# Dave Inc.: Form 10-Q for the period ended Sep 30, 2024

- Company: [Dave Inc.](/companies/dave.md) (CIK 1841408)
- Form: 10-Q
- Filed: 2024-11-12
- Accepted by EDGAR: Nov 12, 2024, 16:30 ET
- Period: 2024-09-30
- Accession: 0000950170-24-125522
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1841408/000095017024125522/dave-20240930.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1841408/000095017024125522/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2024-09-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2024-07-01 to 2024-09-30 | $92.5m | us-gaap:Revenues |
| Revenue | 9 months, 2024-01-01 to 2024-09-30 | $246.2m | us-gaap:Revenues |
| Interest expense | 3 months, 2024-07-01 to 2024-09-30 | $2.0m | us-gaap:InterestExpense |
| Interest expense | 9 months, 2024-01-01 to 2024-09-30 | $6.1m | us-gaap:InterestExpense |
| Income tax | 3 months, 2024-07-01 to 2024-09-30 | $373.0k | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 9 months, 2024-01-01 to 2024-09-30 | $1.8m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2024-07-01 to 2024-09-30 | $466.0k | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2024-01-01 to 2024-09-30 | $41.1m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2024-07-01 to 2024-09-30 | $0.03 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 9 months, 2024-01-01 to 2024-09-30 | $3.02 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2024-07-01 to 2024-09-30 | $0.04 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 9 months, 2024-01-01 to 2024-09-30 | $3.30 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2024-07-01 to 2024-09-30 | 13,932,652 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 9 months, 2024-01-01 to 2024-09-30 | 13,587,377 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 9 months, 2024-01-01 to 2024-09-30 | $83.4m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 9 months, 2024-01-01 to 2024-09-30 | $212.0k | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Cash and equivalents | at 2024-09-30 | $35.1m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2024-09-30 | $254.7m | us-gaap:AssetsCurrent |
| Total assets | at 2024-09-30 | $272.2m | us-gaap:Assets |
| Current liabilities | at 2024-09-30 | $37.4m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2024-09-30 | $116.4m | us-gaap:Liabilities |
| Long-term debt | at 2024-09-30 | $75.0m | us-gaap:LongTermDebtNoncurrent |
| Shareholders' equity | at 2024-09-30 | $155.8m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 64,776 characters.

*The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and the notes related thereto which are included elsewhere in this report. 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,” “Risk Factors” and elsewhere in our Annual Report on Form 10-K* for the year ended December 31, 2023 filed with the Securities and Exchange Commission (the “SEC”) on March 5, 2024 (the “Annual Report”) *and in our subsequent Quarterly Reports on Form 10-Q.*

### Overview

In the story of David vs. Goliath, the small underdog is able to outsmart and defeat his larger adversary. This is the spirit behind the name “Dave.” We have built an integrated financial services online platform that provides millions of Americans with seamless access to a variety of intuitive financial products at a fraction of the cost and with much higher speed to value than that of the legacy financial services incumbents, such as traditional banks and other financial institutions. Our mission is to build products that level the financial playing field. Our near-term strategy is focused on delivering a superior banking experience for anyone living paycheck to paycheck.

Based on our observation and analysis of Member data, legacy financial institutions charge high fees for consumer banking and other financial services products, which disproportionately burdens tens of millions of Americans who can least afford them. We see this dynamic playing out with our Members who we believe are on average paying between $300-$400 in overdraft, maintenance and other fees to their existing bank for basic checking services.

Further, we see a significant opportunity to address the broader short-term credit market. According to a 2024 report by The Financial Health Network ("FHN"), legacy financial institutions charge approximately $40 billion in fees annually. The FHN estimates that financially “coping” and “vulnerable” populations pay over $200 billion a year in fees and interest for access to short-term credit. Our prospective Member opportunity is also significant. We estimate that our total addressable market consists of between 170 million and 190 million Americans who are in need of financial stability and are either not served or underserved by legacy financial institutions.

Dave offers a suite of innovative financial products aimed at helping our Members improve their financial health. To help Members avoid punitive overdraft fees and access short-term liquidity, Dave offers, through Evolve, its flagship 0% interest ExtraCash product. Through Dave Banking, we provide a digital checking account experience, seamlessly integrated with ExtraCash, with no hidden fees. With a Dave Banking account, Members have access to valuable tools for building long-term financial health, such as Goals savings accounts and customizable automatic round-up savings on debit spend transactions. We also help Members generate extra income for spending or emergencies through high APY savings rates, our Side Hustle product, where we present Members with supplemental work opportunities, and through our Surveys product, where Members can earn supplemental income by taking surveys. Our budgeting tool helps Members manage their upcoming bills to avoid overspending.

We have only begun to address the many inequities in financial services, but our progress to date demonstrates the demand for Dave to improve the financial system for the everyday person. Since inception and through the date of this report, nearly 16 million Members have registered on the Dave app and nearly 12 million Members have used at least one of our products and we believe that we have a substantial opportunity to continue growing our Member base going forward. We strongly believe that the value proposition of our platform approach will continue to accelerate as a result of our data-driven perspective of our Members, allowing us to introduce products and services that address their changing life circumstances.

### 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 currently rely on agreements with Evolve, our only 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 are in the process of evaluating additional financial institutions with which we can partner.

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, rising 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 condensed 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 and subscriptions charged to Members, net of processor-related costs associated with ExtraCash originations. 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 fees, ATM-related fees, and interest earned by Members, fees earned from funding and withdrawal-related transactions, and volume support from a certain co-branded agreement and deposit referral fees that 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 condensed consolidated statement 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 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 condensed 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 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 manage 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, transaction based 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 debt, changes in fair value of earnout liabilities and changes in fair value of warrant liabilities.

Provision (benefit) for income taxes

Provision (benefit) for income taxes consists of the federal and state corporate income taxes accrued on income resulting from the sale of our services.

### Results of Operations

### Comparison of the three months ended September 30, 2024 and 2023

Operating revenues

*(in thousands, except for percentages)*

| Service based revenue, net | For the Three Months Ended September 30, 2024 | 2023 | Change $% 2024/2023 | 2024/2023 |
| --- | ---: | ---: | ---: | ---: |
| Processing fees, net | $58,659 | $39,166 | $19,493 | 50% |
| Tips | 18,297 | 14,548 | 3,749 | 26% |
| Subscriptions | 6,334 | 5,119 | 1,215 | 24% |
| Other | 100 | 346 | (246) | -71% |
| Transaction based revenue, net | 9,099 | 6,632 | 2,467 | 37% |
| **Total** | **$92,489** | **$65,811** | **$26,678** | 41% |

#### Service based revenue, net—

#### Processing fees, net

Processing fees, net of processor costs associated with ExtraCash originations, for the three months ended September 30, 2024 were $58.7 million, an increase of $19.5 million, or 50%, from $39.2 million for the three months ended September 30, 2023. The increase was primarily attributable to a 23% increase in monthly transacting Members period over period, increases in total ExtraCash volume from approximately $931.5 million to approximately $1,359.5 million period over period and average ExtraCash amounts that increased from $147 to $172 as of the three months ended September 30, 2023 and 2024, respectively. Additionally, the average processing fees Members paid to expedite ExtraCash increased, while the percentage of Members that chose to pay a processing fee to expedite ExtraCash remained flat for the three months ended September 30, 2024 as compared to the three months ended September 30, 2023, respectively. Prospectively, 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 three months ended September 30, 2024 were $18.3 million, an increase of $3.8 million, or 26%, from $14.5 million for the three months ended September 30, 2023. The increase was primarily attributable to higher tips from Members relating to increases in total ExtraCash volume from approximately $931.5 million to approximately $1,359.5 million period over period and average ExtraCash amounts increased from $147 to $172 for the three months ended September 30, 2023 and 2024, respectively. The average tip Members chose to leave increased while the percentage of Members that chose to leave a tip decreased for the three months ended September 30, 2024 as compared to the three months ended September 30, 2023, respectively. 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 three months ended September 30, 2024 were $6.3 million, an increase of $1.2 million, or 24%, from $5.1 million for the three months ended September 30, 2023. The increase was primarily attributable to an increase in paying Members on our platform.

