Record GAAP and Adjusted Net Revenue for Third Quarter 2023
GAAP Net Revenue of $537 Million Up 27%; $531 Million Adjusted Net Revenue Up 27% Year-over-Year
Record Adjusted EBITDA of $98 Million Up 121% Year-over-Year
GAAP EPS Loss of $0.29; EPS Loss Excluding the Impact of Goodwill Impairment of $0.03
New Member Adds of Over 717,000; Quarter-End Total Members Up 47% Year-over-Year to Over 6.9 Million
New Product Adds of Nearly 1,047,000; Quarter-End Total Products Up 45% Year-over-Year to Over 10.4 Million
Total Deposit Growth of $2.9 Billion, Up 23% During the Third Quarter to $15.7 Billion
$68 Million Growth in Tangible Book Value, $171 Million on a Trailing 12 Month Basis
Management Raises Full-Year 2023 Guidance
SAN FRANCISCO–(BUSINESS WIRE)–SoFi Technologies, Inc. (NASDAQ: SOFI), a member-centric, one-stop shop for digital financial services that helps members borrow, save, spend, invest and protect their money, reported financial results today for its third quarter ended September 30, 2023.
“We delivered another quarter of record financial results and generated our tenth consecutive quarter of record adjusted net revenue of $531 million. We saw record new member adds of 717,000 and accelerating growth of 47% for total ending members of over 6.9 million, along with record new product adds of over 1 million, also with accelerating growth of 45% to over 10 million total products. Record revenue at the company level was driven by record revenue across all three of our business segments, with 67% of adjusted net revenue growth coming from our non-Lending segments (Technology Platform and Financial Services segments). On a consolidated level, we saw sequential and year-over-year expansion in our net interest margin to 5.99% and record sequential deposit growth of $2.9 billion. We also generated record adjusted EBITDA of $98 million, representing a 48% incremental adjusted EBITDA margin and a 18% margin overall, with all three business segments profitable as the Financial Services segment posted positive contribution profit for the first time. Excluding the impact of a non-cash impairment of goodwill assets, we would have had a net loss of $19.5 million and an EPS loss of $0.03, which reinforces our confidence in achieving positive GAAP net income in the fourth quarter of 2023. Finally, we generated $68 million in tangible book value growth in the quarter and $171 million on a trailing 12-month basis,” said Anthony Noto, CEO of SoFi Technologies, Inc.
|
Consolidated Results Summary |
|||||||||||
|
|
|
Three Months Ended September 30, |
|
% Change |
|||||||
|
($ in thousands, except per share amounts) |
|
2023 |
|
2022 |
|
||||||
|
Consolidated – GAAP |
|
|
|
|
|
|
|||||
|
Total net revenue |
|
$ |
537,209 |
|
|
$ |
423,985 |
|
|
27 |
% |
|
Net loss |
|
|
(266,684 |
) |
|
|
(74,209 |
) |
|
259 |
% |
|
Net loss attributable to common stockholders – basic and diluted(1) |
|
|
(276,873 |
) |
|
|
(84,398 |
) |
|
228 |
% |
|
Loss per share attributable to common stockholders – basic and diluted |
|
|
(0.29 |
) |
|
|
(0.09 |
) |
|
222 |
% |
|
|
|
|
|
|
|
|
|||||
|
Consolidated – Non-GAAP |
|
|
|
|
|
|
|||||
|
Adjusted net revenue(2) |
|
$ |
530,717 |
|
|
$ |
419,256 |
|
|
27 |
% |
|
Adjusted EBITDA(2) |
|
|
98,025 |
|
|
|
44,298 |
|
|
121 |
% |
|
Net loss, excluding impact of goodwill impairment(3) |
|
|
(19,510 |
) |
|
|
(74,209 |
) |
|
(74 |
)% |
|
Net loss attributable to common stockholders, excluding impact of goodwill |
|
|
(29,699 |
) |
|
|
(84,398 |
) |
|
(65 |
)% |
|
Loss per share attributable to common stockholders, excluding impact of |
|
|
(0.03 |
) |
|
|
(0.09 |
) |
|
(67 |
)% |
|
Tangible book value (as of period end)(4) |
|
|
3,272,576 |
|
|
|
3,101,281 |
|
|
6 |
% |
___________________
- Adjusted for the contractual amount of dividends payable to holders of Series 1 redeemable preferred stock, which are participating interests.
