The Bank Charter Thesis Starts Showing Up on the Balance Sheet
This is SoFi's second full quarter operating as a chartered bank, covering the three months ended June 30, 2022. Total net revenue was $362.5 million, up 57% year over year from $231.3 million in Q2 2021, and up from Q1 2022's $330.3 million. Members grew to 4,318,705, up 69% year over year from 2,560,492 - roughly steady with Q1's 70% pace, the deceleration trend from FY2021 leveling off rather than continuing.
The balance-sheet story this quarter is the clearest evidence yet that the bank charter is doing what it was pursued to do. Total deposits reached $2.71 billion, up from $1.16 billion at the end of Q1 - more than doubling in a single quarter. More notably, debt on the balance sheet actually fell, to $3.72 billion from $4.92 billion at Q1's end - the first quarterly decline in debt this site has recorded since the June 2021 warehouse-facility paydown. Deposits aren't just growing alongside debt anymore; they're starting to displace it, which is exactly the cheaper-funding mechanism the Golden Pacific Bancorp acquisition was pursued for back when it was still a pending regulatory application.
Adjusted EBITDA was $20.3 million, up 81% year over year from $11.2 million in Q2 2021, and up sharply from Q1 2022's $8.7 million - the third consecutive quarter of improvement on this metric after the two-quarter dip flagged in the 2021-12 post. GAAP net loss narrowed to $(95.8) million from $(165.3) million a year earlier - the narrowest quarterly loss since Q3 2021's $(30.0) million, though still well above that mark.
The Prescription
SoFi should keep pressing the deposit-for-debt substitution now visibly underway - this quarter is the first real proof the bank charter's cheaper funding is displacing warehouse debt rather than just sitting alongside it, and management should be explicit with investors about the pace it expects that substitution to continue, since it's the clearest evidence yet that the charter thesis is working at the balance-sheet level.
What it should stop doing is treating Financial Services' contribution loss as a problem that deposit funding will eventually solve on its own. Four straight quarters of a widening loss (see Beyond the Usual) is long enough to require a segment-specific plan - cost discipline on member acquisition spend, a clearer cross-sell target, something - rather than continuing to point at the balance-sheet-level funding story as if it will eventually flow down and fix a segment-level economics problem on its own.
Financial Services' Loss Is Still Widening, Even as the Funding Fix Arrives
| Segment | Net Revenue (Q2 2022) | Contribution Profit/(Loss) (Q2 2022) | Net Revenue (Q2 2021) | Contribution Profit/(Loss) (Q2 2021) |
|---|---|---|---|---|
| Lending | $257,117 | $141,991 | $166,291 | $89,188 |
| Technology Platform | $83,899 | $21,841 | $45,297 | $13,013 |
| Financial Services | $30,363 | $(53,700) | $17,039 | $(24,745) |
Lending's contribution profit grew 59% on revenue growth of 55% - margin essentially flat around 55%, still the clear economic engine. Technology Platform's contribution profit grew 68% on revenue growth of 85% - a real acceleration versus Q1's margin compression. Financial Services is again the exception: revenue growth of 78% came with a contribution loss that grew even faster, 117%, to $(53.7) million from $(24.7) million a year earlier - the fourth straight quarter this site has tracked where Financial Services' loss widened in dollar terms even as the segment's own revenue grew. The deposit ramp described above is a funding-cost story, not yet a Financial Services segment-profitability story; those are related but distinct, and this filing's segment table shows the second one still hasn't turned.
