SoFi Technologies (NASDAQ: SOFI) shares were falling following its third-quarter results despite the financial-service company posting strong results and issuing upbeat guidance. The stock had made a huge month since the start of October but is up just modestly on the year.
Let’s take a closer look at the company’s recent results to see if this is a buying opportunity for investors.
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SoFi called its Q3 the strongest in its history, and the results were pretty impressive. The company’s revenue jumped 30% to $697.1 million, while adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) soared 90% to $186.2 million.
Its tangible book value, meanwhile, rose 16% year over year to $4 per share. It grew by 2% sequentially.
The company’s results were led by its financial services segment, which saw revenue more than double to $238.3 million. The segment’s contribution profit soared from $3.3 million to $99.8 million.
The growth was powered by its loan platform business, which is essentially a lead-generation business where it refers borrowers to other parties. The business saw its platform-revenue fees surge 5 times to $55.6 million. The segment also saw interchange revenue skyrocket by 211% to $12 million.
Net-interest income (NII) in the segment, meanwhile, surged 66% to $154.1 million. SoFi said this was driven by increased customer deposits. Overall, it saw a 33% increase in the number of financial products being used. Its annualized revenue per product rose 53% of $81.
For its lending segment, revenue increased 14% to $396.2 million, with net-interest income (NII) rising 19%. Its contribution profit jumped 17% to $238.9 million. Total loan-origination volumes jumped 23%.
Technology-segment revenue, meanwhile, climbed 14% to $102.5 million. Contribution profit rose 2% to $33 million. Total clients jumped 17% to 160.2 million.
From a growth perspective, it appears everything was working in SoFi’s favor this quarter; all results across the board were strong.
One knock on SoFi had been its credit metrics, but the company saw its charge-off rate decline to 3.52% from 3.84% in Q2. SoFi did sell some later-stage delinquencies but said that, if it hadn’t, its all-in annualized net charge-off rate would still have dropped from 5.4% in Q2 to 5% in Q3.
Overall, it said its personal loan borrowers have an average income of $164,000 and weighted-average FICO score of 746. Student loan borrowers, meanwhile, have an average income of $135,000 with a weighted-average FICO score of 765. As such, it does not appear that the company is lending to subprime borrowers to help fuel its growth.