Q4 2024 Mogo Inc Earnings Call
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Speaker Change: Welcome to your conference calls this could be the Sun by your conference will begin shortly.
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Speaker Change: Good morning, ladies and gentlemen, and welcome to Gogo, Inc. Q4, 2020 for financial results Conference call.
Speaker Change: This time all lines are in listen only mode. Following the presentation, we will conduct a question and answer session. If at any time. During this call you require immediate assistance. Please press star zero for the operator. This call is being recorded on Thursday March 22025, and I would now like to turn the conference over to Mr. Craig I mean, that's thank you. Please go ahead.
Speaker Change: Yeah.
Speaker Change: Thank you and good morning, everyone. Just a few quick notes before we get started 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 to differ materially from those projected.
Speaker Change: Undertakes no obligation to update these statements except as required by law.
Speaker Change: Information about the risks and uncertainties are included in mogul as Q4 and year end filings as well as periodic filings with regulators in Canada, and the U S, which you'll find on SEDAR and you cannot in Edgar and you can access via the Investor Relations website as well and lastly, today's session will include several adjusted financial measures are non <unk> measures.
Speaker Change: Please consider these as a supplement to and not a substitute for the I F. A rest measures you'll see that we've included reconciliations to those in the press release and in the Investor deck. There was some technical difficulty getting the slides uploaded but for anyone on the webcast you can download the slides.
Dave: To follow along and they will also be up in the IR website as well so with that I'll turn the call over to Dave seller go ahead, Dave.
Dave: Thanks, Greg.
Dave Seller: And good morning, welcome to our fourth quarter and full year 2024 results conference call I'm joined today by Greg seller, our president and CFO I'll cover some of the key operating highlights and Greg will dig into the deeper financial results and outlook in.
Dave Seller: In 2024, we grew revenue by 9% to $71 2 million driven by 16% increase in wealth revenue.
Dave Seller: 21% increase in payments revenue, our adjusted EBITDA for the full year was $6 7 million coming in above the middle of the range of our increased guidance.
Dave Seller: We also ended the year with $49 1 million in cash marketable securities and investments up from $36 2 million in Q3.
Dave Seller: In wealth assets under management grew 22% year over year, reaching 428 million.
Dave Seller: Our platform continues gaining momentum with revenue, reaching a $12 million annual run rate.
Dave Seller: Telegent that thing solution that includes moca mogul and finish at pro continues to gain traction with its unique and disruptive value proposition and.
Dave Seller: Payments revenue grew 21% in 'twenty 'twenty, four reaching $8 6 million, while total payments volume processed increased 16% year over year at $11 5 billion, reflecting the ongoing expansion of this business.
Dave Seller: We also took steps to strengthen our business, including exiting our institutional brokerage operations to focus on higher margin areas and extending our credit facility to 2029 with lower interest rate.
Dave Seller: Looking ahead, we see significant opportunity in wealth, given the structural shifts happening in the market and they were all the AI will play in reshaping how people invest while it's still early we are focused on scaling wealth and payments in a disciplined way positioning ourselves for long term growth in these key areas.
Dave Seller: Given the importance of all the wealth business I wanted to take some time to explain a little more detail the opportunity and help investors understand our unique approach in the space.
Dave Seller: The market opportunity in wealth is massive Canadian households, now hold $10 eight trillion in financial assets.
Dave Seller: We believe the entire industries on the brink of a major transformation driven by the rise of D. R.
Dave Seller: Investors today have access to more data than ever before but the traditional wealth management investing models have not kept up.
Dave Seller: Inflicted incentives ice's outdated strategies and a lack of transparency continue to hold investors back.
Dave Seller: The two trillion Canadians happen mutual funds with average fees of around 2% highlight the opportunity as Canadians continue to be sold into overcharging and underperforming products.
Dave Seller: Most financial platforms don't actually rethink wealth management. They just tweak the same old system. They operate within those constraints, making minor adjustments instead of addressing real problem, but we're taking a first principles approach deconstructing wealth management investing down to its core truths and rebuilding it optimized for the investor not the firm.
Speaker Change: This is something that many don't fully appreciate it Charlie Munger put it the whole dam system is corrupt the wealth management and self directed investing market is designed to maximize investor success.
Dave Seller: Designed to maximize corporate revenue and profitability. These.
Dave Seller: These conflicts of interests engagement driven platforms. They all keep investors in a cycle the benefits the firm more than the individual.
Dave Seller: We have a unique opportunity to change that by applying first principles thinking and leveraging AI, we're not just moving the system where fundamentally reshaping it.
