Upstart Holdings, Inc. (NASDAQ: UPST), the leading artificial
intelligence (AI) lending marketplace, today announced financial
results for its second quarter of fiscal year 2024 ended June 30,
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.
“The guidance we released today demonstrates that we’re on track
toward resuming our role as the fintech known for high growth and
healthy margins,” said Dave Girouard, CEO, Upstart. “The
improvements in our business are coming from significant advances
in our AI model, a revitalized funding supply, and increased
operating efficiency. These wins and more are providing the
foundation for the Upstart comeback story.”
Second Quarter 2024 Financial Highlights
- Revenue. Total revenue was $128 million, a decrease of
6% from the second quarter of 2023, and remained flat sequentially.
Total fee revenue was $131 million, a decrease of 9%
year-over-year.
- Transaction Volume and Conversion Rate. 143,900 loans
were originated, totaling $1.1 billion across our platform in the
second quarter of 2024, down 6% from the same quarter of the prior
year. Conversion on rate requests was 15% in the second quarter of
2024, up from 9% in the same quarter of the prior year.
- Income (Loss) from Operations. Income (loss) from
operations was ($55.5) million, down from ($33.3) million in the
same quarter of the prior year.
- Net Income (Loss) and EPS. GAAP net income (loss) was
($54.5) million, down from ($28.2) million in the second quarter of
the prior year. Adjusted net income (loss) was ($15.3) million,
down from $5.4 million in the same quarter of the prior year.
Accordingly, GAAP diluted earnings per share was ($0.62), and
diluted adjusted earnings per share was ($0.17) based on the
weighted-average common shares outstanding during the quarter.
- Contribution Profit. Contribution profit was $76.1
million in the second quarter of 2024, down 21% year-over-year,
with a contribution margin of 58% compared to a 67% contribution
margin in the same quarter of the prior year.
- Adjusted EBITDA. Adjusted EBITDA was ($9.3) million,
down from $11.0 million in the same quarter of the prior year. The
second quarter 2024 adjusted EBITDA margin was (7%) of total
revenue, down from 8% in the same quarter of the prior year.
Financial Outlook
For the third quarter of 2024, Upstart expects:
- Revenue of approximately $150 million
- Revenue From Fees of approximately $155 million
- Net Interest Income (Loss) of approximately ($5)
million
- Contribution Margin of approximately 57%
- Net Income (Loss) of approximately ($49) million
- Adjusted Net Income (Loss) of approximately ($14)
million
- Adjusted EBITDA of approximately ($5) million
- Basic Weighted-Average Share Count of approximately 90.0
million shares
- Diluted Weighted-Average Share Count of approximately
90.0 million shares
For the second half of 2024, Upstart expects:
- Revenue from fees of approximately $320 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 August
6, 2024. To access the call in the United States and Canada: +1
888-394-8218, conference code 9076016. To access the call outside
of the United States and Canada: +1 313-209-4906, conference code
9076016. 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,
home equity lines of credit, 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 third quarter of 2024 and the second half of 2024, and being on
track toward resuming our role as the fintech known for high growth
and healthy margins. 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.
CONDENSED CONSOLIDATED BALANCE
SHEETS
(In Thousands, Except Share
and Per Share Data)
(Unaudited)
December 31, 2023 June 30, 2024 Assets
Cash
$
368,405
$
374,791
Restricted cash
99,382
185,827
Loans (at fair value) (1)
1,156,413
820,628
Property, equipment, and software, net
42,655
39,728
Operating lease right of use assets
54,694
49,144
Beneficial interest assets (at fair value)
41,012
97,804
Non-marketable equity securities
41,250
41,250
Goodwill
67,062
67,062
Other assets (includes $48,897 and $50,860 at fair value as of
December 31, 2023 and June 30, 2024, respectively)
146,227
143,990
Total assets
$
2,017,100
$
1,820,224
Liabilities and Stockholders’ Equity Liabilities: Payable to
investors
$
53,580
$
65,502
Borrowings
1,040,424
912,727
Payable to securitization note holders (at fair value)
141,416
113,652
Accrued expenses and other liabilities (includes $10,510 and
$16,663 fair value as of December 31, 2023 and June 30, 2024,
respectively)
84,051
77,259
Operating lease liabilities
62,324
56,374
Total liabilities
1,381,795
1,225,514
Stockholders’ equity: Common stock, $0.0001 par value; 700,000,000
shares authorized; 86,330,303 and 89,084,180 shares issued and
outstanding as of December 31, 2023 and June 30, 2024, respectively
9
9
Additional paid-in capital
917,872
996,345
Accumulated deficit
(282,576)
(401,644)
Total stockholders’ equity
635,305
594,710
Total liabilities and stockholders’ equity
$
2,017,100
$
1,820,224
(1)
Includes $179.1 million and
$135.1 million of loans, at fair value, contributed as collateral
for the consolidated securitization, as of December 31, 2023 and
June 30, 2024, respectively.
