SOFI - SoFi Technologies Inc. (SOFI) Presents at KBW Fintech Payments Conference (Transcript)
SoFi Technologies, Inc. (SOFI)
KBW Fintech Payments Conference
February 28, 2023 11:00 AM ET
Company Participants
Chris Lapointe - CFO
Conference Call Participants
Michael Perito - Keefe, Bruyette & Woods, Inc.
Presentation
Michael Perito
Thank you. We're going to get started with our next session. Thank you for joining us. Thank you.
Up next, we have SoFi Technologies. And representing the company, we have the CFO, Chris Lapointe. Chris, thanks for joining us.
Chris Lapointe
Thanks for having us, Mike.
Question-and-Answer Session
Q - Michael Perito
It's good to have you guys here this year. I thought what would be a good way to start is, assuming that the audience has kind of mixed familiarity with SoFi, and as Anthony often says, you guys have been on the 5-year sprint, so you've done a lot. Maybe begin with a quick overview of SoFi, the 3 main segments that you guys kind of operate and disclose, and then we could take the conversation from there.
Chris Lapointe
Absolutely. So thanks for having me, Mike. Really appreciate it. So our mission at SoFi is to help our members achieve financial independence in order to realize their ambitions. And when I say achieve financial independence, that doesn't necessarily mean having people get rich, it means having people have the careers that they want or the jobs that they want or the families that they want.
In order to help people achieve that financial independence, what we've done is we've created a comprehensive set of products and services that enable them to borrow better, save better, spend better, invest better and protect better. And we've done all of that by putting the interest of our members first and foremost every single day along their financial journey. And the reason that we've done that is because we feel like they have been left behind by legacy financial institutions.
So currently today, we operate in 3 distinct segments. Our Lending segment, we offer student loan refinancing, unsecured personal loans, in-school loans and mortgages. That comprises about 70% of our business today if you look at our 2022 revenue, and that business is operating at about a 60%-plus contribution margin.
Our second segment is Financial Services, which includes all of our daily engagement, lower customer acquisition cost products. So that's our SoFi Money or Checking and Savings business, that's our Credit Card business, brokerage. We have a business called Relay, which is an account aggregation or budgeting tool. And then we have a referral business as well. That's currently comprising about 10% of our overall revenues on a 2022 basis. And we're currently losing money in that segment as a result of there being about a 12- to 24-month payback period on the upfront customer acquisition costs and as a result of building our overall CECL reserves.
And then our third segment is our Technology Platform segment, which is comprised of our 2 acquisitions that we've done over the course of the last 3 years. First was Galileo; and then second is Technisys, and that comprises about 20% of our overall revenue. And that segment operates in the -- or delivers about 20% to 30% contribution margins.
Michael Perito
That's a great rundown to get us started. And I wanted to talk about all 3 segments. But before kind of diving into that, when I think of the Lending segment, the products you mentioned in the Financial Services segment, with the SoFi Money accounts, obviously, the decision to become a bank and get a bank charter kind of is intertwined with both of those businesses.
And I thought maybe it would be helpful just to start, maybe give us 60 seconds on why you felt like that was the right move for SoFi to become a chartered bank. But secondly, how we've seen it start to impact the financials in a positive way already through the balance sheet growth and the net interest income growth that you saw in 2022.
Chris Lapointe
Yes. So rewinding back to 2018, 2019 period when we were primarily just a lending business, we were forced to turn over our balance sheet 4 to 5 times a year because we were dependent on relying on only our equity capital as well as warehouse lines in the ABS market.
One of the things that we talked about with our Board back in 2020 was going out and getting the bank charter because it would provide us with a much lower cost of capital relative to alternative sources. And it would provide us with much more flexibility with respect to growing our originations or our Lending business, and it's done exactly that. We got our charter in February of 2022. We had about $1 billion of deposits at the time. We exited this year with about $7.3 billion of deposits, and about 88% of those member deposits are coming from direct deposit members. So this has been a phenomenal, really sticky source of low-cost funding for us.
