Upstart Holdings, Inc. (NASDAQ: UPST), the leading artificial
intelligence (AI) lending marketplace, today announced financial
results for its fourth quarter and fiscal year 2023 ended December
31, 2023. 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.
“Despite the difficult lending environment, we delivered solid
results to end the year,” said Dave Girouard, CEO, Upstart. “The
numbers will show that we’ve actually become more efficient in
2023. And even while becoming more efficient, we’ve laid the
groundwork to become a more resilient and diversified company that
can thrive through a wide range of economic conditions.”
Fourth Quarter 2023 Financial Highlights
- Revenue. Total revenue was $140 million, a decrease of
4% from the fourth quarter of 2022, but up 4% sequentially. Total
fee revenue was $153 million, a decrease of 2% year-over-year.
- Transaction Volume and Conversion Rate. 129,664 loans
were originated, totaling $1.3 billion across our platform in the
fourth quarter of 2023, down 19% from the same quarter of the prior
year. Conversion on rate requests was 11.6% in the fourth quarter
of 2023, up from 10.5% in the same quarter of the prior year.
- Income (Loss) from Operations. Income (loss) from
operations was ($47.5) million, up from ($58.5) million in the same
quarter of the prior year.
- Net Income (Loss) and EPS. GAAP net income (loss) was
($42.4) million, up from ($55.3) million in the fourth quarter of
the prior year. Adjusted net income (loss) was ($9.7) million, up
from ($20.9) million in the same quarter of the prior year.
Accordingly, GAAP diluted earnings per share was ($0.50), and
diluted adjusted earnings per share was ($0.11) based on the
weighted-average common shares outstanding during the quarter.
- Contribution Profit. Contribution profit was $95.6
million in the fourth quarter of 2023, up 17% year-over-year, with
a contribution margin of 63% compared to a 53% contribution margin
in the same quarter of the prior year.
- Adjusted EBITDA. Adjusted EBITDA was $0.6 million, up
from ($16.6) million in the same quarter of the prior year. The
fourth quarter 2023 adjusted EBITDA margin was 0% of total revenue,
up from (11%) in the same quarter of the prior year.
Fiscal Year 2023 Financial Highlights
- Revenue. Total revenue was $514 million, a decrease of
39% from the prior year. Total fee revenue was $560 million, a
decrease of 38% year-over-year.
- Transaction Volume and Conversion Rate. 437,659 loans
were originated, totaling $4.6 billion across our platform in 2023,
down 59% from the prior year. Conversion on rate requests was 9.7%
in 2023, down from 14.1% in the prior year.
- Income (Loss) from Operations. Income (loss) from
operations was ($257) million, down from ($114) million in the
prior year.
- Net Income (Loss) and EPS. GAAP net income (loss) was
($240) million, down from ($109) million in the prior year.
Adjusted net income (loss) was ($46.9) million, down from $19.4
million in the prior year. Accordingly, GAAP diluted earnings per
share was ($2.87), and diluted adjusted earnings per share was
($0.56) based on the weighted-average common shares outstanding
during the year.
- Contribution Profit. Contribution profit was $353
million in 2023, down 21% year-over-year, with a contribution
margin of 63% compared to a 49% contribution margin in the prior
year.
- Adjusted EBITDA. Adjusted EBITDA was ($17.2) million,
down from $37.2 million in the prior year. 2023 adjusted EBITDA
margin was (3%) of total revenue, down from 4% in the prior
year.
