The one-stop-shop financial services platform SoFi (SOFI 0.07%) recently turned in strong earnings results for the fourth quarter of 2021. SoFi reported a loss of $0.15 per share on total revenue of nearly $286 million, both numbers that were better than analysts' estimates. There is a lot to analyze from the quarter, but I think there were two metrics that really drove the strong results.
Record member and product growth
In Q4, SoFi saw the number of members on its platform grow by 523,000 and jump to 3.46 million overall. SoFi managed to grow members by 430,000 in the first quarter of 2021, but this latest number is even more impressive because it gets harder to keep up growth as companies get bigger. I haven't been the biggest fan in the past of SoFi doing expensive marketing campaigns, but perhaps management was right when it decided to purchase the naming rights for the home stadium of the Los Angeles Rams and also where the National Football League played the Super Bowl this year.
Image source: Getty Images.
SoFi Chief Executive Officer Anthony Noto pointed out that the five nationally televised NFL games this past season were seen by an average of 22 million people. An estimated 106 million people watched the Super Bowl in February, so perhaps SoFi will have another big quarter of member growth when it reports Q1 results.
Member growth is key to SoFi's strategy to become the largest neobank, because the more members the company gets, the more it can lower its customer acquisition costs and employ cross-selling in what it calls a flywheel strategy. In Q3, SoFi spent nearly $115 million on sales and marketing and brought in 377,000 new members during the quarter, giving the company a per-customer acquisition cost (CAC) of about $305. In Q4, SoFi spent about $130 million on sales and marketing and brought in 523,000 new members, giving it a CAC of $248.
Strong member growth was accompanied by record growth in products from nearly 4.3 million in Q3 to nearly 5.2 million in Q4. This is a key part of SoFi's vision to be a one-stop financial shop for its members, who beforehand might have been using multiple banks for multiple financial products.
Image source: SoFi Q4 investor presentation.
As you can see from the chart above, SoFi members tend to join the platform through a cash management account, an investment account, or from the company's personal finance and budgeting tool, SoFi Relay. From there they work down the funnel toward some of the more profitable lending products. Noto said one-third of new products were adopted by existing members. More growth on the top of the funnel translates to more growth on the bottom, more profitable part of the funnel. And the more products SoFi members have, the more profitable they are to the company because there is no additional CAC in the mix.
Important metrics to watch long term
Member and product growth certainly exceeded my expectations for the quarter, and I found them both impressive given the company had strong member growth in the past. I'm very interested to see if SoFi can replicate this success in Q1 of this year, considering the Super Bowl.
There were a few things in the quarterly results that I found a bit underwhelming, such as management's projections, and I still think the valuation may be a bit high and will take a little more time for the company to grow into. But if SoFi can continue to add members and products I think that makes the stock a long-term hold.
