Dave Inc.

Good morning, everyone, and thank you for participating in today's conference call to discuss Dave's financial results for the third quarter ended September 30, 2025. Joining us today are Dave's CEO, Mr. Jason Wilk, and the company's CFO and COO, Mr. Kyle Bielman. By now, everyone should have access to the third quarter 2025 earnings press release, which was issued this morning. The release is available in the investor relations section of Dave's website at investors.dave.com. In addition, this call will be available for webcast replay on the company's website. Following management remarks, we'll 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 being 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 included 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 in Form 8K furnished to the SEC. I would now like to turn the call over to Dave's CEO, Mr. Jason Wilk. Please begin.

Good morning, and thank you for joining. Q3 was another record quarter, and I want to thank our team for their dedication to delivering outstanding value for our members and shareholders. We grew revenue 63% year-over-year to $150.8 million. accelerated growth in monthly transacting members 17% to 2.77 million, expanded ARPU by nearly 40%, and generated 58.7 million of adjusted EBITDA, all in service of our strategy to maximize gross profit dollars across the platform. Given our strong performance and clear momentum in the business, we are pleased to once again raise our 2025 revenue and adjusted EBITDA guidance, which Kyle will touch on shortly. Before reviewing our strategic growth pillars, I'd like to make a few quick points I want every investor to take away from the call today. First, the importance of net credit revenue. Following last quarter's record results, we received a number of questions around delinquency metrics and loss provision trends. I want to clarify how we think about those dynamics. To fully understand our economics, we are laser focused on the net monetization rate per extra cash transaction, calculated as gross yield less 121-day losses. and net revenue per transaction. On those measures, we achieved record performance in Q2 and built upon that momentum with new all-time highs in Q3. These are the metrics that drive gross profit and cash flow and led us to another quarter of record profits. Second, our new pricing is driving better credit economics despite controlled slightly higher loss rates. Early this year, we made a significant change in our pricing model, moving customers from an optional fee model to a mandatory one. The result was greater credit revenue retention as customer standard platform, resulting in better portfolio spreads. The larger and more predictable monetization rates gave us an opportunity to increase approval limits for new and existing customers, which helps with both conversion and monetization. These higher limits led to a controlled step-up in loss rates as the impact was far outweighed by the gains we achieved in incremental growth spreads. The net result is better net monetization per transaction, higher member lifetime value, and stronger economics for the company while supporting better offers for our customers. A win-win. Third, Cash AI v5.5 has started to deliver. We expect continued improvements in credit performance as a result of the rollout of Cache AI v5.5 in late Q3. Cache AI v5.5, the latest evolution of our proprietary underwriting engine, was trained on our new fee structure and leverages nearly twice as many AI-driven features as the prior version. B5.5 has driven stronger conversion, higher approval amounts, and improved credit outcomes in September and thus far in Q4, positioning us for further expansion and extra cash gross profit and revenue net of losses. Lastly, we'll be adding a section on our IR site highlighting how Dave thinks about credit performance, which will hopefully provide clarity for our stakeholders moving forward. Now to turn to a few highlights from our strategic pillars. Starting with our first strategic growth pillar of efficient member acquisition. While CAC per new member remains stable quarter over quarter at $19, CAC per new MTM declined given the improvements we've made to new member conversion. We are increasingly optimizing our marketing investments by device and channel, prioritizing investments that yield the highest gross profit returns rather than the lowest CAC. The higher LTVs we are generating out of the new fee and subscription model have further accelerated our gross profit payback periods by nearly a month year over year, now under four months. Moving to our second strategic pillar of further strengthening engagement with our members through credit. Extra cash originations grew 49% year-over-year, surpassing $2 billion for the first time as a result of MTM growth and a 20% growth in average origination size. The growth in origination size reflects a modest impact from V5.5, which enables us to offer higher approval amounts. In September, which captured most of the V5.5 impact, the average extra cash size was $213, which we believe positions us well for continued origination growth and monetization gains in Q4 and beyond. The third strategic pillar of our strategy is deepening engagement and monetization through data cards. In Q3, total card spend grew 25% year-over-year to $510 million, reflecting growth in MTMs and increases in card spend for active banking customers. High margin subscription revenue grew 57% year-over-year as we completed the rollout of a $3 monthly subscription fee for new members in late Q2. We expect the incremental subscription revenue to flow entirely to the bottom line with little to no impact on member conversion or retention. Existing MTMs remain grandfathered for now, and we expect subscription revenue to become an increasing contributor in the quarters ahead as more MTMs are acquired under the new monthly pricing structure. Lastly, I'd like to provide two operational updates. First on Coastal Community Bank, which is assuming bank sponsorship for Dave's extra cash and banking products from our existing provider. In early Q3, we began onboarding new members onto Coastal and reached full onboarding for all new members in early Q4. Over the coming months, we'll begin migrating existing members to Coastal as well. That brings us to our second update. We're thrilled to welcome Parker Brill as our Chief Product Officer. Parker will lead the next chapter of our product strategy, focused on deepening member engagement through new product developments and strengthening our AI and credit capabilities. To wrap things up before passing to Kyle, this is another incredible quarter for us. We are really excited and optimistic about our future and what we can deliver in the years ahead. Over to you, Kyle.

