Dave Inc. (DAVE) Q3 2026 Earnings Call Transcript

Operator: Good afternoon, everyone. And thank you for participating in today's conference call to discuss Dave's financial results for the third quarter ended 09/30/2026. Joining us today are Dave's Chairman and CEO, Mr. Jason Wilk and the company's CFO and COO, Mr. Kyle Beilman. By now, everyone should have access to the third quarter 26 earnings press 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 note that this call is being recorded. Certain comments made during this conference call and webcast are considered forward looking statements under the Private Securities Litigation Reform Act of 2000. 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 the 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 to the SEC which are available in the Investor Relations section of Dave's website at investors.dave.com. At this time, all participants are in a listen only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will need to press *11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, press *11 again. I would now like to turn the call over to Dave's chairman and CEO, Mr. Jason Wilk. Please go ahead.

Jason Wilk: Good afternoon, and thank you all for joining us. Q3 was another strong quarter for Dave with revenue growth accelerating to 31% year over year. Driven by accelerating member growth and continued ARPU expansion, all while delivering strong credit performance. Based on these results, the momentum we see across the business, we are, once again, raising our full year guidance for revenue, adjusted EBITDA and adjusted diluted EPS. There are 3 key takeaways from today's call. First, credit performance was strong in Q3. And improved further in September following the full rollout of Cash AI V6. With record extra cash sizes and lower 28-day DPD rates. Second, our customer acquisition engine is delivering record scale and improving unit economics, making our growth investments increasingly attractive. Lastly, Dave Flex is showing encouraging early traction with better than expected acquisition costs and strong cross product adoption with extra cash, that suggest significant upside to baseline member lifetime value. Turning to our growth pillars, I will start with member acquisition. We added a record 1.1 million new members up 35% year over year, But the bigger story is how efficiently we scaled, Marketing spend increased more than 50%, while CAC rose just 14%. Which was outpaced by improvements in member lifetime value, thus maintaining our attractive returns at much higher volume. As we have said before, we invest to maximize gross profit dollars rather than minimize CAC. With returns on incremental marketing investment at multiples of our cost of capital, we invested beyond the higher plan we outlined last year. We delivered record non GAAP gross profit of $138 million up 33% year over year, and annualized gross profit per MTM increased approximately $19 to $175. As our record new member cohorts build tenure, we expect their increasing engagement and monetization to support growth into 2027. Moving to our second pillar, engagement through extra cash. Originations reached $2.5 billion up 23% year over year and 9% sequentially, and we exited the quarter at $10 billion in annualized originations. Growth reflected more credit active members and a 5% year on year increase in average extra cash size to $218. Following the full rollout of Cash AI V6, in September, average extra cash size grew to $225 while our 28 day past-due rate on September originations fell below 2% improving from 2.09% for the quarter. This strong credit performance has continued into Q4. We also began testing extra cash limits beyond $600 with early results showing a meaningful increase in gross profit per member. Notably, fee cap members eligible for more than $600 will be enabled with higher limits via an additional draw at a 5% fee. Which we believe now puts all customers roughly on the same fee structure. We believe higher limits in combination with this additional drop monetization and strong credit performance sets us up well to continue delivering higher gross profit per member moving forward. Moving to our third pillar, deepening engagement. Dave Card spend was $533 million up 5% year over year. As we discussed previously, we have deliberately shifted our focus from new debit focused initiatives to our new Dave Flex card, which we believe has more differentiation in the market to win top of wallet spend. Given our advantages in underwriting, and the strong value propositions of the product. During Q3, we grew Dave Flex adoption from single to double digit thousands of members through both cross selling to existing members and direct customer acquisition at better than expected acquisition costs. While results are still early, we are encouraged that the products are proving complementary. Existing Extra Cash members cross-holding the Dave Flex are retaining and monetizing well ahead of baseline, driving significant potential LTV upside. Members acquired directly through Dave's Flex marketing are subsequently adopting Extra Cash. And members who may not yet be approved for Dave Flex are adopting Extra Cash. Overall, our ecosystem approach is playing out as expected. And we plan to continue to optimize the acquisition funnel and unit economics ahead of scaling more broadly in 2027. We do not expect meaningful Dave Flex revenue in 2026, and none is embedded in our guidance. We expect a more significant contribution in the second half of 2027. Before turning it over to Kyle, a couple of strategic updates. First, we recently amended our agreement with Coastal Community Bank to expand our funding capacity giving us greater flexibility to invest in growth and return capital to shareholders. Kyle will cover the specifics. On the DOJ matter, we have no updates and continue to vigorously defend our position. In closing, we are accelerating member growth expanding monetization, and improving credit outcomes which are all coming together to drive record performance. Thanks to the entire Dave team for another strong quarter And with that, I will turn it over to Kyle.

