Dave Inc./DE Q1 FY2026 Earnings Call

Good afternoon, everyone, and thank you for participating in today's conference call to discuss Dave's financial results for the first quarter ended March 31, 2026. Joining us today are Dave's CEO, Mr. Jason Wilk; and the company's CFO and COO, Mr. Kyle Beilman. By now, everyone should have access to the first quarter 2026 earnings press release, which was issued today after the market closed. The release is available in the Investor Relations section of Dave's website at investors.dave.com. This call will also be available for webcast replay on the company's website. Please be advised that today's conference is being recorded. (Operator Instructions). Certain comments made during this conference call and webcast are considered forward-looking statements under the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to certain known and unknown risks and uncertainties as well as assumptions that could cause actual results to differ materially from those reflected in these forward-looking statements. These forward-looking statements are also subject to other risks and uncertainties that are described from time to time in the company's filings with the SEC. Do not place undue reliance on any forward-looking statements, which are being made only as of the date of this call. The company undertakes no obligation to revise or update any forward-looking statements, except as required by law. The company's presentation also includes certain non-GAAP financial measures, including adjusted EBITDA, adjusted EBITDA margin, adjusted net income, non-GAAP gross profit, non-GAAP gross margin, adjusted earnings per share and compensation expense, excluding stock-based compensation, as supplemental measures of performance of our business. All non-GAAP measures have been reconciled to the most directly comparable GAAP measures in accordance with SEC rules. You will find reconciliation tables and other important information in the earnings press release and Form 8-K furnished with the SEC. I would now like to turn the call over to Dave's CEO, Mr. Jason Wilk. Please go ahead.

Good afternoon, and thank you all for joining us. 2026 is off to a strong start at Dave. Revenue grew 47% year-over-year to $158.4 million and adjusted EBITDA grew 57% to $69.3 million at a 44% margin. On the strength of this trend and what we're seeing thus far in Q2, we are raising full year guidance across all three dimensions. There are three key takeaways I want every investor to take away from this call. The first is credit performance resulting from Cash AI V5.5 drove our lowest Q1 loss rate on record. Our 28 days past due metric, which we believe investors should use to assess true credit performance at Dave, is down to 1.69%, marking a 1 basis point improvement year-on-year and down 85 basis points from three years ago. This result underscores how much control we have over our credit outcomes as a result of years of significant investment in training and in our models. The second is we once again demonstrated the durability of our growth algorithm to sustain mid-teens member growth and low double-digit ARPU growth. Despite the usual Q1 seasonal tax refund dynamics and expanded refunds compared to years past, we were still able to grow ARPU 24% year-over-year and monthly transacting members by 18%. We now have a total of 2.99 million MPMs, which is still a small fraction of the overall 185 million customer TAM, and we believe we're still early in our journey to drive incremental ARPU. Lastly, we launched our new Pay in 4 credit product. We officially put our newest product in the hands of a small group of members to trial. I want to congratulate the team on their hard work for reaching this milestone. Turning to our growth pillars, starting with member acquisition. We added 695,000 new members in Q1, up 22% year-over-year at a customer acquisition cost of $18. That CAC is flat year-over-year and improved 11% sequentially, which is better than expected given Q1 is typically our most challenging quarter for marketing efficiency due to tax refund dynamics reducing credit demand. Our gross profit payback period improved to nearly three months in Q1, which gives us increasing confidence to continue scaling member acquisition throughout 2026. Moving to our second pillar, engagement through ExtraCash. Originations reached $2.1 billion, up 37% year-over-year, driven by growth in MTMs and average origination size. MTMs grew 18% as a result of improving conversion and reactivation alongside strong retention rates. Average ExtraCash size increased 10% due largely to the impact from Cash AI V5.5, which was deployed in late Q3 of last year. Sequentially, origination size was modestly lower at $212, reflecting the impact of higher tax refunds late in the quarter. That dynamic has already begun to reverse. Average size rebounded to $214 in April. We expect origination sizes to improve with continued V5.5 model optimizations and the forthcoming V6 model that we expect to begin testing within the next couple of months. Moving to our third pillar, deepening engagement. Dave debit card spend was $534 million in Q1, up 9%. Growth here continues to be attributed to the natural synergy of ExtraCash and the Dave Card as there have been no new initiatives aimed at debit volume growth while we focus our efforts on new credit products to drive deeper engagement. Before turning it over to Kyle, I want to provide a few strategic updates. Starting off with our new Pay in 4 card product, which we're officially calling Dave Flex. Dave Flex is designed as a responsible alternative to traditional credit cards with balances paid back in up to four simple installments aligned with your paycheck date. No compound interest, no late fees and no credit check. We believe this product is competitively positioned against the predatory fees of subprime credit cards and the heavy friction associated with BNPL since Dave Flex can be used at any online or offline merchant without the need to reapply with each use. Dave Flex supports each element of our growth pillars as we expect it to be a driver of customer acquisition, expand our credit capabilities and deepen engagement of existing members. Importantly, Dave Flex uses Cash AI to power 100% of the underwriting, giving us a meaningful edge over incumbent credit card products that rely on FICO, which we believe will lead to greater customer access and superior credit performance. As promised, we began testing Dave Flex with existing members last month. Early engagement has been encouraging, and we plan to share more once we have more data on performance. We do not expect Dave Flex to contribute meaningful revenue in 2026, and it is not embedded in our guidance. Our focus this year is to test and learn and optimize member lifetime value before scaling in 2027. We believe products like ExtraCash and Dave Flex, which leverage short-duration credit to drive share of wallet, are what really differentiate Dave from our scaled neobank competitors. The bulk of our roadmap is staffed on our responsible short-duration credit initiatives, which we believe will further enable us to achieve our medium-term growth algorithm. As such, we have updated our strategic statement to better capture our focus, which is that Dave is a U.S. neobank pioneering innovative credit products for everyday Americans. Next, regarding our partnership with Coastal Community Bank, which remains on track to begin transitioning ExtraCash receivables to the new off-balance sheet funding structure this summer, which will begin unlocking meaningful liquidity and reduce our cost of capital. Lastly, on the DOJ matter, we have no material update and continue to vigorously defend our position. In closing, 2026 is off to a tremendous start. We are executing well against our stated growth algorithm and credit performance is excelling. I want to thank our team who make all of this possible. With that, I will turn the call to Kyle.

