Q4 2020 Mogo Inc Earnings Call
Ladies and gentlemen, thank you for standing by and welcome to of Bogo in Congress.
Incorporated Q4 2020 financial results at the time, all participants lines are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask the question. During the session you will need the press star one on your telephone if you require any further assistance. Please press star zero.
Please be advised that today's conference is being recorded I would now like to hand, the call over to speak of today, Mr. Craig Architects you may begin.
Thank you operator, and good afternoon, everyone. Thanks for joining US today, just a couple of quick notes before we get going first just highlight the todays call will contain.
<unk> looking statements that are based on current of some and subject to risks and uncertainties that 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 these risks and uncertainties are included in our Q4 and year end filings as well as periodic filings with the regulators.
In Canada, and the U S, which you can find on SEDAR and on the website.
Second today's discussion will include adjusted financial measures, which are non <unk> measures. These should be considered as a supplement to and not as a substitute for the IR for us financial measures.
I would also highlight the today's amounts or discussed in Canadian dollars.
Unless otherwise indicated.
Lastly, we do have presentation slides to accompany today's call you should be able to find those through the webcast link.
Lee I mean.
You can also find those under the Investor Relations section of the local website.
With that I'll turn the call over to Dave fell or to get us started.
Dave.
Thanks, Craig Good afternoon, and welcome to Mobiles fourth quarter 'twenty 'twenty results call I'm joined today by Greg Feller, our president and CFO.
It's an exciting day for us here at mobile and we're looking forward to walking through all of the things you've been working on and most importantly, what where we're going.
Over the last year, we've taken several strategic and financial.
Steps that have fundamentally transformed our business our financial results for 2020, which Greg will discuss later reflect the success of our efforts to quickly adapt to an uncertain environment and underscore the fundamental health resilience and profitability of our business.
In addition to the significant investment in the development of our own platform, we've accelerated our strategy with two acquisitions and our strategic.
The investment all of which we will review today. The net effect is we are in of an even stronger position to take advantage of the accelerating adoption of digital wallets and financial health solutions.
We thought it would be helpful of starts day with the popular Cathy with presentation that came out earlier this year and highlight the massive growth opportunity with digital wallets.
We were obviously pleased.
Used to be feature in the report, but most importantly, this report highlights the opportunity we've been focused on for building out our multi product out.
The report highlights of these digital wallets are focused on low cost customer acquisition building Trust and then converting into other products. So you continue to gain wallet share.
Arc says digital wallet share value between 250 in 19.
Hours per user today, but could scale to 20000 and the key is having the right products and experienced the builds trust and drives conversion and adoption of about the products.
We think the key to becoming one of the main winners in the digital wallet space is how well you solve the problem of financial health. The wealth GAAP is real and it's one of the biggest problems we face today.
Hundred although everyone has the band count the majority of people arent close to being where they want to or need to be when it comes of their finances and financial stress remains the number one for us for across all demographics.
In fact, if you followed the traditional path. The most people fall today, you'll find yourself with the credit card debt overspending lack of saving and investing in financial stress.
The new survey out today of highlights how pervasive the problem is with 54% of Canadian saying they don't have a financial plan. The fact is most people really don't know what to do to build wealth and getting control of their finances and for many that do finally figure it out they have already missed valuable years of wealth building, which become very hard to make up.
Our mission is to help people become financially healthy and we believe the key to achieving this is to not only have the right products, but even more importantly, inexperience of game of Fives building wealth. We are focused on building an experienced and the only helps people get on top of their finances, but helps them get on track to building real wealth and for most people that should mean being on track to be coming of millionaire.
We want.
To make building wealth one of the most compelling games you'll ever play.
The highest for them of motivation is doing something because it's fun not because you have to and that's the key driver of our roadmap I E building of game of fight experience with products that make it easier to practice the right financial behaviors in order to build wealth.
So although you're hearing in terms like Super App, which generally refers.
First of all having a whole bunch of products and went out and we think the most important driver is going to be the experience of you create around these products and how that experience actually helps the user of improve their financial results the bay.
The impact for you can make on someone's finances, the more you will win.
The good news. This is a game that everyone can win the basis of our solution comes down to the fact.
That almost anyone can become a millionaire if they get on the right track with the right solutions early on.
The numbers don't lie even at a $40000 of annual income, which is far below the average income of Canadians. If you followed the popular of 50 30 20 budgeting. The model based on your after tax income were 50% goes to the needs like food and shelter 30 per cent to one.
It's like entertainment traveling clothing, and then invested 20 per cent and equities based on historical returns you would be able to retire by the age of 65 with five and a half million dollars and if you kept that going for another 15 years, you would get to a staggering $23 million now even if the only management saving the best half that amount you still get to almost.
Almost $3 million by age 65, and over $10 million by age 80, and as we move into the future of working later in life will become increasingly common now this assumes that someone never gets a raise and their income stays at this 40000 level, which obviously wouldn't be the case for most people. The bottom line is even on the below average income you could become of multimillionaire with the right habits.
Of this discipline implant now when most people see these numbers, they're typically shocked as they thought the only way they could ever become a multimillionaire was if they've made a lot of money or perhaps one of the lotto.
We believe that when it comes to your finances and building wealth controlling our spending is by far of one of the most important and challenging parts of your money game. As this is what determines whether or not you stay out.
Out of debt and whether you have money available each month of save and invest which is really how you build wealth.
