The following discussion and analysis of the Company’s financial condition and
results of operations should be read in conjunction with our audited
consolidated financial statements and the notes related thereto which are
included in “Item 8. Financial Statements and Supplementary Data” of this Annual
Report on Form 10-
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,” “Item 1A. Risk Factors” and elsewhere in
this Annual Report on Form 10-K. On
approved an amendment to the Company’s certificate of incorporation to complete
a 1-for-32 reverse stock split effective
reverse stock split have been reflected in the audited consolidated financial
statements and the footnotes.
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
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 report by FHN, legacy financial institutions
charge approximately
financially “coping” and “vulnerable” populations pay over
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 160 million to 180 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 cash advances through its
flagship 0% interest ExtraCash product. Through Dave Banking, we provide a
digital checking account experience, seamlessly integrated with ExtraCash
advances, 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 our Side Hustle product, where we present Members with
supplemental work opportunities, and through our recently launched 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 rewire the financial system
for the everyday person. Since inception and through the date of this report,
over 10 million Members have registered on the Dave app and over eight million
of them have used at least one of our current 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.
COVID-19 Impact
There are many uncertainties regarding the current global pandemic involving a
novel strain of coronavirus, and we continue to closely monitor the impact of
the pandemic on all aspects of our business, including how it has and may
46
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in the future impact our Members, employees, suppliers, vendors, and business
partners. The duration and magnitude of the continuing effects of COVID-19 and
variants of the virus on our Members remain uncertain and dependent on various
factors, including new variants of the virus and their severity and transmission
rates, the nature of and duration for which preventive and containment measures
are taken and remain in place, and the extent and effectiveness of such
measures, including vaccination programs, and the type of stimulus measures and
other policy responses that the
global macroeconomic effects of the COVID-19 pandemic and related impacts on
Members and their demand for our products and services may persist for an
indefinite period, even after the effects of the pandemic have subsided.
For more information concerning risks related to COVID-19, see the section
titled “Risk Factors-Our business, financial condition and results of operations
have and may continue to be adversely affected by the COVID-19 pandemic or other
similar epidemics or adverse public health developments, including government
responses to such events” and “Risk Factors-Our ExtraCash advances expose us to
credit risk of our Members and if our underwriting criteria for making advances
is not sufficient to mitigate against this risk, our financial condition and
operating results could be adversely affected if a substantial number of our
Members fail to repay the cash advance they receive.”
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.
47
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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 audited consolidated financial statements of
Dave included in this report.
Service based revenue, net
Service based revenue, net primarily consists of optional tips, optional express
processing fees and subscriptions charged to Members, net of processor-related
costs associated with advance disbursements. Service based revenue, net also
consists of lead generation fees from our Side Hustle advertising partners as
well as fees earned related to the Rewards Product for Members who make debit
card spending transactions at participating merchants.
Transaction based revenue, net
Transaction based revenue, net primarily consists of interchange and ATM
revenues from our Checking Product, net of interchange and ATM-related fees,
fees earned from withdrawal-related transactions, volume support from a certain
co-branded agreement, and deposit referrals and 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 Unrecoverable Advances
The provision for unrecoverable advances to Members primarily consists of an
allowance for unrecoverable advances at a level estimated to be adequate to
absorb credit losses inherent in the outstanding advances receivable. 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 cash received
subsequent to period-end. Changes to the allowance have a direct impact on the
provision for unrecoverable advances in the audited consolidated statement of
operations. We consider advances more than 120 days past due or which become
uncollectible based on information available to us as impaired. All impaired
advances are deemed uncollectible and subsequently written off and are a direct
reduction to the allowance for unrecoverable advances. Subsequent recoveries, if
any, of Member advances written-off are recorded as a reduction to Member
advances, resulting in a reduction to the allowance for unrecoverable advances
and a corresponding reduction to the provision for unrecoverable advances in the
audited 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 advances, 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 advance disbursements 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
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
48
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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 handle routine customer service inquiries and support.
Other Operating Expenses
Other operating expenses consist primarily of technology and infrastructure
(third-party Software as a Service “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, general and
recurring legal fees, rent, certain sales tax related costs, office related
expenses, public relations costs, professional service fees, travel and
entertainment, and insurance. Costs associated with technology and
infrastructure, rent, depreciation and amortization of our property and
equipment and intangible assets, professional service fees, travel and
entertainment, public relations costs, utilities, office-related expenses and
insurance technology and infrastructure (third-party subscriptions),
depreciation and amortization of property and equipment and intangible assets,
general and recurring legal fees, rent, office-related expenses, public
relations costs, professional service 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, legal
settlement and litigation expenses, other strategic financing and transactional
expenses, gain on extinguishment of a liability, earnout liabilities fair value
adjustments, derivative asset fair value adjustments, and changes in fair value
of warrant liabilities.
