| 2Q21 beat on revenue, outlook favorable. Prior to the market open on August 11, Mogo, Inc. reported better-than-expected operating results, driven by higher revenue, C$13.7M versus our C$13.0M estimate. The revenue beat was driven by strength in subscription and service, reflecting positive momentum across the business, including MogoCard fees, increased payment processing volumes, and early contribution from recently acquired Moka Financial Technologies. We view stronger top-line results as early evidence of the success of the company’s recent investments in the business. Given this strength, management has increased its previously issued revenue guidance for 4Q21 and indicated it now expects 2022 total revenue of between C$70.0M and C$75.0M, above our and consensus estimates. Importantly, we believe the company's ability to provide forward year revenue guidance speaks to the improved visibility the business. We expect subscription and service revenue growth to continue to accelerate from cross-selling initiatives, and see the company begins to increase lending activity, which should drive significant operating leverage in the model. As the company executes against its strategy and operating results continue to show signs of meaningful improvement, we expect MOGO shares to re-rate at valuation levels more similar to high quality financial technology peers, ultimately driving shares towards our $16 price target over the next 12-months.
Operating results. The company reported 2Q21 revenue of C$13.7M which compares favorably to our C$13.0M estimate and consensus of approximately C$12.8M. The beat to our estimate was driven by higher than modeled subscription and service revenue during the quarter, reflecting increased member growth and improving member engagement. Operating expenses were C$22.1M during the quarter, well above our C$14.7M estimate. As the company remains focused on investing in the business for growth, we expect operating expenses to continue at elevated levels for the remainder of 2021. As a result, the company posted an adj. EBITDA loss of C$3.0M, largely consistent with our estimate. The company added 500,000 new members during the quarter, the highest level in the company’s history, with the majority of new members coming through the recent acquisition of Moka Financial Technologies.
Outlook for 2022 to drive revisions for Street estimates. In concert with the 2Q21 earnings release, the company provided an update on its 4Q21 revenue outlook as well as initial commentary on 2022. The company now expects 4Q21 subscription and service revenue growth of 100.0% to 110.0%, above the previous range of 80.0% to 100.0%. In addition, the earnings release indicated total 2022 revenue of between C$70.0M and C$75.0M which compares to our previous C$70.0M estimate and C$66.6M for the Street. We believe there may be potential revenue upside to this guidance as MogoTrade is unveiled towards the end of 2021. We view trading as a C$100.0M-plus revenue opportunity over the next three to five years. In addition, the company's outlook does not reflect any additional M&A or the potential future consolidation of Coinsquare, should the company move its current ownership position above 50.0%. |