Thread by @InvestiAnalyst

$UPST FULL Thread on Upstart Holdings - Up 47%!😯

Why I've been bullish on this leader in AI disrupting the Trillion-dollar Consumer Lending Market!

✅What is so special?
✅What are the Competitive advantages?
✅ $LMND of Lending?

Let's explore in this deep thread👇👇

1/ Thread Overview:

2- Company Overview
4-Competitive advantages & Emerging Moats
5 -Financials & Customer Growth
7 - Market Opportunity
8 - Management Team
9- The bear thesis & Risks

2/ $UPST Overview:

A lending platform that applies AI & machine learning to improve the consumer lending and underwriting process for making effective credit assessments.

They help their bank partners by referring loans, creating a seamless and simple consumer facing app.

3/ $UPST Cont'd

🛑OLD: Most F.I use FICO scores, around 30 indicators to determine credit.

✅FUTURE: Holistic method now, $UPST applies AI to get 1600+ indicators based over 10.5milion trained variables (Ye!) about a persons background to determine data-driven credit decisions.

4/$UPST Competitive Advantages [Emerging Moat]

Build vs Lease: To rebuild a modelling system to recreate credit decisions is expensive but its easier to partner with $UPST, creating a win-win for banks as they save massive costs as well as an easy process for consumers.

Cont'd

4i/ $UPST Advanced AI Effectiveness:

Their system is more advanced, more efficient and superior

a) 75% reduction in loss rates
b) Over 70% of loans are performed without documents
c) Higher approvals for banks
d) Higher automaton, reducing human error & cost

As seen below

4ii/ $UPST Compelling value prop..

The value to banks is $UPST's advanced machine learning increases more effective loans --> lower loss rates --> More loans approved -> more money for the financial institutions --> more money for UPST.

Leads to high switching costs for banks.

4iii/ $UPST Comps.. Flexible

The Ease of Customizability & Integration capabilities for bank partners such that banks can integrate their existing system allowing the bank to input their variables and to define their own credit policies.

Con'td

4iv/ $UPST Comps... The model

A Two-sided business model and network effects as $UPST acts as the middle man between aggregating consumer demand --> which helps the Revenue growth of bank partners as well as helps upstart too

Multi-channel revenue model from the Ecosystem below

5/ $UPST 2017 - 2021 Financial Growth:💰

Beautiful Revenue growth has consistently accelerated

Bump in growth for 2021 due to:
i) high ROI on their models,
ii) the reopening
iii) Liquidity (excluding acquisitions)

*Remarkable despite the negative effects of the pandemic

5ii/ $UPST Financials (2) - FY 2020: 💰

They have become incredibly efficient while growing top-line! (Beauty :) )

- Contribution Profit ($105M), Up 115% YoY.
- Income from Ops ($11.8M), Up 357% YoY
- Adj. EBITDA: $32M, Up 463% YoY

6/ $UPST Customers & Total Transaction Volume Growth: 💵

They now have over 13-15 Bank Partners.

Observe the acceleration in loans transacted on their platform
- Over 750,000K Transactions since they were founded.

This translates to more data for their AI models :)

7/ $UPST Market Opportunity & Prize: 🌎

• The consumer lending market: $4.2 Trillion, $UPST 5% market share
• The BIGGEST markets are Auto Loans, Mortgages, student loans, business loans and credit cards. (Worth Trillions)
• There are over 3500-5000 FI's that could use $UPST

7i/ $UPST TAM Expansion: 🌐

They just expanded their TAM into Auto's with this acquisition -- This is why the stock is UP BIG because this is massive!

Auto is among the Top-3 largest lending market beyond mortgages in the US.

8/ $UPST Mgmt Teams (My favourite!)

One of the most competent teams I know!!

Founded in 2012 by 3-Co-founders! (30% ownership stake]

David Girouard CEO (formerly w. Google and Apple) – called father" of Google Enterprise building it from scratch.

✅ Top Glassdoor ratings!

8i/ Mgmt Cont'd:

- 2nd Founder: Anna Couselman (Fmr. Google and ran Gmail)

- Paul Gu (29yrs) but incredibly smart. He was recognized as one of Peter Thiel's 20 under 20 Fellows <Top 1% of society's gifted> Also Forbes 30 under 30

- Company has awarded for a great culture

9/ $UPST Risks:

• The story is early
• Customer Concentration and Crossriver bank risks
• Issue with Credit Karma & need for referrals
• Longer sales cycles
• The big banks may to build their models from scratch
• Competitors like $NCNO $LC? [No credible ones so far]

10/ $UPST - Other Notable Achievements:

• Upstart is #12 on the Forbes top 50 most promising artificial intelligence companies of 2019.
• Inc Magazine's Best Workplace for 2020
• Higher NPS and superior product reviews and customers love the product.

11/ Want to read more indepth:

Visit: @JonahLupton: jonahlupton.substack.com/p/upst-upstart

Visit: @GetBenchmarkCo: getbenchmark.substack.com/p/upstart-ai-d…

Personally, I'll write about the conference call, takeaways, 2020 highlights and What Investors can expect in '2021:
investianalystnewsletter.substack.com

10/ $UPST Summary:

✅Financials: Profitable & rapidly growing
✅3-Superior Founder Led Team & Culture
✅Great product with superior reviews & NPS
✅Leading advanced technology product
✅Compelling Value proposition and competitive advantages
✅ Trillion-dollar industry TAM.

11/11- $UPST Final words:

Personally, I've worked within AI on a complex project for determining credit decisions for my FI.

Hence, I wanted to share with my followers why I've been bullish.

Thanks for reading and If you enjoyed, kindly share.

What are your thoughts? :)