Q3 2024 Dave Inc Earnings Call
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Speaker Change: Good afternoon, everyone, and thank you for participating in today's conference call to discuss Dave's financial results for the third quarter ended September 30, 2024.
Speaker Change: Joining us today are Dave's CEO, Mr. Jason Wilk, and the company's CFO, Mr. Kyle Beilman. By now, everyone should have access to the third quarter 2024 earnings press release, which was issued earlier today.
Speaker Change: The release is available in the Investor Relations section of Dave's website at investors.dave.com. In addition, this call will be available for webcast replay on the company's website. Following management's remarks, we'll open the call to answer your questions.
Speaker Change: Certain comments made during this conference call and webcast are considered forward-looking statements under the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to certain known and unknown risks and uncertainties, as well as assumptions that could cause actual results to differ materially from those reflected in these forward-looking statements. These forward-looking statements are also subject to other risks and uncertainties that are described from time to time in the company's filings with the SEC.
Speaker Change: Do not place undue reliance on any forward-looking statements which are being made only as of the date of this call. Except as required by law, the company undertakes no obligation to revise or update any forward-looking statements.
Speaker Change: The company's presentation also includes certain non-GAAP financial measures, including adjusted EBITDA and adjusted net income, as supplemental measures of performance of our business.
Speaker Change: All non-GAAP measures have been reconciled to the most directly comparable GAAP measures in accordance with SEC rules. You'll find reconciliation charts and other important information in the earnings press release in Form 8K Furnished to the SEC. I would now like to turn the call over to Dave's CEO, Mr. Jason Wilk.
Speaker Change: Thank you and good afternoon everyone. Today I'm pleased to share our full third quarter results, building on the strong preliminary results we announced on November 5th. We once again outperformed in the third quarter, achieving record revenue of nearly 93 million, up 41% from the year ago period.
Speaker Change: This marks our fourth consecutive quarter of accelerating year-over-year revenue growth, supported by double-digit percentage increases to both ARPU and multi-transaction members, which are quarterly records for both metrics.
Speaker Change: We also delivered another record quarter on variable margin, which expanded nearly 1,300 basis points year over year, driven by stellar credit performance enabled by Cache AI and our latest underwriting model, which was fully rolled out heading into the third quarter.
Speaker Change: Additionally, we achieved highly efficient CAC at greater levels of investment and significant operating leverage as we remain disciplined in managing our fixed costs.
Speaker Change: All of this led to a 63% sequential increase in adjusted EBITDA to approximately $25 million for the quarter. For reference, at the beginning of the year, $25 million was within range of what we had guided for the entire fiscal year 2024, and I'm incredibly proud to have achieved it in just a single quarter.
Speaker Change: Given our record performance year to date and strong outlook for the remainder of the year, we are raising full year 2024 revenue and adjusted EBITDA guidance, which Kyle will discuss in a moment.
Speaker Change: Turning to the recent FTC matter, which we issued a statement last week as part of our pre-announcement, we believe we have a strong defense and are prepared to vigorously defend ourselves.
Speaker Change: As a reminder, the FTC suit does not question our ability to charge subscription fees, optional tips, or express fees, but rather it pertains to our consumer disclosures and how the company acquires consent for the fees associated with our products, where we believe we have always operated within the law.
Speaker Change: As such, we have not made any changes to our financial forecast as a result of the FTC's action.
Speaker Change: Our company was founded on the belief that far too many Americans are underserved by traditional financial institutions.
Speaker Change: They provide critical financial support that traditional banks often don't offer, including free checking and savings accounts and access to credit without credit checks, late fees, or interest.
Speaker Change: Our members consistently share how much they rely on us to meet their essential needs with over 1.2 million apps for reviews and a 4.8 star rating on iOS.
Speaker Change: Our success is rooted in delivering meaningful value through innovative and accessible product experiences, a commitment that has driven our success, and we believe it will continue to support our growth and profitability moving forward. Transparency, compliance, and customer trust are our highest priorities as we evolve to meet our members' needs.
Speaker Change: Now I'd like to provide additional insight into the ongoing progress we've made executing on our growth strategy. This includes efficiently acquiring new members, engaging them through extra cash, and deepening our relationships through the Dave Card.
Speaker Change: We have continued to prioritize efficient member acquisition at increasing scale, driving consistent growth in our multi-transacting member base in a cost-effective manner.
