Dave Inc.

Good morning, everyone, and thank you for participating in today's conference call to discuss Dave's financial results for the first quarter ended March 31st, 2025. Joining us today are Dave's CEO, Mr. Jason Wilk, and the company's CFO, Mr. Kyle Bauman. By now, everyone should have access to the first quarter 2025 earnings press release, which was issued this morning. The release is available in the Investors Relations section of Dave's website at Investors In addition, this call will be available for webcast replay on the company's website. The following management remarks will open the call to answer your questions. Certain comments made during this conference call and webcast are considered forward-looking statements under the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to certain known and unknown risks and uncertainties, as well as assumptions that could cause actual results to differ materially from those reflected in these forward-looking statements. These forward-looking statements are also subject to other risks and uncertainties that are described from time to time in the company's filings with the SEC. Do not place undue reliance on any forward-looking statements which are made only as of the date of this call. Except as required by law, the company undertakes no obligation to revise or update any forward-looking statements. The company's presentation also includes certain non-GAAP financial measures, including adjusted EBITDA, adjusted net income, non-GAAP variable profit, non-GAAP variable margin, and compensation expense, excluding stock-based compensation as supplemental measures of performance of our business. All non-GAAP measures have been reconciled to the most directly comparable gap measures in accordance with SEC rules. You'll find reconciliation tables and other important information in the earnings press release and Form 8K furnished to the SEC. I would now like to turn the call over to Dave's CEO, Mr. Jason Wilk. Please go ahead.

Thank you, and good morning, everyone. Building on the success of last year's results, we are pleased to report another record-setting first quarter, which outperformed expectations across key areas of our business. Topline growth accelerated on a year-over-year basis to its highest level since 2021, thanks in large part to the strong double-digit gains in ARPU and monthly transaction numbers. Adjusted EBITDA growth accelerated 235% to $44.2 million, representing a year-over-year increase of $31 million, which is the largest dollar increase in our company's history. This increase is mostly due to the operating leverage we continue to achieve on our fixed cost base, as well as the variable margin expansion we continue to generate from cash AI credit performance improvements. Given our results and the momentum we have in our business, we are raising our full year 2025 guidance for both revenue and adjusted EBITDA. This is the seventh consecutive quarter we have either raised or exceeded our guidance. Before turning to our strategic growth pillars, I want to provide an update on our recent transition to the new fee structure for extra cash. As a reminder, on February 19th, we fully transitioned to a new fee structure consisting of a flat 5% fee on all extra cash transactions with a $5 minimum and a $15 cap, removing optional tips as well as additional transfer fees to day of checking. Consistent with the testing we performed at the end of last year and into early this year, results have been better than expected. With this change, we've unlocked enhanced member lifetime value through improvements in conversion, retention, and monetization among new and existing members. Approximately 60% of total originations were on the new fee model in Q1, so we will receive the full benefit of the change in Q2 onwards. Turning now to our three strategic growth pillars, efficient member acquisition, enhanced member engagement through extra cash, and deepening relationships via the data card. Starting with our first strategic growth pillar of efficient member acquisition, we continued to efficiently acquire members at scale, reflecting the power of our credit-first value proposition and its synergies with our banking product suite. In Q1, total members grew 15% year-over-year, ending the first quarter at 12.4 million members. CAC in the first quarter increased 13% year-over-year as a result of strategic refinements in our marketing approach. We are increasingly optimizing our marketing investments by device, platform, and channel, prioritizing investments that yield the highest projected variable profit dollar returns rather than the lowest CAC. This recalibration is also closely tied to the higher member lifetime value we are observing following the transition to our new fee model. Based on these factors, the return on our QM marketing investments is expected to outpace that of prior periods. Importantly, our outlook for new member growth remains strong, and we expect to continue to achieve strong LTV to CAC returns at scale moving forward. Our second strategic pillar centers around continuing to strengthen engagement with our members through credit. Extra cash remains the key entry point for building long-term relationships with our members by addressing what is typically their primary need, short-term liquidity for gas, groceries, and bills. our multi-transacting member base continues to grow with MTMs of 13% year-over-year and 3% sequentially to a record $2.5 million. This growth was favorably impacted by higher new member conversion and dormant member reactivation, in addition to continued strength in member retention. We saw strong engagement with extra cash originations exceeding $1.5 billion, representing an increase of 