Provision for income taxes
Provision 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 Years Ended
Operating revenues
For Year Ended Change
(in thousands, except for December 31,
percentages) $ %
2022 2021 2022/2021 2022/2021
Service based revenue, net
Processing fees, net $ 106,664 $ 79,101 $ 27,563 35 %
Tips 61,951 45,106 16,845 37 %
Subscriptions 19,146 17,203 1,943 11 %
Other 1,099 772 327 42 %
Transaction based revenue, net 15,978 10,831 5,147 48 %
Total $ 204,838 $ 153,013 $ 51,825 34 %
Service based revenue, net-
Processing fees, net
Processing fees, net of processor costs associated with advance disbursements,
for the year ended
million
increase was primarily attributable to increases in total advance volume from
approximately
49
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million to approximately
advance amounts that increased from
31, 2021
volume increases, but may not always trend ratably as processing fees vary
depending on the total amount of the advance. The percentage of Members that
chose to pay a processing fee to expedite an advance remained consistent for the
years ended
to expedite these advances increased modestly for the year ended
2022
Tips
Tips for the year ended
The increase was primarily attributable to increases in total advance volume
from approximately
along with average advance amounts that increased from
years ended
advance volume increases, but may not always trend ratably as tips often vary
depending on the total amount of the advance. The percentage of Members that
chose to leave a tip decreased slightly for the year ended
compared to the year ended
chose to leave increased for the year ended
year ended
Subscriptions
Subscriptions for the year ended
increase of
31, 2021
engagement with Members on our platform.
Other
Other revenue for the year ended
42%, compared to the year ended
attributable to increases in average revenue per lead related to amounts
received from our Side Hustle advertising partners.
Transaction based revenue, net-Transaction based revenue, net for the year ended
attributable to the growth in Members engaging with our Checking Product and
corresponding growth in the number of transactions initiated by Members.
Operating expenses
For Year Ended Change
(in thousands, except for December 31,
percentages) $ %
2022 2021 2022/2021 2022/2021
Provision for unrecoverable
advances $ 66,266 $ 32,174 $ 34,092 106 %
Processing and servicing
costs 31,946 23,459 8,487 36 %
Advertising and marketing 69,038 51,454 17,584 34 %
Compensation and benefits 103,432 49,544 53,888 109 %
Other operating expenses 68,551 43,260 25,291 58 %
Total $ 339,233 $ 199,891 $ 139,342 70 %
Provision for unrecoverable advances-The provision for unrecoverable advances
totaled
million
106%, was primarily attributable to an increase in provision expense of
million
50
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advances aged over 120 days and those that have become uncollectible based on
information available to us, in addition to an increase in provision expense of
The increase in provision expense related to Member advances aged over 120 days
and those which have become uncollectible based on information available to us,
period over period, was attributed to significant increases in average advance
amounts and total advance volume from
year ended
deemed uncollectible are subsequently written-off and are a direct reduction to
the allowance for unrecoverable advances.
The increase in provision expense related to Member advances aged 120 days and
under was primarily attributed to significant increases in average advance
amounts and total advance volume during the last 4 months for the year ended
unrecoverable advances and corresponding higher provision for unrecoverable
advances expense during the year ended
31, 2021
they are directly correlated with the timing and volume of Member advance
activity during the last 120 days prior to the end of the period.
Throughout the year ended
Member advances improved, however, historical loss and collections rates
utilized in the calculation of the provision for unrecoverable advances
decreased slightly when compared to historical rates used in 2021 which
reflected underwriting modifications made during early 2020 in response to the
onset of COVID-19. These underwriting modifications primarily consisted of lower
advance amounts and stricter eligibility requirements. Any changes to our
historical loss and collections experience directly affects the historical loss
rates utilized in the calculation of the allowance for uncollectible advances.
The changes in the allowance for unrecoverable advances, period over period, has
a direct impact on the provision for unrecoverable advances.
For information on the aging of Member advances and a rollforward of the
allowance for unrecoverable advances, refer to the tables in Note 6 Member Cash
Advances, Net in the accompanying audited consolidated financial statements of
Dave included in this report.
