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Mogo Inc
Symbol MOGO
Shares Issued 27,864,605
Close 2020-03-26 C$ 1.48
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Mogo loses $10.8M in 2019, to lay off 30% of employees

2020-03-27 08:23 ET - News Release

Mr. David Feller reports

MOGO ANNOUNCES FOURTH QUARTER & FULL-YEAR 2019 FINANCIAL RESULTS & PROVIDES UPDATE RELATED TO COVID-19

Mogo Inc. has provided its financial and operational results for the fourth quarter and full year ended Dec. 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 chief executive officer. "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 chief financial officer, 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 and 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 on-line, 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, the company is 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 and coaching -- The company is providing information to its members to help them navigate the various options they have available to them for assistance such as accessing government funding and employment insurance, and tips for things like potentially reducing car insurance while unemployed.
  • Spending control -- Living on a reduced budget is challenging. The company is rolling out its 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, the company will offer ID fraud protection for free for six months to any members who do not have MogoProtect. This is in addition to the company's 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 per cent of its 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.

Mr. 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:

  • One hundred per cent of the company's loans are set up for digital payments and approximately 88 per cent of these loans are set up with multiple payments per month that more closely coincide with its 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 per cent of Mogo's customers have optional loan protection insurance, which covers their loan payments for a period of up to six consecutive months in the event of unemployment.
  • Based on the income profile of the company's typical customer, it believes the majority of affected customers would be eligible for government relief measures and/or employment insurance protection. It believes this would significantly lessen the financial impact for these customers.
  • Mogo is one of the most experienced on-line 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 revenue increased 2 per cent over the fourth quarter of 2018 to $15.0-million.
  • Core revenue increased by 8 per cent to $12.4-million, compared with $11.4-million in the same period in 2018.
  • Gross profit was $9.9-million (65.9 per cent of revenue), similar to the $10.0-million (68.3 per cent of revenue) recorded in the fourth quarter of 2018.
  • Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) increased by 11 per cent year over year to $2.3-million (15.3 per cent of total revenue), compared with $2.1-million (14.1 per cent of total revenue) in the fourth quarter of 2018.
  • Cash flow from operations before investment in receivables increased by 49 per cent to $2.2-million in the fourth quarter, compared with $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 the company's 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 Dec. 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 revenue grew by 6 per cent to $59.8-million for 2019.
  • Core revenue increased by 33 per cent over 2018 to $47.2-million.
  • Adjusted EBITDA increased by 73 per cent to $7.2-million, from $4.2-million in 2018.
  • Net loss for 2019 was $10.8-million, a decrease of 51 per cent compared with 2018, while net loss per share was 42 cents, a decrease of 57 per cent from a net loss per share of 97 cents in 2018.

Fourth-quarter and full-year business highlights

  • Active members increased 29 per cent 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 derisking 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 the company's portfolio of six products together. These habits help the company's 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 the company's 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, the company 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 its 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 which will provide over $15.0-million of annual media value until January, 2023.

Conference call and webcast

Mogo will host a conference call to discuss its Q4 and full-year 2019 financial results at 11 a.m. EDT on March 27, 2020. The call will be hosted by David Feller, founder and chief executive officer, and Greg Feller, president and chief financial officer. To participate in the call, dial 416-764-8650 or 888-664-6383 using the conference ID 09374155. Listeners should access the webcast or call 10 to 15 minutes before the start time to ensure they are connected.

About Mogo Inc.

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 No. 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 four 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.

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