Dave Inc. annual report, FY2021

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Business context and reporting period

Dave Inc.’s Form 10-K covers the fiscal year ended December 31, 2021; it does not provide a separate Q4 financial summary. A significant comparability limitation: the audited financial statements in this filing are for VPC Impact Acquisition Holdings III, Inc. (VPCC), the pre-combination shell company, from its January 14, 2021 inception through year-end—not Dave’s operating business. Dave’s business financial statements were to be filed separately.

The business combination closed January 5, 2022, after the reporting date. Dave operates a consumer financial services app offering budgeting tools, non-recourse cash advances, job referrals and digital banking. Its cash advances are funded partly through a credit facility; deposit accounts and debit cards depend on bank and processing partners.

Financial metrics

  • Dave revenue: Business disclosures report 2021 revenue of approximately $153.0 million, up from $121.8 million in 2020 (about 26%). Service revenue was approximately $142.2 million, or 93% of 2021 revenue; transaction revenue was approximately $10.8 million, or 7%.
  • Profit and margins: Dave reported a net loss in 2021, but this filing text does not provide a clear value for Dave’s net loss or gross and operating margins. The audited VPCC shell-company loss was $5.27 million for its inception-to-year-end period and is not Dave’s operating result.
  • Cash flow and liquidity: VPCC reported $79,785 in operating cash, $253.79 million held in trust, and $2.09 million of cash used in operating activities at December 31, 2021. These are pre-combination shell-company figures, not Dave’s operating cash or cash flow. After public-share redemptions, the trust account held $29.59 million immediately before the business combination closed.
  • Debt and advances: Dave’s subsidiary had a $100 million senior secured facility and an additional $20 million credit line. At December 31, 2021, $35 million of term loans and $20 million under the credit line were outstanding. Dave guaranteed up to $50 million of subsidiary obligations; the guarantee was secured by a first-priority lien on substantially all of Dave Inc.’s assets.
  • Advance performance: Average 28-day delinquency was 3.93% in 2021, versus 4.34% in 2020. ExtraCash advances were generally up to $250, non-recourse and due within 14 days.

Material changes, outlook and risks

  • Revenue increased from 2020 to 2021, while average 28-day advance delinquency declined. The filing does not provide Dave’s comparable audited income statement or cash flow statement, limiting analysis of profitability and cash generation.
  • Management described plans to grow Member acquisition, cross-sell Dave Banking, launch additional products and consider acquisitions. No clear formal revenue, earnings or margin guidance is provided. The filing says Dave expected to have sufficient capital for planned operations for the next 18 months.
  • On March 21, 2022, after year-end, Dave agreed to issue FTX Ventures a $100 million convertible note bearing 3% annual interest, compounded semiannually, with an initial $10-per-share conversion price and a 48-month maturity. Dave also agreed to use FTX US exclusively for cryptocurrency services for four years.
  • Key risks include uncertainty in regulation and state licensing of cash advances; credit losses and fraud; dependence on Evolve Bank and third-party processors; cybersecurity and privacy; competition; and the possibility that growth spending prevents sustained profitability.
  • Dave disclosed material weaknesses in internal controls over financial reporting for 2020 and 2021, including financial close/accounting controls and IT general controls. Remediation was ongoing. The filing also reports that disclosure controls were not effective due to a weakness involving complex financial instruments.
  • The CFPB had investigated Dave’s cash-advance practices; staff notified Dave in September 2021 that they did not then intend to recommend enforcement. A December 2021 California DFPI memorandum required information sharing and specified practices and disclosures. Other state inquiries remained a regulatory risk.
  • Unusual legal matters include an estimated $3.2 million settlement of a data-breach class action, recorded in 2020; a separate office-sublease dispute involving approximately $1.8 million; and a former employee claim over shares for which the outcome was uncertain.

Most important facts to verify

  1. Review Dave’s separate audited operating-company financial statements and reconcile them to the revenue figures in this filing; the 10-K’s audited statements are for VPCC, not Dave’s operating business.
  2. Confirm Dave’s 2021 net loss, gross margin, cash flows, cash balance, allowance for unrecoverable advances and full debt terms from the appropriate operating-company filings.
  3. Track material-weakness remediation and any later auditor or management assessment of internal controls.
  4. Check developments in state licensing, the California DFPI requirements and any further regulatory inquiries or actions.
  5. Verify post-combination liquidity after redemptions, the impact and terms of the FTX note, and the status of the disputed legal matters.