Q1 2024 BM Technologies Inc Earnings Call

Operator: Good morning, everyone, and welcome to the BM Technologies first quarter and 2024 earnings call. Please note that this event is being recorded; please follow management's prepared remarks. We will hold a question and answer session. For those joining us on the webcast, you can submit your questions online, and the management team can see them. At this time, I'd like to turn the conference call over to Brian Prenoveau, Investor Relations for Bm Technologies. Please go ahead.

Good morning, everyone and welcome to the <unk> Technologies' first quarter in 2024 earnings call.

Please note that this event is being recorded.

Speaker Change: Hello management prepared remarks.

Speaker Change: We'll hold a question and answer session.

For those joining us on the webcast you can see.

Speaker Change: Your questions online and the management team can see them.

Speaker Change: At this time I'd like to turn the conference call over to Brian Carnival Investor Relations for <unk> technologies.

Brian Prenoveau: Please go ahead.

Brian Prenoveau: Thank you, operator. And good morning, everyone.

Brian Prenoveau: Thank you operator, and good morning, everyone.

Speaker Change: You for joining us for P. M technologies first quarter earnings call before we begin we would like to remind you that some of the statements. We make today may be considered forward looking these forward looking statements are subject to a number of risks and uncertainties that may cause actual performance results to differ materially from what is currently anticipated.

Brian Prenoveau: Thank you for joining us for Bm Technologies' first quarter earnings call. Before we begin, we would like to remind you that some of the statements we make today may be considered forward-looking. These forward-looking statements are subject to a number of risks and uncertainties that may cause actual performance results to differ materially from what is currently anticipated. Please note that these forward-looking statements speak only as of the date of this presentation, and we undertake no obligation to update these forward-looking statements in light of new information or future events, except to the extent required by applicable securities laws.

Speaker Change: Please note that these forward looking statements speak only as of the date of this presentation and we undertake no obligation to update these forward looking statements in light of new information or future events, except to the extent required by applicable securities laws.

Brian Prenoveau: Please refer to our SEC filings, including our Form 10-K and 10-Qs, for a more detailed description of the risk factors that may affect our results. Copies may be obtained from the SEC or by visiting the Investor Relations section of our website. At this time, I will turn the call over to Luvleen Sidhu, Bm Technologies' CEO.

Speaker Change: Please refer to our SEC filings, including our Form 10-K, and 10-Qs for a more detailed description of the risk factors that may affect our results copies may be obtained from the SEC or by visiting the Investor Relations section of our website.

Speaker Change: At this time I will turn the call over to Loveline to do P. M technologies CEO with lean.

Luvleen Sidhu: Thanks, Brian, and good morning, everyone. Joining me on today's call is Ajay Asija, our CFO, and Jamie Donahue, our President and Chief Technology Officer. Together, we are excited to share with you our financial results for the first quarter of 2024 and reiterate our strategy going forward with an emphasis on our technology transformation and growth initiatives. We are very pleased that the foundational steps our team took over the last 18 months have begun to show in the financial results.

Speaker Change: Thanks, Brian and good morning, everyone.

Loveline: Joining me on today's call is a J S D Zhao, our CFO and Jamie Donahue, our president and Chief Technology Officer.

Luvleen Sidhu: Revenue increased 21% compared to the first quarter last year, and we delivered $1.4 million of positive core EBITDA. This represents a $3.2 million improvement compared to the first quarter of last year. Similarly, first quarter net income of $748,000 was a $5.7 million increase compared to the first quarter of last year.

Loveline: Together, we are excited to share with you our financials for the first quarter of 'twenty 'twenty, four and reiterate our strategy going forward with an emphasis on our technology transformation and growth initiatives.

Loveline: We are very pleased that the foundational steps our team took over the last 18 months have begun to show through the financial results.

Loveline: Revenue increased 21% compared to the first quarter last year, and we delivered one 4 million of positive core EBITDA.

Loveline: This represents a $3 2 million dollar improvement compared to the first quarter of last year.

Similarly, first quarter net income of 748000 was a $5 to $5 $7 million increase compared to the first quarter of last year.

Luvleen Sidhu: Ajay will provide further details about the significant financial improvements. However, at a high level, the transfer of deposits to our new Durban exempt partner bank, coupled with variable rate deposit pricing in a stabilized interest rate environment, contributed to our increased revenue. Additionally, the Profit Enhancement Plan introduced last year is showing year-over-year benefits as we have meaningfully lowered our cost structure. These initiatives delivered improvements throughout the P&L, as evidenced by higher revenue, expanding margins, and solid profitability. The first quarter of 2024 represents the fifth consecutive quarter of sequentially improved core EBITDA performance.

Speaker Change: A J, we will provide further detail about the significant financial improvement however, at a high level the transfer of deposits through our new Durbin exempt partner bank, coupled with variable rate deposit pricing and it's stabilized interest rate environment contributed to our increased revenue.

Speaker Change: Additionally, the profit enhancement plan introduced last year is showing year over year benefit.

Speaker Change: We have meaningfully lowered our cost structure.

Speaker Change: These initiatives delivered improvement throughout the P&L as evidenced by higher revenue.

Speaker Change: Banding margin and solid profitability.

Speaker Change: The first quarter of 2024 represents the fifth consecutive quarter of sequentially improved core EBITDA performance.

Luvleen Sidhu: We're happy about the first quarter results and our progress, and we will continue to pursue the strategies we've discussed over the past year, doubling down on our higher education business and executing on our customer for life strategy. Jamie will provide further updates on our technology modernization efforts, which are the precursor to delivering on this plan that positions our company for an exciting future of growth and innovation. The market opportunity remains ripe for growth.

Speaker Change: We're happy about the first quarter results and our progress and we will continue to pursue the strategy. We've discussed over the past year doubling down on our higher education business and executing on our customer for life strategy.

Speaker Change: Jamie will provide further updates on our technology modernization efforts.

Speaker Change: That are the precursor to delivering on this plan.

Speaker Change: Positions, our company for an exciting future growth and innovation.

Speaker Change: The market opportunity remains ripe for growth.

Luvleen Sidhu: The statistics of our core customer market remain the same as what we've discussed in recent quarters, with ample opportunity to deepen customer relationships, increase customer lifetime value, and unlock new revenue streams. This is a unique opportunity only available to BMTX due to our distinctive customer acquisition model and longstanding contractual relationships with colleges and universities across the country. The first quarter marks a return to profitability, but we are not done. We aim to continue enhancing our technology stack to improve the overall user experience with technology and capabilities that appeal to student banking customers and customers beyond their student years.

