Good morning, everyone, and thank you for participating in today's conference call to discuss Dave's financial results for the first quarter ended March 31, 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 first quarter 2024 earnings press release, which was issued earlier today. This release is available in the Investor Relations section of Dave's website at investors.dave.com. In addition, this call will also be available for webcast replay on the company's website. Following management's remarks, we'll open the call to 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 publicly release the results of any revision to any forward-looking statements. The company's presentation also includes certain non-GAAP financial measures, including adjusted EBITDA as supplemental measurements of performance of our business. All non-GAAP measurements have been reconciled to the most directly comparable GAAP measure in accordance with the SEC rules. You'll find reconciliation charts and other important information in the earnings press release, Form 8-K furnished to the SEC. I would now like to turn the call over to Dave's CEO, Mr. Jason Wilk. Please go ahead.

Thank you, and good morning, everyone. Dave's strong business performance from last year continued into 2024 as we exceeded our growth and profitability targets in the first quarter. Revenue grew by 25% year-over-year, our second consecutive quarter of accelerating revenue growth. And our operating expenses declined on a year-over-year basis for the fourth consecutive quarter as we continue to lean into the operating leverage inherent in our business model. As a result, we posted our second consecutive quarter of profitability, generating $13.2 million of adjusted EBITDA in the first quarter, representing a nearly $18 million improvement relative to Q1 of last year and a 32% improvement sequentially. As a result, we have raised our adjusted EBITDA guidance for 2024 to reflect these outstanding results as we further expand our monthly transacting member base beyond the 2.1 million member inflection point at which we achieved profitability in 4Q of last year. We are one of the pioneers in leveraging AI and machine learning techniques within financial services, harnessing the power of AI as an additional source of operating leverage across the business with our internally developed CashAI underwriting engine and our AI-enabled chatbot called DaveGPT. CashAI underwrites our members' cash flow data as we're able to detect income and spending patterns as well as employment signals at a granular level. ExtraCash's short duration lends itself to cash flow underwriting as we have originated nearly $100 million ExtraCash advances since its inception with steadily improving loss rates, providing a tremendous opportunity for CashAI's machine learning to continually optimize. We believe CashAI's time-tested and data-rich ability to underwrite effectively through multiple economic cycles, creates a powerful moat that continues to distinguish Dave from new and existing competitors. With CashAI, we have demonstrated our ability to consistently grow origination volume while improving loss rates,…

Thank you, and good morning, everyone. As Jason mentioned, our first quarter results represent new records across many of our key metrics. Our business continues to demonstrate significant operating leverage by driving higher revenue largely through expanded ARPU and member retention. We've also improved our cost structure through efficient marketing spend, strong credit performance and the optimization of our variable and fixed costs. Now to dive a little deeper into our results. Revenue in Q1 was $73.6 million, up 25% from Q1 of last year. This revenue growth was driven by the 14% increase in MTMs and a 10% increase in ARPU. The MTM growth was driven by the continued efficiency of our member acquisition strategy in addition to improvements in member retention and reactivation we achieved that led to strong existing member engagement. Increases in ExtraCash engagement and growth in Dave Card spend led to the uplift in ARPU. Non-GAAP variable profit in Q1 increased 47% to $49.9 million, representing a 68% margin relative to our GAAP revenue, up approximately 1,000 basis points from Q1 of last year. I would like to note that we revised our variable margin calculation to reflect non-GAAP variable profit as a percentage of GAAP revenue. In prior disclosures, variable margin reflected non-GAAP variable profit as a percentage of non-GAAP revenue. We made this change to align with the basis upon which our revenue guidance is predicated. With respect to the improvement we experienced on variable margin, the sustained increase into 2024 was driven largely by the continued optimization of our CashAI underwriting engine, which has ingested the credit performance of nearly 100 million unique ExtraCash advances originated since our inception. We believe this provides us with a significant competitive advantage in evaluating credit risk. The resulting improvement in credit loss experience has allowed…

The first quarter was a great start to the year for our company. Our team has done a fantastic job to get us here and look forward to continuing our momentum throughout 2024. Operator, we can now open the call for questions.

