Mogo surpasses 1 million
members
Full-year Core Revenue increases 33% to
$47.2
million
Full-Year Adjusted EBITDA up 73% to
$7.2 million
Company
taking immediate cost reduction initiatives to accelerate path
to positive cash flow
Mogo reports in Canadian dollars and in accordance with
IFRS
VANCOUVER, March 27, 2020 /PRNewswire/ - Mogo
Inc. (TSX:MOGO) (NASDAQ:MOGO) ("Mogo" or the "Company"), one
of Canada's leading financial
technology companies, today announced its financial and operational
results for the fourth quarter and full-year ended December 31, 2019. The Company also commented on
the impact of the COVID-19 pandemic on its business and operations
and management's plans to address the current economic
uncertainty.
"Now more than ever, financial stress is a huge issue for
Canadians, and in 2019 we made progress improving our technology
platform, products and user experience to help our members improve
their financial health," said David
Feller, Mogo's Founder and CEO. "Our focus during these
challenging times will be on leveraging our digital products and
solutions to help minimize the impact to our members' financial
lives, especially those who have been most affected. We
believe that our products, including our new MogoSpend, will be
instrumental in helping members manage their financial health
during this time."
Greg Feller, President and CFO,
added: "In 2019, we continued to fundamentally transition our
business toward a capital-light model versus on balance sheet
lending. We move forward with a stronger balance sheet following
the recent $31.5 million sale of our
MogoLiquid portfolio, which provided additional cash while
significantly reducing our leverage and credit risk exposure. These
steps, along with several immediate cost reduction initiatives we
are implementing, will better position the company to manage
through the current challenging environment."
Commentary on COVID-19 & 2020 Outlook
With its 2019 financial results, management also provided an
update on the impact of the COVID-19 situation on its business and
operations. Mogo operates a fully digital platform; its services
and products are all accessed through its app or online, with no
physical branches or consumer-facing offices. As a result, the
Company has not experienced any material business interruption to
date. While the degree of severity and length of an economic
downturn is difficult to predict, Mogo believes that it is well
positioned to navigate through this period.
Mogo's COVID-19 Response: Helping Members Manage Through
This Financial Challenge
Mogo's platform empowers consumers with simple solutions to help
them get in control of their financial wellness. During this
challenging period, we are focused on helping customers in several
areas:
- Financial Relief - Mogo members who have a loan
outstanding and have experienced a disruption in their employment
will be offered payment options including reduced payments and
deferred interest to help manage through this time.
- Support & Coaching – We're providing information to
our members to help them navigate the various options they have
available to them for assistance such as accessing government
funding and EI and tips for things like potentially reducing car
insurance while unemployed.
- Spending Control – Living on a reduced budget is
challenging. We're rolling out our MogoSpend product, designed to
help consumers track and control spending while earning cash
back.
- Monitor and Protect – Since a financial disruption can
have a negative impact on a member's credit score and identity
fraud is on the rise, we will offer ID fraud protection for free
for six months to any members who do not have MogoProtect. This is
in addition to our free credit score product.
Cost Reduction Initiatives
In light of the current economic volatility and uncertainty,
Mogo is taking several immediate steps to accelerate its path to
positive cash flow including the following initiatives, which, when
combined, will reduce cash expenses in the second quarter by an
estimated $5.0 million.
- The Company is reducing expenses across the organization with a
focus on deferring its growth investments in technology and
development and marketing, excluding marketing efforts under the
partnership with Postmedia Network Inc. These reductions will
result in a temporary layoff of approximately 30% of our team, as
well as reduced compensation for the C-Suite.
- Mogo has temporarily paused new on-balance-sheet loan
originations. However, the Company will continue to originate
loans for its lending partner. These loans generate recurring
fee-based revenue for Mogo, with no capital investment or
risk.
- The Company will also exercise its option to capitalize
interest payments on its non-convertible subordinated debentures
beginning in Q2, resulting in cash conservation of approximately
$1.4 million during the
quarter.
Greg Feller added: "We will
continue to support our existing loan customers through this
challenging period while directing new originations to our lending
partners, which will allow us to continue to monetize our digital
lending platform. We have been transitioning our business to a
capital-light model for some time and, in light of the economic
volatility and uncertainty, we are accelerating this transition and
taking immediate steps, which we expect will allow us to mitigate
the potential impact to our business during these uncertain times
and accelerate our path to cash flow positive once we return to a
more stable environment."
Following the sale of the majority of its MogoLiquid portfolio,
Mogo's remaining on balance sheet gross loan balance was reduced to
approximately $72 million. The
Company believes the risk to this portfolio in the current
environment is mitigated by a number of factors:
- 100% of our loans are set up for digital payments and
approximately 88% of these loans are set up with multiple payments
per month that more closely coincide with our customers' pay
cycle.
