Orion Digital Corp. (ORIO) Q2 2020 Earnings Report, Transcript and Summary

Ladies and gentlemen, thank you for standing by. And welcome to the Mogo, Inc. Q2 2020 Financial Results Conference Call. At this time all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today’s conference is being recorded. [Operator Instructions] I would now like to hand the conference over to your speaker today, Craig Armitage, Investor Relations. Thank you. Please go ahead, sir.

Thank you, Operator, and thanks for joining us today. Just a couple of quick notes, first, 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 and the company undertakes no obligation to update these statements except as required by law. Information about these risks and uncertainties are included in our Q2 filings, as well as periodic filings with regulators in Canada and the United States which you can find on SEDAR and 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 IFRS financial measures. And last point, I would make is that the amounts today are discussed in Canadian dollars unless otherwise indicated. And actually last point is, we do have presentation slides accompanying today’s call. You can find those [Audio Gap] website. So, I will turn the call over to Dave Feller to get it started.

Thanks, Craig. Good afternoon. And welcome to Mogo second quarter 2020 results conference call. I am joined today by Greg Feller, our President and CFO. It’s certainly been a challenging few months in many respects in response to this global crisis we have had to act quickly to make changes. We have effectively stopped lending and marketing as we focused on reducing costs and rethinking our growth strategy. We are now beginning to do some lending and working on developing new marketing campaigns to support some exciting new products that we expect to begin in the fall. As Greg will discuss we believe the results of Q2 show how resilient and profitable our model can be. We have worked -- work ahead of us, but as we will discuss today we are pleased with the recent performance and excited about our new products and what we see as a very compelling value proposition that is highly differentiated from others in the market today. Again, I just wanted to say thanks to our team members who have done unbelievable job during these challenging times. Before 2020 we were already seeing this shift from traditional banking to fintech, given their innovative products, digital-first experiences and enhanced value propositions. These new companies are occupying an increasing share of the customers’ financial wallets, and although, it started with simple things like free credit score it’s now moving into more important parts of the financial wallets including spending investing. But the issues we face today have really put the shift into hyper drive. The financial health crisis was here before COVID and now almost 5 million Canadians are with either without jobs or have had their incomes affected, even those who haven’t are looking for ways to save and improve their financial health. This is accelerating the demand for digital-first products that are accessible to all and really help to solve the challenges consumers are having with their finances. Our product roadmap is driven by the goal to make Mogo the app that does this. We believe these trends are leading to what we call sustainable finances. Traditionally, sustainability for businesses was a three piece profit, people and planet. For the individual we believe its financial health, people and planet. People aren’t just looking for great digital experience, they want products to make it easier for them to be in control of their finances and also live a more sustainable lifestyle. Consumers have the power to not only improve their own financial well-being, but make an impact with their money. How you spend your money matters. It impacts not only whether you are in debt or able to save and invest. But it’s also increasingly a way for people to support things they care about including social injustice and the environment. Just like ESG investing is taken off the same trend is coming to spending. The link between finances and living sustainability -- sustainably are undeniable. This is a key part of what guides us on our strategy today and is clearly reflected in our recently launched new MogoSpend in account. We designed Mogo as a mobile-first digital experience and a focus on building innovative and unique products. Our mission remains to make it easy engaging for people to get financially healthy, as well as to live a more sustainable lifestyle. Every one of our members has a bank account. Our goal is offer them value and utility they aren’t getting from their banks. And in particular products and an experience that makes it easier to achieve their important financial goals. Similar to the Cash App in the United States, we have built a simple asset today includes five core products. The app is free, takes only three minutes to open an account, there’s no impact on your credit score and it gives you instant access to these products. Each one of them is unique and together they form a very compelling value proposition in the Canadian market. We spent a lot of time thinking about the best way to help consumers live more sustainable lifestyle and this led us realizing the link between financial health and planet health. Nowhere is the link stronger than your spending, managed effectively and you will spend within your means, have zero debt, money for saving and investing, and help solve one of the biggest issues of our time, climate change. Our value proposition is designed around a simple concept, zero debt and zero carbon footprint. If we learn anything during COVID is that being financially healthy is more important than ever, every penny counts and debt continues to be the biggest driver of financial stress. 