SoFi Technologies, Inc. Q1 FY2025 earnings call

Management Statement and Operational Highlights

• Business Growth: Added a record 800,000 new members in Q1 2025, driving 34% year-over-year growth to 10.9 million members. Added 1.2 million new products, up 35% year-over-year to over 15.9 million products. Adjusted net revenue was a record $771 million, up 33% year-over-year. Adjusted EBITDA was a record $210 million, up 46% year-over-year. EBITDA margin was 27%, and incremental EBITDA margin was 35%. Tangible book value ended the quarter at $5.1 billion, a year-over-year increase of $946 million. Cross buy was strong with 32% of new products opened by existing members.
• Brand Building: Invested in broad-scale branded marketing to build SoFi's brand name, with Unaided brand awareness at 7%. Participated in events like TGL presented by SoFi, SoFi Stadium, and the Country Music Association's CMA Fest. Maintained partnerships with the NBA, sports ambassadors, etc.
• Product Innovation: Financial Services was the fastest-growing segment. SoFi Money business had $27.3 billion in total deposits and over $14 billion in annualized debit spending. Loan platform business grew to an annualized run rate of over $6 billion in originations and over $380 million in high-margin fee-based revenue in less than a year. SoFi Invest product growth accelerated to 2.7 million products, up 21% year-over-year. Tech Platform expanded client base via partnerships like with Wyndham Hotels. Lending segment expanded home equity loans and launched new personal loan and student loan refinancing products. SoFi Relay and SoFi Plus products contributed, with Relay having over 5.1 million products and SoFi Plus members showing strong cross buy behavior.

Segment Performance

• Financial Services: In Q1 2025, net revenue exceeded $300 million, doubling that of Q1 2024. Contribution profit was $148 million, up 4x from the prior year, with a contribution margin of 49%. Net interest income was $173 million, up 45% year-over-year, driven by growth in member deposits. Non-interest income grew 3.2x to $130 million in the quarter, equating to over $0.5 billion in annualized high-quality fee-based income. Revenue per product increased from $59 in Q1 2024 to $88 in Q1 2025. The loan platform business generated $96 million in adjusted net revenue in Q1, up 44% from the previous quarter. LPB business secured new partnerships like a $5 billion deal with Blue Owl Capital and additional $3.2 billion from Fortress and a joint venture. Interchange revenue grew 90% year-over-year.
• Tech Platform: In Q1 2025, net revenue was $103 million, up 10% year-over-year. Contribution profit was $31 million at a contribution margin of 30%. Revenue growth was driven by continued monetization of existing clients and new deals in new client segments.
• Lending: Adjusted net revenue was $412 million in Q1, up 27% from the same period last year. Contribution profit was $239 million with a 58% contribution margin. Net interest income increased 35% year-over-year to $361 million. Total loan originations reached a record $7.2 billion, up 66% year-over-year. Credit performance was strong: personal loan 90-day delinquency rate decreased by 9 basis points sequentially, and annualized charge-off rate declined; student loan 90-day delinquency rate was in line with the prior quarter, and annualized charge-off rate decreased 15 basis points.

Guidance

• Expect to add over 2.8 million members in 2025, representing at least 28% year-over-year growth.
• Revised adjusted net revenue guidance: $3.235 billion to $3.310 billion, up from prior guidance of $3.2 billion to $3.275 billion, representing year-over-year growth of approximately 24% to 27%.
• Revised adjusted EBITDA guidance: $875 million to $895 million, up from prior guidance of $845 million to $865 million, with a 27% margin.
• Revised adjusted net income guidance: $320 million to $330 million, up from prior guidance of $285 million to $305 million. Adjusted EPS guidance: $0.27 to $0.28, up from prior guidance of $0.25 to $0.27.
• Expected growth in tangible book value: $585 million to $600 million for the year, up from prior guidance of $550 million to $575 million.
• For Q2 2025, assuming credit spreads are in line with the range observed year to date, expected adjusted net revenue: $785 million to $805 million; adjusted EBITDA: $200 million to $210 million; adjusted net income: $60 million to $70 million; adjusted EPS: $0.05 to $0.06.

Risks

• Macro-economic conditions and outlook uncertainties could impact business performance.
• Regulatory environment changes may affect operations.
• Intensified market competition could influence market share and profitability.

Question and Answer

Q: Andrew Jeffrey of William Blair asked about whether SoFi could become materially a fee-based business and implications for deposits and interest rate environments.

A: Anthony Noto responded that the mix would increasingly shift to greater fee-based, not just from the loan platform business but also from interchange, referral revenue, etc. The loan platform business could see much larger revenue if deals outside the credit box are done, and the Invest business including crypto would add fee-based revenue.

Q: Kyle Peterson at Needham and Co. inquired about changes in client appetite or decision-making in the tech platform business due to market volatility.

A: Anthony Noto stated that the long-term outlook for the tech platform business remains unchanged. There could be an acceleration in 2026 in new deals and their impact as financial institutions need to innovate to compete.

Q: Dan Dolev from Mizuho asked about the strength of the capital markets.

A: Chris Lapointe replied that the strength of the capital markets, including the loan platform business, remains extremely strong. Q1 saw over $3 billion of personal and home loans sold or transferred at strong execution levels, and there were over $8 billion of LPD partnerships signed, driving acceleration in Q2 volume.

Q: Jeff Adelson from Morgan Stanley asked about the student loan business in case of Congress capping programs and the take rate on the loan platform business.

A: Anthony Noto said SoFi would capture the in-school student loan opportunity if the government backs away from providing such loans. Chris Lapointe mentioned that the take rate on the loan platform business is seeing momentum with improved monetization, and the economics remain healthy.

Q: Unidentified Analyst asked about implications of forward Fed fund expectations on deposit costs and growth.

A: Anthony Noto and Chris Lapointe stated that SoFi has a competitive advantage in deposit APY due to its lending business to fund deposits. Historically, deposit beta is in the 65%-70% range, and the goal is to be 85%-90% member deposit funded. They are confident in maintaining a top-tier APY.

Q: Reggie Smith from JPMorgan asked about underwriting in the current market environment with potential binary outcomes.

A: Anthony Noto said SoFi has an early warning dashboard and credit policy to adjust underwriting standards if needed. Currently, economic indicators don't warrant changing standards, and credit performance remains strong.

Q: Terry Ma at Barclays followed up on Parent PLUS and Grad PLUS opportunity coexisting with the refinance business.

A: Anthony Noto responded that they can coexist. Prepayments need to be factored into loan valuation, and SoFi aims to help people spend less than they make and invest the rest, with the in-school loans and refinance business both part of that mission.