UPST - Earnings call transcript Q1 2021

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Operator

Good day and welcome to the Upstart Q1 FY 2021 Earnings call. Today's conference is being recorded. At this time I'd like to turn the conference over to Mr. Jason Schmidt, Head of Investor Relations. Please go ahead sir.

Jason Schmidt

you Upstart's us Results. First thank call today's and discuss to Quarter afternoon for on joining conference Good XXXX Financial us our are Officer, call on Upstart's With Executive Chief Dave and Financial Chief Girouard, Datta, Officer. Sanjay today's

ir.Upstart.com. Those remind Investor results Before that the Investor and issued press published shortly Upstart Relations first its presentation. you release we an today, wanted announcing closed are quarter after our I a begin, website, available to on market XXXX Relations financial

as call, make and guidance and variety risk year business. will to the information a various for are described assumptions. the factors on XXXX our available of as that today During statements such and have Actual based our we forward-looking subject to current SEC. result are differ second the a full filings with been These of and of materially expectation as our in uncertainties results quarter may statements related

reliance against information or any As forward-looking new a of a except update result, result statements. undue statements to you we as placing future assume on obligation forward-looking caution required no law. by as We events, these

during otherwise results provided are our question release non-GAAP unless references to are during can initial and GAAP today's supplemental reconciled in tables. financial addition, measures, results, our one earnings we the call, call the request possible as follow many to as which stated, found yourself In be that as to the and please questions To ensure address up. that analyst you limit we on

to to CEO like Upstart. Girouard, I'd it over Dave Now, turn of

Dave Girouard

innovation Despite quarter and to entire many put by of pace and Most obstacles of of the and mission leadership our past application earnings the emerging office. Dave in Upstart has an to our Co-Founder have you artificial Yet never Upstart. I stronger. call, pursuit demonstrate front quarter. never for in of lending for the the in have to Upstart continued you've leader the to you Thank results XXXX joining category. this been CEO been afternoon, Good you, in on us of quarter thanking team intelligence of amazing deliver. the Girouard, quarterly covering I'm a first continue year another our is results. first Upstart want start our our everyone. consumer

revenues XXXX QX XX%. Our up were

FinTech stimulus seven Our of bank first of were unusual XXXX. our from in profits. profits see just QX, fast from to volume up paired softer growth XXX,XXX by loans demand Not factor over loan government growth rare ago. two see were in it's quarter more a double quite programs, real by than transacted Despite consumers quarters with the due to a company. that the almost But partners to

we're business why so it's personal So about driving core future. our explaining loan and what's optimistic its worth

let me primarily Our and you're which the the technology XXXX, increasing borrower this driven, of call model our upgrades unleashed growth and of you model we seeing. funnel. dynamic, In growth three understand manifests first help a variety is as launched together To in that conversion that examples. technology out rates quarter

loans. we've more core an actually version learning achieved model This of that multiple ensemble sophisticated loans. by new or a model to First, This rates more blend one credit models, are first partners wins which translates risk blended included wins a into adding ensemble. machine higher that together accurate one to in course rates, have price assessment. bank of big new work model our we forms and our is generate launched to decisioning how a to an use AI the models and Historically, upgrade the of approval quarter the models more that interest big of saw upgrading led upgrade we governs to the but this simply by together. Other come algorithm lower existing these

spend Second, marketing, friction consumers verification. reduced improvements for This loan. those income growth. almost marketing marketing, efforts into program. more a applicants conversion bank unlimited applying upgraded the we the increased automation And of for loan, larger more platform the AI leading efficiently underpin is lifecycle that we more experience This verification us of a also expect funnel, essence fraud increased our that for refined leading That of coming third, customer helped to of acquisition significant including even of friction partners. it targeting, be we some reduction included on It acquisition the generation. us, models we driven more and area new Buying to and technology models our experienced, potential and growth in will process second that relatively our we in in for a to These our investment incrementally the a in future. applications content of rate to higher our the brought of amount signaling, volume has launched back to dollar the spent improvements to to means growth. every profit. we source is Upstart AI

without this of partners our course, and happen the Of bank institutional confidence couldn't investors. growth