Speaker Change: In the third quarter, we acquired 4% more members compared to the prior year period, despite spending nearly 10% less on marketing.
Speaker Change: This led to a 14% year-over-year decrease in CAC to $15. On a sequential basis, our CAC was down 2%, while member acquisition was up 19% as we continue to optimize our channel mix and as the market for digital media assets remains rational.
Speaker Change: During the third quarter, we did not observe any impact to our cap efficiency from the election cycle, nor did we start to in Q4 through last week's election. Overall, performance this quarter has remained strong.
Speaker Change: The second pillar of our growth strategy centers around enhancing engagement with our monthly transaction members, strategically positioning extra cash as the key entry point that sets a foundation for long-term member relationships.
Speaker Change: As I mentioned earlier, this focus has delivered another quarter of strong results, with MTMs going 23% year-over-year to a new quarterly record of 2.4 million members.
Speaker Change: Our extra cash-driven value proposition, coupled with our comprehensive banking product suite, has been instrumental in driving growth.
Speaker Change: Moreover, in the third quarter, we benefited from a full quarter's impact of our latest underwriting model, which supports better conversion and retention rates while improving credit performance, as I'll get into in a moment.
Speaker Change: With the consistent growth of our member base and the ongoing expansion of our product capabilities, earlier today we announced that we entered into a non-bonding letter of intent to form a strategic partnership with what we believe to be one of the most highly respected sponsor banks in the FinTech ecosystem.
Speaker Change: We anticipate that this new bank partner, whose parent is publicly traded, will leverage its scale, experience, and strong compliance and risk management capabilities to sponsor our credit and banking products.
Speaker Change: We anticipate that this partnership will further diversify our key commercial relationships and better position us to launch next-generation products in support of Dave's mission of leveling the financial playing field for everyday Americans.
Speaker Change: With respect to extra cash, we generated another record quarter of originations, which grew 46% year-over-year to $1.4 billion. This was driven largely by the increase in monthly transacting members, as well as a 17% increase in average extra cash origination size.
Speaker Change: The new underwriting model, which we rolled out throughout Q2, played a big role in supporting the increase in average disbursement amount. Relative to Q2, extra cash originations grew 15%, which is the strongest sequential growth in originations in two years, when the scale of originations was nearly half as large.
Speaker Change: Ultimately, we believe our ability to sustain meaningful growth and origination demonstrates both the depth and breadth of our TAM, as well as our ability to address members' needs for short-term liquidity.
Speaker Change: For the third quarter, our net receivables portfolio totaled $166 million at quarter end, which represents a $38 million increase from the end of Q2, despite growing originations by $174 million to $1.4 billion over the same period.
Speaker Change: We believe this continues to underscore the short-term, high-velocity nature of our product, enabling us to serve many customers efficiently without relying on a capital-intensive balance sheet or taking significant credit risk exposure at any one point in time.
Speaker Change: Moving to extra cash performance, our cash AI underwriting engine allows us to enhance liquidity access for our members while continuing to improve credit performance.
Speaker Change: In Q3, we improved our 28-day delinquency rate to 1.78%, down 64 basis points year-over-year, over which time extra cash originations increased 46%, as I mentioned a moment ago.
Speaker Change: Our 28-day delinquency rate in Q3 is down 25 basis points quarter over quarter and actually came in lower than Q1, which is historically our seasonally strongest quarter in terms of credit performance.
Speaker Change: Throughout Q2 of this year, we rolled out a new underwriting model, which they trained on more than double the number of machine learning variables that were used to train our prior underwriting model that was launched in Q2 of 2023, which we believe bodes well for future performance.
Speaker Change: Credit performance in Q3 of this year benefited from a full quarter's impact of this new model and this performance has persisted thus far on Q4, which we expect to continue going forward.
Speaker Change: Turning to the third and final pillar in our growth strategy, strengthening member relationships by driving engagement through the Dave Card. Our strategy leverages the power of our market-leading extra cash offering to build deeper, long-term banking relationships with our members.
Speaker Change: During the third quarter, Dave's card spending volume was up 19% year-over-year to $407 million, driven by a combination of strong growth in banking active customers, as well as card spend per banking active customer.
Speaker Change: This strength in spending volume was supported by solid growth in both extra cash disbursements to Dave checking accounts, as well as in external funding into the Dave ecosystem.
