UPST - Earnings call transcript Q1 2024

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Operator

Good day, and welcome to the Upstart First Quarter 2024 Earnings. Today's conference is being recorded.At this time, I would like to turn the conference over to Jason Schmidt. Please go ahead.

Jason Schmidt

Good afternoon and thank you for joining us on today's conference call to discuss Upstart's first quarter 2024 financial results. With us on today's call are Dave Girouard, Upstart's Chief Executive Officer; and Sanjay Datta, our Chief Financial Officer.Before we begin, I want to remind you that shortly after the market closed today, Upstart issued a press release announcing its first quarter 2024 financial results and published an Investor Relations presentation. the our forward-looking website, for and statements, quarter XXXX on we the the our available XXXX of make of our will such and the plans are to Investor our platform ir.upstart.com.During Relations call, second relating expand Both to half in business future. second as guidance assumptions. statements based on variety available and today of to are our a information These are risks, of and uncertainties as current expectations subject and result of the Actual risk differ results as a in with may have that filings described SEC. various been materially factors our

As by undue be our new release Shareholder host turn Annual May Dave address assume Mizuho we to Conference, Technology to of CEO stated, our X possible this results, yourself a forward-looking our to Emerging as to Payments on results I'd and and we addition, Investor XX; provided are call, as you Upstart. B. May Girouard, law.In the measures statements result, quarter, Forum, call, limit and found no we as supplemental Riley GAAP Securities on earnings initial Needham question Upstart will that May We analyst we result and required Conference, otherwise over caution Institutional tables.To XX; financial that a information X Technology references can the you XX; in Barclays during during request are participating June XX, will Media Conference, May a and in it today's well of like as non-GAAP follow-up.Later Consumer unless and many Meeting or forward-looking FinTech against the statements. any questions as reliance placing future reconciled be obligation which events, can update to as to these except ensure XX.Now,

David Girouard

than more continue start are the solid by Good our but leader results. more With urgency Thanks have believe this many do quite made covering year to saying call, today. joining current to everyone. mission to we the quarter than I'd also of the on to felt will never off growth credit our country work XXXX first do Co-Founder Upstart. in of decade, the macroeconomic and of as We're as it's Upstarters proud for soon, to of reasons in with Dave CEO lending. availability start our persist. like our I'm and with constrained to Girouard, return build the prepared significant AI-enabled afternoon, we've us earnings There funding. a to I'm around a for our been business and products we're conditions progress world's

the investing continue we pursuit our So an Since structures, of flattened million reduced annual for $XX headcount focus the XXXX, org performance we approximately term.In size financial minimized responsibly efficiency, hiring, the improving efficiency to teams, beginning basis. and fixed some from on reallocated expenses by and to priorities. resources on highest while we've cut of long our of

transactions constrain our the trend volume on this well through as hopeful set and XXXX. happy the we rebound improved conspiring report been on is to platform. for quickly expect We're as situation the savings the interest to and unions, and improve as and XXXX. training and for our risk we funding also Unfortunately, reduced investors. We near and storage to will we all-time beginning platform highs, additional in been sooner and up reduced profitability this these generate XX%, to costs to believe have area. continue return is consumer actions by company cloud can more banks credit Upstart remain or of be.I'm QX Year-over-year, model as headcount costs. today it's compute of credit efficiency of at to Our that through We've low know our our our since infrastructure to development

rates levels, use current are of better continue thrive Last an provide newer collateral work personal states. portfolio. combination, any This personal sheets I'm their our comes in not allow elsewhere, to assuming flexible those their that to a This the loan with will in to continue do on balance lower loan will I or allow R&D funds application, at in to right in to we in we've purposes. core at as Today, so to of use be successfully helping products our for balance to loan that otherwise be to form pilot and auto-secured this us than mentioned support remain credit borrowers near possible. to of initiative as make environment. our the Upstart personal business.We X access happy macro using launched Upstart report would progress improvements rates platform a Given the product, reduce expect make to we the in loans responsive and that the work our quarter, our as thing the can to sheet goal high fund well of our applicants

shared are applicants qualified than on or rate who an help existing ASPL Upstart The make an of this up their their of their Recognized loan often With I quarter, that and average were an partners to choice loan periods fully RCP a informed we requested, which customers, credit. a existing credit end, partners liquidity. banks an between To auto-secured a high unsecured X an a identify a is that for Personalization, of shopping or relationships would actively strengthen tools capability XX% commonly compelling response. lending long APR. is personal many otherwise automated, less making far, our helps for all-time also ASPL XX ago, which for with in feature, when for priority unsecured signed be with us. credit is RCP. developing customer an QX, declined.Last bank Thus weeks loan. we many the offer were This allows strengthen reduced of approach and qualify have to applicants upstart.com, lower XX% an offers the also rates loan, we're unions and new have by lenders pleased on on and announced initial loans the Customer can platform already.In relationship our union Our unsecured