Dave Seller: This first principles thinking applied not just the products and experience, but to the business model itself, our business model that actually aligns with the success that the investors combined with the power of AI will fundamentally change the industry and empower investors in a way that never been before.
Dave Seller: When it comes to being a successful investor one of the question investors need to ask themselves is what is my age.
Dave Seller: Every successful Investor has what Buffett Monger Lynch pros playing at the highest level don't win because they are lucky they win because they have an advantage.
Speaker Change: But here's the problem most platforms are built to take the edge away from the users and give it to the house they push into high five P funds. They push you to trade they create experiences to designed to drive behaviors that are optimized for their business model.
Speaker Change: You return the system is designed for them to win not U. We built intelligent best thing to flip the script on this head we're obsessed with one thing the actual performance of our members as investors. Our solution is designed to help investors improve their informational analytical and most importantly behavioral edge.
Speaker Change: And mogul, we Didnt just build another trading out we built the system intelligent best thing is designed around the principles of the greatest and best for ball time Warren Buffett.
Speaker Change: System is based on a few key truths, firstly as Warren Buffett says success and investing is about temperament not intellect.
Speaker Change: Our primary objective is giving investors the behavioral edge they need to win which means it's designed to also help minimize the behaviors that lead to poor performance.
Speaker Change: The second truth is another thing that Buffett and Munger has been preaching for years and the average investor would be way better off by simply investing through a low cost index like the S&P 500 in fact, it outperforms, 98% of professionals over the long run.
Speaker Change: So no plausible narrative to try and justify Ips for funds that underperform.
Speaker Change: And the third truth is that being a successful active investors really hard contrary to what is generally marketed today, Charlie Munger said anyone who thinks it's easiest stupid.
Speaker Change: Empowering investors with the right knowledge and analytical capabilities is critical for any chance to be a successful stock bigger.
Speaker Change: Today, our top 100 members are currently on track to over $3 billion. This isn't about getting rich quick it's about disciplined patient long term wealth building.
Speaker Change: Real wealth isn't built on hype is built on consistency and that's exactly what the first part of our solution is designed for Moca makes investing automatic no market timing no guests were just.
Speaker Change: Just set up schedule contributions stay invested in like compound to do its thing and the results speak for themselves last year and most of the growth portfolio delivered a 34% return that's the kind of performance that would have placed it third among the top hedge funds in the U S without the complexity without the high fees and without distressed back to trading again. This is a fully managed solution.
Speaker Change: Based on the proven performance of the S&P 500. It includes weekly dollar cost averaging automated dividend Reinvestments and importantly, an experienced are designed to help investors stay disciplined and consistent.
Speaker Change: Through the inevitable ups and downs of the market.
Speaker Change: One bucket is criticisms with the industry was that you won't find anyone telling their customers just simply go into a low cost index. Unlike the S&P because it's not that's not where the money is.
Speaker Change: Even though that's where most investors would be better off well now there is.
Speaker Change: Most self directed investing app today arent for investing their dopamine fueled casinos, they're designed to maximize engagement not returns.
Speaker Change: <unk> charts Zero Commission trades, and social driven formal keep users trading constantly because that's how these platforms make money, but is there any real investor knows more training usually these whereas results.
Speaker Change: The second part of our solution is designed to take a different approach we're not here to push trading we're here to help our members build wealth.
Speaker Change: No gimmicks no hidden fees no casino tricks, just the right mindset strategy and tools to invest intelligently.
Speaker Change: Trading profit when investors are distracted and addicted our success is tied to helping our members actually succeed if you understand that difference you understand mobile is all about.
Speaker Change: We believe the future of investing will be won by the platforms. They actually deliver the best results not the ones with the most features are those that have done the best job of game of bond trading.
Speaker Change: Most investors are at a disadvantage there making decisions with surface level data driven analysis and the same generic research is widely available. Meanwhile, institutions and hedge funds have access to far more sophisticated tools, giving them an edge that retail investors simply don't have the.
Speaker Change: The third part of our intelligent vesting is designed to change that didn't snap pro provides institutional grade data hedge fund level research and deep fundamental analysis to kind of insights to get serious investors a real advantage.
Speaker Change: Normally doctors this level of research with costs of $110 a month, but we've included as part of the intelligent Betsy membership.
Speaker Change: For investors, who care about performance over speculation signaled over noise in long term wealth building over short term trading since that probe is a game changer.
Speaker Change: The typical investing platform makes money ways that don't align with the investors best interest whether it's high management sees an uninformed funds hidden spreads or business models that rely on encouraging more training. The reality is simple most platform profit even when you don't.
