SoFi Technologies, Inc.

Good morning or good afternoon all. My name is Adam and I will be your conference operator today. At this time, I would like to welcome everyone to the SoFi Technologies Q3 2024 Annex Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you'd like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, that would be star followed by two. Thank you. With that, you may begin your conference.

Thank you and good morning. Welcome to SoFi's third quarter of 2024 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 advantage 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 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. 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.

Good morning. Thanks for joining us today. I'm thrilled to share our results for Q3, which was the strongest quarter in our history. I want to thank our members and clients for continuing to put their trust in SoFi and to thank our team for their absolute grit delivering another great quarter. Our results reflect far more than just 90 days of work. They show how SoFi is consistently achieving durable growth, how our innovation and brand building are attracting more members and clients to our platform than ever before, and how we are delivering strong and improving returns. I'll touch on these three topics before handing it over to Chris, who will share our financial and operating results. First, on SoFi's performance as a durable growth company. Q3 was another record quarter for SoFi. We built on the strong momentum from the first half of 2024, putting us on pace to significantly exceed our 2024 plan and firmly on track toward the three-year outlook we shared at the end of last year. Here are some highlights. Adjusted net revenue reached a record of $689 million in the quarter, a year-over-year acceleration in growth to 30% versus 22% in Q2. the first time financial services makes up more than a third of our total revenue the segment recorded 238 million dollars of revenue in q3 up 102 percent from the prior year i could not be prouder of how we've scaled this segment over the past five years since launching these products through a tumultuous and unpredictable environment to now be a one billion dollar annualized revenue business growing over 100 with strong and improving profitability and frankly It's still day one. Our tech platform grew to nearly $103 million in net revenue, up 14% from the prior year. We continue to see a strong pipeline of potential partners that are striving to modernize their platforms. Combined, our non-lending segments grew 64% year-over-year and drove the company's overall growth of 30%. And now they make up a record 49% of total revenue, up from 39% a year ago, driving an important diversification of our business. We also recorded tremendous growth in key revenue drivers, members, products, as well as revenue per product in the quarter. We added 756,000 new members in Q3. That's up 35% year-over-year to a total of 9.4 million members. We grew products in the quarter by over 1 million to 13.7 million products. That's up 31% year-over-year or 37% when excluding digital asset accounts related to our transfer of crypto services in 2023. The financial services segment drove $964,000 of those new products. Importantly, revenue per product was $81, up 52% from a $53 a year ago. We believe there remains substantial upside in both product growth and monetization. Our one-stop shop continues to attract great cross-buying behavior by our members. In fact, 32% of new products were opened by existing SoFi members and 20% of our new members open a second product in their first 30 days. This is the power of the flywheel we have developed. In our tech platform, we reached over 160 million total accounts. That's up 17% year-over-year. Overall, we're making incredible progress in our shift towards more fee-based capital light and lower risk revenue sources. Combined, fee-based revenue made up $174 million, or a quarter of our adjusted net revenue in Q3. This revenue grew by 65% year-over-year. On an annualized basis, that's nearly $700 million in revenue. This progress was driven by a record quarter in our loan platform business, which totaled $56 million in fee-based revenue and is up more than 5x year-over-year, as well as strong growth in interchange, which is up 2x year-over-year. Chris will share more details on these areas in a few moments. On top of all this work to diversify our revenue base to capital light, high return on equity and fee based revenue, we also grew our lending segment in Q3. We seized on the improving rate environment in the quarter, our improving credit trends and strong performance across all lending products to achieve a record $6.3 billion in loan volume and $392 million in adjusted net revenue of 14% year over year. Looking back at the progress we've made over the past several years, it's fair to say that SoFi is battle tested. Given the scale, profitability, and growth we have recorded for the total company in 2024 with our largest and most profitable business lending barely growing. It should now be crystal clear that SoFi can drive sustained growth across the cycle. We've achieved 17 of 19 quarters of record revenue through a recession, a pandemic, 150 basis point rate drop, damage to our largest and most profitable business, student loan refinance, only to face a 500 basis point increase in rates and the collapse of venerable financial institutions in our neighborhood. The innovations we have driven to scale our non-lending revenue, which are capital light and high ROE, have enabled us to grow our total revenue by more than 20% year-over-year for 17 consecutive quarters, as well as grow both our members and products by 35% or more year-over-year excluding digital asset accounts transferred in 2023. Our performance in the hard times is what gives me the strong confidence in our future. Today, we face fewer headwinds than any point in our history. We're heading into 2025 with the most favorable conditions of the last seven years with declining rates and a stable economy. With the most diverse business we've ever had, with more members in our ecosystem and more products that serve their needs than ever before. This brings me to my second topic, the innovation and brand building that drive our durable growth. The market for consumer financial services is massive and historically poorly served. A Mintel report found that just this year, one in five US adults have been in the market for a new savings account. A similar number are looking for new credit cards. Those markets, not to mention those looking for new investment accounts, new checking accounts, new personal loans, new mortgages, and buy now, pay later, all grew year over year. Meeting all of a person's financial needs in one place with world-class products delivered seamlessly and digitally gives us a massive advantage. This is why you'll often hear me say it's a matter of when, not if, we become a top 10 financial institution. To do so, it's absolutely critical that we build the unaided brand awareness to become a trusted household brand name. The awareness we generate for SoFi is highly effective at getting people to try a product. After