UPSTART HOLDINGS, INC.
CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS and COMPREHENSIVE LOSS
(In Thousands, Except Share
and Per Share Data)
(Unaudited)
Three Months Ended June
30,
Six Months Ended June
30,
2023
2024
2023
2024
Revenue: Revenue from fees, net
$
143,689
$
130,532
$
260,830
$
268,600
Interest income, interest expense, and fair value adjustments, net:
Interest income (1)
33,916
52,883
79,231
104,054
Interest expense (1)
(4,282)
(11,470)
(11,414)
(22,184)
Fair value and other adjustments (1)
(37,557)
(44,315)
(89,954)
(95,046)
Total interest income, interest expense, and fair value
adjustments, net
(7,923)
(2,902)
(22,137)
(13,176)
Total revenue
135,766
127,630
238,693
255,424
Operating expenses: Sales and marketing
23,891
32,958
55,329
68,108
Customer operations
36,797
38,684
77,387
78,092
Engineering and product development
57,974
58,453
168,045
121,544
General, administrative, and other
50,448
53,021
103,111
110,634
Total operating expenses
169,110
183,116
403,872
378,378
Loss from operations
(33,344)
(55,486)
(165,179)
(122,954)
Other income, net
5,197
1,031
7,794
3,915
Net loss before income taxes
(28,147)
(54,455)
(157,385)
(119,039)
Provision for income taxes
18
15
34
29
Net loss
$
(28,165)
$
(54,470)
$
(157,419)
$
(119,068)
Net loss per share, basic
$
(0.34)
$
(0.62)
$
(1.91)
$
(1.36)
Net loss per share, diluted
$
(0.34)
$
(0.62)
$
(1.91)
$
(1.36)
Weighted-average number of shares outstanding used in computing net
loss per share, basic
83,130,638
88,435,893
82,524,403
87,733,294
Weighted-average number of shares outstanding used in computing net
loss per share, diluted
83,130,638
88,435,893
82,524,403
87,733,294
(1)
Balances for the three months
ended June 30, 2024 include $7.7 million of interest income, ($2.5)
million of interest expense, and ($9.3) million of fair value and
other adjustments, net related to the consolidated securitization.
Balances for the six months ended June 30, 2024 include $16.3
million of interest income, ($5.3) million of interest expense, and
($19.9) million of fair value and other adjustments, net related to
the consolidated securitization.
UPSTART HOLDINGS, INC.
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)
Six Months Ended June 30,
2023
2024
Cash flows from operating activities Net loss
$
(157,419)
$
(119,068)
Adjustments to reconcile net loss to net cash provided by operating
activities: Change in fair value of loans
90,341
103,778
Change in fair value of servicing assets
10,165
8,201
Change in fair value of servicing liabilities
(1,468)
(817)
Change in fair value of beneficial interest assets
1,956
(1,067)
Change in fair value of beneficial interest liabilities
(85)
9,344
Change in fair value of other financial instruments
(2,271)
(4,316)
Stock-based compensation
106,705
69,986
Gain on loan servicing rights, net
(6,960)
(5,897)
Depreciation and amortization
10,866
10,460
Non-cash interest expense
1,533
1,541
Other
(1,917)
(6,084)
Net changes in operating assets and liabilities: Purchases of loans
held-for-sale
(1,250,346)
(1,570,013)
Proceeds from sale of loans held-for-sale
1,266,604
1,491,994
Principal payments received for loans held-for-sale
101,829
115,335
Principal payments received for loans held by consolidated
securitization
-
24,714
Payments on beneficial interest liabilities
-
(2,367)
Other assets
(3,826)
5,722
Operating lease liability and right-of-use asset
1,438
(400)
Payable to investors for beneficial interest assets (1)
4,108
-
Accrued expenses and other liabilities
(29,657)
(13,129)
Net cash provided by operating activities
$
141,596
$
117,917
Cash flows from investing activities Purchases and
originations of loans held-for-investment
(83,868)
(110,941)
Principal payments received for loans held-for-investment
50,427
60,207
Principal payments received for notes receivable and repayments of
residual certificates
2,996
2,681
Purchases of property and equipment
(1,150)
(721)
Capitalized software costs
(6,324)
(3,356)
Acquisition of beneficial interest assets
(26,427)
(63,246)
Proceeds from beneficial interest assets
-
1,729
Net cash used in investing activities
$
(64,346)
$
(113,647)
Cash flows from financing activities Proceeds from
borrowings
340,370
247,510
Repayments of borrowings
(397,644)
(154,999)
Principal payments made on securitization notes
-
(28,446)
Payable to investors (1)
(54,944)
17,714
Proceeds from issuance of common stock under employee stock
purchase plan
5,728
4,565
Proceeds from exercise of stock options
6,672
2,219
Taxes paid related to net share settlement of equity awards
(6)
(2)
Net cash used in financing activities
(99,824)
88,561
Change in cash and restricted cash
(22,574)
92,831
Cash and restricted cash Cash and restricted cash at
beginning of period
532,467
467,787
Cash and restricted cash at end of period
$
509,893
$
560,618
(1)
During the second quarter of
2024, the Company elected to change the presentation of changes in
the payable to investors balance on the condensed consolidated
statement of cash flows. Under the new presentation, a portion of
the payable to investors balance related to fiduciary cash was
reclassified from operating to financing activities.
