Q4 2024 Upstart Holdings Inc Earnings Call
Thank you for watching!
Speaker Change: Good afternoon and welcome to the Upstart fourth quarter and full year 2024 earnings call. At this time, all participants are in a listen-only mode to prevent any background noises. Later, we will conduct a Q&A question and answer session and instructions will be given at that time. As a reminder, this conference call is being recorded. I would now like to turn the call over to Sonia Banerjee, Head of Investor Relations. Please go ahead, Sonia.
Speaker Change: Thank you. Welcome to the Upstart Earnings Call for the fourth quarter and full year 2024. With me on today's call are Dave Girouard, our CEO and co-founder, and Sanjay Datta, our CFO.
Speaker Change: During today's call, we will make four looking statements, which include statements about our outlook and business strategy. These statements are based on our expectations and beliefs as of today and are subject to a variety of risks, uncertainties, and assumptions.
Speaker Change: Actual results may differ materially as a result of various risk factors that have been described in our SEC filings.
Speaker Change: We assume no obligation to update any forward-looking statements as a result of new information or future events except as required by law.
Speaker Change: Our discussion will include non-GAAP financial measures, which are not a substitute for our GAAP results. Reconciliations of our historical GAAP to non-GAAP results can be found in our earnings materials, which are available on our IR website.
Speaker Change: Before I turn the call over to Dave, I'll share the events that we're participating in this quarter.
Speaker Change: On February 13th, we'll be participating in a Retail Investor Q&A on Twitter with Henry Invest, and on March 3rd, we'll be participating in the Citizens JMP Technology Conference. A replay of both events will be available on our IR website. With that, Dave, over to you.
Dave Girouard: Thanks, Sonia. Good afternoon, everyone. Thank you for joining us today.
2024 was a year of rapid quarter-by-quarter improvement for Upstart.
and the fourth quarter clearly took the cake.
Dave Girouard: Considering the weak environment we faced at the beginning of the year, we couldn't have asked for a stronger finish.
Dave Girouard: In Q4, our business grew dramatically across all product categories on a sequential basis, delivered adjusted EBITDA at levels not seen since the first quarter of 2022, and came within a whisker of returning to GAAP profitability.
Dave Girouard: We'll get to the financial details a bit later, but it's worth summarizing up front.
Dave Girouard: In Q4, overall our origination volume grew 33% and our revenue grew 35%, both on a sequential basis.
Dave Girouard: On a year-over-year basis, this equates to 68% growth in originations and 56% growth in revenue.
Dave Girouard: Originations for each of our new product categories grew at an incredible pace.
Dave Girouard: With both Otto and HELOC growing by about 60% sequentially, and our small-dollar relief product growing a stunning 115% quarter-on-quarter.
Dave Girouard: None of this could have happened without insanely great work by Upstarters across the country. I want to thank each of them for believing in Upstart and achieving more than we thought possible just a year ago.
Dave Girouard: While we continue to deliver model and product wins to support that growth, we also finally benefited from a macro tailwind, most clearly represented by the decline of the upstart macro index in the latter part of 2024.
Dave Girouard: We never plan our business assuming any future improvements to the macro, but to certainly appreciate it when they come.
Dave Girouard: Now I'd like to dive in and describe some of the product and model wins that we saw in the fourth quarter.
Dave Girouard: In our core personal loan product, we continue to deliver model innovations that separate us further from the crowd.
Dave Girouard: Model wins that increase risk separation are the lifeblood of Upstart. They're responsible for much of the improvements you have seen in our business lately and our pipeline of potential future model wins is robust.
Dave Girouard: If you recall with Model 18, the most impactful innovation was using the price of the loan, or APR, as an input to the model. This is what's referred to as a feature of the model in ML speak, and it led to a giant leap forward in model accuracy.
Dave Girouard: This model delivered much of the momentum we saw in the second half of 2024.
Dave Girouard: To explain this a bit, in all prior models, the underwriting model only considered the terminal state and timing of a loan in the training data set.
Dave Girouard: In other words, the particular month when a loan was charged off or prepaid.
Dave Girouard: PTM enables consideration of intermediate delinquency states that may have preceded the final status of the loan. This means delinquencies that recover to current are suddenly meaningful in the training data and can inform a more accurate model.
Dave Girouard: It also means that our model can properly learn from loans that are delinquent but not charged off directly in the core model.
Dave Girouard: We're often surprised by the increase in accuracy these types of innovations deliver.
Dave Girouard: But concepts like APR as a feature and PTM aren't one-time boosts. They're new model forms entirely. You can think of them as innovation vectors that offer our team many ways to refine and build on their advantages for a long time to come.
Dave Girouard: In addition to these core model innovations focused on risk separation, we've also invested significantly in achieving consistent model calibration. I want to share some recent thoughts and analysis we've done in this area.
Dave Girouard: As a reminder, calibration measures the gap between the predicted and actual overall level of default. And as we all know, Upstart had several quarterly vintages that underperformed during the time that the government was withdrawing COVID stimulus.
Dave Girouard: It's important to state first that less than 1% of our lending partners' quarterly vintages actually lost principal during even the worst of this period, but of course any underperformance whatsoever isn't a good thing.
Dave Girouard: We recently completed a back test using today's macro handling tools applied to this period associated with intense macro volatility.
Dave Girouard: We found that had we had today's tools throughout this time of volatility, we would have avoided 55% of the excess loan defaults observed in that historical period and would have returned to full calibration 12 months sooner.
Dave Girouard: This analysis gives us confidence that we're making meaningful strides to improve the resilience of our platform through periods of economic volatility and bodes well for our future.
Dave Girouard: Moving on to our newer products. In Q4 we released new underwriting models for both our auto refinance and auto retail products, resulting in improved conversion rates and contributing to the roughly 60% sequential increase in origination volume that I mentioned earlier.
Dave Girouard: Autorefi, in particular, has seen giant improvements in conversion rates, about a 7x improvement across all of 2024.
Dave Girouard: Also, the modest reductions in base interest rates has begun to revive the auto refinance opportunity, and we hope to take full advantage of it in 2025. We're increasingly focused on auto refinance as an excellent cross-sell opportunity for our millions of prior borrowers.
Dave Girouard: Our HELOC product had a strong Q4, growing by approximately 60% sequentially, much like our auto business.
Dave Girouard: This growth was driven by a combination of conversion improvements, cross-selling, and expanding state eligibility.
Dave Girouard: In Q4, we automated the counteroffer process, much as we did in personal loans years ago. This is an important conversion booster.
