Dave Inc./DE 10-K

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations. The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with our consolidated financial statements and the notes related thereto which are included in “Item 8. Financial Statements and Supplementary Data” of this Annual Report on Form 10-K. Certain information contained in the discussion and analysis set forth below includes forward-looking statements. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors, including those set forth under “Cautionary Note Regarding Forward-Looking Statements,” “Item 1A. Risk Factors” and elsewhere in this Annual Report on Form 10-K. On January 5, 2023, the Board of Directors approved an amendment to the Company’s certificate of incorporation to complete a 1-for-32 reverse stock split effective January 5, 2023. The effects of the reverse stock split have been reflected in the consolidated financial statements and the footnotes. Overview In the story of David vs. Goliath, the small underdog is able to outsmart and defeat his larger adversary. This is the spirit behind the name “Dave.” We have built an integrated financial services online platform that provides millions of Americans with seamless access to a variety of intuitive financial products at a fraction of the cost and with much higher speed to value than that of the legacy financial services incumbents, such as traditional banks and other financial institutions. Our mission is to build products that level the financial playing field. Our near-term strategy is focused on delivering a superior banking experience for anyone living paycheck to paycheck. Based on our observation and analysis of Member data, legacy financial institutions charge high fees for consumer banking and other financial services products, which disproportionately burdens tens of millions of Americans who can least afford them. We see this dynamic playing out with our Members who we believe are on average paying between $300-$400 in overdraft, maintenance and other fees to their existing bank for basic checking services. Further, we see a significant opportunity to address the broader short-term credit market. According to a 2023 report by FHN, legacy financial institutions charge approximately $40 billion in fees annually. The FHN estimates that financially “coping” and “vulnerable” populations pay over $160 billion a year in fees and interest for access to short-term credit. Our prospective Member opportunity is also significant. We estimate that our total addressable market consists of between 160 million to 180 million Americans who are in need of financial stability and are either not served or underserved by legacy financial institutions. Dave offers a suite of innovative financial products aimed at helping our Members improve their financial health. To help Members avoid punitive overdraft fees and access short-term liquidity, Dave offers cash advances through its flagship 0% interest ExtraCash product. Through Dave Banking, we provide a digital checking account experience, seamlessly integrated with ExtraCash advances, with no hidden fees. With a Dave Banking account, Members have access to valuable tools for building long-term financial health, such as Goals savings accounts and customizable automatic round-up savings on debit spend transactions. We also help Members generate extra income for spending or emergencies through high APY savings rates, our Side Hustle product, where we present Members with supplemental work opportunities, and through our Surveys product, where Members can earn supplemental income by taking surveys. Our budgeting tool helps Members manage their upcoming bills to avoid overspending. We have only begun to address the many inequities in financial services, but our progress to date demonstrates the demand for Dave to improve the financial system for the everyday person. Since inception and through the date of this report, over 13 million Members have registered on the Dave app and over 10 million Members have used at least one of our products and we believe that we have a substantial opportunity to continue growing our Member base going forward. We strongly believe that the value proposition of our platform approach will continue to accelerate as a result of our data-driven perspective of our Members, allowing us to introduce products and services that address their changing life circumstances. Comparability of Financial Information Our future results of operations and financial position may not be comparable to historical results as a result of the consummation of the Business Combination. 47 Key Factors Affecting Operating Results Our future operating results and cash flows are dependent upon a number of opportunities, challenges and other factors, including Member growth and activity, product expansion, competition, industry trends and general economic conditions. Member Growth and Activity We have made significant investments in our platform, and our business is dependent on continued Member growth, as well as our ability to offer new products and services and generate additional revenues from our existing members using such additional products and services. Member growth and activity are critical to our ability to increase our scale, capture market share and earn an attractive return on our technology, product and marketing investments. Growth in Members and Member activity will depend heavily on our ability to continue to offer attractive products and services and the success of our marketing and Member acquisition efforts. Product Expansion We aim to develop and offer a best-in-class financial services platform with integrated products and services that improve the financial well-being of our Members. We have invested and continue to make significant investments in the development, improvement and marketing of our financial products and are focused on continual growth in the number of products we offer that are utilized by our Members. Competition We face competition from several financial services-oriented institutions. In our reportable segment, as well as in potential new lines of business, we may compete with more established institutions, some of which