SoFi Technologies, the digital personal finance company, announced better-than-expected results for the fourth quarter and full year 2023 on Monday, including its first ever quarterly profit since going public. SoFi’s stock surged over 20% in premarket trading following the news.
Q4 Financial Highlights
- Revenue increased 57% year-over-year to $594.2 million, beating estimates
- Net income was $37.2 million compared to a net loss of $111.0 million in Q4 2022
- Adjusted EBITDA soared 156% to $84.4 million
- Added 377,000 new members in Q4, up 44% year-over-year
- Ended the year with over 4.8 million members
“Q4 was an outstanding quarter for SoFi. We achieved record adjusted net revenue along with our first full quarter of GAAP profitability, generated robust growth across our three business verticals, and added a record number of new members,” said Anthony Noto, CEO of SoFi.
SoFi delivered such strong results by executing on its strategy of Cross-Buy and driving increased engagement from its existing member base. Nearly 40% of loan originations in Q4 came from multi-product members.
Details on Business Segments
Lending
- Total originations were $4.3 billion, up 53% year-over-year
- Personal loans originations increased 96% to $1.5 billion
- Student loan originations jumped 52% to $242 million
- Home loans originations rose 9% to $1.3 billion
SoFi has continued gaining share in key lending products like personal loans and student loans. The student loans business saw tailwinds from recently extended federal student loan payment pause.
“We feel great about the momentum in our lending franchise with $4.3 billion of originations in the quarter, up 53% year-over-year,” said Noto.
Financial Services
- Record adjusted net revenue of $65 million, up 206%
- Over 377,000 new SoFi Money, Invest, and Relay users added in Q4
- Ended year with nearly 1.7 million products, up over 100%
SoFi saw increased consumer adoption of its financial services products in Q4. The company is penetrating the massive wealth management market through faster user growth of SoFi Invest.
“We added a record 377 thousand net new members reflecting the increased awareness of the brand, as well as stellar products and services that members love and value,” Noto commented.
| Key Full Year 2023 Metrics | Year-Over-Year Growth |
|---|---|
| Total Members | 61% |
| Products | 117% |
| Adjusted Revenue | 54% |
| Adjusted EBITDA | 205% |
Technology Platform
- Revenue increased 51% year-over-year to $70.8 million
- Adjusted EBITDA margin expanded to 29.9%, showcasing ability to scale
- Galileo accounts reached 115 million, up 44%
SoFi’s technology platform business continued its rapid expansion through Galileo’s partnerships with leading fintechs. Galileo grew accounts 44% in 2023 while improving profitability.
2024 Full Year Guidance
In addition to the strong fourth quarter results, SoFi issued an upbeat outlook for 2024. Management guided for:
- Revenue of $1.57-$1.6 billion, ahead of estimates of $1.56 billion
- GAAP net income of $100-$120 million
- Adjusted EBITDA of $330-$360 million
SoFi’s initial 2024 forecast implies continued robust growth in the business alongside further profitability gains.
“We expect full year 2024 GAAP Net income between $100 million and $120 million demonstrating the operating leverage in our model,” said CFO Chris Lapointe.
Analyst Commentary and Reactions
SoFi’s big fourth quarter earnings beat sparked a wave of bullish analyst notes as expectations were exceeded across the board.
Mizuho analyst Dan Dolev lifted his price target to $9 from $8 while keeping a Buy rating. He was very encouraged by momentum in member adds and cross-buying trends.
“Do we think SOFI will post profits every single quarter? No. But this quarter definitively puts to rest the notion that fintech/hypergrowth cos can’t make $$ over the long run,” Dolev wrote.
JPMorgan analyst Richard Shane also raised his price objective on SoFi stock to $8 from $6. He pointed to better profitability translating into a higher valuation.
“SOFI posted solid 4Q results with stronger-than-expected revenue and user growth and margin expansion,” Shane commented.
SoFi results also received positive reactions on social media:
$SOFI up 20% on earnings (yes, actual earnings) surprise. As the fintech turned the corner? My latest for @InvestorPlace. https://t.co/H3mMlv2dk6
— Paul R. La Monica (@LaMonicaBuzz) January 29, 2024
SoFi with its first ever quarterly profit. Fintech believers have to be psyched $SOFI
$SOFI reported earnings this morning posting numbers of
EPS of $0.02 beating expectations of $0.00
Revenue of $594M beating expectation of $572M— Evan (@StockMKTNewz) January 29, 2024
$SOFI reports adjusted net revenue for the quarter ended December 31, 2022 of $443 million (no adjustments in the year ago quarter), an increase of 74% year-over-year, and 57% compared to the third quarter of 2022.
Based on the significant Q4 beat and strong initial 2024 outlook, most analysts raised their targets and see substantial upside for SoFi stock over the next 12 months.
Final Take
SoFi’s first ever quarterly profit was a major milestone that validated the company’s growth trajectory and path to profitability. Increased scale has allowed SoFi’s unique hybrid model spanning multiple finance verticals to drive strong operating leverage.
The fintech continues gaining market share across lending and financial services. SoFi also benefits from its industry-leading technology platform arm Galileo. With momentum accelerating, 2023 guidance calling for 100%+ GAAP net income growth, and a long growth runway across business lines, SoFi looks poised to continue its success story.
What’s Next for SoFi Stock
In the near-term, SoFi shares will likely continue pushing higher following this earnings breakout. However, there could be some consolidation around these levels as the stock has made a big move in a short timeframe.
Longer term, analysts and investors have become much more constructive on SoFi’s outlook after this quarterly beat. Profitability milestones coupled with strong top line growth and user traction have strengthened the bull case.
If SoFi can consistently execute and translate revenue gains into earnings leverage over 2024, more upside could be in store for the stock price. Considering the latest results and guidance, SOFI still trades at a reasonable mid-teens price-to sales multiple on 2024 estimates.
As SoFi expands its flywheel business model and grows lifetime value per member, analysts argue the stock deserves a premium fintech software multiple. If SoFi achieves sustained profitability in coming quarters alongside member and revenue growth in 70% range annually, shares look positioned to move significantly higher over the next 2 years.
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