Personal-loan origination volumes shot up 46% in the first quarter
Shares of SoFi Technologies Inc. were dropping nearly 12% in midday trading Monday, even as the financial-services company easily topped earnings expectations for its latest quarter while calling out continued strength in personal lending.
Looking past the headline numbers, there could be two factors spooking investors, Mizuho analyst Dan Dolev told MarketWatch. The first is that SoFi (SOFI) reported 126 million accounts during the first quarter for its technology-platform business, which lets companies build financial services offerings, down from 131 million in the fourth quarter.
Chief Executive Anthony Noto said on the earnings call that the company’s technology-platform business “is in a transition from a lot of small accounts and earlier-stage startups to fewer, larger, durable customers,” a shift he expects to bring greater economic opportunity going forward.
But there’s a “worry out there that there’s a lot more competition in next-gen issuer processors,” Dolev said, and a “negative data point” like what was seen in the first-quarter results could help feed those concerns. It’s the same fear that’s haunting Marqeta Inc. (MQ), noted Dolev, though he’s bullish on SoFi’s stock.
The second factor is that while SoFi moved its full-year revenue forecast to $1.955 billion-$2.02 billion, up from a prior range of $1.925 billion-$2 billion, the company didn’t increase the outlook by the amount of its first-quarter revenue beat.
SoFi also now expects $268 million to $288 million in full-year adjusted earnings before interest, taxes, depreciation and amortization (Ebitda), up from a prior forecast calling for $260 million to $280 million. That guidance bump didn’t flow through the full amount of the first-quarter beat either, Dolev noted.
SoFi “could’ve raised by a bit more,” he said, though overall, SoFi posted “actually a really good quarter.”
The company reported a first-quarter net loss of $34 million, or 5 cents a share, whereas it recorded a loss of $110 million, or 14 cents a share, in the year-prior period. Analysts tracked by FactSet were expecting 8 cents a share in GAAP earnings.
SoFi also posted adjusted Ebitda of $76 million, up from $9 million a year before and above the $42 million that analysts tracked by FactSet had been expecting.
GAAP revenue rose to $472 million from $330 million, while analysts were anticipating $436 million.
The company saw more than 433,000 new-member additions in the period, bringing its total member count up to almost 5.7 million by the end of the quarter.
Personal-loan origination volumes shot up 46% to $2.95 billion, which the company said in a release was “aided by years of investment in technology to automate and accelerate the application-to-approval process for qualified borrowers and constant testing of risk controls and underwriting models to maintain high credit quality.”
The strength in personal lending helped to make up for softer trends in the student-lending and home-lending segments. SoFi saw $525 million in student-loan origination volume during the first quarter, down 47% from a year before, and $90 million in home-loan origination volume, down 71%.
SoFi’s student-loan business has been weighed down by the student-loan repayment moratorium, while the home-loan business has felt pressure from interest-rate trends and continued issues with SoFi’s fulfillment partners.
For the second quarter, SoFi said it expects $470 to $480 million of adjusted net revenue, while analysts were expecting $473 million, along with $50 to $60 million of adjusted Ebitda. The FactSet consensus was for adjusted Ebitda of $50 million.