Release Date: May 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Dave Inc (DAVE, Financial) reported a 25% year-over-year revenue growth, demonstrating strong business performance.
- The company achieved its second consecutive quarter of profitability, with $13.2 million in adjusted EBITDA, a significant improvement from the previous year.
- Dave Inc (DAVE) has successfully expanded its multi-transacting member base, which grew by 14% year-over-year.
- The company's proprietary Cash AI underwriting engine has led to a decrease in the 28-day delinquency rate, improving credit performance.
- Dave Inc (DAVE) continues to leverage AI technology, such as Dave GPT, to reduce costs and improve member satisfaction, contributing to higher net promoter scores.
Negative Points
- Despite overall growth, the company noted a seasonal softness in demand for extra cash advances due to tax refunds, which could indicate variability in performance based on external economic factors.
- The company's marketing expenses are expected to increase in the coming quarters to drive member growth, which could impact profitability if not managed effectively.
- There is an anticipated normalization of the 28-day delinquency rate, which may increase slightly throughout the year following the seasonal benefits observed in Q1.
- Dave Inc (DAVE) faces ongoing challenges in increasing the adoption rate of the Dave card, with a significant portion of transactions still not utilizing this feature.
- The company's reliance on AI and technological advancements, while beneficial, also poses risks related to the rapid pace of technological change and the need for continual investment in innovation.
Q & A Highlights
Q: On originations, they grew modestly despite normal seasonal dynamics. Was there just not seasonality in the industry because of the market backdrop? Or would you characterize that as more of a Dave specific dynamic either because of higher average advances or adding members or other efforts to drive engagement? What does that suggest for a normal seasonal rebound into the second quarter?
A: Jason Wilk, CEO of Dave Inc, explained that the growth in originations was partly due to optimizations made to their Cash AI engine, which optimized for higher advance payments, increasing engagement. Additionally, the macroeconomic environment, with tightening credit originations in areas like credit cards and personal loans, contributed to more volume on extra cash, helping Dave beat some of the seasonality dynamics. Kyle Beilman, CFO, added that improvements in customer retention and reengagement with non-transacting MTMs also bolstered performance, suggesting that it was more about what Dave was doing internally to drive reengagement.
Q: Continuing to see the average size of originations tick up a bit. Where do you see that going over time, assuming a reasonable backdrop continues? How should we think about the interplay with that and revenue per advance? How important are higher advances to your differentiation story for your customers?
A: Jason Wilk mentioned that as customer retention improves, the engine gets better, which naturally leads to advancements scaling up over time. He expects monetization to grow as they increase the average origination size. Kyle Beilman highlighted that there are better risk splitting opportunities within the portfolio, which allows them to align the right amount with the right risk profile of customers, supporting increased monetization and providing value through the product.
Q: On spend volume growth, what specifically are you doing in the strategy to drive customer engagement and spend activity? What strategies are you considering to drive more direct deposit usage?
A: Jason Wilk stated that currently, they are mostly focusing on customer messaging about the benefits of banking with Dave, such as no overdraft fees and no minimum balance fees. They offer a slight discount on instant transfer fees if customers send it to the Dave card, which has led to meaningful engagement. They plan to test various strategies in Q2 and Q3 to incentivize customers to set up direct deposit, knowing the significant increase in RPU when converting a customer to direct deposit.
Q: Can you elaborate on changes to the subscriber model and how those changes played out in the quarter?
A: Jason Wilk clarified that there was no change to the price of the subscription model, which remains at $1. They are considering testing various price points in the $3 to $5 range in Q2 and Q3, but nothing has been solidified yet. The subscription billing optimization mentioned was about a new billing platform that positions the system to test new price points. Kyle Beilman added that there was an increase in subscriber-only MTMs in the quarter, reflecting the benefits of the new billing system.
Q: On the quarterly delinquency rate, do you feel that as you are proliferating more in the market and getting more positive press, you are starting to attract a stronger socioeconomic kind of individual to the Dave platform?
A: Jason Wilk attributed the improvement in delinquency performance primarily to the AI-driven extra cash AI engine, which continuously analyzes previous performance and real-time events on customers. He noted that as they expand their set of marketing channels, they are seeing a broader consumer base. Kyle Beilman added that as the average tenure of origination has gone up, it leads to better performance on delinquency rates.
Q: On marketing, how should we think about ramping up marketing spend and the return on investment before hitting diminishing returns?
A: Kyle Beilman explained that they expect to ramp up marketing spend throughout the year as they move out of the seasonally softer period in Q1. The majority of this spend will be on top of funnel marketing across key channels, where they have effective tracking to manage the efficiency of the spend. They view marketing through the lens of investment, evaluating it based on the return profiles of those investments, with a focus on driving value creation through that investment.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
