Upstart Holdings, Inc. · NASDAQ:UPST
Upstart — Q2 2023 Earnings Presentation
33 slides from Upstart's earnings presentation, Aug 8, 2023
Slide 1: Q2 2023 Earnings
Q2 2023 Earnings August 8, 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 2.7M+ $34B+ 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: Q2'23 Summary
Q2’23 Summary Revenue Income from Operations Contribution Profit Margin Net Income Adjusted EBITDA $135.8M ($33.3M) 67% ($28.2M) $11.0M -40% y/y from ($32.1M) in Q2’22 vs 47% in Q2’22 from ($29.9M) in Q2’22 from $5.5.M in Q2’22 Highlights 87% 12 New patent pending 38% 1 Of loans fully Additional stat
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 70 billion 1 approve more applicants at lower APRs. cells of performance data with an
Slide 7: More efficient borrowing and lending
More efficient borrowing and lending Enabled by better AI and more sophisticated risk models 83 Net promoter score Borrowers love Upstart with 42K+ rating us ‘Excellent’ on Trustpilot1 87% of loans are instantly approved and fully automated2 70% of borrowers apply through a mobile phone3 1 as of 6/30
Slide 8: Expanding our footprint
Expanding our footprint Product, borrower, and funding diversification can drive growth and provide greater resilience through market cycles 100 61 1 1 HELOC Lending partners, up Dealerships now Started pilot program from 71 a year ago, offering Upstart in Colorado and 10 at IPO powered loans, from 3
Slide 9: Consumer and Credit Trends
Consumer and Credit Trends
Slide 10: UMI and consumer trends
UMI and consumer trends Increasing macroeconomic risk reflects both the unwinding of Q1’s favorable seasonality, and a pause in the recovery of key consumer trends June consumer trends 1.80 June UMI 4.3% Personal savings1 rate* 1.68 1.60 2 vs 4.6% in March 1.40 1.20 4.4% CPI (Inflation)* 1 1.00 vs 4.9
Slide 11: Upstart loan performance
Upstart loan performance Most recent vintages are now expected to deliver 11%+ gross returns1 Expected gross realized returns have increased from 3.5% in Q1’22 to 11.5% for Q1’231 If an investor invested equally in all Upstart cohorts, they would now expect a 9.7% gross annualized return against a b
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 1.1% 3.4% 6.0% 8.4% 13.0% 4.5% a steadily increasing default rate from Above 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 $ 2.2T1 Small Business 895B4 Auto $ 755B2 Personal $ 170B3 1 Total mortgage originations using data provided by TransUnion for Q1 2022 – Q4 2022 2 Total auto loans using data provided by TransUnion for Q1 2022 –
Slide 16: Financial Summary
Financial Summary
Slide 17: Q2'23 summary P&L and non-GAAP metrics
Q2’23 summary P&L and non-GAAP metrics (in millions, except ratios and per share data) Q2’23 Q1’23 Q|Q Q2’22 Y|Y Revenue $135.8 $102.9 32% $228.2 (40%) Revenue from Fees $143.7 $117.1 23% $258.3 (44%) Income (Loss) from Operations ($33.3) ($131.8) n/a ($32.1) n/a Net Income (Loss) ($28.2) ($129.3) n
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) Q2’23 Q1’23 Q2’22 Cash and Restricted Cash $509.9 $451.9 $914.4 Loans, Notes, and Residuals $841.5 $987.3 $628.5 Total Assets $1,763.7 $1,821.7 $1,9
Slide 19: Loans Held on Balance sheet
Loans Held on Balance sheet Fair Value (in millions, except ratios) Q2’23 Q1’23 Q2’22 Testing and Evaluation (R&D)1 $493 $493 $484 Auto $413 $401 $385 Other $80 $92 $99 Core Personal $345 $489 $140 Total $838 $982 $624 1. “R&D Loans” are loans that were originated on our platform that we hold on our
Slide 20: Committed Capital Co-Investment Summary
Committed Capital Co-Investment Summary in millions, except ratios Q1’23 Q2’23 As of June 30, Upstart has invested $40.2M in Initial capital co-invested - $40.2 risk-sharing linked to credit performance as part of our committed capital arrangements. Current assessed value - $51.7 (undiscounted) The
Slide 21: Lending by Product
Lending by Product (in millions, except number of loans and ratios) Personal Unsecured Q2’23 Q1’23 Q|Q Q2’22 Y|Y Number of Loans 106,919 82,070 30% 311,245 (66%) Transaction Dollars $1,120 $952 18% $3,080 (64%) Auto Secured Q2’23 Q1’23 Q|Q Q2’22 Y|Y Number of Loans 2,528 2,014 26% 9,893 (74%) Transa
Slide 22: Outlook
Outlook Q3’23 Revenue approximately $140 million Revenue From Fees approximately $150 million Net Interest Income (Loss) approximately ($10) million Contribution Margin approximately 65% Net Income (Loss) approximately ($38) million Non-GAAP Adjusted Net Income (Loss)1 approximately ($2) million Adj
Slide 23: Financial Appendix
Financial Appendix
Slide 24: Financial Statements
Financial Statements (in thousands, except share and per share data) December 31, 2022 June 30, 2023 Assets Cash $ 422,411 $ 443,672 Restricted cash 110,056 66,221 Loans (at fair value) 1,010,421 837,565 Property, equipment, and software, net 44,168 47,010 Operating lease right of use assets 86,335
Slide 25: Financial Statements
Financial Statements (in thousands, except share and per share data) Three Months Ended June 30, Six Months Ended June 30, 2022 2023 2022 2023 Revenue: Revenue from fees, net $ 258,345 $ 143,689 $ 572,327 $ 260,830 Interest income and fair value adjustments, net: Interest income 28,974 33,916 44,108
Slide 26: Financial Statements
Financial Statements (in thousands, except share and per share data) Six Months Ended June 30, 2022 2023 Cash flows from operating activities Net income (loss) $ 2,821 $ (157,419) 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) Six Months Ended June 30, 2022 2023 Cash flows from investing activities Purchase of loans held-for-investment (13,876) (83,868) Proceeds from sale of loans held-for-investment 83 — Principal payments received for loans held-for-inv
Slide 28: Reconciliation of non-GAAP financial measures
Reconciliation of non-GAAP financial measures (in thousands, except ratios) Three Months Ended June 30, Six Months Ended June 30, 2022 2023 2022 2023 Revenue from fees, net $ 258,345 $ 143,689 $ 572,327 $ 260,830 Income (loss) from operations (32,107) (33,344) 2,726 (165,179) Operating Margin (12)% (
Slide 29: Reconciliation of non-GAAP financial measures
Reconciliation of non-GAAP financial measures (in thousands, except ratios) Three Months Ended June 30, Six Months Ended June 30, 2022 2023 2022 2023 Total revenue $ 228,162 $ 135,766 $ 538,298 $ 238,693 Net income (loss) (29,871) (28,165) 2,821 (157,419) Net Income (Loss) Margin (13)% (21)% 1% (66)%
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 June 30, Six Months Ended June 30, 2022 2023 2022 2023 Net income (loss) $ (29,871) $ (28,165) $ 2,821 $ (157,419) Adjusted to exclude the following: Stock-based compensation and certain
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