Speaker Change: We took a completely different approach instead of charging big management fees are relying on revenue from trading activity. We built a simple transparent subscription model just $20 a month.
Speaker Change: Others pushed trading we've designed our solution to minimize trading and focus on long term patient investing the approach. It historically delivers the best results in an industry with management fees are typically range from one 5%, 2% and trading revenue driven by commissions and foreign exchange fees as high as 2%, it's easy to see how the incentives aren't aligned our business model.
Speaker Change: Is built around helping our members become better investors not more active traders.
Speaker Change: We are witnessing one of the most profound technical technological shifts in the world has ever seen as the impact.
Speaker Change: And wealth management investing in history will be transformational with AI for decades banks wealth advisors and trading asset control the industry built on high Pes complexity and models that serve institutions more than investors.
Speaker Change: That was before AI now we're entering note after AI era, where technology is breaking down barriers, eliminating inefficiencies and fundamentally changing how wealth is built.
Speaker Change: AI driven platforms will enable does that have an investor first mindset to deliver a transformational experience and value proposition that delivers better performance lower cost and a level of transparency. The traditional industry will be reluctant to match. This shift will enable new leaders to emerge and we believe we have the approach and determination to be one of them.
Speaker Change: The future of investing isn't just about technology. It's about culture. The next generation doesn't just want tools. They want something that you can believe that brand that stands for something a brand that inspires them to invest intelligently most investing platforms today feels transactional just another app with charts and numbers, but wealth building is more than that it's about a mindset identity and a long term vision.
Speaker Change: That's why we're building more than just an investing platform. We're building a brand a brand that challenges the status quo and brings a proven principles of the world's greatest investors to a new generation, but in a way that is culturally relevant brand that speaks to a new generation of investors, who want to break free from the traps and take control of their financial future. This.
Speaker Change: This is about making intelligent bathroom aspirational, making a high status, making it's something people want to be a part of.
Greg seller: With that I'll turn the call over to Greg Greg.
Greg seller: Thanks, Dave and good morning.
Greg seller: Have to say I love the dopamine field casinos line, it's so true.
Greg seller: And it's why we're so excited with our intelligent investing solution and why we believe it's so disruptive, especially in the new world.
Greg seller: We're in more and more investors, who will be leveraging AI to make smart decisions really nothing like it either in Canada or even in the in the U S market. So.
Greg seller: So I wanted to first make a few comments on our payments business Carter worldwide.
Greg seller: As mentioned for the first time this quarter, we are now breaking out revenue from this business alongside of wealth as it were.
Greg seller: Represent our two primary areas of focus for driving long term growth into massive addressable market payments business is also our only international segment with a majority of Carter's revenues coming from European customers.
Greg seller: And our.
Greg seller: Wealth in our lending business, our Canada only as highlighted Karta had another strong quarter as reflected in a 14% year over year increase in payments volume to $3 2 billion in the quarter. During the same period revenue actually grew at a higher rate of 27% to $2 4 million for the full year transaction volume was up 16%.
Greg seller: $11 5 billion revenue was up 20% to $8 6 million.
Greg seller: We've been investing heavily in Carter's technology platform over the past year, which we've spoken about before and we're on track to complete the major portion of this investment by the end of this quarter positioned the business to continue growth trajectory and move towards profitability.
Greg seller: Turning to our investment portfolio, which is a major value driver for our shareholders given us substantial size totaled $38 1 million a large portion of this is crypto related with the stake in Canadian Crypto exchange Wonder fight.
Greg seller: This is also a fairly liquid asset that offers us flexibility to monetize portions of our portfolio.
Greg seller: When it makes sense for us in fact post year end, we sold some of this physician to $5 million of our eight 7 million shares for proceeds of $1 7 million and we also monetize private investments for an initial 750000.
Greg seller: Revenue for the quarter was strong.
Greg seller: We increased to $18 million up 5% growth driven by 11% and subscription and services revenue, which more than offset 3% decline in interest revenue full year revenue was up 9% to 71 million and subscription services was up 11% year over year.
Greg seller: 24 was also a milestone year for well through payments in terms of scale, which is why we're now breaking this these businesses out wealth and payments both saw accelerated growth in the fourth quarter of.
Greg seller: 19% in Q4 for wealth and 27% for payment during the same period based on this strength, we are guiding to 20% to 25% growth in wells for 25 and mid to high teens growth for payment in 2005.
