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SoFi Reports Blowout Results Ahead of SPAC Merger

By Evan Niu, CFA - May 22, 2021 at 11:00AM

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The fintech start-up is seeing growth accelerate on numerous fronts.

Social Finance (SoFi) is preparing to close its merger with special-purpose acquisition company (SPAC) Social Capital Hedosophia V (IPOE), and the fintech start-up released first-quarter results last week that blew away its own guidance. SoFi is seeing growth accelerate on a number of fronts as it positions itself as a one-stop shop for financial services targeting younger demographics.

Here's what Social Capital Hedosophia V shareholders need to know.

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Accelerating growth

Adjusted net revenue in the first quarter came in at $216 million, well ahead of SoFi's guidance of $190 million to $195 million. The top-line result also includes a $5 million hit due to interest expense related to paying back debt. That all translated into adjusted EBITDA of $4.1 million, similarly beating the outlook of negative $5 million to positive $1 million.

Member growth meaningfully accelerated, with total members jumping 110% to 2.28 million. This was the seventh consecutive quarter of accelerating growth, and SoFi continues to roll out new products for its members. The number of accounts on SoFi's Galileo platform, which SoFi acquired last year, has reached 70 million, up from 59 million in the fourth quarter. Galileo provides back-end infrastructure functionalities to third-party companies.

Student loan originations, which is where SoFi initially started as a business, remain the dominant loan category, with $1 billion in originations in the first quarter. Personal loan originations were $805.7 million and home loan originations were $735.6 million. That brought total originations to over $2.5 billion.

SoFi reiterated its full-year 2021 guidance, with the fintech company forecasting adjusted net revenue of $980 million for the year, representing growth of 58% over 2020. Adjusted EBITDA in 2021 is expected to be $27 million.

What comes next

SoFi has recently detailed several additional catalysts to continue driving future growth. The company plans to allow retail investors to participate directly in IPOs, a departure from the status quo where IPO allocations are typically heavily skewed toward ultra-high-net-worth individuals and institutional investors. That disruptive move is already attracting competition: Robinhood said on Thursday that it would follow suit and do likewise.

SoFi also recently launched auto loan refinancing through its Lantern subsidiary and in partnership with smaller fintech start-up MotoRefi. The company sees significant opportunities in auto loans, as total auto debt in the U.S. hit a record $1.37 trillion in 2020, according to Experian. (Disclaimer: The Motley Fool has invested in MotoRefi through Motley Fool Ventures.)

The company is also still working on obtaining a national bank charter, which will meaningfully reduce its borrowing costs and bolster profitability by using member deposits as a source of funding. SoFi is in the processing of acquiring Golden Pacific Bancorp to accelerate that strategy.

Social Capital Hedosophia V shareholders are set to vote on the merger next week.

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