This conference call transcript was computer generated and almost certianly contains errors. This transcript is provided for information purposes only.EarningsCall, LLC makes no representation about the accuracy of the aforementioned transcript, and you are cautioned not to place undue reliance on the information provided by the transcript.
spk09: Only two things are forever, love and Liberty Mutual, customizing your car insurance so you only pay for what you need.
spk03: Ladies and gentlemen, thank you for standing by. and welcome to the MoGo Q2 earnings conference call. At this time, our participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star one on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star zero. I would now like to hand the conference over to your speaker today, Craig Armitage with Investor Relations. Thank you. Please go ahead, sir.
spk05: Thank you and thanks for joining us today. Just a couple of quick notes from me before we get started. First, today's call will contain forward-looking statements that are based on current assumptions and subject to risks and uncertainties that could cause actual results to differ materially from those projected. The company then takes no obligation to update these statements except as required by law. Information about these risks and uncertainties are included in our Q2 filings as well as periodic filings with regulators in Canada and the United States. which you can find on CDAR, EDGAR, and on the investor relations section of our website. Second, today's discussion will include adjusted financial measures, which are non-IFRS measures. These should be considered as a supplement to and not as a substitute for IFRS financial measures. And lastly, the amounts today are discussed in Canadian dollars, unless otherwise indicated. And actually, a final note that we do have presentation slides available on the website to accompany today's call. So those can be downloaded from the IR section of the website. With that, I'll turn it over to Dave to get us started. Thanks.
spk07: Thanks, Greg. Thank you. Good afternoon and welcome to MoGo's second quarter 2021 results conference call. I'm joined today by Greg Feller, our President and CFO. It's been an active and highly productive start to 2021 for MoGo. We're pleased to update you on a strong Q2 results. What continues to guide us is a simple mission, make it easy and engaging for consumers to get financially fit and live a more sustainable lifestyle. We're hyper-focused on making MoGo the go-to money app for Gen Z and millennials by helping them develop healthy money habits to make it easy for them to achieve their financial goals and achieve financial freedom. We continue to make solid progress in this mission, but still early days. This strategy and focus on financial health is what's driving our results and reflected in the strong quarter, second quarter, and year-to-date performance. Highlights include 80% subscription services revenue growth for the second quarter based on the accelerating adoption of our products, and we're now at approximately 1.7 million members in Canada. Our payments business also continues to grow with volume up 83% to 2 billion. In this quarter, we also increased our ownership to CoinSquare to approximately 40%. The transactions we completed since 2020, both strategic and financial, have completely transformed our business and accelerated our growth plans and vision, bringing us closer to one of our strategic goals of building the leading digital wealth platform in Canada. If we look at some of the key milestones and what's driving our success, our marketing partnership with PostMedia continues to be a strong strategic advantage, giving us a cost-efficient reach and exposure. We have lots of new product feature releases, which continue to drive our growth, highlighted by the MOGO card with carbon offsetting and Bitcoin rewards. We have also improved our balance sheet by reducing debt and raising significant new equity, among other steps. And we have been very active with acquisitions and strategic investment activity. Over this period, we have acquired Carta and Mocha, made some strategic investment in CoinSquare, and we're close to completing the acquisition of Fortification. Together, these transactions bring us revenue scale and diversification and important capabilities and expertise in digital saving, investing, and stock trading. Let me start with our plans on the trading side. Retail investing and stock trading has become more popular than ever, and we believe there's a massive opportunity for our upcoming new product, Mogotrade. We're heads down on building this out, and it's not only the biggest investment in a product we've made, but perhaps our most important product to date. In fact, almost our entire product and development team is focused on this product launch. In addition to the product development milestones, our acquisition of Fortification is expected to be completed in Q3, which is an important step. The proposed acquisition would provide us with a licensed investment dealer with the requisite registrations as well as regulatory and technology capabilities, key building blocks for our trading offering. We're targeting launching Mogotrade in Q4, once we have regulatory approval for the change in business supportification. Given we now have the majority of our resources focused on this product in order to help ensure we launch it this year, we've also decided to move the launch date of our P2P to next year. There's no doubt from our perspective, this is the right decision given the growth opportunity with trading. And the good news is many of the things needed for P2P are also needed for trade. So the order here makes a lot of sense. Digging into trade a little further, based on our research of the most successful trading apps, we've