56% of Canadians carry credit card debt today. The driver of this debt and the stress is overpaying on credit cards that has been designed to not only make it easy, but actually incentivize with their reward program. MogoSpend was designed with features that make it easier for consumers to budget, to save money and avoid debt, and help pay down debt. Getting out of debt continues to be the number one financial goal of Canadians nine years in a row and today is the number one reason why our members sign up for the card. Just like it makes sense to have a separate account for your savings, MogoSpend was designed to give all Canadians a separate spending account from their bank account for free. As that separation makes it easier to budget and avoid spending money that was meant for something else. It also has features like spending analysis that makes it very easy to see at a glance how much you are spending on a monthly basis, so you can easily track your progress, something that isn’t easily seen with typical banker account or credit card. But we wanted to go further in the just budgeting and believe that designing experience that also helps tackle what is arguably the biggest existential threat of our lifetime, climate change. Sustainability is a megatrend, whether it’s ESG investing our consumers moving away from animal-based protein to plant-based proteins like beyond meat. Increasingly consumers are looking to make a positive impact and are voting with their money. When it comes to climate change, 82% of Canadians believe it’s a serious problem. Most importantly climate change is directly linked to our spending and in an estimated 72% of CO2 comes from our own consumption. Everything we buy and spend our money on has a carbon footprint and if that carbon footprint that’s the main driver climate crisis. As you can see from this example, the carbon footprint of a jacket is estimated 66 pounds and because MogoSpend automatically offsets 1 pound of CO2 for every dollar spent, not only does it fully offset your carbon footprint in many cases including this one, you can actually be climate positive on your purchase, i.e. offset more CO2 than you create. Now for those that aren’t familiar with offsetting, it’s a growing industry that focuses on supporting carbon absorbing initiatives such as tree planting or saving for us from deforestation. We partnered with the banker based company that specializes in helping companies go green and get carbon neutral. We have also done an analysis on our own business and going forward we will actually be carbon positive. In terms of the card program, the specific offsetting project is focused on preventing an area of the Amazon Rainforest from being cut down. We will also be bringing this project into the app so users can only see how much CO2 they are offsetting, but easily see how every time they spend they are helping save the Amazon Rainforest. By getting people to also link their spending to the impact on the planet, it’s another way to help them control their spending, as it helps create an emotional link to your spending and helps you be more mindful of it, which is also key to stick into a budget. The payment market in Canada is simply massive at almost $10 trillion a year. Now this includes cash, credit cards, debit cards, checks, EFTs, et cetera. But if you just look at the cash, credit and debit card market, it’s close to a $1 trillion dollars a year. With COVID cash has actually accelerated its move to digital and using a prepaid card like mobile is equivalent to cash, but with a lot more benefits. Compared to debit cards where banks charge an average of $15 a month for unlimited use, the advantage is compelling, not only is it free, with many features that make it much easier to control your spending than a debit or credit card, it comes with what we see as the ultimate reward program, saving the planet. In fact if all Canadians move their spending to MogoSpend Canada could achieve one of the UN’s top climate goals of reducing CO2 by 50%. We are also one of the first companies in Canada to implement Visa Direct for real-time transfers and now customers from three of Canada’s big five banks can instantly link and not only do real-time transfers that are free, but easily set up automated transfers. Once linked, transferring money from one of these banks to your mobile spending account is just as easy as transferring it between accounts of the same bank. So now millions of Canadians can easily use this free app and card to control their spending, and help solve climate change without any of the hassles of switching banks. This is why we think the opportunities are so large. We have been working on this product in different forums for several years now and I have learned a lot. Although, it has definitely taken longer than we would hoped, we are excited about the impact that this product will have. We announce that the card is now available to anyone signing up. However, we have still been rolling out our marketing slowly as we continue to gather feedback on the best way to communicate the value proposition. We are currently working on the development of an ad campaign that we plan on launching this fall. Since 2008 fraud, identity fraud is increased by 15000% and as our lives continue to move to the