$UPST Earnings vs. What I Was Looking For
Spoiler alert: I think it was a good-but-not-great-but-not-awful quarter!

My updates below are in italics.

Here's what I'm looking for:

  • Management seems to sandbag guidance every quarter. They've beaten their own midpoint guidance by nearly 15% on average the past 4 Qs. They're guiding for $300MM at the midpoint in Q1, which is $4MM below where Q4. I'm looking for at least $340MM.

Revenue of $310MM. Beat their own guidance but came up well short of what I was hoping for. Management also issued guidance for next quarter that was identical to Q1 guidance. This is the first time their QoQ guidance wasn't significantly higher. Near-term headwinds indeed.

  • I'm not concerned with Upstart becoming profitable yet. I'd rather they work on gaining market share. However, 2021 was a big drop in net income. Their balance sheet is good but not great. Keep increasing FCF or scale back net losses.

Their pristine balance sheet took a hit here. Borrowings increased almost 11% and loans on their books more than doubled. Thats a big surge in loan exposure.

  • Conversion rate and contribution margins will be key. Also, some internet sleuths noticed they updated their About page to say 74% of loans have been fully automated through 12/31/21. However, their recent 10-K had that number at 69% for 2021. Very curious to see what their Q1 % is.

Conversion rate and contribution margin both declined YoY (22% to 21.4% and 48% to 47%, respectively). Percent of loans fully automated, however, increase from 71% to 74%. I'm most bullish on that last number. It shows their AI is working.



  • Concentration risk needs to keep decreasing. This one is important. Cross River Bank was a record low 55% of all loans originated (previously 67% in 2020 and 89% in 2019) and 56% of revenue (63% and 80%, respectively). However, 55%/56% is still quite high. A second bank has actually increased as CRB decreased. Bank Unknown went from 24% of loans in 2020 to 36% in 2021 and 18% of revenue to 27%. I really want to see CRB decrease without any/a substantial increase to this other bank.

Number of loans from CRB decreased from 56% to 52% YoY and revenue dropped from 60% to 46%. However, Bank Unknown went from 34% to 38% and 25% to 31%. In total though, those two banks went from 90% of loans originated in Q1'21 to... 90% in Q1'22. Damn. But revenue dropped from 85% to 77%. Progress, barely. I think the concentration risk will start getting better more quickly though. The number of bank and credit union partners is rising fast. It was just 18 back in Q1'21, which then jumped to 25, then 31, then 42, and now up to 57 in Q1'22. Number of auto dealers also rose fast.


I remain bullish but I'll be watching their balance sheet closely going forward as well as the KPIs in the screenshots above and concentration risk. I did increase my total cost basis by ~11% this morning.

Here's my original post:
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