Speaker Change: Over the past eight quarters, we have primarily focused our resources on expanding extra cash and optimizing the levers supporting this product to drive overall profitability.
Speaker Change: While we remain committed to enhancing and refining extra cash, in 2025, we plan to allocate more of our R&D resources towards elevating the day-of-card experience to encourage greater adoption on top of wallet spending behavior.
Speaker Change: Our combined efforts in Extra Cash, Dave Card, and Subscriptions resulted in a strong 14% year-over-year increase and an 11% sequential increase in ARPU during the third quarter, which we believe highlights our ability to continue expanding the monetization of our growing member base.
Speaker Change: These gains were largely due to the progress we've made increasing average extra cash disbursement amounts, which is the primary deriver of our average revenue per extra cash origination, which was up 15% year-over-year and 6% sequentially.
Speaker Change: With respect to extra cash monetization, it's worth noting that the flexibility of our business model and the strength of the underlying member demand allows us to continue to optimize the structure of the monetization.
Speaker Change: As you may recall, in 2023, we successfully transitioned from a tier-based fee structure to one that is percent-based, which improved our average revenue for extra cash disbursement and new member conversion without any adverse impact to extra cash engagement or retention.
Speaker Change: As the next step in this evolution, we are testing a simplified mandatory fee structure and user experience that will remove both optional tips and optional instant transfer fees to Dave Checking accounts. After issuing over $115 million extra cash originations, we believe we have sufficient data to assess the willingness of what members will pay for access to this service.
Speaker Change: This new structure has several benefits. One, given optional fee decline as customers see on our platform, we believe that the new fee model we are evaluating should scale better, allowing us to increase average extra cash approval amounts and engagement.
Speaker Change: Second, improved investor clarity with respect to our business model, and lastly, even though we feel strongly about the significant customer benefit that optional fees bring to consumers in need, there is no question that these fees have become more of a focus for regulators as many companies have chosen to implement this experience in various ways.
Speaker Change: If testing is successful, we expect to be in a position to share more about our progress on this initiative during our next quarterly earnings release.
Speaker Change: 2024 has been an exceptional year thus far, highlighted by record performance quarter after quarter. We believe it's clear that our strategic focus on increasing access to extra cash through product and underwriting enhancements, winning deeper wallet share of our members' banking needs, and expanding our base of members benefiting from these products has positioned us well for the future.
Speaker Change: We're proud of the strong execution from our team and the meaningful product improvements we've implemented to increase member value and engagement, leading to increased RPU and lifetime value, all while remaining disciplined on cost management.
Speaker Change: With that, I will turn the call over to Kyle and take you through our financial results. Kyle?
Kyle Beilman: Thank you, and good afternoon everyone. As Jason highlighted, the third quarter further demonstrated the strength and scalability of our business, with record results across nearly all key metrics.
Kyle Beilman: We achieved substantial operating leverage by accelerating revenue growth and remaining disciplined with our fixed cost base.
Kyle Beilman: We expanded our variable margins significantly and improved marketing efficiency at scale.
Kyle Beilman: Given our strong third-quarter performance, we are increasing our full-year revenue guidance and, once again, increasing our adjusted EBITDA guidance for the third consecutive quarter.
Kyle Beilman: We surpassed the high end of our most recent full-year adjusted EBITDA guidance range through the third quarter of this year.
Kyle Beilman: As we shared in our preliminary results announcement on November 5th, third quarter revenue reached $92.5 million, representing a 41% year-over-year increase.
Kyle Beilman: Our ability to acquire new members efficiently has amplified the impact of our marketing investments, while strengthened retention and reactivation initiatives have driven additional growth in our MTM base.
Kyle Beilman: The ARPU increase was due to both increased extra cash engagement and monetization, as well as stronger engagement with and monetization of the DAVE card.
Kyle Beilman: Non-GAAP variable profit in Q3 increased 72% year-over-year to $64.2 million, representing a 69% margin relative to GAAP revenue, which is an all-time high and up approximately 1,300 basis points from Q3 of last year.
Kyle Beilman: Our sustained improvements to variable margin have been driven by lower provision expense as a percentage of gap revenue as a result of significant improvements in credit performance driven by cash AI.
Kyle Beilman: These improvements enabled us to continue to lower loss rates while increasing the revenue generated per extra cash origination.
