Dave Aktie

Good afternoon, everyone, and thank you for participating in today's conference call to discuss Dave's financial results for the first quarter ended March 31, 2026. Joining us today are Dave's CEO, Mr. Jason Wilk; and the company's CFO and COO, Mr. Kyle Bauman. By now, everyone should have access to the first quarter 2026 earnings press release, which was issued today after the market closed. The release is available in the Investor Relations section of Dave's website at investors.dave.com. This call will also be available for webcast replay on the company's website. Please be advised that today's conference is being recorded. [Operator Instructions].

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. 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-GAAP gross margin, adjusted earnings per share 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 will find reconciliation tables and other important information in the earnings press release and Form 8-K furnished with 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. 2026 is off to a strong start at Dave. Revenue grew 47% year-over-year to $158.4 million and adjusted EBITDA grew 57% to $69.3 million at a 44% margin. On the strength of this trend and what we're seeing thus far in Q2, we are raising full year guidance across all 3 dimensions. There are 3 key takeaways I want every investor to take away from this call. The first is credit performance resulting from Cash AIV 5.5 drove our lowest Q1 loss rate on record. Our 28 days past due metric, which we believe investors should use to assess true credit performance at Dave is down to 1.69%, marking a 1 basis point improvement year-on-year and down 85 basis points from 3 years ago. This result underscores how much control we have over our credit outcomes as a result of years of significant investment in training in our models. T

he second is we once again demonstrated the durability of our growth algorithm to sustain mid-teens member growth and low double-digit ARPU growth. Despite the usual Q1 seasonal tax refund season and expanded refunds compared to years past, we were still able to grow ARPU 24% year-over-year and monthly transacting members by 18%. We now have a total of 2.99 million MPMs, which is still a small fraction of the overall $185 million customer TAM, and we believe we're still early in our journey to drive incremental ARPU. Lastly, we launched our new Pay in 4 credit product. We officially put our newest product in the hands of a small group of members to trial. I want to congratulate the team on their hard work for reaching this milestone.

Turning to our growth pillars, starting with member acquisition. We added 695,000 new members in Q1, up 22% year-over-year at a customer acquisition cost of $18. That CAC is flat year-over-year and improved 11% sequentially, which is better than expected given Q1 is typically our most challenging quarter for marketing efficiency due to tax refund dynamics reducing credit demand. Our gross profit payback period improved to nearly 3 months in Q1, which gives us increasing confidence to continue scaling member acquisition throughout 2026.

Moving to our second pillar, engagement through ExtraCash. Originations reached $2.1 billion, up 37% year-over-year, driven by growth in MTMs and average origination size. MTMs grew 18% as a result of improving conversion and reactivation alongside strong retention rates. Average ExtraCash size increased 10% due largely to the impact from Cash AI V5.5, which was deployed in late Q3 of last year. Sequentially, origination size was modestly lower at 212, reflecting the impact of higher tax refunds late in the quarter. That dynamic has already begun to reverse. Average size rebounded to 214 in April. We expect origination sizes to improve with continued V5.5 model optimizations and the forthcoming V6 model that we expect to begin testing within the next couple of months.

Moving to our third pillar, deepening engagement. Dave debit card spend was $534 million in Q1, up 9%. Growth here continues to be attributed to the natural synergy of ExtraCash and Dave Card as there have been no new initiatives aim at debit volume growth while we focus our efforts on new credit products to drive deeper engagement.

Before turning it over to Kyle, I want to provide a few strategic updates. Starting off with our new Pay in 4 card product, which we're officially calling Dave Flex. Dave Flex is designed as a responsible alternative to traditional credit cards with balances paid back in up to 4 simple installments aligned with your paycheck date. No compound interest, no late fees and no credit check. We believe this product is competitively positioned against the predatory fees of subprime credit cards and the heavy friction associated with BNPL since Dave Flex can be used at any online or offline merchant without the need to reapply with each use.

Dave Flex supports each element of our growth pillars as we expect it to be a driver of customer acquisition, expand our credit capabilities and deepen engagement of existing members. Importantly, Dave Flex uses cash AI to power 100% of the underwriting, giving us a meaningful edge over incumbent credit card products that rely on FICO, which we believe will lead to greater customer access and superior credit performance. As promised, we began testing Dave Flex with existing members last month. Early engagement has been encouraging, and we plan to share more once we have more data on performance. We do not expect Dave Flex to contribute meaningful revenue in 2026, and it is not embedded in our guidance. Our focus this year is to test and learn and optimize member lifetime value before scaling in 2027.

We believe products like ExtraCash and Dave Flex, which levers short duration credit to drive share of wallet is what really differentiates Dave from our scaled neobank competitors. The bulk of our road map is staffed on our responsible short duration credit initiatives, which we believe will further enable us to achieve our medium-term growth algorithm. As such, we have updated our strategic statement to better capture our focus, which is that Dave is a U.S. neobank pioneering innovative credit products for everyday Americans.

Next, regarding our partnership with Coastal Community Bank, which remain on track to begin transitioning ExtraCash receivables to the new off-balance sheet funding structure this summer, which will begin unlocking meaningful liquidity and reduce our cost of capital. Lastly, on the DOJ matter, we have no material update and continue to vigorously defend our position. In closing, 2026 is off to a tremendous start. We are executing well against our stated growth algorithm and credit performance is excelling. I want to thank our team who make all of this possible.

With that, I will turn the call to Kyle.

Thanks, Jason, and good afternoon, everyone. Q1 was a strong start to the year, marked by durable revenue growth, disciplined marketing investment and continued strong credit performance. Together, those factors drove another quarter of outsized adjusted EBITDA and EPS growth and support the guidance raise we are announcing today, our eighth consecutive quarter of increasing guidance on all metrics. Today, I will cover the key drivers underlying the quarter, credit and provision mechanics, an update on capital allocation and our revised outlook. For a more detailed review of our KPIs, please refer to the earnings supplement on our IR website. Revenue was $158.4 million, representing 47% growth year-over-year. Growth was driven by 18% MTM growth and 24% ARPU expansion, both ahead of our medium-term growth algorithm.

Underneath those headline numbers, new member conversion, dormant member reactivation and retention all contributed and repeat originations from members with an average tenure of close to 2 years continue to anchor the book. For those newer to the Dave story, Q1 is seasonally our softest quarter, driven by tax refunds, which temporarily reduced demand for ExtraCash. As a result, the number of ExtraCash disbursements declined 5% sequentially, consistent with the range we have observed in every Q1 since 2021. This was the primary driver of the 3% sequential decline in revenue.

Average ExtraCash size was down modestly from $214 to $212 sequentially, reflecting higher-than-normal tax refunds per member. It's worth noting that Q1 of last year benefited from the step-up in ExtraCash approval limits we implemented as part of our fee model transition. Both average origination size and disbursement volume have rebounded in April, and we expect continued expansion in Q2 and beyond.

In terms of forward-looking color on top line drivers, in addition to the optimism we have about the potential impact of Cash AI V 6.0, we also have a series of initiatives aimed at improving average origination sizes, monetization rates and therefore, ARPU in the near term. The first is removing our $15 fee cap for new members, which enables more members to achieve higher limits now that the risk is appropriately monetized. Second, we addressed a common member pain point, where if you hadn't utilized your entire ExtraCash limit, the additional amount wasn't accessible within that pay period. This new feature, which we are calling second draw, solves that problem and enables members more flexibility, which we believe should help with overall credit utilization and therefore, average origination size. Second draw is now available to all eligible members as of last month.

Now turning to credit and provision. As Jason noted, the underlying credit picture continued to improve meaningfully in the first quarter. Our 28-day past due rate of 1.69% was a Q1 record, improving both sequentially and year-over-year, even with originations up 37%. This was the first quarter we have seen EPD improve year-over-year since transitioning to the new fee model. When we moved to that structure, we deliberately expanded the credit box while Cash AI iterated. 3 quarters of optimization later, loss rates are back below where we started. That momentum has continued into Q2 and should expand upon rolling out CashAIV6.0 over the coming months.

On provision for credit losses, the sequential increase was mechanical and calendar driven. The underlying book performed 10% better than Q4 on a 28 DPD rate basis. The metrics that incorporate credit performance, DPD rate, net monetization rate and revenue per origination net of losses, all improved sequentially and year-over-year, which we believe is a more meaningful signal. Consistent with the expectation we set last quarter, Q1 ended on a Tuesday, typically the intra-week peak in outstanding receivables.

Higher ExtraCash balances at the measurement date mechanically drive a higher loss reserve even when the underlying loss content on those receivables is trending lower. Had Q1 ended on the prior Friday, the provision would have been approximately $5 million lower and non-GAAP gross margin would have been approximately 75% Importantly, because Q1 already absorbed the elevated reserve with that Tuesday watermark, we do not expect Q2 ending on a Tuesday to adversely impact provision in the same way it did in Q1. Furthermore, Q3 and Q4 ending on a Wednesday and Thursday, respectively, should provide a tailwind for loss provision as a percentage of originations and gross margin in those periods.

Non-GAAP gross profit was $114.4 million, up 37% year-over-year. Non-GAAP gross margin was 72%, which is consistent with the low 70s framework we guided to in March, and we expect Q1 to represent the low point for the year. Given the improving DPD trend and more favorable calendar dynamics ahead, we now expect non-GAAP gross margin to expand into the mid-70s for the balance of the year.

In terms of marketing, Q1 was our seasonal low by design. We moderated investment given the typical softness in ExtraCash demand during tax refund season. For the balance of 2026, we plan to expand marketing spend above fourth quarter 2025 levels while maintaining our discipline on investment returns. On fixed costs, compensation expense grew 1% year-over-year and 11% sequentially. We typically see a modest bump in Q1 related to seasonally elevated payroll taxes. Additionally, we began making targeted investments in product development headcount as previously communicated. To size that investment, we expect to move from under 300 employees as of the end of last year to around 325 by the end of this year, representing an annualized incremental expense of approximately $10 million.

We continue to run a highly efficient platform with what we believe is one of the strongest revenue per employee businesses in the industry. As revenue scales throughout the balance of the year, we expect operating leverage to continue to build thereafter. Pulling it all together, adjusted EBITDA was $69.3 million, up 57% year-over-year at a 44% margin. That is approximately 300 basis points of year-over-year margin expansion and consistent with our commitment to deliver ongoing annual EBITDA margin improvement. GAAP net income was $57.9 million, up 101%. Adjusted net income was $52.3 million, up 61% and adjusted diluted EPS was $3.64, up 64%, reflecting the combined benefit of operating performance and the reduction in share count from Q1 repurchases.

Given that our share repurchases in Q1 occurred entirely in March, Q2 will begin to experience a full quarter's benefit of their impact. In terms of capital allocation, Q1 was a meaningful quarter for per share value accretion. We deployed $194.9 million into share repurchases and restricted stock unit net settlements, reducing our basic share count from 13.6 million at year-end 2025 to 12.7 million at the end of Q1, a reduction of approximately 6% sequentially. In early March, we completed $200 million zero coupon convertible notes offering, generating $175.7 million of net proceeds. We simultaneously repurchased $70 million of common stock in a privately negotiated transaction with the convertible note holders and continued buying shares in the open market for the remainder of the quarter. We have approximately $113.3 million in remaining capacity under our share repurchase authorization, which we expect to continue to utilize opportunistically.

Our capital priorities remain the same. First, invest in organic growth where we are generating returns that are multiples of our cost of capital; second, operationalize the coastal funding structure; third, return capital through share repurchases using our excess cash when risk-adjusted returns exceed those alternatives. Our objective is simple. We intend to allocate capital to maximize value for shareholders, and Q1 was a strong proof point of us doing it at scale. We remain on track to transition ExtraCash receivables to the coastal off-balance sheet funding structure this summer. At full implementation, we expect to unlock over $200 million in incremental liquidity, reduce our cost of capital and repay our existing credit facility. As a reminder, the fees paid to Coastal under this arrangement will be recognized as an operating expense that will burden non-GAAP gross profit and gross margin but will be added back for adjusted EBITDA purposes.

Now turning to guidance. Based on Q1 results and the trajectory we see in the business, we are raising 2026 guidance across all 3 metrics. We now expect full year revenue of $710 million to $720 million, representing growth of approximately 28% to 30%. Additionally, we are raising adjusted EBITDA guidance to $305 million to $315 million. Lastly, we are raising adjusted diluted EPS to a range of $16.25 to $16.75, up from $14 to $15. This represents year-over-year growth of approximately 43% to 47% on a tax rate adjusted basis, reflecting both strong operating performance and a meaningful reduction in share count from Q1 repurchases. All figures assume a 23% effective tax rate.