- Adjusted net revenue and adjusted EBITDA are non-GAAP financial measures. For more information and reconciliations to the most comparable GAAP measures, see “Non-GAAP Financial Measures” and Table 2 to the “Financial Tables” herein.
- Loss per share attributable to common stockholders, excluding impact of goodwill impairment is defined as net income (loss) attributable to common stockholders, adjusted to exclude goodwill impairment losses of $247.2 million for the three months ended September 30, 2023, divided by the weighted average common stock outstanding for the respective periods. The goodwill impairment adjustment had no impact on weighted average common stock outstanding, or income tax impacts.
- Defined as permanent equity, adjusted to exclude goodwill and intangible assets.
Noto continued: “Our record number of member and product additions, along with improving operating efficiency, reflects the benefits of our broad product suite and unique Financial Services Productivity Loop (FSPL) strategy.”
Noto concluded: “Total deposits grew by $2.9 billion, up 23% during the third quarter to $15.7 billion at quarter-end, and over 90% of SoFi Money deposits (inclusive of Checking and Savings and cash management accounts) are from direct deposit members. For new direct deposit accounts opened in the third quarter, the median FICO score was 743. More than half of newly funded SoFi Money accounts are setting up direct deposit by day 30, and this has had a significant impact on debit spending, which exceeded $1 billion in quarterly debit transaction volume and was up 3.2x year-over-year, representing more than $5 billion of annualized debit transaction volume. We continue to see strong cross-buy trends from this attractive member base into Lending and other Financial Services products. With our launch in the first quarter of 2023 of enhanced FDIC insurance of up to $2 million, nearly 98% of our deposits were insured at quarter-end.
As a result of this growth in high quality deposits, we have benefited from a lower cost of funding for our loans. Our deposit funding also increases our flexibility to capture additional net interest margin (NIM) and optimize returns, a critical advantage in light of notable macroeconomic uncertainty. SoFi Bank, N.A. generated $84.8 million of GAAP net income at a 19% margin.”
Consolidated Results
Third quarter total GAAP net revenue increased 27% to $537.2 million from the prior-year period’s $424.0 million. Third quarter adjusted net revenue of $530.7 million was up 27% from the same prior-year period’s $419.3 million. Third quarter record adjusted EBITDA of $98.0 million increased 121% from the same prior year period’s $44.3 million.
SoFi hit a number of key financial inflection points in the quarter, including positive contribution profit in the Financial Services segment of $3.3 million, versus a $4.3 million loss in the second quarter of 2023 and $52.6 million loss in the third quarter of 2022. Notably, of the $111.5 million of incremental adjusted net revenue, over $74.4 million, or 67%, came from the non-Lending segments (Technology Platform and Financial Services segments). Additionally, adjusted EBITDA of $98.0 million exceeded share-based compensation expense of $62.0 million for the third consecutive quarter. These points reinforce the company’s confidence in achieving GAAP profitability for the company for the fourth quarter of 2023. SoFi recorded a GAAP net loss of $266.7 million for the third quarter of 2023, an increase from the prior-year period’s net loss of $74.2 million.
Net interest income of $345.0 million was up 119% from the prior-year period and up 18% sequentially. Net interest margin of 5.99% was a record for the company, up from 5.74% last quarter and 5.86% in the prior-year quarter. Excluding the impact of a non-cash impairment of goodwill assets, we would have had a net loss of $19.5 million.
The average rate on interest-earning assets increased by 53 basis points sequentially and 244 basis points versus the prior-year period, as the company continued to successfully increase the weighted average coupon in its personal loans and student loans, while the average rate on interest-bearing liabilities increased just 18 basis points sequentially and 230 basis points year-over-year. The funding of loans continued to shift toward deposits. In the quarter, the average rate on deposits was 219 basis points lower than that of warehouse facilities.
Member and Product Growth
SoFi achieved strong year-over-year growth in both members and products in the third quarter of 2023. Record new member additions of over 717,000 brought total members to over 6.9 million by quarter-end, up over 2.2 million, or 47%, from the end of 2022’s third quarter.
