Business Wire | Mar 17, 2021 04:05PM EDT

Upstart Announces Fourth Quarter 2020 and Fiscal Year 2020 Results

Mar. 17, 2021

SAN MATEO, Calif.--(BUSINESS WIRE)--Mar. 17, 2021--Upstart Holdings, Inc. (NASDAQ: UPST), a leading artificial intelligence (AI) lending platform, today announced financial results for its fourth quarter and fiscal year ended December 31, 2020. Upstart will host a conference call and webcast at 1:30 p.m. Pacific Time today. An earnings presentation and link to the webcast are available at ir.upstart.com.

"We're excited to share our financial results for the first time as a public company. Despite the COVID-19 pandemic, we delivered strong growth and profits in Q4 and for the full year 2020. This combination is rare among FinTechs and demonstrates the growing advantages of AI-based lending," said Dave Girouard, CEO of Upstart. He added, "We believe virtually all lending will be powered by AI in the future, and we're in the earliest stages of helping our bank partners successfully navigate that transformation."

Separately, Upstart today announced it has entered into a definitive agreement to acquire Prodigy Software, Inc., a provider of cloud-based automotive retail software. With the acquisition of Prodigy, Upstart will accelerate its efforts to offer AI-enabled auto loans through the tens of thousands of auto dealers nationwide where the majority of auto loans are originated.

Fourth Quarter 2020 Financial Highlights

* Revenue. Total revenue was $86.7 million, an increase of 39% year-over-year for the fourth quarter. Total fee revenue was $84.4 million, an increase of 38% year-over-year. * Lending Volume and Conversion Rate. Bank partners originated 123,396 loans across our platform in the fourth quarter of 2020, up 57% from the same quarter of the prior year. Conversion on rate requests was 17.4% in the fourth quarter of 2020, up from 14.9% in the same quarter of the prior year. * Income from Operations. In the fourth quarter of 2020, income from operations was $10.4 million, an increase of 196% year-over-year for the fourth quarter. * Net Income and EPS. In the fourth quarter of 2020, GAAP net income was $1.0 million and adjusted net income was $5.4 million. Accordingly, GAAP net income per share was $0.00, and diluted adjusted net income per share was $0.07 based on the weighted-average common shares outstanding during the period. In the fourth quarter of 2019, GAAP net income was $6.1 million and adjusted net income was $7.7 million. * Contribution Profit. Fourth quarter 2020 contribution profit was $41.4 million with a contribution margin of 49% compared to $23.4 million in contribution profit and a 38% contribution margin in the fourth quarter of 2019. Contribution profit grew 77% in the fourth quarter of 2020 versus the comparable quarter last year. * Adjusted EBITDA. Fourth quarter adjusted EBITDA was $15.5 million, which represents a 123% year-over-year increase compared to a fourth quarter 2019 adjusted EBITDA of $7.0 million. The fourth quarter 2020 adjusted EBITDA margin was 18% of total revenue and the adjusted EBITDA margin was 11% in the fourth quarter of 2019.

Fiscal Year 2020 Financial Highlights

* Revenue. Fiscal year 2020 total revenue was $233.4 million, an increase of 42% year-over-year. Total fee revenue was $228.6 million, an increase of 43% year-over-year. * Lending Volume and Conversion Rate. Bank partners originated 300,379 loans across our platform in 2020, up 40% year-over-year. Conversion on rate requests was 15.2% in 2020, up from 13.1% in the prior year. * Income from Operations. Fiscal year 2020 income from operations was $11.8 million, an increase of 357% year-over-year. * Net Income and EPS. For the fiscal year 2020, GAAP net income was $6.0 million and adjusted net income was $17.5 million. Accordingly, GAAP diluted net income per share was $0.00, and diluted adjusted net income per share was $0.23 based on the weighted-average common shares outstanding during the period. In the fiscal year 2019, GAAP net loss was $0.5 million and adjusted net income was $3.3 million. * Contribution Profit. Fiscal year 2020 contribution profit totaled $105.1 million, or 46% contribution margin, compared to $48.9 million, or 31% contribution margin in fiscal year 2019. Contribution profit grew 115% year-over-year. * Adjusted EBITDA. Fiscal year 2020 adjusted EBITDA totaled $31.5 million, which represents a 463% year-over-year increase compared to a fiscal year 2019 adjusted EBITDA of $5.6 million. The fiscal year 2020 adjusted EBITDA margin was 13% of total revenue, and the adjusted EBITDA margin was 3% in the fiscal year 2019.

