Orion Digital Corp

Good afternoon, ladies and gentlemen, and welcome to the MoCo Q2 2023 earnings conference call. At this time, all lines are in a listen-only mode. Following the presentation, we will conduct a question and answer session. If at any time during this call you need assistance, please press star zero for the operator. This call is being recorded on Thursday, August 10, 2023. I would now like to turn the conference over to Craig Armitage. Please go ahead.

Thank you, Joanna, and good afternoon, everyone. Thanks for joining us. Just a few notes before we get started. 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 undertakes no obligation to update these statements except as required by law. Information about the risks and uncertainties are included in MOGO's Q2 filings, as well as periodic filings with regulators in Canada and the United States. which you'll find on CDAR, EDGAR, and through the Investor Relations website. Secondly, today's discussion will include some adjusted financial measures, such as non-IFRS measures. Please consider these as a supplement to and not as a substitute for the IFRS measures, and we've included reconciliations to those, both in the filings and the investor deck. I'll now turn it over to Dave Fowler to get us started. Dave?

Thanks, Craig. Thank you, and good afternoon. Welcome to our second quarter 2023 results call. I'm joined today by Greg Feller, our president and CFO. Over the past year, we focused our team and resources on accelerating the path to profitability, narrowing our product focus, and building a more efficient operating platform, one that will allow us to scale MoGo profitably over time while also driving long-term organic growth in our three core pillars. As you can see, we're continuing to make solid progress, We continue to significantly improve adjusted EBITDA, which went from negative 4.1 million last year to positive 1.8 million this quarter. Cash flow from operations before investment in loan book improved from negative 2.5 million last year and roughly break even last quarter to positive 2.1 million this quarter. Although revenue debt was down slightly from last year due primarily to the elimination of unprofitable products, gross profit increased from 11.3 million to 11.9 million. Our progress goes beyond efficiencies, as we are also seeing growth in our three key business segments, which we will touch on. As part of this, we increased our full-year adjusted EBITDA guidance to a range of 7 million to 9 million. Although much of our focus has been on narrowing our focus and simplifying the business, along with driving efficiencies in every area, we've also been spending time investing in growth initiatives in all three pillars of our business. As we move forward, we expect more and more of our time and resources will be towards driving profitable growth. Importantly, today, we're already seeing organic growth. Lending, although down year over year, is up sequentially. Wealth assets have grown about 14% year over year, and payment volume is up 50%. Beginning with wealth, wealth includes MOCA, MOGO Trade, and MOGO Asset Management, which is an emerging B2B growth opportunity for our wealth business. Total assets and wealth are up 14% year over year, and this segment now contributes about one-third of our subscription services revenue. Perhaps most importantly, the growth we are seeing is all organic, as we are essentially spending nothing on marketing these products. Obviously, this is a massive market measured in the trillions, and we have three meaningful ways to grow within it. Although from a product perspective, we've been focused on the development of trade, Mocha continues to be an important business and a big opportunity going forward. In terms of revenue, MoCA is the biggest driver within wealth. Our goal is to build the best and most effective passive wealth solution in Canada. That means making it easy for anyone to get on track to becoming a millionaire and helping everyone build wealth more effectively than what they are currently doing. I think the best way to understand our primary value proposition is comparing investing through MoCA versus the average mutual fund, which is still the dominant way most Canadians invest with almost $2 trillion today in mutual funds. Given the average fee for a mutual fund is around 2%, assuming the same return for both portfolios over a 50-year period, you would end up with about double the amount of money with MOCA. Our value proposition is simple. MOCA is designed primarily as long-term wealth solution based on an S&P 500 strategy. Now, the reality is the average mutual fund historically dramatically underperforms the S&P 500. In fact, research shows that 95% of financial professionals can't beat this benchmark over time. With Mocha, users can also set up short-term savings goals, and our current short-term yield is 5.3%, significantly higher than rates found in any high-interest rate savings account. Again, this is all for $4.99 a month. And at any time, users can adjust their contributions, pause them, do one-time deposits, and set up as many goals as they want, all from the app. This is a massive market, and we are a very small player with a very compelling value proposition that positions us for significant long-term growth. Mogul Asset Management. This is a business that we've talked about in the past and it's become a meaningful part of wealth. This is a B2B model where we offer an independent platform for portfolio managers to grow their business. We provide the regulatory, technological, and operational infrastructure needed for an advisor to build their business. And as an exempt market dealer, we also offer the ability for foreign investment managers to distribute their alternative funds in Canada. This business continues to grow just by word of mouth and is now at a scale that's driving meaningful revenue and profit contribution. We're excited about the long-term growth prospects here. In terms of product development, Mogotrade has been our primary focus for the last 12 months, and we continue to make progress in our path to product market fit. Like Mocha, our goal is to build the most effective self-directed trading platform in Canada, one that actually helps people become a more successful investor. Mogotrade is built for serious investors that know how hard it is to beat the market and are looking for every edge they can get. With zero commission, zero FX fee, and zero CO2, Mogotrade is the simplest, lowest cost, and most sustainable way to invest in Canada. In terms of our competitive moat, we have built a very low-cost platform that enables us to offer this unique value proposition. While it's still early days, we continue to see strong signs of product market fit, including strong cohort retentions, solid net promoter scores, and a continued growth in assets on the platform. Within wealth, Mogotrade is the fastest-growing product. Payments. Carta is our payments business that runs completely independently of MoGo with its own team and resources. Carta continues to grow, payments volume up over 50% to $2.5 billion. This is the second quarter in a row with year-over-year growth of 50%. Similar to our wealth products, Carta offers payment processing at a fraction of the cost of big players. And in today's world with a focus on efficiency and profitability, we think this positions Carta well. In terms of the long-term growth opportunity, payments is a massive market, and we're very small players, so there's lots of runway for Carta. We have a long history in digital lending with over 20 years, and this continues to be an important part of our business. Our mode includes 20 years of data and experience through multiple market cycles and deep organizational know-how across all the required capabilities. Many fintechs are looking to get into lending in some way, which speaks to the attractiveness of the business and the market opportunity. As I mentioned earlier, although down year over year, originations have been growing, which are of a slight growth sequentially, and we expect the growth to continue. While we also like the size of the opportunity for lending as a standalone product, we're also pleased with how synergistic it has become with wealth. Think about a traditional banking model where customers come in for savings, checking, credit cards, and then attach to things like mutual funds. We see a similar opportunity here. What's more is the same habit that enables someone to pay off the loan can be transferred to saving and investing, i.e., going from being in debt to building wealth. Now, our results are really attributable directly to the performance of the team, which continues to impress. The team has really embraced our high-performance culture and is helping improve productivity across the board. Total team members have gone from a high of 391 down to about 211, and Mogul itself has gone from about 320 to only 150. A metric that I think highlights our progress is revenue per employee, which has gone from about $135,000 in Q1 of 2021 to about $303,000 this quarter, all while also improving our growth prospects within our three pillars. As we make further progress on our goals and see the results, the team continues to get more engaged. We believe we're just getting started. With that, I will turn the call over to Greg.