Kyle Beilman: Thanks, Jason, and good afternoon, everyone. Our Q3 results show the durability of our model at increased scale. We increased acquisition investment beyond our prior plan while maintaining strong credit performance and growing adjusted EBITDA faster than revenue. In addition, the coastal funding transition freed up liquidity to support growth and capital return. I will cover the financial results, explain the provision and gross margin drivers, and close with our capital position and raised outlook. The earnings supplement on our IR site provides a detailed KPI breakdown. Starting with revenue. Total revenue was $198 million accelerating to 31% year over year and nearly 16% sequentially. Growth was driven by an 18% increase in monthly transacting members to 3.15 million, an acceleration from Q2. Together with an 11% growth rate and annualized ARPU to $251 Newer members begin at lower ARPU and expand with tenure. So a record new member cohort weighs on the average. Even with that mix shift and faster MTM growth, monetization improved as the fee cap changes and Cash AI V6.0 supported larger extra cash amounts and higher revenue per origination. 1 note on comparability: beginning this quarter, we no longer include in our calculation of MTMs, members whose only monthly activity was low engagement non monetized activity related to goals accounts. This change affects MTMs ARPU and gross profit per MTM and prior periods have been recast to ensure comparability. On pricing, September's gross monetization rate, which measures Extra Cash revenue per dollar originated before credit losses, was approximately 7% compared with 6.4% for Q2. Combined with a larger average extra cash size in September, this drove a 16% increase in revenue per origination versus Q2. These results capture a full month of fee cap changes and most of the rollout of Cash AI V6.0. For the full quarter, those gains held up after credit losses. Our net monetization rate was 5.2%, up about 40 basis points year over year and our highest in 5 years. Beyond extra cash, subscription revenue provides another monetization tailwind. Growing 74% year over year as more of the base joins at the $3-a-month price point. With pricing, underwriting, subscription mix, and seasoning of our recent new member cohorts all contributing, we believe we are well positioned to sustain MTM growth and ARPU expansion. into 2027. Moving to gross profit, non-GAAP gross profit was $138 million up 33% year over year and non GAAP gross margin was 70%, up from 69% a year ago and down from 72% in Q2. 2 items drove the sequential change. First, coastal funding costs, which accounted for about 100 basis points of the change from Q2. Most of that was planned, but the transition moved faster than expected, so more receivables entered the program sooner. And the related costs came through earlier. These costs are included in gross margin, but excluded from adjusted EBITDA. And the transition freed up significant liquidity tied up in extra cash receivables. Second is the provision. Provision for credit losses was $37 million, or about 1.5% of extra cash originations in line with the year ago rate but above our forecast. Provision reflects portfolio growth, mix, and credit performance. So it can move differently from static pool delinquency and loss rates, which we believe more directly measure credit quality. Static pool loss rates were flat to down year over year. However, our prior provision forecast assumed a larger improvement based on the stronger early repayment performance we saw coming out of the spring following collections enhancements we made. Those enhancements brought repayments in sooner but did not reduce ultimate losses as much as the early data implied. We have recalibrated our forecast to reflect these new repayment timing patterns, and our updated outlook incorporates them. September was our strongest month of the quarter, with a 28-day past-due rate below 2%. Q4 to date is tracking in line with September, supporting our expectation that the quarter's 28 day past due rate will remain below 2%. Our updated forecast points to meaningfully better ultimate loss rates. Which together with our pricing changes, supports our expectation for Q4 non GAAP gross margin to exceed Q2 levels. Now working down the P&L, advertising and activation expense was $28 million, up 48% year over year and 37% sequentially. As Jason noted, attractive returns supported investments above our prior plan. We expect a modest further increase in marketing investment in Q4. Compensation and benefits was $43 million, including $22 million of stock based