Dave Girouard: In December, we launched a machine learning-powered feature that increased instant income verification rates by 34%. We also ramped up our ability to cross-sell HELOCs to prior borrowers.
Dave Girouard: We finished the year with our HELOC offered in 36 states, representing 60% of the U.S. population.
Dave Girouard: We're working hard and hoping to begin originations in our home state of California soon. We also finished 2024 with more than 1,000 HELOCs originated and zero defaults, a super strong start for our newest product.
Dave Girouard: In Q4, we also signed our first HELOC agreement with a lending partner. This was an important milestone for us and a harbinger of great things to come.
Dave Girouard: HELOC offers were already being made on behalf of this partner in January, which is a super fast turnaround on bringing the partner live. And more importantly, this partner's offers improved the best HELOC rates available on Upstart by about a hundred basis points.
A huge win for borrowers and for Upstart.
Dave Girouard: The demand for HELOCs from our lending partners is substantial, because it's very prime, and it's a product with which they're both familiar and comfortable. Banks and credit unions also love homeowners as customers, so it's quite likely our funding supply for HELOC will exceed our needs for some time to come.
Dave Girouard: I expect 2025 will be a great year for home lending as a fast-growing and emerging part of Upstart.
Dave Girouard: I'm increasingly confident that our HELOC product will have a distinct advantage, not only in terms of process automation, which is always an upstart strength, but also in terms of cost of funding, given our extensive relationships with and business orientation toward banks and credit unions.
Dave Girouard: The team developing our small dollar relief loans continued their amazing run with more than a hundred percent sequential growth in loan volume in Q4.
Dave Girouard: This was driven predominantly by the large reduction in variable cost per loan origination that I referenced earlier in the year. This giant cost improvement allowed us to approve more borrowers for small dollar loans within our target economics.
Dave Girouard: The SDL product has exceptional credit performance, strong gross margins, and accounted for more than 13% of new borrowers on Upstart in the fourth quarter.
Dave Girouard: As of Model 19, we're beginning to use small-dollar repayment data to help train our core personal loan underwriting model.
Dave Girouard: This has the important effect of expanding the sample set of bars on which the model is trained to represent even more Americans. In the near future, we'll be moving to a single underwriting model for both of our unsecured products, which we expect to lead to more efficiency and accuracy for both.
Dave Girouard: Last year I outlined plans to modernize and scale our servicing operations by leveraging data, automation, and personalization to improve borrower outcomes in operational efficiency. In 2024 it became clear that these efforts were paying off.
Dave Girouard: In Q4, we increased the rate at which a delinquent borrower makes a payment within 14 days of contact by 25% sequentially by personalizing our outreach timing and methods. This demonstrates how personalization helps borrowers stay on track and improves overall portfolio health.
Dave Girouard: Ongoing investments in automation helped us reduce the people-related cost per current loan by 50% over the course of 2024.
Dave Girouard: At the same time, we've intentionally prioritized direct collections efforts for borrowers at risk of default where they're most impactful.
Dave Girouard: This balanced approach, automating routine servicing while intensifying delinquency management, has helped us reduce roll rates from one-day delinquent to charge-off by 15% year-over-year.
Dave Girouard: AutoPay enrollment continues to rise as well, with more than 93% of new loans now enrolled at origination, the highest level in two years. Overall, portfolio-wide AutoPay exceeded 80% for the first time, up more than 300 basis points year over year.
Dave Girouard: These improvements reflect our commitment to exceptional customer experiences while driving efficiency and better credit outcomes for both borrowers and lenders. Servicing may not be the flashiest part of lending but at FSTART we're turning it into a competitive differentiator that creates value for all stakeholders.
Thanks for watching!
Dave Girouard: 2024 was an exceptional year for the funding supply in our business and sets us up well for 2025. We saw increased commitments from our partners in private credit as well as a growing roster of lending partners active on our platform.
Dave Girouard: In Q4, we upsized commitments with longstanding capital partners, increasing these commitments by a total of $1.3 billion. We also closed a $150 million personal loan warehouse facility. These wins underscore the confidence our capital partners have in our platform.
Dave Girouard: 2024 also marked the return of lenders to our platform, with our bank and credit union partners continuing to expand their loan volumes, given improved liquidity and confidence in the Upstart platform.
Dave Girouard: Q4 originations with our lending partners grew 30% quarter over quarter and 76% year over year.
Dave Girouard: We also strengthened our balance sheet considerably in the second half of the year by refinancing convertible debt due in 2026, as well as raising almost $500 million to improve our cash position and liquidity for our anticipated growth in 2025 and beyond.
Dave Girouard: As we begin the new year, I want to share my priorities for Upstart in 2025.
Number one.
10x our leadership in AI.
Dave Girouard: I want to dramatically increase our pace of model innovation this year. This means strengthening the team, improving the infrastructure, streamlining the processes, and accelerating the growth in our proprietary training data. This goal is number one for a reason.
Dave Girouard: Number two, prepare a funding supply for rapid growth. We can strengthen our funding partnerships with both investors and lenders by delivering high quality reliable loans across all of our asset classes.
Dave Girouard: In 2025, I want to take steps towards building the largest yield factory in the world.
Dave Girouard: Number three, return to gap net income profitability in the second half of the year. We aim once again to be the unique company that combines high growth and profits. We're on the verge of doing just that.
Dave Girouard: And number four, giant leaps toward best rates, best process for all.
Speaker Change: A few thoughts as I wrap up. One of our very early upstarters who went on to join Google's DeepMind and then eventually started his own AI venture fund said something recently that stuck with me.
Upstart is building the foundation model for credit.
Nobody else is even trying.
Speaker Change: This is a simple yet elegant description of Upstart. In fact, I wish I had said it.
Speaker Change: But if you're a believer in the transformational power of AI, it's undeniable that the trillions of dollars of credit origination each year represent a clear and obvious opportunity for AI to improve the lives of people everywhere.
Speaker Change: While many rightfully worry about whether AI will ultimately be good or bad for humanity, AI-enabled lending is undeniably a winner for the American family.
Speaker Change: A few weeks ago, we Upstarters gathered in San Diego to kick off 2025 with our second annual Upstart Live conference. The theme of the event was game changers, and we spent a lot of time talking about what it will take to create a generational company, a destination for credit unlike any other in the world.
Speaker Change: 2025 is mostly about taking giant leaps toward the best rate and best process for all across each of our products. This is an incredibly challenging goal but it's realistically within our grasp.
Speaker Change: We believe success at offering the best rate and best process to all will create a brand and a company for the ages.
