Dave Inc. — Q1 2023 Form 10-Q
Reporting period: Three months ended March 31, 2023; comparisons are with the three months ended March 31, 2022 unless noted. Dave provides digital financial products, including ExtraCash advances, digital checking, budgeting, and income opportunities.
Financial performance and liquidity
| Metric | Q1 2023 | Q1 2022 | Change |
|---|---|---|---|
| Operating revenue | $58.9 million | $42.6 million | Up 38% |
| Operating expenses | $71.4 million | $65.2 million | Up 9% |
| Operating loss | $12.5 million | $22.7 million | Loss narrowed |
| Net loss | $14.0 million | $32.8 million | Loss narrowed |
| Net loss per share, diluted | $1.19 | $2.91 | Loss per share narrowed |
| Adjusted EBITDA (non-GAAP) | $(4.5) million | $(18.4) million | Improved |
| Net cash used in operating activities | $6.9 million | $12.5 million | Cash use decreased |
- Revenue growth reflected higher advance volume and average advance size, increased subscriptions, and growth in checking-related transactions. Processing-fee revenue rose 57% to $33.0 million; transaction-based revenue rose 93% to $6.4 million. Tips were nearly flat at $13.8 million.
- Operating expenses rose despite lower credit-loss provision and advertising costs. Compensation and benefits increased 36% to $24.4 million, including higher payroll and stock-based compensation; other operating expenses rose 25% to $18.5 million, including checking-product costs and charitable contributions.
- Provision for credit losses was $12.0 million, down 13%. Management cited stronger collections, including seasonal tax-refund effects, while provision expense for older or uncollectible advances increased. The allowance was $17.4 million against $97.5 million of gross advances; net advances were $80.2 million.
- At March 31, cash and cash equivalents were $51.8 million, marketable securities $34.4 million, and short-term investments $108.8 million—approximately $195.0 million combined. Total assets were $305.4 million and stockholders’ equity was $100.1 million.
- Debt included $75.0 million outstanding under a senior secured facility maturing January 2025 and $103.1 million under a convertible note, including capitalized interest. The note bears 3% annual interest, compounds semiannually, and matures four years after its March 2022 issuance. Dave reported compliance with the facility covenants, including its $8.0 million minimum-liquidity requirement.
Material changes and notable items
- Revenue increased 38%, while net loss narrowed by $18.8 million. The prior-year comparison included larger non-cash fair-value and transaction-related expenses; Q1 2023 also benefited from lower credit-loss provision and higher interest income.
- Cash and investments combined increased to approximately $195.0 million from $192.0 million at year-end 2022. Operating cash use improved, while investing cash inflow primarily reflected maturities and sales of short-term investments and net collections of advances.
- Dave completed a 1-for-32 reverse stock split effective January 5, 2023, intended to address Nasdaq’s minimum bid-price requirement. Class V shares carry 10 votes per share versus one vote for Class A shares.
- Q1 included $6.8 million of stock-based compensation, up from $3.2 million. In April 2023, the board approved a proposed repricing of 337,053 options, subject to stockholder approval; the company expected to record its impact in Q2.
Outlook, risks, and contingencies
- Management said existing cash should fund working capital and capital expenditure needs for at least 12 months from the report date, while noting that additional financing may be needed and is not assured. No quantified revenue or earnings guidance was provided.
- Management expected advertising and marketing spending to increase in Q2 and Q3 2023 as ExtraCash demand typically rises seasonally. The company expected to continue funding advances primarily from its balance sheet and, as needed, the debt facility.
- Risks highlighted include competition, member growth and activity, credit losses and collections, regulation, service failures, litigation, economic conditions, and access to capital. The filing reported no material changes to the risk factors in the 2022 Form 10-K.
- Disclosure controls and procedures were deemed ineffective because of previously identified material weaknesses in financial reporting controls and IT general controls. Remediation efforts were ongoing; management said it performed additional analysis and believed the financial statements fairly presented the company’s results.
- A former-employee lawsuit was settled in January 2023 for approximately $6.0 million. A purported class action related to a 2020 data breach remained in settlement discussions, with an estimated $3.2 million accrual. The filing states that management did not believe other ordinary-course proceedings would have a significant adverse effect.
Key facts for investors to verify
- Whether improved advance collections and credit-loss metrics persist beyond the tax-refund season, including loss and recovery trends by advance age.
- Whether revenue growth translates into sustained operating improvement as compensation, checking-related costs, and seasonal marketing spending change.
- Liquidity available for operations after considering advance funding needs, the $75.0 million secured facility, and the $103.1 million convertible note.
- Progress in remediating material weaknesses and the status and financial impact of the data-breach settlement and option repricing.