Speaker Change: The statistics of our core customer market remain the same as what we've discussed in recent quarters with ample opportunity to deepen customer relationships increased customer lifetime value and unlock new revenue stream.

This is a unique opportunity only available to be MTX due to our distinctive customer acquisition model and longstanding contractual relationships with colleges and universities across the country.

Speaker Change: The first quarter marks our return to profitability, but we are not done we aim to continue enhancing our technology stack to improve the overall user experience with technology and capability that appeal to student banking customers and customers beyond their student years.

Luvleen Sidhu: We believe that by executing on our long-term growth strategy, we will be able to build upon a foundation of excellent financial results and continue to drive growth and profitability. I will now hand it over to Ajay to review our financial performance in the first quarter in more detail and to provide more context.

Speaker Change: We believe that by executing on our long term growth strategy, we will be able to build upon a foundation of excellent financial results and continue to drive growth and profitability.

Ajay Asija: During the first quarter of 2024, the company earned $16.2 million of operating revenue, up 21% compared to $13.4 million in the prior year. Servicing fees for the first quarter of 2024 totaled $9.0 million as compared to $6.6 million in the prior year. Servicing fees were up 35% due to higher deposit yields under the new variable rate deposit processing service agreement. Interchange and card revenue totaled $3.4 million for the first quarter of 2024 as compared to $3.0 million in the prior year. Interchange and card revenue were up 15%, driven primarily by the change in partner banks with Durban exempt interchange rates and higher overall spend.

Speaker Change: I will now hand, it over to a J to review our financial performance in the first quarter in more detail and to provide more context.

Speaker Change: Yeah.

Speaker Change: Thank you Leanne.

J: During the first quarter of 2024, the company earned $16 2 million of operating revenue up 21% compared to $13 4 million in the prior year.

Speaker Change: Servicing fee for the first quarter of 2024 total.

Speaker Change: 9.0 million.

Speaker Change: As compared with $6 6 million in the prior year.

Speaker Change: Servicing fees were up 35% due.

Speaker Change: Due to higher deposit deals under the new variable rate deposit processing service agreement.

Speaker Change: Interchange and card revenue totaled $3 4 million for the first quarter of 2024 as compared to 3.0 million in the prior year.

Speaker Change: Interchange and card revenue were up 15% driven primarily by the change in partner banks with Durbin exam interchange rates and higher overall spend.

Ajay Asija: Average service deposits totaled $828 million for the first quarter of 2024, an increase from $805 million for the fourth quarter of 2023 but a decrease from $1.2 billion in the first quarter of 2023. All of this balance reduction occurred within our BAS vertical due to the interest rate sensitivity of a large portion of these accounts. Average deposits in our higher education vertical were 2.5% higher than the first quarter of 2020. Deposits for 90-day active accounts in our Higher Education Vertical at December 31, 2024 averaged $2,025, up from $1,947 compared to the first quarter of 2023.

Speaker Change: Average service deposits totaled 828 million for the first quarter of 'twenty 'twenty, four and increased from $805 million for the fourth quarter of 2023, but a decrease from $1 2 billion in the first quarter of 2023.

Speaker Change: All of this balance reduction occurred within our bass vertical due to the interest rate sensitivity of a large portion of these accounts.

Speaker Change: Average deposits in our higher education, vertical where $2, 5% higher than the first quarter of 2023.

Speaker Change: Deposits for 90 day active accounts.

Speaker Change: Education vertical.

Speaker Change: December 31, 2020 for average $2025 up from $1947 compared to the first quarter of 2023.

Speaker Change: Spend totaled 809 million for the first quarter of 2024.

Ajay Asija: Spend total $809 million for the first quarter of 2024, up both from $714 million for the fourth quarter of 2024 and $787 million in the first quarter of 2023. Spend for 90 day active accounts for the first quarter of 2024 averaged $2,396 within our higher education vertical and $1,666 within our BATS vertical. Annualized debit card spend for highly active BaaS users, meaning those with both direct deposits and a minimum of five customer-driven transactions per month, was approximately $20,100 during the first quarter of 2024.

Speaker Change: Both from $714 million for the fourth quarter of 'twenty four.

Speaker Change: 787 million in the first quarter of 'twenty three.

Speaker Change: Spend per 90 day active accounts for the first quarter of 2024 averaged $2396 within our higher education vertical and $1666 within our bats vertical.

Speaker Change: Annualized debit card spend for highly active bass users.

Speaker Change: As with both direct deposits in a minimum of five customer driven transactions per month was approximately 20000 and $100 during the first quarter of 2024.

Ajay Asija: This very attractive cohort makes up approximately 23% of our active accounts at March 31, 2024, as compared to 21% in the year-ago period. Additionally, there were approximately 100,000 new account signups in the first quarter of 2024. Account fees and university fees totaled $3.7 million for the first quarter of 2024, up slightly from $3.6 million in the prior year. During the first quarter of 2024, the company retained 99% of its higher education and institutional clients.

Speaker Change: This very attractive cohort makes up approximately 23% of our active accounts at.

At March 31st 2024, as compared to 21% in the year ago period.

Speaker Change: There were approximately 100000, new account sign ups in the first quarter of 2024.

Speaker Change: Account phasing University fees totaled $3 7 million for the first quarter of 2024 up slightly from $3 6 million in the prior year.

Speaker Change: During the first quarter of 2024.

Speaker Change: <unk> retained 99% of its higher education and institutional clients.

Ajay Asija: We processed over $4.3 billion of student financial aid refund disbursements during the first quarter of 2024. Also, $4.3 billion, approximately 12%, or $523 million, was disbursed into BankMobile by checking account. Core operating expenses totaled $14.8 billion for the first quarter of 2024, comparing favorably to the $15.3 million incurred in the first quarter of 2023, primarily from the implementation of our PEP plan. Total expenses decreased meaningfully to $15.5 million from $19.7 million in the first quarter last year.

Speaker Change: We processed over $4 3 billion.

Speaker Change: Student financial aid refund disbursements during the first quarter of 2024.

Speaker Change: After a 4.3.

Speaker Change: 3 billion approximately 12%.

