Sanjay Datta: Hey James, I would say that in rough terms, I think we noticed this starting to happen at the end of last year. And by this year early, they were sort of persistent enough that we reacted.
James Faucette: Okay. So, it was early on in the quarter, not just something in the last couple of weeks, I guess.
Sanjay Datta: I mean we’re only six weeks into the quarter. So, yes, it was not — it wasn’t January 1st coming off the New Year’s Eve party, but I think we’ve been watching this last year and I think it takes a few weeks for it to bake and for us to react to it.
James Faucette: Okay, that’s great. Thank you so much.
Sanjay Datta: Thanks James.
Operator: And our next question is going to come from Michael Ng from Goldman Sachs. Please go ahead.
Michael Ng: Hey good afternoon. Thanks for the question. I had a follow-up to some of the questions about the outlook for the rest of the year. But perhaps you could just talk a little bit about the visibility that you might have in origination volume and recovery throughout the rest of 2024? Should 1Q be the low watermark because of the seasonality piece? And is there anything that you saw as it relates to the stabilization and the lower-prime borrowers that might be a helpful framework to think about when we should see more stabilization and potential recovery on the primer side? Thank you very much.
Dave Girouard: Hi Mike, I think it’s a good question. I would just say the pandemic — the strange pandemic effects of stimulus and subsequent de-stimulus we’re fairly profound, and they hit first and hardest to lesser prime, lower-income people and we did see that improve. So, that sort of suggests there’s a bit of mania or some form of mania maybe when someone has too much cash and inability to spend it that they develop some habits that don’t make sense long-term and then they recover from them. But the effect was just delayed on higher-income, higher FICO people, and I would think there’s reason to believe it just won’t last as long or be as destructive as it can be for lower income people. So, we do believe there has to be a time where things begin to revert to the mean just in terms of consumer behavior, savings rates, things of that nature and we’re hopeful about 2024 the year that will begin to happen.
Also, of course, inflation waning — it doesn’t just — just even if we have great inflation prints, things are still a lot more expensive today than they were in 2019, regardless. So, that still just takes a bit of time for people’s incomes to catch up with their expenses and I think that kind of what’s going on right now.
Michael Ng: Thank you, Dave.
Operator: And our next question is going to come from Regi Smith from JPMorgan. Please go ahead.
Regi Smith: Hey guys. Thanks for taking the questions. Most of mine have been hit. But I did, I guess, I have a question about — you talked about, I guess, high income and prime consumers feeling it and kind of tightening the credit box there. And the question is like who are you approving these days? What’s the profile of a successful applicant today?
Dave Girouard: Well, Regi, we’re not sort of like radically changing who’s approved as any loss assumptions go up than certain people that might have been approved before wouldn’t be. But when we say that the credit box is tightening, which it has for primer people in recent times, that’s really just saying, on average, they’re probably going to have a bit higher rate than they would have otherwise. It doesn’t necessarily mean they’re not approved and that does affect conversion. So, for the primer people, it means a bit higher rates, maybe the loan size their approved for, might not be exactly what they ask for. But generally, they’re still going to get approved for something. When it happens at the less prime end, a lot of them fall — end up going above — effectively going up above the 36% rate. And for that reason or declined. That’s the dynamic that plays out whenever rates go up or when the credit models tighten.
Regi Smith: Understood, that’s helpful. Thinking about — no, it’s real quick, I’m sorry. There was, I guess, a slide towards the back of your presentation and I think you recalibrated I guess, the returns. Maybe can you talk a little bit about what that is, the Upstart loan performance chart, Page 36 in the back, whether that — a little bit about like kind of what’s going on there and I guess, it doesn’t sound like it impacted your cash flows, but what would you tell people that kind of question the ability to kind of underwrite and the thoroughness of your models with a mistake like this? Thanks.
Sanjay Datta: Yes, sure. Thanks Regi, it’s Sanjay. So, yes, this chart, I’ll say, so it’s a bit of a specific artifact. The point of this chart was really to try and aggregate loan performance across our entire platform of funding channels, which obviously no single investor or lender is. But really, it’s just meant to show the impact of the macro conditions on the overall business and how we’ve reacted to them. The specific thing we’re calling out on this chart is that in updating the forecast methodology of this chart we realized we were making a calculation error in the old way that we’ve been using that resulted in us overestimating the forecast of the expected returns on this chart. So, first of all, importantly, this is just an error that’s isolated to this particular PowerPoint slide.
