Good morning, everyone, and thank you for participating in today's conference call to discuss Dave's financial results for the second quarter ended June 30, 2024. Joining us today are Dave's CEO, Mr. Jason Wilk, and the company's CFO, Mr. Kyle Beilman. By now, everyone should have access to the second quarter 2024 earnings press release, which was issued yesterday. The release is available in the Investor Relations section of Dave's website at https://investors.dave.com. In addition, this call will also be available for webcast replay on the company's website. Following management remarks, we'll open the call for your questions. Certain comments made on 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 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, including adjusted EBITDA and 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 charts and other important information in the earnings press release and Form 8-K furnished to the SEC. I would now like to turn the call over to Dave's CEO, Mr. Jason Wilk. You may begin.

Thank you, and good morning, everyone. We continued to outperform expectations in the second quarter, delivering 31% revenue growth and materially improved profitability compared to the year ago period. This marks our third consecutive quarter of accelerating year-over-year revenue growth, which we accomplished while managing to reduce operating expenses for the fifth consecutive quarter. This resulted in achieving another record quarter of adjusted EBITDA. Given our performance year-to-date and strong outlook for the remainder of the year, we are raising the bottom end of our revenue guidance and increasing adjusted EBITDA guidance for 2024. This upper revision is further supported by continued growth in our monthly transacting member base, which reached 2.3 million members. Turning to the second quarter, I'd like to share more about our continued progress in executing on our growth strategy. This includes efficiently acquiring new members, engaging them through extra cash and deepening our relationships to the Dave Card. Our commitment to efficient member acquisition is paying off as we continue to reduce marketing spend when compared to year-ago periods, yet still expand our monthly transaction member base as I'll discuss in more detail in a moment. In the second quarter, we acquired 3% fewer members relative to the year ago period, but with nearly 30% less marketing investment. This was driven by a 26% year-over-year decrease in CAC to $15 as we continue to optimize our marketing ROI in pursuit of profitable growth. On a sequential basis, we ramped up marketing spend by 18% to capitalize on the seasonal demand pattern for extra cash while reducing CAC by 7% at this higher level of investment. As we navigate an election year, we are closely monitoring its potential impact on customer acquisition costs. While we didn't observe election impacts in Q2 nor have we thus far…

Thank you, and good morning, everyone. As Jason highlighted, we continue to demonstrate the strength and scalability of our business during the second quarter, where our results represent new high watermarks across most all key metrics. We achieved substantial operating leverage by accelerating revenue growth and remaining disciplined with our fixed cost base, which we believe has been further supported by our internally developed cash AI underwriting engine and our AI-enabled chatbot called DaveGPT. As you may recall, we raised our full year adjusted EBITDA guidance during the first quarter based on the strong performance in that period. During the second quarter, we continued to execute well, enabling us to once again raise adjusted EBITDA guidance for the full year. Q2 revenue reached $80.1 million, representing a 31% year-over-year increase. This was fueled by 18% growth in MTMs and ARPU expansion of 11%. New member acquisition remained efficient, allowing our marketing dollars to go further, while improved retention and reactivation further boosted our MTM base. The ARPU increase was due to both increased extra cash utilization as well as stronger engagement with the Dave Card. Non-GAAP variable profit in Q2 increased 57% on a year-over-year basis to $51.8 million, representing a 65% margin relative to GAAP revenue, up approximately 1,100 basis points from Q2 of last year. Our sustained improvements to variable margins have been driven largely by the continued optimization of our cash AI underwriting engine, which has ingested the credit performance of over 105 million unique extra cash transactions since our inception. We believe this continues to expand the competitive advantage we have in evaluating portfolio risk. The resulting improvement and credit loss experience has also allowed us to reduce loss rates while increasing the revenue we generate per extra cash origination Additionally, our variable margin performance in…

Our strong performance this quarter reinforces the continued positive trajectory of our company. I'm confident that our team will continue to drive growth and achieve new milestones in 2024 and beyond. Operator, we can now open the call for questions.

[Operator Instructions] And our first question will be coming from Devin Ryan of Citizens JMP. Your line is open, Devin.

Thanks so much. Good morning, Jason. Good morning, Kyle. How are you?

Doing well. Good morning, Devin.

Good. So obviously, really nice step-up in extra cash volume this quarter, up 13% sequentially, 37% year-over-year. I know there can be a seasonal bump in the second quarter, but it looks like this was driven by both more originations and then higher average advances. So great to get just a little more color around the trends you're seeing with your customer base right now and then more broadly, the ability and comfort to take up the average advance size higher from here?

