Thank you for your patience. Today's SoFi Q2 2021 Earnings Conference Call will begin shortly. Welcome to today's SoFi Q2 2021 Earnings Conference Call. My name is Jordan, and I'll be coordinating your call today. I'm now going to hand over to Andrea Prochniak, Vice President of Investor Relations to begin.
Andrea, please go ahead.
Thank you, operator, and thank you all for joining us today for SoFi's 2nd quarter 2021 earnings call. I'm Andrea Prochniak, SoFi's VP of Investor Relations, and I'm thrilled to be here kicking off SoFi's Quarterly reporting process as a public company. Joining me today are Anthony Noto, SoFi's CEO and Chris Lapointe, SoFi's CFO, they will share prepared remarks regarding the quarter's results and then take your questions at the end. Just after market close today, we issued a press release announcing SoFi's Q2 2021 financial results. Our discussion of our results today is complementary to the press release, which is available on the Investor Relations page of our website, investors.
Sofi.com. This conference call is being webcast live with accompanying slides on our IR page as well and will be available for a replay for 30 days beginning about 1 hour after the conclusion of this call. During the course of this conference call, we may make forward looking statements based on current Expectations, forecasts and projections as of today's date. Any forward looking statements that we make are subject to various risks and uncertainties, We discuss these factors in our filings with the SEC, including our upcoming Form 10 Q, which can be found on the IR page of our website or the SEC filings website, sec.gov/edgar. As a reminder, we are not required to update our forward looking statements.
In our presentation today, unless otherwise noted, We will be discussing adjusted financial measures, which are non GAAP measures And the GAAP reconciliations, you should refer to the financial data contained within our press release, which is also posted to the IR page of our website. While today's discussion will focus primarily on the 2nd quarter results, We encourage you to evaluate SoFi's performance on an annual basis as quarterly results can be affected by Now I'll turn the call over to Anthony.
Thank you, Andrea. Welcome all to SoFi's 1st earnings conference call as a public company. We're excited to speak with you today about our 2nd quarter results. I want to start by providing you with a short overview of our mission, our strategy, our job to be done, Which is more commonly referred to as our value proposition and our points of differentiation. Our mission is to help our members predominantly made up Products and services so that we are there for every major financial decision in our members' lives and all the days in between.
My passion for SoFi increases every day, driven by the impact that we have on our members' lives. That impact is driven by our focus on a unique value One doubt will be done, which is helping our members get their money right by giving them a one stop shop to borrow better, save better, spend better, Financial decisions are uniquely both rational and emotional. That's why earning the confidence And trust of our members by building lifetime relationships with them is so important. We do this in 2 ways. 1, we constantly strive to create best offerings in terms of speed, selection, content and convenience by using member feedback to drive continuous iteration and learning, Which drives compounding innovation over time that should make each product great on its own.
And second, Not only do we strive to make each of these products best in class, we also obsess over how to make them work better when they're used together. When we do both of these things right, we not only deliver unique SoFi experience to our members that improves with each new product they choose, But we can also create the best unit economics across our business. As we get more efficient in serving our members, we can invest that savings in offering members our ability to help our members use more products to get their money right. We call this the financial services productivity loop, And it's working. We see it in the numbers, accelerating year over year growth in members and products, increasing member lifetime values, declining member acquisition Let's get into the quarter.
I'll take you through a few high level takeaways and then Chris will take you through the results in more detail. The Q2 proved to be a very strong quarter full of milestones. We want to highlight 4 key points from the results. 1st, Our strategy and execution are driving record results. 2nd, we are constantly striving to iterate, learn and iterate some more in order compound innovation and differentiate our products.
3rd, we are hitting an inflection point in our financial services productivity strategy with the number of financial products used by our members reaching nearly 3x the number of running products during the quarter versus about equal 1 year ago. And 4th, we continue to invest aggressively to ensure we are driving compounding growth while still delivering profitability. Let's take these 1 by 1, Starting with our strategy and execution are driving record results. Specifically, we achieved record adjusted net revenue of $237,000,000 Despite our student loan refinancing business operating at less than 50% of pre COVID levels through the CARES Act, which is a great testament to the diversity of our business. Total members grew 113% year over year, which is our 8th consecutive quarter of accelerating year over year growth.
Total products held by our members increased 123%, our 4th consecutive quarter of year over year growth of more than 100%. We demonstrated a continued strong cross buying trend with cross bought products up 1.7x versus a year ago. Galileo, our technology platform business, more than doubled its total client accounts to $79,000,000 and just crossed $100,000,000,000 of annualized payment volume in July. We delivered our 4th consecutive quarter of positive EBITDA And our Financial Services segment revenue had a breakout quarter of 2.5x versus Q1 2021. This brings me to the 2nd key takeaway.
In the quarter, we demonstrated our commitment to constantly iterate across 4 factors: Fast selection content convenience to drive compounding innovation. Here are just a few examples of what we did in the quarter. Our products are 100 percent digital, and there are infinite ways to tower them to specific members' needs. To ensure our members This drove a 30% higher approval rate with the same credit box, leading to a 60% increase in funnel conversion and improved net promoter score, all with 0 negative impact on credit quality. Across lending, we continue to invest in automation to make the loan application process Easier, faster and lower touch.
