Q3 2020 Mogo Inc (British Columbia) Earnings Call
Ladies and gentlemen, thank you for standing by and welcome to the Bogo Q3, 2020 financial results Conference call.
At this time all participants are in listen only mode. After the speakers presentation, there will be a question and answer session.
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She handed over to Craig average guest relations. Thank you. Please go ahead.
Thank you, Mike and thanks for joining us today I just a couple quick notes before we get started first start todays 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 to.
The company undertakes no obligation to update these statements except as required by law.
Information about these risks and uncertainties are included in our Q3 filings as well as periodic filings with regulators in Canada, and the United States, which you can find on SEDAR Edgar and our website.
Second today's discussion will include adjusted financial measures, which are non IRS measures. He should be considered a supplement to and not as a substitute for I ever us financial measures.
Lastly, the announced today are discussed in Canadian dollars unless otherwise indicated.
And it just wasn't clear to people, we do have the presentation slides available to accompany today's call. A those are can be found in the investor Relations section of the website. So with that I'll turn the call over to date seller to get us started.
Thanks, Greg.
Thank you and good morning, welcome to <unk> third quarter, 2020 result conference call Im joined today by Greg Feller, and President and CFO.
We're pleased to report another quarter of strong results in our key profit measures, including positive net income of $1 million and 346% increase in adjusted EBITDA. These.
These results reflect the success of our efforts to quickly adapt to an uncertain environment. This year and really shine a light on the fundamental health resilience and profitability of our business.
In a world, where many fintechs of unproved business models and no path to profitability, we have shown we do.
I would also like to call it the team at mobile for the Great work and 2020, it's certainly been a challenging year in many ways and the team has done a great job during these difficult times.
Because of their all their hard work, we feel good about how the business is positioned heading into 2021.
The adoption of digital banking digital wallets and financial health are all powerful long term trends that have accelerated in 2020, and moguls squarely positioned to benefit.
We still have a lot of work to do and the team is hyper focus on execution of our plan and we're pleased with the things we are seeing including an 89% growth in members from our previous quarter.
And a 237% growth year over year, and Big Clinton County.
Given the pandemic along with the increased pressure on consumers finances, the shift to digital continues to be an hyperdrive.
A problem of financial stress has only gotten worse, it's clear that for most people to existing banking solution doesn't solve their problem.
So what does the next generation banking look like we believe it looks more like a gaming I'm gonna banking.
We see game application as one of the keys to winning in this space and we are focused on making mobo not only the best one of the best games to play that game that help you get financially healthy and achieve your important life goals like getting out a dad buying a home and saving for retirement.
In fact, we believe this is one of the keys to solving wealth wealth gap in Canada.
One thing to have a great products is another thing to have and engaging experience. It makes it fun the highs form a human motivations doing things because they're fun not just because they're good for you.
You'll see in today's presentation games caissons key element of our strategy and something we're proud to be pioneers of when it comes to personal finance.
As you may have seen in the broader fin tech landscape players such as cash happened U.S. are seeing huge growth in demand for big claims paid they'll also recently announced as customers in the U.S., we will be able to buy cryptocurrency is including big point directly from them pay Pal account.
Well, Canada typically lags the U.S. with these trends demand is growing here too we are seeing it in our metrics mobile bitcoin users are up 237% year over year and in Tobar, we're already seeing doubling from Q3 levels.
What's more we achieved this growth with little to no marketing around bitcoin.
As more and more Canadians look to participate in decline, we believe that mobile is uniquely position. Unlike other crypto apps. We are only focused on bitcoin and we have a much broader value proposition.
But perhaps most important is that we have the trust and credibility of being the only publicly traded company that offers everyday Canadians, a simple and low cost way to buy and sell Buckley.
We believe this can be an increasingly meaningful part of our member and revenue growth and our focus on increasing our focus on this product.
Putting yesterday's announcement of our new Bitcoin rewards program as well as our stacking Sats campaign stack.
Stacking sats as a term used to describe the active regularly accumulating small amounts of big coin also known as the Toshiba.
We believe reward programs like collecting points in air miles are losing relevancy, especially long among millennials and Gen Z and bitcoin is a perfect platform for modern rewards program.
There are 100 million to tow she's in a decline which is a great structure for awards program and unlike old school reward programs Sotos she's offer the added benefit and excitement of being something that have potential to appreciate in value.
If you are a gamer you'll know that rewards are a key part of gamification and we will now have a way to reward members for good financial behaviors as well as rewarding them for engaging with their products.
