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Business Segment Information
 6 Months Ended
Jun. 30, 2022
Segment Reporting [Abstract]  
Business Segment Information Business Segment Information
Segment Organization and Reporting Framework
The Company has three reportable segments: Lending, Technology Platform and Financial Services. Each of our reportable segments is a strategic business unit that serves specific needs of our members based on the products and services provided. The segments are based on the manner in which management views the financial performance of the business. The reportable segments also reflect the Company’s organizational structure. Each segment has a segment manager who reports directly to the Chief Operating Decision Maker (“CODM”). The CODM has ultimate authority and responsibility over resource allocation decisions and performance assessment.
The operations of acquired businesses have been integrated into, or managed as part of, our existing reportable segments. Activities that are not part of a reportable segment, such as management of our corporate investment portfolio and
asset/liability management by our centralized treasury function (as further discussed below), are included in the Corporate/Other non-reportable segment (previously referred to as the “Other” non-reportable segment).
Contribution profit (loss) is the primary measure of segment profit and loss reviewed by the CODM and is intended to measure the direct profitability of each segment in the manner in which management evaluates performance and makes decisions about funding our operations and allocating resources. Contribution profit (loss) is defined as total net revenue for each reportable segment less:
•fair value changes in servicing rights and residual interests classified as debt that are attributable to assumption changes, which impact the contribution profit within the Lending segment. These fair value changes are non-cash in nature and are not realized in the period; therefore, they do not impact the amounts available to fund our operations; and
•expenses directly attributable to the corresponding reportable segment. Directly attributable expenses primarily include compensation and benefits and sales and marketing, and vary based on the amount of activity within each segment. Directly attributable expenses also include loan origination and servicing expenses, professional services, product fulfillment, lead generation and occupancy-related costs. Expenses are attributed to the reportable segments using either direct costs of the segment or labor costs that can be attributed based upon the allocation of employee time for individual products.
During the first quarter of 2022, we implemented a funds transfer pricing (“FTP”) framework to attribute net interest income to our business segments based on their usage and/or provision of funding. The primary objective of the FTP framework is to transfer interest rate risk from the business segments by providing matched duration of funding of assets and liabilities to allocate interest income and interest expense to each segment. Therefore, the financial impact, management and reporting of interest rate risk is centralized in Corporate/Other, where it is monitored and managed. Under the FTP framework, treasury provides a funds credit for sources of funds, such as deposits generated by our Financial Services segment, and a funds charge for the use of funds, such as loan originations in our Lending segment. The process for determining FTP credits and charges is based on a number of factors and assumptions, including prevailing market interest rates, the expected duration of interest-earning and interest-bearing assets and liabilities, contingent risks and behaviors, and the Company’s broader funding profile. As the durations of assets and liabilities are typically not perfectly matched, the residual impact of the FTP framework is reflected within Corporate/Other. We regularly assess the assumptions, methodologies and reporting classifications used for segment reporting, which may result in further refinements or changes to the framework in future periods. During the second quarter of 2022, we further refined the FTP framework for determining average asset and liability balances. The application of the FTP framework impacts the measure of net interest income and, thereby, total net revenue and contribution profit (loss) for our Lending and Financial Services segments, as well as the total net revenue of Corporate/Other, but has no impact on our consolidated results of operations.
Prior to implementing the FTP framework, the presentation of our Lending and Financial Services segments’ net interest income reflected the difference between interest income earned on our loans and the actual interest expense incurred on any loans that were financed. Under the FTP framework, such interest expense is incurred by treasury within Corporate/Other and replaced by an FTP charge. Application of our current FTP framework during the comparative three and six month periods ended June 30, 2021, would have impacted Lending segment net interest income by $1,393 and $2,651, respectively, and Financial Services segment net interest income by $(51) and $(72), respectively. The offsetting impact would have been reflected within net interest income in Corporate/Other. If we had applied the refined methodology during the first quarter of 2021, Lending and Financial Services segment net interest income would have been impacted by $1,258 and $(21), respectively, relative to the net interest income reported in the comparative period.