Devin, this is Kyle. Thanks again for joining the call. I'd say, overall, we're feeling really good just about the overall demand dynamics that we're seeing. I think as you can see in our customer acquisition costs were at multiyear lows despite the ramp-up in marketing spend sequentially. We're also seeing really favorable trends with respect to existing member retention and reactivation of dormant customers. So I think it's just overall the demand patterns are looking really solid at this point and gives us a lot of confidence going into the second half of the year. In terms of overall ability to increase origination size and therefore, monetization moving forward, I think we feel very comfortable that we still have room to run there. We rolled out a new model in the second quarter that both allows us to ramp up average advanced size as well as lower our loss rate performance, and we're going to continue to lean into that in the second half and feel that there is further upside there as we move through the rest of the year.

And Devin, just to add to that real quick, we're able to do this because of the high velocity nature of the product. As you know, the average amount people use actually cash flow is around 10 days. And so we're able to test and learn on those new models. So rapidly that we can gain a lot of confidence so quickly compared to traditional credit providers that have to wait a long time with their vintages to season.

All right. Terrific. Thank you. And then a question on the CFPB proposal announced in July. You obviously issued a press release around your position, so we'll have to see how it all plays out. But if we were to play out a scenario where there are changes to the regulatory framework for the industry. And I think on one hand, you have COPD, which an overdraft could be really positive. It feels like if the large banks have to lower overdraft fees and there was a Wall Street Journal article in early July, talking about the impact on that. So I'd love to maybe get a little color there. But then on the more recent proposal, it would seem to squeeze a number of marginal players in the space. So I just love to think about some of the levers at your disposal around the monetization model, and then maybe just the elasticity of pricing to the extent there is any changes on that front. So kind of maybe touch on both proposals and the implications on the business since there's a lot for I think the market on pack right now. Thank you.

Yeah, great question, Devin. So on the first part around the proposed overdraft regulation, we think we sit in a really good spot there, just given our lower cost to serve as we pointed out for the first time in our supplement, how much lower our cost to serve is compared to traditional bank. And that Wall Street Journal article you're mentioning specifically references how much it cost the banks to operate, which means they have to charge a certain amount of fees just to break even on a checking account. By our calculation, it's about $300 per year for a major bank to break even on a basic checking account. Therefore, they have to make up for that with minimum balance overdraft fees. And so if overdraft were to go away or be significantly limited, prices have to go up in different areas. And so we think that continuing to lean in on our lower cost to serve puts us in a significant advantage to have lower fees, yet still have great gross margins as we have today. On the proposed EWA, yes, we did issue a statement that we don't believe we're subject to this role. If it were to become effective, we feel very strongly in our position as an overdraft product similar to traditional banks, albeit at significantly cheaper fees. And if the rule were to pass, yes, I agree that it could squeeze some players out there that are continuing to offer unlicensed credit that is not regulated. Dave is a federally regulated overdraft product, and we spent a lot of time developing and building our business in a very compliant way leading up to going public.

Thank you. And can you maybe just on the price elasticity as well of just the overall platform? So I think that plays in here, too, that there's potentially other levers around the business model that the world wouldn't stay static.

Devin, this is Kyle. Just to jump in here. I think what we've shown and what our results have shown is that there is a high willingness from customers to pay for the product that we offer. And I think that given the evolving landscape, we have flexibility, should we need to evolve what we're doing from a pricing standpoint. So just point back to the ARPA trends that we've seen over the past, call it, six quarters as we continue to ramp up origination size. Monetization has also increased. And I think that just points to the fact that customers are willing to pay for what we're offering. And that gives me a lot of confidence that we can continue to operate effectively regardless of what happens within the broader regulatory landscape.

Yeah. I would say just to add to that we do like the optionality within our fee structure, which we can continue on today with our model, but should we be pressed there, we could always move to a mandatory fee model similar to traditional banks and discharge significantly in lower fees than the incumbent. So either way, we think there's a lot of flexibility in the pricing to reach our desired ARPU level, which we feel very confident to continue moving forward.

Okay. I’ll leave it there. Thank you guys. Appreciate it.

Yeah. Thanks, Devin.

One moment for our next question. And our next question will be coming from Jeff Cantwell of Seaport Research. Jeff, your line is open.

Hey, great. Thanks guys. [Four areas] (ph) I want to touch on. These are medium-term questions. First, on revenue growth, that was 31% this quarter, came in above the expectation. Can you talk about thinking further out how sustainable is, call it, 20% revenue growth, what your thoughts are there? Second is on adjusted EBITDA. It looks like you're very profitable here, 30 to second quarter positive adjusted EBITDA. When we drill down, again, we can see the business expenses a little bit below, but you're also talking about the remainder of the year. So can you help us understand how sustainable you think it is in terms of positive adjusted EBITDA over the next, call it, several quarters, and what the major callouts are there?