And currently, we're about -- the cost of our deposits are about 190 basis points lower than alternative sources. So it's starting to have a real meaningful impact, not only from a net interest income perspective but also on our ability to hold loans for a longer period of time because we aren't forced to sell because we are subject to having to rely on just warehouse lines.
So if you take that 190 basis points for every $1 billion of deposits that we're using to fund originations, it's about $19 million in annualized savings. And if you look at our total deposit base of about $7 billion, that's $125 million to $130 million of annualized savings that we're getting as a result of having that low-cost funding.
In addition to that, by having the bank, we're able to offer an unmatched value proposition to our members through a higher API. Right now, direct deposit members can earn 3.75%, which is at the top of the market and is really helping us drive deposit growth on a quarter-to-quarter basis.
Michael Perito
And have you guys -- when you -- I remember, I think it was on the first quarter of '22 transcript, you guys talked about just the weekly inflows you were seeing on the SoFi Money deposits from the rate you were offering. Not in any way in earnest, but you are starting to see more banks and other kind of digital companies start to get more aggressive, deposits are shrinking. Has it gotten more competitive for you guys? Or have you found that, that's a position you're in, competitively, is still basically driving elevated deposit and flow activity for SoFi?
Chris Lapointe
No. In Q4, we had another phenomenal quarter. We grew deposits by about $2 billion quarter-over-quarter. So we haven't seen a slowdown in terms of overall inflows unlike a lot of the other peers out there.
And the other thing I would say is we still have significant room to continue to offer that unmatched value proposition, given the spread between the deposit base and our alternative source of funding, about 190 basis points. So in a world where things get more competitive and people raise their rates, we still have a significant buffer that will enable us to hold on to that value proposition.
Michael Perito
And just lastly on the bank charter, before we move on, I'm curious, kind of a 2-part question here, but how have you found the regulatory oversight of the charter impact your day-to-day kind of operations to SoFi high growth -- I mean, you guys are a high-growth company, right, high-growth revenue company? But secondly, do you find that the regulators focus on SoFi Bank? Or is there an equal amount of focus on the bank and the consolidated company when looking at profitability, capital, liquidity, all those things? Because it's not within a bank holding company, right? Like we -- like a lot of traditional bank people are used to looking at. I'm just curious what that dichotomy looks like.
Chris Lapointe
Yes. So a lot of folks ask us about the regulatory or potential regulatory burden as a result of having the bank. What I would say is rewinding to when we were -- back when we were just a lender, we were regulated in all 50 states that we were originating loans in. So if anything, having to work with just the OCC and the Fed has streamlined some of our regulatory requirements and relationships. Right now, we have a phenomenal relationship with both the OCC and Fed. So we don't view it as being any more burdensome than it was historically, and we're no stranger to operating in this type of environment.
In terms of how they think about it, bank versus a holding company, the OCC regulates our bank. And the Fed is regulating the entire holding company, which includes all other businesses.
Michael Perito
Got it. So anything -- just functionally, any capital or liquidity views that the Fed would have for you guys would be across the entire organization?
Chris Lapointe
That the Fed would have, exactly.
Michael Perito
Okay. Circling back, one of the things I think personally that I've always differentiated you guys versus other kind of consumer-first digital fintech type platforms is the breadth of products. I know Anthony always talks about the Financial Services productivity loop.
I was wondering if maybe you could spend a minute going into that a bit further. I mean, a lot of that's housed within that Financial Services segment that you already brought up briefly. But can you maybe walk through a layer deeper on the array of products? And also maybe give us some insights on to where you're seeing the most kind of economic efficient customer acquisition happening today that you're trying to push the pedal down on?
Chris Lapointe
Yes, absolutely. So one of the ways that we help our members achieve that financial independence is by deploying that strategy that you just referred to as the Financial Services productivity loop. There are 3 different components to that.
