease right of use asset
Slide 25: Financial Statements
Financial Statements (in thousands, except share and per share data) Three Months Ended September 30, Nine Months Ended September 30, 2022 2023 2022 2023 Revenue: Revenue from fees, net $ 179,348 $ 146,755 $ 751,675 $ 407,585 Interest income and fair value adjustments, net: Interest income (1) 22,18
Slide 26: Financial Statements
Financial Statements (in thousands, except share and per share data) Nine Months Ended September 30, 2022 2023 Cash flows from operating activities Net loss $ (53,402) $ (197,734) Adjustments to reconcile net income (loss) to net cash used in operating activities: Change in fair value of financial ins
Slide 27: Financial Statements
Financial Statements (in thousands, except share and per share data) Nine Months Ended September 30, 2022 2023 Cash flows from investing activities Purchase of loans held-for-investment (55,294) (121,294) Proceeds from sale of loans held-for-investment 11,993 774 Principal payments received for loans
Slide 28: Reconciliation of non-GAAP financial measures
Reconciliation of non-GAAP financial measures (in thousands, except ratios) Three Months Ended September 30, Nine Months Ended September 30, 2022 2023 2022 2023 Revenue from fees, net $ 179,348 $ 146,755 $ 751,675 $ 407,585 Loss from operations (58,091) (43,845) (55,365) (209,024) Operating Margin (3
Slide 29: Reconciliation of non-GAAP financial measures
Reconciliation of non-GAAP financial measures (in thousands, except ratios) Three Months Ended September 30, Nine Months Ended September 30, 2022 2023 2022 2023 Total revenue $ 157,233 $ 134,557 $ 695,531 $ 373,250 Net loss (56,223) (40,315) (53,402) (197,734) Net Loss Margin (36)% (30)% (8)% (53)% A
Slide 30: Reconciliation of non-GAAP financial measures
Reconciliation of non-GAAP financial measures (in thousands, except ratios, and per share data) Three Months Ended September 30, Nine Months Ended September 30, 2022 2023 2022 2023 Net loss $ (56,223) $ (40,315) $ (53,402) $ (197,734) Adjusted to exclude the following: Stock-based compensation and ce
Slide 31: 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 32: 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 33: Thank You
Thank You