Record product additions of nearly 1,047,000 in the third quarter brought total products to over 10.4 million at quarter-end, up 45% from 7.2 million at the same prior year quarter-end.
Note: For additional information on our company metrics, including the definitions of “Members”, “Total Products” and “Technology Platform Total Accounts”, see Table 6 in the “Financial Tables” herein.
- The company includes SoFi accounts on the Galileo platform-as-a-service in its total Technology Platform accounts metric to better align with the presentation of Technology Platform segment revenue.
- In 2023, Technology Platform total accounts reflects the previously disclosed migration by one of our clients of the majority of its processing volumes to a pure processor. These accounts remained open for administrative purposes through the end of 2022, and were included in our total accounts in such period.
In the Financial Services segment, total products increased by 50% year-over-year, to 8.9 million from 5.9 million in the third quarter of 2022. SoFi Money (inclusive of Checking and Savings and cash management accounts) grew 53% year-over-year to 3.1 million products, SoFi Invest grew 19% year-over-year to 2.5 million products, and SoFi Relay grew 85% year-over-year to 3.0 million products.
Lending products increased 24% year-over-year to 1.6 million products, driven primarily by continued growth in personal loan products as well as accelerating growth in student loan products.
Technology Platform enabled accounts increased by 10% year-over-year to 136.7 million.
Lending Segment Results
Lending segment GAAP and adjusted net revenues were $349.0 million and $342.5 million, respectively, for the third quarter of 2023, up 16% and 15%, respectively, compared to the third quarter of 2022. Higher loan balances and net interest margin expansion drove strong growth in net interest income, which significantly exceeded directly attributable expenses of $138.5 million.
Lending segment third quarter contribution profit of $204.0 million increased 13% from $180.6 million in the same prior-year period. Contribution margin using Lending adjusted net revenue remained healthy at 60% in the third quarter of 2023, versus 61% in the same prior-year period. These advances reflect SoFi’s ability to capitalize on continued strong demand for its lending products.
|
Lending – Segment Results of Operations |
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, |
|
|
||
|
($ in thousands) |
|
2023 |
|
2022 |
|
% Change |
|
Net interest income |
|
$ 265,215 |
|
$ 139,516 |
|
90 % |
|
Noninterest income |
|
83,758 |
|
162,178 |
|
(48) % |
|
Total net revenue – Lending |
|
348,973 |
|
301,694 |
|
16 % |
|
Servicing rights – change in valuation inputs or assumptions |
|
(7,420) |
|
(6,182) |
|
20 % |
|
Residual interests classified as debt – change in valuation inputs or |
|
928 |
|
1,453 |
|
(36) % |
|
Directly attributable expenses |
|
(138,525) |
|
(116,403) |
|
19 % |
|
Contribution Profit |
|
$ 203,956 |
|
$ 180,562 |
|
13 % |
|
|
|
|
|
|
|
|
|
Adjusted net revenue – Lending(1) |
|
$ 342,481 |
|
$ 296,965 |
|
15 % |
___________________
- Adjusted net revenue – Lending represents a non-GAAP financial measure. For more information and a reconciliation to the most comparable GAAP measure, see “Non-GAAP Financial Measures” and Table 2 to the “Financial Tables” herein.
