Orion Digital Corp. (ORIO) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen, and welcome to the Orion Digital Second Quarter 2026 Earnings Call. [Operator Instructions] This call is being recorded on Thursday, August 6, 2026. I would now like to turn the conference over to Craig Armitage, Investor Relations. Please go ahead.

Thank you, Joanna, and good morning, everyone. Before we begin, I'd like to cover a few brief items. Today's call will include forward-looking statements based on current assumptions and subject to risks and uncertainties that could cause actual results to differ materially. The company undertakes no obligation to update these statements, except as required by law. Additional information about these risks is included in Orion Digital's Q2 filings and the periodic filings with Canadian and U.S. regulators, which you'll find on SEDAR+, EDGAR and on the Orion Investor Relations website. In addition, today's discussion will include certain non-IFRS or adjusted financial measures. These should be considered as a supplement to and not a substitute for IFRS results. We've included reconciliations of these measures in the Q2 press release and other filings. With that, I'll turn the call over to Dave Feller. Dave?

Thanks, Craig. I'm joined today by our President and CFO, Greg Feller. Before I get into Wealth, a word on the quarter. Consolidated adjusted EBITDA was $3.3 million, up 115% sequentially and 70% year-over-year, with margins expanding to 19.5%. Greg will cover the mechanics. I want to talk about something the numbers don't fully capture. On July 27, we commercially launched Intelligent Investing. We're still early, and we expect to make a lot of improvements from here, but we're encouraged by what we're seeing so far. Intelligent Investing pairs commission-free investing with independent AI-powered research and a structured system for how members make and track capital allocation decisions, built on top of an established Wealth business with the regulatory and operating foundation already in place. Here's the belief behind it. The retail investing industry promised democratization, access, low-cost empowerment, but the economics of the category actually rewards activity because revenue follows transaction volume. That's not a claim about anyone's motives. It's what the incentive structure produces. We build something else. We're asset class neutral. Over time, subject to regulatory approval, we expect to support a broader range of instruments. What we're not neutral on is process. Every asset class on the platform gets the same discipline, documented decisions and a performance measured against the benchmark over time. The instrument isn't a problem, offering it with no record of the reasoning behind it is. That's rooted in a simple premise. Behavior isn't a product -- byproduct of information, it's a byproduct of environment. Give someone perfect information inside an activity-driven environment and they'll still behave accordingly. We want engagement, too, just pointed at research, patience and reviewing decisions instead of trading activity. That's why the platform is calm rather than stimulating, why members get full access to FinChat AI's professional research platform and why we're building towards a decision architecture that asks investors to document the reasoning and revisit it later. Our thesis: the platforms that win the next era will be the ones that demonstrate performance, not the ones that win the most trading activity. And to be precise about what performance means, not a big year, which is often just risk or luck, but compounding rate over decades. That's the number that actually builds Wealth. Looking forward, we expect model capability to keep improving. And over time, we believe AI becomes a meaningful part of how investors make better, more disciplined decisions, not by replacing judgment, but by helping surface what actually drove good outcomes and what didn't. That only works if the underlying system is capturing the right data now, the decisions, the reasoning, the context behind them, structured well enough to eventually determine what drives good outcomes over time. That is a data structure problem today and an intelligence layer we intend to build on top of it over time. We're building towards a capital allocation system with AI eventually as part of what makes it smarter as disciplined decisions run through it, not a trading app with a feature bolted on. This is commercializing out of a real business, $545 million in client assets, up 18% year-over-year and $4.1 million in Wealth revenue up 14%. That foundation is what lets us commercialize without starting from 0. For the rest of the year, we'll be putting the platform in front of more investors, testing what message brings in the right ones and building an acquisition model that earns the right to more growth capital. This isn't a trading app. It's built for investors who want to improve their performance often because they're not happy with it today and want to do the research and discipline professional allocators have always had. With that, I will pass it over to Greg, who will take you through Carta, the financials and the outlook.