decided to launch trade as a separate app. The bottom line is that when people are trading and investing, they want an app that is all about this, especially if they're active traders. That means being able to easily log in and see your stocks and quickly see prices and make trades, compared with an app with trading as one of the many products that require a user to go through multiple screens. Our goal is to build the leading trading app in Canada, and we couldn't be more excited with how this product is evolving. We believe trade can be a $100 million business in three to five years post-launch. Our roadmap includes bringing full crypto trading into the app as well beginning next year. While we're moving forward with the separate app, Trade will also be designed to work together with the existing MOGO app. Although they're two separate apps, it's important that the friction for MOGO members between the two apps is as low as possible. Users will have one account and login. MOGO Trade users will be able to easily log into their MOGO app, just the same as MOGO users can log into the Trade app with the same login. And users will also be able to easily move or transfer money from card, crypto, or trade. So if I have money on my card and want to use it to buy stocks, I can simply transfer that money in a few clicks. We're excited to share more as we get closer to launch and eventually get all of you using the products yourself. We continue to be excited about the opportunity with our card and see it as a key driver of member adoption and engagement. We are truly focused on making this the easiest way for someone to control their spending and avoid the overspending of credit cards, while at the same time helping them save the planet from climate change. I believe the two biggest challenges we face today are solving the wealth gap and climate change. And the fact is, financial health and the health of the planet are directly linked. Again, how someone manages their spending has perhaps the biggest impact on their financial health, highlighted by the fact that about 60% of consumers live paycheck to paycheck. And 72% of carbon emissions comes from our consumption and spending. Spend less, save more, and lower your footprint. As we've all seen in the news recently, climate change is only getting worse, and we all need to do more to help stop it, and MOGO makes it really easy to do a lot more, while also helping you save money. One pound of CO2 is offset for every dollar spent, and our current initiative is helping protect the Amazon rainforest, one of the world's largest carbon-absorbing landmasses. If all spending in Canada was done on the MOGO card, Canada could hit our goal of becoming carbon neutral almost immediately. This value proposition is driving accelerated growth in transaction volume, In fact, Q2 volume was up over 1600% year over year. Another critical measure we look at is net promoter score, which measures how likely your customers are to refer others. Are they promoters or detractors? Our NPS for active card users in our most recent survey is 66, driven by strong savings users are seeing as well as the positive environmental impact they're making. What's also particularly interesting is for those that chose the card because of the environmental impact, our NPS is 77. And for those that are using their card for more than 75% of their budgeting, their MPS goes up to 87. For context, the industry average for finance and commercial banks is zero, and two of the Canadian Big Five banks have an MPS of four and six. So we're really excited from what we're seeing here to continue to get feedback and make adjustments to our value, profit, and experience. Again, our goal is to make this the most powerful tool in Canada to help someone control their spending while also helping save the planet. So stay tuned for more updates. Our save and invest product continues to grow with over 120,000 subscribers and revenue up 64% year over year. Recall this product enables anyone to connect their debit or credit card and either roundup purchases or set a regular fixed recurring deposit. Unlike traditional roundup products that put money into a savings account, this is money that's actually being invested, which means that every time a user spends money, they're actually investing in companies like Tesla, Shopify, and Apple. Our goal is to continue to expand and enhance this product offering and enable our members to automate their wealth building with a passive investment strategy and complement that with active investing through mobile trade, all part of our digital wealth strategy. Our Bitcoin trading product continues to trend well. While Bitcoin is a relatively small component of our revenue today, it continues to be an important part of our broader value proposition and helps drive engagement. Bitcoin users are also seven and a half times more likely to refer a friend. Q2 trading volume was up 390% year-over-year. Building on this success, our plan is to launch a full crypto offering within Mogotrade next year. This means that existing Mogotrade crypto users will be able to access and trade a full range of cryptos through Mogotrade. As many of you are aware, our roots are in consumer credit, and it's always been an important part of our offering. And just like every other area of banking, consumer credit is evolving in this new digital world. Gen Z and millennials are looking for simpler, easier, and more flexible solutions and this is driving a shift away from using traditional forms of credit like credit cards. Square's recent acquisition of Afterpay highlights this shift and our goal is to continue to evolve our own credit offering and give our members the same level of convenience and affordability of buy now, pay later. As our card offering continues to grow, this will become an increasingly