Orion Digital Corp. (ORIO) Q3 2020 Earnings Report, Transcript and Summary

Ladies and gentlemen, thank you for standing by. And welcome to the Mogo, Q3 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 it over to Craig Armitage, Investor Relations. Thank you. Please go ahead.

Thank you, Mike, and thanks for joining us today. Just a couple of quick notes, before we get started. First, 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 Q3 filings, as well as periodic filings with regulators in Canada and the United States which you can find on SEDAR, EDGAR 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 IFRS financial measures. Lastly, the amounts today are discussed in Canadian dollars unless otherwise indicated. And this wasn't clear to people, we do have presentation slides available to accompanying today's call. Those are can be found on the Investor Relations section of the website. So with that I'll turn the call over to Dave Feller to get it started.

Thanks, Craig. Thank you and good morning. Welcome to the Mogo's third quarter 2020 results conference call. I'm joined today by Greg Feller, our President and CFO. We're pleased to report another quarter of strong results in our key profit measures including positive net income of a $1 million and a 346% increase in adjusted EBITDA. These results reflect the success of our efforts to quickly adapt to an uncertain environment this year, and really shine a light on the fundamental health resilience and profitability of our business. In a world where many FinTech's have unproven business models and no path to profitability we have shown we do. I would also like to call up the team at Mogo for the great work in 2020. It's certainly been a challenging year in many ways, and the team has done a great job during these difficult times. And because of all their hard work, we feel good about how the businesses position heading into 2021. The adoption of digital banking, digital wallets and financial health are all powerful long-term trends that have accelerated in 2020 and Mogo squarely positioned to benefit. We still have a lot of work to do, and the team is hyper focused on execution of our plan. And we're pleased with the things we're seeing including an 89% growth in members from our previous quarter, and a 237% growth year-over-year in Bitcoin accounts. Given the pandemic along with the increased pressure on consumers' finances, the shift to digital continues to be in hyper drive, the problem of financial stress has only gotten worse. It's clear that for most people, their existing banking solution doesn't solve their problem. So what does the next generation banking look like? We believe it looks more like a gaming app than a banking app. We see Gamification is one of the keys to winning in this space and we're focused on making Mogo not only the best, one of the best games to play, but a game that helps you get financially healthy and achieve your important life goals like getting out of debt, buying a home and saving for retirement. In fact, we believe this is one of the keys to solving wealth gap in Canada. It's one thing to have a great products, it's another thing to have an engaging experience makes it fun. The highest form of human motivation is doing things because they're fun, not just because they're good for you. As you'll see in today's presentation, Gamification is key element of our strategy, and something we're proud to be pioneers of when it comes to personal finance. As you may have seen in the broader FinTech landscape, players, such as cash app in the U.S. are seeing huge growth and demand for Bitcoin. PayPal also recently announced that's its customers in the U.S. will be able to buy crypto currencies, including Bitcoin directly from their PayPal account. While Canada typically lags the U.S. with these trends, demand is growing here too. We are seeing in in our metrics, Mogo Bitcoin users are up 237% year-over-year, and in October we're already seeing doubling from Q3 levels. Once more, we achieved this growth with little to no marketing around Bitcoin. As more and more Canadians look to participate in Bitcoin, we believe that Mogo is uniquely positioned, unlike other crypto apps, we are only focused on Bitcoin, and we have a much broader value proposition. But perhaps most important is that we have the trust and credibility of being the only publicly traded company that offers everyday Canadians. A simple and low cost way to buy and sell Bitcoin. We believe this can be an increasingly meaningful part of our member and revenue growth and our focus on increasing our focus on this product, including yesterday's announcement of our new Bitcoin rewards program as well as origin stacking Sats campaign. Stacking Sats is a term used to describe the act of regularly accumulating small amounts of Bitcoin, also known as satoshis. We believe reward programs like collecting points and Air Miles are losing relevancy especially among Millennial and Gen Z. And Bitcoin is a perfect platform for modern rewards program. There are 100 million satoshis in a Bitcoin which is a great structure for a rewards program. And unlike old school reward