Financial Outlook
For the first quarter of 2024, Upstart expects:
- Revenue of approximately $125 million
- Revenue From Fees of approximately $133 million
- Net Interest Income (Loss) of approximately ($8)
million
- Contribution Margin of approximately 61%
- Net Income (Loss) of approximately ($75) million
- Adjusted Net Income (Loss) of approximately ($33)
million
- Adjusted EBITDA of approximately ($25) million
- Basic Weighted-Average Share Count of approximately 87.0
million shares
- Diluted Weighted-Average Share Count of approximately
87.0 million shares
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 February
13, 2024. To access the call in the United States and Canada:
+1 888-256-1007, conference code 7615310. To access the call
outside of the United States and Canada: +1 313-209-4906,
conference code 7615310. 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 first quarter 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 facilitated on our marketplace during the
periods presented. We define “transaction volume, number of loans”
as the number of loan originations 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 and net gain on a lease modification. 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, acquisition-related costs, net gain
on a lease modification, 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)
December 31,
December 31
2022
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 assets
86,335
54,694
Beneficial interest assets (at fair
value)
-
41,012
Non-marketable equity securities
41,250
41,250
Goodwill
67,062
67,062
Other assets (includes $42,648 and $48,897
at fair value as of December 31, 2022 and December 31, 2023,
respectively)
154,351
146,227
Total assets
$
1,936,054
$
2,017,100
Liabilities and Stockholders’
Equity
Liabilities:
Accounts payable
$
18,715
$
12,613
Payable to investors
90,777
53,580
Borrowings
986,394
1,040,424
Payable to securitization note holders (at
fair value)
-
141,416
Accrued expenses and other liabilities
(includes $8,820 and $10,510 at fair value as of December 31, 2022
and December 31, 2023, respectively)
66,946
71,438
Operating lease liabilities
100,787
62,324
Total liabilities
1,263,619
1,381,795
Stockholders’ equity:
Common stock, $0.0001 par value;
700,000,000 shares authorized; 81,259,676 and 86,330,303 shares
issued and outstanding as of December 31, 2022 and December, 2023,
respectively
8
9
Additional paid-in capital
714,871
917,872
Accumulated deficit
(42,444
)
(282,576
)
Total stockholders’ equity
672,435
635,305
Total liabilities and stockholders’
equity
$
1,936,054
$
2,017,100
(1) As of December 31, 2023, includes
$179.1 million of loans, at fair value, contributed as collateral
for the consolidated securitization. No such loans were held as of
December 31, 2022.
UPSTART HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF
OPERATIONS and COMPREHENSIVE LOSS
(In Thousands, Except Share
and Per Share Data)
(Unaudited)
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 (1)
39,292
52,073
105,580
168,996
Interest expense (1)
(4,521
)
(14,066
)
(10,843
)
(34,894
)
Fair value and other adjustments (1)
(43,455
)
(50,541
)
(159,565
)
(180,971
)
Total interest income, interest expense,
and fair value adjustments, net
(8,684
)
(12,534
)
(64,828
)
(46,869
)
Total revenue
146,913
140,312
842,444
513,562
Operating expenses:
Sales and marketing
50,753
38,772
345,776
127,143
Customer operations
43,487
36,117
187,994
150,418
Engineering and product development
64,029
57,152
237,247
280,138
General, administrative, and other
47,142
55,772
185,290
212,388
Total operating expenses
205,411
187,813
956,307
770,087
Loss from operations
(58,498
)
(47,501
)
(113,863
)
(256,525
)
Other income, net
3,944
6,345
9,473
21,206
Expense on convertible notes
(1,173
)
(1,179
)
(4,684
)
(4,706
)
Net loss before income taxes
(55,727
)
(42,335
)
(109,074
)
(240,025
)
(Benefit) provision for income taxes
(464
)
63
(409
)
107
Net loss
$
(55,263
)
$
(42,398
)
$
(108,665
)
$
(240,132
)
Net loss per share, basic
$
(0.67
)
$
(0.50
)
$
(1.31
)
$
(2.87
)
Net loss per share, diluted
$
(0.67
)
$
(0.50
)
$
(1.31
)
$
(2.87
)
Weighted-average number of shares
outstanding used in computing net loss per share, basic
82,230,427
85,569,351
82,771,268
83,765,896
Weighted-average number of shares
outstanding used in computing net loss per share, diluted
82,230,427
85,569,351
82,771,268
83,765,896
(1) Balances for the three months ended
December 31, 2023 include $9.6 million of interest income, $(3.0)
million of interest expense, and $(5.9) million of fair value and
other adjustments, net related to the consolidated securitization.
Balances for the year ended December 31, 2023 include $19.7 million
of interest expense, $(6.7) million of interest expense, and $(5.5)
million of fair value and other adjustments, net related to the
consolidated securitization.
