Q4 2021 Dave Inc Earnings Call

March 21, 2022

Greetings and welcome to Dave fourth quarter 2021 earnings call. At this time all participants are in a listen only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance. During the conference. Please press star zero on your telephone keypad.

As a reminder, this conference is being recorded.

Afternoon, Dave issued a press release announcing results for the fourth quarter and the fiscal year that ended on December 31, 2021, which can be found on the investors got Dave Dotcom.

We would like to remind you that during this conference call management will be making forward looking statements, including statements regarding expectations related to financial guidance outlook for the sector and company and the expected investment in growth initiatives.

Please note. These forward looking statements are based on current expectations and assumptions, which are subject to risks and uncertainties.

These statements reflect the company's views only as of today should not be relied upon as representative of use as any as of any subsequent date and Dave undertakes no obligation to revise or publicly release the results of any revision to these forward looking statements.

Of new information or future events.

These statements are subject to a variety of risks and uncertainties that could cause actual results to differ materially from expectations.

For further discussion of the material risks and other important factors that could affect our financial results. Please refer to the company's filings with the SEC, including its form 8-K filed with the SEC on January 11 2022.

In addition, during today's call the company will discuss non-GAAP financial metrics, which they believe are useful as a supplement measured.

<unk> performance. These non-GAAP measures should be considered in addition to and not as a substitute for or in isolation from GAAP results.

You will find additional disclosures regarding the non-GAAP financial measures discussed on today's call and press release issued this afternoon and its filings with the SEC each of which is posted on the Dave website. The webcast of this call will be will also be available on the Investor Relations section of the company website.

It is now my pleasure to introduce your host Mr. Jason will PEO.

I didn't and chairman of the board.

Thank you Mr. <unk> you may begin.

Thank you operator, I would like to add my own welcome to our first earnings call as a public company.

Our public market listing in January was a significant milestone as we continue on our mission to build products that level, the financial playing field for millions of Americans.

I want to thank all my colleagues and shareholders I'm, making this dream a reality.

I'm so proud of everything we've accomplished so far and even more excited to take this next step on our journey together.

For today's call I would like to begin by providing a brief overview update for those who are not as familiar with our story.

I'll then briefly share some highlights on the quarter recap of our growth strategy to create long term shareholder value and then turn it to our CFO Cal Baumann, who will discuss our fourth quarter results as well as our guidance for 2022.

First and foremost Dave as a technology company building financial solutions to serve everyday Americans, who are struggling with some or all aspects of their financial lives.

We have built one of the largest digital banking platforms in the world with over 6 million members in the U S.

We're serving a massive market with an estimated 150 million people, who still need our help in the U S alone.

We think of our market across two key groups the financially vulnerable and financially coping.

By our estimates there are 35 million people that are financially vulnerable struggling with every aspect of their financial lives.

Those are customers, who overdraft 10 to 20 times per year, and our reliance on single pay credit.

Those who need help building credit and finding new work opportunities.

There is an estimated 135000 people that are financially coping.

Struggling with some but not all aspects of their financial life.

This group is overdrafting several times per year, they need help building credit need access to affordable short and long term credit and savings and investing advice.

We started in 2017 to disrupt overdrafts, a pain point for both of these audiences that drives more than $20 billion in annual revenue per banks.

We realized early on and out of my own personal experience that consumers are primarily using overdraft knowingly.

Any form of over price short term credit.

The majority of incumbent EMEA banks require members to go negative on their accounts to access overdrafts literally requiring them to go broke to access an unreliable and expensive experience that can cost up to $100 a day in peace.

The primary use case being simply to buy gas and groceries.

And average Dave remember incurred 300 to $400 a year in bank fees prior to joining us.

We started with in App, allowing customers to link their existing bank account, which enables safety predictive overdraft alerts about upcoming bill's and offer customers.

Instant interest free credit after $75 whenever they need it to buy those everyday essentials without incurring over Jackie.

Millions of customers now rely on a service called extra cash or speed to value is unparalleled compared to incumbent and neo banks.

New user can download, Dave and have fun in their account within minutes not months and no direct deposit is required.

<unk> unique value proposition has propelled Dave to industry Best brand favorability and also leads to an estimated 30% of our members are coming to us via word of mouth.

These extra cash products has been used more than 45 million times through the end of 2021, providing us with unparalleled amounts of data, which gives us a large head start and non FICO base underwriting.

After mapping brand loyalty, our most requested future banking was launched as a separate product within the App in December of 2020.

Dave banking comes with no minimum balance fees or over Japanese.

We couple that with real time spend alerts and let our members access or paycheck two days early.

Banking is already very well received with over 2 million people opening accounts on our platform in just over a year.

Lastly, we're the first neo bank to help members put money in their pockets by tapping into the gig economy through our site hostel capability.

This product helps members apply to additional side income opportunities from Uber Jacquard, Jordache Smith and 35 other partners.

We have facilitated nearly 3 million applications for work since its launch in 2019, helping.

Helping our members generate millions of dollars of incremental income side.

Side Hustle empowers our numbers to generate additional financial flexibility.

And really highlights our mission and our community based approach.

We've made a tremendous impact helping.

Helping our members about an estimated $1 billion in fees with these three products outlined above we feel we've only scratched the surface of products that we can deliver for our total addressable market.

Now onto some highlights from the quarter and year ended December 31 2021.

During the quarter, we added 440000 net new members and ended the year with over 6 million total members on the data platform.

We had over $1 5 million monthly transacting members in Q4, and four five average transactions per active member.

Our non-GAAP total operating revenue for the quarter was $42 2 million and we generated $157 6 million in non-GAAP total operating revenues for the full year representing growth of 26% year over year.

Adjusted EBITDA for Q4, 2021 was negative $12 6 million and we ended the 2021 year with adjusted EBITDA of negative $36 5 million as we continue to invest in growth and product development.

As mentioned, Dave uniquely starts our user journey by giving customers access to credit.

