Good morning or good afternoon, all. My name is Adam, and I'll be your conference operator today. At this time, I would like to welcome everyone to the SoFi Technologies Q3 2024 Earnings Conference Call. [Operator Instructions] 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 towards 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. For the first time, financial services makes up more than a third of our total revenue. The segment recorded $238 million of revenue in Q3, up 102% 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 $1 billion 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…

Thanks, Anthony. I'm going to walk through key financial highlights and our financial outlook. Unless otherwise stated, I'll be referring to adjusted results for the third quarter of 2024 versus the third quarter of 2023. Our GAAP consolidated income statement and all reconciliations can be found in today's earnings release and the subsequent 10-Q filing, which will be made available next month. The record results we achieved across all three segments this quarter are a testament of our continued execution, our durable growth in members, products and clients, and our diversification toward capital-light, fee-based revenue with increased returns. For the quarter, we delivered record adjusted net revenue of $689 million, with growth accelerating to 30% year-over-year, up from 22% last quarter. Adjusted EBITDA was $186 million at a 27% margin. This represents nearly 9 points of year-over-year margin improvement, demonstrating significant operating leverage across all of our functions with expense margins decreasing year-over-year. Importantly, sales and marketing continues to decline as a percentage of adjusted net revenue, decreasing by 4 points year-over-year. We delivered our fourth consecutive quarter of GAAP profitability with GAAP net income reaching 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 period. We generated GAAP EPS at $0.05 per share in the quarter. On a trailing 12-month basis, we delivered $214 million of GAAP net income. And when looking at the sum of our reported EPS over the past four quarters, we generated about $0.11 per share. Now, on to the segment-level performance, where we saw record revenue and contribution profit across all three operating segments. Starting with Financial Services, we achieved $238 million in net revenue, up more than 2x year-over-year. We reached nearly 11.8 million products in the quarter, up…

[Operator Instructions] And our first question today comes from Dan Dolev from Mizuho. Dan, please go ahead. Your line is open.

Hi guys. Great results as always. Can you give us some more color on the loan platform deals, like how do you make money here and how does this differ from the prior quarters? Thanks again great results.

Sure. Thanks, Dan. And so overall, this is a great fee-based and capital-light revenue source for us. We're not taking balance sheet risk. We're generating meaningful cash fees upfront at time of transfer or referral and we're able to serve the needs of more members at a more rapid pace than we've been able to do so before. So, there are several ways that we make revenue within the business, which has certainly evolved since we started focusing on decline monetization in 2019. First is we send qualified borrowers to platform partners via our Lantern marketplace and we receive a referral fee if the borrower takes out a loan. The second way we make money is we can embed the specific credit box of our platform partners into our underwriting engine and originate on behalf of those partners with the transfer of those loans to the partner occurring shortly after origination. For that, we receive an upfront cash fee and we also retain servicing. The third way and what's new this quarter is that we're able to originate on behalf of other third-party investors based on a specific asset characteristic and return profile of that investor with loans transferred shortly after origination. This is within days or a week. We receive an upfront cash fee -- platform fee for that business and we also retain servicing. And then the fourth way that we can make money and we've been doing this for a few quarters now is we can service assets that we do not originate, but are held on the balance sheets of other third-parties. For that, we receive regular servicing fees that are not capitalized. What I would say is important is in all of these cases, these are assets that we wouldn't have otherwise underwritten unless contracted due to a number of reasons, including, first, the credit profile and other characteristics of the assets, which may not be directly consistent with our current portfolio. Second, our own risk appetite may not align with those originations. And then finally, our capital allocation strategy at any given point in time may not align. The last thing I would say here is that there are no financing commitments or lost share agreements associated with any of these deals or partnerships. And the only other thing I would add, Dan, and this may not be known by a lot of people, but we declined between 70% and 80% of the personal loan applicants to SoFi. And so there's a lot of potential -- latent potential there to service them better. And so that's a big number that exists before we even try to do anything else in this business in terms of generating incremental demand or other initiatives to make people aware of the products that we can offer.

