EXCLUSIVE: Speaking With SoFi CEO Anthony Noto After Earnings

We're not actually creating any market. We're stealing from these massive TAMs that exist already. Well, guess what? We're crushing their ROE by giving the consumer a much better choice and we should trade well above a two times tangible book in the five plus range. So, that's why I buy the stock. That's why I think it's a huge home run. I can look at a scoreboard and say the scoreboard doesn't reflect what we're doing. We control what we deliver and we're doing a great job of that and I can sleep at night. What part of the SoFi story do you think that the market is not giving value to right now? >> This is my second conversation with Anthony Notto, the CEO of SoFi. We recorded it one day after SoFi ended up reporting on their Q2 results, a quarter that delivered record revenue, record loan originations, and accelerating member growth, and yet still sent the stock down nearly 10%. So, going into this interview, I wanted to ask Anthony the questions that current and potential SoFi investors are asking right now. This conversation is about the quarter, but most importantly, it's about SoFi's ever evolving business model, the biggest opportunities, and the risks to investors that they need to pay attention to. Without further ado, please enjoy the conversation with Anthony Notto. Anthony, great to have you back on the show. I first wanted to start off with the stock price and the actual performance that we've had. You just showed off a triple beat, beat on the top line, beat on the bottom line versus Wall Street expectations, but yet the stock ended up selling off. what happened and what is the market potentially worried about right now from your point of view? >> Yeah, the first thing I'd say is obviously um our stock price is in many way a scoreboard relative to what the market believes we're doing. Um and so to see it trade off um relative to our results is incredibly disappointing. Um obviously we care deeply about creating shareholder value and we recognize that is created over the long term and and we do take a longterm view. Um but to see that type of reaction on such a um exceptional quarter is disappointing. I I do believe it's tied generally to our guidance. Um you know guidance is always a challenging thing um from the standpoint that you want to show confidence in the business when you have confidence which we absolutely have and you want to show um continued outlook that is that is accurate which we have. Um but there's a there's a balancing act and we're in an environment um where some things are out of our control. I think we've done an excellent job of managing the business over the eight years when we are dealt with things that are out of our control and we've been able to deliver 19 consecutive quarters of [clears throat] uh more than a rule of 40 is pretty remarkable. And for those that don't know, the rule of 40 is a software um concept and if someone has higher than a rule of 40, they're considered in an elite class of growth companies. Um and the rule of 40 is your revenue growth plus your IBA or EBITC growth. and ours in the quarter was 40% revenue growth. Um, and we had 30% EBA margins. Um, and our growth is is pretty um, I think diversified in many ways. And we can talk about that that in more detail. Um, but as we look forward and we think about the interest rate environment and how much money we want to invest in our business, we didn't think it was prudent to raise profitability. We didn't need to raise IBITA or net income. And we've been pretty good at signaling to the investment community that we're going to reinvest, you know, 70 cents of every incremental dollar and drop 30 cents of every incremental dollar to the bottom line. We've been talking about that for a number of years. And the reason why it was established and the reason why we stick to it is so that at moments like this, we're not changing what we've done historically. There's no additional, you know, noise or or issues behind the scenes that is causing it to happen. We've been pretty consistent in saying 30% incremental EBA margins. So people knew as we were under earning where our margins could be long-term and sure enough our EBA margins are now 30%. So um given the outperformance in revenue and in earnings we just wanted to pass through the outperformance in revenue and raise the back half of the year revenue given how strong the business is. But we don't want to underinvest in the business. We want our growth rate to compound for years to come. Which means we have to make sure we're planting seeds for today. So a year from now, two years from now, three years from now, those seeds are sprouting and continuing our strong growth. Um, just like we have for the last 19 quarters. Um, but I understand that uncertainty of us saying, "Hey, interest rates are supposed to increase twice. Um, we want to invest a lot more and the combination of that causes us not to raise guidance." Um, but I I couldn't feel better about the business and the strategy working. And I I do feel like the results were an inflection for us. >> Well, I I like what you say about the seeds. The sort of focus that I put is on the member growth and then also what those members are doing. There's been a massive inflection point on the amount of products per member that people are taking out with SoFi. Is this a proof point of the financial services productivity work uh loop working? And then what sort of role does SoFi plus have in this and how does that change the unit economics per member? Yeah, to answer your question right up front, it absolutely is evidence that the financial services productivity loop is working. And that's simply a strategy where we want to build trust and high quality and reliability with you when you take out your first product. So when you need a second or third product, you come to us. We get a huge benefit when that happens. We don't have to pay a second or third customer acquisition cost. uh it greatly increases our unit economics and we can then use that to reinvest at a faster rate in better services, better products, lower interest rates on loans, higher interest rates on savings, better capabilities and invest more products, etc., etc. Um, and our products per member has been generally flat. You kind of have to take it out to two decimal points given how big the denominator is and also given how fast the denominator is growing. Um but despite the fact that our members have been growing 35% for a while, we have seen the last two quarters an uptick in the products per