Thanks, Jason, and good afternoon, everyone. Q1 was a strong start to the year, marked by durable revenue growth, disciplined marketing investment and continued strong credit performance. Together, those factors drove another quarter of outsized adjusted EBITDA and EPS growth and support the guidance raise we are announcing today, our eighth consecutive quarter of increasing guidance on all metrics. Today, I will cover the key drivers underlying the quarter, credit and provision mechanics, an update on capital allocation and our revised outlook. For a more detailed review of our KPIs, please refer to the earnings supplement on our IR website. Revenue was $158.4 million, representing 47% growth year-over-year. Growth was driven by 18% MTM growth and 24% ARPU expansion, both ahead of our medium-term growth algorithm. Underneath those headline numbers, new member conversion, dormant member reactivation and retention all contributed, and repeat originations from members with an average tenure of close to two years continue to anchor the book. For those newer to the Dave story, Q1 is seasonally our softest quarter, driven by tax refunds, which temporarily reduced demand for ExtraCash. As a result, the number of ExtraCash disbursements declined 5% sequentially, consistent with the range we have observed in every Q1 since 2021. This was the primary driver of the 3% sequential decline in revenue. Average ExtraCash size was down modestly from $214 to $212 sequentially, reflecting higher-than-normal tax refunds per member. It's worth noting that Q1 of last year benefited from the step-up in ExtraCash approval limits we implemented as part of our fee model transition. Both average origination size and disbursement volume have rebounded in April, and we expect continued expansion in Q2 and beyond. In terms of forward-looking color on top line drivers, in addition to the optimism we have about the potential impact of Cash AI V6.0, we also have a series of initiatives aimed at improving average origination sizes, monetization rates and therefore ARPU in the near term. The first is removing our $15 fee cap for new members, which enables more members to achieve higher limits now that the risk is appropriately monetized. Second, we addressed a common member pain point, where if you hadn't utilized your entire ExtraCash limit, the additional amount wasn't accessible within that pay period. This new feature, which we are calling second draw, solves that problem and enables members more flexibility, which we believe should help with overall credit utilization and therefore average origination size. Second draw is now available to all eligible members as of last month. Now turning to credit and provision. As Jason noted, the underlying credit picture continued to improve meaningfully in the first quarter. Our 28-day past due rate of 1.69% was a Q1 record, improving both sequentially and year-over-year, even with originations up 37%. This was the first quarter we have seen EPD improve year-over-year since transitioning to the new fee model. When we moved to that structure, we deliberately expanded the credit box while Cash AI iterated. Three quarters of optimization later, loss rates are back below where we started. That momentum has continued into Q2 and should expand upon rolling out Cash AI V6.0 over the coming months. On provision for credit losses, the sequential increase was mechanical and calendar-driven. The underlying book performed 10% better than Q4 on a 28 DPD rate basis. The metrics that incorporate credit performance—DPD rate, net monetization rate and revenue per origination net of losses—all improved sequentially and year-over-year, which we believe is a more meaningful signal. Consistent with the expectation we set last quarter, Q1 ended on a Tuesday, typically the intra-week peak in outstanding receivables. Higher ExtraCash balances at the measurement date mechanically drive a higher loss reserve even when the underlying loss content on those receivables is trending lower. Had Q1 ended on the prior Friday, the provision would have been approximately $5 million lower and non-GAAP gross margin would have been approximately 75%. Importantly, because Q1 already absorbed the elevated reserve with that Tuesday watermark, we do not expect Q2 ending on a Tuesday to adversely impact provision in the same way it did in Q1. Furthermore, Q3 and Q4 ending on a Wednesday and Thursday, respectively, should provide a tailwind for loss provision as a percentage of originations and gross margin in those periods. Non-GAAP gross profit was $114.4 million, up 37% year-over-year. Non-GAAP gross margin was 72%, which is consistent with the low 70s framework we guided to in March, and we expect Q1 to represent the low point for the year. Given the