Neobank Dave hit its marks in its latest quarterly results, giving it a "renewed path to profitability," according to one analyst, as its growing base of customers experience low unemployment and engage more with the company's services.
While Dave started out profitable in its early days, it has not been so since going public via a special-purpose acquisition company in January 2022. However, its quarterly results reported Monday indicated the company has "a renewed path to profitability" according to an analyst at Jefferies.
"[This quarter] was a much cleaner quarter as Dave continues to add value to its customers, resulting in an increase in engagement and total members," the Jefferies analysis read. John Hecht, a managing director at Jefferies, is the company's chief analyst for Dave.
Dave offers a depository account and debit card, but it says its differentiator is ExtraCash — an interest-free cash advance of up to $500. The company uses data collected from the customer's linked bank account and previous history on their Dave spending account to determine the amount they qualify to get advanced.
Dave CEO Jason Wilk said the company has issued cash advances 65 million times since opening up shop in 2017 — its first and, so far, only year of profitability. He also reiterated the company's guidance from last year that it would become profitable again in 2024 without the need for additional capital.
"We're able to grow our way to profitability," Wilk said. "We grew the business pretty considerably in the fourth quarter while reducing our losses by 50%. A lot of companies that get profitable have to shrink their businesses, and we're able to grow and still perform."
Wilk also said the company's current strategy is sufficient to get it where it needs to go.
"We don't need any new products for us to get to profitability," Wilk said. "We're not relying on anything to pop up. Anything new we do add will be purely incremental to lifetime value."
The growth has come from both new customers (543,000 in the fourth quarter) and additional engagement from existing customers. Dave's transaction-based revenue last quarter came to $5.8 million, which beat Jefferies' projection of $4.3 million and is 88% higher than the same quarter last year.
Dave is working off its current momentum on other items, as well. While the company had been increasing its ExtraCash maximums every few months prior to the current quarter, Wilk said the $500 makes it the market leader at the moment, making them "sufficiently positioned" to remain competitive.
When asked about the potential of offering interest-bearing credit, Wilk said he felt Dave would have a "unique advantage" in the space given the data it gets from customers, but he also said the company had no announcements of any such products.
Dave's ideas about getting into crypto offerings also appear to be on hold. Cryptocurrency exchange FTX invested $100 million in Dave in March 2022, but FTX is now in the middle of bankruptcy proceedings, and its CEO Sam Bankman-Fried was arrested after allegedly misusing FTX customer funds.
Dave still has $101.6 million to pay back on that note as of September, since FTX never opted to convert the investment into shares. The maturity date on the note is March 2026, and Wilk said the company is scheduled to repay it.
"[Crypto is] an interesting asset class that we're keeping our eye on, but our near-term roadmap does not account for any developments in anything related to crypto," Wilk said.
For now, the company will stick to its bread and butter: A spending account, a debit card, and cash advances. The economic picture for its customers is good, and Dave continues to see fewer defaults on ExtraCash advances, the company says.
"Our customers we feel like are the ones that are being reported in this record low unemployment rate," Wilk said. "They're more employed than ever."
