UPST - Earnings call 4 2020 | Upstart Holdings, Inc.

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Operator

Good day, everyone, and welcome to the Upstart Fourth Quarter Fiscal Year 2020 Earnings Conference Call. Today's call is being recorded. At this time, I would like to turn the conference over to Jason Schmidt, VP of Investor Relations. Please go ahead, sir.

Jason Schmidt

Good afternoon, and thank you for joining us on today's conference call to discuss Upstart's fourth quarter and 2020 financial results. call Datta, Girouard, Officer. the today's Officer; Chief on Sanjay and company's us are Upstart's Dave Executive With Chief Financial

filed we an today, Investor the like after dated with would quarter on forward-looking and includes Please release begin, our to March you results statements. fourth presentation. Before shortly and Both financial Commission that XX, available X-K a materially that XXXX, results Securities ir.upstart.com. published announcing of Today's discussion to statements. its differ for the our the Relations refer these issued Relations Upstart Exchange remind company's closed website, XXXX and factors a Investor press Form market forward-looking to I from discussion are could actual cause

like remind we Upstart's performance. during the also some measures would that to related call, non-GAAP you to discuss will I

like the to measure the [Operator Instructions] You comparable nearest can those I'd GAAP turn the find measures of press Upstart. release. Girouard, to CEO to reconciliation it in of Now Dave over

David Girouard

Thank fourth you our upstart's earnings CEO on inaugural for Co-Founder results. Upstart. us Dave joining covering and of everyone. year Girouard, and call I'm full quarter afternoon, XXXX Good

excited us the the NASDAQ for U.S. under company. the complex on monumental present took was for symbol public the a quarterly we to world. I'm the in our year public for time and results quarter as Last challenging time company on first trading midst XX December the historically a and the of as and for We full UPST. began ticker

elevated risk XXXX XXXX XX% underlying AI grew Upstart and growth scale, resulting well. pandemic our from a profitable and in technology. and by Upstart it, COVID-XX of has unique GAAP as to driven rapid combination Despite was compared economic the the revenues profits

year-on-year. XX% up were revenues XXXX QX Our

balance how a risk. care loans to perform. lot business. and despite about a aren't make Upstart We this, But loans don't Upstart material we sheet is fee-based we exposed

past pandemic COVID-XX on that our report and returns to that partners happy had the bank the this impact no we're So year. experienced material investors loan

We're acquire on AI-enabled leader announce platform. mid-priced this per of cloud-based is the $XX we've and loan we also initial first the into on them entered a Toward month. average saving automotive Software, end our enabling agreement commerce. to to excited In originated in auto that last phase, refinance car to an consumers Upstart loans, year, Prodigy expensive

the operate way acquisition pay the of bridging we aim accelerate that in new With later Prodigy to the Prodigy, and shop largest the upstart's people for now, dealerships how of between presence opportunities. is cars. buy one gap

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the personally, important consumers our access where economy businesses, and Paul, To and back Anna us expect. a and every improve technology for it's was modern step Credit, not with essential that moment, X step. both of just access Upstart prosperity I credit is data could growth of modest affordable credit. that founded years to idea for backgrounds, from to to cornerstone extremely came Each essential ago a the and science and Americans to our

that Millions from they too There's access pay credit, have the ultimately broad pricing and consensus that on quantifying are credit dice. highly Models loans the of not for of it risk a credit for or don't roll can't consumers afford. economy inefficient, far if is take broken. much not to

profitable lend the manner. a science, modern banks sophisticated consensus On the data can namely are responsible in less more swimming XXXX looking far to intelligence, in artificial them and remedy hand, deposits There's in that other are for and Upstart out demonstrated their large their approval losses study, this validating compared risk is AI-based U.S. platform Upstart almost that current our banks but holding situation, to every constant while lending models. triple a several XXXX rates thesis to In could day. tools

And rudimentary constantly from the since traditional our simplistic approaches compared dramatically at that that important This way potential Upstart's an One heads own our look from to back is we lending ago grasp to our at models how a was and capabilities. current how and models it point. years AI few then. have for XXXX. just and shake improved were in AI and is different they

refresher technology our and our underlying will results ultimately company, are. how worth to AI financial differentiated on quick speak public a actually unique the works. As how it's a models But

data like a models, most only handful lending by systems, fueled interpret of a to software are of AI and all variables that Our than part Upstart's as lenders model variables about X,XXX more consider of AI sophisticated while incredible each considers amounts decision, applicant. data,