We are starting off with rewards for improving your credit score as well as rewards for activating and finding a bit Clinton county long with earnings that coin for referring friends to mobile.
This is just the beginning and our plan is to bring his words program to all our products in a way that not only helps members improve their finances that helps drive more engagement to all the products.
We are excited about this new program believe it can be a meaningful driver of engagement monetization long term retention similar to other successful war programs.
In order to participate members by the activated become an account and download them I'll go out.
Our free credit score offering continues to resonate with members and our new rewards program helps to make it even more engaging every month members will now have an opportunity to earn decline our credit score experience is evolving from simply monitoring someone score, it's really helping them improve it something that millions of Canadians are focused on doing.
All members can now earn their claim by achieving what we call rock star status, which is a credit score of 850 or above something that only about 10% of Canadians currently have.
We also have a category for most improved monthly player I eat a member that improves their credit score. The most this player can win 1 million SAP, which is worth about $200.
This now directly ties credit score with their bitcoin account I, either participating members need to sign up and activate their mogul big claim count.
This new reward program is the only one of its kind in Canada were Canadians, who want to improve the score or simply just monitor it can earn and when that point, a truly differentiated and compelling value proposition.
In Q3, we launched our new carbon offsetting feature for the mobile card. This is the first card in Canada that helps you control your spending while also offsetting your Seo too as you spend and all for free.
Two continues to be the primary causes of climate change a recent survey show that it is a top concern of both millennials and Gen <unk>.
Still early days in this new product, but we're very pleased with the initial results. We've seen a 66% increase in average spend per user and this is especially impressive considering we took away a cash back incentive and replace it with a more profitable carbon offsetting model.
We're also excited about a new feature that we just launched called rain Forest mode.
Users, who logged into the dashboard get to experience the sounds and even the visuals of the Amazon Rain Forest. This brings our carbon offsetting project of protecting the Amazon reinforced the life and creates a very cool experience. It also helps our members be more mindful around their spending.
Think about it like a mindfulness out like Kong integrated into our spending account. The initial feedback on this experience has been excellent and suddenly and until you experience. It you won't appreciate how impactful it can be I promise you. This isn't anything like logging into your banking App and takes gamification of money to the next level.
Also starting to get some really strong and positive feedback from users and how much that 11 this new experience.
The mark to market opportunity is massive with almost a trillion dollars you're in spending happening between cash credit and debit cards in Canada.
We also believe that we will continue to see a shift in consumer is moving away from credit cards towards the control of prepaid cards like the mobile card given the improved ability to control spending and avoid debt.
As well as the continued trend to move away from cash and a prepaid card like moguls equipment equivalent of digital cast.
Our other products. We are also planning incorporating a new bitcoin rewards program, the getting with rewarding new users for signing up and becoming active card users again the goal to reward members for becoming after these users of a product while also helping them get control of their spending and financial health.
As I mentioned earlier free I'd fraud protection launch in Q3 has been a key driver in helping us achieve a 79% increase in new member growth in Q3 versus the previous quarter.
This is a must have product for every Canadian as every one of US is that more at risk of I'd fraud than ever before as their lives continue to go more and more digital and in fact recent data shows that 75% of Canadians have had their data breach in the last 12 months.
This is also something that you would have to pay about $240 a year to get from the credit bureaus and moguls are first to offer for free. So if you haven't signed up for it yet get on it today.
Today, there are about 20 million Canadians were eligible for this product in the markets. We serve and we are currently protecting less than 2% so lots of room for growth.
To date, we have already sent out over 370000 alert and 30% of our new members have received an alert in the first 60 days and we're just beginning to hear from our members on how much their loved enough alerts. Let you know who has done an inquiry and your Bureau, and it's here that you have a chance to stop I'd fraud for mapping.
Stopping someone from getting a loan and your name none of us can prevent I'd theft, but we all have an opportunity to minimize risk by the fraud before it happens and if you become a victim and can cause a lot of problems, including preventing you from getting a mortgage of qualifying for alone.
We're also excited to see that given the nature of this product, we're actually seeing close to a 100% retention rate.
Lending is what our business was initially built on and we believe remains one of our key strategic advantages after selling our liquid loan book, we're primarily focused on growing loans our partners. Our goal to ensure we have the best in class loan offering across the full credit spectrum and expect partnership and referral model to continue to expand.