|
Lending – Loans Held for Sale |
|
|
|
|
|
|
|
|||||
|
|
Personal Loans |
|
Student Loans |
|
Home Loans |
|
Total |
|||||
|
September 30, 2023 |
|
|
|
|
|
|
|
|||||
|
Unpaid principal |
$ |
14,177,004 |
|
$ |
5,929,047 |
|
$ |
110,320 |
|
|
$ |
20,216,371 |
|
Accumulated interest |
|
105,156 |
|
|
26,497 |
|
|
163 |
|
|
|
131,816 |
|
Cumulative fair value adjustments(1) |
|
568,836 |
|
|
86,000 |
|
|
(9,187 |
) |
|
|
645,649 |
|
Total fair value of loans(2) |
$ |
14,850,996 |
|
$ |
6,041,544 |
|
$ |
101,296 |
|
|
$ |
20,993,836 |
|
June 30, 2023 |
|
|
|
|
|
|
|
|||||
|
Unpaid principal |
$ |
12,171,935 |
|
$ |
5,262,975 |
|
$ |
87,928 |
|
|
$ |
17,522,838 |
|
Accumulated interest |
|
82,868 |
|
|
21,164 |
|
|
150 |
|
|
|
104,182 |
|
Cumulative fair value adjustments(1) |
|
496,360 |
|
|
99,782 |
|
|
(9,495 |
) |
|
|
586,647 |
|
Total fair value of loans(2) |
$ |
12,751,163 |
|
$ |
5,383,921 |
|
$ |
78,583 |
|
|
$ |
18,213,667 |
___________________
- During the three months ended September 30, 2023, the cumulative fair value adjustments for personal loans were primarily impacted by higher origination volume and higher coupon rates, partially offset by lower fair value marks driven primarily by higher prepayment rate assumption and a higher discount rate. The cumulative fair value adjustments for student loans were primarily impacted by a higher discount rate, which resulted in lower fair value marks, partially offset by higher origination volume and increases in coupon rates.
- Each component of the fair value of loans is impacted by charge-offs during the period. Our fair value assumption for annual default rate incorporates fair value markdowns on loans beginning when they are 10 days or more delinquent, with additional markdowns at 30, 60 and 90 days past due.
The following table summarizes the significant inputs to the fair value model for personal and student loans:
|
|
Personal Loans |
|
Student Loans |
||||||||
|
|
September 30, |
|
June 30, |
|
September 30, |
|
June 30, |
||||
|
Weighted average coupon rate(1) |
13.8 |
% |
|
13.6 |
% |
|
5.3 |
% |
|
5.0 |
% |
|
Weighted average annual default rate |
4.6 |
|
|
4.6 |
|
|
0.5 |
|
|
0.5 |
|
|
Weighted average conditional prepayment rate |
20.3 |
|
|
19.0 |
|
|
10.5 |
|
|
10.6 |
|
|
Weighted average discount rate |
6.6 |
|
|
6.1 |
|
|
4.8 |
|
|
4.4 |
|
___________________
- Represents the average coupon rate on loans held on balance sheet, weighted by unpaid principal balance outstanding at the balance sheet date.
Third quarter Lending segment total origination volume increased 48% year-over-year, as a result of continued strong demand for personal loans and notable sequential growth in student loan originations.
Record personal loan originations of $3.9 billion in the third quarter of 2023 were up $1.1 billion, or 38%, year-over-year, and rose 4% sequentially. Third quarter student loan volume of over $919 million was up $462 million, or 101%, year-over-year, and rose 133% sequentially as borrowers prepared to resume student loan payments in October. Third quarter home loan volume of $356 million was up 64% year-over-year, as we began to benefit from the integration of Wyndham Capital Mortgage with improved fulfillment capacity from our acquisition at the beginning of the second quarter.
|
Lending – Originations and Average Balances |
|
|
|
|
|
|
|||
|
|
|
Three Months Ended September 30, |
|
% Change |
|||||
|
|
|
2023 |
|
2022 |
|
||||
|
Origination volume ($ in thousands, during period) |
|
|
|
|
|
|
|||
|
Personal loans |
|
$ |
3,885,967 |
|
$ |
2,809,759 |
|
38 |
% |
|
Student loans |
|
|
919,330 |
|
|
457,184 |
|
101 |
% |
|
Home loans |
|
|
355,698 |
|
|
216,246 |
|
64 |
% |
|
Total |
|
$ |
5,160,995 |
|
$ |
3,483,189 |
|
48 |
% |
|
|
|
|
|
|
|
|
|||
|
Average loan balance ($, as of period end)(1) |
|
|
|
|
|
|
|||
|
Personal loans |
|
$ |
24,221 |
|
$ |
24,772 |
|
(2 |
)% |
|
Student loans |
|
|
44,828 |
|
|
47,152 |
|
(5 |
)% |
|
Home loans |
|
|
285,773 |
|
|
286,855 |
|
— |
% |
_________________
- Within each loan product category, average loan balance is defined as the total unpaid principal balance of the loans divided by the number of loans that have a balance greater than zero dollars as of the reporting date. Average loan balance includes loans on the balance sheet and transferred loans with which SoFi has a continuing involvement through its servicing agreements.
