Dave Inc.

Good afternoon, everyone, and thank you for participating in today's conference call to discuss Dave's financial results for the second quarter ended June 30th, 2026. Joining us today are Dave's CEO, Mr. Jason Wilk, and the company's CFO and COO, Mr. Kyle Beilman. By now, everyone should have access to the second quarter 2026 earnings press release, which was issued today after the market closed. to withdraw your question, please press star one one again. 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 risk 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 risk 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. The company undertakes no obligation to revise or update any forward-looking statements except as required by law. The company's presentation also includes certain non-GAAP financial measures including adjusted EBITDA, adjusted EBITDA margin, adjusted net income, non-GAAP gross profit, Non-gap gross margin, adjusted earnings per share, and compensation expense excluding stock-based compensation as supplemental measures of the performance of our business. All non-gap measures have been reconciled to the most directly comparable gap measures in accordance with the SEC rules. You will 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.

Good afternoon and thank you all for joining us. The business is performing exceptionally well as we close out the first half of 2026. Q2 revenue grew 30% year-over-year to $171 million and adjusted EBITDA grew 48% to $76 million at a 44% margin. On the strength of these results and the trends between the business, we are once again raising our full-year guidance for revenue, adjusted EBITDA, and adjusted diluted EPS. The key takeaway from today's call is that our growth engine remains incredibly strong, with Q2 representing our ninth consecutive quarter of 30% plus revenue growth. Marketing efficiency and overall user growth continue to outperform. That gives us the confidence to lean further into marketing in the second half, which should accelerate MTM growth. combined with more levers than ever on ARPU were well positioned to sustain this trajectory for the foreseeable future. Turning to our growth pillars. Starting with member acquisition, we added 951,000 new members in the quarter, up 32% year-over-year, our fastest growth in nearly four years, and we delivered it at many times the scale we had back then. We did this while holding CAC flat at $19, which we believe tells us two things. Our brand and funnel are getting more efficient as we grow, and we are still in the early endings of penetrating the enormous 185 million customer chain in the US. Moving to our second pillar, engagement through extra cash. Originations reached 2.3 billion, up 27% year over year, as member engagement and overall demand remains very strong. Additionally, average extra cash size reached a new high of 215. meaning members are getting more of the short-term liquidity they need for gas, groceries, and rent from Dave while also driving incremental monetization for us. And we are monetizing that growing demand more effectively than ever. Last quarter, we removed the $15 fee cap for new members. Earlier this quarter, we removed that fee cap for a large portion of grandfathered members, and we plan to increase the fee cap to $20 for the remaining grandfathered members effective late August. The more efficient monetization enables us to increase average origination sizes per user with planned initiatives to raise our maximum well above $500 without compromising margin. We additionally began rolling out CashEI v6, the latest generation of our proprietary cash flow underwriting engine. v6 is built on more than 700 model features, nearly 400 of which are brand new. As with any model upgrade, V6 is designed to expand gross profit dollars within our controlled range of loss rates, not necessarily to drop the lowest possible loss rates. And with stronger growth spreads from our new pricing, the model has greater flexibility to optimize unit economics. Early results suggest V6 is delivering higher credit limits and is driving the desired outcome of expanded gross profit dollars. Those higher limits also deepen member value, which tends to compound into better conversion, retention, and reactivation, and ultimately MTM and revenue growth. A win-win. Moving to our third pillar, deepening card engagement, Dave Card was approximately $530 million, up 7% year-over-year, as card volume continues to benefit from its natural synergy with extra cash. As we discussed last quarter, we have deliberately shifted our focus from new debit-focused initiatives to our new Dave FlexCard. which we believe has more differentiation in the market to win top of all its spend given our advantages in underwriting. We continue to expand test cohorts as unit economics have improved and early engagement has been promising. Our focus remains to test and learn and optimize through year end. We do not expect Day 5 to contribute meaningful revenue in 2026 and is not embedded in our guidance. We will share more as performance data matures. Before I turn it over to Kyle, a couple of strategic updates. First, on our partnership with Coastal Community Bank, During the quarter, we began funding extra cash receivables through our new structure with Coastal. As it scales, it makes our funding model significantly more capital efficient, lowers our cost of funds, and frees up meaningful liquidity to pursue high return investment opportunities and return capital to shareholders. We have already unlocked nearly $100 million of cash on the balance sheet as a result of this favorable arrangement. Finally, on the DOJ matter, we have no updates and continue to vigorously defend our position. In closing, Halfway through the year, this business is delivering exactly what we said it would. Members are growing quickly, credit is further improving from an already favorable level, and we are expanding revenue per user. My thanks to the entire Dave team for another exceptional quarter. And with that, I'll turn it over to Kyle.