have more financial resources. We compete at multiple levels, including competition among other financial institutions and lenders in our ExtraCash business, competition for deposits in and debit card spending from our Dave Banking product from traditional banks and digital banking products and competition for subscribers to our personal financial management tools. Some of our competitors may at times seek to increase their market share by undercutting pricing terms prevalent in that market, which could adversely affect our market share for any of our products and services or require us to incur higher member acquisition costs. Key Components of Statements of Operations Basis of presentation Currently, we conduct business through one operating segment which constitutes a single reportable segment. For more information about our basis of presentation, refer to Note 2 in the accompanying consolidated financial statements of Dave included in this report. Service based revenue, net Service based revenue, net primarily consists of optional tips, optional express processing fees and subscriptions charged to Members, net of processor-related costs associated with advance disbursements. Service based revenue, net also consists of lead generation fees from our Side Hustle advertising partners and revenue share from our surveys partner. Transaction based revenue, net Transaction based revenue, net primarily consists of interchange and ATM revenues from our Checking Product, net of interchange and ATM-related fees, fees earned from funding and withdrawal-related transactions, volume support from a certain co-branded agreement, fees earned related to the Rewards Product for Members who make debit card spending transactions at participating merchants and deposit referral fees and are recognized at the point in time the transactions occur, as the performance obligations are satisfied and the variable consideration is not constrained. 48 Operating expenses We classify our operating expenses into the following five categories: Provision for Credit Losses The provision for credit losses primarily consists of an allowance for expected credit losses at a level estimated to be adequate to absorb credit losses inherent in the outstanding advances receivable, inclusive of outstanding processing fees and tips along with outstanding amounts aged over 120 days or which become uncollectible based on information available to us during the period. We currently estimate the allowance balance required using historical loss and collections experience, and, if relevant, the nature and volume of the portfolio, economic conditions, and other factors such as collections trends and cash collections received subsequent to the balance sheet date. Changes to the allowance have a direct impact on the provision for credit losses in the consolidated statement of operations. We consider advances aged more than 120 days or which become uncollectible based on information available to us as impaired. All impaired advances are deemed uncollectible and subsequently written off and are a direct reduction to the allowance for credit losses. Subsequent recoveries, if any, of Member advances written-off are recorded as a reduction to Member advances, resulting in a reduction to the allowance for credit losses and a corresponding reduction to the provision for credit losses in the consolidated statements of operations when collected. Processing and Servicing Costs Processing and servicing fees consist of fees paid to our processing partners for the recovery of advances, optional tips, optional express processing fees and subscriptions. These expenses also include fees paid for services to connect Members’ bank accounts to our application. Except for processing and servicing fees associated with advance disbursements which are recorded net against revenue, all other processing and service fees are expensed as incurred. Advertising and Marketing Advertising and marketing expenses consist primarily of fees we pay to our advertising and marketing platform partners. We incur advertising, marketing and production-related expenses for online, social media and television advertising and for partnerships and promotional advertising. Advertising and marketing expenses are expensed as incurred although they typically deliver a benefit over an extended period. Compensation and Benefits Compensation and benefits expenses represent the compensation, inclusive of stock-based compensation and benefits, that we provide to our employees and the payments we make to third-party contractors. While we have an in-house customer service function, we employ third-party contractors to conduct call center operations and handle routine customer service inquiries and support. Other Operating Expenses Other operating expenses consist primarily of technology and infrastructure (third-party Software as a Service “SaaS”), commitments to charity, transaction based costs (program expenses, association fees, processor fees, losses from Member-disputed transactions, bank card fees and fraud), depreciation and amortization of property and equipment and intangible assets, legal fees, rent, certain sales tax related costs, office related expenses, public relations costs, professional services fees, travel and entertainment, and insurance. Costs associated with technology and infrastructure (third-party SaaS), depreciation and amortization of property and equipment and intangible assets, legal fees, rent, office related expenses, public relations costs, professional services fees, travel and entertainment, and insurance vary based upon our investment in infrastructure, business development, risk management and internal controls and are generally not correlated with our operating revenues or other transaction metrics. 