SoFi Technologies, Inc.

Thank you for your patience. The SoFi Q3 2022 earnings conference call will begin shortly. © transcript Emily Beynon Good morning and thank you for attending today's SoFi Q3 2022 earnings conference call. All lines will be muted during the presentation portion of the call with an opportunity for question and answers at the end. At this time, I would now like to turn the conference over to our host, Maura Seer from SoFi Investor Relations. Maura, please proceed.

Thank you and good morning. Welcome to SoFi's third quarter 2022 earnings conference call. Joining me today to talk about our results and recent events are Anthony Noto, CEO, and Chris LaPointe, CFO. You can find the presentation accompanying our earnings release on the investor relations section of our website. Our remarks today will include forward-looking statements that are based on our current expectations and forecasts and involve risks and uncertainties. These statements include, but are not limited to, our competitive advantages and strategy, macroeconomic conditions and outlook, future products and services, and future business and financial performance. Our actual results may differ materially from those contemplated by these forward-looking statements. Factors that could cause these results to differ materially are described in today's press release and our most recent Form 10-K, as filed with the Securities and Exchange Commission, as well as our subsequent filings made with the SEC, including our upcoming Form 10-Q. Any forward-looking statements that we make on this call are based on assumptions as of today, and we undertake no obligation to update these statements as a result of new information or future events. And now, I'd like to turn the call over to Anthony.