Processing and service costs-Processing and servicing costs totaled
million
year ended
primarily attributable to the increase in advance volume from approximately
discounts and cost savings due to price reductions from our processors.
Advertising and marketing-Advertising and marketing expenses totaled
million
year ended
primarily attributable to increased advertising efforts, production costs and
promotions across various social media platforms and television.
Compensation and benefits-Compensation and benefits expenses totaled
million
year ended
primarily attributable to the following:
•
an increase in payroll and related costs of
hiring and increased headcount throughout the business; and
•
an increase in stock-based compensation of
restricted stock units granted during the year ended
options granted to a certain executive during 2021, which achieved certain
performance conditions associated with the close of the Business Combination.
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Other operating expenses-Other operating expenses totaled
year ended
attributable to the following:
•
an increase in insurance related costs of
director and officer, general liability and cyber insurance premiums;
•
an increase in accounting costs of
audit, tax and Sarbanes-Oxley compliance readiness related fees associated with
the Business Combination in
•
an increase in technology and infrastructure expenses of
due to increased costs to support the growth of our business and development of
new products and features;
•
an increase in expenses related to our Checking Product of
primarily attributable to processing fees, card fees and fraud related costs
associated with the growth in Members and the number of transactions processed;
•
an increase in legal fees of
compliance, employment and general corporate related matters;
•
an increase in various administrative expenses of
increases in investor relations fees, company meetings, bank service charges,
sales tax, licenses and fees, travel and entertainment and other administrative
expenses;
•
an increase in depreciation and amortization of
accelerated amortization related to the change in useful life of a certain
intangible asset, increased amortization of internally developed software due to
increased internally developed capitalized costs, and depreciation related to
leasehold improvements and equipment purchases; and
•
an increase in rent expense of
space; offset by
•
a decrease in charitable contribution expenses of
decreased amounts pledged to charitable meal donations related to Members’ tips;
and
•
a decrease of
activity in relation to our Checking Product during the first quarter of 2021.
Other (income) expense
For Year Ended Change
(in thousands, except for December 31,
percentages) $ %
2022 2021 2022/2021 2022/2021
Interest income $ (2,953 ) $ (287 ) $ (2,666 ) 929 %
Interest expense 9,197 2,545 6,652 261 %
Legal settlement and litigation
expenses 6,282 1,667 4,615 277 %
Other strategic financing and
transactional expenses 4,591 264 4,327 1639 %
Gain on extinguishment of
liability (4,290 ) - (4,290 ) -100 %
Changes in fair value of earnout
liabilities (9,629 ) - (9,629 ) -100 %
Changes in fair value of
derivative asset on loans to
stockholders 5,572 (34,791 ) 40,363 -116 %
Changes in fair value of warrant
liabilities (14,192 ) 3,620 (17,812 ) -492 %
Total $ (5,422 ) $ (26,982 ) $ 21,560 -80 %
Interest income- Interest income totaled
2021
interest earned from yields from short-term investments and higher interest
rates during the year ended
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Interest expense- Interest expense totaled
2021
interest related to increased borrowings from the delayed draw senior secured
loan facility (the “Debt Facility”) which
entered into during
2021
interest related to the Note with
borrowings under the Debt Facility and Credit Facility.
Legal settlement and litigation expenses-Legal settlement and litigation
expenses totaled
Contingencies in the accompanying audited consolidated financial statements of
Dave included in this report for more information regarding pending legal
actions. The increase of
the settlement of an employee-related legal matter.
Other strategic financing and transactional expenses-Other strategic financing
and transactional expenses totaled
2022
increase of
in addition to certain one-time post-closing expenses associated with the
Business Combination.
Gain on extinguishment of liability-Gain on extinguishment of liability totaled
ended
attributable to the extinguishment of a
transaction costs associated with the Business Combination that were settled
during 2022 in exchange for shares of our Class A common stock. The
in transaction costs were also included as part of additional paid in capital
within our audited consolidated balance sheets as the transaction costs were
originally capitalized in conjunction with the Business Combination.
Changes in fair value of earnout liability-Changes in fair value of earnout
liabilities totaled a benefit of
2022
million
associated with certain earnout shares liability due to decreases in our
underlying Class A Common Stock price.