improving DPD trend and more favorable calendar dynamics ahead, we now expect non-GAAP gross margin to expand into the mid-70s for the balance of the year. In terms of marketing, Q1 was our seasonal low by design. We moderated investment given the typical softness in ExtraCash demand during tax refund season. For the balance of 2026, we plan to expand marketing spend above fourth quarter 2025 levels while maintaining our discipline on investment returns. On fixed costs, compensation expense grew 1% year-over-year and 11% sequentially. We typically see a modest bump in Q1 related to seasonally elevated payroll taxes. Additionally, we began making targeted investments in product development headcount as previously communicated. To size that investment, we expect to move from under 300 employees as of the end of last year to around 325 by the end of this year, representing an annualized incremental expense of approximately $10 million. We continue to run a highly efficient platform with what we believe is one of the strongest revenue per employee businesses in the industry. As revenue scales throughout the balance of the year, we expect operating leverage to continue to build thereafter. Pulling it all together, adjusted EBITDA was $69.3 million, up 57% year-over-year at a 44% margin. That is approximately 300 basis points of year-over-year margin expansion and consistent with our commitment to deliver ongoing annual EBITDA margin improvement. GAAP net income was $57.9 million, up 101%. Adjusted net income was $52.3 million, up 61% and adjusted diluted EPS was $3.64, up 64%, reflecting the combined benefit of operating performance and the reduction in share count from Q1 repurchases. Given that our share repurchases in Q1 occurred entirely in March, Q2 will begin to experience a full quarter's benefit of their impact. In terms of capital allocation, Q1 was a meaningful quarter for per share value accretion. We deployed $194.9 million into share repurchases and restricted stock unit net settlements, reducing our basic share count from 13.6 million at year-end 2025 to 12.7 million at the end of Q1, a reduction of approximately 6% sequentially. In early March, we completed a $200 million zero coupon convertible notes offering, generating $175.7 million of net proceeds. We simultaneously repurchased $70 million of common stock in a privately negotiated transaction with the convertible note holders and continued buying shares in the open market for the remainder of the quarter. We have approximately $113.3 million in remaining capacity under our share repurchase authorization, which we expect to continue to utilize opportunistically. Our capital priorities remain the same. First, invest in organic growth where we are generating returns that are multiples of our cost of capital; second, operationalize the Coastal funding structure; third, return capital through share repurchases using our excess cash when risk-adjusted returns exceed those alternatives. Our objective is simple. We intend to allocate capital to maximize value for shareholders, and Q1 was a strong proof point of us doing it at scale. We remain on track to transition ExtraCash receivables to the Coastal off-balance sheet funding structure this summer. At full implementation, we expect to unlock over $200 million in incremental liquidity, reduce our cost of capital and repay our existing credit facility. As a reminder, the fees paid to Coastal under this arrangement will be recognized as an operating expense that will burden non-GAAP gross profit and gross margin but will be added back for adjusted EBITDA purposes. Now turning to guidance. Based on Q1 results and the trajectory we see in the business, we are raising 2026 guidance across all three metrics. We now expect full year revenue of $710 million to $720 million, representing growth of approximately 28% to 30%. Additionally, we are raising adjusted EBITDA guidance to $305 million to $315 million. Lastly, we are raising adjusted diluted EPS to a range of $16.25 to $16.75, up from $14 to $15. This represents year-over-year growth of approximately 43% to 47% on a tax rate adjusted basis, reflecting both strong operating performance and a meaningful reduction in share count from Q1 repurchases. All figures assume a 23% effective tax rate. The execution we have demonstrated over the last several years, consistently raising guidance while improving credit and scaling originations has carried into 2026. Cash AI continues to sharpen. Our competitive position continues to strengthen, and we believe we have a clear and executable path to deliver on our medium-term growth algorithm while creating outsized shareholder value. With that, we will conclude our prepared remarks. Operator, please open the line for questions.