UPSTART HOLDINGS, INC.
RECONCILIATION OF GAAP TO
NON-GAAP FINANCIAL MEASURES
(In Thousands, Except Share
and Per Share Data)
(Unaudited)
Three Months Ended June
30,
Six Months Ended June
30,
2023
2024
2023
2024
Revenue from fees, net
$
143,689
$
130,532
$
260,830
$
268,600
Loss from operations
(33,344)
(55,486)
(165,179)
(122,954)
Operating Margin
(23%)
(43%)
(63%)
(46%)
Sales and marketing, net of borrower acquisition costs (1)
$
4,842
$
9,741
$
16,568
$
20,072
Customer operations, net of borrower verification and servicing
costs (2)
8,079
7,486
18,863
14,787
Engineering and product development
57,974
58,453
168,045
121,544
General, administrative, and other
50,448
53,021
103,111
110,634
Interest income, interest expense, and fair value adjustments, net
7,923
2,902
22,137
13,176
Contribution Profit
$
95,922
$
76,117
$
163,545
$
157,259
Contribution Margin
67%
58%
63%
59%
(1)
Borrower acquisition costs were
$19.0 million, and $23.2 million for the three months ended June
30, 2023 and 2024, respectively, and were $38.8 million, and $48.0
million for the six months ended June 30, 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.
(2)
Borrower verification and
servicing costs were $28.7 million, and $31.2 million for the three
months ended June 30, 2023 and 2024, respectively, and were $58.5
million, and $63.3 million for the six months ended June 30, 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.
UPSTART HOLDINGS, INC.
RECONCILIATION OF GAAP TO
NON-GAAP FINANCIAL MEASURES
(In Thousands, Except Share
and Per Share Data)
(Unaudited)
Three Months Ended June
30,
Six Months Ended June
30,
2023
2024
2023
2024
Total revenue
$
135,766
$
127,630
$
238,693
$
255,424
Net loss
(28,165)
(54,470)
(157,419)
(119,068)
Net Loss Margin
(21%)
(43%)
(66%)
(47%)
Adjusted to exclude the following: Stock-based compensation and
certain payroll tax expenses (1)
$
33,519
$
35,410
$
108,545
$
72,843
Depreciation and amortization
4,425
4,828
10,866
10,460
Reorganization expenses
-
3,778
15,536
3,778
Expense on convertible notes
1,176
1,183
2,350
2,363
Provision for income taxes
18
15
34
29
Adjusted EBITDA
$
10,973
$
(9,256)
$
(20,088)
$
(29,595)
Adjusted EBITDA Margin
8%
(7%)
(8%)
(12%)
(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 June
30,
Six Months Ended June
30,
2023
2024
2023
2024
Net loss
$
(28,165)
$
(54,470)
$
(157,419)
$
(119,068)
Adjusted to exclude the following: Stock-based compensation and
certain payroll tax expenses (1)
33,519
35,410
108,545
72,843
Reorganization expenses
-
3,778
15,536
3,778
Adjusted Net Income (Loss)
$
5,354
$
(15,282)
$
(33,338)
$
(42,447)
Net loss per share: Basic
$
(0.34)
$
(0.62)
$
(1.91)
$
(1.36)
Diluted
$
(0.34)
$
(0.62)
$
(1.91)
$
(1.36)
Adjusted Net Income (Loss) per Share: Basic
$
0.06
$
(0.17)
$
(0.40)
$
(0.48)
Diluted
$
0.06
$
(0.17)
$
(0.40)
$
(0.48)
Weighted-average common shares outstanding: Basic
83,130,638
88,435,893
82,542,403
87,733,294
Diluted
91,026,284
88,435,893
82,524,403
87,733,294
(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/20240806364099/en/
Press press@upstart.com
Investors ir@upstart.com
Upstart (NASDAQ:UPST)
Historical Stock Chart
From Sep 2024 to Oct 2024
Upstart (NASDAQ:UPST)
Historical Stock Chart
From Oct 2023 to Oct 2024