Changes in fair value of derivative asset on loans to stockholders-Changes in
fair value of derivative asset on loans to stockholders totaled
the year ended
year ended
primarily attributable to the exercise of the call options and the settlement of
this derivative asset at the close of the Business Combination in
For further details, please refer to Note 2 in the accompanying audited
consolidated financial statements of Dave included in this report.
Changes in fair value of warrant liability-Changes in fair value of warrant
liability totaled a benefit of
2022
2021
attributable to fair value adjustments associated with certain public and
private warrant liabilities due to decreases in our underlying Class A Common
Stock price, offset by fair value adjustments associated with certain warrants
issued in connection with the Debt Facility.
Provision for income taxes
For Year Ended Change
(in thousands, except for December 31,
percentages) $ %
2022 2021 2022/2021 2022/2021
(Benefit from) provision
for income taxes (67 ) 97 (164 ) -169 %
Total $ (67 ) $ 97 $ (164 ) -169 %
53
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Provision for income taxes for the year ended
decrease was primarily due to a decrease in state taxes, including gross margin
state taxes, resulting from a favorable ruling by the
regarding the determination of state sourced service income.
Comparison of Years Ended
A discussion regarding our results of operations for the year ended
2021
under “Management’s Discussion and Analysis of Financial Condition and Results
of Operations of Dave – Results of Operations” in our Form 8-K/A filed with the
www.sec.gov.
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 loss adjusted for interest expense, net,
provision 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 all companies may not 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 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 loss to Adjusted EBITDA for the years ended
54
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For Year Ended
(in thousands) December 31,
2022 2021
Net loss $ (128,906 ) $ (19,993 )
Interest expense, net 6,244 2,258
(Benefit from) provision for income taxes (67 ) 97
Depreciation and amortization 6,661 2,976
Stock-based compensation 40,639 7,381
Legal settlement and litigation expenses 6,282 1,667
Other strategic financing and transactional
expenses 4,591 264
Gain on extinguishment of liability (4,290 ) -
Changes in fair value of earnout liabilities (9,629 ) -
Changes in fair value of derivative asset on
loans to stockholders 5,572 (34,791 )
Changes in fair value of warrant liabilities (14,192 ) 3,620
Adjusted EBITDA $ (87,095 ) $ (36,521 )
Liquidity and Capital Resources
Since inception, we have financed our operations primarily from the issuance of
preferred stock, issuances of convertible notes, funds from borrowings under the
Debt Facility and the Credit Facility, and funds received as a result of the
Business Combination. As of
equivalents, marketable securities and short-term investments balance was
million
As an early-stage company, the expenses we have incurred since inception are
consistent with our strategy and approach to capital allocation. We expect to
incur net losses 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 Dave when, and in the amounts needed, Dave 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 for a period of at least 12 months
from the date of this report and sufficient to fund our operations. 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
While the effect of COVID-19 and other macro-economic factors have created
economic uncertainty and impacted how we manage our liquidity and capital
resources, we intend to continue to invest in people, marketing and user
acquisition, technology and infrastructure, and new and existing financial
products and programs we believe are critical to meeting our strategic
objectives. As growth of our ExtraCash product scales, material cash will be
required to fund advances until the point at which those advances are
subsequently collected. The amount and timing of these related cash outflows in
future periods are difficult to predict and is dependent on a number of factors
including the hiring of new employees, the rate of change in technology used in
our business and our business outlook as a result of the COVID-19 pandemic.
While we anticipate certain cash outflows related to these objectives could
exceed amounts spent in prior years, we expect to fund these cash outflows
primarily through our cash flows provided by operating, investing and financing
activities.
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.