Since the start of the pandemic substantial government benefits have filled some of the role that they provided but as that stimulus is reduced we're expecting it to create an even stronger need for our products activate tailwind in the quarters and years ahead.

I'll also note that a significant delay in the closing of a business combination, which delayed our ability to deploy growth capital given our limited balance sheet prior to close.

You may notice that we began to report on two new metrics monthly transacting members and transactions per active member.

A monthly transacting member as someone who makes a funding spending extra cash or subscription transaction with Dave and transactions per active is going to measure the average number of transactions initiated by that population.

Our near term roadmap is oriented around becoming a banking app of choice for our members to spend borrow and move money all transactions already around to more frequent behavior.

So we're expecting to drive both the number of monthly transacting members and the frequency, which would they transact throughout 2022 and beyond.

As we'll describe more shortly.

Substantial revenue growth by deepening our engagement with both existing loyal members and new members using these metrics as a benchmark.

Now to go into our near term strategy to drive growth, which consists of three key components first grow our population of monthly transacting members driven by both new user acquisition and increased engagement of our large existing base.

Second utilize our data driven underwriting advantaged to profitably grow our extra cash originations and average revenue per user.

Third accelerate banking adoption and spend frequency ultimately building towards winning primary account status with our members.

Success across the three key areas is what will drive our P&L moving forward.

They are interrelated and thus dismiss shouldn't be interpreted as prioritization, but inside the U S aren't rebalanced pillars for growth.

Now if you go into a bit more detail on our strategy to drive growth.

First focus on our transacting member acquisition Dave's credit first go to market strategy creates a powerful marketing flywheel.

Promoting the ability to get money in our members' pockets within minutes enables highly performative direct response advertising.

<unk> instant brand loyalty very early on in their lifecycle.

This is evidenced by our four eight star accelerating and nearly $1 million total reviews as of year end as well as our estimate that more than 30% of our members come to us via word of mouth.

This all leads to what we believe is one of the most efficient customer acquisition engine in the history of the banking industry.

With the proceeds from our business combination, which brought us to the public markets. We now have a strong balance sheet that provides the capital to grow at our full potential.

We plan to continue to increase our direct response marketing investments and Reengage most active members.

The pace of our marketing investments will continue to be disciplined in driving profitable unit economics and substantial returns in terms of LTV to CAC.

We're excited to continue investing behind the opportunities we see in the market and our strong unit economics.

We will additionally look to make David household name through brand marketing with the help of our new CMO, Michael Good body, who hails from credit Karma and transfer wise to organizations that understand how to build efficient marketing engines at scale.

Of the top 50 financial apps, Dave is the only one with a recognizable mascot and approachable bear that where all the credits that went into it.

Next we're focused on delivering a superior banking experience for everyday Americans.

His banking products has been a market as a separate product within our app for a little over a year.

We've been able to grow our number of accounts at a very low cost, which shows the power of cross sell opportunities within days.

We had approximately one 4 million New day Bank accounts opened in 2021, and nearly 50% of members who engage with extra cash ended up opening a checking account.

There was a significant <unk> opportunity as we bring people through our user journey to date banking.

We know that members who become frequent spenders on day banking also have considerably higher than the average date remember so this opportunity is important for us to capture.

What are the biggest opportunity still remains for us to drive funnel throughput and spend frequency, which I think we will achieve in a few ways.

In the second quarter of this year, we are thrilled to finally put Dave banking in the hands of all <unk> members.

In its initial phases, they separate product it was a bifurcated experience with little synergy between extra cash.

We spent a considerable amount of time thinking through the unity of these products, which took enlarged development effort over the last 18 months.

Moving forward, all new and existing Dave members will be giving a free spend accounts.

Testing, we've seen no increase to customer acquisition cost.

With our credit first approach to acquiring customers. We can now create an optimal experience for our members to spend their extra cash with their Dave debit card instead of sending funds out to their external bank accounts.

Our data as it got that driving trial and the data card provides a strong signal towards driving longer term engagement and ultimately direct deposit.

We will drive the trial on the card in two major ways.

First we will make it cheaper for Dave customers to spend extra cash instantly what their <unk> card versus express sending funds for their external account.

And next we will be introducing cashback rewards in Q2 supporting hundreds of everyday merchants to make it even more attractive to trial and use the data card compared to that of external account.

Our ultimate objective remains to build trust with our members and when primary account status with them on.

On average our direct deposit members spend about $1000 per month on their data card initiate over 35 transactions a month with us achieving.

Achieving primary account status takes time and building a high degree of chocolate or our members, which we're deeply focused on at this time driving trial as a huge way to start that journey.

Lastly, we intend to continue to expand our ability to extend more credit leveraging our underwriting and data advantage.

We'll be continuing our continuing our focus on increasing extra cash limits to help our members are for more but they need without having to go to other financial institutions.

Based on our estimate 60% of Americans can't afford a $400 emergency and we'd like to help them cover that full amount.

Over the course of 2021.

We increased the average extra cash origination size by 86%.

And average revenue per origination by 22%.

I hold up our offerings, we believe we've been able to manage risk effectively.

Because of our data advantage in our underwriting we continue to maintain credit performance and our write offs as a percentage of origination and associated revenue have been steady at about 2%.

We think our credit unit economics are best in class.

Going to continue to lean in and see this opportunity to provide a lot of upside to member lifetime value.

Beyond our core strategy. We are very excited today to announce that we have formed a strategic partnership with S. T X to develop and introduce blockchain product and services to our members in the coming quarters and years ahead.

<unk> was an investor in our pipe facility, which closed with our business combination and we've sent them building a close relationship with CEO Sam banking fee.

And his team.

There's a lot of alignment between our vision.

As part of this partnership <unk> will be making an additional $100 billion investment in Dave Great convertible note.

We look forward to talking more about this partnership and what it means in the coming quarters.

Next is important to us at these growth opportunities and lead to earnings power over time, we have a capital efficient model and cost structure with high operating leverage potential.

We continue to scale and invest in sourcing capabilities to increase margins, we will continue to build a powerful financial model.