The first of which is that we want to create products that are best of breed in and of themselves, but more importantly, that work better when they're used together. And the reason that, that's critically important is because when someone takes out a first product, we need to build that trust and loyalty with them such that they're more willing to take out that second, third, fourth and fifth product.
And the reason that, that's important is because when that person takes out that second product with us, the revenue per that member increases drastically. And we're not paying that second customer acquisition cost in order to acquire them. So the LTV -- our goal of having the highest LTV in the industry is really met when that productivity loop starts to work.
The second part of the strategy is to have superior unit economics across each and every one of our businesses. We've seen that with our Lending business, where we're 100% vertically integrated. And it allows us to innovate at a much faster clip and operate at a much lower cost. Again, that helps us deliver the highest LTV, the highest unit economics, reinvest those profits back into the business in the form of better products, better pricing, better services, et cetera.
And then the third component, which we'll likely hit on later, is to continue to build on our goal of becoming the AWS of fintech and building out our Technology Platform. One of our main objectives when we acquired the Galileo business was because we wanted to vertically integrate our Checking and Savings business. And the reason for that was because we wanted to be able to innovate and get products and services to market much faster, but also be that low-cost provider.
And we have certainly seen that, that's playing out in spades. We're a very low-cost operator, and it's a great business. But what's more importantly is it's a great business in and of itself, and we're able to serve members across a much broader ecosystem than just the SoFi ecosystem. So we're excited about the progress that we've made both on the SoFi side but also on the tech platform side.
Michael Perito
And where is -- when you think about like active members and their products per active member, I know you guys don't really disclose that, but can you give us maybe some indication of like where the customers that are engaging with your platform are the most, how many products are they using? And what kind of marketing verticals have you had the most success with? I mean you guys do a lot, right? You're in a lot of different channels, social media, all the -- just curious where you guys have seen the best kind of bang for your buck, I guess, for...
Chris Lapointe
Yes. So I'll split it out into the different segments. So in our Lending segment, we predominantly rely on direct mail and affiliates to acquire members. And then on the Financial Services side, we typically rely on digital marketing and referrals. We have started to have some success with affiliates as well on our Checking and Savings business, but it's predominantly been lower customer acquisition digital channels that we've relied on.
In terms of the overall engagement, we don't disclose anything but products and members. The best indication of the fact that people are engaged on our platform is, I would say, twofold, is looking at the number of products per member. It's been right around that 1.5 level for the last several quarters, which is a great indication that people are using the products because of how fast we're growing the overall member base.
And then the second way I would look at it is revenue. We've delivered 7 consecutive quarters of record revenue and that doesn't happen unless people are engaged and highly engaged on our platform, specifically in Financial Services.
Michael Perito
I wanted to transition a little bit and talk -- that provides a good backdrop of kind of foundationally, what you guys are doing, what you're trying to build, how you're trying to go about it. Transition a little to what are the financial outcomes of that the financial targets. And I wanted to start with probably one of the more critical ones.
I mean I thought it was noticeable that this year on your fourth quarter call, when putting your targets out for 2023, there was the goal to reach profitability as a company. And that's kind of -- obviously, I think everyone in this room understands why that's the ultimate goal.
But you also have this -- historically a pretty strong view that you want to invest $0.70 of every $1 of revenue you make. So can you kind of maybe bridge the gap of those 2 things? Has the environment changed at all? Has that 70-30 rule changed at all? Or are we just -- or is that 1.5 going to increase to the point in 2023 where you think you can finally kind of get that hockey stick ramp in the GAAP EPS?
Chris Lapointe
Yes. We're finally starting to hit that inflection point. What I would say is our view on how we invest in the business has not changed since we somewhat transformed the business back in 2018 and 2019.
What we've said consistently is that we want to reinvest 70% of every incremental dollar back into the business in order to drive incremental EBITDA margins of 30%. Why 30%? Because we think that, that's the right level that will enable us to deliver compounding revenue growth for years and years to come.
