What happened
Shares of Upstart Holdings (UPST 2.76%) were down 30% as of 11 a.m. EDT Wednesday, according to data provided by S&P Global Market Intelligence, after the AI lending platform followed better-than-expected second-quarter results with discouraging forward guidance.
On the former, Upstart's quarterly revenue declined a whopping 40% year over year to $135.8 million, translating to a generally accepted accounting principles (GAAP) net loss of $28.2 million, or $0.34 per share. Adjusted for items like stock-based compensation, non-GAAP net income arrived at $5.4 million, or $0.06 per share. Analysts, on average, were looking for an adjusted net loss of $0.07 per share on slightly lower revenue of $135.3 million.
So what
Digging further into Upstart's results, its lending partners originated 109,447 loans during the quarter, totaling $1.2 billion -- down 64% year over year. Conversion on rate requests was 9%, down from 13% in the same year-ago period.
Upstart CEO Dave Girouard focused on the company's earnings beat, noting efficiency and operating leverage initiatives helped them "achieve record-high contribution margin and positive cash flow in Q2," adding that, "While the economic environment continues to be challenging, Upstart has the opportunity to grow quickly and profitably when we return to a normalized economy."
Now what
In the meantime, for the (current) third quarter of 2023, Upstart issued guidance for revenue of $140 million and an adjusted net loss of $2 million (or a loss of between $0.02 and $0.03 per share based on its assumption for a diluted weighted-average share count of 84.5 million shares). By contrast, most analysts were modeling Q3 adjusted net income of $0.02 per share on significantly higher revenue of $155 million.
All things considered, it appears Upstart is indeed positioned well to benefit when current macro headwinds subside. But near-term-oriented investors absolutely hate being told to hurry up and wait for that to happen. With shares having quadrupled so far in 2023 leading up to this report, it's no surprise to see Upstart stock plunging in response today.