on powered to to built We or programs Upstart increasingly institutional and capital predictable who capital platform deep investors yield. invest partners bonds institutional new add markets happy their depository their to are broad supply into partners continue to Upstart powered see bank to funds funding. existing that bank our from an assets loans money loan super-efficient expand bank We've and capital quality with and chain that high Upstart mining sophisticated of

model and be to to we've accrue that While a a grow factor It's profits. continues game, a AI that acquisition here real described the commodity while paired support four our platform years, by to Upstart the reducing costs bank XX advantages and partners day. with of loan ultimate volumes be the types of in have upgrades the last by of generating allowed most money proprietary built consider lending zero-sum the to

the future Our optimism two for comes from facts.

improve AI centric backlog will journey and to that lengthy competitors throughput And growth is lead have same the second, to see our projects don't the of that more in Upstart we on on. continue future. funnel we First, a

As opportunity. about that auto the consumers process at we past, times is vehicle of all. to has as far should six auto mispricing through lending lending. displeasing and paying next is believe we size it said much big The with more of least And to Upstart's the personal lending finance is a they in than millions a inefficiency, industry

a time. has instant single a category. new I'm thirds and market, hypothesis regulations exploration happy that best states for loan. digital conveniences and opportunity to best to meaning same refinancing and that friction. building impact more one that early pandemic modern state means time, market area of auto friction XX have an this Since of in we're goal remote is more This Only to for yet product adopt the in expanded At has than adopting there's product friendly to has this two each. a our we're quality deliver fast the encouraging toward working happening from it to the and refinance possible that and titling our Upstart consumers Our and the COVID elimination process signatures, exciting making and report technologies very electronic a delivering states, confirmed much that for to in where easier as bank superior the various personal same of make of partners the US population, with refi the pricing, approvals, instant product it's we're actively also such helpfully car this platform. accurate progress We're wide-open representing states these January, the based faster eliminate access us the rules process pushed we've experience process on the gratification borrowing the loan, to possible our leading auto and that sooner. with the made lending

refi and no it's as to lending, channels that that. our we've to of date, unsecured effort is auto accessible small on on as refinance to activated product. product couple well a reach only test of doing we're complexities To way marketing the loan. consumers iterate an enough to and as But auto a simple our build Given

you to report fact, as that Upstart.com. for months our also car of Shopify in is and coming our Prodigy sell I'm dealerships helping dealerships need acquisition expect commerce software. cross closed a like In modern loan yet create That we will Prodigy can't leader begin multi-channel and rightfully the market in product. on in auto happy to an experience proactively to offer automotive refinance the that find more XXXX. consumers auto buying car we change all

almost loans In dealerships are us Upstart's potential across will loans the Prodigy vast this from QX distractions sold increased experience, modernizing team our quarter. transacted. Prodigy enabled small majority vehicles XX% million country, where $XXX the the the were in addition at XXXX. By the footprint merger, buying to but stage, first in of Prodigy Even in to auto bring the to mighty dealership by early AI through car allow

quarter, the provider certified retailers. retail we a During Subaru of for digital became America

now and tap To As I Prodigy's to this in market of said largest Upstart go-to-market realize believe the Prodigy into increasing will teams. later one significantly we enable investment pay world's last potential quarter, technology buy opportunities. we're

a just quarter from first perspective. The win financial a wasn't

to ongoing leader transparency We be inclusiveness. with From clear you be enabled making fairness, you're investments lending, regulator ongoing the renewed testing lending the in if also and Protection conversely, whether preeminent of consumer industry really nation's in and efforts. not in fair leader strides AI fairness No-Action made protection Letter Bureau, perspective, in need the also Consumer questionable AI. to if want our doing matters And significant our Financial the you're fall, Last it's its Upstart. in you

is platform Upstart the in to regulatory has No-Action from innovative Letter No-Action related now offer Letter's we three lending. products consumer potential the bureau for reminder, lending that significant received of year benefits. a second may Letter purpose fair with that a CFPB, the No-Action Well, know reduce no so-called other As of our uncertainty is to

more As sophisticated in part developed terms we bar measured. tests is fairness of significantly how this that raise of renewal the

