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What SoFi’s Q2 earnings miss means for investors

Social Finance (NASDAQ:SOFI) released their second quarter earnings at market close, reporting an EPS miss of $0.42. Despite the earnings miss, the company beat revenue expectations reporting a record $237.2 Million in adjusted revenue. The adjusted revenue beat indicates a YOY improvement of 74%.

So where did the company fall short?

SoFi’s net loss widens quarter-on-quarter

SoFi reported a widening net loss of $165.3 Million, in comparison to the companies Q1 net loss of $106 Million.

SoFi noted in the earnings release that an absence of an acquisition related tax benefit, alongside significant non-cash stock-based compensation expenses and fair value changes in warrants were the largest contributors to the current period net loss.

Importantly, SOFI maintained a positive EBITDA for the fourth quarter in a row. The company reported a EBITDA of $11.2 Million, compared to its first quarter EBITDA of $4.1 Million. The $11 Million EBITDA result actually beat high end analyst estimates by $9 Million. However, SoFi’s guidance for Q3 suggests EBITDA may fall into the negatives (see guidance below).

SoFi Q2 earnings highlights strong membership growth

SoFi reported 2.6 Million members in the second quarter, compared to 2.26 Million recorded in Q1. The growth was primarily driven by expansion in the offering across SoFi’s business segments.

“We drove our 8th straight quarter of accelerating member growth, with even faster growth in cross-buying from existing members, increased our Galileo account base to nearly 79 million, and raised nearly $2 billion in our successful transition to a public company.” said Anthony Noto, CEO of SoFi.

SoFi sets new guidance for Q3 revenue

The company expects to continue its strong revenue growth in the third quarter of 2021. SoFi set its revenue guidance to an adjusted net revenue between $245 million to $255 million. However, SOFI expects Q3 adjusted EBITDA between $(7) million to $3 million.

SoFi reiterates its full-year 2021 guidance of adjusted net revenue of $980 million and adjusted EBITDA of $27 million.

The Bottom Line- SoFi Q2 earnings

Overall, the Q2 earnings miss has placed additional pressure on the share price after hours, dropping 10% at the time of writing. Nevertheless, the earnings miss is not all doom and gloom for SoFi investors based on revenue growth and Q3 revenue guidance. It cannot be understated that the company did break a quarterly adjusted revenue record despite its surprise earnings miss.

In saying this, the guidance in Q3 looks underwhelming in terms of EBITDA performance. We will see how the remainder of Wallstreet reacts to the earnings miss over the next week, however guidance for FY 2021 still remains unchanged according to SoFi.

The information above is not financial advice. Youth Investment Group has no liability for personal financial interests or investment decisions. You should make your own investment decisions based upon your own research and what you believe is best for you.

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