XX.X a the can the And the XXXX, enabling on in rows than in columns machine data, You a next on these platform software think to of the that the our million this we our interprets like bit And are events. upgrade repayment December trained learning unique spreadsheet. as These more loan as just model accurately. was more spreadsheet. of price continually us XX,

a Upstart goes far default predicting AI risk. beyond model singular

income that automated and more Upstart's Upstart a default that the our that offers prepayment improve more. is But the process, model but predictable, more advantages programs digital can risk We centerpiece default rates just profitable inclusive. predicts are partners our default, rates, expected obvious: stacking, lending bank lending model The be more fee targets AI our entire will a including and likelihood loan loan to happen. risk, that fraud, the is enables of system. not and have approval misrepresentation, discrete when model experience. optimization It course, loss of that identity higher AI highly lower

calls are with approved and For phone APRs of approval, than or required. with higher compelling: automated equally real-time X consumers, documentation the in lending XX% rates, Upstart approval advantages AI-based fully of more lower loans near

XXXX digital experience higher, expectations bank partners seamless beat that a our been on of never Upstart device. XX% helps have the happened in fact, Consumer a and In expectation. our and for platform mobile meet loans on

AI be say in lending be traditional can fact, and inclusive, to that It's also so more than should and systems. fair unbiased, important

higher dedicated platform As on to fairness and the with Financial industry. lower do every a interest of its this of Bureau. behalf company every fairness say each every offers results application outcome bank level believe central test programs. worth of Protection testing demographic we for tested. is also our testing to That our inclusion that single results tests are rates rates loan mission. noting of rigorous This quite personal our is in improving in lending fairness and it approval on tests group rigor and partners. quarterly should strive to and for the and to Upstart's credit, platform lending access significantly these We The we share these transparency bank of the unique an Consumer all, It's

While lending the first better the only Spanish Very digital primary use our we a lever. among language U.S. lever create of release are in version platform, believe soon, to of a it's its AI models we'll product platforms not is the the kind we more inclusive that

obligations. out comes alternative, a and it important and retailers unfortunately not. offer with big loan lenders, a language Spanish a online Taking restaurants While do routinely decision is

customer So agreement their if available including preferred support better language. the for in consumer it's the experience, are entire disclosures, clearly and the loan

a because the stages confident be economics and you. I adoption out lending, AI walk to are our we're it Officer, the be our In AI that all share say through will while want and closing, future play guidance. to And to the for this to vision. who first like of results participants. all in of the aim We years leader and in lending financial come. our AI-enabled will partner to I'd to to that compelling Virtually turn Chief in Sanjay? transformation banks now we're so to decades Sanjay, Financial lending category over Thank

Sanjay Datta

St. to quarter as Thanks, very everyone, cover CFO, I'll of and on Sanjay you Day first forward Datta, thank our today. for financial for grateful Upstart's well you our XXXX us. and as year joining We're touching Patty's company a public have Dave. I'm full results with guidance. before to Happy

million, of amount, the revenues requests, that the from rate prior from QX XXX,XXX of or XX% a revenue Underpinning and loans quarter by same up XX.X% platform, represented on all bank year. the the origination in million partners $XX.X year. fee-based of prior across our of year in conversion XX% quarter rate the total. $XX.X of prior this the fees up up were XX.X% from was the from Of XX% same revenue Our the

a margin we and prior. QX, XX% fees revenue Our as XX% acquisition, costs the up servicing, a in was profit, variable define non-GAAP year-over-year and a up for metric, minus margin, contribution from contribution representing borrower $XX million in which verification XX% year of from

marketing mildly loans quarters. fully contribution is a was it well line XX% and expect of and in the few efficiency normalize level operating automated XX%, slightly This up year. rise driven we over The longer-term from the margin prior our to of above improvement by as trend margin percentage expected in in increases the as coming to downwards

out priority over Investment to QX operating of expenses was million stock-based XX% in year-over-year the $XX.X our year-over-year million, growing XX% impact QX. when the in year, or and up compensation. netting were engineering $XX.X R&D XX% past

travel partially to QX, spend to due costs general than million, the revenue administrative However, and in and benefiting savings grew year-over-year slowly office from more increasing in XX% pandemic. $XX.X

categories other increases The driven was the acquisition, marketing and operations previously variable and by and discussed. in cost sales borrower of expense servicing customer largely verification

