SoFi (SOFI) 8-KSoFi Technologies Reports Net Revenue of $697 Million and Net Income of $61 Million for Q3 2024, Demonstrating Durable Growth and Strong Returns

SoFi Technologies Reports Net Revenue of $697 Million and Net Income of $61 Million for Q3 2024, Demonstrating Durable Growth and Strong Returns

Record Adjusted Net Revenue with Growth Accelerating to 30% Driven by 64% Combined Growth in Financial Services and Tech Platform Segments, representing 49% of Total Adjusted Net Revenue

35% Growth in Members and Strong Product Innovation Remain Key Drivers of Growth

Company Recorded $174 Million in Capital Light, Fee-Based Revenue, Reinforcing Strength of Increased Mix of Higher ROE Revenue

Management Raises FY24 Guidance

SAN FRANCISCO, Calif. – (BUSINESS WIRE) – October 29, 2024 – 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, 2024.

Anthony Noto, CEO of SoFi Technologies, Inc. commented: “This quarter was the strongest quarter in our history. Our results reflect how SoFi is consistently achieving durable growth, how our innovation and brand building are attracting more members and clients to our platform than ever before, and how we are delivering strong and improving returns.

“Our Financial Services and Tech Platform segments now make up a record 49% of SoFi's adjusted net revenue, up from 39% a year ago," Noto continued. "In the third quarter, these businesses grew revenue by a combined 64% year-over-year, a testament of our continued execution and deliberate shift towards capital-light, higher ROE, fee based revenue streams."

Consolidated Results Summary

SoFi's continuous product innovation and brand building yielded several milestones in the quarter, fueling significant member and product growth and paving the way for strong future growth. Among the highlights:

SoFi reported a number of key financial achievements in the third quarter of 2024, including total GAAP net revenue of $697.1 million, which increased 30% relative to the prior-year period's $537.2 million. Third quarter record adjusted net revenue of $689.4 million grew 30% from the corresponding prior-year period of $530.7 million. Third quarter record adjusted EBITDA of $186.2 million, a 27% adjusted EBITDA margin, increased 90% from the same prior year period's $98.0 million. All three segments achieved record contribution profit in the quarter.

Net interest income of $431.0 million for the third quarter was up 25% year-over-year, driven by a 35% increase in average interest-earning assets, slightly offset by a 44 basis points decrease in average yields year-over-year. Net interest margin of 5.57% decreased from 5.99% in the year ago quarter, due to mix shift towards lower yielding secured loans.

The average rate on interest-earning assets decreased by 18 basis points sequentially, while the average rate on interest-bearing liabilities increased 2 basis points from the prior quarter. In the third quarter of 2024, the average rate on deposits was 220 basis points lower than that of warehouse facilities.

Continued growth in both total members and products in the third quarter of 2024, along with improving operating efficiency, reflects the benefits of our broad product suite and unique Financial Services Productivity Loop (FSPL) strategy.

New member additions were over 756,000 in the third quarter of 2024, and total members reached nearly 9.4 million, up 35% from 7.0 million at the same prior year period.

Product additions were nearly 1.1 million in the third quarter of 2024, and total products were nearly 13.7 million, up 31% from 10.4 million at the same prior year period, or 37% when excluding digital assets accounts related to our transfer of crypto services in 2023.

Lending products increased 19% year-over-year to 1.9 million products, driven primarily by continued demand for personal loan products as well as steady growth in student and home loan products.

Technology Platform enabled accounts increased by 17% year-over-year to 160 million.

Financial Services segment net revenue increased 102% year-over-year to a record $238.3 million in the third quarter of 2024 from the prior year period's total of $118.2 million. Net interest income of $154.1 million increased 66% year-over-year, which was primarily driven by growth in consumer deposits. Noninterest income grew 235% from the prior year period to $84.2 million in the quarter, which represents nearly $340 million in annualized revenue.