Kyle Beilman: Our variable margin performance in Q3 was further enhanced by the strides we made in optimizing payment processing costs, along with the benefits of two key vendor contracts renegotiated in Q4 of last year, as well as in Q3 of this year.
Now turning to operating expenses.
Kyle Beilman: Our provision for credit losses improved, decreasing 14% year-over-year to $13.7 million from $16 million in the prior year period, while extra cash originations grew by 46% over that time.
Kyle Beilman: As a percentage of extra cash originations, the loss provision fell to 1% from 1.7% the prior year.
Kyle Beilman: which we believe underscores the power of our cash AI underwriting engine, which continues to make more precise and predictive credit risk decisions through the incorporation of more model variables and the performance of the more than 115 million unique extra cash disbursements originated to date.
Kyle Beilman: The improvement and loss provision expense exceeded our own internal forecast and more than offset the calendar dynamic related to the day of the week on which the quarter ended, which we highlighted last quarter.
Speaker Change: As Jason mentioned, credit performance in Q4 remains strong, though we expect the same day-of-the-week dynamic to impact the loss provision in Q4, which ends on a Tuesday and from an accounting standpoint, offset some of the strong underlying performance.
Speaker Change: Processing and servicing costs in Q3 increased 21% year-over-year to $8.6 million compared to $7.1 million in the year-ago period, while extra cash originations grew by 46%.
Speaker Change: We expect to realize a full quarter's benefit of this renegotiated contract beginning in Q4.
Speaker Change: Advertising and marketing costs decreased approximately 10% year-over-year to $12.5 million compared to $13.9 million in the prior year period, as we were able to achieve our MTM growth goals at lower levels of spend.
Speaker Change: The 14% year-over-year reduction in CAC to $15 allowed us to acquire 4% new members in the quarter for 10% less marketing spent.
Speaker Change: We expect marketing investments in Q4 to remain at a comparable level to that of Q3, as we plan to continue capitalizing on the strong demand we're experiencing and the attractive LTV to CACs we're generating on our investments.
Speaker Change: Looking at compensation and headcount, our compensation-related expenses grew by $7.6 million to $30.7 million in Q3.
Speaker Change: The specific impact related to these awards in Q3, which were tied to the delivery of certain adjusted EBITDA targets, was $5.6 million.
Speaker Change: Excluding stock-based compensation expense, compensation and benefits increased by 5% year-over-year and on a percentage of revenue basis decreased to 19% from 25% in a year-ago period, which we believe further underscores the operating leverage inherent in our business model.
Speaker Change: Other operating expenses increased $8.1 million to $24.4 million in the third quarter from $16.3 million in the year-ago period.
Speaker Change: The Q3 figure includes a seven million dollar accrual for legal settlement and litigation expenses related to the FTC matter which Jason mentioned earlier in the call.
Speaker Change: As a percentage of revenue, other operating expenses, excluding the legal settlement and litigation accrual, fell to 19% of revenue in the quarter, down from 25% in the same period last year.
Speaker Change: Gap net income for the third quarter improved to 0.5 million which includes the seven million dollar accrual for legal settlement and litigation expenses.
Speaker Change: This compares to a gap net loss of $12.1 million in the year-ago period.
Speaker Change: Adjusted net income, which excludes the legal settlement and litigation accrual, stock-based compensation, as well as changes in fair value to certain non-cash liabilities, was $21.1 million in Q3 compared to an adjusted net loss of $5.6 million in the third quarter of last year.
Speaker Change: Adjusted EBITDA for the third quarter was $24.7 million compared to an adjusted EBITDA loss of $2.5 million during the prior year period, which is attributable to revenue growth, margin expansion, TAC efficiency, and improved operating leverage.
Speaker Change: Through consistent execution, we have achieved adjusted EVADOT profitability for four consecutive quarters with a 63% sequential increase.
Looking ahead, we expect continued adjusted EBITDA profitability.
Speaker Change: Although the trajectory may be uneven as we plan to strategically allocate marketing investments,
Speaker Change: as well as account for an increase in the provision for credit losses in Q4 and throughout 2025, driven by the quarter-end timing dynamics I mentioned earlier, which may more than offset the solid credit performance we expect to continue to persist.