Over the next eight to 10 quarters, our focus is on disciplined investment in profitable growth and unit economics.

After this investment period, we'll be well positioned to deliver positive adjusted EBITDA.

Our philosophy of lean towards growth profitability is important to us and will drive our capital allocation decisions.

Depending on on returns our path to profitability could be shortened or extended our primary focus is on value creation.

Most importantly, with our existing balance sheet and the capital infusion from apps, yes, we're well capitalized and have the strategic flexibility to execute on a massive market opportunity and achieve profitability with capital efficiency.

We are thrilled about closing out our business combination earlier this year.

To become a public company and look forward to working with our new board of directors to drive future growth and returns for our shareholders.

This new influx of capital will allow us to invest in our business and in turn deliver on our mission to level the financial playing field.

I would now like to turn the call over to Kyle to review our results from Q4 and provide guidance for 2022.

Passenger you Kyle.

Thank you Jason.

Given this is our first earnings call I wanted to briefly discuss our financial model before I review, our 2021 results and share our outlook for the full year of 2022.

We have two main revenue streams.

Service based revenue, which primarily consists of optional tips and optional express processing fees associated with our extra cash product.

And subscription discharge to members for our budgeting and personal financial management service.

It also includes revenue derived from lead generation fees from our side Hustle partners as well as fees earned related to our rewards product for members, who make debit card spending transactions participating merchants.

Currently the majority of service based revenue is driven by engagement with extra cash.

As our origination volume increases we tend to see increases to both optional tips and optional processing fees.

Our transaction based revenue is associated with our banking product with.

We generate interchange on card spend transactions and ATM revenue when members go outside of our network of free Atms withdraw their cash this.

This revenue line item is driven by funding and spending and engagement the strategic.

Evolution that Jason discussed previously you should lead to considerable mix shift towards this revenue stream over time.

With that background, let's take a closer look at our results.

As Jason mentioned, we are proud of the team's performance during the quarter and year and we showed that we can deliver growth. Despite the macro backdrop that you talked about.

As of December 31, 2021, we had over $6 million, Dave members and over $1 5 million average monthly transacting members in the fourth quarter.

We're also able to make considerable progress in terms of number of transaction frequency throughout the year.

Q4, our average transacting members completed an average of four five transactions per month, an increase of more than 80% versus Q4 2020.

Jason also mentioned, you'll hear us talk about these metrics consistently moving forward because we view them as an important way to measure our progress towards our strategic objective of driving greater member engagement over time.

In terms of top line performance Q4, 'twenty, one total non-GAAP operating revenues were $42 2 million, representing roughly 16% year over year growth.

Service based revenue.

Approximately 8% year over year, which was primarily driven by an increase in extra cash origination volume as well as increases to our average revenue Accourage nation.

This is a key growth lever that will continue to pursue going forward.

We had significant growth in transaction based revenue is our banking product engagement ramp versus prior year.

Q4 transaction based revenue was $33 1 million up 520% year over year we.

We have a great opportunity to continue to drive significant growth here as we deliver on the product offers opportunities that are in the pipeline.

We're excited about this part of the business as we work towards becoming a daily transaction for our members and ultimately driving towards primary account status.

Next I'll address our non-GAAP variable profit, which in Q4 was $20 2 million, representing a 48% margin relative to our non-GAAP total operating revenue.

We think this is an important metric to monitor as it's a useful indicator of the health and margin profile of our unit economics.

Key drivers of this metric.

Our extra cash credit performance as well as the primary direct cost drivers associated with our product portfolio.

It's a metric that we focus on internally in order to manage the quality of our revenue growth and ultimately increase member LTV.

Not only are we focused on driving topline growth, but we have identified meaningful near term opportunities for us to improve margins that will be accretive to our overall financial profile.

In terms of operating expenses I wanted to touch on a few key areas.

The provision for Unrecoverable advances totaled approximately $10 5 million for Q4 dollars 21 compared to $11 2 million in Q4 2000.

The slight decrease was primarily attributable to a decrease in the provision expense related to amounts outstanding 120 days under offset by an increase in amounts written off primarily attributable to growth in origination volume during the second part of the year.

Overall, our credit performance has been very consistent over time.

This is an important point from a unit economic perspective, as Jason mentioned previously in Q4, we grew the average size of an extra cost origination significantly year over year and our credit performance has been stable.

Our ability to manage risk as we increased limits is a testament to our data advantage and the investments that we've made in our proprietary underwriting in payment systems.

This is a core capability and our performance to date gives us confidence that we can continue scaling up limit in order to drive <unk> and LTV expansion moving forward.

This positions us well to extend the use case and value prop up the extra cash product to disrupt other forms of short term credit.

In Q4 of 2021 processing and servicing fees totaled approximately $6 5 million compared with <unk> 6 million for Q4 2020.

The increase was primarily.

Primarily attributable to the increase in origination volume offset by volume associated discounts and cost savings due to price reductions from our processors as we grow we'll generate incremental leverage and efficiency as a percentage of our origination volume in this line item.

In terms of marketing and acquisition spend we continue to demonstrate efficient top of funnel growth and we feel that we have among the lowest member acquisition costs in the industry.

Our marketing acquisition spend totaled approximately $12 6 million for Q4 2021 compared to approximately $15 4 million for Q4 2020.

During Q4, we added approximately 440000 net new users, which represented an average member acquisition cost of approximately $28 50.

We're hoping to deploy more capital in the fourth quarter, but given the delays in closing the business combination we were capital constrained during an attractive window to drive incremental growth.

As Jason already touched on we're in the process of gearing up for more significant investments in the second quarter behind key product initiatives.

It's worth mentioning that we're disciplined when it comes to member acquisition and the return profile of our investments.

Our objective is to manage to a payback period.

Of approximately 12 months to 18 months on a non-GAAP variable profit basis.

We expect acquisition cost to increase this year as we focus on driving monthly transacting user growth, which is a bit of a mixed shift relative to how we manage our funnel historically more oriented towards growing total Dave members.

