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

Ladies and gentlemen, thank you for standing by, and welcome to Mogo Inc. Q4 2020 financial results. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the call over to your speaker today, Mr. Craig Armitage, you may begin.

Thank you, operator, and good afternoon, everyone. Thanks for joining us today. Just a couple of quick notes before we get going. First, just to highlight that today's call will contain forward-looking statements that are based on current assumptions and subject to risks and uncertainties that could cause actual results to differ materially from those projected. The company undertakes no obligation to update these statements, except as required by law. Information about these risks and uncertainties are included in our Q4 and year-end filings as well as periodic filings with regulators in Canada and the U.S., which you can find on SEDAR and on our website. Second, today's discussion will include adjusted financial measures, which are non-IFRS measures. These should be considered as a supplement to and not as a substitute for the IFRS financial measures. I would also highlight that today's amounts are discussed in Canadian dollars, unless otherwise indicated. Lastly, we do have presentation slides to accompany today's call. You should be able to find those through the webcast link. You can also find under the Investor Relations section of the Mogo website. With that, I'll turn the call over to Dave Feller to get us started. Dave?

Thanks, Craig. Good afternoon. Welcome to Mogo's fourth quarter 2020 results call. I'm joined today by Greg Feller, our President and CFO. It's an exciting day for us here at Mogo, and we're looking forward to walking you through all the things we've been working on, and most importantly, where we're going. Over the last year, we've taken several strategic and financial steps that have fundamentally transformed our business. Our financial results for 2020, which Greg will discuss later, reflect the success of our efforts to quickly adapt to an uncertain environment, and underscore the fundamental health, resilience and profitability of our business. In addition to a significant investment in the development of our own platform, we have accelerated our strategy with 2 acquisitions and a strategic investment, all of which we will review today. The net effect is we are in an even stronger position to take advantage of the accelerating adoption of digital wallets and financial health solutions. We thought it would be helpful to start to say with the popular cap with presentation that came out earlier this year and highlight the massive growth opportunity with digital wallets. We were obviously pleased to be featured in the report, but most importantly, this report highlights the opportunity we've been focused on for building out our multiproduct app. The report highlights that these digital wallets are focused on low-cost customer acquisition, building trust and then converting into other products, so you continue to gain wallet share. Our digital wallets are valued between $250 and $1,900 per user today, but could scale to $20,000. The key is having the right products and experience that builds trust and drives conversion and adoption of other products. We think the key to becoming one of the main winners in the digital wallet space is how well you solve the problem of financial health. The wealth gap is real and is one of the biggest problems we face today. Although everyone has a banking account, the majority of people aren't close to being where they want to or need to be when it comes to their finances and financial stress remains the #1 stress across all demographics. In fact, if you follow the traditional path that most people follow today, you'll find yourself with credit card debt, overspending, lack of saving, investing and financial stress. A new survey out today highlights how pervasive the problem is with 54% of Canadians saying they don't have a financial plan. The fact is most people really don't know what to do to build wealth and get in control of their finances. And for many that they do finally figured out, they've already missed valuable years of wealth building, which become very hard to make up. Our mission is to help people become financially healthy, and we believe the key to achieving this is to not only have the right products, but even more importantly, in experience a gamifies building wealth. We are focused on building an experience that only helps people get on top of their finances, but help them get on track to building real wealth, and for most people, that should mean being on track to becoming a millionaire. We want to make building wealth, one of the most compelling games you'll ever play. The highest form of motivation is doing something because it's fun, not because they have to. And that's a key driver of our road map, i.e., building a gamified experience with products to make it easier to practice the right financial behaviors in order to build wealth. So although you're hearing terms like super app, which generally refers to having a whole bunch of products and went out, we think the most important driver is going to be the experience you create around these products and how that experience actually helps the user improve their financial results. The bigger the impact you can make on someone's finances, the more you will win. The good news, this is a game that everyone can win. The basis of our solution comes down to the fact that almost anyone can become a millionaire if they get on the right track with the right solutions early on. The numbers don't lie. Even at a $40,000 annual income, which is far below the average income of Canadians, if you follow the popular 50-30-20 budgeting model based on your after tax income, where 50% goes to needs like food and shelter, 30% to wants like entertainment, travel and clothing, and then invested 20% in equities based on historical returns, you would be able to retire by the age of 65 with $5.5 million. And if you kept that going for another 15 years, you will get to a staggering $23 million. Now even if you only manage to save and invest half that amount, you still get to almost $3 million by age 65 and over $10 million by age 80. And as we move into the future, working late on life will become increasingly common. Now this assumes that someone never gets a raise and their income stays at this $40,000 level, which obviously wouldn't be the case for most people. The bottom line is, even on a below-average income, you could become a multimillionaire with the right habits, discipline and plan. Now when most people see these numbers, they're typically shocked as they thought the only way they could ever become a multimillionaire was if they made