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01/11 03:20
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call shows strong financial performance with a 67% revenue increase and exceeded net interest income outlook. The Walmart partnership is a positive catalyst, and management's optimism about conversion rates and credit demand adds to the positive sentiment. The decline in contribution margin and unrestricted cash are concerns but are offset by the positive impact of strategic partnerships and robust demand trends. The market cap indicates a potential positive reaction, likely in the range of 2% to 8% over the next two weeks.
Total Revenue $213 million, up 67% year-on-year due to higher origination volumes and net interest income.
Revenue from Fees $185 million, up 34% year-on-year, in line with guidance but exceeded expectations in the Super Prime borrower segment.
Net Interest Income $28 million, exceeding outlook by $13 million, driven by higher net interest spreads and unrealized fair value gains.
Volume of Loan Transactions 241,000, up 102% year-on-year but down 2% sequentially, representing 163,000 new borrowers.
Average Loan Size $8,865, up from $8,580 in the prior quarter, due to an increase in loans made to Super Prime borrowers.
Contribution Margin 55%, down 6 percentage points from the prior quarter and 2 points below guidance, due to lower take rates in the primer borrower segments.
GAAP Operating Expenses $218 million, down 3% sequentially from Q4, with variable expenses up 7% sequentially.
GAAP Net Loss $2 million, better than expected due to outperformance on net interest income.
Adjusted EBITDA $43 million, reflecting operating leverage.
Unrestricted Cash $600 million, down from $788 million in the prior quarter, primarily due to R&D loan funding and corporate bonus payouts.
Loans Held on Balance Sheet $726 million, down 21% year-on-year but up sequentially from $703 million in Q4.
Core Personal Loan Product: Originations were flat sequentially and up 83% year-over-year. 92% of loans are fully automated.
Auto Lending: Originations grew 42% sequentially and almost 5X year-over-year. First instant approval of an auto refinance loan completed in 9 minutes.
HELOC Product: Launched in California, covering 37 states and 75% of U.S. population. Originations grew 52% quarter-on-quarter and more than 6X year-on-year.
Small-Dollar Product: Originations grew 7% sequentially and almost tripled year-on-year, accounting for 16% of new borrowers.
Market Expansion: Expanded HELOC product to California, increasing coverage to 37 states and 75% of U.S. population.
Funding Supply: Signed first committed capital arrangement with Fortress Investment Group, adding 15 new lending partners.
Operational Efficiency: Automated 90% of hardship applications, improving efficiency.
Cost Reduction: Reduced acquisition costs for auto refinance product by 57% quarter-over-quarter.
AI Leadership: Introduced embeddings to core personal loan underwriting model, enhancing predictive capabilities.
Profitability Goals: On track to return to GAAP net income profitability in the second half of 2025.
Regulatory Issues: Potential disruptions from recent government trade policy could impact operations.
Economic Factors: Risks related to reinflation and persistent tariffs affecting consumer affordability and credit.
Labor Market Risks: Structural shortage of labor supply may impact economic stability.
Credit Performance: Uncertainty in the macroenvironment could lead to both upside and downside scenarios for credit performance.
Consumer Financial Health: High-default environment with low savings rates may negatively influence credit.
AI Leadership: 10X our leadership in AI, with significant advancements in process and substance, particularly through the introduction of embeddings in our underwriting model.
Funding Supply Preparation: Prepare funding supply for rapid growth, with over 50% of loan funding in committed partnership agreements and new partnerships expected to expand value.
Return to GAAP Profitability: Aim to return to GAAP net income profitability in the second half of 2025.
Best Rates Initiative: Strive for the best rates against major market competitors for each borrower segment by the end of 2025.
Q2 Revenue Guidance: Expect total revenues of approximately $225 million, with revenue from fees of approximately $210 million.
Full Year 2025 Revenue Guidance: Expect total revenues of approximately $1.01 billion, with revenue from fees of approximately $920 million.
Q2 Adjusted EBITDA Guidance: Expect adjusted EBITDA of approximately $37 million.
Full Year 2025 Adjusted EBITDA Margin: Expect adjusted EBITDA margin of approximately 19%.
Q2 Net Income Guidance: Expect net income of approximately negative $10 million.
Full Year 2025 GAAP Net Income Guidance: Expect GAAP net income to be positive in the second half of the year.
Share Repurchase Program: In Q1, Upstart put in place a universal shelf and a $500 million 'At the Market' program, which provides additional balance sheet flexibility.
The earnings call summary and Q&A indicate strong financial metrics and optimistic guidance. The company is focusing on AI enhancements and new product growth, which are expected to drive market share leadership. Despite some model conservatism impacting conversion rates, credit performance remains strong. The positive sentiment is bolstered by a robust shareholder return plan and strategic partnerships, suggesting a likely positive stock price movement over the next two weeks.
The earnings call highlights several positive factors: strong financial metrics, strategic partnerships, and optimistic guidance for future profitability. The company is focusing on AI leadership and funding supply preparation, which are expected to drive growth. Despite a negative net income guidance for Q2, the optimistic full-year guidance for 2025 suggests a positive long-term outlook. The Q&A session revealed management's strategic approach to competition and funding, which should reassure investors. Given the company's market cap and strategic initiatives, a positive stock price movement of 2% to 8% over the next two weeks is anticipated.
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