compensation. Stock based compensation increased as our stronger full year outlook raised expected payouts on performance based awards. Including a onetime catch up of about $4 million for prior quarters. Excluding stock based compensation, compensation was $21 million, up roughly 21% year over year and 10% sequentially. The increase reflects the targeted investments in product development marketing and AI we outlined last quarter. Other operating expenses were $14 million, including $6 million of nonrecurring legal settlement and litigation expenses excluded from adjusted results. On an adjusted basis, fixed expenses grew more slowly than revenue, and declined to approximately 17% of revenue from 18% a year ago. We expect operating leverage to continue building as revenue scales. Pulling it all together around profitability, adjusted EBITDA was $82 million, up 39% year over year at a 41% margin up from 39% a year ago. GAAP net income was $64 million or $3.30 per diluted share. Including $26 million of noncash gains from the remeasurement of warrant and earn out liabilities. Those gains are excluded from adjusted results. And the underlying instruments expire in January 2027. The year ago GAAP comparison included a significant tax benefit primarily from releasing a valuation allowance. Adjusted net income was $60 million and adjusted diluted EPS was $4.39, down 71% year over year, respectively. Both comparisons reflect taxes, Last year's third quarter included a tax benefit in adjusted results, while this quarter reflects a more normalized effective tax rate. Before taxes, adjusted earnings grew roughly in line with adjusted EBITDA, and a 5% lower adjusted diluted share count helped per share results. Turning to capital. We ended Q3 with $315 million of cash, investments, and restricted cash. Up from $254 million at the end of the second quarter. We generated over $81 million in operating cash flow while additional coastal funding reduced our direct funding needs. As Jason noted, we recently amended our coastal program agreement. Increasing our extra cash funding capacity from $225 million to $325 million. Coastal funded approximately $159 million of receivables at quarter end up from $93 million at the end of the second quarter. We expect to complete the remaining member migration in early 2027, allowing us to make fuller use of the expanded capacity. As a reminder, Coastal funds the receivables while we retain the underlying economics and credit risk exposure. With respect to capital return, we deployed approximately $20 million during the quarter to reduce our share count through restricted stock unit net settlements and open market repurchases leaving $88 million available under our repurchase authorization. In early October, we also repaid the $75 million outstanding under our Victory Park debt facility. Adjusting September 30 cash, for only that repayment leaves approximately $240 million of cash investments and restricted cash. With no borrowings remaining under that facility. Our capital priorities remain unchanged. Invest in organic growth at attractive returns, and repurchase shares opportunistically to create long term per share value. Turning to our updated 2026 outlook. We are raising guidance across all 3 metrics. We now expect revenue of $746 million to $750 million up from $725 million to $735 million. We expect adjusted EBITDA of $327 million to $330 million up from $315 million to $325 million, and we expect adjusted diluted EPS of $17.45 to $17.65 up from $17 to $17.50, and this assumes a 23% effective tax rate. At the midpoint, our outlook implies fourth quarter revenue of approximately $221 million, up roughly 35% year over year and a further acceleration from 31% in Q3 and a fourth quarter adjusted EBITDA margin of approximately 46%. For the full year, that represents approximately 300 basis points of adjusted EBITDA margin expansion. The outlook assumes higher marketing investment in Q4 than in Q3. Continued ARPU support from pricing Cash AI underwriting, subscription mix and cohort seasoning. And the Q4 gross margin expansion I described. It also assumes no meaningful revenue contribution from Dave Flex. In closing, we are raising our full year outlook with revenue growth accelerating again in Q4 while investing more in acquisition at attractive returns. Improving credit performance and stronger monetization support our Q4 margin outlook. While greater funding capacity and liquidity give us flexibility to invest in growth and capital return. We believe these factors position us well heading into 2027. With that, operator, please open the line for questions.

