BM Technologies(BMTX) - 2024 Q2 - Quarterly Results

Executive Summary & Highlights Overall Performance Overview BM Technologies reported mixed results for Q2 and H1 2024, with H1 revenue up 10% YoY but Q2 revenue slightly down, focusing on digital transformation and a Durbin exempt bank strategy for future growth in higher education - First Half 2024 Revenue: $28.7 million, up 10% YoY[1][3] - Q2 2024 Interchange and Card Revenue: Increased 57% YoY[1][6] - Strategic Focus: Digital transformation and switching to a Durbin exempt bank to set the stage for growth in the higher education business[2] Strategic Initiatives and Product Launches BMTX completed its NextGen technology platform transformation, enabling faster product development, and launched a cash back rewards engine and an AI/ML-powered Identity Verification (IDV) SaaS product for universities, with 15 sales YTD - Technology Platform: Completed a cutting-edge microservice architecture platform (NextGen) in Q2 2024, unlocking the ability to bring additional products and services to market[2][10] - Product Launches: Launched a cash back rewards engine for Vibe customers (early July) and an innovative Software-as-a-Service (SaaS IDV) product for universities, leveraging AI and machine learning to mitigate fraud[1][3][8] - IDV Product Sales: 15 Identity Verification (IDV) product sales year-to-date[1][9] Financial Highlights (Q2 & H1 2024) Q2 2024 saw a net loss of $(4.8) million, including $1.6 million in one-time NextGen implementation costs, with Core EBITDA at a loss of $(0.9) million for Q2 and a positive $0.5 million for H1, maintaining strong liquidity with $12.5 million cash and no debt | Metric | Q2 2024 | H1 2024 | Q2 2023 | | :----- | :------ | :------ | :------ | | Operating Revenues | $12.5M | $28.7M | $12.6M | | Net Loss | $(4.8)M | $(4.1)M | $(4.46)M | | Diluted EPS | $(0.41) | $(0.35) | $(0.39) | | Core EBITDA (Loss) | $(0.9)M | $0.5M | $(0.9)M | - One-time Q2 2024 costs: $1.6 million ($0.13 per diluted share) related to the implementation of NextGen technology[4][10] - Liquidity (June 30, 2024): $12.5 million of cash (over $1 per diluted share outstanding), $0.4 million of working capital, and no debt[4] - Seasonality: The second quarter is generally the weakest quarter of the year for the higher education business[4][7] Operating Highlights (H1 2024) The company reported $685 million in average serviced deposits and $642 million in ending serviced deposits at June 30, 2024, with debit card spend reaching $1.4 billion in H1 and 160 thousand new account sign-ups - Average serviced deposits totaled $685 million and ending serviced deposits totaled $642 million at June 30, 2024[5][28] - Debit card spend totaled $631 million in Q2 2024 and $1.4 billion in the six months ended June 30, 2024[5][28] - New account sign-ups: Approximately 60 thousand in Q2 2024 and approximately 160 thousand in the first six months of 2024[5] - Higher Education Organic Deposits: $366 million for Q2 2024 and $814 million for H1 2024[5][28] Financial Performance Analysis Revenue Breakdown Total GAAP Operating Revenue for Q2 2024 was $12.541 million, a slight decrease of 1% YoY, while Interchange and card revenue showed strong growth, up 57% YoY, and servicing and account fees declined | Revenue Type (in thousands) | Q2 2024 | Q2 2023 | YoY Change ($) | YoY Change (%) | | :-------------------------- | :------ | :------ | :------------- | :------------- | | Interchange and card revenue | $2,284 | $1,458 | $826 | 57% | | Servicing fees | $6,874 | $7,700 | $(826) | (11)% | | Account fees | $1,805 | $1,910 | $(105) | (5)% | | University fees | $1,469 | $1,373 | $96 | 7% | | Other revenue | $109 | $200 | $(91) | (46)% | | Total GAAP Operating Revenue | $12,541 | $12,641 | $(100) | (1)% | Operating Expenses and Profitability GAAP Operating Expense for Q2 2024 was $17.210 million, a 3% decrease YoY, with Core EBITDA (Loss) for Q2 2024 at $(881) thousand, showing a 3% improvement YoY, and $1.560 million in NextGen implementation costs incurred during Q2 | Expense/Profitability Metric (in thousands) | Q2 2024 | Q2 2023 | YoY Change ($) | YoY Change (%) | | :---------------------------------------- | :------ | :------ | :------------- | :------------- | | GAAP Operating Expense | $17,210 | $17,682 | $(472) | (3)% | | Core Operating Expense (ex. Dep & Amort) | $13,422 | $13,547 | $(125) | (1)% | | Core EBITDA (Loss) | $(881) | $(906) | $25 | 3% | | Core EBITDA (Loss) Margin | (7)% | (7)% | N/A | N/A | - NextGen implementation costs: $1,560 thousand incurred in Q2 2024[6][10][20][23][26] Business Segment Update Higher Education Vertical The Higher Education segment maintained a high client retention rate of 99.3% and signed three new colleges in H1 2024, with Q2 disbursements totaling over $1.9 billion, 12% of which went into BankMobile Vibe accounts, and a new rewards engine is expected to boost transaction volume despite a 4% YoY decrease in debit card POS spend in Q2 - Client Retention: 99.3% of Higher Education institutional clients retained during Q2 2024[7][28] - New Clients: Signed three new colleges and universities in H1 2024, providing access to approximately 16,000 additional students[7] - Disbursements: Over $1.9 billion in refunds disbursed to students in Q2 2024, with approximately 12% ($234 million) disbursed into BankMobile Vibe checking accounts[7][28] | Metric | Q2 2024 | Q2 2023 | YoY Change ($) | YoY Change (%) | | :-------------------------------- | :------ | :------ | :------------- | :------------- | | Higher Education Average Serviced Deposits | $425M | $429M | $(4)M | (1)% | | Higher Education Ending Serviced Deposits | $392M | $408M | $(16)M | (4)% | | Debit Card POS Spend (Higher Education) | $472M | $490M | $(18)M | (4)% | - New Product: Launched a rewards engine in early July for Vibe customers to earn cash back on debit card purchases, expected to increase transaction and spend volume[8] - IDV Product: Signed 15 universities for the IDV SaaS product YTD, with a strong pipeline for solid sales through the remainder of the year[9] Banking-as-a-Service (BaaS) Vertical The BaaS segment experienced significant declines in deposits and debit card spend, with the BaaS relationship set to expire in February 2025, and the company expects a wind-down to increase pro-forma core EBITDA by at least $1 million per quarter due to unprofitability in the current environment | Metric | Q2 2024 | Q2 2023 | YoY Change ($) | YoY Change (%) | | :-------------------------------- | :------ | :------ | :------------- | :------------- | | BaaS Average Serviced Deposits | $261M | $494M | $(233)M | (47)% | | BaaS Ending Serviced Deposits | $250M | $439M | $(189)M | (43)% | | Debit Card POS Spend (BaaS) | $158M | $168M | $(10)M | (6)% | - Relationship Expiry: The BaaS relationship expires in February 2025[10] - Profitability: The BaaS business is unprofitable for the company in the current regulatory and interest rate environment[10] - Wind-down Impact: In the event of a wind-down, pro-forma core EBITDA is expected to increase by at least $1 million per quarter on a run-rate basis[10] Technology and Growth Initiatives Technology Platform Transformation The company completed its NextGen technology platform, a microservice architecture, in Q2 2024, a significant investment enabling the launch of targeted products and services, though it resulted in higher Q2 expenses due to running dual platforms - NextGen Platform: Completed the technology platform transformation to a cutting-edge microservice architecture in Q2 2024[2][10] - Capabilities: The platform unlocks the ability to market targeted products and services to the Vibe customer base and bring additional products to market at an industry-leading pace[2][10] - Q2 Expenses: Implementation of the new architecture resulted in higher expenses in Q2 related to technology and professional services costs from running two separate platforms[10] Growth Outlook BMTX anticipates revenue growth and positive Core EBITDA in 2024, driven by investments in the Higher Education vertical, the full-year effect of Durbin-exempt interchange rates, and stricter cost controls, with future product launches including financial, insurance, and wellness benefits, and enhanced direct deposit/external account linking - 2024 Outlook: Anticipates revenue