Dave Inc. — Q3 2022 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2022. Unaudited results; amounts below are in millions unless stated otherwise. Dave offers budgeting, cash advances through ExtraCash, Side Hustle, and digital checking products. The January 2022 business combination is accounted for as a reverse recapitalization, so prior-period results generally reflect Legacy Dave.
Financial performance and liquidity
| Metric | Q3 2022 | Q3 2021 | Nine months 2022 | Nine months 2021 |
|---|---|---|---|---|
| Revenue | $56.8 | $40.2 | $145.2 | $111.9 |
| Operating expenses | $94.7 | $55.9 | $258.8 | $144.1 |
| Net loss | $(47.5) | $(7.9) | $(107.4) | $(4.8) |
| Adjusted EBITDA loss | $(27.5) | $(11.3) | $(74.4) | $(23.9) |
- Q3 revenue increased 41% year over year, led by service-based revenue of $52.8 million; transaction-based revenue was $4.0 million. Management attributed growth largely to higher advance volume, which rose to $757.1 million from $360.7 million in Q3 2021.
- Provision for unrecoverable advances was $18.4 million in Q3, up 71%; it included approximately $3.0 million of write-offs related to a fraud event. For the nine months, the provision rose 112% to $46.0 million. The allowance was $22.1 million at September 30, against gross advances of $109.7 million.
- Q3 operating expenses grew 70%, faster than revenue; advertising and marketing increased 86% to $24.1 million, and compensation and benefits rose 57% to $24.3 million. Nine-month stock-based compensation was $34.1 million.
- Gross profit and gross margin are not separately reported. Net loss as a percentage of revenue was approximately 84% in Q3 2022 versus 20% in Q3 2021.
- Cash, cash equivalents, and short-term investments totaled approximately $223.9 million at September 30, 2022; cash and restricted cash were $39.3 million. Short-term investments had $3.0 million of unrealized losses recorded in other comprehensive loss.
- Nine-month cash flows: operating $(40.9) million, investing $(263.9) million, and financing $311.8 million. Investing outflows included $77.6 million net funding of member advances and purchases of short-term investments; financing included PIPE proceeds and borrowing proceeds.
- Debt at period-end included $45.0 million drawn under the debt facility, $20.0 million under the credit facility, and $101.6 million of convertible debt, approximately $166.6 million in total. The FTX Ventures note carries 3% interest, matures in March 2026, and is convertible at an initial $10 per share; the full original principal could convert into 10 million shares, before any additional shares for paid-in-kind interest.
- Current assets were $322.3 million and current liabilities $63.2 million. The filing reports no dividends. Debt-facility covenants, including a $10 million minimum liquidity requirement, were met at September 30.
Material changes and notable items
- Revenue growth was accompanied by a substantially larger net loss and Adjusted EBITDA loss; provision for advance losses, marketing, staffing, and public-company costs increased.
- The company restated the 2021 comparative cash-flow presentation: net disbursements and collections of member advances were reclassified from operating to investing activities. Management said the correction affected cash-flow classification only, not total cash flows.
- Dave recorded $6.8 million of legal settlement and litigation expense in Q3. The balance sheet included a $10.1 million legal settlement accrual, including estimated settlements of about $3.2 million for a data-breach class action and $6.0 million for a former-employee dispute. A separate consumer-protection and lending-law class action remained active; the company could not estimate its outcome.
- Dave received Nasdaq notice in July 2022 that its share price failed the $1.00 minimum bid requirement. The initial cure deadline was January 23, 2023; the company said it was considering options including a reverse stock split. Delisting remained possible if compliance was not regained.
- Management concluded disclosure controls and procedures were ineffective at September 30, 2022, citing previously identified material weaknesses in financial reporting controls. Remediation efforts were underway; the filing also describes prior restatements.
Outlook, commentary, and risks
- No specific revenue, earnings, or margin guidance is provided. Management expects continued net losses and investment in people, marketing, technology, infrastructure, and products. It stated that available cash following the business combination and the $100 million FTX Ventures note should fund working capital and capital requirements for at least 12 months from the filing date, while noting future capital access is not assured.
- Management cited member growth and activity, product expansion, competition, and general economic conditions as key operating factors. Cash requirements for funding advances may vary with member activity.
- Risks include credit losses and underwriting estimates, fraud, litigation and evolving regulation, competition, inflation and macroeconomic uncertainty, funding availability, Nasdaq listing compliance, and reliance on estimates for the advance-loss allowance and fair-value liabilities.
Investor verification priorities
- Track advance volume, repayment and collection trends, delinquency aging, allowance coverage, and the effects of the Q3 fraud event.
- Assess whether revenue growth can outpace credit-loss provisions, marketing, compensation, and other operating costs.
- Verify liquidity runway and cash needs for member advances, including debt interest, maturities, and potential dilution from convertible debt and equity awards.
- Monitor Nasdaq bid-price compliance and any reverse-split or listing-market actions.
- Follow the legal matters and settlement payments, and confirm progress in remediating material weaknesses and improving reporting controls.
- Review the restated comparative cash-flow classification when comparing operating and investing cash flows across periods.