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Speaker 1: The other big mover to the upside is in the

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Speaker 1: earnings context, and that is so FI actually on track

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Speaker 1: for its biggest jump since late July, first week of August.

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Speaker 1: Why profitability for the first time on a net income basis?

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Speaker 1: This is the milestone that the street was looking for.

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Speaker 1: There's a lot going on on the technology side of

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Speaker 1: Sofar's business and a lot going on on the lending

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Speaker 1: side and finance side of its business as well.

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Speaker 2: Who do we speak to?

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Speaker 1: The CEO, Anthony Notto joins us now and Antie. We've

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Speaker 1: been through this process psychologically that first profit with a

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Speaker 1: number of companies before. What were the main contributing factors

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Speaker 1: to you guys hitting profitability on a net income basis?

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Speaker 1: And how confident can the street be that you continue

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Speaker 1: on this arc of increasing profitability and.

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Speaker 2: Thank you for having me on.

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Speaker 3: The main contributors to the profitability is that we finally

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Speaker 3: reached the scale in our non lending businesses that they

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Speaker 3: are now profitable, and so we have three profitable segments.

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Speaker 3: When I joined the company six years ago, we're primarily

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Speaker 3: a lender.

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Speaker 2: That's a very profitable business for us.

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Speaker 3: We've entered the technology platform services business where we enable

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Speaker 3: one hundred and forty million accounts throughout the United States

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Speaker 3: and lat Am to do payment processing, as well as

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Speaker 3: core banking technologies and a number of other financial services

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Speaker 3: technologies that.

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Speaker 2: We use at SOFI, but we also sell to others.

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Speaker 3: And then our third segment is our financial services segment,

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Speaker 3: which consists of products like Sofi Money, which is a

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Speaker 3: checking SAMES account, Sofi Invests, so Fi credit card, Sofi

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Speaker 3: Protectors's insurance. Those businesses required a significant amount investment over

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Speaker 3: the last six years, but we've now reached the point

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Speaker 3: where they're forty percent of our revenue in the fourth

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Speaker 3: quarter compared to lending at sixty percent, and they're profitable,

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Speaker 3: and so that inflection point hit this quarter, and as

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Speaker 3: we go into twenty twenty four, we believe the businesses

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Speaker 3: will be fifty percent lending, fifty percent tech platform and

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Speaker 3: financial services, and with all three being.

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Speaker 2: Profitable, the profitability is sustainable.

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Speaker 1: I'm trying to understand that guidance. So you're basically saying

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Speaker 1: fifty percent compound annual growth from the financial services business

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Speaker 1: over kind of this pretty wide window twenty twenty three

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Speaker 1: through twenty twenty six. What gives you the confidence that

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Speaker 1: you can see that far into the future in terms

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Speaker 1: of how your company will grow that segment.

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Speaker 3: Sure, just to clarify for viewers, I was suggesting that

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Speaker 3: we'll have fifty percent of our revenue from lending in

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Speaker 3: twenty twenty four and fifty percent of our revenue from

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Speaker 3: the two other divisions combined, the technology platform segment and

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Speaker 3: the financial services segment. In terms of our longer term

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Speaker 3: revenue growth outlook, we are forecasting seventy five percent growth

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Speaker 3: in the fincial services segment in twenty twenty four and

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Speaker 3: twenty percent growth in the tech platform. From the twenty

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Speaker 3: twenty three through twenty twenty six time period, technology platform

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Speaker 3: will come down to fifty percent and sorry, technology platform

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Speaker 3: will be mid twenties and the fincial services segment will

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Speaker 3: come down to fifty percent.

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Speaker 2: And the reason we could see that is.

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Speaker 3: Because we understand our customer acquisition cost, how much we

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Speaker 3: spend on marketing, and that drives the adoption of the

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Speaker 3: products and then they monetize it rate that we've seen

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Speaker 3: over the last couple of years, and so they're pretty

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Speaker 3: strong leaning indicators of what the future brings from a

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Speaker 3: growth perspective.

