BM Technologies, Inc.

Hello, and thank you for standing by. My name is Regina, and I will be your conference operator today. At this time, I would like to welcome everyone to the BM Technologies Incorporated third quarter 2022 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star, then the number one on your telephone keypad. To withdraw your question, press star 1 again. I would now like to turn the conference over to Bob Ramsey, CFO. Please go ahead.

Thank you, Operator, and good morning, everyone. And thank you for joining us for BM Technology's third quarter earnings call. Our earnings release and investor presentation were filed this morning, and both are posted on the investor relations page of the company's website at ir.emtxinc.com. Our investor presentation includes important details that we will be walking through on this morning's webcast and I encourage everyone to pull up a copy. Before we begin, we would like to remind you that some of the statements we make today may be considered forward-looking. These forward-looking statements are subject to a number of risks and uncertainties that may cause actual performance results to differ materially from what is currently anticipated. Please note that these forward-looking statements speak only as of the date of this presentation and we undertake no obligation to update these forward-looking statements in light of new information or future events, except to the extent required by applicable securities laws. Please refer to our SEC filings, including our Form 10-K and 10-Q, for a more detailed description of the risk factors that may affect our results. Copies may be obtained from the SEC or by visiting the Investor Relations section of our website. At this time, it's my pleasure to turn the call over to Lavleen Sadu, BM Technologies Chair and CEO.

Thank you, Bob. Good morning, everyone, and thank you so much for joining BM Technologies' third quarter earnings call. To begin, we are excited to report to you solid year-to-date results. We will discuss in more detail both year-to-date and third quarter results in a few minutes. This year, despite the challenging environment, we generated revenue of $67.9 million, net income of $3.4 million, and core EBITDA of $16.4 million in the first nine months of 2022. As I just stated, both Bob and I will later provide more details on financials, but for a brief moment, I want to take a step back and provide some business highlights, which we will provide more details on during the call. We continue to strengthen our banking as a service business with our recent announced collaboration with Helix by Q2, which creates the most comprehensive banking as a service solution available on the market today. We also continue to invest in development work to provide technology and program management to a significant new banking as a service partner with tens of millions of U.S. customers, which is expected to launch in 2023. Second, we are also actively working towards a definitive agreement with a new partner bank at economics, which will be better for us in this environment, with improved variable rate pricing. This new sponsor bank will eventually replace our existing relationship with customer's bank. To allow sufficient time to finalize the agreement and transfer the deposits, we have also entered into a short-term extension of our deposit servicing agreement with our current partner bank. Let me remind you that bank partnerships will facilitate an off-balance sheet strategy for our deposits even in the future as part of a chartered institution. We also continue to push forward our merger with First Sound Bank and are working on resubmitting our merger application in order to respond to questions posed by regulators with a goal of now closing in 2023. Other business highlights include average service deposits totaling $1.6 billion in the third quarter, which included $1.1 billion in average Banking as a Service service deposits. Our debit card spend was $0.7 billion in the third quarter and $2.2 billion in the nine months ended September 30th. Our revenue per 90-day active account was approximately $46 in the third quarter and approximately $150 year-to-date as of September 30th. We are excited to share that we opened approximately 175,000 new accounts in the third quarter and approximately 390,000 in the first nine months of the year. In our higher education business, new account signups improved 11% year over year. I will now deep dive into the financials on slide five. Total operating revenues for the three and nine months ended September 30th totaled 19.9 million and $67.9 million respectively. Core EBITDA for the third quarter totaled $1.5 million, and core EBITDA for the nine months ended September 30th totaled $16.4 million. Net income for the nine months ended September 30th totaled $3.4 million, and core earnings for the nine months ended September 30th totaled $5 million. We are proud to report these solid results despite the difficult macro environment where we face unprecedented times with rapidly rising interest rates, inflationary pressures, and market volatility. Revenue and EBITDA were negatively impacted this quarter as we were no longer benefiting from the tailwinds of stimulus, which affected customer spend, and our decision not to chase rates to keep balances. Instead, we focused on building deposit franchise value by keeping core deposits and letting highly rate-sensitive deposits run off. We have now begun to balance our desire to minimize rate-sensitive deposits with offering a more competitive market rate for T-Mobile money deposits, even though it reduces our deposit servicing fees in the short term. However, it has helped stabilize these balances. Moreover, we continue to believe we will benefit immensely in the long term from having a bank charter, which will provide more flexibility in pricing deposits and the ability to earn more on these deposits with a high-quality asset generation strategy. In 2023, we are committed to combining with a bank and improving our revenues. Let's move to slide six, where we deep dive in deposits and spend metrics. Average service deposits totaled $1.6 billion in Q3 2022, which included $1.1 billion in average banking as a service service deposits. Total ending deposits totaled $1.57 billion, with approximately $600 million of this coming from the higher education vertical. I would like to highlight that the higher education vertical deposits are essentially non-interest-bearing deposits. with a deposit beta close to 0%, which is extremely attractive in the current rate environment. Moving on to debit card spend, debit card spend was $683 million in the third quarter and $2.2 billion year to date. Student business spend specifically was $524 million in the third quarter and $1.7 billion year to date. And banking as a service business spend was $158 million in the third quarter and $469 million year-to-date. I would now like to share some of our compelling metrics in our higher education vertical. We disbursed $3.4 billion in financial aid in the third quarter in financial aid refunds in the third quarter and $10.3 billion year-to-date. $1.2 billion of these disbursements were deposited into a Bank Mobile Vibe checking account held at our partner bank based on the student's choice to do so. In addition to this, students made organic deposits into these accounts. These are deposits over and above any refund disbursement coming into the account. Organic deposits totaled $1.3 billion year to date, indicating primary banking behavior. Additionally, We saw increased account sign-ups with an 11% increase in checking account sign-ups year-over-year and a 6% increase in saving account sign-ups year-over-year. As you can see, we celebrate many business wins despite the challenging times. I would now like to pass it on to Bob Ramsey to walk through our per-account metrics on slide 7.