Q2 2021 Mogo Inc Earnings Call
Ladies and gentlemen, and thank you for standing by and welcome to the MOGO Q2 earnings Conference call. At this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During the session you will need to press star one on your telephone.
So you say about that today's conference is being recorded.
And we're proud of any further assistance. Please press star Zero I would now like to hand, the conference over to your speaker today, Craig Armitage from Investor Relations. Thank you. Please go ahead Sir.
Thank you and thanks for joining US today, just a quick couple of quick notes from me before we get started and our first.
Today's call will contain forward looking statements that are based on current assumptions and subject to risks and uncertainties that could cause actual results and the mature differ materially from those projected.
And then takes no obligation to update these statements except as required by law information about these risks and uncertainties are included in our Q2 filings as well as periodic filings with regulators in Canada, and the United States, which you can find on SEDAR and Edgar and on the.
The Investor Relations section of our website.
And second today's discussion will include adjusted financial measures, which are non <unk> measures.
And this should be considered as a supplement to and not as a substitute for <unk> financial measures and lastly, the announced city are discussed in Canadian dollars unless otherwise indicated.
And actually one final note that we do have a presentation slides available on our website to accompany today's call I suppose can be downloaded downloaded excuse me from the IR section of the website and with that I'll turn it over to Dave to get started thanks.
Thanks, Greg.
Thank you good afternoon, and welcome to MOGO second quarter 2021 results conference call I'm joined today by Greg Feller, our president and CFO.
It's been and active and highly productive start to 2021 from mobile and we're pleased to update you on our strong Q2 results.
Well continues to guide us as a simple mission make it easy and engaging for consumers to get financially fit and live a more sustainable lifestyle.
We're hyper focused on making MOGO, the goto money out for Gen Z and millennials by helping them develop healthy money habits and make it easy for them to achieve their financial goals and achieve financial freedom.
Continue to make solid progress on this mission, but still early days.
This strategy and focus on financial health is what's driving our results and reflected and the strong quarter second quarter and year to day performance.
Highlights include 80% subscription services revenue growth for the second quarter based on the accelerating adoption of our products and we're now at approximately $1.7 million members and Canada.
Our payments business also continues to grow with volume up 83 per cent to 2 billion.
And this quarter, we also increased our ownership to acquaint square to approximately 40 per cent.
The transactions, we completed since 2020, both strategic and financial have completely transformed our business and accelerate our growth plans and vision, bringing us closer to one of our strategic goals of building, a leading digital wealth platform and Canada.
If we look at some of the key milestones and what's driving our success on <unk>.
Marketing partnership with post media continues to be a strong strategic advantage, giving us cost efficient reach and exposure. We have lots of new product feature releases, which continued to drive our growth highlighted by the mobile card with carbon offsetting and bitcoin and rewards.
We have also improved our balance sheet by reducing debt and raising significant new equity among other steps.
And we've been very active with acquisitions and strategic investment activity over this period, we have acquired Carter and Mocha made a strategic investment and quite square and we're close to completing the acquisition of fortification.
Together these transactions bring us revenue scale, and diversification and important capabilities and expertise and digital saving investing and stock trading.
Let me start with our plans on the trading side.
Investing and stock trading has become more popular than ever and we believe there's a massive opportunity for upcoming new product MOGO trade.
And we're heads down on building this out and it's not only the biggest investment and a product we've made that perhaps our most important product to date and in fact, almost our entire product and development team is focused on this product launch.
In addition to the product development milestones our acquisition of fortification is expected to be completed in Q3, which is an important step.
The proposed acquisition would provide us with a license investment dealer with the requisite registrations as well as regulatory and technology capabilities key building blocks for our trading offering.
We're targeting launching mobile trade in Q4, once we have regulatory approval for the change and business support vacation given we now have the majority of our resources and focus on this product in order to help ensure we launch. It. This year. We've also decided to move and the launch date of our P to P to next year.
There is no doubt from a per from from our perspective. This is the right decision given the growth opportunity with trading and the good news is many of the things needed for P. To P are also needed for trade. So the order here and makes a lot of sense.