The next question comes from Terry Ma from Barclays. Terry, your line is open. Please go ahead.

Hi, thank you. Good morning. So your originations came in ahead of our expectations and it's increased each quarter of this year. Credit seems to be improving sequentially and the macro probably a little bit less clear than earlier this year. So I guess going-forward, how do you think about originations and lending growth for your own balance sheet versus maybe originating for some of your big partnerships.

Yes. What I would say is our overall outlook for originations or at least growth on the balance sheet has not changed. We do expect to see modest growth in dollar terms on the balance sheet year-over-year and that will continue into Q4. We are happy with the size of the balance sheet that we have today and the amount of net interest income that we're generating. We are seeing excess demand both on the borrower side as well as the loan investor side for our unsecured personal loans, and we've been able to successfully navigate and fulfill that demand through the expansion of our loan platform business. So, we would expect not to grow the PL balance sheet meaningfully from where we are today. Where we will migrate into is in a lower rate environment, you would see an uptick in-demand for our student loan refinancing business where we had a really strong quarter this quarter as well as our home loans business where we had our best quarter since 2021.

The next question comes from John Hecht from Jefferies. John, your line is open. Please go ahead.

Good morning, guys. Congratulations and thanks for taking my question. I appreciate all the information on the credit slide about the 17 vintage versus the more recent ones. It looks like the current vintages are performing better than the 2017 vintage. I'm wondering how do you guys think about that? The contribution of that performance trend to like return on capital? And how do prepayments, or your just payment assumptions impact this outcome as well?

Yes, thanks John. So, we often talk about underwriting to an 8% life alone loss target, which obviously reflects the strength of our underwriting and the high quality of our borrower base. However, life alone losses represents just one of several variables, which in combination actually drive our pricing, and underwriting decisions designed to maximize return on equity, while adhering to our credit risk tolerance. In terms of how we think about the returns on recent, versus some of our past vintages, all in returns on our more recent vintages are projected, to produce meaningfully higher returns. I'm talking greater than 2x versus 2017, with newer vintages expected to produce ROEs above 30%. And I'm defining ROE here, as the weighted average coupon minus annual losses, funding costs and other operational costs plus origination fees. And then multiplied by the weighted average life and levered. What's really driving those increases in returns, is a function of a number of things. First, is lower expected life alone loss rates as we show in our Investor Presentation on Page 10. Second is the higher pricing beta throughout rate increase cycles. We've demonstrated time-and-time again that we've been able to maintain really good betas. We were successful in increasing the portfolio weighted average coupon, across both products in a rising rate environment over the course of the last few years. And we've also been able to maintain pricing in down rate environments, due to the quality of our product. The third way is we've had funding cost efficiencies, given our higher reliance on member deposits and success in growing direct deposits, and replacing higher cost warehouse funding. And then fourth, we've introduced origination fees over the course of the last year plus, and we're now generating close to $400 million in origination fees annually. So the combination of these drivers, is more than offsetting the increase in prepayment speeds, and the reduction in weighted average lives that we're observing in some of these newer cohorts. Going forward, what I would say, is we're going to be talking about return metrics more often, because these life alone losses don't provide the full view.

Another thing I would just emphasize, John, and everyone - and the shareholders more broadly, is that we've been able to achieve these types of high ROE returns in more recent vintages despite the fact that rates have been, increased significantly in a very short period of time and the economy has been somewhat uncertain, during that time period. As we look into 2025, and declining rate environment in a stable economy, we think we can only improve on these returns. And it's one of the reasons why we're leveraging all the different businesses. We are across the opportunity set that we have from a return standpoint, relative to what we believe is a prudent level of balance sheet risk, in a particular asset class such as personal loans. So we think there's a lot of upside and it only gets better from here.

The next question comes from Jeff Adelson from Morgan Stanley. Jeff, your line is open. Please go ahead.