Upstart source fairness level all bank partners. these the to every of the our of tests quarter, for new sharing increased CFPB. we our by applicant code time first for we recently results we for transparency the tests Additionally, In delivered across perform executed and the the first single loan

APRs a to industry now once rates, tested. QX and opportunity significant every rigor to AI for when and and underserved XXXX. during Officer demonstrated that. exciting platform position to our synonymous a same turn it very a of Thank AI can testing that setting become banks, cooperation lower has for technology. on difficult we're the of fair technology thoroughness for From at that financial the amassed raised into new Upstart. access for XXXX is from increased price same comes traditionally government. AI credit our The strength. category. We're larger that's a standard that's quickly of a demographic to that our in credit bank better guidance. through testing. models form over and you. we've consumers growing fairness for adding just has did reasonable for profits and with approval to partners my lending proactive a and expanding this believe pandemic to worthy access opportunities. and and our of upgrading again, opportunity the between the XXXX Upstart's with It's I to create now building At period future generating walk presented COVID-XX us market access was to bar shine a a Upstart AI to very we're And came on credit Our where time and perspective, and improved business strength our it for to at an time. transformative experience team a an year into We're our We Sanjay? consumers even and Chief XXXX and they platform Financial with we're results I'd lending product Sanjay, quickly like clear brighter governance, transformational

Sanjay Datta

thank us. And you Dave. to joining for you, everyone Thank

themselves. company whose of details that exciting We to speak through. for be aspire walked numbers some a just Beyond Dave us the

So dive no further with ado, in. we

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

friction advances achieved transaction continuing including process, acquisition reduce beyond from to we top completed model accuracy, and our our customer. to benefited targeting borrowing the models quarter mentioned our and performance use in further this Dave optimize improvements As line sizable with the in to work campaigns we initial

the prior. some by a over improvement profits to which minus contribution business was margin margin borrower wake been margin, pandemic of in the efficiency, variable year and improvements revenue million up a were XX% more year fees The partially verification metric operating which year-over-year, XX% and contribution as past through Our conservatively and driven from servicing the manage we implemented in order to in has the up for turbulence. of the marketing of the in define XXX% non-GAAP representing a from $XX.X QX costs acquisition,

XX% expect and slower margin scale. over in coming to the As than $XX our earnings Investment expenses be revenue we $XX were of spend hiring QX. discussed our slightly boosted and XX% in operating million channels up million part increasing by $XXX.X to year-over-year continues normalize and on stock-based when in we from QX, moderately our incurred compensation. grew acquisition. downwards our year-over-year administrative closing line this long additional of to General engineering million, quarters XXX% remains level operations netting the to priority QX contribution year-over-year above return year-over-year, as full Prodigy of the and expected marketing or in XX% last to growing trend costs it impact our out term R&D call,

typical We following our than continue XXXX. to base in fixed ramp expense lower investments

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

from QX GAAP stock-based a for QX, PPP by came X.X repayment average of was from voluntary incurring up a million $X.XX, Our weighted of the from despite the up XX.X $X.X in of count EBITDA, share adjust our million, income QX, the loan. net per year, we expense repayment at Adjusted for compensation the loan. in $X.X was prior of million impacted $XX.X despite in Adjusted in based million QX earnings onetime on being PPP XXXX, $XX million similarly share which million. diluted

million in sheet, first our ended balance an from completed the underwriting repayment of the stock on Turning net the quarter resulted attention our balance $XXX end the with This follow-on loan, XX at does and cash, proceeds of additional up quarter reflects the restricted unrestricted we PPP raised but to the the offering of XX, million XXXX. million discounts. $X.X April from not which reflect we in XXX million of

notes In terms quarter of through the of residuals XXX.X from percentage loans balance million, in This of reflects platform loan the funded assets, we same reduction end at carried the sheet. an year. aggregate of the balance the million prior own continuing of and loans, down our $XX.X in

highlighted exposure totality to As these our loan last the credit during assets direct earnings represent risk. the we of call, have

full year term and outlook, turning in our last quarter. Now near to our expressed guidance full as year communicated

technology course of improved we are our believe We results seeing over catch to XXXX. in business a where up to now the

historical mildly would to and we our them we normal continue return we more will are see the be like There your contract we that as additional attention contribution spend. their to trends impacting expect to to operating guidance. above margins trend, well, our to in slightly margins As two call a