The more we grow our member base and the more engaged members are more opportunities we have to convert them into loans, which have great economics.
We saw a 63% increase in part and allow them to go easy in Q3 over Q2, we're also planning and integrating our big win Wars program as another way to reward and incentivize members. This could also include earning that coin for staying in good standing on their loan payments again lots of opportunities Leverages program.
Another way, we're monetizing members is through a partner referral program during the quarter, we announce that we partner with the Keybanc to promote their industry, leading savings account, although still early days, we've seen some really strong results from initial tests with above average conversion rate, although not a primary focus today. This will continue to be something we look to grow and improve on.
And a great way to bring a broader offering to our ever growing member base as with our other products. We plan to bring our Big club rewards program to a referral product. So members can earn sad if they sign up with one of our partners. Our goal remains to cure rate best in class part partners. So we can offer best in class products for our member base.
Interest rate savings account for me. He was a good example of this with rates that are up to 30 times higher than other banks.
We also recently announced that we were working on a new PDP product that we anticipate launching in the first half of next year, Although most Canadians have access to E mail money transfer the experience is a lot of friction and lax. Many of the kidney convenience features that the leading PDP solutions have in the U.S. market.
We believe there is a big opportunity bring this type of solution the Canadian market and think that we are well positioned to do it the.
The roadmap for this product incorporates a lot more than just the PDP solution. There are many significant enhancements that are part of this plan and will dramatically improve the convenience of the mobile app to our members and make accessing our other products a lot easier.
This feature will also enable our card customers do things like split the bill so they can pay and have their friends easily pay them back.
Lots of excitement internally for this new product and we're working hard to bring in place. We'll continue to keep you updated on as we move along.
Perhaps the single biggest challenge for startup in our space is customer acquisition.
The reality is bank spend hundreds and even over $1000 to acquire a customer, but given the long term lifetime value. This still produces a positive ROI.
We believe we have an advantage compared to many of our peers that enable us to have a relatively low customer acquisition costs, our unique value proposition, including free credit score and now free I'd fraud protection long with their mobile card decline account helps us acquire customers at a fraction of the cost of what banks pay. This is also help our unique partnership with post media that gives us over $30 million.
Year in marketing spend this helps gives a halo effect to all our other marketing channels, which ultimately result in low customer acquisition cost.
Improving our marketing performance continues to be a major focus of ours and we have many initiatives helping us achieve this we were also able to kick off the new Influencer campaign, where they will begin promoting the mobile app and various products.
Obviously in fuel Influencer marketing is increasingly becoming important as many of the younger generation are making decisions based on the people they follow.
Our business model continues to be driven by a formula that helps drive low cost customer acquisition engagement combined with multiple ways to monetize our team is hyper focused on executing the strategy, including product road map that is designed to continue to increase utility the mobile app for our members helping them move their financial health while.
Also driving revenue and profitability growth.
With that I'll ask Barry to cover the financials in more detail Greg.
Thanks, Dave and good morning building on strong Q2 results, we reported another excellent quarter across all our key financial metrics. Once again, a highlight the underlying profitability and cash generation capability of our financial model. In addition, we also reported very strong growth in net member additions as well as they go into account growth, which we believe is just the beginning of the growth are.
Ladies and two there are two areas. We also outperformed our guidance on revenue adjusted EBITDA in the quarter, specifically revenue for the quarter of $9.8 million was above our guidance nine and a half 9.7 million adjusted EBITDA of 4.89 was above our guidance 3.8 to 4.2 million and represented a record 49% margin the second quarter revenue.
At this level.
The increase is primarily primarily attributable to record gross margins of 93% is what was the second quarter of significantly lower growth related operating expenses and.
Other highlights this quarter with positive net income <unk> million dollars cash flow was also very strong with positive cash flow from operations net of investing and 4.4 million, which was at the high end of our guidance has increased by 2.4 million in the quarter ending with approximately 10 million of cash which is after paying an additional 2 million on a credit facility total cash and investment portfolio.
For the quarter 26 million.
As we look ahead these metrics give us strong confidence in our plan to dial back of our growth investments that support accelerating revenue growth 21.
As Dave mentioned, our model starts with a low cost member acquisition strategy with the new products and product enhancements, we saw an acceleration in new member additions in Q3, which were up 89% and we ended the quarter with well over a million members. We expect to continue to drive strong member growth.
And we're turning our attention increased engagement.
Revenue for the quarter of $9.8 million. They said was ahead of our guidance core revenue was down year over year due to proactive measure.
