Scandal-Plagued SoFi Posts Revenue Gain But Pulls Back ExpansionBy and
Startup’s revenue rises but profit falls from previous quarter
Firm will pull back from some of its expansion plans
Social Finance Inc., the financial technology startup grappling with lawsuits alleging sexual harassment and other unethical actions by managers, said it posted higher revenue but a smaller profit during the third quarter.
The closely held San Francisco-based company also will pull back its international expansion plans and sell the hedge fund founded by SoFi co-founder and former Chief Executive Officer Mike Cagney, according to an investor letter from Executive Chairman and Interim CEO Tom Hutton obtained by Bloomberg.
SoFi’s adjusted operating revenue was $145.3 million in the third quarter, according to Hutton’s letter. The compares with $134 million in the previous period. The company had adjusted earnings before interest, taxes, depreciation and amortization of $56.1 million, down from $61.6 million in the prior quarter.
Once a darling of Silicon Valley, SoFi has fallen from its pedestal after a series of lawsuits and sexual harassment allegations. In September, the company replaced Cagney amid claims that he sexually harassed female employees. SoFi has retained the search firm Heidrick & Struggles to help find a new CEO, and is currently searching for a new chief financial officer, Hutton said in the letter.
Hutton also commented on the firm’s decision to withdraw its application for an industrial loan company charter with the Federal Deposit Insurance Corp.
“Throughout our ILC application process, we have been preparing on a parallel track a partner-based approach for our banking products that is no less valuable for members and still offers us attractive economics,” he said.
As Bloomberg reported last month, there’s a big question mark over other initiatives Cagney had championed, but board members viewed as pet projects. Some of those, such as expansion into Australia and Canada, will be delayed.
“We will instead focus on further improving our core lending products and developing strategic initiatives like banking and wealth management to broaden relationships with our clients,” Hutton said.
SoFi also plans sell Cabezon Investment Group, the hedge fund Cagney founded, which was acquired last year.
Hutton said the company added 55,000 members in the quarter and now has more than 400,000. SoFi extended more than $3.52 billion in loans in the period and completed three securities offerings totaling more than $1.5 billion.
After hinting at an IPO in its second-quarter letter, there was no mention of one this time.