Here's our initial take on Upstart's (UPST +13.04%) fourth-quarter results.
Key Metrics
| Metric | Q4 FY23 | Q4 FY24 | Change | vs. Expectations |
|---|---|---|---|---|
| Revenue | $140 million | $219 million | +56% | Beat |
| GAAP earnings per share (loss) | ($0.50) | ($0.03) | n/a | Beat |
| Adjusted EBITDA | $0.6 million | $38.8 million | +6,164% | n/a |
| Unit loan transaction volume | 129,664 | 245,663 | +90% | n/a |
Demand for loans is bouncing back, and the Upstart profit flywheel is ramping up
Upstart's business has whipsawed around the past few years as strong initial demand in a low-interest rate environment led to quick growth and then interest rates surging to multi-decade highs saw lenders pull back from the unsecured personal loans that make up the bulk of Upstart's business.
There are some signs that the lending freeze is beginning to thaw and that Upstart is positioned to be a big winner from lenders' increasing trust in its risk assessment platform.
Revenue rocketed up 56% year over year in the fourth quarter on 68% more loan transactions, including solid growth both in small-dollar loans (between $250 and $2,500) and loans that are originated by Upstart's bank and credit union partners. Auto loan originations increased 61% sequentially, while HELOCs (home equity loans) increased 59%. There's also still significant room for growth in both categories, with only $70 million in originations in the quarter, against the backdrop of a $1.4 trillion home lending market, and $677 billion auto loan market.
It's not just exciting top-line growth, either. While still reporting a GAAP loss, Upstart's financial trends are extremely favorable. Its $2.8 million net loss in Q4 compares to a $42.4 million loss last year, and its operating loss shrank from $48 million to $4.8 million year over year. For the full year, Upstart shrank its operating loss by 33% and almost cut its GAAP loss in half.
NASDAQ: UPST
Key Data Points
Immediate Market Reaction
Upstart shares are rocketing higher in after-hours trading. At this writing, shares are trading up more than 25%, on both the results that smashed expectations, and full-year 2025 guidance that is definitively positive and further expectations-smashing.
What to Watch
Upstart gave us guidance for 2025 that says Q4 was not an outlier, but our most clear indication that lenders believe its credit risk assessment tools and platform deliver high-quality loans they can trust owning. Upstart added 28 banks and credit union partners in 2024, and it now has more than 100, as well as numerous existing investors who made $1.3 billion in new commitments to purchase and fund loans on the platform.
Upstart is calling for accelerating growth in 2025, with first-quarter revenue expected to grow 56%, and full-year revenue to reach $1 billion, up 57% from last year. It's also expecting to be "at least" break even on GAAP profitability, and to generate $180 million in adjusted EBITDA.
Lending will always be cyclical, with ebbs and flows based on interest rates and the broader economy, but we are beginning to see more of Upstart's potential as lenders put their money at risk on its platform.