Speaker Change: $523 million was dispersed into bank globally by checking accounts.

Speaker Change: Okay.

Speaker Change: Yeah.

Speaker Change: Core operating expenses totaled $14 8 billion for the first quarter of 2024.

Speaker Change: Pairing favorably to the $15 3 million incurred in the first quarter of 2023, primarily from the implementation of our pet plan.

Speaker Change: Total expenses decreased meaningfully to $15 5 million from $19 7 million in the first quarter last year.

Ajay Asija: This reduction was primarily the result of lower expenses from the implementation of our PEP plan, lower depreciation and amortization costs from full amortization of a portion of the internally developed software, and a one-time reduction in share-based compensation expense. Core net income before interest, taxes, depreciation, and amortization totaled $108,000 for the first quarter of 2024, a substantial increase from the core net loss of $5.0 million in the Core EBITDA was $1.4 million, compared to a core EBITDA loss of $1.9 million in the first quarter last year.

Speaker Change: This reduction was primarily the result of lower expenses.

From the implementation of our Pep plan, lower depreciation and amortization costs from full amortization of a portion of the internally developed software and a onetime.

Speaker Change: Reduction in share based compensation expense.

Speaker Change: Core net income before interest taxes, depreciation and amortization totaled $108000 for the first quarter of 2024.

Speaker Change: The actual increase from the core net loss of.

Speaker Change: <unk> 5.0 million in the first quarter of 2023.

Speaker Change: Core EBITDA was a positive $1 4 million.

Speaker Change: Core EBITDA loss.

Speaker Change: Negative $1 9 million in the first quarter last year.

Ajay Asija: Q1 2024 marked a turnaround in the company with the first positive core EBITDA since Q3 of 2022; liquidity remains strong, at March 31st, 2024 with $14.6 million of cash, 4.8 million of working capital, and no debt. Given the strong start to the year and continued impact of the 2023 PEP, we anticipate delivering positive core EBITDA for the full year 2024. And with that, I'd like to turn the call over to Jamie for his discussions on our technology investments and improvements. Jamie? Thank you, Ajay.

Speaker Change: Q1, 2024, Mark the turnaround in the company with the first positive core EBITDA since Q3 of 2022.

Speaker Change: Liquidity remained strong.

Speaker Change: At March 31, 2020 core with $14 6 million of cash.

Speaker Change: $4 8 million of working capital and no debt.

Speaker Change: Given the strong start to the year and continued impact of the twin twenty-three pad, we anticipate delivering positive core EBITDA for the full year of 2024.

Speaker Change: And with that I'd like to turn the call over to Jamie for his discussions on our technology investments and improvements Jamie.

James Donahue: Thank you, Ajay, and good morning. As we shared last quarter, BMTX is well on its way to executing on our technology transformation. We are happy to announce that we have launched our new mobile and web experiences for our Bank Mobile Vibe customers this quarter, with exciting new features to enhance the overall user experience. Our technology transformation was driven by our vision to modernize our platform architecture and offer innovative products and services to our customers.

James Donahue: Thank you a J and good morning, as we shared last quarter PMT is well on its way to executing on our technology transformation.

James Donahue: We are happy to announce that we have launched our new mobile and web experiences for our bank mobile <unk> customers. This quarter with exciting new features to enhance the overall user experience or.

James Donahue: Our technology transformation was driven by our vision to modernize our platform architecture and offer innovative products and services to our customers.

James Donahue: We are executing on that vision and delivering exciting new features for our clients. Our main focus over the next few quarters will be to add a rewards engine to allow our students to take advantage of their everyday spending and encourage primary banking behavior. We are also looking to enhance our direct deposit flow and external account linking for easy funding. All these changes will make the Bank Mobile VIVE account a future-rich, lifelong checking and savings account that will grow with our student population.

James Donahue: We are executing on that vision and delivering exciting new features for our clients.

James Donahue: Our main focus over the next few quarters will be to Adam rewards engine to allow our students to take advantage of their everyday spending and encourage primary banking behavior.

James Donahue: We are also looking to enhance our direct deposit flow and external account linking for easy funding. All these changes will make the bank mobile vibe account a feature rich lifelong checking and savings account that will grow with our student population.

James Donahue: Our technology platform will also enable us to integrate with partners more easily so we can truly add value to our customers from a product and partnership standpoint over time. I'm also excited to announce that we have successfully launched our first new product and service to our university clients to diversify beyond our original refund disbursement product. The product is called Identity Verification Service, or IDV.

James Donahue: Our technology platform will also enable us to integrate with partners more easily so we can truly add value to our customers from a product and partnership stamps standpoint over time.

James Donahue: I'm also excited to announce that we have successfully launched our first new product and service to our university clients to diversify beyond our original re from the refund disbursement product.

James Donahue: The product is called identity verification service, where I D.

James Donahue: It is a SaaS revenue product that assists universities with one of their biggest pain points, which is enrollment fraud. The product we have launched mitigates fraud vulnerabilities during the student enrollment process. We've signed nine clients to date and have a strong pipeline of over 50 schools we're working on over the next several quarters. We are excited as this offering increases stickiness and lifetime value of our existing higher education relationship and opens doors to sell new products to new clients. In a few minutes, I will turn the call back over to Luvleen.

James Donahue: It is SaaS revenue product that assists universities with one of their biggest pain points, which is enrollment fraud. The product we have launched mitigates broadwater abilities during our student enrollment process.

James Donahue: We have signed nine clients to date and have a strong pipeline of over 50 schools. We are working on over the next several quarters.

James Donahue: We are excited as this offering increase the stickiness and lifetime value of our existing higher education relationships and opening stores to sell new to new clients.

James Donahue: But before I do, I want to update you on our progress executing on the automation and machine learning front within BMTS. We're happy to share that since we met with you last, we've deployed three more robotic processing automation, automation agents, and RPA modules, bringing our production total to 10, within our back office that has increased efficiency, reduced error rates, and lower overall expenses. As an example, just one of these automated intelligence agents has handled over 83,000 cases since its launch in January. We estimate that some 5000 hours are saved in this application of AI and ML alone.

Speaker Change: In a few minutes I will turn the call back over to Loveline, but before I do I want to update you on our progress executing on the automation and machine learning front with MB MTX.

We're happy to share that since we met with the last we've deployed three more robotic processing autumn agent automation agents RPE modules, bringing our production totaled to 10.