In Q2, more than 50% of personal loans processed were 100% automated. That compares with less than 30% 1 year ago, which drove lower cost per loan and shortened time to fund to 2 days from 4 days last year In nearly a week a few years ago, in student loans, we worked to align with members' individual needs throughout the pandemic, specifically by introducing the snooze feature. The snooze feature allows borrowers to lock in a low rate on a student loan today, The delay in the start of payments until the CARES Act loan deferral program ends in January 2022. In SoFi Money, We enhanced our direct deposit offering by adding 2 day early paycheck to earlier enhancements like free overdraft protection, auto save and roundup features. In SoFi Invest, members asked for more cryptocurrency selection, so we added 16 coins to the offering.
We also had the ability to redeem SoFi reward points earned on all of SoFi products into cryptocurrency. And we were one of the first offer We are a new IPO investment center. Also in Invest, we added to our already strong SoFi ETF offering by launching SoFi Weekly, the first ever equity ETF that pays weekly dividends. This joined SoFi TJIF, existing clients to the cloud, which will be filed by onboarding new clients straight to the cloud. We also continue to grow the Galileo partner base, Signing up 22 new partners in the first half of twenty twenty one with 12 of those in Q2, including some focused on enterprise and cryptocurrency.
Finally, we continue to iterate and innovate on our unique rewards program by adding additional reward triggers when members Set up recurring purchases or recurring deposits in SoFi Invest or direct deposit in SoFi Money or When members use the app to take actions that make their financial life better. Since launch, Rewards has contributed meaningfully to cross buy and engagement. Already members have earned 450,000,000 points with new ways to earn in the works. This is just a sample of all of the innovation introduced this quarter, We have much more in the pipeline, so stay tuned. The 3rd message I want to hit on today is the inflection point we have reached with the Financial Services We worked hard to scale our financial services offering, which includes products like SoFi Money, SoFi Invest, SoFi Relay and SoFi Credit Card.
As these products have a much broader appeal, lower customer acquisition costs And greater daily engagement compared to lending products, which have significantly higher LTV, were used less frequently and by fewer people. Driving greater scale in the top of our member funnel with financial services products drives 2 crucial benefits. 1st, It results in more members, more usage and more data across a set of products with extremely attractive standalone characteristics. And second, this drives greater volume of crossbar products at lower overall acquisition costs leading to superior unit economics and lifetime value. We are seeing our efforts pay off.
In Q2, we reached a critical inflection point with a number of financial services products Held by SoFi members at nearly 2,700,000 is now nearly 3 times the number of SoFi lending products at almost 1,000,000. A year ago, they were about equal in number. The 3x greater scale is helping drive a 1.7x increase in the number of products That were cross bought in the quarter versus Q2 2020. The profitability of our lending products is already at industry highs, And it increases dramatically when loans are cross bought because there is no additional cost from acquisition. This further solidifies our superior lifetime values, leading to our ability to offer unmatched value to our members.
The last point I'd like to drive home today That we continue to invest aggressively in our business to fuel compounding growth while still delivering profitability to our shareholders. This combination is not easy, but we are committed to contributing around 30% of incremental revenue to the bottom line And reinvesting remaining 70% in bolstering our product innovation to drive decades of compounding growth. Even as we invest aggressively in technology, Marketing and people, we continue to realize cost efficiencies, which is beginning to drive real operating leverage. By leveraging cross buying And better gating utilization and targeting, we've reduced sales and marketing as a percentage of revenue and customer acquisition cost meaningfully year over year. We have also improved our member services capabilities, reduced onboarding friction points via implementation of more streamlined processes, including leveraging data to improve communications, all to drive down operating expenses and improve efficiencies.
All the while, we've worked to drive improved product NPS with better products and greater automation, which in turn reduces context In summary, we had record results with accelerating growth and a lot of milestones we've caught up As we head into the second half of the year, but rest assured, we are committed to running faster, reaching higher and achieving more every day. With that, let me turn it over to Chris to run through the results in detail. Thanks, Anthony, and good afternoon, everyone. We had a
great quarter with Strong growth trends across all of our businesses. We exceeded our financial outlook while achieving record revenue in our 4th consecutive quarter of positive EBITDA. We're excited about these trends and are focused on building on this momentum as we move into the back half of the year. I'm going to walk you through some key financial highlights for the quarter and then share some color on our financial outlook. Unless otherwise stated, I'll be referring to adjusted results Our GAAP consolidated income statement and all reconciliations can be found in today's earnings release and in our upcoming 10 Q filing.
For the quarter, our adjusted net revenue grew 74% year over year to $237,000,000 a new record. That exceeded the midpoint of our $215,000,000 to $220,000,000 of guidance by 9%. We also delivered $11,000,000 of adjusted EBITDA, which is up $35,000,000 year over year. That exceeded the midpoint of our negative $8,000,000 to positive $2,000,000 of guidance by $14,000,000 Our incremental EBITDA margin, which is the change in EBITDA versus the year ago period divided by the change in revenue for a given period and a good indicator of our long term margin despite the ongoing environment of significant uncertainty and macro volatility. Over the last 12 months, we generated $852,000,000 of adjusted net Revenue and that includes the negative impact of interest on corporate debt as well as a small charge we took related to our prior investment in Apex.
