1. SoFi Technologies — Leadership Interviews
a. CEO Anthony Noto Interviews with Morgan Stanley
On SoFi Relay:
SoFi Relay is an entirely free product where members can gain insights and tips on how to get their money right. This is an example of SoFi being there every step of the way for the consumer, not just when it’s most profitable for SoFi. This serves as a powerfully efficient top-of-funnel consumer acquisition tool for members not yet ready to take financial action but who will be soon.
On the notable member growth acceleration this last quarter:
Noto told us that the current membership growth trends continue to be very positive into this quarter.
“It’s about building unaided brand awareness. Going into 2020, I said to the board that it’s a matter of when not if. The reasoning is that we had all the products on 1 digital platform and we were leveraging data across all products to create the best experience. In Q3 2021 we saw an inflection point from the combination of SoFi Stadium, Money Moves campaign, referral program re-vamping & more.”
On the customer acquisition cost (CAC) trend:
“Each product team is given a target CAC relative to what we forecast for the lifetime value (LTV) of that customer (with SoFi’s unique cross-selling abilities considered) so that we get a 1 to 2 year payback period. All of our businesses are in line with our benchmark of best-in-breed CAC and unit economics which have both been steady or improving for our products.”
SoFi now boasts roughly 1.5 products per member vs. 1.2 when it went public which is also helping to improve its LTV/CAC ratio. Noto expects that its product growth will continue to greatly outpace member growth as cross-selling momentum builds.
On Where SoFi is on the Product Roadmap:
“SoFi’s long term 5 year forecast does not anticipate any new products. It doesn’t include things like becoming a principal in insurance — today we are just a partner. It doesn’t include tax products or auto-refi. It doesn’t include new money products like high yield savings accounts if we get our banking license or adding new credit cards to attract different consumers. We will add more things over time.”
On mortgage growth:
“In our 5 year forecast we laid out a plan to get to 1% mortgage origination market share vs. 0.1% today. I would be hugely disappointed if we only got to 1% market share.”
On Galileo — SoFi’s business to business (B2B) technology platform:
Growth opportunities for Galileo:
- Galileo is experimenting with new credit/secured credit processing application programming interfaces (APIs) to enhance its value to customers beyond debit/ACH. This is a natural extension.
- The company is pursuing new opportunities with large banks.
“Throughout 2022 you will start to see us getting into new product areas with Galileo. There’s a lot of demand for credit processing as well as the reward and fraud capabilities and lending as a service that we’ve built at SoFi.” — CFO Chris LaPointe
Galileo just finished on-boarding Toast as a new enterprise partner.
Galileo has signed the 4 largest neo-banks in Mexico and is gearing up for an expansion into Columbia.
“We are innovating here faster than everyone else.”
b. CFO Chris LaPointe Interviews with Credit Suisse
On interest rates:
“The beauty of our model is the diversification both holistically and within each segment. In different interest rate cycles different products benefit and others are hit. Our platform will enable us to withstand credit and interest rate movements.”
On home loans:
The vast majority of home loan origination is agency refinancing. SoFi plans to aggressively grow its purchase loan business which has expanded from a low single-digit % of originations to about 10% of originations today. This should rise further with the launch of jumbo-loans.
The segment has more demand than it can supply due to bottlenecks with third parties. The bottlenecks all vanish with a banking charter.
Home loan NPS score has grown from near-0 to a “mid-thirties range” today.
On the revenue mix:
LaPointe highlighted how early on SoFi is in the monetization process for its financial services products. The company plans to now shift more aggressively to monetizing that segment as it has appropriate scale and unit economics (the 2 initial focuses here).
On the customer acquisition cost (CAC) trend:
“We are now at the CAC level for all of our products that will get us to our long term 30% EBITDA margin target. We feel like we are at the point where we can aggressively scale these businesses. The financial services segment which has a lower CAC will place more downward pressure on our overall CAC going forward.”