Financial Outlook

For the first quarter of 2021, Upstart expects:

* Revenue of $112 to $118 million * Contribution Margin of approximately 44% * Net Income of $7.8 to $8.3 million * Adjusted Net Income of $13.4 to $14.2 million * Adjusted EBITDA of $14.6 to $15.3 million * Basic Weighted-Average Share Count of approximately 74.3 million shares * Diluted Weighted-Average Share Count of approximately 92.4 million shares

For the 2021 fiscal year, Upstart expects:

* Revenue of approximately $500 million * Contribution Margin of approximately 41% * Adjusted EBITDA Margin of approximately 10%

Upstart has not reconciled the forward-looking non-GAAP measures above to comparable forward-looking GAAP measures because of the potential variability and uncertainty of incurring these costs and expenses in the future. Accordingly, a reconciliation is not available without unreasonable effort.

Key Operating Metrics and Non-GAAP Financial Measures

For a description of our key operating measures, please see the section titled "Key Operating Metrics" below.

Reconciliations of non-GAAP financial measures to the most directly comparable financial results as determined in accordance with GAAP are included at the end of this press release following the accompanying financial data. For a description of these non-GAAP financial measures, including the reasons management uses each measure, please see the section titled "About Non-GAAP Financial Measures" below.

Conference Call and Webcast

* Live Conference Call and Webcast at 1:30 p.m. PT on March 17, 2021. To access the call in the U.S. and Canada, dial +1 800-437-2398 (code 3352996), and outside of the U.S. and Canada, dial +1 323-289-6576 (code 3352996). A webcast is available at ir.upstart.com. * Event Replay. To replay the call in the U.S. and Canada, dial +1 888-203-1112 (code 3352996), and outside of the U.S. and Canada, dial +1 719-457-0820 (code 3352996). A call replay is available through March 24, 2021. A webcast will be archived at ir.upstart.com.

About Upstart

Upstart is a leading AI lending platform partnering with banks to expand access to affordable credit. By leveraging Upstart's AI platform, Upstart-powered banks can have higher approval rates and lower loss rates, while simultaneously delivering the exceptional digital-first lending experience their customers demand. More than two-thirds of Upstart loans are approved instantly and are fully automated. Upstart was founded by ex-Googlers in 2012 and is based in San Mateo, California and Columbus, Ohio.

Forward-Looking Statements

This press release contains forward-looking statements, including but not limited to, statements regarding our outlook for the full year and first quarter of 2021 and Upstart's ability to offer AI-enabled auto loans due to its proposed acquisition of Prodigy. You can identify forward-looking statements by the fact that they do not relate strictly to historical or current facts. These statements may include words such as "anticipate", "estimate", "expect", "project", "plan", "project", "intend", "target", "aim", "believe", "may", "will", "should", "could", "can have", "likely" and other words and terms of similar meaning in connection with any discussion of the timing or nature of future operating or financial performance or other events. Forward-looking statements give our current expectations and projections relating to our financial condition; plans; objectives; assumptions; risks; future performance; business; and results of operations, including revenue, net income (loss), adjusted EBITDA, adjusted EBITDA margin, contribution margin, non-GAAP adjusted net income, basic weighted-average share count and fully diluted weighted-average share count. Neither we nor any other person assumes responsibility for the accuracy and completeness of any of these forward-looking statements. The forward-looking statements included in this press release and on the related teleconference call relate only to events as of the date hereof. Upstart undertakes no obligation to update or revise any forward-looking statement as a result of new information, future events or otherwise, except as otherwise required by law.

All forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those that we expected. More information about factors that could affect our results of operations are described in greater detail in our public filings with the Securities and Exchange Commission, copies of which may be obtained by visiting our investor relations website at www.upstart.com or the SEC's website at www.sec.gov.

Key Operating Metrics

We review a number of operating metrics, including number of loans transacted and conversion rate, to evaluate our business, measure our performance, identify trends affecting our business, formulate business plans, and make strategic decisions.