digital world, identity theft continues to rise and the risk of each one of us face of becoming a victim of identity fraud continues to go up. Unlike when someone fraudulent uses your credit card, which is typically covered by your credit card company, ID fraud is on you and it can be devastating including preventing you from getting a mortgage. There are an estimated 20 million Canadians in the target market for this product and we estimate that less than 10% currently have a solution. The bureau charged $20 a month with no mobile app experience. As the first free mobile first identity fraud protection products in Canada, this is truly a game changing value proposition and something we believe everyone will increasingly realize they should have. We have been working on this over the last quarter and actually expected to go live later this week. This will obviously be a product that not only helps grow our member base, but also helps drive engagement. Like MogoSpend, we expect to include this in our marketing campaign debuting this fall. Bitcoin is up just over 60% year-to-date versus just under 4% for the S&P 500, which is one of the reasons it has been getting increased attention by consumers. It’s also been a key part of the success of apps like the Cash App in the U.S. Similar to them our focus is really on simplifying things as the average Canadian has yet to own any Bitcoin, with Mogo you can buy as little as $1 with a Bitcoin. And instead of focusing on all cryptos, we only offer Bitcoin and it is part of our broader value proposition. One more thing you can do in the mobile app, you can do in your bank app. Given our pause on all marketing over the last few months, we haven’t been focused on leveraging this. But plan on including in our upcoming campaign. Mogo is also the first app in Canada to offer free credit score monitoring and although many of the banks now offer a credit score in some way, still no banks today in Canada actually offers monthly monitoring of your Equifax bureau and none of them offer it for free. By itself credit score monitoring is something that doesn’t have as much power to draw new members as once did, but it’s still something that consumers expect and need to manage their financial health. So as part of an overall holistic financial solution, it’s still matters and it still helps drive engagement. Lending is what our business was initially built-on and we believe remains one of the key strategic advantages even in the current environment where we had record unemployment are small and affordable loans have proven resilient. We have slowly started to originate new loans and we will continue to do so slowly as we monitor market conditions and credit metrics. Again our goal continues to be to offer the best rates across the entire credit spectrum. Today, we are doing some of the higher rate loans that our balance sheet, given the high yield and our cost of capital. We have also partnered with one of Canada’s largest some private lenders Goeasy that is funding a segment of these customers. And we have also recently signed a referral partnership agreement with the bank where we will be referring prime loans. Our goal is to ensure we have the best-in-class offering across the full credit spectrum and expect the partnership and referral model to continue to expand. We expect to announce this partnership shortly. Our unique close media partnership is one of the keys of growing our member base over million members. Although, we have effectively positive marketing in the last few months we believe or post media partnership will continue to be a key driver of growth. And as we get back to marking, launching our ad campaigns for our new products including Spend and Protect, this partnership helps us get in front of approximately 18 million Canadians a year and is very complementary to our other marketing channels. As I mentioned earlier, referral partners are one of the ways we are looking at increasing our product offering and driving new revenue. We recently signed agreements with two partners that we will be announcing shortly. We have always been looking for great partner for a high interest rate savings account and we are excited with the partner we have chosen, and as I have already mentioned, we have also signed referral partner for prime loans. Our goal is to create a best-in-class offering and although we will continue to consider fully integrated solutions, partner referrals will be an increasing part of our strategy. Unlike fully integrated partners, they are much easier to execute and can be a great entry point to a fully integrated experience. As we have mentioned in the past, there are many more partnership opportunities including insurance wealth et cetera. With our newly available MogoSpend are upcoming free identify fraud protection. We believe we have built the unique and compelling value proposition that is unrivaled in the Canadian market. We believe our strategy of offering many free products alongside an increasing number of ways to monetize is how we can build a high growth model alongside a strong economic model. In summary, we have taken decisive actions in recent months from a financial perspective and strategically to enhance our value proposition and clearly align with the trends towards financial health and sustainability. We believe these changes not only protect us in the near-term, but they position us for well for renewed growth and expansion from multiple revenue streams as we look out to 2021 and beyond. I will turn the call over to Greg to review the financials. Greg?