The average <unk> of our monthly transacting members is significantly higher so, which we're expecting to improve our overall LTV to CAC profile.

That said, we'll be focused on maximizing returns.

As you'll be able to observe from our historical financials, we're not a growth at all costs team.

In terms of adjusted EBITDA as Jason alluded to earlier, we're still in considerable investment mode that will set us up to drive consistent future growth.

We grew our team meaningfully throughout 2021.

These head count investments are focused on enhancing our core offerings and building. The next generation of our products for the business we.

We expect these investments will allow us to bring more value to our members increased RFP with a more robust.

<unk> and further penetrate our Tam and deliver growth over the next several years.

That said, we frontloaded a lot of our fixed cost investments.

2021, and specifically in Q4, so we're expecting to build meaningful operating leverage as we grow throughout 2022.

With that background Q4, adjusted EBITDA was negative $12 6 million.

<unk> GAAP net loss of $15 2 million.

Note that the average shares for Q4 2021 will be significantly different given the impact of the business combination which was completed on January four.

To calculate fully diluted shares outstanding please visit our investor website.

Slide detailing our share count.

Now turning to the balance sheet, the closing of the business combination added approximately $202 million of cash after expenses, which relative to the $61 million of equity we had raised prior to going public is significant we.

We believe we are adequately capitalized to growth to execute on our growth plan.

Additionally, we currently have a significant amount of undrawn capacity under our warehouse credit facility and ample runway to scale that facility as we expand our credit business.

However on that note, we'll be looking to diversify our funding sources over the next couple of quarters to optimize our capital structure and secure a lower cost of funding.

The additional $100 million of capital from the <unk> investment provides us with added capacity to pursue further potential organic and inorganic growth opportunities.

Accounting for this new capital, we have approximately $320 million of cash on the balance sheet.

We continue to be believers in industry consolidation and think that M&A and maybe an attractive component of our growth and capital allocation strategy.

Net net we're confident that our go forward balance sheet gives us the capacity to grow considerably over the next several years and reach profitability without the need to raise additional capital.

Now turning to our outlook for the year.

We expect non-GAAP total operating revenues to be between $200 million and $230 million for the year historically.

Historically, we have found that Q1 is our lightest quarter due to tax refund season, reducing the need for credit amongst our audience. Additionally, we expect our growth to ramp throughout the year as we realize the expected returns from our investments in marketing and product enhancements.

In terms of margins, we expect our non-GAAP variable profit margin to be in a range of 44% to 48%.

We're really excited about our future and ability to continue to deliver significant growth and value for our members and shareholders for many years to come.

And with that I'll pass it over to the operator for Q&A.

Thank you we will now be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate that your line is in the question queue.

Press Star two if you would like to remove your question from the queue for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star one.

One moment, please while we poll for questions.

Okay.

Thank you. Our first question comes from John Hecht with Jefferies. Please proceed with your question.

Afternoon, guys. Thanks for taking my questions. The first one I appreciate all the customer count in transaction count.

That you gave in the quarter.

I am wondering like when you look at the customer trends.

What is what are you talking about the types of product usage of the tip levels or so forth are you seeing any kind of changes as you guys bring on more customers.

Specifically related to <unk> John .

No.

The way the.

The frequency of usage the types of products that are engaging with <unk> things like tip levels is it is it been pretty consistent or are you seeing any migration.

I would say, it's been pretty consistent over the last several years I think that there was some adverse selection going on with the stimulus as many customers didn't need a reliable services much with all the government benefit while the government benefits, but nonetheless, we did see.

Consistency from the active user base that use the product.

Okay, and then when it comes to the Fts partnership you how quickly will you be able to start kind of re offering some of those crypto services across your platform is cross selling opportunity.

We will follow up on that but we think we can get something in market at least one product in 2022.

Okay.

And then last question is you did mentioned the acquisition might be an attractive way for you to deploy capital given all the cash.

What types of things when you look at it.

So we will look at two different types of deals one that could really add significant potential to the business are ones that could drive a lot more further engagement.

Yes, Bill for Us is something that look to be alive.

As a driver for the business, so more things to acquire in that potential lean or in areas, where there is again significant ARPA potential error.

An industry that historically have high customer acquisition costs.

Great. Thank you guys very much.

Why that's important John is our cross sell as proven by <unk> bank, because so strong with the business that we think we can start to roll out products that otherwise are up to get adoption, but similar to banking, where we can get it.

<unk>.

Yes.

Thanks, guys.

Okay.

As a reminder, if you would like to ask a question. Please press star one on your telephone keypad. The confirmation tone will indicate your line is in the question queue.

Our next question comes from Sean Hogan with Rosenblatt. Please proceed with your question.

Hey, guys. Thanks for taking my question.

I just had one I wanted to get your thoughts on the latest moves from from banks moving towards reducing or completely eliminating overdraft fees.

Are you seeing now or do you anticipate.

Any pressure on this front.

So if you look at the history of sort of neo banks that have been out in market for a significant amount of time their approach to overdraft has always been do not allow it yes.

They've had a hard time getting traction because as I said at the top of the call. Most of our customers are relying on overdraft as a form of the expensive short term credit.

As the banks are rolling out products that either.

Eradicate overdraft, which we think is net negative to consumers and we will push more people towards gave the ones that are trying to offer a customer friendly solution still require the customer to go negative on their account literally going fully Brooklyn, where they can access what we believe is still an unreliable experience boy.

I love about the <unk> product that we can use our transaction based underwriting.

Money People's pockets the same day at the amount of money. They know they can count on that they can use access through an ATM or extending the friends and family.

And also just gives them access to the consistent.

Liquidity we.

We find that the big banks are still pretty far from coming up with accretion Thats competitive today, then ultimately one where we think there's a lot of defensibility around.

The way, we monetize it with tips, we think knowing whatever one.

One of these major institutions.

Got it thanks and then.

I appreciate the color on CAC I just wanted to.

