Mogo Inc.

Good afternoon, ladies and gentlemen, and welcome to the MoGo second 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 need assistance, please press star zero for the operator. This call is being recorded on Thursday, August 7, 2025. I would now like to turn the conference over to Craig Armitage, Investor Relations. Please go ahead.

Thank you 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 Q2 filings, as well as periodic filings with regulators in Canada and the U.S., which you can find on CDAR+. Edgar, and you can also access via the MOGO Investor Relations website. Lastly, today's session will include several adjusted financial measures or non-IFRS measures. Please consider these as a supplement to and not as a substitute for the IFRS measures. You'll see that we've included reconciliations to those in the press release and in the investor deck that accompanies the webcast. With that, I'll turn it over to Dave Feller. Go ahead, Dave.

Thanks, Greg. Thanks everyone for joining.

Q2 was a strong quarter across the board, profitable, high margin, and structurally aligned with our long-term vision. We delivered net income of $13.5 million, wealth revenue grew 48% year-over-year, payments was up 23%, and adjusted EBITDA margin expanded to 11.4%. We were also cash flow positive. Book value now stands at $81.6 million, or $3.41 per share. Cash, marketable, securities, investments total over $50 million. We expanded our Bitcoin treasury strategy. Wealth, AUM, hit an all-time high of $462 million. And we began a regulatory process to offer crypto trading, positioning us to be one of only two companies in Canada to be able to offer both crypto and equities in one regulated experience. We also saw continued strength in the European payments sector, with card volume up 15% year-over-year in Europe, excluding the exited Canadian business. One of the most important parts of our long-term architecture is the way we're building value across both product and capital, what we call our dual compounding strategy. On the capital side, we began our Bitcoin treasury strategy in 2024. In Q2, we deployed $1 million into Bitcoin ETFs. And post-quarter, we added another $1.4 million funded by proceeds from our 1 to 5 monetizations. That monetization was close to $14 million, a real-world example of how capital appreciation is now a live part of our compounding engine. At the same time, we're working on embedding Bitcoin into our product stack across wealth, lending, and payments, making it not just a reserve asset, but part of how the system grows and self-reinforces. What sets this business apart is the behavioral foundation we've built it on. Our members aren't optimizing for activity. They're optimizing for discipline. And we're seeing that reflected in outcomes. Our top 10 members are now tracking towards over $2 billion in long-term wealth outcomes. That's not because of stock picking. It's the result of contributing consistently, holding over time, and ignoring noise. On the business side, our wealth AUM reached $462 million, up 18% year over year. And again, wealth revenue was up 48%. Importantly, we're seeing a meaningful ARPU shift. While we're not spending on marketing today, new users are coming in at $20 a month versus $10 a month for our legacy base. That shift alone is driving strong revenue growth, and it gives us confidence heading into Q4 platform launch and Q1 2026 marketing ramp. We're now deep into building our new unified AI-native platform for long-term investors. This isn't just a redesign, it's a full rebuild. And from day one, we've been using AI to build it from product strategy to copy to UX to code with tools like Cursor at the core of our development process. Every part of this platform is being constructed to reinforce behavioral discipline, not engagement. Most platforms today are optimized for trading activity and usage because that's how they monetize. Ours is different. We're a subscription-based model. We don't need users to trade. We just need them to hold. And that alignment gives us room to build the right thing. As Warren Buffett said, the most important quality for an investor is temperament, not intellect. We expect to launch B1 of this platform in Q4. Real-time AI integration will begin rolling out in phases post-launch, once a behavioral foundation is in place. In July, we began the formal regulatory process to enable crypto trading alongside equities. If approved, Mogul would become one of only two companies in Canada authorized to offer both in a single regulated account. To clarify, this is not about encouraging crypto speculation. We're not launching it to drive short-term activity or feed trading behavior, the model most platforms rely on. Our approach is consistent with everything we've built. Behavioral discipline, long-term investing, and alignment with our members' outcomes. Just as we've done with equities, we'll bring crypto into the experience in a way that reinforces temperament, not undermine it. Our flat subscription model means we don't need members to trade. Instead, we help them calibrate exposure thoughtfully and hold with conviction, not chase volatility. This is Buffett mode applied to crypto. And it's why we believe this will be a structurally different kind of crypto offering. Platforms like Robinhood and Wealthsimple have scaled rapidly by optimizing for engagement and trading activity. But activity doesn't guarantee outcomes. And over time, outcomes are what matter. We believe the shift is already underway. We're not trying to dominate the market. We don't have to. Well, Simple's last product valuation is almost 100 times ours. We don't need to catch them. We don't even need to compete with them. We just need to serve the investors who eventually outgrow speculation. Even capturing a fraction of that shift would represent meaningful upside, and we're structured for it in our pricing, our platform, and our philosophy. The next great investment platform won't be the ones that monetize attention. They'll be the ones that help people perform.