Digging into trade a little further based on our research and the most successful trading apps, we've decided to launch trade as a separate out the bottom line is that when people are trading and investing they want and app that is all about this especially if they are active traders.
That means being able to easily log in and see your stocks and quickly see prices and make trades compared with an app with trading is one of the many products that require a user to go through multiple screens. Our goal is to build a leading trading app and Canada and we couldn't be more excited with how this product is evolving we.
We believe trade can be $100 million business and three to five years post launch our roadmap includes bringing full crypto trading into the App as well beginning next year.
Well, we're moving forward with the separate out the trade will also be designed to work together with the existing MOGO out although they're two separate apps and it's important that the friction from Oba members between the two axes and lowest possible users will have one account and login mobile trade users will be able to easily log into their mobile app.
The same is as a mobile users can log into the trade up with the same login and users will also be able to easily move or transfer money from card crypto or trade. So if I have money on my card and want to use it to buy stocks I can simply transfer that money and a few clicks.
We're excited to share more as we get closer to launch and eventually get all of us and the products yourself.
We continue to be excited about the opportunity with our card and see it as a key driver of member adoption and engagement. We are truly focused on making this the easiest way for someone to control their spending and avoid the overspending on credit cards, while at the same time, helping them save the planet from climate change.
I believe the two biggest challenges we face today are solving the wealth GAAP and climate change and the fact is financial health and the health and the planet are directly linked.
And again, how someone manages their spending has perhaps the biggest impact on their financial health highlighted by the fact that about 60% of consumers live paycheck to paycheck.
And 72% of carbon emissions comes from our consumption and spending spend less save more and lower your footprint.
As we've all seen the news recently climate change is only getting worse and we all need to do more to help stop it and MOGO makes it really easy to do a lot more while also helping you save money one pound of C. O. Two is offset for every dollar spent and our current initiatives, helping protect the Amazon rainforest, one of the world's largest carbon and absorbing landmasses.
Vault spending and Canada was down on the mobile card, Canada could hit our goal of becoming carbon neutral almost immediately.
This value proposition is driving accelerated growth and transaction volume and in fact Q2 volume was up over 600 per cent year over year. Another critical measure we look at look at is net promoter score, which measures how likely your customers are to refer others are they promoters or detractors are N. P. S per active card users and our most recent survey 66.
Driven by strong savings users are seeing as well as the positive environment impact. They are making what's also particularly interesting is for those that chose the card because of the environmental impact. Our MTS is 77 and for those that are using their card for more than 75 per cent of their budgeting. The MTS goes up to 87.
For context, the industry average for financing commercial banks is zero and tube Canadian Big five banks have and MTS are four and six.
So we're really excited from what we're seeing here to continue to get feedback and make adjustments share value prop and experience again, our goal is to make this the most powerful tool and candidate helps them on control their spending while also helping save the planet So stay tuned from more updates.
Our savings and best product continues to grow with over 120000 subscribers and revenue up 64% year over year.
Recall this product enables anyone to connect their debit or credit card and.
And either roundup purchases or set of regular fixed recurring deposits. Unlike traditional roundup products that put money into savings accounts. This is money that is actually being invested which means that every time a user spends money. They were actually investing in companies like Tesla Shopify and Apple our goal is to continue to expand and enhance its product offering and enable our members to automate their wealth building.
With a passive investment strategy and complement that with active investing through MOGO trade all part of our digital wealth strategy.
Our bitcoin trading product continues to trend well well bitcoin as a relatively small component of our revenue today. It continues to be and important part of our broader value proposition and helps drive engagement Bitcoin users were also seven five times more likely to refer a friend Q2 trading volume was up 390% year over year building on.
On this success, we're planning to launch a full crypto offering within MOGO trade next year. This means that existing MOGO crypto users will be able to access and trade a full range of crypto through MOGO trade.
As many of you are aware, our roots are and consumer credit and it's always been and important part of our offering and just like every other Arab banking consumer credit is evolving and this new digital world.
Gen Z and millennials are looking for simpler easier and more flexible solutions and this is driving a shift away from using traditional forms of credit like credit cards.
