Upstart Beats on Earnings, but a Forecast Miss Sends the Stock Sliding

The AI-oriented lending company is hoping to see a return to sequential growth in the second half of 2024

Upstart Holdings reported first-quarter earnings on Tuesday afternoon.

Upstart Holdings Inc. beat expectations with its latest earnings, but the company’s forecast for the current quarter came up short.

Upstart, which uses artificial intelligence to inform lending decisions, reported a first-quarter net loss of $64.6 million, or 74 cents a share, compared with $129.3 million, or $1.58 a share, in the year-earlier period.

On an adjusted basis, Upstart posted a loss of 31 cents on a per-share basis, while analysts were modeling a 37-cent loss.

Upstart shares were halted trading ahead of the report’s release, and they were falling about 11% once the halt was lifted.

The company lost $20.3 million on the basis of earnings before interest, taxes, depreciation and amortization (Ebitda), while the FactSet analysts’ consensus called for a $26 million loss.

Revenue rose to $128 million, from $103 million in the year-prior quarter, and beat the consensus view, which was for $125 million.

Net revenue from fees was $138 million, up from $117 million a year earlier, but negative impacts from items like fair-value adjustments contributed to the lower total-revenue figure. Analysts were modeling $133 million in revenue from fees.

Looking to the second quarter, Upstart is calling for $125 million in revenue as well as a $25 million loss on the basis of adjusted Ebitda. Analysts were looking for $145 million in revenue and a $5.9 million adjusted Ebitda loss.

“Although the quarter was generally consistent on [revenues] and contribution profit, guidance was again weaker than expected as the company appears to slowly work through recurring loan-performance issues and investor demand constraints,” Jefferies analyst John Hecht wrote.

Chief Executive Dave Girouard said in a release that the company is looking for “a return to sequential growth in the second half of the year and positive Ebitda by the end of the year, even in the current credit environment.”

That outlook was more in line with what investors were expecting, according to Hecht, but “the key to this will be in extending/renewing flow agreements,” he said.