As you saw on the previous page you actually don't need to make a lot of money to become wealthy we've all heard of people, making millions of gone bankrupt. How you manage your spending is critical which is why we put so much work in the making the move of card a great tool.
Again, it all starts with your spending.
And based on the 50, 30, 20 budgeting model someone making 40000 of year might have around 1000 of month available for paying rent and after paying rent and utilities and if they want to hit the 20% of investing goal, which means you'd need to budget, you're spending that's why avoiding credit cards of critical as it's so easy to overspend of not only not have any money to save and invest but end up with credit.
Pending debt like a large percentage of Canadians today like.
Like a debit card. This is your own money, there's no credit and no overdraft available and is designed to help you keep up the date and all of your spending and how much you have left so you have a better chance of sticking to it our goal is to make this most compelling card in your wallet and the easiest way to stick to a budget.
One of the cool features of the card.
That of card the new Bitcoin cash back program. The MOGO card is the first garden candidates for the ability for someone to earn bitcoin with every purchase and help them get into the habit of saving and investing while they're spending perhaps most importantly, unless anyone participating of bitcoin for free without risking any of their own money.
If there was a 10% cash back card, how many people would switch to it well.
Well if you.
Card is the one per cent bitcoin cash back five years ago, the value of the bitcoin would be worth over 100 times debt, which means it would have been equivalent to a 100% cashback and in the last 12 months alone it would be worth of over 7% today Theres No card in Canada that comes close to this and instead of accumulating air miles of your acute accumulating and exciting and speculative asset class that can be converted.
The cash with the one click and without having the risk any of your own money although.
Although it is still early days in terms of of Bitcoin cash back experience. We're already seeing some very positive trends for members who have that activated. These users are spending on average over three times more than non bitcoin cash back user and.
In order for members activate bitcoin cash back today, they must prefer at least one.
Frank This is also helping to drive increased sharing.
Again. This is all about game of finding experience. So you can actually make sticking to a budget and moving away from credit cards, unexciting and compelling experience and get our members to make this a primary spending gardner of wallet.
Many experts say that the two biggest opportunities for businesses to solve over the next decade as the wealth GAAP.
Climate change and we believe they're linked the mobile cards. The also the first garden, Canada also helps you offset your carbon footprint, while you spend and given the 72% of carbon comes from our own consumption.
Having a card that I'm actually offsets for C. O. Two as you spend is the easiest way someone can live a zero carbon lifestyle again. This is all about game of find the experience.
And controlling spending and spending less money one of the most engaging and rewarding things you can do I'm building wealth, while doing my part of climate change that's what the next generation of consumers expect and that's what we're trying to deliver controlling this part of the customer's wallet is not only one of the most important parts of helping them achieve their financial goals, but it's also one of the most important drivers of engagement.
And make building the helps drive the adoption of other products and greater share of wallet.
The coin is clearly one of the most compelling and exciting new technologies of our lifetime every day, we see more people and companies looking to invest and get exposure to this new asset class. We were one of the first companies in Canada offer of Bitcoin and the first offered alongside of broader.
And trust offering.
Our value proposition today is very simple and compelling. Unlike most other crypto offerings in Canada, we're actually the only one offering just bitcoin and our members don't have to worry about taking cassidy of it. We continue to believe there's a large and growing segment of consumers, who arent crypto enthusiast, but are looking for a simple and trusted way to invest in this new asset class.
Our products saw significant growth last year in bitcoin trading although coming off of low base. We saw just over 14 times growth in trading volume.
This growth has also continued in Q1 with January and February up over 20 times versus the same period last year.
But perhaps even more interesting is where what we're seeing in terms of behavior of these users and the engagement.
We enacted the acquaint members nine times more engaged than a non the coin remember and this translates into more conversion and for other products as well as likelihood to refer others.
We announced the launch of of Bitcoin rewards program last year, and we're continuing to build out. This experience. Obviously rewards are a key part of the gamification and can really.
Really helped drive behavior.
What's unique about this program as it gives all of those who want to participate and get the claim but arent willing to risk their own money a way to do it not.
Not only are we adding back one rewards as incentives to try our products, but we're also building in hidden Easter eggs. Another gamification technique, where users find the hidden rewards this could be.
Something like after 100 transactions on the mobile card the user gets of bitcoin reward or by practicing dollar cost averaging.
We continue to be excited about the impact is for program can have on our user behavior and really help improve engagement and ultimately help them get closer to their financial goals. Although many people are concerned about the volatility of bitcoin.
You can't deny how exciting it is and in fact, it's one of the elements of it makes it so exciting and getting our members excited and even addicted to playing their wealth building game is exactly what we're trying to do.
The Big news today is our announcement of the mogul acquisition.
And before I talk about how this will accelerate our growth strategy. Let me first walk you through what makes most.
Moca of Great Finance App.
Phil and his team has done a great job of building mocha, and it's such a great fit in so many ways not least of which is how similar the names are.
Most importantly, they have been hyper focused on helping Canadians improve their finances by making it easier than ever to not only save money, but invest at their core solution today is an automated.
The best thing product that happens by rounding up purchases of members linked cards or cards by connecting to their bank account moca enables them to link any credit or debit card. So that every purchase they make us round. It up and then at the end of the month that money's debited from their bank account instead of just going into the savings account it's invested.
Unlike some of the bank round up.
Teachers Moca is agnostic and can be linked to as many cars as you want and instead of putting it into the low interest rate savings account for the money is being invested what's more as they enable their members who do this through of tfsa RSP or non registered accounts. The average moca customer saves of $1000 annually through this program.