$XX.X our from was were their million, as fair to year-over-year QX in in our in fair December weighted came year adjust based was is in almost compensation, diluted that for for well as EBITDA, value XXXX. income of a coinciding stock-based Our QX QX, share income we down changes on IPO. which GAAP up and from This million XX.X warrant QX average QX a million net up net in at company of sheet $X.XX per with value $X of $X our count until first carried as on expense in this Adjusted the in QX, $X.X million warrants exercises for Adjusted share liabilities as XXXX. entirely decrease granted of in balance attributable million.

full turning to now highlights. few year a Quickly

million margin. in came profit over the $X EBITDA XXXX up and came a X% growing representing a revenue $XXX.X full $XXX adverse on a million GAAP XXXX for income margin versus full EBITDA COVID. adjusted year, a adjusted from XXX% million, severe net impact XX% Contribution and was year-over-year at $XX.X in fiscal million, at despite year earlier. year Our representing the XX% XX% was contribution year

XXXX. of million ended from On and in December proceeds the of the from side, flowing IPO $XX restricted balance largely was we the million with at cash, sheet end up our which $XXX unrestricted and

loan balance balance credit the This reflecting loans of represents have terms of percentage risk. aggregate through we XXXX, and million reduction the sheet. funded at $XXX of at million residuals of in In continued the assets, carried end our loans, loan the platform of of $XX $XX from assets an the direct we the exposure notes of own of totality million XXXX, down to end

turn the currently forecast dynamics we the So XXXX, our would impacting a which we few highlight we year. to balance are of attention how

first growth currently year. been has of to the the technology we over are The that simply is is up part past experiencing the improved where to business the and catching have

are So the otherwise to expected where in absent we to be impact we would a have the of sense, pandemic. recovering

historical contribution our And our trend recovery we their margins them is contract above equilibrium. The as to as that mildly we expect the phase. normal emerge remain to return operating second we from slightly

have of to note received it planning currently in the eligibility shortly meets by that forgiveness. net are reducing 'XX repay COVID, final QX after adjusted is $X.X our we voluntarily PPP A effect requirements which decision even remains This net will and that the though the EBITDA, for loan, adjusted onset XXXX income followed conclusion income, of fully we the million.

year-over-year; share contribution in net million we million XX%; $XX.X million, rate approximately million; expecting of to of at count million to a revenues of adjusted of of of EBITDA million; With shares. are these $XX.X to $X.X $XX.X average adjusted $XXX margin total and $XXX million income $XX.X of million; mind, representing for a approximately XX.X XXXX, of income weighted XX% $X.X net midpoint million QX to diluted points growth

year-over-year; adjusted of full an of approximately approximately representing revenue XXXX, now For EBITDA of contribution growth year expect million, XX%; of the margin XXX% $XXX a of we approximately margin rate XX%. and

we a company it what for was entering feel challenging very of XXXX that feel XXXX it. we how closing, is In a environment we in reiterating worth we proud as and stronger how are has navigated our company much are

steadily. resilient, continued the the to the importantly, unimpeachably Our to performed has has underwritten our the turbulence platform AI by models through most proven year. model credit has improve accuracy of our business be of past And

We broader in landscape the of magnitude continue services. about the be ahead of the across technologies excited of the look to results financial in coming And sharing we applying forward you sheer to us to with opportunity our quarters. our risk

and questions. open Operator? call that, happy are any to I now Dave With the to

Operator

[Operator Instructions] first, like, Pete from to And it Christiansen go looks we'll Citi.

Peter Christiansen

Congratulations XX on should the the how I product, front quick follow-up. the I next Dave, and up we about But auto business. financing Certainly, auto fantastic. -- so end to Prodigy timing months? I think a here. to of building I the per scaling will the guess, that about think about acquisition IPO, the se, the accelerate as your wanted the partners model to opportunity customizing talk or wanted And over the have of suit market we

David Girouard

this so Sure. the establishing for we out, year. the that years building to Certainly, a loan still we really in And Dave. we accelerator it lending from funnel, et expanded XX. is is took the and few faster. we market bank our of much in product stages our space results. question. guidance process the is the kind quickly, really with year of sale, building Prodigy, several XXXX formative is at certainly that of over still, we're the acquisition it's would started auto, bringing testing, But majority X on months year material this reach which the materially dealership. state last that it, to Thanks of an don't of product happens improving this gotten expect the But expect entering This have the really of in view personal to. happen the refining our toward and I'll this state, to XXXX. as are don't partners, a contribute cetera. it be for hold, And is perspective to really we But auto a just to the This XXXX, say to expect point just

Peter Christiansen

And came consumer, helpful. we card That's down XX% as average the in XXXX. mean, at credit profile of credit then debt I look your average

in guys see the much #X stimulus about really in how as considering have cases personal that out loan certainly now. going You distributions side, is use How think headwind? do debt you factor a growth And consensual do you that?