programs, satoshis are offered the added benefit and excitement of being something that had potential to appreciate in value. If you're a gamer, you'll know the rewards are a key part of Gamification. And we will now have a way to reward members for good financial behaviors as well as rewarding them for engaging with our products. We are starting off with rewards for improving your credit score, as well as rewards for activating and funding your Bitcoin account along with earning Bitcoin for referring friends to Mogo. This is just the beginning and our plan is to bring this rewards program to all our products in a way that not only helps members improve their finances, but helps drive more engagement to all our products. We are excited about this new program believe it can be a meaningful driver of engagement, monetization and long-term retention similar to other successful reward programs. In order to participate members was activated Bitcoin account and download the Mogo app. Our free credit score offering continues to resonate with members and our new rewards program helps to make it even more engaging. Every month members will now have an opportunity to earn bitcoin. Our credit score experiences evolving from simply monitoring someone's score to really helping them improve it, something that millions of Canadians are focused on doing. All members can now earn bitcoin by achieving what we call Rockstar status, which is a credit score of 850 or above, something that only about 10% of Canadians currently have. We also have a category for most improved monthly player i.e., the member that improves their credit score the most, this player can win 1 million Sats which is worth about $200. This now directly ties credit score with our bitcoin account, i.e. to participate members need to sign up and activate their Mogo bitcoin account. This new reward program is the only one of its kind in Canada where Canadians who want to improve this score, or simply just monitor it can earn when bitcoin, truly differentiated and compelling value proposition. In Q3, we launched our new carbon offsetting feature for the MogoCard. This is the first card in Canada that helps you control your spending while also offsetting your CO2 as you spend, and all for free. CO2 continues to be the primary cause of climate change and recent surveys show that it is a top concern of both Millennials and GenZ. Still early days in this new product, but we're very pleased with the initial results. We've seen a 66% increase in average spend per user. And this is especially impressive considering we took away a cash back incentive and replace it with a more profitable carbon offsetting model. We're also excited about a new feature that we just launched called Rainforest mode. Users who log into the dashboard get to experience the sounds and even the visuals of the Amazon Rainforest. This brings our carbon offsetting project of protecting the Amazon Rainforest to life and creates a very cool experience. It also helps our members be more mindful around their spending. Think about it like a mindfulness app like calm integrated into our spending account. The initial feedback on this experience has been excellent and it's something that until you experience it, you won't appreciate how impactful it can be. I promise you this isn't anything like login to your banking app and takes Gamification of money to the next level. Also starting to get some really strong and positive feedback from users and how much they're loving this new experience. The market opportunity is massive with almost a trillion dollars a year in spending happening between cash, credit and debit cards in Canada. We also believe that we will continue to see a shift in consumers moving away from credit cards towards a control of prepaid cards like mobile card. Given the improved ability to control spending and avoid debt. As well as a continued trend and moving away from cash and a prepaid card like Mogo is equivalent of digital cash. Like our other products, we are also planning incorporating a new bitcoin rewards program, beginning with rewarding new users for signing up and becoming active card users. Again, the goal is to reward members for becoming active users of our products, while also helping them get control of their spending and financial health. As I mentioned earlier, free ID fraud protection launch in Q3 has been a key driver in helping us achieve the 79% increase in new member growth in Q3 versus previous quarter. This is a must have product for every Canadian, as every one of us is more at risk of ID fraud than ever before as our lives continue to go more and more digital and in fact recent data shows that 75% of Canadians have had their data breach in the last 12 months. This is also something that you would have to pay about $240 a year to get from the credit bureaus and Mogo is that first offer for free. So if you haven't signed up for it yet, get on it. Today, there are about 20 million Canadians, who are eligible for this product in the markets we serve. And we are currently protecting less than 2%, so lots of room for growth. To-date, we've already sent out over 370,000 