member. Um if you look take it out to two decimals, it's gone from I think 1.48 to 1.51 to 1.54. Um and that's happening organically as we continue to build awareness of the other products that we have with our existing members as well as launch new products. And so what we saw in the quarter and and last quarter was the beginning impact of SoFi plus and SoFi plus was launched in 2025 and it wasn't that successful. Um but we have a culture of iterating and learning and iterating and learning and we relaunched SoFi Plus in um in Q1 and as we reported I think it was 206,000 uh SoFi Plus members 85% of them are existing members um and so that means they're taking out a second or third or fourth product. Um, and then 25% of that 85% is actually taking out a product afterwards. And the product that's benefiting the most from that is SoFi Invest. Um, which is just a phenomenal what I would call triple. You know, they already have one product with us. They take out a second product with us and then a third product. Some of the SoFi Plus members actually already had multiple products. I'm just using that as a as a base case. And so Plus is doing two things. one, it's appealing to our members where they can get a better version of the product they currently have with us and every other product um if they use SoFi Plus than just those products. Um and so it's it's absolutely doing that and it's attracting attention. Um those existing members are actually increasing their deposit with us with us post SoFi Plus or increasing their AUM and invest and increasing their spending. So it's having a great first order effect, a new product that generates $120 per member. Um, as I mentioned with the members we have today, it's $24 million annualized. [clears throat] We hope to get to a million SoFi Plus members by next year, which would be $120 million annualized. So, it's it's has that first order effect. It has a second order effect of increasing their engagement with us in deposits or spending or AUM and then third order effect taking out another product. Um, and so you see that show up. And one of the most astonishing things is if is if you go back and look at Q1 of 2021's cohort. So those members that became members in Q1 of 2021, the average number of products for the people that are in that cohort that were SoFi money members and using it as their primary account, their number of products increased by one. That means every person took out at least one more product or some percentage of those people took out more than one for the entire cohort's average products per member to increase by one which is pretty pretty amazing. So I'm really excited about that. We also launched crypto buy, sell, and hold and the vast majority of our buy, sell, and hold crypto members are existing members and we reported 300,000 new crypto members. Um and then in addition to that, we're rolling out SoFi USD and SoFi Coach. Um, and there's not been a ton of traction in SoFi USD. SoFi Coach just became available to people uh, broadly in in Q um, in the current quarter Q3. Um, this is a product that I thought I had zero expectations for. The team came to me. They said, "We want to build a chatbot using LLM to help people get their money right by answering the question, what must you do in your financial life that day? What should you do in your financial life that day? And what could you do?" Um, and I was like, nah, it's never going to work. you're going to come back to me a year from now and say we're close and want another squad and then oh no we're we're almost there and then want another squad and the team I gave them very few resources after six months they came back to me I started using it and I said you know what this is pretty damn good this is actually really good I have a pretty complicated financial background in terms of where my money and assets are um there are many different accounts and I'd ask it questions like how much did I spend on subscriptions last month and it pulled in all the information that I had tied into already and it was pretty actually, you know, accurate and it could go level by level down to the merchant, down to the vendor, down to who's actually spending the money, whether it's me or one of my children. And, you know, at some point we're going to launch being able to cancel some of those subscriptions inside of SoFi Plus as a free as a free service. So, Coach, I think, is just magical. And, um, I'm using it a ton. I ask it every question I would ask a friend or a colleague about my financial life. Um, and it's and it's really good and it's only going to add to the equation because it will give people actionable steps to take. Opening new accounts, moving money from a no interest bearing account to an interest bearing account, refinancing a mortgage at a lower rate, investing in a dollar cost averaging way in a diversified way. Um, and so we expect that to add to the equation as well. So super encouraged by plus hitting that inflection point of the fun service productivity loop moving. Um, and you know, we've found over time if people are aware of our products, they adopt them. Um, and it's great to be able to do some of that without having to spend any money. I I just want to go off a little bit on, you know, there's been so many people that either show off another financial institution that may offer a single product or feature that might differ from SoFi's and they call it, you know, the the SoFi killer or something like this where you see these products uh or or people tweeting online. What do you think makes SoFi continue to show up in beat versus those other apps that come out with either higher APIs or a single feature that keeps people coming back to SoFi? And you know there there's a lot of solutions out there that might offer a single feature or something like this that might differ from SoFi but yet people aren't switching. What what's the magic sauce there? Yeah, I think I think our competitive advantage is that we have the highest lifetime value um from a member and we have the highest lifetime value from a member because we have more products and because we build great unit economics um into our products. Um our lending products, we have four of them, you know, they've been architected to have a great variable profit that is sustainable and durable through an economic cycle. um those products when we take somebody that's an existing member like SoFi money or SoFi invest or relay or credit card or crypto now or SoFi Plus when that member cross buys into a lending product we double our variable profit >> our variable