The accounting policies of our reportable segments are consistent with those described in Note 1 and in our Annual Report on Form 10-K, except for the application of the FTP framework and the allocations of consolidated income and consolidated expenses. Assets are not allocated to reportable segments, as our CODM does not evaluate reportable segments using discrete asset information.
Segment Information
Lending.        The Lending segment includes our personal loan, student loan and home loan products and the related servicing activities. We originate loans in each of the aforementioned channels with the objective of either selling whole
loans or securitizing a pool of originated loans for transfer to third-party purchasers. Revenues in the Lending segment are driven by changes in the fair value of our whole loans and securitization interests (inclusive of our economic hedging activities), gains or losses recognized on transfers that meet the true sale requirements, and our servicing-related activities, which mainly consist of servicing fees and the changes in our servicing assets over time. In our Lending segment, we also earn the difference between interest income earned on our loans and interest expense, as determined using the FTP framework for the three-month 2022 period and a portion of the six-month 2022 period, and from our warehouse financing in the remainder of the six-month 2022 period and the full 2021 period. Our CODM considers net interest income in addition to contribution profit in evaluating the performance of our Lending segment and making resource allocation decisions. Therefore, we present interest income net of interest expense.
Technology Platform.    The Technology Platform segment includes our technology products and solutions revenue, which was primarily related to our platform-as-a-service through Galileo, which provides the infrastructure to facilitate core client-facing and back-end capabilities, such as account setup, accounting funding, direct deposit, authorizations and processing, payments functionality and check account balance features. Beginning in March 2022, this segment also includes our revenue earned by Technisys, which expanded our segment to include a cloud-native digital and core banking platform offering and which results in the sale of software licenses and the provision of related technology solutions. See Note 2 for additional information on the Technisys Merger.
Financial Services.    The Financial Services segment primarily includes our SoFi Checking and Savings product (which commenced in the first quarter of 2022), SoFi Money cash management product, SoFi Invest product, SoFi Credit Card product, SoFi Relay personal finance management product and other financial services, such as equity capital markets and advisory services, lead generation, and content for other financial services institutions and our members. SoFi Checking and Savings provides members a digital banking experience that offers no account fees, 2-day early paycheck and a competitive annual percentage yield. SoFi Money cash management provides members a digital cash management experience. Effective June 5, 2022, our SoFi Money cash management accounts no longer earn interest, as we implemented our plan to build new features only for SoFi Checking and Savings and reduce support of our SoFi Money cash management accounts. SoFi Invest provides investment features and financial planning services that we offer to our members. Revenues in the Financial Services segment include interest income earned and interest expense incurred under the FTP framework, payment network fees on our member transactions and pay for order flow, digital assets transaction fees and share lending arrangements in SoFi Invest. We also earn referral fees in connection with referral activity we facilitate through our platform. The referral fee is paid to us by third-party partners that offer services to end users who do not use one of our product offerings, but who were referred to the partners through our platform. Beginning in the third quarter of 2021, referral fees also include referral fulfillment fees earned for providing pre-qualified borrower referrals to a third-party partner who separately contracts with a loan originator.
Our CODM considers net interest income in addition to contribution profit (loss) in evaluating the performance of our Financial Services segment and making resource allocation decisions. Under the FTP framework, the Financial Services segment earns interest income that is reflective of an FTP credit for deposits provided to the overall business, as well as incurs interest expense that is reflective of an FTP charge related to the use of funding for SoFi Credit Card.
Corporate/Other.        Non-segment operations are classified as Corporate/Other (previously referred to as “Other”), which includes net revenues associated with corporate functions that are not directly related to a reportable segment. Beginning in the first quarter of 2022, net interest income (expense) within Corporate/Other reflects the residual impact from FTP charges and FTP credits allocated to our reportable segments under our FTP framework. These non-segment net revenue (loss) also include interest income earned on corporate cash balances, nonrecurring income on certain investments from available cash on hand, such as our investments in AFS debt securities (which investments are not interconnected with our core business lines and, thereby, reportable segments), and interest expense on other corporate borrowings, such as our revolving credit facility and the amortization of debt issuance costs and original issue discount on our convertible notes. During the six months ended June 30, 2021, net revenue (loss) within Corporate/Other also included earnings in connection with related party transactions. Refer to Note 14 for further discussion of our related party transactions.
