VANCOUVER, April 27, 2020 /PRNewswire/ - Mogo Inc. (TSX:
MOGO) (NASDAQ: MOGO) ("Mogo" or the "Company"), one of Canada's leading financial technology
companies, today provided an update on its business performance and
measures the Company is taking in response to the ongoing COVID-19
pandemic.
"Like many companies, we've had to quickly adapt and make some
difficult but necessary decisions as a result of the emerging
effects of the coronavirus. I'm proud of how our team has managed
the transition and the tremendous commitment they have shown to
serving our customers in these challenging times," said
David Feller, President and CEO of
Mogo. "We are taking actions to better position Mogo to manage
through the current challenging environment, including steps to
accelerate our path to positive cash flow. As we emerge from this
period, financial health and digital banking are two trends we
expect to accelerate, and our leading digital platform positions us
well for the recovery."
Actions taken in response to COVID-19:
- Enabled nearly 100% of employees to work from home
- Launched a Job Loss Action Plan for members, including payment
programs for affected loan customers
- Accelerated deployment of MogoSpend to current loan
customers
- Implemented approximately $5.0
million of cash operating expense reductions in Q2 2020
- Temporarily suspended new loan originations to mitigate impact
of pandemic on future credit performance
- Exercised option to capitalize interest payments on
non-convertible subordinated debentures and proposed amendments to
convertible senior secured debentures (as outlined below)
Helping Members Manage Through This Financial
Challenge
Mogo has taken additional steps to further support its members,
consistent with its mission to promote financial health.
- Mogo has accelerated the roll-out of MogoSpend, its digital
spending account with Mogo Visa* Platinum Prepaid Card, to current
loan customers. New cards are being issued weekly, with premium
loan customers receiving the card for free.
- In addition to free monthly credit score monitoring, members
are now able to get 6 months of MogoProtect identity fraud
protection for free.
Loan Originations & Cost Reduction
Initiatives
Mogo's consumer lending portfolio is primarily composed of
small-dollar lines of credit, with an average balance of
approximately $1,500 per loan and
average payments of approximately $50, across approximately 44,000 customers.
Approximately 55% of Mogo's customers have loan protection
insurance which covers their loan payments for a period of up to 6
consecutive months in the event of unemployment.
As discussed with its Q4 2019 financial results, Mogo has
temporarily paused new on-balance-sheet loan originations, which is
expected to have a negative impact on its near-term revenue.
However, the Company continues to service and support its
existing loan customers through this challenging period while
directing new originations to its lending partner. To date we have
provided just under 5% of our loan customers with some form of
relief, including reduced interest and deferred payments, and have
experienced only a modest increase in the number of loans in
default. At the same time, we have seen higher-than-normal
repayments in the past month.
With its Q4 2019 results, Mogo also outlined several measures to
improve its financial position during these uncertain times. The
Company is on track to reduce Q2 2020 operating expenses (exclusive
of any reductions to interest expense) by an estimated $5.0 million. The combined effect of these
measures is now expected to enable Mogo to generate positive cash
flow from operations (net of cash used in investing activities) in
Q2 2020.
Greg Feller, President and CFO,
added: "The loan portfolio has remained relatively stable
considering the scope of the economic impact. Because most of our
loans are small, the payments are affordable and customers can meet
their obligations. In addition, many customers are already
benefiting from government relief measures. Once we see markets
conditions stabilize, we expect to slowly resume on-balance-sheet
lending, in addition to expanding our lending partnerships."
Proposed Amendments to Convertible Debentures
The Company also announced that it will seek the approval of
holders (the "Convertible Debentureholders") of its 10.0%
convertible senior secured debentures due May 31, 2020 (TSX: MOGO.DB)
(the "Convertible Debentures") to amend certain terms of the
Convertible Debentures at an extraordinary meeting to be held on
May 22, 2020 (the "Meeting") as
an alternative to the Company repaying the Convertible Debentures
in common shares in the capital of the Company on their scheduled
maturity date. The proposed amendments (the "Amendments") include,
among other things, extending the maturity date of the Convertible
Debentures from May 31, 2020 to
May 31, 2022 and reducing the
conversion price of the principal by 30% from $5.00 to $3.50 per
common share. Details regarding the Amendments and the Meeting can
be found in the Company's management information circular (the
"Circular") which has been filed under the Company's profile on
SEDAR at www.sedar.com and on EDGAR at www.sec.gov and
mailed to the Convertible Debentureholders today.
If the Amendments are approved by the Convertible
Debentureholders, they will be effective on the date that the
Company enters into the second supplemental trust indenture
providing for such Amendments, which is anticipated to be on or
about May 26, 2020. The Amendments
are also subject to the approval of the Toronto Stock Exchange.
Certain of the Company's directors and executive officers who
own in the aggregate 1.7% of the outstanding Convertible Debentures
are considered "related parties" to the Company for the purposes of
Multilateral Instrument 61-101 – Protection of Minority
Security Holders in Special Transactions ("MI 61-101"),
and accordingly, the Amendments are considered "related party
transactions" within the meaning of MI 61-101. The Company is
relying on exemptions from the formal valuation and minority
shareholder approval requirements in Sections 5.5(a) and 5.7(1)(a)
of MI 61-101 in respect of the Amendments as neither the fair
market value of the Convertible Debentureholders held by interested
parties (as such term is defined in MI 61-101) nor any
consideration for the transaction insofar as it involves interested
parties exceeds 25% of the market capitalization of the
Company.
If the Amendments are not approved by the Convertible
Debentureholders at the Meeting, the Company intends to repay the
principal amount and all accrued interest owing under all of the
Convertible Debentures through the issuance of common shares on
May 31, 2020, as permitted by the
governing indenture.
Forward-Looking Statements
This news release may contain "forward-looking statements"
within the meaning of applicable securities legislation, including
statements regarding the Company's response to COVID-19, the
reduction of its expenses its path to cash flow positive and the
resumption of on-balance sheet lending and statements regarding the
timing for implementing the proposed Amendments. Forward-looking
statements are necessarily based upon a number of estimates and
assumptions that, while considered reasonable by management at the
time of preparation, are inherently subject to significant
business, economic and competitive uncertainties and contingencies,
and may prove to be incorrect. Forward-looking statements involve
known and unknown risks, uncertainties and other factors that may
cause actual financial results, performance or achievements to be
materially different from the estimated future results, performance
or achievements expressed or implied by those forward-looking
statements and the forward-looking statements are not guarantees of
future performance. Mogo's growth, its ability to expand into new
products and markets and its expectations for its financial
performance for 2020 are subject to a number of conditions, many of
which are outside of Mogo's control. For a description of the risks
associated with Mogo's business please refer to the "Risk Factors"
section of Mogo's current annual information form, which is
available at www.sedar.com and
www.sec.gov. Except as required by law, Mogo disclaims
any obligation to update or revise any forward-looking statements,
whether as a result of new information, events or otherwise
About Mogo
Mogo — a financial technology company — offers a finance app
that empowers consumers with simple solutions to help them get in
control of their financial wellness. Financial wellness continues
to be the #1 source of stress across all demographics and highest
among millennials. At Mogo, users can sign up for a free account in
only three minutes and begin to learn the 4 habits of financial
health and get convenient access to products that can help them
achieve their financial goals. The Mogo platform has been
purpose-built to deliver a best-in-class digital experience, with
best-in-class products all through one account. With more than one
million members and a marketing partnership with Canada's largest news media company, Mogo
continues to execute on its vision of becoming the go-to financial
app for the next generation of Canadians. To learn more, please
visit mogo.ca or download the mobile app (iOS or Android).
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SOURCE Mogo Inc.