Dave Inc.

Good morning, everyone, and thank you for participating in today's conference call to discuss Dave's financial results for the second quarter, and the June 30th, 2025. Joining us today are Dave's CEO, Mr. Jason Wilk and the company CFO and COO, Mr. Kyle Beilman. By now everyone should have access to the second quarter, 2025 earnings press release, which was issued this morning. The release is available in the investor relations section of Dave's website at .dave.com. In addition, this call will be available for webcast replay on the company's website. Following management remarks will open the call to answer your questions. Certain comments made during this conference call and webcasts are considered forward-looking statements under the private security 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 being made only as of the date of this call, except as required by law if 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 gross profit, non-GAAP gross 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 GAAP 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 like now to turn the call over to Dave CEO, Mr. Jason Wilk. Please begin.

Good morning, everyone. And thank you for joining us. We're pleased to share that we achieved another quarter of record performance as we continue to deliver against our mission of leveling the financial playing field for everyday Americans. Q2 represented a continuation of our momentum with accelerating revenue growth, robust unit economics, and strong earnings growth, all tracking ahead of plan. Revenue accelerated to 64% -over-year to $131.7 million, marking our fastest growth rate in over five years. Performance was driven by a 16% increase in monthly transacting members and step change ARPU growth of 42%, underscoring our ability to monetize a growing and engaged number base. Adjusted EBITDA demonstrated growing operating leverage more than tripling -over-year to $50.9 million. This result represented the largest absolute adjusted EBITDA gain in company history, highlighting strong execution across the business and disciplined expense management. All of this outperformance reflects consistent execution across our team, as well as the upset of our new fee structure, which continues to strengthen monetization and deepen member engagement through larger limits. Given our strong -to-date performance and clear momentum in the business, we are pleased to once again raise our full year revenue and adjusted EBITDA guidance. Turning now to our three strategic growth pillars, efficient member acquisition, enhanced member engagement through extra cash, and deepening relationships via the Dave card. Starting with our first strategic growth pillar of efficient member acquisition, we added 722,000 new members in the quarter. Bringing total members at $12.9 million. Our member base grew 14% -over-year, while CAC modestly increased $1 sequentially to $19. We are increasingly optimizing our marketing investments by device platform and channel, prioritizing investments that yield the highest projected gross 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. Importantly, our payback periods on customer acquisition costs have further improved to an estimated four months, down from five months mid-last year. As a result, we expect to scale marketing investment through the back half of the year. This reflects our belief that our enhanced unit economic profile, in addition to current market conditions, represents an attractive opportunity to further lean in and drive efficient incremental growth. 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. In Q2, extra cash originations reached $1.8 billion, a 51% -over-year and 17% sequentially. This represents a new high for the company and reflects both growth in multi-transaction members and an increase in average extra cash size. We ended the quarter with 2.6 million monthly transaction members, up 16% -over-year and 4% sequentially, with both growth rates representing accelerations compared to the prior period. We saw continued gains in new member conversion and dormant member reactivation, along with strong retention, all positive signals of strong and consistent demand, and the durability of our value proposition. The average extra cash originations size in Q2 increased to $206, up 24% -over-year and 7% sequentially. This growth reflects improved credit segmentation enabled by Cash AI, the impact of our new theme model driving higher extra cash approval limits, and a natural increase in originations sizes as our member base seasons on the platform. We view this as a win-win, driving higher ARPU for the company while also enhancing our ability to meet our members' liquidity needs. On credit performance, our 28-day delinquency rate increased by approximately 37 basis points -over-year. A third-party issue, which has since been resolved, resulted in a temporary delay in settlements affecting a limited subset of our extra cash receivables. This temporary delay impacted our 28-day delinquency rate in Q2 by an estimated 19 basis points, or 9%, implying a delinquency rate of