Thanks, David. Good afternoon. Q2 was a very important quarter for the company as it highlighted the underlying profitability of our financial model when we exclude the discretionary growth investments, the resiliency of our customer base and the cash flow generation capability when we pull back on our expense and loan capital levers. We also outperformed our guidance on every metric in the quarter, including revenue for the quarter of $10.6 million above our guidance of $10.3 million to $10.5 million. Adjusted EBITDA of $5.2 million for the quarter was above our guidance to $4.5 million to $5 million represented a 49% margin in the quarter. During the quarter, we generated positive cash flow from operations and net investing of $7.3 million, which is also above our revised guidance of $6.5 million to $7 million. Strong underlying credit performance, as well as limited origination in the quarter also drove a record gross margin of 91%. We ended the quarter with approximately $25 million of cash and investments which included $7.5 million of cash and $17.8 million of investment portfolio. We have consistently talked about our ability to use leverage to generate high margin and cash flow and this is the first time we have decided to use those levers as we felt it was necessary like others to take aggressive action during an uncertain period. We believe this quarter will serve as a proof point of the underlying profitability and flexibility of our model and the resiliency of our business. Based on the strong performance, we are now moving back from defensive mode to offensive mode as we begin to slowly dial back up some of our growth investments along with the launch this quarter of MogoSpend. Revenue for the quarter as I said was $10.6 million, which is ahead of our guidance. Core revenue was down 6.4% year-over-year due to the proactive measures we took in the quarter including reducing marketing spend and new loan origination in light of the COVID-19 pandemic and subscription services revenue now represents 43% of total revenue. Our ability to act quickly at the end of Q1 to reduce cost starts with having a flexible expense structure. This enables us to use the operating expense leverage we have particularly investment in growth initiatives to quickly reduce our cost base. Our cash OpEx for Q2 was $5.3 million, a reduction of 46% of $4.4 million in one single quarter. The reduction was driven primarily by reduced growth investments in technology development and marketing. We have invested significantly in recent years to build our digital platform and app, which enabled us to adjust these growth styles while navigating this period. Although, a number of these were variable related expenses like marketing, we expected a number of these cost savings to be permanent in nature and reduce our OpEx and increase operating leverage going forward. Lastly, we determined that we qualify for the Canadian Emergency Wage subsidy and accrued $1.3 million of other income related to the subsidy in the quarter, which helped to further offset expenses. The underlying profitability of our business with front and center in Q2 driven by record gross profit and adjusted EBITDA margin. Specifically gross profit increased by 14% from Q1 and gross profit margin climbed to more than 90% in the quarter from 60% in Q1. Adjusted EBITDA was $5.2 million, up from only a $0.5 million in the first quarter and EBITDA margin was almost 50% in Q2, compared to only 4% in Q1. Again, when we resume growth investments, we would expect to see these margins impacted. However, we believe this quarter is a great test case for the underlying margin and profitability of our model, which as we scale will draw -- drive strong long-term profitability. Perhaps the most significant highlight of the quarter was the dramatic sequential increase in cash flow from operations net of investing. Our model allowed us to quickly move from investment mode into cash flow generation mode resulting in a record positive cash flow in the quarter. Net cash provided by operating investing activities grew to $7.3 million in the quarter, which exceeded our previous guidance range. The positive cash flow included about $2 million positive cash flow from operations with the balance coming from cash generated from our loan book. On an apples-to-apples basis, this representative of positive cash flow increase of over $11 million in one single quarter. We have all obviously seen a lot of business models struggled during this uncertain economic period, which is why we are very pleased with the resiliency of our business and financial performance in the quarter. Our credit performance with a positive highlight again in Q2, particularly given the economic headwinds, our deep history in dating consumer lending gave us confidence that this was a resilient portfolio performance from recent months and certainly reinforced that. In the second quarter, we experienced a decrease in the rate of customer default relative to historic levels which has continued into the third quarter. To-date, we provided approximately 6% of the loan customers with some form of relief including reduced interest and deferred payments, but only about 1% of our customers still on relief at quarter end and that is further reduced into the third quarter. In addition to the leaner cost structure actions in 2020 have substantially improved the balance sheet. The main highlights for 2020 were, the sale of our liquid book reducing our credit exposure by almost $32 million, the subject of payoff of one of our two credit facility, reducing our total credit facilities outstanding to $39 million at the end of Q2 from $77 million at year end, we also extended our remaining facility to July 2022 and significantly reduced the interest rate, and lastly, during the second quarter, we amended our $12.5 million of convertible debentures and extended the maturity date by two years to May 2022. At quarter end, we had cash investments of $25.3 million. Well much of what I discussed relates to the strong financial performance of the quarter, we have also been moving forward with new initiatives that we believe will be important drivers of growth going forward, including the launch of rollout of MogoSpend account, which along with our Bitcoin account, ID fraud detection and access to credit makes the Mogo app only fully integrated financial app in Canada that helps consumers getting control and manage their finances. As Dave mentioned, we are also moving forward with our new partner for that and have brought on two new partners that we expect to announce in the near-term which we are very excited about. We also expect to start ramping up our highly loan platform including loan partnership in the next quarter as we move back to growth mode. With that, we will open the call questions. Operator?