Speaker Change: Within our back office that have increased efficiency reduced our rates and lower overall expenses.

Speaker Change: As an example, just one of these automated intelligence agents has handled over 83000 cases since its launch in January we estimate some 5000 hours were saved in this application of AI and ml alone. We are executing on expanding these functions working across the larger organization in the coming quarters.

James Donahue: We are executing on expanding these functions across the larger organization in the coming quarter. In addition to this, we are leveraging our new AI innovation lab on a few. The first is leveraging our proprietary large language model that employs our data set to direct marketing to our existing and prospective clients in deeply meaningful ways. And frankly, it was just not available on our legacy platform.

Speaker Change: In addition to this we are leveraging our new AI innovation lab on a few fronts. The first is leveraging our proprietary large language model that employs our dataset to.

Speaker Change: To direct marketing to our existing and prospective clients and deeply meaningful ways and frankly that was just not available on our legacy platform.

James Donahue: We've also built an API to automate and predict fraudulent activity across the portfolio. The new API is in production and actively being tuned and trained. We are also developing a press of assistance that will help answer and support questions, answer support questions, provide detail on account activity, and we believe it will be of immense value to our bank mobile vibe customers. Thank you for your time this morning. I will close with this thought. We are extremely proud of the hard work and dedication of our talented team that makes this amazing technology come to life. I look forward to keeping the positive momentum going, and with that, I turn the call back over to Luvleen for some closing thoughts.

Speaker Change: We've also built an API to automate and predict fraudulent activity across the portfolio.

Speaker Change: This new API is in production and actively being tuned and trained.

Speaker Change: We are also developing impressive assistant that will help answer and support question answer support questions provide detail on account activity and we believe Adam mentioned value to our bank mobile by customers.

Speaker Change: Thank you for your time. This morning, I will close with this thought we are extremely proud of the hard work and dedication of our talented team that makes this amazing technology come to life.

Speaker Change: Look forward to keeping the positive momentum going and with that I'll turn the call back over to Loveline for some closing thoughts.

Loveline: Thank you Jamie as you can tell there is a lot of excitement amongst our leadership team about the trajectory of our business and the opportunities that lie ahead.

Luvleen Sidhu: As you can tell, there is a lot of excitement amongst our leadership team about the trajectory of our business and the opportunities that lie ahead. Our technology is an enabler that opens up new revenue streams and positions us to offer our customers products and partnerships we could never before. This year we are particularly focused on three key tactics to drive growth now that we have our technology in place. First, a new product launch for a student-buy checking account.

Loveline: Our technology is an enabler that opens up new revenue streams and positions us to offer our customers products and partnerships, we never could before.

Luvleen Sidhu: This will be our cashback rewards engine launching in Q2. Second, a new product launch for our university. This is our IDB product, of which we have nine signed clients to date. Third, provide personalized omni-channel marketing to increase funnel conversion and engagement. With the advantages of AI, we are better positioned for micropersonalization.

Loveline: This year, we are particularly focused on three key tactics to drive growth now that we have our technology in place.

Loveline: First a new product launch for our student by checking account.

Loveline: This will be our cashback rewards engine launching in Q2.

Loveline: Second our new product launch for our University clients.

Loveline: This is our <unk> product, which we have nine signed clients to date third provide personalized omnichannel marketing increased funnel conversion and engagement.

With the advantages of AI, we are better positioned for micro personalization.

Luvleen Sidhu: We believe that these three focused efforts will help us attract new customers, increase engagement with existing customers, and improve our revenue. We have created a unique marketplace with universities on one side and student customers on the other. Over time, our goal is to keep offering new products and services to each side of our marketplace to provide our customers with the best value and also increase our revenue. Our go forward roadmap will be based on listening to and understanding our customers' wants and needs and then delivering.

Loveline: We believe that these three focused efforts will help us attract new customers increase engagement with existing customers and improve our revenues.

Loveline: We have created a unique marketplace with universities on one side and student customers on the other overtime. Our goal is to keep offering new products and services to each side of our marketplace to provide our customers with the best value and also increase our revenue potential.

Speaker Change: Our go forward roadmap will be based on listening to and understanding our customers' wants and needs and then delivering.

Luvleen Sidhu: We are optimistic about our future and what we are building. The first quarter of 2024 was a great step in our future direction. I want to thank you for joining us on our call today, and we will now open the line for questions.

Speaker Change: We are optimistic about our future and what we are building the first quarter of 'twenty 'twenty four with a great step in our future direction I want to thank you for joining us on our call today, and we will now open the line for questions.

Speaker Change: Yeah.

Operator: Ladies and gentlemen, we will now begin the question and answer session. In order to ask a question, please press star followed by the number one on your telephone keypad. Your first question comes from the line of Greg Pendy with Chardin.

Speaker Change: Ladies and gentlemen, we will now begin the question and answer session.

Speaker Change: In order to ask a question. Please press star followed by the number one on your telephone keypad.

Speaker Change: The first question comes from the line of Greg <unk> with Chardan.

Speaker Change: Please go ahead.

Gregory R. Pendy: Hey guys, just a couple of questions. I'm not sure if you put much value into it, but the Fed survey earlier this week noted that expectations for college education are supposed to increase 9% or 2.5%. That's a big uptick for next year. What would the, if this starts to gain momentum, or people start to raise expectations for a big bump next year, what are the puts and takes we should be thinking about for next year in your business?

Gregory R. Pendy: Hey, guys just a couple of questions I'm not sure if you put a much value into it but the fed a survey earlier. This week noted that our expectations for college educations are supposed to increased 9% or two and a half a percent increase that's that big uptick for <unk>.

Gregory R. Pendy: Next year, what would be the if it starts to gain momentum or.

Gregory R. Pendy:

Gregory R. Pendy: People start to raise expectations for a big bump next year, what are the puts and takes we should be thinking about for next year to your business.

James Donahue: Yeah. Hey, Greg, nice to hear from you. This is Jamie.

Greg: Yeah, Hey, Greg Nice nice to hear from you.

Jamie.

Speaker Change: What we what we think is we have we have a market dominant position in this person's business. So anything that happens in that space boost that side and then the.

