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Upstart (NASDAQ:UPST) Delivers Impressive Q4, Stock Jumps 27.7%


Kayode Omotosho /
2022/02/15 4:17 pm EST
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AI lending platform Upstart (NASDAQ:UPST) reported Q4 FY2021 results topping analyst expectations, with revenue up 247% year on year to $304.8 million. On top of that, guidance for next quarter's revenue was surprisingly good, being $300 million at the midpoint, 16.1% above what analysts were expecting. Upstart made a GAAP profit of $58.9 million, improving on its profit of $1.02 million, in the same quarter last year.

Is now the time to buy Upstart? Access our full analysis of the earnings results here, it's free.

Upstart (UPST) Q4 FY2021 Highlights:

  • Revenue: $304.8 million vs analyst estimates of $262.8 million (15.9% beat)
  • EPS (non-GAAP): $0.89 vs analyst estimates of $0.51 (75.1% beat)
  • Revenue guidance for Q1 2022 is $300 million at the midpoint, above analyst estimates of $258.2 million
  • Management's revenue guidance for upcoming financial year 2022 is $1.4 billion at the midpoint, beating analyst estimates by 16% and predicting 64.7% growth (vs 230% in FY2021)
  • Free cash flow was negative $16.8 million, down from positive free cash flow of $38.3 million in previous quarter
  • Gross Margin (GAAP): 84.7%, in line with same quarter last year

“With triple-digit growth and record profits, Q4 was an exceptional finish to a breakout year for Upstart. 2021 will be remembered as the year AI lending came to the forefront, kicking off the most impactful transformation of credit in decades,” said Dave Girouard co-founder and CEO of Upstart.

Founded by the former head of Google's enterprise business Dave Girouard, Upstart (NASDAQ:UPST) is an AI-powered lending platform that helps banks better evaluate the risk of lending money to a person and provide loans to more customers.

Businesses have come to use data driven insights to stratify their customers into more granular buckets that enable more personalized (and profitable) offerings. Lending software is a prime example of fintech democratizing access to loans in a still-profitable manner for financial institutions.

Sales Growth

As you can see below, Upstart's revenue growth has been incredible over the last year, growing from quarterly revenue of $87.7 million, to $304.8 million.

Upstart Total Revenue

This was another standout quarter with the revenue up a splendid 247% year on year. On top of that, revenue increased $76.3 million quarter on quarter, a very strong improvement on the $34.5 million increase in Q3 2021, and a sign of acceleration of growth, which is very nice to see indeed.

Guidance for the next quarter indicates Upstart is expecting revenue to grow 145% year on year to $300 million, improving on the 81.9% year-over-year increase in revenue the company had recorded in the same quarter last year. For the upcoming financial year management expects revenue to be $1.4 billion at the midpoint, growing 64.7% compared to 230% increase in FY2021.

Profitability

What makes the software as a service business so attractive is that once the software is developed, it typically shouldn't cost much to provide it as an ongoing service to customers. Upstart's gross profit margin, an important metric measuring how much money there is left after paying for servers, licenses, technical support and other necessary running expenses was at 84.7% in Q4.

Upstart Gross Margin (GAAP)

That means that for every $1 in revenue the company had $0.84 left to spend on developing new products, marketing & sales and the general administrative overhead. This is a great gross margin, that allows companies like Upstart to fund large investments in product and sales during periods of rapid growth and be profitable when they reach maturity. It is good to see that the gross margin is staying stable which indicates that Upstart is doing a good job controlling costs and is not under pressure from competition to lower prices.

Key Takeaways from Upstart's Q4 Results

With a market capitalization of $8.57 billion Upstart is among smaller companies, but its more than $986.6 million in cash and positive free cash flow over the last twelve months put it in a very strong position to invest in growth.

We were impressed by how strongly Upstart outperformed analysts’ revenue expectations this quarter and by the very optimistic guidance for the next year. Overall, we think this was a strong quarter, that should leave shareholders feeling very positive. The company is up 27.7% on the results and currently trades at $139.39 per share.

Upstart may have had a good quarter, so should you invest right now? It is important that you take into account its valuation and business qualities, as well as what happened in the latest quarter. We look at that in our actionable report which you can read here, it's free.

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The author has no position in any of the stocks mentioned.