I met with SoFi Investor Relations! Here’s what SURPRISED me.

本站添加: 2026-05-07

[00:00:00]Hey guys, it's Crossroads here. Today I want to talk about SoFi specifically. I had a chance with Tevis and I know Tanner met with them separately as well just because of time constraints with SoFi's investor relations team and this was an invitation event uh where we got to ask no questions barred. Now they would not give us of course material non-public information. They can't do that and I wouldn't be able to do this video if they had. uh but they answered questions that they thought was m uh was public knowledge and that gave clarity on a number of subjects some which I found quite surprising. Now before I get into this uh this made me a little bit more bullish on SoFi. The reason is uh over the past year and a half or two years I've had a lot of interactions now with a lot of IR teams. Some have gone great and awesome. Some I've had some concerns with uh mostly express those publicly. But when you have a company that wants to communicate, wants questions, is not just trying to funnel you to ask about these certain things or present certain topics. Uh, and there it's a company that is very confident that is not hiding anything. And it we've seen this shift in Anthony Notto and also in SoFi as a result from playing with his hand very close to his vest not really that long ago to opening up. And so for me this is showing how excited they are and frankly that the team talked about this that there is a divergence of course they can't comment on the stock price or stock price action but there is this uh as as he and I were talking with them divergence between what the company is putting up over 40% year-over-year growth and at the same time what is happening with the share price which has not been fun for anybody. uh they are very excited about the company and of course they pay more attention to that as well but they do want to of course benefit shareholders and some of SoFi's largest shareholders are SoFi uh employees as well. So what exactly did I learn? Now Teus asked some questions I'm trying not to answer uh and give answers to the questions that he asked. Go check out his video. I'm sure Tanner will do one of these and we weren't even with him in that session.

[00:02:06]That's for the elite of elite. I'm just kidding. Uh but uh the questions that I asked first was on risk. So, as you may know, about 3 months ago, a Muddy Waters short seller report came out and one of two arguments that I found not preposterous. There's like 15 or 20 arguments and all but two were just absolutely ridiculous, but one that I was like, you know, I need to better understand this and I don't fully um they answered. Uh I think not did a good job of answering before, but now it's actually clear in my mind and that's with the loan platform business specifically. The short seller said, "Hey, they're selling all these loans and of course they're doing volume in the loan platform business because they're assuming all the risk." Now, that's very different than what Anthony Notto and his team had communicated in past orders, but there were some specific language that I did not fully understand. And yeah, you can put it in chat GBT or or what other LLM and kind of have an idea, but it's not the same as talking to the actual company. And so, I asked about this. I I asked a question and I said, "Is there any balance sheet risk or is this no risk at all or does it depend and what factors does it depend on?" And so they basically said that specifically uh with SoFi that their loan platform business for the most part when they're not securitizing um there's no balance sheet risk at all. Now if they do securitize and a lot of the agreements that they do then the regulators and regulation requires them to keep some skin in the game. So the the picture that they put is if there's a $100 million loan pool, you have all these different credit raters from AAA tunch, which is by far the best, you know, all the way down double A, single A, triple B, and so forth. And so they'll sell uh or um do maybe $100 million worth of these. And so they'll have the really highend AAA that have really good credit ratings that are probably not going to default all the way. They don't do junk bonds, but you could go down that low. And rather than just assume the risk on the lowest of lows or have it all up on the AAA's which they wouldn't stomach the the regulation requires some skin in the game. And so this takes a form of 5% across every single layer. So effectively in other words if there's some issues with lowerend credit consumers and that certainly does happen then SoFi might take a hint. So hit if it so the way that this works out is le let's say in the worst case let's take the worst case scenario that the entire world blows up with something worse than the great financial crisis since SoFi has 5% ownership of that layer uh just to have that skin in the game that way they're not issuing really bad loans or doing some sort of formula um it just it's a regulator thing and I think it's a good move they will take a 5% hit now um and so what they have actually managed to do in terms of selling these loans with the loan platform business they make somewhere around 4 and a.5% uh yield off of selling these loan platform business loans. So in effect they take a very small loss of about a half a percent if every single loan that they issue from AAA all the way down are were to blow up. Now that would not be a good thing but that's showing the most risk specifically with that which they securitize. So it's not first loss it's not horizontal. So, in other words, if just the lower-end credit gets hit, the the the triple B's, let's say, or everything up to the triple B's, whatever percent that is, SoFi has 5% at stake there. And so, yeah, perhaps they don't realize on the back end quite as much as they made here. Uh, but of course, SoFi has impeccable lending standards. We've seen the vintages that they have in house. There's no reason to think that the performance is going to be worse, barring, of course, macroeconomic factors in the future. So this is uh not uh them absorbing first loss. It's not anything crazy or wild.