What's also impressive is the man.
To do this through a successful subscription program, where they now have over 100000 act of monthly paying subscribers.
Members of also given the additional ability to either add or move to a set monthly investment of Mount and today over 50 per cent of their subscribers have both roundup and recurring deposits setup.
For a member can begin their investing journey with simple round ups and then graduate.
Managed through the hiring more automated monthly investment program all for a low fee of $3 a month.
In addition to the smoke has several other great features including Bill negotiation, where they helped members of lower their bills. The average savings on this program has over $200. The debt management solution can help anyone who are struggling with debt get them help them pay it off on a program many people.
Wait of struggled to come up with the plan to get out of debt and this could be of great help in need of first step before you can begin building wealth the.
Also of the Cashback rewards program and an on demand financial coaching that's powered by certified financial planners.
It's easy to see how moca is a perfect complement to MOGO and our solutions and as every product and feature they have becomes complementary to ours.
That adequately helps improve the impact we can make on someone's finances again, we couldn't be more excited to welcome the moca team to team logo.
Yeah.
With the acquisition, we will greatly expand our product capabilities and total addressable market and the estimated five trillion dollar of wealth management industry.
Globally, we are seeing a massive secular shift to digital wealth platforms.
Moca will enable us to fill our biggest product GAAP mogul wealth will give our members the ability to save and invest through tfsa RSP of non registered accounts.
Again over 50 per cent of Canadians don't have a financial plan and a big part of that comes down to not knowing how to build wealth and what to invest and what's more of <unk> 45 per cent of Canadians 18 of over don't have the TSA R. R.
Andrew Mount the two main accounts of Canadians need to be using to save invest and build wealth again the massive opportunity.
One of the unique things about moca as they also have the solution that doesn't require a large initial deposit to get started unlike many of the solutions today in the market and anyone can get started with as little as a dollar of months.
As you can see our goal is to build an experience that helps our members.
S. P at long term wealth and makes it easy for them to see how they're performing and importantly helps them keep their eye on the prize in terms of dollar of the Stern track for again, if someone is earning 40000 of year invested 20 per cent of the after tax earnings in the market based on our historical performance they could easily become a millionaire having.
Having a solution of the holistic experience that enables this is a big GAAP.
In the market today, and we're excited to get this product to our members.
We've always talked about our strategy of working alongside your bank account with the goal of one day of enabling our members to make the full switch to MOGO. We're currently working on a new digital bank account that will enable our members to make this switch this new digital account will function similarly to checking account and that members.
The build their paycheck set up for automated deposit have automated payments such as mortgage income out of this account as well as enable P to P.
Perhaps most importantly, this will enable us to launch features and benefits that are exclusively for direct deposit customers I E customers, who make MOGO. Their primary banking relationship. These include launching things like early pay day. Obviously this has been.
It's gonna have successful companies in the U S is one of the key ways, they've been able to capture a large share of the market and get consumers to move away from their traditional bank accounts.
Bringing these three accounts together you can see how it will be set up so that it actually helps automate budgeting for our members. Your paycheck gets deposited your spending budget goes into your spending account in 'twenty.
Been very non gets automatically invested again this is what people need to automate their money away that helps them stay out of debt and build wealth everything that today's solutions don't deliver on.
Obviously, most members won't start at this level, but our goal is to continue to nudge them to improve their spending and that helped them get closer to that 20% goal.
We've long been.
20% of them to launch free stock trading and we're also excited to announce of this acquisition will speed up our plans to do this along with bringing in crypto trading through our strategic partnership the coin square, although we believe strongly in the automated wealth building program through low cost Etfs. There's also a growing retail trend in stock trading and investing although there are many people who want a more passive.
The implant and approach. There's also a growing number of consumers that want to invest directly in stocks and cryptos and in the long run we think most will incorporate both into the investment strategy.
Our goal is also designed into the way that helps our members see how they're performing versus the benchmark performance of the S&P 500, as an investor I will want to know if my self directed investments.
From an belge is more effective in it and then an easier and more passive strategy versus getting myself that I'm doing well again, another GAAP in todays market.
Free trading is now the standard in the U S and so far in Canada, There's only one option for investors and that option has a lot of room for improvement and that's what we plan on doing.
Our goal is to launch this before the end of this.
This year with that I'll ask Greg to cover the transaction of financials in more detail Greg.
Thanks Jay.
Yeah.
As Dave mentioned, we have fundamentally transformed the business of recent quarters through two acquisitions and the strategic investment all of which I will discuss in more detail.
Specifically.
The strategy of these transactions the standard product capabilities and accelerating the roadmap and give us additional scale of do we believe positions us for accelerating subscription services revenue growth of 2021.
As we look at the mobile platform, we will have for drivers of value going forward, one of our core BDC business, which once closed the with now includes most.
Typically savings and investments illusion of longtime of mobile of existing digital wallet capability.
Two of our BTB payments business part of which serves as an attractive and bring the international market. The the shifting from like the protesters do API B nextgen protesters like part of it.
Three our now strategic investment Acquaints, where what you believe the tremendous value.
Upside and forge gross portfolio of minority investments in most of the private technology companies, which post year end now include investing in bitcoin.
We believe this combination of assets make mogul and strategically valuable company in the Fintech sector and a unique way for investments the gain exposure to some of the most disruptive trends in the market today.
Earlier today, we entered.