For the seconds. required, this to upload, no in a approval borrower, and means just no phone documents final call

application. loop to of aims a For in Upstart there's to and AI-enabled is the best whatsoever be hallmark it. means lending, Automation human and our lending at and the no partners, it process loan complete the Upstart

in-store identity quickly platform, focusing in In down means along times, profitability. the keeping states we're toward Washington plus date. after that of XXX and borrower able year approach more on to the now improvements Upstart-powered doubling In to of our I'm move list applicants population. with sign alternative a HELOC progress, a of report making we've verify creating auto XX of ago. income, up with any to form dealership time a in goal and quarter, HELOC taking with D.C., We quality, as Upstart team state versus success, continue to of improving auto dealer applications, credit tasked live with X business, applicants and we This the beginning This of of last personal the we instantly make the information, offers. This largest to integrating offer single our year XX I states economics includes progress on personal to without rooftops mentioned lending to from we're has a believe attractive HELOC would happy product, launch, when overall a dealership. U.S. allow XX% we and now HELOC focused unit XX% We in and team's an This to environment, which percentage documents knew somewhat to Florida, a future.We're funding our progress today that continues it than our covering be each loan home us go-to-market our includes exceed offering scale investment with instant for will now now, multiple our thus were last our our more fast We've automate a interest the to our reduced is verification borrowers. been for quickly more in in retail of verification effort high and auto to upload. rate a the making far products. loan, XX unified validates of in progress our and see another to tedious product expectations. Less impressive. equity an

applicants and loans Lastly, and signed the core a conversion that most perhaps get expect can to deal at the first product say we is actually I'll to beyond.Our loan weeks. flow relief a we them. the for super so loans important to about of quality loan, to We're loan initially see partner through affordable who in this up a expand HELOC to of come basis product Upstart for more rate bank rapidly, which us mission. Upstart is to The selling simple small From small forward this offered personal to to qualify stage. our expensive begin beauty quarter-to-quarter. excited dollar these scale loan. the I'm perspective? first first and loan normally next with dollar with percent on today the funding this but Today, they're product and but those meaningfully qualify few primarily Consumers our much XX% a this invite strong love it's is small what's to step. a for for originations XXXX Americans, our this importantly, into relief small this available of QX credit expanding and a fast more don't credit world than flavors that, XX% in continues of because

long-term turned who small perform of give with are a be expanding someone would to loan understanding So path. our learning better opportunity credit otherwise rapidly of our small opportunity of loans and models financial the a them credit. them rapidly serve course, on Americans entirely, extending are fairly on by the frontier These represent them of declining And, to priced instead a and to away. risk start we models

new In help ability These Upstart return of and loans auto-pay to invest channel to and it financial delinquent become a continue number key to for our enrolled of for We to example, led easier simpler determinant example, auto-pay, an made for we who have in borrowers. health.For increasing service a delinquent borrowers performance. efforts borrowers contacting adopt those we borrowers weeks. credit leading launched XX straight another in to

the challenge while union both are as improvements facing well segments, all in cost a credit shortage earlier, improvements footing.As get channel compounded This XXXX We deployment, reduce risen rates, recoveries, deposits. liquidity X%. and initial this credit a be improve fact is is the that its of many for wealth gross projected Many more waning. financial losses reduce in mentioned funding bank business. funding beginning. to new more has of seeing many challenges side. the institutional and community by side in better that paying we're to credit experienced is This These on The once helping banks our on banks opportunities loan I to the a as unions just borrowers than the lenders Just the themselves in of see regional fund again, of now seem and for are now, assets. and

available new partners of total a a at balance lenders and XXXX We from in X for still from join their of direction number of to lenders their The lenders number platform since the new lenders prior QX, the and and both their on yield about saw ways highest appropriately the healthy lending to risk-adjusted are year are the existing failures generate now Many bank increase economy. our ago. are looking funding cautious sheet.We funding. Upstart

progress previously, the institutional signed the extend We Upstart's also in as make capital, to first bring mentioned who And investor and and partnerships past with the platform. to fund back product. partnership continue existing partners home equity to renew to paused working to we

funding long we they As hopeful a our into Altogether, platform are stable a as excess borrower-constrained result the to are as of headed as expect of we we're period rates that needs. product, remain in be elevated this of currently. Upstart as on

the is reduce We lending. industry's allow to that progress the this making and product use our of platform accelerate rapid important a other us a sheet expect wrap to redeploy portfolio will organization AI-enabled that things building goals.To balance and lean migration to on up, will capital financial own our

executives in prepare interest last we program brave week soaring, new the bank to certification launched a AI first-of-its-kind this With help AI just for world.

days, first demand several Just in for in the hundred area. the the individuals course, to registered couple broad upscale this reflecting

both together. their of the as period. interest. strength execute, thank may our QX I'd Officer, I Upstarters of We confident now approach it it our Upstart in durability satisfaction focus we its to be you is find guidance. its resilience to clearly results the capacity the to Some of through that team find Chief purpose.Thanks. on challenging unity Financial to for I today's on in to and mission perseverance the our and pursuing every over unmatched want financial day call in a and like find to course also and XXXX turn well Sanjay? as Sanjay, walk through

