Upstart Earnings Expectations

It’s no secret, one of the most anticipated and unpredictable earnings reports is coming out tomorrow. How will our love/hate relationship with Upstart evolve this time? Upstart reports after closing on Feb 15th. I’ve found it good practice to document my expectations in advance, so I know how to quickly react to earnings. Price action is often swift, so I want to take advantage of after hours trading. Posting it here in case anyone finds it helpful or has meaningful disagreement and rationale around why my expectations may be off base. I like to track and predict the metrics that the company include in the press release as “important” numbers. For Upstart this is a Revenue Growth, Contribution Profit (CP in millions), Contribution Margin (CM), Transaction Volume (TxVolume), Transaction Dollars (Tx$ in billions), Average Loan Size (AvgSize), and Conversion Rate (CRate). These metrics are somewhat different than our typical metrics for SaaS companies. We don’t have the recurring revenue, so in general all metrics are much more difficult to predict.

After a disappointing quarter, I think we often lose sight that this is still a company that has grown revenue sequentially by a minimum of 22% every quarter excluding the F20 covid quarters, when all financial institutions basically halted personal lending. They are still growing at an alarming rate and we have to expect volatility in numbers. So for this company, probably more than any of my other holdings, it will be important to react quickly. We’ve seen a couple dynamics at play, (1) Transaction volume is rapidly increasing (2) Loan size is rapidly decreasing. I’ll be paying close attention to see if there is any leveling off of the average loan size or if there is a continued rapid drop. Transaction volumes should keep rising quickly given the number of new financial institutions they have partnered with over the past few months. Interestingly their guidance is the strongest of any of my holdings. My current thought is that market was overly exuberant heading into earnings last quarter (inflating the stock price) and it’s a complete 180, with pessimism heading into this quarter (depressing the stock price). So I am very comfortable with my 14% allocation to Upstart headed into this report, as any surprise - think anything over 22% sequential revenue growth - could send us soaring again.

I also want to thank and recommend brittlerock’s recent post on why he’s long UPST:

Upstart Earnings Expectations:

UPST         Rev     YoY       SQoQ    TTM    YoY        CP    CM   TxVolume      Tx$    AvgSize    CRate
F19 Q1      22.24
F19 Q2      28.56                28%   50.8
F19 Q3      47.90                68%   98.7
F19 Q4      61.15                28%  159.8             23.4   38%      78.7                          15%
F20 Q1      68.01    206%        11%  205.6             25.7   38%                                    14%
F20 Q2      13.31    -53%       -80%  190.4   275%       4.3   32%                                     9%
F20 Q3      62.86     31%       372%  205.3   108%      33.8   54%      80.9                          15%
F20 Q4      84.42     38%        34%  228.6    43%      41.4   49%     123.4                          17%
F21 Q1     121.35     78%        44%  281.9    37%      55.8   48%     169.8      1.73   $10,191      22%
F21 Q2     187.30   1308%        54%  455.9   139%      96.7   52%     286.9      2.80   $ 9,761      24%
F21 Q3     228.45    263%        22%  621.5   203%      95.9   46%     362.8      3.13   $ 8,628      23%

**Mid-point Company Guidance:**
F21 Q4 (G)  260.0                14%                           47%

**My Expectations:**
Below        <275               <20%                    <129   <47%    <450k      <3.8B    <$8000    <22%
Meets     275-285             20-24%                 129-136 47-48% 450-500k   3.8-4.0B 8000-8500  22-24%
Exceeds      >285               >24%                    >136   >48%    >500k      >4.0B    >$8500    >24%

*F21 Q3 Conversion Rate excluded fraudulant inquiries. Material impact to metric (23% vs 13.5% including fraudulent requests).

Keeping score, here’s how we’re doing this quarter, IMHO:

DataDog:     Exceeded expectations!
Cloudflare:  Met expectations.
ZoomInfo:    TBD
Upstart:     TBD

I hope you find this helpful.

Daws (Long UPST ~14%)


A couple people have messaged me off board noting that for some quarters I have used the Revenue from fees and not the total Revenue. Thank you for noting that correction, it does also impact the QoQ and YoY percentages. This correction does have me slightly adjusting my expectations to be on the lower end of the range.