Speaker Change: Now, I will turn to the balance sheet. As of quarter end, we had approximately $76.7 million of cash and cash equivalents, restricted cash, and other highly liquid securities, compared to $89.7 million as of the end of Q2.
Speaker Change: The decrease in cash was driven largely by the $37.7 million increase in extra cash receivables outstanding at quarter end due to higher extra cash originations as well as the dynamic related to the day of the week on which the quarters ended.
Speaker Change: The amount drawn on our credit facility remained at $75 million as of the end of Q3 as we continue to rely on balance sheet cash to fund extra cash originations versus our credit facility.
Speaker Change: Subsequent to quarter end, we amended our credit facility with Victory Park Capital. The amendment increased the advance rate within the facility by 250 basis points.
Speaker Change: following the 800 basis point increase in September of 2023, and it adjusted eligibility criteria and concentration limits to expand our borrowing capacity.
Speaker Change: There is no impact to the cost of funds on the $75 million outstanding, and the cost of any future draws will remain at the same spread over the benchmark rate.
Speaker Change: We believe this amended facility underscores the confidence our lender has in the strength of our business and financial performance.
And now, to turn to guidance.
Speaker Change: We are raising our full year 2024 revenue guidance to range between $340 million and $343 million.
Speaker Change: This compares to our previous guidance of $310 million to $325 million and represents growth of 31% to 32% compared to the full year of 2023.
Speaker Change: This compares to the guidance we provided last quarter of $40 million to $50 million and our original guidance at the start of the year from $25 million to $35 million.
Speaker Change: Overall, our outlook remains incredibly positive and we believe we're well positioned to continue driving growth and profitability from here.
And with that, we'll now open it up for questions.
Speaker Change: Certainly. As a reminder, to ask a question, please press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1-1 again.
And one moment for our first question.
Speaker Change: Our first question will be coming from Devon Ryan of Citizens JMP. Your line is open.
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Hey Jason, hey Kyle, how are you?
Great Devin, how are you?
doing well. Um, you know, obviously great results here. Um,
Speaker Change: Want to start with the new sponsor bank announcement from this morning
Speaker Change: I'd love to just kind of walk through, if you can, you know, how those economics compare to the existing relationship you have.
Speaker Change: You mentioned opportunities to collaborate to launch next generation banking and credit products. So I'm not sure if that's just kind of a broader statement or whether that suggests there are some new products.
Speaker Change: this relationship is going to open the door to that maybe wasn't available before. So, you know, if that is the case, we'd love to hear about anything that you can share there and even more broadly about the product roadmap with the new relationship. Thanks.
Speaker Change: Yeah, thanks for the question. So, first on the cost piece, we believe that the costs are comparable between the two banks.
Speaker Change: And so we're feeling good about the economics there. We hammered out a very detailed LOI, which took us a little while to get here, but should help clear a clean pathway to get the definitive agreement done.
Speaker Change: As far as our mention of the next generation credit and banking products, we have talked about our interest in getting a new credit product in market next year, and this bank can be a very key partner in our ability to get that off the ground.
Speaker Change: Okay, terrific. And then just want to ask one about just Dave Card, Spence, obviously some nice growth there. What are some of the things you guys are contemplating to I guess drive that into a bigger contributor to the business? I heard the comments around kind of leaning in on investment, further accelerating in 2025 and kind of moving to top of wallet. So just love to hear about maybe if there's low-hanging fruit of things you guys can do or how you would frame kind of the opportunity to really drive a material change in the contribution from that part of the business.
Speaker Change: Thanks, Devin. So as we mentioned on the call, we really have spent the last couple of years just focused on the extra cash product and
Speaker Change: getting the business to improve our margins and profitability. And so we haven't done a lot from a banking incentive perspective to get the cross attached other than offering a small discount on those instant transfer fees.
Speaker Change: And so I think there's a lot of opportunity to continue to merge the extra cash and banking products together to win more of the extra cash originations to be spent on the day of card.
Speaker Change: and knowing why customers are coming to the Dave product in general for extra cash. It is for things like gas, groceries.
Speaker Change: rent and so we think that Given the healthy economics we have across the business including subscription and extra cash Monetization that we're not as reliant on the margin from interchange
Speaker Change: such as our competition, and therefore we are excited to explore things like rewards as a way to drive further attachment to the product and get it to be more top-of-the-wallet versus other neobanks.