a lot of money or perhaps won Moloto. We believe that when it comes to your finances and building wealth, controlling your spending is by far one of the most important and challenging parts of your money game as this is what determines whether or not you stay out of debt and whether you have money available each month to save and invest, which is really how you build wealth. As you saw on the previous page, you actually don't need to make a lot of money to become wealthy. We've all heard of people making millions who've gone bankrupt. How you manage your spending is critical, which is why we put so much work into making the MogoCard, a great tool. Again, it all starts with your spending. And based on the 50-30-20 budgeting model, someone making $40,000 a year might have around $1,000 a month available for paying rent and after paying rent and utilities and if they want to hit their 20% investing goal, which means you need to budget your spending. That's why avoiding credit cards are critical as it's so easy to overspend and not only not have any money to save and invest, but end up with credit card debt like a large percentage of Canadians today. Like a debit card, this is your own money. There's no credit and no overdraft available, and it's designed to help you keep up-to-date on all your spending and how much you have left. So you have a better chance of sticking to it. Our goal is to make this most compelling card in your wallet and the easiest way to stick to a budget. One of the cool features of the card is our new Bitcoin cashback program. The MogoCard is the first card in Canada that offers the ability for someone to earn Bitcoin with every purchase and help them get into the habit of saving and investing while they're spending. Perhaps most importantly, unless anyone participate in Bitcoin for free without risking any of their own money. If there was a 10% cashback card, how many people would switch to it. Well, with you earning 1% Bitcoin cash back 5 years ago, the value of the Bitcoin would be worth over 100x that, which means it would have been equivalent to 100% cashback. And in the last 12 months alone, it will be worth over 7%. Today, there's no card in Canada that comes close to this. And instead of accumulating air miles, you are accumulating an exciting and speculative asset class that can be converted to cash with one click and without having to risk any of your own money. Although it's still early days in terms of our Bitcoin cashback experience, we're already seeing some very positive trends for members who have been activated. These users are spending on average over 3x more than a non-Bitcoin cashback user. In order for members to activate Bitcoin cashback today, they must refer to at least one friend. This is also helping to drive increased sharing. Again, this is all about gamifying experience, so you can actually make sticking to a budget and moving away from credit cards, an exciting and compelling experience and get our members to make this their primary spending card in their wallet. Many experts say that the 2 biggest opportunities for businesses to solve over the next decade is wealth gap and climate change. And we believe they're linked. The MogoCard is also the first card in Canada that also helps you offset your carbon footprint while you spend. And given 72% of carbon comes from our own consumption, having a card that automatically offsets your CO2 as you spend is the easiest way someone can live with 0 carbon lifestyle. Again, this is all about gamifying the experience and make controlling spending and spending less money, one of the most engaging and rewarding things you can do. On building wealth, well doing my part of self-climate change. That's what the next-generation consumers expect, and that's what we are trying to deliver. Controlling this part of the customer's wallet is not only one of the most important parts of helping them achieve their financial goals, but it's also one of the most important drivers of engagement and trust building that helps drive the adoption of other products and greater share of wallet. Bitcoin is clearly one of the most compelling and exciting new technologies of our lifetime. Every day, we see more people and companies looking to invest and get exposure to this new asset class. We were one of the first companies in Canada to offer Bitcoin and then first to offer alongside a broader product offering. Our value proposition today is very simple and compelling. Unlike most other crypto offerings in Canada, we are actually the only one offering just Bitcoin and our members don't have to worry about taking custody of it. We continue to believe there's a large and growing segment of consumers who aren't crypto enthusiasts, but are looking for a simple and trusted way to invest in this new asset class. We saw a significant growth last year in Bitcoin trading, although coming off a low base, we saw just over 14x growth in trading volume. This growth has also continued in Q1 with January and February up over 20x versus the same period last year. But perhaps even more interesting is we're -- what we're seeing in terms of behavior of these users and their engagement. An active Bitcoin member is 9x more engaged than a non-Bitcoin member, and this translates into more conversion into our other products as well as likelihood to refer others. We announced the launch of our Bitcoin Rewards program last year, and we're continuing to build out this experience. Obviously, rewards are a key part of gamification and can really help drive behavior. What's unique about this program is it gives all those who want to participate and get Bitcoins, but aren't willing to risk their own money, a way to do it. Not only are we adding Bitcoin Rewards as incentives to try our products, but we're also building in hidden Easter eggs another gamification technique where users find hidden rewards. This could be something like after 100 transactions on the MogoCard, a user gets a Bitcoin reward or by practicing dollar cost averaging. We continue to be excited about the impact this reward program can have on our user behavior and really help improve engagement and ultimately help them get closer to their financial goals. Although many people are concerned about the volatility of Bitcoin, you can't deny how exciting it is. And in fact, it's one of the elements that makes it so exciting. And getting our members excited and even addicted to playing their wealth building game is exactly what we're trying to do. The big news today is our announcement of the Moka acquisition. And before I talk about how this will accelerate our growth strategy, let me first walk you through what makes Moka a great finance app. Phil and his team have done a great job of building Moka and it is such a great fit