49 Other (income) expenses Other (income) expenses consist of interest income, interest expense, other strategic financing and transactional expenses, earnout liabilities fair value adjustments, derivative asset fair value adjustments, and changes in fair value of warrant liabilities. Provision for income taxes Provision for income taxes consists of the federal and state corporate income taxes accrued on income resulting from the sale of our services. Results of Operations Comparison of the Years Ended December 31, 2023 and 2022 Operating revenues For the Year Ended Change (in thousands, except for percentages) December 31, $ % 2023 2022 2023/2022 2023/2022 Service based revenue, net Processing fees, net $ 152,490 $ 106,664 $ 45,826 43 % Tips 56,945 61,951 (5,006 ) -8 % Subscriptions 21,483 19,146 2,337 12 % Other 1,323 1,099 224 20 % Transaction based revenue, net 26,852 15,978 10,874 68 % Total $ 259,093 $ 204,838 $ 54,255 26 % Service based revenue, net— Processing fees, net Processing fees, net of processor costs associated with advance disbursements, for the year ended December 31, 2023 were $152.5 million, an increase of $45.8 million, or 43%, from $106.7 million for the year ended December 31, 2022. The increase was primarily attributable to increases in transacting Members, increases in total advance volume from approximately $2,709 million to approximately $3,629 million year over year and average advance amounts that increased from $134 to $152 as of the years ended December 31, 2022 and 2023, respectively. Processing fees tend to increase as advance volume increases, but may not always trend ratably, as historically, prior to the implementation of percentage-based fees in late 2023, processing fees varied depending on the total amount of the advance. The percentage of Members that chose to pay a processing fee to expedite an advance remained relatively flat for the years ended December 31, 2023 and 2022. The average processing fees Members paid to expedite these advances increased modestly for the year ended December 31, 2023 as compared to the year ended December 31, 2022. Tips Tips for the year ended December 31, 2023 were $56.9 million, a decrease of $5.0 million, or 8%, from $62.0 million for the year ended December 31, 2022. The decrease was primarily attributable to lower tip engagement from Members despite increases in transacting Members, increases in total advance volume from approximately $2,709 million to approximately $3,629 million year over year and average advance amounts that increased from $134 to $152 as of the years ended December 31, 2022 and 2023, respectively. Tip amounts may not always trend ratably as tips often vary depending on the total amount of the advance and number of Members who leave a tip. The average tip Members chose to leave increased while the percentage of Members that chose to leave a tip decreased for the year ended December 31, 2023 as compared to the year ended December 31, 2022. 50 Subscriptions Subscriptions for the year ended December 31, 2023 were $21.5 million, an increase of $2.3 million, or 12%, from $19.1 million for the year ended December 31, 2022. The increase was primarily attributable to an increase in paying Members on our platform. Other Other revenue for the year ended December 31, 2023 were $1.3 million, an increase of $0.2 million, or 20%, compared to the year ended December 31, 2022. The increase was primarily attributable to increases in revenue related to the launch of our Survey product and the Reward product for Members, offset by a decrease in average revenue per lead related to amounts received from our Side Hustle advertising partners. Transaction based revenue, net —Transaction based revenue, net for the year ended December 31, 2023 was $26.9 million, an increase of $10.9 million, or 68%, from $16.0 million, for the year ended December 31, 2022. The increase was primarily attributable to the growth in Members engaging with our Checking Product and corresponding growth in the number of card spend transactions initiated by Members. Operating expenses For the Year Ended Change (in thousands, except for percentages) December 31, $ % 2023 2022 2023/2022 2023/2022 Provision for credit losses $ 58,386 $ 66,266 $ (7,880 ) -12 % Processing and servicing costs 28,926 31,946 (3,020 ) -9 % Advertising and marketing 48,392 69,038 (20,646 ) -30 % Compensation and benefits 94,910 103,432 (8,522 ) -8 % Other operating expenses 70,679 68,551 2,128 3 % Total $ 301,293 $ 339,233 $ (37,940 ) -11 % Provision for credit losses —The provision for credit losses totaled $58.4 million for the year ended December 31, 2023, compared to $66.3 million for the year ended December 31, 2022. The decrease of $7.9 million, or 12%, was primarily attributable to an increase of $8.8 million related to Member advances aged over 120 days and those that have become uncollectible based on information available to us, partially offset by a decrease in provision expense of $16.7 million related to Member advances aged 120 days and under. The increase in provision expense of $8.8 million related to Member advances aged over 120 days and those which have become uncollectible based on information available to us, period over period, was attributed to increases in transacting members, average advance amounts from $134 to $152 and total advance volume from $2,709 million to $3,629 million for the years ended December 31, 2022 and 2023, respectively. All impaired advances deemed uncollectible are subsequently written-off and are a direct reduction to the allowance for credit losses. The decrease in provision expense of $16.7 million related to Member advances aged 120 days and under was primarily attributed to improved collections performance and lower advances outstanding, despite a 27% increase in advance volume during the last four months for the year ended December 31, 2023 compared to the last four months of the year ended December 31, 2022. This resulted in a decrease to the allowance for credit losses and corresponding lower provision for credit losses expense during the year ended December 31, 2023 as compared to December 31, 2022. We anticipate volatility in Member advances outstanding each period as they are directly correlated with the timing and volume of Member advance activity during the last 120 days prior to the end of the period. 