[Operator Instructions] Your first question comes from the line of Bill Zhang with Raymond James. Your line is open.

Hi, guys. I know you guys just rolled out the MogoSpend a couple of weeks ago. So could you give us some details on like what the initial response has been there?

Hey. It’s Dave. Yeah. So, as I mentioned in my commentary, although, we did the card is now available if somebody signs up. We have actually been pretty careful in terms of marketing it and actually getting people to sign up for it as of now. Part of this is -- this whole value prop including the climate action piece is very new and so we want to make sure that we can really kind of test it, really get that messaging right, figure out what really resonates with our members, as well as with new members. So right now we are not -- we actually don’t have specifics to comment on, but as I said before, we are essentially working towards an ad campaign that we expect to launch sometime in September. So between the initial launch and then we are continuing to gather a lot of feedback. What I can say is we have been kind of, I think, pleasantly surprised in terms of some of the people that initially weren’t thinking that the carbon offsetting and the climate action was something that they themselves actually would care about. But what we have noticed is once people start using their card and many of them come for the budgeting features, it actually is the carbon offsetting and that connection to that actually seems to drive a lot of the kind of more emotional engagement. So it’s starting to I think give us some really kind of positive signs that the opportunity for that piece is very compelling. And quite frankly, what we have noticed with some is the desire to put more of their spending on that card versus another type of reward is there, because that is if you actually put all of your spending on this card it effectively will help you get to net zero emissions. And so the more you connect to that the more you realize every other card you use in your wallet you are essentially, obviously, you have got the carbon footprint there’s no offsetting. And so I’d say, that’s kind of where we are in this, and obviously, expecting in the next quarter or two to get more color on it.

Great. Yeah. Thank you guys for the detail there. And I guess in connection to the MogoProtect, I know it’s made free for all the users. Have you been able to see an uptick in the level of engagement there and…

Yeah. So…

Is it too early…

Yeah.

Yeah.

So that was actually hasn’t been -- so what’s happened is, we have had essentially a coupon where you could sign up and put a coupon in, but only actually beginning this Thursday will actually be free. So today, for example, if you are going to sign up today you would still have to put your credit card in, right, your credit card details. Obviously that is a very big friction point. Most people don’t consider that free. You are essentially getting depending on the offer maybe six months free and then after that you are -- you would start being charged on the credit card. What we are moving to that actually is going to be launching on Thursday. All new members that sign up as soon as their dashboard lights up they are automatically active with both credit score and identity fraud protection is automatic, right? No credit card, nothing. So this is a completely different experience than what we currently have. So that -- again that product that feature goes live on Thursday.