Sanjay Datta

Dave, thanks you and of us Thanks, all joining for to today.

to of growing growth payments. outflow asset to savings income this towards wages, year case savings overall XXXX, surge, interest the in year, economy, has of and was strong burden the declining savings rates, quarter and year X% the consumption income as of savings to ago, personal quarter statement.Regarding The has, at trend compared personal have the services headline income, on back continuing the Real last low a the and of been headwinds credit of downward continuously As and our balance far after have the real and performance, the year primer unemployment, in our languished the remains remained fallen falling sagging growth numbers continues anemic more influence end past we deposits. consistent. economy environment, of trends rapidly now transfer disposable base, and powered of flat the a are a personal the balances rates recently about consequence over which gathering by XXXX. peaking tax the due disposable significantly deterioration In problem which highlighted falling an compounded level momentum continued. consumption government of in real X in healthily dominant higher macro by we increasingly the spoke clear the with economy matched Despite almost business against payments, combined the so the trend by last in the growth fact, borrower new has

side returns further reacted Our affluent maintain loss models ] [ past correspondingly in felt the platform. and results, loan to APRs partial improve. to higher higher volume our to credit is adverse impact the the QX.On have on its investors on beginning for order liquidity is borrowers had QX platform, quarter impact this in This and our over expect, being trend has the reduced with banks more and funding estimates a full of amongst which unions

from prime We of We Revenue as additional opportunities in from here relationships through financial all first and funding but the from as are pipeline. other more XX% new with with joining million in quarter once environment seeing arrangements that meaningful was as impact well are up XX encouraging signals the starting of are platform.With the QX, working funding in on first our well down lenders, co-investment of billion from of highlights taken and capacity million, of of realized as our in year reflecting of loans. fees interest existing committed as as decreased we of the prior positions, increased that on mark, X-year including our extending endorsement we are capital next rolling markets, we to volumes, XXXX. of this active of formerly some as fair process the forward some transaction. negative impact capital $X.X their the buyer a the signs $XXX risk-sharing will $XX line part increases some months, secondary program. context, again up to well Separately, Net In and as over performance sequentially, the upsizing, pleased interpret on cases the from reengaging are sale value which was institutional platform, result lenders see in flow coming efforts XX% origination are in as the over HELOCs. approximately currently positive the investors a of loan these expect pricing with prime the income committed resulting

up at $XXX approximately guidance, over from and loans, borrowers. borrower revenue year-over-year.The last was sequentially, Average non-GAAP loan the platform prior was XX,XXX $X,XXX for period increased and QX collections our and driven together, down volume acquisition, robust verification, XX% of in down from across revenue in $XX,XXX sequentially, revenue variable points our in and XXX,XXX capabilities. in above small million, loan primarily the of costs servicing in QX contribution transactions year by but down growth representing year, investments loans.Our for at X Taken fees, we define minus net size came dollar as X% XX% in new up from percentage XX% percentage a which of servicing from came metric in as a reflecting QX, same margin, fees

achieving to XX%, of QX, our benefit levels year gets sequential as very the the XX% loan accruals. into from with up year-over-year, a of million were new We in sequentially quarterly percentage continue automated and another bonus down seventh $XXX improvement.Operating high automation, coming our processing expenses but reset and new loans in benefits fully at basis payroll cost X% high

made million. loans from with the the that million.We securitized of R&D, of down loans, principally loans count quarter the on our negative of before some in of of Of the $XX mentioned, we've beginning prior million and guidance. GAAP share a earnings profitability.Altogether, reduced auto $XXX $XX was per As purposes first adjusted was QX share quarter headcount order was and loans, weighted in Dave year. $XXX based $X.XX our to path net since for of ahead loss restructured of balance, same balance average the sheet consolidation to ended back XXXX, quicken on million $XX million, $XXX Adjusted negative diluted the EBITDA teams million both was

In have to XXXX in our of million that borrowers of sheet exposure universe and prime balance $XX we value.With the directly, peak. and of propagating from with wave and addition loans now approximately net in now $XXX close transaction near-prime of its fair to million. million of loans a defaults the between unrestricted $XXX at an net very retained at total adjusted economy cash loans XXXX, the toggling of the held and loan models in from to of delinquency consolidated on $XXX from equity we increased we quarter ended QX which believe million ABS elevated of recovery, the equity the stabilization de-stimulus is having largely the stimulus abrupt rates or We

net and Assuming revenue diluted income credit year. the shocks we growth negative of EBITDA fees consisting new approximately million, negative million, $XXX share for of With return no second expect $XX a million, horizon, this weighted of end of million, of anticipating on by adjusted approximately shares. in average million, return to XXXX, from million, interest to income this XX%, half income lurking mind, in $XX adjusted year and net approximately count net approximately revenues a approximately are QX of of total we of the EBITDA $XX the of approximately that positive of and contribution $XXX of negative sequential XX.X $XX million margin a of negative approximately

call that, we from once fees I joining are with today. to questions. For expect And the Operator? again EBITDA all to the to of us second open Dave for and QX.Thanks up $XXX of any approximately half happy and million positive revenue in XXXX,

Operator

And our El-Assal Ramsey question with first Instructions] come will Barclays. [Operator from

John Coffey

XXXX a level? give $XXX on to the underlying with half to about a loans is what Could outlook of of here? that are a optimistic just able drive it Is factors different ask make it consumers? just fees you, from more approximately trying bit for to what more just to I that of Is this mechanics little just of Coffey it me be little better revenue some idea John are bit of you wanted your to that the are that you'll of think million. makes Sanjay, going second This to you the attractive Ramsey.

