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Upstart Holdings Inc. Faces Stock Decline After Lower Quarterly Results and Outlook

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4.5

Andrew R. Michaud

• November 07, 2023

Upstart Holdings Inc., a company that utilizes artificial intelligence in lending decisions, experienced a sharp decline in its shares during Tuesday's extended session. The company's quarterly results and outlook fell below expectations, leading to a 13% decrease in stock value.

Disappointing Financial Performance

Upstart reported a net loss of $40.3 million, equivalent to 48 cents per share, in comparison to a loss of $56.2 million, or 69 cents per share, during the same period the previous year. Adjusted earnings showed a loss of 5 cents per share, while analysts had predicted a loss of only 2 cents per share.

Revenue also saw a decline, dropping from $157 million to $135 million. According to the FactSet consensus, analysts had anticipated revenue to reach $140 million. The company's fee revenue amounted to $146 million, slightly below the projected $150 million. Furthermore, total interest income and fair value adjustments negatively impacted overall revenue by approximately $12 million.

Strategic Approach in Challenging Times

Recognizing the current circumstances, Chief Executive Dave Girouard emphasized the company's conservative operating mode. He stated, "Of course we'd prefer to be growing quickly, but this is a time when it's wise to be operating in a conservative mode." Girouard highlighted positive aspects of the company's performance, including being Ebitda positive for two consecutive quarters and near-record high contribution margins. Upstart continues to invest in its teams and core artificial intelligence.

Improved Ebitda and Future Outlook

In the third quarter, Upstart achieved $2.3 million in adjusted Ebitda compared to a loss of $14.4 million in the same period last year. However, this fell short of the FactSet consensus of $4.6 million. Looking ahead, the company expects approximately $135 million in revenue for the fourth quarter, whereas analysts were forecasting $158 million. Upstart aims to break even on an adjusted Ebitda basis, contrary to analysts' projections of $10.7 million.

While Upstart Holdings Inc. faces challenges with its latest financial results, the company remains committed to its strategic vision and continued investment in technological advancements.