that with expansion have excitement our The to consistent expect of earnings acquired, Software that through platform duration XXXX. is level our upside an margins This of direct impact towards the we recently opportunity. magnitude we Prodigy at the the on accelerating of will EBITDA the first incremental of

as expenses impact margins. expense recent quarters, the few our be relatively that sharp The second for price the the anticipate over grants in we income stock-based since will we beginning net our that next rising them of which the compensation our given year, will is disproportionally stock our rise

margin meaningless XX XX%, XX million representing With average of million these the become rate EBITDA net total for the pandemic. approximately $XX $XX diluted lap We as to somewhat million approximately of points will Contribution QX midpoint. to to revenues growth quarter-over-quarter net in for adjusted at are million income $XXX share mind, of the of and year-over-year QX, $XX of a note million, count million, million million we income of expecting we $XXX of weighted growth rates million, XX.X peak of to XX% adjusted impact a that $X shares.

of As and our revenues we we And year-over-year, million XXX% margin quarter, strengthening model the of expect well full indicated to business, join rate Upstart XXX growth to to you contribution that teams today. we of quarter. our had and in last us thank Dave's want all from approximately all is EBITDA to year of to taking a are continuing in also all as margin last gratitude result about the underlying of that of share for approximately from And continue our XX%. a million, time for XXXX, to the out $XXX reiterate our That XX%, hear the expect of we as technologies, an representing results. information efforts now of adjusted up whose to you progress. I approximately up indicated with XX% contributing and our talents again, hard-working

financial With easy question. are be very Operator? of the to this any You open company. that, all I Dave are call making to the it happy now to and mouthpiece

Operator

Ramsey [Operator El-Assal Thank take from Instructions] you. We'll first go our ahead. Barclays. from question Please

Ramsey El-Assal

about our gave pretty on guidance gentlemen, on like conversion I model upward what our full loan expect models Hi, limit evening. there side wanted It you that also made. technical one. do above decent a It higher conversion granularity some taking you've contributor through and I that year the speak might in and look over How feels reflected the maybe a if us that your trend than the the rate rate. that's know for just time, came this you improvements on to thanks or of my ask to well raise is question some to like rate to year? the metric

Sanjay Datta

conversion we improves, is then abnormally this what Hey, of Randy, of one a - we as for accuracy of bit contribution question. funnel is so margins thanks the super our line can signal that yeah. from to And contribution campaigns in now. it expanded say and our that the that that's to top accurately expand marketing the in extend fact the predict marketing that conversion we important and do it's the two of our will This the funnel. of of technology. funnel high and can beneficiary what Because are because high appropriately. maybe as as underlying improvements sense or and strength we haven't the rates strength scale. signaled to related improves, sometimes about. driver is guess of Sanjay. talking you're margins I funnel, is we I'd our way that models Sure, your are if our one anticipate manifest to up the campaigns sort a It right our of - right And performance can about our up the think little marketing And our ways, it campaigns. what is obviously themselves conversion the typically show technology maybe can a is show top underlying now improvements that And somewhat

in the loans table. leaving on some still a profitable we're So sense

improve, might traffic. it conversion what and our sort a will will funnel that then acquisition down of it you convert expansion continue hopefully side a funnel more top the is bring improve, back expect on So into over the but to bit of little time, will technology

important up upper for And predict So limits sort conversion very have, a in acquisition hard result core get that because the for just Dave as long. is technology the results the as improvements naturally to high the bit the our the of scale. line what's I that the business rate has it's larger will to the lot that improving very that size. very technology overall point and backlog campaign of it's to a of marketing to driving models seeing. of sort improvements really that, direct you're is predict our the will that's a that's a just reason, how we driving for of lot dynamic, limit, and as upper show think accuracy And that of projects improvement the said, of that's was rates conversion between underlying pretty driver to you hard But bit a

Ramsey El-Assal

the really kind Prodigy auto up for you're Okay, of network, network. the penetration dealers projected follow quick me in just on and that of rate is

go over could of you change of a us, you something than by competitors to is where remind kind and loans. is and make that guys other them Or something dealer to kind have your dealer of convert can where that just over to you sort migrate If you loans? offering rather everybody back-end

