Mogo(MOGO) - 2023 Q4 - Annual Report

Financial Performance - The company reported an accumulated deficit of approximately $332 million, highlighting ongoing challenges in achieving consistent profitability despite having shareholders' equity of approximately$94 million [49]. - Total revenue for 2023 was $65.221 million, a decrease of 5.3$68.949 million in 2022 [182]. - Revenue for Q4 2023 was $17,157,000, a slight increase of 0$17,146,000 in Q4 2022; however, annual revenue decreased by 5% from $68,949,000 in 2022 to$65,221,000 in 2023 [229]. - Subscription and services revenue in Canada for 2023 was $32.668 million, down from$35.112 million in 2022, while interest revenue in Canada was $26.436 million, slightly down from$27.208 million [182]. - Net income for Q4 2023 was $8,511,000, a significant improvement from a net loss of$74,943,000 in Q4 2022; annual net loss improved from $(165,678,000) in 2022 to$(17,887,000) in 2023 [229]. - Adjusted EBITDA for Q4 2023 was $2,743,000, a substantial increase of 1006$248,000 in Q4 2022; annual adjusted EBITDA improved from $(12,227,000) in 2022 to$7,669,000 in 2023 [229]. - The company’s ability to generate sufficient cash flow to service its debt is uncertain and may require refinancing or additional financing, which could dilute shareholders [77]. - Net cash used in operating activities for Q4 2023 was $(2,199,000), an increase of 62$(1,356,000) in Q4 2022; annual cash used improved from $(27,009,000) in 2022 to$(9,167,000) in 2023 [229]. Membership Growth - Membership grew from 2.0 million as of December 31, 2022, to 2.1 million as of December 31, 2023, reflecting a slowdown in growth compared to previous periods [51]. - Total Mogo members increased to 2,110,000 as of December 31, 2023, up 6% from 1,993,000 members as of December 31, 2022, representing a net increase of 117,000 members [231]. - The member base grew by 33,000 in Q4 2023, indicating continued adoption of products by new members [231]. Risks and Challenges - The company faces significant risks from worsening economic conditions, which may increase loan default rates and negatively impact operating results [40]. - The allowance for loan losses is based on both objective and subjective factors, and there is a risk that it may not be adequate to absorb potential loan losses [45]. - The proprietary credit scoring model is critical for forecasting loss rates; failure to accurately assess creditworthiness could lead to higher than expected losses [46]. - The company may require additional capital to pursue business objectives and respond to unforeseen challenges, which could limit operational flexibility if not secured [53]. - The company faces potential liabilities due to evolving privacy regulations and the handling of personally identifiable information, which may require changes to business practices [86]. - Cybersecurity incidents are a significant risk, with increasing frequency and severity, potentially impacting operations and financial results [87]. - The company is subject to extensive regulation, which may change and impact its business operations and expansion efforts [62]. - Future legislation may restrict operational methods and impose additional costs, potentially impacting revenue and financial condition [63]. Operational Strategy - The company is committed to maintaining effective internal controls over financial reporting, with significant resources allocated to ensure compliance with regulations [128]. - The company’s operational infrastructure is vulnerable to breaches, which could lead to unauthorized access to sensitive data [89]. - The company relies on third-party service providers for transaction processing, which poses risks if these services are disrupted or unavailable [106]. - The company relies on third-party partners and service providers for key functions, which poses risks of service disruption and operational vulnerabilities [107]. - The company has a remote-first operational model and has subleased its Vancouver office, seeking to exit the Winnipeg lease [220]. Competitive Landscape - Competition is increasing from traditional financial institutions and technology companies targeting millennials, which could adversely affect market share and pricing [112]. - The company operates in a competitive financial services market, facing competition from fintech companies, traditional banks, and new market entrants [195]. - The company anticipates future market entrants with substantial resources, which may intensify competition in the financial services sector [196]. Product and Service Development - New products and platform enhancements must achieve sufficient market acceptance to recoup development investments; failure to do so could harm financial results [55]. - MogoTrade offers commission-free stock trading and aims to help users invest based on a Warren Buffett approach to long-term investing [142]. - Moka is a fully managed investment platform that specializes in helping members invest strategically in the S&P 500, with no minimum contribution required to start [145]. - MogoMoney provides unsecured loans up to $5,000 at annual rates up to 47.42$49.4 million on its Credit Facility and $36.8 million in outstanding debentures as of December 31, 2023 [77]. - The company’s debt financing sources are highly concentrated, which may limit access to additional funding on reasonable terms [42]. - The company may need to issue equity or increase debt for acquisitions, which could dilute shareholder value and adversely affect financial results [61]. - Mogo expanded its credit facility, increasing available loan capital from$50 million to $60 million and lowering the effective interest rate from a maximum of 9$3.3 million in marketing expenses for the year ended December 31, 2023, to enhance brand visibility and member acquisition [101]. - Mogo's marketing strategy focuses on building a strong digital financial brand in Canada, targeting consumers looking to improve their financial health [183]. - Mogo amended its marketing collaboration agreement with Postmedia, extending it until December 31, 2024, to leverage Postmedia's media network [161]. Corporate Governance - The company has entered into a Voting Agreement with KAOS to support its director nominees, indicating active management of its investment portfolio [122]. - The company does not expect to be classified as a Passive Foreign Investment Company (PFIC) for the taxable year ending December 31, 2023, but this status is subject to annual determination [124].