Thanks, Jason, and good afternoon, everyone. The second quarter brought together the things we care most about, durable, high-quality revenue growth driven by a healthy mix of efficient customer acquisition and improving revenue per user, all while delivering strong credit performance. We additionally delivered on continued operating leverage and growing capital efficiency as we moved receivables off balance sheet to Coastal. The combination, in addition to the ongoing momentum we continue to see, gives us the confidence to raise our full year outlook across all metrics. Today, I will cover the drivers of the quarter and how we are thinking about the ARPU trajectory credit and provision, margins, capital, and our financial targets for the year. As always, there's a detailed KPI breakdown in the earnings supplement on our IR site. Starting with revenue, total revenue was 171 million, up 30% year over year and nearly 8% sequentially. Growth was driven by a 17% increase in MTMs to 3.08 million and 11% ARPU growth, New member conversion, retention, and reactivation performed well, and this quarter the mix shifted toward member-led growth as acquisition reaccelerated. The mix shift is deliberate and healthy as a result of the sizable ramp we're seeing at the top of the funnel. So let me expand on the ARPU trajectory Jason mentioned a moment ago. As acquisition increases, newer members represent a larger share of the MTM base. Their ARPU begins lower and expands with tenure, more than doubling on average from the acquisition month to the fourth month on book. At the same time, several monetization tailwinds are stacking. By late August, nearly all of our members are expected to have either no fee cap or a $20 cap, and we expect the share with no fee cap to continue increasing. Lifting the fee cap gives us meaningful monetization headroom to expand extra cash limits. Not only up to the current $500 maximum, but as Jason mentioned, we have plans to go beyond that, increasing both member value and total monetization. Additionally, our high margin subscription mix continues to expand, reaching 9% of total revenue compared with 6% a year ago. Together, these factors reinforce our confidence in the ARPU opportunity ahead, even before accounting for the impact of Dave Flex and other future products. The quarterly cadence will reflect acquisition mix, and as newer cohorts mature and these modernization levers scale, we expect to enter 2027 with a significantly larger MTM base and increasing monetization across that base. Turning to credit and provision, our 28th day pass due rate, which we believe is the most direct measure of underlying credit quality, improved 14 basis points year-over-year to 2.12%. Sequentially, the rate increased due to a seasonal normalization following Q1's tax refund season. More importantly, year-over-year performance strengthened from roughly flat in Q1 to 6% better in Q2, even as originations grew by 27%. Credit performance has remained strong thus far in the quarter, based in part from the early impact of the V6 model rollout, which we expect will deliver Q3 loss rates in a similar range to Q2, with the benefit of higher extra cash origination sizes. Provision for credit losses was 29 million, up 14% year over year. Provision reflects three main drivers, portfolio growth, credit performance, and the day of the week on which the quarter ends. Sequentially, provision increased 8% compared with a 15% increase in gross extra cash receivables, including the portion funded through Coastal. Both Q2 and Q1 ended on a Tuesday, which is typically the intra-week peak in outstanding receivables. As we noted last quarter, Q1 established the loss reserve at that peak, so we did not expect Q2's Tuesday quarter end to create the same incremental pressure. And that's what we saw. With a neutral day of week effect, provision as a percentage of extra cash originations improved by one basis point sequentially. Looking ahead, Q3 and Q4 will end on Wednesday and Thursday, respectively, which should be favorable for provision as a percentage of originations and for gross margin. On gross margin, we said last quarter that the first quarter would be the low point for the year, and margin expanded sequentially as expected. Non-GAAP gross profit was $124 million, up 34% year-over-year, and non-GAAP gross margin was 72%, up about 300 basis points year-over-year. We continue to expect gross margin to expand into the mid-70s over the balance of the year, and that is after absorbing the fees under the Coastal Funding Arrangement, which are recorded in financial network and transaction costs. Now working down the P&L, this was the quarter we began accelerating our top of funnel marketing. Advertising and activation expense was $20 million, up 32% year-over-year and 43% sequentially. Part of the sequential increase reflects a deliberately lighter first quarter when tax refunds temporarily reduced members' need for short-term liquidity and marketing is typically less efficient. The balance of the step-up was by design. Extra cash demand remains strong, while acquisition returns improved as the removal of fee caps enhanced monetization for new members, credit quality improved, and CAC remained stable as we