- Mogo's consumer lending portfolio is primarily composed of
small-dollar lines of credit, with an average balance of
approximately $1,500 per loan and
average payments of approximately $50, across more than 45,000 customers.
- Approximately 55% of Mogo's customers have optional loan
protection insurance, which covers their loan payments for a period
of up to 6 consecutive months in the event of unemployment.
- Based on the income profile of our typical customer, we believe
the majority of affected customers would be eligible for government
relief measures and/or employment insurance protection. We believe
this would significantly lessen the financial impact for these
customers.
- Mogo is one of the most experienced online lenders in
Canada, with deep expertise in
underwriting and collections. The Company is working closely with
members to support them through this changing environment. Where
required, the Company will provide more flexible options, including
extended payment terms, payment deferrals and interest relief.
Based on the significant recent changes to the economic
backdrop, and the changes Mogo is implementing to its business, the
Company is not providing a more detailed financial outlook in the
near-term and is withdrawing the previous targets communicated with
its Q3 2019 financial results.
Financial Review
Fourth-Quarter 2019 Financial Highlights
- Total revenue1 increased 2% over the fourth quarter
of 2018 to $15.0 million.
- Core revenue2 increased by 8% to $12.4 million, compared with $11.4 million in the same period in
2018.
- Gross profit was $9.9 million (65.9% of
revenue), similar to the $10.0
million (68.3% of revenue) recorded in the fourth quarter of
2018.
- Adjusted EBITDA increased by 11% year over year to $2.3 million (15.3% of total revenue), compared
with $2.1 million (14.1% of total
revenue) in the fourth quarter of 2018.
- Cash flow from operations before investment in receivables
increased by 49% to $2.2 million in
the fourth quarter, compared to $1.5
million in the fourth quarter of 2018.
- Adjusted net loss was $5.2
million, compared with $4.7
million in the same period in 2018.
- Net loss of $6.2 million,
compared with a net loss of $5.0
million in the fourth quarter of 2018.
- Renewed and expanded our Corporate credit facility which
included increasing the facility to $60
million, reducing the interest rate by 400 basis points and
extending the maturity to July
2022.
- At December 31, 2019, the Company
had $31.2 million in combined cash
and investment portfolio ($10.4
million of Cash and $20.8
million investment portfolio).
Full-Year 2019 Financial Highlights
- Total revenue1 grew by 6% to $59.8 million for 2019.
- Core revenue2 increased by 33% over 2018 to
$47.2 million.
- Adjusted EBITDA increased by 73% to $7.2
million, from $4.2 million in
2018.
- Net loss for 2019 was $10.8 million, a decrease of 51%
compared to 2018, while net loss per share was $0.42 a decrease of 57% from a net loss per share
of $0.97 in 2018.
Fourth-Quarter and Full-Year Business
Highlights
- Active members increased 29% year over year to 976,000 at year
end. In February 2020, the Company
surpassed one million members.
- Launched new partner lending platform to leverage Mogo's
digital platform and technology driven adjudication process to
continue providing Canadians with quick and convenient access to
personal loans, while de-risking its balance sheet.
- Introduced a complete redesign of the Mogo app customer
interface which included the introduction of four habits of
financial health that tie our portfolio of 6 products together.
These habits help our members: 1) monitor and protect their credit
score; 2) control their spending; 3) learn how to save and invest
wisely; and 4) borrow responsibly.
- Completed development work for the launch of MogoSpend, the
Company's new digital spending account with Mogo Visa* Platinum
Prepaid Card. This is the first product of its kind designed to
help Canadians get better control over their spending, while
earning best-in-class cashback and having a positive impact on the
environment through the carbon-offset program.
- In February 2020, sold the
majority of our MogoLiquid loan portfolio to goeasy for gross
consideration of $31.5 million. Mogo
is also eligible for an additional performance-based payment of up
to $1.5 million payable upon
achieving certain agreed-upon annual origination amounts under the
lending partnership with goeasy described below.
- In conjunction with the sale of the MogoLiquid loan portfolio,
we repaid and extinguished the Credit Facility – Liquid, which held
an outstanding balance of $29.3
million at year end.
- In February 2020, signed a
three-year lending partnership with goeasy Ltd. following a
successful pilot program that started in October 2019. The partnership enables Mogo to
fully monetize our lending platform and drive new recurring
fee-based revenue with no capital investment or risk of these
loans.
- In February 2020, amended and
extended the marketing collaboration agreement with Postmedia
Network Inc. which will provide over $15.0
million of annual media value until January 2023.
1 During 2019, the Company changed its
presentation of loan protection revenue and associated costs.
Historically, the Company presented costs associated with loan
protection as part of transaction costs. Under the new
presentation, the Company is presenting revenue net of expenses.