in so many ways, not least of which is how similar our names are. Most importantly, they have been hyper-focused on helping Canadians improve their finances by making it easier than ever to not only save money but invest it. Their core solution today is an automated saving and investing product that happens by rounding up purchases of members linked card or cards. By connecting to their bank account, Moka enables them to link any credit or debit card so that every purchase they make is rounded up. And then at the end of the month, that money is debited from their bank account, instead of just going into a savings account, it's invested. Unlike some of the bank round up features, Moka is agnostic and can be linked to as many cards as you want. And instead of putting it into a low interest rate savings account, the money is being invested. What's more is they enable their members to do this through a TFSA, RSP or nonregistered accounts. The average Moka customer saves over $1,000 annually through this program. What's also impressive is they managed to do this through a successful subscription program where they now have over 100,000 active monthly paying subscribers. Members are also given the additional ability to either add or move to a set monthly investment amount. And today, over 50% of their subscribers have both round up and recurring deposits set out. So a member can begin their investing journey with simple round ups and then graduate to hiring more automated monthly investing program, all for a low fee of $3 a month. In addition to this, Moka has several other great features, including bill negotiation, where they help members lower their bills, the average savings on this program is over $200. Their debt management solution can help anyone who is struggling with debt, get -- help them pay it off on a program. Many people that struggle to come up with a plan to get out of debt, and this can be a great help and need a first step before you can begin building wealth. They also have a cash back rewards program and an on-demand financial coaching that's powered by certified financial planners. It's easy to see how Moka is a perfect complement to Mogo and our solutions, and as every product and feature they have becomes complementary to ours and dramatically helps improve the impact we make on someone's finances. Again, we couldn't be more excited to welcome the Moka team to team Mogo. With the acquisition, we will greatly expand our product capabilities and total addressable market in the estimated $5 trillion wealth management industry. Globally, we are seeing a massive secular shift to digital wealth platforms. Moka will enable us to fill our biggest product gap. MogoWealth will give our members the ability to save and invest through TFSA, RSP and nonregistered accounts. Again, over 50% of Canadians don't have a financial plan and a big part of that comes down to not knowing how to build wealth and what to invest in. What's more, 45% of Canadians 18 year or over don't have a TFSA or RSP account. The 2 main accounts that Canadians need to be using to save, invest and build wealth, again a massive opportunity. One of the unique things about Moka is they also have a solution that doesn't require a large initial deposit to get started, unlike many of the solutions today in the market, and anyone can get started with as little as a dollar a month. As you can see, our goal is to build an experience that helps our members build long-term wealth and makes it easy for them to see how they're performing and importantly, helps them their eye on the prize in terms of dollars that they're on track for. Again, if someone is earning $40,000 a year, invested 20% of their after tax earnings in the market based on historical performance, they could easily become a millionaire. Having a solution, a holistic experience that enables us as a big gap in the market today and we're excited to get this product to our members. We've always talked about our strategy of working alongside your bank account with the goal of one day enabling our members to make the full switch to Mogo. We're currently working on our new digital bank account that will enable our members to make this switch. This new digital account will function similarly to a checking account and that members can have their paycheck set up for automated deposit, have automated payments such as mortgage come out of this account as well as enable P2P. Perhaps most importantly, this will enable us to launch features and benefits that are exclusively for direct deposit customers, i.e., customers who make Mogo their primary banking relationship. These include launching things like early pay day, obviously, this has been very successful companies in the U.S. is one of the key ways they've been able to capture a large share of the market and get consumers to move away from their traditional bank accounts. Bringing these 3 accounts together, you can see how it will be set up so that it actually helps automate budgeting for our members. Your paycheck gets deposited, your spending budget goes into your spending account and 20% gets automatically invested. Again, this is what people need to automate their money away that helps them stay out of debt and build wealth. Everything that today's solutions don't deliver on. Obviously, most members won't start at this level, but our goal is to continue to nudge them to improve their spending and help them get closer to that 20% goal. We've long been planning to launch free stock trading, and we're also excited to announce that this acquisition will speed up our plans to do this, along with bringing in crypto trading through our strategic partnership with Coinsquare. Although we believe strongly in automated wealth building program through low-cost ETFs, there's also a growing retail trend in stock trading and investing. Although there are many people who want a more passive investment approach, there's also a growing number of consumers that want to invest directly in stocks and cryptos. And in the long run, we think most will incorporate both into their investment strategy. Our goal is to also design this in a way that helps our members see how they are performing versus benchmark performance of the S&P 500. As an investor, I will want to know if my self-direct investment strategy is more effective than an easier and more passive strategy versus kidding myself that I'm doing well. Again, another gap in today's market. Free trading is now the standard in the U.S. And so far in Canada, there's only 1 option for investors, and that option has a lot of room for improvement, and that's what we plan on doing. Our goal is to launch this before the end of this year. With that, I'll ask Greg to cover the transaction and financials in more detail. Greg?