#### Transaction based revenue, net

Transaction based revenue, net for the three months ended September 30, 2024 was $9.1 million, an increase of $2.5 million, or 37%, from $6.6 million for the three months ended September 30, 2023. The increase was primarily attributable to interchange revenue earned from the growth in Members engaging with our Checking Product, card spend and transaction volume of $471.9 million for the three months ended September 30, 2024, an increase of 38%, from $341.0 million for the three months ended September 30, 2023, in addition to increases in fees earned from Members' funding and withdrawal-related transactions, offset by an increase of $0.3 million in interest due to Members.

Operating expenses

*(in thousands, except for percentages)*

|  | For the Three Months Ended September 30, 2024 | 2023 | Change $% 2024/2023 | 2024/2023 |
| --- | ---: | ---: | ---: | ---: |
| Provision for credit losses | $13,680 | $15,983 | $(2,303) | -14% |
| Processing and servicing costs | 8,576 | 7,064 | 1,512 | 21% |
| Advertising and marketing | 12,501 | 13,914 | (1,413) | -10% |
| Compensation and benefits | 30,763 | 23,081 | 7,682 | 33% |
| Other operating expenses | 24,419 | 16,343 | 8,076 | 49% |
| **Total** | **$89,939** | **$76,385** | **$13,554** | 18% |

*Provision for credit losses—*The provision for credit losses totaled $13.7 million for the three months ended September 30, 2024, compared to $16.0 million for the three months ended September 30, 2023. The decrease of $2.3 million, or 14%, was primarily attributable to a decrease in provision expense of $2.9 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 $0.6 million related to ExtraCash receivables aged 120 days and under.

The decrease in provision expense of $2.9 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, new Member conversion and risk detection, all despite increases in transacting Members, average ExtraCash amounts from $147 to $172 and total ExtraCash origination volume from $931.5 million to approximately $1,359.5 million for the three months ended September 30, 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 $0.6 million related to ExtraCash receivables aged 120 days and under was primarily attributed to an increase in receivables outstanding related to the 46% increase in ExtraCash origination volume, offset by improved collections performance during the period ended September 30, 2024 as compared to the period ended September 30, 2023. This resulted in an increase to the allowance for credit losses and corresponding increase in provision expense during the three months ended September 30, 2024 as compared to September 30, 2023. We anticipate volatility in ExtraCash receivables outstanding each period as they are directly correlated with the timing and volume of Member ExtraCash activity 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 when 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 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 condensed consolidated financial statements of Dave included in this report.

*Processing and service costs—*Processing and servicing costs totaled $8.6 million for the three months ended September 30, 2024, compared to $7.1 million for the three months ended September 30, 2023. The increase of $1.5 million, or 21%, was primarily driven by increases in ExtraCash origination volume from $931.5 million to approximately $1,359.5 million, offset by, continued technology enhancements made to our ExtraCash payments structure along with rebates and cost savings due to price reductions from our processors.

*Advertising and marketing—*Advertising and marketing expenses totaled $12.5 million for the three months ended September 30, 2024, compared to $13.9 million for the three months ended September 30, 2023. The decrease of $1.4 million, or 10%, was primarily attributable to a more targeted, conversion-focused spend approach on our advertising campaigns, production and promotions across various social media platforms and television. Additionally, channel and creative optimization and ongoing improvements to our measurement and reporting infrastructure allowed us to invest more intelligently across our marketing mix.

*Compensation and benefits—*Compensation and benefits expenses totaled $30.8 million for the three months ended September 30, 2024, compared to $23.1 million for the three months ended September 30, 2023. The increase of $7.7 million, or 33%, was primarily attributable to the following:

- an increase in stock-based compensation of $6.6 million, primarily due to the vesting of certain performance based restricted stock units during the three months ended September 30, 2024, compared to the three months ended September 30, 2023, offset by a reduction in stock-based compensation expense related to stock options granted in prior years that have fully vested; and
- an increase in payroll related costs of $1.1 million, primarily due to an increase in salaries, offset by reductions in headcounts and severance-related costs, period over period.

*Other operating expenses—*Other operating expenses totaled $24.4 million for the three months ended September 30, 2024, compared to $16.3 million for the three months ended September 30, 2023. The increase of $8.1 million, or 49%, was primarily attributable to the following:

- an increase in legal settlement expenses of $7.3 million, primarily attributed to a $7.0 million legal settlement and litigation accrual related to the FTC matter.
- an increase in expenses related to our Checking Product of $0.8 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 depreciation and amortization of $0.4 million, primarily due to increased amortization of other internally capitalized project costs and depreciation related to leasehold improvements and equipment purchases; offset by
- a decrease in various general and administrative expenses of $0.5 million, primarily due to cost cutting measures enacted across the Company.

Other (income) expenses

*(in thousands, except for percentages)*

|  | For the Three Months Ended September 30, 2024 | 2023 | Change $% 2024/2023 | 2024/2023 |
| --- | ---: | ---: | ---: | ---: |
| Interest income | $(439) | $(1,332) | $893 | -67% |
| Interest expense | 1,964 | 3,057 | (1,093) | -36% |
| Changes in fair value of earnout liabilities | (17) | 2 | (19) | -950% |
| Changes in fair value of public and private warrant liabilities | 203 | (257) | 460 | -179% |
| **Total** | **$1,711** | **$1,470** | **$241** | 16% |

*Interest income—* Interest income totaled $0.4 million for the three months ended September 30, 2024, compared to $1.3 million for the three months ended September 30, 2023. The decrease of $0.9 million, or 67%, was primarily attributable to an average lower total balance of investments held during the quarter ended September 30, 2024 as compared to the quarter ended September 30, 2023.

*Interest expense—* Interest expense totaled $2.0 million for the three months ended September 30, 2024, compared to $3.1 million for the three months ended September 30, 2023. The decrease of $1.1 million, or 36%, was primarily attributable to a reduction of interest expense related to the repurchase of the convertible note with FTX Ventures Ltd. in January 2024.