[00:05:50]It's not the same at all as the risk that they have with the loans that they have on their platform itself. There they have full ownership of the risk. So there is some risk uh but it is still capital light. It is still feebased revenue and like the worst case scenario if the entire world blows up they take a small hit on the overall loan. Uh and of course that's not going to happen. So I thought that that was really good news and it's important to understand the risk but I also wanted to understand the upside and so one of the layers of acceleration that we've seen this quarter was in lending a tremendous amount. Now I didn't ask why because I understand why that's why they did the equity raise. That's why uh Crystal Point talked about uh the hundred billion dollar opportunity that they have passing them by of loans that they don't even issue and what if they capture 5 10 or 15% of that. That's what they're doing with the capital that they have. Not with warehouse loans either.

[00:06:40]whether it's with their own cash that they raise through the equity. So, uh, but specifically, it was interesting to see this step up for, uh, student loans.

[00:06:50]Uh, let me actually go ahead and pull that up right quick so you can take a look and let me share here as well so you'll see what's happening here. So, I I asked about the what was happening with student loans because there's a been a couple of opportunities.

[00:07:09]Obviously, there's some hypothetical if if the US government privatizes. That's not going to happen. I've I've done a video in the past on that. We've talked about why as well. But there's two other opportunities. One is there's been a restriction or a change as far as regulation from the amount that's available for grad plus loans and postgrad loans as well. uh it used to be a substantially higher amount and now it is capped and as a result some higherend degrees at higherend universities suddenly don't have enough uh specifically with publicly available loans to be able to afford their graduate degree if they need to get a full loan for that or postgrad as well and so private lenders like SoFi can step in and issue loans it's usually at higher rates than what is publicly available but it can float between uh the the two so if they have can only raise 20,000 with their grad plus loan they need 30,000 so if I can do the other 10%. But they said that is not a large revenue driver at all. So specifically let's actually take a look at the numbers on the student loan side.

[00:08:09]And before I pull this up there's a couple of things to note. I looked at this from two opportunities. I asked about both. Are they seeing more growth because of what's happened with the demand or the need there from grad plus loans and also postgrad loans.

[00:08:23]Effectively, regulation last year limited the amount the upward bound that would be available for those type of loans. And as a result, there's some graduate and post-graduate students at higherend universities with higherend degrees that can no longer be able to obtain the public loan that they would have been able to in the past. As a result, they're looking at private lenders like SoFi. And the answer was yes. They've seen some acceleration in that business, but it is bottom line is that's not been the main opportunity and it's not something that going forward they even necessarily think is a key revenue driver. But instead the greater opportunity has been driven certainly because of refinancing and also a great driven. This is a $400 billion TAM opportunity and SoFi is one of a few that are in this space. So let's look at the numbers here and we can see that they speak for themselves. This is in the quarterly time span and we can see this is products by the way. This is not revenue but you can see a pretty nice acceleration actually from quite some for quite some time from March 2024 uh all the way up now to 15.2% where it was growing at 7.6% as well. So that is very nice growth. It is still growing slower on a products basis compared to uh personal loans, but there's only so much TAM. And that's why I think that they mention that there's 300 billion in TAM just in this and a lot fewer participants as well. And so if we do in fact see some rate cuts, and we will at some point. It may not be that we see the two this year, that's going to drive even more demand above and beyond this.

[00:09:55]But there's also other factors. We've gone over those in the past. But as far as loan repayments, uh, loan debt and loan loan forgiveness, that's a lot more restrictive than it was under the prior administration. Another driver of what's happening with SoFi and the higher FAFSA rates that people have had to have um, from the last couple of years. It it just is what it is and it's a tough place for students. So, um, that was a very clear answer as well. One other thing that they mentioned too which I did not know and I was not aware of is as far as the inschool loans, they had a number of campus tours that they are doing or in the process of doing now to try to grow that segment and area. And so rather than just be on the internet itself that they can actually have that as one of the options that's available should a student find themselves in a situation where they need a private loan. What and that can be the case perhaps if they're on SAP suspension. In other words, they didn't meet the academic requirements uh for the degree in the institution and at that institution they no longer have public student loans. Saw this all the time when I worked at Liberty University and it's a tough place to be. There's an appeals process but it is not always successful and actually often times is the case where it is not. um and as a result they might need a private student loan or again grad plus doctoral or you just have a lot more expenses than what the FAFSA is able to give you as a result having an onpresent C uh having that as a list of options at some of these major universities would be a compelling point for SoFi u but again they're not calling it a key revenue driver it was just something that they shared because I happened to ask now the last question that I asked was on the tech platform itself I've not been bullish on from the tech platform. But they did remind me as they did also in the call, they said it would not be able or possible to grow these many products including they singled out the uh SoFi money business without the technology platform that that from that end alone the acquisition uh they didn't say this but I read between the lines was probably worth it but of course it has disappointed in terms of revenue. So let's go ahead and pull up fiscal AI here. By the way, as I'm doing this, um, this is a great platform. It is the sponsor of this video. It's my only sponsor. They are actually running a promotion, and I jumped the gun a little bit earlier, a 25% off sale this week.

