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So fine out with earnings that well look strong today, but the forecast is what people are worrying about. The shares falling after the fintech company provided second quarter nuance here with adjusted net revenue and adjusted ebit DA that perhaps fell short of some consensussessments out there. We want to dig into that nuance with SOFI CEO Anthony Noto. Thank you for joining us, Anthony, And look, we've got to focus on the fact that your full year guidance
was raised. You're feeling positive about the way in which you're steering the company. You say you're in an inflection point. But why the second quarter being below expectations? What can you add to what you're seeing here right here, right now.
Get we had a great first quarter, as we reported twenty six percent year of year of growth, and it's in line with the transformation that we talked about, which is our combined tech platform business and our financial services business would grow.
Fifty percent or more.
It grew fifty four percent year of year and that combined with flat revenue for lending, and that was part of the plan. And we had our second consecutive quarter of gap positive EPs. In addition to growing our book value on a tangible basis per share by about sixteen percent sequentially, we also guided the full year, as you mentioned above, not just our beat, but also above our prior guidance, so that's a positive overall outlook.
We had not given Q two guidance before.
We typically give the full year and then the current quarter that we're in, so at the end of twenty four we gave guidance for the full.
Year and Q one, not Q two.
The analysts atarted using their own estimates for that and because we're taking a conservative you on lending, lending will be down sequentially in Q two, while our tech platform revenue and our financial services revenue will continue to have strong year year growth, but also strong sequential growth and continue profitability as well.
So we feel really.
Great about the business and the transformation we've made over the last six years. The fact that we can grow revenue twenty six percent on flat lending revenue real testament to the diversity of our business.
Hey Darson, you can't feel great about the share reaction.
You know, any given day, it's hard to predict what's going to happen with the shriffes. But what I can say is the business is doing incredibly well, the strategy is working, and we're really happy about the trend we do. We are taking a conservative you on lending, but that's
given how uncertain the environment is. If the environment becomes more stable, we'll be more aggressive on lending, but right now there's no need to and the environment remains as uncertain as it has for the last six months.
On rates, Misster noto, good morning, It's Edin San Francisco. A lot of the questions I got from our audience for you were about the capital you raise and your strategy going forward. There was convertible in one queue, a lot of interest in that. I actually am not clear why, but the people want to know, so that's the question.
Yeah, I think people misunderstand the share count. First, we did two things in Q one. First, we issued a convertible note at one point two five percent interest that allowed us to redeem a preferred security that we're paying twelve and a half percent interest on. So that is going to provide an interest savings for us, and we've already noticed all of the holders of that preferred instrument,
and so that's being redeemed sooner than expected. We also bought back an existing convert that was trading well below its face value, and that was a creative to book value and it was basically neutral on tangible book value per share. So there's some perception that it was diluted. It's not diluted on a tangible book value per share. And I think there's just a misunderstanding on what the total ending share count will be in the future.
My colleague at Bloomberg Intelligence, Herman Chan, has a very clear thesis for you guys. You have a brilliant app, strong user interface, one stop shop, and you're targeting young professionals.
That's what they think.
But the story really is this higher interest rates for longer environment narrative. How does that thesis work in that rate environment?
Anthony, Yeah, Well, first of all, your colleagues said it very well, and so we should consider having them being one of our spokespeople. But I'd say is higher for longer is going to create challenges for financial institutions.
We are very well capitalized.
We have a seventeen point one percent risk based capital ratio, so we have ample cushion or capital ratio relative to where we have to operate from a regulatory standpoint, and we have plenty of liquidity. That said, as we saw today another regional bank was very challenged. We're also benefiting
from really strong deposit growth. We had our record growth and deposits three billion dollars of new deposits and ninety percent of our deposits are from direct deposit customers, which means we're their primary account and it's very very sticky, but higher for longer. We'll put stress on other people's balance sheets if they're not hedging.
Appropriately the way we do.
We hedge our loans once we grant them, so we don't have that interest rate exposure. We can also match what we're giving it as an apy to our SOFI money member against the loans that we're offering in the rates that they have to maintain a very high NIM and we've been able to do that consistently. In addition to that, we also the tech platform business, which is
not tied to interest rates. And then in the financial services business, we have the invest platform that's growing very nicely, good aum growth, good member growth, and another source of diverisfied revenue for US.
Where technology show we want to go into the specifics of your technology, Anthony, but I want to bring our audience that macro flavor that you so brilliantly give, because why are you more cautious on the US economy? Why are you seeing five percent excess of unemployment? Why are you seeing these interest rate cuts that you've now basically halved in your expectations for twenty twenty four.
Yeah, our balance sheet has grown quite meaningfully. It's about a thirty billion dollars bounce sheet now. So as we came into twenty twenty four, we had a choice. Could we come up with our own expectations for twenty twenty four? Could we use consensus expectation. Let's just take up planning stanch that's really conservative. And the planning stance that we took then was that there would only be four rate cuts. The market was factoring in six rate cuts at the time.
We also took up planning stance on unemployment that would be more than five percent, the market was well below that. And we also took a stance on GDP contraction that was modest. Well, here we sit today three months later, and the market's only factoring in one to two rate cuts.
So I'm really thankful we took a conservative.
Stance going into the year, and I'm really thankful we still have a conservative stance. I couldn't feel better about the underlying trends of our strategy and execution of our business.
But I don't think we're an.
Environment where anyone has a really strong high conviction level and where rates will be.
There's still a debate whether it be any rate cuts whatsoever.
So we just can't put the business at risk hoping that we can figure it out.
So we're going to a conservative point of view.
But with short time, anthy, you're moving away from this kind of trademark student loans and REFI business.
Why Well, the strategy when I came in twenty eighteen was to create a once stop shop for all your fincial services needs. There was no one providing all the products that you need for the big moments in your life and all the days in between.
So we offer home.
Loans, student loans, personal loans, in school loans, checking and savings called SOFI, money investing insurance, small meat and business loan lead generation in addition to the tech platform business. So the strategy was always about building a one stop shop for all your financial services needs, and that's actually resulted in diversified business that allows us to make choices on what we grow versus what we take.
A conservative view
On SOFI CEO Anthony Notto, great catch up, great heavy back on the program.