Upstart Holdings, Inc.

and welcome to the Upstart Q4 FY 2021 earnings call. Today's conference is being recorded. At this time, I would like to turn the conference over to Jason Schmidt, VP of Investor Relations. Please go ahead, sir.

Good afternoon, and thank you for joining us on today's conference call to discuss Upstart's fourth quarter and full year 2021 financial results. With us today are Dave Girard, 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 fourth quarter and full year 2021 financial results. and published an investor relations presentation. Both are available on our investor relations website, ir.upstart.com. During the call, we will make forward-looking statements, such as guidance for the first quarter and full year 2022, related to our business and our plans to expand our platform in the future. These statements are based on our current expectations and information available to us today and are subject to a variety of risks, uncertainties, and assumptions. actual results may differ materially as a result of various risk factors that have been described in our filings with the SEC. As a result, we caution you against placing undue reliance on these forward-looking statements as we assume no obligation to update any forward-looking statements as a result of new information or future events, except as required by law. In addition, during today's call, unless otherwise stated, References to our results are provided as non-GAAP financial measures and are reconciled to our GAAP results, which can be found in the earnings relief and supplemental tables. To ensure that we address as many analyst questions as possible during the call, we request that you please limit yourself to one initial question and one follow-up question. Later this quarter, Upstart will be participating in Jeffrey's Payments and FinTech Summit on March 1st. JMP's Securities Technology Conference on March 8th, and Morgan Stanley's Technology Media and Telco Conference on March 9th. Now I'd like to turn it over to Dave Girard, CEO of Upstart.

