Dave Inc. — Q2 2023 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2023. Unaudited consolidated results. Dave operates a digital financial-services platform, including ExtraCash advances, checking, budgeting, and income-opportunity products. The company reported more than 9 million app accounts.
Key financial results
| Metric | Q2 2023 | Q2 2022 | Six months 2023 | Six months 2022 |
|---|---|---|---|---|
| Revenue | $61.2 million | $45.8 million | $120.2 million | $88.4 million |
| Operating loss | $20.9 million | $53.0 million | $33.4 million | $75.7 million |
| Net loss | $22.6 million | $27.1 million | $36.6 million | $59.9 million |
| Net loss per share | $1.90 | $2.34 | $3.09 | $5.24 |
| Operating cash flow | Not separately reported | Not separately reported | $2.8 million | $(26.6) million |
Calculated operating margins were approximately negative 34% in Q2 2023 versus negative 116% in Q2 2022; six-month margins were approximately negative 28% versus negative 86%. Net loss margins were approximately negative 37% and negative 59% for the respective quarters. These calculations use reported revenue and operating or net loss.
- Q2 revenue grew 34%. Service-based revenue rose 28% to $55.0 million; transaction-based revenue more than doubled to $6.3 million.
- Q2 processing-fee revenue increased 51% to $36.0 million, alongside advance volume growth to approximately $867 million from $606 million. Tips declined 10% to $13.1 million, which management attributed to lower tip engagement; subscriptions increased 25% to $5.4 million.
- Q2 operating expenses fell 17% to $82.2 million. Lower advertising and stock-based compensation were partly offset by higher credit-loss provision and legal costs.
- Six-month revenue increased 36%, while total operating expenses declined 6%. The six-month net loss improved, but prior-year results included substantial noncash fair-value gains and a liability-extinguishment gain, making net-loss comparisons less representative of operating performance.
Liquidity, debt, and cash flows
- At June 30, cash and cash equivalents were $49.3 million; marketable securities were $3.2 million and short-term investments were $125.1 million, totaling approximately $177.7 million. This compares with $192.0 million at December 31, 2022.
- Current assets were $281.1 million and current liabilities $32.0 million. Net member advances were $88.7 million, after a $19.8 million credit-loss allowance against $108.4 million of gross advances.
- Debt comprised $75.0 million drawn under a senior secured facility, due January 2025, and $103.9 million outstanding on a convertible note issued to FTX Ventures. The note bears 3% interest and is due 48 months after its March 2022 issuance. Total reported debt was approximately $178.9 million.
- For the six months, operating cash flow was positive $2.8 million; investing activities provided $23.7 million, largely reflecting investment maturities and sales; financing activities used approximately $11,000. Cash, cash equivalents, and restricted cash increased $26.5 million.
- Management stated that available cash should fund working capital and capital expenditure needs for at least 12 months from the report date, while warning that future capital access is not assured. The company was in compliance with the debt facility’s covenants, including its $8.0 million minimum-liquidity requirement.
Management commentary, risks, and unusual items
- Management attributed revenue growth to more transacting members, higher advance volume and average advance size, and increased checking-product engagement. It said loss and collections experience improved year over year; first-half collections benefited from seasonal tax refunds.
- Q2 credit-loss provision increased 15% to $15.9 million, principally due to aged or uncollectible advances. The allowance declined from $24.5 million at year-end to $19.8 million at June 30, reflecting write-offs and recoveries as well as provision expense.
- Legal accruals totaled $7.6 million at June 30, including an estimated $3.2 million settlement for a class action related to a 2020 data breach and $3.8 million for individual data-breach claims. A separate former-employee matter was settled for approximately $6.0 million in January 2023.
- Other operating expenses rose 15% in Q2, primarily from increased legal fees. The company also disclosed related-party office leases with entities controlled by founders, including the CEO.
- Disclosure controls and procedures were deemed ineffective because of previously identified material weaknesses in financial reporting controls, staffing and segregation of duties, period-end processes, and IT general controls. Remediation efforts were ongoing; management said it performed additional analysis and believed the financial statements fairly present the reported results.
- The filing gives no specific revenue or earnings guidance. Management expects continued net losses under its operating plan. It identifies competition, regulation, litigation, service failures, economic conditions, member growth and credit performance as risks; it reported no material changes to the risk factors in its 2022 Form 10-K.
Investor verification priorities
- Track advance volume, average advance size, repayment and collection trends, aged balances, write-offs, and allowance adequacy.
- Assess whether revenue growth and expense controls can produce sustained improvement in operating performance and cash generation, apart from noncash fair-value movements.
- Review liquidity relative to the $75.0 million facility due in January 2025 and the $103.9 million FTX Ventures convertible note, including interest and conversion or repayment terms.
- Monitor resolution and payment of data-breach and other legal matters, as well as legal costs and related-party arrangements.
- Follow remediation of material weaknesses and any subsequent updates to internal-control effectiveness.