The execution we have demonstrated over the last several years, consistently raising guidance while improving credit and scaling originations has carried into 2026. Cash AI continues to sharpen. Our competitive position continues to strengthen, and we believe we have a clear and executable path to deliver on our medium-term growth algorithm while creating outsized shareholder value. With that, we will conclude our prepared remarks. Operator, please open the line for questions.

[Operator Instructions] And our first question comes from Andrew Jeffrey with William Blair.

I wanted to ask about, Jason, maybe your comments around focusing on engagement, particularly in the context of Dave Card volume, which -- the growth of which deceled a little bit this quarter. It sounds like that's less at least of a near-term focus for you in terms of engagement as you turn your eyes to Flex and Cash AI 6.0. I wonder if you could just kind of unpack that a little bit for us.

Yes, sure. Thanks for the question. So look, when I think about deepening engagement, specifically through card, we believe have a much differentiated offering through the Dave Flex product, just given our advantages in underwriting, but also the fact there's just far less friction associated with winning card spend when we're provisioning credit versus asking someone to switch their direct deposit. We found there's very little differentiation amongst all the scaled neobanks on debit card offerings. And therefore, we're going to maintain the natural synergy between ExtraCash and the debit card to drive natural volume there, but we do think there's a massive opportunity with Dave Flex to make that a scaled product and be a real differentiator amongst our peers.

Okay. Yes, I look forward to that product rolling out. And one follow-up, if I may. Just where do you think over time, engagement goes? You got about a 20% MTM to MAU attached this quarter, somewhere in that neighborhood. Where can that go and over what period of time? And I assume that could be a pretty important ARPU driver along with some of the other initiatives you called out on the call today.

Look, as stated on the call, I think we're doing really well against our stated growth algorithm, which is to grow MTMs mid-double digits and ARPU low double digits, and we're doing very well there, exceeded both those targets within the quarter. And as I mentioned, a lot of room to run given we're 2.99 million MTMs against the total 10 million member TAM. And we just know that from a sort of credit share of wallet, there's a tremendous opportunity for us to continue to do more for this customer and ExtraCash is largely used for nondiscretionary expenses. And while we think there's still a ton of room to run with that product to drive more MTMs and optimize that product for more ARPU, just think the opportunity with things like Dave Flex to drive more of that discretionary spending to win more of the daily engagement and expand into that credit wallet, just a huge opportunity.

Our next question comes from Ryan Tomasello with KBW.

Following up on the Flex Pay in 4 product, maybe if you could just give us an update on how you're thinking about monetization rates relative to ExtraCash as well as the credit component, how that might compare given the higher advance rates, higher advanced limits and longer duration? And then as a follow-up on that, I think the intention you've mentioned is to focus initially on existing customers for the Pay in 4 product. But as you lean into more external growth eventually, do you think that you can maintain that sub-$25 or so CAC level? Or might higher LTVs on that product justify a step-up in CAC for the Flex product?

Sure. Well, answering the last question, I mean, we've said pretty repeatedly, we're not focused on the lowest dollar CAC. We look at the best and most attractive returns. And so we would expect to spend against Flex acquisition where we see positive returns that we like. It's too early to tell on that given we're not actually testing in market for new users at this point, but we do anticipate testing this year to understand how it does with paid advertising and what kind of growth algorithm we can have for that product in 2027.

As far as the economics, we are in market testing a higher monthly fee than ExtraCash. And then we plan to have -- we are in market testing a per spike transaction fee with that product as well. No late fees, no compound interest on the product. You can apply with no credit check using Cash AI. I think one thing we are willing to share right now is that everything so far on the adoption points to incrementality with regard to total originations per customer, meaning we are seeing natural synergy between this product and with ExtraCash. And so there should be some -- definitely ARPU lift is what we're seeing. It's what we expected with the product, given how we've seen people interact with BNPL within our customer cash flow data. But nonetheless, still positive to see the initial signs are there, and our hypothesis is turning out to be true there.

Great. And then one of your large neobank peers has signaled a renewed push into the cash advance space I believe with a modestly lower cost product, they're also expanding into the enterprise earned wage access category. Curious if you've seen any measurable impact there from those competitive dynamics? And if you can just give us your thoughts on whether the enterprise EWA category competes with the direct-to-consumer cash advance product and generally how you view that strategy as a potential tack on today's product pipeline at some point?

Well, look, we still view our ability to underwrite external primary accounts via Plaid to be a differentiator amongst our scaled neobank competitors, which require a direct deposit into their account to access credit. We've said before that we believe the TAM of people willing to connect a bank account to get access to credit is far wider than those willing to switch their bank account. And therefore, we think that it's hard to compare the product on apples-to-apples because even if that product may be slightly cheaper, there's a massive tax on the user in the sense that they have to switch their direct deposit, which has a lot of friction.

When I think about the enterprise opportunity, I mean it's certainly an interesting differentiated way to acquire customers, but it's a very different value prop and that this is customers being able to access their earned wages every single day. We look at Dave as the ability to capture a much larger paycheck before at the beginning of your pay period to go cover things like rent or gas or groceries. And so the use case is different, and we do view those to be pretty complementary products. those enterprise businesses have been around for a decade plus, and we just haven't seen anyone really crack significant scale there, and it certainly has had no bearing or impact on our business.

Our next question comes from Joseph Vafi with Canaccord.

Terrific results once again here in the quarter. Congrats. I thought maybe we'd look at -- maybe look at customer acquisition through a little bit of a different lens here. Obviously, there's sales and marketing spend for customer acquisition. Just wanted to kind of also drill down into your credit algo and how much of a factor that is, is in driving -- as that continues to improve and you're on Cash AI V6, how much that is a driver in customer acquisition because obviously, if someone applies, they may or may not get approved and how that really kind of is part of growth in MTM. And I have a quick follow-up.

Yes. Thanks. As mentioned, the quarter was better than expected from a marketing perspective. I mean CAC was -- came in less than we thought it was going to, which we thought was impressive given the elevated tax refunds that we did see. And that just gives us more confidence given the shrinking payback period that we have a lot of confidence going into the rest of the year to continue to deploy marketing dollars efficiently and at scale. With regard to Cash AI V6, I wouldn't think about it in the terms of this is going to approve more customers that otherwise would be rejected. It's more so the people that we do approve we are able to get incremental credit from there. And we do see that benefit conversion, which helps with CAC from a first-time credit active perspective. And so one of the things we mentioned or that Kyle mentioned on the call was removing that fee cap for new customers. We're already seeing the benefits there of it resulting in more customers getting approved for higher amounts, and that has compounding effects on first-time conversion, retention, et cetera, and just incremental to LTV and marketing spend all around.

Sure. And then just a follow-up...

Let me just jump in and add something real quick there. I mean everything that Jason said is true, but it also applies to the overall book. And so the better that we can get with underwriting and improvements that we expect from Cash AI V6 that all those benefits and higher limits and therefore, a better value prop increases customer retention and reactivation as well and supports overall customer growth. And so it's both new users and existing user benefits that we expect to see as we continue to make improvements on Cash AI.

Sure. That makes sense. And then maybe just on removing that fee cap, how much price sensitivity was there? And maybe kind of drill down a little bit more on your thoughts there on removing that would be helpful.

I'll pass to Kyle on that one.

Yes. I mean, Joe, I think we've seen over the last couple of years as we've made pricing optimizations that as we move on price and therefore, increase spreads, we're able to open up the credit box and that sort of increase in limit and value prop is much more valuable than the customer than the incremental cost associated with it. And so that's the same dynamic that we're seeing play out here with eliminating the fee cap as we can generate the incremental spread there with the removal of that cap and therefore, increase the limits, we're seeing benefits to conversion, as Jason mentioned. So all facts and kind of data points over the last couple of years kind of speak to that dynamic where limit matters more than price, and we're trying to find the sweet spot there at all times to maximize the customer experience while ensuring that we are compensated well enough for the incremental risk that we're taking on.

Our next question comes from Devin Ryan with Citizens Bank.

Jason and Kyle, congrats on the strong quarter here. Just want to touch on capital. Obviously, the offering this quarter bought back a lot of stock with the coastal transition coming, that's $200 million of liquidity. When we think about kind of the uses of liquidity and kind of excess cash, you obviously can pay down the existing facility. Beyond that, should we just think about kind of free cash generation as just being pegged towards buybacks? Or is there anything else we should be thinking about with that because obviously, beyond the $200 million, you're generating another couple of hundred million dollars or more a year as well. So a lot of capacity there.

Thanks, Kevin. I'll pass to Kyle on that one.

Devin, look, I think you keyed in on the point there. I mean the company at this point is substantially free cash flow generative. We're unlocking a significant amount of capital with the migration to the coastal funding arrangement, and that gives us a lot of dry powder from a capital allocation perspective. And as I mentioned in my remarks, we continue to see share repurchases as a very attractive way for us to continue to deploy capital. That's at the sort of top of the list from a capital allocation prioritization perspective. And we have looked at various M&A opportunities over time, and we'll continue to evaluate that landscape if there's anything that's overall additive to our strategy. But I would say, by and large, very much oriented towards share repurchases for use of excess cash.

Got it. And then just another follow-up here on ExtraCash. Obviously, strong demand against what's typically kind of a seasonally softer quarter, and it seemed like this year was actually even a heavier tax refund season than prior year. So I think kind of the results are even more notable against that backdrop. So can you just talk about some of the trends that you saw with your customers? Were there any new factors driving demand? Was it just all kind of cash AI 55 expanding the credit box and kind of doing what it does? Or were there other factors? And then also, what does that imply for kind of the snapback into the second quarter once we move beyond some of these seasonal dynamics? I heard, obviously, what you guys said in the prepared remarks, but any other color there would be helpful as well.

Yes. Thanks, Devin. For your point, we mentioned that there has been a snapback in April with respect to average origination size. As far as Q1, obviously, we have a massive data set with over 7 million customer connected accounts we can peer into to understand what's happening with the economy with respect to our consumer. And we're just seeing everything pretty consistent. Income is holding up. If anything, income is up a little bit year-over-year. Spending is pretty flat year-over-year, no evidence of trade down behavior. to call out, restaurant has been gaining some share of food and drink spend at the expense of groceries, but no signs of increasing credit or leverage. And as we saw, we had record Q1 performance and investors really take that away as a big positive for the business and shows the strength of Cash and having control of our credit box.

Maybe I'll jump in with just one more sort of anecdote there, Devin. I mean if you look back to the sort of sequential trend, whether that's on ARPU or the amount of ExtraCash originations per MTM, the Q1 '26 versus our Q4 '25 trend was very similar to what we saw in years past. Last year was a little different given that we had introduced the new fee model and the higher thresholds in Q1, so that obfuscated some of that impact, but this Q1 largely mirrored the last several years before last year. And so it was pretty much business as usual for us and very much in line with expectations from tax refunds.

Our next question comes from Jeff Cantwell with Seaport Research.

Can you tell us what provision expense would have been in the quarter if not for the timing impact? How much was that impact this quarter? Can you maybe size that? And then assuming the macro remains fairly steady, should we expect to see that normalize from here? Or is there anything else to flag as you look out to the remainder of this year?

Thanks, Jeff. I'll let Kyle take this one.

Jeff, thanks for the question. So as I mentioned in the remarks, the provision dynamic from, say, the quarter closing on a Wednesday versus the prior Friday was about a $5 million swing to gross profit. So that's, I think, a pretty strong indicator of what it would have looked like as the provision as a percent of originations and it would have brought the gross margins back into the mid-70s. Look, I think we tried to do our best to signal this impact coming in Q1. We know about the sort of calendar dynamic swings, obviously, well ahead of time and gross margin performance was still well within our expectations of the low 70s -- we do expect Q1 to represent the low watermark for the year and expect gross margins to be in the mid-70s for the rest of the year. And then in terms of overall credit performance, we would expect that to -- on a DPD rate basis to be at least as good as where we were last year, if not better. So I think all signs point to improving gross margins and all else equal, timing dynamics aside, provision as a percentage of originations coming down.

Got it. Got it. And then looking at CAC this quarter, it was $18. That's down a couple of dollars versus the previous quarter and flat versus last year. I guess my question is that when you think about the pay in the card, -- just given the competitive dynamics of that space, the BNPL space, is there any reason to suspect that you're contemplating changes in CAC in order to drive new customer growth from that channel? Or how should we be thinking about CAC in the context of the new product launch?