So, hey, Jeff, good morning. Look, I think we feel very confident in our ability to continue to deliver 20%-plus growth for many quarters and hopefully, years to come. And so the 31% growth for the quarter was tremendous. We hope to continue that. We're not committing to 30-plus percent growth, but we feel that the company can continue at a very healthy trajectory at these levels and supported by our low CAC levels as well. As far as that continued EBITDA, I think Kyle mentioned in the script that we plan to continue on as a positive EBITDA company, there may be some fluctuations in that based on marketing trends where we may take advantage of some increased marketing to take advantage of the demand. But overall, we do want to maintain positive EBITDA moving forward to the company here on out and not have to access any additional capital.

That’s great. Super helpful. Third, is on Evolve and your bank practice. Clearly in order to talk about the first two, you just discussed your revenue and profitability, that supposed to be viewing how things are going to be maintained optionally going forward. So can you comment on your relationship with Evolve. Maybe talk about whether there's any contingency plans in place to finding new bank partners over time in the event something would happen that would change that relationship. Thanks.

Yeah. So we noted in the call that we are evaluating a second bank partner, we'll report back when we've made material progress on our negotiations. We think that we are a very attractive partner opportunity for many of the qualified sponsor banks that are out there. There are several of them that have approached us and conversations are ongoing at this point. And I just want to note that because of our established risk and compliance programs, we feel very well suited to be an attractive partner for these new firms.

And just to jump in there, I would also just say that our relationship with Evolve is still positive and healthy. Nothing about what happened with the consent order there and some of the other challenges that they're facing as it impacted our business. We have a close relationship with their leadership team over there and are continuing to work positively in that partnership. So the second bank is really just a risk mitigation step that we're taking, but nothing about the business has been impacted in any capacity to date.

And I would just add that the risk mitigation has been part of the plan for quite some time. These bank conversations have stemmed from last year. This is nothing reactionary from the most recent news. As we noted in the call, we've reached a significant customer scale at this point of 2.3 million paying members, and it's the right decision for risk to have some redundancy set up just in case.

Okay, great. And then lastly, just a follow-up on Devin's question. On regulation, again, can you give us some more color on your thoughts about the CFPB's ruling. It seems like certain areas like PIPs are coming into focus, the all-in costs are in focus. Can you comment on those areas in terms of what your position is and how that might play out for yourselves over time? Thanks.

Look, we feel confident in our ability to keep offering the fees that we have. They are completely optional, and they're also within an overdraft program as we set up the program as an overdraft product similar to how major banks are offering overdrafts as well. So we don't think this ruling does apply to us. We think that the callout they have around tipping seem mostly aimed at people that are forcing tipping on customers, which we have never done as a business. There are several firms out there that require you to disclose your tip ahead of being approved for credit or condition your credit approval based on how much you tipped last time, we do nothing on the such and so I'm actually a fan of seeing regulation around that piece because there is and has been some various activity, which is disappointing because shipping is in an optional state is a great way to monetize customers as many people can choose to pay when they can afford it and access it for free when they can't.

Okay, great. Thanks for the color guys. Appreciate it.

Yeah, thanks, Jeff.

One moment for our next question. Our next question will be coming from Jacob Stephan of Lake Street Capital Markets. Your line is open, Jacob.

Hi, guys. Thanks for taking my questions. Congrats one the quarter here as well. I just wanted to start out with the customer acquisition costs. And obviously, you guys said that you're not seeing any impact from the election. But maybe what is it that you're doing differently here to see that cost effectiveness in the new customer adds?

Well, we are continuing to see a positive trajectory in our word of mouth. That's been our largest form of acquisition since the beginning of the business. We also see that we're doing very well across our channel distribution. In the beginning of the company, we were quite focused on just word-of-mouth in a couple of digital channels. Now we are everywhere from TV, streaming, all the social channels, search affiliate. We have a very healthy distribution of all of our marketing dollars, and it's given us a lot of confidence to spend moving forward with seeing this reduction in CAC, which is not typical for a growth company at this stage.

Got it. And maybe, Kyle, I think you pointed out that in Q3 here, we could see some elevated marketing spend, but maybe help us kind of size the magnitude of the increase.

Yeah. Look, I think we haven't provided specific guidance on what the elevated level of marketing spend will be on a sequential basis or 2H as relative to 1H. I wouldn't expect anything overly dramatic, but just healthy quarterly ramping, maybe consistent with what we saw last year as we work through the rest of the calendar at least from Q2 to Q3, just taking advantage of the more attractive demand environment over the summer periods with the go-to-market message there. But I'd say overall, what's really driving our decision-making around increasing marketing is just the LTV to CAC trends that we're seeing, our payback periods on a gross profit basis at this point are in the four to five-month range, just really attractive, and we're just leaning into that opportunity to drive attractive returns on that spend. I hope that helps to answer your question.