*Changes in fair value of warrant liability—*Changes in fair value of warrant liability totaled an expense of $0.2 million for the three months ended September 30, 2024, compared to a gain of $0.3 million for the three months ended September 30, 2023. The increase in expense of $0.5 million, or 179%, was primarily attributable to fair value adjustments associated with our public and private warrant liabilities due to increases in our underlying Class A Common Stock price compared to the quarter ended September 30, 2023.

Provision (benefit) for income taxes

*(in thousands, except for percentages)*

|  | For the Three Months Ended September 30, 2024 | 2023 | Change $% 2024/2023 | 2024/2023 |
| --- | ---: | ---: | ---: | ---: |
| Provision for income taxes | 373 | 9 | 364 | 4044% |
| **Total** | **$373** | **$9** | **$364** | 4044% |

Provision for income taxes for the three months ended September 30, 2024 increased by approximately $0.4 million compared to the three months ended September 30, 2023. The increase was primarily due to income reported for the three months ended September 30, 2024 compared to losses report for the three months ended September 30, 2023. The Company reported losses for the three months ended September 30, 2023 resulting in state minimum taxes but no income tax benefit on the losses due to the Company’s valuation allowance.

### Results of Operations

### Comparison of the nine months ended September 30, 2024 and 2023

Operating revenues

*(in thousands, except for percentages)*

| Service based revenue, net | For the Nine Months Ended September 30, 2024 | 2023 | Change $% 2024/2023 | 2024/2023 |
| --- | ---: | ---: | ---: | ---: |
| Processing fees, net | $152,850 | $108,153 | $44,697 | 41% |
| Tips | 49,284 | 41,447 | 7,837 | 19% |
| Subscriptions | 18,127 | 16,150 | 1,977 | 12% |
| Other | 342 | 990 | (648) | -65% |
| Transaction based revenue, net | 25,633 | 19,234 | 6,399 | 33% |
| **Total** | **$246,236** | **$185,974** | **$60,262** | 32% |

#### Service based revenue, net—

#### Processing fees, net

Processing fees, net of processor costs associated with ExtraCash originations, for the nine months ended September 30, 2024 were $152.9 million, an increase of $44.7 million, or 41%, from $108.2 million for the nine months ended September 30, 2023. The increase was primarily attributable to an 18% increase in monthly transacting Members period over period, increases in total ExtraCash volume from approximately $2,596.9 million to approximately $3,596.2 million period over period and average ExtraCash amounts that increased from $152 to $166 as of the nine months ended September 30, 2023 and 2024, respectively. Additionally, the average processing fees Members paid to expedite ExtraCash increased while the percentage of Members that chose to pay a processing fee to expedite ExtraCash remained flat for the nine months ended September 30, 2024 as compared to the nine months ended September 30, 2023, respectively. Prospectively, 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 sizes.

#### Tips

Tips for the nine months ended September 30, 2024 were $49.3 million, an increase of $7.9 million, or 19%, from $41.4 million for the nine months ended September 30, 2023. The increase was primarily attributable to higher tips from Members relating to increases in total ExtraCash volume from approximately $2,596.9 million to approximately $3,596.2 million period over period and average

ExtraCash amounts increased from $152 to $166 for the nine months ended September 30, 2023 and 2024, respectively. The average tip Members chose to leave increased while the percentage of Members that chose to leave a tip decreased for the nine months ended September 30, 2024 as compared to the nine months ended September 30, 2023, respectively. Tip amounts may not always trend ratably as tips can vary depending on the total amount of the ExtraCash, the amount of tips Members choose to leave and the percentage of Members who leave a tip.

#### Subscriptions

Subscriptions for the nine months ended September 30, 2024 were $18.1 million, an increase of $1.9 million, or 12%, from $16.2 million for the nine months ended September 30, 2023. The increase was primarily attributable to an increase in paying Members on our platform.

#### Transaction based revenue, net

Transaction based revenue, net for the nine months ended September 30, 2024 were $25.6 million, an increase of $6.4 million, or 33%, from $19.2 million for the nine months ended September 30, 2023. The increase was primarily attributable to interchange revenue earned from the growth in Members engaging with our Checking Product, card spend and transaction volume of $1,393.8 million for the nine months ended September 30, 2024, an increase of 48%, from $940.0 million for the nine months ended September 30, 2023 and increases in fees earned from Members' funding and withdrawal-related transactions, offset by an increase of $1.1 million in interest due to Members during the nine months ended September 30, 2024.

Operating expenses

*(in thousands, except for percentages)*

|  | For the Nine Months Ended September 30, 2024 | 2023 | Change $% 2024/2023 | 2024/2023 |
| --- | ---: | ---: | ---: | ---: |
| Provision for credit losses | $37,988 | $43,861 | $(5,873) | -13% |
| Processing and servicing costs | 24,093 | 21,414 | 2,679 | 13% |
| Advertising and marketing | 32,341 | 38,370 | (6,029) | -16% |
| Compensation and benefits | 79,830 | 71,380 | 8,450 | 12% |
| Other operating expenses | 58,366 | 54,922 | 3,444 | 6% |
| **Total** | **$232,618** | **$229,947** | **$2,671** | 1% |

*Provision for credit losses—*The provision for credit losses totaled $38.0 million for the nine months ended September 30, 2024, compared to $43.9 million for the nine months ended September 30, 2023. The decrease of $5.9 million, or 13%, was primarily attributable to a decrease in provision expense of $11.4 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 $5.6 million related to ExtraCash receivables aged 120 days and under.

The decrease in provision expense of $11.4 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, new Member conversion and risk detection, despite increases in transacting Members, average ExtraCash from $152 to $166 and total ExtraCash origination volume from $2,596.9 million to approximately $3,596.2 million for the nine months ended September 30, 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 $5.6 million related to ExtraCash receivables aged 120 days and under was primarily attributed to an increase in receivables outstanding related to the 38% increase in ExtraCash volume, offset by improved collections performance during the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023. This resulted in an increase to the allowance for credit losses and corresponding increase in provision expense during the nine months ended September 30, 2024 as compared to September 30, 2023. We anticipate volatility in ExtraCash receivables outstanding each period as they are directly correlated with the timing and volume of Member ExtraCash activity 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 decreased slightly when 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 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 condensed consolidated financial statements of Dave included in this report.

*Processing and service costs—*Processing and servicing costs totaled $24.1 million for the nine months ended September 30, 2024, compared to $21.4 million for the nine months ended September 30, 2023. The increase of $2.7 million, or 13%, was primarily driven by increases in ExtraCash origination volume from $2,596.9 million to approximately $3,596.2 million, offset by, technology enhancements made to our ExtraCash payments structure along with rebates and cost savings due to price reductions from our processors.

*Advertising and marketing—*Advertising and marketing expenses totaled $32.3 million for the nine months ended September 30, 2024, compared to $38.4 million for the nine months ended September 30, 2023. The decrease of $6.0 million, or 16%, was primarily attributable to a more targeted, conversion-focused spend approach on our advertising campaigns, production and promotions across various social media platforms and television. Additionally, channel and creative optimization and ongoing improvements to our measurement and reporting infrastructure allowed us to invest more intelligently across our marketing mix.