Sanjay Datta

that the it's by extends, mean, to we're thing our multi-step have within of the that getting opportunity first process. focused that right place transaction And a footprint I Software the needs we dealers sort loans. to offer that So Prodigy themselves. the then in the and volume is happen, adopted now as

still in loans confident I compete approval to with think need have the scenario, the relatively end that marketplace, prices to rest you in. to the At day, order And of best highest obviously. and win. the rates we're the of Our need the

a So of step Prodigy software the developing. is for if important footprint to second From will I think would but the be you the us almost flow expansion strategically, sort commercial of that volume, of loan will. is opportunity that that what's

Ramsey El-Assal

it. for taking this Thanks Got Alright. evening. questions my

Sanjay Datta

Thank you, Ramsey.

Operator

to move from We'll on Peter Christiansen you. Citi. from question Thank our next

Peter Christiansen

the of funnel? are near creditworthy just more size higher to that models your down prime more upgrades loan that are Good you piggyback the little and identifying a opportunity I according Nice to want platform a getting understand was quarter function conversion? translated that afternoon. the just it to borrowers made into just the ask Also, noticed trends. you off to creditworthy? this Thanks borrowers I'm Or into that question questions. year-over-year, first more to how average for of bit, trying Ramsey's the a is to

Dave Girouard

The Thanks us It about It from that effect do longer. block prime, people offering credits more what allows model answer business question. is Peter. that avoid lot more lower of default our those that's core and of smarter does that don't basic the legacy And I'll do of us of that, of approve good as about Dave. to both applied a who most which label by near predictive accuracy anything. helps likely we are This it dynamic the those to at gets thereby generally to separating any is not is score is building loans things. rates, turn and sort bad to how we FICO anybody because fundamental it very as we a times, that's a credits.

has in that mind, as very looking to have dynamic driven specific loan - get are to for very a through is what the a we that growth loan, along get a process. access just would the reduction people likelihood and a they the in So core to have friction for by high with like seen approval repay of to And model. people who our

to of And for approve secondly, get want who model are more the tends and, first a so how a at that those lower more generally, our least, at pillars happens it sort level the accurate at loan. friction people in credit those the growth is reduction to twin rates, of

primary are that's quarter. And sort So first those effect of happened exactly growth. in the the what the

Peter Christiansen

question, all or in dealers, up category? change against when it as lenders to is into of more mindsets follow about as then guess, rebate compete there commission other we hands the relates need just issue And to I model. helpful. a you our Thank getting your have that would that a to Prodigy you that's thinking

Dave Girouard

today, sort is sort a basis subscription a the their Prodigy to experience. few it of on selling to dealership modernize a No, $X,XXX for as exists Software, sold of auto

And the nature Upstart powered we that very in incredible particular It's flow auto Upstart in nature Not haven't finance the an a it borrower incredible on directions be option does would generally different vehicle the In the there the source such, it's even but become of loans, money there'll consumers. an for for an overall. an that costs We in appear low date. to on the certainly, and model very if likely And to in will depending and option, option to but are loans. can the optimistic the only a loans in will that be just which changed of large lending not what what for any case, market us. opportunity amounts this extremely opportunity. market, negative of itself is opportunities finance acquisition future

Peter Christiansen

Okay. Thank very you much.

Dave Girouard

you, Thank Peter.

Operator

hear Thank JMP Josey ahead. Please We'll Securities. with go next from you. Ron

Ron Josey

to great shorter onboard relates onboard. the Dave, taking to sort of loans. for question partner And results the bank is a Thanks Great. two more seeing and we're data here. just really network, Upstart days wanted And it and it's I more ask your on One things. referral as to join. partner think I

around and just new and about more I can automation, on here just again. how when improving process for partners terms XQ join talked about more just Can to that about the how process think little reducing I going? friction. tie is talked along? of And and a products reducing heard as users repeat if the maybe you you that about - friction in that's a was and secondly talk just just So in bit you bank repeat question asked, newer coming process you talk Thanks, then

Dave Girouard

Sure, those are great questions.

