All right, everybody, we're gonna keep it going here at the 44th Annual Canaccord Growth Conference. I'm Joe Vafi, equity research analyst here at Canaccord, focused on the fintech sector. Up next, we are pleased to have with us the management team from Dave, and that's Jason Wilk, CEO, and Kyle Beilman, CFO. Launched in 2017, Dave is an innovative fintech company focused on providing a differentiated set of financial services, which help, helps level the playing field for some lower-income consumers. Dave provides a great banking application, which has no minimum balances, no overdrafts, and modest, and the ability to do modest cash advances. Dave also helps its members build credit and even find gig jobs if they need to augment their income. The company recently reported its Q2 results, with record revenue and an upped outlook for the year. So, with that, welcome, Jason and Kyle. Thanks for having us. Great. So maybe we'll just start off and introduce Dave to us in your own words. I think the name of your company comes from Dave versus... David versus Goliath, right? And leveling the playing field for people. What was the inspiration to start the company? And then we'll kind of dig into how you're differentiated versus other financial services players out there. Yeah. Thanks for having us. So, as you said, the name stands for Dave versus Goliath. I was very disgruntled by paying a lot of heavy overdraft fees going through college, and I quickly realized, after researching the problem, that it really is a massive cost to serve issue that these incumbent banks have, that they have the need to charge these high fees just to break even on an average cost to serve. The everyday American bank costs them $300 per year to maintain a checking account for a user. Our digital-first model, which has no bank branches, our cost to serve a consumer is about $50 per year. Therefore, we can pass through those savings in terms of having no overdraft fees, having no minimum balance fees, and through our use of data intelligence and AI, we can offer a superior overdraft protection product we call ExtraCash, which bridges the gap between paychecks for our customers to lend them between $25 and $500 to get gas and groceries at no interest. Great. And then maybe kind of just talk about the revenue model here. Can you go over some of the different ways you do generate revenue? I know in Q2, I think you posted some really nice growth on the top line, I think over 30%. So maybe kind of talk about, you know, what your revenue model is and some of the drivers of that growth right now. Yeah, so we monetize our completely free checking and savings account with interchange from our issuing partner, Mastercard. We're making about 150 basis points every time somebody swipes a Dave Mastercard, and that's a very high margin business that we think is a great way to build long-term relationships with our members. We charge for access to our budgeting features, which tells customers about their upcoming bills, helps warn them about upcoming things that could take their account negative. We charge $1 per month on that. And our ExtraCash overdraft service, which will lend people up to $500, we do charge optional fees, mostly for access to speed. For people who want the money instantly, we charge between 3% and 5%, depending on where they want the money sent, and on average, we make about $9 per origination. Far cheaper than what they're paying at an incumbent bank, and a far better experience. It's much more transparent, as the customer knows exactly how much money they're approved for and how much they can rely on to go buy gas and groceries or help supplement their even rent. Sure, and maybe we just kind of compare and contrast your model. I mean, you're, you're nicely profitable, you're growing very fast with no branches, right? Right. You think of what kind of a legacy incumbent bank business is today and the costs that they have with their brick-and-mortar locations, with the systems they have in place, and the like. Maybe just, you know, at least from your perspective, looking at, you know, their cost structure versus yours, and how you're able to deliver and pass a lot of that savings on to customers, you know, in lower fees and in freer products, right? That, that's right. That was really the thesis for starting the business, was- Mm-hmm. The cost to serve is too high at the incumbents. If we can have a digital-first strategy that leverages best-in-class technology, take a very asset-light model. We have 300 employees that are servicing 2.3 million monthly paying members. We have over 11 million total members on the platform at this point, and it just shows the inherent operating leverage within our business, that we can offer an amazing product at scale with a significantly cheaper cost structure, with better technology, and that results in a much cheaper product for the consumer, better quality, and certainly puts a lot of money back in their pocket. Sure, and then, Just to- Yeah, go ahead. Add to that, you know, this past quarter was our third consecutive quarter of accelerating revenue growth. We grew the business by over 30%, as you mentioned. But if you look at the trajectory of our fixed cost base over the past five quarters, we've actually reduced our fixed costs as we've been able to achieve that revenue growth. Our gross margins are up about 1,000 basis points year-over-year. So it's just... Everything's kind of coming together. We hit this inflection point of scale at 2.1 million monthly transacting members, and, you know, we just don't