What we also said on the Q4 call is that we expect to be able to deliver 20% incremental GAAP net income margins, which puts us, if you do the math, right, at GAAP profitability by Q4. So we hit some critical inflection points during Q4 that helped demonstrate that we're certainly on that path. If you look at our Lending business, for the first time, our net interest income exceeded our noninterest income, which is a really good indicator that we're starting to grow a nice recurring steady stream of revenue in the form of net interest income.
In addition to that, if you look at our Lending business, our net interest income exceeded cost attributable, both on the fixed and variable side on the Lending business. So we're profitable even excluding noninterest income and overall origination revenue. So that's a really good critical milestone to hit that will ensure that we're delivering profitability in that Lending segment even through a cycle.
The second critical milestone that we hit was having our adjusted EBITDA of $70 million in the quarter was essentially equal to the stock-based compensation, which is a noncash item that sits below adjusted EBITDA and hits GAAP net income. So at $70 million, again, that's a really good indication that we're going to continue to get leverage in the system and deliver those GAAP profits.
The only other lines between adjusted EBITDA and GAAP net income are depreciation and amortization. The vast majority of that D&A is attributable to amortization of intangibles on the 2 acquisitions that we made. There is some capitalized software in there as well, but it's a smaller component of it. But again, we're going to continue to see leverage in that as the amortization comes down.
Michael Perito
What are the biggest risks to achieving that target? I mean to me, it feels like it's probably twofold. I mean you guys are going to be able to grow the balance sheet if you want to, just -- I think you guys have demonstrated that.
So is it -- are the biggest risks, possible margin compression in the Lending segment and possibly maybe not as fast of a margin rebound in the Technology segment? If you had to kind of put your finger on 2 things that could maybe prevent you from achieving that, would those be high on the list? Or is there something else we should be mindful of when you think about the risks of reaching profitability?
Chris Lapointe
Yes. I think I would -- there are a bunch of levers that can impact the overall results for 2023, and we kind of walked through them on our earnings call, but what I would point back to is some of the macro assumptions that we made in our 2023 guide, the first of which was that we expect rates to reach 5% by mid part of 2023. And then there -- we expected there to be about 2 rate cuts to get us down to 4.5% exiting the year.
Who knows what's going to happen over the course of the next several quarters in that, but that could be either a tailwind or a headwind depending on where things go. I think we assumed -- or I know we assumed that unemployment would reach 5% and be more normalized. If things are better than that, our consumer lending business could be more of a tailwind versus a headwind. If it's worse, you could have the opposite effect.
We did assume that credit spreads would remain elevated throughout the course of the year. What we saw in January was that credit spreads actually tightened, which is a good indication that the ABS markets are starting to open up again. We just accessed the markets a few weeks ago and did another term securitization similar to what we did in November of this year at spreads that were 90 basis points tighter than our last deal. So it's a really good indicator that, that market is starting to open, and we're able to access it. So that could continue to be a tailwind for us.
And then from a loss perspective, we assume that things would return closer to 2019 levels, and we will manage against that -- those losses, so that could be a potential tailwind if things stay where they are today.
Michael Perito
So it sounds like you're not necessarily assuming a recession, but you are assuming some normalization in various items, whether it's losses on vintages and on the personal lending, rates. I mean nothing sounds overly aggressive in kind of those backdrops -- would you say that's fair?
Chris Lapointe
That's fair. And we also said that we're assuming a 2.5% GDP contraction throughout the year as well. So not a significant recession, but steady as she goes.
Michael Perito
So I wanted to spend a minute on -- and you were talking about credit spreads, and that's a good segue because the personal lending market for you guys has really been a great engine of revenue growth and particularly with kind of the political and strong nature of the student refi business, right, that we've been in for some time now, that really has kind of taken the baton and grown the top line for you.