profit's about $800 um per loan um and it has about $800 of customer acquisition cost and so if we bring somebody in through SoFi relay which has virtually hardly any um customer acquisition cost and they take out alone, we're making $1,600 in variable profit against that individual that we can reinvest in other products and services. So, I think over the long run, no one's going to be able to compete with us on price. What do I mean by price? The interest rate we give on checking and savings, the interest rates we charge on credit cards or on loans, the free services that we give people, the breadth of selection that we offer. Walmart and Kmart have won because they're lowcost operators and they can take that higher margin that they have and reinvest it in better prices, better selection, better services than anybody else. Our equivalent to their lowcost operation is the highest lifetime value and we can reinvest in the same things that give us a competitive advantage. If you think about the number of things that we're innovating on right now, it's actually much bigger than many companies um that are public. We launched big business banking this year. We launched small medium business capab lending this year. We launched SoFi USD. Um we launched SoFi crypto. We relaunched SoFi Plus. We relaunched SoFi Smart Card. Um there's a lot going on at the company. Um and we're funding all of that that is actually money losing relative to our P&L. and we're still posting 30% ebida margins um and a net income incremental margin of 30% which is where we think our net income margin can get to over time. Now a a large amount that um tied into that beat was a big boost in lending. Now, some people I saw some comments about the strength of your beat that you ended up showing up was maybe less favorable because it was driven by lending on balance sheet versus some of the feebased revenue that we saw from previous quarters. Now, now feebased revenue still grew, but why the uh pivot to such a heavy uh balance sheet amount of lending? Is it just because you guys have the capital to do so? >> Yeah, it's I know that people want to say it's a pivot. I think at different moments and different times there are different opportunities that we could capture. Um and when we think about 2026, 2027, 2028, you know, we're committed to driving to our intermediate goals which we share we've shared in the past about our growth rate and our our profitability and the allocation of resources that we're making today give us the best chances of achieving those outcomes. You know, in 2028, you know, we're on track to deliver. I think we've given guidance that would get you to over a dollar in earnings per share at like a 20% net income margin. In order to do that in 2028, we need to make sure that we use our balance sheet to grow the lending of the assets on the balance sheet to generate net interest income. Um, we need to make sure we're investing in the technology platform, SoFi Technology Solutions to grow that 20 plus percent which we've talked about before. And then financial services, you know, as long as we continue to grow financial services at 30% uh in terms of products um and keep revenue per product flat, we get to those outcomes in 2028. I think the thing that people misunderstand is we've never said lending is going to be a 0% of our revenue. We've said we expect it to be 50% of our revenue over time. Right now it's roughly 60%. Um, but investing in our assets today creates great net interest income in 2027 and 2028. One of the things I mentioned on the call that I think just got glossed over was a huge data point we generated since Q1 of 2024, I think it's five, I think it was 5.4 or 5.2 billion of cash net interest income. That's unequivocal cash net interest income. That's money that's come from borrowers to us after our um our interest expense. So 5.2 or 5.4, I can't remember the exact number. Now, here's the more interesting thing. From that time period, from Q1 of 2024 to Q2 of 2026, the nonrevenue recorded premium was $2 billion. $2 billion. So, we put loans on our books that had a premium of $2 billion and they generated more than 2x the cash net interest income of that non um non-cash recorded revenue which is astronomical. So, if you think about 2027 and 2028 and you want a good sustainable net interest income number, you have to put the assets on the balance sheet today. You can't wait to mid 2027 to do that. So we're frontloading the asset build which gives us that interest income that allows us to invest meaningfully. Um and then we continue to benefit from SoFi Technology Solutions accelerating growth on a year-over-year basis excluding you know normalizing it for losing a customer last year. It grew 15% year-over-year. No one noticed. Um financial services um revenue growth rate if you actually exclude LPB is really really strong. Um LPB's generated a ton of revenue. I will tell you in the back half of last year we had a ton of inmarket demand that maybe grew that business organically faster than it would have grown otherwise. I kind of think if we just had grown it gradually to where you know where it was slowly over time would have been a nice even slope instead of this you know that you're you're going to see. But the LPB business is going to continue to grow very nicely. It's growing year-over-year. It's going to start growing sequentially as well especially now that we're adding small medium business loans to it as well as closedend home equity loans. um though they will all contribute to the LPB business as well. So I feel really confident about our growth rate. The business is going to be 5050 over time. We're building a high quality balance sheet now that gives us very visible predictive net interest income with allows us to then aggressively invest in driving product growth which will bear fruit down the road as well. So it's really a portfolio approach and it's better to build a balance sheet now than wait till later because we get the benefit every quarter of that as opposed to half the time period. >> I think I want to touch on mostly everything that you said but let's let's do it one by one. So uh starting with the amount of personal loans and loans that you ended up giving out I think it was 10.6 billion 10.7 billion of personal loans this quarter. That's an insane amount. At what point do you actually start to reach saturation concerns because you have such a large percentage of, you know, high quality uh loans in the United States and then that might start end up changing the credit boxes or am I looking at it the