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Upstart Announces First Quarter 2024 Results

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.

 

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