really need to add any incremental expense to continue growing the size of our customer base at this point, and that's just translating into, I think, some really attractive financial results. Yeah, for sure. That's great. And then maybe one of the drivers of that nice growth has been, and, you know, you mentioned your, your monthly active users, but I think ARPU is also going higher. Is that right? That's right. Yeah, that's right. So we've been able to increase our ARPU sequentially as well, and that's really a result of us getting even better at underwriting. So we can now increase the amount of ExtraC ash our customers can rely on between paychecks. We've also seen our loss rates come down year on year as well. So very healthy dynamics here that we can offer a better quality service through better underwriting and, you know, reduce losses. So, yeah, our- Great ... our originations were up about 37% year-over-year, and our delinquency rates were down about 80 basis points over the same period. Wow! Usually, you see those things work in reverse of one another. Sure. We've seen them, you know, we've been able to increase originations while driving down loss rates, which is a big- Right ... driver of the margin outperformance that we've seen. So, you know, we've issued extra cash about 105 million unique times to date. The feedback loop on that, on a short duration product like that, just allows us to continue to fine-tune the model, and I think we've been able to really demonstrate the, our ability to manage risk effectively over the past, you know, year and a half or so, and it's been somewhat of a challenging macro backdrop- Yeah, sure ... for other types of credit providers who are, you know, closing off the credit box or de-risking, their models. And we've sort of done the opposite. That's great, and it's a super short duration product, right, for you? That's right. It's not designed to compete with personal loans or credit cards. Yeah. This is purely something that people use, almost like working capital. It's the checking account that you can get extra leverage to go buy gas and groceries- Yeah ... knowing that it's gonna be due on your next paycheck date. So we never have a lot of duration risk ever with our- Yeah ... with our business, and, yeah, we don't really think it is even in a similar asset class of these other types of credit, given the dynamics at play. We're the only people that are raising originations and reducing loss rates of the class. That's great. Maybe we just drill down into that for a second, 'cause I, I don't know the answer is, on your underwriting model, how have you kind of fine-tuned it? I guess one thing would be you've got a big base of monthly actives, and so you know who may be coming back again for, you know, another, short duration loan, right? Or- Yeah ... but are there some other things to fine-tune your underwriting? Yeah, I mean, I think it starts with the- Mm-hmm ... the data set that we're leveraging to make credit decisions. We ingest a customer's transaction data at, within the checking account. Mm-hmm. So, you know, we, based on that, we know where you work, we know where you shop, we know how much you get paid, how much you typically spend between- Sure ... paychecks, and we know all that data in real time. So we can take all of those considerations into, you know, into the model when, you know, extending a credit decision. So that real time visibility into the customer gives us a big edge. You add that to the fact that the duration's very short, we can continue to sort of move the dial on our models to figure out, you know, what's more effective risk splitting within the portfolio, make changes, and see the result of those changes in a matter of a week or two. And so that's just a compounding effect over time, that we just get smarter and smarter the more that we originate the product, and I think that's just what you're seeing playing out in the delinquency performance over time. Great. And then, your ExtraCash product, I mean, not only are your existing customers using it, but it, it's a great customer acquisition tool in the first place. Yeah. Right? I think- It is ... that's really kind of one of your key levers to grow your customer base, right? Absolutely. We had a very early hypothesis founding the business, that people don't wake up in the morning excited to open up a new checking account, and we had seen other neobank entrants sort of try and fail at building these businesses because the cost to acquire was so high to bring a user in. People are not excited to move over their checking account, which makes you move over all your bills, and it's a painful process. Therefore, that's why their CAC is in the hundreds of dollars. We took a very different approach of, let's solve the pain point people really have access to, which is they need to cover these gas and grocery payments. They don't want to pay a $34 fee. So Dave started out just offering the short-term liquidity to people with extra cash. That dominates our marketing message today across television, across digital, streaming TV, influencers, that Dave is the checking account that you can get up to $500 within 5 minutes of download, and that's a really powerful message for people that are willing to take you up on that offer. It's a very lightweight approach to delivering instant speed of value to the customer that doesn't require them to switch over their direct deposit. Right. And that's a meaningful way that we can use to acquire users. Our cost to acquire in Q2 was only $15 to get a new checking account open. Compare that to $500- Mm ... at the incumbent banks, and that's another point of leverage we have to keep costs lower for consumers, 'cause it all factors into a cheaper cost to serve. Sure, you always see those advertisements from big banks, $300 to open a new account, and then you don't even do it anyway, right? So... Exactly, and we don't offer any account opening incentive. It's purely that we are the best at offering paycheck to paycheck liquidity. Mm-hmm. That's the reason why you're gonna open an account, drives very low CAC. Also drives very strong word of mouth. 