Thanks. As I mentioned, to put the other questions here, we're going to invest in growth in Flex Card where we see positive economics and returns. So if that comes at a higher CAC than $18, it doesn't really matter to us because we're solving for returns, not for lowest dollar CAC. And so we're very interested to see what the returns look like. From a competitive landscape, while BNPL is quite competitive as a merchant checkout, a direct-to-consumer offering where you can actually buy now, pay later or whatever you want without the need to reapply is not that competitive. And so we are excited to start to penetrate that TAM and be one of the first to have scaled advertising against that message. A lot of the pay in for card type competitor products are largely cross-sold products and people that were already acquired through BNPL channels. And given our advantages within Cash AI to underwrite new customers based on cash flow data as well as our advantages in having a strong brand with very scaled marketing channels and messages, we feel confident that there's a lot of opportunity there. And I think I mentioned this on previous calls, but we really think that target here to disruptive subprime credit cards, which is monetizing customers on being late with late fees, compound interest and those products is the exact opposite with responsible credit offering, payments tied back to your future paycheck dates with no late fees. And so excited to get this out there and think there's a lot of opportunity to make this a marketing machine.

Our next question comes from Hal Goetsch with B. Riley Securities.

Can you just give us maybe a hint on where you think share count will be for maybe the next couple of quarters with all the buyback activity and the timing of it?

I'll let Kyle get on this one.

Thanks, Hal. We're not providing any specific guidance on the buybacks at this point. Of note, I would say our revised guidance on adjusted EPS does not contemplate buybacks for the duration of the year. But as I alluded to earlier, I would expect us to continue to be forward leaning on the buyback with the excess cash that we're generating. So yes, no specific numbers there for you, but I would expect some impact from future repurchases if things continue to sort of play out the way that we expect them to.

And perhaps maybe you could remind us maybe how much you -- given your cash flow underwriting, what percentage of your customers are using BNPL maybe the other prominent 6 to 7 logos that are out there in the United States. Do you have kind of a rough number of what percentage of your active customers are using BNPL?

We see around 50% of people will engage with it at some point during a quarter. And so we know the demand is there and early signs that we -- as I mentioned earlier in the questions here that we are seeing this as an incremental credit opportunity with respect to origination sizes given that's how we already see people use DNPL today. And so we like the ability to see the opportunity to displace that DNPL activity. But importantly, our customers are either not approved for subprime credit cards or they are having a terrible experience because they're massively overpaying in fees. credit card interest rates in the U.S. are being collected over $100 billion a year, credit card late fees over $20 billion. And just like Dave was invented to disrupt traditional overdraft fees, we see the opportunity here to really change the industry. And so just a lot of excitement. We don't really think about it being directly competitive with the existing BNPL given the merchant checkout, heavy friction, et cetera, if that makes sense.

That's terrific. And would you say the key takeaway on Flex is that you're probably the only BNPL company that has payments triggered on pay days because the other BNPLs, they don't know when they get paid. Is that right?

That's correct.

Yes. Terrific.

And Hal, same goes for subprime credit card companies, too. They're just leveraging antiquated FICO models for underwriting. They're all collecting on the exact same day, and we can be highly customized here knowing what your paycheck date is given the income visibility and prediction algorithms with C AI gives us a huge advantage when you are underwriting a customer like we are, the everyday American consumer collecting on their right paycheck data is a huge advantage for settlement efficiency.

Our next question comes from Jacob Stephan with Lake Street Capital Markets.

I want to ask a little bit on dormant reactivation. You guys kind of talked about that being one of the drivers of the MTM growth this quarter. But can you help us kind of piece out what's driving the reactivation, C AI or reengagement marketing? And as kind of a follow-up to that, is there a way to frame maybe how large the reactivation cohort was as a percentage of Q1 MTM adds?

I'll pass to Kyle on that one.

Jacob, so in terms of the size of that opportunity, it's about 11.5 million dormant customers that we have to sort of continue the opportunity to drive reengagement and reactivation with. And the interesting data point there is we grew total members by about 17% and are growing MTMs faster than that. So I think that just kind of speaks to the activation of the base that we've been able to kind of chip away at over time through these reactivation initiatives. It's life cycle marketing, it's improvements to cash AI and the value prop of our limits relative to other alternatives out there to increase consideration when people are coming back into the category. That's really big for us. It's promotions. I mean it's a whole sort of slew of different initiatives that the team has been driving to increase that reactivation number, and it continues to be a really important part of the MTM mix. We don't quantify that portion of the overall MTMs in a given period. But again, it's a very valuable customer pool that we have to fish in on a regular basis and an important part of the MTM growth story that we're super focused on. Okay.

And maybe as a second follow-up, as it relates to the removal of the $15 fee cap, can you just remind us the MTMs, those are essentially grandfathered into the old fee cap, the $15 fee cap and any reactivated members essentially, would they be subject to removal of the cap? Or how does that work?

The fee cap would only -- or the removal of the fee cap would only apply to new customers who are onboarding on to Dave for the first time. So that's where the focus of this fee change is. Again, we don't quantify how big that portion is of the MTM base, but we would expect it to be supportive of incremental ARPU throughout the year as more and more of Dave's new customers become a bigger portion of the overall MTM base over time.

Okay. So just to clarify, anything over and above the 14.5 million total members essentially would be on the new fee cap or the no fee cap model?

Correct.

Thank you.

Thank you.

This concludes the conference. Thank you for your participation. You may now disconnect.

Good afternoon, everyone, and thank you for participating in today's conference call to discuss Dave's financial results for the fourth quarter and full year ended December 31, 2025. 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 fourth quarter and full year 2025 earnings press release, which was issued today after the market closed.

The release is available in the Investor Relations section of TA's website at investors.dav.com. In addition, this call will be available for webcast replay on the company's website. Following management remarks, we'll open the call for 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, including adjusted EBITDA and adjusted EBITDA margin, adjusted net income, non-GAAP gross profit, non-GAAP gross margin, adjusted earnings per share and compensation expense, excluding stock-based compensation as supplement 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 and Form 8-K furnished to the SEC. I would now like to turn the call over today's CEO, Mr. Jason Wilk. Please, you may begin.

Good afternoon, and thank you for joining us. 2025 was the strongest year in Dave's history. Revenue grew 60% to $554 million, and adjusted EBITDA reached $227 million at a roughly 41% margin. To put the year in perspective, we entered 2025 with guidance of $415 million to $435 million in revenue and $110 million to $120 million in adjusted EBITDA.

We raised guidance every quarter and ultimately exceeded the midpoint of that original revenue guidance by 30% and nearly double the original EBITDA guidance. In dollar terms, we outperformed on revenue by $129 million and EBITDA by $112 million. meaning we had an 86% flow-through rate on our top line outperformance for the year.

Full year adjusted EBITDA grew 162% nearly 3x the revenue growth rate driven by gross margin expansion and the operating leverage embedded in our business model. I want to thank our incredibly talented and hard-working team for making that possible. The 2 key takeaways in this call are: one, we once again demonstrated the durability of what we will now refer to as our growth algorithm, were to sustain mid-teens member growth and low double-digit ARPU growth.

ARPU spend at 36% year-over-year and multi-transaction members accelerated 19%, which positions us well heading into 2026. Our 2.9 million MTMs are still a small fraction of the overall $185 million customer TAM and we believe we're still early in our journey to drive incremental ARPU through underwriting enhancements, new ExtraCash features and price optimization and new credit products.

The second takeaway is that credit performance resulting from cash AI 5.5 produced further improvement sequentially. Credit performance remains an input, not an output to maximize gross profit dollars, which we again displayed in the fourth quarter. gross profit and net monetization rate were both records in Q4, further demonstrating the improving unit economics underlying our growth.

Now let me touch on the key drivers of our growth strategy. Starting with efficient member acquisition, our first strategic pillar. In Q4, we acquired 867,000 new members, up 13% year-over-year at a $20 tax. Our strategy is to deploy marketing spend to maximize gross profit rather than minimize CAC. This approach, combined with our improved unit economics drove a $48 increase year-over-year in annualized gross profit per MTM significantly outpacing changes in CAC.

Our gross profit payback period improved by nearly 1 month year-over-year to under 4 months, which gives us confidence to continue scaling MTMs throughout 2026. Our second strategic pillar, engage members with ExtraCash continued to drive substantial growth. Originations reached a record $2.2 billion, up 50% year-over-year, driven by 19% MTM growth and a 20% increase in average ExtraCash size of $214.

CashAI v5.5, which was trained on our new fee structure and leverages nearly twice as many AI-driven features as our prior model. has now delivered a full quarter of performance. Our Q4 28-day past due rate improved 12% sequentially to 1.89%, outperforming our guidance of below 2.1% for the quarter.

Leveraging direct visibility from connected bank accounts, CashAI maintains disciplined risk controls while delivering what we believe are the largest average disbursement in the single-pay credit market. This differentiated underwriting capability strengthens our value proposition to support additional customer growth, allowing us to compound more training data for our AI models, creating a powerful flywheel that strengthens our mode.

Our third strategic pillar is deepening engagement through Dave Card. Total card spend grew 17% year-over-year to $534 million. High-margin subscription revenue grew 9% year-over-year benefiting from the full impact of our $3 monthly subscription fee from new members. As a proportion of our MTM base acquired under the new subscription pricing increases, we expect subscription revenue to become a more meaningful contribution to total revenue.

Before turning it over to Kyle, I want to provide a few strategic updates. On Coastal Community Bank, we remain on track to begin transitioning ExtraCash receivables to the new off-balance sheet funding structure next quarter, which will begin unlocking meaningful liquidity and reduce our cost of capital.

Kyle will provide additional details shortly. Turning to our Pay in 4 product, we are well into internal testing and expect to begin customer testing as early as next month. We believe this direct-to-consumer offering, which will not accrue compound interest or charge late fees will be far superior and differentiated from traditional credit cards offered to our target market, which are optimized for customers who carry large balances at high and incur excessively fees.

Leveraging CashAI, we believe we can meaningfully differentiate our offering through superior underwriting and product experience while enhancing every aspect of our strategic pillars. We don't expect meaningful Pay in 4 revenue in 2026 and as we remain focused on optimizing unit economics before scaling in 2027.

Next, regarding the DOJ matter, the case is currently in the discovery phase, and we have no material updates. We continue to bite that we believe we were in compliance with applicable law at all times. Lastly, I want to quickly touch on our soft or potential AI disruption in the software industry.

From a defensibility perspective, we believe Dave has a sizable moat. We've invested significant time and capital in building the necessary regulatory and operational infrastructure and relationships across bank partnerships, payments infrastructure, compliance, capital markets, and a large network of customized vendor integrations to operate at scale. Additionally, and most importantly, we have established a massive proprietary data set on product performance and servicing interactions to refine our models, which is impossible to replicate without significant user scale and capital investment to absorb losses.

Second, in a scenario in which AI creates dislocation in the economy, leading to lower income or higher unemployment and government assisted income while origination per user could potentially decrease slightly, we believe this will be more than offset by the large increase in Americans looking for and for whom we can underwrite for short-term liquidity.

Overall, we believe our business will continue to benefit from AI innovation, AI technology allows us to make CashAI more powerful, build and market more valuable products for our members with an efficient team and supports speed and scalability across all aspects of our operations, all of which are expected to lead to more growth opportunities and operating others for our business.

Looking ahead to 2026, we believe our gross algorithm remains durable. Our momentum combine disciplined investment and the continued evolution of CashAI to improve ExtraCash credit performance and enable new credit products help position us to deliver the growth and profitability embedded in our full year outlook. With that, I'll turn the call over to Kyle for additional detail.

Thanks, Jason, and good afternoon, everyone. Today, I'm going to walk through the core drivers of our fourth quarter and full year performance, a concise overview of credit our balance sheet and capital allocation updates and our 2026 outlook. Let's start with the key trends that shaped our results. Our growth algorithm remains incredibly strong. .

We accelerated MTM growth for the third consecutive quarter, driven by efficient member acquisition, higher conversion and reactivation rates from successful product and marketing initiatives and continued strong retention.

On the ARPU side, underwriting enhancements, including the impact of CashAI v5.5, combined with our updated pricing model and a growing mix of members on our new subscription tier were key drivers of growth. In the fourth quarter, we delivered revenue of $163.7 million, up 62% year-over-year and 9% sequentially. For the full year, revenue reached $554.2 million up 60%, driven by each component of our growth algorithm performing above expectations.

As Jason alluded to earlier, our credit performance demonstrated the strong fundamentals underlying our profitable growth. In the fourth quarter, our 28-day delinquency rate improved 14 basis points sequentially to 2.19%.

