SoFi Technologies (NASDAQ:SOFI) Inc. reported its Q3 2023 earnings, marking the 10th consecutive quarter of record revenue and the fifth consecutive quarter of adjusted EBITDA growth. The company also announced its target to achieve GAAP profitability by Q4 2023 and maintain it in subsequent years.
Key takeaways from the earnings call:
- SoFi reported adjusted net revenue of $531 million, a 22% YoY increase, and adjusted EBITDA of $98 million.
- The company added 717,000 new members in Q3 2023, bringing the total to nearly 7 million.
- SoFi Bank reported $84.8 million of GAAP net income at a 19.3% margin.
- The company launched a corporate credit solution, expanded its Buy Now Pay Later offering, and introduced an innovative debit card program to improve credit scores.
- Deposits reached $15.7 billion, a sequential increase of $2.9 billion.
SoFi's strong performance in Q3 was driven by diversified growth across its three business segments: Lending, Tech Platform, and Financial Services. The Lending segment saw growth in net interest income and originations across personal loans, student loans, and home loans. The Tech Platform segment delivered a record net revenue of $90 million, while the Financial Services segment achieved new highs in revenue and product ads.
The company's strategic shift towards larger, more durable customers and expansion into other verticals, such as the B2B channel, contributed to its robust financial performance. SoFi also highlighted its focus on non-financial institutions and financial institutions with large customer bases to drive revenue growth.
During the call, SoFi provided an updated outlook for the full year 2023, expecting revenue of $2.045 billion to $2.065 billion and EBITDA of $386 million to $396 million. The company expects to deliver higher revenue and EBITDA for the full year of 2023.
SoFi's CEO, Anthony Noto, discussed the company's profitability outlook. He stated that they expect to generate positive GAAP earnings in the fourth quarter of this year and are committed to maintaining positive GAAP earnings throughout 2024. While they are still in investment mode, they aim to balance growth and profitability. Noto mentioned that they have been ahead of their target for incremental EBITDA margins and GAAP net income margins this year.
In terms of capitalization, the company remains well-capitalized with strong liquidity and a diverse revenue stream. The total capital ratio at the end of the quarter was 14.5%, comfortably above the regulatory minimum of 10.5%. SoFi continues to focus on underwriting high-quality credit and scaling its business.
On the sales and marketing side, SoFi expects increased efficiency as they drive native brand awareness higher. They highlighted the macro factor of scaling unaided brand awareness for greater efficiency. The company also discussed the movement in discount rates for personal loans and student loans, attributing the increase to various factors.
Looking ahead, SoFi emphasized the need to balance growth and profitability, with plans to generate positive GAAP earnings in Q4 and throughout 2024. The company aims for 30% incremental EBITDA margins and 20% incremental GAAP net income margins. SoFi believes it is well-positioned to lead the digital transformation of financial services.
InvestingPro Insights
According to real-time data from InvestingPro, SoFi Technologies Inc. holds a market capitalization of $6590M USD, with a P/E ratio of -27.22 as of Q2 2023. The company's revenue for the last twelve months as of Q2 2023 is $1798.55M USD, showing a growth of 47.38%. However, the stock's price has fallen significantly over the last three months, as indicated by a 3-month price total return of -28.06%.
InvestingPro tips suggest that despite SoFi's consistent increase in earnings per share, the company's revenue growth has been slowing down recently. Furthermore, SoFi's stock is currently in oversold territory according to the Relative Strength Index (RSI). This could indicate a potential buying opportunity for investors who believe in the company's long-term prospects.
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