Neobank Dave hit its revenue targets and continued to show progress toward its goal of becoming profitable in 2024, the company said in its first quarter earnings call this week. It's leading these efforts with ExtraCash, an interest-free cash advance of up to $500 that yields about 90% of the company's revenue.
ExtraCash differentiates itself for consumers as the largest interest-free cash advance offering. Like some other fintechs and banks, Dave uses cashflow underwriting that considers transactions in the consumer's linked bank account (or accounts) to anticipate their cash flow and thus decide if they qualify for a cash advance.
ExtraCash generates revenue for Dave through optional tips that consumers can pay when accepting an advance and a fee the company levies if the customer wants instant access to the funds. The fee for instant access to the funds via a Dave debit card is half the fee levied for instant transfers to external accounts (between $1.99 and $5.99, depending on the amount).
Dave's ExtraCash offering was quite innovative at its launch, but the industry has since caught up and introduced competing options, according to Dylan Lerner, a senior analyst of digital banking for consulting firm Javelin. He named Chime as an example, which offers $200 advances with its
"Outside of fintech, banks are exploring short-term liquidity solutions that can be conveniently delivered in digital channels and automated with data-driven underwriting that not only expedites the process but also leverages alternative, in-house data sources to minimize risk," Lerner said. "But that takes time to build."
Dave has issued more than 70 million cash advances to date, including $798 million in originations during the first quarter, according to
The company is seeing growth in use of its ExtraCash short-term loans, which are an alternative to overdrafts.
Yet investors are largely cool on the company, which is one of the few neobanks to have gone public. Dave stock has performed on par with the banking sector at large so far this year and underperformed fintechs.
Between Dave's full-year 2022 and first quarter 2023 earnings announcements, its stock price dropped 27%, from $7.52 to $5.50 per share.
During that same time period, two major exchange-traded funds for banks — Invesco's KBWB and State Street KBE — have performed roughly the same as Dave, all experiencing losses around 30%. Two major ETFs for fintechs — ARK Invest's ARKF and Global X's FINX — have seen little change to their prices.
Investment banking group Jefferies rated the stock a "hold" on Thursday after Dave exceeded expectations on adjusted EBITDA. The company had a loss of $4.5 million, versus Jefferies' expectation of a $10.6 million loss.
ExtraCash demand softens in the first quarter of every year because Dave users get their needed cash injection from tax refunds rather than the app, according to CEO Jason Wilk. This year was no exception, but the company still improved its net losses for the quarter to $14 million from $32.8 million in the first quarter of 2022.
According to CFO Beilman, the company's performance in the first quarter equated to an iterative improvement with little in the way of new developments. The company continues to follow a three-pronged approach to growth: acquiring new users, driving engagement with ExtraCash, and deepening relationships with its customers.
"We're just chipping away at that strategy and continuing what we set out for this year," Beilman said. "No material updates, just kind of continued improvements."
