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>