Squares recent acquisition of after pay highlights a shift and our goal is to continue to evolve our own credit offering and give our members the same level of convenience and affordability a buy now pay later.
As our card offering continues to grow this will become an increasingly bigger opportunity and we believe that most will gravitate to this new way of managing money, where they use a card like MOGO to better manage and control their spending while staying away from credit cards, but occasionally need access to credit and looking for more modern digital experience that gives them a more convenient and accessible solution.
We're also seeing increasing demand for our credit products and believe a background and credit will become an increasingly large competitive advantages versus versus other players.
We're also seeing growth from our BTB payments business card and fact this this quarter was its biggest quarter ever for new customers just to highlight a few Carter recently launched its fifth country rollout with Sodexo, which included successfully migrating our card portfolio of roughly two and a half million cards. Several additional country Rollouts are currently being scoped with sodexo.
For deployment and the next year.
Carter's is also providing the transaction processing for leading Fintech and banking solutions, and Canada, including pay fair, which provides the gig economy payments for Uber drivers and Canada. It's also powering a T V's new digital bank bright sides card product.
Another car to customer all pay recently launched one of the largest public sector card programs for the National Health service in the U K. The program is expected to rollout over 250000 cards within its first quarter of being live and and anticipate and see significant growth as it rolls out across the U K.
Clearly, there's a lot going on and a variety of areas and this also ties into our platform and how are we building a moat. We continued to build the deep expertise in these areas and each of them on their own and a very complex and together. This continues to build a competitive moat that isn't easy to replicate takes years of experience and lots of investment to get where we are today. This plan.
Form is also what's enabling us to relatively quickly once something is complicated and stock trading app.
And there are many things that we're developing to support trade that will also be leveraged and our existing mobile app and so we're starting to see some good synergies and even economies of scale that can be very impactful so on.
I'm excited about how things are evolving both on the business side, but also from a platform perspective, which is critical as we continue to grow our business, which we are clearer clearly still and the early days in terms of scale.
With that I'll introduce Greg to talk you through the financials.
Greg.
Thanks, Dave and good afternoon, David mentioned earlier during the second quarter, we continued to accelerate our plans and expanded product capabilities and build the most comprehensive digital wallet and Canada.
Really was a milestone quarter from Ogle from financial perspective with strength across multiple measures and we entered the second half with strong momentum.
Which you will see and an updated outlook now calls for year over year growth of 100, 110% and subscription.
Revenue above our previous guidance needs and 100% key highlights include a significant increase and our member base, both organically and through the <unk> acquisition.
Accelerating subscription services revenue growth record gross profit and.
In addition, we reported and adjusted EBITDA loss of 3 million and the quarter and we significantly increased our gross investment across the board given the strong secular tailwind and Fintech adoption and Canada.
We also reported positive net income in the quarter of $9 million, which included a $25 million gain related to where investment and quaint square and lastly, we ended the quarter with a strong balance sheet, including approximately $76 million of cash investment portfolio and digital assets.
After eclipsing the 1 million member market. This point last year total member base grew to 1.7 million members this quarter and an increase of 63% just over 60% or is that driven by acquisition of MOGO mocha with strong organic growth driven by MOGO card as well as crypto accounted for the balance.
If you were to include quaint square 600000 members as part of a broader member ecosystem, we would be an expense of 2 million members and Canada, which would put us in rare category in terms of member breadth and scale.
We are still early and the journey to more fully monetize their members, but as David talked about today. The large face is a highly valuable asset and it gives us great confidence and our ability to successfully launch new products like <unk> Doc trading.
This product in particular, we believe will enable us and significantly increase and monetization of our members as well as further accelerate growth of new members and 22.
Total revenue increase and the quarter by 29% and $13.7 million again, driven by subscription and services revenue, which really drove all the growth from the corner.
Specifically subscription and services revenue grew by 81%, reflecting a strong combination and new revenue streams from card and mocha, along with strong underlying growth within both of these businesses and a substantial increase and mogul card volume we saw volumes increased 16, 100% year over year.