Excluding these 2 nonrecurring items, last 12 months adjusted revenue is closer to $885,000,000 or 89% higher than in 2019, our last full year of pre COVID results. From a profitability perspective, We generated $61,000,000 of positive EBITDA over the last 12 months, a significant improvement from the $149,000,000 of losses we took in 2019. Before I get into the details of our performance in the quarter, I want to quickly remind everyone that we look at and manage our business across 3 segments. First, our lending segment includes student loan refinancing, personal loans, home loans and in school loans. This segment is primarily a gain on sale model whereby we originate loans and recognize the gain when we sell them via our whole loan or securitization channels.
We also generate net interest income by holding these loans on the 2nd, our technology platform includes Galileo and we generate revenue on a per transaction basis And then finally, Our Financial Services segment includes Money, Invest, Credit Card, Lantern, Protect, Relay, At Work In our new Equity Capital Markets and Advisory business. These revenue streams are dependent on business activity, but primarily driven by member assets on the platform and engagement. Now on to the segment level performance. Our lending businesses grew 47 percent to $172,000,000 in adjusted net revenue, Driven by 66% growth in funded volume across all products to $2,900,000,000 in total. The largest contributor of that growth in funded volume was our personal loans business, which grew 188% to $1,300,000,000 We also saw material growth in gain on sale revenue across both our student loan refinancing and personal loans businesses, which speaks to the quality of the loans that we're underwriting.
It's worth noting that we achieved this revenue growth despite significant headwinds in our student loans business With the $859,000,000 in origination volume in the quarter was less than half of Pre Care's levels. The lending business delivered $89,000,000 of contribution profit at a 52% margin. That's up from $49,000,000 a year ago at a 42% margin. Margin improvement was driven by efficiencies in marketing and operations that have brought cost per funded loan down meaningfully across both our personal loans and student loan refinancing Switching to our tech platform, which delivered net revenue of $45,000,000 in the quarter. This is driven by 119% year on year Galileo account growth $79,000,000 in total.
The tech platform delivered $13,000,000 of profit at a 29% margin. And margins are down year over year due to our significant investments in technology capabilities overall, our migration from on premise to the cloud, as well as ongoing investments in new products and geographies, something that we highlighted during our roadshow. I'll also remind you that our Q2 2020 contribution included our equity investment in Apex, which was 100% margin revenue stream. That contribution ended in January of this year. Overall, we believe the appropriate long term margin for this business is around 30%, but we will continue operating in the 20% to 30% range to set the stage compounding growth for years to come.
Onto our Financial Services business, which really hit an inflection point in the second quarter with revenues of $17,000,000 up 7x versus the prior year quarter and 2.6x sequentially. That growth was driven by exponential growth in products, which more than tripled year over year to 2,700,000 From the 780,000 in Q2 of 2020, every one of our financial services products grew by triple digits year over year. We hit the 1,000,000 product market invest, surpassed $950,000 in money and $600,000 in Relay. We also launched a new Equity Capital Markets and Advisory business in the Q2. Excluding this new initiative, revenue is still up 5x year over year and 2x sequentially.
Financial Services generated $25,000,000 in contribution losses during Q2, An improvement of $6,000,000 from a loss of $31,000,000 a year ago and an improvement of nearly $10,000,000 if you exclude acquisition marketing. As in our lending segment, this margin improvement was driven by efficiencies across both marketing and operations. The next thing I want to address is our balance sheet. Overall, we're very well capitalized after receiving the $2,000,000,000 of proceeds in June. Our current book value is $4,500,000,000 And our capital and leverage ratios are extremely strong.
We also have access to nearly $6,000,000,000 of warehouse capacity to help fund the operations of our lending businesses. We're excited about the strength of our balance sheet and we'll continue to make choices that ensure the most efficient cost and use of capital. All right. I'll finish up with guidance. Looking ahead, we are encouraged by how our various growth initiatives are driving the momentum of our business as we head into the back half of the For Q3, we expect continued strong growth with $245,000,000 to $255,000,000 of adjusted net revenue, Up from $237,000,000 we just reported in Q2, despite the fact we no longer expect a rebound in our student loan refinancing business in But with last Friday's announcement that CARES will definitively expire on January 31, 2022, we have shifted our planning stance.
Despite this shift, we believe the ongoing momentum in our other businesses will offset the absence of the previously expected growth in SLR demand to drive quarter over quarter growth to the $245,000,000 to $255,000,000 range. Our expected adjusted EBITDA range is negative $7,000,000 to positive $3,000,000 For the full year, we're maintaining our original guidance of 9 $80,000,000 in adjusted net revenue and $27,000,000 of adjusted EBITDA despite the negative impact of the following unanticipated factors. 1st, I just covered the CARES Act extension, which has an estimated $40,000,000 negative revenue impact to our original guidance. 2nd, We originally included $12,000,000 of 2021 revenue in our guidance from our equity investment in Apex. As I mentioned earlier, contribution from that investment ended in January, and we will not have the $12,000,000 in 2021.