We define the number of loans transacted as the transaction volume, measured by number of loans facilitated on our platform, between a borrower and originating bank during the period presented. We believe this metric to be a good proxy for our overall scale and reach as a platform.

We define conversion rate as the number of loans transacted in a period divided by the number of rate inquiries received, which we record when a borrower requests a loan offer on our platform. We track this metric to understand the impact of improvements to the efficiency of our borrower funnel on our overall growth.

About Non-GAAP Financial Measures

In addition to our results determined in accordance with generally accepted accounting principles in the United States ("GAAP"), we believe the non-GAAP measures of contribution profit (loss), contribution margin, adjusted EBITDA, adjusted EBITDA margin, adjusted net income or loss, and adjusted net income or loss per share are useful in evaluating our operating performance. Certain of these non-GAAP measures exclude stock-based compensation, warrant expenses, depreciation, amortization, and other non-operating expenses. We exclude stock-based compensation and income and expense on warrants and other non-operating expenses because they are non-cash in nature and exclude in order to facilitate comparisons to other companies' results.

We believe non-GAAP information is useful in evaluating the operating results, ongoing operations, and for internal planning and forecasting purposes. We also believe that non-GAAP financial measures provide consistency and comparability with past financial performance and assist investors with comparing Upstart to other companies some of which use similar non-GAAP financial measures to supplement their GAAP results. We believe non-GAAP financial measures are presented for supplemental informational purposes only and should not be considered a substitute for financial information presented in accordance with GAAP and may be different from similarly titled non-GAAP financial measures used by other companies.

Key limitations of our non-GAAP financial measures include:

* Contribution Profit is not a GAAP financial measure of, nor does it imply, profitability. Even if our revenue exceeds variable expenses over time, we may not be able to achieve or maintain profitability, and the relationship of revenue to variable expenses is not necessarily indicative of future performance; * Contribution Profit does not reflect all of our variable expenses and involves some judgment and discretion around what costs vary directly with loan volume. Other companies that present contribution profit calculate it differently and, therefore, similarly titled measures presented by other companies may not be directly comparable to ours; * Although depreciation expense is a non-cash charge, the assets being depreciated may have to be replaced in the future, and Adjusted EBITDA does not reflect cash capital expenditure requirements for such replacements or for new capital expenditure requirements; * Adjusted EBITDA excludes stock-based compensation expense, which has been, and will continue to be for the foreseeable future, a significant recurring expense for our business and an important part of our compensation strategy; * Adjusted EBITDA does not reflect: (1) changes in, or cash requirements for, our working capital needs; (2) interest expense, or the cash requirements necessary to service interest or principal payments on our debt, which reduces cash available to us; or (3) tax payments that may represent a reduction in cash available to us; * The expenses and other items that we exclude in our calculation of Adjusted EBITDA may differ from the expenses and other items, if any, that other companies may exclude from Adjusted EBITDA when they report their operating results.

Reconciliation tables of the most comparable GAAP financial measures to the non-GAAP financial measures are used in this press release.

UPSTART HOLDINGS, INC.

CONSOLIDATED BALANCE SHEETS

(In Thousands, Except Share and Per Share Data)

(Unaudited)



December December 31, 31,

2019 2020

AssetsCash $ 44,389 $ 250,819

Restricted cash 35,678 60,514

Loans (at fair value) 232,305 78,460

Notes receivable and residual certificates (at fair 34,116 19,074 value)Property, equipment, and software, net 6,030 10,032

Operating lease right of use assets 16,190 18,310

Other assets (includes $4,725 and $6,831 at fair 24,754 40,046 value as of December 31, 2019 and 2020,respectively)Total assets 393,462 477,255

Liabilities, Convertible Preferred Stock, andStockholders' Equity (Deficit)Liabilities:Accounts payable 6,559 13,775

Payable to investors 19,620 45,501

Borrowings 118,609 62,626

Payable to securitization note holders and residualcertificate holders (includes $89,672 and $0 and at 96,107 - fair value and $41,343 and $0 to related parties asof December 31, 2019 and 2020, respectively)Accrued expenses and other liabilities (includes 34,648 35,669 $12,446 and $9,530 at fair value as of December 31,2019 and 2020, respectively)Operating lease liabilities 17,061 19,432