On the bank charter’s impact:
The lending business relies on $6B in warehouse credit capacity and pays 175-400 basis points in incremental cost of capital because of it. The bank charter allows them to use their SoFi Money deposits to offer a higher interest rate while still lowering cost of capital. LaPointe generally quantified this cost savings for SoFi at 200 basis points (or 2%). Less reliance on warehouse capacity will also allow it to more aggressively originate loans.
SoFi will also now be able to hold loans on its balance sheet for 6-9 months vs. 3-4 months which will allow it to generate more consistent net interest income.
C. CEO Anthony Noto Interviews with Wells Fargo
On key advantages over traditional banks:
“On a macro-level, we have better, more vertically-integrated technology. Many of the large banks have been formed through consolidation and their core banking technologies are still on-premise with very siloed data. We are building one consumer-facing experience so that when you use our product it’s like shopping on Amazon. You will not need to fill out a new application for every product you want to use. You can’t have that progressive on-boarding with different data architectures.”
“When we launched SoFi Brokerage, the world thought all of the new neo-brokerage members had been captured by Robinhood. People doubted how SoFi would capture market share. Well, we created a product that was differentiated as the fastest place to open an account and the fastest place to get free certified financial planning help. We needed to allow members to open up an investment account in seconds after they opened up a money account with no new application.
On the outlook:
“I would be very disappointed if we didn’t achieve our 5 year plan to get to 10 million accounts on SoFi
Click here for my broad overview of SoFi.
2. CrowdStrike (CRWD) — CFO Burt Podbere and CTO Mike Sentonas Interview with Wells Fargo & Accolades
CrowdStrike also reported earnings this past week. For my full review of the report click here.
a. Leadership Interview
Podbere on the CISA win and federal government opportunity:
Joe Biden’ executive order to support endpoint detection and response (EDR) earmarked funds for the Cybersecurity and Infrastructure Security Agency (CISA) to support this endeavor. CISA obsessively compared CrowdStrike with all of its competitors and selected CrowdStrike as a major partner.
“The CISA win was a big deal for us — it’s one of the biggest deals we’ve ever consummated. The government did an incredibly thorough job evaluating us and all of our competition and figured out we were the right ones for them. It was extremely competitive.”
“The Falcon platform is tailormade for Biden’s executive order — and that’s not by chance. Our efficacy and ease of deployment and use all matter. I have no doubt that this will lead to more public sector deals for us. It’s just the beginning.”
Burt told us that CISA is the key inroad to the federal government. All of the intricate work and research and testing CISA did to pick CrowdStrike will be shared and used with other agencies needing to fortify their security solutions.
Podbere on a 10X increase in ransom wear attacks year over year:
“The old ways of doing things just simply aren’t good enough. A better solution is needed and that’s where we come in. We are winning customers at a rapid pace as the threat landscape proves alternative solutions don’t work.”
Sentonas on how more module additions have impacted CrowdStrike’s win rate vs. its competition:
“Our strategy is to collect data once and re-use it across our cloud platform. Our architecture allows us to rapidly innovate and create new capabilities and we will continue to grow our module offering without growing complexity or the size of our agent. This drives stickiness.”
Sentonas on Humio:
“We’ve had wins across the board thanks to our better price point and offering.”
Humio is now realizing the majority of its customer wins outside of security use-cases in areas like devops and log management.
Podbere on cloud workloads:
“We think this entire opportunity is greenfield for us.”
With CrowdStrike’s new Google Cloud contract, Falcon Horizon is now partner with all 3 major cloud vendors.
Podbere on incident response:
Around the time of the IPO, every $1 in CrowdStrike incident response services sold translated into $3 in new product sales for the company. That is now $5.50 per $1 to highlight continued cross-selling momentum.
“We come in, clean up the mess from the product that didn’t work and then we often replace it with our own. It’s a small part of our business but continues to be a great lead generator.”
On Wells Fargo’s 2022 cash flow estimates for CrowdStrike:
The bank expects CrowdStrike to generate $500 million in 2022 free cash flow.
b) Top Dog
Fortune Magazine unveiled the top ten from its “Future 50 2021” list. The list aims to identify companies with the most compelling long term potential for growth and innovation. CrowdStrike took the top spot on the list offering yet another sign of its superior offering and bright future.