1 00:00:02,440 --> 00:00:07,040 Speaker 1: Bloomberg Audio Studios, podcasts, radio news. 2 00:00:07,440 --> 00:00:11,000 Speaker 2: So fine out with earnings that well look strong today, 3 00:00:11,119 --> 00:00:13,480 Speaker 2: but the forecast is what people are worrying about. The 4 00:00:13,520 --> 00:00:16,639 Speaker 2: shares falling after the fintech company provided second quarter nuance 5 00:00:16,720 --> 00:00:19,520 Speaker 2: here with adjusted net revenue and adjusted ebit DA that 6 00:00:19,840 --> 00:00:23,040 Speaker 2: perhaps fell short of some consensussessments out there. We want 7 00:00:23,040 --> 00:00:25,920 Speaker 2: to dig into that nuance with SOFI CEO Anthony Noto. 8 00:00:26,040 --> 00:00:28,400 Speaker 2: Thank you for joining us, Anthony, And look, we've got 9 00:00:28,440 --> 00:00:30,400 Speaker 2: to focus on the fact that your full year guidance 10 00:00:30,520 --> 00:00:32,960 Speaker 2: was raised. You're feeling positive about the way in which 11 00:00:32,960 --> 00:00:35,600 Speaker 2: you're steering the company. You say you're in an inflection point. 12 00:00:35,920 --> 00:00:39,720 Speaker 2: But why the second quarter being below expectations? What can 13 00:00:39,760 --> 00:00:41,760 Speaker 2: you add to what you're seeing here right here, right now. 14 00:00:43,000 --> 00:00:45,760 Speaker 3: Get we had a great first quarter, as we reported 15 00:00:45,760 --> 00:00:48,080 Speaker 3: twenty six percent year of year of growth, and it's 16 00:00:47,680 --> 00:00:50,520 Speaker 3: in line with the transformation that we talked about, which 17 00:00:50,560 --> 00:00:53,559 Speaker 3: is our combined tech platform business and our financial services 18 00:00:53,560 --> 00:00:55,120 Speaker 3: business would grow. 19 00:00:55,040 --> 00:00:56,080 Speaker 1: Fifty percent or more. 20 00:00:56,160 --> 00:00:58,720 Speaker 3: It grew fifty four percent year of year and that 21 00:00:58,800 --> 00:01:01,520 Speaker 3: combined with flat revenue for lending, and that was part 22 00:01:01,560 --> 00:01:04,360 Speaker 3: of the plan. And we had our second consecutive quarter 23 00:01:04,720 --> 00:01:08,679 Speaker 3: of gap positive EPs. In addition to growing our book 24 00:01:08,760 --> 00:01:12,440 Speaker 3: value on a tangible basis per share by about sixteen 25 00:01:12,440 --> 00:01:15,360 Speaker 3: percent sequentially, we also guided the full year, as you 26 00:01:15,440 --> 00:01:19,520 Speaker 3: mentioned above, not just our beat, but also above our 27 00:01:19,520 --> 00:01:22,360 Speaker 3: prior guidance, so that's a positive overall outlook. 28 00:01:22,600 --> 00:01:25,160 Speaker 1: We had not given Q two guidance before. 29 00:01:25,240 --> 00:01:27,600 Speaker 3: We typically give the full year and then the current 30 00:01:27,680 --> 00:01:29,679 Speaker 3: quarter that we're in, so at the end of twenty 31 00:01:29,760 --> 00:01:31,800 Speaker 3: four we gave guidance for the full. 32 00:01:31,680 --> 00:01:33,319 Speaker 1: Year and Q one, not Q two. 33 00:01:34,280 --> 00:01:37,039 Speaker 3: The analysts atarted using their own estimates for that and 34 00:01:37,200 --> 00:01:40,160 Speaker 3: because we're taking a conservative you on lending, lending will 35 00:01:40,160 --> 00:01:43,280 Speaker 3: be down sequentially in Q two, while our tech platform 36 00:01:43,360 --> 00:01:46,240 Speaker 3: revenue and our financial services revenue will continue to have 37 00:01:46,319 --> 00:01:49,480 Speaker 3: strong year year growth, but also strong sequential growth and 38 00:01:49,520 --> 00:01:51,400 Speaker 3: continue profitability as well. 39 00:01:51,680 --> 00:01:52,520 Speaker 1: So we feel really. 