51 Throughout the year ended December 31, 2023, loss and collections experience of Member advances continued to improve, due primarily to underwriting modifications related to advance eligibility requirements, advance stability, new Member conversion and risk detection. Historical loss and collections rates utilized in the calculation of the provision for credit losses increased slightly when compared to historical rates utilized in 2022 due to improved collections performance from the underwriting modifications made in reaction to the COVID-19 pandemic. Any changes to our historical loss and collections experience directly affect the historical loss rates utilized in the calculation of the allowance for uncollectible advances. The changes in the allowance for credit losses, period over period, has a direct impact on the provision for credit losses. For information on the aging of Member advances and a roll-forward of the allowance for credit losses, refer to the tables in Note 5 Member Advances, Net in the accompanying consolidated financial statements of Dave included in this report. Processing and service costs —Processing and servicing costs totaled $28.9 million for the year ended December 31, 2023, compared to $31.9 million for the year ended December 31, 2022. The decrease of $3.0 million, or 9.5%, was primarily driven by technology enhancements made to our ExtraCash payments structure along with discounts and cost savings due to price reductions from our processors. Advertising and marketing —Advertising and marketing expenses totaled $48.4 million for the year ended December 31, 2023, compared to $69.0 million for the year ended December 31, 2022. The decrease of $20.6 million, or 29.9%, was primarily attributable to a more targeted, conversion-focused spend approach on our advertising campaigns, production and promotions across various social media platforms and television. Additionally, channel and creative optimization, long-tail marketing investments made during the second quarter of 2023 and ongoing improvements to our measurement and reporting infrastructure allowed us to invest more intelligently across our marketing mix. Compensation and benefits —Compensation and benefits expenses totaled $94.9 million for the year ended December 31, 2023, compared to $103.4 million for the year ended December 31, 2022. The decrease of $8.5 million, or 8.2%, was primarily attributable to the following: • a decrease in stock-based compensation of $14.0 million, primarily due to larger amounts of restricted stock units granted during the year ended December 31, 2022 compared to the year ended December 31, 2023 and stock options granted in prior years' that have fully vested; • a decrease in contractor and consulting fees of $2.8 million due to the average increase in employee headcount and corresponding reduction in external support for IT security, finance, marketing, design and customer service resources; and • an increase in payroll and related costs of $8.2 million, primarily due to average headcount and salary increases, bonuses and severance payments; Other operating expenses —Other operating expenses totaled $70.7 million for the year ended December 31, 2023, compared to $68.6 million for the year ended December 31, 2022. The increase of $2.1 million, or 3.1%, was primarily attributable to the following: • an increase in legal fees of $4.0 million primarily due to ongoing litigation, settlement, compliance, employment and general corporate related matters; • an increase in expenses related to our Checking Product of $2.7 million, primarily attributable to processing fees, card fees and fraud related costs associated with the growth in Members and the number of transactions processed; • an increase in charitable contribution expenses of $2.0 million, primarily due to increased amounts pledged to charitable meal donations related to Members’ tips; • an increase in technology and infrastructure expenses of $0.8 million, primarily due to increased costs to support the growth of our business and development of new products and features; 52 • a decrease in insurance related costs of $3.5 million, primarily related to reductions in director and officer premiums; • a decrease in rent expense of $1.8 million due to a reduction in leased office space; • a decrease in depreciation and amortization of $1.2 million, primarily due to accelerated amortization related to the change in useful life of a certain intangible asset during the year ended December 31, 2022, offset by increased amortization of internally developed software due to increased internally developed capitalized costs, and depreciation related to leasehold improvements and equipment purchases; and • a decrease in administrative expenses of $0.8 million, primarily due to reductions in investor relations fees, accounting related fees, in-person company meetings, bank service charges, sales tax, licenses and fees, travel and entertainment and other administrative expenses. Other (income) expense For the Year Ended Change (in thousands, except for percentages) December 31, $ % 2023 2022 2023/2022 2023/2022 Interest income $ (5,295 ) $ (2,953 ) $ (2,342 ) 79 % Interest expense 11,774 9,197 2,577 28 % Legal settlement and litigation expenses - 6,282 (6,282 ) -100 % Other strategic financing and transactional expenses - 4,591 (4,591 ) -100 % Gain on extinguishment of liability - (4,290 ) 4,290 -100 % Changes in fair value of earnout liabilities (22 ) (9,629 ) 9,607 -100 % Changes in fair value of derivative asset on loans to stockholders - 5,572 (5,572 ) -100 % Changes in fair value of public and private warrant liabilities (260 ) (14,192 ) 13,932 -98 % Total $ 6,197 $ (5,422 ) $ 11,619 -214 % Interest income — Interest income totaled $5.3 million for the year ended December 31, 2023, compared to $3.0 million for the year ended December 31, 2022. The increase of $2.3 million, or 79.3%, was primarily attributable to interest earned from yields from investments and higher interest rates during the year ended December 31, 2023 as compared to the year ended December 31, 2022. Interest expense — Interest expense totaled $11.8 million for the year ended December 31, 2023, compared to $9.2 million for the year ended December 31, 2022. The increase of $2.6 million, or 28%, was primarily attributable to interest related to a higher average outstanding balance during 2023 from the delayed draw senior secured loan facility (the “Debt Facility”) which Dave OD