But as we look ahead, we see an acceleration of.
Top of the funnel activity accelerating member growth I believe one of the monetization models of any consumer fintech globally.
Typically we currently have eight distinct ways to monetize their member base and we're just getting started we plan to continue to expand our monetization model in 2021 and beyond.
The underlying profitability of our business was again clearly highlighted in Q3 with record gross margins and adjusted EBITDA.
Gross margin declined more than 92% in the quarter from 67% in Q3 last year adjusted EBITDA of $4.8 million was up from 1.1 million last year and EBITDA margin was almost 50% in the quarter in the last two quarters alone we have generated approximately $10 million of adjusted EBITDA clearly showcasing beyond <unk>.
The profitability of our model even at current levels of scale. This gives us increased confidence in resuming growth related investment in particular product development and marketing we take full advantage of the accelerating shift digital banking and mobile unique position in the Canadian market.
Although cold that focus.
Were forced us along with a lot of others make changes in our investment plans in 2021 important benefit of this was showcasing to the market. Both the resiliency of our model as well as the ability to adjust their growth lever to generate meaningful cash flow.
And profitability.
Q3, as with Q2, clearly demonstrate that this without generating 4.3 million of cash from operations net of investing.
Perhaps more impressive was the 3.3 million of cash flow generated from operations, excluding cash generated from loan which was up 74% from Q2 levels.
In addition to a leaner cost structure, our actions in 2020 at substantially improve the balance sheet as well.
The main balance sheet highlights for 2020 were the sale of our liquid loan book, reducing our credit exposure by approximately $32 million and reducing our credit facility. The outstanding to 37 million down from 77 million at year end, we extended the remaining facility to July 2022, and reduce our interest rates significantly we amended our 12 and a half million convertible.
Debentures and since the maturity to two years to May 2022.
Lastly, we amended our non convertible debentures, including reducing the average interest rate from 13.7% to 7%.
And extended the maturity date.
Individually. These are all meaningful that together they allow us to move forward in a significantly stronger financial position.
Clearly weve had to take decisive.
Actions in 2020 to strengthen our financial position in an uncertain environment, However, with a favorable backdrop for fintech, including celebrating demand for digital financial health solutions.
Well as leaner cost structure improved balance sheet and with clear proof that we can be profitable, we expect to a new our growth investments that support accelerating revenue growth in 2021 and beyond.
And take full advantage of industry tailwind.
Our unique and proven platform, where we believe we are extremely well positioned going forward with multiple growth drivers, including the expansion of mobile card, which.
Which as Dave mentioned is already showing signs of ramping nicely.
Expansion of a referral partner strategy.
We are also quite excited about the kind of traction.
We're seeing in are bit quite account without any real marketing investment as we rollout. The rewards program. We believe this can be material driver of new members and revenue from transaction fees.
Lastly, we introduced we will introduce the pp pollution and other new products as we move through 2021.
Stepping back we thought it would be helpful to take a look at the bigger picture opportunity from over the next three to five years.
With the Canadian banks generating over 100 billion of annual net income and the move of the next generation to a digital solution with products that help them make smarter financial decision. We believe load was extremely well positioned to take full advantage of the massive market opportunity ahead of us.
Typically over the next three to five years, we are targeting to grow our member base threefold to 3 million members.
Increased our average revenue per member from just under $40 today to a target of approximately $100, which we see as very achievable target given the average revenue per member of the clean credit eases up at $1300.
Using simple math is what makes the 300 million revenue Fintech business.
Which will create tremendous value for our shareholders and we believe would still be only scratching the surface of the opportunity in front of us.
With that we will open the call for questions operator.
As a reminder to ask a question you will need to press star one on your telephone to withdraw your question press the pound or hash key please stand by what we can pile of acuity roster.
Your first question comes from Doug Taylor from Canaccord Genuity. Please go ahead.
Yes, thanks, good morning.
Your decision to begin reinvesting more in your products I Wonder if you could help us think about how that's going to flow through fine.
Financially and kind of parse it out into what you see is investment in.
Some of the new product initiatives versus reinvesting in the loan book and the lending portfolio, which is something that you kind of ramp down through the first part of this year.
Yeah sure. Thanks, Doug it's Greg So yeah. The you know the Bath on the product development side.
I would say the.
So through a 100% of the incremental investment we're planning to make there.
It's going to be really related around new product not around or loan product, but around.