bigger opportunity and we believe that most will gravitate to this new way of managing money where they use a card like MoGo to better manage and control their spending while staying away from credit cards but occasionally need access to credit and looking for a more modern digital experience that gives them a more convenient and accessible solution. We're also seeing increasing demand for our credit products and believe a background in credit will become an increasingly large competitive advantage versus other players. We're also seeing growth from our B2B payments business, Carta. In fact, this quarter was its biggest quarter ever for new customers. Just to highlight a few, Carter recently launched its fifth country rollout with Sodexo, which included successfully migrating a card portfolio of roughly 2.5 million cards. Several additional country rollouts are currently being scoped with Sodexo for deployment in the next year. Carter is also providing the transaction processing for leading fintech and banking solutions in Canada, including Payfair, which provides gig economy payments for Uber drivers in Canada. It's also powering ATB's new digital bank, BrightSides Card Products. Another Carta customer, Alpay, recently launched one of the largest public sector card programs for the National Health Service in the UK. The program is expected to roll out over 250,000 cards within its first quarter of being live and anticipate to see significant growth as it rolls out across the UK. Clearly, there's a lot going on in a variety of areas, and this also ties into our platform and how we're building them out. We continue to build the deep expertise in these areas, and each of them on their own are very complex and together this continues to build a competitive mode that isn't easy to replicate. It takes years of experience and lots of investment to get where we are today. This platform is also what's enabling us to relatively quickly launch something as complicated as stock trading app. And there are many things that we are developing to support trade that will also be leveraged in our existing mobile app. So we're starting to see some good synergies and even economies of scale that can be very impactful. So I'm excited about how things are evolving, both on the business side, but also from a platform perspective, which is critical as we continue to grow our business, which we are clearly still in the early days in terms of scale. With that, I'll introduce Greg to talk you through the financials. Greg?
spk09: Thanks, Dave. Good afternoon. As Dave mentioned earlier, during the second quarter, we continue to accelerate our plans to expand our product capabilities and build the most comprehensive digital wallet in Canada. This really was a milestone quarter for MOCA from a financial perspective with strength across multiple measures, and we entered the second half with strong momentum, which you will see in an updated outlook that now calls for a year-over-year growth of 100% to 110% in subscription revenue above our previous guidance of 80% to 100%. Key highlights include a significant increase in our member base, both organically and through the MOCA acquisitions, accelerating subscription services revenue growth, record gross profit, In addition, we reported an adjusted EBITDA loss of $3 million in the quarter, as we significantly increased our growth investment across the board, given the strong secular tailwinds in fintech adoption in Canada. We also reported a positive income in the quarter of $9 million, which included a $25 million gain related to our investment in Coinscore. Lastly, we ended the quarter with a strong balance sheet, including approximately $76 million of cash, investment portfolio, and digital assets. After eclipsing the million-member market at this point last year, MoCo's total member base grew to 1.7 million members this quarter, an increase of 63%. Just over 60% of this was driven by acquisition of MoCo, with strong organic growth driven by MoCo Card as well as crypto accounting for the balance. If you were to include CoinSquare at 600,000 members as part of our broader member ecosystem, we would be in excess of 2 million members in Canada, which would put us in a rare category in terms of member breadth and scale. We are still early in the journey to more fully monetize our members, but as Dave has talked about today, this large space is a highly valuable asset that gives us great confidence in our ability to successfully launch new products like free stock trading. This product in particular, we believe will enable us to significantly increase the monetization of our members as well as further accelerate growth of new members in 22. Total revenue increase in the quarter by 29% to $13.7 million, again driven by subscription and services revenue, which really drove all the growth in the quarter. Specifically, subscription and services revenue grew by 81%, reflecting a strong combination of new revenue streams from Card and Mocha, along with strong underlying growth within both of these businesses and a substantial increase in MoGo Card volume, which saw volumes increase 1,600% year over year. MoGo Crypto also had grew nicely during the quarter, although represented a smaller portion of total revenue. Subscription services now make up 60% of total revenue versus 43% in the prior period. Even dating back to our origins in online lending, there was a high recurring revenue element to our business. With the evolution of our model, including the expansion of our products in recent years, approximately 95% of our revenue is now recurring in nature, be it subscription fees, transaction processing, interchange revenue, or interest revenue. These stable and recurring revenue streams give us increased revenue visibility, which is one of the key factors underpinning our first-ever