30% of our customer acquisition is from people sharing it with friends and family. It's been that way ever since we started the business, and we think a very healthy dynamic that allows us to continue to compound growth of the business without the need to spend a lot of money on marketing. Great, and your customer acquisition cost is, I think, $15, right? Yeah. So I guess doing an ExtraCash for a person for the very first time and not seeing their financial history with your account, there's a little more risk, obviously, up front there. There's actually not. So the way we actually do our underwriting, you can be approved in two ways. So when you join Dave, you can get approved for extra cash if you become a direct deposit member of Dave, which takes about 30 days for us to underwrite you for your first extra cash origination. ... We also let people opt to link their external account, which they're coming from, coming over from via Plaid. Plaid is the conduit between Dave and 14,000 banks- Mm-hmm. Where people can input their username and password of their Chase or Wells Fargo account. Plaid then gives us access to 18 months of that customer's checking account data, and we get a real-time connection ongoing. And we're using that data to feed our AI model, which is determining people's paycheck dates. It's looking at the types of transactions they're making. We know if you're using BNPL, we know if you're using other lending apps, we know if your paycheck was lower. These are all things that FICO data does not give you access to, and we think that this type of underwriting lends itself very well to a super short-term duration product like ExtraCash. Great. And then, once you do get a new customer, you tend to monetize that customer more over time, right? That's right. Our user, yeah. So our goal with the customer is to acquire them very efficiently with a strong top-of-funnel marketing message, which is, "Get up to $500 in five minutes or less." That drives our $15 account opening. Then it's our goal to engage the customer with extra cash. Our approval rates for first-time customers is incredibly high because we are leveraging the existing account data. But ultimately, our goal is to get that customer to send the extra cash money to their Dave debit card, which we ship all users, and the North Star really for us, is for that customer to then set up direct deposit- Mm-hmm ... and become a primary account customer. So we take a slower path to winning our way to direct deposit, but we already have very strong CAC to LTV dynamics just with the extra cash business in itself, so anything, down funnel to convert to direct deposit is purely, gravy for us at that point. Sure. Yeah, and once you have direct deposit hooked up to that account, then the Dave Debit Card probably moves to the top of the wallet, right? That's right. It just starts getting swiped more. Yeah, you'll see. We see an ExtraCash customer that does not use Dave Checking versus someone that's a direct deposit user that uses ExtraCash. It's about five times the monthly revenue per user once we see that shift. So it is a meaningful way for us to drive more, more ARPU and more LTV for the customers just by deepening our engagement, and we're sub 10% direct deposit penetration today. Mm-hmm. It's a very exciting opportunity- Great ... for us to continue to grow the business without even adding any new products. Sure. Maybe we kind of drill down into the strategy of getting more of, you know, increasing that conversion rate, to direct deposit and what you've learned so far and, you know, incenting your users or customers to make the switch. Well, we're great at driving trial of the card. Mm-hmm. So 50% of people that engage with extra cash at any given time will trial the Dave Card at some point. I think the steady state right now is about 30% of people will continuously use the extra cash on their Dave Card. But the direct deposit, our only go-to-market to win customers there is by having no overdraft or minimum balance fees, which is a great value prop, but we'd love to extend that into offering other types of incentives to get people over the hump. We know that the ARPU dynamics are 5-6x, and so we have a lot of leverage from rewards to even cash bonus at that point, to want to get people over, as we know the exact incremental LTV we can extract once someone can get there. That's more of a later this year, 2025 initiative for us to try and further drive towards more adoption there. Sure, and I think the industry backdrop on that. Did I read somewhere recently that some of the big banks may be dropping free checking unless you've got a big balance inside the bank? Is that right? Yeah, so that's actually in relation to some regulation proposed around capping overdraft fees at banks- That's true ... with over $10 billion of assets. It was actually the JPMorgan consumer CEO that came out and said, "If you cap overdraft fees, we have to raise prices elsewhere." So free checking is gonna be