In summary, we expect to be able to offset this $52,000,000 in previously unanticipated revenue headwinds through the strong momentum we're seeing across the business. Overall, we're thrilled with our Q2 results. We've made a ton of progress and are very well capitalized to continue With that, let's begin the Q and A.
Our first question comes from Sean Horgan of Rosenblatt Securities. Sean, the line is yours.
Thanks. Hey, guys. Thanks for taking my question. I wanted to start on the financial Services is a clear high point, I think, for the quarter. So, can you talk about the behavior you're seeing there, maybe across buy rates at the Product level for incremental financial services products.
And also, I'm just wondering On the lending side, personal loan origination saw strong uptick. So can you talk about the Ira is there and then just touch on your thoughts on BNPL as a potential future product offering.
Great. Thank you for the questions. In terms of Financial Services segment, we're seeing really strong growth, as Chris mentioned, across all the products With triple digit growth in SoFi Money, SoFi Invest as well as our recently launched SoFi credit card, We're also seeing nice contributions from our product comparison property called Lantern in addition to great leverage from our distribution And platform capabilities in the enterprise channel, which is called AtWork. So we're really pleased with the way we're executing across the board. As we mentioned on the call, the business really saw a key inflection point in the quarter with revenue up 2.5x in Q2 versus Q1 As we're now starting to monetize all that activity, it's a critical element of our overall strategy because these products are much lower customer acquisition cost products.
They do provide great lifetime value, but it pales in comparison to lending products. And so we leverage them at the top of our funnel. So the bigger These products get, the bigger the top of our funnel gets and it feeds to the bottom of our funnel where we make really, really high LTZ on the loan products, Which have great variable profit margins. And so we're starting to see that continue. We continue to see really strong cost buying rates both from the top of the funnel to the bottom as well as within the funnel across the products.
We shared when we were going through the public process that our crossbar rates were Continue to increase and we're in the mid-twenty range and they continue to be very strong. So we're really happy with the overall strategy. And the key inflection point now is the top of the funnel is meaningfully greater than the bottom of the funnel, and we see those trends continue. As it relates to the overall Environment for personal loans, I'm going to turn over to Chris to give you some perspective on how our business operates in different rate environments and what we saw in the quarter.
Yes. Thanks, Anthony, and thanks, Sean, for the questions. In terms of our overall lending business, one of
the things that we're really excited about is that it
benefits Across
different macro environments and interest rate environment.
In high interest rates, our personal loans business does really well. In low interest rate environment, our student loan refinancing and home loans business do better with higher demand. What you saw coming out of the end of Q2 Originations, which is up 188% year over year and significantly up from pre COVID levels when we're originating between 8
The buy now pay later, for those that aren't familiar, we have 4 different lending products today. We have in school loans for those going off to undergrad College, we refinanced student loans. We also have a home loan, which is primarily refinanced today. And then in addition to that, We have student loan refinancing. We also have revolving credit with a credit card, and we'll continue to look at new loan products to Hi to our members.
There's a lot of enthusiasm in the marketplace right now for buy now, pay later. We do think we participate at retail with a number of different products, We'll continue to find ways to innovate across the range of running products that we have. The great thing is we're vertically integrated in loans from top to bottom, Which makes us a low cost operator and gives us a great platform to add other products onto without a lot of incremental fixed cost.
Great. Thanks for the answers, guys. So the next one, I wanted to see if we could get an update on The bank charter process, I'm curious, has it been a cooperative process or have there been any Pain points and do you still expect the process to conclude before year end? And then lastly, just I've been getting some questions on Gemini and the involvement there. I think there was a release by the Fed that Has Gemini in the release along with you guys?
So if you could just touch on that and
clear that up, that'd be great. Thanks. Sure. So I may need
to ask you to clarify the Gemini question, though I'm not sure what that's about. But on the bank charter, yes, we've been really encouraged. And just to give people some history, I'll walk back in time on where we've been with the bank application process and where we are now. But to answer your question upfront, We're really encouraged by the process. It's been great to work with the Federal Reserve Bank and the OCC.
They've been incredibly constructive, and It's been a really good process for us. They've been really clear in what they expect. We've been able to provide them that feedback and that information and give them access to our team and our processes. And in the cases where there are things that have additional questions, we've been able to respond in a way that's been also constructive. But To give you a perspective for those that aren't familiar, we applied for a National Bank Charter license in July of 2020 with the OCC.
We're really encouraging when we received preliminary conditional approval in October of 2020. We hadn't applied at that Point to the other regulatory bodies because we need to convert our capital structure from our preferred equity capital structure to a common equity capital structure, And we're able to accomplish that by going public. In addition to going public to make that transition, we did we announced a proposed acquisition of a Small existing bank called the Golden Pacific. And at that time, we refiled with the Federal Reserve and the OCC in March of 2021 In a change of control application process versus our original application in July of 2020, that was a de novo process. Since that time, we've been going through exams and reviews with both the OCC as well as the Federal Reserve.