becoming a member, they cross by into another product, then another. They recommend SoFi to others. This flywheel that we've created drives acquisition costs down over time and reliably generates profits that we can invest in new product innovations to serve even more of our members' needs. Our accomplishments in Q3 demonstrate the power of this virtuous cycle. First, we continue to establish SoFi as a trusted household name. We ended Q3 with our highest average unaided brand awareness of all time, up nearly 40% year-over-year to 7%. Our highly effective marketing engine continues to reach and engage new audiences. For example, Q3 saw the kickoff of the new NFL season at the award-winning SoFi Stadium. We unveiled a new brand campaign with LA Chargers quarterback Justin Herbert, inspiring people to reach their most important financial ambitions. We also launched new partnerships with Los Angeles Sparks forward Cameron Brink and tennis champion Venus Williams. And coming in January, the TGL presented by SoFi, a new tech-infused arena golf league with an exciting match play format across teams of top PGA Tour golfers like Tiger Woods, Rory McIlroy, Wyndham Clark, Zandra Shuffley, and Justin Thomas, just to name a few. Second, we continue to innovate so people find unique value when they use our products, starting with our financial services segment. In SoFi Invest, we've seen strong engagement driven by new alternative assets, mutual funds, and money market funds we've rolled out over the past year. Overall, we're providing main street investors access to unique investment products, historically reserved for the ultra wealthy like interval funds, private credit, private real estate, and private venture. We also launched our new directed share program, which offers a modern and streamlined approach to equity programs for companies looking to raise capital through IPOs. And we are expanding our award-winning robo offering later this year. Importantly, We are building the invest business cost effectively by appealing to existing members. Seventy percent of signups are existing SoFi members. In SoFi money, we reached record highs in accounts, total deposits, and direct deposit members. We grew member deposits by nearly $2.4 billion, and annualized debit spend reached $10.3 billion in Q3. We will soon improve our self-serve wire transfers which, similar to introducing Zelle, will further expand members' money movement options. In our member team, we're beta testing a new Cash Coach product that will analyze members' cash across all of their financial products at SoFi and beyond and offer various ways to optimize their cash, whether it's paying down expensive debt, setting up an emergency savings fund, getting more yield on their savings, or making investments in a diversified portfolio that is appropriate for their goals. We're also on track to launch improvements to SoFi Plus, our premium membership tier, and our beta testing, a new fee-based subscription option in the coming months. Over time, SoFi Plus will increasingly show the magic of our strategy, deliver incremental and unmatched value across our portfolio of products. In credit cards, we officially launched the everyday cash rewards and the essential credit cards, enabling SoFi to serve more people's spending and borrowing needs whether it's helping them earn rewards or building their credit. In our loan platform business, what started as a decline monetization funnel has now evolved into an integrated loan platform experience, which now offers just in time lending. In Q3, the loan platform business grew five X year over year, mainly driven by record personal loan volume. We expect this business to continue to grow as we shift towards even more fee based capital light and lower risk sources of revenue. We also signed our first two direct insurance carriers for Sofar Protect, complimenting our comprehensive financial services offering we've built over the last five years. Turning to our lending segment. In personal loans, our innovation has helped generate a record $4.9 billion in volume, up 26% year-over-year, including $1 billion originated on behalf of third parties for our loan platform business. In home loans, We grew total home loan volume 38% year-over-year to $490 million. Home equity loan volume was up 44% from the prior quarter as rates began to decline. Home purchase and refinancing volumes grew 23% from the prior year period. In fact, home refinancing volume was the highest we've seen since the second quarter of 2022. And finally, in our tech platform. We signed several new partnerships, including processing deals with two charter banks in Mexico and a deployment of Galileo's CyberBank Core for SoFi's new commercial payment services sponsor bank program. We launched additional fraud prevention solutions, the Galileo Instant Verification Engine, which we call GIVE, as well as Transaction Risk G-Score, both of which help clients enhance their security and operational efficiency. Our new secured credit with dynamic funding offering promotes greater financial inclusion and enables clients to help their customers build stronger credit. And lastly, we launched programs with clients signed in prior quarters spanning cross-border payments, global payouts, financial literacy, and scalable payment solutions. On top of this relentless focus on innovation and brand building, we built our business to deliver strong and reliable returns well into the future. We achieved record profitability in Q3. GAAP net income reached nearly $61 million, a $327 million improvement year over year, or $80 million when excluding the goodwill impairment expense we incurred in the prior year. EBITDA grew 90% from the prior year to a record of $186 million. All three of our operating segments achieved record contribution profit in the quarter. We continue to improve credit performance in Q3 and are firmly within the life of loan guidance we've previously provided. As we've shared in our last call, delinquencies peaked in March of 2024. Since then, we've continued to see improvements quarter over quarter. Cumulative fair value adjustments along with delinquencies on an absolute and percentage basis all perform better in Q3. With all the innovations we've made across marketing, originations, and servicing, buyers continue to see compelling opportunities and SoFi's loan portfolio. Loan sales reached almost $1.3 billion in total this quarter and nearly $5 billion in the last 12 months. And finally, with our strong balance sheet, we are well capitalized heading into an improving rate environment. Our total capital ratio is 16.3%, well above regulatory minimums. In Q3, tangible book value increased $236 million to a total of $4.4 billion. We look forward to building on this momentum and delivering continued returns heading into the new year. In closing, I couldn't be more proud of what we've accomplished, not just for Q3, but for delivering a steady and consistent record of durable growth, incredible brand building and product innovation that help our members and clients, and strong improving returns for our shareholders. The future is bright, and I am fired up for what's in store. With that, I'll hand it over to Chris.