- Adjusted Net Revenue: $597 million, a 22% year-over-year increase.
- EBITDA: $138 million, an 80% year-over-year growth.
- GAAP Net Income: $17 million, compared to a loss of $40 million in Q2 2023.
- Member Growth: Added 643,000 members, totaling 8.8 million, up 41% year-over-year.
- Product Growth: Added 946,000 products, totaling 12.8 million, up 43% year-over-year.
- Financial Services Segment Revenue: $176 million, up 80% year-over-year.
- Financial Services Segment Contribution Profit: $55 million, compared to a loss of $4 million one year earlier.
- Net Interest Income: $279 million, 82% of lending revenue.
- Personal Loan Originations: $4.2 billion, a record high.
- Home Loan Originations: $417 million, up 71% year-over-year.
- Student Loan Originations: $737 million, up 86% year-over-year.
- Tech Platform Segment Revenue: $95 million, up 9% year-over-year.
- Tech Platform Segment Contribution Profit: $31 million, up 82% year-over-year at a 33% margin.
- Deposits: $23 billion, with consumer deposits up $2.2 billion from the previous quarter.
- Guidance for Q3 2024: Adjusted net revenue of $625 million to $645 million, adjusted EBITDA of $160 million to $165 million, GAAP net income of $40 million to $45 million, and EPS of $0.04 per share.
- Full-Year 2024 Guidance: Adjusted net revenue of $2.425 billion to $2.465 billion, adjusted EBITDA of $605 million to $615 million, GAAP net income of $175 million to $185 million, and GAAP EPS of $0.09 to $0.10 per share.
Release Date: July 30, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- SoFi Technologies Inc (SOFI, Financial) achieved record adjusted net revenue of $597 million, a 22% year-over-year increase.
- The company recorded its third consecutive quarter of GAAP profitability with $17 million in GAAP net income versus a loss of $40 million in Q2 of 2023.
- SoFi Technologies Inc (SOFI) added 643,000 members in Q2, bringing the total to 8.8 million, up 41% year-over-year.
- The Financial Services segment reported record revenue of $176 million, up 80% from the previous year, driving a contribution profit of $55 million.
- The Tech Platform segment recorded revenue of $95 million, up 9% year-over-year, with a contribution profit of $31 million at a 33% margin.
Negative Points
- Non-interest income in the Lending segment was down 38% year-over-year as planned.
- The Credit Card and Invest businesses are still in investment mode, with nearly $100 million in annualized losses.
- The company remains cautious in its personal loan origination due to macroeconomic uncertainties, limiting potential growth in this segment.
- The Tech Platform segment's growth guidance was revised to mid to upper teens percent year-over-year, lower than the original 20% guidance.
- The company faces challenges in maintaining high APY rates in a potentially declining interest rate environment, which could impact deposit growth.
Q & A Highlights
Q: I think you said that cumulative losses would have to go above 10%, I think, to 11% for you to kind of breach your 8% assumptions in your underwriting. What kind of scenario would that entail in terms of like payment rates or delinquency rates and just to kind of connect the dots there?
A: Christopher Lapointe, CFO: Credit is performing in line with expectations, and we remain extremely confident in our 7% to 8% life of loan loss assumption. For originations from 2020 through Q1 2024, only 44% remain, with 56% paid down experiencing only 3% net cumulative losses. To reach 8% cumulative losses, the remaining 44% would need to charge off at 11%. This would require a material change in conditions, as past vintages with similar remaining UPB have not experienced such losses. Recent vintages since credit cuts in 2022 are performing better than the 2017 cohort, which approached 8% losses. Leading indicators for losses, such as delinquencies, have started to improve.
Q: You show some pretty encouraging vintage charge-off metrics on slides 8 and 9. It sounds like from your commentary, everything is kind of in line. But maybe just kind of reconcile your more conservative stance and maybe talk about what you need to see in the environment to maybe just grow a little bit again in the portfolio.
A: Anthony Noto, CEO: We're encouraged by credit trends and proud of achieving record revenue with 22% year-over-year growth despite conservative lending. Incremental opportunities lie in home loans and student loan refinancing. For personal loans, we remain conservative due to potential macroeconomic changes, such as unemployment rates. We could grow faster if we chose to allocate more resources to personal loans, but we're focusing on diversified, durable growth. Home equity loans, now offered as a principal, present another growth opportunity.
Q: How do you expect to keep growing Financial Services given the significant growth in deposits and interest income?
A: Anthony Noto, CEO: We've driven diversification with Financial Services segment revenue at $176 million, up 80% year-over-year. Growth drivers include product growth (up 47%), deposits (up 80%), and non-net interest income (up 58%). Future growth will come from increased product growth, higher revenue per product, and monetization opportunities in interchange, AUM, insurance, and our loan platform business. We see significant upside in revenue per product, which grew 29% this quarter.
Q: How should we think about the growth outlook for deposits and how that counterbalances with any ongoing runoff of brokered funding?
A: Anthony Noto, CEO: We will maintain a high APY relative to competition, leveraging our origination platform. Our broader value proposition, including no fees, seamless integration with brokerage, and features like Zelle, will continue to drive deposit growth. Christopher Lapointe, CFO: We added $2.2 billion in member deposits this quarter and reduced brokered CDs by $800 million. We aim to maintain an 80% to 90% deposit funding mix, optimizing funding sources to lower overall costs.
Q: Can you talk about the opportunity to grow the Credit Card business given the large user base in Money and Relay?
A: Anthony Noto, CEO: Credit Card is an early-stage business where we're ensuring the right product market fit, credit, and unit economics. We've made significant progress and will launch two new cards targeting different user needs. We aim to integrate Credit Card benefits with other products, like SoFi Plus, to enhance member value. While we're moving cautiously, we see long-term potential for Credit Card to contribute significantly to our business.
Q: Are you seeing better opportunities in lending, and how does the bending of the curve in credit translate into lower charge-off rates?
A: Anthony Noto, CEO: We're managing to diversify the lending business relative to the total company. Despite conservative personal loan growth, we achieved 22% year-over-year revenue growth. Marketing efficiency and higher unit economics drove better-than-expected originations. Christopher Lapointe, CFO: We're confident in our 7% to 8% life of loan loss expectation but aren't guiding to NCOs due to their lumpiness. Early delinquency trends will eventually reflect in NCOs.
Q: Can you discuss the appetite for future asset sales and your risk transfer strategy given credit improvements?
A: Christopher Lapointe, CFO: We see continued strong demand from credit buyers, driven by attractive yielding assets and strong credit profiles. We've done $3.3 billion in personal loan sales over the last three quarters. We expect demand to increase in a declining rate environment, allowing us to offer flexible deal structures and maintain long-term partnerships with buyers.
Q: How would a return to a lower rate environment change the ROE math on retaining loans versus selling?
A: Anthony Noto, CEO: Lower rates would make our loans more attractive to buyers without origination platforms, increasing demand and potentially improving terms and values. We would manage this relative to our production and financial goals, but historically, lower rates have led to higher demand and favorable conditions for loan sales.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