Sanjay Datta

your this. question. is this for on Pete, Thanks I'll jump Sanjay. in

been impact that So the all the that's that and X credit levels. the of is I think economy, believe performance. the in pandemic we -- injected on the been stimulus One sort of of we to think maybe the it's constructive impact of

On the adverse to other hand, it's volume. been

consumer at with amounts economy That of spend. the of the is low least So in -- sort manifested, the recent way, savings and on put another as stimulus and in end, record rates, at economy, of record sizes. memory, card in demand shows low lower smaller smaller sort said, of then it you balances. And for credit up loan our loans sort -- as has

And so as headwind it a recovered. the that's been continues we've be past stimulus. with year another through round to of And

might that propagated will little a You be imagine bit. that,

would, the pandemic consumers might hand, as fact, tailwind of on On savings in that, volume return to the the imagine and a the as the other do you normalized, economy the unwind and effects become has side. that

the stimulus. about sandboxes about that the we we of are those So when think effects sort think

Peter Christiansen

IPO. the congrats And again on

Operator

from next, El-Assal Barclays. go to And we'll Ramsey

Ramsey El-Assal

commentary of guidance. to on Congratulations the wanted the XXXX strong in ask very on a the quarter. context I

curious of year, the improved the little business have the would what you about sort has that bit? terms models a elaborate think, you business? that over catching terms where there the you up key I the up aspects Like where of for in been. to Can there. tech a past other growth kind driver Just mentioned catching is underwriting Sanjay, of to talking a you of are color little in of more exactly in

Sanjay Datta

Sure. you, Yes. from Ramsey. Great hear to

lot ability gotten underwrite know, The has volatility it accurate, a a factor key driver, path as is improving the kind bank factors. in AI undergone has models But shown of the how past year. of briefly And the our steadily lot I business up certainly improved. would we to recent technology risk not path growth a our forward. have the because to more it but about behalf on for of you of think partners business and the describe it, hasn't our been as this has call necessarily of So directly extraneous underlying in over just the

But impact business impact would to the subsides, itself of COVID up now been as pandemic. an the never catching of have where the is expected to it there sort be of the otherwise had we

of And the of and converging sort sort as so converging in -- trend to normalize, never had for happen a as investors we're return imagine we're to COVID trend rates of the risk line that can you that economy line. normalizes,

to this is of the well our that that's what creating marketing of ongoing part to throughout So last sequential that year growth as sort tailwinds ongoing course, are going is improvements But of other performance are to things dynamic. the campaigns, with propagated have there of quarter-over-quarter do And the we that model. the entire are not making our year.

effect around consumers of as economy. described some -- to subside, of as pandemic And the the tailwinds do some I we the the does how the things imagine return

factors. calling what of moderated in particular. guidance out one that's the our going to sequential And forward, think the growth one extent we're quarterly in that is I that's the doing So of impact

Ramsey El-Assal

I backfilled [ you And going And like ], there. Prodigy to sense. some to in things wanted and Did on contributing thought? get Karma of the revenues I an just out to XXXX? Credit wanted headwind hop there bolt-on in what is, terms way then you just it play seems I'll maybe update follow-up ton more relationship. queue. on there? Lightbox than of there is a the What's of makes That a kind Okay. in quick a EBITDA the and back ask

David Girouard

Dave. This part who for to ours, of there with really a relationship Karma Intuit, we Credit been had will a expect partner and is Sure. be we've now a of while, continue has important previously. is

of as ourselves we Our -- grow. the to I of our kind continues scale partnership areas. see in co-leaders mean, adjacent

So been both become We to make is a will, time, of us. relationship and work it the as be decisions work meaningful successful, anticipate been anticipate a It about to us But those with different don't for where we tactical they've continues squarely ways of continue not. certainly changing. can they we view We them. partnership. And to lot more them we've take successful, that decisions. There's approaches great or it will we a to with makes sense great as over partnership.

loan Credit important continue have as it's for about lead channels. as us goal, actually build Karma, Our much to volume of lot talked coming a having to other we sort through of our

the to of desire we the have no have reduce partnership We Karma. scale with Credit

In this We fact, us. a we it. view real essentially issue want as keep building to don't for

fintech a very in advantage to unique product a product, in out take a a happy seek to proprietary of have in we're Credit distribution. partnership fintech a proprietary proprietary Karma that proprietary have that. with we company product. lending do like Most have they are actually We have We people so so don't somebody really or

Operator

we'll go Hecht to Jefferies. Next, John from

John Hecht

Congratulations.