forward fiscal year revenue outlook. As I mentioned, with the confidence in the underlying model within 2020, we have significantly increased our investments in growth initiatives this year, as we believe the tailwind fintech adoption in Canada has never been stronger. This increase in investment drove the decrease in adjusted EBITDA, which included a significant increase in product and development investments. In particular, we're making large investments, one of the largest in the company's history, in order to deliver a free stock trading app in Canada by year end, a market which is still at very early stage relative to the U.S. In addition, we're also making big investments in sales and marketing, both at MoGo to expand our user base, as well as investing in the geographic expansion of our digital payments business, Carta, which recently expanded into the large U.S. payments market. Importantly, these growth investments are levers and dials we control. Specifically, approximately 80% of the increase in OpEx year-over-year is growth-related spending. As Dave outlined during the second quarter, we executed multiple transactions to increase our ownership in Canada's leading crypto platform, CoinSquare, to approximately 39%. We also maintained an auction and a warrant to increase the ownership to 53%. I would caveat that we require points for board approval to do this. The warrant has an exercise price at a significant discount to last transaction prices for points for shares, which results in us recognizing a meaningful gain in the quarter for the value of these warrants. It is also worth noting that this is the first period in which we have accounted for the strategic investment under the equity method. As a result, going forward, you will see some new disclosure in MD&A, along with one line non-operating income on our income statement, to account for proportionate share of Coinsquare's income or losses at each period. At a high level, Coinsquare experienced very strong growth in the business during Q2, up over 450% year-over-year. Like others across the industry, however, the growth was heavily weighted in the first half of the quarter, with volume falling substantially in June. June is also the period in which our ownership increased from 19.9% to 39%, and therefore, our proportionate share of Coinsquare's results were weighted towards the lower June results. Volumes remain low in July, but have been seeing a recent rebound month to date in August, although still at much lower levels and peak levels in Q2. We anticipated this volatility when we made our investment, which is why we structured this as a minority investment with a call option. We continue to be big believers in the disruptive powers of crypto and its importance in any next-gen digital financial platform, and continue to view CoinScore as a very strategic and attractive long-term investment. Although we do have crypto-related revenue at MoGo, it accounts for less than 5% of our total revenue, so crypto volatility doesn't have a meaningful impact on our core business and results. Instead, over 95% of our crypto exposure will continue to be through our investment in Coinsquare, which currently sits in our balance sheet at a book value of approximately $102 million. Separately, after quarter end, we announced a small investment in Tetra, which was spun off from Coinsquare and became Canada's first qualified custodian for cryptocurrency assets. Tetra's core business is the custody and storage of cryptocurrency assets, including Bitcoin, Ether, and a variety of other digital assets. Prior to Tetra's launch, the payment market for cryptocurrency custody was limited to U.S. providers and unregulated Canadian custodians. In addition to Coinsquare and MoGo, Tetra Trust is backed by several industry participants, including Coinbase Ventures, an investment arm of Coinbase, and the Canadian Securities Exchange. Coinsquare owns approximately 47% of MoGo, and MoGo has approximately 4% of Tetra. We continue to have a sizable investment portfolio in our balance sheet of about $20 million at quarter end, which includes about a dozen equity investments in private technology and e-gaming companies, as well as small investments in both Ethereum and Bitcoin. Our goal with new investments in this portfolio is to support the broader ecosystem in Canada that we ultimately see playing a role in consumers' digital wallets. Will monetizing non for investments, such as the sale recently of our stake in Venice for proceeds of 4.7 million in which we recognize 116% gain from versus book value at your end. Also post quarter end we exchanged a portion of our investment in private media company blue ant into shares of public gaming company enthusiast gaming. Our strong results year-to-date and the multiple growth drivers you see here enable us to revise our financial guidance for 2021 and introduce 2022 guidance. Specifically, we expect year-over-year growth of 100% to 110% in subscription and services revenue in Q4 2021 as compared to Q4 2020. Again, this is above our previously communicated range of 80% to 100%. We also are introducing total revenue guidance for fiscal year 2022 in the range of 70 to 75 million. We also anticipate improving adjusted EBITDA margins as a percentage of revenue beginning in fiscal 2022, as we continue to benefit from scale. And we believe that as we continue to increase our scale, EBITDA margins, we believe in the range of 35% are achievable over time. We are assuming continued growth investments both in technology and in marketing to drive continued product expansion along with increased engagement and monetization to support accelerating revenue growth. While we also expect to remain active in M&A, we have not factored that into our outlook for FY22 at this time. With that, we will open the call up to questions. Operator?