Funding I, LLC (“Dave OD”) entered into during January 2021, and which was subsequently amended in November 2021 to include a $20 million line of credit (the “Credit Facility”), along with interest related to the Note with FTX Ventures and higher interest rates on borrowings under the Debt Facility and Credit Facility. Legal settlement and litigation expenses —Legal settlement and litigation expenses totaled $0 for the year ended December 31, 2023, compared to $6.3 million for the year ended December 31, 2022. See Note 13 Commitments and Contingencies in the accompanying consolidated financial statements of Dave included in this report for more information regarding pending legal actions. The decrease of $6.3 million, or 100%, was primarily attributable to the settlement of an employee-related legal matter during the year ended December 31, 2022. Other strategic financing and transactional expenses —Other strategic financing and transactional expenses totaled $0 for the year ended December 31, 2023, compared to $4.6 million for the year ended December 31, 2022. The 53 decrease of $4.6 million was related to one-time strategic opportunities in addition to one-time post-closing expenses associated with the Business Combination that occurred in 2022. Gain on extinguishment of liability —Gain on extinguishment of liability totaled $0 for the year ended December 31, 2023, compared to $4.3 for the year ended December 31, 2022. The decrease of $4.3 million, or 100%, was primarily attributable to the extinguishment of a $7.5 million liability related to transaction costs associated with the Business Combination that were settled during 2022 in exchange for shares of our Class A common stock. The $7.5 million in transaction costs were also included as part of additional paid in capital within our consolidated balance sheets as the transaction costs were originally capitalized in conjunction with the Business Combination. Changes in fair value of earnout liability —Changes in fair value of earnout liabilities totaled a benefit of $0.02 million for the year ended December 31, 2023, compared to totaled a benefit of $9.6 million for the year ended December 31, 2022. The decrease of $9.6 million, or 99.8%, was primarily attributable to fair value adjustments associated with certain earnout shares liability due to decreases in our underlying Class A Common Stock price. Changes in fair value of derivative asset on loans to stockholders —Changes in fair value of derivative asset on loans to stockholders totaled $0 for the year ended December 31, 2023, compared $5.6 million for the year ended December 31, 2022. The decrease of $5.6 million, or 100%, was primarily attributable to fair value adjustments associated with options issued in connection with loans to stockholders resulting from a decrease in the underlying fair value of our Class A Common Stock as of the settlement date of the derivative asset in early 2022. For further details, please refer to Note 2 in the accompanying consolidated financial statements of Dave included in this report. Changes in fair value of warrant liability —Changes in fair value of warrant liability totaled a benefit of $0.3 million for the year ended December 31, 2023, compared to total a benefit of $14.2 million for the year ended December 31, 2022. The decrease in benefit of $13.9 million, or 98.2%, was primarily attributable to fair value adjustments associated with certain public and private warrant liabilities due to decreases in our underlying Class A Common Stock price over the last 12 months. Provision for income taxes For the Year Ended Change (in thousands, except for percentages) December 31, $ % 2023 2022 2023/2022 2023/2022 Provision for (benefit from) income taxes 120 (67 ) 187 -279 % Total $ 120 $ (67 ) $ 187 -279 % Provision for income taxes for the year ended December 31, 2023 increased by $0.2 million, or 279%, compared to the year ended December 31, 2022. This increase was primarily due to an increase in state taxes, including gross margin state taxes, because a favorable ruling by the Texas Supreme Court regarding the determination of state sourced service income had a more significant impact on the year ended December 31, 2022. Comparison of Years Ended December 31, 2022 and 2021 A discussion regarding our results of operations for the year ended December 31, 2022 compared to the results for the year ended December 31, 2021 can be found under “Management’s Discussion and Analysis of Financial Condition and Results of Operations of Dave – Results of Operations” in our Form 10-K filed with the SEC on March 13, 2023 , which is available on the SEC’s website at www.sec.gov . Non-GAAP Financial Measures In addition to our results determined in accordance with GAAP, we believe the following non-GAAP measure is useful in evaluating our operational performance. We use the following non-GAAP measure to evaluate our ongoing operations and for internal planning and forecasting purposes. We believe that the non-GAAP financial information may be helpful in assessing our operating performance and facilitates an alternative comparison among fiscal 54 periods. The non-GAAP financial measure is not, and should not be viewed as, a substitute for GAAP reporting measures. Adjusted EBITDA “Adjusted EBITDA” is defined as net loss adjusted for interest expense, net, provision for income taxes, depreciation and amortization, stock-based compensation and other discretionary items determined by management. Adjusted EBITDA is intended as a supplemental measure of our performance that is neither required by, nor presented in accordance with, GAAP. We believe that the use of Adjusted EBITDA provides an additional tool for investors to use in evaluating ongoing operating results and trends and in comparing our financial measures with those of comparable companies, which may present similar non-GAAP financial measures to investors. However, you should be aware that, when evaluating Adjusted EBITDA, we may incur future expenses similar to those excluded when calculating these measures. In addition, our presentation of these measures should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items. Our computation of Adjusted EBITDA