alerts, and 30% of our new members have received an alert in the first 60 days. And we're just beginning to hear from our members and how much they're loving this. Alerts let who has done an inquiry in your bureau. And it's here that you have a chance to stop ID fraud from happening, i.e. stopping someone from getting a loan in your name. None of us can prevent ID debt, but we all have an opportunity to minimize the risk of ID fraud before it happens. And if you become a victim, it can cause a lot of problems including preventing you from getting a mortgage or qualifying for a loan. We're also excited to see that the given the nature of this product we're actually seeing close to 100% retention rate. Lending is one of our business was initially built on and we believe remains one of our key strategic advantages. After selling our liquid loan book, we are primarily focused on growing loan through our partners. Our goal is to ensure we have a best-in-class loan offering across the full credit spectrum and expect partnership and referral model to continue to expand. The more we grow our member base and the more engaged these members are the more opportunities we have to convert them into loans which upgrade economics. We saw 63% increase in partner loans to Goeasy in Q3 over Q2. We're also planning on integrating our bitcoin rewards program as another way to reward incentivize members. This could also include earning bitcoin for staying in good standing on their loan payments. Again, lots of opportunities leverage this program. Another way, we are monetizing members is through a partner referral program. During the quarter, we announced that we partnered with EQ Bank to promote their industry leading savings account. Although still early days, we've seen some really strong results from our initial tests with above average conversion rates. Although not a primary focus today, this will continue to be something we look to grow and improve on, and a great way to bring a broader offering to our ever-growing member base. As with our other products, we plan on bringing our Bitcoin rewards program to our referral product, so members can earn Sats if they sign up with one of our partners. Our goal remains to curate best-in-class partners, so we can offer best-in-class products for our member base. The high interest rate savings account from EQ is a good example of this with rates that are up to 30 times higher than other banks. We also recently announced that we're working on a new P2P product that we anticipate launching the first half of next year. Although most Canadians have access to email money transfer the experiences a lot of friction, and lacks many of the convenient features that the leading P2P solutions have in the U.S. market. We believe there's a big opportunity to bring this type of solution in the Canadian market and think that we are well positioned to do it. The roadmap for this product incorporates a lot more than just a P2P solution. There are many significant enhancements that are part of this plan, and will dramatically improve the convenience of the Mogo app to our members and make accessing our other products a lot easier. This feature will also enable our prior customers to do things like split the bill, so they can pay and have their friends easily pay them back. Lots of excitement internally for this new product and we're working hard to bring it to life. We'll continue to keep you updated on as we move along. Perhaps the single biggest challenge for a start-up in our space is customer acquisition. The reality is banks spend hundreds and even over $1,000 to acquire customer. But given the long-term lifetime value, this still produces a positive ROI. We believe we have an advantage compared to many of our peers that enable us to have a relatively low customer acquisition cost. Our unique value proposition including free credit score and now free ID fraud protection, along with our mobile card Bitcoin account helps us acquire customers in a fraction of the cost of what banks pay. This is also helped by our unique partnership with post media, that gives us over $30 million a year in marketing spend. This helps gives a halo effect to all our other marketing channels, which ultimately result in low customer acquisition costs. Improving our marketing performance continues to be a major focus of ours, and we have many initiatives helping us achieve this. We're also about to kick off a new influencer campaign, where they will begin promoting the mobile app and various products. Obviously, influencer marketing is increasingly becoming important, as many of the younger generation are making decisions based on the people they follow. Our business model continues to be driven by a formula that helps drive low cost customer acquisition engagement, combined with multiple ways to monetize. Our team is hyper focused on executing this strategy, including a product roadmap that is designed to continue to increase utility to Mogo app for our members, helping them improve their financial health while also driving revenue and profitability growth. With that, I'll ask Greg to cover the financials in more detail. Greg?

