Mogo Inc. Q3 FY2024 earnings call

Management Statement and Operational Highlights

• The company is executing on its plan to achieve profitability while investing in key product areas.
• Raised 2024 EBITDA guidance and introduced 2025 EBITDA guidance with a midpoint growth of 69%.
• Expect to have positive adjusted net income in 2025 for the first time in the company's history.
• Made progress in the wealth platform, seeing a unique value proposition in the massive wealth market.
• Mogo's wealth platform combines behavioral science with a managed S&P 500 strategy, and its self-directed investing app is designed for thoughtful long-term investing.
• Integrated AI with FinChat.io, with plans to include FinChat Pro in its $15 monthly fee.
• Net Promoter Score improved from -25 to 59 for new users over 2 years, with a goal to reach north of 80.
• Focus on efficiency initiatives, including migration to OCI, payroll reduction, and vendor expense reduction.

Segment Performance

• Wealth: Subscription and services revenue grew mid-teens year-over-year, with wealth business contributing approximately one-third of subscription and services revenue.
• Payments (Carta Worldwide): Payments volume increased 23% year-over-year to $3 billion in the quarter, with an annual run rate of over $12 billion. Revenue grew similarly, and the company has been investing in its tech platform, expecting to complete a major technology investment by Q1 2025.
• Lending: Interest revenue was up 5% year-over-year but down sequentially due to a conservative approach to loan originations. The new rate cap effective January 2025, lowering the maximum APR from 47% to 34%, is expected to impact the lending business, but the company views it as potentially expanding the appeal of its lending solutions to a broader customer base.

Guidance

• 2024: Expected subscription services revenue growth of approximately 10% for the full year, with adjusted EBITDA raised to $6 million to $7 million from prior guidance of $5 million to $6 million.
• 2025: Aiming for high single-digit subscription services revenue growth, adjusted EBITDA of $10 million to $12 million (69% growth midpoint), and positive adjusted net income for the year.

Risks

• Regulatory changes affecting loan interest rates, particularly the impact of the rate cap on the lending business.
• Uncertainties in the crypto market that could affect the company's investment in WonderFi.
• General risks associated with forward-looking statements and potential differences between projected and actual results, as well as market and operational uncertainties.

Question and Answer

Q: With the EBITDA guide calling for about $4.5 million to $5 million in adjusted EBITDA improvement into fiscal 2025, where do you guys think you can really drive those efficiencies from?

A: Efficiencies will be spread across 3 areas: migration to OCI at both Carta and Mogo, payroll reduction, and vendor expense reduction.

Q: I wanted to see if I could get a little more color on the deceleration in revenue growth in subscription and service for '25. Is that something in the macro or something unique to what you guys are seeing within your product suite?

A: The high single-digit growth guidance for 2025 is consistent with 2024. The company is prioritizing profitability and cash flow over growth, focusing on the Rule of 40 to balance growth and margins, aiming for cash flow positive in Q1 and flexibility for future decisions.