These 2 metrics generated a strong quarter for SoFi

The One-Stop Financial Services Platform SoFi ( SOFI -6.82% ) recently posted strong results for the fourth quarter of 2021. SoFi reported a loss of $0.15 per share on total revenue of nearly $286 million, double figures better than analysts’ estimates. There’s a lot to analyze from the quarter, but I think there were two metrics that really led to good results.

Record member and product growth

In the fourth quarter, SoFi saw the number of members on its platform increase by 523,000 to 3.46 million in total. SoFi managed to increase membership by 430,000 in the first quarter of 2021, but this latest figure is even more impressive as it becomes more difficult to maintain growth as companies grow. I haven’t been the biggest fan in the past of SoFi doing expensive marketing campaigns, but maybe management was right when they decided to buy the naming rights for the Los Rams stadium Angeles and also where the National Football League played the Super Bowl this year.

Image source: Getty Images.

SoFi chief executive Anthony Noto pointed out that the five nationally televised NFL games last season were viewed by an average of 22 million people. An estimated 106 million people watched the Super Bowl in February, so maybe SoFi will have another big quarter of member growth when it releases Q1 results.

Membership growth is key to SoFi’s strategy to become the largest neobank because the more members the company has, the more it can reduce its customer acquisition costs and employ cross-selling in what it calls a flywheel strategy. In the third quarter, SoFi spent nearly $115 million on sales and marketing and recruited 377,000 new members during the quarter, giving the company a cost of acquisition per customer (CAC) of around 305. dollars. In the fourth quarter, SoFi spent approximately $130 million on sales and marketing and brought in 523,000 new members, giving it a CAC of $248.

Strong membership growth was accompanied by record revenue growth, growing 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-shop for its members, who may have previously used multiple banks for multiple financial products.

Breakdown of SoFi 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, investment account, or from the personal finance and budgeting tool. company, SoFi Relay. From there, they work down the funnel to some of the most profitable loan products. Noto said a third of new products have been adopted by existing members. More growth at the top of the funnel translates to more growth at the bottom, a more profitable part of the funnel. And the more products SoFi members have, the more profitable it is for the company because there is no additional CAC in the mix.

Important Metrics to Watch for Long-Term

Membership and revenue growth certainly exceeded my expectations for the quarter, and I found them both impressive given that the company has had strong membership growth in the past. I’m very interested to see if SoFi can replicate that success in the first quarter of this year, given the Super Bowl.

There were a few things in the quarterly results that I found a little disappointing, like management projections, and I still think the valuation might be a little high and it will take a little longer to as the business grows. But if SoFi can keep adding members and products, I think that makes the stock a long-term hold.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a high-end consulting service Motley Fool. We are heterogeneous! Challenging an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and wealthier.