Mogo Inc. Q4 FY2023 earnings call

Key Points

• In 2023, the focus was on building a more profitable and efficient company while setting up for long-term growth.
• Q4 2023 revenue was $17.2 million, up 6% sequentially. Adjusted EBITDA was $2.7 million, up 1000% y-o-y, with full year adjusted EBITDA at $7.7 million, top of guidance range.
• Operational efficiencies: Total OpEx decreased 25% in Q4, 37% full year; revenue per employee up 82% since efficiency initiatives.
• Wealth segment: Emphasizes behavioral science in wealth products, with Mogo and Moka apps. Moka is a next-gen wealth building app using behavioral science and proven investment strategy. Marketing efforts to ramp up in Q2 2024, led by influencer focus for Gen Z and millennials.
• Payments segment: Carta's growth driven by expansion with existing customers, including large customers like Plexi.
• Crypto segment: Investment in WonderFi, view that it's an undervalued asset with potential in the growing crypto sector.

The company's business is composed of three key pillars: wealth, payments, and crypto.

• Wealth: The Canadian wealth market is trillions in size and expected to grow. Mogo's wealth products leverage behavioral science, with the Mogo app including Buffet mode based on Warren Buffett's value investing principles. Q4 revenue details for wealth weren't explicitly broken out by absolute and percentage, but the focus is on building a wealth platform.
• Payments (Carta Worldwide): Q4 2023 payments volume was $9.9 million, up 30% sequentially, driven by expansion of the core European payments business.
• Crypto: Includes 87 million shares in TSX-listed WonderFi, which owns leading digital asset businesses in Canada like Bitbuy and Coinsquare (a regulated crypto exchange).

Forward Guidance

• Expect accelerating subscription services revenue growth in 2024.
• Overall subscription and services growth rate expected to be in the mid-teens for the full year 2024.
• Continue to focus on increasing combined subscription services revenue growth and adjusted EBITDA margin toward the target rule of 40.
• Increase investments in marketing and development to drive acceleration in subscription services revenue growth from wealth and payments business.

Risks

• Today's call contains forward-looking statements based on current assumptions, subject to risks and uncertainties that could cause actual results to differ materially from projected.
• Information about risks and uncertainties are included in Mogo's Q4 and year end filings, as well as periodic filings with regulators in Canada and the United States.

Q: Just wanted to start off by touching on the forward guidance itself. It's good to see the uplift in subscription revenue growth. Just curious where that confidence is coming from and what are some of the triggers to get to that double-digits?

A: Greg Feller said they feel good about continued growth in the payments business driven by expansion with existing customers. For wealth, they've made massive investments in the wealth platform, getting strong early feedback, high NPS score, and ramping up marketing spend with limited prior marketing spend putting them in a good position.

Q: And on Carta, there's some very positive data on the payments business. Can you maybe touch on what 2024 look like -- what it looks like is it going to be more net new users? Or are you -- is it going to be activating the current use of is?

A: Gregory Feller said in Carta, it's going to be about expansion with existing customers, like winning business with big customers such as Plexi, a global player, and expect more of the same in 2024 with expanding existing programs in existing countries with big customers.

Q: First, I was hoping maybe you could provide a little bit more color on where some of the incremental marketing dollars are going to be gone?

A: David Feller said they'll be kicking up significant marketing efforts starting in Q2, primarily led by strong influencer focus given target demo of Gen Z and millennials. It will include bringing on influencers, campaigns to member base, and postmedia partnership, ramping up all through Q2.

Q: And then I was curious how you guys are feeling about share repurchases today? I know you had bought back some shares in '23 and it looks like it was at an average price maybe at or even a little above where we are today. Just kind of curious, your thought process now on share repurchases and kind of capital allocation in general.

A: Gregory Feller said they continue to have a share repurchase authorization in place and it's reasonable to assume share repurchases will be part of capital allocation going forward.

Q: And then last one for me. I'm curious to get your thoughts on WonderFi share price. I mean, I think the stock is down kind of 13% year-to-date versus at least the perception that there's been a real rebound in crypto and a broadening of interest there.

A: Gregory Feller said they are large shareholders, view WonderFi as having valuable assets and not getting proper recognition in the market, with their basis in WonderFi over $1 a share effectively.

Q: Maybe could you give us some more color on the decision to invest in Bitcoin and Bitcoin ETF this quarter?

A: Gregory Feller said they've been long-time believers in Bitcoin as a store of value, subscribe to the view of dollar depreciation, and think having some excess cash in Bitcoin or Bitcoin ETF makes sense as part of their overall portfolio, consistent with their focus on the market.