Our 28 days past due or DPD metric, which we introduced last quarter, improved 26 basis points or 12% sequentially to 1.89%, well below the initial guidance we provided last quarter and the preliminary results that we shared last month. The DPD metric more closely aligns with industry standards and removes noise associated with assets with different duration profiles.

Note that we will stop reporting on the 28-gig delinquency rate in 2026 as we fully transitioned to 28 DPD as our core delinquency rate metric. Seasonally, the first quarter typically reflects our lowest delinquency and loss rates due to the additional liquidity members received from tax refunds and performance to date in Q1 is tracking consistent with that pattern.

Given these improvements in credit, alongside the expansion we're seeing on ARPU, our net monetization rate, defined as ExtraCash revenue net of 121-day losses as a percentage of originations expanded 29 basis points year-over-year to an all-time high of 4.8% and average revenue perExtraCash origination net of losses grew 27% year-over-year. Gross profit reached $121.9 million in Q4, up 68% year-over-year.

Gross margin was 74%, up approximately 300 basis points year-over-year and 500 basis points sequentially. The sequential improvement was primarily driven by a lower provision as a percentage of revenue, reflecting continued improvements in credit performance from CashAI v5.5 in and a favorable quarter end calendar dynamic as Q4 ended on a Wednesday rather than a Tuesday in Q3.

For the full year, gross profit was $401.5 million, up 68% and with a gross margin of 72%, up approximately 400 basis points year-over-year. Looking ahead, we expect gross margins in the low 70s range in 2026.

And up from our previously guided range of upper 60s to low 70s, supported by improving credit performance and growing subscription revenue mix. It's important to note that Q1 ends on a Tuesday, which typically marks the intra-week peak in outstanding receivables and as a result, drives higher provision for credit losses despite favorable underlying credit trends. All else equal, the Tuesday close creates adverse impacts to the provision, both sequentially and year-over-year.

To touch on a few other P&L items, Advertising and activation costs were $19.7 million in Q4, up 34% year-over-year as we lean into user acquisition given the significant returns and sub-4-month payback periods we continue to generate on our marketing dollars. As we look to 2026, the first quarter is typically our softest from a marketing efficiency standpoint due to tax refund dynamics.

As a result, we are moderating marketing investment in Q1 to offset seasonal softness in ExtraCash demand. While average tax refund amounts appear modestly higher year-over-year, likely reflecting recent tax reform, we are not seeing demand impact out of normal seasonal patterns.

For the remainder of the year, we plan to moderately expand marketing investment above fourth quarter 2025 levels. Turning to fixed costs. Compensation expenses in Q4 declined 7% year-over-year and were roughly flat sequentially. Excluding stock-based compensation, fixed expenses as a percentage of revenue improved to approximately 19%, down roughly 800 basis points year-over-year, highlighting the operating leverage inherent in our platform. Taking all this together, fourth quarter GAAP net income was $66 million compared to $16.8 million in the prior year period.

Adjusted EBITDA reached a record $72.3 million up 118% year-over-year, representing a 45% margin, an expansion of approximately 1,100 basis points. For the full year, adjusted EBITDA was $226.7 million, had a 41% margin with a flow-through rate of 86% from gross profit. Regarding our Coastal Community Bank funding arrangement, we remain on track to begin transitioning ExtraCash receivables under the op balance sheet structure next quarter.

Upon full implementation, we expect to unlock over $200 million in incremental liquidity, reduce our cost of capital and enable us to repay our existing credit facility by midyear.

We anticipate the fees paid to coastal under this new arrangement will be recognized as an operating expense. As a result, the associated expense will reduce non-GAAP gross profit and gross margin will be added back for adjusted EBITDA purposes. When you combine our year-end cash position with the incremental liquidity expected from the coastal transition and our continued free cash flow generation, our forecasted cash balance at the end of the year represents a meaningful double-digit percentage of our current enterprise value, providing significant flexibility to execute on our capital allocation priorities.

To that end, our Board has approved an increase in our share repurchase authorization from $125 million to $300 million. We believe this expanded program reflects our confidence in the intrinsic value of our shares and our firm commitment to returning capital to shareholders while continuing to invest in profitable growth. Given the current market backdrop, we expect to begin executing aggressively against this authorization in the near term.

Now let's turn to our outlook. First, as Jason alluded to, we've established a medium-term baseline growth algorithm where we expect MTM and ARPU growth rates to be in the mid-teens and low double digits, respectively. Given the size of our TAM and additional product expansion opportunities ahead, we believe this algorithm is a sustainable baseline for the next several years while also giving ourselves the ability to outperform. For 2026, we expect revenue to be in the range of $690 million to $710 million, representing year-over-year growth of approximately 25% to 28%.

We expect adjusted EBITDA to be in the range of $290 million to $305 million. In addition, for the first time, we are introducing adjusted earnings per share guidance reflecting our focus on driving per share denominated value creation as a result of a focus on opportunistic share repurchases at scale.

For 2026, we expect adjusted EPS to be in the range of $14 to $15. This guidance assumes estimated annual effective tax rate of approximately 23% for 2026. Our outlook is built on a continuation of what we proved in 2025. Mid-teens MTM growth, continued ARPU expansion driven by origination size pricing, subscription mix and a disciplined investment posture.

We plan to make modest and incremental investments in new product development and go-to-market capabilities that we believe will drive future growth while continuing to expand annual adjusted EBITDA margins. In closing, the execution we demonstrated throughout 2025, raising guidance every quarter, accelerating MTM growth significantly expanding margins and improving credit performance while scaling originations, provided a strong foundation for 2026.

We believe our competitive moat continues to strengthen through CashAI and we have significant opportunities to drive shareholder value with our strong balance sheet and compelling product road map for many years to come.

And with that, we'll conclude our prepared remarks. Operator, let's open the line for questions.

[Operator Instructions] Our first question comes from the line of Andrew Jeffrey with William Blair.

It's great to see the flywheel, Jason, as you described it, spooling up. I wonder if you could give us a sense sort of how close you think you are to kind of optimizing credit outcomes and gross profit growth, mainly driven by average ExtraCash loan size? And whether as you approach what you think the limit is under 5.5, whether you start to roll out 6.0 and I guess how seamless that transition will be? I don't want to get too far ahead of ourselves here, but I'm just trying to think ahead about how the growth algorithm perpetuates over time.

Yes. Thanks a lot, Andrew. It was a fantastic quarter. Look, I think we plan for this year with our growth algorithm to continue chipping away at average origination size growth. We think there's a lot of room left to run in v5.5, but we will start to be testing v6.0 later this year.

And as we rolled out v5.5, you could see that we can test those new models pretty rapidly. We started testing the first versions of v5.5 early in the summer, and we had our first full month rolled out in September.

And I think that's just a real testament to how fast the duration is or ExtraCash portfolio, our book turns over every 8 to 10 days. And we combine that with our CashAI algorithm that is able to look at cash flow data, it just sort of an unparalleled position to sit within short duration consumer credit compared to our peers that are doing longer duration on lending or open line credit card.

Okay. I look forward to seeing the progress there. And if I might, one follow-up. To the extent that Dave Card is important for ecosystem monetization, any thoughts on sort of how to perhaps incentivize behavior such as disbursement of ExtraCash balances into Dave Card accounts. Would that be something that's worth investing some CAC on?

Or do you think that's sort of a natural maturation process that just takes place with time?

We've seen historically about 30% of all ExtraCash dollars flow on to the Dave debit card. We see that as a meaningful way for us to drive our third pillar of our strategy, which is to deepen engagement with our members. We do plan on new credit products helping to also deepen that relationship. The debit card is strategic to our longer-term road map but I'd say our more near-term road map is focused on new short-term credit opportunities like the Pay in 4 product, which we're very excited about testing with existing employees right now in-house and expect to start testing with customers sometime in April. So excited to continue to see more products being shipped with CashAI.

And I think that's where we really have a lot of differentiation not a ton of differentiated within debit other than giving customers discounts to adopt the product. And I do suspect that over the many years, we do more for our members within credit, the chance we have to win more of their direct deposit will grow over time.

Our next question is from Ryan Tomasello with KBW.

SP-3 Given the visibility you have into your members spending from the cash flow underwriting, are you able to size how much of your members monthly spend that Dave is currently capturing. And then with the new pain 4 product, how do you view that contributing to unlocking more of that wallet share and ultimately, capturing more of every spend and moving more up wallet with your members?

Ryan. Ultimately, the Dave Card is capturing about 30% of our customers ExtraCash spend. And so if you look at the overall direct deposit adoption of the company, we don't have significant penetration there. So it's hard to say what overall spend penetration we have of our customers' wallet share.

But as far as the Pay in 4 product, we look to that as another way to drive incremental engagement. We expect the limits of that product to be pretty significantly larger than ExtraCash, roughly 50% to 2x the limit.

And so with that, tend to grow more within the credit, TAM, which we see with our customers using things like other EWA products, other BNPL products or traditional overdraft, which is still our primary competition here.

I think you largely covered it. But I think from an income perspective, we see customers have roughly 3,000 to 4,000 of income coming into their connected accounts with us. And if you look at the average ExtraCash amount today as a proportion of that total income, it's relatively small. And see the overall spending potential to increase, if you want to think about just total sort of credit origination and for how much wallet share is that capturing as a percentage of income.

Yes, we're in a very low -- very low penetration of that overall equation there and view the Flex card to be a meaningful opportunity to capture more of that wallet share, as Jason mentioned.

Got it. Yes, that 3,000 to 4,000, I think, is very helpful to contextualize the opportunity. And then just as a follow-up, within the guidance, can you give any color on the range of 28-day DPD rates that you're baking into the guide for the year for that 25% to 20% growth?

Yes. I mean, roughly speaking, where we were at in Q4, we had about 1.89% DPD rate in Q4. So if you extrapolate that out to our 121-day loss metric, it implies about 1.3%. I'd say that's largely where we expect things to fall and that roughly tracks to the low 70s gross margin guidance that we provided.

And really, our approach with the loss rates isn't to think about managing them lower from here is how can we just continue to increase monthly transacting members with loss rates kind of sustaining in that level?

[Operator Instructions] Our next question is Devin Ryan with Citizens Bank.

It's Neo Eloff on for Devin. Some quick questions. I guess on the paid forward, it's great to hear that you see, I guess, kind of on the last question, how the revenue will compare over time relative to ExtraCash. Do you guys have any concern that the product itself will cannibalize a portion of ExtraCash as it begins to roll out?

We're anticipating some cannibalization, but ultimately view those products to be pretty complementary. We do see pretty significant penetration of our customers using online BNPL today, which will be quite differentiated from. And with that, they're still using ExtraCash because the use cases are quite different.

ExtraCash primarily used for bills, gas, groceries. And today, we don't view ourselves winning any of the discretionary spending that we do see our competition within the BNPL winning. So expect some cannibalization. But again, most of you view those to be pretty complementary.

We also would expect -- even though the monetization of the Pay in 4 product will be slightly less than ExtraCash because of the heavy demand from our customers and feedback around giving more duration, we do expect longer retention or higher retention of that product. And so I would view actually LTV to be higher of Pay in 4. And so we actually wouldn't even mind if the -- if there was cannibalization given the higher profile of the business. But importantly, I think with Pay in 4, we do expect this to be a meaningful new UA go-to-market for us. And so it could unlock more incremental marketing scale is that even if you look at it from that perspective, cannibalization is not as relevant.

All right. Great. And then I guess my next question, maybe a smaller one is on the subscription charges for Dave Card. So obviously, new members are now paying $3 are the grandfathered accounts going to be changing over any time soon? Or will they remain at $1.

The current plan is for us to keep those folks at $1 per month, though we do see there being optionality around that in the future, but we'd like to compare that if and when we ever made a change with additional product value that we'd be delivering to those customers. So I would say no for now, but we'd reserve that right in the future to make a change there.

[Operator Instructions] Our next question comes from the line of Joseph Vafi with Canaccord Genuity.

Great results here once again. Maybe we just kind of double-click on the balance sheet impact we're seeing, obviously, moving off balance sheet for ExtraCash, but Pay in 4. What does that mean for the balance sheet moving forward if that product is successful.

And then maybe just as a follow-up, as you roll out your guide here for 2026, guidance is -- I think it's an important part of the day story and investment case. So any changes or updates to the general philosophy around guidance relative to the market opportunity? You've seen obviously, you've outperformed materially against your guidance and -- so maybe if you could kind of refresh us on your guidance philosophy and any learnings or updates to that philosophy versus a year ago?

