Upstart Holdings, Inc. (NASDAQ: UPST), a leading artificial
intelligence (AI) lending marketplace, today announced financial
results for its fourth quarter and fiscal year 2022 ended December
31, 2022. 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 economic headwinds of 2022 and continued funding
challenges that have impacted our financial results, we’re a much
better company than we were a year ago,” said Dave Girouard,
co-founder and CEO of Upstart. “We begin the new year with more
advanced technology, faster AI model development, dramatically more
training data, and a strengthened leadership team. We’re on an
important journey to reinvent credit so that it works for everyone
and excited to remind the world what Upstart is capable of.”
Fourth Quarter 2022 Financial Highlights
- Revenue. Total revenue was $147 million, a decrease of
52% from the fourth quarter of 2021. Total fee revenue was $156
million, a decrease of 46% year-over-year.
- Transaction Volume and Conversion Rate. Lending partners
originated 154,478 loans, totaling $1.5 billion across our platform
in the fourth quarter, down 62% from the same quarter of the prior
year. Conversion on rate requests was 11% in the fourth quarter of
2022, down from 24% in the same quarter of the prior year.
- Income (Loss) from Operations. Income (loss) from
operations was ($58.5) million, down from $60.4 million the prior
year.
- Net Income (Loss) and EPS. GAAP net income (loss) was
($55.3) million, down from $58.9 million in the fourth quarter of
2021. Adjusted net income (loss) was ($20.9) million, down from
$87.0 million in the same quarter of the prior year. Accordingly,
GAAP diluted earnings per share was ($0.67), and diluted adjusted
earnings per share was ($0.25) based on the weighted-average common
shares outstanding during the quarter.
- Contribution Profit. Contribution profit was $82.0
million, down 45% year-over-year in the fourth quarter of 2022,
with a contribution margin of 53% compared to a 52% contribution
margin in the same quarter of the prior year.
- Adjusted EBITDA. Adjusted EBITDA was ($16.6) million,
down from $91.0 million in the same quarter of the prior year. The
fourth quarter 2022 adjusted EBITDA margin was (11%) of total
revenue, down from 30% in the same quarter of 2021.
- Share Repurchases. Upstart repurchased 1.4 million
shares of UPST totaling approximately $28 million.
Fiscal Year 2022 Financial Highlights
- Revenue. Total revenue was $842 million, a decrease of
1% from 2021. Total fee revenue was $907 million, an increase of
13% year-over-year.
- Transaction Volume and Conversion Rate. Lending partners
originated 1,129,672 loans, totaling $11.2 billion, across our
platform, down 5% from the prior year. Conversion on rate requests
was 14% in 2022, down from 24% in the prior year.
- Income (Loss) from Operations. Income (loss) from
operations was ($113.9) million, down from $140.9 million the prior
year.
- Net Income (Loss) and EPS. GAAP net income (loss) was
($108.7) million, down from $135.4 million in 2021. Adjusted net
income was $19.4 million, down from $224.1 million in the prior
year. Accordingly, GAAP diluted earnings per share was ($1.31), and
diluted adjusted earnings per share was $0.21 based on the
weighted-average common shares outstanding during the year.
- Contribution Profit. Contribution profit was $446.8
million, up 12% year-over-year, with a contribution margin of 49%
compared to a 50% contribution margin in 2021.
- Adjusted EBITDA. Adjusted EBITDA was $37.2 million, down
from $232.0 million in the prior year. 2022 adjusted EBITDA margin
was 4% of total revenue, down from 27% in 2021.
- Share Repurchases. Upstart repurchased 5.9 million
shares of UPST totaling approximately $178 million over 2022.