Speaker Change: On May 14th, we'll host an event we're calling Upstart AI Day for investors and analysts in New York City, where we'll provide an in-depth look at our technology, our business model, and the incredible opportunity the combination of the two unlocks.
Speaker Change: This event is a great opportunity to connect with more of our management team and gain deeper insight into what we're building and how it sets us apart.
Speaker Change: Thank you and now I'd like to turn it over to Sanjay, our Chief Financial Officer, to walk through our 2024 financial results and guidance. Sanjay?
Sanjay Datta: Thanks, Dave, and thanks to all of our participants for sharing some of your time with us today.
Sanjay Datta: We are encouraged to be emerging from 2024 with good momentum, having navigated what was an otherwise challenging environment for much of the past year.
Sanjay Datta: At the beginning of last year, we set out some ambitious financial objectives.
Sanjay Datta: Turn around the growth trajectory of the business, continue to scale up our committed capital base, reduce the size and improve the performance of our own balance sheet, and return to adjusted EBITDA profitability.
Our wish list consisted only of a stable macro environment.
Sanjay Datta: As we look back on the year, we are pleased with our report card.
Sanjay Datta: versus our Nader in Q1 of 2024. By the fourth quarter, originations were up 86%, revenue from fees were up 44%,
Sanjay Datta: The amount of loans on our balance sheet fell by about 25%.
Sanjay Datta: Quarterly net interest income flipped from negative 10 million dollars to positive 20 million dollars.
Sanjay Datta: Fixed costs were largely controlled and we closed the year with two successive quarters of positive adjusted EBITDA.
Sanjay Datta: The macro did indeed remain largely steady over the back half of the year from a credit default perspective.
Sanjay Datta: Even showing recent signs of improvement since attaining peak defaultiness sometime last spring, as reflected in our published macro index, the UMI.
Sanjay Datta: This welcome break from the consistently degrading environment of the prior two years allowed some of our more recent model improvements to see the light of day, giving us good momentum on conversion wins over the last two quarters of the year.
Sanjay Datta: Our conversion rate in Q4 was at its highest level in nearly three years.
Sanjay Datta: Additionally, as of year-end, all of the recent credit priced on our platform on behalf of lenders and investors was on track to meet return targets, giving our funding partners increasing confidence to continue leaning into our marketplace with their supply of lending capital.
Sanjay Datta: With this as context, here are some financial highlights from the fourth quarter of 2024, which exceeded our guidance across virtually all metrics.
Sanjay Datta: Revenue from fees was $199 million, up 30% year-over-year and 19% sequentially, partially from the aforementioned model enhancements and partially from a combination of lower UMI and last fall's rate cuts working their way into our platform pricing.
Sanjay Datta: Net interest income was almost 20 million dollars as we've now mostly worked off underperforming older vintages and as the falling UMI is increasingly reflected in improving fair value marks.
Sanjay Datta: Taken together, net revenue for Q4 came in at approximately $219 million, up 56% year-on-year and 35% quarter-on-quarter.
Sanjay Datta: The volume of loan transactions across our platform was approximately 246,000, up 89% from the prior year and 31% sequentially.
and representing 162,000 new borrowers.
Sanjay Datta: Average loan size of approximately $8,580 was up from $8,400 in the prior quarter, reflecting continued model improvements that allowed us to approve higher loan amounts.
Sanjay Datta: Our contribution margin, a non-GAAP metric which we define as revenue from fees minus variable costs for borrower acquisition, verification and servicing, as a percentage of revenue from fees, came in at 61% in Q4, a lot versus the prior quarter.
Sanjay Datta: Despite a marginally lower take rate than Q3, margins were supported by the strength of our conversion funnel, which reinforced our customer acquisition efficiency, as well as an improving cost to service borrowers.
Sanjay Datta: GAAP operating expenses were roughly $224 million in Q4, up 8% sequentially from Q3.
Sanjay Datta: Expenses that are considered variable, relating to borrower acquisition, verification, and servicing, were up 19% sequentially, in line with the growth of the corresponding fee revenue base.
Sanjay Datta: Fixed expenses were marginally up by 3% versus Q3 due to continued catch-up accruals for expenses that were not being incurred earlier in the year at our lower volumes, some of which will be temporary in nature.
Sanjay Datta: You can expect that we will continue to pursue tight fixed expense management as a core principle of how we manage our business.
Sanjay Datta: Altogether, Q4 gap net loss was $2.8 million, well ahead of expectation and reflecting the outperformance on the top line against our steady margins and fixed cost base.
Sanjay Datta: Adjusted EBITDA was $39 million, also scaling nicely in accordance with our operating leverage, and positive for the second consecutive quarter.
Thanks for watching!
Sanjay Datta: Adjusted earnings per share was 26 cents based on a diluted weighted average share count of 116 million.
Sanjay Datta: We completed the full year with net revenue of approximately $637 million, up 24% from 2023.
Sanjay Datta: A contribution margin of 60% and a positive adjusted EBITDA of $10.6 million, representing a 2% adjusted EBITDA margin versus a negative margin of 3% a year earlier.
Sanjay Datta: We ended the year with $806 million of loans on balance sheet, consisting of $703 million of loans held directly and $103 million from the consolidation of a securitization deal in which we retain minimal economic exposure.
Sanjay Datta: The $703 million of loans held directly is down 28% from the prior year, but rose sequentially from $537 million in Q3, as the surge of borrower volume outstripped our expectations for the quarter.
Sanjay Datta: We view this to be a short-term timing issue. Rising borrower volumes are the signal for us to put in place the next set of capital arrangements, which we are now well down the path towards.
Sanjay Datta: Our objective remains to continue reducing the amount of loans held directly on our balance sheet as the year progresses.
Sanjay Datta: The $103 million of consolidated loans are from a securitization deal completed back in 2023, from which we retain a total net exposure of only $16 million.
Sanjay Datta: Our unrestricted cash position also strengthened as we ended the year at $788 million, up from 445 million in the prior quarter, and reflecting the proceeds from two convertible debt issuances that we did in the back half of last year.
Sanjay Datta: As we gear up for the year ahead, we will strive for the following objectives and plan against the following baseline assumptions.
Sanjay Datta: A relatively stable macro environment and a constant upstart macro index.
No assumption of any rate cuts.
Sanjay Datta: A historical pace of modeling wins and conversion gains that will drive the majority of our growth.
Sanjay Datta: Relatively stable contribution margins, although our efforts to grow in the primer-borrower segments, if successful, may put some downward pressure on average margins and take rates.
Continued availability of third-party funding as we scale platform volume.
