Dave(US:DAVE)2025-08-06 20:00PART I. FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) This section presents Dave Inc.'s unaudited condensed consolidated financial statements and detailed notes for specified periods Condensed Consolidated Balance Sheets | Metric (in thousands) | June 30, 2025 | December 31, 2024 | | :-------------------- | :------------ | :---------------- | | Total Assets | $363,563 | $299,327 | | Total Liabilities | $146,489 | $116,226 | | Total Stockholders' Equity | $217,074 | $183,101 | - ExtraCash receivables, net, increased from $175,857 thousand as of December 31, 2024, to $225,662 thousand as of June 30, 2025, reflecting a significant increase in outstanding credit16 - Warrant and earnout liabilities saw a substantial increase from $2,928 thousand at December 31, 2024, to $31,267 thousand at June 30, 202516 Condensed Consolidated Statements of Operations | Metric (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total Operating Revenues, Net | $131,757 | $80,117 | $239,736 | $153,747 | | Total Operating Expenses | $90,675 | $74,448 | $163,505 | $142,679 | | Net Income | $9,040 | $6,358 | $37,852 | $40,601 | | Basic Net Income Per Share | $0.68 | $0.51 | $2.86 | $3.30 | | Diluted Net Income Per Share | $0.62 | $0.47 | $2.61 | $3.02 | - Total operating revenues, net, increased by 64% for the three months ended June 30, 2025, compared to the same period in 2024, and by 56% for the six months ended June 30, 2025, compared to 202422 - Net income increased by 42% for the three months ended June 30, 2025, compared to the same period in 2024, but decreased by 6.8% for the six months ended June 30, 2025, compared to 202422 Condensed Consolidated Statements of Comprehensive Income | Metric (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net Income | $9,040 | $6,358 | $37,852 | $40,601 | | Other Comprehensive Gain (Loss) | $(132) | $73 | $(124) | $(574) | | Comprehensive Income | $8,908 | $6,431 | $37,728 | $40,027 | Condensed Consolidated Statement of Stockholders' Equity - Total stockholders' equity increased from $183,101 thousand at January 1, 2025, to $217,074 thousand at June 30, 20252830 - The company repurchased 81,370 shares of Class A common stock for $6,960 thousand during the six months ended June 30, 2025, recorded as treasury shares30 - Net income contributed $37,852 thousand to stockholders' equity for the six months ended June 30, 202530 Condensed Consolidated Statements of Cash Flows | Cash Flow Activity (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :----------------------------- | :----------------------------- | | Net Cash Provided by Operating Activities | $113,484 | $46,391 | | Net Cash (Used in) Provided by Investing Activities | $(81,845) | $31,607 | | Net Cash Used in Financing Activities | $(19,488) | $(70,930) | | Net Increase in Cash and Cash Equivalents and Restricted Cash | $12,151 | $7,068 | - Net cash provided by operating activities significantly increased by 144.6% to $113,484 thousand for the six months ended June 30, 2025, compared to $46,391 thousand in the prior year32 - Investing activities shifted from providing $31,607 thousand in cash in 2024 to using $81,845 thousand in 2025, primarily due to increased net originations of ExtraCash receivables and purchases of investments32 Note 1 Organization and Nature of Business - Dave Inc. was launched in 2017 to provide a faster, more transparent, and lower-cost alternative to traditional financial institutions, focusing on underserved consumers35 - ExtraCash: An AI-powered overdraft product offering up to $500 credit without FICO or credit bureau data, with repayment scheduled based on forecasted paychecks. The company manages the entire risk management value chain3638 - Dave Checking: A digital demand deposit account with premium features, no minimums or fees, FDIC pass-through insurance, and a Dave branded debit Mastercard. Revenues are driven by merchant interchange, Mastercard incentives, interest on deposits, and ancillary fees4041 - Personal Financial Management: Includes a Budget tool for anticipating transactions and overdraft risks, Side Hustle for gig economy job opportunities, and Surveys for additional earning opportunities. These services generate monthly subscription revenue42 Note 2 Significant Accounting Policies - Basis of Presentation: Financial statements prepared in accordance with U.S. GAAP. Certain prior period amounts were reclassified