approximately .21% had this issue not occurred. Excluding the estimated impact of this issue, the 28-day delinquency rate would have increased roughly 18 basis points -over-year, which remains within our internal guardrails and aligns with our strategic focus on maximizing gross profit dollars rather than minimizing the loss rate. On a sequential basis, our 28-day delinquency rate also increased as a result of this third-party issue in addition to seasonal normalization following Q1's tax refund season. Extra Cash numbers is Cache AI, our proprietary underwriting engine which enables near real-time identification of credit risk through fully automated analysis of bank account transaction data. Combined with Extra Cash short repayment cycle, this tool 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. We're now in the testing phase of our Cache AI v5.5, the latest evolution of our underwriting. This next-gen model is designed to fully incorporate the economics of our new fee structure while introducing additional variables to enhance precision. The new model is trained on more than twice the number of features that we use to train our current v5.0 model, which we believe bodes well for future credit performance. We expect to begin deploying the v5.5 model later this year. The third pillar of our strategy is deepening engagement and monetization through DaveCard. In Q2, total card sum reached 493 million out of 27% -over-year, reflecting growth in transaction members, increases in card spend per active banking customer, and continuous synergy between Extra Cash and DaveCard usage. A significant portion of Extra Cash resignations continue to be dispersed to the DaveCard. This integration improves member convenience, produces member costs, and strengthens member engagement within our financial ecosystem. Active DaveCard users tend to exhibit stronger retention on Extra Cash and drives higher lifetime value, benefiting both from increased product stickiness and the incremental ARPU associated with the DaveCard usage. As our ecosystem has expanded in value, we have been testing a new monthly subscription price point after nearly eight years of charging $1 per month. Following several months of testing, we completed the rollout of a $3 monthly subscription fee for all new members. Testing results validated that we could implement the pricing change with minimal impact on conversion or retention, and the higher price has proven to be accreted to lifetime value. Our current plan is to grandfather existing MTMs on to the existing $1 price for now. The new monthly fee impact in Q2 is modest, as the change is fully implemented in mid-June. We expect a growing contribution in the quarters ahead as an increasing share of our MTM bases acquired under the new monthly pricing structure. Pushing gears a bit, given the importance of cash flow transaction data to Cache.ai, I want to briefly address recent headlines surrounding the dispute between JP Morgan and Open Banking data aggregators over potential fees for access to consumers' financial data. First and foremost, we believe it's not a foregone conclusion that prices will increase. We've been encouraged by the strong response from the industry trade groups, policymakers, and other key stakeholders who have stepped in to defend consumer rights to free data access. We're also pleased that the CFPB has indicated it will revisit the issue and fast-track the resolution. Second, in the event fees do increase, we believe Dave is well positioned to significantly optimize our use of data while continuing to maintain our existing member experience and business performance. Lastly, given our scale and demonstrated pricing power, we would expect any potential incremental cost to be shared across all stakeholders, further minimizing the potential impact on our expenses. I'd also like to provide an update on our strategic partnership with Coastal Community Bank, which is assuming bank sponsors if we're Dave's extra cash and banking products from our existing provider. Last month, we began onboarding new members onto Coastal in line with our previously communicated timeline. This marks a key milestone in strengthening our banking infrastructure, adding a risk management breaker and scalability needed to support future product expansion and our broader growth ambitions. Additionally, as Kyle described in greater detail, we recently completed an amendment to our program agreement with Coastal, whereby over time, Coastal will serve as the primary funding partner for extra cash receivables, which should further unlock the capital efficiency of our business model. More on that in a moment. In closing, Q2 represented another step function change in our profitable growth trajectory. I want to thank our team for their tireless dedication to delivering outstanding value for our members and shareholders. With that, I'll turn it over to Kyle. Thanks, Jason. Q2