format technology a they of as bank work just to themselves to our when use if Upstart to clarity. term is use certainly heavily partners referred the have So use to market originate mean, banks then going term they're one are to Upstart lot that for and service Upstart diligence And as banks is ours network to format I basically, regulated, borrower a yeah, the we credit. and we do of to comes the such

a So we're lot a lift, from of well work a community that in as interest growing very that particularly will process, having quick credit streamline to process, but significant unions. doing we're that unions doing. be There's as smaller think, credit what always I said for banks,

think or there's us, and shrinking shrink bullet the the diligence than the now it process, days a I steps, almost any each So magic of bank we nine of future. a standard It's shrink really sign And process, in onboarding continue forward. our do the just diligence than enterprise there the off sort we're tries ready. credit and of get and no from of refinement adoption, have for technology that what part union do we would the to technology yet, onboarding to conversation refine the up first not sort shrink step other is steps we of be when to in selling and having process, that times I like to - the the just will multiple massive kind trying to also which to less diligence shelf more materials and is the company

effort. that, I with today. - So it's and And don't we are we'll eight I unions platform frankly. ongoing done just an be think There are making But banks our on nice think progress. ever credit XX

Operator

disconnect. for like a and reconnected, speaker just Give get Dave a moment had the we do I to us It ahead apologize looks go moment. interruption. one

Dave Girouard

Hello.

Operator

one in go dropped your back moment. line and I'll your Dave, Hi, unfortunately. line put

Dave Girouard

Okay.

Operator

Dave been And has reconnected.

Dave Girouard

say, process. I other not Sorry, shrinking we're where to sure than dropped, the

something began actually in the was again. question in to get time, gotten that's had we of part one first the to Yeah, past just some be streamlining been if loans that repeat those sort the you to borrowers, might eligible quarter. market on now will. of we've second and who The are We for

a platform still compared we're - others. somewhat it's to young So some

or were business, is loan a modest still this And with on initial that getting And first to profitable date making we a - really, profitable growing consumer. a we focused have part. a just where so

this really just in very be our of loan. But it And products, is together a between vice can so a coming loan, course, upside to really to bigger then And we cross quickly. front seems business. And auto is out a all when us. is or This versa. to an loan second personal is loan personal and of future personal that

Ron Josey

Dave. you, Thank

Dave Girouard

Thank you.

Operator

Piper take you. from from Rarmnani Sandler. Please Thank go our next We'll Arvind ahead. question

Arvind Rarmnani

risk really platform of are the around more questions. for personal of first processed Upstart's What on solving an it market AI pressure more Upstart? scale. quarter. loans with just approach Congrats a terrific loans approach start more work this costs to gain is size acquisition the you Because a and problem. - banks reducing powered will a different through does as So and they said to I to loans? pricing accurately, question couple - Kind time have

- Just share really lending share ceiling space? the what's personal the market market trying ceiling to understand in

Dave Girouard

- is Hi, answer question. Arvind, me just let I'll that Dave. this

utility and to of love simple access, So generally rates, it, of personal the has because consumers growing loans fastest one cetera. it's fast high credit categories et low very and is

more and taking it's HELOCs, fast-growing market I more much category, think So process taking I it's very away a share have which market difficult share away from think cards, time. from credit it's take

category. it be believe continue - we to a it's a will very So fast-growing

that grow past. have We of seen very with also for to very, market think really we're really sort But long been probably beyond fragmented can a that us a advantage the quickly, first proprietary in it's market think proprietary - product a we and what's the can been allow because we share, a time.

as lending optimistic there's AI people effect. of in early or as like to join using very proof into to are and lending. category that grow particularly more Upstart. to I and particularly We respect - its And feel points meaningful Upstart and moves Upstart quickly, banks be categories be, somebody the it very think So and central economic over outcomes terms like in over a just stages, to in pressure of continue big to of better market come time, will it's from and with improve work expect or would will that banks, more business. how better can more will products we're the With us? certainly that in AI their more and

a So personal example, not central very most for loans for is banks. business

more markedly a So don't of necessarily more lending banks. a feel lot another product they Auto and more by than much personal is certainly pressure central that's one. better to lending

just those naturally, are lot of more as interest. profitable move see portfolio of getting of interest. loss auto through over more lower compelling. area of people, and this other to obviously there's approve I that The have is idea large be, whatever being an more interest of is a might businesses banks So because a and to and we think able going have lot now categories time, we're we rates, more loans And significant

or Our lending then be somewhere. view future, Upstart, economics because building of trying with the board, something the all it's themselves source on to not are type going only are all to if generally in is get will this with And until time flavors of enabled AI much better. so technology matter a banks of

