It's been a difficult road for shareholders of SoFi Technologies (NASDAQ:SOFI)
in 2022. Shares topped out after Q3 2021 earnings at $24.65 and declined by -$19.83 (-80.45%) to a low of $4.82 in 2022. Going into Q2 2022 earnings, shares of SOFI bounced off their lows to a closing price of $6.41 (32.99%) on 8/2 prior to the earnings release. SOFI delivered a top and bottom-line beat, provided their second guidance raise in 2022, and improved on every Key Performance Indicator (KPI) they track.
In Q2 2022, SOFI generated $356.09 million of revenue which was a beat of $11.62 million and a YoY increase of 50.01%. SOFI's GAAP EPS showed that losses are narrowing as it came in at -$0.12, which was a beat of $0.01. SOFI's CEO Anthony Noto explained that they feel that free cash flow (FCF) is the best value driver as GAAP net income is not a full cash measurement. Normally people determine a company's FCF by subtracting CapEx from the cash from operations produced. He explained that financial service companies utilize their cash to fund loans, so they feel EBITDA minus CapEx is a better measurement of cash flow because that drives increasing book value. Mr. Noto has stated in the past that EBITDA is a better longer-term measure of economic cash flow because there are a lot of non-cash charges below EBITDA. Adjusted EBITDA is the financial metric that indicates earnings before interest, taxes, depreciation, and amortizations. Adjusted EBITDA removes non-recurring, irregular, and one-time items that could distort EBITDA. SOFI guided for $5 - $15 million of EBITDA in Q2 and delivered $20 million of EBITDA, which is a 6% margin.
SOFI has delivered $678 million of revenue and $29 million of adjusted EBITDA in the first half of 2022. On the earnings call Mr. Lapointe (SOFI CFO) indicated that they expect to deliver $830 to $835 million of revenue and $75 to $80 million of adjusted EBITDA, with a more significant portion of the revenue and EBITDA getting generated in Q4. This indicated another 2 consecutive quarters of QoQ growth.
SOFI's member growth is an indication of the value proposition it's creating for its membership. SOFI's member base grew by 11.66% in Q2 2022 as it added 450,000 new members bringing its total to 4.32 million members. This is a 69% YoY growth rate as SOFI has added 1.76 million members over the previous 4 quarters. SOFI added an additional 42,000 members in Q2 compared to Q1 and is on track to break 5 million members in 2022. SOFI would need to add 681,000 members for an average of 340,500 new members in each of the following 2 quarters. SOFI's average membership add is 440,000 per quarter for the previous 4 quarters. There is a good probability that SOFI will close our 2022, adding at least 1.54 million members in 2022, which would be a 44.51% YoY growth rate on membership.
SOFI is still in its infancy, and there is a long runway for future growth. The bank charter is a proven game changer, and SOFI is now growing its deposits at a triple-digit QoQ rate. SOFI continues to innovate, and the efficiencies from Technisys haven't been realized yet. Transitioning SOFI's checking, savings, and credit card to Technisys technology stack will create $75 - $85 million in cumulative cost savings from 2023 to 2025. From 2025 forward, SOFI will benefit from roughly $60 - $70 million of cost savings on an annual basis. Not only will SOFI generate annual cost savings, but their AWS of Fintech will be completed and open up a new business segment as their technology platform can be marketed to other neo, challenger, and traditional bank systems. When it comes to SOFI's future, there is a lot to like. Membership is growing, deposits are growing, SOFI is entering new markets, and eventually, the student loan moratorium will expire. SOFI is a buy and hold; if you're not looking at 5-10 years into the future, this isn't your investment.
@CaptainTiger@Tiger_Earnings@MillionaireTiger
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