spk03: At this time, ladies and gentlemen, if you would like to ask an audio question, Press star, then your number one on your telephone keypad. Then once again, that is star, then your number one on your telephone keypad. We'll pause for just a moment to compile the Q&A roster. Your first question comes from the line of Scott Buck with HC Wainwright.
spk02: Hi, good afternoon, guys. Congrats on the quarter. Thanks, Scott.
spk08: I'm curious, can you give us a little bit of color on what the uptake has been from the MOCA or legacy MOCA members with some of the legacy MOGO products? Are you seeing adoption of the card and then some of the other services that you guys provide?
spk07: So, it's Dave. Yeah, I mean, it's definitely still early days there. We've just literally begun some of the cross-sell. So, MOCA... members are starting to receive obviously communication from Mocha and vice versa but generally I would say you know low general kind of cross sell given the two experiences so our roadmap calls for integrating the two and that obviously is going to accelerate that so right now again Mocha still is a separate app so a separate login and password and those accounts aren't linked So the conversion really is just happening through some email campaigns we're beginning to test. We're definitely seeing conversion, including even obviously on our other products. So when we run these campaigns, not only do we see uptake on the card, but we see Mocha users also getting loans and other things. So it just continues to reinforce our view that having an integrated solution with obviously more products for upsell and cross-sell obviously just drives a better LTV and ARPU for customers. Again, that is on our roadmap, and we hope to basically integrate that into the MoGo app at some point in, you know, as early as first half of next year.
spk08: Great idea. That's very helpful. Second one, I'm just kind of curious, you know, how we should be thinking about the lending business moving forward. It sounds like you guys have some, you know, creative things you're thinking about for that in 2022. You know, should we assume this is kind of a low single-digit growth business or, you know, really just static with, you know, 2021 levels?
spk09: Yes. So, Scott, I'll take that. So, as you heard in Dave's commentary, you know, lending, obviously, we've been big believers in lending for a long time. That's the roots of the company. Very sticky product, very high LTV product. And, you know, our focus on our own balance sheet is low dollar loans, very capital efficient, and then lending through partnership for higher dollar loans. So we think we've got a very good model there. We do believe that, you know, increasingly, you know, lending is becoming, you know, more and more relevant for fintechs across the board. And we have a very unique position and strength there that, quite frankly, others don't. So we do see that advantage, and we see increasing demand from our own members to tap into convenient credit. So I think, you know, one thing that has changed, you know, now going forward is we see lending as no longer going to be sort of a drag on growth. We still think our primary growth driver will be subscription services. But lending will actually participate in that to a certain degree as well. So I think that's probably the sort of the color I can give you at this point.
spk08: I appreciate that. And one last quick modeling question. It looks like stock comp kicked up quite a bit this quarter. What was driving that and what's kind of the expectation for that line of moving forward?
spk09: Yeah, well, so what happened with this quarter is when options were granted this quarter, our stock was at a very high level, higher than it was today. So those options, therefore, are out of the money. But valuations and that expense is based on the price at the time. And under IFRS, it's more heavily weighted towards the quarter of grants. But look, it's hard to predict stock option comp because it is dependent on valuations at the time. But I wouldn't think that that number would be higher than what it was this quarter. But also, that's why you'll see on the income statement, we specifically broke out stock-based comp and DNA from our four main OPEX categories just to make it a little easier to see what the real sort of drivers are from a cash basis versus a non-cash basis.