40 00:01:52,360 --> 00:01:54,600 Speaker 3: Great about the business and the transformation we've made over 41 00:01:54,600 --> 00:01:57,000 Speaker 3: the last six years. The fact that we can grow 42 00:01:57,080 --> 00:02:00,800 Speaker 3: revenue twenty six percent on flat lending revenue real testament 43 00:02:00,960 --> 00:02:02,360 Speaker 3: to the diversity of our business. 44 00:02:03,680 --> 00:02:05,840 Speaker 2: Hey Darson, you can't feel great about the share reaction. 45 00:02:07,240 --> 00:02:09,839 Speaker 3: You know, any given day, it's hard to predict what's 46 00:02:09,840 --> 00:02:12,280 Speaker 3: going to happen with the shriffes. But what I can 47 00:02:12,320 --> 00:02:15,160 Speaker 3: say is the business is doing incredibly well, the strategy 48 00:02:15,240 --> 00:02:18,799 Speaker 3: is working, and we're really happy about the trend we do. 49 00:02:19,280 --> 00:02:21,320 Speaker 3: We are taking a conservative you on lending, but that's 50 00:02:21,720 --> 00:02:24,840 Speaker 3: given how uncertain the environment is. If the environment becomes 51 00:02:24,840 --> 00:02:27,520 Speaker 3: more stable, we'll be more aggressive on lending, but right 52 00:02:27,560 --> 00:02:29,919 Speaker 3: now there's no need to and the environment remains as 53 00:02:30,000 --> 00:02:31,919 Speaker 3: uncertain as it has for the last six months. 54 00:02:31,960 --> 00:02:35,800 Speaker 4: On rates, Misster noto, good morning, It's Edin San Francisco. 55 00:02:36,120 --> 00:02:37,920 Speaker 4: A lot of the questions I got from our audience 56 00:02:37,960 --> 00:02:41,560 Speaker 4: for you were about the capital you raise and your 57 00:02:41,600 --> 00:02:45,280 Speaker 4: strategy going forward. There was convertible in one queue, a 58 00:02:45,280 --> 00:02:48,440 Speaker 4: lot of interest in that. I actually am not clear why, 59 00:02:48,800 --> 00:02:51,239 Speaker 4: but the people want to know, so that's the question. 60 00:02:52,040 --> 00:02:55,040 Speaker 3: Yeah, I think people misunderstand the share count. First, we 61 00:02:55,120 --> 00:02:58,000 Speaker 3: did two things in Q one. First, we issued a 62 00:02:58,040 --> 00:03:01,519 Speaker 3: convertible note at one point two five percent interest that 63 00:03:02,320 --> 00:03:06,040 Speaker 3: allowed us to redeem a preferred security that we're paying 64 00:03:06,080 --> 00:03:08,320 Speaker 3: twelve and a half percent interest on. So that is 65 00:03:08,360 --> 00:03:10,400 Speaker 3: going to provide an interest savings for us, and we've 66 00:03:10,440 --> 00:03:14,840 Speaker 3: already noticed all of the holders of that preferred instrument, 67 00:03:14,880 --> 00:03:18,120 Speaker 3: and so that's being redeemed sooner than expected. We also 68 00:03:18,240 --> 00:03:21,239 Speaker 3: bought back an existing convert that was trading well below 69 00:03:21,280 --> 00:03:23,600 Speaker 3: its face value, and that was a creative to book 70 00:03:23,680 --> 00:03:27,120 Speaker 3: value and it was basically neutral on tangible book value 71 00:03:27,160 --> 00:03:30,120 Speaker 3: per share. So there's some perception that it was diluted. 72 00:03:30,280 --> 00:03:32,799 Speaker 3: It's not diluted on a tangible book value per share. 73 00:03:33,560 --> 00:03:36,160 Speaker 3: And I think there's just a misunderstanding on what the 74 00:03:36,200 --> 00:03:38,840 Speaker 3: total ending share count will be in the future. 75 00:03:40,280 --> 00:03:43,000 Speaker 4: My colleague at Bloomberg Intelligence, Herman Chan, has a very 76 00:03:43,000 --> 00:03:45,960 Speaker 4: clear thesis for you guys. You have a brilliant app, 77 00:03:46,280 --> 00:03:50,880 Speaker 4: strong user interface, one stop shop, and you're targeting young professionals. 78 00:03:51,000 --> 00:03:52,120 Speaker 1: That's what they think. 