Dave Inc. — Q2 2022 Form 10-Q Summary
Reporting period: Quarter and six months ended June 30, 2022. Unaudited results; amounts below are in U.S. dollars, generally millions. Dave provides digital financial products, including budgeting tools, optional-fee cash advances, banking, and job referrals. It completed its business combination and became publicly traded on January 5, 2022, so comparisons with prior periods may be affected by the transaction and public-company costs.
Financial performance and condition
| Metric | Q2 2022 | Q2 2021 | Six months 2022 | Six months 2021 |
|---|---|---|---|---|
| Operating revenue | $45.8 | $37.2 | $88.4 | $71.7 |
| Operating expenses | $98.8 | $43.5 | $164.0 | $88.3 |
| Net income (loss) | $(27.1) | $(0.9) | $(59.9) | $3.1 |
| Adjusted EBITDA, company-defined non-GAAP | $(28.5) | $(4.5) | $(46.9) | $(12.5) |
| Net loss per share | $(0.07) | $(0.01) | $(0.16) | $0.00 |
- Revenue rose 23% in both Q2 and the first half. Q2 service-based revenue increased to $43.0 million; transaction-based revenue was $2.8 million. First-half service-based revenue was $82.3 million and transaction-based revenue was $6.1 million.
- Advance volume grew to approximately $561.5 million in Q2 from $323.2 million, and to $1.097 billion for the first half from $600.1 million. Growth supported processing-fee and tip revenue.
- Operating expenses grew substantially faster than revenue. The largest increases included compensation and benefits, advertising, and provision for unrecoverable advances. Compensation included $22.9 million of stock-based compensation in Q2 and $26.0 million in the first half.
- Credit-loss provision was $13.9 million in Q2 and $27.6 million in the first half, compared with $7.4 million and $10.9 million, respectively, in 2021. The allowance for unrecoverable advances was $19.2 million against $95.2 million gross advances at June 30; $20.5 million of advances were written off during the first half.
- Reported earnings include sizable noncash and transaction-related fair-value items. Q2 included $17.5 million of gains from changes in warrant liabilities and $7.6 million from earnout-liability remeasurement, partly offset by operating losses and other expenses. The filing does not present a conventional gross-margin measure.
- Operating cash flow was negative $26.6 million in the first half. Investing cash flow was negative $280.6 million, largely reflecting purchases and sales of marketable securities and purchases of short-term investments, as well as $51.2 million of net member-advance disbursements. Financing cash flow was positive $301.7 million, primarily from the PIPE, FTX convertible note, and business-combination proceeds. Cash, cash equivalents, and restricted cash ended at $26.8 million.
- Cash, cash equivalents, marketable securities, and short-term investments totaled approximately $256.8 million at quarter-end, including $194.3 million of available-for-sale short-term investments. The company recorded a $2.4 million unrealized loss on those investments in other comprehensive loss.
- Debt at June 30 included $35 million outstanding under the senior secured debt facility, $20 million under its credit facility, and $100.8 million of FTX convertible debt, or approximately $155.8 million in total. The facilities carry floating-rate interest; the FTX note bears 3% annual interest, is due in 2026, and is convertible at the investor’s option at an initial $10 per share.
- Total assets were $358.5 million, total liabilities $195.2 million, and stockholders’ equity $163.3 million. Current assets were $345.6 million and current liabilities $57.4 million.
Material changes, outlook, risks, and unusual items
- The business combination generated gross proceeds including a $210 million PIPE, but transaction costs and redemptions affected cash received. Dave reported a $4.3 million gain related to extinguishment of a liability in exchange for Class A shares.
- Management expects continued net losses and increased operating expenses as it invests in products, marketing, staffing, technology, and public-company compliance. It stated that available liquidity, including the FTX note proceeds, should fund operations for at least 12 months from the report date. No specific revenue, earnings, or other numerical operating guidance was provided.
- Management said advance growth requires cash to fund advances pending collection. It also noted uncertainty around the economy, inflation, COVID-19, member creditworthiness, competition, regulation, and access to future capital.
- The FTX agreement also made FTX US the exclusive provider of cryptocurrency services through Dave’s platform for a four-year term. Conversion of the note could initially issue 10 million shares, with additional shares possible if interest is paid in kind; the filing identifies potential dilution and default-related risks.
- On July 27, 2022, Dave received Nasdaq notice that its share price had failed the $1 minimum bid-price requirement for 30 consecutive trading days. The initial compliance period ran to January 23, 2023; the company said it would consider options including a reverse stock split. The notice had no immediate effect on listing.
- Management disclosed material weaknesses in internal control over financial reporting, including review-control deficiencies involving member advances and earnout shares, and concluded disclosure controls were ineffective as of June 30. The filing says related financial statements were restated and describes planned remediation. Separately, the 2021 comparative cash-flow statement was restated to classify net member-advance disbursements and collections as investing rather than operating cash flow; this reclassification did not change total cash flow.
- Legal matters include an estimated $3.2 million settlement for a purported class action concerning a 2020 data breach, included in the legal settlement accrual; ongoing litigation by a former employee and a landlord dispute whose outcome management could not estimate; and a July 2022 purported consumer-protection and lending-law class action whose outcome also could not be estimated.
Important facts for investors to verify
- Reconcile the reported liquidity total with the composition, maturity, and market value of investments, and assess how much cash is available for advance funding and operations.
- Track advance repayment, aging, write-offs, allowance adequacy, and whether credit losses continue to rise relative to advance volume.
- Separate operating trends from stock-based compensation, fair-value changes, and other unusual items when assessing losses and company-defined Adjusted EBITDA.
- Review the FTX note’s conversion, interest, repayment, and default terms, along with the potential dilution from the note and other equity awards.
- Monitor Nasdaq bid-price compliance, remediation of material control weaknesses, and the status and potential cost of pending legal matters.