spk08: Right. No, it's very helpful. I appreciate the time today, guys.
spk03: Thanks. Once again, ladies and gentlemen, that has started the number one for any audio questions. Your next question comes from the line of Ed here. Good dive. with a capital.
spk02: Hey, guys. Good afternoon. Congrats on the quarter.
spk10: Thank you. Just maybe on Carta. Obviously, you guys did announce a couple of client wins in the US. Can you maybe talk about their pipeline and how maybe that's kind of evolving now that they've been with you for almost quarter?
spk09: Yeah, so look, Carta is definitely an area that we're investing in. So we've hired up some people in the U.S. and we're making further investments in Europe. We continue to see a lot of opportunity in that sector and, quite frankly, increasing synergy. So we're seeing demand from some of Carta clients to tap into some of kind of MOGO's capabilities. in regions where MoGo is not. So MoGo is obviously focused from a B2C perspective in Canada. We're not looking to build that B2C brand outside of Canada. Carta is really sort of our international growth strategy, but that actually allows us to potentially leverage some of our platform, move up the stack as it were at the Carta level with clients. And so we think there's a big opportunity there as well. So I think we're, we feel good about, you know, the Cardiff platform and the investments we're making there so that, you know, Cardiff can continue to be a, you know, a growth driver for us going forward.
spk10: Fantastic. Maybe just one more on, sorry, on the updates.
spk02: Sorry, I'm just getting a little bit of feedback here.
spk10: On your overall cross-sell on the platform, I'm talking about like outside of Mocha, which you kind of already addressed, but can you maybe talk about the cross-sell that you're experiencing on the platform from, you know, Bitcoin to the card to maybe even platform lending, just in the overall ecosystem, please?
spk07: So, sure, it's Dave. Maybe just to touch on it a bit. So, I would say increasingly on the MoGo side, given a lot of the positive data points we have on the card program, we're starting to focus more in on the card product. It's still, again, early days, even though we're seeing big growth there. Obviously, the One of the key attributes, obviously, of a card user is they're more engaged than any other user, including Bitcoin. So our average card user is logging in 28 times a month. So again, very high active engagement. And as we all know, cross-selling, really, and adoption of other products, usually there's a direct correlation to engagement, how many times somebody's logging in to ultimately cross-selling into other products. That's also where we see the opportunity on the loan side and obviously on the kind of the buy now, pay later type digital offering. So our plans include bringing that more into the experience so that it's more of a natural ability for someone to tap into some credit if they need it with a kind of an in-app digital experience and options very similar to a buy now, pay later experience. The other important, I think, thing to note is, you know, our penetration right now on card is still relatively low on our member base. It's sub 10%. So there's still a massive opportunity in terms of just growth of our member base into the card product itself. You know, we're, again, still doing a lot of work in terms of surveys, getting customer feedback, see what's resonating. The stat I just shared in terms of the savings is another great one that, you know, just came from our recent – survey results in terms of the average card user that reported savings. So 66% of users reported savings using the card and averaged of over $200 a month, which is obviously material. And then also seeing the connection to the carbon offsetting and environmental impact. Increasingly, we see that as a big opportunity. And based on this, we've got some changes that are going to be coming up. that we think are going to make a big impact in terms of making that product even more appealing. And what we're starting to see is a higher percentage of our members that are signing up now that are actually getting the card. So, you know, that number continues to go up and it's now starting to be, you know, in the 20% plus range in terms of users that are new users signing up and actually ordering a card. So things are continuing to evolve. And again, I would say the card especially is becoming kind of a key driver and ultimately will be that key driver of conversion into other products. Also, including on the invest side, our plan is to actually incorporate that directly into the card experience so that just like you can do a roundup on the MoCap, you can do a roundup in the card and have that money obviously automatically go in to invest. So you can see how That'll also tie into conversion. And the other related point that I mentioned earlier is with trade. When trade launches later this year, the goal is you're going to have the ability to use the money on the card to buy stock or move money from your stock account into your card. And i.e., if you have money sitting in your account and you want to spend it, you can easily spend it on the card. Same thing in crypto. That is a key driver of cross-selling. So if you look at an app like Cash App, that's obviously been one of the key drivers of their success. The money you have in your account can be used to buy Bitcoin, can be used to buy stock, or it can be used in P2P. And today at MoGo, the money sitting on your card cannot be used to buy crypto and vice versa. So that's also going to be happening later this year, and we think that's going to be a key accelerant in terms of conversion and adoption of other products.