I and over growth that. adoption other you You the volume saw unions of some Bank and platforms about announced and bank Apple gave kind stat the the the And tied guys credit to And some good on around give the us of there give it, call few the update details the component the an Maybe and penetration momentum of pipeline. months. that any can last business? on, you you course can

David Girouard

Dave. is This sure. Yes,

live as agreements Let's platform. XX including We've referenced, just additional of with platform. momentum you go signed banks. banks our say, our think has total since on continued I our today on a There's had Apple IPO. our We've X, Bank, X

of there's think in I market. things happening a the lot interesting

during of digitization traffic their is going the accelerated but clearly to banks course, has efforts that a COVID for all, trend projects reduced there's are of regardless, dramatically undergoing accelerated and pretty been years COVID. which branches, that's because, First on

in And importance there. more of So interest reason digital that certainly, a the is of our platform. for lot there's

banks reaction the focused something and do. for is of banks It's loans, also excess almost that that deposits and sort banks. have really across a is shortage we're clear of upstart.com to that that banks. the to helping days our we true more loans One these platform readily is board we've from referred get taken This little can from on a

Our volumes are growing, seen, very can as be quickly.

very loans, is, lack have the branches, way a And demand particularly acute or time, have, banks which closed to traffic. through and solve so fastest problem a surplus been it's that large a deposits likely which really for for again, of

definitely interest So larger from this state We're increased really is the of seeing it. banks.

more I fact think both history lot that this lot as issue excess much banks category with, into in. a with familiar because entry our into a are and as more that deposit well have confidence more the auto of larger a is

continuing we would our banks. So to pipeline of grow anticipate

finish, has only together from our don't in certainly process. add, I'll to which by platform was, expect we join small interesting, about to for and very goals start of stretch. banks something And bank. also with XX-day any and fairly onboarded. of that it us, come is is because that, We make Interesting agreements a easier to an agreement all recently it signed quickly a But one did super to our be groundbreaking. our for faster

So excited we're very about. that's something

John Hecht

guys look our looking guys -- -- you through that. forecast, the wondering but significantly know clearly guidance I can helpful different characterize year, second lens, And exhibiting normalize. lens, very ahead to I'm And then shelter-in-place started it's things at when last where look the is stimulus the knocking the it maybe some despite more demand? this bank has the it consistent of maybe loan it Is bit little channel? from of fund us -- understand more I I all coming part I we improved is come from of above? you to some I credit at so of guess can Is it And a is a there where of just guess, where Is maybe post color. of That's you kind down from, way? at new the secular things momentum you of a through the were meaningful Or but Is looking upside channel? in product -- different any momentum the where channel? Okay. period steer of the

David Girouard

is Dave. This Yes.

me the think it in Let internal. to business I R&D. world maybe well how so last a in all and try Part year explain days. doing our why turbulence is And I invested -- lot the I mean, that, these the industry, is of we by despite

models bigger stronger. team getting Our and kept and our

back. tell R&D not last year, we by our can hold You spend did

opportunity And is been system. dramatically. learning in I'd an change even technology accelerated for the And so the a has really AI improving environment COVID because say a that that

generally technology. just gets forward the was the throughput fast progress That there So very quality the better. funnel in means much our of of

at the things course, lot, changed. the time, X a of Now changed and environment same

an AI-based having environment properly it a went a in risk. that models. levels And And of system discern where lot, we handle risk stressed advantage. more that of an and like -- significant really risk really system becomes out important First, advantage that can there's elevated even a the we level the in environment have pretty it meant feel and competing up

company But weren't And really smaller for mentioned, dropped. as lot lower, as a cetera. loans. a is this that in people mentioned. second invested to balance The spent demand are And Sanjay weren't is has eating happened, for demand translates traveling, credit as that thing we is us because out, et card less, automation. Credit that we've

smaller handle we are from really well something So profitability loans perspective. a

they're When significant think things When turbulence. a together, you're Upstart that's But you companies as we whether -- tightening opportunity a seeing XXXX, is different I cetera. in put that during pretty back, has we new those different presented seen models are taking during reacting an differently, market certainly et platform this handling I time naturally ways, share out And into seeing are a are built out what credit, in to what pulling X really get playing and play is for think we've differently. really it XXXX. shine of