Financial Outlook
For the first quarter of 2023, Upstart expects:
- Revenue of approximately $100 million
- Revenue From Fees of approximately $110 million
- Net Interest Income (Loss) of approximately ($10)
million
- Contribution Margin of approximately 55%
- Net Income (Loss) of approximately ($145) million
- Adjusted Net Income (Loss) of approximately ($70)
million
- Adjusted EBITDA of approximately ($45) million
- Basic Weighted-Average Share Count of approximately 81.9
million shares
- Diluted Weighted-Average Share Count of approximately
81.9 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
14, 2023. To access the call in the U.S. and Canada, dial +1
888-394-8218, conference code 4173985, and outside of the U.S. and
Canada, dial +1 323-994-2093, conference code 4173985. A webcast is
available at ir.upstart.com.
- Event Replay. To replay the call in the U.S. and Canada,
dial +1 888-203-1112 (code 4173985), and outside of the U.S. and
Canada, dial +1 719-457-0820 (code 4173985). A call replay is
available through February 21, 2023. The webcast will be archived
for one year at ir.upstart.com.
About Upstart
Upstart is a leading AI lending marketplace partnering with
banks and credit unions to expand access to affordable credit. By
leveraging Upstart’s AI marketplace, Upstart-powered banks and
credit unions can have higher approval rates and lower loss rates
across races, ages and genders, while simultaneously delivering the
exceptional digital-first lending experience their customers
demand. More than two-thirds of Upstart loans are approved
instantly and are fully automated. Upstart was founded by
ex-Googlers in 2012 and 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 2023. 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 future growth prospects and financial performance;
our ability to manage the adverse effects of macroeconomic
conditions and disruptions in the credit markets, including
inflation and related monetary policy changes, such as increasing
interest rates; our ability to access sufficient loan funding,
including in the securitization and whole loan sale markets; the
effectiveness of our credit decisioning models and risk management
efforts; geopolitical events, such as the Russia-Ukraine conflict;
our ability to retain existing, and attract new, lending partners;
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 loans transacted on our platform between a borrower and the
originating bank during the period presented. We define
“transaction volume, number of loans” as the number of loans
facilitated on our platform between a borrower and the originating
bank during the period 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, and other non-operating expenses. We
exclude stock-based compensation, expense on convertible notes and
other non-operating expenses because they are non-cash in nature
and 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. Non-GAAP financial measures are
presented for supplemental informational purposes only and should
not be considered a substitute for 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 and
certain employer payroll taxes on employee stock transactions.
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,
2021
2022
Assets
Cash
$
986,608
$
422,411
Restricted cash
204,633
110,056
Loans (at fair value)
252,477
1,010,421
Property, equipment, and software, net
24,259
44,168
Operating lease right of use assets
96,118
86,335
Non-marketable equity securities
40,000
41,250
Goodwill
67,062
67,062
Intangible assets, net
19,906
15,631
Other assets (includes $18,388 and $42,648
at fair value as of December 31, 2021 and December 31, 2022,
respectively)
129,392
138,720
Total assets
$
1,820,455
$
1,936,054
Liabilities and Stockholders’
Equity
Liabilities:
Accounts payable
$
6,563
$
18,715
Payable to investors
107,598
90,777
Borrowings
695,432
986,394
Accrued expenses and other liabilities