Speaker Change: Okay, that's great. I'll leave it there and let someone else ask, but thanks for taking the questions. Yeah, of course. Thank you. Thanks, Devin.
Speaker Change: And one moment for our next question, which will be coming from Hal Goach of B Riley Securities. Your line is open, Hal.
Hal Goach: I've got two questions on credit performance. It just seems to be really outstanding. Could you just give us any large level color on cash AI?
and how it's performing so well.
And the other one is, it's just.
Speaker Change: Other commentary on customer acquisition costs, it just seems to be getting better. What is the environment allowing that to happen? If you could give any more detail on this, that'd be terrific. Thanks.
Speaker Change: Jason, you want to take that, or I'm happy to? Yeah, I'm happy to. So Hal, as Kyle alluded to in the call, we've had now a full quarter of.
Speaker Change: testing with some of our new models with regards to extra cash and cash AI and there's now just several hundred more data points in there that the AI isn't learning from and as I said we've had a full quarter of benefit of having that fully rolled out so that's I think we're seeing great impact there on lower loss rates.
Speaker Change: That also impacts marketing as well as we can, the stronger offers we can offer people for their first
Speaker Change: Extra cash, the better they can convert to. The better underwriting also helps with retention. And so, Cash.AI really is a lever to pull across all dimensions from conversion to existing ARPU loss rates, as well as retention to drive higher LTV. And we're just feeling really good about that product in general.
Speaker Change: Just one other quick thing I would add to that is, you know, as we've gotten better and better at retention, and our MTM retention rates are now at all-time highs,
Speaker Change: It has the benefit of supporting credit performance as well. If you look at the sort of average time on book,
Speaker Change: of an extra cash user in Q3 of this year versus, say, a year ago, it's up substantially. And so, as you might imagine, the longer someone is around on the platform, the better they perform on credit.
Speaker Change: And so, yeah, we see that as like, I'd say an overall tailwind and something that's quite durable as well. And so overall, between cash AI and just the longer customer tenure, that's supporting what you're seeing on the loss rate side.
All right, terrific. Thank you.
Thanks, Hal.
And one moment for our next question.
Thank you.
Speaker Change: Our next question will be coming from Jacob Steffen of Lake Street Capital Markets. Jacob, your line is open.
Jacob Steffen: Hey guys, thanks for taking my questions. Congrats on the quarter and all the progress here. I guess first one for me, I just kind of want to get a sense on how you're thinking about kind of balancing top line growth and also just EBITDA growth or margin expansion as we kind of look at Q4 and 2025.
Speaker Change: So, yeah, Jacob, I'm happy to take it. I mean, look, I think our view is that, you know, we're
Jacob Steffen: where our outlook remains incredibly strong. We think we're serving a really big market here with best-in-class products and solutions, and we think that that really just lays the groundwork for really solid growth for many years to come.
Jacob Steffen: So, again, just feeling very good about the outlook, as I mentioned in my remarks.
Jacob Steffen: How do we, you know, invest in marketing at the level of returns that are acceptable to us and use that as sort of the governing function around marketing investment, which is a big, like I said, a big driver of the profitability equation.
Jacob Steffen: So we're happy with the returns that we're seeing, you know, we're still in this, you know, call it sub six month payback on a gross profit basis, which is
really, really attractive and we can deliver, you know, solid.
Jacob Steffen: Really solid top line growth as you saw in Q3 while maintaining really strong levels of profitability as well.
Jacob Steffen: And we had 27% EBITDA margins in the quarter. Our flow through from gross profit to EBITDA is incredibly high. I think if you look at Q3 of last year.
The amount of total revenue growth.
that flowed through to EBITDA was more than 100%.
Jacob Steffen: And so we would expect, you know, that to kind of provide a somewhat of a signal.
Jacob Steffen: around what future growth will look like from here, where again, a lot of those incremental gross profit dollars should fall directly down to the bottom line and support overall levels of EBITDA and earnings growth and margin expansion. So, I hope that helps to answer the question.
Yeah, very helpful.
Speaker Change: And then just one more. I know you guys kind of alluded to it on the call a little bit, but the new fee model You know you kind of said that you know maybe in some transfer fees and tips would be
Speaker Change: you know, going away, and you know, I'm guessing that's going to be coupled with a subscription price increase, like you guys have talked about in the past, but maybe help us kind of, you know, piece through that a little bit.