*Compensation and benefits—*Compensation and benefits expenses totaled $79.8 million for the nine months ended September 30, 2024, compared to $71.4 million for the nine months ended September 30, 2023. The increase of $8.4 million, or 12%, was primarily attributable to the following:

- an increase in stock-based compensation of $7.0 million, primarily due to additional stock-based compensation expense related to a modification of price targets in the market vesting conditions for unvested RSUs, larger amounts of restricted stock units granted during the 9 months ended September 30, 2024 and the vesting of certain performance based RSUs compared to the nine months ended September 30, 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 $2.2 million, primarily related to increases in salaries and performance bonuses; offset by
- a decrease in contractor and consulting fees of $0.8 million due to the reduction in external support for IT security, finance, marketing, design and customer service resources.

*Other operating expenses—*Other operating expenses totaled $58.4 million for the nine months ended September 30, 2024, compared to $54.9 million for the nine months ended September 30, 2023. The increase of $3.4 million, or 6%, was primarily attributable to the following:

- an increase in legal expenses of $2.9 million, primarily due to a $7.0 million legal settlement and litigation accrual related to the FTC matter during the nine months ended September 30, 2024, compared to $4.3 million in legal and settlement related to a separate matter incurred during the nine months ended September 30, 2023;
- an increase in expenses related to our Checking Product of $1.5 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 depreciation and amortization of $1.5 million, primarily due to increased amortization of other internally capitalized project costs and depreciation related to leasehold improvements and equipment purchases; offset by
- a decrease in charitable contribution expenses of $1.0 million, primarily due to amounts pledged to charitable meal donations related to Members' tips; and
- a decrease in various general and administrative expenses of $1.6 million, primarily due to cost cutting measures enacted across the company.

Other (income) expense

*(in thousands, except for percentages)*

|  | For the Nine Months Ended September 30, 2024 | 2023 | Change $% 2024/2023 | 2024/2023 |
| --- | ---: | ---: | ---: | ---: |
| Interest income | $(2,471) | $(4,009) | $1,538 | -38% |
| Interest expense | 6,146 | 8,982 | (2,836) | -32% |
| Gain on extinguishment of convertible debt | (33,442) | - | (33,442) | -100% |
| Changes in fair value of earnout liabilities | 116 | (35) | 151 | -431% |
| Changes in fair value of public and private warrant liabilities | 408 | (239) | 647 | -271% |
| **Total** | **$(29,243)** | **$4,699** | **$(33,942)** | -722% |

*Interest income—* Interest income totaled $2.5 million for the nine months ended September 30, 2024, compared to $4.0 million for nine months ended September 30, 2023. The decrease of $1.5 million, or 38%, was primarily attributable to an average lower balance of investments held during the nine months ended September 30, 2024 as compared to the nine months ended September 30, 2023.

*Interest expense—* Interest expense totaled $6.1 million for the nine months ended September 30, 2024, compared to $9.0 million for the nine months ended September 30, 2023. The decrease of $2.8 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 nine months ended September 30, 2024, compared to $0 for the nine months ended September 30, 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 during January of 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 the fair value of earnout liabilities totaled an expense of $0.1 million for the nine months ended September 30, 2024, compared to a gain of $0.04 million for the nine months ended September 30, 2023. The increase in expense of $0.2 million, or 431%, was primarily attributable to fair value adjustments associated with our earnout shares liability due to increases in our underlying Class A Common Stock price as of the nine months ended September 30, 2024 when compared to the nine months ended September 30, 2023.

*Changes in fair value of warrant liability—*Changes in the fair value of warrant liability totaled an expense of $0.4 million for the nine months ended September 30, 2024, compared to a gain of $0.2 million for the nine months ended September 30, 2023. The increase in expense of $0.6 million, or 271%, was primarily attributable to fair value adjustments associated with our public and private warrant liabilities due to increases in our underlying Class A Common Stock price for the nine months ended September 30, 2024 as compared to the nine months ended September 30, 2023.

Provision for income taxes

*(in thousands, except for percentages)*

|  | For the Nine Months Ended September 30, 2024 | 2023 | Change $% 2024/2023 | 2024/2023 |
| --- | ---: | ---: | ---: | ---: |
| Provision for income taxes | 1,794 | 24 | 1,770 | 7375% |
| **Total** | **$1,794** | **$24** | **$1,770** | 7375% |

Provision for income taxes for the nine months ended September 30, 2024 increased by approximately $1.8 million compared to the nine months ended September 30, 2023. This increase was primarily due to a significant increase in income for nine months ended September 30, 2024 compared to the nine months ended September 30, 2023, including a discrete gain on extinguishment of convertible debt of $33.4 million.

### 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 (benefit) 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 not all companies 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.

The following table reconciles net income (loss) to Adjusted EBITDA (loss) for the three and nine months ended September 30, 2024 and 2023, respectively:

*(in thousands)*

|  | For the Three Months Ended September 30, 2024 | 2023 |
| --- | ---: | ---: |
| Net income (loss) | $466 | $(12,053) |
| Interest expense, net | 1,525 | 1,725 |
| Provision for income taxes | 373 | 9 |
| Depreciation and amortization | 1,803 | 1,364 |
| Stock-based compensation | 13,359 | 6,740 |
| Legal settlement and litigation accrual | 7,000 | - |
| Changes in fair value of earnout liabilities | (17) | 2 |
| Changes in fair value of public and private warrant liabilities | 203 | (257) |
| **Adjusted EBITDA (loss)** | **$24,712** | **$(2,470)** |

*(in thousands)*

|  | For the Nine Months Ended September 30, 2024 | 2023 |
| --- | ---: | ---: |
| Net income (loss) | $41,067 | $(48,696) |
| Interest expense, net | 3,675 | 4,973 |
| Provision for income taxes | 1,794 | 24 |
| Depreciation and amortization | 5,235 | 3,750 |
| Stock-based compensation | 27,195 | 20,145 |
| Legal settlement and litigation accrual | 7,000 |  |
| Gain on extinguishment of convertible debt | (33,442) | - |
| Changes in fair value of earnout liabilities | 116 | (35) |
| Changes in fair value of public and private warrant liabilities | 408 | (239) |
| **Adjusted EBITDA (loss)** | **$53,048** | **$(20,078)** |

### 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 September 30, 2024 and December 31, 2023 our cash and cash equivalents, marketable securities, investments and restricted cash balance was $76.7 million and $157.3 million, respectively.

As an early-stage company, the expenses we have incurred since inception are consistent with our strategy and approach to capital allocation. Although we have recently begun to generate net income, we may incur net losses in the future 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.

### 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 our existing cash balances. We do 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 1.3 to 4.1 years as of September 30, 2024, and we had a total lease liability of $0.6 million. See Note 12, Leases in the notes to our condensed consolidated financial statements for additional information regarding our lease liabilities as of September 30, 2024.

In the near term, we expect to continue to generate ExtraCash 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 September 30, 2024, $75.0 million of term loans under the Debt Facility were outstanding. See Note 10, Debt Facility in the notes to our condensed 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 Ltd. 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 for $71.0 million. For more information on the Note Purchase Agreement with FTX Ventures Ltd., see Note 8, Convertible Note Payable.

