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 Company Overview Dave was launched in 2017 to provide a faster, more transparent, and lower-cost alternative to traditional financial institutions, particularly for those living paycheck to paycheck. Inspired by the story of David vs. Goliath, we set out to challenge legacy banking by leveraging technology to expand financial access and improve consumer financial health. Through our mobile-first platform, we deliver innovative financial products designed to help underserved consumers manage their money more effectively. Our mission is to level the financial playing field by providing intuitive, transparent, and accessible solutions that empower our Members to navigate life’s financial challenges with confidence. We have engineered a purpose-driven platform designed to deliver on our mission, making a significant impact across the stakeholder groups we serve. Since our inception, more than 16 million Members have signed up for the Dave app, with over 12 million having used at least one of our products. We have provided Members with more than $15 billion in ExtraCash, offering critical liquidity when they need it most. To further support our communities, we have donated approximately $23 million to charity and important causes since inception. Customers value our products, as demonstrated by more than 700,000 App Store reviews with an average 4.8-star rating as of February 2025. Our business model is built on transparency and customer alignment and building relationships with our Members that drive positive outcomes for both them and our business. At the core of our success is a world-class team dedicated to delivering on our mission. Dave has been recognized by Built In as a Best Place to Work for five consecutive years, reinforcing our commitment to both our Members and employees. Market Opportunity The U.S. financial system has historically failed to address the needs of the millions of Americans who are living paycheck to paycheck. According to the Financial Health Network (“FHN”) in 2024, approximately 180 million Americans are classified as financially “coping” or “vulnerable” representing over 70% of the U.S. population, up from 66% in 2021. A December 2024 report by PYMNTS also found that 65% of U.S. consumers were living paycheck to paycheck, up from 60% a year earlier. This market includes both young and financially challenged individuals who have trouble managing cash flow, have minimal savings, regularly overdraft, and pay high fees for access to financial services. FHN research estimates there is approximately $38 billion of fees paid annually for access to basic checking services, including account maintenance fees, overdraft fees and ATM fees and that financially vulnerable and coping populations pay over $200 billion in annual fees and interest for short-term credit. We believe these insights are supported by a Dave study of our Members which reveals that traditional financial institutions charge consumers between $350-$400 of fees annually for access to basic checking services. We also believe these trends underscore a growing need for better financial solutions and illustrate the depth of our total addressable market (“TAM”), which we estimate to be approximately 180 million Americans that do not have access to affordable and effective banking solutions. 57 We believe that these high costs are the result of the cost structure of incumbents. With expensive brick-and-mortar bank branch networks, antiquated technology, large employee bases, and inefficient customer acquisition strategies, legacy institutions have significant costs to serve their customers, which drives the high price that customers have to pay for access to their services. By leveraging world-class technology and harnessing the power of data and artificial intelligence, we believe that we have dramatically reduced the costs to serve customers in this market. Through this structural advantage, we are able to provide increased access to banking and credit products at lower costs, resulting in a much stronger value proposition to our Members. 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. 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. Concentration We rely on agreements with Evolve, currently our only active bank partner, to provide ExtraCash and other deposit accounts, debit card services and other transaction services to us and our Members. See Part II Item 1A, “Risk Factors” for additional information. Given the size and consistent growth of our Member base as well as how our product capabilities have been expanding, we recently announced an additional financial institution with which we will partner. 58 Industry Trends/General Economic Conditions We expect economic cycles to affect our business, financial performance, and financial condition. Macroeconomic conditions, including, but not limited to, regulatory uncertainty, fluctuating interest rates, inflation, unemployment rates, and consumer sentiment may impact consumer spending behavior and consumer demand for financial products. Although the Company’s business operations have not been materially impacted as of the date of this report, our business, financial condition, results of operations and prospects may be adversely affected due to the ongoing nature of these macroeconomic factors. Interest rates have remained elevated over the last two years which has increased the costs of borrowing on our Debt Facility. Higher interest rates also often lead to higher payment obligations, which may reduce the ability of Members to repay their ExtraCash and, therefore, lead to increased delinquencies, write-offs and decreased recoveries. We also believe that higher interest rates may increase demand for ExtraCash as consumers seek additional sources of liquidity to help them fund higher costs of living. Additionally, higher levels of unemployment could adversely impact Members’ income levels and, hence, the ability of Members to repay, which could lead to deterioration in credit performance. We believe that our underwriting engine is well positioned to evaluate credit risk in a higher unemployment environment as it analyzes bank account transaction data to assess, nearly in real-time, changes in Members’ income, spending, savings, and employment status. We also believe that demand for ExtraCash may increase in periods of higher unemployment as consumers seek additional sources of liquidity to help them meet their financial obligations. 