(Operator Instructions) And our first question comes from Andrew Jeffrey with William Blair.

I wanted to ask about, Jason, maybe your comments around focusing on engagement, particularly in the context of Dave Card volume, which the growth of which decelerated a little bit this quarter. It sounds like that's less, at least as a near-term focus for you in terms of engagement as you turn your eyes to Flex and Cash AI 6.0. I wonder if you could unpack that a little bit for us.

Yes, sure. When I think about deepening engagement, specifically through card, we believe we have a much differentiated offering through the Dave Flex product, given our advantages in underwriting, and also the fact there's far less friction associated with winning card spend when we're provisioned credit versus asking someone to switch their direct deposit. We found there's very little differentiation amongst all the scaled neobanks on debit card offerings. Therefore, we're going to maintain the natural synergy between ExtraCash and the debit card to drive natural volume there, but we do think there's a massive opportunity with Dave Flex to make that a scaled product and be a real differentiator among our peers.

Okay. Yes, I look forward to that product rolling out. And one follow-up, if I may. Just where do you think, over time, engagement goes? You got about a 20% MTM to MAU attachment this quarter, somewhere in that neighborhood. Where can that go and over what period of time? And I assume that could be a pretty important ARPU driver along with some of the other initiatives you called out on the call today.

As stated on the call, I think we're doing really well against our stated growth algorithm, which is to grow MTMs mid-double digits and ARPU low double digits, and we're doing very well there, exceeding both those targets within the quarter. As I mentioned, there's a lot of room to run given we're 2.99 million MTMs against the total 185 million member TAM. We know that from a credit share-of-wallet perspective, there's a tremendous opportunity for us to continue to do more for this customer and ExtraCash is largely used for nondiscretionary expenses. While there's still a ton of room to run with that product to drive more MTMs and optimize for more ARPU, the opportunity with Dave Flex to drive more discretionary spending and win more daily engagement and expand into that credit wallet is a huge opportunity.

Our next question comes from Ryan Tomasello with KBW.