Low because into of binding LOI to acquire Mocha. In addition to the city of benefit in terms of expanded product offerings and the math of wealth management market. The proposed acquisition also include most of the more than 500000 members and over 100000 monthly subscribers. The acquisition will therefore significantly standard current member base to approximately one.
Entered a million.
The acquisition also brings approximately $250 million of assets under management, along with the registry portfolio management capabilities from Canada and Europe.
As Dave mentioned it gives us a much broader range of taking the best new product along with most of the technology platform experienced fintech team.
Most significantly of the salaried most of the planned to launch of free doctoring.
Seven from the Canadian.
The transaction also accelerates the growth of our subscription and transaction based revenue and lastly, it will allow us to expand geographically into the large impact of Quebec market.
As mentioned in the press release of the transaction is going to be completed by an all stock transaction for approximately 5 million shares.
During.
During the current quarter, we closed on our previously announced acquisition of card of adding significant digital payments capabilities of our platform along with the growing Nextgen BTB global payments business.
<unk> next generation platform is the engine behind innovation and tech companies and products around the globe powering over hundred car program.
Providing vital processing.
During the course of industry leaders, including the transfer wise, the Nashville paper and others Carter, which is headquartered in Toronto protests of over 5 billion worth of transactions on the platform in 2020, which was the 35% from 2019. In addition car to bring significant benefit smuggle including significantly.
Significantly expanded Tam tuna.
All of your drilling global payments market strengthening our digital wallet capabilities, the deep payment expertise, which we're leveraging of the development of R. 22 of your payment solution, increasing logos revenue scaling of accelerating the growth of our high margin subscription and transaction based revenue.
<unk> been making good progress on its growth plan last month, they announced the expansion into Japan.
For transfer wise launched the multi current debit card. They also recently announced the expansion of the U S. The world.
The largest pant market garner will be providing products for the initial group of clients and expect the further expanding the bank and fintech companies in the coming quarters.
Another significant and highly strategic transaction that we now post.
Can you read was the agreement to acquire the interest in Canada, leading crypto currency part from coins were.
Launched in 2014 points, where it has grown to become the leading digital at the trading platform in Canada with monthly trading volume in excess of $600 million in the assets under management of over 600 million great.
Quite square the current revenue run rate is also the substantial of approximately 50.
Posted dollar which would be an almost fourfold increase from full year 2020 results. We've had a relationship points where for nearly three years as they currently power of Bitcoin accounts. We believe the platform is one of the most robust trading platform in Canada for digital assets and as a result, we believe they are well positioned to capitalize on the block the SEC.
You're going for it.
The first stage of this transaction, we will have is the for $19 nine percentage points, whereby the issuance of approximately $2 8 million shares from 27 million of cash.
We expect the closing this initial investment next month.
Two of agreement also includes an option for movement of acquiring additional shares it would take our ownership of the company to approximately 43%.
The millions of scores of our view of the points, where the highly strategic and value lap that from all of them. As we believe cryptocurrency is and will continue to be a core part of any leading nextgen digital wallet.
In addition to giving mobile investments the signet can take from what we believe is the highly strategic and value platform. The Canadian Fintech ecosystem. The coin square investment provides.
Which leveraged the one of the most exciting fastest growing sectors of Fintech. We also see significant opportunities to work together more closely with them by bringing together, leading digital capabilities, including squared leading digital crypto trading platform in Canada.
The last value driver for most of the growing investment portfolio, which now include the.
Significant kind of portfolio of just under a dozen minority investments in private companies in the technology of Med Tech media in the gaming space.
The investments, which were acquired from our acquisition of different capital in 2019 of the current book value of $17 million, excluding the car to stake which was previously part of this portfolio of yearend, we believe that a number of these investments.
And it couldn't be monetization event in 2021, some of that potentially meaningful premiums for current book value.
In addition to this portfolio, which we are focused on monetizing. The also now hold of about 17 point the point, which we purchased earlier this year and the average price of approximately $33000 U S per coin.
Co investment with part of our announced plan to make an initial corporate investment of up to one of the have millions of bitcoin representing approximately one five percentage of our total at the time.
The investment in Bitcoin is consistent with our belief in bitcoin as an emerging asset class and builds on our significant product development related investments in the point of lots of the years, including MOGO crypto and the Bitcoin rewards program.
Now, let me turn to Q4 and the full year financial results.
I will be brief given the full year results for available since this morning.
For anyone who is new to MOGO preface it that our year end numbers reflect an expected decrease in loan origination interest revenue and other related revenue stream as we sold a portion of our loan portfolio in early 2020.
Graham and intentionally reduced lending activity in light of Covid and our goal to reduce on balance sheet credit risks. These factors were partially offset by growth in subscription services revenue, which accelerated at the end of the year driven mostly by mobile crypto MOGO card also they were offset by lower operating and interest expenses from the improvements where capital.
Structure.
Importantly, our Q4 results showed accelerating subscription and services revenue specifically subscription services revenue was $4 6 million of the quarter up eight 4% sequentially from Q3 Q.
Q4, 2020 revenue with $10 million compared to 9.8 in Q3, driven by subscription services revenue again offsetting decline in interim.
Capitals.
The underlying profitability of our business was again clearly highlight in the quarter and full year gross profit margin of the extent of the year up from 68% in 2019, and 2020 of adjusted EBITDA of between 51% to $11 6 million from $7 2 million.
The profitability gives us increased confidence.
