No. of Recommendations: 5
Upstart provided guidance for Q1.2023 in their press release of 02/14/2023. Their numbers
only makes sense to me if we're in for some nasty surprises in Q1.
Is there a huge write-off coming in Q1?For Q1 they've guided for $100M in revenue and a GAAP net loss of -$145M. If that happens,
then expenses by definition would have to total $245M in Q1. However, some of that expense
in Q1 can be accounted for by one-time charges related to planned layoffs. In a 01/31/2023
press release, Upstart stated they expect to incur $15M in cash restructuring charges offset
by $3M from a one-time, non-cash reversal of stock-base compensation. If we deduct the one-time
restructuring charges and the SBC reversal, we would expect expenses to increase by $31M, or
+15% in Q1, based on their guidance for revenue and GAAP net loss.
Here's what that looks like in tabular form:
(in thousands)
Actual Guidance
Q4.2002 Q1.2023 Diff
------- ------- -------
Total Revenue 146,913 100,000 -46,913 -32%
Expenses 202,176 233,000 +30,824 +15%
Restructuring Charges 0 15,000
SBC Reversal 0 -3,000
-------- --------
GAAP Net Loss -55,263 -145,000
Does it make sense that revenue is expected to decline 32% but expenses are expected to
increase by 15%? Consider that expenses have declined sequentially in lockstep with revenue
every quarter since the beginning of 2022.
Based on
-------------- Actual ------------ Guidance
Q1.2022 Q2.2022 Q3.2022 Q4.2022 Q1.2023
------- ------- ------- ------- -------
Expenses 277,444 258,033 213,456 202,176 233,000
-7% -17% -5% +15%
What all this tells me is we can probably expect a write-off of $30M or more in Q1.
What's happening with stock-based compensation?!They've guided for an Adjusted Net Loss of -70M in Q1. This is a non-GAAP number and
the calculation is straightforward: Adjusted Net Income (Loss) = GAAP Net Income (Loss)
minus Stock-Based Compensation and associated payroll taxes and acquisition-related
costs. Because associated payroll taxes and acquisition-related costs are minor or nil,
the equation really comes down to Adjusted Net Income (Loss) = GAAP Net Income (Loss)
minus Stock-Based Compensation. Let's again compare actuals from Q4 to expected results
in Q1 based on guidance.
(in thousands)
Based on
Actual Guidance
Q4.2002 Q1.2023
------- -------
GAAP Net Income (Loss) -55,263 -145,000
Stock-Based Compensation 34,316 75,000
Adjusted Net Income (Loss) -20,947 -70,000
Based on their guidance for GAAP Net Loss and Adjusted Net Loss, we can expect stock-based
compensation to be approximately 75M in Q1. That's an astonishing number! For perspective,
it's 3/4 of revenue. Tech companies are considered outliers when their stock-based comp
approaches 20% of revenue. It's more than twice as much as Q4 and about 60% of all of 2022.
Ears <long UPST>