Crypto also grew nicely during the quarter, although represented a smaller portion of total revenue.
<unk> and services now make up 60% and total revenue versus 43% and prior period.
Even dating back to our origins and online lending there was a high recurring revenue element to our business with the evolution of our model, including the expansion of our product in recent years approximately 95% of on revenue is now recurring in nature be it subscription fees and transaction processing interchange revenue interest revenue.
Stable and recurring revenue stream gives us increased revenue visibility, which is one of the key factors underpinning our first ever forward fiscal year revenue outlook.
As I mentioned with the confidence and the underlying model of are within.
Within 2020, we have significantly increased our investments and growth initiatives. This year as we believe the tailwind and Fintech adoption and Canada has never been stronger this increase and investment drove the decrease in adjusted EBITDA, which included a significant increase in product and development investment in particular, we're making large investments.
One of the largest and the company's history in order to deliver a free stock trading App and Canada by yearend.
Market, which is still at very early stage relative to the U S.
In addition, we are also making big investments and sales and marketing both on mobile to expand our user base as well as investing and the geographic expansion of our digital payments business.
Which recently expanded into the large European market and importantly, these growth investments are levers and dials, we control specifically approximately 80% of the increase in opex year over year is growth related spending.
And as Dave outlined during the second quarter, we executed on multiple transactions to increase our ownership in the leading candidate lean crypto platform point square to approximately 39%.
We also maintained and option and warrant to increase the ownership to 53% I would caveat, we required point towards board approval to do this.
The warrants and exercise price at a significant discount and the last transaction prices from point for share, which results and that's recognizing and meaningful gain and the quarter for the value of these warrants.
And it's also worth noting that this is the first period and which we have accounted for this strategic investment under the equity method.
As a result going forward you will see some new disclosure and MD&A along with one line nonoperating income on our income statement to account for proportionate share points where income.
And losses in each period.
And a high level points were experienced very strong growth and the business during Q2 up over 450% year over year like others across the industry. However, the growth was heavily weighted and first half of the quarter with volume falling substantially and June June and all through the period in which our ownership increased from 19, 9%, 39% and therefore, our proportionate share and points where.
Results were weighted towards the lower June result.
Volume has remained low and July but its been senior recent rebound month to date and August although still at much lower levels and peak levels and Q2.
We anticipated this volatility when we made our investment which is why we structured this as a minority investment with a call option.
We continue to be big believers and the disruptive power of the crypto and its importance and any nextgen digital financial platform and continue to view point score as a very strategic and attractive long term investment.
And though we do have crypto related revenue and Pogo and it accounts for less than five percentage of our total revenue. So crypto volatility doesn't have a meaningful impact on our core business and result, instead over 95% of our crypto exposure and will continue to be through our investment and point square, which currently sits on our balance sheet at a book value of approximately $102 million.
Separately after quarter, and we announced on small investment and Tetra, which was spun off from coin square and became candidates first qualified custodian for crypto currency asset.
<unk> core business is the KFC and storage of crypto currency athletes, including bitcoin, either and variety of other digital asset.
Priority catches wants and canyon market from crypto currency costs, and he was limited U S providers and unregulated needing custodian.
In addition to point square and MOGO tetrode trusted backed by several industry participants, including point based ventures and investment arm Coinbase and the Canadian Securities Exchange points.
<unk> owns approximately 47% of mobile and mobile.
<unk>, 4% et cetera.
We continue to have a sizable investment and portfolio on our balance sheet of about $20 million at quarter end, which includes about a dozen equity investment from private technology unique gaming company, as well and small investments and both CRM and bitcoin.
Our goal with new investments and this portfolio to support and broader ecosystem in Canada, and we ultimately see playing a role and consumers' digital wallet, while monetizing non core investments such as the sale recently and we're thinking benefit from <unk>.
Proceeds of $4.7 million, and which we recognized 116% gain from versus book value at year end.
And also post quarter, and we exchange a portion of our investments and private media company fluent and to share the public E Gaming company enthusiast gaming.
Our strong results year to date and the multiple growth drivers you see here enabled us to revise our financial guidance for 2020 one and.