Total liabilities 292,604 177,003

Commitments and contingenciesConvertible preferred stock $0.0001 par value;53,927,657 and 70,000,000 shares authorized as ofDecember 31, 2019 and 2020, respectively; aggregate 162,546 - liquidation preference of $166,257 and $0 as ofDecember 31, 2019 and 2020 respectively; 47,349,577and 0 shares issued and outstanding as of December31, 2019 and 2020Stockholders' equity (deficit):

Common stock, $0.0001 par value; 90,000,000 and700,000,000 and shares authorized as of December 31, 2 7 2019 and 2020, respectively; 14,561,398 and73,314,026 shares issued and outstanding as ofDecember 31, 2019 and 2020, respectivelyAdditional paid-in capital 12,489 369,467

Accumulated deficit (75,205 ) (69,222 )

Total Upstart Holdings, Inc. stockholders' equity (62,714 ) 300,252 (deficit)Noncontrolling interests 1,026 -

Total stockholders' equity (deficit) (61,688 ) 300,252

Total liabilities, convertible preferred stock, and $ 393,462 $ 477,255 stockholders' equity (deficit)UPSTART HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS and COMPREHENSIVE INCOME (LOSS)

(In Thousands, Except Share and Per Share Amounts)

(Unaudited)

Three Months Ended December 31,

Year Ended December 31,

2019

2020

2019

2020

Revenue:Revenue from fees, net$

61,148

$

84,421

$

159,847

$

228,600

Interest income and fair value adjustments, net (includes $703, $0, $2,963, and $1,014 from related parties expense and $1,804, $0, $7,400, and of related parties fair value adjustments for the three months ended December 31, 2019 and 2020, and years ended December 31, 2019 and 2020, respectively1,424

2,289

4,342

4,816

Total revenue62,572

86,710

164,189

233,416

Operating expenses:Sales and marketing31,939

34,546

93,175

99,659

Customer operations8,354

12,789

24,947

37,581

Engineering and product development7,297

14,151

18,777

38,802

General, administrative, and other11,466

14,831

31,865

45,609

Total operating expenses59,056

76,317

168,764

221,651

Income (loss) from operations3,516

10,393

(4,575)

11,765

Other income204

52

1,036

5,549

Income (expense) on warrants and other non-operating expenses, net1,219

(9,047)

(1,407)

(11,364)

Net income (loss) before income taxes4,939

1,398

(4,946)

5,950

Provision for income taxes74

371

74

371

Net income (loss) before attribution to noncontrolling interests4,865

1,027

(5,020)

5,579

Net income (loss) attributable to noncontrolling interests(1,186)

-

(4,554)

(404)

Net income (loss) attributable to Upstart Holdings, Inc. common stockholders$

6,051

$

1,027

$

(466)

$

5,983

Net income (loss) per share attributable to Upstart Holdings, Inc. common stockholders, basic0.06

-

(0.03)

-

Net income (loss) per share attributable to Upstart Holdings, Inc. common stockholders, diluted0.05

-

(0.03)

-

Weighted-average number of shares outstanding used in computing net income (loss) per share attributable to Upstart Holdings, Inc. common stockholders, basic14,401,927

26,001,856

14,335,611

17,513,670

Weighted-average number of shares outstanding used in computing net income (loss) per share attributable to Upstart Holdings, Inc. common stockholders, diluted24,978,484

26,001,856

14,335,611

17,513,670

UPSTART HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS and COMPREHENSIVE INCOME (LOSS)

(In Thousands, Except Share and Per Share Amounts)

(Unaudited)

Three Months Ended Year Ended December 31, December 31,

2019 2020 2019 2020

Revenue:Revenue from fees, $ 61,148 $ 84,421 $ 159,847 $ 228,600netInterest income andfair valueadjustments, net(includes $703, $0,$2,963, and $1,014from related partiesexpense and $1,804,$0, $7,400, and of 1,424 2,289 4,342 4,816related parties fairvalue adjustmentsfor the three monthsended December 31,2019 and 2020, andyears ended December31, 2019 and 2020,respectivelyTotal revenue 62,572 86,710 164,189 233,416