We may use cash to acquire businesses and technologies. The nature of these transactions, however, makes it difficult to predict the amount and timing of such cash requirements.

### Cash Flows Summary

*(in thousands)*

| Total cash provided by (used in): | For the Nine Months Ended September 30, 2024 | 2023 |
| --- | ---: | ---: |
| Operating activities | $83,423 | $18,121 |
| Investing activities | (19,028) | 2,997 |
| Financing activities | (70,868) | 4 |
| **Net (decrease) increase in cash and cash equivalents and restricted cash** | **$(6,473)** | **$21,122** |

45

Cash Flows From Operating Activities

During the nine months ended September 30, 2024, net cash provided by operating activities increased compared to the nine months ended September 30, 2023 due to increases in operating revenues and a reduction in various operating expenses across the organization. Net cash provided by operating activities for the nine months ended September 30, 2024 included net income of $41.1 million, and excluding non-cash impacts, included increase in legal settlement accrual of $3.8 million, an increase in accounts payable of $2.9 million, an increase in other non-current liabilities of $2.8 million, an increase in accrued expenses of $4.5 million, and a decrease in prepaid income taxes of $0.1 million. These changes were offset by an increase in prepaid expenses and other current assets of $6.0 million, an increase in ExtraCash receivables, service based revenue of $3.7 million.

During the nine months ended September 30, 2023, net cash provided by operating activities increased compared to the nine months

ended September 30, 2022 due to increases in operating revenues, offset primarily by increases in compensation and other operating

expenses to support the growth of the business. Net cash provided by operating activities for the nine months ended September 30,

2023 included a net loss of $48.6 million, and excluding non-cash impacts, included a decrease in accounts payable of $2.1 million, a

decrease in a legal settlement accrual of $1.4 million, and a decrease in other current liabilities of $0.6 million. These changes were

offset primarily by an increase in accrued expenses of $2.8 million, a decrease in prepaid expenses and other current assets of $0.4

million and a decrease in other non-current assets of $0.1 million.

Cash Flows From Investing Activities

During the nine months ended September 30, 2024, net cash provided by investing activities was $19.0 million. This included the sale and maturity of investments of $147.7 million and sale of marketable securities of $60.1 million, offset by purchases of investments of $74.8 million, purchases of marketable securities of $59.3 million, net ExtraCash originations and collections of $87.0 million and payments related to internally developed software costs and property and equipment of $5.5 million.

During the nine months ended September 30, 2023, net cash provided by investing activities was $3.0 million. This included the sale

and maturity of short-term investments of $137.2 million and sale of marketable securities of $33.0 million, offset by purchases of

short-term investments of $92.0 million, net ExtraCash originations and collections of $34.3 million, payments related to

internally developed software costs of $5.9 million, and purchases of marketable securities of $34.4 million.

Cash Flows From Financing Activities

During the nine months ended September 30, 2024, net cash used in financing activities was $70.9 million, which consisted of the $71.8 million paydown of the FTX Ventures Ltd. convertible note and associated costs, offset by $0.9 million for proceeds received for stock option exercises.

During the nine months ended September 30, 2023 net cash used in financing activities was $4.0 thousand, which primarily consisted

of payments for fractional shares that resulted from a reverse stock split.

### Critical Accounting Estimates

Our condensed consolidated financial statements have been prepared in accordance with U.S. GAAP. The preparation of these condensed 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 condensed 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. For further details, please refer to Note 2 in our accompanying condensed consolidated financial statements for the three and nine months ended September 30, 2024 and 2023 included in this Form 10-Q.

While our significant accounting estimates are described in the notes to our condensed 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.

Allowance for Credit Losses

ExtraCash receivables from contracts with Members as of the balance sheet dates are recorded at their original ExtraCash 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 at the time of the ExtraCash origination. 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 condensed 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 condensed 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.

The effective tax rate used for interim periods is the estimated annual effective tax rate, based on the current estimate of full year results, except that those taxes related to specific discrete events, if any, are recorded in the interim period in which they occur. The annual effective tax rate is based upon several significant estimates and judgments, including our estimated annual pre-tax income in each tax jurisdiction in which it operates, and the development of tax planning strategies during the year. In addition, our tax expense can be impacted by changes in tax rates or laws and other factors that cannot be predicted with certainty. As such, there can be significant volatility in interim tax provisions.

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 $1.8 million and $1.1 million of uncertain tax positions as of September 30, 2024 and 2023, respectively, related to state income taxes and federal and state R&D tax credits.

Our policy is to recognize interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense within the statement of operations.

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 certain deferred tax liabilities, at September 30, 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 certain 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 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 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 condensed consolidated financial statements included in this report for the recent accounting pronouncements adopted and the recent accounting pronouncements not yet adopted for the three months ended September 30, 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 condensed 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 $700.0 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 condensed consolidated financial statements included in this report for a discussion of the impact of recent accounting pronouncements.

## Controls and procedures

As filed, 4,693 characters.

### Evaluation of Disclosure Controls and Procedures

Disclosure controls and procedures are designed to ensure that information required to be disclosed by us in our Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

As required by Rules 13a-15 and 15d-15 under the Exchange Act, our Chief Executive Officer and Chief Financial Officer conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of September 30, 2024. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were not effective, due to the material weaknesses in our internal control over financial reporting described below. As a result, we performed additional analysis as deemed necessary to ensure that our financial statements were prepared in accordance with U.S. generally accepted accounting principles. Accordingly, management believes that the financial statements included in this Quarterly Report on Form 10-Q present fairly in all material respects our financial position, results of operations and cash flows for the period presented.

### Previously Identified Material Weaknesses

As discussed in Part II, Item 9A in our Annual Report, we identified material weaknesses in our internal control over financial reporting for the years ended December 31, 2023 because:

- We did not maintain sufficient evidence of the performance and/or review of certain internal controls or complete remediation testing for certain internal controls over the period-end financial reporting process addressing financial statement and footnote presentation and disclosures; and
- We did not maintain sufficient evidence of the performance and/or review of certain IT application controls for information systems that are relevant to the preparation of our financial statements.

### Remediation Plan and Status

During 2023, we made significant progress enhancing our internal control environment by completing an enterprise-wide risk assessment, process narratives, risk and control matrices, a subsequent gap analysis and performed targeted testing of the design and operating effectiveness of our internal control over financial reporting in efforts to remediate previously disclosed material weaknesses. These efforts also include, but are not limited to: adding additional resources in accounting and finance departments, utilizing third party specialists to assist with complex accounting matters and reduce risks associated with the lack of segregation of duties; implementing a segregation of duties monitoring tool; formalizing accounting policies and procedures; implementing a new enterprise resource planning system to enhance the journal entry review and approval processes; performing bank and balance sheet account reconciliations on a monthly basis; implementing a SOX compliance and audit management platform; and designing and implementing both IT general controls and IT application controls around our product platform and core applications, including controls over: change management, access security and IT operations.

We will continue to implement our plan to remediate the material weaknesses described above. Those remediation measures are ongoing and include (i) ensuring our enterprise-wide risk assessment, risk and control matrices, process narratives and gap analysis continue to be updated to reflect our current accounting processes and internal control environment and (ii) ensuring internal control over financial reporting is adequately performed; and (iii) ensuring sufficient testing is performed and the testing-related support and documentation are complete and accurate for the design and operating effectiveness of internal control over financial reporting.