was another record quarter highlighted by accelerating revenue growth, continued margin expansion, disciplined marketing spend, and increased operating leverage. These factors collectively drove outsized growth and adjusted EBITDA, further underscoring the strength of our business model. Let me walk through the financials in more detail. Starting with revenue, total revenue was 131.7 million, up 64% year over year, and 22% sequentially. Growth was driven by a 16% increase in MTMs and an acceleration in ARPU growth of 42% to 200. These metrics reflect a full quarter of monetization from our new fee structure, larger extra cash sizes, and deeper member engagement across extra cash and Daycard. Before turning to expenses, I want to note that we've expanded the view of certain operating expense line items on our P&L to help provide greater transparency into our cost structure, specifically by distinguishing between variable and fixed components. Under this revised classification, variable costs include provision for credit losses, processing and servicing costs, and financial network and transaction costs. In this new view, readers can directly reconcile total revenue to non-GAAP gross profit using specific line items on our statement of operations. Compensation and benefits, technology and infrastructure, and other operating expenses represent our fixed operating costs. Finally, advertising and activation costs reflect our previously reported advertising and marketing line item and now include member activation costs, which were previously a part of processing and servicing costs and other operating expenses. It's also important to note that only the advertising and marketing components of this line are used to calculate our customer acquisition costs, given that activation related expenses may apply to both new and existing members. With that framework in place, let's walk through each of the operating expense categories. During the second quarter, our provision for credit losses was 25.2 million, up approximately 10.8 million year over year, primarily due to increased origination volumes, which grew 51 percent over the same period. Additionally, as Jason mentioned earlier, a third party issue, which has since been resolved, caused a temporary delay in settlements affecting a limited subset of our extra cash receivables. The estimated impact of this issue was approximately 3 million in Q2, which is reflected in the provision for credit losses. Excluding this impact, provision for credit losses would have represented 1.2 percent of originations, roughly in line with the year ago period and consistent with our plan to manage credit performance to maximize gross profit dollars. It's worth noting that provision for credit losses was also up on a sequential basis as expected, given the favorable repayment trends we experienced in the first quarter as a result of tax refund season. We anticipate provision for credit losses as a percentage of originations will reach its high point in Q3, since the quarter ends on a Tuesday, which is typically the interweek peak for outstanding receivables. The higher gross receivables balance will itself cause the provision to increase, regardless of any potential changes in credit performance. Using Q2 as an example, had the quarter ended on Tuesday, July 1st, our provision for credit losses would have been approximately 1.7 million higher. Had it ended on the Friday prior to quarter end, it would have been approximately 4.5 million lower. This illustrates that a four-day difference in the day of the week on which the second quarter ended could have driven a variance of over $6 million in our provision for credit losses. Processing and servicing costs decreased 4 percent year over year to 7.2 million, driven primarily by efficiencies gained from two significant vendor contacts renegotiated last year, as well as the scale economies inherent in most of our processing vendor contracts. As a percentage of extra cash origination volume, these costs improved to 0.4 percent from 0.6 percent in Q2 of last year. Financial network and transaction costs, previously included as a component of other operating expenses, increased 11 percent year over year to 7.2 million, which was largely attributable to increased DaveCard spending volume. As a percentage of revenue, financial network and transaction costs decreased to 5 percent from 8 percent in the year ago period. This brings us to non-GAAP gross profit, which we previously referred to as non-GAAP variable profit, which grew 78 percent year over year to 92 million. We changed the name of this metric to better align with industry norms, though the definition and calculation remain the same as in prior disclosures. Non-GAAP gross margin, which we previously referred to as non-GAAP variable margin, came in at 70 percent for Q2, in line with our expected gross margin range of high 60s to low 70s that we outlined last quarter to reflect credit performance normalization following tax refund season. Relative to last year, our gross margin expanded approximately 500 basis points as a result of processing cost optimizations and key vendor renegotiations. Advertising and activation costs increased 20 percent year over year and 30 percent sequentially to 15.5 million. We typically moderate marketing