Thanks, Dave. As Dave mentioned, we have fundamentally transformed the business in recent quarters through 2 acquisitions and a strategic investment, all of which I will discuss in more detail. Specifically, these transactions expand our product capabilities, accelerate a road map and give us additional scale that we believe positions us for accelerating subscription services revenue growth in 2021. As we look at the mobile platform, we will have 4 drivers of value going forward. One, our core B2C business, which once closed with now includes Moka's savings and investment solution alongside of Mogo's existing digital wallet capabilities; two, our B2B payments business in Carta, which serves as an attractive and growing international market that is shifting from legacy processors to API-based next-gen processors like Carta; three, our announced strategic investment in Coinsquare, which we believe has tremendous value and upside; and four, as growth portfolio of minority investments in mostly private technology companies, which post year-end now include investment in Bitcoin. We believe this combination of assets makes Mogo, a strategically valuable company in the fintech sector and a unique way for investments to gain exposure to some of the most disruptive trends in the market today. Earlier today, we entered into a binding LOI to acquire Moka. In addition to the significant benefits in terms of expanded product offerings in the massive wealth management market, the proposed acquisition also includes Moka's more than 500,000 members and over 100,000 monthly subscribers. The acquisition will, therefore, significantly expand our current member base to approximately 1.7 million. The acquisition also brings approximately $250 million of assets under management along with registered portfolio management capabilities throughout Canada and Europe. As Dave mentioned, it gives us a much broader range of savings and investing products along with Moka's technology platform, experience and tech team, most significantly accelerate Mogo's plan to launch free stock trading solution for Canadians. The transaction also accelerates the growth of our subscription- and transaction-based revenue. And lastly, it will allow us to expand graphically into large and active markets. As mentioned in the press release, the transaction is going to be completed by an all-stock transaction for approximately 5 million shares. During the quarter, we closed on our previously announced acquisition of Carta, adding significant digital payments capabilities to our platform, along with the growing next-gen B2B global payments business. Carta's next-generation platform is the engine behind innovative fintech companies and products around the globe, powering over 100 card programs, providing vital processing technology to industry leaders including TransferWise, Sodexo, Payfare, and others. Carta, which is headquartered in Toronto, processed over $5 billion worth of transactions on this platform in 2020, which is up 35% from 2019. In addition, Carta brings significant benefits to Mogo, including a significantly expanded TAM, $2.5 trillion global payments market, strengthening our digital wallet capabilities with deep payment expertise, which we're leveraging in the development of our open peer-to-peer payment solution, increasing Mogo's revenue scale and accelerating the growth of our high-margin subscription transaction-based revenue. Carta has been making good progress on its growth plan. Last month, they announced expansion into Japan to support TransferWise launched their multi-currency debit card. They also recently announced expansions in the U.S., the world's largest payment market. Carta will be providing products with the initial group of clients and expect to further expand its base with banks and fintech companies in the coming quarters. Another significant and highly strategic transaction that we announced post year-end was the agreement to acquire interest in Canada's leading crypto currency platform, Coinsquare. Launched in 2014, Coinsquare has grown to become the leading digital asset trading platform in Canada with monthly trading volume in excess of $600 million and the assets under management over $600 million. Coinsquare's current revenue rate is also substantial at approximately $50 million, which would be an almost fourfold increase from full year 2020 results. We've had a relationship with Coinsquare for nearly 3 years as they currently power our Bitcoin account. We believe their platform is one of the most robust trading platforms in Canada for digital assets. And as a result, we believe they're well positioned to capitalize on growth into this sector going forward. The first stage of this transaction will have acquiring 19.9% of Coinsquare by the issuance of approximately 2.8 million shares and $27 million of cash. We expect to close this initial investment next month. Coinsquare agreement also includes an option for Mogo to acquire additional shares that will take our ownership in the company to approximately 43%, which underscores our view that Coinsquare is a highly strategic and valuable asset for Mogo. As we believe crypto currency is and will continue to be a core part of any leading next-gen digital wallet. In addition to giving mobile investors, the significant stake of what we believe is a highly strategic platform in the Canadian fintech ecosystem, the Coinsquare investment provides significant leverage to one of the most exciting and fastest-growing sectors in fintech. We also see significant opportunities to work together more closely with them by bringing together Mogo's leading digital wallet capabilities and Coinsquare's leading digital crypto trading platform in Canada. The last value driver for Mogo is a growing investment portfolio, which now includes Bitcoin alongside a portfolio of just under a dozen minority investments in private companies in the technology, med tech, media and e-gaming space. The investments, which were acquired from our acquisition of Difference Capital in 2019 at a current book value of $17 million, excluding the Carta stake which was previously part of this portfolio at year-end. We believe that a number of these investments could see monetization events in 2021 some potentially meaningful premium to our current book value. In addition to this portfolio, which we are focused on monetizing, we also now hold about 17.8 bitcoins which we purchased earlier this year at an average price of approximately USD 33,000 per coin. The investment was part of our announced plans to make an initial corporate investment of up to $1.5 million of Bitcoin, representing approximately 1.5% of our total assets at the time. The investment in Bitcoin is consistent with our belief in Bitcoin as an emerging asset class and builds on our significant product development related investments in Bitcoin over the last several years, including MogoCrypto and the Bitcoin Rewards program. Now let me turn to Q4 and the full year financial results. I will be brief given the full year results were available since this morning. For anyone who is new to Mogo, our preface is that our year-end numbers reflect an expected decrease in loan origination, interest revenue and other-related revenue streams as we sold a portion of our loan portfolio in early 2020 and intentionally reduced lending activity in light of COVID and our goal to reduce our balance sheet credit risk. These factors were partially offset by growth in subscription and services revenue, which accelerated at the end of the year, driven mostly by MogoCrypto, MogoCard, also, they were offset by lower operating and interest expenses from the improvements to our capital structure. Importantly, our Q4 results showed accelerating subscription and services revenue, specifically subscription services revenue of $4.6 million in the quarter, up 8.4% sequentially from Q3. Q4 2020 revenue was $10 million compared to $9.8 million in Q3 driven by subscription and services revenue, again, offsetting decline in interest revenue. The underlying profitability of our business was again clearly highlighted in the quarter and the full year. Gross profit margin of 80% for the year, up from 68% in 2019, and 2020 adjusted EBITDA increased by 61% to $11.6 million from $7.2 million. The profitability gives us increased confidence in resuming growth-related investments, in particularly in product development and marketing as we look to take advantage of the accelerating shift to digital banking and Mogo's unique position in the Canadian market. Turning to our balance sheet. We've also significantly improved our balance sheet and financial position through a series of important steps over the past 12 months. Specifically, in 2020, reduced our loan book -- reduced our liquid loan book, reducing our credit exposure by approximately $32 million and reducing our credit facilities outstanding to $37 million from $77 million at year-end of 2019. We also extended our remaining credit facility and reduced the rate by approximately 400 basis points, and we reduced the interest rate on our debentures from 14% to 7%. Lastly, post our year-end, we had added a significant amount of growth capital to our balance sheet, raising a total net of expenses of $81.6 million. Individually, these are all meaningful steps. Together, they allow us to move forward in a much stronger financial position and put us in an excellent position to capitalize on the growth opportunities we see going forward. Mogo's model, as you know, starts with a low-cost member acquisition strategy. Our new member growth accelerated for the second quarter in a row in Q4. Net member additions increased 51% in Q4 relative to additions in Q3, and total members exceeded 1.1 million members at year-end, an increase of approximately 15% over 2019. This speaks to the appeal of our products, including Bitcoin, for ID fraud protection and MogoCard as well as the value of having them all integrated into a seamless, easy-to-use digital account that helps members management of their financial lives. We believe the current product trends we are seeing put us in a good position for a continued strong member growth and engagement in 2021. As we have discussed in the past, we believe we have one of the best monetization models of any consumer fintech globally. We currently have 7 distinct ways to monetize the member base and with the addition of Moka, we have made. In addition to member monetization revenue to Carta, we also have a diversified our revenue stream to include payment processing fees, which we will begin to recognize in the first quarter. As we look ahead to 2021, we are turning our attention to increased engagement and monetization to support accelerating revenue growth. Specifically, the current trends we are seeing, along with our recently announced strategic transactions have given us increased confidence in our revenue outlook. So we're providing some specific guidance for 2021. This guidance currently excludes the impact of Moka. Specifically, we're guiding towards continued increase in net member additions during the year, accelerated growth in subscription service revenue, and we are targeting 80% to 100% year-over-year growth in subscription services revenue in Q4 2021 as compared to the same period in 2020. With that, we will open the call up to questions.