And as I mentioned, It's been a very constructive process. We've enjoyed working with both regulatory bodies. There's not a definitive timeline to the process itself. We keep going through each step in the process with them, and we're encouraged about the outlook. We think we have the right type of company to be a national bank, And it's a matter of continuing working with them through the process, and we'll give you updates as we have them, but we remain encouraged about the process and where we'll end up.
And then as it relates to Gemini, could you just clarify for me, our crypto business is one that we partner with a couple of
Yes. So there's a release from the Federal Reserve Bank of San Francisco. It's as it relates to SoFi and Gemini Merger Sub Inc. Plan to become
Yes. That Gemini reference is actually Golden Pacific.
Got it. Okay. Thank you. I'll walk back in the queue and Thanks for taking my questions.
Thank you, Sean.
Our next question comes from Dominic Gabriele of Oppenheimer. Dominic, the line is yours.
Great. Congrats on your first conference call, and thanks so much for the updated If we obviously, in the quarter, there There's really good member growth. There is really good revenue growth across the lending segment as well as the financial segment. I guess if we think about the technology platform and the revenue growth there and how your original expectations are across through basically 25, are across through basically 25. Is there anything that's changed in that platform as far as where you think Your ultimate revenue mix may hash out in the next in 'twenty one and kind of through your original expectations.
Thank you. To answer your question right upfront, we couldn't be more encouraged by the acquisition of Galileo Technology Platform, the Progress that we've made with the business and the integration to our overall company, we're seeing really strong growth. And let me give you a few highlights and We'll talk through your question in more detail. We saw 119% growth year over year in the partner accounts that We have reaching 79,000,000 accounts enabled by the Galileo platform. That's up from 36,000,000 accounts when we closed the deal in Q2 of 2020.
So really strong growth on accounts. We've also continued to grow the partnership base. We added 22 new partners on Galileo in the first half of twenty twenty one. We added 10 in Q1 And we're adding 12 in Q2. Those are announced deals that could take a while to implement.
And so we've added 22 new partners to our partner So far in 2021, and that compares to really strong growth of 41 new partners in 2020 with 7 in the 4th quarter. So our expectations for the business, its ability to capture the secular transition of physical payment to digital payments has only been reinforced by the last 15 months of owning the business. The financial results have also been very positive. Last thing I'd mention about Galileo And where we're headed is we've made a significant investment in the technology over the last year. Our first priority was to ensure that we develop Stability, reliability and responsiveness in the current on premises platform for their current partners and at the same time build out an Our cloud environment over the last 15 months.
That cloud environment is now built and we've begun transitioning partners over. Once we complete that transition to the cloud from on prem, we'll have significant cost savings that we can reinvest back in the business. We'll also be more agile in our ability to develop new products and deploy them to our partners. And we have a really robust Product pipeline on top of the products that Gallo has historically offered. And that will not only increase the revenue and partnerships With our existing partners, but it will also allow us to reach a broader swath of new partners and continue on that partnering list that I mentioned.
That transition will take place over the next 6 months. And in addition to that, we'll be onboarding our new partners that we've announced Straight into the cloud as opposed to on prem. Let me turn it over to Chris to talk about the specifics on the revenue in the quarter and then our outlook for Q3 as it relates to revenue, And then I'll come back about the longer term outlook.
Thanks, Dominic, for the question. So in terms of the overall revenue for the quarter, obviously, we're really Excited about the trends that we're seeing that Anthony mentioned from a transaction perspective. We saw strong revenue growth year over year. The $45,000,000 of revenue that we had on the quarter was impacted by an intentional delay of our migration to the cloud by 1 quarter, which ended up resulting in a one time lower than normal payment from one of our clients, which negatively impacted revenue for Q2. If you were to exclude the impact of that item, you would have seen good solid sequential growth in revenue.
And then the only other thing I would note as it relates to Tech platform revenue is that in Q1, we benefited meaningfully from the 2 stimulus checks that were issued by the U. S. Government, which also made it a pretty tough comp. Overall, while we're not guiding at the segment level from a revenue perspective through the rest of the year, I would say that we are expecting to see stronger quarter over quarter growth into Q3. And specifically, we expect to be in the mid to high single digit percentage growth range compared to Q2 of 'twenty one.
And then the only other thing I would note as it relates to has guidance changed for this segment overall in our long term outlook. I would say that our original 5 year model and guidance that we had given included the impact of our equity investment in Apex, which It was about $12,000,000 of revenue that was embedded in our original 2021 plan. Apex called their investment back at the beginning of the year, and we're no longer going to see that $12,000,000 embedded in revenue for 2021. That was in tech platform.
Separate from that, our outlook for Gallo is no change from what it was before.
Excellent. Thanks so much for that. All that color, that's great. And then the numbers in the member acquisition, The revenue per product and the cross sell that you're seeing is obviously well, it's much better than we were Expecting this soon. Can you just talk to the mix of your products and how that can translate into better revenue per product over time.
And then maybe you can talk about on average how many products over your Horizon here through 2025, if you may. How many products on average your clients you're expecting them to have? That'd be really great. Thank you so much.