Sanjay Datta: continued fixed-cost containment and continued pruning of the loans held directly on balance sheet.
Sanjay Datta: Additionally, as we complete a shift from multi-year over to one-year equity grants, we expect to see a negative impact on stock-based compensation expense.
Sanjay Datta: While one-year grants will generally result in lower economic dilution by aligning calculated amounts with the current stock price, they will incur a higher accounting charge than older grants, which are typically expensed at the lower historical prices.
Sanjay Datta: With these items as context, and with a reminder that the first quarter is typically our seasonally slowest quarter, for Q1 of 2025, we are expecting
Sanjay Datta: Total revenues of approximately $200 million, consisting of revenue from fees of $185 million and net interest income of approximately positive $15 million.
Contribution margin of approximately 57%.
Net income of approximately negative 20 million dollars.
adjusted net income of approximately positive 16 million dollars.
adjusted EBITDA of approximately 27 million dollars.
Sanjay Datta: with a basic weighted average share count of approximately 95 million shares and a diluted weighted average share count of approximately 105 million shares.
Sanjay Datta: For the full year of 2025, we are expecting total revenues of approximately $1 billion, consisting of revenue from fees of $920 million and net interest income of approximately positive $80 million.
Adjusted EBITDA margin of approximately 18%.
Sanjay Datta: And we expect GAP net income to be at least break-even for the year.
Speaker Change: Thanks to all once again for joining us on this call. To the Upstart employees, profound thanks to you for all your efforts and contributions as we've navigated this past year together. Excited about 2025, I am.
Operator, over to you.
Speaker Change: Thank you. If you'd like to ask a question, please signal by pressing star 1 on your telephone keypad. If you're using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Again, that's press star 1 to ask a question. And we'll pause for a moment to allow everyone an opportunity to signal.
Speaker Change: And we'll take our first question from the line of Kyle Peterson with Needham. Please go ahead.
Speaker Change: and others. You know, committed capital, you know, some of the at-will buyers or depositories. How should we think about, you know, the deployment of additional funding in 2025?
Speaker Change: Hey Kyle, thanks for joining. This is Sanjay. I would say that our medium-term objectives here remain the same.
Speaker Change: We've talked in the past of having, you know, somewhere north of 50% of our capital committed and to balance, you know, some allocation between bank and credit union balance sheet capital and, you know, maybe at will.
Speaker Change: ABS and hedge fund type capital. I think that's still a good medium term target for us. Obviously in the short term we're seeing some expansion of borrower volumes and we will look to grow.
Speaker Change: capital in the most expeditious way possible. And oftentimes that involves striking some large deals with counterparties. So that's probably what we have lined up in the near future, but I think our medium term.
Objectives remain the same.
Speaker Change: Okay, thank you. And then, you know, maybe just a follow-up on the balance sheet. Appreciate the commentary that you guys plan on kind of reducing, you know, what will be held on the balance sheet as the year goes on. How should we think
Speaker Change: About, you know, the pace of that and is there any update, whether it's, you know, end of January or anything you could provide as to kind of where the loans on balance sheet sit now and where that should sit over the next, you know, quarter or two?
Speaker Change: Yeah Kyle, we've talked in the past similarly about you know there being a bit of a timing challenge between spurts of growth on the borrower side and you know the ability to put in place a capital agreements to match it.
Speaker Change: So, I would say that's quarter to quarter, and you know, we'll look to.
Speaker Change: We'll look to create the capital sources to take those loans from us, and we're in conversations about that right now, but it's more of a quarter-to-quarter activity than a month-to-month one.
Okay, fair enough, thank you, and nice results.
Thanks, Kyle.
Speaker Change: We'll take our next question from the line of Simon Clinch with Redburn Atlantic. Please go ahead, your line is open.
Hi everyone, thanks for taking my question.
Simon Clinch: I was wondering if we could just start with your comments, Sanjay, on the borrower demand. Could you just help break down what really drove the upside that you saw this quarter? Was it all to do with the model, or was there just borrowers being brought down beneath that sort of 36% rate cap? I'm just kind of curious as to how that sort of breaks down.
Okay, Simon.
Some amount of it was the improvements to model accuracy
Simon Clinch: it could be a great idea for a bit room. ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ...
Simon Clinch: And, you know, I guess, you know, corresponding default rates have moderated a little bit that's been reflected in.
Simon Clinch: platform pricing and, you know, the rate cuts we saw last fall.
Simon Clinch: We've always talked about them having some delay in how they work into our platform pricing, but some of that is being reflected now as well. Some combination of better technology, a little moderation in default rates, and some rate cuts from last fall, all conspiring to lower APRs on the platform.
Speaker Change: Great, thanks. And just a quick follow-up actually. Thanks for all the colour around the framework with which you're thinking about the macro and your guidance for the year.
Speaker Change: I'm kind of curious as to how much Lex, or yeah, I guess...
Speaker Change: Your approach to managing that outlook, given there's still plenty of uncertainty, there's certainly people in my shop that think that rates might even be going up at the end of the year. How are you planning for those kinds of various eventualities within your business?
Speaker Change: Well we take I guess what would I we think of as a conservative position we don't assume that rates are going to go down or up for that matter we don't assume that UMI is going to go up or down so so we think that's the most
Speaker Change: just a modest amount of over-performance if things stay as they are.
Speaker Change: have the models adjust themselves very, very quickly to any changes is actually very powerful. I talked about that.
Speaker Change: a bit of my remarks. And I think that's our view on it, which is, you know,
Speaker Change: as is necessary based on what's going on out there. And I think this is a big win for our lending partners and investors because it just, it means better results for them.
Sanjay Datta: And Simon, just a reminder that the impact of rate movements themselves are relatively modest, certainly compared to changes in our default index.
Yeah.
Thanks guys.
Thanks, Tom.
Speaker Change: Our next question comes from the line of P. Chris Jackson with Citi. Please go ahead, your line is open.
Speaker Change: Thank you. Good evening. Thanks for the question. Nice turnaround, guys. Sanjay, I'm just curious, as you're thinking about forming...
Speaker Change: David Girouard, Cynthia Moon, Alice Berry, David Girouard, Cynthia Moon, Alice Berry,
Speaker Change: Do you think there's more appetite for our outside partners to think about taking on more risk here?
Speaker Change: Hey Pete, just to clarify you're asking about risk retention in our committed capital arrangements or just more generally in the securitization markets?
Yeah, that and both, actually.
Speaker Change: you know, a certain, you know, target percentage of our platforms that we want underpinned by committed capital and in those arrangements.