[Operator Instructions] Our first question comes from the line of Devin Ryan from JMP Securities.

So first question here on originations. Obviously, as you guys highlighted, they grew modestly despite kind of normal seasonal dynamics. So I'm curious, was there just not seasonality in the industry because of the market backdrop? Or would you kind of characterize that as more of a Dave-specific dynamic, either because of higher average advances or adding members or other efforts to drive engagement? And then also just curious, because you kind of grew through normal seasonality what does that suggest for kind of a normal maybe seasonal rebound into the second quarter?

I'm happy to take the first part of the question. So Devin, I think it's a little bit of both. We've done a lot of great work on optimizing the CashAI and tend to optimize for higher advancements for our customers, which is increased engagement. But I also think that there is a tougher macro backdrop going on with things like credit cards and personal loans still tightening their belt on credit originations, which leads to more volume on ExtraCash. So I think that helped us beat some of the seasonality dynamics.

Yes. Just to jump in and add to that, I think to Jason's point, a lot of the improvements that we continue to make to ExtraCash and CashAI has really augmented customer retention and reengagement opportunities with our existing non-transacting MTMs for us to go out and kind of reacquire into engaged MTMs. And so that just bolstered the overall kind of performance of the book. But I'd say from a macro standpoint or an industry-wide standpoint, we did see relatively consistent performance in terms of total cash refund inflows into customer accounts, which just leads me to believe that it was more, I think, what we were doing on our end to drive reengagement than something that had changed dramatically in the macro.

Got it. Okay. Appreciate the color, guys. And then another one here just on originations. So continuing to see the average size tick up a bit and did again from the prior quarter to $159 transaction. I know this has been a focus of the firm, so good to see that. Where do you see that going over time, assuming a reasonable backdrop continues? And then kind of how should we think about the interplay with that and revenue per advance or credit as well? And then also how important are higher advances to kind of your differentiation story for your customers?

I think part of that has to do, Devin, with just time on book. So the longer customers retain, the engine gets better. So naturally, as retention improves, we can see advance limits continue to scale up over time. So I'd expect that number to keep growing as we do a better job with the CashAI engine as well as keeping the retention -- continuing to improve the retention.

In terms of monetization, Devin, we expect to continue to grow monetization as we increase the origination size, which is just overall kind of accretive to ARPU. So it is a focus of ours to kind of pull people up the limit curve as we -- just to Jason's point, there's a benefit of time on book, but there's also just better risk splitting opportunities that we have within the portfolio to fund the optimal amount to give to each customer and ensuring that we're providing the most value through the product that we can by kind of pulling people up the limit spectrum, and there is monetization benefits to that for the company. So yes, it is a focus of ours. We expect that number to continue to grow throughout the year based on a number of initiatives that we have within that part of the business. So we would expect that to kind of increase as we move forward from here.

Devin, just to highlight, we changed the monetization to percent-based pricing last year. So the scale does work well. As we scale up origination amounts, that should lead to increased monetization, so just to further prove the point.

Yes. Exactly. Okay. If I can just ask another one here on spend. So obviously, another nice quarter of volume growth, I think up 7% from last quarter, up 34% year-over-year. So love to just get a little bit more flavor around expectations to continue to drive customer engagement and spend activity, kind of what specifically you're doing in the strategy. And Jason, I know you also alluded to kind of strategies to drive more direct deposit usage, so I'd just love to kind of hear more broadly about that.

