Mogo Inc.

Good afternoon, ladies and gentlemen, and welcome to MoGo first quarter 2025 financial results 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 require immediate assistance, please press star zero for the operator. These calls may be recorded on Thursday, May 8, 2025. I would now like to turn the conference over to Craig Armitage. Investor Relations, please go ahead.

Thank you, Operator, and good afternoon, everyone. Just a few quick 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. It 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 Q1 filings, as well as periodic filings with regulators in Canada and the United States, which you'll find on CDAR. You can access via the Investor Relations website as well. Lastly, today's session will include several adjusted financial measures or non-IFRS financial measures. Please consider these as a supplement to and not a substitute for the IFRS measures. You'll see that we've included reconciliations to those in the press release and the investor deck. And with that, I'll turn the call over to Dave Feller to get us started. Dave? Thanks, Greg.

Thank you. Good afternoon. Welcome to MoGo's Q1 2025 results conference call. I'm joined today by Greg Feller, our president and CFO. I'll cover some of the key operating highlights and our strategic focus for the year, and then I'll pass it over to Greg to review our financial results. Q1 was a solid quarter, especially with our continued momentum in both wealth and payments, with wealth revenue up 41% and payments revenue up 34%. Importantly, we also achieved this while maintaining positive adjusted EBITDA and strong balance sheet. Like every company, we've been spending a lot of time digging deep into AI and identifying all the ways that we can leverage it to help build our business. We've recently formalized this into what we are now calling Mogul 3.0, which is all about becoming an AI-native business. This is a full reset on how we build, operate, and scale across every part of our business. This means embedding intelligence in every layer, product, operations, finance, and member experience. It's a move to become leaner, smarter, and radically more efficient. This means fewer people, higher velocity, and one unified platform across lending and wealth. Eventually, there'll be no part of our business that isn't AI-powered. It's hard to overstate the impact that it's already having, and we are only scratching the surface. Things that were once not even possible are now very accessible. Just to give you a sense of the impact, there are certain areas where, through AI, our productivity gains have easily been 10 to 20x, including in product marketing. Today, almost every single one of our team members are using AI in their daily business and exploring new AI tools that are helping them dramatically improve their productivity. Historically, our lending experience, like most, was relatively simple. It was static, rule-based, and reactive. We're now reimagining the entire experience as an AI-native one. This means smarter marketing and customer acquisition, smarter underwriting that will include behavioral data, alternative data including spending patterns that will enable smarter credit decisions, and better outcomes for both the user and our business. AI will also enable us to better serve our customers, helping nudge them to better behaviors, including helping them get out of debt sooner and ultimately to get them on a path to wealth building. This will continue into collections as well. There's no part of the experience that can't be radically improved with AI, and this is a key initiative as part of the 3.0 transformation. As we saw this quarter's performance, we're continuing to make progress in our wealth business driven by continued improvement in the experience and value proposition, which is helping attract higher value users. But now we're heads down reimagining it as an AI native and unified experience. There was a time when having two separate apps made sense, but now that we have brought them together as a single intelligent investing value proposition, we believe unifying them into a single AI native app makes a lot of sense. We think this will be a big unlock for us and dramatically improve the experience and value proposition for our users. Again, while the market is dominated by what we call dopamine-fueled casinos, we are building one that prioritizes discipline, patience, and long-term focus. something that not only sets us apart from the competition, but resonates with investors that are looking for something better. Our goal isn't to be the biggest, it's to be the most effective wealth building platform in the market. We're already leveraging AI and giving our members a behavioral edge, but we're only scratching the surface of what's possible. As a refresher, unlike commission-free apps that focus on training activity and foreign exchange fees, we offer a very compelling value proposition at $20 a month that includes zero commission and zero FX fees, along with a fully managed S&P 500-based portfolio and a serious research and analytical tool. This model helps align our success with the success of our members. While others push trading activities to drive increased revenue, we focus on improving the performance of our members, which usually means more discipline, patience, and fewer trades. We call it buff mode. Now, it's important to understand that becoming AI native isn't a flip of the switch, especially not in financial services where trust, accuracy, and compliance are non-negotiable. That's why we're approaching this as a phase transformation, starting where the impact is the highest and the risk is the lowest, and then expanding from there. Right now, we're in phase one. We're embedding AI to augment our teams and workflows. Support is a great example where over 60% of our interactions are now handled by our AI agents, delivering faster and better responses at a lower cost. In engineering, we're using co-pilots and AI tools like Cursor, and the percentage of our code that's written by AI continues to increase, with some engineers reporting as much as 50% of their code now written by AI. The next phase is where AI starts to own full workflows end-to-end, always with human oversight. At this stage, we move from augmentation to orchestration with AI running core business processes and humans focusing on oversight, refinement, and innovation. And then we enter the third phase, where AI becomes the brains of the platform. This is where real compounding begins, where intelligence flows across lending, investing, support, and operations to drive performance, retention, and long-term value. The point is we're not rushing this. We're building this with purpose. We know where this is headed, and we're building the architecture, the culture, and the capabilities to get us there responsibly but aggressively. MoGo 3.0 is our reset. leaner, smarter, and more focused. We're not chasing hype. We're playing the long game and building for durable value. Our objective is to be one of the most product-focused AI-native challengers in fintech. Things are moving faster than ever, and our team is working hard to execute on the strategic initiatives that will transform MoGo.

