Wealthfront Corporation Common Stock 2027 Q2 Earnings Call

Please go ahead, sir. Good afternoon, everyone, and thank you for joining us today to discuss Wealthfront's fiscal Q2 2027 financial results, which reflect the quarter ended July 31st, 2026.

On the line are David Fortunato, our Chief Executive Officer and President, and Alan Imberman, our Chief Financial Officer and Treasurer. After prepared remarks, we will open the line for Q&A. During the course of today's call, we may make forward-looking statements as defined under applicable securities laws. Forward-looking statements are subject to risks and uncertainties. The company can give no assurance that they will prove to be correct. To better understand the risks and uncertainties that could cause actual results to differ, we refer you to the documents that Wealthfront files with the Securities and Exchange Commission, including our most recent Form 10-Q. Our discussion today will include certain non-GAAP financial measures.

These non-GAAP financial measures should be considered in addition to, not as a substitute or in isolation from, GAAP measures. Reconciliations of non-GAAP financial measures to comparable GAAP measures can be found in our press release accompanying this call, which is posted to our investor relations website at ir.wealthfront.com. With that, I will now turn the call over to David.

Good afternoon, everyone. In our fiscal Q2 2027, we continued to deliver on our objective of becoming the leading tech-driven platform for digital natives seeking to turn their savings into wealth. Before I get into a review of our last quarter, I want to remind everyone of our unique business model and development philosophy. We believe we make the best practices of personal finance accessible at low fees through automation and intuitive and convenient through user-friendly design. At scale, this drives high margins, allowing us to share savings with clients, creating trust, which drives add-on deposits, new product adoption, and low-cost word-of-mouth growth, which once again drives high margins. This flywheel enables us to enhance our core cash management and Investment Advisory product offerings and build new products like Wealthfront Home Lending, which helps our clients save more, earn higher returns on their savings, and borrow at lower rates.

In other words, grow their wealth. We continue to believe that the best way to build deep, long-term client relationships is to delight clients by offering them more value than they can find anywhere else and focusing on their long-term financial outcomes. This informs our product development strategy and keeps us focused on our roadmap regardless of short-term market conditions. For example, this past quarter, we expanded availability of Wealthfront Home Lending and further automated key parts of the flow. We added Custodial Accounts to our broad suite of family wealth management offerings and started select client testing of an initial AI solution that helps clients size and set their emergency funds. We don't attempt to time the market or build products that take advantage of speculative fads, and each year we continue to increase the value we provide to clients.

I'm proud to announce this focus allowed us to surpass $100 billion in total platform assets as of the end of August. As I reflect on this achievement, I could not be more grateful for our clients who have entrusted us to help them achieve their financial goals and proud of our team that have been instrumental in getting us to this point. Digital natives, defined as those born after 1980, have faced significant economic headwinds throughout the years, like the 2008 financial crisis and the COVID-19 pandemic, and they continue to navigate inflation, housing affordability, and a changing labor market. Despite these challenges, we've both advised and observed our clients remain resilient and focused on intelligent savings and investing strategies. An analysis of clients who have been saving and investing with Wealthfront from January 1, 2021 to January 1, 2026, showed impressive growth across their accounts.

Of these clients, millennials have, on average, nearly tripled their wealth held on our platform over that timeframe, and Gen Z clients have, on average, quintupled their wealth held on our platform over that timeframe. Across the same cohort of clients, the number of millennial clients who have over $1 million on our platform has increased by over 500%. We aspire to be the modern wealth manager for digital natives, replacing financial uncertainty with best practice investing, automated habits, and tax strategies that maximize what clients keep. By continuing to ship products aligned with our clients' interests, we remain confident in our ability to deliver on this aspiration.

Turning to the quarter, total platform assets grew 2% quarter-over-quarter and 12% year-over-year to $99 billion at quarter end, driven by Investment Advisory assets up 5% quarter-over-quarter and up 30% year-over-year to $54.1 billion. Overall net deposits were $1.1 billion in the quarter, including $1.1 billion from Investment Advisory, which incorporated the second-best quarter of net cross-account transfers from cash to invest in the company's history. This is a continuation of our intentional strategy to drive cross-product flows during transition environments like the one we are in today and reflects the intentionally hedged business model we constructed that should drive client asset growth through most, if not all, macro environments. Transition environments are periods where prospect and client sentiment shifts, often driven by changes in the macro environment and investing sentiment.

This transition environment began during the rate cuts towards the end of calendar year 2025 and has persisted due to continued strong market performance. Helping clients adopt a broader range of products is vital to continuing asset growth through any environment, including during transition environments like the one we are in today. Most of our annual client cohorts have shown broad-based Investment Advisory adoption, supporting year-to-date net asset growth on the platform. Our 2023 and 2024 annual cohorts have lagged behind. The behavior of the 2023 and 2024 annual client cohorts is not entirely a surprise, as a large majority of these clients hired us during the recent period where rates peaked and the Wealthfront Cash Account was particularly attractive. We've had a shorter period of time to drive cross-product adoption for these cohorts and have been focused on doing so over the past year.

We've been quite successful in driving cross-product adoption. However, these client cohorts have been investing at external brokerages as well. The result has been cash asset flows in a dynamic equilibrium, with these two client cohorts underperforming, but more than offset by the remaining client cohorts performing better and contributing to overall asset growth. We have focused our recent incentives and new product offerings on improving adoption of investing products and specifically focused on the 2023 and 2024 client cohorts. Our cross-product adoption incentives have shifted the behavior of some clients, and new account types like our tax-aware Custodial Account have helped broaden client relationships. These efforts have helped improve the 2023 and 2024 annual cohort performance, and the current year client cohort performance has been consistently strong.

The result has been improving cash net deposits in July and August, including the best month for cash net deposits since March of this year. There's more for us to do, and we will be better positioned in the future. I'm happy to share that in October, we will complete the transition of the Stock Investing Account to the broker-dealer and rename it the Wealthfront Brokerage Account. This enhancement has been in the works for some time, and we expect the Wealthfront Brokerage Account to benefit us in periods of elevated self-directed investing sentiment like the one we are in today by providing a familiar experience to beginner investors and increasing asset consolidation from our existing clients. We shipped a variety of other new products and feature enhancements in the quarter as well.

We launched a Custodial Account in June, an expansion of our suite of family-oriented wealth management offerings that complement our existing 529 joint and trust account offerings. Our Custodial Account provides a flexible way for parents to save for their child's future and is one of the only Custodial Accounts in-market designed to automatically lower a child's future tax burden through Tax-Gain Harvesting. Tax-Gain Harvesting is designed to take advantage of the favorable federal tax treatment available to children, helping them realize up to $1,350 in tax-free growth each year without requiring a federal tax return filing, increasing their cost basis, thereby reducing the amount of realized gain when the investment is later sold. Thanks to this strategy, when the funds are eventually withdrawn by the child years later, they have less taxes to pay, so they can keep more of their returns.

We continue to see our digital native clients progress into the home buying phases of their lives. In May, we launched general availability of Wealthfront Home Lending in Texas, and in August, we launched general availability in California. We plan to enter Washington, Florida, Illinois, and Oregon in the coming months as we continue our measured rollout. Recall, Wealthfront Home Lending intends to deliver a better digital home mortgage experience with mortgage rates at least 50 basis points below the national average. We are proud to have delivered on this mortgage rate objective of our value proposition on an average basis and have made excellent progress on improving the digital home mortgage experience. We launched a self-service scenarios tool that allows borrowers to explore custom loan configurations and lock in their new rate autonomously online, all without the back and forth with a loan officer.