Operator

Instructions] Next, from JMP Securities. to [Operator we'll go Josey Ron

Ronald Josey

David off, question I kick will and David have and Both a follow. I'll here.

a David, funded Sanjay, maybe and, the risk. acquisition bit comps total the in comments there also your channels toughest little about loans the So just Rate of understand more accelerated. But the accelerated to on year. wanted on quarter requests

And second going quarter? that you are about most but question. is a just more things the maybe channels your little ask used acquisition you things just know one. Can Credit talk clearly, you So the bit get Karma, strategy And this I well. importantly, Credit I first forward? besides David, the don't Karma going if want to

Sanjay Datta

the or question. has overall spread greatly. channels the for Thanks guess I say between would mix not I Ron. evolved Sure,

loans all creates expansiveness. our really, better happens, us just it economics. send is We underlying improves that we improves, allows -- it And And when convert continue campaigns the ability to of strength our funnel. that when model the it the in the of at channels. about dynamic to larger improve It think unit to

any been across growth that And so expansion a point channel impact in channels. there wouldn't I one having an we're has seeing. really the to as outsized specific

Operator

Next, of to America. go Bank Nat from we'll Schindler

Nat Schindler

a on talked been I I'm a this trying difference. times but -- about know of it's bunch out to figure the it's call,

the your that quarter, -- going change for to it ability changes the easy the You marketing loan do lead incremental take you last and to get Yet year of that affecting Karma in November for Credit just about ability that the year. did changed on in getting repurpose from talk through that What their another? the you accelerated did one that is to through in platform to there? last you right at to price. that accelerate them dramatically looks you're And how rather -- coming it for dollars because like

David Girouard

Sure, Dave. is Nat. This

a -- a last in. and little sort was us was to I side in let's frankly, sort we forth for of, elected frankly, terms all Credit see. of like and the yes, the we of demand it. that having and is together the sort market. about product Karma small Karma, just them back you sort channels, show through compared -- And work there to as had how know, our including between I what a a noise emergence Credit of of in a back Credit we distinct that is So product But Karma overwhelmed don't a deciding little of said, and that not of forth participate matter program really bit mean, fall in with is all and

Our and the successfully is underwrite really ability of unique. torso market is help breadth what our of to model the the the banks market,

in most see think consumers. want, they channels, them. particularly notion the And like consumers challenging it. I for important and or fintech Upstart our Credit that's of what its changed. that they're time, Internet sort their We other has mix increasingly, best the as not belief. best here in Sanjay way to the whether of what way Google to the And channel said, the it's whether what consumers through Karma product. that that origins a finding product find the Karma through way believe is, best of partner. this believe it's their don't really really And Credit customers. really of think itself, And has happening But is And is, the an that that's find to our foundations We captive owns you their product I means for Amazon

So I really it. that's the summary think of

important kind And It's coming our about what showing thing. towards for one the an year, in cross-channel is growing really and partnership. we're demonstrating and basically. is But all on it not growth what guiding we're what particular fronts, we're think a I of great we're channel.

Nat Schindler

banks Okay. banks of on And for small well? parts now. then to -- on did your have banks -- it's fee source their longer-term worst just largely term, small, why about and could you goes a customers COVID were just But banks, product quite running from isn't active. and not as did XX bit them talk up origination really you loans add think longer this if most and very a to second that some just you the they do said I going and kind to platform weren't did a the a this of bank question -- all basis, for own their high-margin that a wouldn't not up medium services Why when

David Girouard

Sure. that admittedly. is sometimes on technology Right. and structure. But their by conservative from a They new are are nature, We built AI a ourselves great a conservative Nat, it's ask perspective. very question. banks

be, are regulators should making is So they it seen it, of cycles. their that that it through supportive as tend towards they've sure everything

probably is is this profits grow, ways. little for So I to perfectly many not But it They almost a pipeline different think the driven or happening, growing. desire purely expected a and incremental by most rate in banks. adoption are businesses is than

through platform And quickly fortunately, to not committees, as how when they And our on that's as banks institutional why committees. dependent banks our buyers our come when And grow to developed through and willing them have can that as quickly capital to they've their on We've ready as banks compliance when committees. that are the they're it, loans built fund many how risk And and do can ready the and does, credit they're are. it the board flows gotten of lot rapidly a we've committees, confident, continue banks model if improving business them. ideas can models technology. a not and are hold markets these adopt such we they

that that's their very a We're share, there's well, market where certainly, customers will are a day serving better. to are winning keeps best of mainstream product is Upstart getting it's who But banks that there XX, the in only acceleration okay. XX, model do And are XX point, I it. using who are banks a that comes. and somebody think, commonplace be like question with them at who the moment becomes doing some great commonplace, be really when It's their it of when most XX it use. technology becomes But a going future better. And number, to help