Thanks, Dave. And good morning. Building on the strong Q2 results, we reported another excellent quarter across all our key financial metrics, that once again to highlight the underlying profitability and cash generation capability of our financial model. In addition, we also reported very strong growth in net member additions as well as Bitcoin account growth, which we believe is just the beginning of the growth opportunities in two areas. We also outperformed our guidance on revenue and adjusted EBITDA in the quarter, specifically revenue for the quarter of $9.8 million was above our guidance $9.5 million to $9.7 million. Adjusted EBITDA of $4.8 million was above our guidance $3.8 million to $4.2 million, and represented a record 49% margin, the second quarter in a row at this level. This increase is primarily attributable to record gross margins of 93% as well as the second quarter of significantly lower growth-related operating expenses. Another highlight this quarter was positive net income of $1 million. Cash flow is also very strong with positive cash flow from operations net of investing of $4.4 million, which was at the high end of our guidance. Cash increased by $2.4 million into quarter ending with approximately $10 million of cash, which was after paying an additional $2 million in our credit facility. Total cash and investment portfolio ended the quarter at $26 million. As we look ahead, these metrics give a strong confidence in our plan to dial back our growth investments to support accelerating revenue growth in 2021. As Dave mentioned, our model starts with a low-cost member acquisition strategy with the new products and product enhancements, we saw an acceleration in new member additions in Q3 which were up 89%. And we ended the quarter with well over a million members, we expect to continue to drive strong member growth. And we're turning our attention to increased engagement. Revenue for the quarter of $9.8 million, as I said was the head of our guidance. Well, core revenue was down year-over-year due to proactive measures that we took COVID. As we look ahead, we see an acceleration of top of the funnel activities with accelerating member growth and believe when best monetization models of any consumer FinTech globally. Specifically, we currently have eight distinct ways to monetize our member base and we are just getting started. We plan to continue to expand our monetization model in 2021 and beyond. The underlying profitability of our business was again clearly highlighted in Q3 with record gross margins and adjusted EBITDA. Gross margin climbs more than 92% in the quarter from 67% in Q3 last year. Adjusted EBITDA of $4.8 million was up from $1.1 million last year, and EBITDA margin was almost 50% in the quarter. In the last two quarters alone, we have generated approximately $10 million of adjusted EBITDA, clearly showcasing the underlying profitability of our model even at current levels of scale. This gives us increased confidence in resuming growth related investment in particular product development and marketing as we take full advantage of the accelerating shift to digital banking and Mogo's unique position in the Canadian market. Although COVID focused us or forced us along with a lot of others make changes in our investments plans in 2020. One important benefit of this was showcasing to the market both resiliency of our model as well as the ability to adjust our growth lever to generate meaningful cash flow and profitability. Q3 as with Q2 clearly demonstrates this with us generating $4.3 million of cash from operations net of investing. Perhaps more impressive was the $3.3 million of cash flow generated from operations excluding cash generated from loans, which was up 74% from Q2 levels. In addition to a leaner cost structure, our actions in 2020 have substantially improved the balance sheet as well. The main balance sheet highlights the 2020 work, the sale of our liquid loan book reducing our credit exposure by approximately $32 million and reducing our credit facilities outstanding to $37 million down from $77 million at year-end. We extended the remaining facility to July 2022 and reduce our interest rates significantly. We amended our $12.5 million convertible debentures and extended the maturity to two years to May 2022. Lastly, we amended our nonconvertible debentures, including reducing the average interest rate from 13.7% to 7%, and extended the maturity date. Individually these are all meaningful steps. Together, they allow us to move forward in a significantly stronger financial position. Clearly, we've had to take decisive actions in 2020 to strengthen our financial position in an uncertain environment. However, with a favorable backdrop for FinTech including accelerating demand for digital financial health solutions, as well as leaner cost structure improved balance sheet, and with clear proof that we can be profitable, we expect to a newer growth investment to support accelerating revenue growth in 2021 and beyond and take full advantage of industry tailwind. With our unique improvement platform, we believe, we're extremely well positioned going forward with multiple growth drivers, including the expansion of Mogo card, which as Dave mentioned, is already showing signs of ramping nicely. Expansion of our referral partner strategy, we are also quite excited about the traction we're seeing in our bitcoin account without any real marketing investment. As we roll out the rewards program, we believe this can be material driver of new members of revenue from transaction fees. Lastly, we introduce - we will introduce the P2P solution and other new products as we move through 2021. Stepping back, we thought it would be helpful to take a look at the bigger picture opportunity for Mogo over the next three to five years. With the Canadian banks generating over $100 billion of annual net income and the move of the next generation to a digital solution with products that help them make smarter financial decisions. We believe Mogo is extremely well positioned to take full advantage of the massive market opportunity ahead of us. Specifically over the next three to five years we are targeting to grow our member base threefold to 3 million members. Increase our average revenue per member from just under $40 today to a target of approximately $100, which we see is very achievable target given the average revenue per member of the Canadian credit uses over $1,300. Using simple math is what makes us a $300 million revenue FinTech business, which would create tremendous value for shareholders, and we believe would still be only scratching the surface of the opportunity in front of us. With that, we will open the call to question. Operator?

