Filing Summary
Company and period: The supplied filing is Mogo Inc.’s Form 20-F annual report for the fiscal year ended December 31, 2022, dated March 23, 2023—not a filing for Orion Digital Corp. The report includes audited consolidated financial statements prepared under IFRS. Unless noted otherwise, amounts below are in Canadian dollars.
Business Context
Mogo is a Canadian digital finance company with digital lending and mortgage products, investing apps MogoTrade and Moka, and Carta, a digital payments platform. MogoTrade remained invitation-only. The company retired MogoCrypto in December 2022 and wound down Moka France in Q4, focusing on its Canadian business and reducing costs.
Financial Performance
| Metric | FY 2022 | FY 2021 | Q4 2022 | Q4 2021 |
|---|---|---|---|---|
| Revenue | $68.9 million | $57.5 million | $17.1 million | $17.0 million |
| Subscription and services revenue | $41.7 million | $34.4 million | $10.3 million | $10.7 million |
| Interest revenue | $27.2 million | $23.1 million | $6.8 million | $6.3 million |
| Gross profit | $46.2 million | $46.0 million | $11.7 million | $12.3 million |
| Gross margin | Approximately 67% | Approximately 80% | Approximately 68% | Approximately 72% |
| Loss from operations | $(33.6) million | $(35.5) million | $(3.8) million | $(11.3) million |
| Net loss | $(165.7) million | $(33.2) million | $(74.9) million | $(29.6) million |
| Adjusted EBITDA, non-IFRS | $(12.2) million | $(11.1) million | $0.2 million | $(3.7) million |
- Full-year revenue grew 20%, mainly from Carta, Moka and Fortification acquisitions and increased interest revenue. Q4 revenue was nearly flat year over year.
- Net loss increased sharply, principally due to non-cash impairment and investment-related charges: $58.3 million on Coinsquare, $31.8 million on goodwill, and $6.5 million on certain intangible assets, among other valuation losses.
- Provision for loan losses was $14.7 million, up 95%. Gross loans receivable were $69.9 million; the allowance was $13.1 million, or 18.7% of gross loans, versus 14.9% a year earlier.
- Operating expenses were $79.8 million, down from $81.6 million. Management reported that quarterly operating expenses fell $9.2 million from Q1 to Q4 and cited the first positive quarterly adjusted EBITDA since FY 2020.
Cash, Liquidity and Debt
- Cash and cash equivalents were $29.3 million at year-end, down from $67.8 million. Total assets were $221.5 million and total liabilities were $110.6 million.
- Cash used in operating activities was $27.0 million for FY 2022, compared with $31.1 million in FY 2021. Cash used in investing activities was $9.1 million; financing activities used $3.1 million. Net cash decreased $38.5 million.
- The senior secured credit facility has a $60 million limit and matures July 2, 2025. Outstanding principal and interest were $46.2 million at year-end; the facility bears variable interest and is secured by company assets. Mogo reported compliance with its covenants at year-end.
- Debenture principal was $39.7 million, with a $38.3 million carrying balance including discount and interest payable. Debentures are subordinated to the credit facility; principal repayments may be made in cash or common shares at the company’s option.
- Management said it expects to refinance amounts owing under the credit facility or debentures as they become due. Contractual obligations include $46.2 million of credit facility principal due in 2025 and $35.1 million of debenture principal due in 2025.
Material Changes, Outlook and Risks
- In 2022, Mogo reduced its workforce by approximately 33% from March 31 levels, cut vendor and marketing spending, exited Moka France, and retired MogoCrypto. No bonus was expected for 2022. Management said cost reductions were intended to accelerate the path to profitability; it did not provide specific forward financial guidance.
- The company reduced loan originations in the second half of 2022 to manage credit risk. Management’s loan-loss allowance includes forward-looking assumptions for inflation, rising rates and possible recession conditions; actual delinquencies and losses may differ.
- Mogo held an approximately 34% stake in Coinsquare. The filing describes material exposure to crypto-market volatility and regulatory, funding, banking, insurance and reputational risks. Coinsquare’s 2022 trading-volume decline contributed to impairment and equity-method losses.
- On October 28, 2022, Mogo received a Nasdaq minimum-bid-price deficiency notice, with an initial compliance deadline of April 26, 2023. Failure to regain compliance could threaten its Nasdaq listing; its shares would remain listed on the TSX.
- Other principal risks include concentrated debt funding, variable-rate borrowing costs, loan defaults and model risk, regulatory changes, privacy and cybersecurity incidents, reliance on third parties, competition, and the need for additional capital. Mogo disclosed an accumulated deficit of $314 million and a history of losses.
- The filing reports no legal proceedings or regulatory actions expected to have a material adverse effect and no significant business changes it believed would reasonably be expected to have such an effect. It intends to reinvest future earnings and does not expect to pay dividends in the foreseeable future.
Important Facts for Investors to Verify
- Review the audited financial statements and impairment assumptions, especially the Coinsquare, goodwill and intangible-asset valuations; the reported $165.7 million net loss substantially exceeded the operating loss.
- Confirm current cash, borrowing availability, covenant headroom, interest-rate benchmark transition from USD LIBOR to SOFR, and refinancing plans for debt due or scheduled in 2025.
- Track loan delinquency, charge-offs, originations and allowance adequacy as inflation, interest rates and consumer conditions evolve.
- Check whether Mogo regained Nasdaq bid-price compliance by the stated deadline and whether the company took any subsequent listing actions.
- Reconcile the filing’s different descriptions of investment-portfolio value: it cites approximately $45 million for Mogo Ventures, $37.5 million for investments including Coinsquare at year-end, and a $68 million year-end value in its discussion of the portfolio. The text does not clearly explain these differing figures.
- Assess whether cost reductions and the Q4 adjusted EBITDA result can be sustained without impairing product development, member growth, service quality or compliance.