wrong way? >> No, I I I think it's a question that everyone asks. I think the answer is different than what people think. It's not about the personal loan market. That's not the TAM. The target adjustable market is actually the credit card industry. People have unsecured debt, about $30,000 is their average loan. They have already unsecured $30,000 of debt with a financial institution, typically a big bank, in a credit card, and they're paying 25% interest. We are refinancing their $30,000 at 12% interest. It is a no-brainer. That is an IQ test that you should refinance with us instead of keeping the credit card debt out there. We just have to build the awareness of this option to credit card borrowers. Um, I think part of our secret sauce is that we started to figure out how to target those credit card borrowers and giving them a great replacement. And there's also a benefit that we get with our credit card business that I'll talk about in a second. And I forget, please ask me. Um, so that's the market we're going after. Um, we continue to gradually increase the amount we originate there because we want to do it efficiently. Our customer acquisition costs have been been pretty steady. Um, we've slowly grown that business without increasing our customer acquisition cost and we've significantly grown that business sticking to the cash flow underwriting metrics uh that have made us successful to date. So, um, I think we're doing it prudently and wisely, and the market's much, much bigger than we are today, and we'll just slowly, linearly try to keep capturing more market share, keeping our CAC under control, sticking to our credit discipline of underwriting to cash flow, uh, and making sure we keep those cash flow ratios and total debt ratios in place. >> Yeah. So would you guys say that you I I don't want to give too much uh emphasis on this but uh that you guys are almost changing what people look at as the total addressable market of personal loans because you are bringing on essentially new borrowers. >> Yeah, we're we're creating we are growing the secular growth of the personal loan market by moving >> money that's lent out of the credit card industry into the personal loan industry. And and one of the things I love about the consumer >> Yeah. I mean, one of the things I love about financial services is we're really not creating markets. Like, if you think about technology companies and you create a mobile phone, you're creating a market when the mobile phone first launched. You think about chips for AI. You're creating the AI market. We're not actually creating any market. We're stealing from these massive TAMs that exist already. And in this particular case, people want to pigeon hole us into only being able to address the personal loan markets. I just explained to you how this personal loan is a great substitute for this other market called credit cards. By the way, there's a reason not a lot of people offer personal loan products. They don't offer because they hold the credit card balance and they're getting paid 25% interest and they're loving their ROE. Well, guess what? We're crushing their ROE by giving the consumer a much better choice and taking share from the credit card market and pulling it into the personal loan market and growing the secular size of the personal loan market. The more awareness there is of the personal loan market, the more substitution there will be for that credit card. Now, here's a reality. We watch the FICO drift. We watch the cash flow ratios of our of our customers. And in order to, you know, keep our eyes on, do they still keep using their credit card? Because they likely will, we're actually tandemly offering them a credit card now. So, if they pay off their credit card with a personal loan debt, we're approving them for the personal loan and preapproving them for a credit card to get at the top of their wallet. So, if they do start spending with that credit card, we will it will be our credit card. will benefit from it and we'll be able to coach them to keep that balance paid off and to stop it from escalating, right? And so it's actually it's a double bottom line benefit, the personal loan business. And I'm super excit I talked about cracking the credit card uh offer. This is one of the ways we're cracking it. >> Now that's really surprising I think to a lot of uh people that look at traditional banks because for the most part in on the consumer side, credit cards have been the bread and butter. But you don't want to pigeon hole people to their debt. you want to get them out of that debt, you know, get them back into a personal loan where the APRs could be 10% less in some cases. That that's uh it's really beneficial, you know, being the the company that's actually helping the consumer. >> Yeah, it's it's a great tandem product. At the end of the day, people are going to want to spend with their credit card. They get reward points for it. You don't get reward points for a personal loan. Similarly, you can't bring a personal loan to the counter and pay for your groceries and and then have to carry cash around. So people are going to use their credit card. So we want them to use our credit card, make it top of wallet. We then can help them manage their overall credit credit profile. Um and so you'll see us doing that more and more. The other thing I'd say is people, you know, want to say that the lending business isn't a great business. It's that's not correct. The lending business when run correctly against the right credit profile is a great business. It's not going to be our only business. It's going to be 50% of our revenue and it gives us a competitive advantage. It allows us to be better in all the non- lending products. Now, one of the uh well, I guess it's a credit product, but it kind of falls under financial services that I don't think many people picked up on this quarter, but that your credit cards have now turned profitable. >> It was our backbook. So, if [clears throat] you think about front book and backbook, um we had a certain management team that was running the credit card for a period of time and that strategy was not working well. We changed the management team, brought in a new management team. So, internally, we talk about the backbook and the front book and that's just a a demarcation in time. The backbook was built in in not that well. It was losing a lot of money. We've worked really hard to turn that backbook into profitability and it's now reached profitability. We're still we're still investing overall in the credit card business. So, our contribution