55
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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. Dave does not
have any “off-balance sheet arrangements,” as defined by the
In response to our remote employee workforce strategy in the
yet 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 10 months to 3 years, subject to
renewal options of varying terms, and as of
lease liability of
consolidated financial statements for additional information regarding our lease
liabilities as of
We also have certain contractual payment obligations for principal and interest
owed under the Debt Facility. Interest payments are required to be made on a
monthly basis. At
Facility were outstanding. See Note 13, Debt and Credit Facility in the notes to
our audited consolidated financial statements in this report. Additionally, we
also have certain contractual payment obligations for interest owed under the
entered into with
required to be made or added to the outstanding principal on a semi-annual
basis. At
outstanding principal. For more information on the Purchase Agreement with
Ventures
Cash Flows Summary
(in thousands) For Year Ended Total cash (used in) provided by: December 31, 2022 December 31, 2021 Operating activities $ (44,883 ) $ (541 ) Investing activities (285,579 ) (37,202 ) Financing activities 321,767 65,046 Net (decrease) increase in cash and cash equivalents and restricted cash $ (8,695 ) $ 27,303
Cash Flows From Operating Activities
We recorded a net loss of
and a net loss of
reported cash flows used in operating activities of
million
During the year ended
increased compared to the year ended
processing costs, marketing, compensation and other operating expenses to
support the growth of the business. Excluding non-cash impacts, changes in cash
flows from operations included an increase in receivables related to revenue
from Member advances of
current assets of
and a decrease in other current liabilities of
offset primarily by an increase in legal settlement accrual of
decrease in prepaid income taxes of
payable of
Net cash used in operating activities for the year ended
included a net loss of
million
unrecoverable advances,
value, and
by
non-cash impacts, changes in cash flows from operations included an increase in
receivables related to revenue from Member advances of
in other current liabilities of
liabilities of
in prepaid income taxes of
56
——————————————————————————–
million, an increase in accounts payable of
expenses of
million
Cash Flows From Investing Activities
During the year ended
was
costs of
net disbursements and collections of Member advances of
purchase of short-term investments of
marketable securities of
securities of
of
During the year ended
was
collections of Member advances of
developed software costs of
equipment of
of
Cash Flows From Financing Activities
During the year ended
activities was
from PIPE financing in connection with the Business Combination,
in proceeds from the Business Combination, net of redemptions,
proceeds from stock option exercises,
related to the Purchase Agreement with
to debt facility borrowings, partially offset by
of issuance costs related to the Business Combination,
the repayment of the credit facility borrowings, and
repurchase of Class A Common Stock. For more information on the Business
Combination, see “- Business Combination and Public Company Costs”.
During the year ended
activities was
payments. The
Debt Facility and
Investment
Recapitalization and Related Transactions.
Critical Accounting Estimates
Our audited consolidated financial statements have been prepared in accordance
with
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 audited 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) Fair value of a derivative asset;
(ii) Fair value of warrant liabilities;
(iii) Fair value of earnout liabilities;
(iv) Allowance for unrecoverable advances;
(v) Fair value of common stock; and
(vi) Income taxes.
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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. Please refer to Note 2 in our accompanying audited consolidated
financial statements for the years ended
this Annual Report on Form 10-K.
While our significant accounting estimates are described in the notes to our
audited 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.
Valuation techniques used to measure fair value must maximize the use of
observable inputs and minimize the use of unobservable inputs.
Derivative Asset
We recorded a derivative asset related to call option on loans to stockholders.
The derivative asset was carried at its estimated fair value on our audited
consolidated balance sheets and was extinguished as at the close of the Business
Combination as all of the call options related to the Loans to Stockholders were
exercised and the related loans were settled. Changes in the estimated fair
value of the derivative asset were driven by changes in the underlying value of
our Common stock and any changes in fair value were reported as a loss (gain) on
derivatives in the accompanying audited consolidated statements of operations.
We utilized the binomial option pricing model to compute the fair value of the
derivative asset and to mark to market the fair value of the derivative at each
balance sheet date. The binomial option-pricing model considers a range of
assumptions related to the fair value of common stock (see below Fair Value of
Common Stock for further details), volatility, dividend yield and risk-free
interest rate. The binomial option pricing model includes subjective input
assumptions that can materially affect the fair value estimates.
Warrant Liabilities
We recorded a warrant liability associated with the Debt Facility. The warrant
liability was carried on our audited consolidated balance sheets as a long-term
liability estimated at fair value and extinguished immediately prior to close of
the Business Combination as the warrants were exercised. Changes in the
estimated fair value of this warrant liability were driven by changes in the
underlying value of our Common stock and were reported as a loss (gain) in the
accompanying audited consolidated statements of operations. We utilized the
binomial option-pricing model to compute the fair value and to mark to market
the fair value of the warrant liability at each audited consolidated balance
sheet date. The binomial option-pricing model considers a range of assumptions
related to the fair value of common stock (see below Fair Value of Common Stock
for further details), volatility, dividend yield and risk-free interest rate.
The binomial option pricing model includes subjective input assumptions that can
materially affect the fair value estimates.