Operating expenses:Sales and marketing 31,939 34,546 93,175 99,659

Customer operations 8,354 12,789 24,947 37,581

Engineering and 7,297 14,151 18,777 38,802product developmentGeneral, 11,466 14,831 31,865 45,609administrative, andotherTotal operating 59,056 76,317 168,764 221,651expensesIncome (loss) from 3,516 10,393 (4,575) 11,765operationsOther income 204 52 1,036 5,549

Income (expense) onwarrants and other 1,219 (9,047) (1,407) (11,364)non-operatingexpenses, netNet income (loss) 4,939 1,398 (4,946) 5,950before income taxesProvision for income 74 371 74 371taxesNet income (loss)before attribution 4,865 1,027 (5,020) 5,579to noncontrollinginterestsNet income (loss)attributable to (1,186) - (4,554) (404)noncontrollinginterestsNet income (loss)attributable to $ 6,051 $ 1,027 $ (466) $ 5,983Upstart Holdings,Inc. commonstockholdersNet income (loss)per shareattributable to 0.06 - (0.03) -Upstart Holdings,Inc. commonstockholders, basicNet income (loss)per shareattributable to 0.05 - (0.03) -Upstart Holdings,Inc. commonstockholders,dilutedWeighted-averagenumber of sharesoutstanding used incomputing net income 14,401,927 26,001,856 14,335,611 17,513,670(loss) per shareattributable toUpstart Holdings,Inc. commonstockholders, basicWeighted-averagenumber of sharesoutstanding used incomputing net income(loss) per share 24,978,484 26,001,856 14,335,611 17,513,670attributable toUpstart Holdings,Inc. commonstockholders,dilutedUPSTART HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands)

(Unaudited)

Year Ended December 31,

2019

2020

Cash flows from operating activitiesNet income (loss) before attribution to noncontrolling interests$

(5,020

)

$

5,579

Adjustments to reconcile net income (loss) to net cash provided by operating activitiesChange in fair value of financial instruments (includes $($7,400) and $(4,238) to related parties for the years ended December 31, 2019 and 2020, respectively)34,716

29,049

Stock-based compensation3,806

11,513

Loss (gain) on loan servicing arrangements and sale of noncontrolling interests, net856

(1,530

)

Depreciation and amortization774

2,278

Incentive share expense-

787

Noncash interest expense74

73

Gain on repurchased and retired convertible preferred stock warrants(3,657

)

-

Net changes in operating assets and liabilitiesPurchase of loans for immediate resale to investors(1,779,180

)

(2,540,948

)

Proceeds from immediate resale of loans to investors1,779,180

2,540,948

Purchase of loans held-for-sale-

(116,127

)

Principal payments received for loans held-for-sale-

18,218

Net proceeds from sale of loans held-for-sale-

47,604

Other assets(11,957

)

(13,186

)

Operating lease liability and right-of-use asset871

251

Accounts payable3,613

7,033

Payable to investors(14,875

)

19,446

Accrued expenses and other liabilities22,381

4,709

Net cash provided by operating activities31,582

15,697

Cash flows from investing activitiesPrincipal payments received for loans held by consolidated securitizations158,921

24,018

Net proceeds from sale of loans held-for-investment100,678

97,340

Principal payments received for loans held-for-investment48,124

15,758

Principal payments received for notes receivable and repayments of residual certificates8,760

14,665

Purchase of loans held-for-investment(265,286

)

(9,655

)

Purchase of notes receivable and residual certificates(485

)

(4

)

Purchase of property and equipment(4,004

)

(1,355

)

Capitalized software costs(1,275

)

(4,250

)

Net cash (used in) provided by investing activities45,433

136,517

Cash flows from financing activitiesProceeds from initial public offering, net of underwriting discounts and offering costs-

159,488

Payments made on securitization notes and certificates (includes $3,262 and paid to related parties for the years ended December 31, 2019 and 2020, respectively)(176,742

)

(26,126

)

Repayments of borrowings(109,939

)

(148,113

)

Repayments of notes payable(22,637

)

-

Distributions made to noncontrolling interests(4,960

)

(622

)