Speaker Change: at risk from our own balance sheet, and I think those rough ratios continue to remain true.
Speaker Change: I think more broadly in the market, there is definitely an increasing appetite for risk both in the securitization markets.
Speaker Change: and just more broadly with, you know, loan asset purchasing. And so I think we're starting to see some parts of that market heat up a little bit. Not yet.
Speaker Change: Quite back to the you know the fever pitch it was maybe a few years ago, but there's there's definitely a lot of conversations and and traffic and Engagement happening even at the you know the risk part of the of the debt stack so that's encouraging
Speaker Change: of principle went up a little uptick a little bit just curious you know how you're thinking about that using you know external network partners or do you think the upstart brand is gotten to a point where it can really attract borrowers onto itself thanks
Dave Girouard: Hey Pete, this is Dave. We've had over a long period of time a pretty amazing either consistency or even dropping in acquisition cost per loan so we feel very good about that. The economics
Dave Girouard: The economics of our loans are exceptional, so there will be little variances from quarter to quarter. But if you looked over the long trajectory...
Dave Girouard: Through enormous growth, we've actually reduced, you know, the cost of acquisition per loan. So, we have no concerns on that front whatsoever, generally speaking, we have opportunities to dial up marketing and dial down contribution per loan when that makes sense. And- But it's an area where I feel like the team has performed exceedingly well for
for many, many years.
Thank you, Dave. That's helpful. Thank you.
Speaker Change: We'll take our next question from the line of Ramsey Ellisall with Barclays. Please go ahead, your line is now open.
Hi, thanks for taking my question. Terrific quarter.
Speaker Change: The fully automated loans kind of keep moving up. I think now they sit at about 91%. Those seem to have a lot of knock-on benefits for the model. I'm just curious about your updated thoughts about is there a ceiling there? How close we are? Are we to the max level or is there still a lot of room to run in terms of automation?
You know, I think they're...
Speaker Change: I guess you could say the ceiling is 100%, but there'll always be some sort of fraudulent activity, et cetera, or just imperfections that mean we'll never get to 100%. I would say a couple of years ago, we never would have expected to get to 90%. So I do think that we're happy with where it is. There's a team working constantly to improve on the models that unlock instant approvals.
Speaker Change: So I think it can go higher. We're also, I mean a lot of what we're doing is applying some of the same techniques.
Speaker Change: is ultimately a fraction of how much we can attract, you know, true applicants, true borrowers to the platform versus, you know, the bad guys out there that we have to keep away. And that dynamic will always be there.
Speaker Change: Okay. And a follow-up for me, as we look out over the next few years,
Speaker Change: Can you help us think through kind of like a hypothetical pie chart of your loan mix?
Speaker Change: in terms of personal loans, small dollar loans, auto, HELOC, in terms of originations, how should we think about the model evolving now that you're getting a little traction with these other verticals, these other loan types?
Speaker Change: Yeah, we certainly don't have a perfect lens on to that. Other than to say our core business, as you can see today, is growing very rapidly. It's a category itself.
Speaker Change: much larger categories, generally speaking. So there's a huge amount of headroom there. So, you know, it's a bit of a bet and we don't know for sure. We're really happy to see the newer products growing very rapidly and we're excited to see what they'll do in 2025. But it's frankly a little bit hard to judge between them.
Got it. All right. Thank you.
Speaker Change: And we'll take our next question from the line of Dan Doles with Mizzou. Please go ahead, your line is now open.
Thanks for watching!
Dan Doles: Hey Sanjay, Dave. Outstanding quarter as always. Thank you very much. This is great. I have two quick questions. First one is on the margin. Looks like you're guiding 18%, which is huge for the year. Can you maybe walk us through some of the operating levers that you have in the model and, you know, how should we think about the model over the medium and long term? Because it looks pretty good and then I have a quick follow-up. Thank you.
Hey Dan, great to hear from you.
Speaker Change: We've talked in the past about the fact that we believe we have good operating leverage in our business model, and by that specifically what I mean is, as the volumes increase and our fee revenue increases, we foresee relatively steady take rates and relatively steady contribution margins, meaning a lot of that will drop.
from the top line very efficiently, you know, to the...
Speaker Change: Now that we're expanding on the top line again, we will make some investments in 2025, but they'll be modest.
Speaker Change: And so I just think, in general, as our business grows in 2025 and beyond...
We have an ability.
Speaker Change: to transmit a lot of that to the bottom line. And, you know, Dave talked more generally about our ambition to be a company that's both fast-growing and highly profitable. And I think this sort of underpins our belief in our ability to do that.
Speaker Change: Got it. It did have a follow-up, you know, it seems like we are in some sort of a super cycle.
Speaker Change: I mean, I know, you know, I guess that according to the Bible, the prophecy is for the fools. So I don't want you to make a prophecy. But I mean, how much legs is there to this cycle? I mean, it seems like things are getting better, incrementally better over time. Like if you had to make a bet on where we are at the cycle, that would be great. Thank you.
For more information visit www.FEMA.gov
Speaker Change: I don't know that I'd call it a cycle in that sense, you know, pricing of loans in our platform are still relatively high, you know, long-term, UMI is, you know, notionally
should be one and and it's much higher so
Speaker Change: I don't think, and also rates are probably, you know, at least a little bit higher than you might expect them to be on a long-term normal. So that tells me, at least in terms of those inputs to our platform, which are really important and very fundamental to the price of loans, that those are still, you know, elevated. And I hope there's some...
Speaker Change: over the next year, maybe it will take two years, that we will see both of those things trend back toward long term normals, and that would be, you know, obviously great for our business. We've been able to do, you know, what we've been able to do still with these very high prices.
Speaker Change: But, you know, like we said, we don't sit around waiting for interest rates to go down or UMI to go down. Most of what we do here are just fundamental improvements to risk separation and automation and those deliver growth. So I think we'll just take the macro wins when we can get them and otherwise we'll keep cranking away on
more accurate models.
That sounds really positive. Well, great results. Thanks again.
Thanks, Jeff. Thanks, Sam.
Speaker Change: We'll take our next question from the line of David Scharf with Citizens JMP. Please go ahead, your line is open.
David Scharf: Great, good afternoon. Thanks for taking my questions. Maybe one specific and one a little more open-ended. On the specific side, Sanjay, obviously we know how much operating leverage there is.
David Scharf: material fair value write-ups. Is any of that included in the NII guide for 25? Or is part of it just holding fewer loans on the balance sheet and having you know less mark-to-market you know growth?
Speaker Change: Hey David, great to hear from you. Let's see, our NII guide for 2025, I would say is the majority of that is just the performing...