Following up on the Flex Pay in 4 product, maybe if you could give us an update on how you're thinking about monetization rates relative to ExtraCash as well as the credit component, how that might compare given the higher advance rates, higher advance limits and longer duration? And then as a follow-up on that, I think the intention you've mentioned is to focus initially on existing customers for the Pay in 4 product. But as you lean into more external growth eventually, do you think that you can maintain that sub-$25 or so CAC level? Or might higher LTVs on that product justify a step-up in CAC for the Flex product?

Answering the second question first, we've said repeatedly we're not focused on the lowest dollar CAC; we look at the best and most attractive returns. We would expect to spend against Flex acquisition where we see positive returns that we like. It's too early to tell on that given we're not actually testing in market for new users at this point, but we do anticipate testing this year to understand how it performs with paid advertising and what kind of growth algorithm we can have for that product in 2027. As far as the economics, we are in-market testing a higher monthly fee than ExtraCash. We also plan to test a per-spike transaction fee with that product. No late fees, no compound interest on the product. You can apply with no credit check using Cash AI. One thing we are willing to share right now is that everything so far on adoption points to incrementality with regard to total originations per customer, meaning we are seeing natural synergy between this product and ExtraCash. Thus far there should be ARPU lift, which is what we expected, given how people interact with BNPL within our customer cash flow data. The initial signs are encouraging and our hypothesis is proving out.

Great. And then one of your large neobank peers has signaled a renewed push into the cash advance space with a modestly lower cost product; they're also expanding into the enterprise earned wage access category. Curious if you've seen any measurable impact there from those competitive dynamics? And can you give us your thoughts on whether the enterprise EWA category competes with the direct-to-consumer cash advance product and how you view that strategy as a potential tack-on to today's product pipeline at some point?

We still view our ability to underwrite external primary accounts via Plaid to be a differentiator among our scaled neobank competitors, which require a direct deposit into their account to access credit. We believe the TAM of people willing to connect a bank account to get access to credit is far wider than those willing to switch their bank account. Therefore, it's hard to compare the products apples-to-apples because even if a product may be slightly cheaper, there's a massive tax on the user in the friction required to switch direct deposit. When I think about the enterprise opportunity, it's an interesting differentiated way to acquire customers, but it's a very different value proposition—customers accessing their earned wages every single day. We see Dave as the ability to capture a much larger paycheck at the beginning of a pay period to cover things like rent, gas or groceries. The use case is different, and we view those as complementary products. Enterprise EWA businesses have been around for a decade plus, and we haven't seen anyone really crack significant scale there, and it has had no bearing or impact on our business.

Our next question comes from Joseph Vafi with Canaccord.

Terrific results once again in the quarter. Congrats. I thought maybe we'd look at customer acquisition through a little bit of a different lens here. Obviously there's sales and marketing spend for customer acquisition. I just wanted to also drill down into your credit algo and how much of a factor that is in driving growth as that continues to improve. As Cash AI moves to V6, how much is that a driver in customer acquisition because, obviously, if someone applies they may or may not get approved and how that really is part of growth in MTM. I have a quick follow-up.

As mentioned, the quarter was better than expected from a marketing perspective. CAC came in lower than we thought it would, which is impressive given the elevated tax refunds. That shrinking payback period gives us confidence to deploy marketing dollars efficiently and at scale for the rest of the year. With regard to Cash AI V6, I wouldn't think about it as approving customers who otherwise would have been rejected. It's more that the people we do approve are able to get incremental credit from there. We see conversion benefits, which help CAC from a first-time credit active perspective. One of the things Kyle mentioned was removing the fee cap for new customers. We're already seeing the benefits—more customers getting approved for higher amounts—and that has compounding effects on first-time conversion, retention and LTV, and on marketing spend efficiency overall.

Everything Jason said is true, and it also applies to the overall book. The better we get at underwriting and the improvements we expect from Cash AI V6, the more those benefits—higher limits and therefore a better value prop—increase customer retention and reactivation and support overall customer growth. Thus, it's beneficial to both new users and existing users as we continue to improve Cash AI.