Repurchase and retirement of convertible preferred stock warrants(1,426

)

-

Repurchase and retirement of convertible preferred stock(661

)

-

Proceeds from borrowings153,491

92,057

Proceeds from issuance of notes payable39,863

-

Proceeds from issuance of convertible preferred stock, net of issuance costs1,912

-

Proceeds from exercise of convertible preferred stock warrants1,631

6

Proceeds from exercise of stock options278

2,362

Net cash (used in) provided by financing activities(119,190

)

79,052

Net increase (decrease) in cash and restricted cash(42,175

)

231,266

Cash and restricted cashBeginning of year122,242

80,067

End of year$

80,067

$

311,333

Supplemental disclosures of cash flow informationCash paid for interest26,871

8,028

Cash paid for amounts included in the measurement of lease liabilities1,905

4,158

Supplemental disclosures of non-cash operating activitiesTotal right-of-use assets capitalized16,190

5,506

Supplemental disclosures of non-cash investing and financing activitiesReclassification of common stock warrant liability related to cashless exercise-

2,971

Reclassification of preferred stock warrant liability related to cash exercise-

12,177

Reclassification of common stock warrant liability to equity upon termination of repurchase option

-

2,945

Derecognition of loans held-for-investment in consolidated VIE154,864

57,222

Derecognition of notes payable held in consolidated VIE69,419

-

Derecognition of payable to securitization note holders and residual certificate holders80,825

58,017

Securities retained under unconsolidated securitization transactions31,160

-

Transfer of notes receivable and residual certificate on deconsolidation of VIE3,699

-

Capitalized stock-based compensation expense-

492

UPSTART HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands)

(Unaudited)

Year Ended December 31,

2019 2020

Cash flows from operating activitiesNet income (loss) before attribution to $ (5,020 ) $ 5,579 noncontrolling interestsAdjustments to reconcile net income (loss) tonet cash provided by operating activitiesChange in fair value of financial instruments(includes $($7,400) and $(4,238) to related 34,716 29,049 parties for the years ended December 31, 2019and 2020, respectively)Stock-based compensation 3,806 11,513

Loss (gain) on loan servicing arrangements and 856 (1,530 )sale of noncontrolling interests, netDepreciation and amortization 774 2,278

Incentive share expense - 787

Noncash interest expense 74 73

Gain on repurchased and retired convertible (3,657 ) - preferred stock warrantsNet changes in operating assets andliabilitiesPurchase of loans for immediate resale to (1,779,180 ) (2,540,948 )investorsProceeds from immediate resale of loans to 1,779,180 2,540,948 investorsPurchase of loans held-for-sale - (116,127 )

Principal payments received for loans - 18,218 held-for-saleNet proceeds from sale of loans held-for-sale - 47,604

Other assets (11,957 ) (13,186 )

Operating lease liability and right-of-use 871 251 assetAccounts payable 3,613 7,033

Payable to investors (14,875 ) 19,446

Accrued expenses and other liabilities 22,381 4,709

Net cash provided by operating activities 31,582 15,697

Cash flows from investing activitiesPrincipal payments received for loans held by 158,921 24,018 consolidated securitizationsNet proceeds from sale of loans 100,678 97,340 held-for-investmentPrincipal payments received for loans 48,124 15,758 held-for-investmentPrincipal payments received for notes 8,760 14,665 receivable and repayments of residualcertificatesPurchase of loans held-for-investment (265,286 ) (9,655 )

Purchase of notes receivable and residual (485 ) (4 )certificatesPurchase of property and equipment (4,004 ) (1,355 )

Capitalized software costs (1,275 ) (4,250 )

Net cash (used in) provided by investing 45,433 136,517 activities Cash flows from financing activitiesProceeds from initial public offering, net of - 159,488 underwriting discounts and offering costsPayments made on securitization notes andcertificates (includes $3,262 and paid to (176,742 ) (26,126 )related parties for the years ended December31, 2019 and 2020, respectively)Repayments of borrowings (109,939 ) (148,113 )

Repayments of notes payable (22,637 ) -

Distributions made to noncontrolling interests (4,960 ) (622 )

Repurchase and retirement of convertible (1,426 ) - preferred stock warrantsRepurchase and retirement of convertible (661 ) - preferred stockProceeds from borrowings 153,491 92,057

