SoFi Technologies, Inc.

Welcome to today's SoFi Q2 2021 earnings conference call. My name is Jordan, and I'll be coordinating your call today. If you'd like to ask a question, you may do so by pressing star followed by one on your telephone keypad. I'm now going to hand over to Andrea Prochniak, Vice President of Investor Relations, to begin. Andrea, please go ahead.

Thank you, Operator, and thank you all for joining us today for SoFi's second quarter 2021 earnings call. I'm Andrea Prochniak, SoFi's VP of Investor Relations, and I'm thrilled to be here kicking off SoFi's quarterly reporting process as a public company. Joining me today are Anthony Noto, SoFi's CEO, and Chris LaPointe, SoFi's CFO. They will share prepared remarks regarding the quarter's results and then take your questions at the end. Just after market closed today, we issued a press release announcing SoFi's second quarter 2021 financial results. Our discussion of our results today is complementary to the press release, which is available on the investor relations page of our website, investors.sofi.com. This conference call is being webcast live with accompanying slides on our IR page as well, and will be available for a replay for 30 days, beginning about one hour after the conclusion of this call. During the course of this conference call, we may make forward-looking statements based on current expectations, forecasts, and projections as of today's date. Any forward-looking statements that we make are subject to various risks and uncertainty, and there are important factors that could cause actual outcomes to differ materially from those indicated in the statements. We discuss these factors in our filings with the SEC, including our upcoming Form 10-Q, which can be found on the IR page of our website or the SEC filings website, sec.gov backslash EDGAR. As a reminder, we are not required to update our forward-looking statements. In our presentation today, unless otherwise noted, we will be discussing adjusted financial measures which are non-GAAP measures that we believe are meaningful when evaluating the company's performance. For detailed disclosures on these measures and the GAAP reconciliations, you should refer to the financial data contained within our press release. which is also posted to the IR page of our website. While today's discussion will focus primarily on the second quarter results, we encourage you to evaluate SoFi's performance on an annual basis, as quarterly results can be affected by unexpected events that are outside our control. Now I'll turn the call over to Anthony.