79 00:03:52,480 --> 00:03:55,240 Speaker 4: But the story really is this higher interest rates for 80 00:03:55,320 --> 00:03:59,760 Speaker 4: longer environment narrative. How does that thesis work in that 81 00:03:59,840 --> 00:04:00,680 Speaker 4: rate environment? 82 00:04:00,720 --> 00:04:03,520 Speaker 3: Anthony, Yeah, Well, first of all, your colleagues said it 83 00:04:03,640 --> 00:04:05,720 Speaker 3: very well, and so we should consider having them being 84 00:04:05,760 --> 00:04:08,640 Speaker 3: one of our spokespeople. But I'd say is higher for 85 00:04:08,760 --> 00:04:12,360 Speaker 3: longer is going to create challenges for financial institutions. 86 00:04:12,600 --> 00:04:14,120 Speaker 1: We are very well capitalized. 87 00:04:14,160 --> 00:04:17,560 Speaker 3: We have a seventeen point one percent risk based capital ratio, 88 00:04:18,120 --> 00:04:20,960 Speaker 3: so we have ample cushion or capital ratio relative to 89 00:04:21,040 --> 00:04:24,240 Speaker 3: where we have to operate from a regulatory standpoint, and 90 00:04:24,279 --> 00:04:26,800 Speaker 3: we have plenty of liquidity. That said, as we saw 91 00:04:26,880 --> 00:04:30,640 Speaker 3: today another regional bank was very challenged. We're also benefiting 92 00:04:30,640 --> 00:04:33,359 Speaker 3: from really strong deposit growth. We had our record growth 93 00:04:33,360 --> 00:04:37,120 Speaker 3: and deposits three billion dollars of new deposits and ninety 94 00:04:37,160 --> 00:04:40,039 Speaker 3: percent of our deposits are from direct deposit customers, which 95 00:04:40,080 --> 00:04:43,120 Speaker 3: means we're their primary account and it's very very sticky, 96 00:04:43,839 --> 00:04:47,400 Speaker 3: but higher for longer. We'll put stress on other people's 97 00:04:47,400 --> 00:04:49,279 Speaker 3: balance sheets if they're not hedging. 98 00:04:48,960 --> 00:04:50,800 Speaker 1: Appropriately the way we do. 99 00:04:50,880 --> 00:04:53,320 Speaker 3: We hedge our loans once we grant them, so we 100 00:04:53,400 --> 00:04:56,680 Speaker 3: don't have that interest rate exposure. We can also match 101 00:04:56,760 --> 00:04:59,440 Speaker 3: what we're giving it as an apy to our SOFI 102 00:04:59,520 --> 00:05:02,240 Speaker 3: money member against the loans that we're offering in the 103 00:05:02,320 --> 00:05:04,720 Speaker 3: rates that they have to maintain a very high NIM 104 00:05:04,839 --> 00:05:07,360 Speaker 3: and we've been able to do that consistently. In addition 105 00:05:07,400 --> 00:05:09,640 Speaker 3: to that, we also the tech platform business, which is 106 00:05:09,680 --> 00:05:12,520 Speaker 3: not tied to interest rates. And then in the financial 107 00:05:12,600 --> 00:05:16,400 Speaker 3: services business, we have the invest platform that's growing very nicely, 108 00:05:16,680 --> 00:05:19,479 Speaker 3: good aum growth, good member growth, and another source of 109 00:05:19,480 --> 00:05:21,039 Speaker 3: diverisfied revenue for US. 110 00:05:21,360 --> 00:05:24,200 Speaker 2: Where technology show we want to go into the specifics 111 00:05:24,200 --> 00:05:26,480 Speaker 2: of your technology, Anthony, but I want to bring our 112 00:05:26,480 --> 00:05:29,640 Speaker 2: audience that macro flavor that you so brilliantly give, because 113 00:05:29,880 --> 00:05:33,720 Speaker 2: why are you more cautious on the US economy? Why 114 00:05:33,720 --> 00:05:36,960 Speaker 2: are you seeing five percent excess of unemployment? Why are 115 00:05:36,960 --> 00:05:39,760 Speaker 2: you seeing these interest rate cuts that you've now basically 116 00:05:39,839 --> 00:05:42,680 Speaker 2: halved in your expectations for twenty twenty four. 117 00:05:42,920 --> 00:05:45,640 Speaker 3: Yeah, our balance sheet has grown quite meaningfully. It's about 118 00:05:45,640 --> 00:05:47,680 Speaker 3: a thirty billion dollars bounce sheet now. So as we 119 