And introduced 2022 guidance.
Typically we expect year over year growth of about $100 or 110% and subscription and services revenue in Q4.2021 as compared to Q4.2020 again. This is above our previously communicated range of 80% to 100%.
And also are introducing total revenue guidance for fiscal year, 2022, and the range of $70 million to $75 million.
We also anticipate improving adjusted EBITDA margin as a percentage of revenue beginning in fiscal 2022, as we continue to benefit from scale.
And we believe and as we continue to increase our scale EBITDA margin, we believe and the range of 35% are achievable over time.
We are assuming continued growth investments both in technology, and and marketing to drive continued product expansion, along with increased engagement and monetization and support accelerating revenue growth.
While we also expect to remain active and M&A, we've not factored that into our outlook for FY 'twenty two at this time.
With that we will open the call up to questions operator.
At this time, ladies and gentlemen, if you would like to ask on audio question Press Star then the number one on your telephone keypad and why.
Once again by day Star then the number one on your telephone keypad, we'll pause for just a moment to compile the Q&A roster.
Your first question comes from the line of Scott Berg with H C. Wainwright.
Hi, good afternoon, guys congrats on the quarter.
Thanks Scott.
I'm curious can you give us a little bit of color around what the uptake has been from the.
Moca and legacy Moca members with some of the.
Legacy MOGO products.
Are you seeing adopt the card and and some of the other services that you guys provide.
So it's Dave Yeah, I mean, it's definitely still early days there. We've just literally begun some of the cross sell so moca members are starting to receive obviously communication.
From MOGO and vice versa.
But generally I would say.
Low general kind of cross sell given the the two experiences so our roadmap calls for integrating the two and that obviously is going to accelerate that so.
Right now again mocha still as a separate app, so separate logging in and and.
Password and those accounts arent linked so the conversion really is just happening through some email campaigns are beginning to test, we're definitely seeing conversion, including even obviously on our other products. So when we run these campaigns not only do we see uptake on the card, but we see moca users also getting loans and other things. So it just continues to be.
Reinforce our view that having an integrated solution with obviously more products for upsell and cross sell obviously, just drives a better LTV and ARPA for customers. So again that that is on our roadmap and we hope.
To basically integrate that into the MOGO up at some point and.
As early as first half of next year.
Great.
Very helpful.
Second one I'm just kind of curious.
And how we should be thinking about the lending business moving forward. It sounds like you guys have some creative things youre thinking about but as we look out in 2022.
Should we assume this is kind of a low single digit growth business or really just static with wood.
And <unk> 2021 levels.
Yeah.
Yes, so Scott I'll I'll I'll take that.
As you heard and Dave's commentary.
Lending, obviously, we've been big believers and lighting for a long time, that's the roots of the company very sticky product very high LTV product.
And.
Our focus on our own balance sheet is.
Low dollar loans.
Very capital efficient.
And then lending crew partnership for higher dollar loans so.
And so we think we've got a very good model there.
And we do believe that increasingly lending is becoming more and more relevant for fintech across the board.
And we have a very unique position and strength there that quite frankly, others don't so we do see that advantage and we see increasing demand from our own members.
And to tap into convenient credit.
So I think one thing that has changed.
Now going forward is we see lending ads.
And no longer going to be sort of a drag on growth.
We still think our primary growth driver will be subscription services, but but lending will actually participate in that to a certain degree as well.
So I think that's probably the sort of the color I can give you at this point.
I appreciate that and one last quick modeling question and it looks like stock comp kicked up quite a bit this quarter.
And what was driving that and what's kind of the expectation for that line item moving forward.
Yes.
So what happened with this quarter is when options were granted this quarter. Our stock was at a very high level higher than it was today, so those options and therefore out of the money.
But but valuations and that expense is based on the price at the time.
And under Ifr at.
More heavily weighted towards the quarter of grant.
So.
But you know look it's hard to predict stock option grant and sorry stock option comp because it is dependent on.
On valuations at the time so.
But but but.
I wouldn't think that that number would be would be higher than what it was this quarter.