Joe, it's Kyle. Thanks for joining and appreciate the question. Maybe just to start off on the balance sheet impact for Coastal with respect to the ExtraCash product to recap for everyone. We have plan to move all of our receivables or the majority of our receivables to coastal and an off-balance sheet structure where we maintain full economic exposure of the assets we're just effectively paying them for utilizing their balance sheet.

And so that should free up about $200 million at current levels of cash as those receivables migrate. So it's a really capital efficient structure for us. We will plan to mimic that structure for the BNPL product as well. So it will require us to invest a little bit in the receivables there, but the overwhelming majority of those receivables will also sit at coastal.

So again, a very capital-efficient approach to growing that product. And then with respect to the guidance, as we've talked about in the past, our goal is to put out numbers that we have very high confidence in delivering upon.

We think that's a really important part of our approach and building relationships and trust with the Street and we'd largely continue with that same approach for 2026. I will say kind of rewinding back to this time last year, we had just rolled out our new fee model, and that we were optimistic around that.

We wanted to give ourselves a little bit of flexibility with the guidance and be a little bit maybe more conservative than we would have been otherwise, just given the kind of the early innings of the performance data that we've seen to date.

So that, I think, allowed us to outperform a bit more than what we had expected because the results of that were, I'd say, beyond expectation. But yes, just to recap, conservative approach to the guide want to give ourselves the ability to outperform.

And I think we've beat and raised every quarter for the last 3-plus years now, and we'd like to be in a position to continue to do that moving forward as well.

Just put numbers behind that. We still believe in this growth algorithm we just talked about on the call, which is to sustain mid-teens user growth and mid-double-digit ARPU growth. As you think about last year, our ARPU is 36% as a result of the new fee model. So just significant outperformance as a result of that. And so we expect growth to return more to normal to this year.

[Operator Instructions] Our next question comes the line of Jacob Stephan with Lake Street Capital Markets.

Appreciate questions. Nice quarter, nice guide. I just wanted to touch on the MTMs. Obviously, you saw an acceleration in growth here in Q4. Maybe along with the subscription price increase here, maybe you could just talk about kind of do you see customers leaving with the subscription at $3 a month and then coming back more often?

Or is there any kind of comparison to the $1 per month subscription? Any color there is helpful?

I think it's worth noting that we've been -- we're in testing with the higher price point subscription, testing everything from 0, $1, $3 and $5 price points for about 6 months. And we wanted to make sure that we were measuring both conversion and retention impact. We landed on the $3 because we saw no impact to retention or conversion. And so it gave us a lot of conviction to roll it out for new customers.

And so I think that helps answer your question there. Importantly, we didn't want to raise the price in existing members because we already increased revenue per user pretty significantly through the new fee model last year.

And so I didn't feel the need given the improvements in ARPU that need to increase the subscription price as well. But I would expect that we'd have success there should we want to, given the performance of the new customers on that model.

That makes sense. And maybe could you kind of help us think were -- was the acceleration in growth? I mean, was that better marketing strategy? Or do you think it was kind of economic driven? Any color there.

I would say that was more driven by things that we have done from either an underwriting perspective or product improvements or marketing improvements as opposed to anything that we've seen in the macro. I mean, if you just look at the sort of the activity rate of MTM as a percentage of total account holders.

We're growing that number faster than what we are, the total account base. And so I think that just speaks to the improvements that we're making in from a product perspective and conversion and retention to drive overall MTM growth.

So we're excited to continue to invest in just making ExtraCash, the #1 product in the market. And as Jason mentioned, we think that the pain floor product as well will give us another opportunity to acquire customers at the top of the funnel efficiently and drive additional retention as we're fulfilling more of their credit needs over time.

Got it. Maybe just one last one. Impact kind of tax refund season is upon us here. I know you said Q1 ends on a Tuesday. Your guys is least favorite day, but -- maybe help us think through kind of any impact that you're seeing from kind of the tax refund cycle currently.

Jason, do you want to take that one? .

Yes. I think we're ultimately seeing pretty much a normal tax refund season. We are seeing refunds up about 10%. ASo nothing near what people were worried about seeing that we would potentially see significant refund increases over last year and ultimately through the quarter, seeing no significant business impacts and that's just business as usual here.

And this concludes our Q&A session. I will pass it back to Jason Wilk for closing remarks.

Thanks, everyone. We appreciate it.

This concludes our conference. Thank you all for participating, and you may now disconnect.

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 Beilman. 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 and Form 8-K 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 ExtraCash 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 customers stay on our 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 gross 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, CashAI v5.5 has started to deliver. We expect continued improvements in credit performance as a result of the rollout of CashAI v5.5 in late Q3. CashAI 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. v5.5 has driven stronger conversion, higher approval amounts and improved credit outcomes in September and thus far in Q4, positioning us for further expansion in ExtraCash 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 remained 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 period by nearly a month year-over-year, now under 4 months.

Moving to our second strategic pillar of further strengthening engagement with our members through credit. ExtraCash 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 ExtraCash 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 Dave Card. In Q3, total card spend grew 25% year-over-year to $510 million, reflecting growth in MTMs and increases in card spend per active banking customer. 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 2 operational updates. First, on Coastal Community Bank, which is assuming bank sponsorship for Dave's ExtraCash and banking products from our existing provider. In early Q3, we began onboarding new members on to 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 me to our second update. We're thrilled to welcome Parker Barrile 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 was 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 ExtraCash offers, consistent growth of Dave 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. The 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 gross spreads and broader approval sizes for members. This change increases credit losses relative to our prior approach. However, the incremental gross 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 ExtraCash transaction net of losses are up 45 basis points and 32%, respectively.

In terms of delinquency rate, our Q3 28-day delinquency rate improved 7 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, CashAI v5.5. As a reminder, the 28-day delinquency rate measures the percentage of the calendar months 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 v5.5 model change where we intentionally increased limits for members on monthly income cycles, such as social security recipients.

To provide a clear 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 CashAI 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 intra-week receivables, definitionally increasing the reserve calculation and thereby increasing the provision.

Had 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 CAC 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 nonrecurring legal settlement charges. Also, a $4.5 million legal settlement charge this quarter has been excluded from adjusted EBITDA.

Taking all this together, GAAP net 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 excludes nonrecurring items, stock-based compensation and noncash 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% flow-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 ExtraCash 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.

[Operator Instructions]

Our first question will come from Jacob Stephan from Lake Street Capital Markets.

Great quarter here. Maybe you could kind of start off talking a little bit about delinquency rates. Obviously, we saw 28-day delinquencies drop. What is it specifically kind of about CashAI 5.5 either qualitative or quantitatively that you guys are able to kind of outperform in this category?

So with CashAI, as we've talked about extensively, the amount of inputs we have in that model that stem from our customers' cash flow data is just a massive data set we have. And when you factor in CashAI v5.5, which has 200 more variables input in there, and we marry that with the super short duration cycles that we're able to learn from, that leads to just superior credit performance and gives us a lot of confidence that credit is an input to our model, not an output, and the company is very in control over loss rates.

Got it. And maybe you could just kind of touch on some of the broader consumer trends. Obviously, you guys have a pretty significant lead on several other loan providers. But maybe you could just kind of talk to the shortness of -- the duration and the short duration of your book and what trends are you seeing in consumers currently?

Well, we do track a proprietary index we built using the cash flow data we have access to. And for all intents and purposes, we're seeing normalcy across spend, income, merchant types. The consumer at this end of the spectrum on the K curve looks very healthy in our opinion. And I think where you can see a lot of that show up is just in the stableness of our CAC at $19, which is flat sequentially. But importantly, it's down if you look at it on an MTM basis, which we're able to leverage better conversion as a result of new improvements in CashAI to get better approvals for customers as they enter in the front door, which is a great trade-off for us. But I think we're seeing everything being very healthy for the business.

Okay. And maybe just kind of one last one. As we look at Q4 here, help us think through kind of customer acquisition cost. Do you kind of expect it to remain stable? Or do you have higher spend in Q4 to take advantage of some of these consumers?

Jacob, it's Kyle. So in terms of CAC and spend, we largely expect things to look pretty consistent in Q4 as we did in Q3. Q4 is more of a peak season from an overall market spend perspective. So CPMs do rise, and we try to sort of match our spend to the most opportunistic points of the calendar where we can really optimize that spend from a CPM perspective. But by and large, I would expect CAC and overall levels of media spend to be pretty consistent in Q4.

And the next question will come from Hal Goetsch from B. Riley Securities.

Great quarter guys. It's terrific execution. I wanted to ask about the transition with Coastal on the balance sheet. When do you think it will be like a complete transition and the balance sheet will look very different?

And the second part would be, could you tell us a little bit about the deliverables for your new executive hire and product?

So just to start with the balance sheet question, Hal. We are in the process of the Coastal migration. I think as we talked about on the call, all new customers are now onboarding under the bank, and we're going to begin the process of transitioning existing customers here imminently and would expect that to be completed in early 2026. And the transition of the balance sheet will be a fast follow to that. So targeting end of first quarter, early second quarter, I think, is a good time line for us to make that full migration of the funding arrangement with Coastal.

But yes, we're looking forward to that. We think it's going to be a super attractive outcome for us as we've talked about and free up a lot of cash for us to pursue more strategic capital allocation opportunities.

But Jason, do you want to take the question about Parker?

Sorry. What was the question about Parker, Hal?

Yes. What are the deliverables for Parker in the first 24 to 36 months at Dave that we could just -- for our own [ edification ].

Well, I'd say we're excited to have Parker come in and accelerate product velocity. He's seen some of the best companies in the world at scale, and we think we can benefit from some of these new opportunities we have coming out such as the buy now, pay later product we've talked quite a bit about, excited just to get him in seat. He's got a fantastic executive presence, and we're excited about his ability to deliver on long-term product road map, credit performance as well as just bring in a high-performing team as well.

And the next question will come from Devin Ryan from Citizens Bank.

Great quarter. Just want to touch on operating leverage and just where you guys are right now, obviously, putting up tremendous results and tremendous kind of operating leverage in the business model here at roughly 40% EBITDA margin. So as you think about kind of where this model can go, I appreciate you're going to be going into some new product areas and there is some growth investment and at the same time, you can kind of toggle marketing. But how do you think about where this company can be over the next few years as you expand? Is there more room from here? Or is this kind of the right place to be where you can balance both that growth investment and growth really?

I think by and large, we like where we're at from an overall margin perspective -- from an EBITDA margin perspective specifically. We think this is a sort of nice balance between delivering significant profitability, but also giving us the opportunity to invest in some more R&D to deliver these new products that Jason was alluding to that Parker will be obviously a very critical component of delivering. But yes, look, I think we are excited about these new opportunities, and that is going to come along with a little bit more investment in resources to make sure that we can fully execute on those opportunities. So we're super excited about that.

But yes, I mean, just to answer the question, I think the margin profile here is something that we're quite happy with and would like to make further investments to set the company up for its next phase of growth.

Got it. And a follow-up on the buy now, pay later opportunity. I appreciate we're still kind of early days there. But -- how much does kind of your existing business model and ExtraCash product and just the data you have on your customers give you an advantage, do you feel like in the marketplace, meaning you have the opportunity to potentially provide this product to customers that are already using a buy now, pay later product, but you have an informational advantage as well there relative to some of the other products out there. Just curious kind of like how you're thinking about it.

And then also, if you have a sense of how many of your current customers are using some type of buy now, pay later product already?

Yes. Thanks a lot, Devin. So I'd say there's 3 points. So to answer your last question, we do see in our transaction data, which is a huge advantage that roughly 60% of our members are currently engaging in some form of a BNPL transaction today, which is a significant opportunity of which Dave has 0% market share in a space we feel like we have a very strong right to play in. Second, we feel like we can really differentiate with our cash flow and CashAI underwriting given we are -- we will be the only BNPL company leveraging cash flow data. If you think about traditional BNPL, the merchant checkout, there'd be too much friction to try to get someone to connect a bank account there. And so most of these guys are still leveraging alternative bureau underwriting of which to assess the customer. And we feel like our ability to use CashAI to approve more people, increase limits is a real advantage for us.

And then lastly, we believe that letting people have the opportunity to BNPL whatever they want is a huge opportunity where we see a lot of friction with people having to select an e-commerce merchant and figure out who's going to be at checkout when you go shopping versus just paying to have the flexibility to shop and BNPL anywhere is a great opportunity and we think unique to the market.

And the next question will be from Joe Vafi from Canaccord.