Segment Results
The following tables present financial information, including the measure of contribution profit (loss), for each reportable segment for the periods indicated:
Three Months Ended June 30, 2022
Lending(2)
Technology
Platform(1)
Financial Services(1)(2)
Reportable Segments Total(2)
Corporate/Other(1)(2)
Total
Net interest income (expense)
$114,003 $— $12,925 $126,928 $(4,199)$122,729 
Noninterest income (loss)
143,114 83,899 17,438 244,451 (4,653)239,798 
Total net revenue (loss)
$257,117 $83,899 $30,363 $371,379 $(8,852)$362,527 
Servicing rights – change in valuation inputs or assumptions(3)
(9,098)— — (9,098)
Residual interests classified as debt – change in valuation inputs or assumptions(4)
2,662 — — 2,662 
Directly attributable expenses
(108,690)(62,058)(84,063)(254,811)
Contribution profit (loss)
$141,991 $21,841 $(53,700)$110,132 
Three Months Ended June 30, 2021
Lending
Technology
Platform
Financial Services
Reportable Segments TotalCorporate/OtherTotal
Net interest income (expense)
$56,822 $(32)$542 $57,332 $(1,320)$56,012 
Noninterest income
109,469 45,329 16,497 171,295 3,967 175,262 
Total net revenue
$166,291 $45,297 $17,039 $228,627 $2,647 $231,274 
Servicing rights – change in valuation inputs or assumptions(3)
224 — — 224 
Residual interests classified as debt – change in valuation inputs or assumptions(4)
5,717 — — 5,717 
Directly attributable expenses
(83,044)(32,284)(41,784)(157,112)
Contribution profit (loss)
$89,188 $13,013 $(24,745)$77,456 
Six Months Ended June 30, 2022
Lending(2)
Technology
Platform(1)
Financial Services(1)(2)
Reportable Segments Total(2)
Corporate/Other(1)(2)
Total
Net interest income (expense)
$208,357 $— $18,807 $227,164 $(9,502)$217,662 
Noninterest income (loss)
301,749 144,704 35,099 481,552 (6,343)475,209 
Total net revenue (loss)
$510,106 $144,704 $53,906 $708,716 $(15,845)$692,871 
Servicing rights – change in valuation inputs or assumptions(3)
(20,678)— — (20,678)
Residual interests classified as debt – change in valuation inputs or assumptions(4)
5,625 — — 5,625 
Directly attributable expenses
(220,411)(104,608)(157,121)(482,140)
Contribution profit (loss)
$274,642 $40,096 $(103,215)$211,523 
Six Months Ended June 30, 2021
Lending
Technology
Platform
Financial Services
Reportable Segments TotalCorporate/OtherTotal
Net interest income (expense)
$108,599 $(68)$771 $109,302 $(6,010)$103,292 
Noninterest income
205,669 91,430 22,731 319,830 4,136 323,966 
Total net revenue (loss)
$314,268 $91,362 $23,502 $429,132 $(1,874)$427,258 
Servicing rights – change in valuation inputs or assumptions(3)
12,333 — — 12,333 
Residual interests classified as debt – change in valuation inputs or assumptions(4)
13,668 — — 13,668 
Directly attributable expenses
(163,395)(62,664)(83,766)(309,825)
Contribution profit (loss)
$176,874 $28,698 $(60,264)$145,308 
____________________
(1)During the three and six months ended June 30, 2022, total net revenue for the Technology Platform segment included $953 and $1,723, respectively, of intercompany fees earned by Galileo from SoFi, which is a Galileo client. There is an equal and offsetting expense reflected within the Financial Services segment directly attributable expenses representing the intercompany fees incurred to Galileo. The intercompany revenue and expense are eliminated in consolidation. The revenue is eliminated within Corporate/Other and the expense is adjusted in our reconciliation of directly attributable expenses below. We did not recast the segment information for these intercompany amounts for the three and six months ended June 30, 2021, but rather reflected the full year 2021 impact within the fourth quarter of 2021, as inter-quarter amounts were determined to be immaterial. Additionally, for both the three and six months ended June 30, 2022, total net revenue for the Technology Platform segment included $718 of intercompany fees earned by Technisys from Galileo, which is a Technisys client. There is an equal and offsetting expense reflected within the Technology Platform segment directly attributable expenses representing the intercompany fees incurred by Galileo to Technisys. The intercompany revenue and expense are eliminated in consolidation. The revenue is eliminated within Corporate/Other and the expense is adjusted in our reconciliation of directly attributable expenses below.