00:05:47,760 --> 00:05:50,800 Speaker 3: came into twenty twenty four, we had a choice. Could 120 00:05:50,839 --> 00:05:53,840 Speaker 3: we come up with our own expectations for twenty twenty four? 121 00:05:54,080 --> 00:05:57,680 Speaker 3: Could we use consensus expectation. Let's just take up planning 122 00:05:57,680 --> 00:06:01,039 Speaker 3: stanch that's really conservative. And the planning stance that we 123 00:06:01,080 --> 00:06:03,480 Speaker 3: took then was that there would only be four rate cuts. 124 00:06:03,760 --> 00:06:06,400 Speaker 3: The market was factoring in six rate cuts at the time. 125 00:06:06,760 --> 00:06:09,120 Speaker 3: We also took up planning stance on unemployment that would 126 00:06:09,160 --> 00:06:11,760 Speaker 3: be more than five percent, the market was well below that. 127 00:06:12,080 --> 00:06:14,479 Speaker 3: And we also took a stance on GDP contraction that 128 00:06:14,600 --> 00:06:17,960 Speaker 3: was modest. Well, here we sit today three months later, 129 00:06:18,240 --> 00:06:20,880 Speaker 3: and the market's only factoring in one to two rate cuts. 130 00:06:20,880 --> 00:06:23,799 Speaker 1: So I'm really thankful we took a conservative. 131 00:06:23,320 --> 00:06:25,400 Speaker 3: Stance going into the year, and I'm really thankful we 132 00:06:25,440 --> 00:06:28,160 Speaker 3: still have a conservative stance. I couldn't feel better about 133 00:06:28,240 --> 00:06:31,480 Speaker 3: the underlying trends of our strategy and execution of our business. 134 00:06:31,760 --> 00:06:32,760 Speaker 1: But I don't think we're an. 135 00:06:32,760 --> 00:06:36,320 Speaker 3: Environment where anyone has a really strong high conviction level 136 00:06:36,360 --> 00:06:37,320 Speaker 3: and where rates will be. 137 00:06:37,839 --> 00:06:40,360 Speaker 1: There's still a debate whether it be any rate cuts whatsoever. 138 00:06:40,640 --> 00:06:43,760 Speaker 3: So we just can't put the business at risk hoping 139 00:06:43,800 --> 00:06:44,839 Speaker 3: that we can figure it out. 140 00:06:45,000 --> 00:06:47,400 Speaker 1: So we're going to a conservative point of view. 141 00:06:48,120 --> 00:06:51,200 Speaker 4: But with short time, anthy, you're moving away from this 142 00:06:51,279 --> 00:06:54,640 Speaker 4: kind of trademark student loans and REFI business. 143 00:06:55,040 --> 00:06:58,960 Speaker 3: Why Well, the strategy when I came in twenty eighteen 144 00:06:59,080 --> 00:07:01,760 Speaker 3: was to create a once stop shop for all your 145 00:07:01,800 --> 00:07:04,800 Speaker 3: fincial services needs. There was no one providing all the 146 00:07:04,800 --> 00:07:07,200 Speaker 3: products that you need for the big moments in your 147 00:07:07,200 --> 00:07:08,479 Speaker 3: life and all the days in between. 148 00:07:08,800 --> 00:07:10,120 Speaker 1: So we offer home. 149 00:07:09,960 --> 00:07:13,880 Speaker 3: Loans, student loans, personal loans, in school loans, checking and 150 00:07:13,880 --> 00:07:18,480 Speaker 3: savings called SOFI, money investing insurance, small meat and business 151 00:07:18,480 --> 00:07:22,280 Speaker 3: loan lead generation in addition to the tech platform business. 152 00:07:22,280 --> 00:07:24,360 Speaker 3: So the strategy was always about building a one stop 153 00:07:24,360 --> 00:07:27,679 Speaker 3: shop for all your financial services needs, and that's actually 154 00:07:27,760 --> 00:07:30,960 Speaker 3: resulted in diversified business that allows us to make choices 155 00:07:31,160 --> 00:07:33,160 Speaker 3: on what we grow versus what we take. 156 00:07:33,200 --> 00:07:34,000 Speaker 1: A conservative view 157 00:07:34,040 --> 00:07:39,200 Speaker 4: On SOFI CEO Anthony Notto, great catch up, great heavy 158 00:07:39,200 --> 00:07:40,000 Speaker 4: back on the program.