may not be comparable to other similarly titled measures computed by other companies, because all companies may not calculate Adjusted EBITDA in the same fashion. Because of these limitations, Adjusted EBITDA should not be considered in isolation or as a substitute for performance measures calculated in accordance with GAAP. We compensate for these limitations by relying primarily on our GAAP results and using Adjusted EBITDA on a supplemental basis. The reconciliation of net loss to Adjusted EBITDA below should be reviewed, and no single financial measure should be relied upon to evaluate our business. The following table reconciles net loss to Adjusted EBITDA for the years ended December 31, 2023 and 2022: For the Year Ended (in thousands) December 31, 2023 2022 Net loss $ (48,517 ) $ (128,906 ) Interest expense, net 6,479 6,244 Provision for (benefit from) income taxes 120 (67 ) Depreciation and amortization 5,450 6,661 Stock-based compensation 26,674 40,639 Legal settlement and litigation expenses - 6,282 Other strategic financing and transactional expenses - 4,591 Gain on extinguishment of liability - (4,290 ) Changes in fair value of earnout liabilities (22 ) (9,629 ) Changes in fair value of derivative asset on loans to stockholders - 5,572 Changes in fair value of public and private warrant liabilities (260 ) (14,192 ) Adjusted EBITDA $ (10,076 ) $ (87,095 ) Liquidity and Capital Resources In the past, we have financed our operations primarily from cash receipts from service and transaction based revenues, equity financings, borrowings under the Debt Facility, issuances of convertible notes and funds received as a result of the business combination. As of December 31, 2023 and 2022, our cash and cash equivalents, marketable securities and investments balance was $155.9 million and $192.0 million, respectively. As an early-stage company, the expenses we have incurred since inception are consistent with our strategy and approach to capital allocation. We expect to incur net losses in accordance with our operating plan as we continue to expand and improve upon our financial platform. 55 Our ability to access capital when needed is not assured and, if capital is not available to us when, and in the amounts needed, we could be required to delay, scale back or abandon some or all of our development programs and other operations, which could materially harm our business, prospects, financial condition and operating results. We believe that our cash on hand should be sufficient to meet our working capital and capital expenditure requirements and fund our operations for a period of at least 12 months from the date of this report. We may raise additional capital through private or public equity or debt financings. The amount and timing of our future funding requirements, if any, will depend on many factors, including the pace and results of our product development efforts. No assurances can be provided that additional funding will be available at terms acceptable to us, if at all. If we are unable to raise additional capital, we may significantly curtail our operations, modify existing strategic plans and/or dispose of certain operations or assets. Material Cash Requirements In the normal course of business, we enter into various agreements with our vendors that may subject us to minimum annual requirements. While our contractual commitments will have an impact on our future liquidity, we believe that we will be able to adequately fulfill these obligations through cash generated from operations and from our existing cash balances. Dave does not have any “off-balance sheet arrangements,” as defined by the SEC regulations. Although we have fully implemented our remote employee workforce strategy in the U.S., we have not closed our leased office locations. We are required to continue making our contractual payments until our operating leases are formally terminated or expire. Our remaining leases have terms of approximately 2 to 5 years as of December 31, 2023, and we had a total lease liability of $0.8 million. See Note 13, Leases in the notes to our consolidated financial statements for additional information regarding our lease liabilities as of December 31, 2023. In the near term, we expect to continue to generate ExtraCash originations relying primarily on our balance sheet cash and Debt Facility, as needed. Interest payments on term loan borrowings under the Debt Facility are required to be made on a monthly basis. At December 31, 2023, $75.0 million of term loans under the Debt Facility were outstanding. See Note 11, Debt and Credit Facility in the notes to our consolidated financial statements in this report. Additionally, we also had certain contractual payment obligations for interest owed under the $100.0 million Note we issued and sold pursuant to the Note Purchase Agreement entered into with FTX Ventures. Interest payments relating to the Note were required to be made or added to the outstanding principal on a semi-annual basis. At December 31, 2023, a total of $5.5 million of interest was added to the outstanding principal. On January 29, 2024, we repurchased the $105.5 million outstanding balance of the Note as of December 31, 2023 for $71.0 million. For more information on the Note Purchase Agreement with FTX Ventures, see Note 9, Convertible Note Payable and Note 21, Subsequent Events. We may use cash to acquire businesses and technologies. The nature of these potential transactions, however, makes it difficult to predict the amount and timing of such cash requirements. Cash Flows Summary (in thousands) For the Year Ended December 31, Total cash provided by (used in): 2023 2022 Operating activities $ 33,754 $ (44,883 ) Investing activities (14,375 ) (285,579 ) Financing activities 22 321,767 Net increase (decrease) in cash and cash equivalents and restricted cash $ 19,401 $ (8,695 ) 56 Cash Flows From Operating Activities We recorded a net loss of $48.5 million for the year ended December 31, 2023, and a net loss of $128.9 million for the year ended December 31, 2022. We reported cash flows provided by operating activities of $33.8 million for the year ended December 31, 2023 and cash flows used in operating activities