SoFi shares soar as earnings bring ‘major upside’ to earnings and growth

Shares of SoFi Technologies Inc. soared in morning trading on Monday after the digital financial services company beat expectations with its latest results and said it expects to be profitable on a GAAP basis of here the fourth quarter of this year.

The company saw its fourth-quarter losses narrow to $40 million, or 5 cents per share, from $111 million, or 15 cents per share, in the year-ago quarter. Analysts had expected a loss of 9 cents per share for the period.

On an adjusted basis, SoFi SOFI,
reported adjusted earnings before interest, tax, depreciation and amortization (Ebitda) of $70 million, ahead of the roughly $5 million in adjusted Ebitda it generated in the year-ago quarter. The FactSet consensus was $43 million.

The shares rose almost 15% in morning trading and are on track to post their third consecutive gain after earnings.

See also: SoFi shares gain after company announces upbeat 2023 earnings forecast

The company saw its fourth-quarter non-interest revenue fall from $136.5 million to $144.6 million as it benefited from an increase in personal loans, but also saw a decline in loans students and home loans.

Personal loans were up 50% year over year, while student loans were down 72% and home loans were down 84% “due to macroeconomic headwinds and continued partner transition real estate loans”. according to SoFi’s statement.

SoFi completed $2.5 billion in personal loans during the quarter. “This strong performance was aided by years of investment in technology to automate and accelerate the approval application process for qualified borrowers and frequent testing of risk controls and underwriting models to maintain our high level of credit quality,” the company said in its release.

“While these origination levels themselves are impressive, the strength of our balance sheet and the diversification of our funding sources provide new options for funding loan growth while driving efficiency with cost savings,” general manager Anthony Noto said during the earnings call, according to a transcript. provided by AlphaSense/Sentieo. “These benefits are a direct result of SoFi Bank,” as SoFi can use deposits as a funding source.

The company saw a 46% increase in total deposits for SoFi Bank in the last quarter, and SoFi noted that the banking portion of the business generated approximately $30 million in net income on a GAAP basis during the past quarter. of what was the third full quarter of its operations. .

“Deposits strengthen and diversify our funding sources, allowing us to offer our best rates on loans, while generating impressive returns and improving net interest income,” Noto said on the call.

The results “look solid, especially given the interest rate and political headwinds that SOFI continues to run,” Jefferies analyst John Hecht wrote in a report.

Looking ahead, Noto said, the company’s growth and overall GAAP net margin improvement “positions us very well in 2023” to “achieve GAAP net income profitability in the fourth quarter.”

“The big hit to revenue and adjusted EBITDA are the main bright spots in Q4 results,” Mizuho analyst Dan Dolev wrote in a note to clients. “Furthermore, the promise of generating a positive GAAP net income in Q4 2023 should be welcomed as GAAP losses have been a key deterrent in 2022 for FinTech investors.”

The company’s fiscal outlook for the first quarter calls for between $40 million and $45 million in Adjusted Ebitda, while analysts had expected $50 million. Management also expects Adjusted Ebitda of $260-280 million for the full year, compared to the FactSet consensus of $246 million.

“In our personal loans business, we expect modest growth as we balance the benefit of sufficient headroom in this business given our current market share and differentiated product with a thoughtful and cautious to ensure that our credit remains of very high quality,” the CFO said. Officer Chris Lapointe said during the results call. “We remain committed to underwriting an industry-leading loan loss lifetime profile.”

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