spk02: That's great. Thank you, guys. I'll pass the line.
spk03: Your next question comes from the line of Doug Taylor with Canaccord Genuity.
spk04: Yeah, thanks. Good afternoon. You mentioned a stretch target of EBITDA margins of 35% being achievable kind of at maturity. Now, obviously, you've got a lot of exciting opportunities that you're investing in in the near term, but maybe you could help us think about the bridge between now and maturity and how you're balancing investment versus growth and then delivering margin and profitability.
spk09: Sure. Thanks, Doug. So I guess a couple of things. As you know, in Q2 and Q3 last year, we generated close to 50% EBITDA margins on 10 million of revenue. And obviously, our revenue is scaling now. Now, that was obviously a period where we dialed back our growth spend. So, you know, we couldn't be at that level at that scale, right, and growing the way we want to be. So, obviously, that wasn't long-term sustainable at that scale. But I think it did highlight how quickly we are able to turn the dial on our own business and how much of our spend is variable. So the other thing we mentioned in our comments here is that if you look at the big increase in OpEx spend year over year, about 80% of that is growth related. So there's a portion of it that you know, not growth related, i.e. kind of more just based on, you know, scale of growing the business. But I think our focus is definitely on investment right now, not EBITDA margin and profitability. We've shown we have the ability to do that and do that quickly if we need to. But we think that with the tailwinds finally on fintech adoption in Canada, catching up, quite frankly, to where things have been in the U.S. and other markets. This is the time to invest and focus on growth. We obviously have provided guidance that we expect improving EBITDA margins beginning in FY 2022. Therefore, what we're obviously saying as well is as we scale up, we're looking for a portion of that incremental gross profit dollars to fall to the bottom line and some of those investing put towards investment, but with a commitment to drive to profitability and drive to that sort of long-term targeted EBITDA margin of around 35%. So obviously difficult to say exactly, you know, when we're going to be at a point to do that, but quite frankly, I think that will depend on the market. our ability to drive meaningful growth and ROI from those investments. And if we're not seeing that, then, you know, we may, we have the ability and flexibility to turn those dials down and get to, you know, EBITDA margin profitability sooner rather than later if that's what we decide is the right decision.
spk04: So just to put a finer point on that, I mean, you've talked now about $70 to $75 million in total revenue next year, and what you're suggesting is narrowing EBITDA losses, which is, I think, consistent with what is being expected of you by the street right now.
spk09: Yes, that's correct. Narrowing EBITDA losses as a percentage of revenue.
spk04: Okay, that's great. Thank you very much.
spk09: Thank you.
spk03: Your next question comes from the line of Stephen Lee with Raymond James.
spk06: Thank you. Hey, Dave, can you elaborate a bit more on Mogotrade being a separate app? So I have the Mogotrade app. How do you engage me and drive take-up? Or the initial marketing for Mogotrade is also going to be a bit standalone?
spk07: Yeah, so there's going to be two components. Mogotrade will be a separate its own campaign and you know I think there's there's already an example obviously in Canada in terms of wealth simple they launched a separate trading app obviously they've seen big success and quite frankly they now have you know multiple apps they have three separate apps and trade is clearly the one that's driving their accelerated customer acquisition and that then becomes a conduit for kind of cross selling into these other products And similar to what we're doing, these are products that you essentially have the ability to manage even multiple apps essentially with one account. So you have one way to transfer money in and out. You can easily in your mobile app transfer money to trade or vice versa. So there's a connection there that you can quickly go from one app to the other. which let's say is completely different than what we're talking about with Mocha. Today, Mocha and Mogo, those are two totally separate apps. There's no link at all. Obviously, not even right now in the name. Whereas Trade and Mogo, they're going to be completely interlinked. So if you're, again, a Mogo trade customer or a Mogo customer, you're going to know that there's this other app and there's going to be some of that functionality in there. And that includes the ability... to even have some of the information showing up in the app, which potentially we may do as well. But yeah, we're going to be marketing it separately. It's going to be its own separate marketing campaign and essentially download that app. The nice thing about it, you don't have any of the confusion of the other products. Nobody's thinking about, well, what do I want to do with this? It's all about trade. It's meant to compete with best-in-class trading apps in Canada. You know, one of the things, too, that especially for the U.S. audience in Canada, there's only today one app that offers commission-free trading. Mogul is going to be the second app. And obviously all of the big banks, all of those are still charging material commission and really have more of a legacy experience. This is obviously all built in with a modern UI and experience very similar to the leaders in the U.S.