Revenue growth related investments in particular in product development and marketing as we look to take advantage of the accelerating shift of digital banking and mobile unique position in the Canadian market.
Turning to our balance sheet. We've also significantly improved our balance sheet of financial position through a series of important steps over the past 12 months.
Specifically in 2020 in.
And redo of loan book redo of our liquid loan book, reducing our credit exposure by approximately 32 million of reducing your credit facilities outstanding for $37 million from $77 million at year end of 2019, we.
We also extended the remaining credit facility and reduce the range by approximately 400 basis points and we reduced the interest rate on the adventures from 14%.
We feel the percent lastly, post our year and we added a significant amount of growth capital to our balance sheet raising a total net of expenses of $81 6 million individually. These are all meaningful debt together they allow us to move forward in a much stronger financial position and put us in an excellent position to capitalize on the growth opportunities we see going.
September.
Most of US model of you know it starts with the low cost of member acquisition strategy, our new member growth accelerated for the second quarter and the role in Q4 net member additions increased 51% of Q4 relative to additions in Q3 and total members exceeded $1 1 million members at year end the increase of approximately 15% year.
Over 2019, the speak for the appeal of our products, including Bitcoin for anti fraud protection of interim overpowered as well as the value of having them all integrated into the seamless easy to use digital account that health net members of management their financial lives.
We believe the current product trends youre seeing put into the good position for continued strong member growth of engagement.
And for 2021.
As we've discussed in the past we believe we have one of the best monetization of malls of any consumer fintech globally.
We currently have seven distinct ways of monetizing the member base and with the addition of most of them will have needs in.
In addition to member monetization revenue the harder we also have diversified our revenue streams include painted.
The gauge the missing piece, which we will begin to recognize in the first quarter.
As we look ahead to 2021, we're turning our attention to increase engagement monetization to support accelerating revenue growth specifically the current trends, we're seeing along with the recently announced strategic transactions of giving us the increased confidence in our revenue.
So we're providing some specific guidance for 2020. One this guidance currently excludes the impact of Moca.
Typically we're guiding towards continued increase in net member additions during the year accelerated growth in subscription services revenue and we are targeting 80 to 100 per cent year over year growth.
All the services revenue in Q4 2021 as compared to the same period in 2020.
With that we will open the call up for questions.
As a reminder to ask a question he will need to press star one on your telephone to the dry question press the pound key.
Please standby.
The child, the Q&A roster.
Your first question is from the Taylor of Canaccord Genuity. Your line is open.
Yes. Thank you good evening.
The guidance you provided for the.
The 80% to 100% growth Q4, two two for in terms of subscription and services revenue I Wonder if you could just kind of help us think about how we should know chart that over the course of the year in light of the you know the M&A that has happened and also with you know your your your product roadmap.
<unk> map in your new products being released over the course of the year.
Sure Doug it's Greg.
So yeah. So we do really sort of see the trend from the subscription and services perspective accelerate growth.
Celebrating during the year.
So effectively accelerating growth going into Q4, so obviously that means that.
We expect that the the impact the bigger in Q2 than it was in Q1 et cetera.
So from an M&A perspective card are you know we are only going.
B, partially consolidating the results in Q1.
For a full consolidation in Q2.
Mocap, which right now is not part of that guidance.
You know, we we may see some revenue impact in Q2, depending on when we close the transaction.
<unk>.
We do believe that ultimately moca will be.
Consolidated for for the full quarter by Q3.
So so that's obviously going to drive further acceleration in an overall subscription services revenue during the year.
And so so all of none of that seems to be tied to any you know.
Material jump from any particular product launch of upcoming new feature of that you're releasing of is that correct. Do you expect the the organic business to be relatively smooth.
In terms of the growth over the course of the year.
Yeah, well actually I would say there is the there is acceleration we see in the organic business as well.
Some of the trends of Dave actually spoke to.
We're early days and a lot of these products in terms of revenue scale, but the momentum. We're seeing we think is going to make a bigger impact on our overall revenue growth.
As the quarters go on and net revenue has more scale. So we actually do expect.
Specced, similar kind of accelerating trends on the organic level as well.
Okay.
You signaled I believe with your prepared remarks, there that you know you'd like to reinvest.
The reinvest a little more significantly in the in the product and the marketing.
And certainly it looks like.
Of the market's giving you the license to do that but I wonder if you can help us think about how you know your updated view on what the right level of investment is so that we can tune our models for that.
Yeah.
We haven't given specific guidance on EBITDA, but.
But your your takeaway I would say is accurate.
Our strong bias, if we kind of.
Look at 2020.
What did we do one of the key things that we believe we accomplish.
It was really highlighting the underlying profitability of the model when we dialed back growth spend.
The left and where we generated close to 50% EBITDA margins in the second and third quarter.
And.
And we also highlighted our ability to very quickly dial those growth investments down in.
In particular on the marketing side and some of the product development side.
But now with the with the position that we're in in terms of the early trends that we're seeing in our product.
The excitement of we have on new products.
Investment.
And the upcoming.
The transaction with the with Moca as well as expansion.
[noise] of card it into new markets in the U S.
We are and the significant amount of capital that we can put it on our balance sheet.
We feel that we're in a very good position to dial up that growth investment, which means youre really going to see that growth of investment show up in the technology and development spend as well as.
As well on the the marketing side.
The thought some of that show up.
In the current quarter sequentially over Q3.
But I would say you can expect some similar trends.
Going into 2021.
So where we are.