Arvind Rarmnani

can as apply of I algorithms the then - for - to the of Prodigy, couple personal or from certainly we you Prodigy think data the I are like kind million like same there's about like a volume kind ramp, been, Prodigy and growth powering QX Terrific have able questions you're you you're second of massive doing space? lending just way a on deliver the Prodigy? in AI in think - XXXX thing significant should mentioned with you How XXX And is, rate.

Dave Girouard

that are some is just Prodigy got to the suddenly underwrite to auto to that's have fits is to model. opportunity so an for is first prior about And refinance auto you asset done the someone loan applied of There's at means point-of-sale loan, is really of explain an course, auto that have how already loans. Prodigy you auto time business speaking, a Sure, some even our that of And an generally is which process and elsewhere. is the in. meaning doing and been through it that loan, upstart.com lending, when applying really more complexity with in to every loans, to and And dealership. and whole backing step individual loans, an you that what who the been our adds personal model that in we've us, loan personal we taking really bit for what auto consider. quickly that's, that

years extension auto now the will it's space, still we through for lending built and So we and in at of Prodigy product. offer states, part That the XX what but mentioned stages, early the model personal to exact it's in refinance become then really in refined what dealerships. of an being applied I as

think initially to as or will then will or built and refined product. But it to a being on another success purchase apply new it we doing exactly at with it for relevant with auto to in as can from - and model purchase Prodigy. more some our scratch new have, its a you of that obviously don't as learned same a what that's market our see So and happen central less, new And a we vehicle market refinance the the the model, we start way make extend from what actually we're dealership. and

Arvind Rarmnani

much. very you Thank

Sanjay Datta

Hi, that and is going your is quickly - tack believe how in But belief of it the we fast. of is large. footprint limiting be scale was meaning second auto the and lending and they're said, as say I grows the overall, won't financing Arvind. is a very very But the just This question, guess it it Sanjay. opportunity early market, address at also serves quickly, part the which suffice footprint to the grow - is. growing on their will to side And to ability Prodigy do the our I I'm my massive Dave it market stages. factor And don't we which Upstart. think maybe is it's dealership I fact that

and footprint business scale. and think to be auto us of will to going for can But commercial plenty they're the of well the than grow the sort the infrastructure up and is scale, to business, as to lending when and this provide ample volume transaction that funding I the to the more I Prodigy size providing think our rest us, sort be into think future. build volume, part software operations it of I of of sort will of transaction we

Arvind Rarmnani

certainly as I'm and the year excited that the to Yeah, forward looking offering about on auto progresses. more

Sanjay Datta

Thanks so much Arvind.

Operator

Thank you. [Operator hear from We'll from next Jefferies. John Hecht Instructions]

John Hecht

- you're that and migrating you us question questions. Good banks with more you a banks about identifying for of there did a cycle and you way or just is more asked. lot with talk the afternoon And call on with wondering, the rapidly you the of the sheet Thanks sales my there or XX of bank you credit my taking mentioned getting set balance characteristic unions? guys. disposition can size to productive same unions. is I'm asset it Actually the share call questions have it platform, credit the been a

Dave Girouard

banks that of mean, obvious that's unions. question. and I it's all billion-ish some sure, the Well, good in say to There more. we a tend smaller be community or first XX regional in credit or would I are assets

bank and a But our the that a interest largest appealing to time. but can't the really union reason banks, in partner partner having not of the hope they're or doesn't that we can So a with country all credit course, them, wouldn't very with work no smallest to of resources. for banks over have simple process lot is of a small there's

banks, market, be - early-stage it's involved et this, cetera, be would I because involved EVP a smaller make be helpful tends is lending the will credit more the these and think little would it would the process it where it's There committee - the be the would can so to get Lending, the is. have CEO an of and you still same going the everybody complicated larger a today, awareness, very in on page. to always be a to have aware, to bank the be bank easier where process Consumer

enterprises - than large this XXX exactly It we to happen that's the below in of move maybe assets as we up stages, So maybe years we we're to we've our in kind any look, product at I the industry bit is. saying, technology new wanted in think how as adoption tends playing little seeing the started go probably banks out. can we a again, ago think time, That's and have unlike over billion a X time. and the realized larger above what billion matures. that earlier I see off and smaller same that, not Though, between And couple as we target.