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 express processing fees, optional tips, overdraft service fees and subscriptions charged to Members, net of processor-related costs associated with ExtraCash 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. 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 ExtraCash receivables, 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 59 of operations. We consider ExtraCash receivables, aged more than 120 days or which become uncollectible based on information available to us as impaired. All impaired ExtraCash receivables, are deemed uncollectible and subsequently written off and are a direct reduction to the allowance for credit losses. Subsequent recoveries, if any, of Member ExtraCash receivables, written-off are recorded as a reduction to ExtraCash receivables, 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 ExtraCash, optional tips, optional express processing fees, overdraft service 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 ExtraCash originations 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 or “SaaS”), commitments to charity, checking product 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. Other (income) expenses Other (income) expenses consist of interest income, interest expense, gain on extinguishment of convertible debt, earnout liabilities 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. 60 Results of Operations Comparison of the Years Ended December 31, 2024 and 2023 Operating revenues For the Year Ended Change (in thousands, except for percentages) December 31, $ % 2024 2023 2024/2023 2024/2023 Service based revenue, net Processing fees, net $ 218,802 $ 152,490 $ 66,312 43 % Tips 67,563 56,945 10,618 19 % Subscriptions 24,599 21,483 3,116 15 % Other 462 1,323 (861 ) -65 % Transaction based revenue, net 35,650 26,852 8,798 33 % Total $ 347,076 $ 259,093 $ 87,983 34 % Service based revenue, net— Processing fees, net Processing fees, net of processor costs associated with ExtraCash originations, for the year ended December 31, 2024 were $218.8 million, an increase of $66.3 million, or 43%, from $152.5 million for the year ended December 31, 2023. The increase was primarily attributable to increases in transacting Members, increases in total ExtraCash origination volume from approximately $3.6 billion to approximately $5.1 billion year over year and average ExtraCash origination amounts that increased from $152 to $170 as of the years ended December 31, 2023 and 2024, respectively. As a percentage of total ExtraCash volume, processing fees remained relatively flat, year over year. Additionally, the average processing fees Members paid to expedite ExtraCash increased modestly, while the percentage of Members that chose to pay a processing fee to expedite ExtraCash remained relatively flat for the year ended December 31, 2024 as compared to the year ended December 31, 2023, respectively. Going forward, we expect processing fees to increase as expedited ExtraCash volume and average expedited ExtraCash sizes increase, however, processing fees have not always trended ratably. Prior to the implementation of percentage-based processing fees in late 2023, processing fees did not scale ratably with expedited ExtraCash origination amounts. Tips Tips for the year ended December 31, 2024 were $67.6 million, an increase of $10.6 million, or 19%, from $56.9 million for the year ended December 31, 2023. The increase was primarily attributable to higher tips from Members due primarily to increases in transacting Members, increases in total ExtraCash origination volume from approximately $3.6 billion to approximately $5.1 billion year over year and average ExtraCash origination amounts that increased from $152 to $170 as of the years ended December 31, 2024 and 2023, respectively. As a percentage of total ExtraCash volume, tips decreased from 1.57% to 1.33% for the year ended December 31, 2024 as compared to the year ended December 31, 2023. The average tip Members chose to leave increased modestly while the percentage of Members that chose to leave a tip decreased modestly for the year ended December 31, 2024 as compared to the year ended December 31, 2023. Tip amounts may not always trend ratably as tips can vary depending on the total amount of the ExtraCash, amount of tips Members choose to leave and the percentage of Members who leave a tip. Subscriptions Subscriptions for the year ended December 31, 2024 were $24.6 million, an increase of $3.1 million, or 15%, from $21.5 million for the year ended December 31, 2023. The increase was primarily attributable to an increase in paying Members on our platform. 