for current period presentation without impacting net income or EPS43 - Principles of Consolidation: Includes accounts of the Company and a variable interest entity (VIE), Dave OD Funding I, LLC, where Dave is the primary beneficiary44 - Revenue Recognition: Service-based revenue includes processing and service fees (mandatory since Feb 2025), subscriptions (recognized ratably), and other fees. Optional tips were discontinued in Feb 2025. Transaction-based revenue includes interchange and ATM revenues, recognized at the point of transaction4550515354 - Allowance for Credit Losses: Estimated using an aging method and historical loss rates for short-term ExtraCash receivables (average 11 days). Allowance is recognized immediately upon origination, with adjustments recognized in operating expenses5868 - The company revised its statement of operations presentation, separating 'Financial network and transaction costs,' 'Advertising and activation costs' (including Member activation), and 'Technology and infrastructure' into distinct line items47 Operating Revenues (in thousands) | Revenue Type | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Service based revenue, net | $121,593 | $71,651 | $219,444 | $137,213 | | Processing and service fees, net | $113,464 | $49,595 | $196,912 | $94,191 | | Tips | $- | $16,077 | $7,496 | $30,987 | | Subscriptions | $8,053 | $5,850 | $14,870 | $11,794 | | Transaction based revenue, net | $10,164 | $8,466 | $20,292 | $16,534 | | Total Operating Revenues, Net | $131,757 | $80,117 | $239,736 | $153,747 | Note 3 Marketable Securities - Marketable securities, consisting of publicly traded money market mutual funds, remained stable at $99 thousand as of June 30, 2025, compared to $97 thousand at December 31, 2024102 - The investment portfolio had a weighted-average maturity of 35 days at both periods102 Note 4 Investments | Investment Type (in thousands) | Fair Value (June 30, 2025) | Fair Value (December 31, 2024) | | :----------------------------- | :------------------------- | :----------------------------- | | Corporate bonds | $2,415 | $4,212 | | Government securities | $38,652 | $36,261 | | Total Investments | $41,067 | $40,473 | - Total investments increased slightly from $40,473 thousand at December 31, 2024, to $41,067 thousand at June 30, 2025103 - The company does not intend to sell these available-for-sale investments before recovery of amortized cost, and no credit-related impairment losses were recorded105 Note 5 ExtraCash Receivables, Net | Metric (in thousands) | June 30, 2025 | December 31, 2024 | | :-------------------- | :------------ | :---------------- | | Gross ExtraCash Receivables | $258,179 | $198,560 | | Allowance for Credit Losses | $(32,517) | $(22,703) | | ExtraCash Receivables, Net | $225,662 | $175,857 | Roll-forward of Allowance for Credit Losses (in thousands) | Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----- | :----------------------------- | :----------------------------- | | Opening Balance | $22,703 | $20,310 | | Plus: Provision for Credit Losses | $35,898 | $24,308 | | Plus: Amounts Recovered | $7,860 | $5,778 | | Less: Amounts Written-off | $(33,944) | $(29,903) |\ | Ending Balance | $32,517 | $20,493 | - The provision for credit losses increased due to a rise in ExtraCash origination volume from $2.24 billion (H1 2024) to $3.32 billion (H1 2025), despite improved collections performance108 Note 6 Intangible Assets, Net | Intangible Asset (in thousands) | Net Book Value (June 30, 2025) | Net Book Value (December 31, 2024) | | :------------------------------ | :----------------------------- | :--------------------------------- | | Internally developed software | $13,884 | $13,584 | | Domain name | $54 | $58 | | Total Intangible Assets, Net | $13,938 | $13,642 | - Internally developed software, with an estimated useful life of 3 years, constitutes the majority of intangible assets71109 - Amortization expense for the six months ended June 30, 2025, was $2.8 million, down from $3.1 million in the prior year110 Note 7 Accrued Expenses and Other Current Liabilities | Accrued Expense (in thousands) | June 30, 2025 | December 31, 2024 | | :----------------------------- | :------------ | :---------------- | | Income taxes payable | $6,668 | $1,476 | | Accrued professional and program fees | $5,882 | $4,718 | | Accrued compensation | $2,678 | $5,166 | | Accrued charitable contributions | $- | $2,223 | | Total Accrued Expenses | $17,165 | $16,707 | - Accrued charitable contributions decreased to $0 at June 30, 2025, from $2,223 thousand at December 31, 2024, due to the discontinuation of the optional tips model in February 2025112 | Other Current Liabilities (in thousands) | June 30, 2025 | December 31, 2024 | | :--------------------------------------- | :------------ | :---------------- | | Deferred transaction costs | $3,150 | $3,150 | | Other | $887 | $982 | | Total Other Current Liabilities | $4,037 | $4,132 | Note 8 Convertible Note - On January 29, 2024, the company repurchased the $105.7 million outstanding balance of a convertible note from FTX Ventures Ltd. for $71.0 million, resulting in a gain on extinguishment of $33.4 million115116 Note 9 Warrant Liabilities - As of June 30, 2025, there were 6,344,021 public warrants and 5,100,214 private placement warrants outstanding, each exercisable for one share of Class A Common Stock per 32 warrants117 - The exercise price for both public and private warrants is $368 per share of Class A Common Stock (after a 32-for-1 stock split)119 - The company issued warrants to lenders of its Debt Facility as a loan commitment fee, which are accounted for as a liability at fair value and remeasured each reporting period124 Note 10 Debt Facility - The company's Debt Facility with Victory Park Management, LLC allows borrowing up to $150 million, with $75.0 million drawn as of June 30, 2025127130 - The Third Amendment (Sept 2023) extended the maturity to December 2026, increased the commitment, and updated interest rates to SOFR plus 5.00% (or 4.50% for amounts over $75M)127 - As of June 30, 2025, the company was not in compliance with the Minimum Receivable Loan-to-Value (LTV) Ratio covenant, but received a one-time limited waiver. The Fifth Amendment (July 2025) subsequently removed this LTV ratio covenant129 Note 11 Commitments and Contingencies - The company is a defendant in a lawsuit filed by the Department of Justice (DOJ) on December 30, 2024, alleging violations of Section 5(a) of the FTC Act and the Restore Online Shoppers' Confidence Act related to its ExtraCash product133 - A $7.0 million litigation and settlement accrual was recorded as of June 30, 2025, for this matter, though the outcome remains uncertain and could result in higher costs134 Note 12 Leases - The company leases office space under operating leases, including a related-party sublease with PCJW Properties LLC (controlled by founders)135136 - Total lease cost for the six months ended June 30, 2025, was $174 thousand, with cash paid for operating leases at $193 thousand137 Future Minimum Lease Payments (in thousands) | Year | Related-Party Commitment | | :--- | :----------------------- | | 2025 (remaining) | $193 | | 2026 | $80 | | 2027 | $83 | | 2028 | $71 | | Total minimum lease payments | $427 | | Less: imputed interest | $(44) | | Total lease liabilities | $383 | Note 13 Fair Value of Financial Instruments Fair Value Measurements (in thousands) | Category | June 30, 2025 Total | December 31, 2024 Total | | :------- | :------------------ | :---------------------- | | Assets | $41,166 | $40,570 | | Liabilities | $31,267 | $2,928 | - Warrant liabilities (public and private) and earnout liabilities are measured at fair value, with significant changes in fair value impacting net income145147148 - The fair value of public warrant liability increased by $10,467 thousand from January 1, 2025, to June 30, 2025, while private warrant liability increased by $10,376 thousand in the same period146148 - Earnout liabilities increased by $7,496 thousand from January 1, 2025, to June 30, 2025, primarily due to fluctuations in the Class A common stock price150 Note 14 Stockholders' Equity - The company has two classes of common stock: Class A (one vote per share) and Class V (ten votes per share), with Class V convertible to Class A on a one-to-one basis153 - As of June 30, 2025, there were 12,083,076 Class A shares and 1,414,082 Class V shares outstanding153 - During Q1 2025, the company used $13.3 million in cash for net share settlement of RSU tax withholding, resulting in 132,312 shares not issued to employees155 Note 15 Stock-Based Compensation - Stock-based compensation expense was $8.3 million for the three months and $15.8 million for the six months ended June 30, 2025, an increase from $7.7 million and $13.8 million respectively in 2024157 - Unrecognized stock-based