What happened
Shares of the one-stop-shop financial services company and digital bank SoFi Technologies (SOFI 2.50%) fell more than 12% today after the company reported earnings results for the first quarter of the year.
So what
SoFi generated a loss of $0.05 diluted earnings per share on record revenue of more than $472 million, both numbers that beat earnings estimates. SoFi also reported adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of nearly $75.7 million.
The company's lending segment generated more than $325 million of adjusted revenue, largely on the back of $3 billion of personal loan originations. Revenue in SoFi's tech segment, however, fell in the quarter to close to $78 million, as the company saw a decline in accounts on its payments platform, Galileo.
Notably, SoFi's loss in its financial services division fell to around $24 million in Q1, which is down from the nearly $44 million loss the division reported in the sequential quarter.
SoFi also slightly raised its full-year guidance for 2023 and now expects to generate $2.02 billion of adjusted revenue and adjusted EBITDA of $288 million at the top end of its range. Management also continues to expect to reach profitability by the fourth quarter of this year.
Now what
While SoFi did beat earnings estimates and raise guidance, I think there are a few reasons why the stock sold off today.
For one, Galileo accounts declined for the first quarter ever. Management also didn't raise its guidance very much. Also, the company continued to build up its on-balance-sheet loan balance, despite the fact that almost all of its loans are designated for sale.
Management said the company did not do any whole loan sales in its personal lending portfolio, although SoFi did do a $440 million asset-backed securitization in the quarter. Investors may be worried about the company's ability to offload these loans in the future.
The positive from the quarter was the narrowed loss in the financial services decision, but I do share some of those concerns about executing loan sales. I also still find SoFi's stock too expensive; it currently trades at close to 18 times 2023 adjusted EBITDA.