James Donahue: So, what we think is, you know, we have a market-dominant position in this person's business. So, anything that happens in that space boosts that side. And then, you know, the output of that is more clients signing up for the Vive account. So, that's how we see it. So, it's what we work hard on every day. The team's laser focused on how to convert those, what we call, prospects or people through the funnel into bank mobile Vive customers.

Speaker Change: The output of that as more clients signing up for the vibe accounts. So that's how we see it. So it's every it's what we work on hard every day. The team. The team is laser focused on how to how to convert those what we call prospects or people through the funnel into bank mobile by customers.

Speaker Change: Yeah.

Ajay Asija: Okay, great. And then it looks like you maintained your outlook for core positive EBITDA for the year. I know rates have fluctuated and we just heard from you 30 days ago, but is there any color you'd want to provide on, you know, you put up positive core EBITDA in this quarter, any kind of thing that has changed notably in that thought process?

Okay, Great and then.

Speaker Change: It looks like <unk>.

Speaker Change: Maintained your outlook for core a positive EBITDA for the year.

Speaker Change: Rate rates have fluctuated and we just heard from your 30 days ago, but is there any color you'd want to provide on you put up positive core EBITDA in that in this quarter and any kind of thing that has changed.

Speaker Change: Notably in that in that thought process.

Ajay Asija: Hi, it's Ajay Asija. Let me take that question. So, you know, consistent with what we told you a month ago or so, we expect continued growth in the higher education business and the several growth initiatives that Luvleen and Jamie talked about. So we are optimistic about the future, but we're not providing guidance at this time.

J: Yeah, Hi, it's a J, let me take that question. So you know.

J: And with what we told you a month ago or so we expect continued growth in the higher education business and several growth initiatives at Laguna.

J: Again, we have talked about them. So we are optimistic about the future, but we're not providing guidance at this time.

Speaker Change: Okay Fair enough and then just can you just go into one final question just your provision for operating losses.

Gregory R. Pendy: Okay, fair enough. And then, can you just go into one final question, just your provision for operating losses, you know, the downtick from 4Q and then the year over year change, anything you're seeing there?

Speaker Change: Downtick from <unk>, and then the year over year change anything Youre seeing there.

Unknown Executive: Yeah, so the provision for operating losses was up from the first quarter of last year. It was primarily related to third-party fraud related to unauthorized card transactions, but as you can see, it was down from Q4 as well.

Speaker Change: Yeah, so the the.

Speaker Change: Provision for operating losses were up from first quarter of last.

Last year. It was it was primarily related to third party fraud.

Speaker Change: Got it to an unauthorized car transactions, but as you can see it was down from Q4 as well.

Gregory R. Pendy: Okay, very helpful. And that you're working on that. I take it with the initiative you announced. Okay, great. Perfect. Thanks a lot. That's all I have.

Okay very helpful and that's working on that I take it with the initiatives.

Speaker Change: Ounce.

Speaker Change: Okay, great perfect. Thanks, a lot that's all I have.

Speaker Change: Thanks.

Operator: The next question comes from the line of Mike Grondahl with Northland Securities. Please go ahead.

Speaker Change: Next question comes from the line of Mike Grondahl with Northland Securities.

Speaker Change: Please go ahead.

Michael John Grondahl: Hey, thank you. Um, I know you're putting a little bit less emphasis on the bass new biz, but what is your outlook for deposits there in the next couple quarters?

Michael John Grondahl: Hey, Thank you.

Speaker Change: You know I know, you're putting a little bit less emphasis on the on the bass new business.

Michael John Grondahl: But what is kind of your outlook for deposits there. The next couple of quarters.

Unknown Executive: Um, so, um, you know, we, as you saw last year, the deposits were down meaningfully in the BATS business. The business has mostly stabilized. There is a little bit of a runoff. There's still a little bit of a runoff in the deposits, but for the most part, it's stabilized.

Michael John Grondahl:

Speaker Change: We we as you saw last year the deposits were down meaningfully.

Michael John Grondahl: Got it. Got it. Good.

Speaker Change: The bass business.

Speaker Change: This is mostly stabilized it is a little bit of a runoff there is still a little bit of runoff in the deposits, but for the most part it's stabilized.

Unknown Executive: And could you kind of describe the revenue model for the IDV business? It sounds like you have nine clients signed. I don't know, maybe the average revenue per school, just so we can get a feel for that business and its revenue model.

Speaker Change: Got it got it good and could you kind of describe the revenue model for the <unk> business. It sounds like you have nine clients signed.

Speaker Change: I don't know maybe the average revenue per school.

Speaker Change: Just so we can get a feel for for that business and its revenue model.

Unknown Executive: Yeah, Michael, at this time, we aren't providing guidance on that, but at a high level, what we want to say is that we're very excited about the product. We have seen that the pipeline is actually multiples of refund disbursement, and the reason why is because the pain point that we have identified is so urgent for our schools. And the beauty of the revenue model, at a high level, is that it's a mix of recurring annual subscription fees, but also like a fast model where there's a variable per student cost as students go through the enrollment verification process. And so it's a diversified new revenue stream for us, and we're really excited to share more as we launch more of these schools and continue to build upon the pipeline.

Speaker Change: Yeah, Mike at this time, we aren't providing guidance on that that but at a high level. What we wanted to see is that we're very excited about the products. We have seen that the pipeline is actually multiples of refund disbursements and the reason why is because as you know that the pain point that we haven't identified it so urgent.

Speaker Change: Our schools and the beauty of their revenue model at a high level is it the next recurring annual subscription fees, but also like a SaaS model, where theres a variable per student costs.

Michael John Grondahl: Got it. And any guess what the mix is between sort of the recurring subscription and the transactional per student cost?

Speaker Change: Students go through the enrollment.

Speaker Change: Verification process and so it's a diversified new revenue stream for us and we're really excited to share more as we launch more of these schools and continue to build upon the pipeline.

Speaker Change: Got it and any any guess what the mix be.

Speaker Change: Tween sort of.

Speaker Change: The recurring subscription and the transactional per student cost will be.

James Donahue: Yeah, Mike, Jamie, Jamie here. Yeah, so the subscription is, you know, as an SAS offering, right, would be a subscription to get into the dance. And then as students come through the enrollment side, that's where we see the per-use usage.

James Donahue: Yes, Mike Jamie Jamie here, yes. So the subscription is you know as a SaaS offering right would be a subscription to get into the dance and then as students come through the enrollment side.

James Donahue: It was where we see the per the per use usage.