A key driver of noninterest income growth this quarter was our Loan Platform Business, where we refer pre-qualified borrowers to origination partners and originate loans on behalf of third parties. In the quarter, the Loan

Platform Business grew 5x, and generated $55.6 million in loan platform fees, driven by $1.0 billion of personal loans originated on behalf of third parties, as well as referrals. We also generated $5.5 million in servicing cash flow, which is recorded in our Lending segment. In total, our Loan Platform Business added $61.1 million to our consolidated adjusted net revenue.

In addition to our Loan Platform Business, we continued to see healthy growth in interchange, up 211% year-over-year as a result of $12 billion in total annualized spend in the quarter across Money and Credit Card.

The Financial Services segment posted a contribution profit of $99.8 million for the third quarter of 2024, a $96.5 million improvement from the prior year quarter, while contribution margin grew nearly 11 percentage points sequentially to 42%. At the same time, operating leverage is evident, as the segment generated $120.1 million in incremental revenue, with only $23.6 million in incremental directly attributable expenses year-over-year.

By continuously innovating with new and relevant offerings, features and rewards for members, SoFi grew total Financial Services products by 2.9 million, or 33%, year-over-year, bringing the total to 11.8 million at quarter-end, or 40% when excluding digital assets accounts related to our transfer of crypto services in 2023. SoFi Money reached 4.7 million products, Relay reached 4.2 million products and SoFi Invest reached 2.4 million products by the end of the third quarter.

Monetization continues to improve across all products, with annualized revenue per product of $81, up 52% year-over-year from $53 in the prior year quarter.

SoFi Money continues to offer a top tier APY of up to 4.30% as of October 29, 2024, no minimum balance requirement nor balance limits, FDIC insurance through a network of participating banks of up to $2 million, a host of free features and a unique rewards program.

Total deposits grew to $24.4 billion, with over 90% of SoFi Money deposits (inclusive of Checking and Savings and cash management accounts) coming from direct deposit members. For new direct deposit accounts opened in the third quarter of 2024, the median FICO score was 743, with more than half of newly funded SoFi Money accounts setting up direct deposit by day 30.

For the third quarter of 2024, Lending segment GAAP net revenue of $396.2 million increased 14% from the prior year period, while adjusted net revenue for the segment of $391.9 million increased 14% from the prior year period. Lending segment performance was driven by net interest income, which rose 19% year-over-year and now makes up 81% of segment adjusted net revenue. This was driven by a 35% year-over-year increase in average interest-earning assets, slightly offset by a 44 basis points year-over-year decrease in average yields. Net interest income of $316.3 million significantly exceeded directly attributable segment expenses of $153.0 million for the third quarter of 2024.

Lending segment contribution profit was $238.9 million in the quarter, up 17% from $204.0 million in the same prior-year period. Lending segment adjusted contribution margin for the third quarter of 2024 increased to 61% from 60% in the same prior-year period. These strong margins reflect SoFi’s ability to capitalize on continued strong demand for its lending products.

rate, as well as a lower discount rate. The lower discount rate was driven by a 87 basis points decrease in benchmark rates and offset by 42 basis points of spread widening. This was slightly offset by higher default rate.

The following table summarizes the significant inputs to the fair value model for personal and student loans:

Third quarter Lending segment total origination volume increased 23% year-over-year, as a result of continued strong demand for personal loans and stable growth in student loan and home loan originations.

Personal loan record originations of $4.9 billion in the third quarter of 2024 were up 26% year-over-year, and increased 17% sequentially, inclusive of $1.0 billion originated on behalf of third parties for our Loan Platform Business. Third quarter student loan volume of $944 million was up 3% year-over-year, and increased 28% sequentially. Third quarter home loan volume of $490 million was up 38% year-over-year, and 17% sequentially.

In the quarter, loan sales reached nearly $1.3 billion in total, and nearly $5.0 billion in the last twelve months, exclusive of $1.0 billion of Loan Platform Business sales.

Cumulative fair value adjustments from delinquent personal loans peaked in the first quarter of 2024, along with delinquencies on an absolute and percentage basis. We continued to improve credit performance in the third quarter, with on-balance sheet 90 day personal loan delinquency rate of 57 basis points, a decrease from 64 basis points in the prior quarter.

