Upstart CEO defends rising loan balances, says AI lending platform’s model unchanged

In an interview Tuesday with CNBC’s Jim Cramer, Upstart Holdings Chief Executive Officer David Girouard sought to assuage investor concerns about the increased balance of debt held on the financial technology company’s balance sheet at the end of the first quarter.

Shares of the artificial intelligence lending platform down 56.42% on Tuesday, closed at $33.61 per person, a day after it also lowered its full-year revenue outlook and adjusted EBITDA margins. Upstart cited rising interest rates and broader economic uncertainty for revised forecasts, which were lighter than Wall Street expectations. Upstart loan balances were also in focus on Tuesday.

“Just to be clear that, in the first quarter, a single-digit percentage of loans originating from our foundation reached our balance sheet,” Girouard said in an interview. interview “Crazy Money.” “That hasn’t changed in our history.”

On Monday, Upstart reported that it holds $604.4 million worth of loans on its balance sheet, as of March 31, up from $260.8 million in the fourth quarter of 2021. Some analysts note that the increase increases Upstart’s credit risk, and Cramer told Girouard he was “shocked” by the number.

“We’ve been told that we use loans on the balance sheet to test new products and new models, and that’s largely what represented those things,” said Girouard. ‘ said Girouard.

Upstart has recently expanded into the auto loan market and is also working to launch a small loan product.

“This is not a shift in our model,” said Girouard, referring to Upstart using its balance sheet to support research and development of new lending products. “More than 90% of our loans are sourced and held by the bank or sourced and sold forward to institutional markets. That doesn’t change.”

Start up, that going public in December 2020. away from high-growth companies in response to the hawkish Federal Reserve. As of late Tuesday, Upstart stock is down about 91% from their record close.

Many Wall Street analysts downgraded Upstart shares on Tuesday. Cramer told Girouard he believes part of Tuesday’s dramatic share slide was because investors realized there was “much greater risk” than they previously understood.

“All other things being equal, I like [if] Our stock has increased. But the fundamentals of our business have remained the same,” said Girouard, a former Google executive who also founded Upstart. Profit and growth have been a combination since our founding in December 2020 and ever since. We are proud of what we are building. “

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