Its first-ever EBITDA positive quarter has M Partners analyst Steven Salz feeling good about Mogo’s (Mogo Stock Quote, Chart, News: TSX:GO) prospects.
On Wednesday, Mogo reported its Q3, 2016 results. The company lost $3.6-million on revenue $12.6 million, a 9 per-cent bump over the same period last year.
“In the third quarter, the three key pillars of our strategy — platform, products, and brand — came together to drive a significant increase in new members and our first quarter of positive adjusted EBITDA since our [initial public offering],” said CEO David Feller. “We launched our new digital account and mobile app, which truly showcase the power of our technology to deliver a great digital experience. We also launched our new free monthly credit score monitoring product and harnessed the reach of our Postmedia partnership. The result was a record number of new members. The increase in our members grew by three times over the second quarter, and, last month, we surpassed 300,000 members, putting us on target to reach our goal of one million members in the next three years.”
Salz notes that Mogo’s topline bested his estimate of $12.2-million, and the company’s EBITDA of $500,000 also topped the EBITDA loss of $100,000 he had modeled. He put the results in context.
“Steady top line growth, combined with ~$1M in marketing savings from the Postmedia partnership enabled Mogo to achieve its first EBITDA positive quarter in company history,” says Salz. “We note that this accomplishment is not significant for a traditional lender; however it marks a step towards becoming net income positive with the launch of the upcoming fee-based products, as well as in a downside case from shifting to a pure lender.”
In a research update to clients today, Salz maintained his “Buy” rating and one-year price target of $3.00 on Mogo, implying a return of 59 per cent at the time of publication.
Salz believes Mogo will post Adjusted EBITDA of -$1.3-million on a topline of $49.9-million in fiscal 2016. He expects these numbers will improve to EBITDA of $3.1-million on revenue of $55.1-million the following year.
Disclosure: Mogo is an annual sponsor of Cantech Letter.
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