Key Financial Metrics
Three months ended June 30, 2022, compared with three months ended June 30, 2021. All figures in USD thousands unless noted.
| Metric | Q2 2022 | Q2 2021 | YoY Change | Notes |
|---|---|---|---|---|
| Total net revenue | $362,527 | $231,274 | +57% ✅ | Up from Q1 2022's $330,344 |
| Adjusted EBITDA | $20,304 | $11,240 | +81% ✅ | Third straight quarterly improvement; up from Q1 2022's $8,684 |
| Net loss | $(95,835) | $(165,314) | -42% ✅ | Narrowest quarterly loss since Q3 2021's $(30,047) |
| Total deposits (period-end) | $2,712,264 | $0 | n/a | More than doubled from Q1 2022's $1,155,922 |
| Debt (balance sheet) | $3,723,561 | n/a | Down from $4,916,175 at Q1 2022 end - first quarterly decline since the June 2021 warehouse paydown | |
| Total assets | $12,670,886 | n/a | Up from $9,176,326 at Dec 31, 2021 (this filing's comparative column) | |
| Cash and cash equivalents (period-end) | $707,302 | n/a | Down from $1,325,135 at Q1 2022 end |
Free cash flow is not reported by SoFi and is not computed here, the same reason FCF is omitted for any bank/NBFC on this site.
Stock Price: Another 44% Decline, and a 79% Drop From the January 2021 High
SOFI closed the quarter (June 30, 2022) at $5.27 per share, down from $9.45 at the end of Q1 2022 - a 44% decline over the quarter, on top of Q1's own 40% decline. Across the roughly eighteen months this site has price data for, SOFI has fallen from a $25.14 high in January 2021 to $5.27 here - a 79% cumulative decline. This is the fourth consecutive quarter of falling operating losses and improving Adjusted EBITDA paired with a falling stock price - the disconnect first noted in Q1's post has now persisted long enough that it looks less like noise and more like a genuine repricing of growth and fintech names broadly during 2022's market conditions, though this filing alone still can't isolate how much of the move is SoFi-specific versus sector-wide.
Beyond the Usual
Deposits Are Now Displacing Debt, Not Just Growing Alongside It
For the first time since this site began tracking SoFi's balance sheet, total debt fell quarter over quarter - from $4.92 billion to $3.72 billion - while deposits more than doubled to $2.71 billion. Q1's post flagged that deposits were additive funding capacity rather than a debt replacement after the bank charter's first quarter live; this quarter is the first evidence the substitution is actually happening, one quarter after the concern was raised.
Financial Services' Contribution Loss Has Now Widened for Four Straight Quarters
Financial Services' contribution loss was $(24.7)M in Q2 2021, $(39.5)M in Q3 2021, $(134.9)M for full-year 2021 (implying a similar-sized Q4), $(49.5)M in Q1 2022, and $(53.7)M this quarter - a segment that has not posted a smaller loss than the prior comparable quarter in any period this site has tracked. The bank charter's funding-cost benefit is starting to show up in the consolidated balance sheet (see above), but it has not yet reached this segment's own contribution-profit line, which is the number that would actually validate the original investment thesis for pursuing the charter.
Shares Outstanding Growth Has Slowed
Shares outstanding were 922,377,054 as of July 29, 2022, up only about 0.7% from 915,824,337 as of May 4, 2022 - a sharp slowdown from the roughly 10.5% jump between February and May tied to the Technisys stock-funded acquisition. Share count growth from routine equity compensation and vesting appears to be running at a much lower rate on its own.
Target Valuation Range
Still too early to call with a real numeric range: operating metrics (revenue, Adjusted EBITDA, deposits) have now improved for multiple consecutive quarters while the stock has fallen in every one of them - a genuine, sustained disconnect this filing alone can't resolve without more visibility into whether the market is pricing macro risk, execution risk in Financial Services, or something else entirely.
With 922,377,054 shares outstanding as of July 29, 2022 (the closest disclosed count to this quarter's end) and a June 30, 2022 close of $5.27, implied market capitalization was roughly $4.9 billion - down from approximately $8.7 billion at the end of Q1 2022, and down from roughly $13.1 billion just two quarters earlier at the end of 2021. A genuine DCF or peer-multiples valuation range will follow once there's more visibility into whether Financial Services' contribution loss actually turns given the deposit-funding tailwind now appearing on the balance sheet.
SoFi Technologies, Inc.'s Quarterly Report on Form 10-Q for the quarter ended June 30, 2022, filed with the SEC.