Upstart Q1 2022 – Earnings Report and CEO Transcript
- May 9, 2022
- 10 minute read
May 09, 2022
Editor’s note: Upstart Co-Founder and CEO Dave Girouard shared thoughts on first quarter 2022, during the company’s quarterly earnings call.
Good afternoon, everyone. Thank you for joining us on our earnings call, covering our first quarter 2022 results. I’m Dave Girouard, co-founder and CEO of Upstart.
I’m pleased to say that we’re off to a great start in 2022. The Upstart team just delivered our seventh consecutive profitable quarter and our fourth straight quarter with triple-digit year-on-year revenue growth. As the recognized innovator in AI lending, we continue to expand our leadership position in personal lending and are now off and running in our auto lending product.
Despite the macro headwinds that appeared over the first quarter, we saw loan transactions of more than $4.5 billion—a record for the Upstart platform and perhaps for the industry as a whole. At the same time, we added a huge number of lenders and car dealerships during Q1. Today we have more than 500 dealerships on Upstart as well as 57 banks and credit unions, which is up from 42 when I last updated you in February. At this point, we’re adding about a lender per week. Additionally, we now have 11 lenders with no minimum FICO score in their credit policies—up from 7 the last time we spoke.
Economic Backdrop
Of course, in recent weeks and months, it’s become apparent that 2022 is shaping up to be a challenging one for the economy and for the financial services industry in particular. The two-year treasury note, which is the most relevant industry benchmark for our business, has risen more than 200 basis points since October. The war in Ukraine and the zero-COVID policy in China have only increased the risks and uncertainties facing the global economy. As a result of the increased risk in the economy, the average loan pricing on our platform has increased more than 300 basis points since October 2021.
Recent performance
I’m proud of how Upstart performed in the last two years, particularly during an economic cycle with no precedent. In the worst year of the pandemic—2020—Upstart grew revenue 42% and generated a modest profit. Our guidance for full-year revenue implies a growth rate of 47% over 2021, and we expect to be cash-flow positive.
For Upstart loans originated and funded by our banks and credit union partners, we saw significant over-performance since the beginning of COVID. There’s been no meaningful under-performance of returns with any of our more than 50 lending partners since the program’s inception in 2018.
Looking forward
One of our most important initiatives for 2022 is the accelerated rollout of our Auto Retail product. Since acquiring Prodigy in April of 2021, we expanded our dealership footprint from about 100 rooftops at the time of the acquisition to more than 500 today. Our auto teams are working quickly to smooth some of the product’s edges, filling in a few missing features, and completing integrations with various legacy dealer systems—all in the interest of moving toward a broad-based roll-out.
We began publicly testing our small dollar loan product recently, designed to help consumers with unexpected and immediate cash needs. This is a strategic initiative to our mission to improve access to credit.
Investment in AI
We’re also hard at work on some fundamental upgrades to the infrastructure that underpins our AI models. The opportunity to improve the infrastructure we use to build, train, and deploy AI models is enormous. We’re working to dramatically upgrade this infrastructure to allow hundreds of research scientists to seamlessly and securely build new models, train and test them in an automated fashion, and deploy them across the entire model ecosystem.
Closing thoughts
We celebrated Upstart’s 10th anniversary recently, and I reminded our team that we need to act with urgency today, while being prepared to navigate whatever 2022 and beyond might hold. We see a clear path to building a company with more than $10 billion in revenue in the coming years.