Okay. Okay. That makes sense. And I guess for your small-dollar loan portfolio, you mentioned that year-to-date spend about at 6% relief level, would you say is at its peak or do you expect that to come down as it progressed to the balance of the year?

Well, yeah, so what we said is to-date we have gone the peak was 6%, right now…

Yeah.

…it’s actually under 1%.

Okay.

And at quarter end we have actually seen it go down even further in Q3 so far than where we ended in Q2.

Okay. And well one last question before I pass the line. So your two sign-ups. You said that you would be giving a little bit more detail on that later on. I was just wondering is there anything else you can speak on that or?

Yeah. I mean, I think, the -- just to reiterate what I said in my commentary. This referral partnership strategy as we mentioned is, obviously, a lot easier to execute than a fully integrated solution. Having said that, it is still about finding these partners that offer a best-in-class solution, obviously, for example, in a savings account, there’s a whole bunch of savings accounts available in Canada and the rates vary widely, right? The best rates are more than 30 times higher than what the big banks are offering. So depending on who you find in the partner, it’s also about finding that right partner that has the right product offering. So we are happy with the partner that we chose there. And one of the things obviously that matters there too is, as we get into products like MogoSpend and identity fraud protection, having these other prime ways for us to monetize more of a prime consumer will be increasingly important, things like a high interest rate savings account may not be that relevant to somebody who is struggling to get at that, but definitely relevant to people that are obviously in a different financial situation, right? Same thing on the prime loans, as we are bringing an increasingly wide demographic base, the majority of Canadians are actually prime consumers, not subprime. So obviously having solutions and essentially creating partnerships with essentially these prime-type product offerings will be increasingly important. What I can also say even on the revenue side model there, on the loan side the actual economics of these referrals are actually very good and require very little effort on our part. So there’s a whole bunch of benefits versus doing the fully integrated. But as we said, we will -- we expect to announce those partners within the next week or two.

Okay. Thank you guys very much.

[Operator Instructions] Your next question comes from the line of Suthan Sukumar with Eight Capital. Your line is open.

Good afternoon, guys, and congrats on the quarter.

Great. Thanks.

Guys, the first question for me is on the higher than expected operating cash savings, I think, you guys have recognize in the quarter. I am going to get a better sense of some of the moving pieces within the OpEx profile in terms of what kind of one-time COVID related versus what may be sustainable going forward, any color you guys can share there?

Yeah. Hey, Suthan. It’s Greg. So, look, what I would say is that, probably, the biggest discretionary on the OpEx side that you saw a reduction in is marketing. And obviously, as we move back into growth mode we are going to want that marketing spend number to come back up as we roll out the card and our new value prop that Dave has been talking about. I would say beyond that, we are going to be very judicious on other expenses and how -- and increasing them. So we are very much trying to manage our business at this new base level with the exception of marketing expense. So I think that’s the color I would give you. So really in this quarter from a sort of a cash OpEx perspective beyond marketing, you are seeing marketing going up in Q3 and Q4, we wouldn’t expect to see dramatic increases in any of the other numbers some at the stage.

Okay. Thanks and that’s helpful. And the same question I had was on the -- on announcement that you secured to new partnerships for your -- for partner furlough offerings on the high interest side and on the prime known side. I am curious what’s the timing on launching these offerings and what does integration usability look like within the app compared to what a fully integrated solution would look like if that solution was in fact built-in-house by Mogo?