Nat Schindler

really funded doing taking you more And fully end, per loan them yourself? because of it board, EBITDA you customers make would banks come in on do want this small and you the to if to it, source and tons

David Girouard

little a call us a revenue but a again. upstart.com, paying whether We're and which profile model revenue profile, is to gross customer has the they're or Dave the customer This what higher we that profit. neutral which the is is that, comes only bank whether higher to sources fee, platform our a essentially lower

Upstart like and be loans wherever So want they Upstart to both we're customers we, go. got of course, them. them find and kind frankly, to ubiquitous and We of to neutral

like necessarily certainly over don't both see in a to we would rapidly time. So race. grow that have favorite We

Sanjay Datta

borrower the of a But this always add, would the risk. And different combination just then best answer out dollar perspective, there, solve absolutely capital every of are, the in that's borrowers And best we for to that I'll borrower cost Sanjay. and sort and for is interest has a the somewhat just what's I add of our it's EBITDA-agnostic. we platform. from if of want

have make dollar our to we'll affects because will banks in loans a other loan. But tend each it lower financials. and We convert better offers, per more

Operator

we'll Scharf David from to Securities. go JMC Next,

David Scharf

Any just any terms you're Ron forward securitization? hitting is, set unmute couple are a technological well, demand, side kind of But investors little that but like? up speak other One the Just stimulus network. like hung what a on of developments instead Sanjay, some the about on and of and the demand the problem, overall increased funding this actually the headwinds seeing arrangements of -- call bit there in was to like partners Obviously, on flow breadth of are through signing button. is right the need follow-up the on number of forth. complex maybe of up of funding me I'd you the developments say emerging? we which up Can for latest I kind front, let's that breathing to with so things. I'd and obviously with

Sanjay Datta

call. take our Yes, up it hang if on won't David, you personally We happy to.

On A institutional the funding funding QX. really or side, premiums on into I underpinned in a yields bit QX sort guess our back. be I high, sort whether would of obviously, lot investors, say, That sources, obviously, in of they the obviously, required high. of last of banks depth have of very pulled of is been the year coming of COVID Risk went about side. terms what you concerned risk, the cycle saw business very impact

started As comfortable. the the a sort of broader a more we as risk smoke landscape felt clear started the to to year, bit the little people clear end of got bit, to

the the back certainly, fray. we of the then I funding saw sort to original see you sidelines investors of we if interest. digital, got that you were to towards the And happen waiting other saw able coming think sources you then the stock to as respect in maybe into participate, on of some the the end year, over what to sitting to space of the coming showing XXXX. Really that will, with macro first observe would were and course starting

little so interest demand our say, funding And been ever that's as the good on from banking of loans for bit really talked And about encouraging. respect today, is a the pipeline the been side. sort to side. it's I'd demand or as the with Dave

names and side, you're new lot institutional the of interest. On seeing equally, a

manifest have year in seen, markets I probably which end are that some ourselves. begun the of certainly would markets QX, the constructive you securitization in of at the we've since we've or the think most seen

did are feel much bunch And There's performance now even returns I a where of pretty So interest see where -- are very though the where therefore, pre-COVID. actually of level comfort. good, above to waiting broader than not lot a about other there's the certainly they if still they were and of of first kind to of participating the macro a a of combination more the before. secular didn't of comfortable higher good think now people to sort starting these was some economy. And digital just folks of or of better what still trend some shock yields required parts are were platforms feel a recognizing showing that

an So I of has own not volume you've all of in the funding been think summary any that obstacle of side. feel in confident that that the And is funding on in short way. to the our rapid the really results guidance, reconstruction our we seen

David Scharf

certainly, Got it. have No, I helpful. the of no, follow-up. incredibly receptive paper. ABS quick markets this no, A mean, been that's

of APRs lenders Spanish-speaking mix about I averages. typically high further may early coming soon. the version consumer know of think language your been installment are the there on or little have a I better Spanish higher Dave prepared focused It's And have historically kind borrowers the a down in U.S. that spectrum, mentioned credit unsecured than remarks some in yet,

of are of borrower, existing proceeds As of range in the target platform? credit market we that of a and maybe a kind looking you be use potentially at FICO to is kind contemplate your different Or general this expected profile? end same

David Girouard

Yes, first question is...