Yeah, that makes sense. Just one last one for me here. Maybe just give us some more color kind of on the updated pricing on the subscriber plans. I know this has been a focus in the past, but any update there would be helpful.

So no official update. We're still evaluating the test results and don't have a firm timeline for a full rollout. It's important to note though that it's not in any of our guide it's not modeled in any upside. So we're continuing to test, but nothing firm.

Okay, got it. Thanks guys.

Thanks a lot.

And one moment for our next question. And our next question will be coming from Gary Prestopino of Barrington. Your line is open.

Hi, good morning. Jason and Kyle. Couple of questions here. Could you maybe discuss the attach rate of the extra cash to the Dave Card in terms of what you're seeing out there sequentially and year-over-year in terms of improvement?

Sure. Gary, this is Kyle. Happy to take the question and thanks so much for joining this morning. So we don't disclose this explicitly. But what we've seen over the last handful of quarters is roughly 30% attach rate from EC volume being sent to the Dave Debit Card. It's been relatively consistent, I'd say, over the last two to three quarters. And we do have some product development stacked against that opportunity later this year that we hope to drive further attach rates there, which our view is that there's an opportunity there just to help further drive card adoption as well as increase the penetration of direct deposit within our overall MTM base. So hopefully, some more to come on that strategy and performance there later this year. But yes, the attach rates are roughly 30%.

And we do see definitively that when customers do attach to the Dave Card that retention does go up on those customers. So our strategy is playing out well there, and we want to find more ways to get people to adopt the card and then ultimately direct deposit.

And retention is going up, but obviously, transaction should rise commensurate as well, correct?

Transactions and overall ARPU. So it's a really healthy opportunity for us to go after as it just increases lifetime value from both a tension and monetization standpoint. So yeah, something we're really focused on and again, have some product development stacked against that later this year that we're optimistic about.

Could you also comment on your progress on direct deposit of paychecks to the Dave Card?

We don't disclose direct deposit penetration. We feel there's a model room to run on that metric still. But extra cash to Dave Card is a good way for us to drive that initial trial of the card and ultimately, a good proxy to see how we're doing against direct deposits just to keep monitoring how we're doing on total transaction growth as you see a higher percentage of people from direct deposit would be adding up in that total monthly Dave Card spend.

And then just lastly, you talked about rolling out a new underwriting model that's improved your loss ratios. I know directionally, you're not going to tell us exactly what you did, but directionally, can you talk about where the proof points of this new model are benefiting you?

Yeah. I mean I think it just shows up in our 28-day loss rate performance, Gary. As you can see, year-over-year, we continue to drive down those loss rates, which ultimately just drive the economics of the portfolio. So in the context of both the rising average revenue per origination as well as the reduction in the 28-day loss rate, and ultimately, our 120-day charge-off rates. It's a really powerful equation there as we're able to drive both sides of that equation by further optimizing the model. So I'd point to those as the proof points of how we're doing and the effectiveness of the strategy and the execution from the team.

Yes, I asked the question, Ron. I guess what I'm trying to get at is what's changed in the focus of what you're doing, maybe just to give us an idea of how you've tweaked this. Can you talk about that?

I'd say it's just the addition of new data points into the model. We've added substantially more just data points into the overall model, I think that just allow us to better risk split within the portfolio. I'd say that's all we're willing to share at this point is just the introduction of more data points. Sorry, Gary, just to add to that. It's largely the same approach, just I'd say, a more robust and comprehensive model versus the prior versions.

And then I think in the discussions with you that you were testing with giving individuals who have higher credit rating risk parameters, more bites at the apple for extra cash. I think you're allowed one every two weeks. Is that starting to gain a little bit of traction or can you tell us how that testing is working?

Yeah. So we've had an ongoing initiative here to give our higher-- we don't use credit score as a proxy but our internal scoring based on their transaction data that our highest-quality customers were giving assets to a little bit additional credit if they need it within the same paycheck period, and that is working quite well. We're seeing increased ARPU on those customers and increased levels of retention. So overall, it's been a great strategy. We're not yet to a 100% rollout. We plan to do so hopefully, by the end of the year.

Okay. Thank you.

Yeah, I think just, Gary, to that point, what we would expect the impact to be is just higher average origination size per customer and that's driving average revenue per origination up as well. So just upside from a monetization standpoint there.

Okay. Thank you.

And this concludes the question-and-answer session as well as today's program. Everyone, have a great day. You may now disconnect.