We also recorded warrant liabilities for both public and private warrants
associated with the Business Combination. The warrant liabilities are carried on
our audited consolidated balance sheets as a long-term liability estimated at
fair value. Changes in the estimated fair value of the warrant liabilities were
driven by changes in the underlying value of our Common stock and were reported
as a loss (gain) in the accompanying audited consolidated statements of
operations. We utilize the Black-Scholes model to compute the fair value and to
mark to market the fair value of the private placement warrant liability at the
time of the Business Combination and at each audited consolidated balance sheet
date. The public warrants were valued using the Black-Scholes model and public
trading price of the warrants, when available. The Black-Scholes model considers
a range of assumptions such as stock price, strike price, volatility, time to
maturity, dividend yield and risk-free interest rate. The Black-Scholes pricing
model includes subjective input assumptions that can materially affect the fair
value estimates.
Earnout Liabilities
We recorded earnout liabilities associated with the Business Combination. The
earnout liabilities are carried on our audited consolidated balance sheets as a
long-term liability estimated at fair value. Changes in the estimated fair
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value of the earnout liabilities are reported as a loss (gain) in the
accompanying audited consolidated statements of operations. We utilized a Monte
Carlo Simulation Method to compute the fair value and to mark to market the fair
value of the earnout liabilities at each audited consolidated balance sheet
date. The Monte Carlo Simulation Method considers a range of assumptions such as
stock price, volatility, and risk-free interest rate. The Monte Carlo Simulation
Method includes subjective input assumptions that can materially affect the fair
value estimates.
Fair Value of Common Stock
We are required to estimate the fair value of the common stock underlying our
share-based awards. The fair value of the common stock underlying our
stock-based awards has been determined, in each case, based on a valuation model
as discussed further below, and was approved by our Board of Directors. Our
Board of Directors intends all stock options granted to be exercisable at a
price per share not less than the fair value per share of the ordinary share
underlying those stock options on the date of grant.
Before the Company’s shares were traded publicly, there was no public market for
its Common Stock. The valuation has been determined using appropriate valuation
methodologies in accordance with the guidelines outlined in the
Institute of Certified Public Accountants Practice Guide
Held Company Equity Securities Issued as Compensation.
We considered various objective and subjective factors to determine the fair
value of our common stock as of each grant date, including:
•
Historical financial performance;
•
Our business strategy;
•
Industry information, such as external market conditions and trends;
•
Likelihood of achieving a liquidity event, such as an initial public offering,
SPAC merger, or strategic sale given prevailing market conditions and the nature
and history of our business;
•
Prices, privileges, powers, preferences and rights of our convertible preferred
stock relative to those of Dave Common Stock;
•
Forecasted cash flow projections for Dave’s business;
•
Publicly traded price of the special purpose acquisition company (“SPAC”);
•
Primary preferred stock financings and secondary common stock transactions of
our equity securities;
•
Lack of marketability/illiquidity of the common stock underlying our stock-based
awards involving securities in a private company; and
•
Macroeconomic conditions.
The assumptions underlying these valuations represented management’s best
estimate, which involved inherent uncertainties and the application of
management’s judgment. The probability of a liquidity event, the derived
discount rate, and the selected multiples that are applied to our financial
statistics are significant assumptions used to estimate the fair value of our
common stock. If we had used different assumptions or estimates, the fair value
of our common stock and our stock-based compensation expense could have been
materially different.
During 2019 and 2020, our estimated fair value of our common stock remained
relatively consistent before a potential public listing through a business
combination with a special purpose acquisition company was first considered in
2021 (“SPAC Transaction”).
The fair value for our common stock was estimated to be
post-split adjusted basis) as of
2020
Transaction, which was incorporated in the
in a fair value for our common stock of
adjusted basis) (“
the subsequent
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valuation performed as of
Dave’s common stock of
(“
The
contemplation of the Business Combination, and at the time of these valuations
our management did not expect a near-term exit. The
performed at the time of the close of Dave’s Series B-1 and B-2 preferred equity
financings (“Series B Financing”). Since no near-term exit was expected, the
subject company transaction method was performed using a single option pricing
model (“OPM”) as the allocation method. As a result, the fair value of our
common stock was inferred from the Series B Financing. The
was performed using the market approach, specifically the guideline public
company method (“GPCM”) and used a single OPM as the allocation methodology. The
GPCM was performed by first considering the Series B Financing’s implied revenue
multiple from the
changes in the guideline public company’s multiples since the Series B Financing
occurred, with consideration for adjustments based on our comparative
operational performance between the periods.
