Upstart Holdings, Inc. (NASDAQ: UPST), a leading artificial
intelligence (AI) lending platform, today announced financial
results for its second quarter of the fiscal year 2021 ended June
30, 2021. 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.
“Our second quarter results continue to show why Upstart has the
potential to be among the world’s largest and most impactful
FinTechs,” said Dave Girouard, CEO of Upstart. “Lending is the
center beam of revenue and profits in financial services and
artificial intelligence may be the most transformational change to
come to this industry in its 5,000 year history.”
Second Quarter 2021 Financial Highlights
- Revenue. Total revenue was $194 million, an increase of
1,018% from the second quarter of 2020. Total fee revenue was $187
million, an increase of 1,308% year-over-year.
- Transaction Volume and Conversion Rate. Bank partners
originated 286,864 loans, totaling $2.80 billion, across our
platform in the second quarter, up 1,605% from the same quarter of
the prior year. Conversion on rate requests was 24% in the second
quarter of 2021, up from 9% in the same quarter of the prior
year.
- Income from Operations. Income from operations was $36.3
million, from ($11.4) million the prior year.
- Net Income and EPS. GAAP net income was $37.3 million,
up from ($6.2) million in the same quarter of the prior year.
Adjusted net income was $58.5 million, up from ($3.7) million in
the same quarter of the prior year. Accordingly, GAAP diluted
earnings per share was $0.39, and diluted adjusted earnings per
share was $0.62 based on the weighted-average common shares
outstanding during the period.
- Contribution Profit. Contribution profit was $96.7
million, up 2,171% from in the second quarter of 2020, with a
contribution margin of 52% compared to a 32% contribution margin in
the second quarter of 2020.
- Adjusted EBITDA. Adjusted EBITDA was $59.5 million, up
from ($3.1) million in the same quarter prior year. The second
quarter 2021 adjusted EBITDA margin was 31% of total revenue, from
(18)% in the second quarter of 2020.
Financial Outlook
For the third quarter of 2021, Upstart expects:
- Revenue of $205 to $215 million
- Contribution Margin of approximately 45%
- Net Income of $18 to $22 million
- Adjusted Net Income of $28 to $32 million
- Adjusted EBITDA of $30 to $34 million
- Basic Weighted-Average Share Count of approximately 78.0
million shares
- Diluted Weighted-Average Share Count of approximately
94.9 million shares
For the 2021 fiscal year, Upstart now expects:
- Revenue of approximately $750 million (vs prior guidance
of $600 million)
- Contribution Margin of approximately 45% (vs prior
guidance of 42%)
- Adjusted EBITDA Margin of approximately 17% (vs prior
guidance of 10%)
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
10, 2021. To access the call in the U.S. and Canada, dial +1
800-437-2398 (code 9610077), and outside of the U.S. and Canada,
dial +1 323-289-6576 (code 9610077). 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 9610077), and outside of the U.S. and
Canada, dial +1 719-457-0820 (code 9610077). A call replay is
available through August 20, 2021. The webcast will be archived for
one year at ir.upstart.com.
About Upstart
Upstart is a leading AI lending platform partnering with banks
to expand access to affordable credit. By leveraging Upstart's AI
platform, Upstart-powered banks can have higher approval rates and
lower loss rates, 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 full year and third quarter of 2021 and Upstart’s potential to
be among the world's largest and most impactful FinTechs. 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", “project”, "intend", “target”, “aim”, "believe",
"may", "will", "should", “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; plans; objectives; assumptions; risks; future
performance; business; and results of operations, including
revenue, contribution margin, net income (loss), non-GAAP adjusted
net income, 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 sustain our growth rates; the
effectiveness of our credit decisioning models and risk management
efforts; overall economic conditions; disruptions in the credit
markets; our ability to retain existing, and attract new, bank
partners and lenders; 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, 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
(loss), contribution margin, adjusted EBITDA, adjusted EBITDA
margin, adjusted net income or loss, and adjusted net income or
loss per share are useful in evaluating our operating performance.
Certain of these non-GAAP measures exclude stock-based
compensation, warrant expenses, depreciation, amortization, and
other non-operating expenses. We exclude stock-based compensation
and income and expense on warrants 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. We believe 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,
which 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;
- 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 are used in this press
release.
UPSTART HOLDINGS, INC.