compensation cost for unvested stock options was $1.4 million (expected over 3.0 years) and for nonvested RSUs was $35.3 million (expected over 2.9 years) as of June 30, 2025162165 - A price target milestone was achieved during Q2 2025, vesting 119,321 stock options granted to the CEO164 Note 16 Related-Party Transactions - The company paid $0.1 million (three months) and $0.2 million (six months) in related-party lease payments to PCJW Properties LLC, controlled by its founders174 - Interest expense related to the Debt Facility with Victory Park Management, LLC (a related party through a board member) totaled $1.8 million (three months) and $3.5 million (six months) for June 30, 2025176 - Legal services from Mitchell Sandler LLC, where a company director is a partner, amounted to $0.4 million (three months) and $0.6 million (six months) for June 30, 2025177 Note 17 401(k) Savings Plan - The company matches 100% of the first 4% of wages deferred by participating employees in its 401(k) savings plan178 - Employer matching contributions were $0.5 million (three months) and $1.1 million (six months) for June 30, 2025, a slight increase from the prior year178 Note 18 Segment Information - The company operates as a single operating and reportable segment, with the Chief Executive Officer and Chief Financial Officer acting as joint Chief Operating Decision Makers (CODM)179 - The CODM reviews financial information on a consolidated basis, focusing on net income, available liquidity, and ExtraCash receivables to allocate resources and evaluate performance181183 Note 19 Treasury Shares - In March 2025, the Board authorized a share repurchase program of up to $50.0 million of Class A common stock187 - During Q1 2025, the company repurchased 81,370 Class A shares for $6.9 million, with $43.1 million remaining available under the authorization188 - No share repurchases were made during the quarter ended June 30, 2025189 Note 20 Subsequent Events - On July 4, 2025, the One Big Beautiful Bill Act (OBBBA) was signed into law, which is expected to decrease California apportioned income and state income tax expense for the company starting in 2025191 - On July 14, 2025, the Fifth Amendment to the Financing Agreement was executed, removing the Loan-to-Value (LTV) financial covenant from the Debt Facility192 - On August 4, 2025, an amendment to the Program Agreement with Coastal Community Bank was made, allowing receivables up to $225 million to be maintained on Coastal's balance sheet for up to 60 days before being sold to the company193 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section analyzes Dave Inc.'s financial condition, operating results, key performance factors, and critical accounting estimates Company Overview - Dave Inc. was founded in 2017 to provide accessible and affordable financial products, particularly ExtraCash, to underserved consumers living paycheck to paycheck195 - Since inception, nearly 18 million members have signed up, with almost 13 million using at least one product, and the company has provided nearly $18 billion in ExtraCash196 - The company has donated over $23 million to charity and maintains a 4.8-star rating on the App Store196197 Market Opportunity - Approximately 180 million Americans (over 70% of the U.S. population) are financially 'coping' or 'vulnerable,' representing a significant market for Dave's services199 - Financially vulnerable populations pay over $200 billion annually in fees and interest for short-term credit, highlighting the need for lower-cost alternatives199 - Dave leverages technology and AI to reduce costs and provide increased access to banking and credit products at lower costs, offering a stronger value proposition200 Key Factors Affecting Operating Results - Member Growth and Activity: Dependent on continued member growth, ability to offer new products, and generate additional revenues from existing members203 - Product Expansion: Ongoing significant investments in developing, improving, and marketing financial products to enhance member well-being204 - Competition: Faces competition from established financial institutions and lenders, requiring competitive pricing and member acquisition strategies205 - Concentration: Relies on agreements with Evolve Bank & Trust and Coastal Community Bank for ExtraCash, deposit accounts, and debit card services206 - Industry Trends/General Economic Conditions: Macroeconomic factors