Thank you, Dave. I will now focus on the financial performance behind the quarter, how we're allocating capital and what investors should watch as we continue executing the strategy our CEO outlined. Q2 was an important financial milestone for Orion. Adjusted EBITDA increased to $3.3 million, up 115% sequentially and 70% year-over-year. Adjusted EBITDA margin expanded to 19.5%, gross margin increased to 75%, and we generated $1.3 million of operating income. The results demonstrate that Orion has meaningful earnings and cash generation capacity while operating with a lower level of lending deployment. As we made clear in our disclosures, this should not be viewed as a normalized quarterly run rate in the near term. Some of the improvements reflected lower customer acquisition costs, lower loan loss provisions and lower funding requirements associated with reduced lending deployment. As we selectively increase lending originations and continue investing behind marketing Intelligent Investing, some of these costs will naturally increase during the second half. Key takeaway is that we've strengthened the underlying economics of the business while establishing a more disciplined framework for deploying capital. Turning to revenue. Revenue was $16.9 million in the quarter, essentially unchanged from the prior year. Within the results, Wealth revenue increased 14% to $4.1 million, while assets under management in our consolidated Wealth business increased 18% to $545.3 million. It's important to distinguish those existing assets from adoption of the newly launched Intelligent Investing experience. Our existing Wealth business provides a regulatory operating and technology foundation for commercialization of Intelligent Investing. But to be clear, our total AUM includes both our Intelligent Investing platform and our legacy Wealth business. Payments revenue was $2.4 million, down 9% year-over-year, primarily reflecting lower nonrecurring services revenue in the quarter, while European transaction volume of $2.8 billion was up slightly from the last quarter and stable year-over-year. Interest revenue declined 3%, reflecting the deliberate reduction in Mogo lending operations. We continue to accept the near-term revenue pressure from lower lending revenue because we believe deploying additional lending capital below our return and liquidity requirements would create lower quality growth. Our objective is to build a more durable earnings base, not simply maximize near-term revenue. The improvement in profitability reflected 3 primary factors: continued growth in Wealth, lower lending acquisition costs and provisions, and continued operating discipline across the business. Looking ahead, we expect second half adjusted EBITDA to moderate from first half levels as lending originations gradually increase associated provisions normalize and commercialization of investments for Wealth increase. That's entirely consistent with our strategy. Our objective isn't to maximize quarterly EBITDA; it's to invest where returns justify the capital while continuing to improve the long-term cash generation. Turning to cash flow. Cash flow remains one of the most important ways we evaluate our performance. Cash provided by operating activities in the quarter was $2.7 million compared with $900,000 in the prior year period. Core operating cash generation of $5.1 million. This supplemental measure is intended to show the cash generated by our operating businesses before growth investment, lending activity and corporate finance activities. Excluding the $3 million nonrecurring receipt included in the prior year quarter, core operating cash generation increased by approximately $1.1 million, or 29%. During the quarter, we invested approximately $900,000 in growth and platform development and approximately $1.65 million into our loan portfolio. We also repaid approximately $1.6 million under the lending credit facility and just over $0.5 million of debentures. After these investing and financing activities, together with share repurchases, total cash declined by approximately $500,000 in the quarter to $25.1 million. Our primary financial objective remains achieving sustainable consolidated cash flow after funding recurring growth investment, lending capital requirements and corporate obligations. Now I want to talk about our capital allocation. Capital allocation is ultimately what ties the financial strategy together. Our first priorities are maintaining liquidity and meeting our obligations. From there, we evaluate every discretionary use of capital against expected returns, payback downside risk and long-term value creation. In lending, our current framework targets approximately 18 to 24 months for return. Total capital includes both the equity we are required to contribute on the lending facility and customer acquisition costs. This represents a higher investment standard than we have historically used. We'll also increase originations only where expected net yields, credit performance, acquisition costs and capital requirements satisfy those return thresholds. Growth in the lending portfolio is an output of qualifying economics. It is not the objective. At the quarter end, gross loan receivables were $75.4 million, while the related lending credit facility was $49.8 million. Additional investment in Intelligent Investing will be driven by demonstrated customer engagement, retention, funded account growth and customer economics. Carta is now positioned to fund its ordinary platform investment and growth internally. Lastly, share repurchases and debt reduction continue to compete for capital alongside internal investment opportunities. Turning to our outlook. We are not changing it from Q1 guidance. However, based on stronger-than-expected first half performance, we expect full year adjusted EBITDA to be at the upper end or exceed our previously communicated guidance range of $6 million to $7 million. As investors assess our execution over the coming quarters, I would encourage them to focus on 3 areas: disciplined growth in lending portfolio under our updated return framework, measured commercialization progress in Intelligent Investing and Carta continues to operate as a financially self-sustaining business. With that, operator, we're now happy to turn it over and take questions.

[Operator Instructions] We have no questions from analysts. I will turn the call back over to Greg Feller for closing comments.

Great. Thank you. Actually, before we do close, I did want to answer or address one question that we've understandably received from a number of investors, which relates to the NASDAQ notice. As we did disclose, we received a NASDAQ notice regarding the minimum bid price requirement, which was not unexpected given where the share price has been trading. As you know, we're also listed on the Toronto Stock Exchange. That said, maintaining our NASDAQ listing is very important to us. And we have a defined compliance period and our primary focus is on executing the business and continuing to close what we believe is a meaningful disconnect between our operating performance and our market valuation. So with that, if there are no other questions, I think we'll end the call. Thank you, everyone, again, for joining and look forward to giving you update for the next quarter. Thanks, everyone.

Ladies and gentlemen, this concludes your conference call for today. We thank you for participating, and we ask that you please disconnect your lines.