Dan, in terms of the monetization of the products, in the Financial Services segment, monetization is Very early. I'll talk through some of the drivers and how that will continue to improve over time. But we've obviously benchmarked each of these businesses versus Industry standards and we see ourselves at or better than what others have seen at similar points in time. So for the SoFi Invest business, we uniquely have Single stocks, fractional shares, ETFs, we also have robo accounts and cryptocurrency. Each one of them generate revenue in a variety of different ways, It is largely tied to some level of assets under management and the activity against those assets under management.
And as you bring on a new account and that account funds, the AUM for that account starts to grow over time. And so today, we're continuing to see really strong Cohort trends in AUM driving to those long term benchmarks, but we're still very early because we're growing so fast at triple digits. So We're not at the AUM levels per account that others would be at a steady state because we're adding so many new accounts that have to go through that Transition of funding and building assets, etcetera. In addition to the AUM build, we're not monetizing all the AUM The way others have and we will over time, for example, we currently didn't have margin nor do we have options in the single stock area. The ETF business, 2 of our ETFs are no load ETFs.
The rest do generate fees, and we're seeing nice trends in our AUM there as well. And our robo accounts have a very similar profile to that. Cryptocurrency, we do actually generate commissions or fees off cryptocurrency based on trading activity. And so it's still very early days in AUM per account in addition to new revenue streams against those AUM And invest. So we are seeing obviously a big acceleration there, 2.5x versus Q2 in total revenue, but there's still a lot of room to go per account.
For SoFiMoney, today, we primarily generate revenue as interchange. There's not much NIM in that business today given where rates are. As we become a bank, there will be a big opportunity in SoFiMoney to generate not just interchange, but even in this rate environment, A pretty healthy type of NIM margin based on the ability of using insured deposits to fund our lending business. And that would be attributed to the bank and to the SoFiMoney business. And so we're very early days in that product as well as it relates to Deposits per account and spending levels, but seeing the nice trends that you would see over time.
And then the other element of SoFi money that's really important is driving direct deposit curve. And we're seeing triple digit growth year over year in direct deposits and that's accelerated for the last few quarters. As we drive a higher percentage of direct deposits, it drives more Deposits into the account drives more spending and drives the overall economics of the business directly in revenue, But it also has a big indirect benefit. And the indirect benefit is that when we have a primary account through direct deposit, we see what bills are being paid, In addition to that information, we also can see how much they're spending, whether they're able to save money and when they're investing that money, whether they're overspending And they run to a deficit and we can help them potentially refinance some of the revolving rate debt. And so that's how we think about the SoFi money business.
And certified credit card, we launched in the fall of last year. It's off to a really strong start. It's a very unique value proposition. We tallied it specifically for our members, And they get twice the reward points if they redeem into cryptocurrency, if they redeem it as stocks or to invest generally. They get double the reward points if they redeem it Into Money Orange, our lending products.
And so we're really encouraged there. And then Lantern, which is a price comparison platform, Benefits in a couple of ways. It benefits from the demand that we get to SoFi for loans. And if a SoFi applicant gets Turned down by our credit model and they're open to an affiliate offer, we can monetize that offer through our platform and lantern And same with other types of products as it relates to applicants on at SoFi or just those looking for Different financial services products that we don't have at SoFi, but we do have at Lantern like small, medium business, and we're seeing a nice ramp in that as well. Really good trends across all the businesses, but it's super early days in terms of monetization.
Excellent. And maybe just one last 1 on the competitive landscape. Maybe you could talk to how the competitive landscape for the various products within The Financial Services segment has perhaps changed over the last year and how SoFi The long term positioning of the company, maybe you could talk to your competitive advantages when you go to market? Thanks so much. I really appreciate it.
The biggest competitive advantage we have is that we have a superior lifetime value. We have that superior lifetime value for a couple of factors. 1st and foremost, We're a one stop shop. And so we're building best of breed products. So when someone needs a product, we're there for them, whether that's a big financial decision or something that they're going to do on a daily basis.
And when they use that first product, we build trust and reliability with them. So they want to use a second product, we're there from them. When that happens, not only do we generate more revenue from that relationship, but we have compounding profitability benefits because we're not paying a second customer So in our loan business as an example, we've had variable profit in the range of $800 When That product gets cross bought, that $800 doubles, which we outlined in our management presentation during the road show because we're not incurring a second acquisition cost. That lifetime value is really unmatched by any of our competitive set because, 1, they don't have the range of products that we have and, 2, many are not in the lending business. And because we have that superior lifetime value, we can then reinvest the excess profit compared to our competitors in better rates, better prices, No fees, better service, better selection.
And it just drives the overall flywheel of our business. And when we say we're seeing an inflection point there, we are seeing the benefits Across lower customer acquisition costs, lower sales and marketing as a percent of revenue overall, and as you saw, significant acceleration in the number of We have and the number of members that we have. In terms of the competitive landscape, no one else is really doing it. Everyone's talked about it. I arrived in January 2018.
We talked about our strategy. Others have talked about trying to become a one stop shop, and no one's gotten And there's a lot of reasons for it, but our team has really executed and blitz scaled our way to the fact that we have this one stop shop with this range of products and we'll continue Add to it, our biggest competitive concern continues to focus on the 500,000,000 accounts that are tied to legacy FDIC banks. We see that as the huge opportunity and that's what we're going after. We want the tide of digital frontier companies to continue to rise and all the votes to rise with us, But we see that market share coming from the legacy players.