of $44.9 million for the year ended December 31, 2022. During the year ended December 31, 2023, cash provided by operating activities increased compared to the year ended December 31, 2022 due to decreases in the provision for credit losses, processing costs, marketing and compensation and benefits across the business. Excluding non-cash impacts, changes in cash flows from operations included an increase in receivables related to revenue from Member advances of $4.1 million, a decrease in accounts payable of $5.9 million, a decrease in legal settlement accrual of $5.6 million, and a decrease in other current liabilities of $1 million. These changes were offset primarily by a decrease in prepaid income taxes of 0.7 million, a decrease in prepaid expenses and other current assets of $2.9 million, an increase in accrued expenses of $1.7 million. Net cash used in operating activities for the year ended December 31, 2022 included a net loss of $128.9 million, adjusted for non-cash items of $7.1 million for depreciation and amortization, $66.3 million for provision for credit losses, $5.6 million for a decrease in derivative asset fair value, and $40.6 million for stock-based compensation expense, partially offset by $9.6 million for a decrease in earnout liabilities fair value, and 14.2 million for a decrease in warrant liabilities fair value. Excluding non-cash impacts, changes in cash flows from operations included an increase in receivables related to revenue from Member advances of $6.8 million, a decrease in other current liabilities of $0.3 million, an increase in prepaid expenses and other current assets of $6.8 million, and a decrease in accrued expenses of $1.7 million. These changes were offset primarily by an increase in legal settlement accrual of $5.7 million, a decrease in prepaid income taxes of $0.6 million, and an increase in accounts payable of $0.3 million. Cash Flows From Investing Activities During the year ended December 31, 2023, net cash used in investing activities was $14.4 million. This amount included payments for internally developed software costs of $7.9 million, the purchase of property and equipment of $0.7 million, net disbursements and collections of Member advances of $63.0 million, the purchase of investments of $120.0 million, and the purchase of marketable securities of $34.4 million, offset by the sale of marketable securities of $33.7 million and the sale and maturity of investments of $177.9 million. During the year ended December 31, 2022, net cash used in investing activities was $285.6 million. This amount included payments for internally developed software costs of $8.6 million, the purchase of property and equipment of $0.7 million, net disbursements and collections of Member advances of $114.3 million, the purchase of investments of $202.1 million, and the purchase of marketable securities of $317.7 million, offset by the sale of marketable securities of $325.6 million and the sale and maturity of investments of $32.2 million. Cash Flows From Financing Activities During the year ended December 31, 2023, net cash provided by financing activities was $0.02 million, which primarily consisted of payments of $0.01 million for fractional shares that resulted from our reserve stock spilt and $0.03 million in proceeds from the issuance of common stock for stock option exercises. During the year ended December 31, 2022, net cash provided by financing activities was $321.8 million, which consisted of $195.0 million in proceeds from PIPE financing in connection with the Business Combination, $29.7 million in proceeds from the Business Combination, net of redemptions, $0.6 million in proceeds from stock option exercises, $100 million in proceeds from borrowings related to the Note Purchase Agreement with FTX Ventures, 57 and $40.0 million related to debt facility borrowings, partially offset by $23.0 million for the payment of issuance costs related to the Business Combination, $20.0 million related to the repayment of the credit facility borrowings, and $0.5 million related to the repurchase of Class A Common Stock. Critical Accounting Estimates Our consolidated financial statements have been prepared in accordance with U.S. GAAP. The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the consolidated financial statements, as well as the reported revenues and expenses incurred during the reporting periods. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Our critical accounting estimates and assumptions are evaluated on an ongoing basis, including those related to the following: (i) Allowance for credit losses; and (ii) Income taxes. Actual results may differ from these estimates under different assumptions or conditions. We believe that the accounting estimates discussed below are critical to understanding our historical and future performance, as these estimates relate to the more significant areas involving management’s judgments and estimates. Please refer to Note 2 in our accompanying consolidated financial statements for the years ended December 31, 2023 and 2022 included in this Annual Report on Form 10-K. While our significant accounting estimates are described in the notes to our consolidated financial statements, we believe that the following accounting estimates require a greater degree of judgment and complexity and are the most critical to understanding our financial condition and historical and future results of operations. Allowance for Credit Losses Member advances from contracts with Members as of the balance sheet dates are recorded at their original advance amounts reduced by an allowance for expected credit losses. We pool our Member advances, all of which are short-term in nature and arise from contracts with Members, based on shared risk characteristics to assess their risk of loss, even when that risk is remote. We use an aging method and historical loss rates as a basis for estimating the percentage of current and delinquent Member advances balances that will result in credit losses. We consider whether the conditions at the measurement date and reasonable and supportable forecasts about future conditions warrant an adjustment to our historical loss experience. In assessing