James Donahue: Um, there's, you know, it's an interesting play and a value proposition that helps us identify fraud at the top of our funnel, right? Because without this gate,

James Donahue: There is you know, it's an interesting play and a value proposition that helps us identify fraud at the top of our funnel right because without this gate.

James Donahue: Uh, the universities might enroll some suspects. I mean, I think you're aware it's public that there was about 5 billion dollars of healthcare act fraud that really hit this space hard.

James Donahue: Overseas might enroll some suspect folks I mean, I think you're aware, it's public that there was about $5 billion of cares Act fraud right. It really hit the space hard. This was an answer to that so the revenue was on the subscription side, just think SaaS model when youre looking for the revenue and as long as we've outlined we weave.

James Donahue: This was an answer to that. Um, so the revenue is on the subscription side; just think SAS model when you're looking for revenue, and as well, believe the outline we, we, we. We felt pretty strongly that we wanted some. And sign contracts to build you guys' models in the coming quarters to share with you what that looks like.

Speaker Change: We felt pretty strongly that we wanted some signed contracts to build to build your guys' models in the coming quarters to share what God here with the rate and I guess, just one last question.

Michael John Grondahl: And I guess just one last question is, is this a university that signed up? Do they put all of their enrollees through the process? Or do they just do it?

Speaker Change: It is a.

Speaker Change: University that signed up do they put.

Speaker Change: All of their enrollees through the process or do they just kind of.

Michael John Grondahl: Select the enrollees they want to be identified. Is it kind of an old...

Speaker Change: Select the enrollees they want to be I D. Verified is it kind of no.

James Donahue: Yeah, it's a great question. And that's from our side. The beauty in this, right?

Speaker Change: Yeah, It's a great question and that's from our side the beauty and that's right you know the applicant far outpaced the seats available right across across the spectrum. So the plan is we take that enrollment fall from University and push all of the applicants through.

James Donahue: You know, the applicants far outpace the seats available, right across the spectrum. So the plan is, we take that enrollment file from the university and push all of the applicants, as a screening mechanism. And then the universities have different rules, right? State rules, different private rules. So they make their decisions based on our scoring that we provide them. But yes, it's everyone.

Speaker Change: As a screening mechanism and then the university. They all have different rules right state rules different private rules. So they make their decisions based on our scoring that we provide them.

Speaker Change: But yes, it's everyone.

Speaker Change: Got it.

Michael John Grondahl: Got it. And then last question, just for the higher education business. Are you seeing any changes in the competitive environment there? If you could talk about

Speaker Change: And then last question just.

Speaker Change: For the higher Ed business.

Speaker Change: Or are you seeing any changes in the competitive environment. There if you could talk about that.

James Donahue: No, I think we're, no, to answer you directly, the players that are out there are still out there. We think we have, as we've said, and we believe, we have a unique value proposition that takes a burden off of our universities, provides a valuable service, and gives the fastest, nearly the fastest, access to money to our students. So we think on both sides, as Luvleen described, we're providing a service to the higher education universities themselves and real value to our bank mobile vibe. Got it. Sure, sure.

Speaker Change: No I think I think we're no to answer you directly that the players that are out there are still out there. We think we have as we've said and we believe we have a unique value proposition that takes the burden off of our universities provides valuable service and gives.

Speaker Change: The fastest nearly a fastest access to money to our students. So we think on both sides is lovely described we're providing a service to the higher education University of themselves and real value to our to our bank Mobil five customers.

Speaker Change: Got it sure sure.

Michael John Grondahl: Got it. Sure, sure. Thank you.

Speaker Change: <unk>.

Speaker Change: Thanks, Mike.

Operator: Your next question comes from the line of Bill Dezellem with Titan Capital.

Speaker Change: Next question comes from the line of Bill <unk> with.

Speaker Change: With Titan capital.

Speaker Change: Go ahead.

William J. Dezellem: Thank you. Let's start with interchange in card revenues, which were down in the fourth quarter, but then switched to not only being up, but up 15% in the first quarter. What changed?

Speaker Change: Thank you, let's start with the interchange in card revenues.

Speaker Change: We're down in the fourth quarter.

Speaker Change: But then switched should not not only being up but up 15% in the first quarter what changed.

Ajay Asija: Let me take that question, Bill. It's Ajay Asija over here. So the interchange and card revenue were up primarily because of the new DPSA with First Carolina Bank that allows us to earn the interchange revenues on a Durban-exempt basis. Plus, spend was a little bit higher as well. So those two are the big reasons.

Speaker Change: Let me take that question Bill It is a it's either over here. So the interchange and card revenue were up primarily because of the new.

Speaker Change #100: M D PSA, but of course Carolina Bank.

Speaker Change: That allows us to earn the interchange revenues on Ann Durbin exempt basis.

Speaker Change: The spend was a little bit higher as well. So those two are the big reasons.

William J. Dezellem: And speaking of the spend, the spend was up. Is this correct that the spend was up versus the fourth quarter? And I'm thinking $809 million versus $714 million. And if so, why was that the case? Because I guess, in my mind, the holiday spend would have driven, you know, a seasonality where Q4 would have been higher.

Speaker Change: And speaking of the spend.

Speaker Change: The.

Speaker Change: The spend was up was this corrected the spend was up versus the fourth quarter, I'm thinking $809 million versus $714 million.

Speaker Change: And if so when.

Speaker Change: Why was that the case, because I guess in my mind the holiday spend.

Speaker Change: Would have would have driven.

Speaker Change: A seasonality where Q4 would've been higher.

James Donahue: Yeah, so Bill, Jamie, we think of that as a sign of our work that we did the year prior, our direct marketing, some of our campaigns, some of the features we added before, ahead of our technology refresh, which we implemented in April. So we believe that some of the marketing, our campaigns, and some of the services we added on the legacy tech are drivers to that. And plus, we've seen, the other thing I think that contributes to that number being higher is that the runoff has stabilized and flattened out, especially in higher education. So those two factors, we think, are positive signs.

Speaker Change: Yeah, So bill Jamie so we.

Speaker Change: We think of that as a.

Speaker Change: Sign up of our work that we did the year prior.

Speaker Change: Our direct marketing some of our campaigns.

Speaker Change: The features we added.