Personal loan annualized charge-off rate decreased to 3.52% from 3.84% in the prior quarter, including the impact of asset sales, new originations and the delinquency sale in the quarter. Had we not sold these late stage delinquencies, we estimate that, including recoveries between 90-120 days delinquent, we would have had an all-in annualized net charge off rate for personal loans of approximately 5.0% vs. 5.4% last quarter.

SoFi's credit discipline continues to result in strong credit performance, as observed on the cumulative net losses of several of the company's personal loan vintages, relative to the 7% to 8% maximum life of loan loss assumption, inline with our underwriting tolerance.

The 2017 personal loan vintage was the last yearly vintage that approached 8% life of loan loss. When looking at the Q4 2022 - Q4 2023 vintages, at roughly 49% of remaining unpaid principal balance, net cumulative losses of 3.33% are below the 4.77% observed in the 2017 vintage at the same point of 49% remaining principal balance.

Looking at Q1 2020 through Q2 2024 personal loan originations, only 43% of unpaid principal remains. Among the 57% of principal that has already been paid down, we have seen 6% in net cumulative losses. For life of loan losses on this entire cohort of loans to reach 8% net cumulative losses, the remaining unpaid principal would need to be charged-off at a rate of more than 10%. Past vintages have performed meaningfully better after this point in the seasoning curve.

Technology Platform segment net revenue of $102.5 million for the third quarter of 2024 increased 14% year-over-year. Contribution profit of $33.0 million for the third quarter of 2024 increased 2% year-over-year, for a contribution margin of 32%.

In the third quarter of 2024, growth was driven by strong contribution from new clients, as well as growth in Latin America, consumer brands in the US, and clients with innovative use cases like earned wage access and money movement.

Technology Platform total enabled client accounts increased 17% year-over-year, to 160.2 million up from 136.7 million in the year-prior period.

Our pipeline spans banks, brands, and fintechs across consumer and B2B, which offer larger and more durable revenue. The pipeline is in a stronger spot than it has ever been, and the investments made in this segment have greatly expanded the market opportunity.

For the full year 2024, management now expects to deliver adjusted net revenue of $2.535 to $2.550 billion, which is $85 million higher than the prior guidance range of $2.43 to $2.47 billion. This implies 22 to 23% annual growth versus 17 to 19% previously. This guidance now assumes lending adjusted net revenue will be at least 100% of 2023 levels, Financial Services segment revenue to grow more than 80% year-over-year, and for Tech Platform revenue to grow low-to-high teens percentage year-over-year.

Management now expects to deliver adjusted EBITDA of $640 to $645 million, above prior guidance of $605 to $615 million. This represents a 25% adjusted EBITDA margin. We now expect full-year GAAP net income of $204 to $206 million, above prior guidance of $175 to $185 million, and GAAP EPS of $0.11 to $0.12, above prior guidance of $0.09 to $0.10.

Management now expects growth in tangible book value of approximately $1 to $1.05 billion and continues to expect to end the year with a total capital ratio north of 16%.

We continue to expect to add at least 2.3 million new members in 2024, which represents 30% growth from 2023 levels.

Management will further address full-year 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 net income 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.

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.