The
wherein a probability-weighted expected return model (“PWERM”) incorporated an
expected near-term SPAC exit scenario as well as an OPM. The OPM was used to
model the value of common stock in a delayed exit/stay private scenario. Total
equity values for each scenario management identified were estimated as of the
measurement date. The delayed exit/stay private scenario total equity value was
estimated using the discounted cash flow method under the income approach and
the GPCM under the market approach. The total equity value in the SPAC
Transaction scenario included in the
the expected Business Combination pre-money valuation. The common stock price
per share in the SPAC Transaction scenario included in the
Valuation was determined based on the publicly traded price of the SPAC as of
the valuation date. Our management’s estimated probability for each scenario
occurring at each valuation date was applied to the respective scenario’s
indicated common stock value to arrive at the estimated fair value of common
stock.
The increase in the fair value of our common stock between the
Valuation was predominantly due to our progress towards completing the Business
Combination that was not known or knowable at the earlier valuation dates. As
previously discussed, the
to determine the value of common stock in a single OPM. The
Valuation relied upon the GPCM with valuation multiples selected considering the
implied multiples at the time of the Series B Financing, with appropriate
adjustments to the multiples to account for changes in our financial and
operational performance as well as to reflect changes in the guideline public
companies’ multiples and comparative performance, from the close of the Series B
financing to the
contemplated a SPAC Transaction and began taking the necessary steps to prepare
for a business combination with VPCC. The necessary steps undertaken to prepare
for the Business Combination included meeting with VPCC and investment bankers,
discussing timing expectations, and negotiating the preliminary letter of intent
with VPCC. As our ongoing negotiations related to the Business Combination
reflected an increased likelihood of a near-term exit transaction and/or
liquidity event, the valuation of Dave’s equity as of the
took into consideration the indicated equity value implied by the negotiations
as well as the uncertainty inherent in the future key milestones including
execution of the Merger Agreement and VPCC’s shareholder vote. Similarly, the
increase in the common stock value to
Valuation resulted primarily from an increase in the probability of the
near-term SPAC Transaction closing and an increase in the value of common stock
in that scenario due to the passage of time and an increase in the SPAC’s
publicly traded price as compared to the SPAC Transaction’s negotiated pre-money
valuation. As a result, the increase in Dave’s common stock fair value between
the valuation dates resulted directly from both the increase in the pre-money
valuation and acceleration of the timing of an exit, from the Series B Financing
to the Business Combination.
For further details, please refer to Note 2 in our accompanying audited
consolidated financial statements for the year ended
in this Annual Report on Form 10-K.
Allowance for Unrecoverable Advances
We maintain an allowance for unrecoverable advances at a level estimated to be
adequate to absorb credit losses inherent in outstanding Member advances. We
currently estimate the allowance balance required using historical
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loss and collections experience, and, if relevant, the nature and volume of the
portfolio, economic conditions, and other factors such as cash received
subsequent to period-end. Interpretations of the nature of volume of the
portfolio and projections of future economic conditions involve a high degree of
subjectivity. Changes to the allowance have a direct impact on the provision for
unrecoverable advances in the audited consolidated statement of operations.
We consider advances over 120 days past due or which become uncollectible based
on information available to us as impaired. All impaired advances are deemed
uncollectible and subsequently written-off and are a direct reduction to the
allowance for unrecoverable advances. Subsequent recoveries of Member advances
written-off, if any, are recorded as a reduction to Member advances when
collected, resulting in a reduction to the allowance for unrecoverable advances
and a corresponding reduction to the provision for unrecoverable advances
expense in the audited consolidated statements of operations.
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 audited 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.
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
million
respectively, related to state income taxes and federal and state R&D tax
credits.
We are subject to income tax in jurisdictions in which we operate, including
United States
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
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 audited
consolidated financial statements included in this report for the recent
accounting pronouncements adopted and the recent accounting pronouncements not
yet adopted for the years ended
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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
Accounting Oversight Board
supplement to the auditor’s report providing additional information about the
audited 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
we have total annual gross revenue of at least
are deemed to be a “large accelerated filer” under the rules of the
means the market value of our common equity that is held by non-affiliates
exceeds
quarter; and (2) the date on which we have issued more than
non-convertible debt securities during the previous three years.
Recently Issued Accounting Standards
Refer to Note 2, “Significant Accounting Policies,” of our audited consolidated
financial statements included in this report for a discussion of the impact of
recent accounting pronouncements.
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