No. of Recommendations: 3
Powerpoint of the presentation for this earnings report:
https://ir.upstart.com/static-files/8d29df4b-e299-...Lot's of optimistic stuff on the early slides ... and I still believe there is powerful business here, but when it comes to the actual numbers reported for the quarter, it's brutal. Mostly expected, but brutal nonetheless ... as earslookin highlighted on the board previously, there was a truly massive amount of stock-based compensation this past quarter: $74m on the cash flow statement ... which is hard to swallow for a company reporting revenue from fees of $117m and a net reported loss of $129m.
Total revenue reported was only $103m, with $45m in interest income more than offset by $7m in interest expense and a big $52m adjustment in fair value of loans held on the books due to rising interest rates, triggered in part by an impending sale of a bundle of loans which will reflect the worsening interest rate environment during the quarter.
Number of diluted shares is down to 81.9m from 95.5m reported for last year's Q1.
They expect revenue to bounce back up to $135m next Q, as deal volume picks up and they expect a net gain from interest of $5m to go with revenue from fees of $130m.
'Contribution margin' was at a record high 58% and expected to hit 60% next Q, following cost cutting and increasing automation. From the transcript:
"Our contribution margin, a non-GAAP metric, which we define as revenue from fees minus variable costs for borrower acquisition, verification, and servicing as a percentage of revenue from fees came in at 58% in Q1, up from 47% last year and 3 percentage points above our guided expectation for the quarter. "
Part of it increasing was also a result of the company intentionally working the levers to improve loan profitability, as opposed to loan volume, since they were volume constrained anyway by lack of funds to lend.