For further details on our material weaknesses that existed during the years ended December 31, 2023 and 2022, please refer to our Annual Report.

### Changes in Internal Control over Financial Reporting

Other than described above, there were no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

## Risk factors

As filed, 29,770 characters.

As of the date of this Form 10-Q, there have been no material changes to the risk factors disclosed in in our Annual Report for the year ended December 31, 2023 filed with the SEC on March 5, 2024, other than as noted below. Any of these factors could result in a significant or material adverse effect on our results of operations or financial condition. Additional risk factors not presently known to us or that we currently deem immaterial may also impair our business or results of operations. We may disclose changes to such risk factors or disclose additional risk factors from time to time in our future filings with the SEC.

***We currently rely on a single bank partner, and if our present or any future key banking relationships are terminated and we are not able to secure or successfully migrate client portfolios to a new bank partner or partners, or our bank partner becomes subject to regulatory restrictions or other operational disruptions, our business would be adversely affected.***

We currently rely on agreements with Evolve, our only bank partner, to provide ExtraCash and other deposit accounts, debit card services and other transaction services to us and our Members. These agreements and corresponding regulations governing banks and financial institutions may give Evolve substantial discretion in approving certain aspects of our business practices, including our application and qualification procedures for Members and require us to comply with certain legal requirements. Evolve discretionary actions under these agreements could impose material limitations to, or have a material adverse effect on, our business, financial condition and results of operations. In addition, any disruptions or restrictions on Evolve’s operations could have an adverse effect on our business, financial condition and results of operations. For example, in May 2024, Evolve experienced a cybersecurity incident that resulted in the leak of certain customer information, including information of some of our Members. If our relationship with Evolve is terminated or Evolve becomes unable to provide the necessary services to us, we would need to find another financial institution to provide those services, which could be difficult and expensive. If we are unable to find a replacement financial institution to provide the services we receive from Evolve, we would not be able to offer ExtraCash advances, service our deposit accounts, debit cards and other services, which would have a material adverse effect on our business, financial condition and results of operations. Furthermore, our financial results could be adversely affected if our costs associated with using Evolve materially change or if any penalty or claim for damages is imposed as a result of our breach of our agreements with Evolve.

In addition, state and federal agencies have broad discretion in their interpretation of laws and requirements related to bank partnership programs and may elect to alter standards or the interpretation of the standards applicable to these programs. The uncertainty of the federal and state regulatory environments around bank partnership programs means that our efforts to launch products and services through bank partners may not ultimately be successful, or may be restricted or challenged by legislation or regulatory action. If the legal structure underlying our relationship with Evolve were to be successfully challenged or otherwise restricted, we would need to find an alternative bank relationship. Furthermore, Evolve or any other future bank partners could be subject to enforcement actions, civil monetary penalties, supervisory orders to cease and desist or other remedial actions, which, even if unrelated to our business, could impose restrictions on the bank partner’s ability to continue to extend credit on current terms or offer services that are required for certain of our products. For example, in June 2024, the Federal Reserve Board issued a cease and desist order against Evolve for alleged deficiencies in its anti-money laundering, risk management and consumer compliance programs. Federal or state regulators may also subject us to increased compliance, legal and operational costs, and could subject our business model to scrutiny and otherwise increase our regulatory requirements, or may adversely affect our ability to expand our business.

***Cyberattacks and other security breaches or disruptions suffered by us or third parties upon which we rely could have a materially adverse effect on our business, harm our reputation and expose us to public scrutiny and liability.***

In the normal course of business, we collect, process, use and retain sensitive and confidential information regarding our Members and prospective Members, including data provided by and related to Members and their transactions, as well as other data of the counterparties to their payments. We also have arrangements in place with certain third-party service providers that require us to share consumer information for servicing purposes. Information security risks in the financial services industry continue to increase generally, in part because of new technologies, the use of the Internet and telecommunications technologies (including mobile devices) to conduct financial and other business transactions and the increased sophistication and activities of organized criminals, perpetrators of fraud, hackers, terrorists and other malicious third parties. In addition to cyberattacks and other security breaches involving the theft of sensitive and confidential information, hackers, terrorists, sophisticated nation-state and nation-state supported actors and other malicious third parties recently have engaged in attacks that are designed to disrupt key business services, such as consumer-facing applications and websites.

These cybersecurity challenges, including threats to our own IT infrastructure or those of third-party providers, may take a variety of forms ranging from stolen bank accounts, business email compromise, user fraud, account takeover, check fraud or cybersecurity attacks, such as ransomware, unauthorized encryption, denial-of-service attacks, social engineering, unauthorized access, spam or other attacks, to “mega breaches” targeted against cloud-based services and other hosted software, which could be initiated by individual or groups of hackers or sophisticated cyber criminals. A cybersecurity incident or breach could result in disclosure of confidential information and intellectual property, or cause service interruptions and compromised data. We may be unable to anticipate or prevent techniques used in the future to obtain unauthorized access or to sabotage systems because they change frequently and often are not detected until after an incident has occurred. Our information technology and infrastructure, as well as those of our third-party service providers, have experienced breaches and may be subject or vulnerable in the future to breaches or attacks. For example, a third-party breach resulted in improper disclosure of certain of our Members’ information, and any future improper disclosure of our own confidential business information or the information of our Members could materially and adversely affect our business. A core aspect of our business is the reliability and security of our platform. Any perceived or actual breach of security, regardless of how it occurs or the extent of the breach, could have a significant impact on our reputation as a trusted brand, cause us to lose existing partners or Members, prevent us from obtaining new partners and Members, require us to expend significant funds to remedy problems caused by breaches and implement measures to prevent further breaches, and expose us to legal risk and potential liability including from governmental or regulatory investigations, class action litigation and other lawsuits. If sensitive information is lost or improperly disclosed through a data breach or otherwise or threatened to be disclosed, we could experience a loss of confidence by our partners and Members in the security of our systems, products and services and prevent us from obtaining new partners and Members, and we could incur significant costs to remedy problems caused by breaches and implement measures to prevent further breaches, and expose us to legal risk and potential liability and penalties, including from governmental or regulatory investigations, class action litigation and other lawsuits, all of which could adversely affect our reputation and our operating results. Any actual or perceived security breach at a company providing services to us or our Members could have similar effects.

Most jurisdictions have enacted laws requiring companies to notify individuals, regulatory authorities and others of security breaches involving certain types of data. In addition, our agreements with certain partners and service providers may require us to notify them in the event of a security breach. Such mandatory disclosures are costly, could lead to negative publicity, may cause our Members to lose confidence in the effectiveness of our security measures and require us to expend significant capital and other resources to respond to and/or alleviate problems caused by the actual or perceived security breach. A security breach of any of our vendors that processes personally identifiable information of our Members may pose similar risks.