Dig in a little bit on that one.

And I guess specifically.

What youre seeing in terms of <unk>.

Pressures from data privacy and the traditional channels and what percentage of your budget is allocated towards traditional performance based marketing channels as opposed to brand marketing Influencer marketing some of the other alternatives that we can see.

I would say our mix is still largely around digital channels, and so brand sort of outdoor TV still a pretty nascent channel for us we've done some testing there.

But still less than 20% of our overall overall budget as they.

About 30% of our customers today are coming to us completely be.

Gordon out, which we which we will have to see.

As far as that data privacy piece around your first question.

Does make it harder to track how effective advertising you're doing but.

All intents and purposes, we are seeing still strong performance on our direct response advertising.

We're looking forward.

Spanning that debt.

That level of spend from there on out.

I appreciate it thanks guys.

Thanks.

Thank you there are no further questions at this time. This does conclude today's conference you may disconnect. Your lines at this time. Thank you for your participation.

Okay.

[music].

Greetings and welcome todays fourth quarter 2021 earnings call. At this time all participants are in a listen only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance. During the conference. Please press star zero on your telephone keypad.

Minder This conference is being recorded.

Afternoon, Dave issued a press release announcing results for the fourth quarter and the fiscal year that ended on December 31, 2021, which can be found on the investors got Dave Dotcom.

Please note. These forward looking statements are based on current expectations and assumptions, which are subject to risks and uncertainties.

These statements reflect the company's views only as of today should not be relied upon as representative of views as of any subsequent date and Dave undertakes no obligation to revise or publicly release the results of any revision to these forward looking statements.

Of new information or future events.

These statements are subject to a variety of risks and uncertainties that could cause actual results to differ materially from expectations.

In addition, during today's call the company will discuss non-GAAP financial measures, which they believe are useful as a supplement measured.

David performance. These non-GAAP measures should be considered in addition to and not as a substitute for or in isolation from GAAP results.

You will find additional disclosures regarding the non-GAAP financial measures discussed on today's call and Dave's press release issued this afternoon and its filings with the SEC each of which is posted on the Dave website. The webcast of this call will be will also be available on the Investor Relations section of the company website.

It is now my pleasure to introduce your host Mr. Jason <unk>, CEO , President and chairman of the board. Thank you. Mr. <unk> you may begin.

Thank you operator, I would like to add my own welcome to our first earnings call as a public company.

Our public market listing in January was a significant milestone as we continue on our mission to build product that level, the financial playing field for millions of Americans.

I want to thank all my colleagues and shareholders I'm, making this dream a reality.

I am so proud of everything we've accomplished so far and even more excited to take this next step on our journey together.

For today's call I would like to begin by providing a brief overview of Dave for those who are not as familiar with our story.

First and foremost Dave as a technology company building financial solutions to serve everyday Americans, who are struggling with some or all aspects of their financial lives.

We have built one of the largest digital banking platforms in the world with over 6 million members in the U S.

We're serving a massive market with an estimated 150 million people, who still need our help in the us alone.

We think of our market across two key groups the financially vulnerable and financially coping.

By our estimates there are 35 million people that are financially vulnerable struggling with every aspect of their financial lives.

Those are customers, who have overdraft 10 to 20 times per year, and our reliance on single pay credit.

Those who need help building credit and finding new work opportunities.

There is an estimated 135000 people that are financially coping.

Struggling with some but not all aspects of their financial life.

This group is overdrafting several times per year, they need help building credit need access to affordable short and long term credit and savings and investing advice.

We started in 2017 to disrupt overdrafts, a pain point for both of these audiences that drives more than $20 billion in annual revenue per banks.

We realized early on and out of my own personal experience that consumers are primarily using overdraft knowingly and as a form of over price short term credit.

The majority of incumbents and neo banks require members to go negative on their accounts to access overdrafts literally require them to go broke to access an unreliable and expensive experience that can cost up to $100 a day in peace.

The primary use case being simply to buy gas and groceries.

And average Dave remember incurred 300 to $400 a year in bank. These prior to joining us.

We started with in App, allowing customers to link their existing bank account, which enables Dave too predictive overdraft alerts about upcoming bill's and offer customers.

Instant interest free credit up to $75 whenever they needed to buy those everyday essentials without incurring overdraft fees.

Millions of customers now rely on a service called extra cash or speed to value is unparalleled compared to incumbent and neo banks and new user can download Dave and have funds in their account within minutes not months and no direct deposit is required.

This unique value proposition has propelled Dave to industry Best brand favorability and also leads to an estimated 30% of our members coming to us via word of mouth.

Steve's extra cash products has been used more than 45 million times through the end of 2021, providing us with unparalleled amounts of data, which gives us a large head start and non FICO base underwriting.

After mapping brand loyalty, our most requested future banking was launched as a separate product within the App in December of 2020.

Dave banking comes at no minimum balance these or over Japanese.

We couple that with real time spend alerts and let our members access or paycheck two days early.

Banking is already very well received with over 2 million people opening accounts on our platform in just over a year.

Lastly, we're the first bank to help members put money in their pockets by tapping into the gig economy through our site hospital capability.

This product helps members apply to additional side income opportunities from Uber Jacquard, Jordache Smith and 35 other partners.

We have facilitated nearly 3 million applications for work since this launch in 2019.

Helping our members generate millions of dollars of incremental income side.

Side Hustle empowers our members to generate additional financial flexibility.

And really highlights our mission and our community based approach.

We've made a tremendous impact helping.

Helping our members of what an estimated $1 billion in fees with the re product outlined above.

We feel we've only scratched the surface of products that we can deliver for our total addressable market.

Now onto some highlights from the quarter and year ended December 31 2021.

During the quarter, we added 440000 net new members and ended the year with over 6 million total members on the data platform.

We had over $1 5 million monthly transacting members in Q4 and $4 five average transactions per active member.

Our non-GAAP total operating revenue for the quarter was $42 $2 million and we generated $157 6 million in non-GAAP total operating revenue for the full year representing growth of 26% year over year.

