SoFi Technologies, Inc. (SOFI) Q3 2025 Earnings Call Transcript

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Overview

The earnings call highlights record high personal and home loan originations, strong net interest income, and a significant increase in deposits. Positive developments in student loan refinancing and membership growth, along with strategic focus on AI and blockchain, further bolster optimism. Despite some vague responses in the Q&A, the overall sentiment remains positive due to strong financial performance and optimistic guidance, suggesting a likely stock price increase of 2% to 8% over the next two weeks.

Key Financial Performance

Adjusted net revenue $950 million, up 38% year-over-year. This growth was powered by strong member and product growth.

Financial Services and Technology Platform revenue $534 million, up 57% year-over-year. This segment now represents 56% of total revenue, marking the first time these segments have generated more than $0.5 billion of quarterly revenue.

Lending segment adjusted net revenue $481 million, up 23% year-over-year. This was driven by strong originations of $6.6 billion, up 23% from the prior year.

Total originations $9.9 billion, a record high, up $1.2 billion from the prior record. This includes $3.4 billion of originations in the loan platform business.

Fee-based revenue $409 million, up 50% year-over-year. This was driven by strong performance from the loan platform business, origination fees, referral fees, interchange revenue, and brokerage fee revenue.

Adjusted EBITDA $277 million, up nearly 50% year-over-year. The adjusted EBITDA margin for the quarter was 29%, with an incremental EBITDA margin of 35%.

Net income $139 million, with a margin of 14%. Earnings per share were $0.11. This reflects profitability and strong returns.

Tangible book value $7.2 billion, more than doubled over the past 2 years. This includes the benefit from a successful opportunistic capital raise during the quarter.

Financial Services segment net revenue $420 million, up 76% year-over-year. Contribution profit was $226 million, up nearly 2.3x from last year, with a contribution margin of 54%.

Loan platform business adjusted net revenue $168 million, up 29% from the previous quarter. This was driven by $3.4 billion of personal loans originated on behalf of third parties and referrals.

Tech Platform segment net revenue $115 million, up 12% year-over-year. Contribution profit was $32 million, with a contribution margin of 28%.

Personal loan originations $7.5 billion, a record high, up 53% year-over-year. This includes $3.4 billion originated on behalf of third parties through the loan platform business.

Student loan originations $1.5 billion, up 58% year-over-year. This reflects strong demand for refinancing student debt at more affordable rates.

Home loan originations $945 million, a record high, nearly 2x year-over-year. This growth was driven by the launch of a home equity loan product.

Net interest income $428 million, up 35% year-over-year. This was primarily driven by growth in member deposits.

Total deposits $32.9 billion, up $3.4 billion from the previous quarter. This growth was driven by member deposits.

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Operating Highlights

SoFi Pay: Launched a blockchain-based payment product for fast, low-cost international payments. Initially available for transfers to Mexico, with plans to expand to Europe and South America. Future integration with SoFi USD stablecoin planned for 2026.

Crypto Services: Relaunching the ability to buy, sell, and hold crypto assets directly in the SoFi app. Plans for a broader crypto and blockchain product roadmap in 2026.

AI-driven Tools: Introduced AI-driven Cash Coach to optimize cash utilization and provide financial suggestions. Plans to expand to a comprehensive SoFi Coach in 2026 for broader financial insights and recommendations.

SoFi Smart Card: Launching a new card with features like 5% back on food, high deposit interest rates, and credit builder capabilities.

NFL Partnership: Partnered with NFL MVP Josh Allen to promote SoFi Plus, increasing unaided brand awareness by 35% among NFL fans.

Southwest Airlines Partnership: Announced a partnership to power Southwest Airlines' Rapid Rewards debit card, expanding embedded financial product offerings.

Member Growth: Added 905,000 new members in Q3, reaching 12.6 million total members, a 35% year-over-year increase.

Product Growth: Added 1.4 million new products in Q3, totaling 18.6 million products, a 36% year-over-year increase.

Revenue Growth: Achieved record adjusted net revenue of $950 million in Q3, up 38% year-over-year.

Fee-based Revenue: Generated $409 million in fee-based revenue, up 50% year-over-year, reflecting a shift towards capital-light revenue streams.

Technology Supercycles: Positioning to benefit from AI and blockchain supercycles, with plans to leverage these technologies for financial services innovation.

Capital Raise: Raised $1.7 billion in new capital to strengthen the balance sheet and reduce higher-cost debt.

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Risk or Challenges

Macroeconomic Conditions: The company acknowledges risks and uncertainties related to macroeconomic conditions and outlook, which could impact future business and financial performance.

Regulatory Compliance: The company faces risks related to regulatory compliance, especially as it plans to expand into areas like crypto and blockchain, which are subject to evolving regulations.

Credit Performance: While credit performance remains strong, there are moderate signs of stress in the market, which could impact loan repayment rates and overall financial health.

Private Credit Market Concerns: Concerns in the private credit markets could pose challenges, although the company has seen a flight to quality in its loan platform business.

Technology and Product Execution: The company is heavily investing in new technologies like AI and blockchain, which carry execution risks and uncertainties about adoption and ROI.

International Expansion: Plans to expand internationally with products like SoFi Pay and stablecoins introduce risks related to market entry, competition, and regulatory compliance in new regions.

Interest Rate Environment: The higher interest rate environment could impact the company's lending and home loan businesses, as well as consumer borrowing behavior.

Capital Allocation: The company is accelerating investments in new products and technologies, which could strain financial resources if not managed effectively.