With that, I'll pass it over to Greg.

Thanks, Dave. Let me start by spending a few minutes on our payments business, Carter Worldwide, which, as you know, is a separate wholly-owned subsidiary of MoGo. And alongside wealth comprises one of our two primary areas of focus for driving long-term growth in massive TAMs. Carta had another strong quarter as reflected in our 26% year-over-year increase in volume to $3.2 billion. And revenue growth during the period was even higher at 34% due to the impact of better pricing. We've discussed previously that we've been investing heavily in Carta's tech platform in the past couple of years and recently completed our OCI migration. which positions the business to continuous growth trajectory and move towards EBITDA positive this year. Also, we completed our exit of the Canadian market, given the smaller scale of this market for us and increased efficiencies we're able to achieve by exiting the Carta business from Canada. This also allows us to increase our focus on Carta's main growth market in Europe and enhance our ability to serve our European customers. Turning to our investment portfolio, which continues to be a major component of value for Mogul and its shareholders, given its total value at quarter end, represented close to 70% of our current market cap. A large portion of this portfolio is crypto-related, with our stake in Canadian crypto exchange 1-5 valued at $16.3 million at quarter end. Like many other equities, their stock price was affected by the recent market volatility. During Q1, prior to much of the volatility, we sold the first tranche for a 1-5 position, liquidating $5 million of our approximately 87 million shares for proceeds of approximately $1.7 million. We also monetize an investment, one of our private investments, for net proceeds of $750,000. Turning to our financials, quarterly adjusted total revenue, which removes the legacy brokerage business, which we announced last quarter that we exited, was $16.7 million in Q1, up from $16.4 million in the prior year. The increase driven by continued strong double-digit growth from wealth and payments, offset by lower interest revenue. Q1 results in wealth benefit from an increase in new higher value users on our intelligent investing platform based on the additional value we've built into the platform. This more than offset the planned decline in interest revenues. We take a more cautious approach again in our lending business regarding economic uncertainty. We are also achieving strong growth in these businesses while maintaining positive adjusted EBITDA, which was $1.1 million in the quarter, a 6.1% margin, modest increase from the prior year. Adjusted net loss for the quarter was $1.5 million. Our continued focus on cash flow showed through again in Q1. Specifically, cash flow from operations before investment in gross loan receivables was positive for the 10th consecutive quarter, reaching $3.8 million in Q1. Total cash flow from operating activities, which includes the investment in loan receivables, was also positive for the quarter at Q1. compared to negative 3.9 million in the prior year period. We maintain a solid position at year end with cash and total investments of roughly 39 million. This included combined cash, restricted cash of 13 million up from the prior quarter, and 25.8 million in marketable securities and investment portfolio. Again, as we mentioned, we monetized about 2.4 million of investments during the quarter. There is no change to our outlook for 2025 that we presented at year end. And so with that, I'll turn it back to Dave and open it up for any questions.

