Upstart Holdings (UPST) Q3 Earnings Beat, Revenues Up Y/Y

Upstart Holdings (UPST Free Report) reported third-quarter 2021 non-GAAP earnings of 60 cents per share, which surpassed the Zacks Consensus Estimate by 93.5%. The reported figure significantly increased from earnings of 16 cents in the year-ago quarter. Yet, the bottom line declined 3.2% sequentially.

Revenues of $228 million significantly increased from $65 million reported in the year-ago quarter and beat the consensus mark by 7%. The top line also increased 17.8% from the second quarter.

The top-line growth was driven by continual improvement of artificial intelligence-based models.

Quarter Details

Revenues from fees (accounting for 92.1% of total revenues) were $210.4 million, much higher than $62.9 million reported in the year-ago quarter.

Other revenues (7.9% of total revenues) skyrocketed from $2.5 million a year ago to $18 million.

For the reported quarter, bank partners originated 362,780 loans, totaling $3.13 billion across Upstart’s platform, up 244% year over year.

Conversion on rate requests was 23% for the third quarter, which rose 15% from the prior-year period.

Operating Results

Sales & marketing expenses were $93.3 million for the third quarter, up 293.4% year over year.

Customer operations surged 273.7% from the year-ago quarter to $35 million.

Engineering & product development expenses rose 272.1% year over year to $37.1 million for the reported quarter.

General, administrative & other expenses soared 241% year over year to $34.4 million.

As a percentage of revenues, sales & marketing, customer operations, and engineering & product development expenses expanded 460 basis points (bps), 100 bps, and 100 bps year over year, respectively. Yet, general, administrative & other expenses — as a percentage of revenues — contracted 40 bps from the year-ago period.

Consequently, contribution margin was 46%, which contracted 800 bps from the year-ago quarter.

Adjusted EBITDA margin was 26% for the reported quarter, expanding 200 bps year over year.

Operating income was $28.6 million for the third quarter compared with $12.2 million in the second quarter.

Balance Sheet

As of Sep 30, 2021, total cash including restricted cash was $1.2 billion compared with $617.5 million on Jun 30, 2021.

Guidance

For the fourth quarter of 2021, Upstart expects revenues between $255 million and $265 million. The Zacks Consensus Estimate for the same is projected at $231.4 million.

Contribution margin is expected to be 47%. Adjusted EBITDA is expected between $51 million and $53 million.

Zacks Rank & Stocks to Consider

Currently, Upstart has a Zacks Rank #4 (Sell).

Some better-ranked stocks in the broader technology sector include Advanced Micro Devices (AMD Free Report) , ASE Technology (ASX Free Report) and Mimecast Limited (MIME Free Report) , each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Long-term earnings growth rates for Advanced Micro Devices, Mimecast, and ASE are currently projected at 46.2%, 35%, and 26.9%, respectively.

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