But also that's why you'll see on the income statement, we specifically broke out stock based comp and DNA from our four main opex categories that just to make it a little easier to see what the real sort of drivers are from a cash basis versus a non cash basis.
Right no that's very helpful. I appreciate the time today guys.
And.
Once again, ladies and gentlemen that has started and then the number one for any audio questions.
Your next question comes from the line of Ed here could dive with a capitals.
Hey, guys. Good afternoon, congrats on the quarter.
And thank you.
Just maybe on <unk>, obviously, you guys did announce a couple of client wins and the U S. Can you maybe talk about their pipeline and how maybe that's kind of evolving now that they have been.
With you from almost quarter.
Yeah. So look we're carda is definitely an area that we're investing and so we've been we've hired some people and the U S.
And where we're making investment further investments and in Europe, we continue to see a lot of opportunity and that sector and.
And quite frankly increase and synergies. So we're seeing we're seeing demand from some kartik clients.
And to tap into some of kind of mobile capabilities.
And regions, where we're moguls not so MOGO is obviously focused from a BDC perspective and Canada.
Not looking to build that BDC brand outside of Canada.
<unk> is really sort of our international growth strategy.
But that actually allows us to potentially leverage some of our platform move up the stack and that we're at the card and level with clients and so we think theres a big.
A big opportunity there as well.
So I think we're we feel good about.
The card is.
And platform.
And the investments, we're making there so that you know kartik and continued to be a growth driver for us going forward.
Fantastic.
Maybe just one more on.
Sorry on.
The.
Sorry, I'm, just getting a little bit of.
Feedback here.
On.
On your overall cross sell on the platform and I'm talking about like outside of what you've kind of already addressed but can you maybe talk about the cross sell that you are experiencing on the platform from bitcoin to to the card to maybe even platform lending just in the overall ecosystem. Please.
So sure it's Dave maybe just to touch on it a bit.
So.
I would say increasingly on the MOGO side, given a lot of the positive.
Data points, we have on the card program and we're starting to focus more and on on the card.
Product.
It's still again early days, even though we're seeing big growth there.
Obviously the.
One of the key attributes obviously of a card user is they're more engaged than any other user including day acquaint. So our average card users logging in 28 times a month.
So again very high active engagement.
And as we all know cross selling really and adoption of other products. Usually is is there's a direct correlation to engagement and how many time somebody's logging into ultimately cross selling into other products.
And that's also where we see the opportunity on the loan side and obviously on the kind of the buy now pay later type digital offering so our plans include.
Bringing that more into the experience so that it's a more of a natural.
The ability for someone to tap into some credit if they need it.
With the kind of the in App digital experience and and options very similar to a to a buy now pay later.
The other the other important I think thing to note is on.
Our penetration right now on card is still relatively low on a member base. It's sub 10%. So there's still a massive opportunity in terms of just growth on a per member base into the card product itself.
We're again still doing a lot of work in terms of surveys getting customer feedback see what's resonating the stat I just shared in terms of the savings is another great. One that just came from a recent.
Survey results in terms of the average card user.
That reported savings so 66% of our of.
Of users reported savings using the card and averaged of over $200 a month, which is obviously material.
And then also seeing the the connection to the carbon offsetting and environmental impact increasingly we see that as a big opportunity.
And based on this we've got some changes that are going to be coming up that we think are going to make a big impact in terms of making that product even even more appealing.
And what we're starting to see is a higher percentage of our members that are signing up now that are actually getting the cards. So that that number continues to go up and it's now starting to be in.
On the 20% plus range in terms of.
Users that are new users, signing up and actually ordering and card.
So things are continuing to evolve and again I would say the card, especially is becoming kind of a key driver and and ultimately will be that key driver of conversion into two other products.
Also including on the inverse side, our plan is to actually incorporate that directly into the card experience. So that just like you can do a round up on the Mocap you can do a roundup and the card and have that money, obviously automatically go in and to invest so you can see how that will also tie into conversion and the other.
Related point that I mentioned earlier is with trade.
And when trade launches later this year.
The goal is.