Speaker Change: So, we're still working through the details of our subscription pricing planning. We did de-prioritize that a little bit in favor of working on this new mandatory fee model. And to be clear, Jacob, it would be a fee for access to extra cash, which would be separate from whatever we're doing with subscriptions.
Speaker Change: and that fee we expect and our goal is to maintain or exceed LTV over over a longer period of time as a full replacement of in some transfer fees and tips
Speaker Change: Okay, got it. That's helpful. I appreciate the color guys. Of course. Thank you. And one moment for our next question.
Speaker Change: Our next question will be coming from Mark Palmer of the Benchmark Company. Your line is open, Mark.
Mark Palmer: Yes, thanks for taking my question and, you know, let me turn in and congratulate you on the very, very strong performance.
Speaker Change: to a certain extent, filters into the upgrade of the credit decisioning model as well.
Speaker Change: returning customers whose credit profiles you knew and you were comfortable with and to what extent was it due to being able to offer larger loans to first-time borrowers given your increased confidence in credit decisioning?
Speaker Change: I'm happy to happy to jump in. Thanks for the question and for being on the call, Mark. I'd say the primary driver of the growth, both sequentially and year-over-year, is attributable to Cash AI's improved risk splitting of, I'd say, existing customers.
Speaker Change: They represent the overwhelming majority of all extra cash originations within a given quarter, you know, talking, you know, well in excess of 95%. And so when you, you know, in order to sort of move the needle on the overall size,
Speaker Change: across the whole portfolio, that's the biggest driver. That said, we have seen pretty significant improvements in the offers we're able to provide new customers as well. And Jason alluded to this earlier.
Speaker Change: is, um, you know, but that's an important function and lever that we have to drive conversion of new customers by increasing the size of the offer at the front door and their first experience with us.
Speaker Change: That is an important focal point of ours, but the average size has really been driven by existing customer expansion.
Thank you. And
Speaker Change: Just one more broad question, you know, we're a week after the U.S. elections.
Speaker Change: What is your expectation with regard to what the regulatory environment may look like under a different government?
Speaker Change: Well, we certainly do anticipate an administration change, and so I would expect a more business-friendly environment, both from the CFPB and the FTC.
Speaker Change: but we'll see what what happens as as the administration turns over.
Speaker Change: But yeah, we're feeling very confident in our position and the market seems to be in favor of that as well.
Very good. Thank you very much.
And one moment for our next question.
Thank you.
Speaker Change: And our last question will be coming from Gary Prestapino of Barrington. Your line is open.
Jason, Kyle, how are you? Doing great.
Speaker Change: Most of my questions have been answered, but I wanted to just get a feel for, was there any real change to what you're seeing as a direct deposit on the Dave card in terms of members using that service?
Speaker Change: report back on that. Direct depositors do make up a good portion of the overall card spend, given the average direct depositor will spend about a thousand dollars a month on their card. A non-direct deposit user will spend considerably less.
Speaker Change: and direct deposit is something we're still very focused on and as mentioned 2025 will be putting more resources towards driving more bank primacy across the customer base.
Speaker Change: Okay, what about extra cash advances to the Dave card? Was that about still steady in the 30% of originations range?
Yes.
Speaker Change: okay and the last question I don't know if you can answer this or not I'm going to put you on the spot but
Speaker Change: given what's happened with the FTC and the change in administration.
Speaker Change: If this has been remanded to a California court and you don't settle, but you get a change in the whole FTC, and you get a change in the leadership of the FTC, can that...
Speaker Change: Can this be dropped without having to go through a court proceeding or because it's been remanded to a court you will may eventually have to go to court?
Speaker Change: I think that overall process, you know, it's within the legal system as you mentioned at this point. It's highly uncertain if an administration change is going to, you know,
Speaker Change: We're going to change the course of that or not at this point, there's a lot of unknowns too early to say
Speaker Change: I mean, there is a situation, though, where the FTC could decide, you know, that they don't want to sort of invest the resources in pursuing litigation with us. But again, it's highly, highly uncertain and we're anticipating, you know, going into litigation on the matter. And we feel good about our facts, Gary, as stated.
Okay, thank you.
Thank you.
Speaker Change: And this concludes today's conference call. Thank you for participating. You may now disconnect.