Thank you, Andrea. Welcome all to SoFi's first earnings conference call as a public company. We're excited to speak with you today about our second quarter results. I want to start by providing you with a short overview of our mission, our strategy, our job to be done, which is more commonly referred to as our value proposition, and our points of differentiation. Our mission is to help our members, predominantly made up of what we call high earners, not well served, achieve financial independence to realize their ambitions. Our strategy is to offer a comprehensive suite of products and services so that we are there for every major financial decision in our members' lives and all the days in between. My passion for SoFi increases every day, driven by the impact that we have on our members' lives. That impact is driven by our focus on a unique value prop, one job to be done. which is helping our members get their money right by giving them a one-stop shop to borrow better, save better, spend better, invest better, and protect better. Financial decisions are uniquely both rational and emotional. That's why earning the confidence and trust of our members by building lifetime relationships with them is so important. We do this in two ways. One, we constantly strive to create best of breed offerings in terms of speed, selection, content, and convenience by using member feedback to drive continuous iteration and learning, which drives compounding innovation over time that should make each product great on its own. And second, not only do we strive to make each of these products best in class, we also obsess over how to make them work better when they're used together. When we do both of these things right, we not only deliver a unique SoFi experience to our members that improves with each new product they choose, but we can also create the best unit economics across our business. As we get more efficient in serving our members, we can invest that savings in offering members the best rates, no fees, the best prices, terms, and selection. This in turn drives more engagement, more data, and our ability to help our members use more products to get their money right. We call this the financial services productivity loop, and it's working. We see it in the numbers, accelerating year-over-year growth in members and products, increasing member lifetime values, declining member acquisition costs, superior revenue growth, and improving margins. Today, to the best of our knowledge, SoFi is the only company providing a comprehensive solution set in one easy-to-use, mobile-first digital platform. many companies have talked about it but only sofi has done it now let's get into the quarter i'll take you through a few high level takeaways and then chris will take you to the results in more detail the second quarter proved to be a very strong quarter full of milestones we want to highlight four key points from the results first our strategy and execution are driving record results Second, we are constantly striving to iterate, learn, and iterate some more in order to compound innovation and differentiate our products. Third, we are hitting an inflection point in our financial services productivity strategy with a number of financial services products used by our members reaching nearly 3x the number of running products during the quarter versus about equal one year ago. And fourth, we continue to invest aggressively to ensure we are driving compounding growth while still delivering profitability. Let's take these one by one, starting with our strides in execution are driving record results. Specifically, we achieved record adjusted net revenue of $237 million, despite our student loan refinancing business operating at less than 50% of pre-COVID levels through the CARES Act, which is a great testament to the diversity of our business. Total members grew 113% year-over-year, which is our eighth consecutive quarter of accelerating year-over-year growth. Total products held by our members increased 123%, our fourth consecutive quarter of year-over-year growth of more than 100%. We demonstrated a continued strong cross-buying trend with cross-bought products up 1.7x versus a year ago. Galileo, our technology platform business, more than doubled its total client accounts to $79 million and just crossed $100 billion of annualized payment volume in July. We delivered our fourth consecutive quarter of positive EBITDA, and our financial services segment revenue had a breakout quarter of 2.5x versus Q1 2021. This brings me to the second key takeaway. In the quarter, we demonstrated our commitment to constantly iterate across four factors, fast selection, content convenience, to drive compounding innovation. Here are just a few examples of what we did in the quarter. Our products are 100% digital, and there are infinite ways to tailor them to specific members' needs. To ensure our members get the right loan for them, we launched a next-gen credit model and re-engineered our fraud and income verification processes. This drove a 30% higher approval rate with the same credit box, leading to a 60% increase in funnel conversion and improved net promoter score, all with zero negative impact on credit quality. Across lending, we continue to invest in automation to make the loan application process easier, faster, and lower touch. In Q2, more than 50% of personal loans processed were 100% automated. That compares with less than 30% one year ago, which drove lower cost per loan and shortened time to fund to two days from four days last year and nearly a week a few years ago. In student loans, we work to align with members' individual needs throughout the pandemic, specifically by introducing the snooze feature. The snooze feature allows borrowers to lock in a low rate on a student loan today, but delay the start of payments until the CARES Act loan deferral program ends in January 2022. In SoFi Money, we enhanced our direct deposit offering by adding two-day early paycheck to earlier enhancements like free overdraft protection, autosave, and roundup features. In SoFi Invest, members asked for more cryptocurrency selection, so we added 16 coins to the offering. We also had the ability to redeem SoFi reward points earned on all of SoFi products into cryptocurrency. And we were one of the first to offer our new IPO investment center. Also in Invest, we added to our already strong SoFi ETF offering by launching SoFi Weekly, the first ever equity ETF that pays weekly dividends. This joins certified TGIF, our fixed income ETF, which pays a dividend every Friday. At Galileo, we near completion on a 15-month project to build out a new cloud computing environment to replace the on-premises environment and are now in Q3 focused on the migration of existing clients to the cloud, which will be filed by onboarding new clients straight to the cloud. We also continue to grow the Galileo partner base, signing up 22 new partners in the first half of 21, with 12 of those in Q2, including some focused on enterprise and cryptocurrency. Finally, we continue to iterate and innovate on our unique rewards program by adding additional reward triggers when members set up recurring purchases or recurring deposits in SoFi Invest or direct deposit in SoFi Money. or when members use the app to take actions that make their financial life better. Since launch, Rewards has contributed meaningfully to cross-buy and engagement. Already, members have earned 450 million points with new ways to earn in the works. This is just a sample of all the innovation introduced this quarter, and we have much more in the pipeline, so stay tuned. The third message I want to hit on today is the inflection point we have reached with the Financial Services Productivity Loop Strategy. We've worked hard to scale our financial services offering, which includes products like SoFi Money, SoFi Invest, SoFi Relay, and SoFi Credit Card, as these products have a much broader appeal, lower customer acquisition costs, and greater daily engagement compared to lending products, which have significantly higher LTV, but are used less frequently and by fewer people. Driving greater scale on the top of our member funnel with financial services products drives two crucial benefits. First, it results in more members, more usage, and more data across a set of products with extremely attractive standalone characteristics. And second, this drives greater volume of cross-border products at lower overall acquisition costs, leading to superior economics and lifetime value. We are seeing our efforts pay off. In Q2, we reached a critical inflection point with a number of financial services products held by SoFi members at nearly 2.7 million is now nearly three times the number of SoFi lending products at almost 1 million. A year ago, they were about equal in number. The 3X greater scale is helping drive a 1.7X increase in the number of products that were cross-bought in the quarter versus Q2 2020. The profitability of our lending products is already at industry highs, and it increases dramatically when loans are cross-bought because there is no additional cost from acquisition. This further solidifies our superior lifetime values, leading to our ability to offer unmatched value to our members. The last point I'd like to drive home today is that we continue to invest aggressively in our business to fuel compounding growth while still delivering profitability to our shareholders. This combination is not easy, but we are committed to contributing around 30% of incremental revenue to the bottom line and reinvesting the remaining 70% in bolstering our product innovation to drive decades of compounding growth. Even as we invest aggressively in technology, marketing, and people, we continue to realize cost efficiencies, which is beginning to drive real operating leverage. By leveraging cross-buying and better gate utilization and targeting, we've reduced sales and marketing as a percentage of revenue and customer acquisition costs meaningfully year over year. We have also improved our member services capabilities, reduced onboarding friction points via implementation of more streamlined processes, including leveraging data and improved communications, all to drive down operating expenses and improve efficiencies. All the while, we've worked to drive improved product MTS with better products and greater automation, which in turn reduces contacts and frees up resources to play offense. In summary, we had record results with accelerating growth and a lot of milestones to be proud of as we head into the second half of the year. But rest assured, we are committed to running faster, reaching higher, and achieving more every day. With that, let me turn it over to Chris to run through the results in detail.