This results in a decrease in revenue and a corresponding decrease
in transaction costs by $4,628 in
2019, $4,727 in 2018, and
$3,133 in 2017. The changes to the
presentation of loan protection revenue and associated costs did
not have an impact on the Company's gross profit. There is no
impact on net loss and comprehensive loss and the consolidated
statement of financial position, consolidated statement of changes
in equity and the consolidated statement of cash flows remain
unchanged as a result of this recast. A reconciliation of
revenue under the new presentation to our previously reported
amounts is included in Note 4 of our annual financial
statements.
2 In light of our exit from our bitcoin
mining operations and the sale of our MogoLiquid loan portfolio,
the Company has revised its definition of core revenue to exclude
revenue from bitcoin mining and revenue related to Liquid loans.
The prior period comparative figures for core revenue and core ARPM
have also been revised to conform with the new definition.
Conference Call & Webcast
Mogo will host a conference call to discuss its Q4 and full-year
2019 financial results at 11:00 a.m.
EDT on March 27,
2020. The call will be hosted by David
Feller, Founder and CEO, and Greg
Feller, President and CFO. To participate in the call, dial
(416) 764-8650 or (888) 664-6383 using the conference ID
09374155. The webcast can be accessed at
https://bit.ly/33aPtrQ or http://investors.mogo.ca. Listeners
should access the webcast or call 10-15 minutes before the start
time to ensure they are connected.
Non-IFRS Financial Measures
This press release makes reference to certain non‑IFRS
financial measures. These measures are not recognized measures
under IFRS, do not have a standardized meaning prescribed by IFRS
and are therefore unlikely to be comparable to similar measures
presented by other companies. These measures are provided as
additional information to complement the IFRS financial measures
contained herein by providing further metrics to understand the
Company's results of operations from management's perspective.
Accordingly, they should not be considered in isolation nor as a
substitute for analysis of our financial information reported under
IFRS. We use non‑IFRS financial measures, including core revenue
(total revenue excluding revenue from bitcoin mining and revenue
related to Liquid loans ), adjusted EBITDA, adjusted net
income (loss), cash provided by (used in) operating activities
before investment in loans receivable, core ARPM, Contribution, and
Mogo members, to provide investors with supplemental measures of
our operating performance and thus highlight trends in our core
business that may not otherwise be apparent when relying solely on
IFRS financial measures. Our management also uses non‑IFRS
financial measures in order to facilitate operating performance
comparisons from period to period, prepare annual operating budgets
and assess our ability to meet our capital expenditure and working
capital requirements. Please see "Non-IFRS Financial Measures" in
our Management's Discussion and Analysis for the Period Ended
December 31, 2019 for a
reconciliation of these non-IFRS financial measures to the nearest
IFRS measures which is available at
www.sedar.com and at
www.sec.gov.
Forward-Looking Statements
This news release may contain "forward-looking statements"
within the meaning of applicable securities legislation, including
statements regarding Mogo's strategic priorities and expectations
for 2020 and statements regarding the Company's response to
COVID-19, the reduction of its expenses and its path to cash flow
positive. Forward-looking statements are necessarily based upon a
number of estimates and assumptions that, while considered
reasonable by management at the time of preparation, are inherently
subject to significant business, economic and competitive
uncertainties and contingencies, and may prove to be incorrect.
Forward-looking statements involve known and unknown risks,
uncertainties and other factors that may cause actual financial
results, performance or achievements to be materially different
from the estimated future results, performance or achievements
expressed or implied by those forward-looking statements and the
forward-looking statements are not guarantees of future
performance. Mogo's growth, its ability to expand into new products
and markets and its expectations for its financial performance for
2020 are subject to a number of conditions, many of which are
outside of Mogo's control. For a description of the risks
associated with Mogo's business please refer to the "Risk Factors"
section of Mogo's current annual information form, which is
available at www.sedar.com and
www.sec.gov. Except as required by law, Mogo disclaims
any obligation to update or revise any forward-looking statements,
whether as a result of new information, events or otherwise
About Mogo
Mogo — a financial technology company — offers a finance app
that empowers consumers with simple solutions to help them get in
control of their financial wellness. Financial wellness continues
to be the #1 source of stress across all demographics and highest
among millennials. At Mogo, users can sign up for a free account in
only three minutes and begin to learn the 4 habits of financial
health and get convenient access to products that can help them
achieve their financial goals. The Mogo platform has been
purpose-built to deliver a best-in-class digital experience, with
best-in-class products all through one account. With more than one
million members and a marketing partnership with Canada's largest news media company, Mogo
continues to execute on its vision of becoming the go-to financial
app for the next generation of Canadians. To learn more, please
visit mogo.ca or download the mobile app (iOS or Android).
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SOURCE Mogo Inc.