Operator: Thank you. As a reminder, to ask a question, please press 11 on your telephone, and wait for your name to be announced. To withdraw your question, press 11 again. Due to time restraints, we ask that you please limit yourself to 1 question and 1 follow-up question. Our first question will come from the line of Devin Ryan with Citizens Bank. Your line is open.

Devin Ryan: Great. Good afternoon, Kyle, and Jason as well. Question just on the record new member, additions, obviously, good to see here. Can you talk about what you are doing different to drive them, obviously, higher marketing dollars but CAC went up a little bit, but it is still at very. Looks like a positive payback. So can you just talk a little bit about that? And then also, just the seasoning that you typically see since this is a big number, As we look out over the next 4 quarters, as they mature how much ARPU uplift do you see typically over kind of a 12-month look forward just so we can kind of think about modeling this since it is a big number? Thanks.

Jason Wilk: Yeah. Thanks a lot, Devin. Appreciate it. I can speak to the first part of the question with new members. Yeah. I. I would say it is just really business as usual with our existing channels. We are scaling up the ones that work best for us from TV to social media. And as you know, 30% of our acquisition is coming from word-of-mouth, which is not changed at all with this increased levels of scale, which gives us a lot of promise going into, you know, the next several years here. I would say the 1 lift that was from our further investments in AI born creative. And we have a very recognizable brand mascot. We spent a lot of time, effort, and energy developing that and AI is able to create tens of thousands of creatives within minutes. It tends to be that most of these networks, they like new and fresh creative, and previously, it took us several months to make 1 ad, and now we can make ads within a matter of seconds using our proprietary bear mascot with its incredibly recognizable dave.com domain name. So I just speak to that being, you know, really good signs, and we love to see the incrementality that we are driving here. And I will let Kyle speak to the incremental ARPU expansion as these cohorts season.

Kyle Beilman: Hey, Devin. In terms of how they season, we tend to see, you know, call it in that post-6-month window. Things tend to sort of approach more what we would consider kind of a terminal kind of monetization. We do not provide explicit breakouts around that, but you know, I think that we are just really excited to see all the ARPU levers we have kind of stacking that give us a lot of confidence in just the runway of ARPU and getting us to that low double digit ARPU growth trajectory that we have talked a lot about over the last couple of years, and that comes in the form of, you know, the fee cap changes that we completed in Q3. The higher limits that were, you know, in the process of offering. We talked about in September that number was about $225 and we see there to be a lot of continued upside in that by lifting the higher end of the limit spectrum. And then, you know, we also have the subscription fee revenue that is growing You know, I think that was up about 74% year over year, and then you layer on flex opportunity on top of all that. And on the monetization side of the equation, you know, we are we are feeling very good. But I would say, you know, all else equal, you probably would have seen us closer to that kind of 13 ish percent number if we if we had, cohorts kind of in that seasoned range that we would kinda expect things to mature to if that. If you are following that.

Devin Ryan: Yep. Great. I appreciate the color there. And then as my follow-up, I just want to get a little bit of maybe early learnings from Flex You are good to hear that you are seeing some demand there and expansion. The question is, are you seeing these members? I know there is overlap with existing extra cash members. Is it additive in terms of the activity level that you are seeing from the members, or is it all cannibalistic where they are using. They are now using Flex instead of extra cash? Just trying to get a sense of, you know, like, how to think about the it. Are they complementing each other, or in some ways, they competing with each other? Thanks.

Jason Wilk: Thanks. Thanks, Devin. I would say that is 1 of the most encouraging parts of the product launch thus far as the complementary nature of the 2 business lines. We are seeing customers that are existing Extra Cash users who adopt Flex continue to use Extra Cash almost in its entirety from their prior limits. what is also encouraging as we mentioned on the call is customers we are acquiring directly into Flex Both the ones that were approved also adopt extra cash at a very high rate. And, also, the ones that we turned down adopt extra cash at a very high rate, which that turns it into much more of a low and grow strategy where we can hang on to that customer and upsell them flex later. So there is a lot to like and yeah, we just continue to develop the cohorts. We are excited to ramp up that product further in 2027. But definitely not, cannibalistic. Yep. Okay. Excellent. Good to hear. Thanks so much. Yeah. Thank you.

Operator: 1 moment for our next question. And that will come from the line of Patrick Molley with Piper Sandler. Your line is open.

Analyst: Yes. Good afternoon, guys. Thanks for taking the question. So Kyle, on gross monetization, you said it reached about 7% in September as a legacy fee caps came off. 5.2% for the quarter. So is that 7% the fully loaded rate now? Or is there more that we should expect as that $20 cap cohort rolls off? Thanks.

Kyle Beilman: Thanks, Patrick. it is about 7% for September. And then in terms of total unit monetization, on the $225 base, you can kind of infer what the average revenue per cash is. So the quarterly average was about 6.4% for gross monetization versus that September figure. So you can kinda see what the impact of that fee change was relative to baseline there. I think that September metric is a pretty good indication for where we see, you know, the Q4 number shake out. Okay. Great. Thanks. that is it for me, guys.