spending Q1, which tends to be less efficient given that tax refunds reduce our members' liquidity needs. In Q2, we ramped investment to capitalize on continued strong demand for extra cash and to take advantage of the stronger LTV to CAC returns we've unlocked through the new extra cash fee structure and the higher subscription fee. Looking ahead, we plan to continue increasing marketing investment throughout the remainder of the year as our outlook for new member growth and lifetime value expansion remains strong. More specifically, we expect year over year growth and marketing spend in Q3 and Q4 to track at or above the pace we observed in Q2. Compensation related expenses rose 9 percent year over year to 26.4 million. As a percentage of revenue, compensation expense declined to 20 percent in Q2 from 25 percent last quarter and 30 percent in the year ago period. Additionally, our annualized run rate revenue per employee expanded 66 percent to 1.9 million, up from 1.1 million in Q2 of last year. These improvements highlight the scalability of our business model and the productivity gains resulting from our investments in AI and our broader technology platform. Technology and infrastructure expenses and other operating expenses, which primarily consist of platform compute infrastructure costs and third-party software expenses, increased 3 percent and 1 percent year over year, respectively. Over the same period, revenue grew 64 percent, further underscoring the scalability of our platform. During the quarter, we recorded non-cash expenses from -to-market changes in the value of the earn-out and warrant securities that are outstanding. The 7.9 million dollar earn-out expense this quarter reflects the higher value of those potential shares, while the 20.5 million dollar warrant expense is tied to the increased value of outstanding warrants, both driven by the strong performance of our stock and warrant prices. To be clear, these are non-cash expenses and not a reflection of the underlying business fundamentals. That said, we anticipate some volatility in these figures as our stock price changes in the future. Gap net income increased 42 percent to 9.1 million from 6.4 million in Q2 of last year. Our -to-date effective tax rate was approximately 17 percent, and we estimate our 2025 annual effective tax rate to range between 19 percent and 21 percent. Adjusted net income, which excludes non-recurring items, stock-based compensation, and non-cash fair value adjustments to the warrant and earn-out securities, increased 233 percent year over year to 45.7 million. Similarly, adjusted EBITDA reached 50.9 million, more than tripling compared to Q2 of last year, with flow through from gross profit to EBITDA of approximately 90 percent. Turning to the balance sheet, we ended the quarter with 104.7 million in cash and cash equivalents, marketable securities, investments, and restricted cash, up from 89.7 million at the end of Q1. This $15 million increase was attributable to free cash flow generation, offset by an increase in the extra cash receivables balance, which on a gross basis, increased by 43.4 million over the last quarter. As Jason mentioned earlier, following the recent amendment to our program agreement with Coastal, we expect to move a significant portion of our extra cash receivables off balance sheet. We believe this shift will meaningfully reduce our direct funding obligations, lower our cost of capital, and unlock substantial liquidity to pursue capital allocation opportunities going forward, all while allowing us to eliminate the warehouse line debt from our balance sheet by mid-2026. In addition, the new arrangement provided total funding capacity of 225 million, representing 75 million more capacity than our current credit facility. We anticipate beginning to transition extra cash receivables under the new program by early next year. From a capital allocation perspective, we remain focused on flexibility. Our priorities continue to be reinvesting in organic growth opportunities to drive future growth, increasing our dry powder to facilitate potential M&A, and opportunistically returning capital to shareholders via share repurchases. Given our strong performance through the first half of the year, we are once again raising our full year outlook. We now expect revenue of 505 to 515 million, up from our prior range of 460 to 475 million, and adjusted EBITDA of 180 to 190 million, up from our prior range of 155 to 165 million. The midpoint of our revised outlook implies annual revenue growth of 47% and adjusted EBITDA growth of 114%, and we continue to expect gross margins to be in the upper 60s to low 70s for the remainder of the year. We're proud of the financial and strategic progress we've made in the first half of 2025. We're delivering durable growth, expanding margins, and innovating for the benefit of our members. With continued focus on execution, we're confident in our ability to create long-term shareholder value while advancing our mission to build a better banking experience for everyday Americans. And with that, we'll open the line for questions.