Adjusted EBITDA for Q4, 2021 was negative $12 6 million and we ended the 2021 year with adjusted EBITDA of negative $36 5 million as we continue to invest in growth and product development.

As mentioned, Dave uniquely starts our user journey by giving customers access to credit.

Since the start of the pandemic substantial government benefits have filled some of the role that <unk> provides but as that stimulus is reduced we're expecting it to create an even stronger need for our products and activate tailwind in the quarters and years ahead.

I'll also note that a significant delay in the closing of our of our business combination, which delayed our ability to deploy growth capital given our limited balance sheet prior to close.

You may notice that we began to report on two new metrics monthly transacting members and transactions per active member.

Monthly transacting member as someone who makes a funding spending extra cash for subscription transaction with Dave and transactions per active is going to measure the average number of transactions initiated by that population.

Our near term roadmap is oriented around becoming the banking app of choice for our members to spend borrow and move money all transactions already around to more frequent behavior.

So we're expecting to drive both the number of monthly transacting members and the frequency, which would they transact throughout 2022 and beyond.

As we'll describe more shortly we expect.

Substantial revenue growth by deepening our engagement with both existing members and new members using these metrics as a benchmark.

Now to go into our near term strategy to drive growth, which consists of three key components first grow our population of multi transacting members driven by both new user acquisition and increased engagement of our large existing base.

Okay utilize our data driven underwriting advantage to profitably grow our extra cash originations and average revenue per user.

Third accelerate banking adoption and spend frequency ultimately building towards winning primary account status with our members.

Success across the three key areas is what will drive our P&L moving forward. These are interrelated and not dismiss shouldn't be interpreted as prioritization, but instead viewed as our rebalanced pillars for growth.

Now if you go into a bit more detail on our strategy to drive growth.

First focus on our transacting member acquisition Dave's credit first go to market strategy creates a powerful marketing flywheel.

Noting the ability to get money in our members' pockets within minutes enables highly pro formative direct response advertising, creating instant brand loyalty very early on in their lifecycle.

This is evidenced by our four eights are accelerating and nearly $1 million total reviews as of year end as well as our estimate that more than 30% of our members come to us via word of mouth.

This all leads to what we believe is one of the most efficient customer acquisition engines in the history of the banking industry.

With the proceeds from our business combination, which brought us to the public markets. We now have a strong balance sheet that provides the capital to grow at our full potential.

We plan to continue to increase our direct response marketing investments and Reengage most active members.

The pace of our marketing investments will continue to be disciplined in driving profitable unit economics and substantial returns in terms of LTV to CAC.

Excited to continue investing behind the opportunities we see in the market and our strong unit economics.

We will additionally look to make David household name through brand marketing with the help of our new CMO, Michael Good body, who hails from credit Karma and transfer rise to organizations that understand how to build efficient marketing engines at scale.

The top 50 financial apps, Dave is the only one with a recognizable mascot and approachable bear that we're all excited to move into.

Next we're focused on delivering a superior banking experience or everyday Americans days.

Todays banking products has been a market as a separate product within our app for a little over a year.

We've been able to grow our number of accounts at a very low cost, which shows the power of cross sell opportunities within days.

We had approximately one 4 million new data bank accounts opened in 2021, and nearly 50% of members who engage with extra cash ended up opening a checking account.

There is a significant <unk> opportunity as we bring people through our user journey to date banking.

We know that members who become frequent spenders on day banking also have considerably higher.

And the average date remember so this opportunity is important for us to capture.

What are the biggest opportunity still remains for us to drive funnel throughput and spend frequency, which I think we will achieve in a few ways.

In the second quarter of this year, we are thrilled to finally put Dave banking enhances all of the members.

In its initial phases.

Product it was a bifurcated experience with little synergy between extra cash.

We spent a considerable amount of time thinking through the unity of these products, which took enlarged development effort over the last 18 months.

Moving forward, all new and existing Dave members will be giving a free spend accounts in.

And testing, we've seen no increase in customer acquisition costs with.

Our data suggests that driving trial and the data card provides a strong signal towards driving longer term engagement and ultimately direct deposit.

We will drive the trial on the card in two major ways.

First we will make it cheaper for Dave customers to spend extra cash instantly what their <unk> card versus express sending funds that are external account.

And next we will be introducing cashback rewards in Q2 supporting hundreds of everyday merchants to make it even more attractive to trial and use the data card compared to that of external account.

Our ultimate objective remains to build trust with our members and when primary account status with them.

On average our direct deposit members spend about $1000 per month on their Descartes initiate over 35 transactions a month with us achieving.

Achieving primary account status takes time and building a high degree of trust that our members, which we're deeply focused on at this time driving trial as a huge way to start that journey.

Lastly, we intend to continue to expand our ability to extend more credit leveraging our underwriting and data advantage.

We'll be continuing our continuing our focus on increasing extra cash limits to help our members afford more of what they need without having to go to other financial institutions.

Based on our estimate 60% of Americans can't afford a $400 emergency and we'd like to help them cover that full amount.

Over the course of 2021.

We increased the average extra cash origination size by 86%.

And average revenue per origination by 22%.

When I look up our offerings, we believe we have been able to manage risk effectively.

Because of our data advantage in our underwriting we continue to maintain credit performance and our write offs as a percentage of originations and associated revenue have been steady at about 2%.

We think our credit unit economics are best in class. So we're going to continue to lean in and see this opportunity to provide a lot of upside to member lifetime value.

Beyond our core strategy. We are very excited today to announce that we have formed a strategic partnership with <unk> to develop and introduce blockchain product and services to our members in the coming quarters and years ahead.

<unk> was an investor in our pipe facility, which closed with our business combination and we've sent them building a closer relationship with CEO Sam Bank Macquarie.

And his team.

A lot of alignment between our vision.

As part of this partnership <unk> will be making an additional $100 million investment in Dave Great convertible note.

We look forward to talking more about this partnership and what it means in the coming quarters.