We're gonna be less focused on.
On the EBITDA line in 2021 that we believe ultimately that this entire sector is is accelerating and over the next 24 months. We believe the the leaders are going to be established and we believe we're in a very key.
Key position in the Canadian market.
To remain one.
One of the the key leaders here and we want to take advantage of that we want to take advantage of our financial strength and our product strength. So our bias is definitely to invest in growth.
And and we believe that that's going to be the right of ROI decision for for the company and for our investors.
Okay, perhaps one last question for me and maybe it's too early of true to say, but can you talk a little bit about what once this the moca transactions close what the you know the integration roadmap of milestones, we should be thinking about and you know what it was.
For your intention to run that product in that brand.
Market or consolidated into the MOGO brand of I mean anything like that I think might be helpful. And so that we can be and what that's gonna look like.
Yeah, I'll I'll I'll I'll, let Dave comment a little bit on it but did you say it is early we just announced transaction and obviously as we get closer to close we will come out.
<unk>.
More specific information on the on our plan.
So we're not going to get into sort of the.
The real specifics, but I don't know, Dave if there's anything.
On any of those topics that you think are worthwhile touching on right now.
Sure Yeah, I think initially we think.
With.
At the very least rebranding moca to MOGO and and then the Moog Moca App becomes effectively the MOGO saving of investing app and that effectively could be just the initial way that we launch MOGO saving and investing for our members and then obviously you start promoting that tour.
So obviously, we're seeing similar strategies, whether the companies well simple obviously now has three different apps. So there is a of multi app strategy. There that actually has some benefits. So the initial goal is to you know.
Integrate that way and then make it easier for both mocha members and both of them.
Remember the two to go between the apps.
But then as we kind of visualize through the presentation. Our goal is obviously to bring that into the mobile app as well.
And then as we look at the the stock trading in crypto, they're there's a good chance that we decided the best way to launch that.
Members for for a bunch of reasons is a separate out still under the MOGO brand right.
So those are still things that we're thinking through but I would say that's the kind of where we are right now.
Okay, well look forward to hearing more of as you approach closing thank you.
Okay. Thanks.
Your next question is from Scott Buck of H C. Wainwright Your line is open.
Hi, Good afternoon, guys I'm, hoping maybe you can give a little bit of color on the.
Preference for acquisitions, rather than partnerships and should we expect to see additional acquisitions as you continue to build out.
And the MOGO well the vertical.
Yeah. So so so let me comment on that so I guess, here's how we look at acquisitions right now.
We look at acquisitions that the way to accelerate our product road map.
And brain.
A key expertise and.
And scale to the business and if we do find opportunities that you know I mean, moca just being a great example of where for us to have built their functionality.
And be on the path to even launch free stock trading, we'd probably be 12 months from.
Given our own roadmap before we could even start on that and and and then you have to bring the capabilities and expertise that they bring on the team from of wealth management perspective, you're talking about of regulated industry.
And so there's a whole bunch of benefits on an acquisition there as far as excel.
Now rating your product roadmap.
And and aligning and bringing the expertise in house. So that's just the natural and if the if there are other opportunities, which we think complement our roadmap and accelerate it.
From an M&A perspective, you know then we will absolutely look at that.
So I I do.
Or our strategy going forward will be a combination of.
Our our own product development initiatives, but complemented with strategic acquisitions that we think accelerate that.
Bring scale and expertise.
Capabilities that are.
We think our our value add so I think it is going to continue to be a combination of those two things.
Great.
Helpful. Second one for me I'm curious the organic member growth in the fourth quarter and thus far in the first quarter, how much of that do you attribute to the kind of frenzy around bitcoin and crypto.
And maybe if you have it you know of the new account new members that you've added how many also have opened.
Big point of accounts with you guys.
Yeah.
Well, maybe Dave if you want to.
No.
It's always difficult to actually be.
The very specific on on where the member growth is coming from because when customers come in they actually onboard into the account which has multiple products. So it's difficult to say exact.
Exactly all the time, what there what you know what really is the driver.
But I would say for sure a bitcoin.
Joe of Blake one of the biggest drivers and accelerators of member growth you know if you look at it and you think about the broader you know what's happening in the landscape of effectively bitcoin as an emerging asset class crypto currency as an emerging technology and and current.
It's probably.
Is is obviously gaining increased attention with consumers.
And awareness of and.
And we believe that that trend is going to continue and the majority of true traditional players don't offer access for that product. So.
If you think about the you.
Current wave of adoption of crypto currency was the early adopters that went online you know found crypto exchanges that people hadn't heard of in the past jump through hoops paid high fees at to be able to trade crypto, but increasingly we believe of a big part of the next wave are going to be the you know the everyday consumer that actually.
The first wanted to get access to maybe bitcoin start to test test it out and have exposure and they're not going to be willing to jump through hoops pay high fees of.
And they're going to want to go to players that have of brand have credibility.
Great user experience and that's really what we're positioning MOGO for on the crypto side.
So that clearly has been a trend and we think it's the trend that's going to continue for you know for the foreseeable future. Obviously, the the sector is volatile and you see volatility in price is not necessarily.
The price levels that volatility in prices driving Ah you know driving net interest as well and so that will continue but I'd.
For all of the trend has continued to be positive and then you know our card or card I would say is right behind there as far as increasing our.
Attention and awareness.
And interest from consumers and obviously there is a link even to the card to bitcoin.
With with the cash back so I'd say those of the.