Operator: 1 moment for our next question. And that will come from the line of Chao Zhang with UBS. Your line is open.

Chao Zhang: Hi. Thanks for taking my question. My first question was on the acquisition cost. For the quarter, but I think it is more we are actually more interested in what it looks like in September. And in particular, I remember recently you shared some stats on the returns or the paybacks on the marginal acquisition dollar and maybe can you give us a sense of an update of the CAC for September onwards? Cohorts and on the margin, what kind of returns or ROIs you are looking at for the marginal acquisition dollars?

Kyle Beilman: Yeah. Thanks, Chao. So just to reiterate, so CAC did go to $22, but the gross profit per user went up even faster by $8 to $1.75. And so it is still a sub-4-month payback even at this, increased scale with a very slight increase to CAC. I mean, the reality is the marginal improvements in LTV over the last couple of years certainly significantly overshadowed the small increases in CAC. To the point that these investment returns are still very, very attractive with much higher increases in CAC compared to this. So these are really healthy trends, and we are. We were we were encouraged and excited to see the results here. And just to add to that, Chao, you know, in terms of that marginal tax, I mean, they you can imagine, they are higher than the sort of baseline average. But you know, we are investing aggressively at this level. I think as you can see, you know, in the amount of dollars we are putting to work here, that the returns on an incremental basis are multiples of our cost of capital. And so, you know, things continue to look very, very healthy at the top of the funnel.

Chao Zhang: Alright. Appreciate it. Thank you. Thank you for thanks to both of you. And my follow-up is on the loss rates. And I guess maybe conceptually, can you give us a sense of potentially under Cash AI V6.0 how much have you already kind of loosened the loss risk at all? Just to kind of widen the originations in order to maximize the gross profit dollars. And then maybe looking ahead, just compared to the take rate, how much are you willing to kinda loosen the loss rates going forward. Maybe, like, also can. On the marginal concept, if you could give us a sense of maybe what the loss rate looks like on the marginal cohort, maybe the lowest credit quality cohort how high the losses are you willing to tolerate in order to just maximize the gross profit dollars? That would be helpful. Thank you.

Kyle Beilman: So, maybe just to start with the September figures because I think those are a pretty good indication of the fee model changes as well as the impact of V6, which, you know, covered nearly all the originations in September. And so what we talked about is the 28 DPD rate for September being below that 2% level, which should pull through to really solid sequential improvements to our 121-day loss rates. And I know, like, we are we are always kind of considering different optimizations within the portfolio to maximize gross profit. I would not say that we are there is always room to make improvements. But I think in terms of you know, where the margins are at, we are we are pretty happy there. And I would not expect to see us make any material deviations from these kind of unit economics to maximize you know, a different outcome than what we are what we have been sort of orienting around over the last, call it quarter or quarter or 2 here You know, hope that helps. But you know, again, we are we are always kinda hunting for value, but very comfortable with where the unit economics lie, especially coming out of September based on the dynamics that we have talked about.

Chao Zhang: Alright. Appreciate it, Kyle. Definitely, so encouraging to see the improvements in September. Thank you.

Kyle Beilman: Thank you.

Operator: 1 moment for our next question. And that will come from the line of Connor Allen with JPMorgan. Your line is open.

Analyst: Hey, Jason. Hey, Kyle. Thanks for taking my questions. I also wanted to ask about members and your investment into marketing. I was curious as the kind of top of the funnel is widening as you are investing into it. Are you seeing any change or surprises relative to the conversion rate to transacting members? Has that dynamic changed at all versus your expectation?

Kyle Beilman: I mean, the short answer is no. I mean, I think that is captured in our payback periods. And they continue to stay in that, call it, 4-ish month range there. And you know, at this higher level of scale, So again, you know, as we talked about things are very, very healthy, and we are certainly not seeing any kind of deterioration in the quality of customers that we are acquiring. At this higher level of scale. Things are, again, very, very healthy at the top of the funnel.