Sure. So right now, we're really not doing too much, I would say. It's mostly just customer messaging about the benefits of banking with Dave, highlighting no overdraft fees, no minimum balance fees. From an incentive perspective, all we're really doing at this point is offering customers a slight discount on their instant transfer fee for the advance if they send it to the Dave Card, which does lead to a pretty meaningful engagement. And as noted, that cross attach is up 10%. So we'll continue to lean in there. But we are excited to start looking at different ways to incentivize customers to set up direct deposit. We know the ARPU is worth 5 to 6x when we can convert somebody. And so we're certainly not leaning in there enough. We'll be testing some various strategies here in Q2 and leaning in further in Q3 to see what the sort of upper bound of opportunity lies within ExtraCash to sort of direct deposit cross attach.

And our next question comes from the line of Gary Prestopino from Barrington Research.

A couple of questions here. First of all, Jason, you talked about -- and I couldn't write it down fast enough, talked about some changes to the subscriber model in terms of, I think, maybe I'm reading into this, but what you were charging per month. I mean could you go into that a little bit more on how those changes played out in the quarter?

There was no actual change to the price. It is still $1. We are looking at various price points to test throughout Q2 and Q3 in the $3 to $5 price point range, but it's nothing that we've solidified. It's not something that's in our financial model today. The subscription billing optimization we talked about is more of a new billing platform, which got the system in a position to be able to test new price points. So that's really what we highlighted in the call. It has nothing to do with new additional monetization.

Gary, I think the -- just to add to that, the important dynamic to call out that we touched on in our notes was just that we had an increase in subscriber-only MTMs in the quarter, which is just, I think, a reflection of the benefits of the new billing system that we rolled out. So that's -- that was the dynamic that we wanted to kind of expand upon in the notes, like I said.

Okay. The quarterly delinquency rate going down fairly dramatically year-over-year and sequentially, is it you're feeling -- I know you've got this great model and all that, but is it your feeling that as you are proliferating more in the market and getting more positive press or whatever, that you are starting to drive a little bit stronger socioeconomic kind of individual to the Dave platform?

I would say as we expand our set of channels for marketing, we are seeing a broader consumer and tend to tick up in age as we look at channels like television. But ultimately, I would look at the delinquency performance improvement really just as a testament to the ExtraCash CashAI engine, which is all AI-driven and is continuously looking at the previous performance of the book and looking at the real-time events we have on the customer, most notably real-time access to their checking account data, which we know their income and sort of employment status.

And just to add to that real quick, Gary. Jason touched on the time-on-book dynamic. As we increase the retention rate of our customer base over time, the average tenure of origination has also gone up, which leads to better performance on the delinquency rates because as you can expect, the longer that someone is with the company as a customer, the better performance that we see on the credit side. So we expect that to also just further support the performance moving forward as retention continues to improve.

I mean, do you have a metric you can share with us of recurring ExtraCash?

We have not called that out explicitly, but the number of existing customer repeat originations in a given month or quarter is in excess of 95%.

Okay. That's a good stat. What else did I want to ask here? Yes. You said the attach rates on the Dave Card with the ExtraCash are about -- grew 10%. I think when we first started talking, you were at about 30% of ExtraCash advances on the Dave Card. Where are you now?

Pretty consistent, Gary. It's right around the 30% of originations gets sent to the Dave Card. And about 50% of new customers are trialing the Dave Card with an ExtraCash origination within their first couple of months as a customer.

Okay. Okay. And then just lastly, I don't want to get ahead of the skis here, but you would often -- we talked about the fact that 20% adjusted EBITDA margin was a target for the company. It looks like you're at 17.6% this quarter and really in the early stages of your life span here. Any changes to that potential target there given what -- how well you are performing?

Gary, I don't recall putting a specific long-term EBITDA target out there for the company, certainly not something that we've established as part of our outlook. I certainly -- I don't want to comment too much on that 20%. I think there's just a ton of operating leverage built into the business model that as we continue to grow that there's a significant margin potential here that is, I would say, well in excess of that 20%. That's not something that we've discussed as a management team and as part of our disclosures.

[Operator Instructions] Our next question comes from the line of Zachary Gunn from FT Partners.