I’m reposting the table with the corrected total Revenue numbers:

Upstart Earnings Expectations:

UPST         Rev     YoY       SQoQ    TTM    YoY        CP    CM   TxVolume      Tx$    AvgSize    CRate
F19 Q1      22.24
F19 Q2      28.56                28%   50.8
F19 Q3      47.90                68%   98.7
F19 Q4      62.57                31%  161.3             23.4   38%      78.7                          15%
F20 Q1      63.99    188%         2%  203.0             25.7   38%                                    14%
F20 Q2      17.35    -39%       -73%  191.8   278%       4.3   32%                                     9%
F20 Q3      65.36     36%       277%  209.3   112%      33.8   54%      80.9                          15%
F20 Q4      86.71     39%        33%  233.4    45%      41.4   49%     123.4                          17%
F21 Q1     121.35     90%        40%  290.8    43%      55.8   48%     169.8      1.73   $10,191      22%
F21 Q2     193.95   1018%        60%  467.4   144%      96.7   52%     286.9      2.80   $ 9,761      24%
F21 Q3     228.45    250%        18%  630.5   201%      95.9   46%     362.8      3.13   $ 8,628      23%

**Mid-point Company Guidance:**
F21 Q4 (G)  260.0                14%                           47%

**My Expectations:**
Below        <275               <20%                    <129   <47%    <450k      <3.8B    <$8000    <22%
Meets     275-285             20-24%                 129-136 47-48% 450-500k   3.8-4.0B 8000-8500  22-24%
Exceeds      >285               >24%                    >136   >48%    >500k      >4.0B    >$8500    >24%

*F21 Q3 Conversion Rate excluded fraudulant inquiries. Material impact to metric (23% vs 13.5% including fraudulent requests).



Thanks for your post Daws!

Interesting that your expectations for “Average loan size” is a further decrease QoQ. In the Q3 call when asked about the decreasing trend in the average loan size they mentioned “I do think we’re starting to see the signs in terms of the macro economy of normalization in the economy with respect to savings rates, with respect to credit balances. And so if that is really accurate, what we would expect to see as a stabilization of loan size and then ultimately a gradual return to larger loan sizes as savings rates go down and credit bonds has come back up”. So for me an average loan size of 8,600 will meet my expectations, and but I would really like to see an increase in the average loan size QoQ in Q4. (maybe I’m expecting too much. If total amount of loans come in at 4.2B and total number of loans come in at 480M then the average loan size would be about 8750)

I think another important number to watch is the number of refinanced auto loans. In Q3 they reported “more than 4000 powered auto loans, have been originated in 47 different states” - I would like to see 100% growth QoQ - so im looking for 8000 Refinanced Auto Loans. Also I will be watching to see how well Prodigy has done (last Q they had originated their first loan.

I will also be watching how many Bank Partners UPST has (last Q they added 6 new bank partners - and I would like to see them add more than ‘6’ at least this Q).



Upstart’s use of a fee-based service for their own revenues has to have an impact on just how small a loan can “go” before it is unprofitable for any bank, right? The bank customers themselves will push aside small loans as “unprofitable” and it would seem like Upstart would be comprehensive in their knowledge of the profit in small loans and in complete control and over what size loans get approved at CreditKarma or Upstart’s own website.

I am more concerned about whether there is more discussion of fraudsters targeting Upstart’s approval engine. It seemed to me that they were a little quick in the Q3 release & call to say that they had “handled it,” but now we’re also observing that some of Upstart’s most recent collateralized loan products are showing greater delinquencies in the early months than in prior loan bundles. I expect they can overcome this issue and maybe already have, in future bundled loan products, but I also think there may still be some fallout left to be discovered.


I’m expecting very similar numbers to what you state above for the quarter. I summarised my thoughts here:…

My expectations were $285m Revenue, 453k loans originated, $3.9bn loan value and average loan size in line with Q3.

So as close as anything to your guess and also very close to what JohnWayne said he was expecting.

I also agree with brittlerock’s nice succint bullish summary and have a similar-sided position at just over 8%.

However I think the thing that will make or break this ER and that I will be watching very carefully is their guidance.

Bear has made this point a couple of times but it seems to have gotten lost in some of the noise (for example in the recent discussion about CRWD vs NET) but the absolutely key thing which determines whether a company re-rates to a higher valuation (all other things being equal) is the expectation of revenue growth durability.

Which is why Pubmatic, with a most recent quarter revenue growth of 54%, a NRR of 157% and a 42% EBITDA margin trades at a P/S of just under 8 and Cloudflare, with a most recent revenue growth of 54%, NRR of 125% and Operating margin of only 1% trades at a P/S of just over 50.

