Its Show Time for UPST!
I am one of those people who remains invested in the company; although, rather than chest high I am more like mid-calf. To be fair I am not sure it makes much difference and the reason is simply that UPST is one of those companies whose stock could go up 10-15 times from here or just nose over and plummet to zilch.
Lots of folks got out of UPST when Saul did and odds suggest that getting out of a stock when Saul does is moderately the better play. The reason Saul mentioned that he abandoned ship on UPST was due to not understanding it; which, to be honest, puzzles me a bit. Now - I am not gonna attempt to cover-up my lemming like behavior and/or claim I didn’t reduce my own UPST stake due to Saul’s revelation; however, it did occur to me that everyone seemed to understand the company just fine when it was kicking butt and taking names. You see the dichotomy here - the beating heart of the investing dilemma here? That said, the good news for me, which remains to be seen, is that I never actually understood all the intricate working parts of the company anyway. And since I couldn’t much have had less understanding of UPST than I already did it washed over me that in that particular regard I was flat out even keel - dead even, so to speak.
UPST is something of a different animal though, isn’t it: how many companies come along that really have the opportunity to change and entire industry? And since the company is still biting off pieces of the FinTech pie in big chunks I decided I would just sit a spell. So here I am.
The last time UPST reported its numbers they were once again eye popping and the company appeared to be making steady progress on their storming of the established financial castles. As a reminder, here is the Press Release to that report:
One Article Headline Blared:
“Upstart stock soars after Q4 earnings beat, strong guidance, stock buyback”.
Now thats a happy Trifecta if I ever saw one!
Revenue. Total revenue was $305 million, an increase of 252% from the fourth quarter of 2020. Total fee revenue was $287 million, an increase of 240% year-over-year.
Transaction Volume and Conversion Rate. Bank partners originated 495,205 loans, totaling $4.1 billion, across our platform in the fourth quarter, up 301% from the same quarter of the prior year. Conversion on rate requests was 24% in the fourth quarter of 2021, up from 17% in the same quarter of the prior year.
Contribution Profit. Contribution profit was $149.5 million, up 261% from in the fourth quarter of 2020, with a contribution margin of 52% compared to a 49% contribution margin in the same quarter of the prior year.
Here was their Guidance for Q1 2022:
For the first quarter of 2022, Upstart expects:
Revenue of $295 to $305 million
Contribution Margin of approximately 46%
Net Income of $18 to $22 million
Adjusted Net Income of $50 to $52 million
Adjusted EBITDA of $56 to $58 million
Basic Weighted-Average Share Count of approximately 84.3 million shares
Diluted Weighted-Average Share Count of approximately 95.9 million shares
Here are a few quotes from the Conference Call:
As the rare public technology company with triple-digit growth and profits, we’re confident that an economy and market in transition plays to our strength. I’d like to start by reflecting on 2021, which was a remarkable year for Upstart. We grew revenue from $233 million in 2020 to $849 million in 2021, while generating net income of $137 million. And with the fourth quarter surge, we’re now at more than $1 billion in revenue on an annualized basis. 2021 will be remembered as the year AI lending came to the forefront, kicking off the most impactful transformation of credit in decades.
To gain some perspective on what Upstart achieved in 2021, we looked for another company in the public markets with our combination of scale, growth and profits, but we were unable to find one.
Our profits are neither marginal nor ephemeral. We generated more cash in 2021 than we burned in our entire eight-plus years as a private company.
Ok so now that my memory is refreshed what should we savvy High Growth investors be focused on in today’s report? Well thats easy courtesy of a SA UPST Earnings Preview:
But thats just the start and there are specific things we ought to be eyeballing:
You can read all about it in this SA article titled: Panic Time:
My personal view of the moment is simply to let it ride: as the company CEO stated this is a multi-decade mission and one report - one way or the other, probably isn’t going to make that much of a difference in the long run - that is, unless they really bonehead it up. But even it the report is wonderfully fabulous it represents only the first half of the game - while the second half consists of the Guidance. And in this take no prisoners market unless things are overwhelmingly precise and perfect odds are we are getting a haircut.
In about an hour or so we’ll see I suppose. Ought to be a good game and we have comfy 50 Yard Line chair back seats.
All the Best,