Upstart Announces Second Quarter 2024 Results
“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
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
-
Revenue From Fees of approximately
- 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 onAugust 6, 2024 . To access the call inthe United States andCanada : +1 888-394-8218, conference code 9076016. To access the call outside ofthe United States andCanada : +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
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
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
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.
|
|||||
CONDENSED CONSOLIDATED BALANCE SHEETS |
|||||
(In Thousands, Except Share and Per Share Data) |
|||||
(Unaudited) |
|||||
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 |
|
|
67,062 |
|
67,062 |
||
Other assets (includes |
|
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 |
|
84,051 |
|
77,259 |
|
Operating lease liabilities |
|
62,324 |
|
56,374 |
|
Total liabilities |
|
1,381,795 |
|
1,225,514 |
|
Stockholders’ equity: | |||||
Common stock, |
|
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 |
|
|||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS and COMPREHENSIVE LOSS |
|||||||||||
(In Thousands, Except Share and Per Share Data) |
|||||||||||
(Unaudited) |
|||||||||||
Three Months Ended |
|
Six Months Ended |
|||||||||
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 |
|
|||||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS |
|||||
(In Thousands) |
|||||
(Unaudited) |
|||||
Six Months Ended |
|||||
|
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. |
|
|||||||||||
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES |
|||||||||||
(In Thousands, Except Share and Per Share Data) |
|||||||||||
(Unaudited) |
|||||||||||
Three Months Ended |
|
Six Months Ended |
|||||||||
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 |
|||||||
(2) |
|
Borrower verification and servicing costs were |
|
|||||||||||
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES |
|||||||||||
(In Thousands, Except Share and Per Share Data) |
|||||||||||
(Unaudited) |
|||||||||||
Three Months Ended |
|
Six Months Ended |
|||||||||
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. |
|
|||||||||||
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES |
|||||||||||
(In Thousands, Except Share and Per Share Data) |
|||||||||||
(Unaudited) |
|||||||||||
Three Months Ended |
|
Six Months Ended |
|||||||||
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. |
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