I guess I saw in the deck that you fully rolled out the percentage-based fee structured to all members in 4Q. I know that's a change from the previous per dollar fee structure. We were just curious if you're seeing kind of any headwinds in larger origination sizes or any changes in consumer behavior with that? Just any commentary there would be great.

Thank you for joining the call, Zachary. I appreciate it. I appreciate it. So look, I think that -- nothing really to speak of there. It's been a positive change for us from a monetization standpoint that just brings more consistency to the monetization as we scale up origination sizes. And we've seen customers respond well. And what we like about the model is that it just really incentivizes us and aligns us with our customers to be able to pull them up the limit curve and kind of provides the right incentives for us to continue to do that. So yes, it's been a positive change.

I would just add, the customer is less price-sensitive and more credit-responsive. And so as Kyle mentioned, the percent-based pricing has allowed us to better scale the limit for the members. So it's been a good business member value exchange.

Got it. That makes sense. And then just as a follow-up, you mentioned improved credit performance, and I get that there's some benefit in the quarter from tax refunds and seasonality. But can you maybe just give us some commentary on the credit box? Are you holding that the same? I know there's comments about the macro being challenging. So just anything in terms of what you're seeing with the credit box right now.

I think Q1 performance is really just demonstrative of the continuous improvements that we've made to our underwriting system. Over time, we've originated ExtraCash nearly 100 million times to date. And so that's just a significant amount of performance data for us to continue to refine our models. And so that just allows us to kind of better risk split between the portfolio, find new ways to segment customers to, again, sort of align the right amount or the right offer with the right risk profile of our customer base. So we're continuing to feel very good about the performance there and our outlook for performance for a number of reasons as we continue to just refine the model as I spoke of. There's the benefits of just average time on book going up over time that's supportive of better delinquency performance and just a really important and key focus of ours to continue to drive performance out of the portfolio here. So it's -- we're feeling good overall about the trajectory of it moving into the -- throughout the rest of the year.

[Operator Instructions] And our next question is a follow-up question from Devin Ryan from JMP Securities.

Here. So just one on marketing and heard, obviously, the commentary you'll look to ramp that a little bit, and we can back into some overall expense numbers just based on the revenue and EBITDA guide. But just how should we be thinking about that? Is that going to come through in the way of promotions or kind of targeted ad placement? And then how do you guys think because you guys have been obviously running pretty lean here over the last year and done a great job on getting to very strongly positive adjusted EBITDA and even GAAP profitability recently. But how much can you really lean in on marketing if you want to turn that back on where you can really benefit from that investment? How should we think about the return on investment before you start to hit maybe diminishing returns? And I ask the question, obviously, because we look at your CAC and LTV performance, and it would seem to support more marketing that you can get the benefit off of that. So I'd just love to hear a little bit more about the components of it, where it's going to come from and then how you're thinking about it more broadly?

Sure. Jason, do you want me to take that?

Yes. Go ahead, Kyle.

Sure. So Devin, like as we mentioned in the notes, we expect to ramp marketing spend throughout the remainder of the year as we come out of a seasonally softer period in Q1 with tax refunds. I'd say the overwhelming majority of that spend will come in the form of top-of-funnel marketing spend across our key channels where we have very effective tracking in place to manage the efficiency of that spend. We do expect that to be a growth catalyst for us moving through the rest of the year. Our returns are very solid. We look at things on a kind of a gross-profit-based payback period. Our payback periods are sub-6 months at this point. So it is an opportunity for us to lean into more spend there to drive value creation through that investment. That's how we think about marketing is through the lens of an investment, not an expense necessarily. And we kind of evaluate it based on the return profiles of those investments. So -- and we do expect, like I said, that to ramp things up here moving into Q2 and through the remainder of the year but certainly to do it in a disciplined way to drive returns.

This does conclude the question-and-answer session as well as today's program. Everyone, have a great day. You may now disconnect.