That's what we're building. I'll now pass it over to Greg to walk through the financials. Thanks, Dave. Before I turn to financials, I just want to touch on Carta.

Turning to our payment business, we process 2.8 billion volume in Q2, which is flat year over year on a reported basis. But as Dave mentioned, we previously announced the decision to exit Canada at the end of Q1 to exclusively focus on Europe where Carta has been a pioneer in payments markets. When you exclude the Canadian volume market, core European business was up 15% year-over-year on a volume basis. In other words, we replaced the 13% revenue exit with 15% growth in the market we're scaling. With our full OCI migration now complete, Carter is operating in a modern infrastructure stack that improves both scalability and cost efficiency. In the longer term, we see an opportunity for Carter to play a role in stablecoin-based payments aligned with broader shift to real-time blockchain-based settlements across fintech. Now we'll walk through our Q2 financial results, which reflect the progress we've made across both operations and capital allocation. In Q2, we delivered strong year-over-year growth in both wealth and payments, up 48% and 23% respectively. Gross margin expanded to 72%, net income came in at $13.5 million, and we were operating cash flow positive. We also delivered an adjusted EBITDA margin of 11.4%, reflecting both operating leverage and capital disciplines. Our growth is being driven by the right segments. Wealth and payments are both scaling organically and importantly within wealth, we're seeing an ARPU shift towards higher value users. We're not spending to acquire right now, as Dave mentioned, but new users are coming in at meaningfully higher ARPUs while legacy lower value users continue to churn. The mixed shift is driving revenue growth without adding costs and positions us for strong unit economics when we plan to begin broader marketing of our intelligent investing wealth platform in Q1 of 26. On the profitability side, we delivered a justity bid of $1.9 million up from $1.1 million last quarter and $1.4 million a year ago. Margin also expanded, as I mentioned, to 11.4%. We're also operating cash flow positive again this quarter, a key indicator that we can self-fund core growth while also executing our capital strategy, depending on our growth ambitions. Turning to the balance sheet, we ended the quarter with $50.8 million in cash and marketable securities and private investments, or about $2.10 per share. Our investment portfolio, which will increasingly reflect our Bitcoin strategy currently, includes high-quality holdings in companies like WonderFi, Gemini, and Hootsuite. While our Bitcoin reserve is still in early stages, crypto-related investments now represent close to 80% of our total investing holdings as of quarter-end. Supporting this position, our book value at quarter-end stood at $81.6 million, or $3.41 per share. When you compare those data points to our $54 million market cap, the disconnect is clear. And when you also consider that our operating business is approaching a $70 million annualized revenue run rate with high growth contributions from wealth and payments, that disconnect becomes even harder to justify. We believe we're operating one of the most attractive and strategically important segments of the market with an increasingly deep mode and long-term tailwinds firmly behind us. As long as we continue to execute and deliver, we believe the market gap will close. In the meantime, our balance sheet is strong, it's strategic, it gives us flexibility to invest with conviction, adapt when needed, and compound value over the long term. Finally, let's revisit our Bitcoin treasury strategy, a key part of the structural foundation we're building at MoGo. We launched this strategy in 2024. Reminder, we were one of the first public companies in the U.S. to actually put Bitcoin on our balance sheet when we added that strategy. back in 2020 after MicroStrategy and Block and before Tesla. And in Q2 of 24, we decided that we're going to expand on that. And this quarter, we expanded both at scale and strategic intent. We think of this in three layers. The base layer are Bitcoin reserves. This is a long-term sort of value and capital benchmark. In the middle, our regulatory infrastructure, where we're working to become one of only two regulated platforms in Canada offering both equities and crypto. And on top, our product integrations, including plans to launch a flagship 60-40 equity Bitcoin portfolio, BTC-backed lending, and stablecoin-enabled payment infrastructure. This is more than an investment, it's a compounding system. Platform integration fuels user growth, which drives operating income, which funds treasury expansion and future capital gains. and that in turn reinforces the reserve. We're still early in our Bitcoin deployment, and that's intentional. Our near-term focus has been monetizing our stake in 1 to 5, which is in the process of being acquired by Robinhood. After quarter end, we monetized just under 50% of our 1 to 5 position for approximately $14 million in net proceeds, and immediately deployed over a million into additional Bitcoin. It's not a statement, it's execution, and it's a real-time example of our dual compounding model at work. This is how we intend to build long-term value structurally, repeatably, and with discipline. With that, I'll turn it back to Dave.

I think we're ready to open it up for questions.

Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press the star followed by the one on your touchtone phone. you will hear a prompt that your hand has been raised. If you wish to decline from the polling process, please press the star followed by the two. And if you are using a speakerphone, please lift the handset before pressing any keys.