Next is important to us at these growth opportunities lead to earnings power over time, we had a capital efficient model and cost structure with high operating leverage potential.

We continue to scale and invest in sourcing capabilities to increase margins, we will continue to build a powerful financial model.

Over the next eight to 10 quarters, our focus is on disciplined investment in profitable growth and unit economics.

After this investment period, we'll be well positioned to deliver positive adjusted EBITDA.

Our philosophy of lean towards growth, but profitability is important to us and will drive our capital allocation decisions.

Depending on on returns our path to profitability could be shortened or extended our primary focus is on value creation.

Most importantly, with our existing balance sheet and the capital infusion from RPX, we're well capitalized and have the strategic flexibility to execute on a massive market opportunity and achieve profitability with capital efficiency.

We are thrilled about closing out our business combination earlier this year.

To become a public company and look forward to working with our new board of directors to drive future growth and returns for our shareholders.

This new influx of capital will allow us to invest in our business and in turn deliver on our mission to level the financial playing field.

I would now like to turn the call over to Kyle to review our results from Q4 and provide guidance for 2022.

Passenger you Kyle.

Thank you Jason.

Given this is our first earnings call I wanted to briefly discuss our financial model before I review, our 2021 results and share our outlook for the full year of 2022.

We have two main revenue streams first service based revenue, which primarily consists of optional tests and optional express processing fees associated with our extra cash product and.

Subscription is charged to members for our budgeting and personal financial management service.

Currently the majority of service based revenue is driven by engagement with extra cash.

As our origination volume increases we tend to see increases to both optional tips and optional processing fees.

Our transaction based revenue is associated with our day of banking products.

We generate interchange on card spend transactions and ATM fee revenue when members go outside of our network of free Atms with Robert Bosch. This.

This revenue line item is driven by funding and spending and engagement with strategic.

Evolution that Jason discussed previously you should lead to considerable mix shift toward this revenue stream over time.

With that background, let's take a closer look at our results.

As Jason mentioned, we are proud of the team's performance during the quarter and year. When we showed that we can deliver growth. Despite the macro backdrop that you talked about.

As of December 31, 2021, we had over $6 million, Dave members and over $1 5 million average monthly transacting members in the fourth quarter.

We're also able to make considerable progress in terms of number of transaction frequency throughout the year.

Q4, our average transacting members completed an average of four five transactions per month, an increase of more than 80% versus Q4 2020.

In terms of topline performance Q4, 'twenty, one total non-GAAP operating revenues were $42 2 million, representing roughly 16% year over year growth.

Service based revenue.

Approximately 8% year over year, which was primarily driven by an increase in extra cash origination volume as well as increases to our average revenue per origination.

This is a key growth lever that will continue to pursue going forward.

We had significant growth in transaction based revenue as our banking product engagement grants versus prior year.

Q4 transaction based revenue was $33 1 million up 520% year over year we.

We have a great opportunity to continue to drive significant growth year as we deliver on the product opportunities that are in the pipeline.

We're excited about this part of the business as we work towards becoming a daily transaction for our members and ultimately driving towards primary account status.

Next I'll address our non-GAAP variable profit, which in Q4 was $20 2 million, representing a 48% margin relative to our non-GAAP total operating revenue.

We think this is an important metric to monitor as it's a useful indicator of the health and margin profile of our unit economics.

Key drivers of this metric.

Our extra cash credit performance as well as the primary direct cost drivers associated with our product portfolio.

It's a metric that we focus on internally in order to manage the quality of our revenue growth and ultimately increase member LTV.

Not only are we focused on driving top line growth, but we have identified meaningful near term opportunities for us to improve margins that will be accretive to our overall financial profile.

In terms of operating expenses I wanted to touch on a few key areas.

The provision for Unrecoverable advances totaled approximately $10 5 million for Q4 dollars 21 compared to $11 2 million in Q4 2000.

The slight decrease was primarily attributable to a decrease in the provision expense related to amounts outstanding of 120 days under offset by an increase in amounts written off primarily attributable to growth in origination volume during the second part of the year.

Overall, our credit performance has been very consistent over time.

Our ability to manage risk as we increased limits is a testament to our data advantage and the investments that we've made in our proprietary underwriting in payment systems.

This is a core capability and our performance to date gives us confidence that we can continue scaling up limit in order to drive <unk> and LTV expansion moving forward.

This positioned us well to extend the use case and value prop up the extra cash product to disrupt other forms of short term credit.

In Q4 of 2021 processing and servicing fees totaled approximately $6 5 million compared to <unk> 6 million for Q4 2020.

The increase was primary.

In terms of marketing and acquisition spend we continue to demonstrate efficient top of funnel growth and we feel that we have among the lowest member acquisition costs in the industry.

Our marketing acquisition spend totaled approximately $12 6 million for Q4 2021 compared to approximately $15 4 million for Q4 2020.

During Q4, we added approximately 440000 net new users, which represented an average member acquisition cost of approximately $28 50.

As Jason already touched on we're in the process of gearing up for more significant investments in the second quarter behind key product initiatives.

It's worth mentioning that we're disciplined when it comes to member acquisition and the return profile of our investments.

Our objective is to manage to a payback period.

Of approximately 12 months to 18 months on a non-GAAP variable profit basis.

The average <unk> of our monthly transacting members is significantly higher so, which we're expecting to improve our overall LTV to CAC profile.

That said, we'll be focused on maximizing returns.

As you'll be able to observe from our historical financials, we're not a growth at all costs team.

In terms of adjusted EBITDA as Jason alluded to earlier, we're still in considerable investment mode that will set us up to drive consistent future growth.

We grew our team meaningfully throughout 2021.

These head count investments are focused on enhancing our core operate offering and building. The next generation of our products for the business. We expect these investments will allow us to bring more value to our members increased RFP with a more robust.

Offering and further penetrate our Tam and deliver growth over the next several years.

That said, we frontloaded a lot of our fixed cost investments throughout.