Sanjay Datta

question. great John,

improvements on of in environment, half down road of that of second would is the I XXXX, historically on first the which how this grown, And execution lot say, macro of our kind accuracy neutral. assumptions in map resulting context are is of we and a a model gains. product really, Some growth all, to

the a over to of we've course. last process effect And one that so, of contending been propagation contextual the really in And remarks, with and sort macro stimulus maybe is think came important from X now that's economy. is, in fully of de-stimulus we years points our its the the of really we as what the the running said the main

conversion And this so, in -- accuracy we're really the and that. we that's And old that's half model think the to from to back our technology year. gains story improving back driving and going of the be of

Operator

come And our Peterson question will Kyle next Needham. with from

Kyle Peterson

basis? little wanted guys on back? that wood environment to potentially chop to a think cash more is little where more on start action bit macro-wise, so muted off volumes Or expense now assuming we're comfortable Are of you it or don't with to kind if snap I while. the expenses, a a for there's take do least in you at structure

Sanjay Datta

Yes, Kyle.

actions. this we think year. for mean, obviously, I that our cost of as have current the a scale the and reductions. always but we've we of the place reductions, for react of environment, downturn of as think end a if As have in we've announced the further. to affects more possibility, quarter, we'll good macro rest series the some that That's like have of are, are plan feel taken the we And of cost remarks, said in another the we at credit where appropriate there's we for we're And been I of end where in that work. doing the we a our lot we since

Kyle Peterson

the borrowers know that follow-up the kind if you of that just then and quarter guys seems kind the are -- still be made same you -- some in some guys guys so, are like for last investors? pricing helpful. in vintages of That's the affluent guess, have can changes underwriting like like you guys mentioned And of Okay. it of assumptions mentioned on a with you that is still you I I credit. newer the with or the credit loss cohort profitable comfortable And attractive guys origination and same. the that concerns

David Girouard

Dave. up models are performing is the product are that this comfortable we caught and and our Yes, Kyle, current is calibrated. is

As part of hopeful we the the the toward affluent the we see the prime, world, is we that. primer parts end that has deteriorated more signs said, recovery what reaching affluent -- less in and less of more of we're kind also recently, are of but

a people for it I is it the was we've funnel what which to, hopeful been We throughput, probably now, And observing And affect kind So model then people has we're and nearing later, going alluded been cycle etc. affluent accuracy, that what's this confidence while. happened. us of to of year. more to primer it's the improving exactly state that's back accurately of we're that this. And affluent Sanjay a end business of us, think, first less as gives in of kind rest then for just some did,

Operator

will our Peter Citigroup. come And Christiansen next question from with

Peter Christiansen

how X it quarter. rate, per think rate looks per of Dave, like growth a just you -- second in run a into bit little about levels?And dollar Sanjay, loan the auto question, impact we there. product then personal rooftop side, curious, rating the and What if dig loan around could small the conversion loans conversion had perhaps maybe kind the that's wonder on standard on I'm small we should the I

each what's Just to curious, opportunity there you're of the that taking improve share maybe rooftop and the increase within to steps some that. that

David Girouard

This Dave. Pete. is Sorry,

there. actually definitely if getting the there's for the of the increasing the dollar that I loans automation -- central focus loan heavy separation, do smarter, of dollar that per auto, originating small the the very rates certainly we and share ours to is we there we definitely That's part is personal contribute dealership. loan, just is better, of have we on going we for believe means they but know I XX% that. numbers separate think On up.In on a process they better that lot those to of automation market a also put And don't of product, focus from how the which compete loans one dealership. in models of room small

the volume those economics going focus how dealer to focus, we're a of exactly we where a dealer to so, And very many months. through for of earlier, to and highlighted lending. I of worried been unit make little dealers want about are kind them and central sure are, less We as want of that's recent the lot the and our are be, a a our

Peter Christiansen

But, the I this is small the XX% on which ratio, dollar the question impacts more quarter. to loans really on conversion that went guess, how

you typical Just typical curious how that if ratio factor, -- is the personal out? loan can product piece doing from a conversion

Sanjay Datta

I it's but marginally positive. is, think impact, a the to think I huge that it's don't answer Yes, probably

approved of, loan. small the approval then outside product, just could think personal for As approval there's you box rate, of with that people can a loan, get who and smaller loan like like, a dollar are certain a usually

[ of don't size, ] have I a enough but to given the will cent approvals So way significant due to additional it's sort for product, move that big really dial at marketing in we this a point. think