46% year-over-year and 3% sequentially. We believe that sustained growth, particularly during a seasonally softer quarter, is a testament to the effectiveness of our cash AI underwriting engine and new fee model, both of which allows to more profitably underwrite larger numbers of day members for higher extra cash approval amounts. The average size of an extra cash origination in Q1 expanded 21% year over year to 192. In March, which was the first full month operating under our new fee model, the average extra cash size was just over $200, which we believe votes well for origination volumes and corresponding monetization in Q2 and going forward. Turning to credit performance, our 28-day delinquency rate improved 33 basis points, or 18% year-over-year to 1.5%, over which time extra cash originations expanded 46%, as I mentioned. We believe this performance underscores the continued strength and scalability of our proprietary cash AI underwriting engine, and the inherent advantages of our Extra Cash product structure. Extra Cash's short duration has allowed us to originate over 136 million transactions since inception, enabling continuous and dynamic credit risk evaluation. We believe the product's primary use cases, covering essential needs such as gas, groceries, and rent, further enhance its resiliency across macroeconomic cycles. Cash AI enables near real-time identification of credit risk through fully automated analysis of bank account transaction data. Combined with Extra Cash's short repayment cycle, this creates a rapid feedback loop for optimizing underwriting. This agile framework gives us strong confidence in our ability to manage credit risk across a range of economic scenarios. In uncertain macro environments, such as those influenced by tariffs or economic shocks, we believe most lenders need to tighten credit due to the slower feedback loop and lack of transaction-level insights inherent in traditional loan products. In contrast, our short cycle model and real-time risk identification enables us to adapt underwriting dynamically, a structural advantage that could provide a tailwind for Dave and a stress macro when there are fewer credit alternatives for consumers in the market. As we previously highlighted, tax refund season is typically the strongest period of credit performance as a result of the additional liquidity tax refunds provide to our members. As such, we expect our 28-day delinquency rate to normalize throughout the rest of the year. Cash AI is a sophisticated tool that allows us to manage delinquency and loss rates with considerable precision and optimize credit performance in order to maximize variable profit dollars. The third and final pillar of our growth strategy focuses on deepening member relationships by enhancing engagement with DaveCard. Our strategy leverages the power of our market-leading extra cash offering to build deeper, long-term, banking relationships with our members. DaveCard spending increased to a record $488 million, up 24% year-over-year and 7% sequentially. This growth was primarily driven by the growth in MTMs as well as the seasonal spending supported provided by tax refunds. Between the growing usage of the DaveCard and the continued momentum we are seeing in Extra Cash, we expanded ARPU by 29% year-over-year. This is our seventh consecutive quarter of double-digit ARPU expansion on a year-over-year basis and the fastest pace of growth since early 2022. Much of this improvement in Q1 is attributable to the higher average revenue per origination, which came in at approximately $11.40, up 26% year-over-year and 12% sequentially due largely to the impact from our new fee model driving higher extra cash approval limits. In March, which was the first full month operating under our new fee model, average revenue per origination was over $13, which we believe bodes well for monetization in Q2 and beyond. Switching gears a bit, I'd like to provide an update on our strategic partnership with Coastal Community Bank, which will take over support of Dave's extra cash and banking products from our current partner. We've been busy planning the transition process and expect to begin onboarding new customers to the Coastal platform in early Q3, with existing customers beginning to transition later this year. We believe Coastal's scale, experience, and strong compliance and risk-managing capabilities will best serve our members and our business as we continue to deliver on our growth and profitability objectives. The partnership is expected to also strengthen Dave's ability to launch new next-generation products aligned with our mission of leveling the playing field for everyday Americans. Before turning the call over to Kyle, I want to briefly touch on the litigation with the Department of Justice. As we discussed at our last earnings call on February 28th, we filed our motion to dismiss the lawsuit, outlining what we believe to be the technical deficiencies in the DOJ's amended complaint. We now expect a ruling on this motion in Q3 of this year. We remain confident in our legal position and are prepared to vigorously defend ourselves throughout the legal process. Going forward, we remain well positioned to execute against our strategic initiatives that we believe will unlock the full earnings potential of our business model. Q1 represented another step function change in our profitable growth trajectory, attributed to solid performance across the business and amplified by the early success of our new fee structure. I want to thank our team for their tireless dedication to delivering outstanding value for our members and shareholders. With that, I'll now turn the call over to Kyle to discuss our detailed financial results. Kyle. Thank you.