profit in credit card is still negative and meaningfully negative, but that's the J curve negative. It's not perpetual losses. The backbook had perpetual losses. There's a big top five financial institution in the world that loed a credit card real aggressively with a partner. They had tons of losses. It was sort of running out of control. We had a very small version of that. Call it a couple hundred million dollars. I cut it off before it got bigger than that. We've now managed it to the point where that backbook is profitable through a bunch of different strategies that have played out. And the losses we have now are really healthy credit card acquisition with J curve characteristics that will drive a great ROE over 18 to 24 to 36month time period. Okay, that that that helps a lot. But I did also want to touch on going back to sort of the financial services productivity loop. I couldn't understand why your deposits grew by like 5.3 billion this quarter if I'm correct. uh annualized spending increase to like 28 billion dollars. What was that inflection point that made consumers, you know, use SoFi products so much and bring so much uh deposits to the company this quarter because it's not holiday spend. I couldn't quite figure it out. >> Yeah, we just have a real, if you look at the growth rate of our SoFi money products, um we're we're growing SoFi money products, so that's contributing to deposits. Our existing SoFi money members deposits are increasing. Um, and as their deposits increase, their spending also increases. And so it's kind of a threebarreled uh growth driver. Uh, new SoFi money members that are doing direct deposit and so that starts to come into the system. Um, they start to save money because they're not spending at all. And so that's that's in the system. And they may move money over from their other accounts because our interest rates higher. Um, and the one thing fuels the next. Then we have our existing base um that still, you know, they're spending less than they make and so they have savings and that builds up builds up as well. Um and so it's really driving more primacy with our existing SoFi money members and acquiring new SoFi money members and and converting them to direct deposit. >> It's some of the early signs of those seeds that you're talking about planting. You know, you really get to start seeing the pickup of people spending on your uh you know, your platform because they like the products. And so if they have more money on that platform and it becomes a larger amount of their overall assets, then they're going to take out new products. >> Yeah. I mean, SoFi Plus is helping that as well. And so, by the way, we reported in the quarter $40 million of interchange revenue. I mean, the numbers gotten pretty big. It's obviously pure profit if you're already in the business. It's incrementality from a margin standpoint is awesome. So, you know, that's both debit interchange and credit interchange. So, that number is going to keep growing at a pretty pretty high rate. Um, and it's it's great margin. uh great margin business. It also gives us data about what you're doing with your money, whether you're budgeting appropriately, whether you could be investing more, savings more, etc. >> I wanted to talk about the the tech platform. Um I'm curious what your thoughts were. Obviously, you guys lost a large client that you guys uh disclosed and that had brought down some of the revenue. Now, you're on the the the come up again. But if you were to look three or five years out for the tech platform, is this going to become a meaningful revenue and you know margin driver for the company or has the sort of theme of what you want out of the tech platform changed since like 2021 for example? >> No, it hasn't changed. I I want SoFi technology solutions to create technology services for the entire financial industry. Um the financial industry's infrastructure is archaic. um and it's holding our country back quite frankly. Um the ability to move money quickly, the ability to get access to money in an instant. The ability to do that safely and and at low costs. We have to rebuild the entire financial infrastructure of our country to be competitive globally. That's why the Clarity Act is so critical because it will help with blockchain which is a faster, lower cost, safer way to move assets quite frankly. Um so, you know, the aspirations we have haven't changed at all. We hired a new executive to run the business. um KPG. She came to us from a another company. She was at Visa. She was running their value added services, one of which was uh Visa DPS, uh which is who Chime is using now. Um and a couple of other um large companies are using. But she's got the exact background we need to run this business. She's been a bank operator. She's been at technology companies like PayPal. Um she's been at world-class companies like Capital One um and and Visa. So, super excited to have her join our team. Our aspirations haven't changed at all. I think the greatest value that we've gotten from the acquisitions and the organic technology that we've built in STS is the actual performance of the SoFi business. Our SoFi big business banking offering which we just launched wouldn't have launched in three or four months the way it did. Our SoFi money business has benefited tremendously from having the capabilities that are there. We're now moving the SoFi money um core out of the legacy core it was on which is profile and we're slowly moving the the new members and new customers over to the to the new core. We're the first national bank to operate in the core. We think it's the most modern core in the US. We think other people will adopt it and we have a really good strategy across payment hub fraud and risk issue processing and cores and ledgers. Um, and you add to that blockchain and uh, crypto capabilities and it's it's pretty amazing. So USD is sort of permeating. Um, it's part of big business banking. It's how money is being sent in big business banking. It's part of our our investing and trading. We're settling now with SoFi USD instead of fiat. Um, and then SoFi USD is going to be used by third parties um, that are partners with STS. We signed a deal with Mastercard. We're going to start settling our debit and credit card with Mastercard here very shortly with SoFiUSD. And then we do eight billion um transactions a year at SoFi technology solutions. We want those to become SoFi USD transactions as well. Um we have new partners that are signing up in LAM and other places that are actually using so signing up for business