Throughout 2021, and specifically in Q4, so we're expecting to build meaningful operating leverage as we grow throughout 2022.

With that background Q4, adjusted EBITDA was negative $12 6 million.

With a GAAP net loss of $15 2 million.

Note that the average shares for Q4 2021 will be significantly different given the impact of the business combination which was completed on January four.

To calculate fully diluted shares outstanding please visit our investor website.

Slide detailing our share count.

Now turning to the balance sheet, the closing of the business combination added approximately $202 million in cash after expenses, which relative to the $61 million of equity we had raised prior to going public is significant we.

We believe we are adequately capitalized to growth to execute on our growth plan.

Additionally, we currently have a significant amount of undrawn capacity under our warehouse credit facility and ample runway to scale that facility as we expand our credit business.

However on that note, we'll be looking to diversify our funding sources over the next couple of quarters to optimize our capital structure and secure a lower cost of funding.

The additional $100 million of capital from the SPX investment provides us with added capacity to pursue further potential organic and inorganic growth opportunities.

Counting for this new capital, we have approximately $320 million of cash on the balance sheet.

We continue to be believers in industry consolidation and think that M&A and maybe an attractive component of our growth and capital allocation strategy.

Net net we're confident that our go forward balance sheet gives us the capacity to grow considerably over the next several years and reach profitability without the need to raise additional capital.

Now turning to our outlook for the year.

We expect non-GAAP total operating revenues to be between $200 million and $230 million for the year.

In terms of margin.

Our non-GAAP variable profit margin to be in a range of 44% to 48%.

We're really excited about our future and ability to continue to deliver significant growth and value for our members and shareholders for many years to come.

And with that I'll pass it over to the operator for Q&A.

You May press star two if he would like to remove your question from the queue for participants using speaker equipment. It may be necessary to pick up your handset before pressing the historically normal.

One moment, please while we poll for questions.

Okay.

Thank you. Our first question comes from John Hecht with Jefferies. Please proceed with your question.

Afternoon, guys. Thanks for taking my questions. The first one I appreciate all the customer count in transaction count.

That you gave in the quarter.

I'm wondering though when you look at the customer trends.

What are you talking about the types of product usage of the tip levels or so forth are you seeing any kind of changes as you guys bring on more customers.

Specifically related to <unk> John .

No just the way.

The frequency of usage the types of products that are engaging with <unk> things like tip levels is it is it been pretty consistent or are you seeing any migration.

I would say, it's been pretty consistent over the last several years I think that there was some adverse selection going on with the stimulus as many customers just didn't need to rely on that sort of services much with all the government benefit all the government benefits, but nonetheless, we did see.

Consistency from the active user base that use the product.

Okay, and then when it comes to the Fts partnership you how quickly will you be able to start kind of re offering some of those crypto services.

Your platform is cross selling opportunity.

We will follow up on that but we think we can get something in markets.

One product in 2022.

Okay.

And then last question is you did mentioned the acquisition might be an attractive way for you to deploy capital given all the cash.

Sure.

What types of things when you look at it.

So we will look at two different types of deals one that could really add significant potential to the business are ones that could drive a lot more further engagement.

<unk> for us is something that look to be a lot.

As a driver for the business, so more things to acquire in that potential.

Lean or in areas, where there is again significant ARPA potential there.

It's an industry that historically have high customer acquisition costs.

Great. Thank you guys very much.

Why that's important John is our cross sell as proven by the banking is so strong with the business that we think we can start to roll out products that otherwise are up to get adoption, but similar to banking, where we can get a good attach yep.

Yes.

Thanks, guys.

Okay.

As a reminder, if you would like to ask a question. Please press star one on your telephone keypad. The confirmation tone will indicate your line is in the question queue.

Our next question comes from Sean, Oregon with Rosenblatt. Please proceed with your question.

Hey, guys. Thanks for taking my question.

I just had one I wanted to get your thoughts on the latest moves from from banks moving towards reducing or completely eliminating overdraft fees or are you seeing now or do you anticipate.

Any pressure on this front.

So if you look at the history of sort of neo banks that have been out in market for a significant amount of time their approach to overdraft has always been to not allow it.

They've had a hard time getting traction because as I said at the top of the call. Most of our customers are relying on overdraft as a form of the expense of short term credit.

As the banks are rolling out products that either.

Eradicate overdraft, which we think is net negative to consumers and we will push more people towards gave the ones that are trying to offer a customer friendly solution still require the customer to go negative on their account literally going fully brooksville. They can access what we believe is still an unreliable experience we love them.

The <unk> product that we could use our transaction based underwriting to get money in People's pockets. The same day at <unk>.

Money they know they can count on that they can use access through an ATM through sending the friends and family.

And also just gives them access to the consistent.

Liquidity we.

We find that the big banks are still pretty far from coming out with a solution. That's competitive today, then ultimately one where we think there's a lot of defensibility around.

The way, we monetize it with tests, we think knowing whatever one.

One of these major institutions.

Got it thanks and then.

I appreciate the color on CAC I just wanted to.

Dig in a little bit on that front.

And I guess specifically.

What youre seeing in terms of <unk>.

Pressures from some data privacy and the traditional channels and what percentage of your budget is allocated towards traditional performance based marketing channels as opposed to brand marketing Influencer marketing some of the other alternatives that we can see.

I would say our mix is still largely around digital channels and so brand sort of outdoor TV is still a pretty nascent channel for us we've done some testing there.

But still less than 20% of our overall overall budget as they.

About 30% of our customers today are coming to us completely be.

Gordon out, which we will have to see.

As far as that data privacy piece around your first question.

Does make it harder to track how effective advertising you're doing but.

All intents and purposes, we are seeing still strong performance on our direct response advertising.

Looking forward to expanding that.

That level of spend from there on out.

I appreciate it thanks guys.

Thanks.

Sure.

Thank you there are no further questions at this time. This does conclude today's conference you may disconnect. Your lines at this time. Thank you for your participation.

Q4 2021 Dave Inc Earnings Call

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