And good morning, everyone. Building on the momentum from last year, our first quarter results set new records across nearly all key operating and financial metrics, further underscoring the strength and scalability of our business model. We continue to demonstrate substantial operating leverage by accelerating revenue growth through increased ARPU and transacting member growth while maintaining disciplined cost control. In Q1, total revenue reached a record high 108 million, representing year-over-year growth of 47%. This was driven by a 13% increase in MTMs and a 29% lift in ARPU, reflecting increased member engagement and stronger monetization. During the first quarter, non-GAAP variable profit grew 67% year-over-year to $83.4 million, with variable margin reaching 77%, up nearly 950 basis points year-over-year. This improvement was primarily driven by reduced provision expense as a percentage of revenue, reflecting significant credit performance improvements delivered by Cash AI. Ongoing optimization of payment processing costs and renegotiations of key vendor contracts contributed as well. Looking ahead, we anticipate credit performance will normalize following the seasonally strong first quarter, with variable margins expected to be in the upper 60s to low 70s range for the remainder of the year. Now turning to operating expenses. Our provision for credit losses increased by 7% year over year to 10.6 million, primarily due to increased origination volumes, which rose by 46%, partially offset by continued enhancements in credit risk management. As a percentage of originations, our provision for credit losses declined to 0.69% from 0.94% in the same quarter last year. demonstrating Cash AI's ongoing ability to leverage insights and performance data from the greater than 136 million unique extra cash transactions originated to date. We believe this proprietary training data set paired with Cash AI has allowed us to build a moat and flywheel for our business. With more training data, we're better able to identify and segment good risk. thereby maximizing approval and offer amounts for our members that are differentiated from competitors. On a sequential basis, our provision for credit losses improved 36% due to the favorable repayment trends we experienced in the first quarter as a result of tax refund season. We observed higher tax refunds per member in Q1 relative to Q1 of last year, which was a driver of lower charge-offs and stronger recoveries than we anticipated. Going forward, we anticipate provision for credit losses as a percentage of originations will trend upward over the remainder of the year. This expectation primarily reflects the normalization coming out of tax refund season. As Jason referenced, we are leveraging cash AI as part of our plan to strategically manage performance in order to achieve the greatest amount of variable profit dollars, which is consistent with the variable margin expectations I set a moment ago. We expect provision expense as a percentage of originations to reach its high point in Q3, since that quarter ends on a Tuesday, which is typically the inter-week peak for receivables balances. Processing and servicing costs decrease 8% year over year to $7.1 million, driven primarily by efficiencies gained from two significant vendor contracts renegotiated last year. We also benefited from the scale economies inherent in most of our processing vendor contracts. As a percentage of extra cash origination volume, these costs improved to 0.5% from 0.7% in Q1 of last year. Advertising and marketing expenses increased 13% year over year to 10.3 million. As a reminder, we typically moderate our spending Q1 which is historically the softest quarter for marketing efficiency, given that tax refunds reduce liquidity needs within the market. We expect to opportunistically expand marketing investment over the remainder of the year with a moderate step up in spend during the summer months to capitalize on the higher levels of demand for extra cash during that period. Compensation related expenses increased 12% year over year to $27.5 million, primarily driven by stock-based compensation tied to performance-based restricted stock units and payroll taxes triggered by the vesting of these awards during the quarter. Looking ahead, we expect stock-based compensation to normalize toward levels seen prior to Q3 of 2024. Excluding stock-based compensation, compensation as a percentage of revenue fell to 19% from 25% a year ago, highlighting the inherent operating leverage provided by our technology platform and scalable cost structure. In terms of growth-related investments, we remain committed to delivering profitability while also increasing member acquisition spend and pursuing disciplined investments in product development and data capabilities throughout the year. Gap net income declined to $28.8 million from $34.2 million in Q1 of last year, due to the $33 million non-recurring gain from the discounted convertible note repurchase during the first quarter of 2024. Our year-to-date effective tax rate was approximately 15%, and we estimate our 2025 annual effective tax rate to range between 21% and 23%. Adjusted net income, excluding non-recurring items, stock-based compensation, and non-cash liabilities increased nearly 350% to $36.3 million from $8.1 million in the year-ago period. Similarly, adjusted EBITDA reached $44.2 million, more than tripling the $13.2 million generated in Q1 of last year, driven by our revenue growth, variable margin expansion, and operating leverage, with flow-through from revenue growth to EBITDA growth of more than 90%. Now turning to the balance sheet, our overall liquidity remains strong. As of quarter end, we had approximately 89.7 million of cash and cash equivalents, marketable securities, investments, and restricted cash compared to 91.9 million as of the end of 2024. This decrease was primarily driven by two factors. First, we invested over 20 million of cash to reduce our share count through share repurchases and the RSU net settlement transaction we discussed on our last call. Second, net receivables grew by roughly 19 million quarter over quarter, which we chose to self-fund with existing cash as we believe it represents an attractive use of capital at this time. As a whole, we invested upwards of $40 million of balance sheet cash in these two areas, while total cash, cash equivalents investments was down just over $2 million versus prior quarter end. I bring this up to highlight the significant amount of free cash flow that we're generating and our high conversion of earnings to free cash flow. Additionally, As of quarter end, we had approximately 100 million of borrowing capacity under our credit facility, resulting from our decision to use balance sheet cash to fund portfolio growth over the past several years. We have the ongoing ability to tap this source of capital, providing us with additional flexibility to pursue capital allocation opportunities such as M&A and capital return to drive value creation. On the topic of capital return, In March, our Board of Directors authorized a $50 million share repurchase program, reflecting our confidence in the company's financial strength, long-term growth trajectory, and expanding free cash flow profile. We view this program as a strategic capital allocation tool and a compelling way to drive shareholder value. We began executing against this program in March, repurchasing approximately $7 million of common stock. Looking ahead, We intend to be opportunistic and execute repurchases when returns are attractive and they represent the most efficient use of our excess cash. Finally, turning to guidance. For the full year of 2025, we're raising our revenue outlook to a range of $460 to $475 million, representing 33% to 37% growth year over year, and a $42.5 million increase at the midpoint compared to our prior guidance. We're also raising our adjusted EBITDA guidance to 155 to 165 million, reflecting approximately 79 to 91% growth versus 2024, and a $45 million increase from our previous outlook. In closing, our strong momentum and positive results underscore the essential role we play in our members' financial lives. We remain confident in our strategy, encouraged by the demand for our products, and energized by the opportunities ahead. We look forward to continue to deliver meaningful value to both our members and shareholders throughout 2025 and beyond. And with that, we can now open up the line for questions. Thank you.