Dave Inc./DE Q2 FY2024 earnings call

• Continued 31% revenue growth and improved profitability for the third consecutive quarter with accelerating year-over-year revenue growth.
• Reduced operating expenses for the fifth consecutive quarter, achieving another record adjusted EBITDA.
• Raised revenue and adjusted EBITDA guidance for 2024 due to strong year-to-date performance and outlook.
• Efficient member acquisition with 26% year-over-year decrease in customer acquisition cost (CAC) to $15, despite ramping up marketing spend sequentially.
• MTM base grew 18% year-over-year to 2.3 million, driven by new member conversion, retention, and dormant member reactivation.
• Extra cash originations at $1.2 billion, up 37% YOY and 13% QOQ, with 28-day delinquency rate improved to 2.03% YOY.
• Rolled out new underwriting model to optimize credit risk management.
• Dave Card spending at $388 million, up 28% YOY, with focus on driving direct deposit adoption.

In the second quarter, extra cash originations reached $1.2 billion, growing 37% year-over-year and 13% sequentially. Dave Card spending climbed 28% year-over-year to $388 million. Monthly transacting member (MTM) base reached 2.3 million, up 18% year-over-year. ARPU increased 11% year-over-year due to improvements in extra cash engagement and monetization, as well as growth in Dave Card ARPU. Extra cash originations contribute significantly to revenue, with the Dave Card also playing a key role in member engagement and ARPU growth.

• Raised the bottom end of full year 2024 revenue guidance by $5 million to a range of $310 million to $325 million, representing 20%-25% growth vs 2023.
• Increased adjusted EBITDA guidance for 2024 to a range of $40 million to $50 million, up from prior guidance.
• Anticipate continued growth in adjusted EBITDA profitability, though trajectory may be nonlinear due to marketing investments and credit loss provision changes in the back half of the year.

• Election year potential impact on customer acquisition costs, though no observed impact in Q2/Q3 yet.
• Credit loss provision expected to increase in Q3 and Q4 relative to Q2 due to calendar dynamics affecting extra cash receivables balances.
• Regulatory risks such as CFPB proposals, including potential impacts on overdraft regulations and EWA, with need to monitor compliance and potential implications for the business.

Q: Good morning, Jason. Good morning, Kyle. How are you? Could you provide more color on extra cash volume trends, including average advances?

A: Kyle mentioned overall demand dynamics are strong, with low CAC and favorable trends in member retention/reactivation. Jason added the high velocity nature of the product allows rapid testing of new models, enabling confidence in increasing origination size and monetization.

Q: Discuss the CFPB proposal and implications for the business, including pricing elasticity?

A: Jason stated Dave is well-positioned due to lower cost to serve vs traditional banks. Kyle mentioned customers have high willingness to pay, and there's flexibility in pricing to reach desired ARPU. Jason added optionality in fee structure, including potential move to mandatory fees if needed.

Q: On revenue growth sustainability and adjusted EBITDA, what's the outlook?

A: Jason feels confident in continuing 20%+ growth supported by low CAC. Kyle noted plan to maintain positive adjusted EBITDA, with potential fluctuations based on marketing trends but overall aim to remain positive.

Q: Comment on relationship with Evolve and contingency plans for new bank partners?

A: Jason mentioned evaluating a second bank partner with ongoing conversations, noting Dave is an attractive partner opportunity. Kyle added relationship with Evolve is positive and healthy, with second bank as risk mitigation step.

Q: Discuss attach rate of extra cash to Dave Card and direct deposit progress?

A: Kyle stated attach rate of extra cash to Dave Card is roughly 30%, with product development to drive further attach rates. Jason mentioned focus on driving direct deposit, though penetration not disclosed but seen as room to run.

Q: Comment on new underwriting model and its impact on loss ratios?

A: Jason noted new model shows improvement in 28-day loss rates, contributing to better portfolio economics through increased average revenue per origination and reduced loss rates.