SoFi Technologies : Second Quarter 2023 Transcript

TRANSCRIPT

07 - 31 - 2023

SoFi Technologies

Q2 Earnings Call

TOTAL PAGES: 25

SoFi Technologies

Q2 Earnings Call

CORPORATE SPEAKERS:

Maura Cyr

SoFi Technologies, Inc.; Investor Relations

Anthony Noto

SoFi Technologies, Inc.; CEO & Director

Christopher Lapointe

SoFi Technologies, Inc.; Chief Financial Ofcer

PARTICIPANTS:

John Hecht

Jeferies LLC; MD & Equity Analyst

Dan Dolev

Mizuho Securities USA LLC; MD & Senior Equity Research Analyst

Michael Perito

Keefe, Bruyette, & Woods, Inc.; MD

Kevin Barker

Piper Sandler & Co.; MD & Senior Research Analyst

Andrew Jefrey

Truist Securities, Inc.; Director

Mihir Bhatia

BofA Securities; VP in Equity Research & Research Analyst

Eugene Simuni

MofettNathanson LLC; Analyst

Michael Ng

Goldman Sachs Group, Inc.; Research Analyst

Reginald Smith

JPMorgan Chase & Co; Computer Services & IT Consulting Analyst

Dominick Gabriele

Oppenheimer & Co. Inc.; Director & Senior Analyst

Timothy Chiodo

Crédit Suisse AG; Director

Robert Wildhack

Autonomous Research US LP; US Capital Markets Specialty Financials Analyst

PRESENTATION:

SoFi Technologies

Q2 Earnings Call

Operator^ Good morning, and thank you for attending today's SoFi Second Quarter 2023 Earnings Conference Call.

(Operator Instructions) At this time, I would now like to turn the conference over to our host, Maura Cyr, from SoFi Investor Relations. Maura, please proceed.

Maura Cyr^ Thank you, and good morning. Welcome to SoFi's Second Quarter 2023 Earnings Conference Call.

Joining me today to talk about our results and recent events are Anthony Noto, CEO; and Chris Lapointe, CFO. You can fnd the presentation accompanying our earnings release on the Investor Relations section of our website.

Our remarks today will include forward-looking statements that are based on our current expectations and forecasts and involve risks and uncertainties. These statements include, but are not limited to, our competitive advantage and strategy, macroeconomic conditions and outlook, future products and services, and future business and fnancial performance. Our actual results may difer materially from those contemplated by these forward-looking statements. Factors that could cause these results to difer materially are described in today's press release and our most recent Form 10-K as fled with the Securities and Exchange Commission as well as our subsequent flings made with the SEC, including our upcoming Form 10-Q. Any forward-looking statements that we make on this call are based on assumptions as of today. We undertake no obligation to update these statements as a result of new information or future events.

And now I'd like to turn the call over to Anthony.

Anthony Noto^ Thank you, and good morning, everyone. The second quarter at SoFi marked our ninth consecutive quarter of record revenue and fourth consecutive quarter of record adjusted EBITDA. These results were bolstered by record revenue in both our Technology Platform business segment and our Financial Services business segment, which was fueled by record member additions, coupled with strong monetization trends. These results, which we achieved despite market volatility and

SoFi Technologies

Q2 Earnings Call

industry disruption, refect the unique diversifcation of our businesses and the strong execution by our world-class team.

I am incredibly excited to discuss what we've accomplished. I'm even more excited about what is in store for us over the next several quarters as the key underlying trends in each of our segments are indicating continued momentum across the business. A few key fnancial achievements from the second quarter include: record adjusted net revenue of $489 million, up 37% year-over-year; record adjusted EBITDA of nearly $77 million, representing a 43% incremental margin and a 16% consolidated margin. At the company level, we saw an incremental GAAP net income margin of 36%, which resulted in a loss of just $48 million. At SoFi Bank, we had over $63 million of GAAP net income at a margin of 17%.

From a balance sheet perspective, our unique value proposition in SoFi continues to fuel high-quality deposits that increased by $2.7 billion sequentially, and we ended the quarter with nearly $12.7 billion in deposits. Importantly, more than 90% of our consumer deposits are from sticky direct deposit members and nearly 98% of our deposits are insured. Our cash and cash equivalents, excluding restricted cash, increased by $528 million since March 31 to $3 billion, reinforcing our strong liquidity position.

We grew our tangible book value by $14 million. We remain well on track for GAAP proftability by Q4 and a few trends stand out in support of this anticipated achievement. Lending net interest income of $232 million exceeded Lending directly attributable expenses of $139 million. Adjusted EBITDA of $77 million exceeded stock-based compensation expense of $76 million for the second consecutive quarter. And Financial Services contribution loss improved by $20 million versus Q1 2023 to a loss of just $4 million well on its way to reaching positive contribution proft.

From a member and product perspective, I would highlight the following: we added a record number of 584,000 new members in Q2 '23, bringing total members to 6.2 million, up 44% year-over-year. Our second highest quarter ever of new products in Q2 of 847,000 brought total products to 9.4 million, up 43% year-over-year. Financial Services products of 7.9 million at quarter end grew by 47%, while Lending products of over 1.5 million were up 25% year-over-year.

SoFi Technologies

Q2 Earnings Call

And lastly, strong growth due to the increasing word-of-mouth virality of SoFi's products as well as our eforts to drive greater unaided brand awareness. As an example, our recent "Changing the face of fnance" campaign, which is challenging society's gender bias with respect to women and personal fnances resulted in over 72 million impressions in the frst fve weeks. We have driven this growth with improving efciency as our full suite of diferentiated products and services has continued to resonate with both new and existing members.

Now I'd like to spend time touching on segment level results and trends. Lending adjusted net revenue of $322 million grew 29% year-over-year. The personal loans business maintained its strength in the quarter as we originated a record $3.7 billion, up 51% from the $2.5 billion in Q2 '22. Our underwriting model and our focus on high-quality credit have resulted in dependable performance of these loans as our annualized net charge-of rate was lower quarter-over-quarter at 2.94%. Within student loans, we had another quarter of low origination levels, but for the frst time in three years, we have clarity for the business as we look toward the latter half of this year.

Within home loans, we nearly tripled our originations sequentially, aided by the increased capacity and capabilities via our small acquisition at the beginning of the quarter. Increased capacity and functionality allowed us to launch VA loans helping deserving veterans fnd homes with exclusive rates, no origination fees, no down payments and dedicated loan ofcers. We continue to fully leverage the benefts of our bank license to drive great economics in both our Lending and Financial Services businesses.

This has resulted in strong net interest income and sequential NIM expansion as lower cost deposits on our balance sheet have grown. As of the end of Q2, 50% of our loans were funded by deposits, and our $2.7 billion of new deposits raised in the quarter was essential in funding our $4.4 billion of total originations in the most cost-efective way. Our lending capacity remains robust with over $20 billion in total capacity to fund loans and meet our liquidity needs: with $13 billion of deposits that have grown by over $2 billion a quarter, $3 billion of equity capital and over $8 billion of warehouse capacity.