Speaker Change: set of assets on the balance sheet. There may be some incrementally more fair value marks, or maybe put another way, the UMI has improved. That signals an improvement in the expected performance of the assets, and I don't think we've taken all of that.
Speaker Change: really yet and so some more of that should trickle into 2025 if the macro holds.
Speaker Change: But I think more than anything, we're signaling that, you know, look, we on our balance sheet
Speaker Change: I had some underperforming vintages both in the auto R&D that we originated a couple years ago as well as in our core, and I think as of Q4 we've largely moved past it, and now we're looking at a balance sheet that should be expected to perform and produce.
Speaker Change: Returns as any investor would expect as well. So that's the majority of the story
Speaker Change: Yeah, no, understood. Sounds pretty much consistent with most consumer lenders with peak losses in the rarity mirror. Hey, a little more open-ended, and you may have partially answered this in the last question.
Dave Girouard: You know, both the press release and I think Dave's opening comments kind of referenced
You know, sort of Q1 2022.
Dave Girouard: as a reference point. You know, that was sort of a high-water mark.
And as we just try to think about...
Dave Girouard: How much contribution margin in EBITDA a business can scale to once again? I'm looking at that period, that peak late 21, early 22.
Dave Girouard: Other than the interest rate environment, is there anything else different that you could call out that could potentially signal to us that we're going to get back to that sweet spot of an environment?
whether it's just...
Dave Girouard: On the funding side, competition, I don't know if the same players you're competing against.
Dave Girouard: What is it about the current environment that could potentially improve to get back to that level of conversion rate in quarterly funded principal amount?
Dave Girouard: Yeah Dave, I guess the path back to that scale of business, I mean the obvious answer is a drop in the risk of the environment. I guess you could sort of proxy that with a drop in the UMI, but I also think that
The path back.
will look different than our original pop there because
Dave Girouard: Compared to that time, our models are dramatically stronger. I mean, a lot of that is not obvious because of the high rates and the high level of risk in the environment. And so, as Dave said, the prices are still quite elevated. But the models themselves, in terms of their ability to decision risk between relatively similar-looking borrowers,
Dave Girouard: is dramatically better. And so I think we will not require as constructive as an environment as existed in 2022 in order to get back to that rough level of scale.
Dave Girouard: And maybe a related point is that as and when we do, our business model itself is much stronger.
Dave Girouard: I think we've been clear that I do not believe our...
Dave Girouard: contribution margins will fall back to the level that they were back then. I think we're much more optimized in how we price and how we measure elasticity and and how we manage our take rates and so I think again for a similar size of top-line business you should expect us now to have better margins and frankly a more streamlined
Dave Girouard: onboarding and servicing borrowers and even the fixed cost base beyond it. So the only real difference beyond that is that the fact that we have undertaken a few bets that are more early stage.
Dave Girouard: And we expect those to contribute over time as well, and there will be some period of time in which we have to incubate that, but beyond that, I think across the board, whether you're looking at our business model or the strength of our actual underlying technology, it's pretty much better across the board.
Got it. Congrats on the turnaround.
Thank you.
Speaker Change: We'll take our next question from the line of Vintage Cane Tech with BTech. Please go ahead, your line is now open.
Speaker Change: Hi, good afternoon. Thanks for taking my questions, both are follow-ups. So, first question...
Speaker Change: Is it something where we should be expecting EPS to kind of continue to move alongside
Thank you.
Speaker Change: I guess, you know, we just reiterate that in 2025, we'll be in the ballpark of breakeven or at least breakeven. So I think, you know, I think we expect to be roughly in that ballpark, not dramatically ahead of it.
Speaker Change: In general, yeah, I think that you could think of our profitability as improving with scale.
Speaker Change: There is a couple of mechanical things happening to the P&L. I called out one of them quickly in my script that has to do really with the accounting of stock-based expense.
Speaker Change: And the fact that we are moving from what we've previously done, which is, you know, grants approved, you know, multi-year grants, essentially, to more of a one-year grant-style program. And that just has the impact of creating a lot of new opportunities for us.
Speaker Change: essentially pricing or costing the grants at a more current stock price and it increases the accounting charge of the grants. So that's something that I think you could think of as a one-time impact and then as we grow.
Speaker Change: You know, from the Q1 guidance we've given, which I believe is about minus $20 million, you know, as the platform scales through the course of the year, you should see us then grow the profitability to the point where the full year will be, you know, break even to positive.
Speaker Change: Okay, great. That makes sense. Thank you. And then second, just another follow up on the prior discussions about your funding capacity.
Thank you.
Speaker Change: So if I just kind of do the rough math in the fourth quarter of 2024, your 2.1 billion transaction volume.
Speaker Change: and the $150 million of fee income, if that kind of holds, then the guidance for 2025 of the $920 million of fee income, that's close to about $13 billion of transaction volume in 2025. So, you know, great volumes for 2025.
Speaker Change: I'm sort of wondering how much is kind of funding availability or capacity of binding constraint on your ability or on your transaction volume growth if maybe we could see you know potentially more growth in that transaction volume if
It's the current environment of good funding availability.
Holds. Thank you.
Speaker Change: Yeah, Vincent, a couple of thoughts. First of all, I think your math on origination volumes for 2025 is directionally correct, but maybe a little aggressive compared to what we're expecting.
Speaker Change: So it's not, I don't think it's, we aren't expecting quite as much as 13 billion, but even at, you know, relatively.
Speaker Change: you know, close number to that. We did make the explicit assumption, and we called out the explicit assumption, that most of the forecasting modeling we do is really about the borrower side of the platform, and we make the assumption that the funding will be available.
Speaker Change: And every signal we have as of right now, in terms of the conversations we're in and the pipeline we have, suggests that we'll be able to scale the capital side in accordance.
Speaker Change: with what we were able to achieve in terms of borrower volumes and approvability.
Thank you very much. Bye.
Speaker Change: That said, it's not a gating variable in any real way to our guidance. What will determine the growth of the platform really, I think, comes down to how successful we are on the product and the technology and the marketing side of our business in finding more quality borrowers to approve.
Speaker Change: There is a world in which funding does not materialize and that will constrain our growth, but I don't think infinite funding would allow us to raise that number in any way.
Okay, great. That's both very helpful. Thanks very much.
Thank you.
Speaker Change: We'll take our next question from the line of John Hecht with Jeffreys. Please go ahead, your line is open.
Speaker Change: Afternoon guys, thanks very much for taking my questions. Your first one is sort of just on the source of the volumes. Obviously we've seen a pretty good recovery here. I'm wondering how, can you give us some characteristics of how much is coming from your primary channels like Credit Karma, how much is recurring business?