Thanks, Jason, and good morning, everyone. Today, I'm going to focus on the core drivers of this quarter's performance, a concise overview of credit, and our updated outlook. For a more detailed review and discussion of our KPIs, please refer to our earnings supplement available on our IR site. Let's get started with the key trends and achievements that shaped our results. Our growth algorithm continues to strengthen. We accelerated MTM growth through successful product and marketing initiatives that drove higher conversion rates and member reactivation, while retention has remained consistent. On the ARPU side of the equation, underwriting improvements combined with a new pricing model to drive higher extra cash offers, consistent growth of date card spending volume, as well as the growing population of members on our new subscription price point were the key factors driving growth. Combined, we grew revenue by more than 60% for the second consecutive quarter, and with our growing operating leverage, achieved nearly 40% EBITDA margins, exceeding the rule of 100 for the second consecutive quarter. As Jason previously alluded to, our credit performance demonstrates the strong fundamentals underlying our growth. We've set new high watermarks across unit-level net monetization rates, total unit dollar net monetization, and portfolio net revenue. Importantly, we achieved these improvements while growing originations by nearly 50% in the quarter, demonstrating our improved unit economics and volume growth are working in concert to drive gross profit expansion. A key driver of this growth is the new pricing model and underwriting paradigm that we transitioned to earlier this year. This new model generates significantly higher growth spreads and broader approval sizes for members. This change increases credit losses relative to our prior approach. However, the incremental growth spread more than offsets these losses, delivering superior net monetization per transaction, which was the intended outcome of this strategic shift. To put the impact in perspective, year over year, the total monetization rate net of losses and net revenue per extra cash transaction net of losses are up 45 basis points and 32%, respectively. In terms of delinquency rate, our Q3 28-day delinquency rate improved seven basis points sequentially to 2.33%. In September, our 28-day delinquency rate was 2.19%. reflecting the initial benefits from our new underwriting model, CASH AI v5.5. As a reminder, the 28-day delinquency rate measures the percentage of a calendar month's originations that remain outstanding 28 days after the month ends, not necessarily those that are delinquent. As currently defined, the 28-day delinquency rate can be noisy, particularly when the portfolio composition shifts. This recently happened as part of the B5.5 model change, where we intentionally increased limits for members on monthly income cycles, such as Social Security recipients. To provide a clearer picture that controls for these duration dynamics, we are introducing a 28-day, days past due, or DPD metric. For now, we will continue to publish both metrics to track early indicators of the loss outcomes of each of our quarterly vintages. In Q3, the 28-day DPD improved 11 basis points sequentially to 2.15%. And in September, following the Cash AI v5.5 rollout, the DPD rate improved to 2.04%, with further improvements to net revenue per transaction and monetization rate net of losses. These signals reinforce our confidence in the upgrades from the new model and support our expectation for further improvements in credit performance during Q4. Another important point to call out is around the provision. In addition to growth in the originations and the sequential improvement in credit performance, a portion of the change in the Q3 provision was attributable to quarter-end timing. Q3 ended on a Tuesday, which is the high point of intraweek receivables, definitionally increasing the reserve calculation and thereby increasing the provision. At Q3 ended on a Monday consistent with last quarter, the provision would have been roughly $2 million lower. This timing effect is separate from the improvements in economics we're seeing, which as I previously described are very strong. Looking ahead, we expect the provision expense as a percentage of originations to improve in Q4, supported by both continued improvement in credit performance and a more favorable quarter-end calendar, with Q4 closing on a Wednesday. Working down the P&L a bit, we grew non-GAAP gross profit by 62% year-over-year to $104.2 million. Non-GAAP gross margin came in at 69% for Q3, consistent with our target range of high 60s to low 70s for periods outside of the Q1 tax season. With respect to expenses, as we previewed on the Q2 call, we increased marketing spend to take advantage of the favorable LTV to tax that we're generating from our media spend to drive additional growth. We expect to sustain the rough magnitude of the Q3 spend through year end. On the fixed cost base, there are also a few noteworthy items to call out. Compensation-related expenses declined 18% year over year, driven primarily by lower stock-based compensation. In Q3 of last year, there was elevated stock-based compensation tied to performance-based restricted stock units linked to adjusted EBITDA targets that were achieved. Excluding stock-based compensation, compensation-related expenses grew by roughly 3% year over year. Other operating expenses increased 5% year-over-year, excluding the impact of non-recurring legal settlement charges. Also, a $4.5 million legal settlement charge this quarter has been excluded from adjusted EBITDA. Taking all this together, GAAP-MED income increased to $92 million, up $91.5 million year-over-year. This increase includes a $33.6 million income tax benefit, primarily related to the release of a valuation allowance on our deferred tax assets. Adjusted net income, which includes non-recurring items, stock-based compensation, and non-cash fair value adjustments, increased 193% year-over-year to $61.6 million. Similarly, adjusted EBITDA reached 58.7 million, growing 137% year-over-year, with 85% slow-through from gross profit. One other brief update before turning to guidance. Regarding our new funding arrangement with Coastal Community Bank, we remain on track to begin transitioning extra cash receivables under the new off-balance sheet structure in early 2026. This change is expected to meaningfully reduce our direct funding obligations, lower our cost of capital, and unlock substantial liquidity to pursue capital allocation opportunities. It will also allow us to fully retire our existing warehouse debt facility by mid-2026. With that, let's turn to the guidance. Based on our Q3 results and favorable outlook, we are once again raising our 2025 outlook. We expect revenue to range from $544 million to $547 million and adjusted EBITDA to range from $215 million to $218 million. This revised outlook reflects not only the tailwinds from the new fee model and underwriting improvements we've achieved, which significantly increased net monetization per transaction, but also the fact that all aspects of our growth strategy are performing exceptionally well, Monthly transacting members are accelerating, ARPU is rising, and overall market demand and conditions are favorable. All key building blocks supporting our optimistic outlook. And with that, we'll conclude our prepared remarks. Operator, please open the line for questions.