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Speaker 4: One thing, of course, on your call that you made

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Speaker 4: clear to analysis. Look, let's face it, no economist has

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Speaker 4: got this economy right in the last couple of years.

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Speaker 4: How do you feel about the macro economy, Anthony.

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Speaker 2: Yeah, we're very conservative about the macro outlook.

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Speaker 3: Specifically, I don't believe it will be the case that

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Speaker 3: we could have six rate cuts, which is what.

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Speaker 2: The forward curve shows, and a strong economy.

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Speaker 3: I think if we actually get the six rate cuts,

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Speaker 3: it's because we're likely with unemployment above five percent and

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Speaker 3: likely with contracting GDP. I think it's more likely that

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Speaker 3: we'll have fewer cuts and maybe a stable economy. But

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Speaker 3: coming into October, many market pundits we're talking about higher

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Speaker 3: for longer. Ninety days later, they're talking about six rate cuts.

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Speaker 3: It's such a bifurcation of views. It's really hard to

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Speaker 3: know what the real outlook is. And so we're taking

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Speaker 3: a very conservative view. And we can do that given

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Speaker 3: the diversification that we have on the lighting business and with.

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Speaker 2: The other businesses.

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Speaker 3: So we're going into next year with tighter credit and

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Speaker 3: also lower expectations. In fact, we're really just forecasting maintaining

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Speaker 3: our revenue and lending, not growing it.

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Speaker 2: And the other business is driving the growth that I mentioned.

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Speaker 4: And with that sort of growth, you still have that

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Speaker 4: goal of a thirty percent return on equity. You still

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Speaker 4: have that goal of being in the top ten in

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Speaker 4: terms of financial institutions here in the United States. What

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Speaker 4: gets you there in terms of your underlying investments that

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Speaker 4: you now need to make company sure.

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Speaker 3: In twenty twenty three, we were able to grow our

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Speaker 3: revenue thirty five percent. We just hit our long term

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Speaker 3: EBIDAD margin of thirty percent, which is what's required to

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Speaker 3: get to the return on equity of thirty percent. Now

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Speaker 3: we just have to scale the EBADAD dollars against our

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Speaker 3: book value. We grew tangible book value by more than

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Speaker 3: three hundred and forty million dollars this year, and we're

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Speaker 3: looking to grow it even faster next year at three

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Speaker 3: hundred million to five hundred million, and so.

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Speaker 2: The profitability of the business is there.

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Speaker 3: Now, it's about just scaling the revenue, which will scale

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Speaker 3: the returns on equity to that thirty percent level that

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Speaker 3: you mention. We've been in these businesses now for four

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Speaker 3: to six years, and we have pretty good leading indicators

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Speaker 3: of what it takes to drive their growth, and that's

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Speaker 3: what's giving us the confidence in our forward outlook.

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Speaker 1: Anthony, our colleague Paige Smith on the Fintech team is

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Speaker 1: talking about your technology business. Our colleagues are Bloomberg Intelligence

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Speaker 1: are talking about your technology business. This is the Bloomberg

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Speaker 1: Technology Show. What are we talking about when we say

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Speaker 1: that so Far is a tech company? What is the

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Speaker 1: strength that you have there?

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Speaker 2: Sure, obviously we have to build our own technology.

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Speaker 3: We're a financial services company with no physical locations and

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Speaker 3: so the only way our products are delivered is through

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Speaker 3: the mobile app or desktop services. So by definition we

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Speaker 3: have to have technology to do that. In addition, we

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Speaker 3: have to have processing capabilities and operating systems we use

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Speaker 3: for processing. A company that we bought, Galileo, back in

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Speaker 3: twenty twenty.

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Speaker 2: Galileo is powering about one hundred and forty million.

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Speaker 3: Accounts in the United States to do payment processing and

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Speaker 3: debit in ahrals. But also it's developed a whole suite

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Speaker 3: of APIs that allows a developer to tap into those

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Speaker 3: APIs and build account opening or a direct deposit or

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Speaker 3: two day early paycheck or payment risk platform. In addition

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Speaker 3: to that, we have a technology platform that's a core

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Speaker 3: banking technology called Technicist. It's really the operating system for products.

