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Upstart Holdings (UPST) Q2 Earnings Beat, Revenues Rise Y/Y

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Upstart Holdings (UPST - Free Report) delivered diluted adjusted earnings of 1 cent per share in second-quarter 2022, which compared favorably with the Zacks Consensus Estimate of a loss of 5 cents per share. In the year-ago period, the company reported diluted adjusted earnings of 62 cents.

Revenues of $228 million were up 18% on a year-over-year basis, surpassing the consensus mark by 0.07%. Revenues were positively impacted by a solid surge in revenue from fees.

Quarter in Details

In the second quarter, revenue from fees was $258 million (113% of total revenues) and was up 38% year over year. However, revenue from fees was down 18% sequentially due to a difficult macroeconomic environment, which led to funding constraints in the company’s marketplace.

The company reported a loss of $30.183 million in the net interest income segment compared with revenues of $6.65 million in the year-ago quarter. UPST entered into multiple loan sale transactions, some of which incurred a negative fair value impact as the valuation marks of certain loans continued to be negatively impacted by the rising interest rate environment.

Upstart Holdings, Inc. Price, Consensus and EPS Surprise

Upstart Holdings, Inc. Price, Consensus and EPS Surprise

Upstart Holdings, Inc. price-consensus-eps-surprise-chart | Upstart Holdings, Inc. Quote

In the second quarter, volume of loan transactions across the company’s platform was approximately 321,000 loans, up 12% year over year and representing over 233,000 new borrowers.

In the second quarter, bank partners originated 321,138 loans, totaling $3.3 billion across the company’s platform, up 12% year over year. Conversion on rate requests was 13% in the second quarter of 2022, down from 24% in the year-ago quarter.

Average loan size increased over the last quarter by 5%  due to auto loans representing a higher proportion of the mix.

Total operating expenses were $260 million, which increased 64.9% year over year due to growth in engineering and product development expenses.

Second-quarter Adjusted EBITDA of $5.5 million contracted from the year-ago quarter’s figure of $59.49 million. Adjusted EBITDA margin in the second quarter was 2% compared with the year-ago quarter’s margin of 31%.

Balance Sheet & Cash Flow

 As of Jun 30, 2022, Upstart reported $790 million in unrestricted cash, compared with $758 million as of Mar 31, 2022. The balance of loans at the end of Jun 30, 2022, was $624 million compared with $597.98 as of Mar 31, 2022.

Cash outflow from operations was $320 million in the second quarter compared with first-quarter 2022’s cash outflow of $266.79 million.

Guidance

For the third quarter of 2022, Upstart expects revenue of approximately $170 million and adjusted EBITDA of $0.

The company expects adjusted net loss of $9 million for the third quarter.

Zacks Rank & Stocks to Consider

Upstart currently has a Zacks Rank #4 (Sell).

Upstart’s shares have tumbled 80.7% against the Zacks Computer and Technology sector’s decline of 22.6% in the year-to-date period.

Here are some better-ranked stocks worth considering in the broader sector.

Intuit (INTU - Free Report) carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Intuit’s shares have slumped 27.5% in the year-to-date period compared with the Zacks Computer - Software industry’s decline of 18.6%. INTU is scheduled to report second-quarter 2022 results on Aug 23.

Keysight Technologies (KEYS - Free Report) also carries a Zacks Rank #2.

KEY’s shares have slipped 19.5% in the year-to-date period compared with the Zacks Electronics - Measuring Instruments industry’s decline of 21.2%. KEYS is scheduled to report second-quarter 2022 results on Aug 17.

Arco Platform also carries a Zacks Rank #2.

ARCE’s shares have slumped 26.2% in the year-to-date period compared with the Zacks Internet - Software industry’s decline of 45.2%. ARCE is scheduled to report second-quarter 2022 results on Aug 18.


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