like interest rates, inflation, and unemployment can impact consumer spending, ExtraCash demand, and repayment ability. Dave's AI underwriting aims to mitigate these risks207 Key Components of Statements of Operations - Operating Revenues: Comprise Service based revenue (processing fees, subscriptions, lead generation) and Transaction based revenue (interchange, ATM fees, funding/withdrawal fees)211 - Operating Expenses: Include Provision for Credit Losses (allowance for expected ExtraCash losses), Processing and Servicing Costs (third-party fees for ExtraCash recovery, bank account connections), Financial Network and Transaction Costs (program management, card network fees, fraud losses), Advertising and Activation Costs (marketing, new user onboarding), Compensation and Benefits (employee and contractor compensation), Technology and Infrastructure (SaaS solutions, cloud platforms), and Other Operating Expenses (charitable commitments, depreciation, legal, rent, etc.)212213214216217218219220221 - Other (income) expenses: Consist of interest income/expense, gain on extinguishment of debt, and changes in fair value of earnout and warrant liabilities222 - Provision for income taxes: Federal and state corporate income taxes222 Comparison of the three months ended June 30, 2025 and 2024 Operating Revenues (in thousands, except percentages) | Revenue Type | June 30, 2025 | June 30, 2024 | Change ($) | Change (%) | | :------------- | :------------ | :------------ | :--------- | :--------- | | Service based revenue, net | $121,593 | $71,651 | $49,942 | 70% | | Processing and service fees, net | $113,464 | $49,595 | $63,869 | 129% | | Tips | $- | $16,077 | $(16,077) | -100% | | Subscriptions | $8,053 | $5,850 | $2,203 | 38% | | Transaction based revenue, net | $10,164 | $8,466 | $1,698 | 20% | | Total | $131,757 | $80,117 | $51,640 | 64% | - Processing and Service fees, net: Increased by 129% to $113.5 million, driven by a 16% increase in average monthly transacting members, a 50% rise in ExtraCash origination volume to $1.79 billion, and fee structure increases in February 2025224 - Tips: Decreased by 100% due to the elimination of the member tipping option in February 2025225 - Subscriptions: Increased by 38% to $8.1 million, attributed to growth in paying members and subscription fee increases in June 2025226 - Transaction based revenue, net: Increased by 20% to $10.2 million, primarily from higher interchange revenue due to increased member engagement with Checking Product and a 27% rise in card spend and transaction volume227 Operating Expenses (in thousands, except percentages) | Expense Type | June 30, 2025 | June 30, 2024 | Change ($) | Change (%) | | :------------- | :------------ | :------------ | :--------- | :--------- |\ | Provision for credit losses | $25,295 | $14,365 | $10,930 | 76% | | Processing and servicing costs | $7,170 | $7,499 | $(329) | -4% | | Financial network and transaction costs | $7,227 | $6,495 | $732 | 11% | | Advertising and activation costs | $15,456 | $12,883 | $2,573 | 20% | | Compensation and benefits | $26,430 | $24,245 | $2,185 | 9% | | Technology and infrastructure | $2,894 | $2,809 | $85 | 3% | | Other operating expenses | $6,203 | $6,152 | $51 | 1% | | Total | $90,675 | $74,448 | $16,227 | 22% | - Provision for credit losses: Increased by 76% to $25.3 million, driven by higher ExtraCash origination volume and outstanding balances, partially offset by improved collections performance228229 - Processing and service costs: Decreased by 4% to $7.2 million due to technology enhancements and cost savings from processors, despite increased ExtraCash origination volume228230 - Financial network and transaction costs: Increased by 11% to $7.2 million, mainly from higher debit card network fees and processing costs due to a 27% increase in transaction volume233 - Advertising and activation costs: Increased by 20% to $15.5 million, reflecting expanded marketing spend during the summer season to capitalize on higher ExtraCash demand234 - Compensation and benefits: Increased by 9% to $26.4 million, primarily due to higher payroll-related costs and stock-based compensation235236 Other (income) expenses (in thousands, except percentages) | Item | June 30, 2025 | June 30, 2024 | Change ($) | Change (%) | | :--- | :------------ | :------------ | :--------- | :--------- | | Interest income | $(588) | $(537) | $(51) | 9% | | Interest expense | $1,777 | $1,965 | $(188) | -10% | | Changes in fair value of earnout liabilities | $7,894 | $(63) | $7,957 | -12630% | | Changes in fair value of public and private warrant liabilities | $20,491 | $(272) | $20,763 | -7633% | | Total | $29,574 | $1,093 | $28,481 | 2606% | - Interest expense: Decreased by 10% to $1.8 million, primarily due to an overall decline in interest rates240 - Changes in fair value of earnout liability: Shifted from a gain of $0.06 million to an expense of $7.9 million, driven by a significant increase in Class A common stock price241 - Changes in fair value of warrant liability: Shifted from a gain of $0.3 million to an expense of $20.5 million, due to a significant increase in DAVEW warrant price and Class A common stock price242 - Provision for income taxes increased by 238% to $2.5 million, due to higher reported income in 2025 compared to a benefit in 2024243 Comparison of the six months ended June 30, 2025 and 2024 Operating Revenues (in thousands, except percentages) | Revenue Type | June 30, 2025 | June 30, 2024 | Change ($) | Change (%) | | :------------- | :------------ | :------------ | :--------- | :--------- | | Service based revenue, net | $219,444 | $137,213 | $82,231 | 60% | | Processing and service fees, net | $196,912 | $94,191 | $102,721 | 109% | | Tips | $7,496 | $30,987 | $(23,491) | -76% | | Subscriptions | $14,870 | $11,794 | $3,076 | 26% | | Transaction based revenue, net | $20,292 | $16,534 | $3,758 | 23% | | Total | $239,736 | $153,747 | $85,989 | 56% | - Processing and Service fees, net: Increased by 109% to $196.9 million, driven by a 15% increase in average monthly transacting members, a 48% rise in ExtraCash origination volume to $3.32 billion, and fee structure increases in February 2025245 - Tips: Decreased by 76% to $7.5 million due to the elimination of the member tipping option in February 2025247 - Subscriptions: Increased by 26% to $14.9 million, attributed to growth in paying members and subscription fee increases in June 2025248 - Transaction based revenue, net: Increased by 23% to $20.3 million, primarily from higher interchange revenue due to increased member engagement with Checking Product and a 25% rise in card spend and transaction volume249 Operating Expenses (in thousands, except percentages) | Expense Type | June 30, 2025 | June 30, 2024 | Change ($) | Change (%) | | :------------- | :------------ | :------------ | :--------- | :--------- | | Provision for credit losses | $35,898 | $24,308 | $11,590 | 48% | | Processing and servicing costs | $14,157 | $14,953 | $(796) | -5% | | Financial network and transaction costs | $14,266 | $12,850 | $1,416 | 11% | | Advertising and activation costs | $27,386 | $23,820 | $3,566 | 15% | | Compensation and benefits | $53,681 | $48,580 | $5,101 | 11% | | Technology and infrastructure | $5,620 | $5,504 | $116 | 2% | | Other operating expenses | $12,497 | $12,664 | $(167) | -1% | | Total | $163,505 | $142,679 | $20,826 | 15% | - Provision for credit losses: Increased by 48% to $35.9 million, driven by a 49% increase in ExtraCash origination volume, partially offset by improved collections performance250251 - Processing and service costs: Decreased by 5% to $14.2 million due to technology enhancements and cost savings, despite increased ExtraCash origination volume250252 - Financial network and transaction costs: Increased by 11% to $14.3 million, mainly from higher debit card network fees and processing costs due to a 25% increase in transaction volume255 - Advertising and activation costs: Increased by 15% to $27.4 million, reflecting expanded marketing spend during the summer season256 - Compensation and benefits: Increased by 11% to $53.7 million, primarily due to higher payroll-related costs and stock-based compensation257258 Other (income) expenses (in thousands, except percentages) | Item | June 30, 2025 | June 30, 2024 | Change ($) | Change (%) | | :--- | :------------ | :------------ | :--------- | :--------- | | Interest income | $(1,019) | $(2,032) | $1,013 | -50% | | Interest expense | $3,535 | $4,182 | $(647) | -15% | | Gain on extinguishment of convertible debt | $- | $(33,442) | $33,442 | -100% | | Changes in fair value of earnout liabilities | $7,496 | $133 | $7,363 | 5536% | | Changes in fair value of public and private warrant liabilities | $20,843 | $205 | $20,638 | 10067% | | Total | $30,855 | $(30,954) | $61,809 | -200% | - Interest income: Decreased by 50% to $1.0 