61 Other Other revenue for the year ended December 31, 2024 was $0.5 million, a decrease of $0.9 million, or 65% from $1.3 million for the year ended December 31, 2023. The decrease was primarily attributable to lower revenues resulting from the elimination of our Legacy Rewards product in 2023. Transaction based revenue, net Transaction based revenue, net for the year ended December 31, 2024 was $35.7 million, an increase of $8.8 million, or 33%, from $26.9 million, for the year ended December 31, 2023. The increase was primarily attributable to interchange revenue earned from the growth in Members engaging with our Checking Product and card spend of $1.9 billion for the year ended December 31, 2024, an increase of 40%, from $1.4 billion for the year ended December 31, 2023, in addition to increases in fees earned from Members' funding and withdrawal-related transactions, offset by an increase of $1.2 million in interest due to Members. Operating expenses For the Year Ended Change (in thousands, except for percentages) December 31, $ % 2024 2023 2024/2023 2024/2023 Provision for credit losses $ 54,626 $ 58,386 $ (3,760 ) -6 % Processing and servicing costs 30,377 28,926 1,451 5 % Advertising and marketing 44,904 48,392 (3,488 ) -7 % Compensation and benefits 107,028 94,910 12,118 13 % Other operating expenses 75,530 70,679 4,851 7 % Total $ 312,465 $ 301,293 $ 11,172 4 % Provision for credit losses —The provision for credit losses totaled $54.6 million for the year ended December 31, 2024, compared to $58.4 million for the year ended December 31, 2023. The decrease of $3.8 million, or 6%, was primarily attributable to a decrease of $10.3 million related to ExtraCash receivables aged over 120 days and those that have become uncollectible based on information available to us, offset by an increase in provision expense of $6.6 million related to ExtraCash receivables aged 120 days and under. The decrease in provision expense of $10.3 million related to ExtraCash receivables aged over 120 days and those which have become uncollectible based on information available to us, period over period was attributed to improved collections performance due primarily to underwriting modifications related to ExtraCash eligibility requirements and risk detection. This decrease in provision expense occurred despite increases in transacting Members, average ExtraCash originations from $152 to $170 and total ExtraCash origination volume from $3.6 billion to approximately $5.1 billion for the years ended December 31, 2023 and 2024, respectively. All impaired ExtraCash receivables deemed uncollectible are subsequently written-off and are a direct reduction to the allowance for credit losses. The increase in provision expense of $6.6 million related to ExtraCash receivables aged 120 days and under was primarily attributed to an increase in receivables outstanding related to the 43% increase in ExtraCash origination volume, offset by improved collections performance during the year ended December 31, 2024 as compared to the year ended December 31, 2023. This resulted in an increase to the allowance for credit losses and corresponding increase in provision expense during the year ended December 31, 2024 as compared to December 31, 2023. We anticipate volatility in ExtraCash receivables outstanding each period as they are directly correlated with the timing and volume of Member ExtraCash originations and collections during the last 120 days prior to the end of the period. Historical loss and collections rates utilized in the calculation of the provision for credit losses improved slightly as compared to historical rates due to continued improvement in historical collections performance. Any changes to our historical loss and collections experience directly affect the historical loss rates utilized in the calculation of the 62 allowance for credit losses. The changes in the allowance for credit losses, period over period, have a direct impact on the provision for credit losses. For information on the aging of ExtraCash receivables and a roll-forward of the allowance for credit losses, refer to the tables in Note 5 ExtraCash Receivables, Net in the accompanying consolidated financial statements of Dave included in this report. Processing and service costs —Processing and servicing costs totaled $30.4 million for the year ended December 31, 2024, compared to $28.9 million for the year ended December 31, 2023. The increase of $1.5 million, or 5%, was primarily driven by an increase in process transaction volume year over year, offset by technology enhancements made to our ExtraCash payments structure along with discounts and cost savings due to rebates and price reductions from our processors. Advertising and marketing —Advertising and marketing expenses totaled $44.9 million for the year ended December 31, 2024, compared to $48.4 million for the year ended December 31, 2023. The decrease of $3.5 million, or 7%, was primarily attributable to reductions in our non-media marketing spend including our brand refresh, efficiencies achieved by partnering with new marketing agencies, and optimizing our promotion strategy. We also improved the efficiency of our media investment by reallocating marketing spend to more efficient channels via improved measurement, tracking and attribution. Compensation and benefits —Compensation and benefits expenses totaled $107.0 million for the year ended December 31, 2024, compared to $94.9 million for the year ended December 31, 2023. The increase of $12.1 million, or 13%, was primarily attributable to the following: • an increase in stock-based compensation of $10.7 million, primarily due to the vesting of certain performance-based restricted stock units during the year ended December 31, 2024 compared to the year ended December 31, 2023, offset by a reduction in stock-based compensation expense related to stock options granted in prior years that have fully vested; • an increase in payroll and related costs of $1.8 million, primarily due to average headcount and salary increases and bonuses; offset by • a decrease in contractor and consulting fees of $0.4 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. Other operating expenses —Other operating expenses totaled $75.5 million for the year ended December 31, 2024, compared to $70.7 million for the year ended December 31, 2023. The increase of $4.9 million, or 7%, was primarily attributable to the following: • an increase in legal fees of $3.5 million primarily due to ongoing litigation, settlement, compliance, employment and general corporate related matters; • an increase in depreciation and amortization of $2.1 million, primarily due to increased internally developed capitalized costs, and depreciation related to leasehold improvements and equipment