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Speaker 3: It's a multi product platform. We use it for so

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Speaker 3: far by now pay later. Those are the two main

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Speaker 3: products that we sell to third parties, and as I mentioned,

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Speaker 3: servicing about one hundred and forty million accounts in the

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Speaker 3: United States and lat Am.

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Speaker 1: Today, Anthony, I think we've got to talk about the

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Speaker 1: share reaction. Right your gains are holding at around twenty

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Speaker 1: three percent. You know, I talked about that psychological, psychological

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Speaker 1: milestone of net income profit. But so you finally feel

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Speaker 1: like you're getting some credit because you've been talking about

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Speaker 1: this plan for a little while, I have a sense

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Speaker 1: of deja vus. We're talking about the same things now

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Speaker 1: as the two previous times you've been on the show.

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Speaker 3: Sure, I think that the inflection point in this quarter

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Speaker 3: is one hitting our long term margins of you adout

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Speaker 3: thirty percent, so that gives people a longer term view

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Speaker 3: on what.

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Speaker 2: Our profitability could be.

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Speaker 3: Second is forty percent of our revenue came from the

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Speaker 3: technology platform business as well as the financial services business,

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Speaker 3: which means sixty percent came from lending. And so as

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Speaker 3: we go into twenty twenty four, we're calling for that

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Speaker 3: split to be fifty to fifty. As I mentioned, that's

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Speaker 3: also an inflection point. People have been waiting for that

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Speaker 3: for a while. And so while there's a lot of

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Speaker 3: talk and debate about the loans and fair market value

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Speaker 3: accounting versus cost accounting, the reality is that our business

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Speaker 3: is much more than that, and we're starting to get

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Speaker 3: the perspective from investors about that broader diversification.

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Speaker 2: And it's not by accident.

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Speaker 3: We embarked on a strategy to be a one stop

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Speaker 3: shop six years ago for all your financial services needs.

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Speaker 3: Our mission is to help people achieve financial independence, which

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Speaker 3: means we have to help them get their money right,

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Speaker 3: and we can't just do that in one product. We

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Speaker 3: have to across borrowing, saving, spending, investing, and protecting. And

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Speaker 3: what you're seeing in our results is that playing out

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Speaker 3: in diversified revenue and high profitability six years later.

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Speaker 4: Interestingly not in crypto anymore, but interestingly what I'm taken

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Speaker 4: with on a day like today where we see the

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Speaker 4: Amazon I robot merger, have do you put on ice

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Speaker 4: with your background as someone who helped lead the overall

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Speaker 4: investment banking offering over at GOLM and Saxony kN to

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Speaker 4: TMT when you're thinking of your own acquisition strategy. Can

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Speaker 4: deals get done at the moment in the world of

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Speaker 4: Tear Company.

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Speaker 2: I think they can get done. We're not focused on

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Speaker 2: doing deals that so far.

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Speaker 3: We're focused on our strategy and executing organic growth. We

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Speaker 3: feel like we've reached the point now where it's ours

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Speaker 3: for the taking, and the opportunity for us to be

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Speaker 3: the winner. That takes most is completely up to our execution.

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Speaker 3: But more broadly, I do believe there's still m and

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Speaker 3: A that will happen across both technology and financial services.

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Speaker 3: I think financial service is probably a little bit more

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Speaker 3: challenged because of the reglatory backdrop than technology is per se.

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Speaker 3: But deals are getting done. They're just harder to get done,

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Speaker 3: and they're going to courts. But in court people are winning.

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Speaker 3: I think what you've seen in some of the breakups

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Speaker 3: is really about business performance, not about regulation, and businesses

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Speaker 3: under performing relative to expectations and therefore our buyers being

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Speaker 3: able to get out of those deals.

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Speaker 4: Nothing like some bar's remorse, But for now, we really

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Speaker 4: appreciate the time that you spent talking us through your

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Speaker 4: own numbers and your focus. Anthony Notto so Fi CEO,

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Speaker 4: thank you