million, primarily due to a lower average total balance of investments held262 - Interest expense: Decreased by 15% to $3.5 million, attributable to an overall decline in interest rates and reduced expense from the convertible note repurchase263 - Gain on extinguishment of convertible debt: Decreased by 100% to $0, as the $33.4 million gain in 2024 was a one-time event from repurchasing the FTX Ventures Ltd. convertible note264 - Changes in fair value of earnout liability: Increased to an expense of $7.5 million from $0.1 million, driven by a significant increase in Class A common stock price265 - Changes in fair value of warrant liability: Increased to an expense of $20.8 million from $0.2 million, due to a significant increase in DAVEW warrant price and Class A common stock price266 - Provision for income taxes increased by 429% to $7.5 million, primarily due to a significant increase in reported income (excluding discrete items) in 2025 compared to 2024267 Non-GAAP Financial Measures - Adjusted EBITDA is presented as a supplemental non-GAAP measure to evaluate operational performance, excluding items like interest, taxes, depreciation, amortization, stock-based compensation, and fair value changes of liabilities269270 Adjusted EBITDA Reconciliation (in thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income | $9,040 | $6,358 | $37,852 | $40,601 | | Adjusted EBITDA | $50,949 | $15,157 | $95,115 | $28,336 | - Adjusted EBITDA significantly increased by 236% for the three months and 236% for the six months ended June 30, 2025, compared to the prior year periods272 Liquidity and Capital Resources - As of June 30, 2025, cash and cash equivalents, marketable securities, investments, and restricted cash totaled $104.7 million, up from $91.9 million at December 31, 2024273 - The company believes its current cash on hand is sufficient to meet working capital, capital expenditure, and operational funding requirements for at least 12 months276 - Share Repurchase Authorization: In March 2025, the Board authorized a $50.0 million share repurchase program. As of June 30, 2025, $6.9 million had been used to repurchase 81,370 Class A shares, with $43.1 million remaining278280 - Material Cash Requirements: Includes contractual payments for operating leases ($0.4 million total liability), monthly interest payments on the $75.0 million Debt Facility, and accruals for legal contingencies ($7.0 million)281282283285 Cash Flows Summary | Cash Flow Activity (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :----------------------------- | :----------------------------- | | Operating activities | $113,484 | $46,391 | | Investing activities | $(81,845) | $31,607 | | Financing activities | $(19,488) | $(70,930) | | Net increase in cash and cash equivalents and restricted cash | $12,151 | $7,068 | - Operating Activities: Net cash provided increased significantly to $113.5 million in H1 2025, driven by higher operating revenues and reduced expenses288 - Investing Activities: Shifted to a net cash outflow of $81.8 million in H1 2025, primarily due to increased ExtraCash originations and investment purchases290 - Financing Activities: Net cash used decreased to $19.5 million in H1 2025, mainly due to the absence of the convertible note paydown that occurred in H1 2024, partially offset by share repurchases and tax payments for net share settlements292 Critical Accounting Estimates - Allowance for Credit Losses: Estimated using an aging method and historical loss rates for short-term ExtraCash receivables, with immediate recognition upon origination. Management assesses current economic conditions and forecasts for adjustments297298 - Income Taxes: Follows ASC 740, recognizing deferred tax assets/liabilities. The effective tax rate for interim periods is based on the estimated annual effective tax rate. Uncertain tax positions are recognized if more-likely-than-not to be sustained. A valuation allowance is recorded against deferred tax assets300301302304 - California's new single sales factor apportionment method, effective 2025, is expected to decrease the company's California apportioned income and state income tax expense305 Emerging Growth Company Status - The company is an 'emerging growth company' and has elected to use the extended transition period for new or revised financial accounting standards until December 31, 2025306 - This status allows the company to rely on exemptions from