Thanks, Igor.
Next question, please.
Our next question comes from Robert Napoli of William Blair. Robert, the line is yours.
Thank you. Good afternoon, Anthony. Thank you for the question. Just maybe like to dig in a little bit more into Galileo, The 36,000,000 to 79,000,000 accounts, what is the mix of that business? I know you have a big bank, Neobank business, if you would.
But what is the mix of those accounts? And is Bill any concern with Your strategy, your banking strategy, you essentially could be competing with some of those customers, so Galileo's?
Yes. The vast majority of the partnerships are what we would call business to consumer relationships. There is business to business relationships We're providing payment capabilities to non consumer facing businesses. And increasingly, we have more what we call enterprises coming to us looking for Digital payment capabilities, both in the U. S.
As well as LatAm. We've really had great success in Mexico. We'll expand into other Lat And countries in the LatAm market, there is an opportunity not just in B2C, but it's pretty wide open as it relates to enterprise and Different areas like buy now, pay later and supplier payments, etcetera. Increasingly this year, we have seen more of that activity in the U. S.
As well. Of the accounts that I mentioned that we've signed so far in the second quarter, we've signed In the first half of the year, 5 of them in the second quarter were non B2C. They were focused on enterprise or on different types of currency payments. As it relates to the longer term growth of the business, there's an opportunity for us to continue to expand products Beyond just debit and ACH payments, in addition to other functionality. So we're not going to share our pipeline publicly, But there's a fair amount of additional products we can add to our existing partnerships in addition to bring on new partners.
In terms of competitive environment, We haven't lost any of our major partners. There was one partner that announced it would be moving off of Galileo well before we acquired the company Several years ago, that's the only large player that has transitioned off the platform and that was happening over the last year and a half and Really hasn't had any impact on anything that we've talked about. So we've been able to maintain all of our partnerships and the relationships are pretty sticky. And as long as we continue to build more value for our partners, then they can build on their own with someone NPS score with their customers they could possibly have, because they do want to continue to partner with us.
Thank you. And then just a follow-up on, is M and A an important part of your strategy going forward? I mean, you have a decent amount of capital. And if so, what areas would you look to add, geographically or different products or technology?
Yes. We're going to be 1st and foremost great stewards of capital and be very prudent in how we deploy it, whether it's against funding our businesses or Reinvesting in growth or in M and A, so I want to make that point upfront. M and A has been incredibly valuable and strategic for the direct to consumer Just a PayPal, Google's purchase of Android or DoubleClick or YouTube, Expedia's purchase of TripAdvisor, Priceline's purchase Bookings.com, I can give you example after example of how tens of 1,000,000,000 of dollars of value were created from acquisitions in the $100,000,000 to $1,000,000,000 range. And I think our acquisition of Galileo will prove out to be that similar type of huge strategic value. The way we think about M and A prioritization is We're a big believer in vertical integration.
It makes us and it gives us the ability to be agile and deploy technology innovation faster than anyone else It makes us a low cost operator. In addition to that, it allows us to create ancillary additional revenue streams that help fund the Technology investments for the industry and makes the industry better. We are vertically integrated in loans. It's proven to be a great competitive advantage with Really high variable profit margins that we disclosed to you that have been 40% to 50% since 2018 as we focused Quality and really driving the proven economics. Within our financial services businesses, the acquisition of Galileo allowed us to vertically integrate I would so find money, and that provides us all the advantages of being able to innovate faster at lower costs and help the whole industry Become more reliable, more stable, more trustworthy, which will accelerate the transition from traditional banks to new digital frontier banks.
Our credit card business will be vertically integrated as well because of the acquisition of Galileo and our plans there. It'd be in our interest to vertically integrate Some of our other businesses, so we're prioritizing that and looking at those opportunities. From a horizontal standpoint, we largely would look outside the United States for horizontal opportunities. One example of that is in SoFi, Hong Kong. We bought a small company.
We brought a company in Hong Kong. We had a great management team that had deployed and invested product globally previously. They had a really strong technology team. They had licenses. We paid a small dollar amount.
We've been able to more than double the AUM of our sulfate Hong Kong business since
then, and We use that
to lend expand with Invest through other areas within Asia. And then internationally for Galileo, we're primarily focused on LatAm. The competitive environment in there is really one that is where we're taking the blind share of the opportunities and we see A huge amount of opportunity, not just what we've achieved in Mexico, but in other markets there. But there could be opportunities to
Our next question comes from Pim Woodley of Wells Fargo. Always redacted this question. Our next question is a follow-up from Sean Horgan of Rose Black Securities. Sean, the line is yours.
Hey, guys. Thanks for taking my follow-up. So I wanted to ask a couple on crypto. Some of your peers Have seen a lot of success monetizing and driving engagement with crypto trading, but Particularly interested in the crypto rewards, I think. We're starting to see it pop up more and more.
But it's something that I think intuitively would drive a lot of the same kind of behavior. So if you could talk about Any of the early feedback there? And then, any aspirations to move into a DeFi type product like earning yield on a crypto balance.
