Chime Financial, Inc.

Good afternoon. Welcome to Chime's second quarter fiscal 2025 earnings call. Following the speaker's remarks, we will open the lines for your questions. As a reminder, this conference call is being recorded, and a replay of the call will be available on our investor relations website for a reasonable period of time after the call. I'd like to turn the call over to David Pierce, Vice President of Investor Relations and Capital Markets. Thank you. You may begin.

Good afternoon, everyone, and thank you for joining us. for CHIME's second quarter 2025 earnings conference call. Joining me today are Chris Britt, our co-founder and CEO, and Matt Newcomb, our CFO. Mark Trotten, our COO, will participate in the Q&A. As a reminder, we will disclose non-GAAP financial measures on this call. Definitions and reconciliations between our GAAP and non-GAAP results can be found in our earnings release and our earnings presentation posted on our IR website at investors.chime.com. We will also make forward-looking statements on this call, including statements about our business, future outlook, and goals. Such statements are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from those described. Many of those risks and uncertainties are described in our SEC filings, including our final prospectus filed on June 12, 2025. Forward-looking statements represent our beliefs and assumptions only as of the date such statements are made. We disclaim any obligation to update any forward-looking statements except as required by law. With that, I'll hand it over to Chris.

Thanks, David, and thank you all for joining our first earnings call as a public company. As you'll hear today, we're off to a very strong start. I'd like to begin by expressing my gratitude to our members for placing their trust in us and to our employees for their hard work and dedication that brought us to this moment. Over the past few decades, Major industries like transportation, hospitality, and retail that were once dominated by legacy players have been upended by customer-obsessed technology companies. New entrants offered consumers better experiences at lower prices, earning the trust of millions, and in the process, established a new generation of beloved brands. Their digital-first business models allowed them to quickly and efficiently reach massive scale. This same transition is happening now in consumer banking, And I'm proud that Chime has emerged as a clear leader with a mission to unlock financial progress for our members. We created Chime to help everyday people, starting with those earning up to $100,000 a year who've been overlooked by traditional banks. Not the unbanked, but the unhappily banked. Today, we're already the primary financial partner for millions, but our ambition is much bolder to become the largest provider of primary account relationships in the U.S. And we're doing that as a technology company with a scalable and low cost operating model with a combination of recurring payments revenue, high gross margin, and very low credit risk. We've earned the trust of our members and we'll support them in all areas of their financial lives across spending, saving, building credit, borrowing, investing, and more. With our modern tech stack and radical cost to serve advantage, we can deliver innovative, personalized experiences to address each of these needs for free or low cost. And by utilizing AI built on our uniquely rich data set, we're becoming an even more indispensable partner, deeply attuned to our members' individual needs, anticipating what's next, and guiding their financial progress every step of the way. And our vision isn't just aspirational. It's grounded in an attractive business model that's driving rapid growth at scale with strong operating leverage. In Q2, we achieved 37% year-over-year revenue growth and acceleration relative to our seasonally strong Q1, when tax refund activity drives higher levels of re-engaged active members, purchase volume, and revenue. Our adjusted EBITDA margin rose to 3% in Q2, an 18 percentage point increase over the last two years. In Q2, we grew active members 23% year over year to 8.7 million, with the majority relying on Chime as their primary account relationship. Among U.S. adults earning up to $100,000 annually, Chime is the top destination for those switching their direct deposit, thanks to our scalable, referral-driven acquisition model. Despite our scale, with less than 5% penetration, we're barely scratching the surface of the opportunity to serve nearly 200 million everyday Americans earning up to $100,000. Banking for this large segment of everyday people is an area ripe for disruption. In a recent shareholder letter, one of our nation's top bank CEOs reported that for low balance accounts, which make up the majority of their accounts, their cost to serve them are far greater than the revenue they earn. The reasons? First, high cost structures due to a combination of an in-person approach to service delivery physical branches, and legacy tech. And second, their net interest margin or NIM driven business model, which doesn't work for everyday Americans with low average balances and who often don't fit their credit box. Without NIM to cover their high fixed cost structures, incumbents charged consumers over $18 billion in estimated fees in 2023, 95% of which were paid by everyday American households. These are the people who are unhappy with their bank relationships and are coming to Chime. We pioneered a business model that succeeds when we earn our members' trust by designing products that are helpful, easy, and free. If they can't be free, we aim to be the lowest-cost provider. This approach leads to a top-of-wallet primary account relationship, giving us a level of engagement and payments-driven monetization that we believe is among the highest in consumer FinTech. Chime is not a bank. our member deposits