Speaker Change: and then maybe where the sources of for auto, I know auto is through dealership network, but maybe HELOC and auto just more high-level about the sources of that and how that mix might
migrate over the course of this year.
Sure. Hey, John.
Speaker Change: You know because a lot of our growth was conversion driven
Speaker Change: in the core business, it sort of hit all acquisition channels in a similar way. They just all got more productive and more efficient. So I don't think the...
Speaker Change: The channel skew changed much at all versus what it has been previously.
Speaker Change: And the new products, you know, while exciting, are still not at the scale where they're moving the dial on the overall numbers compared to the core business. So, I think you just think of it as largely driven by the core business at the aggregate level with a channel mix that's relatively, you know, sort of similar to what we've been doing in prior quarters.
Speaker Change: Okay, and then second question, Dave, you mentioned the small loan.
Speaker Change: The Small Dollar Loans, it sounds like that's growing nicely. Maybe, what's the mix of that now? What are the kind of size and terms? And then, is the overall intention of that to have a customer kind of development program, where you might take someone in that program and then migrate them to different products over time?
Thank you.
Speaker Change: moving out more rapidly, and that's the heart of that project. It is generating good economics, so it's not sort of a loss leader for us in any sense.
Speaker Change: of the world, but it is an accelerator in terms of the models understanding, and those people can definitely move on to other products, larger personal loans or refinance a car loan, etc. And, and so it's definitely an acquisition strategy we mentioned that in the fourth quarter 13% of new
Speaker Change: new borrowers on Upstart were from that product itself. So that's, you know, that means it's meaningful to us in the sense of how quickly we're bringing new people onto the platform and we're getting better and better at cross-selling to other products, being able to help them.
Speaker Change: on other types of borrowing. So it's all very good. And the rate at which that product is growing, I think, is a huge indicator for our future that we're going to be able to just underwrite and have these models understand more and more of the population.
Speaker Change: John, just in terms of the parameters of those loans, you're looking at terms, you know, from 6 to 18 months.
Thank you.
Great. That's very helpful. Thanks, guys.
Thanks for having me.
Speaker Change: We'll take our next question from the line of Reggie Smith with J.P. Morgan. Please go ahead, your line is open.
Thanks for the questions. Congrats, guys. Great quarter.
Speaker Change: I wanted to follow up on the last question. I'm not sure if you broke this out, but can you talk about...
Speaker Change: from these smaller dollar loans today. And it sounds like there may be a difference in conversion rate between those and the large ones. Maybe frame that for us as well.
Hey Reggie, the small dollar loans...
Speaker Change: are I would say just just north of 15% of total loan count but because they're small they're more like maybe you know something like 3% of total dollar originations so it's on that scale. With respect to conversion I mean it's a little bit
Speaker Change: we can sort of look at them for a much smaller loan. So you're already looking at an applicant that has in some sense been declined. So it's a bit hard to do it apples to apples. Maybe you think of it as a second look at a conversion.
Speaker Change: But that conversion number in of itself is lower than the...
than the number we have for our core product.
Speaker Change: and you kind of talked about this but I was just curious
Speaker Change: You know, what are the main drivers of your improved conversion? Like I would imagine that it's the APR alone, but I don't want to oversimplify that and then the second part of the question is
Speaker Change: You know, when you have these improvements in your underwriting model,
Speaker Change: How does that trickle down to your loan buyers? Like, is there a process where they get comfortable and confident in that? Because, presumably, you'd be approving more people maybe at a lower rate. And I'm curious whether that lower rate would then...
and the accuracy of your model, if that makes sense.
Speaker Change: I'll speak to the first part, this is Dave, and then let Sanjay speak to investors and how they get comfortable.
Speaker Change: you know, avoiding more people that are likely to default or at least pricing them more accurately.
Speaker Change: And when that happens, the other people generally, you can improve more and reduce rates for them.
Speaker Change: So the very basic, you know, dynamic that is so important to who we are and how we do what we do.
Speaker Change: invariably the conversion rate goes up. So those two dynamics explain almost the entire history of our company, frankly.
Speaker Change: more accurate rates or credit decisioning and then less friction and you put those two together and You know, that is the story of upstart in you know, a hundred words or less
Speaker Change: And just to speak to the investor side, Reggie, I mean that
Speaker Change: Loan buyers who work with us are loan buyers who've gotten comfortable with the fact that our model evolves over time and you know it's on that basis that they do their diligence on us and of course in certainly in the Instances where that capital is under a committed capital arrangement. We're also We're also putting our money where our mouth is of course
Speaker Change: And so it's sort of embedded in the nature of any of a relationship that we have with any loan buyer. They know we're not a static underwriter and you know they've chosen to be a counterparty to us.
Speaker Change: on the basis of how our models evolve, and they understand that well, so I don't think it's generally not a surprise to folks who work with us.
Speaker Change: Now, I guess a better way to articulate it would be, you know, as your models improve, if their discount rate or what they're willing to pay for a loan doesn't change, then presumably the alpha in your model is captured by them.
Speaker Change: Am I thinking about that correctly? So, like, they don't change what they're willing to buy your loan for, but if the model improves, they ultimately benefit from it on the back end because it outperforms even what they would have thought.
Speaker Change: Is that the right way to think about it? Not exactly. So, Reggie, you're right in that the state of our model has no bearing on what return they require, but if their return requirement is constant,
Speaker Change: and we perceive, for a set of borrowers, a lower amount of risk, we will actually lower the APR. So it's the borrower, in fact, who makes the gain.
Speaker Change: from a model improvement, not the investor. The investor, you know, they just care that we're calibrated to their rate of return. And frankly, they don't really worry too much how we drive that return as long as we stand behind it and we execute.
Speaker Change: But yeah, better models tend to accrue value to the borrowers in the form of lower APRs.
Speaker Change: Congratulations on the quarter, guys. I was totally flat-footed by this one. I wanted to give you your flowers, so great, great work on the quarter for sure.
Thanks for the question, Rajesh Ravi.
Speaker Change: We'll take our next question from the line of James Fessett with Morgan Stanley. Please go ahead. Your line is now open.
James Fessett: Great, thank you very much and my congratulations on a really good quarter. I have one end to ask a couple of clarifying questions.
James Fessett: First on contribution profit margins, you know, it looks good, although it's probably down a little bit from third quarter 24 and the fourth quarter 0.3. I know there can be some seasonality.