Certain of the statements above are forward-looking and as such are not historical facts. This includes, without limitation, statements regarding our expectations regarding full year 2024 adjusted net revenue (including segment revenue), adjusted EBITDA, adjusted EBITDA margin, GAAP net income, year end total capital ratio, member and product count growth, and expected growth in tangible book value, our expectations regarding our ability to shift towards capital-light, fee based revenue streams, our expectations regarding our ability to continue to grow our business and launch new business lines and products, improve our financials and increase our member, product and total accounts count, our ability to achieve diversified, and more durable growth, our ability to navigate the macroeconomic environment and the financial position, business strategy and plans and objectives of management for our future operations, including our goal of becoming a top ten financial institution. These forward-looking statements are not guarantees of performance. Such statements can be identified by the fact that they do not relate strictly to historical or current facts. Words such as “achieve”, “believe”, “continue”, “expect”, “growth”, “may”, “plan”, “strategy”, “will be”, “will continue”, and similar expressions may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. Factors that could cause actual results to differ materially from those contemplated by these forward-looking statements include: (i) the effect of and our ability to respond and adapt to changing market and economic conditions, including economic downturns, fluctuating inflation and interest rates, and volatility from global events; (ii) our ability to achieve and maintain profitability, operating efficiencies and continued growth across our segments in the future, as well as our ability to continue to achieve GAAP net income profitability and expected GAAP net income margins and our ability to grow tangible book value or increase earnings per share; (iii) the impact on our business of the regulatory environment and complexities with compliance related to such environment; (iv) our ability to realize the benefits of being a bank holding company and operating SoFi Bank, including continuing to grow high quality deposits and our rewards program for members; (v) our ability to continue to drive brand awareness and realize the benefits or our marketing and advertising campaigns; (vi) our ability to vertically integrate our businesses and accelerate the pace of innovation of our financial products; (vii) our ability to manage our growth effectively and our expectations regarding the development and expansion of our business; (viii) our ability to access sources of capital on acceptable terms or at all; (ix) the success of our continued investments in our Financial Services segment and in our business generally; (x) our ability to expand our member base and increase our product adds; (xi) our ability to maintain our leadership position in certain categories of our business and to grow market share in existing markets or any new markets we may enter; (xii) our ability to develop new products, features and functionality that are competitive and meet market needs; (xiii) our ability to realize the benefits of our strategy, including what we refer to as our FSPL; (xiv) our ability to make accurate credit and pricing decisions or effectively forecast our loss rates; (xv) our ability to establish and maintain an effective system of internal controls over financial reporting; (xvi) our ability to maintain the security and reliability of our products; and (xvii) the outcome of any legal or governmental proceedings that may be instituted against us. The foregoing list of factors is not exhaustive. You should carefully consider the foregoing factors and the other risks and uncertainties set forth in the section titled “Risk Factors” in our last quarterly report on Form 10-Q, as filed with the Securities and Exchange Commission, and those that are included in any of our future filings with the Securities and Exchange Commission, including our annual report on Form 10-K, under the Exchange Act. These forward-looking statements are based on information available as of the date hereof and current expectations, forecasts and assumptions, and involve a number of judgments, risks and uncertainties. Accordingly, forward-looking statements should not be relied upon as representing our views as of any subsequent date, and we do not undertake any obligation to update forward-looking statements to reflect events or circumstances after the date they were made, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.

As a result of a number of known and unknown risks and uncertainties, our actual results or performance may be materially different from those expressed or implied by these forward-looking statements. You should not place undue reliance on these forward-looking statements.

This press release presents information about certain non-GAAP financial measures provided as supplements to the results provided in accordance with accounting principles generally accepted in the United States (GAAP). Our management and Board of Directors uses these non-GAAP measures to evaluate our operating performance, formulate business plans, help better assess our overall liquidity position, and make strategic decisions, including those relating to operating expenses and the allocation of internal resources. Accordingly, we believe that these non-GAAP measures provide useful information to investors and others in understanding and evaluating our operating results in the same manner as our management and Board of Directors. These non-GAAP measures have limitations as analytical tools, and should not be considered in isolation from, or as a substitute for, the analysis of other GAAP financial measures. Other companies may not use these non-GAAP measures or may use similar measures that are defined in a different manner. Therefore, SoFi's non-GAAP measures may not be directly comparable to similarly titled measures of other companies.

Reconciliations of these non-GAAP measures to the most directly comparable GAAP financial measures are provided in Table 2 to the “Financial Tables” herein.

SoFi (NASDAQ: SOFI) is a member-centric, one-stop shop for digital financial services on a mission to help people achieve financial independence to realize their ambitions. The company’s full suite of financial products and services helps its nearly 9.4 million SoFi members borrow, save, spend, invest, and protect their money better by giving them fast access to the tools they need to get their money right, all in one app. SoFi also equips members with the resources they need to get ahead – like credentialed financial planners, exclusive experiences and events, and a thriving community – on their path to financial independence.

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