a thing of the past if overdraft doesn't exist, 'cause that's one of the levers they have to recap their high cost to serve. The banks aren't just gonna operate their checking business at a loss, they have a lot of levers to pull to extract that total revenue they need to break even. Overdraft goes away, high minimum balance fees are here to stay. That, we think, is always gonna be a tailwind for us because of our lower cost to serve and lower CAC. Yeah, we'll see what happens. That would be a, that'd be a great tailwind. So your ARPU's going up, you're growing your customers. What, what kind of customer monthly active growth rate are you at now? Year-over-year in Q2, we were just shy of 20%. Okay ... monthly transacting member growth. Got it. And then how does churn figure into your model? I mean, it seems like a lot of your customers stay with you, but everybody had some churn, right? Sure. Yeah. We don't see a lot of sort of manual churn of people deleting their accounts. You will see customers fall in and out of dormancy, 'cause people will sometimes use ExtraCash to cover a short-term emergency. They'll churn off the platform for a little while, they'll come back when they have another bump in the road when they need to cover gas and groceries. That's why migrating people more to a transactional relationship with the Dave card makes a lot of sense, as you become more top of wallet, something people use every day, and that we think is a you know a healthier longer-term dynamic to migrate customers into. Got it. Yeah. Is there any plan on the roadmap to offer more? I mean, I'm sure there probably is, right? Yeah. And then you've got your other things, like you've got your gig on the side, right? And I'm not sure what the update is on that, but, you know, some of the other things you're- Yeah ... doing to help your customers. We do have a product called Side Hustle, which connects people to gig opportunities within the landscape of driving for Uber, driving for Instacart. There's about 50 different opportunities within the app to help our members find more income. ... the more income they make, the more ExtraCash they can get approved for. So we actually are incentivized to help customers find more ways to make money on their account. We also recently launched an expansion to that feature called Surveys, where people can respond to branded questions about Walmart and other different providers, and actually earn money for taking those surveys. All the money of which gets sent to the Dave card is an additional way for us to drive opportunity and transactions on that. As far as growth, though, we think our core competency of the business is the ability to use cash flow data to underwrite consumers for credit. We're excelling at that with ExtraCash, with $1.2 billion of originations in Q2. But we know our customers aspire for a little bit longer duration, too, and so we are exploring what are the ways that we can take people from ExtraCash, which is always due on your next paycheck date, to how do you give them some longer duration to pay for a vacation or pay for something like a- Yeah ... a refrigerator- Yeah - that they can take the whole summer to pay back, not just pay back, in a few days. Right. But it wouldn't be like a two-year duration product- No - or something like that? No, it's I think cash flow underwriting that is absent FICO data has a- Yeah ... I think, a sweet spot within, call it sub-6 months, where that real-time access can give you good visibility. But it would be tough because people's lives change a lot in- Yeah, they can. ... a three-year period. So I think we're most likely best going to market through partnerships with longer term lending, and we think because our CAC is so low, that we can generate a lot of nice incremental LTV through partnership models. We don't have to take on big balance sheet risk to juice the economics because our cost to acquire is so low. Right. And then probably that longer duration product would maybe be with existings and not with new people or new customers? Yeah, I think, you know, we have the ability to stratify even, you know, higher risk versus lower risk customers who are new to the platform. Our underwriting model, we have an internally developed kind of credit score that we score people on, on the basis of, and so, you know, even for new customers, we'd be able to offer them something a little bit longer duration than extra cash, should we choose to do so. But it is such a wide top of funnel. We had, I think, over 700,000 new customers sign up for the platform- Mm ... in Q2, which just gives us, you know, a bigger pool of customers- Mm to be able to, to market various products, too. Got it. I don't know if, if you've disclosed this or not. I'm just kind of curious. Is like the kind of approval rate on ExtraCash for brand new applicants, is that, is that a- Not something we disclose, but it's, it's really high. Okay. It's quite high. And, you know, that just gets back to being able to start the relationship very early on, deliver value to a large number of customers very quickly within- Mm ... the customer journey. Builds a lot of loyalty and goodwill with them right off the bat. We think that's part of the reason why we see our organic numbers be so strong, is that it's that speed to value. You know, people can be stuck at the grocery store or stuck at the gas station, download the app, get to work, you know, feed their family, and that- Yeah ... I think, just engenders a lot of goodwill. And we hope to- Sure ... sort of parlay that into a longer-term