2023-03-21 00:31:11 ET
Summary
- MoneyLion reported strong Q4'22 revenue growth of 71%.
- The fintech added an impressive 1.1 million new customers during the quarter and reached adjusted EBITDA profits in December.
- The stock trades far below 1x '23 sales targets despite having predicted a 35% to 50% CAGR.
MoneyLion ( ML ) just completed a banner year with the company nearly doubling total customers while the stock trades near the lows below $1. The former SPAC appears in the penalty box for no logical reason. My investment thesis remains ultra Bullish on the fintech set to sustain adjusted EBITDA profits in 2023.
Source: Finviz
Strong End to 2022
MoneyLion reported that Q4'22 adjusted revenues jumped 71% to reach $92.4 million. The company ended the year with record revenues and closed out the year with an adjusted EBITDA profit during the month of December.
The fintech added a very impressive 1.1 million customers during Q4, nearly double from the 600k added Q4'21. MoneyLion even added 1.6 million products during the quarter to reach 12.9 million products in a sign of how existing customers are leveraging additional products from the online platform.
Source: MoneyLion Q4'22 presentation
The company now has a powerful Super App ecosystem where new customer acquisition costs are as low as $8 now. The enterprise ecosystem is fully functional with tons of monetizable moments from auto or home loans to insurance and tax preparation.
Source: MoneyLion Q4'22 presentation
MoneyLion added an amazing 1.1 million customers in Q4'22 at a cost of just $9 million in marketing expenses. These new customers now have a minimal payback period of only 2 months as the fintech actually cut marketing spend during 2022 by 14%.
The CAC is down substantially from a still very acceptable $25 back in Q4'21 when the payback period was a still strong 4 months. MoneyLion has seen the ARPU dip, but the profitability of the company has improved with the CAC down $18 per user while only losing out on $10 in ARPU. Due to the higher level of new customers in Q4, the company actually expects ARPU to rebound in future years as these new customers mature.
The enterprise segment even struggled during the end of 2H'22 due to the macro weakness as partners pulled back from their marketing spend. MoneyLion only reported Q4'22 enterprise revenues of $32.7 million, down from the $34.3 million level in Q3'22.
Since MoneyLion provides a digital financial platform, mostly using banking partners, targeted at low-income customers, the company doesn't face the same risk as the regional banks hit with fleeing uninsured deposits. The fintech is more focused on helping consumers with bad credit improve their financial picture via internal financial offerings and enterprise partners. These customers don't typically have accounts with balances in excess of FDIC insurance of $250,000.
SPAC Penalty Box
Considering the company's results, MoneyLion's low stock price and market valuation of only $160 million seem unwarranted, in my view. The company has as cash balance of $154 million now to cushion any downside risk.
The company provided solid guidance for Q1'23 with revenues guided for $85 to $88 million in this quarter. While the target is down from the booming Q4'22 revenue total of $92 million, MoneyLion did easily soar past the targeted Q4 midpoint of $89 million.
Source: MoneyLion Q4'22 presentation
Most importantly, the flinch guided to being adjusted EBITDA positive after burning substantial cash to start 2022. With the macro weakness and the banking sector crisis, MoneyLion needs to be in a better financial position to preserve the current cash balance and avoid any dilutive capital raises with the stock trading far below $1.
At the Investor Day back in December, the company guided to 35% to 50% CAGR . Simply using a 35% revenue growth target for 2023 pushes revenues to a target of $443 million. The stock only has a market cap of $160 million while revenues could top $600 million in 2024 per the guidance of management.
Elevated Risks
The market possibly doesn't like the results with the large $140 million goodwill impairment charge hiding the big adjusted EBITDA improvements over the year or possibly investors fear a reverse split. Fellow fintech Paysafe ( PSFE ) completed a 1-for-12 reverse split and the stock promptly rallied, though Paysafe did initially dip heading into the split.
Either way, MoneyLion wouldn't trade below $1, if elevated risks didn't exist. An upcoming recession could start impacting low-income members leading to the company failing to meet financial targets.
The company has already cut estimates in the past and further cuts to financial targets would damage investor confidence in management. Ultimately, the big risk to the stock is continual cash burn rates leading to very dilutive capital raises in the future always inherent in a stock trading below $1.
Takeaway
The key investor takeaway is that MoneyLion isn't priced for the improving profits story and the strong revenue growth of the business, in our view. The fintech trades far below 1x sales targets now and the company guided to being adjusted EBITDA profitable this year with a possibility of hitting positive EBITDA in Q1.
The stock definitely has risks highlighted by the price dipping below $1, but MoneyLion has built a strong ecosystem and has plenty of cash to invest in the business to reward shareholders. Our opinion is that investors should use the weakness to buy more shares prior to the analyst community catching onto the story with only 2 attending the Q4'22 earnings call .
For further details see:
MoneyLion: Banner Year Ignored