And which is also why I sold PUBM (and CRWD for the same reason) and bought NET again very recently. I’m not expecting PUBM (or CRWD’s) revenue to keep on chugging along at such a rapid growth rate, whereas I am expecting NET’s to keep on growing at around 50%.

A quick illustration (simplified to make the point): if you were to own 100% of a company then the FCF will be the key thing you’re worried about. So let’s take two hypothetical companies - Strike and Flare. Both start with $100 revenue and ends with a 30% FCF margin after 5 years. Strike grows revenue at 60%, then 50%, then 40% then 30% then 20% over the 5 years and Flare at 50% for all 5 years. At the end of the 5 year period Strike generates $157 of free cash flow, and Flare $228, so 45% more. Pull this forward a couple more years and add all of the cash together and the difference becomes astronomical.

Bringing me to the relevance of this for UPST. I think Upstart has fallen by as much as it has, because the Q3 deceleration made the market wonder whether its growth is durable. And they concluded that it wasn’t. I hope that they are wrong, and the thing that may change that perception, will be their guidance and the narrative about the future, more than their actual results for Q4.

So. I’m hoping that they guide for a 40%+ revenue growth for next year and that they show credible traction in expanding their TAM beyond personal loans - i.e. real traction in auto, and early indications in products beyond that.

Numerically I’m hoping for $1.15bn guide for next year and a slight increase vs Q4 for Q1 next year.

Basically I’m expecting Dave and his team to convincingly tell a story of many, many more years of hyper-growth to come.

If he pulls that off, I’m pretty sure the stock will take off again.



In addition to all of the great analysis above, I am expecting them to express a cautionary note in their guidance about auto loans.

This is the year that Upstart expected auto loans to be a significant part of their business, and we’ve seen metrics along the way about their quick addition of participating dealers. But the best auto loan service in the world only works when there are cars to buy, and that is a headwind beyond their control at the moment.

While the Covid and chip shortage effects on the auto supply chain had begun to ease, the trucker protests effectively shutting down the Canadian border have now made that problem worse. (…) Some plants have delayed production or reduced capacity. (…)

I expect that to be somewhat of a drag on their guidance. I don’t see higher car prices as much of a drag for them. More people will need bigger loans. But they can’t create cars out of thin air if the dealers can’t get them. What I hope to hear is evidence of the agility of management in dealing with an unexpected curve ball like that. Do they shift more resources to other products in the pipeline as the supply chain recovers? Are they more aggressive with S&M in the personal loan part of the business?

I was impressed with their handling of the coordinated fraud attack last quarter. Since the supply chain for autos has been a problem for non-trucker reasons for some time, I’m hoping to hear that they had already developed a Plan B in case that did not resolve as expected.

I posted earlier that I expect Upstart to move in and out of hyper-growth. I believe they are poised to be a leader if not THE leader in the future of lending. I don’t have the stomach for jumping in and out, quarter to quarter, because of macro issues beyond their control or small fluctuations in one area or another. If they lost a person in the C Suite for some reason or if the team proves incapable of scaling to their bigger vision, that would concern me. If their balance sheet turned to disaster, that would concern me. If they announced that their model had proven to be fatally flawed and they had to start over from scratch, that would concern me. Otherwise, I can ride the tide.

What I want to see is honest accounting for the quarter and an indication that what they guided for last quarter is what they deliver this afternoon. Then I’ll know that I can trust their guidance going forward and make decisions accordingly.

UPST 19%


I’m hoping that they guide for a 40%+ revenue growth for next year…

There’s the problem as I see it. Guiding for 40% growth and expecting 50% would be very respectable for an ordinary company, but this company will be coming off a year in which they grew at over 200% or 250%, so psychologically that would be quite a comedown. And put on top of that that they are not SaaS, it’s a very complicated picture, and all the rest, why would people hold it when they could buy Datadog, for example, growing at 80%, and know that they will grow somewhere between 90% and 70% next year.

On the other hand, if they could guide to 60% growth, with the expectation of coming in at 75%, that might be different.



Upstart’s use of a fee-based service for their own revenues has to have an impact on just how small a loan can “go” before it is unprofitable for any bank, right?

I think the answer to your question (even if asked rhetorically), is wrong.

Why do I say that? Upstart has made a point of entering the “micro-loan” business. If it’s not immediately obvious (it wasn’t for me, anyway) this means that they have set their sights on disrupting the predatory payday lender business.