Sure. And then maybe just on removing that fee cap, how much price sensitivity was there? Could you drill down a little bit more on your thoughts on removing that?

Over the last couple of years, as we've made pricing optimizations, we've seen that as we move on price and therefore increase spreads, we're able to open up the credit box and that increase in limit and value proposition is much more valuable to the customer than the incremental cost associated with it. That's the same dynamic we see here with eliminating the $15 cap. As we can generate the incremental spread with the removal of that cap and therefore increase limits, we're seeing benefits to conversion. Data over the last couple of years supports the dynamic where limit matters more than price, and we continually try to find the sweet spot to maximize customer experience while ensuring we are compensated for the incremental risk.

Our next question comes from Devin Ryan with Citizens Bank.

Jason and Kyle, congrats on the strong quarter here. Just want to touch on capital. Obviously, the convertible offering this quarter bought back a lot of stock with the Coastal transition coming, and that's $200 million of liquidity. When we think about uses of liquidity and excess cash, you obviously can pay down the existing facility. Beyond that, should we think about free cash generation as primarily being pegged towards buybacks? Or is there anything else we should be thinking about given that beyond the $200 million you're generating another couple hundred million dollars a year or more? So there's a lot of capacity there.

Thanks, Devin. I'll pass that to Kyle.

Devin, the company is substantially free cash flow generative at this point. We're unlocking significant capital with the migration to the Coastal funding arrangement, which gives us a lot of dry powder from a capital allocation perspective. As I mentioned in my remarks, share repurchases remain a very attractive way for us to deploy capital and are top of the list for capital allocation priority. We will continue to evaluate M&A opportunities if anything is additive to our strategy, but by and large we're very oriented towards share repurchases as the primary use of excess cash.

Got it. And then just another follow-up on ExtraCash. Obviously strong demand against what's typically a seasonally softer quarter, and it seemed like this year was even a heavier tax refund season than prior year. So the results are even more notable against that backdrop. Can you talk about trends you saw with your customers? Were there other factors driving demand? Was it mainly Cash AI V5.5 expanding the credit box? And what does that imply for the snapback into Q2 once we move beyond seasonal dynamics? I heard the prepared remarks, but any other color would be helpful.

We saw a snapback in April with respect to average origination size. We have a large dataset with over seven million connected accounts to analyze the economy and our customer behavior. Overall, income is holding up and is up slightly year-over-year. Spending is flat year-over-year—no evidence of trade-down behavior. One trend to note is restaurants have been gaining some share of food and drink spend at the expense of groceries, but we see no signs of increasing credit leverage. We had record Q1 performance, which is a strong positive and shows the strength of Cash AI and our control of the credit box.

To add an anecdote, if you look at sequential trends—ARPU and the amount of ExtraCash originations per MTM—the Q1 2026 versus Q4 2025 trend was very similar to what we've seen in past years. Last year was different due to the fee model and higher thresholds, which obfuscated some impacts, but this Q1 largely mirrored the several years before last year. So it was business as usual and in line with expectations from tax refunds.

Our next question comes from Jeff Cantwell with Seaport Research.

Can you tell us what provision expense would have been in the quarter if not for the timing impact? How much was that impact this quarter? And then assuming the macro remains fairly steady, should we expect that to normalize from here? Is there anything else to flag as you look to the remainder of this year?

Jeff, as I mentioned in the remarks, the provision dynamic from the quarter closing on a Tuesday versus the prior Friday was about a $5 million swing to gross profit. That is a strong indicator of what it would have looked like as the provision as a percent of originations and would have brought gross margins back into the mid-70s. We signaled this calendar impact coming into Q1. Gross margin performance was within our expectations for the low 70s—Q1 is the low watermark for the year—and we expect gross margins to be in the mid-70s for the rest of the year. In terms of overall credit performance, we expect DPD rates to be at least as good as last year, if not better. All signs point to improving gross margins and provision as a percentage of originations coming down, with timing dynamics aside.