I guess kind of a 2-part question. One, where do you -- you talked about a business line that was $40 billion in 2014, it's probably approaching $200 billion now. And you guys have seen a growing piece of that market share. What's kind of SoFi's overall view of the personal lending market? Are we still early innings? Are we reaching kind of a top from a -- I mean, there's still a lot of credit card debt out there. There's still a lot of use case. I'm just curious what your view is there.
And secondly, what has been your value proposition in that space where there are some other players, both public and private that have been trying to grow and have pulled back, have gotten more aggressive? Just curious how you think you fit in competitively in that personal lending market.
Chris Lapointe
Yes. What I would say in terms of the overall market is that it has been growing. I think it's a function of where rates are and where they've gone over the course of the last 12 months. In a rising rate environment, people tend to refinance out of variable rate debt, especially on the credit card side into these fixed unsecured products. That's certainly benefited us. And so we benefited both from a macro tailwind perspective, but we're also gaining share.
If you look at Q4 of 2021, we're at about 4.5% of overall market share. Today or as of the end of Q4 2022, we were at about 6%. So we benefited both from the market tailwind as well as our ability to gain share. And that's a function of us being able to differentiate our products across 4 key dimensions that we often talk about publicly. It's fast, selection, content and convenience. We're able to differentiate on price. We're able to differentiate on in terms of how quickly people can get a loan in an automated way. So all of those things have actually helped benefit us.
I think in this rate environment and where things are headed over the course of 2023, I think you'll continue to see the market grow. I think we have plenty of headroom to continue to grow that business, given our 6% market share, but we're going to be extremely thoughtful and prudent in how we approach it.
We talked publicly on the earnings call that we're going to grow that business modestly because of our maniacal focus on credit and ensuring that we're underwriting the highest quality borrowers. So we're going to be mindful. I don't think there are any headwinds that would prevent us from growing that business, but we're going to be thoughtful on how we do it.
Michael Perito
And can we spend a second on credit there? Because that's something I've always, I don't want to say struggled with, but it's a fairly new asset class. Credit losses have been low for a while, so FICO scores are high. Can you maybe just walk us through how you guys underwrite these customers? Because I'm pretty sure it goes beyond just someone's FICO score, right?
And how are you confident that you're kind of -- I mean, when you guys SPAC-ed and came public, it was high earners, not well served, right? That was the focus, and I think it's still the focus largely of the enterprise. How are you sure -- as you grow these products, how do you kind of make sure that you stay in that sleeve of target customers and not kind of expand the funnel a little bit from a credit perspective as you try to drive the volume?
Chris Lapointe
Yes, we're constantly making tweaks to our underwriting models and what tiers we're actually underwriting to on a day-to-day basis. We look at this at the most granular level in terms of which channels we're acquiring members, et cetera.
We don't underwrite to FICO scores, that's a knockout rule. We won't underwrite below 680. We underwrite to a free cash flow of that member and have been refining that model for quite some time. I think we're on generation 4 of our overall underwriting model and constantly making tweaks.
In terms of the overall demographic, to your point, it's remained extremely high quality. The weighted average FICO is about 746 as of Q4. The weighted average income for that borrower is $160,000. So super high quality.
In terms of the overall credit characteristics of that borrower, if you look at our annualized charge-offs in our personal loans business across the entire portfolio, they were about 1.95% in Q4. And if you look at the average duration of our personal loans, they're on average, about 1.8 years. So if you take that 1.95% of annualized charge-offs multiplied by the duration of that loan, you get to an overall portfolio, life-of-loan loss rate of about 4.45%, which is below our risk tolerance of underwriting to 6% to 8%, which we've said publicly.
So we feel really good about the overall performance and credit of our borrower, but we're constantly evaluating every single cohort and how we're acquiring those members to ensure that we never exceed that risk tolerance that I talked about.
Michael Perito
And I guess the other tricky part is, as you're attracting customers in the Financial Services products, right, you're not necessarily going to only be attracting high earners not well served, right, particularly with like almost a 4% yield on your deposits, right, credit cards, all these other things you're doing.