The first question comes from Scott Buck at HC Wainwright.

Please go ahead.

Hi, good afternoon, guys. Thanks for taking my questions. I'm curious, how do you prioritize or balance the accumulation of Bitcoin for the balance sheet versus using that same cash to reinvest in some of your high growth business verticals. Is it one or the other? Can you do both? I mean, how are you thinking about that?

Yeah, thanks, Scott. So our plan is to do both. But remember, our overarching framework is using Bitcoin as a hurdle rate. So If we believe that we can get a Bitcoin-like or higher return in our core business, that will be the hurdle rate to invest money there. Right now, we're currently operating fairly close to the cash flow break-even. And so with the proceeds from the 1 to 5 transaction and our continued focus on monetizing other pieces of that portfolio, we're going to have significant cash and liquidity available to, we believe, do both invest in Bitcoin and the business. And the way we'll do that, approach that initially is that if we believe that we have high, we can meet the hurdle rate in our core business for Bitcoin, but we don't believe that we really need to use all the excess cash in our balance sheet for that business, then that by definition frees up money for Bitcoin. And obviously the fact that we've started to make those investments in Bitcoin tells you that we believe we've got ample liquidity to do both. But again, Bitcoin will be the hurdle rate that we look at going forward as we consider any investments with cash from our balance sheet.

Great. That's helpful. Given your liquidity position and kind of anticipated liquidity position. How are you thinking about, you know, what's your appetite for potential M&A to accelerate growth and maybe wealth or even payments?

I think we're always open to M&A. I mean, we've, you know, done a number of transactions over the years. I mean, our wealth business really started with an acquisition. years ago. That business has been radically transformed since then, but really that's what got us into that business. Obviously, that's also what got us into payments. And even the one-to-five monetization was from investments we made in the crypto space early days. So we're not shy about doing that, but I think for us, it would have to be pretty strategic. because we believe that we've got a high return opportunity in both our core business today and in Bitcoin. So that would be the hurdle rate for any acquisition as well. So as I said, we've got the muscle memory and the skills at MoGo to do M&A, but it would have to be strategic and make sense and meet that hurdle rate for the areas that we're focused on.

Got it. That makes sense. On the crypto trading initiative, can you give us a sense of, you know, timeline to work through the regulatory process? And does it require any kind of meaningful, you know, investment from you guys in terms of, you know, increased op-ex or anything to get through, you know, to get to approval, I guess?

Yeah, I think from a regulatory perspective, for MoGo to get fully licensed, remember, we're already licensed with the regulators on the equity side. So we think that actually helps us as it relates to going through the crypto side of the regulation. You know, that regulation is probably a minimum of six months. Um, and, and can be longer depending on, uh, on, on issues, um, that may or may not come up, but, um, uh, that sort of give you a sense of, of the direction, but, but it doesn't mean that in the, in between there, there wouldn't be other opportunities potentially from a partnership perspective for us to, um, uh, execute, uh, partially on that, on that crypto strategy, um, uh, as well. So I think we're exploring multiple sort of parallel paths. There will be some investment related to it, but we don't think it's a massive investment. We've got a lot of that infrastructure already in place for our existing wealth business, and so it makes it a lot easier for us to, you know, take that undertaking given that.

Got it. Okay, great. And then if I could sneak one last one in. Can you talk a little bit about the lending business and how you see the environment and maybe what your plans are with that business here over the next 12 months or so?

Yeah, I think, look, lending's always been an important part of our business. We see it as a profitable, cashflow-generating business, fairly high ROI business. um and we've got you know 20 plus years of experience in that business and we think that that really the the data that we have there the experience we have there um is is an asset and a big moat um this is not an easy business to get into as i say it's easy to start lending it's harder to to you know to get the money back if you haven't done that for a long time and you know We've been doing this for 20 years. We've gone through cycles, including the global financial crisis. So we do expect that. I mean, we grew the loan book this quarter. So I think our goal is that that business is supportive of growth, but i.e. not a drag on growth, but not our primary focus to drive growth, wealth and payments. will be our primary focus to drive growth with, you know, the lending business supporting that. And we're going to continue to be pretty disciplined on how we grow that business. But the business is performing well, and we like what we see. So I think we're going to continue with sort of our current path today.

All right. Well, I appreciate the added color, guys. Thank you very much, and congrats on the results. All right. Thanks, Scott.

Thank you. Ladies and gentlemen, as a reminder, should you have any questions, please press star 1.

If there are no further questions, I'll turn the call back over to the presenters.

Okay. Well, again, thanks everybody for joining us on our Q2 call. We look forward to

updating you again post our Q3 earnings. Thanks again.

Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and we ask that you please disconnect your lines.