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Earnings Results: Upstart stock melts down after earnings as ‘challenging’ climate leads to downbeat forecast


Upstart Holdings Inc. has seen its value plummet this year, and it appears set for further declines after delivering a cautious forecast Tuesday afternoon in the wake of continued macroeconomic pressures.

The company’s results for the most recent quarter also disappointed as Upstart

contends with issues around loan funding as well as weakening consumer demands for its loans.

“As a result of our model’s adjustments to these changing macroeconomic conditions, our loans today are being priced at APRs that are significantly higher than those from the beginning of the year, which is one of the principal driving factors behind the overall volume contraction our business is currently experiencing,” Chief Financial Officer Sanjay Datta said on Tuesday’s earnings call.

He maintained that this dynamic is “working as intended.”

Shares of Upstart were down 25% in after-hours trading Tuesday after management gave a forecast for $125 million to $145 million in fourth-quarter revenue, below the $185.3 million FactSet consensus.

Upstart executives also emphasized sustained challenges involving loan funding as banks and others tend to become skittish during rocky economic conditions.

Though Upstart saw “a brief period of late-summer optimism” in the market for asset-backed securities, Datta said on the earnings call that the market has “since receded, and loan funding in general remains challenging,” according to a transcript provided by Sentieo.

The company is “currently pricing our loans expecting a further degradation in the environment and in our macro index,” Datta added.

For the latest quarter, Upstart took a third-quarter net loss of $56.2 million, or 69 cents a share. It generated net income of $27.8 million, or 30 cents a share, in the year-prior quarter.

After adjusting for stock-based compensation and certain other expenses, Upstart lost 24 cents a share, whereas it earned 60 cents a share a year before. Analysts tracked by FactSet were projecting an 8-cent adjusted loss per share.

The company disclosed in early November that it eliminated the positions of 140 hourly workers who processed loan applications.

“This was disappointing for sure, but necessary to keep our operational capacity in line with the current environment,” Chief Executive Dave Girouard said on the earnings call.

Upstart’s revenue fell to $157 million from $229 million, while analysts had been anticipating $169 million.

Upstart shares have struggled this year, falling nearly 90% over the course of 2022 as executives have discussed challenges in obtaining loan funding from bank partners. The company increasingly started to do more lending off its balance sheet in what it deemed a more transitional move, since executives don’t intend for the company to become a full-fledged bank.

Loans on the balance sheet increased by more than $70 million in the latest quarter to about $700 million.

“Whether we draw it up or draw it down over the next quarter or so will continue to be an operating decision we sort of discuss and take, but I think it will be within the parameters of what you saw in this last quarter,” Datta said on the earnings call.

The company bought back 931,000 shares at about $25 million in total during the quarter.

“It’s a challenging time, particularly for the mission that we’re on and the business that we’ve chosen,” Giriouard said. “But we are confident in it.”

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