Greg seller: Adjusted EBITDA for the quarter was $2 1 million or 11, 5% consistent with Q3 and a modest decline from the prior year full year adjusted EBITDA of $6 7 million was above the midpoint of our previously increased guidance and and compared with $7 $7 million in 2023.
Greg seller: We reported positive net income of $10 4 million compared with $8 five in the prior period and Q4 net income reflects $13 8 million gain on marketable securities compared to $13 six in the same period last year. Adjusted net loss was only 400000, an improvement from the 500000 in Q3, and bringing us very close to break even.
Greg seller: <unk>.
Greg seller: Our continued focus on cash flow in in 2004 yielded substantial results specifically cash flows from operating activities before investment in gross loan receivable was positive for the ninth consecutive quarter, reaching $4 1 million in Q4 for the full year cash flow from operating activities before loan receivables increased 50.
Greg seller: 3% to 14, and a half million dollars.
Greg seller: Total cash flow from operating activities.
Greg seller: Uh huh.
Greg seller: Net of investment and loan receivables was also positive for the third quarter consecutive quarter at half a million dollars in Q4 compared to negative $2 2 million in the prior year period overall for the full year, we reduced our total cash used in operating activities net of investment loan receivables from $9 2 million.
Greg seller: Negative in 2023 to only $1 3 million negative in 'twenty four.
Greg seller: We maintain a solid financial position at year end with cash and total investments of $49 million, including combined cash and restricted cash of $11 million and $38 1 million of marketable securities and investment portfolio and as previously mentioned, we monetize over $2 4 million of our investments in the current quarter. So post year end.
Greg seller: And we believe we will have additional monetization opportunities to fund any incremental capital requirements.
Greg seller: For our growth plan in 2025.
Greg seller: With our year end results, we updated our twenty-five outlook <unk> you will see in our press release, which factors into our updated guidance relates to our decision in this current quarter Q1, 'twenty five to exit our institutional brokerage business as part of our strategic decision to move away from low margin revenue streams. Although this business contributed.
Greg seller: One 6 million and $5 3 million of revenue for the three months and year ended December 31, 2004, it respectively. It contributed negligible operating margin during these same periods.
Greg seller: This revenue has historically been reported within our subscription and services revenue segment.
Greg seller: Based on this we are updating our 25 guidance for subscription and services revenue, which we previously expected to grow at high single digit rate.
Greg seller: This is on an on a reported basis will now decrease by 5% to 8%. However, when you adjust for the exited the trading business out of 2024.
Greg seller: Number is we expect subscription services revenue to still grow at mid to high single digit rate.
Greg seller: As articulated we are especially focused on growing our high margin wealth and payments business going forward, specifically, we anticipate accelerated growth in wealth with revenue expected to increase by 2025% and our payments business projected to grow in the mid to high teens.
Greg seller: The strategic shift allows us to focus on two high growth areas. Each within trillion dollar total addressable markets positioning us to build meaningful scale in these attractive markets.
Greg seller: Turning to interest revenue from our lending business. We now expect this to decrease by 8% to 10% and 25% driven by a more cautious approach to lending due to economic uncertainty, particularly the potential impact uncertain impact of U S. Canadian tariff disputes on the Canadian economy.
Greg seller: As a result of the lower interest revenue and increased investments in technology and marketing to support growth in our key growth areas. We now expect adjusted EBITDA to be in the range of $5 million to $6 million in fiscal 2025. We also are no longer focused on generating positive adjusted net income for the year given these decisions, including the prioritization of growth in our view.
Greg seller: Is in the most recent quarter, we are pretty close to getting to positive adjusted net income. So we continue to have dials that we can turn if we need to increase EBITDA.
Greg seller: And to get to positive adjusted net income, but we strongly believe that the right decision now given.
Greg seller: <unk>.
Greg seller: The things that we're seeing around wealth in particular.
Greg seller: Is to move more towards a growth and investment posture, and we feel comfortable with our balance sheet with existing cash and monetization.
Greg seller: <unk> for us to be able to fund that as you know we've been a generally a consistent buyer of our stock the company has.
David: David I have also been consistent buyers of the stock.
Greg seller: When we haven't been in blackout periods.
Greg seller: And we continue to be in a position, where we have never individually ever sold any shares so.
Greg seller: So we are very much putting our money, where our mouth is alongside of our investors.
Greg seller: So with that with that I will turn it back to the.
Greg seller: Operator to open it up for questions.
Speaker Change: Thank you ladies and gentlemen, we will now begin the question and answer session should you have a question. Please press star followed by one on your telephone keypad you would've hit a point that you had has been released.