[Operator Instructions] Your first question comes from Doug Taylor from Canaccord Genuity. Please go ahead.

Yes, thanks. Good morning. Your decision to begin reinvesting more in your products. I wonder if you could help us, think about how that's going to flow through financially and kind of parse it out into what you see as investment in some of the new product initiatives versus reinvesting in the loan book and the lending portfolio, which is something that you've kind of ramped down through the first part of this year.

Yes, sure. Thanks, Doug. It's Greg. So yes, the vast on the product development side, I would say, the close to a 100% of the incremental investment we're planning to make there, is going to be really related around new products, not around our loan product, but around P2P obviously, is a big initiative for us continuing to enhance and expand the features related to the Mogo card, as well as the Bitcoin account, and potentially additional new products. So really, any incremental spend of where we are there on technology and development is very much going to be around expanding our non-loan related products as well as investing in new products.

So is it fair to say from that, then the we should expect the loan book to remain static, continue to gradually at least in terms of loans on your own balance sheet, continue to contract a little bit? Or what should we make the expectations for the business?

Yes, we think the loan book is going to stay relatively static, is not going to be a drag on our revenue going forward into 2021. But really, on the loan side, as you know our focus on the loan side is really through our partner lending program, and a referral program for growth versus on balance sheet.

Okay, so do you expect than the investment. And can you help us quantify what you'd say is the level that you're expecting reinvest? And it should just come through in R&D or marketing?

Yes, it's going to come through in R&D. I mean, if you kind of look at, at levels that we were at in Q1 on the technology and development side, I think it would be reasonable to think that we're going to get back to those kind of level.

Okay. There's a certainly Bitcoin strengths, and some of the development new features that you put into your Bitcoin product is featured pretty prominently in both your release today, and some of your recent product announcements. Can you help us understand, to what degree those are contributing financially to your performance here?

Yes. So, look, Bitcoin is still very early days for us. I mean, as we are really one of the pioneers in Bitcoin in Canada, launch the accounts almost two and a half years ago. But shortly after launching the account, obviously Bitcoin had a very quick retraction and sort of fell out of favor with a lot of investors. But we've seen over the last year or so that credibility building, and with not just square in the U.S., but now PayPal coming in space in a massive way. And increasingly more and more of really, some of the leading money managers around the world, talking about Bitcoin as the digital gold or 2.0. We believe in the long-term - we believe in Bitcoin as a long-term asset class. And so we are going to continue to focus on that product as core products that Mogo delivers, it's really something that competitively differentiates us from all the traditional financial institutions in Canada as well. We are coming at we are starting from a low base on those products. So today, they're still not a meaningful driver of revenue. But as Dave mentioned, we are seeing very significant increase in those, so we do expect those to start becoming more meaningful as we move into the quarters in 2021.

Okay, last question for me, and then I'll pass the line, any update on the monetization efforts for some of the other assets that came with the difference capital transaction, we haven't spoken about those in some time?

Yes. So, nothing specific to update. What I will say is, there are a number of those the companies in that portfolio have seen positive signs in their business and two of our big holdings have done growth related debt fundings in the last six months, as well as one Hootsuite brought on a new CEO. So, I think we're seeing a lot of - and those three companies, which would make up at least 50% of our portfolio. So, we are seeing some positive signs there. And we do think that we are likely to see a monetization opportunity in 2021 is at least one of one of those investments for us.

Okay, I appreciate that. I'll pass the line. Thank you.

Thanks.

Your next question comes from Suthan Sukumar from Eight Capital. Please go ahead.

Good morning, guys. And congrats on the quarter.

Thank you.

Thank you.

As my first question from me is on your new ad-campaign. So, I mean, did this quarter you saw, nice lift sequentially, new member ads, and that was pre roll out of the campaign. Can you touch on what are the trends you're seeing now from a new member ads perspective with the campaign live?

So this is Dave. When you talk about the new campaign, so again, one of the campaigns that we're we actually are about to kick off, we actually have been kicked off is essentially the new Bitcoin campaign. So, as we had mentioned, the growth we saw in Bitcoin, including going into Q4, so as I mentioned in my comments, October, we're actually seeing a significant increase from previous months. And we have yet to market Bitcoin. So we literally have just completed the creative and the ads, obviously just announced the new Bitcoin rewards program, we have yet to actually, basically market that in any way. And that should be kicking off later this month. So, we kind of see that as incremental growth from what we're currently doing. So, all of our existing campaigns will continue. As we mentioned, free identity fraud protection, has definitely helped accelerate growth. So, when we run these campaigns, we're always testing our value prop and seeing what actually performs better. And the addition of free identity fraud protection, has significantly improved the performance from just marketing say for your free credit score. So, we anticipate that adding in Bitcoin, especially what we're seeing is going to obviously accelerate that our member growth. And we also are yet to announce this new Rainforest mode that we just talked about in our presentation. So, that's a new feature. We're actually expecting to do a release on that shortly. And then also begin marketing that as well. So, I'd say those are the two kind of net new campaigns that we plan on launching later this month that should help accelerate what we're currently seeing.