James Fessett: and that kind of thing. But when you talk about like reduced cash, etc., can you give us a little bit of nuance like what is moving the contribution margin around and what we should think as a realistic range for it to be in as we go to the next year and beyond?
James Fessett: Hey James, so things that are moving the contribution margin, I guess I would call out...
James Fessett: three things. One is just our take rates and how we're managing those.
Because, you know, we've been very.
James Fessett: in-quarter take rate optimized recently. I think as we regrow our volumes and get back into net profitability, gap profitability, you could imagine us
You know, um...
James Fessett: altering the levers between in-quarter profit and overall platform volume and we do that by lowering take rates and increasing volumes and that's a constant experiment we're running and it's a constant decision we're taking. So take rates are one source of variability in contribution margin. The second is our acquisition cost.
James Fessett: And similarly, you know, as Dave pointed out, we've been very, very
James Fessett: efficient if you will in you know the lean periods of the prior years we've been largely growing off of what you might think of as organic or
James Fessett: CRM, MIND, Acquisition Leads, and those are obviously free. And as we get more expansive and we get a better conversion funnel, you'll see us wade further into paid acquisition.
James Fessett: So that may have an impact on the margin, on contribution margin. And the third one is really our operating costs, our cost to onboard alone, our cost to service alone. And those are areas where I think we're making great efficiencies over time. We have leaders that are...
James Fessett: to those areas and delivering a lot of automation and a lot of wins. And so our actual cost to process and service alone, those costs are coming down over time.
James Fessett: So I think you add the three of them up and there's some puts and takes in either direction.
James Fessett: But, you know, we've been pretty steady. We've sort of bounced around between, I don't know, it's 58 and 62 percent for most of the past year. So I think in the grand scheme of things, we've demonstrated a pretty good resiliency on the margin.
Speaker Change: Great, thanks. And then speaking of customer acquisition, etc., I just wanted a little bit of influence to what you're thinking on channels and how much is direct and direct mail versus new people at straightupstore.com, etc., and any changes we should anticipate as we go through this year and not next.
Speaker Change: Sure, James. This is Dave. I would say, first of all, we'll continue to have, you know, our kind of
Speaker Change: base of users is growing. So we of course are getting more and more by either cross-selling products or they're getting second or third loans, et cetera. So I think that fraction will always continue to tick up and those of course have.
Speaker Change: close to zero acquisition costs. So generally that's that's a great thing. We continue to make great progress. Whenever our models get better, we tend to get more volume from partners.
Speaker Change: DM direct mail converts better so that you know we can actually increase the amount of direct mail we tend
Speaker Change: earning, you know, $45,000 a year or anywhere in between all those. We want to have the best rates and we've made big strides toward that. And I think one of the results of that will be is you can do much more broad-based marketing.
Speaker Change: when your offer is good for almost everybody. And I think we're making big strides in that direction. And so we're doing OTT, like,
Speaker Change: television stuff at some scale. I think you'll begin to see more and more of that. I don't anticipate us putting our name on a football stadium or anything like that anytime soon, but I do think you'll see Upstart's brand out there more and more in very, very efficient ways to attract consumers.
Great. I appreciate all that, Paula.
Speaker Change: We'll take our next question from the line of Matt O'Neill with FT Partners. Please go ahead, your line is open.
Yeah, thank you so much.
Speaker Change: here. Through the year, would the internal view, you know, continue to come down until you approach where it is now?
Speaker Change: Matt, your question is whether we have an internal view that the UMI will continue to go down?
Speaker Change: My understanding was there's a little bit of an asymmetry around how quickly signs of improvement kind of flow through into the underwriting.
Speaker Change: I see, yeah. Yeah, I mean, I guess in general, we will continue to lag any improvements in UMI, and if UMI stays flat for the rest of the year, we will remain above it in terms of the assumptions we're making in newly underwritten loans.
Speaker Change: So, there will be an enduring conservatism in how we underwrite because, you know, as David explained earlier, we always want some buffer to at least, you know, brace for a scenario where the economy does some kind of a U-turn with respect to credit risk.
until that UMI is back down to some long-term normal.
Speaker Change: average like 1.0 and frankly even then we would want some some positive buffer above how we're underwriting so I think you know maybe the other way to put it is there will always be an expression of conservatism in our underwriting in order to brace for you know scenarios of risk increasing over time.
Got it. Thank you.
Speaker Change: And we'll take our last question from the line of Rob Wildhack with Autonomous Research. Please go ahead, your line is now open.
Rob Wildhack: Hey guys. One more on the contribution margin. Sanjay, I think earlier you said steady contribution margins for 2025. I'm just wondering, why wouldn't those go lower with so much volume growth? I would think that as volume grows, you have to spend a bit more on marketing, take rates tend to come down and lead to a lower contribution margin. Why isn't that the case in 2025?
Hey, Rob.
I think I think we've
Speaker Change: It's harking back to something Dave said. We've been able to demonstrate growth at efficient, you know, steady acquisition costs.
Speaker Change: and take rates over time and I don't think that's changed. I think the only thing that would cause our contribution margin to drop would be a conscious move to lower our take rates.
Speaker Change: in order to invest in future volume, if you will, at the expense of in-quarter financials. And as we've talked about, that is a decision we may take one day. But I do not think...
Speaker Change: So we don't view ourselves as a business that needs to overspend on marketing in order to grow.
Okay.
Speaker Change: And you touched on those at-will, ABS-type loan buyers a couple of times this evening. Curious if that cohort is returning to the platform in a meaningful way yet. And does the 2025 outlook consider a big rebound in the ABS engine there? Because I know that's been a big volume channel in the past. So just curious to get your thoughts on the ABS channel. Thanks.
Speaker Change: Yeah, I guess the more at-will side of the platform, it's a population we're engaged with right now and I think there's a lot of good conversations happening. Probably too soon to really
You know
Speaker Change: make a call in terms of where they are as a broader market, but I think we're optimistic. Our 2025 numbers don't really make any explicit assumptions about at-will capital. They just make the broader assumption that capital will not be a bottleneck for us.
Speaker Change: and there's many different paths or ways that that could be true but nothing specific is being assumed about the ABS markets.
Helpful. Thank you.
Speaker Change: Thank you. That concludes today's question and answer session. Dave, at this time, I'll turn the conference back to you for your closing remarks.
Speaker Change: And we've really taken Upstart to a level that I think the world has yet to see. So we look forward to talking with you all again in May and sharing more about our work in 2025. Thanks. Have a good evening.
Speaker Change: This concludes today's call. Thank you for your participation. Goodbye. You may now disconnect.
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