[Operator Instructions] Your first question is from Doug Taylor of Canaccord Genuity.

The guidance you provided for the 80% to 100% growth Q4 to Q4 in terms of subscription and services revenue, I wonder if you could just kind of help us think about how we should chart that over the course of the year in light of the M&A that has happened and also with your product road map and your new products being released over the course of the year?

Sure, Doug. It's Greg. So yes, so we do really sort of see the trend from the subscription and services perspective accelerate -- growth accelerating during the year. So effectively accelerating growth going into Q4. So obviously, that means that we expect that the impact to be bigger in Q2 than it was in Q1, et cetera. Also from an M&A perspective, Carta, we are only going to be partially consolidating the results in Q1. We'll have full consolidation in Q2. Moka, which right now is not part of that guidance, we may see some revenue impact in Q2, depending on when we close the transaction. But we do believe that ultimately Moka will be consolidated for the full quarter by Q3. So that's obviously going to drive further acceleration in overall subscription and services revenue during the year.

And so all -- none of that seems to be tied to any material jump from any particular product launch or upcoming new feature that you're releasing. Is that correct? You expect the organic business to be relatively smooth in terms of the growth over the course of the year?

Yes. Well, actually, I would say there is acceleration we see in the organic business as well. Some of the trends that Dave actually spoke to are -- we're early days in a lot of these products in terms of revenue scale. But the momentum we're seeing, we think, is going to make a bigger impact on our overall revenue growth as the quarters go on and that revenue has more scale. So we actually do expect similar kind of accelerating trends on the organic level as well.

Okay. You signaled, I believe, with your prepared remarks there, that you'd like to reinvest a little more significantly in the product, in the marketing. And certainly, it looks like the market is giving you the license to do that. But I wonder if you can help us think about how your updated, I guess, view on what the right level of investment is, so that we can tune our models to that.

