Earnings Praise Overshadowed by Structural Cash Flow Risks

3 months ago

Jerry Romine

"SoFi crushed earnings. No one's denying that. But high-erforming quarters don't erase structural risk. They just cover it up until it doesn't work anymore. Here's what still makes this business vulnerable. First, revenue is concentrated in lending. Over 56% of total revenue still comes from originating loans. That means they're not just exposed to consumer behavior. They're exposed to credit markets, interest rates, and macro volatility. And as we broke down earlier, their levered free cash flow margin is negative 99.7%. For every $1 in revenue, they're losing nearly $1 in real cash after servicing debt. That's not a typo. That's not an opinion. That's the math."

The speaker acknowledges SoFi's record-breaking earnings but emphasizes that the underlying business is vulnerable due to its heavy reliance on lending and a severely negative levered free cash flow margin. This commentary highlights structural risks that are not immediately evident in headline figures, cautioning investors about the sustainability of the business model.

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