Mogo Inc. Q2 FY2024 earnings call

• Generated positive cash flow from operations. - Revenue was up 10% year-over-year to $17.6 million. - Carta’s payment volume was up 12% to $2.8 billion. - Made meaningful improvements in the wealth business, with 21 new updates and hundreds of improvements in the last quarter. - Wealth industry is over $6 trillion in investable assets, with mutual funds having high fees and underperformance issues. - Mogo's wealth platform has a unique fee structure of $15 monthly, compared to high fees in traditional mutual funds and wealth advising. - Payments business (Carta) has exciting global customers and is on track for continued growth. - Crypto investments include a large stake in WonderFi, which is in a strong financial position.

The company has three key segments. The wealth segment: Mogo's wealth products have been seeing improvements, with ARPU for wealth products at $180, and overall consumer base products ARPU at $25. The payments segment (Carta) had a 12% year-over-year increase in payments volume to $2.8 billion, putting it on an annual run rate of over $10 billion. The crypto-related investments segment: Represents close to 50% of market cap but 0% of revenue, with the largest investment being 87 million shares in Canadian Crypto Exchange WonderFi, which had client assets under custody increase to about $1.4 billion and is in a strong financial position with cash and digital assets of $47 million and no debt.

• Expect subscription services revenue to grow in the mid-teens for the full year 2024. - Introduced adjusted EBITDA guidance for the full year of $5 million to $6 million. - Anticipate meaningful savings from future rate reductions on the floating rate credit facility.

• Uncertainties in market conditions that could affect actual results. - Impact of rate changes on interest expense and cash savings. - Dependence on successful execution of product improvements and marketing strategies in wealth and payments segments.

Q: Can you give us a sense of how you’re kind of thinking about your cash moving forward through the back half of the year?

A: We were cash flow positive on a consolidated basis, excluding debt repayment and share buyback. Cash flow from operations was positive for the seventh consecutive quarter. We can self-sustain the business at least at a flat loan book while investing in wealth and payments.

Q: How are you guys thinking about what you want to do with the wealth business moving forward?

A: Very hyper focused on continuing to prioritize the improvement to the product, measuring by Net Promoter Score, and complemented by marketing, including new partnerships like with Postmedia.

Q: Can you clarify the ARPU on wealth products?

A: Current average ARPU of Mogo members across all products is $25, while ARPU for wealth products is $180.

Q: State of consumer credit and lending business longer term?

A: Loan book is relatively flat. Prioritizing wealth and payments over lending, but lending is a long-term asset with a large proprietary database.

Q: Economics of Tom Lee partnership?

A: It's a marketing partnership, no equity, with fees paid over 12 months showing in marketing expense.

Q: Impact of declining interest rates on credit facility interest expense?

A: Every 1% rate reduction would mean $0.5 million of cash savings annually.