CONSOLIDATED BALANCE
SHEETS
(In Thousands, Except Share
and Per Share Data)
(Unaudited)
December 31,
June 30,
2020
2021
Assets Cash
$
250,819
$
506,287
Restricted cash
60,514
111,246
Loans (at fair value)
78,460
82,311
Notes receivable and residual certificates (at fair value)
19,074
12,995
Property, equipment, and software, net
10,032
13,549
Operating lease right of use assets
18,310
16,208
Goodwill
-
66,866
Intangible assets, net
-
22,131
Other assets (includes $6,831 and $15,450 at fair value as of
December 31, 2020 and June 30, 2021, respectively)
40,046
72,990
Total assets
$
477,255
$
904,583
Liabilities and Stockholders’ Equity Liabilities: Accounts
payable
$
13,775
$
17,326
Payable to investors
45,501
76,947
Borrowings
62,626
6,057
Accrued expenses and other liabilities (includes $9,530 and $14,396
at fair value as of December 31, 2020 and June 30, 2021,
respectively)
35,669
70,379
Operating lease liabilities
19,432
17,778
Total liabilities
177,003
188,487
Stockholders’ equity: Common stock, $0.0001 par value; 700,000,000
shares authorized; 73,314,026 and 77,626,866 shares issued and
outstanding as of December 31, 2020 and June 30, 2021, respectively
7
8
Additional paid-in capital
369,467
737,924
Accumulated deficit
(69,222
)
(21,836
)
Total stockholders’ equity
300,252
716,096
Total liabilities and stockholders’ equity
$
477,255
$
904,583
UPSTART HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF
OPERATIONS and COMPREHENSIVE INCOME (LOSS)
(In Thousands, Except Share
and Per Share Data)
(Unaudited)
Three Months Ended June
30,
Six Months Ended June
30,
2020
2021
2020
2021
Revenue: Revenue from fees, net
$
13,305
$
187,297
$
81,318
$
303,467
Interest income and fair value adjustments, net (includes $406 and
$1,014 from related parties expense and $(97) and $4,238 of related
parties fair value adjustments for the three and six months ended
June 30, 2020, respectively)
4,048
6,649
29
11,824
Total revenue
17,353
193,946
81,347
315,291
Operating expenses: Sales and marketing
5,436
75,916
41,388
125,292
Customer operations
6,621
24,164
15,432
41,552
Engineering and product development
7,667
31,431
14,685
50,419
General, administrative, and other
9,017
26,141
20,677
46,160
Total operating expenses
28,741
157,652
92,182
263,423
Income (loss) from operations
(11,388
)
36,294
(10,835
)
51,868
Other income (expense)
5,297
15
5,447
(5,218
)
Income (expense) on warrants and other non-operating expenses, net
(18
)
(13
)
271
(31
)
Net income (loss) before income taxes
(6,109
)
36,296
(5,117
)
46,619
Provision (benefit) for income taxes
-
(988
)
-
(767
)
Net income (loss) before attribution to noncontrolling interests
(6,109
)
37,284
(5,117
)
47,386
Net income (loss) attributable to noncontrolling interests
84
-
(404
)
-
Net income (loss) attributable to Upstart Holdings, Inc. common
stockholders
$
(6,193
)
$
37,284
$
(4,713
)
$
47,386
Net income (loss) per share attributable to Upstart
Holdings, Inc. common stockholders, basic
$
(0.42
)
$
0.49
$
(0.32
)
$
0.63
Net income (loss) per share attributable to Upstart Holdings, Inc.
common stockholders, diluted
$
(0.42
)
$
0.39
$
(0.32
)
$
0.51
Weighted-average number of shares outstanding used in computing net
income (loss) per share attributable to Upstart Holdings, Inc.
common stockholders, basic
14,657,399
76,674,129
14,641,333
75,160,037
Weighted-average number of shares outstanding used in computing net
income (loss) per share attributable to Upstart Holdings, Inc.
common stockholders, diluted
14,657,399
94,802,123
14,641,333
93,193,153
UPSTART HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF
CASH FLOWS
(In Thousands)
(Unaudited)
Six Months Ended June
30,
2020
2021
Cash flows from operating activities Net income
(loss) before attribution to noncontrolling interests
$
(5,117
)
$
47,386
Adjustments to reconcile net income (loss) to net cash provided by
(used in) operating activities: Change in fair value of financial
instruments (includes $(4,238) from related parties for the six
months ended June 30, 2020)
14,264
(4,167
)
Stock-based compensation
4,484
29,808
Gain on loan servicing arrangements
(1,680
)
(2,102
)
Depreciation and amortization
1,050
2,799
Incentive share expense
358
-
Other
36
216
Net changes in operating assets and liabilities: Purchase of loans
for immediate resale
(915,234
)
(3,414,231
)
Proceeds from immediate resale of loans
915,234
3,414,231
Purchase of loans held-for-sale
(98,601
)
(38,311
)
Principal payments received for loans held-for-sale
7,790
3,676
Net proceeds from sale of loans held-for-sale
6,813
57,183
Other assets
(2,455
)
(19,651
)
Operating lease liability and right-of-use asset
57
448
Accounts payable
(3,341
)
3,380
Payable to investors
18,689
31,446
Accrued expenses and other liabilities
(12,886
)
23,785