So how do you guys kind of -- I guess, 2-part question again. Have you seen that? Have you seen kind of a broader spectrum of customers come on in your Financial Services products? And is that where like some of your partnerships that you have are so critical where you could funnel that loan volume elsewhere if it doesn't fit your criteria?
Chris Lapointe
Yes. What I would say is we are still seeing super-high-quality members come in through our Financial Services products. I think we said publicly on our earnings call that the -- or the median FICO score of our Checking and Savings members is 745, so still super high quality. But we do have some of these daily engagement products that are broader market appeal, but we still stick to high earners who are not well served with high average incomes. We have found ways to monetize folks who come in through our funnel and are -- cannot take out a loan with us. It's a good example of our Lantern product or lending as a service, where currently, about 70% of all applicants who come through our personal loans funnel do not get a SoFi loan, but we're able to find them...
Michael Perito
That high? 70%?
Chris Lapointe
About 70%. We're able to find them an alternative partner to take out a loan where we get paid a referral fee. So it's a great business, and we're also able to serve a broader market than our target demographic.
Michael Perito
And then I don't want to belabor this point, but I do get a lot of questions just about how you guys opt to do kind of fair value accounting on your loan book. And I thought maybe you could spend a minute -- not many banks do that. So I thought why you guys choose to do that would be a helpful data point. But then also if you could maybe -- the rate environment has been kooky, for lack of a better word, right? And you guys have managed to hedge your way through it and kind of have some stabilized revenue. And I was wondering if you can maybe just spend a minute also on kind of how you hedge these personal loans that I think you're now holding on your books for kind of 6 or 7 months from origination to sales, give or take. I know it depends on the credit. But historically, 6 to 7 months might not have a huge rate impact. But obviously, in 2022, that was not the case. So I think it would be great to spend a minute there and talk about that strategy.
Chris Lapointe
Yes. And in terms of why we do fair market value versus cost, so at time of origination, there are 2 ways that you can account for your loans. You can do it at cost and take a CECL reserve or you can do it at fair market value, and you mark them at the fair market value, which is based on empirical -- like historical sales, default rates, prepayment speeds, rates, et cetera. But what we've done historically since the beginning of the company is we've opted to do fair market value accounting, but we have an intent to sell those loans at time of origination. And we don't have the intent at this point to change how we think about that.
To your point, we've been very successful over the course of 2022 with our hedging program. What we end up doing is we hedge out our -- the loans that are susceptible to rate volatility. And the pure intent of doing that is to offset any increases or decreases in rates and the offsetting impact on the fair market value of those loans. Our goal is to hedge 100% of that volatility, and that's -- you saw that come through in the P&L this past year.
In terms of other things that impact the fair market value of the loan, I would say there are a few things. And why we've been successful on maintaining our overall gain-on-sale margins is, first and foremost, is being able to keep pace with rates and passing that through to the weighted average coupon to the consumer.
So if you look at the last several quarters in our personal loans business, we've increased our overall portfolio by about 60 basis points on a WACC basis, and that's on the entire portfolio. So new originations are coming in well north of that 60 basis points on a quarter-over-quarter basis, which is faster than the forward curve of the underlying benchmarks. So that's reason number 1 as to why we've been able to keep pace with our gain-on-sale margins.
Reason number 2 is our overall default rates and loss rates have held in there extremely well relative to expectations. And then third is prepayment speeds on our loans have slowed as a result of the rate environment, which extends the overall cash flows of those loans and helps with the fair market value.
So those factors combined are what's really driving our noninterest income revenue. The hedging component is purely to offset rate volatility on a one-for-one basis.
Michael Perito
Right, which would be nice if that kind of subsides. I'm sure you'd have a lot more free time to pursue other things. Just one last -- 2 last questions on this before I move to the Technology segment.
You guys have purchased some loan portfolios. Is there a market to purchase back your loans? Is that something that you expect to continue? I'm not necessarily asking for guidance, but is that like competitively, the dynamics of the market right now where those opportunities could come back?
