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00:00:02
Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
00:00:07
Speaker 2: So far reporting second quarter results before the opening bell. The company posted record revenue one point two billion dollars, but also raise its full year revenue outlook. The bit that's unchanged is the earnings guidance. Look at shares down eight point four percent right now on track as it stands for its biggest drop since late April. There had been a deeper decline earlier in the session. Joining us now is Sofi CEO Anthony Nodo. Record revenue and the outlook for the balance of this year. It's really interesting, like projects a lot of confidence. Let's just address the stock move and the story of the quarter. You know, maybe the street felt like you needed to take the bottom line with you in your confidence.
00:00:48
Speaker 1: Yeah, I think you're right. The quarter was incredibly strong. It was our nineteenth consecutive quarter of more than a rule of forty. It was actually a rule of seventy with forty percent revenue growth to one point two billion and over a billion dollars of cash revenue, and our ebadah margin was thirty percent, and we had a really strong net income margin. I think the street likes the trend in the business today, Credits performed well, our new products are getting great adoption. We're seeing the flywheel of being a one stop shop driving success and increased products per member, so really positive story fundamentally in Q two. In Q three, we expect that fundamental story to remain intact and continued strong member growth, product growth and product per member growth with good profitability. We did raise our revenue expectations for the year and the back half of the year, but we left earnings unchanged, primarily because we want to make sure that we keep investing in the business to maintain these high levels of revenue growth for a longer period of time. And in addition to that, we're also now anticipating two rate increases as opposed to the beginning of the year when we anticipated two rate decreases, and that creates them uncertainty, and so we decided to have a little bit of a cushion as it relates to earnings if something like that unfolds. But we couldn't be more confident in the business and the long term profitability of the business. It's just we're not going to take earnings up in the near term to try to drive, you know, market favorability that will be short short term beneficial, but not long term prudent.
00:02:16
Speaker 2: Right, let's talk about the FED. Why not? It's it's it's FED Day. No one wants to talk to the tech guy on FED Day, Anthony, to be honest with you, and I just want to partake in it like everyone else. So you explained it. Your assumption reflects one to two hikes rather than cuts. You know, put the sort of the numbers and monetary policy joggon to one side. How does that change how you think about the world, about how the economy grows, about the consumer and the back half of this year.
00:02:44
Speaker 1: Yeah, I mean, if the FED is raising rates, that means we have a strong economy and we're trying to maintain stable inflation. You know, environment in which rates going up one to two percent will perform very well on the revenue line, which is why we're still forecasting strong revenue and I think ultimately will perform really well on the bottom line. We're already in our guidance and you know, providing guidance of a net income margin on an incremental basis of thirty percent, which is our long term profile where we can get to. So it doesn't really change that much. It just eliminates some of the upside that one may have called today compared to a different environment. I think as stable economy with unemployment below five percent, inflation around two to three percent is a great backdrop for our business, and even better backjob for our business is if rates were declining.
00:03:34
Speaker 2: Final question on the economic side, you know, what is the health of your customer look like? And not just the help, but like, what are the behaviors of your customers in this environment. We've gone over in the past, You and I the demographics and who you're serving, So how are they behaving?
00:03:50
Speaker 1: The customer's behavior is very strong. We see very strong levels of spending. We annualize that at about thirty eight billion dollars of debit spending a year. We're seeing very strong trends in credit, which we reported continuing. We're seeing good inflows into our invest business assets under management standpoint, and we're seeing people take out more products. There definitely is a desire to reduce the cost of debt, and we saw record levels of origination across our unsecured personal loans, our student loans, very financing, and our home equity lines of credit and home equity loans and that's a secured loan that has a lower interest rate. So, and we recently launched small medium Business and we see a lot of demand for small medium business loans as well. So from our advantage point, the economy looks very strong. Inflation isn't causing consumers to hold back. We're not seeing an uptick in unemployment right, We're not seeing any deviation on the credit side.
00:04:44
Speaker 2: Let's talk about AI. When we went through the Big Bang Kernings, the debate right on how much AI is really reshaping financial services and the investment that's required for so far today, where is AI having an impact, you know, across underwriting customers, service, fraud detection, something that's real right now?
00:05:03
Speaker 1: Yeah, the first thing where it's having an impact is actually on code production. We have a unit of work within our engineering group called a squad, and historically a squad consists of seven people. Today a squad is going to consist of four people that can produce the same amount of code as seven people. So that's a huge productivity savings from AI capabilities. It also helps with testing on the cost side of the equation. We're using it to automate fraud investigations. We're using it to automate dispute resolutions, We're using it to help with customer service. On the underwriting side, we're not really using it to predict the ability for people to pay, because we underwrite to their actual cash flow based on their actual income and their expenses. I do think that AI is helpful in verifying some potential outliers or finding them that could be fraudulent activity, first party fraud where an individual has no intent to repay their obligations, and on the overall value prop of SOFI side the equation, We've launched something called SOFI Coach, which is a chatbot that's driven all by AI. You can ask any question about your financial life and it will help you get your money right. You could ask if your REFINANCI, your mortgage, where you should invest, how do you lower your costs and your expenses? Should you be investing more? And it's a super powerful engine based on the data that we uniquely have because we're a one stop shop. We have data across checking and same as accounts, across loans, across mortgages, across investing, across credit cards, and across insurance. So we have not just a great engine of information that can drive great AI solutions, But the data is a huge differentiator and we're seeing really positive effects of that.