with SoFi technology solutions and part of their business is using SoFi USD. So um there's ton of synergies between the two businesses. Some [clears throat] of the value is not captured in the revenue line for STS, but it's captured in our other revenue lines and our valuations. >> How uh can investors sort of track I mean obviously we can see on the blockchain that SoFi USD is a little over $300 million right now if I'm getting that correct for both Salana and Ethereum. Um what are sort of the benchmarks that you're looking for to say this has been a a a major successful launch? And is it just the AUM that you have or is there a certain amount of transactions or how does that work? >> Yeah, the best way to think about is the amount of AUM that needs to get to billions, single digit billions, double digit billions and keep growing. So, it's it's probably the best way to see the value that it's creating. Um, it's still very early days. We're we're just signing up partners with Big Moose Banking. We're just cutting deals with companies like Mastercard. We haven't cut a deal yet with Visa, which we're working on. We've just cut deals with market makers and exchanges and they're slowly ramping up. Then there's just some stuff happening organically because we're a regulated banker and people are like, "Hey, I'd rather use SoFi's, you know, stable payment stable coin than XYZ's payment stable coin." They're keeping their cash and reserves at the Fed um as opposed to going out and buying securities that could have duration risk or credit risk or liquidity risk to them. >> You've been tweeting a lot about uh the Clarity Act on X. I I'm curious what the Clarity Act unlocks for SoFi today that you guys can't do and sort of help uh retail investors understand what's happening on the background. >> So, this may [clears throat] be surprising. I think SoFi is technically better off without the Clarity Act um and without Genius than it is with Genius and Clarity Act because we're already a national bank and the OC came out in March of 2025 with an interpretive letter that said banks have permissibility to operate in cryptocurrency and blockchain. So what we're doing today already falls under those interpretive letters. The Genius Act hasn't become a law. there's still, you know, interpretations and rulemaking that's taking place and clarity hasn't been passed. I think clarity and genius are important for our country and that's why I'm supportive even though it may not be incrementally beneficial to SoFi as much as the current stance. The one thing to be very clear that SoFi will benefit from and everyone will benefit from is it actually becoming law actually becoming law that's permissible for banks to operate in blockchain and cryptocurrency. And that is a risk if it doesn't get passed that with the new administration and new leadership at the OC that they could retract the permissibility which is kind of what happened to us in 2023. So clarity and genius are 100% about our country being more competitive. Um it'll help us from the standpoint that it's permanency. Um and so that's why we're supportive. >> One of the uh other things that I wanted to touch on from your uh statement earlier was on small to mid-size business loans. This I thought was also really interesting. You guys signed a multi-billion dollar loan platform business deal um along with another undisclosed party for I think you said several hundred million dollars. To my understanding, you're barely originating in this area other than in the past few weeks. How do you know that you're going to even find capacity for billions of dollars worth of loans in this brand new asset class? Well, we definitely know there's demand to take out loans because back in 2020 when COVID happened and the government u came out with the ability to sign up for PPP loans, we were inundated from our members trying to apply for PPP loans. Um, and that's when we realized a lot of our members actually had small businesses and needed credit. So [clears throat] at that time we built an HTML site overnight that allowed those people to apply for PBP loans and then we let them submit the loans and we were just an intermediary. After that happened, we decided to build a marketplace for small medium businesses through our our brand Lantern. Lantern is a product comparison financial product comparison site. And so people would come in, they would be looking for small medium business loans. We'd let them fill out an application and then we'd sell that application to a marketplace of lenders that would either lend to them or not and we'd get paid a referral fee that was quite quite meaningful. We've now taken the next step which says we're going to satisfy some of those loans ourselves. Some of them we'll put on our balance sheet. Some of them we may sell in whole loan form. Um but at a starting point they're starting as LPB loans. So um Chris announced the partnerships that we have for small medium business LPB business. So, you know, the thing about LPB that's important for investors to understand and to understand our logic is that we really, you know, we benefit from the business and that we get instant return, we get cash day one, we eliminate credit risk, and we get our capital back. >> Yeah. >> But the value of that isn't as great as if I held that loan to to duration. Right. If I if I take the credit risk and I put up the capital, I need a better return than what I get. like literally producing it for somebody else and getting paid a fee. I mean, we're getting paid a fee essentially to use our technology platform, our originations platform, our marketing platform, our servicing platform, and we get that sort of day one. But we would actually generate more revenue if we didn't if we originated for our own balance sheet and held held it over time. Um, so for the small medium business loans, people have credit profiles that they know work. We're we're implementing their credit profile. they're getting and we're producing a loan on their behalf from getting a fee. Over time, we'll learn the credit performance. We'll understand what risk we want to take, what capital we have to use, and we'll get more value for them. But in the beginning, we're taking a lowrisk, low capital approach because it's early, and there are other people that want to take that risk and apply that capital because they want that return. >> Do you think that there's a a a time in the near future where you're going to be building a a more holistic view for small to mid-size businesses? Oh, absolutely. We we want to build out checking