(2)During the first quarter of 2022, we implemented a centralized FTP framework to attribute net interest income to our business segments based on their usage and/or provision of funding, which impacted the measure of net interest income and, thereby, total net revenue and contribution profit (loss) in our Lending and Financial Services segments, as well as the total net revenue in Corporate/Other, but had no impact on our consolidated results of operations. The net interest income presented within Corporate/Other represents the residual impact of the FTP charges and FTP credits on our reportable segments.
(3)Reflects changes in fair value inputs and assumptions, including market servicing costs, conditional prepayment and default rates and discount rates. This non-cash change, which is recorded within noninterest income in the unaudited condensed consolidated statements of operations and comprehensive income (loss) is unrealized during the period and, therefore, has no impact on our cash flows from operations. As such, the changes in fair value attributable to assumption changes are adjusted to provide management and financial users with better visibility into the cash flows available to finance our operations.
(4)Reflects changes in fair value inputs and assumptions, including conditional prepayment and default rates and discount rates. When third parties finance our consolidated VIEs through purchasing residual interests, we receive proceeds at the time of the securitization close and, thereafter, pass along contractual cash flows to the residual interest owner. These obligations are measured at fair value on a recurring basis, with fair value changes recorded within noninterest income in the unaudited condensed consolidated statements of operations and comprehensive income (loss). The fair value change attributable to assumption changes has no impact on our initial financing proceeds, our future obligations to the residual interest owner (because future residual interest claims are limited to securitization collateral cash flows), or the general operations of our business. As such, this non-cash change in fair value during the period is adjusted to provide management and financial users with better visibility into the cash flows available to finance our operations.
The following table reconciles reportable segments total contribution profit to loss before income taxes for the periods presented. Expenses not allocated to reportable segments represent items that are not considered by our CODM in evaluating segment performance or allocating resources.
Three Months Ended June 30,Six Months Ended June 30,
2022202120222021
Reportable segments total contribution profit $110,132 $77,456 $211,523 $145,308 
Corporate/Other total net revenue (loss)(8,852)2,647 (15,845)(1,874)
Intercompany expenses1,671 — 2,441 — 
Servicing rights – change in valuation inputs or assumptions9,098 (224)20,678 (12,333)
Residual interests classified as debt – change in valuation inputs or assumptions(2,662)(5,717)(5,625)(13,668)
Expenses not allocated to segments:
Share-based compensation expense(80,142)(52,154)(157,163)(89,608)
Depreciation and amortization expense(38,056)(24,989)(68,754)(50,966)
Fair value change of warrant liabilities— (70,989)— (160,909)
Employee-related costs(1)
(45,316)(36,944)(88,006)(69,224)
Special payment(3)
— (21,181)— (21,181)
Other corporate and unallocated expenses(2)
(41,589)(33,297)(104,570)(67,402)
Loss before income taxes$(95,716)$(165,392)$(205,321)$(341,857)
__________________
(1)Includes compensation, benefits, recruiting, certain occupancy-related costs and various travel costs of executive management, certain technology groups and general and administrative functions that are not directly attributable to the reportable segments.
(2)Represents corporate overhead costs that are not allocated to reportable segments, which primarily includes corporate marketing and advertising costs, tools and subscription costs, professional services costs, corporate insurance expense and transaction-related expenses.
(3)Represents a special payment to the Series 1 preferred stockholders in connection with the Business Combination.
No single customer accounted for more than 10% of our consolidated revenues for any of the periods presented.