purchases; • an increase in certain expenses related to our checking product of $1.8 million, primarily attributable to processing fees, card fees and fraud related costs associated with the growth in Members and the number of transactions processed; and • an increase in technology & infrastructure expenses of $0.5 million, primarily due to increased costs to support the growth of our business and development of new products and features; offset by a 63 • a decrease in insurance related costs of $1.1 million, primarily related to reductions in director and officer insurance premiums; • a decrease in charitable contribution expenses of $0.9 million, primarily due to decreased amounts pledged to charitable meal donations related to Members' tips; and • a decrease in administrative expenses of $1.1 million, primarily due to reductions in investor and public relations fees, accounting related fees, bank service charges and other administrative expenses. Other (income) expense For the Year Ended Change (in thousands, except for percentages) December 31, $ % 2024 2023 2024/2023 2024/2023 Interest income $ (2,984 ) $ (5,295 ) $ 2,311 -44 % Interest expense 7,989 11,774 (3,785 ) -32 % Gain on extinguishment of convertible debt (33,442 ) - (33,442 ) -100 % Changes in fair value of earnout liabilities 965 (22 ) 987 -4486 % Changes in fair value of public and private warrant liabilities 1,729 (260 ) 1,989 -765 % Total $ (25,743 ) $ 6,197 $ (31,940 ) -515 % Interest income — Interest income totaled $3.0 million for the year ended December 31, 2024, compared to $5.3 million for the year ended December 31, 2023. The decrease of $2.3 million, or 44%, was primarily attributable to an average lower balance of investments held during the year ended December 31, 2024 as compared to the year ended December 31, 2023. Interest expense — Interest expense totaled $8.0 million for the year ended December 31, 2024, compared to $11.8 million for the year ended December 31, 2023. The decrease of $3.8 million, or 32%, was primarily attributable to a reduction of interest expense related to the repurchase of the convertible note with FTX Ventures Ltd. in January 2024. Gain on extinguishment of convertible debt — The gain on extinguishment of convertible debt totaled $33.4 million for the year ended December 31, 2024, compared to $0 for the year ended December 31, 2023. The increase was primarily attributable to the repurchase of the $105.7 million outstanding balance of the convertible note with FTX Ventures Ltd. for $71.0 million in January 2024. The gain was reduced by unamortized debt issuance costs of $0.03 million at the extinguishment date and third-party costs totaling $1.3 million in conjunction with the settlement of the convertible note. Changes in fair value of earnout liability —Changes in fair value of earnout liabilities totaled an expense of $1.0 million for the year ended December 31, 2024, compared to a benefit of $0.02 million for the year ended December 31, 2024. The increase of $1.0 million, was primarily attributable to fair value adjustments associated with certain earnout shares liability due to increases in our underlying Class A Common Stock price as of the year ended December 31, 2024 as compared to the year ended December 31, 2023. Changes in fair value of warrant liability —Changes in fair value of warrant liability totaled an expense of $1.7 million for the year ended December 31, 2024, compared to total a benefit of $0.3 million for the year ended December 31, 2023. The increase in expense of $2.0 million, or 765%, was primarily attributable to fair value adjustments associated with our public and private warrant liabilities due to increases in our publicly traded warrants price and underlying Class A Common Stock price for the year ended December 31, 2024 as compared to the year ended December 31, 2023. Provision for income taxes 64 For the Year Ended Change (in thousands, except for percentages) December 31, $ % 2024 2023 2024/2023 2024/2023 Provision for income taxes 2,481 120 2,361 1968 % Total $ 2,481 $ 120 $ 2,361 1968 % Provision for income taxes for the year ended December 31, 2024 increased by approximately $2.4 million compared to the year ended December 31, 2023. This increase was primarily due to a significant increase in income for the year ended December 31, 2024 compared to the year ended December 31, 2023, including a nonrecurring gain on extinguishment of convertible debt of $33.4 million. Comparison of Years Ended December 31, 2023 and 2022 A discussion regarding our results of operations for the year ended December 31, 2023 compared to the results for the year ended December 31, 2022 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 5, 2024, 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 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 income (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 income (loss) to Adjusted EBITDA below should be reviewed, and no single financial measure should be relied upon to evaluate our business. 65 The following table reconciles net income (loss) to Adjusted EBITDA for the years ended December 31, 2024 and 2023: For the Year Ended (in thousands) December 31, 2024 2023 Net income (loss) $ 57,873 $ (48,517 ) Interest expense, net 5,005 6,479 Provision for income taxes 2,481 120 Depreciation and amortization 7,540 5,450 Stock-based compensation 37,327 26,674 Legal settlement and litigation accrual 7,000 - Gain on extinguishment of convertible debt (33,442 ) - Changes in fair value of earnout liabilities 965 (22 ) Changes in fair value of public and private warrant liabilities 1,729 (260 ) Adjusted EBITDA (loss) $ 86,478 $ (10,076 ) 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, 2024 and 2023, our cash and cash equivalents, marketable securities and investments balance was $90.3 million and $155.9 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 significant expenses in accordance with our operating plan as we continue to expand and improve upon our financial platform. 