certain reporting requirements, such as auditor's attestation reports on internal controls and full executive compensation disclosures308 Item 3. Quantitative and Qualitative Disclosures About Market Risk Market risk disclosures are not yet required for the company under current reporting regulations - Disclosures about market risk are not yet required for the company310 Item 4. Controls and Procedures This section evaluates the effectiveness of disclosure controls and internal control over financial reporting - Management, with CEO and CFO participation, concluded that disclosure controls and procedures were effective as of June 30, 2025311 - There were no material changes in internal control over financial reporting during the most recent fiscal quarter312 PART II. OTHER INFORMATION Item 1. Legal Proceedings This section details material pending legal proceedings and the company's general exposure to litigation risks - The company is involved in a material legal proceeding with the Department of Justice, as detailed in Note 11, and may face other legal proceedings in the ordinary course of business315316 - Legal proceedings are subject to many unpredictable factors, and unfavorable outcomes could result in material costs, diversion of management resources, and reputational harm316 Item 1A. Risk Factors This section outlines key risks impacting the company's business, including credit, regulatory, and valuation volatility - ExtraCash Credit Risk: The ExtraCash product exposes the company to financial losses if members fail to repay, and underwriting criteria may not be sufficient, especially in economic downturns. Inaccurate or incomplete data used for underwriting could adversely affect financial results318319320321322323 - Reliance on Bank Partners: The company primarily relies on Evolve Bank & Trust and Coastal Community Bank. Termination of these relationships or operational disruptions (e.g., regulatory restrictions, cybersecurity incidents) could severely impact business operations and financial condition325326 - Regulatory and Legal Environment: Subject to extensive federal and state regulation, including oversight by the CFPB and FTC. Ongoing investigations and potential enforcement actions, such as the DOJ lawsuit, could lead to civil penalties, remediation, and significant costs. Consumer litigation and mass arbitrations also pose risks329 - Valuation Volatility: Changes in the fair value of public and private warrants and earnout shares, which are sensitive to stock price fluctuations, can materially increase the volatility of net income333334335338 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds No unregistered equity sales or use of proceeds were reported for the period - No unregistered sales of equity securities or use of proceeds were reported339 Item 3. Defaults Upon Senior Securities No defaults upon senior securities were reported during the period - No defaults upon senior securities were reported339 Item 4. Mine Safety Disclosures Mine safety disclosures are not applicable to the company's operations - Mine safety disclosures are not applicable to the company339 Item 5. Other Information This section discloses pre-arranged stock trading plans by the CEO, CFO, and a Board member - CEO Jason Wilk entered a plan on May 30, 2025, for potential sale of up to 100,000 Class A shares between August 29, 2025, and May 29, 2026339 - CFO Kyle Beilman entered a plan on June 4, 2025, for potential sale of up to 70,000 Class A shares between September 3, 2025, and December 31, 2025340 - Board member Yadin Rozov entered a plan on June 5, 2025, for potential sale of up to 19,386 Class A shares between September 4, 2025, and December 31, 2025341 - These trading plans are intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) under the Exchange Act341 Item 6. Exhibits This section lists all exhibits filed as part of the Form 10-Q, including certifications and data files | Exhibit No. | Description | | :------------ | :---------- | | 31.1 | Certification of the Chief Executive Officer pursuant to Rule 13a-14(a) | | 31.2 | Certification of the Chief Financial Officer pursuant to Rule 13a-14(a) | | 32.1** | Certification of the Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. §1350 | | 101.INS | Inline XBRL Instance Document | | 101.SCH | Inline XBRL Taxonomy Extension Schema Document With Embedded Linkbase Documents | | 104 | Cover Page Interactive Data File |