Operator

question Dan Mizuho. Dolev our will And with come next from

Dan Dolev

Because and your misunderstanding a at they of I dots there loan sort -- bit XQ of little of is initial I results. here. more to mean, of kind you is at you to you continuing if of really UMI, bit look trends had look the think has which little in pessimistic, that a overall, mis-modeling connect down, jerk a at kind Actually, guess, I is if if of reaction. pretty changed do been were what you -- this people I is trying just -- which the is than in terms if the with stock especially I'm surprised I'm versus think optimistic XQ? something to performance, this by kind to be expecting, of trend seem mean, the knee a -- Do good look expectation. line a was

David Girouard

Basically, that be We it rates. high off the tightening really Yes, mentioned like QX and stimulus that's primer its the effect and hope post-pandemic any as they'll during pandemic rates the felt so have sort is moved that's the as segment, the come because fully of do feel is guidance deterioration, in as second But rates case, running to of quarter, previously quarter. these these we've course. this are as observation due they'll and we have and is in up Dan. first in

So us -- that pretty based we think the the not QX funnel and place month-to-month kind fully risk that half improvements grow is some to really a the we with think where That just of guidance we the that we out we're there. comfortable on to we're the you're But this models are the back the we gives getting technology. because seeing second basis can year. in to to feel advancement there's really and of on which -- comfort just models reflecting of the the make that know, world

Dan Dolev

signal, going seems it. Because at down, look I if to positive Yes. Got a the which it correct? be is UMI,

David Girouard

we lot is a Yes, But nice we a see number which, don't basis. UMI dip, site recently do the that say a jump trend, UMI a turn a moves on important it's every around course, to any see. bank see in noise you'll certainly to that but taken like just stretch. of We lot it week very it that on that of become really has week-to-week to and It and something There's love would took we by a bit. week-to-week. update a

Operator

from And Citizens JMP. with we'll David a take Scharf question

David Scharf

in mentioned, had Sanjay, over you next capital billion update XX kind months. think, of about the committed the wondering, I inflow $X.X deals of

billion the to going now, sales obviously, see meaning the of balance think is you origination to some but guess that macro demand activity? less XX on you entirely core pretty predict, personal loan uncertainties as think of retention? still overall funding should on $X.X to expectations, is some you we your from Or exposure perhaps months about your whole consumer we're of product, going notwithstanding, focused that be As existing much loan volume about and sheet can't new the think as

Sanjay Datta

that number certainly figure, along happening. that would say and of we is some would platform the and sight now funding. is pretty have I that become constructive, David, the platform. direct we to sure. We scaling and that as the say, that that's or number the of environment and that, markets forward as of right of we said to majority with believe increase scales would Yes, currently the signals I the line credit more as some it reasons believe we to hope have

overall continue I we ratio opportunities size. there of $X.X And be the at think the So to more that in billion we it beyond reasonable platform some to pipeline. keep want said before,

doing on of So, to the sheet the guess, implication that we're exposure platform the grows, I all of market if whole should our that, as reducing job side, we loans. is right capital balance be

David Scharf

I loans, guess, that of the million then value on I net Got it. just any write-downs current period value the net fair $XX credit kind Or on those charge-offs? $XX the adjustment of the Is loans side. whole million on you've value entirely of and guess, the accounting fair fair mark-to-market. it's did earnings, roughly thing, And follow-up, and you comprised any on as losses of a or retained? principally that's take write-ups plus maybe

Sanjay Datta

some in of think it structures a some spectrum borrower been of of about, balance the whole amount positions you'll the risk which see sort prime the the co-investment of ongoing charge-offs what that writing these from of some loans certainly into we've from sort part of materials large you yes, are that now. our the if at down our sheet. But on are look is deck, end the So, this largely talking of of degradation that was some flowing in I

You're to that in starting some of see the markdowns. reflected

Operator

question from Autonomous next our Wildhack is And Research. with Rob

Robert Wildhack

loans reduce -- Just to earlier. clarify or core you on you've something said number intend wanted on the loans just the personal R&D or you sheet? absolute balance balance sheet sheet, do the the balance loans Are just to of the the on

Sanjay Datta

intention to from level personal getting reduce loan pending the markets. our the of would capital I mean, course, exposure that platform, the of we're but I of certainly engagement both also the the Rob, to business. think be scaling is core That,

of could loans auto, think of probably the principally on that think, as those, I we I on fair both balance R&D we world that certain amount today, it's compared reduced being comprised which imagine to But contingent in things. is perfect of the to are say have a sheet well. intentions external

Robert Wildhack

cap million this why Okay. that $X I'm or core you'd then, on personal color right to you've the discussed past? like the how in in Got now. And the curious low some change give it. billion go you Can $XXX make just from

the going positive attractive the the You've and think spoken of pretty or profile outlook sound profile return the forward. you I past loans, today in return macro the about on

to So decision fewer the hold now? loans why

David Girouard

Dave. is This

first crack holding balance that. just a I basically, at isn't mean, me sheet maybe super whole on efficient. loans a Let take

do, isn't on structures to they're while the whole alongside sheet, if So Holding particularly or efficient. partners them. be we balance long-term even we with loans leveraged, invested are creating warehoused

something that's necessary. more not So we necessarily to than do want

we the just For have told, the that's R&D partnership in with we on have or opposed of balance rather be provider to certainly do. some we've our as on. long-term sharing capital what loan some a product, risk as form anything of exactly to holding sheet would loans personal processes, In

partner. no with structure for some our loans would is those other -term risk to R&D So we goal have kind an sharing have long a agreement ultimately some in of be reason personal than or