Thank you.

Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press star followed by the number one on your touchstone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press star two. If you're using a speakerphone, please lift the handset before pressing any keys. Once again, it is star one if you wish to ask a question. Your first question comes from the line of Scott Bach from HC Wainwright. Your line is now open.

Hi, good afternoon, guys. Thanks for taking my questions. First, it looks like growth in both wealth and payments was well above the full-year growth expectation during the first quarter. Are you expecting a slowdown in that growth for the remainder of the year, or was there something unique mechanically in the first quarter that made growth so, you know, kind of outpaced the full-year expectation?

So, yes, Greg, thanks, Scott. Yeah, we're not changing our guidance for the year at this point. We'll continue to assess that as we go down in later quarters. I think on the payment side, there was some increase from the exiting of Canada and there'll be some decrease from the exiting of Canada later. you know, in the last three quarters of the year. So I think that will moderate the growth rate in the next few quarters. So again, at this time, we're not changing the guidance. And look, we feel very good about wealth as well. But, you know, our view is that at this stage, we're going to take a conservative approach. keep guidance where it is. And, you know, we're still seeing a fairly, I would say, volatile overall economy and market and uncertainty. So we think we're better positioned here to stay conservative and keep things where they are and see how things play out over the next quarter or two.

Great. I appreciate that. And I think that makes sense. I understand the caution on the lending side, but I'm curious, have you actually seen any deterioration in the lending business so far this year?

No, we haven't.

So that's great news. So we haven't seen any deterioration there. And so again, that's something we're going to kind of monitor here over the next couple of quarters and, you know, see how you know, some of these tariff negotiations pan out and the potential impact that that could or couldn't have on the Canadian economy. So at this stage, you know, that caution may not be as warranted, but that, you know, look, one of the benefits that we have as far as lending just being, you know, one leg of the stool and, you know, payments and wealth being primary folks to growth is that we can take that cautious approach to lending and wait until we see how things sort of develop, you know, further in the year before we decide if we want to, you know, get more aggressive there. But at this stage, no, we haven't seen any specific deterioration there.

That's perfect. And then last one for me. I'm curious on the operating expense side, some of these added investments you're making in AI, How do you balance the size of those investments and timing with a desire to maintain profitability? Or does accelerating these investments take priority over profitability in the near term?

Look, I think our goal will continue to stay EBITDA positive while making the appropriate investments. I think You know, we are seeing, you know, as I mentioned, Carta is in a position to turn EBITDA positive this year, which is going to help, and that last year it was negative. And then, you know, look, part of the benefit of AI investments is that actually it does drive efficiencies as well. So there's an ROI to those investments. So I think we you know, at this stage, believe that we can manage the right level of investment with maintaining positive EBITDA that we're focused on.

Great.

Well, I appreciate the added color, guys. Thanks again. Thanks. Once again, as a reminder, if you have a question, please press star one on your telephone keypad. There are no further questions at this time. I will now turn the call over to David Speller. Please continue. Okay. Thanks again for joining us for our Q1 call.

We're excited about our new focus on MoGo 3.0. I think that also is going to be the key kind of long-term driver and kind of the balance in investing in AI and balancing that long-term growth opportunity. you know, specifically, I think, on the wealth side, but also a better position as even in a volatile lending market as well with more of an AI-driven platform there. We look forward to updating you post our Q2 earnings. Thanks again.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.