| Impact: Positive – Mogo’s FQ4 print delivered on revenues slightly ahead of our/Street expectations, led by a stronger subscription and services contribution, with a larger beat on EBITDA, and highlighted an acceleration in new member adds (+50% q/q). Alongside the results, the company announced the acquisition of Moka Financial Technologies, a disruptive, wealth management fintech player, for $64mm in Mogo shares and assumption of $3.0mm in Moka debt, bringing total transaction value to $67.4mm or ~10x revenues, highlighting Mogo’s ability to leverage its rising stock price as currency to pursue highly strategic and complementary acquisitions that continue to expand the capabilities and value of their platform (similar to recent Carta (digital payments) and Coinsquare (crypto) transactions). We see Moka materially accelerating Mogo’s wealth management strategy with the onboarding of +500k users with $250mm in AUM and an experienced investments team, which will ultimately fast track Mogo’s planned free stock trading offering, further aligning the company’s model with that of global consumer fintech peers like SQ (Not Rated) and Robinhood given an increasingly comparable suite of offerings. We continue to believe the growing value inherent in Mogo's platform has yet to be reflected in valuation, and view an attractive risk-reward on current shares. We will revisit our estimates and valuation post this evening’s conference call with management at 5pm EST (dial-in: (833) 968-2206). Key Quarterly Highlights: · FQ4 Revenue was $10.0mm (+2% q/q and -33% y/y), vs. Street/Eight Capital expectations at $9.7mm/$9.8mm o Subscription and Fee-Based Revenue came in at $4.6mm (+8% q/q and -25% y/y) vs. our $4.4mm estimate o Loan Interest from long-term loans came in at $5.4mm (-2% q/q and -39% y/y) vs. our $5.5mm estimate · Adj. EBITDA was $1.1mm (10.5% margin), vs. Street/Eight Capital expectations of $0.6mm(5.6% margin)/$0.6mm (6.2% margin) · Adj. EPS of ($0.10), vs. Street/Eight Capital expectations of ($0.14)/($0.17) · New member growth accelerated q/q with 52k new members added during the quarter (vs. 34k in Q3/F20 and 51k in Q4/F19). Total customer base now sits at 1.13mm (+15% y/y) · Mogo ended the quarter with Cash and Cash equivalents of $30.6mm (consisting of $12.1mm in cash and $18.5mm in investments) vs. $26.8mm LQ Overview of Moka Financial Technologies Inc.: · Mogo announced the acquisition of Moka Financial Technologies for 5mm Mogo shares, which based on yesterday’s close price of C$12.88, amounts to a purchase price of C$64.4mm and assumption of C$3.0mm in net debt, bringing the total transaction value to $67.4mm. Moka generated $6.5mm in revenue in 2020, which implies a transaction multiple of 10.4x Sales. · The acquisition will add 500k members (and 100k monthly subscription members), bringing Mogo’s total member base to +1.7mm (+40%). Further, Moka’s investing platform has an AUM of +$250mm and registered portfolio management capabilities in Canada and Europe (Moka launched in France in 2020). Mogo plans on leveraging Moka’s investment platform and its team to further enhance MogoWealth, as well as accelerate the launch of Mogo’s free stock trading solution. · Founded in 2017 and headquartered in Montreal, Moka is a Lending, Saving and Investing app known for key features like “roundup”, which allows users to automatically round up daily purchases and invest the spare change into a diversified portfolio of ETF’s. To date, Moka has raised $14M in funding, most notably from NAventures, the venture capital division of National Bank of Canada (Not Rated), and Desjardins Capital, the venture capital arm of North America’s largest association of credit unions. |