Okay, great. And kind of with respect to this, call it new cohort of users coming in via Bitcoin, the free Mogo protect offering and obviously, the prepaid card. Is there anything notable, you guys could call up with respect to kind of user behaviour in terms of engagement and other product adoption on the platform?

Yes, I mean, as I mentioned, I think one of the most interesting things, quite frankly, we were surprised at the level of activity that we're seeing in terms of how many alerts we're actually sending out to new members. So, the fact that 30% of new members get an alert within the first 60-days is great, because that obviously, if you sign up for free identity fraud protection, where we're automatically sending out by weekly alert, if there are no alerts, just it will let you know that all is clear. But for those, 30% that are actually seeing in alerts, you can imagine that that definitely drives more engagement. And, and ultimately, also in the NPS, we're starting to do net promoter Score surveys, which is typically a precursor for even sharing, right, one of the challenges from a marketing perspective we're really focused on is increasing word of mouth, referral, etcetera. The precursor for that really is a strong net promoter score, right. So, anything we can do to increase the actual experience the value prop, especially for example, on protect, that's actually where essentially becomes another way to monetize, so obviously, referrals are a lot cheaper than traditional marketing. A lot of referrals are obviously free, free at any fraud protection, something that once you have it and you experience it and it obviously helps you you're literally going out of your way to tell your friends and family, hey, you got it, you have to get this thing, especially when others are charging $240 a year for it. So we're starting to see some of that. What we're also seeing, for example, in our card program is some really interesting data in terms of seeing what card customers turn into higher value card customers. Obviously, still kind of early days there in terms of gathering this data and we're obviously looking at cohorts. Every month, we look at different cohorts, July, August, September, we continue to see an improvement in those cohorts. And that continues to give us more and more data in terms of what are the kind of merchants and companies that the higher value users are shopping at. And that gives us the ability to kind of better target that in our marketing campaigns as well. So all of this data just gives us better information to better expand and target in our marketing side. And we expect that the other key point I wanted to mention again, on identity fraud protection is, is the low churn. For example, credit score monitoring, there's a lot of people out there that have a credit score, obviously, every has a credit score, but many people say hey, it's never been an issue for me, I've always managed to get the credit don't really care about it. There's nobody if you talk to that, once they understand identity fraud that says oh, I don't need identity fraud protection, everybody needs it, whether or not you're checking your credit score or not. Because if you become a victim, it's a real hassle. So the fact that, that product essentially almost has a zero churn, because once you have it, it's not something where you're saying, hey, I want to get rid of. So when you think about difficult it is, especially in financial services to acquire a customer, to give a customer a reason to download the app, give us their information, we're essentially getting obviously tracking their bureau as well, for a lot of these alerts. That's a big deal, right. And it's from there that we obviously look to continue to kind of buildup that trust and credibility. And also that then ties into even our Bitcoin rewards program where just like credit score, we're now tying Bitcoin in, i.e., if you're tracking your credit score, you now have a reason to get a Bitcoin account. Bitcoin account is also where we drive monetization, we're going to be doing the same thing with Protect. And it really is about building that trust and credibility. And we absolutely see the other key thing is we see typically a five times increase in retention and engagement, somebody downloads the app. And the nice thing about identity fraud protection, you have you have a much higher likelihood to download the app given the nature of it, that's where you're going to get the alerts. And obviously, the formula is simple, the more engaged and retain, the more you retain that member, the higher the percentage of those members, you end up converting and monetizing into those other products.

So Suthan, just to add to that, I mean yourself if you're tracking Bitcoin, or tracking a stock. And with Bitcoin people are putting alerts on their phone, Hey, tell me when it's over X or under Y, you know, you can get multiple alerts today. And it's an engaging, alert and something that you actually care about. So that really is, from an engagement perspective, a huge product for us. You think a credit score is day set, or even identity fraud protection, although those are great valuable products, you don't drive that daily user engagement and daily user engagement, increases probability of monetization. Obviously, we've seen players like Square [ph] with a pretty similar value proposition in a lot of ways to the Mogo app in the U.S. leverage Bitcoin into driving more users and user engagement and monetization across the other products. And we believe we've got a similar opportunity.