I'd say the two big drivers were saying, maybe Greg I'll, just add to that of the linked part of this obviously is.
The strategy of having these multiple products when certain things are are more.
Relevant that others, we can leverage that one of the things we're seeing with our bitcoin members. For example of an act of Bitcoin members eight.
Times more likely to use the MOGO card that of non act of the claim remember so there's there's a strong correlation between bitcoin.
Bitcoin member act activity and conversion into other products and obviously things like the bitcoin cash back.
Obviously has what length of but increasingly so as a reward.
The we've also or have often offer where we're offering a bitcoin cash back on mortgage as well. So as an example of a bitcoin active member is two times more likely to apply for a mortgage.
There are also eight times more likely to refer a friend so even obviously on.
The program referral and kind of of that viral coefficient in terms of not only driving engagement, but actually cross selling into other products as well as kind of helping spread the word. The other thing I'd mention is we're also tracking what we call kind of Mega users and one of the things. We're always focused on is the more engagement.
On the you have theres, obviously, a strong correlation between engagement and product adoption, obviously, the more somebody's logging into your app the more likely they are to build trust and credibility and ultimately bumped into other other products.
So we right now have a few segments, we have a segment of users that have.
<unk> logged in on average over in fact, one segment of logged in on average over 182 times. So far this month alone.
And what we're seeing in there is a very high percentage of them have multiple products. So these are the things some of the trends, we're looking at and obviously trying to determine kind of what that winning formula.
But clearly what seems to accelerate it is the combination of the product offering versus just one product.
Great. Thank you guys. That's very helpful. I appreciate the time today.
Okay.
Your next question is from Bill Chang of Raymond James Your line.
Liz.
Hey, guys two questions one of the coins.
The 600 million.
As of March.
And the second question.
Do you think of a 1% drag on that.
Based on my calculation of what comes out of $272 million.
As of them. So could you just reconcile that with the 50 million home on the presentation slides.
Yeah. So so obviously, where we're we're not giving we have a minority stake in the coin square. So we're not disclosing for full financials and information on quaint.
But 600 million of your amid the current number.
M a C.
So that's the the $600 million AUM number.
And.
You know the the revenue component is the combination of fees and spread.
And.
What we're saying is.
Uh huh.
Is that there are at a run rate right now north of 50 without giving too.
Two specifics.
But that that overall spread can can vary month to month as well.
Okay that makes sense.
So all of them.
The cancer.
The sequential growth.
Good day.
Subscription and services sequential growth yeah, the the biggest driver there.
<unk> is well the the.
Let's put it this way the fastest growing product there and revenue by far is bitcoin trading.
So that as they are.
Is the is the big part of it.
And probably the second fastest.
Revenue growth sequentially in subscription services would be would be card transaction.
Hum.
Yes.
Okay, Great that's good and point of one for me.
Can you give an update on the P to P loans and also when we can expect revenues to become more meaningful on the takeaway.
Dave you want to talk about of the PDP tiny.
Yeah. So one of the things that I highlighted in the presentation today is.
This new digital bank account and that actually is related to our P to P roadmap.
We've always the goal has always been again to essentially one day enabled the full switch today all of our members have bank accounts, our goal has not been to essentially.
Enable somebody to make the full switch so.
People have a bank account and then they're using the MOGO out for various things the.
The digital Bank account is actually one of the first pieces on the roadmap to P to P. What that's also going to do is enable a more convenient and and frictionless way for people to get money in and out of their MOGO account.
The prime and from that one experience they can either put money into bitcoin put money into in the case of obviously once we get wealth wealth as well as the spending card all through one account in one experience so versus the different ways to load money in bitcoin and different ways to load money into card. So theres a bunch of other enhancements that are going to go along with that.
And then the other piece of that is is P to P right and that ability will now enable somebody to effectively do a person to person transfer and they can either take the funds out of their cash account, which is the new digital bank account or they can choose to take it out of their spending account if they're using the card.
We expect that Peter.
P to P. In this account is going to launch in the second half of this year. So we still plan before the end of the year for to have that one of count along with P to P.
<unk> launched here in Canada.
And your last question on on Bitcoin revenue.
We're as we talked about earlier.
And sequential.
Accelerating subscription services revenue growth in 2020 one.
And the the the pretty meaningful of 80 to 100 per cent range of of year over year of growth that we're guiding for in Q4.
And that's going to be a combination of at that stage, we would expect the the the kryptonite.
For the revenue to be a meaningful component of it but just one piece of the bottom line of their model is not reliant on one stream of revenue and we we actually believe that really are you know a pretty unique differentiating feature of that MOGO has.
Relative to.
Don't read most of the consumer Fintech from the digital wallets out there with with few exceptions is the diversity of our revenue streams the monetization.
And we think that's going to be a pretty critical differentiator and value driver going forward.
Okay, Great that's all for me.
Okay.
Your next question is from Stan check them off of eight capital. Your line is open.
Good evening gents and congrats.
Congrats on the bulk of acquisition.
Maybe I'll lead with the question there first.
Both of you guys are acquiring are.
A fairly significant user base.
Could you guys provide some color on kind of what is the profile of a typical moca user look like compared to a typical mobile user.
Well, considering things like demographic engagement levels kind of just wondering what some of the similarities and differences are and how and how you guys are thinking about.
I'm, just kind of letting the space longer term, given you're expanding the scope of offerings.
So it it's Dave a couple of things on this obviously, where we're still.