Yes. Thank you, Sean. The way we drive our innovation, which I alluded to in my opening remarks, is we really listen to our members and we try to our Product development is member centric, not product centric. And when we're designing the SoFi Invest product, we ask our members what assets They wanted. We want to differentiate on selection.
And one of the most requested assets was cryptocurrency. And there was a solid debate at SoFi Whether or not that was appropriate for members and whether it should be on the platform. And our view is that we want to educate our members About the volatility of cryptocurrency, about the risk of cryptocurrency, which we do every time they put it in a buy order, but it's clearly an asset that They want and we are providing and that's why we've added continued selection in cryptocurrency. The concept of our rewards program is a great example of how Not only do we have a one stop shop, but an example of how we can make our products work better when we use them together. And so our rewards platform, for those who are not familiar, is not just rewards only once credit card.
We built a platform that allows us to trigger rewards off of any activity you do on SoFi. Whatever our general managers, our product team, our marketing team want to trigger rewards off of that they can fund, they can trigger rewards. So today, You do get rewards when you use your credit card, but we allow you to redeem them into other products. And so one idea we had was, let's not just redeem it to cash, Double the rewards and then redeem into SoFi money out of the credit card or double them when they redeem into their loan to make principal payments or double them when they go into And when we first did it for invest, we didn't include cryptocurrency and our members wanted it in cryptocurrency. So we let them redeem their points It's a cryptocurrency.
And after doing that, it quickly became the tax free and most popular redemption option of all of our products and a great example of how Our pilots can be better when they use together. Another example of that is we just launched in personal loans when you apply, you'll get an interest rate if you get approved, that's x. If you're willing to do direct deposit with us, the interest rate will be lower than that. And that helps the person that's getting the loan get a better price. It helps us build a Primary relationship with them because there's more data to help them get their money right.
And so you'll continue to see this theme play itself out. We're not just going to build best in the products by themselves. We're going to make them better when they're used together, which will be really hard for others to replicate. And cryptocurrency is a perfect example of that.
Sure. In
terms of DeFi products, just to answer that question, we're constantly challenging ourselves to add selection It's all the ways that you can think of. So it's absolutely something we'll continue to evaluate.
Okay, great. Thank you. And maybe one modeling question for Chris. Can you just walk us through The EPS number and clarify how to get there.
Yes, sure. Happy to Sean and thanks for the question. So in terms of our overall net income, we had losses of about $165,000,000 What's important to call Although is that embedded in that number are non cash items related to stock based compensation as well as the fair market value changes to warrants attributable to our business combination with social capital. In addition to those non cash items, there are one time Expenses related to the business combination with social capital as well. In total, those three numbers total about $144,000,000 Of non cash and one time expenses, if you were to exclude those numbers from our net income losses, Net income losses would have been closer to $21,000,000 and the EPS would have been closer to $0.58 of loss
Perfect. Thank you.
Thank you. Operator, I think we have time for one last question.
Our next question comes from Moshe Orenbuch of Credit Suisse. Moshe, please go ahead.
Great. Thanks for getting me in there under the wire. I was wondering if you could talk a little bit, given particularly Growth and success both in mortgage and personal lending, how to think about The efficiency of your marketing spend, is it getting better? Is it getting worse? And kind of what's implied in the forecast over time?
And What have you seen in the recent results as we look towards that? Yes. We've definitely We've seen efficiency in the overall company and marketing spend. We saw a meaningful year over year decline in sales and marketing as a percent of revenue, Which is obviously in the reported results. That's at the aggregate level.
Within the personal loan business, our marketing expense per new loan Also came down meaningfully on a sequential basis, benefiting from cross buying and benefiting from better data utilization and better pricing, but we saw a meaningful step down in the marketing on a per loan basis for personal loans. Home loans has been the gold standard of cross buying. As we shared in our roadshow Our documents in our earlier disclosures, we've been in the mid-sixty percent to high-sixty percent to 70% range each quarter for The percentage of our home loans bought by our existing members and that hasn't changed. When you have that high of a percentage, twothree of the home loans bought by the existing members. There's great marketing efficiencies relative to other products that don't have that level of cross buying.
So It's been a huge benefit. The home loan business will go through a cycle. Personal loans will go through the cycle, but we've had great efficiencies in home loans and Improving efficiencies in personal loans. So we're really encouraged about our long term tax relative to our long term margins of 30%, And we're on track to deliver that. Great.
Well, operator, we I'd like to end the call with a A few closing remarks and thank everyone for joining us on our first conference call as a public company. I'll close now by emphasizing how critical our Team is to our success and the importance of building a durable culture of diversity and a place people love to work. At SoFi, our products and service is digital. There's no storefront to walk into or a teller at a window to meet. Without technology, our service does not exist.
But more critically important is our people. There's a saying I heard 30 plus years ago that I love to repeat. The tanks don't roll, the planes don't fly and the ships don't sell without Our people are our number one critical success factor because they build the technology and our services keystroke by keystroke, Data point by data point, iteration by iteration, step by step that turns our vision into a real impact in our members' lives. I could not be more thankful for the people of SoFi for their resilience, their grit and most importantly, their passion to impact our members' lives in profound ways. Until we chat again in Q3, take care and be safe.
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