Right. So and first of all we have actually already started to test out and actually generate some revenue from these partnerships and literally just testing even with our member base. I mean, we have approximately what 850,000 members that are opted into marketing, so that by itself. If you think about what did we bring to the table for these partners, most -- almost everybody is out there looking for more distribution awareness and ultimately they are looking for its performance marketing, right? They want to pay when they actually get a customer. So what we bring to the table includes not only our members but our ability to market and get in front of them. We have a weekly newsletter that goes out that really is kind of part of our money class content, is really kind of information to help kind of guide people in terms of getting out of debt and getting improving their financial health. So we have tested it in three segments and targeting on that some of these partner offers and actually started to generate revenue. So obviously e-mail will be one of the ways in which we communicate, but our goal is to also bring both of these into the app experience as well. So, for example, in the prime loan side, again our goal is to make sure that we have got that best-in-class offering. So, for prime consumers of those that would qualify for that loan, that would be the loan that they are presented with right in the app. And the initial referral is quite simple, you would get the -- essentially we have obviously a bunch of information that then qualifies you, it would say here you pre-approve through this partner in this case it’s the prime partner. We obviously are only partnering with ones that can essentially support a digital experience. You would then click on that link and it would be a traditional referral model there, you go over say welcome to Mogo customer, many of those are kind of customized landing pages and that’s kind of how that experience. Same thing on the high interest rate savings account, combination of obviously, e-mail, as well as in-app marketing. For example today when you think about how we are structuring MogoSpend. Our goal is hey you already have a bank account. We are not trying to get you to make the big move in terms of changing your bank account, add Mogo to your financial wallet if you are with three of the big ones, CIBC, TD and Scotia, all of those can be directly linked through these direct and transferred instantly. And then in terms of -- if you are looking for savings, we introduce and saying, hey, here’s a savings account that obviously is depending on this, several times what you are most likely getting in your current bank. Part of what we do too is we are not an aggregator, we are not showing a whole bunch of different offers. That’s why these partnerships aren’t just kind of signing everybody up. It really is -- really going after each one specifically. And so those things too can be brought into the app can be promoted for example as part of the MogoSpend value prop, if you are looking to save money for vacation or whatever else and you are using the card to control your spending. We are recommending set up a specific account here get that rate versus offering something in app in our accounts for example there’s competitors that actually created some savings account, but pay no interest, right? So obviously not exactly with that financial of course to create that and actually have it in the same account, but not have interest. So we see these as initial great opportunities to monetize and drive revenue from the segment that we are now attracting. And obviously, clearly, you can imagine in terms of a stepping stone potentially for a more integrated solutions, right?

Okay. Okay. Thanks. And on the lending side of the business, you guys have -- and you started resuming loan origination. How should we think about the mix of loans funded via the balance sheet versus your two new or Goeasy and your new referral partner on the prime side kind of going forward?

Suthan, it’s Greg. So I think our goal there is going to be a ultimately leads to 50-50 mix. But increasingly in the long run we want more to come from a partner lending in the non-balance sheet. So I think we are going to see how that origination starts ramp back up in the next couple of quarters. In fact, I actually think what you will see in the next couple of quarters is it heavily in the next couple of quarters is it heavily -- is it weighted more heavily towards our partners than Mogo? So I think we are going to be more on the cautious side on our own balance sheet and leverage other people’s balance sheets that have the appetite and the capital and lean more towards that fee base model for us.

Okay. Thanks, guys. I will pass the line.

Thanks.

Your next question comes from the line Steven Li with Raymond James. Your line is open.

Hey, guys. I have a follow-up on the Protect. So for already paying customers would you need them to get to reengage -- to engage the app to make it free or it’s automatic come first?

Automatic.

Okay. So then the subscription and services in Q3, how much of a decline are we expecting?

Greg?

Sorry. The -- Well, we haven’t given any specific guidance on subscription services. So we are not giving new guidance on that. But what I would say is that, the move to free on this account we don’t see as a -- with the offset that we see coming from it, we don’t we don’t see it by itself as being a material hit to our subscription services.

Okay. That’s helpful. Thank you.

There are no further questions at this time. I will turn the call back over to Dave Feller.

Okay. Great. Well, we appreciate your time this quarter. We look forward to updating you after Q3. Thanks again.

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