Yes. So we're -- we haven't given specific guidance on EBITDA. But your takeaway, I would say, is accurate that are strong bias. If we kind of look at 2020, what did we do, one of the key things that we believe we accomplished was really highlighting the underlying profitability of the model when we delve back growth spend and where we generated close to 15% EBITDA margins in the second and third quarter. And we also highlighted our ability to very quickly dial those growth investments down, in particular, on the marketing side and some of the product development side. But now with the position that we're in, in terms of the early trends that we're seeing in our products, the excitement we have on new products investment and the upcoming transaction with Moka as well as expansion of Carta into new markets in the U.S., we are -- and there could be a significant amount of capital that we put on our balance sheet, we feel that we're in a very good position to dial up that growth investment, which means you're really going to see that growth investment show up in technology and development spend as well on the marketing side. You saw some of that show up in the current quarter sequentially over Q3. But I would say you can expect some similar trends going into 2021. So we're going to be less focused on the EBITDA line in 2021, as we believe, ultimately, that this entire sector is accelerating. And over the next 24 months, we believe the leaders are going to be established, and we believe we're in a very key position in the Canadian market to remain one of the key leaders here, and we want to take advantage of that. We want to take advantage of our financial strength and our product strength. So our bias is definitely to invest in growth, and we believe that, that's going to be the right ROI decision for the company and for our investors.

Okay. Perhaps one last question for me. Maybe it's too early for you to say, but can you talk a little bit about what -- once this -- the Moka transaction has closed, what the integration road map or milestones we should be thinking about? And is your intention to run that product and that brand or consolidate into the Mogo brand, I mean, anything like that, I think, might be helpful. So that we can build in what that's going to look like.

Yes. I'll let Dave comment a little bit on it. But as you say, it is early. We just announced transaction. And obviously, as we get closer to close, we will come out with more specific information on our plan. So we're not going to get into sort of real specifics. But I don't know, Dave, if there's anything on any of those topics that you are worthwhile touching on right now?

Sure. Yes. I think initially, we think at the very least, rebranding Moka to Mogo. And then the Moka app becomes effectively the Mogo saving investing app and that effectively could be just the initial way that we launch Mogo saving and investing for our members, and then, obviously, start promoting that to our member base. Obviously, we're seeing similar strategies, whether the company is well, simple, obviously, now it has 3 different apps. So there is a multi-app strategy there that actually has some benefits. So the initial goal is to integrate that way and then make it easier for both Moka members and Mogo members to go between the apps. But then as we kind of visualize through the presentation, our goal is obviously to bring that into the Mogo app as well. And then as we look at the stock trading and crypto, there's a good chance that we decide the best way to launch that for a bunch of reasons, is a separate app, still under the Mogo brand, right? So those are still things that we're thinking through. But I'd say that's kind of where we are right now.

Your next question is from Scott Buck of H.C. Wainwright.

I'm hoping maybe you can give a little bit of color on the preference for acquisitions rather than partnerships. And should we expect to see additional acquisitions as you continue to build out the Mogo wealth vertical?

Yes. So let me comment on that. So I guess, here's how we look at acquisitions right now. We look at acquisitions as a way to accelerate our product road map and bring key expertise and scale to the business. And if we do find opportunities, that -- I mean, Moka just being a great example where, for us to have built their functionality and be on a path to even launch free stock trading, we'd probably be 12 months from now, given our own road map before we could even start on that. And then you have to bring the capabilities and expertise that they bring on the team from a wealth management perspective, you're talking about a regulated industry. And so there's a whole bunch of benefits on an acquisition there as far as accelerating your product road map and aligning and bringing the expertise in house. So that's just a natural. And if there are other opportunities, which we think complement our road map and accelerate it from an M&A perspective, then we will absolutely look at that. So I do think our strategy going forward will be a combination of our own product development initiative, but complemented with strategic acquisitions that we think accelerate that, bring scale and expertise and other capabilities that we think are value add. So I think it is going to continue to be a combination of those 2 things.

Great. That's very helpful. Second one for me. I'm curious, the organic member growth in the fourth quarter and thus far in the first quarter, how much of that do you attribute to the kind of frenzy around Bitcoin and crypto? And maybe if you have it, of the new accounts or new members that you've added, how many also have opened Bitcoin accounts with you guys?

Well, maybe, Dave, if you want to -- I mean, it's always difficult to actually be very specific on where the member growth is coming from because when customers come in, they actually onboard into the account, which has multiple products. So it's difficult to say exactly all the time what their -- what really is the driver. But I would say, for sure, Bitcoin is probably one of the biggest drivers and accelerators of member growth. If you look at it and you think about the broader, what's happening in the landscape, effectively, Bitcoin as an emerging asset class, crypto currency as an emerging technology and currency is obviously gaining increased attention with consumers and awareness, and we believe that, that trend is going to continue. And the majority of traditional players don't offer access to that product. So if you think about first wave of adoption of crypto currency, it was the early adopters that went online, found crypto exchanges that people hadn't heard of in the past, jump through hoops, paid high fees to be able to trade crypto. But increasingly, we believe a big part of the next wave are going to be the everyday consumer that actually just wants to get access to maybe Bitcoin, start to test it out and have exposure, and they're not going to be willing to jump through hoops, pay high fees, and they're going to want to go to players that have a brand, have credibility, great user experience. And that's really what we're positioning Mogo for on the crypto side. So that clearly has been a trend, and we think it's a trend that's going to continue for the foreseeable future. Obviously, the sector is volatile, and you see volatility in prices, not necessarily price levels, but volatility in prices driving that interest as well. And so that will continue. But I'd say, overall, the trend is continuing to be positive. And then our card, I would say, is right behind there as far as increasing attention and awareness and interest from consumers. And obviously, there is a link even to the card to Bitcoin with the cash back. So I'd say those are the 2 big drivers we're seeing.