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. As of December 31, 2024, we were not in compliance with a specific debt covenant under our existing Debt Facility with Victory Park Management, LLC (“Agent”). In particular, a breach existed relating to the Minimum Receivable Loan-to-Value ("LTV Ratio"), which exceeded the allowable limits set forth in the covenant. The Agent, on behalf of its lenders, provided a one-time limited waiver of this covenant, effective from October 18, 2024 until June 30, 2025. This waiver is solely for that period and for addressing this specific breach, and does not constitute a waiver of any default or event of default under the Debt Facility. 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 66 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 1 to 4 years as of December 31, 2024, and we had a total lease liability of $0.6 million. See Note 13, Leases in the notes to our consolidated financial statements for additional information regarding our lease liabilities as of December 31, 2024. 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, 2024, $75.0 million of term loans under the Debt Facility were outstanding. See Note 11, Debt 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. 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. 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): 2024 2023 Operating activities $ 125,137 $ 33,754 Investing activities (45,843 ) (14,375 ) Financing activities (70,995 ) 22 Net increase in cash and cash equivalents and restricted cash $ 8,299 $ 19,401 Cash Flows From Operating Activities We recorded net income of $57.9 million for the year ended December 31, 2024, and a net loss of $48.5 million for the year ended December 31, 2023. We reported cash flows provided by operating activities of $125.1 million for the year ended December 31, 2024 and cash flows provided by operating activities of $33.8 million for the year ended December 31, 2023. During the year ended December 31, 2024, cash provided by operating activities increased compared to the year ended December 31, 2023 due to decreases in the provision for credit losses, processing costs, marketing and compensation and benefits across the organization. Net cash provided by operating activities for the year ended December 31, 2024 included net income of $57.9 million, and excluding non-cash impacts, included an increase in prepaid expenses and other current assets of $8.2 million and an increase in receivables related to revenue from ExtraCash of $6.2 million. These changes were offset by an increase in accrued expenses of $4.1 million, an increase in legal settlement accrual of $3.8 million, an increase in non-current liabilities of $2.9 million, an increase in accounts payable of $1.3 million, an increase in other current liabilities of $0.3 million and a decrease in prepaid income taxes of $0.1 million. 67 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 organization. Excluding non-cash impacts, changes in cash flows from operations included an increase in receivables related to revenue from ExtraCash receivables of $4.1 million, a decrease in accounts payable of $5.9 million, a decrease in legal settlement accrual of $6.1 million, and a decrease in other current liabilities of $0.5 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 $3.3 million and an increase in accrued expenses of $1.7 million. Cash Flows From Investing Activities During the year ended December 31, 2024, net cash used in investing activities was $45.8 million. This amount included payments for internally developed software costs of $7.3 million, the purchase of property and equipment of $0.3 million, net ExtraCash originations and collections of $111.5 million, the purchase of investments of $111.3 million, and the purchase of marketable securities of $59.3 million, offset by the sale of marketable securities of $60.1 million and the sale and maturity of investments of $183.7 million. 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 ExtraCash originations and collections 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. Cash Flows From Financing Activities During the year ended December 31, 2024, net cash used in financing activities was $71.0 million, which primarily consisted of the $72.3 million paydown of the convertible note with FTX Ventures Ltd. and associated costs, offset by $1.3 million in proceeds from the issuance of common stock for stock option exercises. 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. 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, 2024 and 2023 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. 68 Allowance for Credit Losses ExtraCash receivables from contracts with Members as of the balance sheet dates are recorded at their original receivable amounts reduced by an allowance for expected credit losses. We pool our ExtraCash receivables, 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 ExtraCash receivables 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 ExtraCash receivable. 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 an ExtraCash receivable 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 ExtraCash receivable 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 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 $2.0 million and $1.3 million of uncertain tax positions as of December 31, 2024 and 2023, respectively, related to state income taxes and federal and state research and development 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 deferred tax liabilities, at December 31, 2024 and December 31, 2023. 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 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 until December 31, 2025 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 69 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, 2024 and 2023. 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. 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.