Jason Wilk: Which, Connor, I think just speaks to the size of the TAM in general for the supporting how large it is. Understood. Got you. Maybe another 1. On just the fee structure changes. I am curious whether you have seen any as you have made the changes, has there been any impact on churn rates customer behavior? It seems like no just from the way you have described it. But anything you would add there just around customer behavior relative to the fee changes you have made? No. Nothing there. I mean, it is specific the fee change from the 15 to 20 fee cap there is been yeah, incremental churn as a result of that. The customers that we do give have a benefit in the sense that for a slightly higher fee, they are getting a higher limit. And so we know that our customers would gladly trade a slightly higher amount of money to get 1 limit. And we did, note in the in the call today that is going beyond $600 will now have access to an additional draw, who were previously fee-capped, at a 5% fee. And so we now, for all intents and purposes, have all customers on roughly the same fee schedule at this point. For sort of modeling simplicity moving forward. Gotcha. Yeah. And that lets you expand that the kind of total cap that you can offer, which matters a lot to the customers. Cool. Thanks, guys. Appreciate it. Yeah. Thank you.

Kyle Beilman: Thank you.

Operator: And our next question that will come from the line of Ryan Tomasello with KBW. Your line is open.

Ryan Tomasello: Thanks, everyone. Can you just put a finer point on what drove the provision recalibration and the deviation in repayment performance relative to your assumptions Anything concerning there on the credit side, particularly with respect to the new member cohorts given you have been leaning into growth. And then does that weaker provision performance run rate into your go forward assumptions If you can tell us what you are baking in for the Q4 provision, that would be helpful. Thanks.

Kyle Beilman: Yeah. Thanks, Ryan. So, like, you know, as we talked about, you know, credit performance in general was very solid. In the quarter. You know, we when we look at the provision and, you know, early, you know, coming out of last quarter, what we saw was really solid early DPD data that we had taken into our provision forecast that was pretty early on, you know, in its sort of repayment curve. Ultimately, the losses did not fall quite as much as what that early strength had suggested. And so instead of them being, you know, improving they were roughly flat and that kind of drove up our expectation or sort of under modeled the provision. For this quarter. And so we have we have recalibrated our extrapolation factors based on the new repayment timing curves, and what had happened there was we rolled out some, servicing and, collection improvements that effectively pull forward some of the collection dollars that typically fall into the into the tail. And we have since recalibrated that is now captured in the revised outlook. And know, I guess to put a bit of a finer point on it, when you look at the relationship between, say, the 28 and DPD rate and the 120 DPD rate. That typically matures at you know, historically had matured in kind of that low 30s range, where it reduced into the low 30s between 28 and 121, And now we are seeing that kind of come in the high 20s. So you know, that is what we are capturing in our, you know, in our modeling and, again, that is all been captured in our revised outlook.

Ryan Tomasello: And then just to follow-up on the fee caps. As you as you look out across the member base, just kind of high level how much runway do you think is out there on average advanced sizes, particularly with the higher advanced limit cohort that you already have. Any way to frame, you know, how that looks entering next year And relative to the $225 million you cited for September, do you expect growth off of that for the full fourth quarter? Thanks.

Jason Wilk: So Ryan, I would say, certainly, we believe a lot of room to run now that we have extended limits beyond $600, you know, with some early test customers already reaching a thousand dollar limit, both on extra cash as well as with Flex. The $225, yeah, we expect to still see some growth there in Q4. September was the first full month of V 6, which really produced the $225 result in combination with the higher than $600 credit limit customers as well as just improvements to underwriting in general with V 6. So as that continues to season, similar with v 5.5, we think there is a good amount of room to run here. Still And as Flex matures, that also will be a tailwind for average originations per user as we. Again, to Kevin's point, we are not seeing any cannibalization with those products. So expect the synergy to show up in positive cumulative consumption of credit. Great. Thank you.

Kyle Beilman: Thank you.

Operator: Our next question will come from the line of Adeeb Chaudhuri with William Blair. Your line is open.

Analyst: Hey, guys. Thanks for taking our questions. So it looks like the extra cash origination dollar year over year growth has been decelerating for the last couple of quarters. We just wanted to ask, is that a function of tighter underwriting or a change in the credit box or aperture, or is there something else you would call out there?

