Fintech Startup Exceeds Expectations with Strong Membership and Loan Growth
Shares of SoFi Technologies Inc. (SOFI) skyrocketed over 30% in premarket trading Monday after the fintech startup reported its first-ever quarterly profit. SoFi swung to net income of $2 million, or 2 cents per share, in the fourth quarter from a loss of $111 million, or 14 cents per share, a year earlier.
Analysts were expecting the company to post a loss of 1 cent per share, according to Refinitiv. Revenue jumped 57% to $456 million, topping expectations of $410.3 million.
SoFi also raised its outlook for 2023, now expecting adjusted net revenue of $1.535 billion to $1.555 billion versus prior guidance of $1.508 billion to $1.528 billion. Adjusted EBITDA is seen at $115 million to $120 million compared to the earlier outlook of $104 million to $109 million.
“We delivered strong fourth quarter and full year 2022 results highlighted by accelerating member and product growth, expanding cross-buy and exceptional momentum in our financial services offerings,” said Anthony Noto, CEO of SoFi.
Key Numbers Show Strength Across Business Segments
SoFi saw robust growth in members, products, and cross-buying. Total members reached 5.01 million at the end of 2022, up 61% from a year earlier. Fueled by student loan refinancing and personal loans, SoFi’s lending business generated $1.7 billion in originations during the quarter, up 69% year-over-year.
| Key Metric | Q4 2022 | Change YOY |
|---|---|---|
| Adjusted Net Revenue | $456 million | +57% |
| Adjusted EBITDA | $43 million | Positive vs loss in Q4 2021 |
| Members | 5.01 million | +61% |
| Products Per Member | 3.02 | +10% |
The company’s financial services segment also showed momentum, with assets under management in SoFi Invest, SoFi Money cash accounts, and SoFi Relay business accounts all more than doubling from the same quarter a year ago.
Profitability Ahead of Schedule on Revenue Strength
SoFi’s swing to profitability comes much sooner than analysts were anticipating, as the company continues to leverage its member base and cross-selling of products. Adjusted EBITDA also turned positive in the quarter after losses through the first three quarters of 2022.
The earlier than expected profitability demonstrates “the strength of SoFi’s diversified business model as well as excellent operational and cost discipline execution,” wrote Mizuho analyst Dan Dolev.
JP Morgan analyst Mario Lu added that growth trends for key products like personal loans and SoFi Invest “continue to impress.” He noted that contribution margins are rising across lending and financial services, driving overall company margins higher as well.
Student Loan Moratorium Expiration Adds Tailwind
SoFi is also likely to get a boost now that the federal student loan moratorium has expired. The company has been limited from refinancing existing federal student loans while they were under the payment pause, but can now expand with new refinancing volume.
Noto said on the earnings call that SoFi saw record consolidation loan application volume in January as the moratorium lifted. With over $1.6 trillion in outstanding federal student loans, lenders like SoFi stand to capitalize on a wave of borrowers looking to lower rates in the coming months.
Growth To Continue in 2023, Profitability Within Reach
SoFi issued full-year 2023 guidance well above Wall Street’s expectations, signaling strong momentum throughout the business. Adjusted net revenue is forecast to climb 43% year-over-year at the midpoint.
The company sees adjusted EBITDA nearing breakeven levels this year at $115-120 million – a dramatic swing from the $299 million loss posted for 2022. SoFi appears on track to deliver sustainable GAAP profitability in the near future as well if current trends continue.
While some analysts point to risks from higher interest rates and potential recession leading to increased loan defaults, SoFi’s membership focus and product breadth help insulate against a downturn. The company now has over 5 million members and 3 million products per member, demonstrating the leverage in its model.
As JP Morgan’s Lu summarized, “higher rates may bring near term headwinds but membership growth and cross-buy should help offset.” He added “SoFi’s growth profile appears best-in-class” amongst fintech competitors.
With the blockbuster Q4 report and strong 2023 guidance, SoFi seems ready to deliver on its goal to build “a digital one-stop shop for finance” – and drive robust returns for investors along the way.
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