Release Date: October 29, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- SoFi Technologies Inc (SOFI, Financial) reported a record adjusted net revenue of $689 million for Q3 2024, marking a 30% year-over-year growth.
- The financial services segment achieved $238 million in revenue, up 102% from the prior year, now constituting more than one-third of total revenue.
- The company added 756,000 new members in Q3, a 35% year-over-year increase, bringing the total to 9.4 million members.
- SoFi's tech platform revenue grew to nearly $103 million, up 14% from the prior year, with a strong pipeline of potential partners.
- The lending segment saw a record $6.3 billion in loan volume, with personal loan originations reaching $4.9 billion, up 26% year-over-year.
Negative Points
- Despite strong growth, the credit card business is still losing money due to a longer payback period.
- The company faces challenges in monetizing its Invest business, currently achieving only half of its potential monetization rate.
- There is a significant J-curve in the credit card business, with profitability expected only after three years.
- The tech platform segment, while growing, has not yet secured decisions on large deals with big financial institutions.
- The macroeconomic environment remains unpredictable, posing potential risks to future growth and profitability.
Q & A Highlights
Q: Can you give us more color on the loan platform deals and how you make money here? How does this differ from prior quarters?
A: Christopher Lapointe, CFO: This is a fee-based and capital-light revenue source for us. We generate cash fees upfront at the time of transfer or referral without taking balance sheet risk. We make money by sending qualified borrowers to platform partners and receiving referral fees, embedding partner credit boxes into our underwriting engine, originating loans on behalf of third-party investors, and servicing assets not originated by us. Importantly, there are no financing commitments or loss share agreements associated with these deals.
Q: How do you think about originations and lending growth for your own balance sheet versus originating for partnerships?
A: Christopher Lapointe, CFO: We expect modest growth in balance sheet originations year-over-year. We are happy with the current size of our balance sheet and the net interest income generated. Excess demand from borrowers and loan investors is being fulfilled through our loan platform business. We expect growth in student loan refinancing and home loans in a lower rate environment.
Q: How do you view the performance of recent loan vintages compared to the 2017 vintage, and how does this impact return on capital?
A: Christopher Lapointe, CFO: Recent vintages are projected to produce higher returns, with ROEs above 30%. This is driven by lower expected life of loan loss rates, higher pricing beta, funding cost efficiencies, and origination fees. These factors offset increased prepayment speeds and reduced weighted average lives.
Q: What are your expectations for the loan platform business growth, and how does it impact loan sales?
A: Christopher Lapointe, CFO: We expect continued strong growth in the loan platform business, with commitments from Fortress and other partners. Demand is strong, and we are fulfilling it through the loan platform business. The platform fee varies depending on the partner, and it is incremental to our originate-to-sell business.
Q: Can you discuss the trends in deposits and any changes in customer behavior with rate changes?
A: Anthony Noto, CEO: SoFi Money continues to resonate well, maintaining market share and ranking in API. We saw over $2 billion in member deposit growth in the quarter, with spending levels on par or better than historical levels. Direct deposit customers are more engaged, with higher product adoption, contributing to our competitive advantage.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