relationship, as Jason described. But, yeah, that's it. Got it. Yeah. A lot of that gets built into your CAC metric anyway, right? Correct. There's an investment in that customer base- That's right ... at the beginning. Right. Great. Aria, yeah, it's good to see you. Yeah, yeah. You have a question? Yeah, gentlemen, can you kind of go again the, again, the three-part customer out there by economics in terms of revenue, where they could profitability to generate per year, of course, starting off with using ExtraCash, cash brand, and Dave Debit Card, I mean, direct deposit. Can you just more clearly explain, you know, these are the four most common profitability profile of customers starting at the beginning of adoption, all the way here at the top of this thing over here? Yeah, it's- Before you're earning as a relationship with Dave. Yeah, so I'd probably classify it as, like, three separate segments. There's the people who are just using ExtraCash, there are the people who are using ExtraCash and the Dave Debit Card, and then there's the third bucket, where there are direct deposit users and likely engaging with ExtraCash. And as you sort of move from segment one through segment three, you unlock, you know, additional monetization through debit card spend and interchange. You also get the retention benefit that we see as we get people to, you know, familiarize themselves with the Dave card and start to utilize that product, and then ultimately, direct deposit. We don't disclose what the, you know, the specific kind of LTVs are of those specific customer segments, but we do see both a retention and monetization benefit as we kind of move from 1 through 3 there. That is really accretive to the model. But on average, from a new customer standpoint, we're paying back our customer acquisition costs in about 4.5 months at this point. And so we just feel like all of that incremental transition that we get from, you know, steps 1 to the second step, to the third step, is all just additive to that. It shortens that payback period and expands the multiple of LTV to CAC. Of the 11 million plus members or customers you have today, you get about 1 million of those direct deposit. Can you clarify how much, how many of the 11 million are just extra cash versus extra cash? Yeah. So just to clarify, of the 11 million total customers that we have on the platform, on average, in Q2, we had about 2.3 million of those total- ... customers transacting with us within the quarter. And so of that 2.3, we don't disclose the direct deposit penetration of that audience, but it is relatively low. We're chipping away at that opportunity. It's call it the single digit percentage points penetration of that audience. But we are really excited about continuing to lean into unlocking product value in exchange for direct deposit. Yeah, the way- Great But as part of our, key part of our strategy, you know, throughout the rest of the year and into next. Okay. We hear a lot about how, you know, the kind of lower income for, consumer stress, all that kind of stuff. Are you seeing any of that in your numbers in terms of delinquency or anything like that? No. We have, I think as I mentioned, an internally developed, kind of almost like similar to a FICO score, our own kind of model score for customers. We've seen that number be pretty stable over the last 12-18 months, I would say. And then our delinquency performance has actually improved over that same, same time period. So we're not seeing that consumer stress on, you know, through our customer base. They've- Is that on a static pool basis, or is that because you're growing on the back? That's on a static pool basis. Okay. Yeah. We're very strong believers that's the only way to evaluate credit performance for a business like ours. Yeah, I, I would say this customer is always in their own kind of recession, right? As someone who's younger, that's not making a lot of money or they're paycheck to paycheck, and so they're always dealing with these liquidity challenges that aren't necessarily related to a recessionary type environment. We'll take one more, and then I think we're gonna have to... Yeah. You're partnering with Evolve. Yep. So, Evolve Bank & Trust, who is the partner bank, where we store our, our deposits, and those are the account of record. When people open a Dave account, they are opening an account with Evolve Bank & Trust. They did recently have a data breach, which resulted in a federal consent order against them to increase their risk management policies at their company. Ultimately, we feel very strong about their ability to continue on as a partnership. We had noted in the earnings call that we are working on a redundant bank partner, should there ever be a situation where we would need to, and the ability for us to transfer, accounts or users over to that new bank partner would, would be, not a material event for, for, for revenue attrition for us. Yeah, okay. No. No. No. I mean, yeah, we have a really good relationship with the management team over there. We're paying very close attention to the situation, but, you know, our business not been impacted whatsoever. We continue to, you know, post really strong results, and as Jason mentioned, we're taking steps to, you know, further add redundancy to our partnership stack. Sorry, sorry. There are, you know, a second bank sponsor. That's right. Great. We're out of time, gentlemen, but thank you very much- Thanks a lot. ... Jason and Kyle, for being with us and sharing the Dave story. Of course. Yeah. Thanks for having us. Thank you. Appreciate it.