PDP, obviously is the big initiative for us.
Continuing to enhance and expand the features related to the mogul card.
As well as the Big point account.
And potentially additional new products, so really any incremental spend that buffer, where we are there and technology and development is very much going to be around expanding.
Expanding our non no loan related products as well as investing in new products.
So is it fair to say from that the we should expect the loan book to remain static continue to gradually.
Just in terms of loans on your own balance sheet.
Due to contract a little bit or what should we make the expectation get worse business. Yeah. We think the loan book is going to stay relatively static.
It's not going to be a drag on our on our revenue.
Going forward into 2021.
But but really on the loan side.
Or our focus on the loan side is really through our partner lending program.
Anna referral program for growth.
Versus the on balance sheet.
Okay. So do you expect them.
Last one can you help us quantify what you say is the level that you're expecting reinvest in it should just come through in R&D.
Our marketing yeah, yeah, it's going to come through in R&D I mean, if you kind of look at.
At levels that we were adding Q1 on a on the technology and development side I think it would be reasonable to think that we're going to get back to two to those kind of level.
Okay.
There is.
Certainly bitcoin strength and some of the development of new features that you put in your big clean product is featured pretty prominently in both your release today and some of your recent product announcements can you help us understand to what degree the those are contributing financially to to your performance here.
Yeah. So look bitcoin is still very early days for us I mean as you know we are really one of the pioneers in in big coin in Canada wants the accounts almost two and half years ago.
But shortly after launching the account obviously big coin.
Had a very quick.
Retraction in sort of fell out of favor with a lot of investors.
But we we we've seen over the last year, so that credibility building.
And with not just square in the U.S., but now pay Pal coming in space in a in a massive way and increasingly more and more really some of the leading money managers around the world you know talking about bitcoin as the digital goal.
Gold or 2.0.
We believe in the in the long term.
We believe the decline is a long term asset class.
And so we are going to continue to to focus on that product is the core product that mobile delivers its really something that competitively differentiates us from all the traditional financial institutions in Canada as well we are coming out we are starting from a low base.
On those products. So today, there's still not a meaningful driver of revenue.
But as Dave mentioned, we are seeing very significant increase in those so.
So we do expect though to start becoming more meaningful as we move into into the quarters in 2021.
Okay.
Last question for me and then I'll pass the line.
Any update on the monetization efforts for some of the other assets that came with the difference capital transaction, we haven't spoken about those in some time.
Yes so.
Nothing specific to update what I will say is there.
There are a number of those the companies in that portfolio has seen positive.
Signs in their business and two.
Two two of our big holding.
You know have done growth related debt funding in the last.
Six months.
As well as one.
One who suite brought on a new CEO. So I think we're seeing a lot of and those those three companies.
You know which would make up.
50% of our portfolio.
So we are seeing some positive signs there and we do think that we are likely to see a monetization opportunity in 2021 is at least one of one of those investments for us.
Okay I appreciate that I'll pass line. Thank you. Thanks.
Your next question comes from Seattle to convert from <unk> capital. Please go ahead.
Okay.
Good morning, guys and.
Congrats on the quarter.
Thank you. Thank you.
Hi, My first question for me is is on your new AD campaign. So I mean it did this quarter you saw a nice lift sequentially in new member adds and that was pre rollout at the campaign.
Can you touch on what are the trends you're seeing now from a new as new member adds perspective with the kind of penalized.
So this is Dave when you talk about the new campaign. So again one of the campaigns that were we actually are about to kick off we actually haven't kicked off is essentially the new big going campaign. So as we had mentioned.
The growth, we saw in disappointing including going into.
Q4, so as I mentioned in my comments you know October.
Actually seeing a significant increase from previous month and.
And we have yet to market declines. So we literally have just completed the creative and and the ads, obviously just announced the new Bitcoin rewards program.
We have yet to actually.
Basically market that in any way and that you've been kicking off later this month. So we kind of see that is incremental growth from what we're currently doing so all of our existing campaigns will continue.
As we mentioned.
Free identity fraud protection has definitely helped accelerate growth. So when we run these campaigns were always testing our value prop and seeing what actually performs better and the addition of a free identity fraud protection has significantly improved the performance from just.
Marketing say free credit score.
So we anticipate that adding in bit coin, especially with it what we're seeing is going to obviously accelerate that.
Our member growth.
And we also are have yet to announce this new rain forests mode that we just talked about in the presentation. So thats a new feature.