Maybe, Greg, I'll just add to that, the link part of this, obviously, is the strategy of having these multiple products when certain things are more relevant than others, we can leverage that. One of the things we're seeing with our Bitcoin members, for example, that active Bitcoin member is 8x more likely to use the MogoCard than a non-active Bitcoin member. So there's a strong correlation between Bitcoin member activity and conversion into other products. And obviously, things like the Bitcoin cash back obviously has -- is what links it, but increasingly, so is our reward program. We've also -- are -- have often offer where we're offering Bitcoin cash back on mortgage as well. So as an example, a Bitcoin active member is 2x more likely to apply for a mortgage. They're also 8x more likely to refer a friend. So even obviously on the referral and kind of that viral coefficient in terms of not only driving engagement, but actually cross-selling into other products as well as kind of helping spread the word. The other thing I'd mention is we're also tracking what we call kind of mega users. And one of the things we're always focused on is the more engagement you have, there's obviously a strong correlation between engagement and product adoption. Obviously, the more somebody is logging into your app, the more likely they are to build trust and credibility and ultimately bump into other products. So we right now have a few segments. We have a segment of users that have logged in, on average over -- in fact, one segment of logged in on average over 182x so far this month alone. So -- and what we're seeing in there is a very high percentage of them have multiple products. So these are the things -- some of the trends we're looking at and obviously trying to determine kind of what that winning formula is. But clearly what seems to accelerate it is the combination of the product offering versus just 1 product.

Your next question is from Bill Zhang of Raymond James.

Two questions on the Coinsquare. Is the $600 million AUM, is that as of March? And the second question, if we're using a 1% spread on that, based on my calculation, that comes up to $72 million. So could you just reconcile that with the $50 million you have on the presentation slide?

Yes. So obviously, we're not giving -- we have a minority stake in Coinsquare. So we're not disclosing full financials and information on Coinsquare. But $600 million AUM is the current number. So that's the $600 million AUM number. And the revenue component is a combination of fees and spread. And what we're saying is that they're at a run rate right now north of $50 million without giving too specific. But that overall spread can vary month-to-month as well.

Okay. That makes sense. And so that brought on subscription and service sequential growth, what's the driver there?

Subscription and services sequential growth? Yes, the biggest driver there is -- well, the -- let's put it this way, the fastest-growing product there and revenue by far is Bitcoin trading. So that is a big part of it. And probably the second fastest revenue growth sequentially in subscription and services would be card transaction fees.

Okay. Great. That's good. And final one for me. Can you give an update on the P2P timeline? And also when we can expect the revenues to become more meaningful on the Bitcoin side?

Dave, do you want to talk about the P2P timing?

Yes. So one of the things that I highlighted in presentation today is this new digital bank account, and that actually is related to our P2P road map. We've always -- the goal has always been, again, to essentially one day enable the full switch. Today, all of our members have bank accounts. Our goal has not been to essentially enable somebody to make the full switch. So primarily, people have a bank account, and then they're using the Mogo app for various things. The digital bank account is actually one of the first pieces on the road map to P2P. What that's also going to do is enable a more convenient and frictionless way for people to get money in and out of their Mogo account. And from that one experience, they can either put money into Bitcoin, put money into, in the case of, obviously, once we get wealth, wealth, as well as the spending card, all through one account and one experience. So versus different ways to load money in Bitcoin and different ways to load money into card. So there's a bunch of other enhancements that are going to go along with that. And then the other piece of that is P2P, right? And that ability will now enable somebody to effectively do a person-to-person transfer and they can either take the funds out of their cash account, which is the new digital bank account or they can choose to take it out of their spending account if they're using the card. We expect that P2P in this account is going to launch in the second half of this year. So we still plan before the end of the year to have that one account along with P2P launched here in Canada.

And to your last question on Bitcoin revenue. As we talked about earlier, the sequential accelerating subscription services revenue growth in 2021 and the pretty meaningful 80% to 100% range of year-over-year growth that we're guiding for in Q4. And that's going to be a combination of -- at that stage, we would expect the crypto revenue to be a meaningful component of it. But just one piece. The bottom line is our model is not reliant on one stream of revenue. And we actually believe that really are -- a pretty unique differentiating feature that Mogo has relative to most of the consumer fintechs and the digital wallets out there, with few exceptions, is the diversity of our revenue streams and monetization streams. And we think that's going to be a pretty critical differentiator and value driver going forward.

Your next question is from Suthan Sukumar of Eight Capital.

Congrats on the Moka acquisition. Maybe I'll lead with a question there first. So with Moka, you guys are acquiring a fairly significant user base. Could you guys provide some color on kind of what is the profile of a typical Moka user look like compared to a typical Mogo user considering things like demographic engagement levels. Kind of just wondering what some of the similarities and differences are? And how you guys are thinking about kind of leveraging the space longer term given you're expanding the scope of offerings?

