3 Key Takeaways From Upstart's Latest Report
Key PointsUpstart delivered a strong quarter in a difficult environment.
1. Upstart's Q3 earnings report showed a 34% jump in revenue to $371 million, surpassing estimates, and earning per share increased from $0.23 to $0.33. Originations growth was flat but the company raised its guidance for the full year revenue from fees, while lowering it on adjusted EBITDA due to macroeconomic pressure.
2. Upstart's secured loan business in home and auto loans, which represents a much larger market in the trillions of dollars in aggregate, showed profitability for the first time with a contribution margin of 17%. Originations in this segment nearly tripled to $587 million. CEO Paul Gu stated that they have focused on profitability for secured products and are now turning attention to growth.
3. Upstart's contribution profit, which strips out noise in financial reports, grew 48% to $218 million, driven by improvements in technology and marketing. This metric is the company's north star, and the CEO acknowledged the macro headwinds but expressed confidence in the long-term business due to durable technology and marketing wins. The stock now trades at a price-to-sales multiple of 1.5, the cheapest it has been since the end of 2022, indicating potential long-term upside if macro environment improves.
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