growth and positive Core EBITDA in 2024[12] - Growth Drivers: Investments in the Higher Education vertical, full-year effect of Durbin-exempt interchange rates, and stricter cost controls implemented as part of the Company's PEP[12] - Upcoming Products: Next product launch targeted before year-end will provide students with financial, insurance, and wellness benefits; also enhancing direct deposit experience and external account linking[10] - Commitment: The Higher Education vertical is a prized asset, with necessary investments made, including NextGen implementation[12] Corporate Information Earnings Webcast & Contact The company will host a conference call and webcast on August 15, 2024, to discuss Q2 2024 results, with contact information provided for investors and media - Webcast Date: Thursday, August 15, 2024, at 9:00 am ET[13] - Access: Via the Company's investor relations site (ir.bmtxinc.com) or direct link[13] - Investor Contact: Ajay Asija, Chief Financial Officer, BM Technologies, Inc. (AAsija@bmtx.com)[14] - Media Inquiries: Brigit Hennaman, Rubenstein Public Relations, Inc. (bhennaman@rubensteinpr.com)[14] About BM Technologies, Inc. BM Technologies, Inc. (BMTX) is a leading digital banking platform and Banking-as-a-Service (BaaS) provider, focused on technology, innovation, and financial wellness, operating as a technology company providing banking services through partner banks - Company Identity: Among the largest digital banking platforms and Banking-as-a-Service (BaaS) providers in the country[1][14] - Mission: To financially empower millions of Americans by providing a more affordable, transparent, and consumer-friendly banking experience[14] - Business Model: A technology company that provides banking services through its partner banks, not a bank itself[14] Forward-Looking Statements Forward-Looking Statements This section contains cautionary statements regarding forward-looking information, highlighting that actual results may differ materially due to various risks and uncertainties, including economic conditions, competition, regulatory risks, and partner performance, with the company disclaiming any obligation to update these statements unless required by law - Nature: Statements about future expectations, beliefs, and intentions, identified by words such as "anticipate," "believe," "expect," etc[16] - Risks and Uncertainties: Actual results may differ materially due to factors including general economic conditions, consumer adoption, technology and competition, interest rate volatility, new partnerships, regulatory risks, and the operations of partners[16][17] - Disclaimer: Shareholders and investors should not place undue reliance on forward-looking statements; BMTX undertakes no obligation to update or revise them unless required by law[18] Unaudited Financial Statements Consolidated Statements of Income (Loss) This table provides a detailed breakdown of operating revenues and expenses, leading to net income (loss) and earnings per share for Q2 2024 and prior quarters, showing a net loss of $(4.831) million for Q2 2024 | (amounts in thousands) | Q2 2024 | Q1 2024 | Q4 2023 | Q3 2023 | Q2 2023 | | :--------------------- | :------ | :------ | :------ | :------ | :------ | | Total operating revenues | $12,541 | $16,181 | $14,859 | $14,381 | $12,641 | | Total operating expenses | $17,210 | $15,526 | $19,038 | $18,766 | $17,682 | | Income (loss) from operations | $(4,669) | $655 | $(4,179) | $(4,385) | $(5,041) | | Net income (loss) | $(4,831) | $748 | $(3,963) | $(3,952) | $(4,456) | | Diluted earnings (loss) per common share | $(0.41) | $0.06 | $(0.34) | $(0.34) | $(0.39) | Consolidated Balance Sheets This table presents the company's assets, liabilities, and shareholders' equity as of June 30, 2024, and prior periods, with total assets at $47.994 million and total liabilities at $21.872 million at June 30, 2024 | (amounts in thousands) | June 30, 2024 | March 31, 2024 | Dec 31, 2023 | Sep 30, 2023 | June 30, 2023 | | :--------------------- | :------------ | :------------- | :----------- | :----------- | :------------ | | Cash and cash equivalents | $12,457 | $14,288 | $14,288 | $11,524 | $11,524 | | Total current assets | $22,091 | $28,564 | $28,564 | $23,401 | $29,349 | | Total assets | $47,994 | $50,977 | $54,640 | $51,051 | $59,167 | | Total current liabilities | $21,653 | $22,899 | $22,899 | $15,953 | $19,833 | | Total liabilities | $21,872 | $23,668 | $23,668 | $16,811 | $21,124 | | Total shareholders' equity | $26,122 | $30,884 | $30,972 | $34,240 | $38,043 | Non-GAAP Financial Reconciliations Core Operating Expenses Reconciliation GAAP total expenses are reconciled to Core Operating Expenses by adjusting for restructuring, merger and acquisition related expenses, impairment of developed software, NextGen implementation costs, and share-based compensation | (amounts in thousands) | Q2 2024 | Q1 2024 | Q4 2023 | Q3 2023 | Q2 2023 | | :----------------------------------------------------- | :------ | :------ | :------ | :------ | :------ | | GAAP total expenses | $17,210 | $15,526 | $19,038 | $18,766 | $17,682 | | Less: restructuring, merger and acquisition related expenses | $(71) | $(79) | $56 | $0 | $(274) | | Less: NextGen implementation costs | $(1,560) | $0 | $0 | $0 | $0 | | Core Operating Expenses ex. Dep and Amort | $13,422 | $14,831 | $15,621 | $15,170 | $13,547 | Core Net (Loss) Income Reconciliation GAAP net income (loss) is reconciled to Core net (loss) income by adding back non-core items such as warrant liability adjustments, restructuring expenses, impairment, share-based compensation, and NextGen implementation costs | (amounts in thousands, except per share data) | Q2 2024 | Q1 2024 | Q4 2023 | Q3 2023 | Q2 2023 | | :-------------------------------------------- | :------ | :------ | :------ | :------ | :------ | | GAAP net income (loss) | $(4,831) | $748 | $(3,963) | $(3,952) | $(4,456) | | Add: NextGen implementation costs | $1,560 | $0 | $0 | $0 | $0 | | Core net (loss)/income | $(2,553) | $109 | $(3,250) | $(4,209) | $(4,053) | | Core diluted (loss) earnings per common share | $(0.22) | $0.01 | $(0.28) | $(0.36) | $(0.35) | Core EBITDA (Loss) Reconciliation GAAP net income (loss) is reconciled to Core EBITDA (Loss) by adjusting for non-core items, income tax, and depreciation and amortization, with Q2 2024 Core EBITDA (Loss) at $(881) thousand | (amounts in thousands) | Q2 2024 | Q1 2024 | Q4 2023 | Q3 2023 | Q2 2023 | | :----------------------------------------------------- | :------ | :------ | :------ | :------ | :------ | | GAAP net income (loss) | $(4,831) | $748 | $(3,963) | $(3,952) | $(4,456) | | Add: NextGen implementation costs | $1,560 | $0 | $0 | $0 | $0 | | Add: depreciation and amortization | $1,671 | $1,226 | $2,488 | $3,420 | $3,138 | | Core (Loss) EBITDA | $(881) | $1,350 | $(762) | $(789) | $(906) | Key Performance Metrics Key Performance Metrics This section provides key operational metrics for both Higher Education and BaaS segments, including debit card POS spend, serviced deposits, and other Higher Education specific metrics | Metric ($ millions) | Q2 2024 | Q1 2024 | Q4 2023 | Q3 2023 | Q2 2023 | YoY Change ($) | YoY Change (%) | | :------------------ | :------ | :------ | :------ | :------ | :------ | :------------- | :------------- | | Debit card POS spend | | | | | | | | | Higher education | $472 | $636 | $545 | $567 | $490 | $(18) | (4)% | | BaaS | $158 | $172 | $168 | $171 | $168 | $(10) | (6)% | | Total POS spend | $631 | $809 | $714 | $737 | $658 | $(28) | (4)% | | Serviced deposits (Ending) | | | | | | | | | Higher education | $392 | $535 | $361 | $636 | $408 | $(16) | (4)% | | BaaS | $250 | $284 | $313 | $357 | $439 | $(189) | (43)% | | Total Ending Deposits | $642 | $820 | $674 | $994 | $848 | $(205) | (24)% | | Serviced deposits (Average) | | | | | | | | | Higher education | $425 | $537 | $479 | $466 | $429 | $(4) | (1)% | | BaaS | $261 | $290 | $326 | $387 | $494 | $(233) | (47)% | | Total Average Deposits | $685 | $828 | $805 | $853 | $922 | $(237) | (26)% | | Higher Education Metrics | | | | | | | | | Higher education retention | 99% | 99% | 99% | 99% | 98% | N/A | N/A | | FAR disbursement amount ($B) | $1.9 | $4.3 | $2.0 | $3.6 | $1.8 | $0.1 | 6% | | Organic deposits ($M) | $366 | $449 | $390 | $411 | $400 | $(34) | (9)% |