Speaker Change: Before ahead of our technology refresh, which we implemented in April so we believe that some of the some of the marketing and our campaigns and some of the services. We added on the legacy Tech are our drivers to that and plus we've seen the other thing I think that contributes to that number being higher is the runoff has stabilized and flattened out.

Especially in that in that high rise business. So those two factors we think.

Speaker Change: Our positive sides.

Unknown Executive: Additionally, Bill, I would just add that there's seasonality in our business, and so there's a winter peak. So students enroll in January and February; that tends to be a high volume refund disbursement time. And similarly, in Q3, beginning of Q4, it's kind of that August through October is another bump from a seasonality standpoint.

Speaker Change: There's really no I would just add to that there is seasonality in our business and so there is a winter peak I'm. So students enrolled in January February that tends to be a high volume refund disbursement times and similarly in that Q3 <unk>.

Speaker Change: Beginning of Q4, it's kind of that.

Speaker Change: August through October is another bump from a seasonality standpoint in our business.

Speaker Change: Okay.

William J. Dezellem: Right. Okay, thank you. And then the rewards engine that you are going to be implementing, what's going to be required to put that into place?

Speaker Change: Okay. Thank you and then.

<unk> rewards engine that you are going to be implementing.

What's going to be required to put that into place.

James Donahue: Yes, so yeah, it's a tech, it's a tech lift, and a partnership agreement, which we have in place. So it's it's the same as you've seen with some of the other credit cards, but this is with a debit card, right?

Speaker Change: Yes, yes.

Speaker Change: It's a tech lift and a partnership agreement with which we have in place.

Speaker Change: And so it's it's it's as you've seen with some of the other credit cards, but this is with a debit card right. So we're going to incentivize.

James Donahue: So we're going to incentivize users. The users can enroll in this program and pick where they want rewards to be generated from. So we're really, really excited, and our surveys tell us that it's the number one feature request of that cohort. So we're really, really excited to see the impact that that'll have on, you know, primary banking.

Speaker Change: The users can enroll in this program and Pik Pik.

Speaker Change: Pick where they want rewards to be generated from them. So we're really really excited and our survey tell us that it's the number one feature request.

Speaker Change: That cohort. So we're really we're really excited to see the impact that that will have to drive.

Speaker Change: Primary banking experience.

William J. Dezellem: And so, Jamie, when you say they get to pick, does this mean they can choose the retailers that they want rewards at? So, for example, Safeway I could care less about, but Kroger I'm excited about, and so we'll make that selection or what what are you referring to there?

Speaker Change: Yes.

Speaker Change: Jamie when you when.

James Donahue: When you say that you get to pick does this mean they can choose the retailers if they want rewards yet so.

Speaker Change: Safeway I could care less about the Kroger I'm excited about and so we will make that a.

Speaker Change: <unk> or what is it what are you referring to there.

James Donahue: Yeah, Bill, right on. You hit the nail right on the head. There are retailers that have signed up for our consortium, that are part of our offering, and the individual users get to decide where they get those rewards.

Speaker Change: Yes, Bill right on you hit the nail right on the head there Pete there there are retailers that have signed up for our consortium that are part of our offering and the individual users get to steer.

Speaker Change: Where they get those rewards.

Speaker Change: Got it Okay and then the last questioner asked about the identity identity verification revenue split between subscription and the per student fees, which of those two do you anticipate to be larger.

William J. Dezellem: Got it. Okay. And then the last questioner asked about the identity verification revenue split between subscription and per-student fees. Which of those two do you anticipate to be larger, subscription or per-student, as you push them through the funnel?

Speaker Change: <unk> or the per student.

As you push them through the funnel.

James Donahue: So, this is Jamie again. The way we see it, university size matters here, right? We have some specialized schools that are on the smaller side. So that's gonna be a mix.

Speaker Change: So.

James Donahue: This is Jamie again bill.

Speaker Change: The way, we see it as University size.

Speaker Change: Matters here right, we have some specialized.

Speaker Change: Schools that are on the smaller side, so that that is going to be a mix.

James Donahue: We priced it, we believe that it's fair for all sizes. But on the larger or large universities, obviously, the funnel is larger for them. So the per unit cost might outpace the subscription by a substantial number in that scenario. But again, we service, you know, a high percentage of all higher education institutions, trade schools, and colleges. So we think it's a mix.

Speaker Change: We priced it we believe that's that's fair for all sizes, but on the larger our large universities, obviously, the you know the.

Speaker Change: The funnel is larger for them so that the per unit cost might outpace of subscription by substantial numbers.

Speaker Change: In that scenario, but but again we service.

Speaker Change: A high percentage of all higher education universities trade schools.

Speaker Change: Colleges universities, so we think it's a mix.

Speaker Change: So in some cases, the subscription could be the larger and more than half of our revenue that the school would pay you, but in other situations that could be where the the per student applicants per applicant fee that ends up being the larger the larger piece of it.

William J. Dezellem: So in some cases, the subscription could be larger, more than half of the revenue that this school would pay you. But in other situations, it could be where the per student applicant or the per applicant fee ends up being the larger, the larger piece then. That's spot on. That's exactly what I meant. Okay, that is helpful. And do you have time for me to ask a couple more questions? Or shall I step back into the queue?

Speaker Change: That's spot on that's part of it.

Speaker Change: Okay that is helpful and do you have time for me to take a couple more questions or shall I step back in the queue.

Operator: Go ahead. Go ahead, Bill. Yes. Okay, so two additional questions. First of all,

Go ahead go ahead, though.

William J. Dezellem: Okay, so two additional questions. First of all, the technology communications and processing expense declined down to $4.7 million from $6.8 million in the fourth quarter. So a couple million dollars declined sequentially. What led to that?

Speaker Change: Oh, Okay. So two additional questions first of all the technology communications and processing expense.

Speaker Change: Declined.

Speaker Change: Down to $4 7 million from $6 8 million in the fourth quarter. So a couple of million dollar decline sequentially, what led to that.

Unknown Executive: Ajay, you're on mute. I'm sorry. I apologize, Bill. It's Ajay Asija.

Speaker Change: Hey, T J yeah I'm.

Speaker Change: I'm, sorry, I apologize Bill Hum.