(includes $13,095 and $8,820 at fair value as of December 31, 2021
and December 31, 2022, respectively)
103,418
66,946
Operating lease liabilities
100,366
100,787
Total liabilities
1,013,377
1,263,619
Stockholders’ equity:
Common stock, $0.0001 par value;
700,000,000 shares authorized; 83,659,665 and 81,259,676, shares
issued and outstanding as of December 31, 2021 and December 31,
2022, respectively
8
8
Additional paid-in capital
740,849
714,871
Retained earnings
66,221
(42,444
)
Total stockholders’ equity
807,078
672,435
Total liabilities and stockholders’
equity
$
1,820,455
$
1,936,054
UPSTART HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF
OPERATIONS and COMPREHENSIVE INCOME (LOSS)
(In Thousands, Except Share
and Per Share Data)
(Unaudited)
Three Months Ended
December 31,
Year Ended December
31,
2021
2022
2021
2022
Revenue:
Revenue from fees, net
$
287,387
$
155,597
$
801,275
$
907,272
Interest income and fair value
adjustments, net:
Interest income
8,614
39,292
20,634
105,580
Interest expense
(478
)
(4,521
)
(3,274
)
(10,843
)
Fair value and other adjustments
9,325
(43,455
)
29,954
(159,565
)
Total interest income and fair value
adjustments, net
17,461
(8,684
)
47,314
(64,828
)
Total revenue
304,848
146,913
848,589
842,444
Total operating expenses:
Sales and marketing
114,815
50,753
333,453
345,776
Customer operations
41,049
43,487
117,579
187,994
Engineering and product development
46,495
64,029
133,999
237,247
General, administrative, and other
42,075
47,142
122,677
185,290
Total operating expenses
244,434
205,411
707,708
956,307
Income (loss) from operations
60,414
(58,498
)
140,881
(113,863
)
Other income (expense), net
22
3,944
(5,174
)
9,473
Expense on warrants and convertible notes,
net
(1,169
)
(1,173
)
(1,976
)
(4,684
)
Net income (loss) before income taxes
59,267
(55,727
)
133,731
(109,074
)
(Benefit) provision for income taxes
323
(464
)
(1,712
)
(409
)
Net income (loss)
$
58,944
$
(55,263
)
$
135,443
$
(108,665
)
Net income (loss) per share, basic
$
0.71
$
(0.67
)
$
1.73
$
(1.31
)
Net income (loss) per share, diluted
$
0.61
$
(0.67
)
$
1.43
$
(1.31
)
Weighted-average number of shares
outstanding used in computing net income (loss) per share,
basic
82,616,735
82,230,427
78,106,359
82,771,268
Weighted-average number of shares
outstanding used in computing net income (loss) per share,
diluted
98,804,259
82,230,427
94,772,641
82,771,268
UPSTART HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF
CASH FLOWS
(In Thousands)
Year Ended December
31,
2021
2022
Cash flows from operating
activities
Net income (loss)
$
135,443
$
(108,665
)
Adjustments to reconcile net income (loss)
to net cash provided by (used in) operating activities:
Change in fair value of financial
instruments
(228
)
168,878
Stock-based compensation
73,186
125,945
Gain on loan servicing arrangement,
net
(6,916
)
(28,739
)
Depreciation and amortization
7,541
13,513
Non-cash interest expense
1,983
3,047
Net changes in operating assets and
liabilities:
Purchase of loans held-for-sale
(8,932,604
)
(7,807,429
)
Proceeds from sale of loans
held-for-sale
8,826,045
6,828,617
Principal payments received for loans
held-for-sale
8,659
152,018
Other assets
(62,042
)
4,173
Operating lease liability and right-of-use
asset
3,126
10,204
Accounts payable
(7,513
)
11,878
Payable to investors
62,097
(16,821
)
Accrued expenses and other liabilities
59,576
(31,300
)
Net cash provided by (used in) operating
activities
168,353
(674,681
)
Cash flows from investing
activities
Purchase of loans held-for-investment
(159,398
)
(149,298
)
Proceeds from sale of loans
held-for-investment
51,403
14,289
Principal payments received for loans
held-for-investment
24,532
43,311
Principal payments received for notes
receivable and repayments of residual certificates
11,458
6,736
Purchase of non-marketable equity
security
(40,000
)
(1,250
)
Purchase of property and equipment
(8,427
)
(8,825
)
Capitalized software costs
(6,688
)
(14,088
)
Purchase of certificates of deposit