such adjustments, we primarily evaluate current economic conditions, expectations of near-term economic trends and changes in customer payment terms and collection trends. For the measurement dates presented herein, given our methods of collecting funds, and that we have not observed meaningful changes in our customers’ payment behavior, we determined that our historical loss rates remained most indicative of our lifetime expected losses. We immediately recognize an allowance for expected credit losses upon the origination of the advance. Adjustments to the allowance each period for changes in the estimate of lifetime expected credit losses are recognized in operating expenses—provision for credit losses in the consolidated statements of operations. When we determine that a Member advance is not collectible, the uncollectible amount is written-off as a reduction to both the allowance and the gross asset balance. Subsequent recoveries are recorded when received and are recorded as a recovery of the allowance for expected credit losses. Any change in circumstances related to a specific Member advance may result in an additional allowance for expected credit losses being recognized in the period in which the change occurs. Income Taxes We follow ASC 740, Income Taxes (“ASC 740”), which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the consolidated financial statements 58 or tax returns. Under this method, deferred tax assets and liabilities are based on the differences between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the period in which the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance to the extent management concludes it is more-likely-than-not that the asset will not be realized. ASC 740 provides that a tax benefit from an uncertain tax position may be recognized when it is more-likely-than-not that the position will be sustained in a court of last resort, based on the technical merits. If more-likely-than-not, the amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized upon examination, including compromise settlements. For tax positions not meeting the more-likely-than-not threshold, no tax benefit is recorded. We have estimated $1.3 million and $0.9 million of uncertain tax positions as of December 31, 2023 and 2022, respectively, related to state income taxes and federal and state R&D tax credits. We are subject to income tax in jurisdictions in which we operate, including the United States. For U.S. income tax purposes, we are taxed as a Subchapter C corporation. We recognize deferred taxes for temporary differences between the basis of assets and liabilities for financial statement and income tax purposes. We recorded a valuation allowance against our deferred tax assets, net of certain deferred tax liabilities, at December 31, 2023 and December 31, 2022. Based upon management’s assessment of all available evidence, we have concluded that it is more-likely-than-not that the deferred tax assets, net of certain deferred tax liabilities, will not be realized. Emerging Growth Company Status We are an “emerging growth company” as defined in Section 2(a) of the Securities Act of 1933, as amended, and have elected to take advantage of the benefits of the extended transition period for new or revised financial accounting standards. We expect to remain an emerging growth company and to continue to take advantage of the benefits of the extended transition period, although we may decide to early adopt such new or revised accounting standards to the extent permitted by such standards. We expect to use this extended transition period for complying with new or revised accounting standards that have different effective dates for public and non-public companies until the earlier of the date we (i) are no longer an emerging growth company or (ii) affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act. This may make it difficult or impossible to compare our financial results with the financial results of another public company that is either not an emerging growth company or is an emerging growth company that has chosen not to take advantage of the extended transition period exemptions because of the potential differences in accounting standards used. See Note 2 of our accompanying consolidated financial statements included in this report for the recent accounting pronouncements adopted and the recent accounting pronouncements not yet adopted for the years ended December 31, 2023 and 2022. In addition, we intend to rely on the other exemptions and reduced reporting requirements provided by the JOBS Act for emerging growth companies. Subject to certain conditions set forth in the JOBS Act, if we intend to rely on such exemptions, we are not required to, among other things: (a) provide an auditor’s attestation report on our system of internal control over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act; (b) provide all of the compensation disclosure that may be required of non-emerging growth public companies under the Dodd- Frank Wall Street Reform and Consumer Protection Act; (c) comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the consolidated financial statements (auditor discussion and analysis); and (d) disclose certain executive compensation-related items such as the correlation between executive compensation and performance and comparisons of the Chief Executive Officer’s compensation to median employee compensation. We will remain an emerging growth company under the JOBS Act until the earliest of (1) the last day of the fiscal year (a) following March 4, 2026, (b) in which we have total annual gross revenue of at least $1.235 billion, (c) in which we are deemed to be a “large accelerated filer” under the rules of the SEC, which means the market value of our common equity that is held by non-affiliates exceeds $700 million as of the end of the prior fiscal year’s second fiscal quarter; and (2) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the previous three years. 59 Recently Issued Accounting Standards Refer to Note 2, “Significant Accounting Policies,” of our consolidated financial statements included in this report for a discussion of the impact of recent accounting pronouncements.