[00:12:14]They only run two promotions, I believe, per year. And so, this is your opportunity. If you haven't, use the link below in the description. It's going to give you a twoe free trial and access to that substantial discount. Uh, so if you like a look of it, be by all means go ahead and take a look. So, let's look up the KPIs here. So, tech platform revenue and we're also going to do tech platform members accounts. Let's see what it's called.

[00:12:38]Plat total technology platform accounts.

[00:12:40]Um, all right. And let's make this just a normal bar so we can see what's going on here. So, this I thought was pretty interesting. Uh, when I was looking at the tech platform earlier, you can see, of course, last quarter we had the offboarding of Chime. uh it was either their largest or one of their largest members a $33 million offboarding fee because they exited that contract early.

[00:13:00]And so I figured, hey, this tech platform might go down to 100 million, maybe a little bit less as well. They're onboarding 10 new clients. And it came in at 75. And so I had some questions because at the same time, you can see the total technology platform accounts actually increased here. And that is certainly interesting. And then we also saw the guidance. I'm not going to pull that up, but you can take a look. and it's not bullish that they look like that they might fight to get back to maybe a hundred million by the end of the year, but it's certainly not rosy.

[00:13:29]So my question was as far as revenue recognition and onboarding new clients is how to think about that. Um if the revenue recognition if they say that they're onboarding quarter one, they'll see revenue. If we think of it as just a slow metriculation of revenue coming in and growing over time or if it's relatively fast or if it's like hey it's just partly because of this first quarter that it was just part of the way through but uh we'll see it in the full the next quarter or do they bill in a lumpy way what exactly is going on there? Well the bottom line is it's pretty simple. They said if there is an existing install base. So in other words, if this is a client, let's say Chime says, you know what, Chime core didn't work out. Let's go back to Galileo. Uh that's going to be our banking core. Well, they already have an existing uh ba customer base. And as a result, once they on board onto SoFi on the technology platform, all of a sudden they begin to recognize that revenue immediately. Now, they hope that customer and client does well because that's also good for them because the number of accounts increases. But regardless, that's what's going on there versus some of these other companies that are using SoFi uh uh tech platform uh Galileo and Technosis, they are launching a new product or new product line. It's great that they're using the tech platform, but the reality is until that there is an existing install base or customer base that grows, they're not really realizing much revenue from that at all. And so that's kind of what's going on with the technology platform.

[00:14:54]Very crystal clear answer as well. Now the other thing that they told me now this was not in regard to a question but just in general conversation was uh how they regard members and and customers as well. They talk about products per member and this relates to one of the things that Tevis asked as a question which I know that he details in his video, but they see customers and and members as potential future clients and customers as well, which is one of the reasons why they market uh with their emails and internal communication so much. People already know and trust SoFi. they're using maybe usually for the SoFi uh banking standpoint, but it may be that that person that onboards is not ready to invest. Uh or perhaps they're not ready and they don't need a personal loan, they're not buying a house, they don't need a credit card, but needs change over time. And if they are able to initiate this relationship, for instance, even when a person is a student in school, either through refinancing when they get out of school or just their banking needs while they're in school, uh then all or even just like that they're on crypto, then when they get out and they graduate, they will look at SoFi more readily than they would some unknown bank that they have no relationship with. And so they are very much playing the long game.

[00:16:08]They are not here, even though they're growing over 40% year-over-year, they are not prioritizing short-term revenue at the expense of long-term growth. It is quite the opposite. It's one of the reasons why it's easy, at least for me, to, even though it's frustrating, to ignore the price action of what's happening in the stock and continue to see what's happening with the fundamental business. And they're absolutely positioned very well, even if the stock doesn't realize it right now.

[00:16:34]Anyway, let me know what you thought in the comments. Uh, if there was any question that you could ask SoFi that wouldn't be material non-public information, cuz I think I might get to do this again. What question would you legitimately want an answer for? And I'll see maybe if the top voted that is a reasonable question if perhaps I can ask it next time. As always, thank you guys for watching, commenting, and subscribing. And until next time, happy investing.