This is Pallav Saini on for Joe. I have 2 quick ones here. First one, maybe on the Dave Card. How did adoption trend in Q3? And what percentage of your member base now has the Dave Card?

So we did see 25% growth in Q3, spend about $510 million now, which we feel very good about the growth there. It continues to be a lot of synergy between ExtraCash origination growth and the growth of Dave Card, given people can access ExtraCash instantly and cheaper by using our card. As far as what percentage of our customers are using the Dave Card, it is a significant amount. We don't disclose that today, but we do disclose the total transaction volume, again, which is that $510 million number.

I think it's important to point out, we don't need to win direct deposit for our business to work. We very much view the Dave Card to be incremental to customer retention and lifetime value. And we're going to continue to chip away at new product ideas to win more there. But we feel like the moat we've really developed is around CashAI and the underwriting and our road map is more heavily focused on credit expansion versus direct deposit penetration.

That's great. And one on the ExtraCash product. Did you disclose what the approval rate was in Q3 and how it is trending so far in Q4?

We don't discuss approval rates, but we did note that our approval rate is at all-time high, which is driving efficiencies in our total MTM conversion, which is why our CAC is stable at $19, but we did allude to MTM CAC being down, not a number we do disclose, but an important health metric that allows us to be more scalable and leads to more profitability and also leads to faster paybacks with us hitting sub-4 months for the first time in probably the life of the business.

The next question is from Jeff Cantwell from Seaport Research.

On the updated 2025 guidance, when we look at the implied guide for Q4, you're raising the fourth quarter revenue guide up versus the prior. Do you mind talking about what motivated the increase in the guide? Maybe talk about what you're seeing with MTMs and ARPU or by product with ExtraCash, et cetera, that might have been different versus where things stood 3 months ago. Any extra details on what's motivating the change in the guidance for revenue would be great. And do you have any early thoughts on how the revenue might look for 2026? I'm curious if you could give us an early read on next year, if at all possible.

So in terms of the guidance, look, we have obviously 1 fewer quarter with the annual guide this period versus 2 last, obviously. But I think just taking a step back, as we talked about on the call, MTMs are accelerating. MTM growth is accelerating. ARPU is expanding. Basically, all aspects of the growth model are firing on all cylinders right now. And I think we have just a lot of optimism with the trajectory of the business. And I think you're seeing that reflected in the revised guidance. So I would say no major difference in terms of where we're at now necessarily versus last quarter.

It's just more of a continuation of the trends that we've been seeing over the last year plus now where, again, MTMs are trending very favorably and ARPU is expanding rapidly, and that's supporting the top line growth. As we've talked about, the unit economics are improving based on the new underwriting paradigm that we're in with the higher gross spreads and net yields that we're seeing within the portfolio, and all that's just flowing down through to the bottom line. So that's really what's showing up in the guide.

We have not provided or we will not be providing any specific color around 2026. I mean, overall, our view is just that this is a very, very big market that we're serving, and we'd like to think that we can continue to grow MTMs as we serve that market over time. And that from an ARPU perspective, we are very early on from what we ultimately want to ship to this customer from a product perspective, and that should lead to additional ARPU growth over time. So we view that the growth algorithm for the business is very durable and that there is still a lot of upside from here for us to drive growth over the next several years.

Got it. That's helpful. And then on your monthly transacting members, that's now 2.8 million this quarter. So that's up sequentially and versus last year. Do you mind digging in a little more in terms of where you're finding new MTMs right now? Walk us through where the new 200,000 MTMs are coming from? It be great if you could help us understand that. And then also, when we compare MTMs versus your total members, that's at about 20%. That's been pretty consistent over the past several quarters.

I guess my question is, do you think there's opportunity to drive greater conversion of your total members to become monthly transactors? Or is that low 20-ish percent sort of the right way to think about it going forward? How do you see that playing out from here?

I'd say that total conversion of our entire base, which is over 13 million now, we feel very good about that being a pool of which we can continue to fish from to convert more customers. The 2.77 million MTMs we just reported on are not the same 2.77 million every single quarter. It is people that come in and out of that total 13 million. So we're still continuing to drive more strategies to convert more people. And hopefully, we can increase that 20% penetration rate over time.

As far as the new MTMs, we're just continuing to see a lot of efficiencies in the existing marketing channels. Word of mouth is still very strong at 1/3 of our acquisition, and we're seeing a lot of pockets of growth within television, which we think is a very challenging channel to scale for most companies, and Dave has found a lot of ways to unlock that, which I think is a real testament to our brand and the very strong message we can go to market with and the rest of our channels continue to perform well across social, digital streaming. It's sort of business as usual with no meaningful concentration in any one channel, which gives us a lot of confidence into 2026 and beyond.

And then as we talked about, I think, you mentioned conversion. We're just seeing much stronger conversion at the front door as a result of CashAI improvements, and that's another way for us to help insulate CAC sensitivities moving forward is just further improvements to conversion.

The next question will be from Gary Prestopino from Barrington Research.

A couple of questions here. Just for my sake, just to be clear, this monthly subscription fee change for $3, that's for new members who are accessing the ExtraCash Advance option. It's not just for new members who sign up.

That's correct. So it's actually for new MTMs that we convert. That's how to think about that number and existing members at the $1 have been grandfathered in. Still hope to be able to convert more of those people to higher subscription revenue over time, but we didn't want to rock the boat on retention or conversion. So we just focused on the new customers, which will continue to grow.

Okay. And then could you -- some other question alluded to this with the ExtraCash Advance in the Dave Card. Could you -- if you don't give that conversion publicly, could you talk about how that has changed over the last year in terms of members putting their ExtraCash Advance on the Dave Card?

We have said about 30% of total customers are sending ExtraCash to the Dave Card. That's been pretty consistent over time, looking for more ways to improve that. That's been a pretty steady-state conversion we've seen and are happy with this, again, we view the Dave Card as a way to drive incremental retention of our members, and it continues to trend nicely with ExtraCash origination growth.

Okay. That's great. And then in terms of new products, you've been talking about BNPL in particular. Are you -- have you developing that product? Do you have it in beta? Where are you? And what are your thoughts on introducing it into the market?

We are with internal testing with a handful of employees as of now. And so excited to hit that milestone and expect to have customers start testing the product in the first quarter. And depending on what we see and like in the conversion and the loss rate performance will determine the pace at which we ramp that product next year.

The next question will be from Mark Palmer from Benchmark.

Yes. With regard to the average ExtraCash Advance size, it nudged up from $206 to $207 between the second quarter and the third quarter, and you noted that it increased to $213 in September. Where could that figure go over time? What are you comfortable with in terms of the rate at which the average loan size increases? How do you see that increasing organically just with the evolution of the platform?

Look, I think the -- we expect to continue to sort of chip away at that average origination size over time. I think if you rewind back to over the last year or 2, you've seen sort of steady progress against that metric. And we do see that to continue to be a source of ARPU expansion under the new pricing model moving forward. We saw a nice lift there in September as a result of the underwriting changes with v5.5, and there are certainly additional model optimizations that we're working on right now that we think will be additive to average origination size.

There is also a dynamic where in Q3, our proportion of new customers is larger than Q2, just by virtue of marketing spend and the conversion benefits that we've talked about. That creates a little bit of a short-term headwind on average origination sizes because as you can imagine, new customers approval limits are lower than the average book. But sort of as that normalizes, I would expect that to also be just a source of average kind of limit increases as well.

And then in terms of just tailwinds as our base becomes more and more seasoned or average tenure of an MTM ticks up over time, that is also a source of origination size expansion. If you look at our average customer tenure of an MTM, it's close to 2 years at this point, which is up pretty significantly on a -- if you look back over the last couple of years. And so as we do better at retention and reactivation, that is also, again, a source of upside to the average origination number -- size number.

But look, I think it is a fair thing to say that, that number can't continue to grow into perpetuity, and we want to get into other types of product categories to give our customers a little bit more flexibility around duration, hence, the BNPL offering that we're super excited about to support those additional credit use cases. But yes, and I'd say over the near to medium term, very optimistic that we can continue to chip away at that origination size number.

[Operator Instructions]

The next question will be from Zachary Gunn from FT Partners.

So I know this isn't disclosed specifically, but if I back out subscription revenue and really look at the processing revenue, the yield on that as a percentage of origination volume has been steadily going up, and it continued to do so this quarter. Can you just talk about what's driving that increase in the yield? And should we expect that to settle, continue to kind of increase? Just what's driving that?

Largely, the changes to the gross revenue yield, if you want to think about it as a sort of service revenue as a percentage of overall originations has come from the pricing model change. Now that, that's more or less worked its way through the system, I would expect that to stabilize around the number that you're seeing today. But yes, I'd say that increase over the last couple of quarters really a result of the pricing evolution that we undertook in Q1.

Got it. Okay. That's helpful. And then just as a follow-up, when you have loans off balance sheet, can you just remind us, walk us through the economics, what the moving pieces will be in terms of accounting for credit losses or anything else we should be aware of?

Yes. So basically, how it's going to work is our receivables or a large portion of our receivables are going to sit with the bank at Coastal. And so the funding obligations from us will be drastically reduced. We will still have full economic exposure to the underlying assets. We're just going to basically be paying the bank for access to their balance sheet. So from a provision and overall accounting perspective on the P&L, in particular, there won't be any real change. It should be very consistent. We'll continue to report out on the same metrics that we do currently.

It's really just the fact that our balance sheet will reflect the fact that our receivables will be sitting at the bank and that we won't have any debt obligations on the balance sheet with respect to the credit facility there. So from a net cash perspective, net cash should go up significantly as we make that transition.

And ladies and gentlemen, this concludes today's question-and-answer session and thus concludes today's call. We thank you for joining Dave Inc.'s third quarter results conference call. At this time, you may disconnect your lines. Take care.

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, 2025. 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 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, including 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 and Form 8-K furnished to the SEC.

I would like now to turn the call over to Dave's CEO, Mr. Jason Wilk. Please begin.

Good morning, everyone, and thank you for joining us. We're pleased to share that we achieved another quarter of record performance as we continue to deliver against our mission of leveling the financial playing field for everyday Americans. Q2 represented a continuation of our momentum with accelerating revenue growth, robust unit economics and strong earnings growth, all tracking ahead of plan.

Revenue accelerated 64% year-over-year to $131.7 million, marking our fastest growth rate in over 5 years. Performance was driven by a 16% increase in monthly transacting members and step change ARPU growth of 42%, underscoring our ability to monetize a growing and engaged member base. Adjusted EBITDA demonstrated growing operating leverage, more than tripling year-over-year to $50.9 million.

This result represented the largest absolute adjusted EBITDA gain in company history, highlighting strong execution across the business and disciplined expense management. All of this outperformance reflects consistent execution across our team as well as the [ outset ] of our new fee structure, which continues to strengthen monetization and deepen member engagement through margin limits.

Given our strong year-to-date performance and clear momentum in the business, we are pleased to once again raise our full year revenue and adjusted EBITDA guidance. Turning now to our three strategic growth pillars: efficient member acquisition, enhanced member engagement through ExtraCash and deepening relationships via the Dave Card. Starting with our first strategic growth pillar of efficient member acquisition.

We added 722,000 new members in the quarter, bringing total members to 12.9 million. Our member base grew 14% year-over-year, while CAC modestly increased $1 sequentially to $19. We are increasingly optimizing our marketing investments by device platform and channel prioritizing investments that yield the highest projected gross profit dollar returns rather than the lowest CAC.

This recalibration is also closely tied to the higher member lifetime value we are observing following the transition to our new fee model. Importantly, our payback periods on customer acquisition costs have further improved to an estimated 4 months, down from 5 months mid last year. As a result, we expect to scale marketing investment through the back half of the year.

This reflects our belief that our enhanced unit economic profile in addition to current market conditions, represents an attractive opportunity to further lean in and drive efficient incremental growth. Our second strategic pillar centers around continuing to strengthen engagement with our members through credit. ExtraCash remains a key entry point for building long-term relationships with our members by addressing what is typically their primary need, short-term liquidity for gas, groceries and bills.

In Q2, ExtraCash originations reached $1.8 billion, up 51% year-over-year and 17% sequentially. This represents a new high for the company and reflects both growth in monthly transacting members and an increase in average ExtraCash size. We ended the quarter with 2.6 million monthly transacting members, up 16% year-over-year and 4% sequentially, with both growth rates representing accelerations compared to the prior period.

We saw continued gains in new member conversion and dormant member reactivation along with strong retention, all positive signals of strong and consistent demand and the durability of our value proposition. The average ExtraCash origination size in Q2 increased to $206, up 24% year-over-year and 7% sequentially.