We're actually expecting to do a release on that shortly.
And then also begin marketing that as well so I'd say those are the two kind of net new campaigns that we plan on launching later this month that should help accelerate what we're currently seeing.
Okay, Okay, great and.
With respect to this.
Call it new cohort of users coming Andrea Bitcoin.
Three local protect offering and obviously the prepaid card is there any.
Big notable you guys could call out with respect to kind.
Kind of user behavior in terms of engagement and and other product adoption on the platform.
Yeah, I mean, as I mentioned I think one of the most you know interesting.
Interesting things quite frankly, we were surprised at the level of activity that we're seeing in terms of how many alerts were actually sending out to new members. So the fact that 30% of new members get an alert within the first 60 days is great because that obviously, if you sign up for free at any fraud protection.
We're we're automatically sending out a biweekly alert if there are no alerts just say, we'll let you know that all all is clear but for those 30% that are actually seeing an alert you can imagine that that definitely drives more engagement.
And and ultimately also in the NPS, we're starting to do net promoter score surveys, which is typically a precursor for even sharing right. One of the channels from a market perspective, we're really focused on is increasing word of mouth referral et cetera.
The precursor for that really is a strong net promoter score right. So anything we can do to increase the actual experience the value prop.
Especially for example on on a pretax thats actually where essentially becomes another way to monetize obviously.
Referrals are a lot cheaper than traditional marketing a lot of referrals are obviously free free.
Free at any fraud protection in something that once you have it and you experience it and it obviously helps you you're literally going out of your way to tell your friends and family Hey, you got it you have to get this thing, especially when others are charged $240 year for it so we're starting to see.
Some of that.
What we're also seeing for example in our card program is.
Some really interesting data in terms of seeing what card customers turn into higher value card customers.
Obviously still kind of early days there in terms of gathering this data and we're obviously looking at cohorts every month, we look at different cohorts July August September we continued to see an improvement in those cohorts and that continues to give us more and more data in terms of what are the kind of merchants and.
Companies that the.
The higher value users are shopping at and that gives us the ability to kind of better target that in our marketing campaigns as well. So all of this data just gives us better information to better expand and targeting our marketing side and.
And we expect that to the other key point I wanted to mention again identity fraud protection is is the low churn right.
For example, credit score monitoring Theres a lot of people out there that you know have a credit score. Obviously every has a credit score, but many people say hey, it's never been an issue for me have always managed to get the credit don't really care about it.
There is nobody if you talk to that once they understand identity fraud that says Oh, I don't need identity fraud protection, everybody knew that whether or not you're checking your credit score or not because if you come a victim, it's a real hassle right.
So the fact that that product essentially almost has a zero churn because once you have it it's not something where you're saying hey, I want to get rid of so when you think about.
How difficult it is especially in financial services to acquire a customer to give a customer a reason to download the app give us or information, we're essentially getting obviously tracking their bureau, as well for a lot of these alerts.
That's that's a big deal right and it's from there that we obviously look to continue to kind of build up that trust and credibility and also that then ties into even are becoming rewards program were just like credit score. We're now tying Vic going in are you if you're tracking your credit score you now have a reason to get a bit coin account bitcoin and count is also where we drive monetization.
We're going to be doing the same thing with protect right.
And it really is about building that trust and credibility and we absolutely see the other key thing is we see typically a five times increase in in retention and engagement is somebody downloads the app and the nice thing about identity fraud protection. You have you have a much higher likelihood to download the app and given the nature of it that's where you're going to get the alert.
And and obviously the the Formula is simple the more engaged and retain the more you retain that member.
The higher the percentage of those members you end up converting and monetizing into those other products.
So the suit and just to add to that would be you know yourself, if you're if you're a tracking bitcoin are tracking stock.
And with that claim people are putting alerts on their phone Hey tell me when it's over acts are under why you can get multiple alerts today.
And it's an engaging allow.
Alert its something that that you actually care about right. So that really is you know what you know from an engagement perspective, the huge product for US you think a credit score as Dave said or even identity fraud protection. Although those are great value products, you don't drive that daily user engagement and daily user engagement.
Increases the probability of monetization, obviously, we've seen players like square with a pretty similar value proposition and a lot of ways to the mobile app.
In the U.S. leverage bit coin into driving more.
More users and user engagement and monetization across the other products and we believe we've got a similar opportunities.
Great No. That's that's so that's helpful.