Spending a lot of time understanding of the Moca business model of demographics of all of that data.
But initially.
What I'll say is obviously their value prop has been completely different than ours in terms of they're really all about saving and investing and up until this point that's not in the market. We've been focused on you know obviously you could say with with the claim that is obviously on the investment side that really would have been the first time, we had any sort of kind of product offering where we're attracting.
<unk> members that were literally looking to invest up until then it was mostly around controlling spending I'm. Obviously, we have on the lending side et cetera. So I would say that is the big piece and quite frankly, that's the piece that we're most excited about that this is a you know of.
The value prop that we have yet to have to not only offered to our existing members, but obviously.
Tractor a member base that we have and attracted before.
Generally I'd say too obviously this roundup feature one of the great things about it is it really is a perfect gateway for someone to begin even saving and investing right. So I'd say typically the customer and the signing up.
Obviously of Cotai solution is one that is having difficulties saving the best thing just saw in a recent survey today, saying that the number the number one goal of.
Millennials and Gen Z is actually increase their savings and most of them are looking for well how am I going to do that right.
Starting to see a lot of kind of traction.
For most of those types of assets that are actually almost making it something that happens in the background and then again. These are typically people I'd say more on the behavioral side that and again they could be all of it all ages right.
In fact, if you look at the stats 35 to 55.
Year olds actually are.
And it's likely to of a financial plan then than age is under 35, So I'd say, they typically fall into that category of they haven't figured out of financial plan, they're struggling to save money, they're looking for a solution that can just get them on track obviously, the fact that the average moca user saves over $1000 annually.
Are you starting to see it's a significant amount of money anybody that then logs in and finds out they've got over 1000 Bucks.
And when before that they were struggling to save any money you can imagine how valuable they find that so anyway I think that's probably the the the where we are in terms of understanding who they.
These are what the looking for and ultimately how the how we can see it you know the couple of days of offering comment did you comment on the AR on the overlap that we saw between our member base from there.
Oh, no I didn't.
So so Suzanne you know one of the things that we are we saw when we looked at it is.
Their customers are pretty low overlap on the remember base with our member base. So.
You know in the in the low double digit percentage of range of the total members. So it does tell you that that value prop on the investing in the savings side.
Is actually attracting a.
And a lot of ways the different.
Actually of MAU from.
Financial of kind of health perspective.
Okay great.
No that's actually helpful. Thank you.
Kind of shifting gears you to the two of payments out of the business.
You guys touched on on Carter's.
Sort of that continued focus on kind of global expansion would move into Japan, and the U S can.
Can you touch on what's the opportunity ahead on the BD front with Carla.
Do you look to leverage some of the core mobile assets.
Part of that strategy going forward.
Yeah. So look I think there's a couple of things first of all of their there is we just think theres significant opportunity with with Carter's existing business and value prop in the market as the as a reminder, when we decided to acquire Carter, we actually looked at for for ourselves when we were moving.
The legacy processors.
Talk to you know two of the other major next Gen processors, Mark head of and Galileo and in fact, we felt that Carter's platform.
Had similar functionality.
But also at a much better value overall.
Value proposition.
From one an N of ROI for us.
And we think that that's where the market's going card of builds out the model in Europe, where it's been a it's a lot more competitive and we think that that model is actually making its way to the U S.
And so we think that's going to be in a big opportunity for Carter to take advantage of that.
Physician U S.
And the related to the opportunity to kind of see some synergies from leveraging moguls platform to help card in their b to B business, obviously, you're you're not talking about the synergies of bringing leveraging part of payment technology and that help mogul on their own platform.
You know where.
And where I would say we're still early days there, but we are increasingly seeing opportunities to do so whether it's where we're already seeing some requests from some of the carter's customers because of that whole market is moving from a one off of.
One piece of our of the solution.
In terms of say just processing to a broader full stack.
And we're already seeing some some inbounds from some of Curtis customers being interested in some of MOGO solution. So effectively card is in the unique position to say Hey look you know talking to other fintech outside of Canada, We we actually know what.
And it's been working and you know and we've got inside kind of scoop on on what a great user experiences and how to build out of your card program into a broader digital wallet.
And the and so we do see of.
A number of opportunities going forward to sort of leverage mode with platform on that front, but.
What is definitely still early days there and.
And I guess that's why.
For the earlier question on investment and why we do think the this is the opportunity we quite frankly have a lot of kind of growth initiatives and investment opportunities in both carton side and the MOGO side, both on moguls existing products.
But yeah, you know one new products in and like like the wealth side. So there's there's really a lot of.
We believe big growth opportunities out there for us.
Perfect.
That's it for me guys. Thanks for taking my questions and I'll pass the line.
Thanks Suzanne.
And the question is just a sign of please continue.
Okay.
Sorry did you say no questions.
Yeah Okay.
Okay, well I think I'm just to summarize obviously, it's been a busy.
And with everything going on we're definitely expecting an even busier next few years here.
One of the things I want to emphasize we're still very early in the stages. The building. This company you know and really where we're hyper focused on building one of the most powerful and engaging financial apps around.
Really excited to update give updates on how the mobile transaction is going and I'm, obviously, a lot of new product.
Releases, yet to come this year, which will keep you update.
Other than that we look forward to updating you on our Q1 results call in and my Thanks again.
Yeah.
Ladies and gentlemen, this concludes today's conference call. Thank you for the pressure. They T. You may now disconnect.
Okay.
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Yeah.
Yes.
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Okay.
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