Proceeds from issuance of notes payable 39,863 -

Proceeds from issuance of convertible 1,912 - preferred stock, net of issuance costsProceeds from exercise of convertible 1,631 6 preferred stock warrantsProceeds from exercise of stock options 278 2,362

Net cash (used in) provided by financing (119,190 ) 79,052 activitiesNet increase (decrease) in cash and restricted (42,175 ) 231,266 cash Cash and restricted cashBeginning of year 122,242 80,067

End of year $ 80,067 $ 311,333

Supplemental disclosures of cash flowinformationCash paid for interest 26,871 8,028

Cash paid for amounts included in the 1,905 4,158 measurement of lease liabilities Supplemental disclosures of non-cash operatingactivitiesTotal right-of-use assets capitalized 16,190 5,506

Supplemental disclosures of non-cash investingand financing activitiesReclassification of common stock warrant - 2,971 liability related to cashless exerciseReclassification of preferred stock warrant - 12,177 liability related to cash exerciseReclassification of common stock warrantliability to equity upon termination of - 2,945 repurchase option

Derecognition of loans held-for-investment in 154,864 57,222 consolidated VIEDerecognition of notes payable held in 69,419 - consolidated VIEDerecognition of payable to securitization 80,825 58,017 note holders and residual certificate holdersSecurities retained under unconsolidated 31,160 - securitization transactionsTransfer of notes receivable and residual 3,699 - certificate on deconsolidation of VIECapitalized stock-based compensation expense - 492

UPSTART HOLDINGS, INC.

RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES

(In Thousands, Except Share and Per Share Amounts)

(Unaudited)

Three Months Ended

December 31,

Year Ended

December 31,

2019

2020

2019

2020

Income (loss) from operations$

3,516

$

10,393

$

(4,575

)

$

11,765

Sales and marketing, net of borrower acquisition costs(1)1,133

2,308

3,606

7,959

Customer operations, net of borrower verification and servicing costs(2)1,390

1,996

3,609

5,769

Engineering and product development7,297

14,151

18,777

38,802

General, administrative, and other11,466

14,831

31,865

45,609

Interest income and fair value adjustments, net(1,424

)

(2,289

)

(4,342

)

(4,816

)

Contribution Profit$

23,378

$

41,390

$

48,940

$

105,088

Contribution margin38

%

49

%

31

%

46

%

UPSTART HOLDINGS, INC.

RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES

(In Thousands, Except Share and Per Share Amounts)

(Unaudited)

Three Months Ended Year Ended December 31, December 31,

2019 2020 2019 2020

Income (loss) from $ 3,516 $ 10,393 $ (4,575 ) $ 11,765 operationsSales and marketing, 1,133 2,308 3,606 7,959 net of borroweracquisition costs^(1)Customer operations,net of borrower 1,390 1,996 3,609 5,769 verification andservicing costs^(2)Engineering and product 7,297 14,151 18,777 38,802 developmentGeneral, 11,466 14,831 31,865 45,609 administrative, andotherInterest income and (1,424 ) (2,289 ) (4,342 ) (4,816 )fair value adjustments,netContribution Profit $ 23,378 $ 41,390 $ 48,940 $ 105,088

Contribution margin 38 % 49 % 31 % 46 %

(1)

Borrower acquisition costs were $30.8 million, $32.2 million, $89.6 million, and $91.7 million for the three months ended December 31, 2019 and 2020 and years ended December 31, 2019 and 2020, respectively. Borrower acquisition costs consist of our sales and marketing expenses adjusted to exclude costs not directly attributable to attracting a new borrower, such as payroll-related expenses for our business development and marketing teams, as well as other operational, brand awareness and marketing activities.

(2)

Borrower verification and servicing costs were $7.0 million, $10.8 million, $21.3 million and $31.8 million for the three months ended December 31, 2019 and 2020 and years ended December 31, 2019 and 2020, respectively. Borrower verification and servicing costs consist of payroll and other personnel-related expenses for personnel engaged in loan onboarding, verification and servicing, as well as servicing system costs. It excludes payroll and personnel-related expenses and stock-based compensation for certain members of our customer operations team whose work is not directly attributable to onboarding and servicing loans.

