Pineapple Financial Inc. — FY2023 Form 10-K
Reporting period: Fiscal year ended August 31, 2023; comparison is with the year ended August 31, 2022. Financial statements are presented in U.S. dollars unless otherwise indicated. This is an annual report, not a calendar-year 2023 Q4 report.
Business context
Pineapple is a Canadian mortgage brokerage and technology company. It provides lender-commission-based mortgage brokerage services, agent subscriptions and pre-underwriting support through its MyPineapple platform. It also describes an insurance business operated through its wholly owned subsidiary. The company reported 55 full-time staff and a network of approximately 600 brokers; active users increased 9.35% from August 2022 to August 2023.
Financial results and liquidity
| Metric | FY2023 | FY2022 | Change / context |
|---|---|---|---|
| Gross revenue, including commissions payable to brokers | $16.434 million | $20.381 million | Down 19.4% |
| GAAP net revenue | $2.502 million | $3.601 million | Down 30.5% |
| Net sales revenue after commission expense | $1.095 million | $2.717 million | Down 59.7% |
| Gross margin | 15.23% | 17.67% | Down 2.44 percentage points; management attributes this to higher volume from lower-margin agents |
| Net loss | $2.809 million | $2.810 million | Nearly unchanged |
| Net loss and comprehensive loss | $2.874 million | $3.015 million | Includes foreign-currency translation loss |
| Adjusted EBITDA (non-GAAP) | $(1.239) million | $(1.615) million | Loss narrowed by $0.376 million |
| Mortgage volume | $1.398 billion | $1.785 billion | Down approximately 21.7% |
| Operating cash flow | $(2.116) million | $(1.835) million | Greater cash use |
| Investing cash flow | $(1.362) million | $(1.053) million | Primarily software development |
| Cash at year-end | $720,365 | $3.897 million | Down approximately $3.176 million |
At August 31, 2023, current assets were $1.698 million and current liabilities were $1.174 million. The company had a $430,098 one-year loan bearing 12% annual compounded interest, due July 31, 2024, and total lease liabilities of $1.108 million. It invested $1.300 million in internally developed software; intangible assets were $1.719 million at year-end.
The November 2023 IPO issued 875,000 shares at $4.00 each, for $3.22 million gross proceeds and approximately $2.76 million net proceeds. These are subsequent to the fiscal year-end and are not included in August 31 cash. The company says it does not currently intend to pay dividends.
Material changes, outlook and risks
- Management links lower mortgage volume and revenue to Bank of Canada rate increases, inflation and reduced real-estate activity. Canadian home transactions cited in the filing declined 21.0% year over year.
- Management reported an FY2023 net loss and negative operating cash flow. The filing states that future operations depend on financing and achieving profitable operations, with no assurance either will occur. It provides no specific revenue, earnings or cash-flow guidance.
- Growth plans include expanding the agent network and geographic reach, developing MyPineapple and growing the insurance channel. Pineapple Insurance was described as early-stage; the filing does not provide a clear amount of insurance revenue or established scale.
- Key risks include mortgage-market and interest-rate exposure, continued losses and financing needs, reliance on agents, lender and strategic partners, technology and cybersecurity risks, regulatory obligations, and competition. The Salesforce platform agreement was scheduled to expire November 30, 2023; the filing does not clearly establish whether it was renewed.
- Management identified internal-control weaknesses, including inadequate segregation of duties, insufficient control documentation, inconsistent procedures and approvals, and inadequate written policies. Management said it was implementing improvements. The company did not include an auditor attestation on internal controls.
- The company recognized a $591,480 government incentive recovery in FY2023 and reported $699,627 of deferred government grant liabilities at year-end. A $27,143 investment write-down and $143,947 legal-fee accrual are also included in the non-GAAP reconciliation.
Important facts for investors to verify
- Reconcile the filing’s net-loss descriptions: the audited statements report net loss of $2.809 million and comprehensive loss of $2.874 million, while the MD&A summary describes $2.874 million as net loss.
- Confirm the reported revenue basis. The filing distinguishes $16.434 million gross revenue from $2.502 million GAAP net revenue after broker commissions; comparisons and margins depend on the measure used.
- Review the latest cash position, cash burn, repayment or refinancing of the $430,098 loan, and liquidity after the IPO proceeds and subsequent spending.
- Confirm whether the Salesforce agreement was renewed after its stated November 30, 2023 expiry, and assess alternative-platform costs and continuity risks.
- Track remediation of the disclosed internal-control weaknesses and confirm future reporting on control effectiveness.
- Assess the assumptions underlying adjusted EBITDA and other non-GAAP measures, including government incentives and add-backs; do not treat adjusted EBITDA as cash available to meet obligations.