Good afternoon, everyone. Thank you for joining us on our earnings call covering our fourth quarter and full year 2021 results. I'm Dave Girard, co-founder and CEO of Upstart. We're a month and a half into the new year, and I'm grateful, finally, to have the opportunity to reconnect with the investor community. Some quiet periods just feel longer than others. We've seen some epic progress at Upstart in the past few months, and I'm excited to share what we've been up to, the results we've been seeing, and how we're thinking about 2022 and beyond. Let me state up front that we're on a multi-decade mission to put affordable credit within reach of every American. The price of credit is the price of opportunity and the price of mobility. And we want to ensure that opportunity and mobility are available to all Americans, particularly for those whom the financial system has failed in the past. But like you, we've been eyes wide open watching all that's happening in the world in the last few months. The rise and fall of the Omicron variant, the clear signs of inflation and the Fed's plan to counter it, and of course, the market rotation out of high growth technology. But through all of it, our business continues to get stronger, and my confidence in Upstart's future has never been greater. As the rare public technology company with triple-digit growth and profits, we're confident that an economy and market in transition plays to our strength. I'd like to start by reflecting on 2021, which was a remarkable year for Upstart. We grew revenue from $233 million in 2020 to $849 million in 2021. while generating net income of $137 million. And with the fourth quarter surge, we're now at more than a billion dollars in revenue on an annualized basis. 2021 will be remembered as the year AI lending came to the forefront, kicking off the most impactful transformation of credit in decades. To gain some perspective on what Upstart achieved in 2021, we looked for another company in the public market with our combination of scale, growth, and profits, but we were unable to find one. Our profits are neither marginal nor ephemeral. We generated more cash in 2021 than we burned in our entire eight plus years as a private company. Profits matter for a reason. They allowed us to invest significantly in our future by more than doubling our headcount in products, engineering, and machine learning in 2021. This unusual combination of growth and profits in a heavily competed industry is evidence of a distinct competitive advantage and clear operating leverage. It also suggests that you're witnessing the creation of an industry-defining category, artificial intelligence lending, and the emergence of the category leader, Upstart. In addition to reaching a billion dollars in annualized revenue and record profits, Q4 was special for other reasons. It was the first quarter with more than $4 billion in loan transactions on our platform, a record not just for Upstart, but potentially for the entire personal lending industry. Our bank and credit union partners originated almost 500,000 loans in the quarter. We also now have 42 banks and credit unions, as well as more than 150 institutional investors, funding loans on the Upstart platform, providing deep and diverse sources of liquidity to keep the engine humming and the AI models learning. I'm also pleased to report that we now have seven lenders on the Upstart platform with no minimum FICO score required. But perhaps the most important achievement of the last quarter of 2021 was the incredible work done by our auto team. Through a relentless and determined cross-functional effort, this team put the last essential pieces in place necessary to begin scaling auto lending on the Upstart platform. I'll come back to this topic in a moment. I'd like to note that the Upstart team accomplished all of this during the second year of a global pandemic while operating in an almost entirely remote and distributed fashion. We moved to a digital-first strategy while simultaneously implementing what we call a vertical team working structure. This new approach is unlocking Upstart's ability to execute quickly and efficiently as a multi-product company. What's really exciting is that we're finding talent across the entire U.S. In fact, in Q4, more than two-thirds of our hires were made outside of our California and Ohio footprint. I cannot help but express my amazement for all the Upstart team accomplished in 2021, particularly given the circumstances under which they accomplished it. A sincere thank you to the entire Upstart team and also to the family and friends that support them. Now we'd like to move on to 2022 and how we're thinking about the year ahead. We find ourselves today in the strongest position Upstart has experienced to date, and it's our mission in 2022 to build on the many successes of the last year. At the beginning of each year, I like to clarify in my head and with the team the handful of objectives Upstart needs to achieve to make the year an unqualified success. Right at the top of the list for 2022 was achieving meaningful scale with auto lending on our platform. We believe in our core that AI lending isn't a one category phenomenon, but will eventually transform virtually all flavors of credit. I'm happy to tell you that just a month and a half into the new year, we've accomplished this goal. In fact, our auto refi funnel performance is now comparable to where our personal loan funnel was in 2019 on a channel adjusted basis. Based on this progress, we now expect $1.5 billion in auto lending transactions on our platform in 2022. Just as importantly, we now have the confidence to invest the resources necessary to unleash the model and technology improvement in auto lending that made Upstart the category leader in personal lending. As I referenced earlier, this great leap forward was the product of an intense push by our auto team toward the end of Q4. There are many pieces and parts we needed to get right to enable a minimally efficient funnel, and the team worked night and day right up through the holidays to make it happen. It's worth stating that scaling the auto business from here is no simple task. More funnel and model improvements will be necessary, and distribution channels in auto refi aren't nearly as well established as they are in personal lending. But even though channel development will require significant time and effort, the good news is that we're confident we're in a class by ourselves. Upstart has a unique and proprietary auto refinance product with far less competition than we've had in personal lending. In truth, if you don't have a certain level of funnel efficiency in auto refi, you really don't have a product. Today, we're confident that automotive lending is a category we can grow into for years to come. We also continue to make rapid progress in the new product categories that I mentioned in our last earnings call, small dollar lending, small business lending, and mortgage. In each case, we've established a core team and are making real progress toward entering the market. In the case of small dollar and small business lending, we expect to have these products in market during 2022. In the case of mortgage lending, we hope to be in market in 2023. In each case, we anticipate a year or so of development, a year of seeding and testing, and then a year to begin scaling. A home run success for Upstart would amount to a new product in market and ready to scale in each of the next two or three years. Of course, it's very hard to time innovation, much less market adoption, but this is the pace we're aiming for. Overall, the categories we're in today or expect to enter represent an addressable market of more than $6 trillion in annual origination. Upstart is now about the size that Google was when I joined that company in early 2004. So I've seen this movie before and hope to use what I learned there to build Upstart into the most impactful FinTech in the world. I have some specific personal goals for Upstart in 2022. First, to transition into a multi-product distributed company that can operate in parallel instead of in serial. Second, to break new ground in terms of quality of execution at the billion-dollar-plus scale with leaders such as Google, Amazon, and Apple as my North Star. And third, to move aggressively to unlock Upstart's addressable market while simultaneously upgrading our ability to pursue it. These challenges will keep our leadership team busy in 2022 and well beyond. Upstart is a unique company, both in terms of our technology and our business model. We don't exactly look like anybody else, and for this reason, we're often misunderstood. So in closing, I'd like to share a few thoughts about Upstart that have struck me in the last few months as useful ways to understand who we are and what we're building. First, Upstart is both a consumer Internet brand as well as a cloud software provider, delivering a deeply proprietary and technical product to our bank and credit union partners. This combination is entirely unique and is central to our competitive position today and in the future. We're not for the AI models at the core of Upstart, we would have little unique value to offer our bank partners. And were it not for our consumer presence and scale, we would not control our destiny, and our AI models would not be learning as quickly as they are. This combination means we can dramatically strengthen the competitive position of banks who partner with us, while simultaneously helping consumers find the very best credit product available to them. Second, choosing not to become a bank was the right decision for Upstart. and it's central to our worldview. A very successful bank will serve a particular slice of America incredibly well, with a well-constructed portfolio of products, a trusted brand, durable relationships, and a predictable business model. We believe we can help forward-thinking banks succeed in their mission with better technology. We think of ourselves as a consumer Internet brand focused on personal finance. Unlike a bank, an Internet brand can seek to serve all Americans and eventually everyone in the world. This time with an incredible diversity of offerings from hundreds, if not thousands of partners, each of whom will benefit from leveraging Upstart AI. So in short, our goal is to become a technology partner to all the world's great financial institutions and through those partnerships to enable the broadest array of financial products at the best price and with the best experience to everybody. Finally, lending is a cyclical industry and always will be. Though Upstart is not a lender, we are a technology provider to this industry, so we expect our growth in transaction volumes to vary considerably from quarter to quarter. But at the same time, we represent a secular change that we believe is both inevitable and durable. Our core thesis is that over a period of years, AI lending will rapidly gain market share over legacy approaches to credit, and Upstart is in the pole position to benefit from that. In fact, economic volatility, such as we've seen in the last two years, only serves to demonstrate the value of a modern AI-enabled approach to credit origination. Thank you, and now I would like to turn it over to Sanjay, our Chief Financial Officer, to walk through our Q4 and full year 2021 financial results and guidance. Sanjay?