spk06: Got it. And then on a mobile card, any KPIs you can share, like number of users with a card or maybe dollar transaction volume? Thanks.
spk07: Well, so a couple of things that I will share in terms of just as we shared in the presentation, if you look at the average carbon offsetting of just about 650 pounds, that also equates to the average spend. So our average user is spending about $650 a month. based on our kind of most recent data. So that is definitely, especially at this stage, we think that's very successful to start getting anywhere close to that $1,000 range. And again, what we're starting to see is increasing spend from users. So as we continue to bring on more users, we're getting better and better at being able to convert them and turn them into a longer-term, you know, uh users on the card program um in terms of you know getting into more specifics around around the numbers still still at a stage where we we don't want to fully disclose but um but obviously as you're seeing in the transaction volume um it's you know at that growth rate it's going to be start to to become increasingly meaningful um and i'm sure at some point we'll start to get some more color on that the other thing uh data point i would give is that um
spk09: um card revenue is is you know roughly uh 3x what our what our crypto revenue is right now just yet and obviously and it was up and and growing faster as well so just to give you kind of a sense um of the two okay that's helpful and then if i remember on that slide dave i think i saw like saving 200 per user per month what what did that mean
spk07: So we're essentially doing a survey, and we're really kind of honing in on, obviously, part of the value prop, if not the biggest piece, is trying to help people spend less. I mean, this is all about the fact that most consumers are overspending. That's where people struggle the most. The reason why, you know, even look at recent retirement surveys, the reason why people aren't actually saving more money for investing is they don't have any money left over at the end of the month. They're typically overspending, and even if they make more money, they're still tending to overspend. So there really is a gap in terms of a solution that really helps them to better control their spending, to better budget, et cetera. Increasingly, that is kind of the main focus of the card. So we essentially did a survey of our active users to find out are they seeing savings, et cetera, and two-thirds of them reported that using the card actually helped them save money, and the average of the users was over $200 a month. So, which is obviously material, right? And, you know, so that, and that really is the primary goal. Can, you know, so if somebody who is using typically a credit card and they go from using a credit card to the mobile card, the big benefit from a dollar's perspective is how much money, how much less they spend, right? There is no immediate access to credit. You're putting your own money on it. It's essentially like spending cash. Obviously, there's a lot of data out there that continues to show that Using your own money on average you'll spend significantly less in fact using a credit card you'll typically you can spend up to 100% more. Just knowing the fact that you have obviously unlimited credit and you can you know paid at a later date, so this whole kind of buy now pay later as much as it's a positive and it's more of a convenient digital form. There's also a trend, quite frankly, to buy now, pay now, right? If you really want to stay in control of your finances and spend less, it actually is about using your own money, staying in control, and that's why we're starting to see the data kind of supporting the same thing in the U.S., where millennials, younger millennials, and Gen Z in particular, are increasingly using essentially a Visa debit card instead of a credit card because of this control.
spk02: Got it. Thanks, guys.
spk03: There are no further questions at this time. Mr. Feller, do you have any closing remarks?
spk07: Well, thanks, everybody, for joining us on our Q2 call. We appreciate your support, and we look forward to updating you on our next quarter. Obviously, we've got a lot going on, and we'll keep you updated in terms of as we get closer to the launching of the trade-out. But thanks again.
spk03: Ladies and gentlemen, thank you for participating. You may now disconnect.
spk01: You know Liberty Mutual customizes your car insurance so you only pay for what you need? Like how I customized this scarf? Check out this backpack I made for Marco. Only pay for what you need.
Disclaimer