This growth reflects improved credit segmentation enabled by CashAI, the impact of our new fee model driving higher ExtraCash approval limits and the natural increase in origination sizes as our member base [indiscernible] on the platform. We view this as a win-win, driving higher ARPU for the company while also enhancing our ability to meet our members' liquidity needs.

On credit performance, our 28-day delinquency rate increased by approximately 37 basis points year-over-year. A third-party issue, which has since been resolved, resulted in a temporary delay in settlements affecting a limited subset of our ExtraCash receivables. This temporary delay impacted our 28-day delinquency rate in Q2 by an estimated 19 basis points or 9%, implying a delinquency rate of approximately 2.21% had this issue not occurred.

Excluding the estimated impact of this issue, the 28-day delinquency rate would have increased roughly 18 basis points year-over-year, which remains within our internal guardrails and aligns with our strategic focus on maximizing gross profit dollars rather than minimizing the loss rate. On a sequential basis, our 28-day delinquency rate also increased as a result of this third-party issue in addition to seasonal normalization following Q1's tax refund season.

ExtraCash [ leverages ] CashAI, our proprietary underwriting engine, which enables near real-time identification of credit risk through fully automated analysis of bank account transaction data. Combined with ExtraCash short repayment cycle, this tool creates a rapid feedback loop for optimizing underwriting. This agile framework gives us strong confidence in our ability to manage credit risk across a range of economic scenarios.

We're now in the testing phase of our CashAI v5.5, the latest evolution of our underwriting. This next-gen model is designed to fully incorporate the economics of our new fee structure while introducing additional variables to enhance precision. The new model is trained on more than twice the number of features that we used to train our current v5.0 model, which we believe bodes well for future credit performance.

We expect to begin deploying the v5.5 model later this year. The third pillar of our strategy is deepening engagement and monetization through Dave Card. In Q2, total card [ sum ] reached $493 million, up 27% year-over-year, reflecting growth in transacting members, increases in card spend per active banking customer and continued synergy between ExtraCash and Dave Card usage. A significant portion of ExtraCash originations continue to be dispersed to the Dave Card.

This integration improves member convenience, reduces member cost and strengthens member engagement within our financial ecosystem. Active Dave Card users tend to exhibit stronger retention on ExtraCash and drive higher lifetime value, benefiting both from increased product stickiness and the incremental ARPU associated with the Dave Card usage. As our ecosystem has expanded in value, we have been testing a new monthly subscription price point after nearly 8 years of charging $1 per month.

Following several months of testing, we completed the rollout of a $3 monthly subscription fee for all new members. Customer results validated that we could implement the pricing change with minimal impact on conversion or retention and the higher price has proven to be accretive to lifetime value. Our current plan is to grandfather existing MTMs onto the existing $1 price for now. The new monthly fee impact in Q2 is modest as the change was fully implemented in mid-June.

We expect a growing contribution in the quarters ahead as an increasing share of our MTM base is acquired under the new monthly pricing structure. Switching gears a bit. Given the importance of cash flow transaction data to CashAI, I want to briefly address recent headlines surrounding the dispute between JPMorgan and open banking data aggregators over potential fees for access to consumers' financial data.

First and foremost, we believe it's not a foregone conclusion that prices will increase. We've been encouraged by the strong response from the industry trade groups, policymakers and other key stakeholders who have stepped in to defend consumer rights to free data access. We're also pleased that the CFPB has indicated it will revisit the issue and fast track the resolution.

Second, in the event fees do increase, we believe Dave is well-positioned to significantly optimize our use of data while continuing to maintain our existing member experience and business performance. Lastly, given our scale and demonstrated pricing power, we would expect any potential incremental cost to be shared across all stakeholders, further minimizing the potential impact on our expenses.

I'd also like to provide an update on our strategic partnership with Coastal Community Bank, which is assuming bank sponsorship for Dave's ExtraCash and banking products from our existing provider. Last month, we began onboarding new members on to Coastal in line with our previously communicated timelines.

This marks a key milestone in strengthening our banking infrastructure, adding the risk management rigor and scalability needed to support future product expansion and our broader growth ambitions. Additionally, as Kyle will describe in greater detail, we recently completed an amendment to our program agreement with Coastal, whereby over time, Coastal will serve as the primary funding partner for ExtraCash receivables, which should further unlock the capital efficiency of our business model.

More on that in a moment. In closing, Q2 represented another step function change in our profitable growth trajectory. I want to thank our team for their tireless dedication to delivering outstanding value for our members and shareholders.

With that, I'll turn it over to Kyle.

Thanks, Jason. Q2 was another record quarter, highlighted by accelerating revenue growth, continued margin expansion, disciplined marketing spend and increased operating leverage. These factors collectively drove outsized growth in adjusted EBITDA, further underscoring the strength of our business model. Let me walk through the financials in more detail.

Starting with revenue. Total revenue was $131.7 million, up 64% year-over-year and 22% sequentially. Growth was driven by a 16% increase in MTMs and an acceleration in ARPU growth of 42% to [ 200 ]. These metrics reflect a full quarter of monetization from our new fee structure, larger ExtraCash sizes and deeper member engagement across ExtraCash and Dave Card.

Before turning to expenses, I want to note that we've expanded the view of certain operating expense line items on our P&L to help provide greater transparency into our cost structure, specifically by distinguishing between variable and fixed components. Under this revised classification, variable costs include provision for credit losses, processing and servicing costs and financial network and transaction costs.

In this new view, readers can directly reconcile total revenue to non-GAAP gross profit using specific line items on our statement of operations. Compensation and benefits, technology and infrastructure and other operating expenses represent our fixed operating costs. Finally, advertising and activation costs reflect our previously reported advertising and marketing line item and now include member activation costs, which were previously a part of processing and servicing costs and other operating expenses.

It's also important to note that only the advertising and marketing components of this line are used to calculate our customer acquisition costs, given that activation-related expenses may apply to both new and existing members. With that framework in place, let's walk through each of the operating expense categories. During the second quarter, our provision for credit losses was $25.2 million, up approximately $10.8 million year-over-year, primarily due to increased origination volumes, which grew 51% over the same period.

Additionally, as Jason mentioned earlier, a third-party issue, which has since been resolved, caused a temporary delay in settlements affecting a limited subset of our ExtraCash receivables. The estimated impact of this issue was approximately $3 million in Q2, which is reflected in the provision for credit losses. Excluding this impact, provision for credit losses would have represented 1.2% of originations, roughly in line with the year-ago period and consistent with our plan to manage credit performance to maximize gross profit dollars.

It's worth noting that provision for credit losses was also up on a sequential basis as expected, given the favorable repayment trends we experienced in the first quarter as a result of tax refund season. We anticipate provision for credit losses as a percentage of originations will reach its high point in Q3 since the quarter ends on a Tuesday, which is typically the intra-week peak for outstanding receivables.

The higher gross receivables balance will itself cause the provision to increase regardless of any potential changes in credit performance. Using Q2 as an example, had the quarter ended on Tuesday, July 1, our provision for credit losses would have been approximately $1.7 million higher. Had it ended on the Friday prior to quarter end, it would have been approximately $4.5 million lower.

This illustrates that a 4-day difference in the day of the week on which the second quarter ended could have driven a variance of over $6 million in our provision for credit losses. Processing and servicing costs decreased 4% year-over-year to $7.2 million, driven primarily by efficiencies gained from two significant vendor contracts renegotiated last year as well as the scale economies inherent in most of our processing vendor contracts.

As a percentage of ExtraCash origination volume, these costs improved to 0.4% from 0.6% in Q2 of last year. Financial network and transaction costs previously included as a component of other operating expenses increased 11% year-over-year to $7.2 million, which was largely attributable to increased Dave Card spending volume. As a percentage of revenue, financial network and transaction costs decreased to 5% from 8% in the year-ago period.

This brings us to non-GAAP gross profit, which we previously referred to as non-GAAP variable profit, which grew 78% year-over-year to $92 million. We've changed the name of this metric to better align with industry norms, though the definition and calculation remain the same as in prior disclosures.

Non-GAAP gross margin, which we previously referred to as non-GAAP variable margin, came in at 70% for Q2, in line with our expected gross margin range of high 60s to low 70s that we outlined last quarter to reflect credit performance normalization following tax refund season. Relative to last year, our gross margin expanded approximately 500 basis points as a result of processing cost optimizations and key vendor renegotiations.

Advertising and activation costs increased 20% year-over-year and 30% sequentially to $15.5 million. We typically moderate marketing spend in Q1, which tends to be less efficient given that tax refunds reduce our members' liquidity needs. In Q2, we ramped investment to capitalize on continued strong demand for ExtraCash and to take advantage of the stronger LTV to CAC returns we've unlocked through the new ExtraCash fee structure and the higher subscription fee.

Looking ahead, we plan to continue increasing marketing investment throughout the remainder of the year as our outlook for new member growth and lifetime value expansion remains strong. More specifically, we expect year-over-year growth in marketing spend in Q3 and Q4 to track at or above the pace we observed in Q2. Compensation-related expenses rose 9% year-over-year to $26.4 million.

As a percentage of revenue, compensation expense declined to 20% in Q2 from 25% last quarter and 30% in the year-ago period. Additionally, our annualized run rate revenue per employee expanded 66% to $1.9 million, up from $1.1 million in Q2 of last year. These improvements highlight the scalability of our business model and the productivity gains resulting from our investments in AI and our broader technology platform.

Technology and infrastructure expenses and other operating expenses, which primarily consist of platform compute infrastructure costs and third-party software expenses increased 3% and 1% year-over-year, respectively. Over the same period, revenue grew 64%, further underscoring the scalability of our platform. During the quarter, we recorded noncash expenses from mark-to-market changes in the value of the earn-out and warrant securities that are outstanding.

The $7.9 million earn-out expense this quarter reflects the higher value of those potential shares, while the $20.5 million warrant expense is tied to the increased value of outstanding warrants, both driven by the strong performance of our stock and warrant prices. To be clear, these are noncash expenses and not a reflection of the underlying business fundamentals.

That said, we anticipate some volatility in these figures as our stock price changes in the future. GAAP net income increased 42% to $9.1 million from $6.4 million in Q2 of last year. Our year-to-date effective tax rate was approximately 17%, and we estimate our 2025 annual effective tax rate to range between 19% and 21%. Adjusted net income, which excludes nonrecurring items, stock-based compensation and noncash fair value adjustments to the warrant and earn-out securities increased 233% year-over-year to $45.7 million.

Similarly, adjusted EBITDA reached $50.9 million, more than tripling compared to Q2 of last year, with flow-through from gross profit to EBITDA of approximately 90%. Turning to the balance sheet; we ended the quarter with $104.7 million in cash and cash equivalents, marketable securities, investments and restricted cash, up from $89.7 million at the end of Q1.

This $15 million increase was attributable to free cash flow generation, offset by an increase in the ExtraCash receivables balance, which on a gross basis increased by $43.4 million over the last quarter. As Jason mentioned earlier, following the recent amendment to our program agreement with Coastal, we expect to move a significant portion of our ExtraCash receivables off balance sheet.

We believe this shift will meaningfully reduce our direct funding obligations, lower our cost of capital and unlock substantial liquidity to pursue capital allocation opportunities going forward, all while allowing us to eliminate the warehouse line debt from our balance sheet by mid-2026. In addition, the new arrangement provides a total funding capacity of $225 million, representing $75 million more capacity than our current credit facility.

We anticipate beginning to transition ExtraCash receivables under the new program by early next year. From a capital allocation perspective, we remain focused on flexibility. Our priorities continue to be reinvesting in organic growth opportunities to drive future growth, increasing our dry powder to facilitate potential M&A and opportunistically returning capital to shareholders via share repurchases.

Given our strong performance through the first half of the year, we are once again raising our full year outlook. We now expect revenue of $505 million to $515 million, up from our prior range of $460 million to $475 million and adjusted EBITDA of $180 million to $190 million, up from our prior range of $155 million to $165 million.

The midpoint of our revised outlook implies annual revenue growth of 47% and adjusted EBITDA growth of 114%, and we continue to expect gross margins to be in the upper 60s to low 70s for the remainder of the year.

We're proud of the financial and strategic progress we've made in the first half of 2025. We're delivering durable growth, expanding margins and innovating for the benefit of our members. With continued focus on execution, we're confident in our ability to create long-term shareholder value while advancing our mission to build a better banking experience for everyday Americans.

And with that, we'll open the line for questions.

[Operator Instructions] Our first question comes from Devin Ryan of Citizens Bank.