reside in regulated FDIC-insured accounts at our partner banks. We are an asset-light technology company obsessed with addressing our members' most critical financial needs. Our early progress has been fueled by four distinct competitive advantages that we believe will continue to expand as we grow. These are our low-cost structure, our track record of product innovation, our primary account relationships, and our beloved brand. I'll now spend a few minutes walking through the progress we've made in each of these four areas in Q2. Our first competitive strength is our significant cost advantage, which allows us to serve customers at one-third the cost of a large bank and one-fifth the cost of a regional bank. This is fueled by our digital-first bank partnership model and vertically integrated tech stack. The recent introduction of Chime Core, our proprietary transaction processing core and ledger, has enhanced our cost advantage, and accelerated our product development velocity. In Q2, we successfully transitioned all new debit and savings accounts onto our new system. Our tech stack was also designed to centralize our data, which facilitates the deployment of AI to improve member experiences, while also significantly reducing our cost to serve. In May, we launched our GenAI voice bot to all members. which more than doubled our satisfaction scores compared to our legacy voice system. AI-powered tools now fully automate the majority of our support interactions and do the work of thousands of human agents. As a reminder, since 2022, we've reduced our cost to serve by nearly 30%. And over time, we think AI can power nearly all of our support interactions. AI is improving the way banking services are delivered, and we believe we're at the forefront. Our second competitive advantage is our track record of developing some of the most impactful product innovations in consumer banking and payments for everyday people. Last year, we launched MyPay, another hit product enabling members to access their earned wages on demand. MyPay is now an over $300 million annual revenue run rate product and another key driver of new member growth. In terms of risk, We made faster progress than planned on improving MyPay loss rates in Q2, which led to transaction margins for this product tripling in the quarter, and we expect further progress in the quarters ahead. Going forward, we think there's much more to do with MyPay, including our enterprise version offered through Chime Workplace, our employee financial wellness solution for employers. We expect to announce some of our early enterprise partnerships in the weeks and months ahead. Because of our strong performance across the business, including MyPay, we've raised our expectations for revenue growth and adjusted EBITDA for the rest of 2025 relative to our previous internal expectations, which I'll have Matt walk through later. In Q2, we also started scaling instant loans, our installment loan product, which allows pre-approved members to borrow up to $1,000 at affordable rates, repaid over a three- and six-month period. Early results are encouraging, and we observe higher engagement and retention among members who take an instant loan, reinforcing our long-term core spending relationship. Loss rates have been in line with our internal expectations as we continue our measured rollout. The final Q2 product update was our continued rollout of Chime Plus, our free premium membership tier. Chime Plus showcases the products our members unlock with direct deposit, like SpotMe and MyPay, combined with enhanced benefits, including exclusive cashback deals, a higher interest rate of 3.75% on savings, and dedicated member support. Early results here are promising. We're already seeing Chime Plus lead to higher direct deposit conversion and member retention rates. Chime Plus is just the beginning of a broader effort to show our members that as they engage more, they get more with Chime. Our third competitive differentiator is our success in earning primary account relationships with the majority of our active members. Our approach has resulted in what we believe are among the highest levels of engagement, long-term retention, and customer lifetime values in consumer FinTech. In Q2, our average active member did 55 transactions per month with us and engaged with our app an average of five times per day, positioning Chime as the center of their financial lives. Our real-time view into the state of the everyday American consumer is showing healthy member spending and stable account balances. Even in an uncertain macro environment, our model focused on non-discretionary spend and short duration liquidity products, as well as our privileged repayment position, is incredibly resilient. We grew our active members 23% year over year in Q2, while also reducing our member acquisition costs. We continue to see that over 50% of new members came to Chime from organic and member-driven channels, including referrals. And our members don't just like Chime, they love Chime. They're passionate about us and they want to tell their friends about us. Our final competitive advantage is the market-leading and trusted brand we've built in banking and payments. We're now a clear leader with unaided brand awareness of 40%. rivaling the two largest traditional banks in the U.S. and the go-to brand for the most critical needs of everyday Americans. Our brand-building initiatives connect with culture, and in April, we celebrated Financial Progress Month, featuring partnerships with Deion Sanders, a.k.a. Coach Chime, and WrestleMania. In June, we announced our newest brand ambassador, Cooper Flag, the NBA's number one draft pick, with content that went viral on TikTok. We believe our combination of competitive advantages is only growing stronger as we demonstrated in Q2. And with that, I'll hand it over to our CFO, Matt, to discuss our financial results and outlook.