In May 2020, an unauthorized third party attempted to gain access to Dave Member accounts and was able to access Member profiles and Members’ partial or incomplete bank account information. We did not uncover any evidence that the attacker was able to take any actions with respect to the data, other than gaining read access to it, nor do we believe any unauthorized transactions were made or advances requested on our platform. We provided notice to relevant parties as required under applicable law and agreements and took steps to set up alerts to detect abnormal request volumes and introduced rate limiting at the IP address level. In addition, in June 2020, we were notified of an unauthorized third party breach of our Dave database. The third party was able to access to Dave’s system by breaching the system of one of Dave’s third party service providers. The attacker was able to download a large data set, including encrypted social security numbers for some Members; however, there was no evidence that unauthorized transactions were made or advances requested on our platform, nor do we believe that the third party gained access to decryption keys or was otherwise able to decrypt encrypted information. The May 2020 and June 2020 incidents are collectively referred to herein as the "2020 Incidents." We took remedial measures, including the engagement of an outside security consultant to monitor for ongoing dark web activity and to conduct a security audit and incident investigation, and notified relevant parties as required under applicable law and agreements. As a result of the 2020 Incidents, we are in the process of settling a purported class action in California for approximately $3.1 million and we settled individual claims outside of California for approximately $4.4 million. See Item 1. Legal Proceedings. In addition, in 2024, one of our third-party service providers experienced a data breach that resulted in improper disclosure of certain of our Members’ information. As we have increased our Member base and our brand has become more widely known and recognized, third parties may continue to seek to compromise our security controls or gain unauthorized access to our sensitive corporate information or our Members’ data.

If our banking partner or other strategic partners were to conclude that our systems and security policies and procedures are insufficiently rigorous, they could terminate their relationships with us, and our financial results and business could be adversely affected. Under our terms of service and our contracts with strategic partners, if there is a breach of non-public personal information of our Members that we store, we could be liable to the partner for their losses and related expenses.

Additionally, as computer malware, viruses, and computer hacking, fraudulent use attempts, and phishing attacks have become more prevalent, we, and third parties upon which we rely, face increased risk in maintaining the performance, reliability, security, and availability of our solutions and related services and technical infrastructure to the satisfaction of our Members. Any computer malware, viruses, computer hacking, fraudulent use attempts, phishing attacks, or other data security breaches related to our network infrastructure or information technology systems or to computer hardware we lease from third parties, could, among other things, harm our reputation and our ability to retain existing Members and attract new Members.

Our insurance may be insufficient or may not cover all liabilities incurred by cybersecurity incidents. We also cannot be certain that our insurance coverage will be adequate for data handling or data security liabilities actually incurred, that insurance will continue to be available to us on economically reasonable terms, or at all, or that any insurer will not deny coverage as to any future claim. The successful assertion of one or more large claims against us that exceed available insurance coverage, or the occurrence of changes in our insurance policies, including premium increases or the imposition of large deductible or co-insurance requirements, could have a material adverse effect on our business, including our financial condition, operating results, and reputation.

***Our business is subject to extensive regulation and oversight in a variety of areas under federal, state and local laws, and is subject to regulatory investigations and consumer litigation.***

We are subject to extensive regulation under United States federal and state laws and regulations. Regulators have broad discretion with respect to the interpretation, implementation, and enforcement of these laws and regulations, including through enforcement actions that could subject us to civil money penalties, Member remediation, increased compliance costs, and limits or prohibitions on our ability to offer certain products or services or to engage in certain activities. Any failure or perceived failure to comply with any of these laws or regulations could subject us to lawsuits or governmental actions and/or damage our reputation, which could materially and adversely affect our business. Moreover, any competitors subject to different, or in some cases less restrictive, legislative or regulatory regimes may have or obtain a competitive advantage over us.

We are subject to the regulatory and enforcement authority of the Consumer Financial Protection Bureau (“CFPB”), which oversees compliance with federal consumer financial protection laws. In addition, our partnership with Evolve is subject to the supervisory authority of the Federal Reserve, which is Evolve’s primary federal bank regulator. The CFPB has broad enforcement powers, and upon determining a violation of applicable law has occurred can order, among other things, rescission or reformation of contracts, the refund of moneys, restitution, disgorgement or compensation for unjust enrichment, the payment of damages or other monetary relief, public notifications regarding violations, limits on activities or functions, remediation of practices, external compliance monitoring and civil money penalties. The cost of responding to investigations can be substantial and an adverse resolution to an investigation, including a consent order or other settlement, may have a material adverse effect on our business, financial position, results of operations and future prospects.

For example, on November 5, 2024, the Federal Trade Commission (the “FTC”) filed a civil complaint against us alleging violations of Section 5(a) of the FTC Act and the Restore Online Shoppers’ Confidence Act related to our platform and offering of our ExtraCash product. The complaint seeks a permanent injunction, monetary relief for an unspecified amount and “other relief as the court determines to be just and proper.” Given the outcome of any case in litigation is uncertain, for the period ending September 30, 2024, we have recorded a $7 million litigation and settlement accrual for this matter. Significant changes in the accrual may be required in future periods as the case progresses and additional information becomes available. At this time, we are unable to reasonably predict the possible outcome of this matter due to, among other things, the fact that it raises difficult factual and legal issues and is subject to many uncertainties and complexities. There can be no assurance that we will be successful in the litigation, and we may incur a loss in excess of the amount accrued. The defense or resolution of this matter could involve significant monetary costs and have a material impact on our business, financial results and operations. See Note 11, “Commitments and Contingencies,” to the condensed consolidated financial statements for additional information.

In addition, we are also subject to consumer litigation, including putative consumer class actions which allege that we violate federal and/or state laws regulating the financial services industry. For example, in July 2022, a purported class action *Lopez v. Dave, Inc.* was filed in the U.S. District Court for the Northern District of California alleging violations of California consumer protection laws and state and federal lending laws, among other things, and we settled this matter in July 2024. In December 2022, a purported class action *Golubiewski and Checchia v. Dave, Inc.* was filed in the U.S. District Court for the Middle District of Pennsylvania alleging similar violations under Pennsylvania state and federal laws. We are actively litigating this matter and cannot estimate the likely outcome at this time.

Our "terms of use" for the Dave App as well as the Evolve agreements related to the ExtraCash and deposit accounts include arbitration clauses. If our arbitration agreements were to become unenforceable for any reason, we could experience an increase to our consumer litigation costs and exposure to potentially damaging class action lawsuits. Even if our arbitration clause remains enforceable, we may be subject to mass arbitrations in which large groups of consumers bring arbitration claims against the Company simultaneously.

We have been and may in the future also be subject to investigations and potential enforcement actions that may be brought by state regulatory authorities, state attorneys general or other state enforcement authorities and other governmental agencies. Any such actions could subject us to civil money penalties and fines, Member remediation, and increased compliance costs, damage our reputation and brand and limit or prohibit our ability to offer certain products and services or engage in certain business practices. Further, in some cases, regardless of fault, it may be less time-consuming or costly to settle these matters, which may require us to implement certain changes to our business practices, provide remediation to certain individuals or make a settlement payment to a given party or regulatory body.

