Upstart (NASDAQ:UPST) Surprises With Q4 Sales But Quarterly Guidance Underwhelms

Radek Strnad /
2023/02/14 4:16 pm EST

AI lending platform Upstart (NASDAQ:UPST) reported Q4 FY2022 results that beat analyst expectations, with revenue down 51.9% year on year to $146.9 million. However, guidance for the next quarter was less impressive, coming in at $100 million at the midpoint, being 35.9% below analyst estimates. Upstart made a GAAP loss of $55.3 million, down on its profit of $58.9 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 FY2022 Highlights:

  • Revenue: $146.9 million vs analyst estimates of $132.7 million (10.7% beat)
  • EPS (non-GAAP): -$0.25 vs analyst estimates of -$0.47
  • Revenue guidance for Q1 2023 is $100 million at the midpoint, below analyst estimates of $156.1 million
  • Free cash flow was negative $257.9 million, compared to negative free cash flow of $102.9 million in previous quarter
  • Gross Margin (GAAP): 56.4%, down from 86.6% same quarter last year

“Despite the economic headwinds of 2022 and continued funding challenges that have impacted our financial results, we’re a much better company than we were a year ago,” 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 volatile over the last two years, growing from quarterly revenue of $87.8 million in Q4 FY2020, to $146.9 million.

Upstart Total Revenue

But this quarter Upstart's revenue was down 51.9% year on year, which might be a disappointment to some shareholders.

Upstart is guiding for revenue to decline next quarter 67.9% year on year to $100 million, a further deceleration on the 154% year-over-year decrease in revenue the company had recorded in the same quarter last year.

In volatile times like these we look for robust businesses with strong pricing power. Unknown to most investors, this company is one of the highest-quality software companies in the world, and their software products have been the default standard in critical industries for decades. The result is an impressive business that is up an incredible 18,152% since the IPO. You can find it on our platform for free.


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 56.4% in Q4.

Upstart Gross Margin (GAAP)

That means that for every $1 in revenue the company had $0.56 left to spend on developing new products, marketing & sales and the general administrative overhead. This would be considered a low gross margin for a SaaS company and it has been going down over the last year, which is probably the opposite direction shareholders would like to see it go.

Key Takeaways from Upstart's Q4 Results

Since it has still been burning cash over the last twelve months it is worth keeping an eye on Upstart’s balance sheet, we note that with a market capitalization of $1.32 billion and more than $422.4 million in cash, the company doesn't have much capacity to continue to prioritise growth over profitability.

We were impressed by how strongly Upstart outperformed analysts’ revenue expectations this quarter. That feature of these results really stood out as a positive. On the other hand, revenue growth was quite weak and the revenue guidance for the next quarter missed analysts' expectations. Overall, this quarter's results were not the best we've seen from Upstart. The company is up 0.89% on the results and currently trades at $16.95 per share.

Upstart may have had a tough quarter, but does that actually create an opportunity to 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.