Really nice results. I guess first question here, just on the new -- well, I guess, the transition to the fee model that you just made. I'm just curious because obviously, you executed that through the second quarter. Is there any remaining benefit related as we look forward to that kind of transition? And then as we look out over the next couple of years, can you maybe just talk a little bit about how you see revenue per advance trending?

It just kind of continues to move higher. But what levers do you have to drive that higher? How much room is there to drive average advance sizes higher? Is there room maybe over the intermediate term to still tweak the fee model because it sounds like you still have pretty good pricing power. So I just want to think about kind of the trajectory there, but then also even short-term here, is everything already baked into the 2Q?

Yeah, Devin, so I'd say if you recall from our last earnings call, we mentioned that March was the first full month of the new fee model. And so we did get the full benefit of the new fee structure in Q2 here.

That said, if you think about future monetization, we're rolling out our new v5.5 model so do expect our ability to keep growing originations per user and earnings given our pricing power and spreads there, feeling good about the ability to keep growing with the member base.

Got it. Okay. And then just a follow-up. I just want to come back to the point on moving the receivables to Coastal. I think that's pretty interesting, obviously, kind of freeing up capital as well. So can you just tell us what the direct financial impact of that is? Like what's the cost of that relative to the current arrangement?

And then as you think about freeing up capital and you have more excess capital and the company is obviously generating a lot of excess capital as we move forward here. What are your priorities there? What type of opportunities are you looking at with excess capital?

Yeah. Thanks, Devin. So yeah, I mean, there's a couple of impacts to the financials. First and foremost is that the overwhelming majority of our receivables will go off balance sheet and will just be held at the bank. We do -- we are, as part of that arrangement, paying Coastal for the balance sheet usage, but it is a 200 basis point reduction relative to our current cost of funds with our existing warehouse line.

So awesome sort of win-win there for us and Coastal as part of that partnership. But yeah, you're right. It is going to free up a substantial amount of cash. Our expectations of well north of $100 million, including paying down the existing warehouse line. And as I talked about, our approach to capital allocation right now is just maintaining flexibility, and we do want to position ourselves to take advantage of opportunistic M&A.

So we want to have sufficient dry powder, and we'll look at share repurchases and capital return alternatives as well. But like I said, our approach is to kind of build up some cash right now to give ourselves dry powder.

Yeah. Okay, great. And then if I can just sneak one more in here. The $3 monthly subscription that you're moving to with new members, how much data do you have on that in terms of how that's affected customer acquisition and then even how customers behave once they're on the platform in terms of repeat use?

And then as you kind of bump up the subscription level, do you plan on adding more services or anything else into that where maybe there's features that you could drive incentives to get more usage of other products like the Dave Card or something else? Just trying to think about kind of the evolution here because you haven't touched the monthly subscription at some time.

Yeah, Devin, as mentioned, we've had the same $1 fee since the company launched in 2017. So it definitely it was time for a refresh given all the increased value we delivered to the customer. As mentioned, the dollar fee will be grandfathered in for existing users. it is $3 for new members starting in June.

So the full Q3 will have the benefit of the new fee structure for new customers. We're feeling good about the value we're delivering. If we think about new features that we can add in here, it really would be things we think are incremental to drive more retention of the subscribers, not necessarily things we feel like need to have increased monetization for the $3.

But, just to add to that, we -- we're not at all in a rush to get this subscription pricing change out. We've been testing extensively over the last couple of quarters to assess impact at the top of the funnel as well as subsequent period retention and the like. And we just saw nothing negative really on that side of the equation, which gives us -- gave us a lot of confidence that we could roll this out and sort of maintain the conversion and retention characteristics.

So the -- that we had previously. And so the pricing change is effectively fully accretive to lifetime value. Beyond that, I think the higher sub fee does give us a promotional lever that we didn't have before, at least not as powerful one. So we could think about waiving the fee for certain activities within the app and just create -- it's just more of a promotion lever that we didn't have in our toolkit before. So excited to put that to work in different use cases.

Our next question comes from Joseph Vafi of Canaccord.

Yes, great results here once again here in Q2. Just maybe we kind of double-click a little bit on that third-party issue that drove up the delinquencies a little bit, if there's any other color to provide there and perhaps what occurred there and if there's any measures you've taken to make sure that, that doesn't happen again. Just if we could get a little more color there, that would be great. And I have a quick follow-up after that.

Yeah. So thanks, Joe. So basically, what happened was sort of a reporting issue on a small set of the receivables that caused us to delay settlements or repayments on those receivables. We sort of caught it as part of our audit process, and we put in additional steps to ensure that something like this doesn't happen again in the future, and we feel confident that we've sort of closed that gap.

But yeah, it basically caused a delay in the collections on the receivables, which ultimately has a sort of impact -- negative impact or adverse impact on the ultimate collectability of those receivables, which is about a $3 million adverse impact in the provision. So that's sort of a high-level summary. But again, we feel really good about our -- the steps that we've taken to ensure that something like that doesn't happen again.

Sure. And then if we kind of look at the rollout of the new AI engine, maybe we get a little more detail there in terms of, I guess, we're going to be, I guess, focused on size of ExtraCash advances as a driver of more ARPU using the AI engine and then maybe how you're looking at that double set of -- the doubling of the set of data points that you're evaluating, what that may mean also in your delinquency? If you can share any kind of initial thoughts on how that might help both on size and on delinquency.

Yeah. So effectively, with every new model release, we're looking at areas for just better risk splitting. And so moving good risk up higher in the limit curve, increasing the value prop for those users and finding pockets of bad risk that we downgrade or kind of eliminate from the portfolio altogether.

And that's certainly what our simulations are suggesting where the ultimate kind of impact of that is higher overall average origination sizes per customer, but also lower delinquency rates, so kind of a win-win for the business there. We just started testing the model about 1.5 weeks ago, but the simulations, like I said, indicate both the upside performance on delinquencies as well as average origination size, which is -- supports overall levels of increased net monetization for us.

Our next question comes from Jeff Cantwell of Seaport Research.

Congrats on the results. I just want to focus in on the updated revenue guidance you provided for the full year, which was taken up to $505 million to $515 million. Can you just explain where the incremental enthusiasm is coming from for you guys as far as your outlook for revenue? In other words, is the raise due to the updated subscription fee or is it greater ExtraCash demand, et cetera? Can you maybe break that out for everyone or how should we be thinking about it?

Jeff, so I think we're still very bullish on our new member adds. As you saw, we added 722,000 new members in Q2. We expect to keep ramping up marketing given the efficient trends we're seeing in our paybacks.

As noted, our payback periods have improved just to 4 months as we've improved LTV with the new fee model and improvements in retention. And so if you factor in both new member acquisition, improvements in ExtraCash with respect to the spreads as well as the new fee model, we're feeling very good about the update to the guide.

Got it. Okay. I wanted to circle back to what you spoke about in your prepared remarks with regards to data aggregator fees. Can you just explain how they work for you guys currently in terms of who bears what cost between yourselves and the aggregator for any data?

And obviously, it sounds like there's a lot of variables potential outcome. So my question is, do you have any range of estimates at this point as to how this might impact your P&L or is this simply not going to be material? Just want to see if you can help us out on that front.

Yeah, Jeff, I'm just going to point back to my comment I made in the script really that we think that there's a few things going on here. One, this is being thought on the policy level. So we're happy to see the CFPB step in here because we do not think it's a foregone conclusion that prices will be going up for us.

We also have, we think, significant pricing power, both with respect to how big Dave is, so our pricing power with our aggregator partners as well as our pricing power with consumers. And so we don't expect even in a world where prices do go up that we would bear the 100% cost of that increase.

Overall, we're feeling good about our position. And in a world, again, where fees were to go up, we feel like we have a major lever to significantly optimize our data aggregation in general and that we don't need to pull as much data to feed cash [ out ] that we are right now and still continue to make major strides in our performance.

Okay. Understood. And then lastly, just to squeeze one more. How are you thinking about M&A? You mentioned increasing your dry powder and perhaps considering being opportunistic. Can you maybe give us some thoughts, high-level thoughts on what would help you build the Dave ecosystem out further?

We really think about M&A in two ways. One is, can it increase distribution to expand and diversify customer acquisition for the company and/or can it be something that can be accretive to ARPU for the existing member base, both as a bolt-on for new subscription products and/or for expanded credit products. The company continues to assess opportunities in the market, not near on anything right now, but we're continuing to keep our ear close to the ground and having conversations.

Our next question comes from Mark Palmer of The Benchmark Company.

During the second quarter, what portion of the ExtraCash advances that were extended were extended to those who had already been on the platform? I know last quarter, that figure was in the high 90s percent. Was that consistent with what you saw in the second quarter as well?

Mark, thanks for joining. Yeah, pretty consistent trends there. I mean, as we ramp up user acquisition in any given period, you tend to see that number come down a little bit, but we're in the, call it, 95% to 96% of units originated to existing customers. And as you might imagine, the average limits for existing customers tend to be higher than brand-new customers.

So if you look at it on a dollar basis of originations, it's, call it, 97% to 98% of originations to repeat customers. So no real change in the dynamic there. The overwhelming majority of our base is repeat usage, and that's something that we continue to see as we've made improvements to retention and customers are sticking around longer, that number has ticked up over time.

And with regard to the average ExtraCash advance size, obviously, now with the mandatory fee structure, you have more incentive to increase the average size of the advances. Any observations from the first full quarter of the mandatory fee structure in that regard? And how do you see the average loan size trending over time? How should we be thinking about just how much potential increase we could see over the next number of quarters?

I mean as we talked about last quarter, we had done a significant amount of testing before we implemented the new fee structure just to understand customer impact and receptivity to the change. And I'd say in Q2, things just played out accordingly as we expected them to. So nothing really to point to as far as surprises, just kind of coming in line with our expectations.

As I mentioned and we've talked about, we are rolling out our new underwriting model, which has better -- indicated better risk splitting capabilities, and we would expect, based on that to be able to continue to drive average origination sizes up over time and we feel good about our ability to do that. We haven't provided any specific guidance around what we would -- what we expect that to look like, though we do expect that to be a lever for ARPU expansion moving forward.

[Operator Instructions] Our next question comes from Jacob Stephan from Lake Street Capital Markets.

Congrats again on a nice quarter here. Maybe just touching on the kind of $3 per month sub fee. I know you talked a little bit about this, mentioned an increase in LTV, but maybe could you help us understand retention metrics a little bit?

I know you've only had these customers for two months. And is the LTV uplift, is that all from the increase in sub fee or are customers more inclined to use it given that they're paying more? Any help there?

Well, the LTV expansion has been a multiple of things, right? It's the ExtraCash origination volume going up per user. This is, I think, mostly helpful in how fast the paybacks are being generated. So we are paying back customer acquisition in now 4 months, which is, I believe, a record low for the business. So really excited to see that. As far as the retention and conversion dynamics, we've been monitoring the situation since last year.

And so there's been a significant amount of testing we've seen to really make sure this is the right price point. And we were testing everything from $0 all the way up to $5 to really test the efficacy of the pricing and $3 was really the sweet spot to really see no impact to conversion or retention. And so that does really have a positive impact on LTV and also the shorter payback periods.

Maybe reiterate that. Reiterate that point is we have done extensive testing on this new subs price point to ensure that we've not rocked the boat either from a conversion perspective or retention and feel really good about the results that we've seen from a testing and supported us putting -- implementing the fee as we've talked about.

Okay. And then second one, I just wanted to touch more on CashAI, 5.5 here. It sounds like you've trained it for the new fee structure. Maybe you could help us understand what's different about the model now and also provision for credit losses has improved so much already. Where can it actually -- where can it go to?

I mean it's just as I talked about, double the model features of the prior model and the goal is to just have better risk splitting capabilities, which we feel like we've accomplished with this latest version of the model. So feeling good about driving originations up from here while also finding some opportunities to cut bad risk to drive delinquency rates down.

So we expect that to play out with the new model release and like I said, increase -- have the potential to drive ARPU expansion as a result of the new model getting into production sometime later this quarter. In terms of the provision, as we've talked about in the past as well, our goal isn't to drive the lowest levels of loss rate is to maximize gross profit and LTV for our cohorts.

And we think this latest quarter is kind of demonstration of having a slightly higher level of provision, but also driving gross profit dollar expansion at a very attractive level. And we would expect that dynamic to continue to play out where loss rates are sort of in a healthy place at this level, and we can now optimize the model around the new fee structure and drive just gross profit dollar expansion off of this new base.

This concludes our question-and-answer session. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.