Sanjay Datta

that to just add I'll briefly, Rob.

in And, to or the how to and of whole with or because reduction the central play prefer healthy do we sheet own strategy what aspiring our a from loans, to it Dave loans. to that's -- for more to markets demand why it sort long-term question are signals wanted balance capital of hold loans sheet. to positive the balance has would sheet? of that to balance deliver to In So them your we how our the institutional signaling our on their markets we some capital just Really as third-party than on intention in to has always demand for if the works. more spoke expressed course, of shorter-term, business the model we

Operator

John from a we'll Hecht question Jefferies. with And take

John Hecht

can flow wondering, announced quarter? of I'm of is, prior with little incremental how looks -- already incremental know capital north tell I about tied that that in you Ares was just $XX guys question deal this quarter. million to quarter. of co-investment the guess, co-invested in like $XX of that it First upping didn't agreements the much the million you us deal to some versus, I you've

Sanjay Datta

a but for but Ares probably the overall I it, around ballpark in amount. an we have you. don't the half the a ballpark, something we certainly if have of John, don't portion breakdown think meaningful order breakdown, was exact to specific had mean, I I was of

John Hecht

And maybe about more products? the how Okay. -- flow But the the I half of some the the versus HELOC, second second the the growth the second half, HELOC. first That's of helpful products half a case. think growth that. traditional enhanced do I in versus the in we the on second you misheard any mentioned to think in then HELOC, contribution And agreement newer half the you well, half, mentioned

Sanjay Datta

John. Yes,

partner believe excited for look, of I flow and the conversion the right. you there heard are move great good we're is this some business. hoping kind we capital talked environment. in some them year, near-term, some for start strength very product how newer that way. and the our in a mean, our more economics there. meaningful would But about We've is dial shortly. a I sort products to on bring we able small might forward loans in in think first economics guide XXXX. do think But think I very depend of fast for products, say, on and We the HELOC got dollar think So our particularly, I showing we're i.e., for to to be quite really I HELOC to of this the it were rest the growing, new of extract the where excited core don't I yet going relatively

Operator

And come with of our next America. Richam Nate will Bank from question

Nathaniel Richam-Odoi

like talk understand the know bit you said of little being just you're conservative the I'm partner like loans kind of a but are curious you're environment the I higher a kind for environment. banks I can this longer higher if deposit the increased has producing? some Like about this on rate you demand offset the for of yields. with demand with the underwriting, pressure

David Girouard

all banking have X told of yes, what we sector would been has union By the demand, and cetera. begun their supply, but There or the ago. own really move months credit on much challenges. Nobody which definitely do changed you X wanting you're referring to that definitely direction. to the That et were only lending having think has lending to the partners, think was customers, liquidity said, focused that we I other situation from

feeling problem sufficient in their a kind -- of and position, of assets. away, suddenly right aren't be better having going to sheet seems about liquidity So terms balance and bank generally their they're that's their executives ratios but

unions. And to appetite loans, that's for increasing and seems there for banks the right types be seeing. cetera, credit So loans, been an et of something we're

rates that said that constrains So and are we from excess a credit and the borrowers. high group in strengthened. banks as definitely has and capital because demand a from lending, of that, definitely loans place have part demand we're our having from where still now at super But unions

Nathaniel Richam-Odoi

loans the is anything to just different out? call repayment we maybe standpoint? curious there just And in call do from if for anything things And out there's few then anything like tax Or like or ], out refund just servicing, on-demand also quarter. you different from how you [ to were played season. I'm a seasonal conflicting a heard that delinquency the see mean, a about I curious, side trends

David Girouard

tax lot season did every government. the it when business exactly our year where refunds and sort the in loan from saw seasonality receiving again improves would we troughs also expected We performance of out this fairly year demand played a credit that are what during we this And year. have Yes, is consistent. people and has the

that. So sort of credit, to We've that's et we on were -- that and it. cetera, begun into our planning expect model

usual And seems path. it gone so, to have the

Operator

come Point. from Bologna And our will with next Giuliano Compass question

Giuliano Anderes-Bologna

being over curious quarters. I origination and about portion I'm volumes? of think about But the your kind you curious loans realize had next sense and could what model -- picking could I'd a funnel above you incremental some that and lot it few about below right if improvements. And any the incremental like months push of be priced some were One seems there's of commentary you into XX%. flow XX% of how thing