What I want to touch on your growth in growth investments next year looking into fiscal 21, and you touched on this a little earlier would slip Doug with respect to your thoughts Randy.
Investment in the technology side of the business, but.
Your priorities in terms of investment area is kind of maybe maybe outside of tech.
And more broadly how should we think about the impact to your opex and EBITDA margins going forward.
Yeah. So so I guess a couple of things.
As you are well aware if you look at.
Really kind of the leading public fintechs out there.
Although a number of them.
The majority of them actually are not even EBITDA positive book that they are the marginally EBITDA positive.
But they're seeing a lot of investor interest because they are investing in the platform and driving growth in a massive market opportunity.
And we believe that we have a very similar opportunity for for mogul in Canada, you know that the key criteria, though or or.
A key element of that is that investors in the market have to believe that the underlying profitability of your model. So that they will actually give you credit for investing in driving growth and I think one of the big milestones over the last couple of quarters, which wasn't planned but it happened because the cobot is that fundamentally we believe we.
The underlying profitability of remodel so if we're at or close to a 10 million dollar a quarter revenue with close to 50% EBITDA margins you know.
I'd say that that's unheard of and not a lot of companies that can generate that kind of EBITDA margin at that kind of scale.
Now what we'd like to do is take some of that EBITDA and started investing it in driving accelerating revenue growth.
And we believe that with the with the proof points. We've had over the last couple of quarters. I think there was a view that maybe Q2 was a fluke and now I think we're showing the market to Q2, Wasnt, a fluke from a profitability and cash flow perspective.
But we believe that's going to give us the credibility to start investing more into into taking advantage of the massive opportunity as I mentioned the banks in Canada make $100 billion of pre tax profit. So.
That's just a massive pie and we obviously are a very small piece.
He said that today, so we want to take advantage of it and we think we've got a unique value proposition from a product perspective and scale.
Really nobody else in Canada that has that.
And we want to take advantage of it. So we want to start investing more of our EBITDA and cash flow into growth and so you're going to start to see us ramp that up in Q4.
We believe that we.
We if we can continue to show accelerating.
Gross that you know you know the market's going to going to reward us for investing in this in this big opportunity, especially with the clear understanding of the underlying profitability of our model.
Got it thank you.
And I think the last one from me is just on the.
Here to pure pigments, I think I might have missed.
During the opening remarks, but could you provide an update on the timing on the on.
The go to market to this end.
And it sounds like you you you guys have an expanded scope for the offering in mind could you just speak on that a bit as well. Please thank you sure Dave.
So we're basically saying that we plan on launching PDP peer to peer in the first half of next year.
And in terms of the scope out what we're calling it peer to peer but the reality is there's a whole bunch of.
Enhancements and benefits that we expect to come out of this one of them for example is.
We're improving our Onboarding experience today for example, there is a percentage of members that actually don't qualify for the card and don't qualify for a big point account because of certain requirements from a kind of K Y C perspective.
And these enhancements will essentially.
Eliminate that and improve the percentage of members. Therefore, we have more growth opportunity for for those products.
Thats just a function of again of the PDP roadmap.
The other thing too is if for example, you will look at say the key.
Cash out down in the U.S.
They essentially have one single account and from that account when you open it and you open your peer to peer account you connect your bank account. You then can obviously transfer fund money in there and transfer money to and from friends, but from the same balance you can get the card you can start using the card or you can buy bitcoin.
The way moguls set up today is you have a separate account for your card you have a separate account for bitcoin and we're we're essentially planning on moving more towards a a cash out model.
What that does is it a lot less friction to for example went to go from peer to peer to say getting the card because you now have the ability to say use the card to access that cash balance right.
Same thing as it relates to big point, So and you also have essentially one experience where you have connected to your account.
You know, it's connecting you're transferring money to your Big Clinton Count then separately opting connect your card and transfer money there. So.
It's a more of a one account experience. So a lot of you know improved lower.
Lower friction that ultimately drives more engage.
Engagement in cross selling into your other products. So those are some of the bigger pieces in that roadmap that we're focused on actually launching first so some of those will start happening in Q1 and quite frankly, we think those will have a meaningful impact on.
On the business right, even well before actual peer to peer itself launches.
Right got it. Thank you guys. That's helpful I'll pass line.
Thanks, Susan Thanks.
Your next question comes from the line of building from Raymond James. Please go ahead.
Hey, guys.
So looking at your member addition, so pre pandemic you were doing 17 20000.