Got it. And then looking at CAC this quarter, it was $18—down a couple of dollars versus the previous quarter and flat versus last year. When you think about the pay-in-4 card and the competitive dynamics of the BNPL space, is there any reason to suspect you might contemplate changes in CAC to drive new customer growth from that channel? Or how should we think about CAC in the context of the new product launch?

We're going to invest in growth for Flex where we see positive economics and returns. If that comes at a higher CAC than $18, it's acceptable because we're solving for returns, not the lowest dollar CAC. We're interested to see what the returns look like. From a competitive perspective, BNPL is quite competitive at merchant checkout, but a direct-to-consumer offering that can be used without reapplying is less competitive. We're excited to penetrate that TAM and be among the first to scale advertising against that message. Many BNPL competitor products are cross-sold to users already acquired through BNPL channels. Given our underwriting advantages with Cash AI and our brand and scaled marketing channels, we feel confident in the opportunity. Our target is to disrupt subprime credit cards that monetize customers through late fees and compound interest, offering instead a responsible credit product tied to future paycheck dates with no late fees.

Our next question comes from Hal Goetsch with B. Riley Securities.

Can you give us a hint on where you think share count will be for the next couple of quarters with all the buyback activity and the timing of it?

We're not providing specific guidance on buybacks at this point. Notably, our revised guidance on adjusted EPS does not contemplate buybacks for the duration of the year. That said, I would expect us to continue to be forward-leaning on buybacks with the excess cash we're generating, so there may be future repurchases that impact share count if conditions remain favorable.

Perhaps you could remind us, given your cash flow underwriting, what percentage of your customers are using BNPL or other prominent BNPL providers in the U.S.? Do you have a rough number of what percentage of your active customers are engaging with BNPL?

We see around 50% of people engage with BNPL at some point during a quarter. The demand is there, and early signs show Dave Flex to be an incremental credit opportunity with respect to origination sizes—this matches how we see customers use BNPL today. Many of our customers are not approved for subprime credit cards or experience poor outcomes with high fees. Credit card interest in the U.S. results in over $100 billion collected annually and late fees over $20 billion. Just as Dave was invented to disrupt traditional overdraft fees, we see an opportunity to change this area of the industry. We're excited about the potential and don't view it as directly competitive with existing BNPL merchant checkout models due to friction differences.

Would you say the key takeaway on Flex is that you're probably the only BNPL-like company that has payments triggered on paydays because other BNPLs don't know when customers get paid? Is that right?

That's correct. The same advantage applies relative to subprime credit card companies that rely on antiquated FICO models. We're able to be highly customized in underwriting given our income visibility and paycheck prediction algorithms via Cash AI, which gives us an advantage in settlement efficiency and in matching payments to customers' payday data.

Our next question comes from Jacob Stephan with Lake Street Capital Markets.

I want to ask a little bit on dormant reactivation. You talked about that being one of the drivers of MTM growth this quarter. Can you help us piece out what's driving reactivation—Cash AI improvements or reengagement marketing? And as a follow-up, is there a way to frame how large the reactivation cohort was as a percentage of Q1 MTM adds?

In terms of the size of the opportunity, we have about 11.5 million dormant customers that present an ongoing reactivation opportunity. We grew total members by about 17% and are growing MTMs faster than that, which speaks to base activation. Reactivation initiatives are a mix: life cycle marketing, improvements to Cash AI, promotions and other value prop improvements that increase consideration when customers return to the category. We don't quantify the portion of MTMs driven by reactivation in a given period, but it is a valuable pool and an important part of MTM growth that we continue to focus on.

Maybe as a second follow-up: regarding the removal of the $15 fee cap, can you remind us whether MTMs are essentially grandfathered into the old $15 fee cap? Would reactivated members be subject to the removal of the cap, or how does that work?

The removal of the $15 fee cap applies only to new customers onboarding to Dave for the first time. That's where the focus of this fee change is. We expect this to be supportive of incremental ARPU throughout the year as new customers become a larger portion of the MTM base over time.

Okay. So just to clarify, anything over and above the 14.5 million total members essentially would be on the new fee structure without the $15 cap?

Correct.

Thank you.

Thank you.

This concludes the conference. Thank you for your participation. You may now disconnect.