Speaker Change: You wish to cancel your request. Please press star celebrated two if you're using a speaker phone. Please lift the handset before pressing any.
Speaker Change: One moment. Please for your first question.
Scott Berg: And your first question comes from the line of Scott Berg from HFC Wainright. Please go ahead.
Scott Berg: Hey, good morning, guys. Thanks for taking my questions.
Scott Berg: I guess first I was hoping we could get a little bit more color on the timing on the decision to leave the institutional brokerage business.
Scott Berg: Why is now the right time has something changed in the macro that makes that business.
Scott Berg: You know less attractive I mean, any kind of additional color there I think would be helpful.
Scott Berg: Yeah, Hey, Scott, it's Greg So look that was a business that.
Scott Berg: With the legacy business that we got when we acquired a business years ago.
Scott Berg: <unk> the regulatory licenses for the mobile trading business. So it was never a core part of our strategy, we just inherited it.
Scott Berg: And it's a it's a pretty volatile business so.
Scott Berg: The quarterly numbers on that can be very up and down makes it difficult to manage.
Scott Berg: Got.
Scott Berg: At least with our reported financials.
Scott Berg: And then we so we continue to look at efficiencies in the business.
Scott Berg: And as we as we've been doing for the last several years.
Scott Berg: And <unk> not only include removing unnecessary costs, but it also includes moving businesses that you don't believe align with our core objectives. Because they are also distractions. So a business that had volatile quarterly revenue.
Scott Berg: Secondly, negligible operating margin, so it's not really impacting our EBITDA.
Scott Berg: And was a distraction because it really wasn't core to our focus.
Scott Berg: We just made the decision that now was the time as we sort of ramped up our focus on.
Scott Berg: On our wealth and our payments business for growth going forward.
Scott Berg: Great that's helpful and second I'm curious as you.
Scott Berg: Look to scale wealth and payments could we see potential acquisitions there.
Scott Berg: To accelerate that process.
Scott Berg: I mean, you know never say never we've obviously done some in the past that.
Scott Berg: Not not a priority for us right now.
Scott Berg: I think we believe we've got a massive opportunity.
Scott Berg: With the with what we're doing in wealth, we believe it's highly differentiated.
Scott Berg: From anything else out there.
Scott Berg: We don't even think there is something out there that would make sense to us I think look as that business scales. There could be other pieces to bring into the ecosystem of wealth that could make sense, but.
Scott Berg: Nothing on the near term horizon.
Scott Berg: Okay, Perfect and then last one for me the decision to pull back in the lending business.
Speaker Change: Are you being proactive here or are you already seeing some deterioration in credit quality in the loan book.
Speaker Change: We're being proactive I think one of the things we've always.
Speaker Change: Emphasized in our business is lending.
Speaker Change: Which years ago with the majority of our revenue.
Speaker Change: It has become a smaller and smaller piece of our revenue. So it allows us to turn those dials up and down when appropriate when your business is exclusively lending.
Speaker Change: Our incentive is to keep pushing ahead.
Speaker Change: No matter what.
Speaker Change: But for US we're not in that position and so we've always I think taken a more cautious approach to lending.
Speaker Change: And right now with the macro environment, the uncertainty around tariffs and how that could impact things, we just decided to take a conservative posture there.
Speaker Change: If things change and things settle out over the next several months.
Speaker Change: We can always revisit that decision.
Speaker Change: But.
Speaker Change: We felt that was.
Speaker Change: The right rate guidance to give given at this stage right now it is very uncertain.
Speaker Change: And clearly from a lending perspective.
Speaker Change: The tariff issue would be a much bigger issue, we believe for the Canadian economy than it would be for the U S economy.
Speaker Change: Great well I appreciate the added color guys. Thank you very much at a time.
Speaker Change: Thanks.
Thank you once again should you have a question. Please press star followed by the one on your telephone keypad.
Speaker Change: Yes.
Speaker Change: And there are no further questions at this time I would now hand, the call back to Mr. Dale Fuller for any closing remarks.
Dale Fuller: Thank you.
Dale Fuller: Thanks again for taking the time to join US. This morning I also wanted to end by again thanking all of our team members for their continued hard work.
Dale Fuller: This is definitely a team sport, we've got a lot of dedicated team members, who work hard every day to make this happen.
Dale Fuller: We look forward to talking to you again after our Q1 results. Thanks Kim.
Dale Fuller: Yes.
Dale Fuller: Thank you.
Speaker Change: This concludes today's call. Thank you for participating you may all disconnect.
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