Great. That's helpful. Wanted to touch on your growth investments next. I mean looking into fiscal 221. And you touched on this a little earlier with Doug with respect to your thoughts around the investment in the technology side of the business. But what are your priorities I mean turns investment areas, kind of maybe outside of tech? And more broadly, how should we think about the impact to your OpEx and EBITDA margins going forward?

Yes, so I guess a couple of things. As you're well aware, if you look at really kind of the leading public FinTechs out there, a number of them - the majority of them actually are not even EBITDA positive if they are the marginally EBITDA positive. But they're seeing a lot of investor interest because they are investing in their platform and driving growth in a massive market opportunity. And we believe that we have a very similar opportunity for Mogo in Canada, that the key criteria, though, or a key element of that, is that investors in the market have to believe in the underlying profitability of your model, so that they will actually, give you credit for investing in driving growth. And I think one of the big milestones of last couple of quarters, which wasn't planned, but happened because of COVID, is that fundamentally we believe we proved underlying profitability of our model. So, if we're at a close to a $10 million quarter revenue with close to an EBITDA margins, I'd say that's unheard of, there's not a lot of companies that can generate that kind of EBITDA margin at that kind of scale. Now, what we'd like to do is, is take some of that EBITDA and start investing it in driving accelerating revenue growth. And we believe that with the proof points we've had over the last couple of quarters, I think there was a view that maybe Q2 was a fluke and now I think we're showing the market that Q2 wasn't a fluke, from a profitability and cash flow perspective. But we believe that's going to give us the credibility to start investing more into taking advantage of the massive opportunities I mentioned, the banks in Canada make $100 billion of pretax profit. So, that's just a massive pie. And we obviously are very small, piece of that today. So, we want to take advantage of it, we think we've got a unique value proposition from a product perspective and scale, there's really nobody else in Canada that has that. And we want to take advantage of it. So, we want to start, investing more of our EBITDA and cash flow into growth, and so you're going to start to see us ramp that up in Q4. And we believe that, if we can continue to show accelerating growth the markets is going to reward us for investing in this, big opportunity, especially with the clear understanding of the underlying profitability of our model.

Got it. Thank you. And I think the last one for me is just on the peer-to-peer payments. I think I might have missed some commentary in the opening remarks. But, could you provide an update on the timing on the go-to-market for this? And it sounds like you guys have an expanded scope for the offering in mind? Could you just speak on that a bit as well, please? Thank you.

Sure, it's Dave. So, we're basically saying that we plan on launching P2P, peer-to-peer in the first half of next year. And in terms of the scope, what's we're calling it peer-to-peer, but the reality is, there's a whole bunch of enhancements and benefits that we expect to come out of this. One of them, for example, is we're improving our on-boarding experience. Today, for example, there is a percentage of members that actually don't qualify for the card, and don't qualify for a Bitcoin account, because of certain requirements from a kind of KYC perspective. And these enhancements will essentially eliminate that and improve the percentage of members, therefore, we have more growth opportunity for those products. That's just a function of, again of the P2P roadmap. The other thing too, is, if for example, you look at, say, the cash app down in the U.S., they essentially have one single account and from that account, when you open it, and you open your peer-to-peer account, you connect your bank account, you then can obviously transfer fund money in there and transfer money to and from friends. But from the same balance, you can get the card you can start using the card or you can buy bitcoin. The way Mogo setup today, is you have a separate account for your card, you have a separate account for Bitcoin. And we're essentially planning and moving more towards a cash app model. And what that does is a lot less friction to for example, went to go from peer-to-peer to say getting the card because you now have the ability to say use the card to access that cash balance. Same thing as it relates to Bitcoin. So, and you also have essentially one experience where you've connected your accounts. You're not connecting - you're transferring money into your Bitcoin account, then separately, I think connect your card and transfer money there. So, it's a more of a one account experience. So, a lot of improved, lower friction that ultimately, drives more engagement and cross selling into your other products. So, those are some of the bigger pieces in that roadmap that we're focused on actually launching first, so, some of those will start happening in Q1 and quite frankly, we think those will have a meaningful impact on the business. Even well before actual peer-to-peer self-launches.

Got it. Thank you, guys, that was helpful. I'll pass the line.

Thanks, Suthan.

