• Revenue from Fees: $168 million in Q3, up 28% sequentially.

• Net Revenue: $162 million, $12 million above guidance, up 20% year-on-year.

• Loan Transactions: Approximately 188,000 loans, up 64% from the prior year.

• Average Loan Size: $8,400, up from $7,700 in the prior quarter.

• Contribution Margin: 61% in Q3, up 3 percentage points sequentially.

• Operating Expenses: $207 million in Q3, up 13% sequentially.

• GAAP Net Loss: $7 million, significantly ahead of guidance.

• Adjusted EBITDA: Positive $1 million, ahead of guidance.

• Loans on Balance Sheet: $537 million, down from $686 million in the prior quarter.

• Unrestricted Cash: $445 million, up almost $70 million from the prior quarter.

• Warning! GuruFocus has detected 6 Warning Signs with UPST.

Release Date: November 07, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Upstart Holdings Inc (NASDAQ:UPST) reported a 43% sequential growth in lending volume and a return to positive adjusted EBITDA sooner than expected.

• The company achieved its largest quarter of personal loan origination volume in two years, despite elevated interest rates.

• Upstart's auto loan originations increased 46% sequentially, and the company signed its 11th certified digital retailing OEM agreement, expanding its market opportunity by 14%.

• The home equity business saw originations more than double sequentially, with zero defaults reported on over 600 HELOCs originated.

• Upstart Holdings Inc (NASDAQ:UPST) secured a partnership with Blue Owl, allowing for the purchase of up to $2 billion in loans over 18 months, strengthening its funding supply.

Negative Points

• Net interest income was negative $5 million, although this was an improvement from the previous year.

• Operating expenses increased by 13% sequentially, with fixed expenses up 12% due to catch-up accruals.

• The company reported a GAAP net loss of $7 million, despite improvements in other financial metrics.

• There is a continued challenge in balancing supply and demand as the company regrows its core business.

• The take rate for the quarter was slightly down, influenced by the mix between institutional and LP funding and the scaling of the T-Prime program.

Q & A Highlights

Q: Can you discuss any changes in the use cases for personal loans? A: Dave Girouard, CEO: There hasn't been a radical change. Personal loans remain a versatile tool for consumers, used for various purposes like weddings and debt consolidation.

Q: How is the recovery in your prime customer base progressing? A: Sanjay Datta, CFO: The recovery is stabilizing across the spectrum. Lower-prime consumers were impacted earlier, but now both lower and higher-prime segments are stabilizing, leading to our confident expansion into the prime segment with the T-Prime program.