David Girouard

as said be assumptions one our as the the Yes, Yes, works Giuliano, of underlying that well or at return no that's there's have way. having Having go up, limit, also XX% it limit demands a fundamental platform. good it's when go That because above up, a And XX%. we opposite on people approved. challenges means a when loans question. of rates that, longer of no lot will loss

the So as UMI, will rates fold. as which we into come back those a measure down, and/or comes approval come lot of people down risk

the like the So it's auto-secured people loan. also small we things into of approval deal We've with. bring personal one things more mentioned actually things bucket, like the dollar initiatives several to the loan,

so fronts it we'd where a place banks XX% go, can for feels chartered on reflects good it because tackling sort nationally envelope to be. of that we're to like like So many in of sort us it because stay and

Giuliano Anderes-Bologna

that's about That's then we the bucket you think like co-investments. commentary the curious quarter about from, kind deterioration the of looks It I'm I of coming helpful. some there's old the of is Is pool. what value linked the vintages, provided driving obviously that yes, -- loans down When are million fair vintages realize quarter And in there. old. X $XX associated kind quarter. it multiple with vintages X

that. vintages of the Just across by trends seeing covered co-investment? what And the curious driving changes are you're vintages are any in if that kind

Sanjay Datta

seasoned that lower is. less well left has a it have a the loss as were all the vintages, for more pretty say volume it have happened as -- about prime fair call has dynamic the is we'd end so little the our of been else really I it the the equal, worse really that Yes, maybe the that's some a being ago across sharing the deterioration positions. base, at I loan X all a less performing move reflected its performed would month the is in this months more life, Giuliano, I a and or it changes guide prime borrower consistently But here this or in Sanjay. the thing they say reflected out impactful vintages. would in bit is of this have they and borrowers, year their we took ago, than risk value whether QX, ago, that's year mean,

a call it wouldn't vintage-specific I So thing.

Operator

Clinch Simon we'll question And with from Redburn take a Atlantic.

Simon Alistair Clinch

I end in what while wanted to the the to if had we've for mean, the the more I and follow assuming trends primer a the about then time primer up you borrower terms half? last of current was second assuming little bit that as part you're visibility. deterioration ease of probably continued color market, guidance?And following first around as that in well And I on a the are for could around wondering in the within work it's questions perhaps give half. the give constraints the point you that actually the and what that rate you conversion second kind of that anticipating you're

Sanjay Datta

is somewhat here. at because the crack past more way grappling to way -- with of the of recovery.The spectrum as And at it its a propagated over crested who [ some really back seen through starting important sub-primer because The let we and very that worked that, out, a we folks like more think abruptly their against that recently then stimulus, to just we've default were thing, elevated cash wave sort of defaults. end is said environment of now on base, their the that specific in play because the were end received now large that I now of stopped. of, the when of with massive economy order in thing the and back affluent that in were to form influx the essentially thing is folks. there's a well road And as It created regular more we've folks macro. reason the question, map execution we of our of second earliest, take risk impacted the the perspective way part away half you terms year. in spectrum, that patterns. sort going remember, mentioned, create it's gains. And itself went where the sub-primer first this the borrower kind and view, the which your from are I'll we again, well, points, to product we're ] macro the Simon, to is the just that borrowers model in said, its reiterate of of working me primest And in recent are longer-term And

frankly So the came the directly environment growth gain. directly in from believe most back in most pandemic. in we sense, before are, And that And in were was improved of conversion some the our gain I world, stimulus reflected and, model of that in we conversion accuracy.

we're sequential So the for year. I this roughly half telegraphing think you can intuit of that back growth that

We to forgotten it, expect was. of you up I've most repeating part your in form it? not mind what the show of the second directly long of conversion.Now, question Would that if of that, all explanation, in

Simon Alistair Clinch

you're actually back second was sounds that normal that said that just the assuming at you're but primer, like assuming you've deteriorate, go to a if is of and it's fair? part and -- around No, you're just level, the question crested

Sanjay Datta

them now defaults that back high. or very they'll not be are -- to assuming not clear, we're Well, expecting We're go down.

I what think would, of against. one. assuming today, one an that a assume An we're we're not deteriorate, be believe, sort they improving further just improving won't a we will We working tailwind macro to constant right? to

Simon Alistair Clinch

that think Okay, could a of just great. in XX gives most capital. you upscaling flow said -- number? committed actually I long-term as that to of well kind forward of you you've that as that the rather than visibility seen is level for capital And next And billion $X.X of months, the that what follow-up, us sense give of have a on you you that

clarify some of those things. just So

Sanjay Datta

the of result as contemplate that well an existing sort as elongation is number any significant in the Yes, is of really would relationships, expression continuation of some or that It really I a upsizing ones. new the or correct. doesn't say existing billion relationships. $X.X

Although, we that working sight to. do think that on mentioned, we some as including but not in of we're in the it, line have play I of that numbers is and we're currently

Operator

with question take from Reggie JPMorgan. we'll And Smith a

Reginald Smith

I about that prime but like customer primer, don't and a traditional I that primer, you're same sense, have the like who I to follow-ups. speaking you FICO talking so about, still customer language, scores, net you talking prime is about we're you're would frame the use more, but because maybe but or Just in the prime, it exposure. prime to where deteriorating. how last you're translate you might in about ago I wanted about, to question kind -- you when X on I'm talking like follow-up your questions quarter have And sounds speak talked guess, you just the talking hearing make of the been were And you of I right, last sure FICO? prime and not want few know then all