and savings. We want to build out other capabilities and and features that small businesses need. I mean, there at the end of the day, they're many of them are our members. So, we'll acquire some that are not, you know, our members and they can become our members on the consumer side. So, it can feed the consumer side of the business as well, not just, you know, the business piece of it, >> right? And and that's the same background like you said from SoFi Technology Solutions that built big business banking would be the same tools that you'd use to build small to mid-size businesses. I assume >> that's that's correct. >> Okay. And and the uh SoFi exchange network um would small to mid-size businesses also tie into that or is that exclusively for large enterprises? >> No. If you're a small medium business and you want to sign up for commercial banking as opposed to like regular checking and savings account, you can sign up for a big banking account. Um, it's APIdriven. Um, you do, you know, I don't think it's valuable if you don't have high volumes of dollars that you're moving. So, if you have high dollar volume you're moving, it's it's absolutely a great product for you. And, you know, because it is, you know, largely self-s served from a from a onboarding standpoint, um, it may be cheaper than wires or a fed now. And you could see people adopting it and and using the send network to to move money faster and to transfer it. You know, if they start small businesses could start accepting stable coins of all types. They could start accepting cryptocurrency of all types. And if they do, they'll absolutely want to use the send network because it instantly can convert from crypto or digital assets to fiat. Now, uh, I remember on a recent podcast that you were on, you talked about how SoFi's valuation being around two times its tangible book value seemed a little bit ridiculous to you. What part of the SoFi story do you think that the market is not giving value to right now? >> You know, and this this also is one of the reasons why we're not we're being more conservative on our profitability for guidance than we otherwise would be. Like I don't think we're in a market right now where people want to buy interest exposed companies and I don't think we're in a market right now where they want to buy financial risk generally. Now some of the big banks have done really well and they've done really well because they have revenue streams that are very different than fintex. They're big market makers and when there's volatile markets as there has been with interest rates they are producing a lot of economic value and capturing that in great revenue streams. So their trading businesses absolutely benefit from volatility interest rates and generally there's also a lot of financing going on with big corporations especially for all the capex that's funding AI in addition to M&A activity and so they have some revenue streams that are not anything similar to fintech company re revenue streams. Fintech company revenue streams are much more sort of you know checking and savings small loan businesses credit card businesses etc. So what I've seen in periods of uncertainty around interest rates um or uncertainty about the economy tied to inflation is that the multiples contract for fintech companies. Um and listen that's the reality like our numbers have gone up. If you think about stocks they their value changes either because a multiple goes up or down or the earnings or cash flow or revenue of the company that that multiple is applied to. So using PE as an example, price to earnings, a price to earnings multiple can go up and a stock will go up if the earnings are unchanged. The price of earnings multiple can go up and earnings go up and the stock will go up even more because both are going up. Similarly, the multiple can contract. The earnings could actually go up, but the multiple contracts more than the earnings goes up and the stock goes down. And that's what's happened to SoFi. Whether you value us on price to revenue, price to tangible book value, price to earnings, price to EV to EBIDA, all of those financial metrics for us have gone up. Our revenue grew 40% this quarter. Earnings grew even faster. Our tangible book value grew very fast, but the stock has gone down. So the multiples continue to contract. I believe the multiples contracted to a point two times tangible book value. That is incredibly attractive. If you have a view that's longer than a few months, I think a company growing at our rate, 40% revenue growth, 30% Ebida growth, generating organic equity and tangible book value, it is a a great opportunity to buy it. If you do a scatter plot and a regression analysis of price um to return on tangible common equity, you'll see financial companies with high return on tangible common equity have high price to book ratios, much higher than two times. If you look at American Express, I think it trades at almost seven times price to tangible book value because its return on tangible common equity is quite high at over 30%. The interesting thing about American Express though is their net income margin I think is in the mid- teens. Um but their their revenue to equity is well over one. Um and so they have a return on tangible common equity that's over 30% against that 15% margin. In fact, it's over two times revenue to equity to get to more than a 30% return on tangible common equity. And they benefit from a six to seven times uh price to tangible uh book value. We're trading at two times tangible book value. I mean old stodgy banks with ROE that is in the low double digits trade at those multiples. Now our return on tangible common equity today is not 20 to 30%. It's high single digits but it's improving. We laid out for the market investors yesterday the fact that we're pretty confident our net income margin can reach 20 to 30%. And that's based on our incremental margin being 30%. And asmtopically your actual margin will become your incremental margin over time. So, I'm pretty confident we could be in that high range of 20 to 30% that income margin. I'm also confident we're going to have a mix of business where our revenue to equity is at least one if not higher. That's just a choice of what businesses you're in. So, today that's not where where I mentioned it's less than one because we have too much equity. Our our riskbased capital ratios are well above the statutory minimum plus a cushion. Um, and our mix of business is changing. So we'll drive a mix of business and our capital base so that it's one or more against 25 to 30% net