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Guidance & Outlook

Member Growth: SoFi expects to add approximately 3.5 million members in 2025, representing a 34% year-over-year growth, up from the prior guidance of 3 million members and 30% growth.

Revenue Growth: Adjusted net revenue for 2025 is projected to be approximately $3.54 billion, reflecting a 36% year-over-year growth, an increase from the prior guidance of $3.375 billion and 30% growth.

Adjusted EBITDA: SoFi anticipates adjusted EBITDA of approximately $1.035 billion for 2025, with a 29% margin, up from the prior guidance of $960 million.

Adjusted Net Income: The company expects adjusted net income of approximately $455 million for 2025, an increase from the prior guidance of $370 million.

Adjusted EPS: Adjusted earnings per share (EPS) for 2025 is expected to be approximately $0.37, up from the prior guidance of $0.31. For Q4 2025, adjusted EPS is projected to be approximately $0.12.

Tangible Book Value Growth: SoFi projects growth in tangible book value of approximately $2.5 billion for 2025, significantly higher than the prior guidance of $640 million.

Technology Super Cycles: SoFi plans to leverage AI and blockchain technology super cycles in 2026 and beyond to drive innovation and growth, including the launch of SoFi USD stablecoin and AI-driven tools like SoFi Coach.

International Expansion: SoFi plans to expand its SoFi Pay product to Europe and South America in the near future, with further plans to offer the app natively in international markets by 2026.

Product Innovation: The company will relaunch the ability to buy, sell, and hold crypto assets in Q4 2025 and plans to launch the SoFi USD stablecoin in 2026. Additionally, SoFi will introduce the SoFi Smart Card and expand AI-driven tools like SoFi Coach in 2026.

Home Loans: SoFi is preparing for lower interest rates to accelerate its home loans business in 2026, targeting its 3 million members with mortgages elsewhere and first-time homebuyers.

Loan Platform Business: The loan platform business is expected to continue its growth trajectory, with demand from partners increasing and annualized originations projected at over $13 billion.

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Shareholder Return Plan

The selected topic was not discussed during the call.

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Key Q&A

Q:Can you give an overview of the health of consumer credit across different FICO trenches?

A:Anthony Noto stated that SoFi's credit is performing very well across all products. He emphasized the company's focus on loan quality over quantity, ensuring durability through economic and interest rate cycles. Net charge-offs have declined, and SoFi remains vigilant, maintaining a life loan loss target of 7%-8%, which they are currently below. Chris Lapointe added that demand from capital markets partners is strong, indicating a flight to quality.

Q:How will the lower rate environment affect the volume mix on the lending side, particularly for student loan refinance activity?

A:Anthony Noto explained that as rates come down, SoFi's student loan business will benefit significantly, offering savings on high federal student loan rates. The home equity and real estate markets will also benefit from lower rates. He highlighted SoFi's competitive advantage in offering superior yields due to its broad product portfolio and insured deposit institution status. Chris Lapointe added that SoFi has maintained healthy NIM margins and expects deposit betas to remain at 65%-70%.

Q:What are your thoughts on the competitive environment and membership growth?

A:Anthony Noto attributed membership growth to increased unaided brand awareness, new product launches, and efficient marketing strategies. He highlighted SoFi's goal to launch new products like buy, sell, and hold crypto by year-end and expand SoFi Pay internationally. He emphasized the importance of maintaining efficient marketing and brand awareness spending to drive growth.

Q:Does faster growth in nonpersonal loans change your funding strategy?

A:Anthony Noto stated that funding from deposits drives durability and confidence in lending, but dependency on deposits will likely reduce over time. He mentioned initiatives to diversify funding, including leveraging blockchain technologies. Chris Lapointe added that 56% of revenue now comes from tech platform and financial services, showing diversification.

Q:Was the growth in the loan platform business broad-based or concentrated?

A:Chris Lapointe noted that growth was across both new and existing partners, with existing partners increasing their commitments. He mentioned a flight to quality, with partners consolidating purchases to fewer platforms, benefiting SoFi.

Q:Can you frame the investment cycle and areas of focus?

A:Anthony Noto explained that SoFi balances growth and profitability, maintaining a 30% incremental EBITDA margin. Investments focus on iterating existing products, launching new ones like SoFi Plus and the smart card, and leveraging AI initiatives. He highlighted the upcoming launch of buy, sell, and hold crypto and a SoFi USD stablecoin, emphasizing their differentiation as a Tier 1 bank.

Q:What are your thoughts on the competitive dynamic in the personal loan business?

A:Anthony Noto stated that competition in personal loans is mainly from non-large banks, as large banks focus on credit cards with high interest rates. He emphasized SoFi's leadership in offering lower rates for prime and super prime customers. Chris Lapointe added that personal loan originations grew 53% year-over-year, with SoFi maintaining a 15% market share in unsecured loans.

Q:What is your perspective on the student loan opportunity and potential government actions?

A:Anthony Noto expressed optimism about potential government actions, such as selling student loan portfolios or reducing borrowing limits. He highlighted SoFi's ability to fill gaps left by the government and the profitability of their in-school loan business. He also mentioned opportunities in new types of loans tailored to evolving professional environments.

Q:Review of Unclear Management Responses

A:Management avoided providing specific details on the number of buyers on the loan platform and the exact capacity for the next quarter. They also used vague language when discussing the process for upsizing commitments from partners, providing limited clarity on the specifics.

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Earnings Word Cloud

The most frequently occurring keywords in this quarter's earning call

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