Hi, good morning. Could you just talk a little bit more about the expectations for the loan platform business, how you expect that can grow from here? I know you said expect that to continue growing, but how meaningful can this become? It seems like if we look at the numbers today, it's already at a $4 billion run rate. You've got the Fortress relationship, which, correct me if I'm wrong, its additive to that. So that's already $6 billion. And should we be thinking about the economics as close to a 5.5% take rate, based on the revenues you reported this quarter? And then, I'm just curious, are you going to maybe deemphasize the loan sales a little bit more from here? I mean, it came in a little bit lower at the $375 million versus the billing for the last three quarters, as you maybe prioritize the loan platform business from here? Thanks.

Yes. So I'll start and Anthony can chime in wherever. But in terms of the overall growth expectations, what I would say is as part of that billion dollars of originations that we did, Jeff, in the period. A portion of that did come from the Fortress transaction that, we announced earlier in the quarter. So it's not additive to your $4 billion run rate. It's inclusive of that. But we do expect to see continued strong growth in the segment. We have that $2 billion agreement with Fortress, as well as commitments for Q4 and 2025, with several other partners. What I would say, is we're one of the very few partners who can deliver assets at scale, with the characteristics and return profile that investors are seeking. In terms of deemphasizing other sales, and ABS transactions in favor of this, what I would say is that, demand is as strong as it's ever been before. Like I had mentioned a few questions ago, we're happy with the size of the balance sheet and the modest growth that we're expecting, expecting over the course of the next three months. But what I would say is that, we are seeing excess demand both from borrowers and investors, and a way to fulfill that demand is through the LPB business. In terms of the take rate, what I would say is. We're looking at apples-and-oranges when you're trying to compare this take rate, to what you see in the general originate to sell business. These are loans that are originated on behalf of others, and they would not have been originated unless contracted to given the credit - and overall asset characteristics of the loans, as well as our own risk appetite and capital allocation strategy. What we're receiving is a platform fee for our underwriting capabilities, our marketing capabilities, and our overall operational capabilities. And that platform fee will vary depending on the partner.

And I think, a couple points just to emphasize. One is, the partners in the loan platform business, many of which are new incremental partners on loans as opposed to the wholesale loan buyers, or ABS buyers that we typically had. They're not all incremental, but a large percentage of them are including in the most recent quarter. In addition to that, Chris has mentioned a couple times. These are loans that wouldn't have otherwise originated, and we only originate when we actually have a contract. So it's not a zero sum game, it's incremental. And the outlook for is pretty significant as we go into 2025, in excess of what you articulated.

The only other thing I would say in terms of, you had mentioned $375 million of sales done in period. We did over $1 billion across all three products in the quarter and $6 billion over the course of the last 12 months in overall loan sales, quarter-to-date in Q4, we've already done close to $1 billion in sales, across our products as well. So the demand is certainly there. We will continue to fulfill on both ends. But as Anthony mentioned, being able to originate on behalf of others is purely incremental to us.

The next question comes from Kyle Peterson from Needham and Co. Kyle, your line is open. Please go ahead.

Great. Thanks guys and good morning. Nice results. Wanted to ask a question on deposits. Some of the trends you guys are seeing there, you guys had really nice growth there despite I believe you took down the rate paid on member deposits, a bit as rates have gone down. So just any color on whether you've seen any changes in average balances, or customer behavior, or if things have been pretty receptive to some of the changes you guys have made on, deposit rates kind of early on in the rate cut cycle?