And secondly, I believe the accounting rules -- you mentioned a phrase, the intent to sell. I think they're fairly liberal around that intent from a timing perspective. But are there any limitations? Can you hold these loans 8, 9 months in the capital and funding? Like is there any kind of restrictions we should think about in that regard as you guys continue to grow?
Chris Lapointe
Yes. First, on your question in terms of having the ability to purchase loans, you saw over the course of the last 2 quarters that we had opportunities to purchase a few portfolios. We did one in Q3 of our personal loans -- of a personal loans portfolio, and we did one in Q4 in student loans.
These are purely opportunistic purchases. We always do cleanup calls with some of our older securitizations when they hit certain thresholds, but this is more of an opportunistic play for us. And the reason for that is we're generating deposits and paying an interest rate on those deposits, and we need to make a return on those. There are a few ways that you can make a return. You can go out and originate a loan. You can pay $800 to $1,000 to acquire that member, or you can go out and purchase loans and start generating real returns on those.
These are -- the loans that we purchased in Q3 and Q4 were originally underwritten by us. We service half of those loans and understand the overall credit profile and loss profile and historics of those members. So it's a great low-risk way to bring loans on to the balance sheet and generate a return far more than we could otherwise with that capital that we're generating. And then...
Michael Perito
The restrictions on intent to sell, like duration-wise, like is that...
Chris Lapointe
Yes. So as long as you have an intent to sell, you would end up -- yes, you would end up marking them as held for sale. Even in an environment where you were to account for these in a fair market value way, you can switch from held for sale to held for investment and hold them to maturity with no implications on CECL or anything. You would always be marking them to market.
Michael Perito
Okay. So I want to transition to the technology segment and then leave a few minutes if there's questions from the audience. So you mentioned -- you kind of gave the backdrop initially just to remind folks, you have Galileo, which was the original acquisition. I believe you closed that right before you guys SPAC-ed and went public. And then you added Technisys later to kind of round out the product offering, bring some more revenues onto the platform.
What would you say SoFi's value proposition in that space is, which can be competitive and not be competitive at the same time? Like it is competitive, but people tend to stick with their processors for long durations of time as well. What have you found with your kind of new full product suite that you have, your value proposition is in that marketplace?
Chris Lapointe
Yes. What I would say is rewinding back to our Galileo acquisition, the reason that we purchased that was because we wanted to become vertically integrated, like I said, at the top of the conversation. We're able to innovate faster and operate at a much lower cost.
As we started working with customers on the Galileo front, some of the things that we noticed is they wanted to get into different types of products and services. One of the problems with getting into different products and services is if you're a monoline business and you want to get into your debit business and you want to get into secured credit or into brokerage, you need a different operating system or a core ledger in order to be able to make that transition.
Galileo offers debit processing, and we offer a core for debit processing, but we didn't offer a core that allowed us to service other types of products and services. We'd have to go out to another third party. So one of the main impetus behind the Technisys acquisition was to get that core technology. There are very few cores out there that are cloud-based, customizable and extensible across multiple products. And that's exactly what Technisys is.
So we have had phenomenal conversations with not only the Galileo customers that want to extend their product suite to other financial services products, where we can get them to market in a much faster way because we have this core technology, but also larger financial institutions and larger consumer technology businesses with large installed bases that we weren't in conversations with before. So it's opened up a lot of new doors and avenues for us and has enabled us to go to market with a product that in our belief no one else has.
Michael Perito
And so is it just -- when you think about the recent revenue growth trends and some of the margins, I mean, you guys are clearly investing in the platform. Is the sales cycle just a little longer than maybe you guys initially expect?
I mean that tends -- having some bank experience, I can know how painfully long these sales cycles can be at times. But just curious if that -- how that's worked out and what can really get this revenue growth rate moving and the margins kind of picking back up? What are some of the key drivers?
