On Tuesday, Dave announced its first profitable quarter since
Dave brought in $10 million in adjusted earnings before interest, taxes, depreciation, and amortization in the fourth quarter, according to the earnings report released Tuesday, and $200,000 in net income. This performance came in large part thanks to $1 billion worth of cash advances made during the period.
Following the Tuesday morning earnings announcement, premarket trading put Dave's stock price 21% higher than it had been at market close on Monday — up to $26.57 per share from $21.90.
Through its ExtraCash product, Dave offers interest-free cash advances of up to $500, underwritten by an AI system it recently branded CashAI. In the fourth quarter, Dave originated more than $1 billion in these cash advances, up from $932 million the previous quarter and $801 million in the fourth quarter of 2022. On average, Dave earns about $9 per advance, through optional tips and expedited transfer fees.
Rather than use a credit score to determine a cash advance approval, CashAI uses information such as income (even for people with irregular employment and gig work), bank balances, spending patterns and history with Dave to determine a unique approval amount each time a debtor applies. Much of this data comes from an analysis of the bank account the debtor has connected to Dave.
Since its founding in 2017, Dave has gained competition in the space of interest-free cash advances, including SolLo Funds (which offers
Among this crowd, Dave says it differentiates itself with CashAI, which has helped the bank increase the total volume of the advances it makes. In the fourth quarter, Dave improved its 28-day delinquency rate on cash advances to 2.19%, which is its lowest to date and an improvement from 3.58% in the fourth quarter of 2022.
This trend comes despite higher delinquencies economy-wide. Across all consumer loans, delinquency rates reached 2.78% in the fourth quarter, up from a low of 1.64% in the fourth quarter of 2021, and the highest rate since 2012,
Wilk said Dave gets between three to 12 months of checking account history from members every time they apply for a cash advance, which is a rich source of data on which to make decisions and train its CashAI model. He attributed the success of CashAI to both the data and methods used to train the model.
"We're very impressed with the CashAI development and how it's been able to sustain these low loss rates while other asset classes and credit have been seeing default rates go up," Wilk said.
The company, which started in personal financial management, has grown quickly by helping consumers avoid overdraft fees and, more recently, adding a no-fee bank account. It's counting on a merger deal with a special-purpose acquisition company to fuel further growth.
CashAI is not the company's only AI product. In December, Dave announced DaveGPT, a customer service assistant powered by technology from enterprise generative AI company Aisera. The new customer service experience resolves more than 75% of member inquiries,
The system comes with some risks. Banks have shied away from building customer service bots based on large language models like Dave has done because of the variety of things that can go wrong. In a recent example of the liabilities these systems can pose, Air Canada
Wilk said he is confident that the risk DaveGPT might hallucinate in this way is mitigated by training the chatbot solely on the company's FAQ documents (which Wilk said the company has had to refine for this reason) rather than giving it access to the internet.
Also in January, Dave
Wilk said "confidence" in the company's outlook underpinned the decision to repurchase the convertible note, which he framed as a "capital allocation opportunity." Prior to the transaction, Dave had $181 million in total liquidity. Accounting for the repurchase and operational costs and revenues, the company had $75.3 million in total liquidity as of Jan. 31.
"After accounting for the note repurchase payment, our balance sheet remains strong and we believe we have ample liquidity to execute our growth plans moving forward," Wilk said.
For 2024, Dave provided guidance of 18-25% growth in GAAP net operating revenues (up to $305-325 million) and adjusted EBITDA of $25-35 million. If it meets this guidance, 2024 would be the first full year of profitability for Dave.
"We're really happy about the beat in Q4," Wilk said. "Getting to this level of profitability just speaks to how hard the team worked, and doing it just really shows off the scalability of our platform and what this company can do, so we're excited about what that means for the future and hopefully this buys us a lot of credibility with investors."