You next question comes from the line of Bill Zhang from Raymond James. Please go ahead.

Hey, guys. So looking at your member additions, so pre-pandemic, you were doing 17,000 to 20,000 member additions per month, and then Q2 was your low point and then Q3 you've almost doubled that rate. Should we expect this to be an inflection given you're ramping [ph] up loans again. And should we expect a return to pre-pandemic levels in Q4?

So, yes, it's Greg. So I would say, yeah, we absolutely expect to see a continued acceleration of net member additions in Q4 and quite frankly in 2021. And we expect that we will in the next few quarters exceed, where we were from a net member additions, pre-pandemic.

Okay, that's great news. And it's also good to hear that your ad spend on the card is up 66%. What is the dollar amount there? And are the number of Mogo spend users increasing and what's been the attachment rate there?

So it's Dave. So yes, I mean, we're continuing to see obviously a steady increase in monthly active card users. And, quite frankly the actual, the fact that the average spend per user, you only have new users coming on has been up that much is very encouraging. Obviously, you also get customers that are signing up and give it a try and just load a little bit of money on it and don't turn into active, so that can actually bring your spend down, before essentially you get mature enough member base. So the fact that we're actually seeing that level of growth, even initially is very encouraging. The other thing that I would say, if you dig deeper to we have - one of the things we also launched was we talked about was Visa Direct, than Visa Direct essentially enables customers that essentially have a Visa Debit Card, so typically, TD, CIBC, Scotia, their main debit card is enabled Tangerine just launched, theirs used to be interact only. Tangerine is Visa enabled as well. ATB is launching theirs. So increasingly, you're starting to see more and more of this in the market. And what we're seeing there is, the benefit there is that you can easily link your bank account to your Mogo account, and you can also set up automated transfers. So that's almost getting very similar to doing a direct deposit. And typically in this space, the spend that we're seeing on our good customers within that segment, is actually in line with typically what you would see if you had direct deposit and direct deposit, again, would be if you had your paycheck directly deposited onto the Mogo card. And that's actually what we had hoped to see. And we're also seeing an even higher spend, obviously, with those that actually set up or reoccurring. Automated transfer whether its weekly-by-weekly, whatever. And I can say that without disclosing the actual number, those are definitely kind of based on all the other programs we're seeing out there, best-in-class type number. So very encouraged with the results there.

Okay. Great. And I noticed for this quarter, there was a nice drop in the interest rate expense. Is that a good run rate to use going forward?

So, yes. On the interest rate expense, what isn't in this quarter is a non sort of cash related expense related to the revised terms of the debentures. So that's going to show up in Q4. Although it's majority of that will be non-cash. So, but it will - but the level will be somewhere between what we reported Q3 on interest, debenture interest, and what we reported in Q2.

Okay, that's great. And one last one for me. Any guidance on the cash flow for Q4?

Yes, we're not giving guidance on cash flow for Q4. As they think, we've obviously signaled that, our focus and our bias is now offense not defense investment mode. I think we've proven here over a couple of quarters that basically on a dime, if we need to throttle back our growth levers, we can generate meaningful cash flow. I mean, we're talking about a business that generated, between 45% and 70% cash flow relative to revenue in the quarter. So, I think we feel pretty good about our ability to do that. We're not giving guidance on cash flow in Q4, but obviously, we are making it clear that our bias is towards investing in growth, knowing that we've got our hand on the levers if we need to adjust those at any point in time.

Okay, that sounds good. That's all for me today.

Thank you.

Your next question comes from the line of Steven Li from Raymond James. Please go ahead.

Hey, guys, I may have missed it, but bitcoin accounts up 237%. What is the actual number of bitcoin accounts? I mean, is it 10,000 plus?

Yes, it's well over 10,000.

100,000?

It's just under the 100,000 mark, but well over the 10,000.

Okay, perfect. And does that mean they have just accepted the $5 promotion or will have they actually traded more under $5?

Well some, obviously, depending on the status have just activated it and accepted the $5. But what we're actually seeing is on the funding side, which obviously is the precursor for trading is actually an even greater acceleration on the funding side as well. So ultimately, there's a corresponding increase in actually trading and therefore trading revenue.

Okay. That helps. Thank you.

That was our last question. At this time, I will turn the call back over to the presenters.

Okay. Well, thanks again for following us on our Q3 update. We look forward to updating you following Q4. Thank you.

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