Chris Lapointe
Yes. So I'll start on the cost side and margins. So over the course of the last few years, specifically with Galileo, we've invested quite heavily in migrating from on-prem to the cloud. We are now essentially done with that migration. We have over 99% of all authorizations on the platform going through the cloud. So we're going to be able to start realizing cost savings by not having to operate both on-prem and the cloud, which we've had to do over the course of the last few years. So that's one area.
We've also invested heavily in headcount where we've scaled that by about 2.5x since we acquired the business, and that was for a few reasons: one was to build out our capabilities on the cloud side; another was to build out product and API capabilities, a lot of those which have been built up until this point now; and then the third was to build out our overall operational capabilities.
So we've invested quite heavily, and now we're at that point where we're going to start being able to realize some cost savings and synergies. We talked a lot about this on the earnings call. So in the near term, you're going to start seeing -- or near to medium term, margins will expand back to those levels that we've talked about historically.
And then on the revenue side, one of the things that we talked about focusing on was larger, more durable customers that are diversified and have larger installed bases, which naturally have longer sales cycles. But once they're fully integrated, that will help reaccelerate revenue to where we had talked about at the start of all this.
Michael Perito
And there's some normalization there baked into your profitability targets?
Chris Lapointe
Exactly.
Michael Perito
Yes. Okay. We have about 5 minutes left. Happy to entertain a couple of questions from the audience if there are any. I'll ask one more while you guys mull.
Just the concentration of this business, this is not something I think most people are unfamiliar with, even like [Mark], there tends to be a little top heavy because they're volume-driven businesses and the biggest platforms that are successful grow and become larger, right? Can you maybe remind us what the concentration of revenue looks like on your technology segment today?
And does that naturally just kind of diversify over time? Is it kind of like a necessary evil, and as you guys grow both geographically and into B2B and other products like it should kind of hopefully not improve, but dilute over time? Or is there anything you can do more immediate that could help kind of reduce some of those concentrations?
Chris Lapointe
Yes. So I'll rewind back to our 2021 10-K that we released. So our top 5 customers at the time comprised about 64% of the Galileo or Tech Platform revenue at that time, which only included Galileo. You'll see in the 10-K that gets published tomorrow or the day after that we will not be disclosing any concentration because the overall limits were not met.
So there's no single customer on the platform that comprises 10% of our SoFi Technologies revenue. So that 64% that I just mentioned has come down meaningfully as a result of growth in new customers, growth in the Technisys business as well.
Michael Perito
And some of those new customers, I imagine, you don't just turn the plug on -- the switch on and start driving huge volume, right? There's integration, there's ramp, it takes time.
Chris Lapointe
Exactly.
Michael Perito
I have one more, but I did want to just give one last chance. Just to wrap us up, I think to summarize, I mean, SoFi, you're trying to put yourselves at the center of your financial members' lives, right, and make their lives easier. And an element of that is payments, right? And you guys touch payments in some different ways, whether through traditional banking rails, whether through payment processing on the Galileo side. But are you guys exploring any innovation on the payment side?
I mean there was a little bit more -- at this conference a couple of years ago, a little bit more talk about like Stablecoins and things of that nature. Obviously, some of that's cooled off. But just curious kind of a last curveball for you here, just on your product road map, I mean, anything on the payment side that's worth the audience being aware of that you guys are maybe not even formally exploring, but just interested in or think could be interesting as your consumers' behavior adapts and evolves?
Chris Lapointe
Yes, nothing that I can say publicly. We obviously have a really robust product road map across the entire SoFi, Galileo and Technisys ecosystem. We're going to continue to innovate. We've invested heavily over the course of the last several years to put us in a position to keep up with that pace of innovation. And that's what we'll do for the foreseeable future.
Michael Perito
Great. Well, Chris, thank you for joining us. Really appreciate it.
Chris Lapointe
Thanks so much. Appreciate it. Take care.
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SoFi Technologies, Inc. (SOFI) Presents at KBW Fintech Payments Conference (Transcript)