Yes, we're really proud of the way the SoFi Money product continues to resonate in the marketplace, despite rates coming down more broadly. We've maintained our market share position, we've maintained our ranking in an APY standpoint, of course we do not charge fees. We obviously give a number of other benefits including the high interest rate, not to mention all the functionality you need in one place. So we've seen continued strong trends in deposits, over $2 billion of member deposit growth in the quarter. In addition to that, the spending levels that we're seeing are on parents, to better to where they have been historically. And so, we're continually getting positive indicators, across the entire business as it relates to SoFi Money. The other thing I would just mention, this is one of the key points of where the flywheel starts. Our direct deposit customers are customers that are more engaged. They have meaningfully higher number of products per customer, compared to the overall average that we report. And when you look at it on a vintage basis, it's even better than the overall average number of products per direct deposit members. So it's been over a year in, which we've operated this business as a bank. And being able to control our own destiny, and having a competitive advantage in being both an origination platform on loans, as well as a national bank that can set its own interest rate, and its own value proposition. It's a competitive advantage and one that's continued in the quarter. And we're excited about next year.

The next question comes from Mihir Bhatia from Bank of America. Mihir, your line is open. Please go ahead.

Good morning. Thank you for taking my questions. I wanted to stay with the Financial Services segment again, and I wanted to just talk about a couple of things there. One is just about monetization in the segment. I think it's up to $81 annually now. Any targets you can share on what you think that can look like maybe this time next year, or just you know, to achieve your three year targets that you laid out. Like how much more monetization can that be? And then just related to that, just I guess what is the next growth, you mentioned SMB PROTECT in your remarks. You also launched the credit card more broadly. So maybe talk to us about where that next growth vector is materializing from. I guess really what I'm asking is what's the next lending platform business in that sector, right. Like I think it was a pretty big surprise for a lot of people how much that business grew this quarter. So give us a…?

You've hit the nail in the head. Yes, thank you. You've hit the nail on the head. It's an exciting part of our business. The fact that we're approaching $1 billion annualized business, very profitable while we're still in investment mode. It's pretty amazing to have a business of that size, $23 million of revenue, growing over 100% and profitable despite how fast we are growing the number of members, and products and revenue per product. And I think the best way to sort of conceptualize where this business could go, is to think about those three variables, member growth, product growth and revenue per product. The revenue per product that we generate today was up meaningfully in the quarter, as you mentioned, but it's nowhere near where it can be long-term. As it relates to our invest business, we're monetizing at about half the rate that we think we can monetize it over time. In 2025, we'll take a number of steps where we start to monetize that better, of course, by adding incremental value to the invest experience. Our invest product is unique in that we're trying to be a one-stop shop just within Invest. We pioneered fractional shares. We obviously don't pay - charge on trades. In addition to that, we created our own ETFs that would better meet the needs of our new and beginning investors. That are lower price point, but diversified, allowing our members to do dollar cost averaging in a diversified way. We have award-winning robo accounts, and we continue to evolve those and you'll see us do more in 2025, behind that to not just grow assets, but also to increase monetization. We do IPOs, which is a direct monetization vehicle. But again, a unique product remain Street investors get access to…

I found this on the web.

The next question is from Peter Christiansen from Citigroup. Peter, your line is open. Please go ahead.

Nice trends here. I was just curious, bigger picture, can we talk about what you're seeing in the alt credit side, credit is certainly becoming a theme, some of your marketplace lending peers have also benefited here. In your discussions pipeline, just curious if you think this is emerging as a larger theme over the next 12, 18 months? And then finally, as it relates to tech platform performance pipeline, can you talk to the degree of decision delay you're seeing currently, versus last quarter? Thank you.

