First Look at BM Technologies

BM Technologies ($BMTX) is a microcap fintech company based in Pennsylvania that is primarily engaged in offering bank accounts and taking deposits. This emerging company is already profitable with zero debt due to their successful business models and company management. The most important catalyst of the year will be their buyout of First Sound Bank to acquire a bank charter and form BM Bank – a deal expected to close in the 2nd half of 2022.

BMTX is essentially a Banking-as-a-Service (BaaS) company, connecting customers with banks or partners and collecting revenue shares – Specializing in targeting the higher education market.

There are three main verticals in which they make money

1. Higher education market – introducing students from over 750 universities to BM Technologies with an offer to open a BankMobile checking account through a partner bank. This vertical creates the most revenue for BMTX because of school partnerships, boasting more than 400,000 new accounts annually.
2. BaaS model – BMTX created a proprietary BaaS platform and white label interface so other fintech companies can launch their own network of products. They then offer a wide array of services to these businesses to help them get started while collecting fees all along the way.
3. Direct-to-Consumer business – Their model allows them to target and reach out to underserved groups. This vertical is budding into a success.

For the sake of this sub, the company trades at a $100m market cap with a free float under 9m and short interest usually around 20%.

Profitable, Debt-Free and Undervalued

BM Technologies reported Q4 2021 and full year earnings on April 4th, 2022. The most recent financial report shows robust quarterly growth with very bright forecasts. As mentioned earlier, BMTX is already profitable with no debt and a healthy cash balance. These are excellent milestones for a microcap fintech.

Most Current Financial Keynotes

1. Full year revenue increased 41% to $94m in 2021 from $67m in 2020.
2. Full year 2021 EBITDA increased 625% to $28.6m from $3.9m in 2020.
3. Opened approximately 440,000 new accounts in 2021 with over 2m established.
4. Holds more than $2b in deposits, over 100% more than the prior year.
5. Dispersed over $13b in student refunds
6. Profitable and debt-free with over $20m in cash on the balance sheet.

Severely Undervalued

BMTX trades at a $100m market cap with an Enterprise Value(EV) around $88m. As an already-profitable fintech company it's surprising to see the stock trading at an insanely low PE Ratio with positive sentiment for future growth. BM is trading at significantly low levels compared with peers and industry averages.

Most notably, the upcoming bank charter will allow this already successful company to exponentially grow.

The Bank Charter as a Major Turning Point

A Bank Charter allows a company to operate as an authorized bank, providing a larger portfolio of services under tighter regulations. The most significant catalyst for BM is being granted a bank charter. In November 2021, BM Technologies announced a strategic plan to acquire First Sound Bank in a deal that would cost around $23m. Upon closing, which is expected in the 2nd half of 2022, BM Technologies will immediately hold a bank charter and form into BM Bank. The current financial status shows BMTX holding zero debt and over $25m in cash – so the deal shouldn't break the bank.

Earnings growth is automatically expected to accelerate at a much faster pace. BMTX will no longer miss out on BaaS shared revenue and can expand horizons into lending, insurance options, financial advisory, investments, retail trading and cryptocurrencies. While for now BM collects 3% from customers, they will soon be able to lend those deposits to its 2m+ client base.

Oh, and those new business pillars are officially planned and were strongly reiterated during the most recent earnings conference.

Conclusion, Current Positions and Future Speculation

BMTX is trading at a significantly low valuation despite strong earnings growth and forward-looking forecasts. Forming an official bank with a charter in the second half of 2022 is worth a share price of at least 3x where we're at today. When you take into account that this company is profitable, debt-free and has cash that reflects 20% of its market cap it's even more obvious that BM is trading at a steep discount. You just don't typically find a microcap under $100m hitting these milestones.

Based on all my research into BM Technologies I maintain a firm price target of $120, positioning the company at a roughly $1.5b market cap

This target price would still reflect a market cap that is 25% the size of SoFi's, which I like to use as an example. Even though BMTX is still primarily in the bank account/deposit business, they still have plans to provide extremely similar products as SoFi. This all goes into motion once the bank charter is acquired this year. SoFi annual revenue is 10x that of BMTX but they aren't far apart in terms of EBITDA ($5m). SoFi is also trading at a valuation several times higher than BMTX and is not expected to be profitable until 2024 with more than $4-Billion in debt. Even the interface designs for both companies are close… and finally the customer acquisition cost for BMTX is less than $10 while SoFi pays an average of $40. BM Technologies will be able to offer these new banking services more than 2 years before SoFi is even profitable.

I have positions in $BMTX Stock and $BMTX+ Warrants. Now let's make some money!