And have the ability to use the money on the card to buy stock or move money from your stock accounts into your card and I E. If you have money you sitting on your account and you want to spend it you can easily spend it on the card.
Same thing and crypto and that is a key driver of cross selling so if you look at our and Aflac cash out. That's obviously been one of the key drivers of their success. The money you have and your account can be used to buy bitcoin can be used to buy stock or it can be used and PDP and <unk>.
And today at MOGO your card the money sitting on your card cannot be used to buy crypto and vice versa. So that's also going to be happening later this year and we think that's going to be a key accelerant in terms of conversion and adoption of other products.
That's great. Thank you guys I'll personally.
Your next question comes from the line of Doug Taylor with Canaccord.
Senior team.
Yeah, Thanks, and good afternoon.
You mentioned the stretch target of EBITDA margins of 35% being achievable kind of at maturity and now obviously, you've got a lot of exciting opportunities that you're investing in and the near term.
And you can help us.
Think about the bridge between now and and maturity and and how you're balancing.
Investment versus gross.
And then delivering margin and profitability.
And.
Sure. Thanks, Doug.
I guess a couple of things.
As you know in Q2, and Q3 last year, we generated close to 50% EBITDA margin.
On $10 million on revenue and obviously our revenue is scaling now.
Now that was oxy period, where we dialed back our gross spend.
So we could be at that level at that scale right and growing.
The way we want it to be so obviously that wasn't long term sustainable at that scale, but I think it day to highlight how.
Quickly, we are able to turn the dials on our own business and how.
How much of our spend is variable so the other thing I just mentioned.
And our comments here is that if you look at the big increase in Opex spend year over year about 80% of that.
Is is growth related so there is a portion of it that non.
Growth related I E kind of more just based on scale of growing growing the business.
But I think our focus is definitely on investment right now not.
EBITDA margin and profitability.
Shown we have the ability to do that and do that quickly. If we if we need to but we think that with the tailwind finally on fintech adoption and Canada catching up quite frankly to where things have been and the U S and other market League. This is the time to invest and focus on growth.
And we obviously have provided guidance that we expect improving EBITDA margins beginning in FY 2022, and therefore, what we're obviously, saying as well is as we scale up and we're looking for a portion of that.
Incremental gross profit dollars to fall to the bottom line and some of those investing.
Put towards investment.
But with a commitment to drive to profitability and drive to that sort of a long term target EBITDA margin and around 35%.
And so obviously difficult to say exactly when and when we're going to be at a point to do that but quite frankly, I think that will depend on the market our ability to drive meaningful growth and ROI from those investments and if we're not seeing that.
And then we may.
We have the ability and flexibility to turn those dials down.
And get to.
EBITDA margin profitability sooner on later, if that's what we decided the right decision.
So just to put a finer point on that I mean, you've talked now about $70 million to $75 million and total revenue next year and what you are suggesting is narrowing EBITDA losses, which is I think consistent with what.
And as being expected of you by by the Street right now.
Yes.
Thats, correct, and EBITDA narrowing EBITDA losses, as a percentage of revenue okay.
That's great. Thank you very much thank you.
Your next question comes from the line of Steven Li with Raymond James.
Thank you Hey, David can you elaborate a bit more on MOGO trade being a separate so I have the mobile app, how do you engage me and drive take up.
The initial marketing from mortgage rate is also going to be a bit stand alone.
Yeah, So there's going to be two components MOGO trade it will be.
Its own campaign.
And I think there's there's already an example, obviously and Canada in terms of well simple they launched a separate trading app, obviously, they've seen big success.
And quite frankly, they now have multiple at five three separate apps and trade. It is clearly the one that's driving their accelerated.
Customer acquisition and that then becomes a conduit for kind of cross selling into these other products and similar to what we're doing.
These are products that you essentially have the ability to manage even multiple apps.
Essentially with one account so.
You have one way to transfer money in and out you can easily and your mobile app transfer money to trade or vice versa. So those so there's a connection there that you can quickly go from one app to the other which let's say is completely different than what we're talking about with moca today Moca and MOGO. Those are two totally separate apps, there's no link at all.