|
Lending – Products |
|
September 30, |
|
|
||
|
|
|
2023 |
|
2022 |
|
% Change |
|
Personal loans |
|
1,057,995 |
|
783,645 |
|
35 % |
|
Student loans |
|
507,567 |
|
471,141 |
|
8 % |
|
Home loans |
|
28,344 |
|
25,707 |
|
10 % |
|
Total lending products |
|
1,593,906 |
|
1,280,493 |
|
24 % |
Technology Platform Segment Results
Technology Platform segment record net revenue of $89.9 million for the third quarter of 2023 increased 6% year-over-year and 3% sequentially. Record contribution profit of $32.2 million increased 65% year-over-year, for a margin of 36%, primarily as a result of a 12% year-over-year reduction in directly attributable expenses.
We are seeing continued diversification of our client base and revenue growth, along with strong adoption of new product offerings, including Konecta, our natural language AI driven intelligent digital assistant, and our Payments Risk Platform (PRP), a platform which leverages transactional data to reduce transaction fraud.
|
Technology Platform – Segment Results of Operations |
|
|
|
|
|
|
|||||
|
|
|
Three Months Ended September 30, |
|
|
|||||||
|
($ in thousands) |
|
2023 |
|
2022 |
|
% Change |
|||||
|
Net interest income |
|
$ |
573 |
|
|
$ |
— |
|
|
n/m |
|
|
Noninterest income |
|
|
89,350 |
|
|
|
84,777 |
|
|
5 |
% |
|
Total net revenue – Technology Platform |
|
|
89,923 |
|
|
|
84,777 |
|
|
6 |
% |
|
Directly attributable expenses |
|
|
(57,732 |
) |
|
|
(65,241 |
) |
|
(12 |
)% |
|
Contribution Profit |
|
$ |
32,191 |
|
|
$ |
19,536 |
|
|
65 |
% |
Technology Platform total enabled client accounts increased 10% year-over-year, to 136.7 million from 124.3 million. The company has made great progress on our strategy to sign larger, more durable clients. Additionally, there is a robust pipeline of ongoing discussions with potential partners with large existing customer bases across both the U.S. and Latin America spanning both the financial services and non-financial services segments.
|
Technology Platform |
|
September 30, |
|
|
|||
|
|
|
2023 |
|
2022 |
|
% Change |
|
|
Total accounts |
|
136,739,131 |
|
124,332,810 |
|
10 |
% |
Financial Services Segment Results
Financial Services segment record net revenue increased 142% in the third quarter of 2023 to $118.2 million from the prior year period’s total of $49.0 million, helped by 43% growth in segment interchange revenue and 231% growth in net interest income. Notably, the company exceeded $1.2 billion in point of sale debit transaction volume in the quarter, representing an annualized $5 billion run-rate. Strength in the segment results was driven by SoFi Money along with contributions from SoFi Invest and SoFi Credit Card.
For the first time, the Financial Services segment posted a positive contribution profit of $3.3 million, reflecting a $55.9 million improvement over the prior-year quarter’s $52.6 million loss. This came as a result of continued improvement in monetization for the segment, along with increasing operating leverage as we efficiently scale the business. Monetization progress is underscored by annualized revenue per product of $53, which grew 61% year-over-year and 8% sequentially. Operating leverage is evident, as the segment generated $69.3 million in incremental revenue, with only $13.4 million of incremental directly attributable expenses versus the year-ago period.
|
Financial Services – Segment Results of Operations |
|
|
|
|
|
|
|||||
|
|
|
Three Months Ended September 30, |
|
|
|||||||
|
($ in thousands) |
|
2023 |
|
2022 |
|
% Change |
|||||
|
Net interest income |
|
$ |
93,101 |
|
|
$ |
28,158 |
|
|
231 |
% |
|
Noninterest income |
|
|
25,146 |
|
|
|
20,795 |
|
|
21 |
% |
|
Total net revenue – Financial Services |
|
|
118,247 |
|
|
|
48,953 |
|
|
142 |
% |
|
Directly attributable expenses |
|
|
(114,987 |
) |
|
|
(101,576 |
) |
|
13 |
% |
|
Contribution profit (loss) |
|
$ |
3,260 |
|
|
$ |
(52,623 |
) |
|
n/m |
|
By continuously innovating with new and relevant offerings, features and rewards for members, SoFi grew total Financial Services products by 2.9 million, or 50%, year-over-year in the third quarter of 2023, bringing the total to 8.9 million at quarter-end. In the third quarter of 2023, SoFi Money products increased by a record of nearly 371,000, Relay products increased by a record of over 405,000, and SoFi Invest products increased by over 149,000.