income margin. We'd have 20 to 30% return on uh tangible common equity and we should trade well above uh two times tangible book in the five plus range. So that's why I buy the stock. That's why I think it's a huge home run and I don't think investors have to do huge leap of faith to get there. If you think about our business, you you we've had products for, you know, the last we've provided product information for the last eight years that I've been here. So products are growing at a certain rate. Right now they grow at 42%. Members are growing 35%. I think products and members could easily grow 30% plus for the next couple of years, maybe even longer. And if you keep revenue per product as it relates to financial services flat, you get to a a really substantial financial services revenue number. We've said tech platform revenue is going to grow about 20% when normalized and we have enough capital to grow our lending uh business over the next couple years at 20% without having to raise capital. So 20% lending growth, 20% SoFi technology solutions and our tech platform reported revenue growth and then growth financial services uh based on product growth of over 30% and keep revenue per product flat and use a 30% incre income margin you get to well over a dollar. you get over to over a dollar in earnings in 2028. >> That's extremely helpful, Anthony. Thank you. Um, but you did at the beginning say that, you know, interestsensitive companies are not seemingly in vogue right now. But, um, you guys had changed your outlook from expecting two rate cuts to now expecting practically two rate hikes and yet your guidance has increased on the top line uh and and stayed the same on the bottom. How interest rate sensitive are you guys if that's the case? >> Well, 60% of our revenue is from interest rates. The the assets we have on our balance sheet we hedge. So the existing B as it relates to interest rates. So the interest rates are hedged on our balance sheet. We don't um hedge our forward production. We hedge it as it gets underwritten. So that means investors have to count on us changing our whack to keep the net interest income ratio that we need, net interest margin that we need to drive outcomes that we've had. And Chris said on the call that our NIM will stay above 5% for the foreseeable future. So if rates do go up, we pass that on to the member in higher whack to keep NIM above a certain level. We've done that for the last eight years. We've proven to be able to do it the last eight years, but there is uncertainty in doing that. Um there's also uncertainty about the economy with inflation where it's at. Um and people worried that could lose lead to credit losses. Our credits performed very well. Our customer acquisition costs are pretty stable. We're not seeing competition increase relative to anywhere that it's been in the past. So, we're able to grow that business nice and linearly. Um I I did read some concern about competition increasing. We're not seeing inflation at customer acquisition cost. If anything, we're spending back to grow even faster because we're getting really good customer acquisition cost and we're spending up to what we can uh accept. So, for example, our products grew 42% in the quarter. members grew 35% in the quarter. If if we're getting acquisition below our cost, we reinvest the money to get the customer acquisition cost up to that optimal level as opposed dropping it to the bottom line. Why? We get more members, more products, and we know the product, you know, revenue per product number. It drives more long-term value. So, um, we're not seeing any inflation on the competition side in any of our products. Um, and we feel really good about our ability to find um, new members and drive more product growth organically at the rates that we've been doing. We wouldn't have a 30% incremental ebidow margin if that wasn't the case. >> Yeah. Yeah. Anthony, [snorts] I just have one personal question for you. You know, I I was stressing out thinking about the questions I was going to ask you here and uh, I I'm curious how you always stay so remarkably composed during everything. How do you handle stress on a day-to-day basis managing such a company? >> Listen, we have a great team. I trust our team. I think we've proven we have a phenomenal strategy. I think this quarter more than any quarter has proven we have a great strategy and we are investing against that strategy and executing. A lot of my friends and relatives and let's say colleagues from other companies will be like what what's next for SoFi? I'm like same same story. Executing the same strategy. We have the foot on the gas. We don't have to step down any faster. We don't have to take it off. We're not putting a front on the brake. Like the products are launched. We iterate on them every day. We have product roadmaps we're delivering on to make them better across five variables. We iterate on the marketing capabilities. We're launching products that we planned on launching on time. And we're just in execution mode. And when you deliver the results that we delivered, I take I you know I I take pride in what we delivered. I'm very happy about that. Um I can look at a scoreboard and say the scoreboard doesn't reflect what we're doing. That's not up to us to decide. We control what we deliver and we're doing a great job of that and I can sleep at night. Um, you know, I always say that if you do everything you can um and you go to bed at night knowing you've left nothing on the field, um, and you've done everything right, um, then whatever happens happens and it's out of your control. So, um, that's how I stay, uh, poised. Now, you may see me poised. Other people may see me get a little bit excited, but sometimes you have to throw around an F-bomb here or there to make sure they know how serious it is and um and and the urgency that that they should have. But I benefit from a great team, eight years of a strategy working and um a process that's working really well. >> I heard this beautiful quote from you that uh I think is really helpful for me. You said, "I go to bed scared and I wake up terrified." And and I think about that a lot. So um thank you to everything you do. really do appreciate it and hopefully we'll continue to have these talks and fresh horses. >> Thank you and I appreciate all the support you guys give us and the amount of time you spend in analyzing the company. It's truly unique and valuable and can't thank you enough for putting in all the effort to help educate people about our story, good or bad. >> Thanks, Anthony. Thank you.