-
(5,000
)
Acquisition, net of cash required
(16,757
)
-
Net cash used in investing activities
(143,877
)
(114,125
)
Cash flows from financing
activities
Proceeds from secondary offering, net of
underwriting discounts, commissions, and offering costs
263,931
-
Proceeds from borrowings
718,422
688,813
Payment of debt issuance costs
(15,727
)
-
Purchase of capped calls
(58,523
)
-
Taxes paid related to net share settlement
of equity awards
(236
)
(16
)
Repayments of borrowings
(71,316
)
(400,898
)
Proceeds from issuance of common stock
under employee stock purchase plan
4,145
7,662
Proceeds from exercise of stock
options
14,736
12,354
Repurchases of common stock
-
(177,883
)
Net cash provided by financing
activities
855,432
130,032
Change in cash and restricted
cash
879,908
(658,774
)
Cash and restricted cash at beginning of
year
311,333
1,191,241
Cash and restricted cash at end of
year
$
1,191,241
$
532,467
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,
2021
2022
2021
2022
Revenue from fees, net
$
287,387
$
155,597
$
801,275
$
907,272
Income (loss) from operations
60,414
(58,498
)
140,881
(113,863
)
Operating Margin
21
%
(38
)%
18
%
(13
)%
Sales and marketing, net of borrower
acquisition costs(1)
$
11,364
$
11,153
$
25,840
$
43,063
Customer operations, net of borrower
verification and servicing costs(2)
6,596
9,458
21,797
30,186
Engineering and product development
46,495
64,029
133,999
237,247
General, administrative, and other
42,075
47,142
122,677
185,290
Interest income and fair value
adjustments, net
(17,461
)
8,684
(47,314
)
64,828
Contribution Profit
$
149,483
$
81,968
$
397,880
$
446,751
Contribution Margin
52
%
53
%
50
%
49
%
_________
(1)
Borrower acquisition costs were $103.5
million and $39.6 million for the three months ended December 31,
2021 and 2022, respectively, and were $307.6 million and $302.7
million for the year ended December 31, 2021 and 2022,
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.
(2)
Borrower verification and servicing costs
were $34.5 million and $34.0 million for the three months ended
December 31, 2021 and 2022, respectively, and were $95.8 million
and $157.8 million for the year ended December 31, 2021 and 2022,
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.
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,
2021
2022
2021
2022
Total revenue
$
304,848
$
146,913
$
848,589
$
842,444
Net income (loss)
58,944
(55,263
)
135,443
(108,665
)
Net Income (loss) Margin
19
%
(38
)%
16
%
(13
)%
Adjusted to exclude the following:
Stock-based compensation and certain
payroll tax expenses(1)
$
28,013
$
34,316
$
87,461
$
128,038
Depreciation and amortization
2,557
3,654
7,541
13,513
Expense on convertible notes
1,169
1,173
1,976
4,684
(Benefit) provision for income taxes
323
(464
)
(1,712
)
(409
)
Acquisition-related costs
-
-
1,237
-
Adjusted EBITDA
$
91,006
$
(16,584
)
$
231,946
$
37,161
Adjusted EBITDA Margin
30
%
(11
)%
27
%
4
%
_________
(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,
2021
2022
2021
2022
Net income (loss)
$
58,944
$
(55,263
)
$
135,443
$
(108,665
)
Adjusted to exclude the following:
Stock-based compensation and certain
payroll tax expenses(1)
28,013
34,316
87,461
128,038
Acquisition-related costs
-
-
1,237
-
Adjusted Net Income (Loss)
$
86,957
$
(20,947
)
$
224,141
$
19,373
Net income (loss) per share:
Basic
$
0.71
$
(0.67
)
$
1.73
$
(1.31
)
Diluted
$
0.61
$
(0.67
)
$
1.43
$
(1.31
)
Adjusted Net Income (Loss) per Share:
Basic
$
1.05
$
(0.25
)
$
2.87
$
0.23
Diluted
$
0.89
$
(0.25
)
$
2.37
$
0.21
Weighted-average common shares
outstanding:
Basic
82,616,735
82,230,427
78,106,359
82,771,268
Diluted
98,804,259
82,230,427
94,772,641
92,023,924
_________
(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/20230214005796/en/
Press press@upstart.com
Investors Jason Schmidt Vice President, Investor
Relations ir@upstart.com
Upstart (NASDAQ:UPST)
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