Most notably, our Checking and Savings offering has an APY of up to 4.60% as of October 30, 2023, no minimum balance requirement nor balance limits, FDIC insurance of up to $2 million, a host of free features and a unique rewards program. Total deposits grew 23% sequentially to $15.7 billion at quarter-end, and over 90% of SoFi Money deposits (inclusive of Checking and Savings and cash management accounts) are from direct deposit members. More than half of newly funded SoFi Money accounts were setting up direct deposit by day 30 in the third quarter of 2023.
|
Financial Services – Products |
|
September 30, |
|
|
|||
|
|
|
2023 |
|
2022 |
|
% Change |
|
|
Money(1) |
|
3,063,778 |
|
2,002,791 |
|
53 |
% |
|
Invest |
|
2,465,072 |
|
2,067,621 |
|
19 |
% |
|
Credit Card |
|
235,791 |
|
153,978 |
|
53 |
% |
|
Referred loans(2) |
|
51,301 |
|
36,538 |
|
40 |
% |
|
Relay |
|
2,958,497 |
|
1,600,102 |
|
85 |
% |
|
At Work |
|
79,461 |
|
57,775 |
|
38 |
% |
|
Total financial services products |
|
8,853,900 |
|
5,918,805 |
|
50 |
% |
___________________
- Includes SoFi Checking and Savings accounts held at SoFi Bank, and cash management accounts.
- Limited to loans wherein we provide third party fulfillment services.
Guidance and Outlook
For the full year 2023, management expects adjusted net revenue of $2.045 to $2.065 billion, up from its prior guidance of $1.974 to $2.034 billion, and full-year adjusted EBITDA of $386 to $396 million, up from its prior guidance of $333 to $343 million, representing a 48% incremental adjusted EBITDA margin and a range of 18.9% to 19.2% adjusted EBITDA margin. As the company moves toward expected GAAP net income profitability in the fourth quarter, management expects depreciation and amortization and share-based compensation expenses to increase in the mid-to-high single digit percentage range in the fourth quarter relative to third quarter results.
Management will further address full-year 2023 guidance on the quarterly earnings conference call. Management has not reconciled forward-looking non-GAAP measures to their most directly comparable GAAP measures of total net revenue, net income and gross margin. This is because the company cannot predict with reasonable certainty and without unreasonable efforts the ultimate outcome of certain GAAP components of such reconciliations due to market-related assumptions that are not within our control as well as certain legal or advisory costs, tax costs or other costs that may arise. For these reasons, management is unable to assess the probable significance of the unavailable information, which could materially impact the amount of the future directly comparable GAAP measures.
Earnings Webcast
SoFi’s executive management team will host a live audio webcast beginning at 8:00 a.m. Eastern Time (5:00 a.m. Pacific Time) today to discuss the quarter’s financial results and business highlights. All interested parties are invited to listen to the live webcast at https://investors.sofi.com. A replay of the webcast will be available on the SoFi Investor Relations website for 30 days. Investor information, including supplemental financial information, is available on SoFi’s Investor Relations website at https://investors.sofi.com.
Cautionary Statement Regarding Forward-Looking Statements
Certain of the statements above are forward-looking and as such are not historical facts. This includes, without limitation, statements regarding our expectations for the full year 2023 adjusted net revenue and adjusted EBITDA, our expectations regarding the profitability of our three business segments and GAAP profitability of our company in the fourth quarter of 2023, our expectations regarding our ability to continue to grow our business, improve our financials and increase our member, product and total accounts count, our ability to navigate the macroeconomic environment and the financial position, business strategy and plans and objectives of management for our future operations. These forward-looking statements are not guarantees of performance.
Contacts
Investors:
SoFi Investor Relations
[email protected]
Media:
SoFi Media Relations
[email protected]