***The financial services industry continues to be highly regulated and subject to new laws or regulations in many jurisdictions, including the U.S. states in which we operate, which could restrict the products and services we offer, impose additional compliance costs on us, render our current operations unprofitable or even prohibit our current or future operations.***

We are required to comply with frequently changing federal, state, and local laws and regulations that regulate, among other things, the terms of the financial products and services we offer. New laws or regulations may require us to incur significant expenses to ensure compliance. Federal and state regulators of consumer financial products and services are also enforcing existing laws, regulations, and rules more aggressively, and enhancing their supervisory expectations regarding the management of legal and regulatory compliance risks. For example, State attorneys general have indicated that they will take a more active role in enforcing consumer protection laws, including through the establishment of state consumer protection agencies as well as the use of Dodd-Frank Act provisions that authorize state attorneys general to enforce certain provisions of federal consumer financial laws and obtain civil money penalties and other relief available to the CFPB.

In addition, regulators are interpreting existing laws, regulations and rules in new and different ways as they attempt to apply them to novel products and business models such as ours. The regulatory landscape in which we operate continues to evolve, and the CFPB has issued several interpretive statements and guidance that could impact our business practices. For example, in July 2024, the CFPB proposed interpretive rule on paycheck advance and earned wage access, a model which Dave was originally founded on but transitioned away from beginning in 2022. If the CFPB determines that our current business model and practices fall within the scope of the proposed interpretive rule, we could be subject to additional regulatory requirements and scrutiny. Moreover, "True lender" challenges of bank partnership arrangements for credit products (such as the arrangement for ExtraCash) are being raised at the federal and state levels, and banking as a service arrangements (such as the arrangements for our deposit accounts) are subject to heightened scrutiny. Changes in the laws, regulations and enforcement priorities applicable to our business, or changes in the way existing laws and regulations are interpreted and applied to us, could have a material impact on our business model, operations and financial position. In some cases, these measures could even directly prohibit some or all of our current business activities in certain jurisdictions or render them unprofitable and/or impractical to continue.

The application of traditional federal and state consumer protection statutes and related regulations to innovative products offered by financial technology companies such as us is often uncertain, evolving and unsettled. To the extent that our products are deemed to be subject to any such laws, we could be subject to additional compliance obligations, including state licensing requirements, disclosure requirements and usury or fee limitations, among other things. Application of such requirements and restrictions to our products and services could require us to make significant changes to our business practices (which may increase our operating expenses and/or decrease revenue) and, in the event of retroactive application of such laws, subject us to litigation or enforcement actions that could result in the payment of damages, restitution, monetary penalties, injunctive restrictions, or other sanctions, as well as unenforceability of the advances facilitated through our platform, any of which could have a material adverse effect on our business, financial position, and results of operations.

Further, we may not be able to respond quickly or effectively to regulatory, legislative, and other developments, and these changes may in turn impair our ability to offer our existing or planned features, products, and services and/or increase our cost of doing business. In addition, we expect to continue to launch new products and services in the coming years, which may subject us to additional legal and regulatory requirements under federal, state and local laws and regulations. To the extent the application of these laws or regulations to our new offerings is unclear or evolving, including changing interpretations and the implementation of new or varying regulatory requirements by federal or state governments and regulators, this may significantly affect or change our proposed business model, increase our operating expenses and hinder or delay our anticipated launch timelines for new products and services.

***Due to our bank partnership model, we are and will continue to be subject to third-party risk management obligations, our business model may need to be substantially altered and we may not be able to continue to operate our business as it is currently operated.***

Banking products made available through us by our bank partner remain subject to regulation and supervision by our bank partner’s regulators and we, as a service provider to our bank partner, undertake certain compliance obligations. If we were to become directly subject to banking regulations or if the third-party risk management requirements applicable to us were to change, our business model may need to be substantially altered and we may not be able to continue to operate our business as it is currently operated. Failure by us, or any of our business partners, to comply with applicable laws and regulations could have a material adverse effect on our business, financial position and results of operations.

***If we were found to be operating without having obtained necessary state or local licenses, it could adversely affect our business, results of operations, financial condition, and future prospects.***

Certain states have adopted laws regulating and requiring licensing, registration, notice filing, or other approval by parties that engage in certain activities regarding consumer finance transactions. We have also received inquiries from state regulatory agencies regarding requirements to obtain licenses from or register with those states, including in states where we have determined that we are not required to obtain such a license or be registered with the state, and we expect to continue to receive such inquiries. The application of certain consumer financial licensing laws to our platform and the related activities it performs is not always clear, and regulatory agencies may not agree with our determinations on the applicability of such laws to us. In addition, state licensing requirements may evolve over time, including, in particular, recent trends in legislation seeking to impose licensing requirements and regulation of parties engaged in the business of offering "earned wage access" products to consumers. For example, in 2023, the banking regulators in Connecticut and Maryland issued guidance (and in the case of Maryland, a regulatory change) (collectively, “State Regulatory Changes”) indicating that traditional “earned wage access” products would, under certain circumstances, be considered small loans under the state lending laws, and that optional fees and tips, under certain circumstances, would be finance charges for purposes of calculating the interest rate under the state’s applicable usury limit. These State Regulatory Changes would subject those covered by them to licensure and limitations or prohibitions on certain charges. Although we do not believe that our ExtraCash overdraft product offered through Evolve is covered by the State Regulatory Changes, we have recently received separate inquiries from the Connecticut and Maryland banking regulators as to whether the ExtraCash product is subject to the State Regulatory Changes, as well as a subpoena from the Maryland Attorney General requesting information regarding any earned wage access and related products that we offer in the state of Maryland. Although we believe that our practices and products offered at all times in Maryland and Connecticut have been in compliance with applicable law, the defense or resolution of these matters could involve significant monetary costs or penalties and have a significant impact on our financial results and operations.

If we were found to be in violation of applicable state licensing or other requirements by a court or a state, federal, or local enforcement agency, or agree to resolve such concerns by voluntary agreement, we could be subject to or agree to pay fines, damages, injunctive relief (including required modification or discontinuation of our business in certain areas), criminal penalties, and other penalties or consequences, and the ExtraCash receivables facilitated through our platform could be rendered void in whole or in part, any of which could have an adverse effect on our business, results of operations, and financial condition. Additionally, in December 2021, we entered into a Memorandum of Understanding (“MOU”) with the California Department of Financial Protection and Innovation (“CA DFPI”). The MOU required us to provide the CA DFPI with certain information as requested by the CA DFPI and adhere to certain practices in connection with our prior advance product (including certain disclosures related to us not being licensed by the CA DFPI). The CA DFPI finalized a new California Consumer Finance Protection Law regulation, effective February 15, 2025, which requires providers of income-based advances (and other providers) to register with the DFPI (the "DFPI Regulation.") The DFPI Regulation has an exemption for bank-issued products such as ExtraCash. The MOU will terminate on the DFPI Regulation's effective date. It is possible that the DFPI may not agree with the Company's interpretation of the DFPI Regulation and if we were found to be in violation of the DFPI Regulation, we could be subject to fines, damages, injunctive relief, and other penalties or consequences.

Filed Nov 12, 2024.
Source: SEC EDGAR, the filing index for accession 0000950170-24-125522. Last ingested by Listed: Nov 4, 2026, 17:49 ET. No prices; not investment advice.