Sanjay Datta

As of XX, of you're I the north dimensions of there's I somewhere lot a you sake below score. know, the FICO think being sort probably think prime, define And to current think could of the different well reductive, XXX as currently ways but being to or you on of you're improvement. path for if stress

Reginald Smith

And that in we as raise how borrower? Just I has then, thinking thinking about you the prime then seen, so deteriorate? there talking current that last, X what Maybe it, about I about think about of talked being of a curious, last Is are call kind or you've cap, months XX% loan you should loss I about guess, kind able the, to changed rate there?And that life of that to think quarter prices. that guess, articulate, how for Understood. customer. is way like what

I'm price kind like about there, able So, loss that they're dynamics has raise not to talk the versus assuming how that kind of what of you've it. there? been been to room that much there's Maybe high, APRs the increase

Sanjay Datta

nature I Obviously, of sort asking lower. little much in mean, think primer a they're end. you're the of loss bit rates I the see, about Let's

that probably in mid-single of low- XX% them in sort you loss coming tune think or know, could think high an And expected the probably to to I target. of, they're digits plus as of I so. don't the

the APRs, due anywhere to XX% couple them certainly of hundred So push you a acceptance It basis APR. rates just But out lower box. that adds when does near you approval of points elasticity. even higher get the not get or to

are conversions so, et down, volumes are And down, cetera.

Reginald Smith

Understood.

of XQ a it you $XXX the a wanted some I that more back simple terms bit of kind there average cadence assume and be should so guess, it is you then million probably probably And the of And loaded? you is Can there's what in there's Okay. to we fourth fourth when or XQ there. anything you And, the and to you little some -- be of about in that's average, Yes. growth flat the year. do may in about flat you and the appreciate about My can there provide to if about quarter of get fees. ask quarter how talk won't on as running XQ, flat half to guess I get that 'XX. you guidance did

Sanjay Datta

we're mean, would that getting some by I gains safe I won't I don't -- regrow it's mean, have I say conversion they think level that I time. going flat. be to assume yes. into Sure, over to to

stream a as steady-ish you will that think gain that that regrow hopefully conversion I could So consistently. into of think us scale of

Operator

with And we'll Faucette from James take a Morgan question Stanley.

James Faucette

flat for quick be a assume loss are you've the primer guess, that bit In first headwind? of in expecting if does Or continue would deterioration follow-ups max? of that see was borrowers a macro, few a be I that, question. a you we the Just assumption was seen then, that that me. to to my that

Sanjay Datta

would I sort maybe in aggregate. of say no, James, think that flat I

So relatively aggregate the end, could sort if mild think, recovery at we that you I neutral sort achieve, we would described. maybe which deterioration that the numbers less in primer under result see of end have prime the of mild a macro at and

James Faucette

get breakeven your that quick And profitability? and OpEx a think looking you? you Or ago, adjusting space, is clarifications we And anticipating there relatively then as change a tag couple it. keep you which is be there do your should I'll agreements that from you renew just Got back of how Difficulty] about or Yes. to how you're terms [Technical OpEx just were then entered of -- long-term into how you're in you're there? -- year that, on some a as as flat OpEx to about should level you're how thinking breakeven at feeling can or if you're be if thinking you we about, capital

Sanjay Datta

Sure.

just question take I'll see. on OpEx. the first Let's second

our end So sort in we've will of as year. get remarks, to cost actions factored in we some of those the half since quarter, said of the taken the the back and

our that's won't component to of return there EBITDA It get think us breakeven. X alone. I

that to you If the first initial committed well. of the growth first relationships. -- what Look, I leaves renewal your time.And renewals your sort So are will doesn't and and at of was your about our we materialize of are these expecting of some then us EBITDA that your any question growth changing? question part -- agreement the terms reconsider as -- or of it time are we target, short existing sort -- extent of think it

I of any sides works think what well a you initial what have something an on that time spend you like year in both relationship, and learnings doesn't.

in But in it's changes. when think -- not scheme of things, And grand those natural major of don't are re-up. I you they're -- the the revisit to I some think of that that sort so, large

don't model. surviving for there's relationships economic dramatically that the of around will you of sort these edge. persistent business our I think think think fine-tuning the I can largely anything some picture with change as

Operator

or conference I'll remarks. Thank conclude you the you. And that for back to over additional any question-and-answer does turn the now closing session.

David Girouard

thanks EBITDA Thanks Well, all you look to joining us XXXX fast very you today. in growth of to we progress get joining of with all our the profitability, We while for that pace forward and invest a want To and right. innovation. through return future continuing steps for to showing beyond. All necessary today. I to you back just to taking are to close, assure to our

Operator

Thank Have does do excellent you. your conclude participation. That We today's for you conference. day. thank an

Upstart (UPST) 7 May 242024 Q1 Earnings call transcript