UPSTART HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF
CASH FLOWS
(In Thousands)
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
234,822
Stock-based compensation
125,945
175,039
Gain on loan servicing rights, net
(28,739
)
(13,713
)
Depreciation and amortization
13,513
24,903
Non-cash interest expense
3,047
3,057
Other
-
(3,869
)
Net changes in operating assets and
liabilities:
Purchases of loans held-for-sale
(7,807,429
)
(3,006,510
)
Proceeds from sale of loans
held-for-sale
6,828,617
2,514,627
Principal payments received for loans
held-for-sale
152,018
189,746
Principal payments received for loans held
by consolidated securitization
-
24,832
Settlements of beneficial interest
liabilities
-
(596
)
Other assets
4,173
(8,932
)
Operating lease liability and right-of-use
asset
10,204
(6,822
)
Accounts payable
11,878
(6,127
)
Payable to investors
(16,821
)
(42,989
)
Accrued expenses and other liabilities
(31,300
)
2,171
Net cash used in operating activities
(674,681
)
(160,493
)
UPSTART HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF
CASH FLOWS
(In Thousands)
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 received for loans
held-for-investment
43,311
102,446
Principal payments received for notes
receivable and repayments of residual certificates
6,736
4,328
Purchases of property and equipment
(8,825
)
(1,527
)
Capitalized software costs
(14,088
)
(10,559
)
Acquisition of beneficial interest
assets
-
(56,892
)
Purchases of non-marketable equity
securities
(1,250
)
-
Purchase of certificates of deposit
(5,000
)
-
Net cash used in investing activities
(114,125
)
(118,455
)
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 issuance of securitization
notes
-
165,318
Proceeds from issuance of common stock
under employee stock purchase plan
7,662
8,431
Proceeds from exercise of stock
options
12,354
12,881
Taxes paid related to net share settlement
of equity awards
(16
)
(15
)
Repurchases of common stock
(177,883
)
-
Net cash provided by financing
activities
130,032
214,268
Change in cash and restricted
cash
(658,774
)
(64,680
)
Cash and restricted cash at beginning of
year
1,191,241
532,467
Cash and restricted cash at end of
year
$
532,467
$
467,787
UPSTART HOLDINGS, INC.
RECONCILIATION OF GAAP TO
NON-GAAP FINANCIAL MEASURES
(In Thousands, Except Share
and Per Share Data)
(Unaudited)
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
)%
(13
)%
(46
)%
Sales and marketing, net of borrower
acquisition costs(1)
$
11,153
$
10,614
$
43,063
$
36,626
Customer operations, net of borrower
verification and servicing costs(2)
9,458
7,024
30,186
33,798
Engineering and product development
64,029
57,152
237,247
280,138
General, administrative, and other
47,142
55,772
185,290
212,388
Interest income, interest expense, and
fair value adjustments, net
8,684
12,534
64,828
46,869
Contribution Profit
$
81,968
$
95,595
$
446,751
$
353,294
Contribution Margin
53
%
63
%
49
%
63
%
(1) Borrower acquisition costs were $39.6
million and $28.2 million for the three months ended December 31,
2022 and 2023, respectively, and were $302.7 million and $90.5
million for the year ended December 31, 2022 and 2023,
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 $34.0 million and $29.1 million for the three months
ended December 31, 2022 and 2023, respectively, and were $157.8
million and $116.6 million for the year ended December 31, 2022 and
2023, 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 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 to exclude the following:
Stock-based compensation and certain
payroll tax expenses(1)
$
34,316
$
33,409
$
128,038
$
178,400
Depreciation and amortization
3,654
9,103
13,513
24,903
Reorganization expenses
-
-
-
15,536
Expense on convertible notes
1,173
1,179
4,684
4,706
Net gain on lease modification
-
(737
)
-
(737
)
(Benefit) provision for income taxes
(464
)
63
(409
)
107
Adjusted EBITDA
$
(16,584
)
$
619
$
37,161
$
(17,217
)
Adjusted EBITDA Margin
(11
)%
0
%
4
%
(3
)%
(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 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
payroll tax expenses(1)
34,316
33,409
128,038
178,400
Reorganization expenses
-
-
-
15,536
Net gain on lease modification
-
(737
)
-
(737
)
Adjusted Net Income (Loss)
$
(20,947
)
$
(9,726
)
$
19,373
$
(46,933
)
Net loss per share:
Basic
$
(0.67
)
$
(0.50
)
$
(1.31
)
$
(2.87
)
Diluted
$
(0.67
)
$
(0.50
)
$
(1.31
)
$
(2.87
)
Adjusted Net Income (Loss) per Share:
Basic
$
(0.25
)
$
(0.11
)
$
0.23
$
(0.56
)
Diluted
$
(0.25
)
$
(0.11
)
$
0.21
$
(0.56
)
Weighted-average common shares
outstanding:
Basic
82,230,427
85,569,351
82,771,268
83,765,896
Diluted
82,230,427
85,569,351
92,023,924
83,765,896
(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/20240213703949/en/
Press press@upstart.com
Investors Jason Schmidt Vice President, Investor
Relations ir@upstart.com
Upstart (NASDAQ:UPST)
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