They are not doing this just because they state on their website "Our mission is to enable effortless credit based on true risk. They are doing this because it’s profitable for Upstart and their bank partners.

You are correct insofar that this is a different market than unsecured personal loans. Micro loans have their own unique set of characteristics, typically loans that are short term and relatively small. I don’t know exactly how that is quantified, but I would guess that term is measured in days (maybe weeks) and loan size is measured in $100s, rather than $1,000s.

Based on absolutely no knowledge of this type of lending (and generally pretty ignorant of most forms of lending) I speculate that loans of this nature do not lend themselves to bundling and resale into the capital markets. It’s not at all clear to me how these loans are handled by Upstart’s partner banks, possibly they are just carried on the books. Maybe they are used by the banks as a way of luring unbanked folks into becoming bank customers with demand deposit and credit card accounts - I really don’t know. But I do know that Upstart is definitely pursuing this market and I’m confident that it’s not intended to be a loss leader.


An article that supports your response to me, brittlerock. I was unaware of this move, I thought they were still operating with the “$1000 minimum loan” frame of mind.


“I am expecting them to express a cautionary note in their guidance about auto loans.”

Everything i have read and viewed from UPST leadership from the outset of discussing auto loans, has been consistent that auto revenue would not be significant until 2H 2022. I have seen just about everything that has come from management since the outset and have not been surprised by any material results to date.

My hope is that this group not make the same mistake as last time and gratuitously inflate expectations. Any significant Q1 auto revenue guidance would be a positive surprise to most analysts, IMO.

Agree with Saul, i.e UPST should guide to at least 60% growth in 2022 to please the market. My view is $840M in revenue for 2021 and $1.4B for 2022 would be a very pleasing report. 40% revenue growth for 2022 would not be sufficient, IMO.

Also, would like to see $2 EPS for 2021 and $2.50 expected for 2022, depending on gear up costs for auto loans.

More: expect partner banks up to 38+ and Credit Karma associated revenue down to < 40%.

G/L to all


“. . . why would people hold it when they could buy Datadog, for example, growing at 80%, and know that they will grow somewhere between 90% and 70% next year.”

Why indeed? Well, for one, not every investor makes their investment decisions strictly based on the fact based objective reported numbers. I noticed in your own monthly portfolio summary a small position in Upstart (~3.5%). I also noticed an ~8.5% position in Cloudflare. I am not even suggesting that you justify those positions in light of your assertion regarding Datadog. It’s simply an observation that the company with the highest (or there abouts) durable growth doesn’t get 100% of the investment dollars for a wide variety of reasons.

I previously posted some of the primary reasons I have maintained an 8.5% position in Upstart. In addition I posted my most likely course of action should Upstart’s report disappoint. And, I failed to mention how important their guidance will be with respect to maintaining or reducing my position which both you and WSM have pointed out. For sure 40% guide would be disappointing, but I’m also sure that I won’t need to see 60% guide to keep me in the game.

I didn’t come right out and say it, but to be honest I see Upstart as a truly unique long term opportunity. Over time I believe that this company will be akin to an Amazon with an enormous TAM and an unassailable moat. I don’t think they will be the sole company in the AI/ML informed lending business, but I do think they will be the behemoth.

I recognize that this is a radical departure from your methodology. It is an investment thesis which is hard to defend strictly based on the numbers. But as I gaze into my rather cloudy crystal ball, I just can’t see why this won’t be so. Performance is important. I already acknowledged that my confidence is not without reservations (8.5% UPST, 20% DDOG). And if UPST fails to meet my minimum expectations (including guidance of 50+%), I’ll reduce my position. But I will not exit this investment unless they report 3 or 4 consecutive disappointing quarters which I think highly unlikely. I anticipate cautiously adding to my position, but time will tell.


Well we got the knock out earnings I wanted! I urge everyone to go and listen to the earnings call. They’ve shown that Q3 was a wobble and the growth is back on track.

It was littered with positivity eg CEO Girouard saying Upstart reminds him of the early days of Google, lots of concrete steer on Upstart becoming a multi product organisation and importantly the breakout of the Auto loans business: “In fact, one of the points we made is that our auto funnel today looks much like what the personal loan funnel look like in 2019”.

We were given 65% guidance for 2022 but I think they can deliver close to 1.7b in revenue in 2022 which would be close to 100% YOY.

I’m really happy for all the holders, well done!