Obviously, not even right now in and the name, whereas trade and MOGO theyre going to be completely interlinked. So if you're again, a ah MOGO trade customer or MOGO customer youre going to know that there's this other app and youre going on there's going to be some of that functionality and there and that includes the ability.
To even have some of the information showing up and yet which potentially we may do as well but.
But yes, we're going to be marketing it separately.
And to be its own separate marketing campaign, and NSX and essentially download that App and then I think about it you don't have any of the confusion of the other products and nobody is thinking about well what do I want to do with US. It's all about trade it's meant to.
And compete with best in class trading apps and Canada.
One of the things to that especially from the U S audience and Canada. There really there's only today one app that offers commission free trading MOGO is going to be the second half and obviously all of the big Big banks all of those are still charging.
Material Commission and really have more of a.
Legacy experience. This is obviously all built and with a modern UI and experienced very similar to the leaders and the U S.
Got it and then on mobile card and you.
And as you can share like number of users with a card or maybe dollar transaction volume. Thanks.
Well, so a couple of things that I will share in terms of just as we shared and the presentation.
And you look at the average carbon offsetting of just up about 650 pounds that also equates to the average spend so our average user spending about $650 a month.
Based on our most recent data.
No.
That is definitely especially at this stage, we think that that's very successful to start getting anywhere close to that $1000 range.
And again, what we're starting to see is increasing spend from from users. So as we continue to bring on more users, we're getting better and better at being able to convert them and turn them into a longer term.
Users.
Users on the card program.
In terms of getting into more specifics around round the numbers still still at a stage, where we we don't want to fully disclose but but obviously as you are seeing and the transaction volume.
And at that growth rate it is going to be start to become increasingly meaningful.
And I'm sure at some point, we'll start to give some more color on that.
The other thing a data point that would give us that.
Card revenue is is roughly.
And three X what are what our crypto revenue is right now just yet and obviously and it was up and and growing faster as well. So just to give you kind of.
And then.
Of the two.
Okay. That's helpful. And then if I remember on that slide Dave I think I saw like saving $200 per user per month.
Did that mean.
So we essentially doing a survey and we are really kind of honing in on obviously part of the value prop if not the biggest piece is trying to help people spend less I mean this is all about the fact that most consumers are overspending, that's where people struggled the most and the reason why and.
And even look at recent retirement surveys and the reason why people arent actually saving more money for investing and they don't have any money left over at the end of the month, they're typically overspending and even if they make more money and theres still tending to overspend. So there really is a GAAP in terms of a solution that really helps them to better control their spending to better budget et cetera increase.
Increasingly that is kind of the main focus of the card. So we essentially did a survey of our active users to find out are they seeing savings et cetera and.
And two thirds of them.
Reported that using the card actually help them save money and the average of the users was over $200 a month.
So which is obviously a material right.
And so that and that really is the primary goal can so if somebody is using typically a credit card and they go from using a credit card to the mobile card.
The big benefit from a dollars perspective, as how much money how much less they spent right. There is no immediate access to credit.
You're putting your own money on it it's essentially like spending cash obviously theres a lot of data out there that continues to show that using your own money on average you'll spend significantly less in fact, using a credit card. You'll typically you can spend up to 100% more just knowing the fact that you have obviously unlimited credit and you can pay it at a later.
So this whole kind of buy now pay later.
As much as it's a positive and it's more of a convenient digital form. There's also a trend quite frankly to buy now pay now right. If you really want to stay and control your finances and spend less it actually is about.
Using your own money staying and control.
And that's why we're starting to see the same day data supporting the same thing and the U S, where millennials younger millennials and Gen Z in particular on.
Are increasingly using.
Essentially a visa debit card instead of a credit card because of these control this control.
Got it thanks guys.
There are no further questions at this time, Mr. Phil or did you have any closing remarks.
Well, thanks, everybody for joining us on our Q2 call. We appreciate your.
Your support and we look forward to updating you on our next quarter, obviously, we've got a lot going on and.
We will keep you updated in terms of as we get closer to the launching of the trade up but thanks again.
Ladies and gentlemen, thank you for participating you may now disconnect on that.
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