Ajay Asija: Let me take that question. So the expenses were down because we had an internally developed piece of software that had $1.9 million in quarterly amortization, and we amortized it down to zero last quarter. So that's the largest part of the change in that expense category. Great, thank you. You referenced that in your opening remarks, and I just didn't appreciate the magnitude. Thank you. There was a reference in the opening remarks about micro personalization. Would you talk about that plan? And the, I guess, number one, the timeline, and number two, really what you're wanting to accomplish through that plan.

Speaker Change: It is he does let me take that question. So that'd be the expenses went down because we had and internally developed piece of software that had a million nine and eight in quarterly amortization and we amortize it down to zero last quarter.

Speaker Change: That's the largest part of the change in in that expense category.

Speaker Change: Great. Thank you you referenced that in your opening remarks and I just didn't appreciate the magnitude. Thank you.

Speaker Change: And then.

Speaker Change: There was a reference in.

Speaker Change: In the opening remarks about micro personalization.

Speaker Change: Would you talk about that plan and the I guess number one the timeline and number two the really.

Speaker Change: Really what you're wanting to accomplish through that plant.

Speaker Change: Yeah.

Luvleen Sidhu: Yeah, Bill, it's a phased approach for us, and we started with finding the right marketing automation partner at the beginning of the year, which we're excited about the partner that we picked. It's industry-leading Braze is the platform that we're using there, coupled with really data mining our customers at a level that we haven't before, which is being accelerated by the new technology platform that Jamie and his team have created. That allows us to understand our customer base better.

Speaker Change: Yeah.

Speaker Change: It's a phased approach for us and we were starting with finding the right marketing automation partner at the top of the year, which we're excited about the partner that we picked at industry leading braised.

Speaker Change: It's a platform that where we're using their coupled with a really data mining our customers at a level that we haven't before which is being accelerated by the new technology platform that Jamie and team have created that allows us to understand our customer base better. So you have the marketing automation tools plus.

Luvleen Sidhu: So you have the marketing automation tools plus the data that allows you to segment the portfolio on a new level that we haven't before. And then 3rd is leveraging. Marketing Automation Tools, as well as AI, that allow us to be able to not just do historical A-B testing and marketing for certain segments, but we can become much more granular and focus students at a very individual level in our messaging, which wasn't possible before.

Speaker Change: The data it allows you to segment the portfolio on a new level that we haven't before and then third is leveraging <unk>.

<unk> marketing automation tools as well as AI and that allows us to be able to not just do historical a b testing and marketing for a certain segment that can become much more granular and focus.

Luvleen Sidhu: So that's at a high level, Bill. I think more tangible as we kind of execute, we might be able to get some more examples, but that's how we've prepared for this. And that's the sort of technology that now exists that allows us to message and engage at those types of individual levels.

Speaker Change: At a very individual level, and our messaging, which wasn't possible before.

Speaker Change: And.

Speaker Change: You know that's that's at a high level Bill I think more tangible as we kind of execute we might be able to get some more examples but that's how we prepared for this and that's the sort of technology that now exists that allows us to message and engage with those types of individual level.

William J. Dezellem: And Luvleen, what are you ultimately from an endgame perspective wanting to accomplish with with those efforts?

Speaker Change: And lovely and what are you ultimately from an end game perspective wanting to accomplish with that with those efforts.

Luvleen Sidhu: Yeah, the end goal would be that when you're able to segment at that type of level of personalization, the hypothesis is that the conversion and the engagement improves because you're meeting the customer at a level where they feel understood, there's empathy in the messaging, there's understanding about what's individual, unique, and important to them. So that's the hypothesis.

Speaker Change: Yeah. The end goal would be that you know when you're able to segment at that type of level of personalization and the hypothesis is that the conversion and the engagement improve because you're meeting the customer at a level that they feel understood theres empathy and the messaging there is understanding.

Speaker Change: What individual unique and important to them. So that's the hypothesis.

William J. Dezellem: And then lastly, do students have the ability to transfer money from one student to another through student A's VIBE account to student B's VIBE account?

Speaker Change: Okay, great. Thank you and then lastly, do students have the ability to transfer money from.

Speaker Change: From one student to another through student as viable count to student BS VI user count.

Speaker Change: Yeah.

James Donahue: Yeah, Bill, we're really happy to announce that one of the feature enhancements in our new platform is peer-to-peer payment. It's homegrown; we've written the software for ourselves. It's an in-house solution. It not only lets funds move between Vibe accounts but also encourages enrollment for those that aren't already Vibe members. So you can send it to somebody that is in a Vibe, money from cash from one account to another, and then have them enroll and then accept the money. So we're really excited about that as a feature that's going to encourage primary banking.

Unknown Executive: Yes Bill.

Speaker Change: We're really happy to announce that one of the feature enhancements in our new platform is peer to peer payment.

Speaker Change: Homegrown, we've written the sulfur for ourselves it's an in house solution.

Speaker Change: It is not only does what funds move between body counts, but also encourages enrollment for those that arent five account. So you can send it to somebody that isn't a vibe money from cash from one account to another and then have them enroll and then accept the money. So we're really excited about that as a as a feature that's going to encourage primary backing.

Speaker Change: Yes.

William J. Dezellem: Great. Thank you and congratulations for implementing that.

Speaker Change: Great. Thank you and congratulations for implementing that.

Speaker Change: Thank you. Thank you bill.

Speaker Change: I will now turn the call back over to Brian printer vote to take any questions submitted on the webcast.

Brian Prenoveau: I will now turn the call back over to Brian Prenoveau to take any questions submitted during the webcast.

Speaker Change: Please go ahead.

Luvleen Sidhu: Thank you. At this time, I don't see any web-submitted questions, so I will turn the call back over to Luvleen for some concluding remarks.

Speaker Change: Thank you at this time I don't see any web submitted questions. So I will turn the call back over to Lee for some concluding remarks.

Luvleen Sidhu: Great, thank you everyone for joining us this quarter, and we look forward to touching base soon. Have a good one. Thank you.

Great. Thank you everyone for joining us this quarter and we look forward to touching base do you have a good one thank you.

Operator: Ladies and gentlemen, that concludes today's call. Thank you all for joining, and you may now disconnect.

Speaker Change #101: Ladies and gentlemen that concludes today's call. Thank you all for joining and you may now disconnect.

Speaker Change: Yeah.

Speaker Change: Okay.

Speaker Change:

Speaker Change: Okay.

Speaker Change:

Speaker Change: Yeah.

Speaker Change: Yeah.

Speaker Change: [noise] [noise].