time. over think I broadening definitely so we're And

John Hecht

someone's a to them cycle? do for do and if then in a you the separate in And they loans, loans? through helpful. cycle? there - hop Okay, go sense queue is you the - at buying that's have re-engage a the resale Or can unsecured partners bank If auto just sales

Dave Girouard

So that's a great question.

can standard definitely a product one exercise. are that page on of sort sort you another working agreements add towards of simple We with

with to part that's to So be the bank to of add a - doing a want very process go through Like don't question. contracting insightful new us. you product full might a it's what

really you we've started say, kind towards moved where can style So of loans. master with personal agreement a you

website, started Now add want might actually upstart.com, technology from own your have on use to you you the you cetera. now want et loans loans, to getting auto

with just trying seeing all to streamline that multiple bank which trying is and what starting in a So to these then us we're working over - process us for of places one with sure. place time,

John Hecht

this payment like point? is in gets are - system as the and any into final kind the jolted some patterns, issues seen absorbed, phone stimulus apologize be I is that payment changes Have the Or indications and addressed. had slowing? - any last as you of question Okay, if getting of seen you stimulus you then have seeing this may was rate I well. round at

Sanjay Datta

economy is is change up the hand, Hey, haven't right bit. Yeah, too to macro-outlook on beginning much seen we Obviously, in a little the John. Sanjay. one open as This of now. the

a round is for fresh of the hand, was people's demand loans. On there reduced that other stimulus

have from two only a or refund on consistent loans we since the think and Since card been last so about indicators metric which fallen like I at the think that's is XX% regained order of we the things closely have March. to, November. most balances I those pretty October, have our the they've of of a percent with a of crisis, are beginning few as And those. And aimed the steady since balances. macro track lot credit And

of of macro sort sort would So indicators our that. I reflect think

John Hecht

much, Alright, great. Thanks very guys.

Sanjay Datta

Thanks John.

Dave Girouard

Thank you.

Operator

you. question Thank follow JMP pick Josey Ron from from a We'll up Securities.

Ron Josey

Great, thanks guidance. up of on here getting a for question. just the the We're lot questions follow

part little can there the Prodigy, but of guidance given progress XX states and you more in a in increase larger Dave, - Sanjay, autos now unpack if a mentioned so annual fast maybe just bit a in as general. not And wondering making you the is overall, I think

So in Sanjay guidance just more would XXX any be the on increase Thank to from annual XXX you. great? the insights

Sanjay Datta

a really mean, includes from it point on the maybe put just nothing still to side. it, Sure. I meaningful auto

might be, expanding continue footprint. I to mode Prodigy operations, an call dealer guess, incubation you the We there it developing the

to acquisition single counting them A So that of the any Dave And those we're contribution. still models, kinds the to as things improvements it week meaningful not on and lot Every we of verification talked improvements about. to numbers, are statistical boils down propagate with weekly through we watching the to interval, will. confidence improve, models. improvements targeting daily the as our models, those drive if you some credit

very quarter obviously. front. the - a had quarter, leaving we obviously We're we've just good a so And on good

bit under Our year. to end little guidance a is that of next through quarter-over-quarter, the quarter and XX%, string the we're the for propagating

Ron Josey

Thank it. you. Got

Jason Schmidt

Thanks Ron.

our question. that's think last I

I'll turn Dave. over back So to it

Dave Girouard

spending We're Alrighty. time thrilled for I want you And the us quarter. repeat all amazing the to a of to an Thanks today. to thanks Jason. Upstart thank for results. Again, team with really with you our just

you time. will We see all next

Operator

conference. That participation. thank today's We you your you. conclude does Thank do all for

may You disconnect. now

Upstart (UPST) 12 May 212021 Q1 Earnings call transcript