Member additions per month, and then Q2 was Allpoint and then Q3 you.
Almost double downbeat should we expect this to be an inflection.
Then you're renting up loans again and should we expect a return to pre pandemic levels in Q4.
So yes, great. So I would say, yes, we absolutely expect.
To see a continued acceleration of net member additions in Q4 and quite frankly in 2021, and we expect that.
We will.
In the next few quarters exceed.
Where we were from a net member additions pre pandemic.
Okay, that's great news.
And it's also good to hear that you're out of the spend on the card is up 66%.
What is the dollar amount there and.
The number of logos and users increasing and what's been the attachment rate.
So it's Dave so yeah, I mean, we're continuing to see obviously, a steady increase in monthly active card users and quite frankly, the the actual.
The fact that the average spend per user you. When you have new users coming on it has been up that much is very encouraging. Obviously you also get customers that are signing up and give it a try and just load a little bit of money on it and don't turn into active so that can actually bring your your spend down.
Before you know essentially you get at mature enough member base. So the fact that we're actually seeing that level of growth. Even initially is very encouraging.
The other thing that I would say if you dig deeper to we have one of the things. We also launch was we talked about was visa direct than visa direct essentially enables customers that essentially have a visa debit card. So typically TDC IVC Scotia there.
Main debit card as these enable tangerine just launch there used to be interact only tangerine is visa enabled as well.
Eightv.
Is launching there so increasingly you're starting to see more and more of this in the market.
And what we're seeing there is the benefit there is that you can easily link your bank account to your mogul account and you can also set up automated transfers right. So thats almost getting very similar to doing a direct deposit and typically in this space.
Spend that we're seeing on our on our good customers.
Within that segment.
Is actually in line with typically what you would see if you had direct deposit direct deposit again would be if you had your paycheck directly deposited onto the mogul card.
And that's actually what we had hoped to see.
We're also seeing an even higher spend obviously with those that actually set up a re occurring right automated transfer weather's weekly by weekly whatever.
And I can I can say that without disclosing the actual number.
Those are definitely kind of based on all the other programs, we're seeing out there.
Best in class type type numbers. So so very encouraged with the results there.
Okay, Okay, Okay, and I noticed that this quarter there was a.
Nice dropping to anticipate expense.
Is that a good run rate to use going forward.
So yes on the interest rate expense.
What isn't in.
This quarter is a.
A non sort of cash related expense.
Related to the revised terms of the debentures.
So that's going to that's going to show up in <unk> in Q4.
Although it's a.
Its majority of that will be non cash so.
But it will but but the level will be somewhere between what we reported Q3 on intra debenture interest and what we reported in Q2.
Okay, Thats, great and one last one for me.
Any guidance on the cash flow for Q4.
Yeah, we're not giving guidance on cash flow for Q4, I don't think we've obviously signaled that our our focus and our bias is now are often not decent investment mode.
We I think we've proven here over a couple of quarters that basically on a dime, if we need to throttle back our growth lever as we can generate meaningful cash flow I mean, we're talking about a business that generated you know between.
45 than 70, 70% cash flow relative to revenue in the quarter. So I think you know I think we feel pretty good about our ability to do that we're not giving guidance on cash flow in Q4, but obviously, we are we are making it clear that part.
A bias is towards investing in growth knowing that we've got our hand on the LIBOR is if we need to.
Yes, so at any point in time.
Okay, Yeah that sounds good.
That's all for me today.
Thank you.
Your next question comes from the line of Steven Li from Raymond James. Please go ahead.
Hey, guys I I may have missed it but.
Bitcoin accounts up to 137% well what is the actual number would be pulling accounts I mean is it 10000 to us.
Yes, yes, well over 10000, yeah.
Hi, Good times.
It's it's just under under the 100000 Mark but.
Well over the 10000.
It does I can and does that mean, they have just accepted the the five dollar promotional how they actually traded mold under $5.
Well, some obviously depending on the status have just activated it and accepted the $5 but.
But what we're actually seeing is on the funding side.
Which obviously is the precursor for trading is actually an even greater acceleration on on the funding side as well. So ultimately there is a corresponding increase in.
And actually trading and therefore trading revenue.
Okay that helps thank you.
That was our last question at this time I will turn the call back over to the presenters.
Okay, well, thanks again for.
Following us on our Q3 update we look forward to updating you following Q4.
Thank you.
Ladies and gentlemen, this concludes today's conference call.
Q4 participating you may now disconnect.
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