Thank you, Maura, and good morning, everyone. Our third quarter results demonstrate the continued resilience of both our team and business and our ability to deliver another quarter of record revenue in EBITDA and strong overall operating results. A few key achievements from the third quarter include our sixth consecutive quarter of record adjusted net revenue of $419 million, up 51% year-over-year, reflecting record revenue in all three business segments. $44 million of record adjusted EBITDA, up 118% quarter-over-quarter. Continued strong performance in member and product additions, as well as cross-buy volume. Further scaling of SoFi Bank with accelerating growth to surpass $5 billion in deposits, up 86% quarter-over-quarter, and savings of 125 basis points on cost of funds versus using other sources of debt to fund loans. Another quarter of positive gap net income for SoFi Bank at $28 million at an 11% margin. Members and products each saw rapid year-over-year growth with continued strong cross-buy trends. The 424,000 new members in Q3 2022 brings total members to 4.7 million, up 61% year-over-year. We also added 635,000 new products in Q3, ending with nearly 7.2 million total products, up 69% year-over-year. Of these new ads, financial services products of 5.9 million at quarter end grew by 83% year-over-year, while lending products of nearly 1.3 million were up 24%. The strength of our results once again underscores how our full suite of differentiated products and services provides the foundation for a uniquely diversified business that is able to endure through market cycles. Now I'd like to spend some time on segment level results with a particular focus on the benefits of a diversified business drivers, as well as the structural advantage of our bank charter. In lending, our personal loan performance more than offset the continued lack of demand in student loan refinancing and the less robust performance of home loans. Student loan refi continues to be negatively impacted as federal borrowers await the end of the moratorium on federal student loan payments. Home loans face macro headwinds from rising rates while we continue the process of transitioning to new fulfillment partners. We originated a record of over $2.8 billion in personal loans in Q3, up 14% from $2.5 billion last quarter, and nearly double the $1.6 billion in Q3 2021. The product continues to deliver, and most importantly, this is while maintaining our strict credit standards and attracting borrowers with high incomes and FICO scores. While these origination levels themselves are impressive, the strength of our balance sheet and diversification of our funding sources provide new options to fund lending growth while driving efficiency with cost savings. These advantages are a direct result of SoFi Bank. Having more flexibility with our balance sheet allows us to generate more net interest margin revenue per loan and optimize returns, a critical advantage in light of the macro uncertainty. Additionally, by using our deposits to fund loans, we benefit from a lower cost of funding for loans and thus more profit per loan. In Q3 alone, the difference in our deposit cost of funds and other sources of debt was approximately 125 basis points versus 100 basis points in Q2. a powerful benefit in a rising rate environment. Lastly, we have a much more compelling value proposition in SoFi checking and savings, as we can invest the greater revenue and profit per loan from the two benefits I just mentioned into an industry leading APY, which drives direct deposit members, resulting in high quality deposits and great levels of engagement. This has led to higher average account balances, even as average spend has increased. We exited the quarter with over $5 billion in total deposits and 85% of SoFi money deposits are from direct deposit members. In fact, 50% of newly funded SoFi money accounts are setting up direct deposit by day 30 versus 37% in the second quarter. And this has had a significant impact on spending. Q3 annualized spend was two times full year 2021 total spend and Q3 annualized spend per average funded account was up 22% quarter over quarter. SoFi Money members increased nearly 72% year over year to 2.3 million accounts while maintaining attractive demographics. In fact, the median FICO score for direct deposit accounts opened in the third quarter was 750. Given the quality of these members, we see ample opportunity for cross-buying in the future. Moving on to financial services more broadly, where net revenue nearly tripled year over year to $49 million and grew 61% from $30 million in Q2. We've continued to achieve strong member and product growth by iterating on products to ensure they are differentiated by four key factors, fast, selection, content, and convenience, and continue to invest to make them work better when used together. We finished Q3 with 5.9 million financial services products, up 83% year over year, and 4.6 times the total lending products of 1.3 million. The increased scale in financial services helps drive cross-buy and marketing efficiencies. Financial services sales and marketing spend as a percentage of net revenue was 58% in Q3 versus 81% the prior quarter and 105% in Q3 of last year. We achieved this improved efficiency even as we continue to scale our top of the funnel products which often do not contribute standalone to revenue for 12 to 18 months. This is due to the increasing monetization and attractiveness of these products, growing brand awareness, and network effects. As mentioned, we continue to iterate and invest aggressively in our product suite, and that investment continues to pay dividends as members embrace our launches. Just in the third quarter, we introduced an increase in our checking and savings APY of up to 2.5% as of September 30th. in addition to the unmatched value proposition, a host of free features, and a unique rewards program. In fact, we're increasing our APY and savings to 3% this week to continue to drive more value for our members. Within SoFi Invest, we introduced new proprietary ETFs to the platform and remain on track to launch the much anticipated options trading product by year end, now in beta testing. We've increasingly utilized our relay platform to acquire, educate and advise our members on their holistic financial picture and their next best move we launched credit alerts in q3 and will continue to add features to drive engagement the relay platform has become a notable source of cross-buying further bolstering the financial services productivity we delivered unprecedented awareness growth as of q3 2022 by delighting our target audience with compelling value propositions reaching our target audience where they are effectively and efficiently, producing winning creative and leveraging data-driven tools to continue to get smarter. Transitioning to the technology platform, a critical element of SoFi's strategy. Not only is this segment a strong revenue and cash flow driver, but its two businesses, Galileo and Technosys, also contribute to two main tenets of SoFi's strategy, faster innovation at lower cost and high return revenue. diversified revenue streams. As a reminder, we're a consumer technology company that delivers financial services products. We need to be a one-stop shop for major financial decisions and all the days in between. To do this, we want to own end-to-end technologies, and that's where our technology platform comes into play. Only we can truly understand the technologies that we need the most. We build them in a way that's both great for us and for everyone else in the ecosystem. In the third quarter, full segment revenue of $85 million grew 69% year-over-year, which included another quarter of record revenue from Galileo with a 23% margin at the segment level or 30% if you exclude technicists. Galileo's overall diversified growth strategy includes growth in new verticals, new products, and new geographies. In Q3, Galileo assigned 10 new clients and made big strides in its strategies. with a strong 30% of new deals in B2B and 40% of new deals outside the United States. Importantly, of these 10 new deals, seven have existing subscribers, portfolios, or payment businesses reflecting continued demand for our services and new use cases for embedded fintechs from more mature organizations. In Q3, we further invested in our push into the B2B segment by shipping two core capabilities. First, Account level controls, which provides self-service opportunities for program managers to set tighter controls in real time at the account level for where and how funds can be spent while reducing fraudulent transactions. And second, real-time funding, which automatically funds an account in real time during the transaction process, optimizing the working capital needs of our SMB customers. I'll finish here by saying that we've been in an all-out sprint over the last five years to build out our digital product suite to meet our members' needs for every major financial decision in their lives in all the days in between. The benefits of our strategy to build a uniquely diversified business, combined with a national bank charter, not only position SoFi to be the winner it takes most in the sector transition of financial services to digital, but also provide greater durability through a market cycle. I'm excited about where we are today and even more excited about where we can go from here. With that, let me turn it over to Chris to review the financials for the quarter.