scaled. As Jason noted, given those returns, we plan to expand investment over the balance of the year, which should be further supported by the ongoing rollout of Cash AI v6.0 that we expect to drive both stronger conversion and higher monetization as a result of higher limits. On fixed costs, total compensation was $36 million, including $16 million of stock-based compensation tied to performance-based restricted stock awards granted in 2024, 2025, and earlier this year, as achievement of the underlying 2026 financial targets became probable during the quarter. Excluding stock-based compensation, compensation grew 7% year over year and declined 5% sequentially as modest headcount additions were more than offset by the seasonal step down in payroll taxes. Our incremental investment over the next couple of quarters is planned to be concentrated in three areas, product development, marketing, and embedding AI more deeply across the organization, which we expect will deliver greater speed and scalability to our business over time. Those investments are modest and may temper fixed cost leverage over the next two quarters. Thereafter, we expect operating leverage to become more pronounced as the business continues to scale. Finally, other operating expenses include approximately 4.4 million of non-recurring items. Excluding those items, other operating expenses were down sequentially. Pulling it together on profitability, adjusted EBITDA grew 48% year-over-year to 76 million, more than 1.5 times the rate of revenue growth. Adjusted EBITDA margin was 44% of nearly 600 basis points year-over-year. Sequentially, margin remained flat despite the marketing step-up I just described. That was a deliberate investment at what we believe are attractive returns and does not change our expectation for continued annual adjusted EBITDA margin expansion. Below the operating line, several items affected the comparability of our GAAP net income results for this quarter. We recorded $37 million of non-cash charges from the required quarterly mark-to-market of our warrant and earn-out liabilities as our share price appreciated during the quarter. These items are excluded from our adjusted results as they do not reflect operating performance. Note that the warrant and earn-out securities expire in January of 2027, thereby eliminating the non-cash gains and losses in our P&L that we've been subject to over the last several years. Gap net income was $7 million compared to $9 million a year ago, reflecting the non-cash charges I just described. Adjusted net income was $56 million, up 39% year-over-year, and adjusted diluted EPS was $4.12, up 48%, reflecting both solid financial performance and our lower share count that now includes a full quarter of the repurchases we completed in March following the convertible note transaction. Now turning to our capital position, we ended the quarter with $254 million of cash, investments, and restricted cash, up $77 million from $178 million at March 31st. The increase was primarily driven by $93 million funded through the Coastal Arrangement, offset by share of purchases during the quarter. As a result of the coastal structure, net cash from extra cash receivables shifted from a $51.7 million use of cash in the second quarter of last year to a $30.5 million source of cash this quarter, demonstrating how the arrangement reduces our direct funding requirements and enhances the free cash flow generation of the business. We repurchased 19 million of shares during the quarter, leaving 94 million available under our authorization. Our capital priorities remain unchanged. Fund high return organic growth and repurchase shares opportunistically when we believe doing so creates attractive per share value. Turning to our updated 2026 outlook. Based on first half results and the trajectory we see, we are raising guidance across all three metrics. We now expect revenue of $725 million to $735 million, representing 32% year-over-year growth at the midpoint. from our prior range of $710 million to $720 million. We expect adjusted EBITDA of $315 million to $325 million from $305 million to $315 million. And we expect adjusted diluted EPS of $17 to $17.50 up from $16.25 to $16.75, assuming a 23% effective tax rate. Our updated outlook assumes a higher level of advertising and activation investment in the second half than contemplated in our prior outlooks, reflecting the attractive returns we are seeing. A near-term growth mix weighted more towards MTMs, continued ARPU support from pricing actions, cohort maturation, subscription mix, and cash AI v6.0, gross margin expansion toward the mid-70s, inclusive of the coastal fees, and no meaningful revenue contribution from flex. In closing, our second quarter results demonstrate the durability of our growth, continued control over credit, and the flexibility of our operating model. We are increasing investment where returns are strongest while maintaining discipline on costs, and the coastal transition is expected to further strengthen our liquidity and capital position. We believe these factors support the updated outlook that we provided today and position us well for the balance of 2026. With that, operator, please open the line for questions.