Yes. In terms of demand for our loans from buyers or investors, similar to other people, the demand has increased quite meaningfully. We are better at being able to meet some of that demand, by continue to evolve our business from origination platform for our own loans, and now the evolution of the loan platform business. So similar to others, we're seeing an increase of it from existing buyers. But also a number of new partners that we've not been able to meet their needs with before, but we now can. So really excited about declining rate environment, putting a tailwind behind the loans, not to mention our new initiatives there. As it relates to the tech platform, no decisions have been made by any of the big deals that we've been in process with over the last 12 to 18 months. I do think we're coming to the end of some of those decisions being made. And I would just say that we haven't had anything announced. But I would just tell you I'm confident that we will have some wins there, but none of the decisions have been made on any of the large deals. And I would just give you more color on the types of deals. There are definitely big financial institutions that have to make some decisions on their technology. They continue to really struggle with how they budget for that transition. But without a doubt, there's a technical reason why they have to switch. There's a risk reason why they have to switch, and there's a regulatory reason. And so, it's going to be an inevitable change, and a tailwind to the demand for technology, like we have in our tech platform business, and specifically in core and processing. And it's just a question of when, and I think we'll win our fair share of deals there, but none have been decided yet. The second area that we haven't talked as much about in the past, is the opportunity to help large branded companies that have big installed bases, they're in the financial services business already today through a credit card, and a white label credit card. There's absolutely a significant amount of demand from those types of partners for us to do something very similar on the debit side of the business. And we continue to receive RFPs, for that type of product. And then, of course, outside of the direct-to-consumer businesses, there is demand from government agencies, there's demand for B2B companies that continue to surface and some of, which we've signed and executed against, some of which will be decided over the coming months.

The next question comes from Jill Shea from UBS. Jill, your line is open. Please go ahead.

Good morning. Thanks for taking the question. You launched the everyday Cash Rewards and the essential credit cards while early days. Can you just talk about the early indications there, and your view of future growth on the card products?

Yes. We really like the card business long term. It obviously is an expensive endeavor near term. There's a J curve of about three years in that business. We have a world-class team that's done this before. That wasn't the case when we first launched. The two cards that you mentioned, are a direct result of all the work the team - our second team that came in and run this business has done. We did a test with the business. We saw the type of performance that we were hoping to see. Our marketing capabilities there have also helped us deliver the type of performance, we wanted to see in those cards. And that's why we went general availability for those cards, as opposed to just testing. I will say we will take a very methodical approach to the credit card business. While it is a great ROE business. It also does have the ability to lose a lot of money and lose money every day. And so, we'll continue to make sure that, that card is something that we market to individuals that we think have a high probability, of utilizing it in the right way, and we can get a great return on it. So, we'll start with our members, and we'll continue to use the data that we have on them to make decisions. We can use that data to model opportunities off of our platform, which we're starting to do as well. Inside of the Financial Services business, think about as a couple of different types of segments. We have businesses that are still growing very fast that, are profitable like SoFi Money, we have businesses that are growing very fast and losing money like invest in credit card. And then we have businesses that are early stage. And we're planting seeds that will continue to be harvested over time, and grown over time. And this is a business that's in the middle, one that we feel we're confident in terms of our go-to-market. And one that will grow, but we'll do it methodically over time, to make sure that we do not push too hard on the investment, we have to make and offset the profitability overall business, but it will be a good contributor.

At this time, I would like to turn the call back over to Anthony Noto for closing remarks.

Thank you, operator, and thanks for everyone that's dialed into the call. I have some closing remarks, I want to share. As I mentioned at the end of Q2, I cannot feel better about what we've achieved and where we're headed right here, and right now. The list of achievements is far, too, great to capture every quarter, so let me be succinct and clear. Despite the tumultuous environment over the past seven years. We've delivered durable growth, world-class innovation and brand building, and improving returns with 17 quarters of record revenue, consistent 35%-plus growth in members and products, four quarters of GAAP profitability, and so many other milestones. There is only one reason available emerge stronger, from such a tumultuous environment. And that reason is that people of SoFi: our employees, our members and our clients. I could not be prouder, or more grateful to the people of SoFi. We now face hopefully, the most advantageous environment that we've seen since I joined the company, and we began the relentless march to be a one-stop shop. Today, we are no longer just a lending company. Today, we are a force to be reckoned with. It is truly our time as we have more products, more members, more capital and more diverse revenue streams than ever before. We are undeniably the absolute best vision company, to capture the massive opportunities still ahead of us, because of the same thing that got us here: our people. Our people are great at heart. Thank you, everyone, for your time today, and we hope you have a great end to 2024.

Good bye.

This concludes today's conference call. You may now disconnect.