(3)

Contribution Margin is calculated as Contribution Profit divided by revenue from fees, net for the relevant period.

Borrower acquisition costs were $30.8 million, $32.2 million, $89.6 million, and $91.7 million for the three months ended December 31, 2019 and 2020 and years ended December 31, 2019 and 2020, respectively.(1) Borrower acquisition costs consist of our sales and marketing expenses adjusted to exclude costs not directly attributable to attracting a new borrower, such as payroll-related expenses for our business development and marketing teams, as well as other operational, brand awareness and marketing activities.

Borrower verification and servicing costs were $7.0 million, $10.8 million, $21.3 million and $31.8 million for the three months ended December 31, 2019 and 2020 and years ended December 31, 2019 and 2020, respectively. Borrower verification and servicing costs consist of payroll(2) and other personnel-related expenses for personnel engaged in loan onboarding, verification and servicing, as well as servicing system costs. It excludes payroll and personnel-related expenses and stock-based compensation for certain members of our customer operations team whose work is not directly attributable to onboarding and servicing loans.

(3) Contribution Margin is calculated as Contribution Profit divided by revenue from fees, net for the relevant period.

UPSTART HOLDINGS, INC.

RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES

(In Thousands, Except Share and Per Share Amounts)

(Unaudited)

Three Months EndedDecember 31,

Year Ended

December 31,

2019

2020

2019

2020

Net income (loss) attributable to Upstart Holdings, Inc. common shareholders$

6,051

$

1,027

$

(466

)

$

5,983

Adjusted to exclude the following:Stock-based compensation1,602

4,411

3,806

11,513

Depreciation and amortization450

647

774

2,278

(Income) Expense on warrants and other non-operating expenses(1)(1,219

)

9,047

1,407

11,364

Provision for income taxes74

371

74

371

Adjusted EBITDA$

6,958

$

15,503

$

5,595

$

31,509

Adjusted EBITDA Margin11

%

18

%

3

%

13

%

UPSTART HOLDINGS, INC.

RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES

(In Thousands, Except Share and Per Share Amounts)

(Unaudited)

Three Months Ended Year Ended December 31, December 31,

2019 2020 2019 2020

Net income (loss)attributable to Upstart $ 6,051 $ 1,027 $ (466 ) $ 5,983 Holdings, Inc. commonshareholdersAdjusted to exclude thefollowing:Stock-based compensation 1,602 4,411 3,806 11,513

Depreciation and 450 647 774 2,278 amortization(Income) Expense onwarrants and other (1,219 ) 9,047 1,407 11,364 non-operating expenses^(1)Provision for income 74 371 74 371 taxesAdjusted EBITDA $ 6,958 $ 15,503 $ 5,595 $ 31,509

Adjusted EBITDA Margin 11 % 18 % 3 % 13 %

(1)

Consists of fair value adjustments to our warrant liability and interest expense on convertible notes.

(2)

Adjusted EBITDA Margin is calculated as Adjusted EBITDA divided by total revenue for the relevant period.

(1) Consists of fair value adjustments to our warrant liability and interest expense on convertible notes.

(2) Adjusted EBITDA Margin is calculated as Adjusted EBITDA divided by total revenue for the relevant period.

Three Months Ended

December 31,

Year Ended

December 31,

2019

2020

2019

2020

Net income (loss) attributable to Upstart Holdings, Inc. common stockholders$

6,051

$

1,027

$

(466

)

$

5,983

Adjusted to exclude the following:Stock-based compensation1,602

4,411

3,806

11,513

Adjusted net income (loss)7,653

5,438

3,340

17,496

Adjusted net income (loss) per shareBasic$

0.54

$

0.21

$

0.23

$

1.00

Diluted$

0.10

$

0.07

$

0.05

$

0.23

Weighted-average common shares outstandingBasic14,301,641

26,001,856

14,335,611

17,513,670

Diluted73,511,809

80,275,422

72,336,672

76,098,275

View source version on businesswire.com: https://www.businesswire.com/news/home/20210317005794/en/

CONTACT: Press press@upstart.com

CONTACT: Investors Jason Schmidt ir@upstart.com