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SoFi CEO on company's 'unique circumstance' to go public via SPAC merger

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SoFi made its public debut on the Nasdaq following a SPAC merger. SoFi CEO Anthony Noto joins Yahoo Finance Live to discuss.

Video Transcript


ZACK GUZMAN: We're back to Yahoo Finance Live. It is a big day for SoFi, the company you might know if you've ever paid off student loans there, expanding far beyond that now as they complete their debut to trade on the NASDAQ, ringing the opening bell this morning after its SPAC merger with Chamath Palihapitiya Social Capital Hedosophia Holdings. Through that process, today's debut day, you're seeing shares there right now off by about 1% to $21.78.

For more on what the company has planned, though, the big push and focus here on fintech, want to bring on the CEO of SoFi, Anthony Noto joins us right now, alongside Yahoo Finance's Brian Sozzi.

And Mr. Noto, good to be chatting with you here. I mean, I know the company through my own personal experiences with student debt. A lot of our viewers might know it through that. But you guys are doing much more than just that now. So talk to me about what the growth looks like for SoFi and where you're headed as a public company.

ANTHONY NOTO: Sure. Thank you. Since February of 2018, we made a strong and aggressive push into broad based financial services, so we could be a one-stop shop for all your financial services needs on your mobile phone. So today, you can take out four different types of loans on SoFi, including mortgages and refinance student loans and personal loans. In addition to that, you can invest in single stocks without commissions, fractional shares, which we pioneered, cryptocurrency, SoFi robo advisory accounts, and SoFi ETFs.

In addition to that, we've introduced a credit card that helps you reduce your debt when you redeem your reward points into different loan products that you have with us, or choose to put it into an investment vehicle like fractional shares. In addition to that, we have SoFi money, which is a way to do direct deposit into an account and from that account be able to spend, with a debit card, electronically with your phone, person-to-person payments or bill pay. And we actually deliver your check two days early, your paycheck, if you do direct deposit with us.

So we're the only place you can really serve all of your financial needs across borrowing, saving, spending, investing, and earning and protecting in one place, with member benefits. And our goal is to be there for every one of the major financial decisions in your life and everything in between, so that you can get your money right and achieve your objectives.

Today we're growing incredibly fast. We've had seven quarters of faster year-over-year growth in our member base. We grew 110% year-over-year faster than the prior six quarters. We're also seeing a really significant pickup in our non-lending products, which are newer, that are now the majority of our total products, that total over $3.2 million as of the end of Q1.

And so we've really benefited from that aggressive push. We also acquired Galileo, which gives us a technology platform that serves our member base better, but it also will allow us to build other products for the financial technology industry as a whole and build out what we call the AWS of fintech.

BRIAN SOZZI: Anthony, Brian here. Congrats on the listing today. I know it was a long work-- long time getting to this point, a lot of work behind the scenes. How big, how big is the crypto platform on SoFi right now?

ANTHONY NOTO: We don't break out the specific number of products that people have bought within crypto. But it's a fast growing, the fastest growing piece of our overall invest business, and the invest business itself is growing very fast. We have broadened our selection within that category.

We initially started with Bitcoin, Litecoin, and Ethereum, and we recently added 15 new coins. That is an important element to diversification. We encourage our investors to think about that asset class as a very volatile, unproven asset class and try to educate them on the benefits of recurring investments in a broad portfolio that best meets their needs, which is why we provide robo accounts, in addition to the ability to invest in fractional shares, and then our own ETFs, which are quite unique in their diversification as well.

BRIAN SOZZI: So in the first quarter, Anthony, you added the growth in new members up 110% year-over-year. Who is coming to the platform? And do you think you could keep some of these newer customers as the economy starts to reopen?

ANTHONY NOTO: Sure, absolutely. Our member base is really, we're targeting millennials and Gen Z, people that are in between getting the high end services or Private Wealth business but need better services than mainstream banks. We call them high earners not well served. And we can uniquely give them not just the products and services that we provide, but also education, access to a free certified financial planner, free career advice, and then educating them on retirement, on buying a home, on saving for education for their children, budgeting better, reducing their cost of debt. So it's really meant to be a full service provider across all the products, but then the education that goes along with it.

ZACK GUZMAN: Yeah, Brian hit you with the members question. I'll hit you with the revenue one here. Because the latest quarter, you showed 151% growth there, in terms of net revenue year-over-year, to hit $216 million. But when you look at maybe the biggest driver there moving forward, what are you leaning in on as that catalyst that's going to take up to the next level? Is it specifically that crypto piece you're talking about, or something else?

ANTHONY NOTO: Yeah. We benefit from what I call a financial services productivity loop strategy. And what that means specifically is we want to build best-in-i class products so that when our member chooses to use one of our products, they find that product to be reliable, they build trust with our brand. And when they need the second product, we have that available for them. And because they trust us, we have better odds of success of having them cross buy from us, which will increase our revenue against that particular member without a second customer acquisition cost.

And that gives us a competitive advantage and a higher lifetime value than other companies, which allows us to invest in lower prices, better yields on investment vehicles, lower interest rates on loans, no fees on product, and more member services. And that flywheel just continues to drive itself. We've reported that a large percentage of our home loans, over 65%, come from our existing members, which makes that a very profitable business on a variable profit basis. And so we've seen nice continual improvement of people cross buying into other products at a significant rate since we launched more products than loans over the last several years.

At the very top of our funnel is what I call our financial services products. That's SoFi Money, SoFi Invest, SoFi Credit Card, and SoFi Relay. Those are broadly appealing products that have high frequency and large engagement, and they have really low customer acquisition cost. When we bring people into that funnel at the top and then they cross buy into loans, we really drive the lifetime value quite meaningfully higher than any company that we think we compete with in the financial technology space on a dollar basis, because of the profitability of the loans and the fact that we're also not paying a second customer acquisition cost there.

So very unique strategy, only executable if you have a broad based platform and take this approach of being a lifetime relationship, being there for every one of the major decisions, and not missing out when they want to buy a house because you're not in mortgage, or they want to invest because you're not in invest, or they need to do a remodeling and need a personal loan.

BRIAN SOZZI: Anthony, I've told you this in the past. You have one heck of a sense for the deal market. But I guess it goes back to your time as an investment banker at Goldman Sachs. Very interesting you chose the SPAC approach here. Do you think we have reached peak SPAC?

ANTHONY NOTO: You know, I think with the evolution of any new financing vehicle, there's a cycle that ensues where there's a lot of interest in that cycle and you have a broad based number of participants that come in, and then there's often a shakeout. And ultimately, quality emerges from that shakeout and it becomes more narrow but an opportunity that will persist over time. And so the vehicle, for us, was a unique way for us to raise private capital at a certain valuation and have certainty of that deal closing, in addition to going public and having it all in one packaged product.

We had a unique circumstance in that we had a significant amount of our capitalization that was preferred stock. And a regular IPO wasn't the easiest and most cost efficient way to convert that preferred into common, which was necessary for us to apply for a bank license, and to be able to go public.

And so a private round from T. Rowe Price, followed by a PIPE round, and then in conjunction, announced with a SPAC, was really the three legged stool that we chose to access the public markets.