Net cash (used in) provided by operating activities
(70,539
)
135,896
Cash flows from investing activities Principal
payments received for loans held by consolidated securitizations
24,018
-
Net proceeds from sale of loans held-for-investment
88,136
9,718
Principal payments received for loans held-for-investment
9,192
7,488
Principal payments received for notes receivable and repayments of
residual certificates
7,616
6,349
Purchase of loans held-for-investment
(2,794
)
(42,548
)
Purchase of notes receivable and residual certificates
(4
)
-
Purchase of property and equipment
(908
)
(1,997
)
Capitalized software costs
(1,659
)
(2,148
)
Acquisition, net of cash acquired
-
(16,561
)
Net cash (used in) provided by investing activities
123,597
(39,699
)
Cash flows from financing activities Proceeds from
secondary offering, net of underwriting discounts, commissions, and
offering costs
-
263,931
Taxes paid related to net share settlement of equity awards
-
(236
)
Payments made on securitization notes and certificates (includes
$1,034 paid to related parties for the six months ended June 30,
2020)
(26,126
)
-
Repayments of borrowings
(86,848
)
(62,455
)
Distributions made to noncontrolling interests
(622
)
-
Proceeds from borrowings
75,997
5,831
Proceeds from exercise of stock options
203
2,932
Net cash (used in) provided by financing activities
(37,396
)
210,003
Net increase in cash and restricted cash
15,662
306,200
Cash and restricted cash at beginning of period
80,067
311,333
Cash and restricted cash at end of period
$
95,729
$
617,533
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,
2020
2021
2020
2021
Revenue from fees
$
13,305
$
187,297
$
81,318
$
303,467
Income (loss) from operations
(11,388
)
36,294
(10,835
)
51,868
Operating Margin
(86
)%
19
%
(13
)%
17
%
Sales and marketing, net of borrower acquisition costs(1)
$
1,858
$
4,984
$
3,107
$
8,237
Customer operations, net of borrower verification and servicing
costs(2)
1,150
4,469
2,311
7,595
Engineering and product development
7,667
31,431
14,685
50,419
General, administrative, and other
9,017
26,141
20,677
46,160
Interest income and fair value adjustments, net
(4,048
)
(6,649
)
(29
)
(11,824
)
Contribution Profit
$
4,256
$
96,670
$
29,916
$
152,455
Contribution Margin(3)
32
%
52
%
37
%
50
%
(1)
Borrower acquisition costs were $3.6
million and $70.9 million for the three months ended June 30, 2020
and 2021, respectively, and were $38.3 million and $117.1 million
for the six months ended June 30, 2020 and 2021, 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 $5.5 million and $19.7 million for the three months ended June
30, 2020 and 2021, respectively, and were $13.2 million and $34.0
million for the six months ended June 30, 2020 and 2021,
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.
(3)
Contribution Margin is calculated as
Contribution Profit divided by revenue from fees, net for the
relevant period.
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,
2020
2021
2020
2021
Total revenue
$
17,353
$
193,946
$
81,347
$
315,291
Net income (loss) attributable to Upstart Holdings, Inc. common
stockholders
(6,193
)
37,284
(4,713
)
47,386
Net Income Margin
(36
)%
19
%
(6
)%
15
%
Adjusted to exclude the following: Stock-based compensation
$
2,519
$
21,186
$
4,484
$
29,808
Depreciation and amortization
535
1,983
1,050
2,799
Expense on warrants and other non-operating expenses(1)
18
13
(271
)
31
Provision for income taxes
-
(988
)
-
(767
)
Acquisition-related costs
-
17
-
1,237
Adjusted EBITDA
$
(3,121
)
$
59,495
$
550
$
80,494
Adjusted EBITDA Margin(2)
(18
)%
31
%
1
%
26
%
(1)
Consists of fair value adjustments to our
warrant liability for the three and six months ended June 30, 2020
and interest expense for the three and six months ended June 30,
2020 and 2021.
(2)
Adjusted EBITDA Margin is calculated as
Adjusted EBITDA divided by total revenue for the relevant
period.
Three Months Ended June
30,
Six Months Ended June
30,
2020
2021
2021
2020
Net income (loss) attributable to Upstart Holdings, Inc. common
stockholders
$
(6,193
)
$
37,284
$
(4,713
)
$
47,386
Adjusted to exclude the following: Stock-based compensation
2,519
21,186
4,484
29,808
Acquisition-related costs
-
17
-
1,237
Adjusted Net Income (Loss)
$
(3,674
)
$
58,487
$
(229
)
$
78,431
Adjusted Net Income (Loss) per Share: Basic
$
(0.25
)
$
0.76
$
(0.02
)
$
1.04
Diluted
$
(0.25
)
$
0.62
$
(0.02
)
$
0.84
Weighted-average common shares outstanding: Basic
14,657,399
76,674,129
14,641,333
75,160,037
Diluted
14,657,399
94,802,123
14,641,333
93,193,153
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210810005939/en/
Press press@upstart.com
Investors Jason Schmidt Vice President, Investor
Relations ir@upstart.com
Upstart (NASDAQ:UPST)
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