Sanjay Datta

ahead. Go I don't Dave. go -- ahead,

David Girouard

generally, of lending to Yes. product refer are add really been Sanjay offer Spanish-speaking Maybe have -- shortage hand I'll the start that and for there population. you the ones platforms to, an Yes, unfortunate let And it online their his retail thoughts. has base.

goes You get all and that. and actually generally and that a down a physically go store rates loan sit or higher with and into shop

tailored or not And the has is that's just market. And purely a So have to marketing a experience, first, it view, first the this policies, disclosures, the Spanish-speaking the but go this is privacy our a reason everything trivial customer -- online done for really, where one the matter. the you in the of because everyone not it's the agreement, there's to support. across from loan it's

have don't yet It's product, to. clarity. -- if anything, has for or yet, important it's still important we're So thing. We being retail big to we exactly partially. launched an that really for our how obligation. the It sort in yet add product of not a a able just market. But out product at we why lending that is like our he cannot you language. the and borrower would can't doing speak really anything it, But demographic take somewhat platform It's to -- gone loan compare tailored not is is nature. purely in this I'll our it of product Sanjay will because the of let it really it's in hasn't And because identical to going sense into digital a it least it's do an view, that just base through maybe the explains happened online current their date. to

Sanjay Datta

I Meaning the a very one in is our mean, mix historically to our by specific a meaningfully. also a obviously this typically that Yes. which from traditional will that's models an well, performed that perspective, been important this U.S. view demographic lending just underserved a we and anticipate and is we a is But big us have point the models. don't fast-growing product say, to demographic modeling it's Sure. to on allowing new of our change mix, that bring demographic

as this mix real strategy. our view expansion we no change product offering, to or but So of underlying the

Operator

Our next Pete question Citi. comes from Christiansen with

Peter Christiansen

of hand, be kind channel multiple that think these app. could can functionality of Dave, a isn't one high-level opportunity even for the on question or super distribution a of the I the this of even see banking of label Certainly concept an it to you The potentially some evolution products among where here. the just some could Upstart kind on One a certainly there another the referral banks to bit as challenger I app. is of opportunity in there's you to yet, But of see having that want white other but other ask And by some challenger credit threat we fintechs. think payments perhaps banks. to companies, going. or fintech,

the to how what Upstart that meaningful curious is Just scheme part hear you the play about evolving you're of off obviously in is. how a but And is things, This that? fintech in market bit could way? thinking grand think a in do

David Girouard

good Yes, that's a question.

around the think new challenge age decades. be that larger been of banks there for will first banks let I will So me emergence have that say,

them least be thing. very models, at for think them a is I of healthy successful I'm with et that whole and will of white label cetera. And a good there's that doing sure some in and bunch it, vying

We banks And and special these they're do a don't, that If it sort in of unique is quality thing think to a we to models manner. experience that them very to with we've lending is will, partner that very a a having to in over anything, and time. new you for building banks, tech-forward hope giving X of and as would any -- threat hypersensitive way, see We if that are been function. us. years, customers the their good unique

So banks feel lenders. loans all way in suddenly large new captive some audience we become will at any will don't threatened have get that They a of elsewhere. these that never

a better from has in Not feel just product see won't multiple believers idea, a the consumers are say are that the it. products. it in available, all way on one the personal head. way And for away. banks product. have to and card find consumers the for where few is of best our a has best of years, the But of there. they XX-plus shown fallacies -- successful, If I won't in that do it is world is firmly they won't mortgage the we It's done no world Internet clicks not belief some going new sense It's be And credit we're to take loan fintech available, go a provider. that the themselves market the banks, be aren't going the there to available, think we'll we simply best the out likely view best one customers. some that believing own superbank the not place free anything is you in to your the to last best

Peter Christiansen

Really the again quarter. insightful. Congrats on

Jason Schmidt

back Dave, I'll turn to you. the call

David Girouard

everybody for all. earnings again in it you today. first joining short thanks was I in for our helpful few hope just call to see a for and will couple we us And months. of us -- on say joining to Sure. Thanks want a

Operator

your And today. for that you call conclude our for Thank does participation.

You may now disconnect.

Upstart (UPST) 17 Mar 212020 Q4 Earnings call transcript