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Earnings Results: Upstart stock soars 40% after upbeat earnings outlook, funding progress

Shares of Upstart Holdings Inc. rocketed 40% higher in after-hours trading Tuesday after the beleaguered financial-services company delivered an upbeat outlook for the current period even as its revenue for the latest quarter came in at a third of what it was a year before.

Upstart UPST, +5.31%, which uses artificial intelligence to inform lending decisions, has struggled in recent quarters as it’s had to price its loans at higher rates, a dynamic that has dampened demand. Additionally, it’s disclosed challenges as its funding partners pulled back due to the economy, though the company signaled some progress on that front in the latest report.

“Despite the headwinds facing our industry, we secured multiple long-term funding agreements, together expected to deliver more than $2 billion to the Upstart platform over the next 12 months,” Chief Executive Dave Girouard said in a release.

He added on the earnings call that Upstart “expanded our roster of institutional partners in ways that should help us deliver quality offers to consumers through all parts of the cycle.”

For the current quarter, Upstart executives expect $135 million in revenue along with breakeven performance on the basis of earnings before interest, taxes, depreciation and amortization (Ebitda). Analysts tracked by FactSet were modeling $125 million in revenue and a $14 million adjusted Ebitda loss.

“Our improving guidance is clearly not deriving from obvious improvements to the macro economy just yet,” Chief Financial Officer Sanjay Datta said on the earnings call. “It is flowing from a combination of tenacious execution, operating discipline, margin expansion and dealmaking.”

Looking at the first quarter that just completed, the company reported a net loss of $129 million, or $1.58 a share, whereas it recorded net income of $33 million, or 34 cents a share, in the year-earlier quarter. On an adjusted basis, Upstart lost 47 cents a share, while analysts had been projecting a loss of 83 cents a share.

Revenue sank to $103 million from $310 million a year before as loan originations plunged. Upstart disclosed that its lending partners originated just over 84,000 loans in the period, down 78% from a year ago.

Analysts had been projecting $99.7 million in revenue for the first quarter.

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