So it's Dave. A couple of things on this. Obviously, we're still spending a lot of time understanding the Moka business model, demographics, all of that data. But initially, what I'll say is, obviously, their value prop has been completely different than ours in terms of they're really all about saving and investing. And up until this point, that's not the market we've been focused on. Obviously, you could say with Bitcoin, that is obviously on the investment side, that really would have been the first time we had any sort of kind of product offering, where we're attracting members that were literally looking to invest. Up until then, it was mostly around controlling spending. Obviously, we have on the lending side, et cetera. So I would say that is the big piece. And quite frankly, that's the piece that we're most excited about, that this is a value prop that we have yet to have to not only offer to our existing members, but obviously attract a member base that we haven't attracted before. Generally, I'd say, too, obviously, this round up feature, one of the great things about it is it really is a perfect gateway for someone to begin even saving and investing, right? So I'd say, typically, the customer that's signing up for Moka type solution is one that is having difficulties, saving and investing, just saw a recent survey today, saying that the #1 goal of millennials and Gen Z is to actually increase their savings. And most of them are looking for, well, how am I going to do that, right? Starting to see a lot of kind of traction in those types of apps that are actually almost making it something that happens in the background. And then again, these are typically people, I would say, more on the behavioral side, that -- and again, they could be of all ages, right? In fact, if you look at the stats, 35 to 55 year olds actually are less likely to have a financial plan than ages under 35. So I'd say they typically fall into that category of -- they haven't figured out a financial plan. They're struggling to save money. They're looking for a solution that can just get them on track. Obviously, the fact that the average Moka user saves over $1,000 annually. They start to see it's a significant amount of money. Anybody that then logs in and finds out they've got over $1,000. And when -- before that, they were struggling to save any money. You can imagine how valuable they find that. So anyway, I think that's probably the -- where we are in terms of understanding who their customers are, what they're looking for and ultimately how we can see it complement our offerings.

Did you comment on the overlap that we saw between our member base and theirs?

No, I didn't. So Suthan, one of the things that we saw when we looked at it is actually a pretty low overlap on their member base with our member base. So in the low double-digit percentage range of the total members. So it does tell you that, that value prop on the investing and savings side is actually attracting in a lot of ways, a different sort of demo from a financial kind of health perspective.

Okay. Great. That's actually helpful. Kind of shifting gears here to the payment side of the business. You guys touched on Carta's continued focus on kind of global expansion which moves into Japan and the U.S. Can you touch on kind of what's the opportunity you had on the B2B front with Carta as you look to leverage some of the core Mogo assets as part of that strategy going forward?

Yes. So look, I think there's a couple of things. First of all, there is -- we just think there's significant opportunity with Carta's existing business and value prop in the market. As a reminder, when we decided to acquire Carta, we actually looked at for ourselves when we were moving from one of the legacy processors, we talked to 2 of the other major next-gen processors, Marqeta and Galileo. And in fact, we felt that Carta's platform had similar functionality, but also at a much better overall value proposition and ROI for us. And we think that, that's where the market is going. Carta builds out their model in Europe, where it's a lot more competitive. And we think that, that model is actually making its way to the U.S. And so we think that's going to be a big opportunity for Carta to take advantage of that in the U.S. And related to the opportunity to kind of see some synergies from leveraging Mogo's platform to help Carta in their B2B business, obviously you're not talking about the synergies of bringing, leveraging Carta's payment technology and that to help Mogo in their own platform. We're -- I would say we're still early days there, but we are increasingly seeing opportunities to do so, whether it's -- we're already seeing some requests from some of Carta's customers because that whole market is moving from a one-off, one piece of the solution in terms of, say, just processing to a broader full stack. And we're already seeing some inbounds from some of Carta's customers being interested in some of Mogo solutions. So effectively, Carta is in the unique position to say, hey, look, talking to other fintechs outside of Canada, we actually know what is working and we've got inside kind of scoop on what a great user experience is and how to build out your Carta program into a broader digital wallet. And so we do see a number of opportunities going forward to sort of leverage Mogo's platform on that front, but definitely still early days there. And I guess that's why to my -- the earlier question on investment and why we do think that this is the opportunity, we, quite frankly, have a lot of kind of growth initiatives and investment opportunities in both Carta side and the Mogo side, both on Mogo's existing products and then want new products and like the wealth side. So there's really a lot of, we believe, big growth opportunities out there for us.

No questions at this time. Please continue.

Sorry, do you say no questions?

Yes, sir.

Okay. Okay. Well, I think just to summarize, obviously, it's been a busy year. And with everything going on, we're definitely expecting an even busier next few years here. One of the things I want to emphasize is we're still very early in the stage of building this company. And really, we're hyper-focused on building one of the most powerful and engaging financial apps around. Really excited to give updates on how the Moka transaction is going. And obviously, a lot of new product releases yet to come this year, which will keep you update. Other than that, we look forward to updating you on our Q1 results call in May. Thanks again.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.