Kyle Beilman: No. I mean, just definitely not a change in sort of risk aperture by any means that, you know, as we have talked about credit performance remains really solid. I mean, it is more of just a function that we have not been growing. We have not been growing that quite as fast as we had historically because we were constrained around the fee cap to grow average origination sizes per customer at the rate that we did you know, last year. For instance. And so I think with that, fee cap constraint, eliminated now, we would expect to grow origination dollars, you know, on top of or at a higher rate than what we have been call it, over the last couple of quarters where it is largely more attractive to customer growth as opposed to being able to unlock higher average origination sizes per customer. So know, all that being said, I would expect to see an acceleration there now that this CCAP constraint has been removed. Got it. And as a follow-up, I guess, we are getting closer to 27, could you kind of remind us about, you know, the line of sight you guys have towards achieving the mid teens member growth and low double digit ARPU monetization growth that is embedded in your longer term growth algorithm? Yeah. I mean, we continue to feel very good about that over the medium term here. Nothing about our performance thus far calls that into question. We are very excited about you know, what is going on with, the overall performance that we are seeing, within the portfolio to drive originations growth. Top of funnel is working exceptionally well. We have the monetization levers that I walked through. Earlier. And so, we are feeling quite confident in the outlook.

Jason Wilk: I will just add that the more months we have here or more quarters we have of this accelerated member acquisition, as those customers season over time, that will set us up well for further growth into 2027. So a strong fourth quarter, you know, third quarter really are going to be accretive for us for next year. And the years following. Thank you.

Operator: 1 moment for our next question. And that will come from the line of Adam Frisch with Evercore. Your line is open. Mr. Frisch, if your line is muted, please unmute. I will move on to the next person. Hi. Next question comes from the line of Jacob Stephan with Lake Street Capital Market. Your line is open.

Jacob Stephan: Yes. Thanks, guys, for taking my questions. Just first, I want to touch on the ARPU expansion quarter over quarter, 9%. Maybe if you could just kind of piece out a little bit more in detail on the, you know, the moving parts of the fee cap removal, plus the, the higher limits that you are you are advancing to customers. And just remind us, the timing of some of those moves. In Q2 when you remove the PCAP and etcetera.

Kyle Beilman: So hey. Hey. Hey, Jacob. Thanks for the question. I mean, effectively, were testing-- well, to take a step back, we had eliminated the fee cap for new customers back in the second quarter we had begun the migration of existing customers to either the $20 cap or the fee cap elimination altogether. Call it by late August is when that change was fully implemented. That sort of coincided with the ramping of v 6 over that same period of time as well. And so, you know, again, that is why we have tried to highlight September as, you know, very instructive on you know, the sort of exit rate for the quarter and baseline for expectations. Moving forward. But that is effectively the timeline is, know, ramping throughout the third quarter on both v 6 as well as the pricing adjustments. With a full quarter's benefit. Or excuse me, a full month's benefit in September.

Jason Wilk: Yeah. And for clarity, existing fee cap customers that are looking for credit in addition to the $600 we are giving them today, we will issue them credit via an additional draw of which you will have to pay the 5% for that additional credit. And that is what I meant on the call that roughly puts all the cohorts on the same pricing as of once we have that fully rolled out by the end of this quarter.

Jacob Stephan: Okay. Got it. That makes sense. And then maybe just on the coastal community facility being upsized, today. You know, I think in the past, you have said that you were planning to fund some of the originations off your own balance sheet Coastal was going to fund the rest. But is that strategy changing at all? How are you thinking about using Coastal going forward?

Kyle Beilman: I would expect to use them for the vast majority of originations. I mean, we have the flexibility to balance sheet more of it ourselves, but we really like this arrangement that we have struck with them. It just provides us a lot of, kind of flexibility from a capital allocation standpoint. At an attractive cost of funds. And so you know, it is something that know, we are we are quite happy with, and we will look to know, likely use to its full extent for the foreseeable future. Got it. I appreciate it, guys.

Operator: 1 moment for our next question. And that will come from the line of Reggie Smith with Loop Capital. Your line is open.

Analyst: Thank you. I just listened to your last response, and I was thinking about you know, the new cohort of users that have come on in so you have obviously relaxed the fees. And so I am curious you know, what you are seeing in terms of initial activation as you kind of think about the various kind of cohorts? Like, I would imagine being able to offer maybe you are not doing it, but are you offering more credit on the first transaction, and have you seen an uptick in early engagement? And anything you could talk to around that. And I have 1 follow-up about your about your collections. So.

Jason Wilk: Hey, Reggie. So I would say for the most part, because we have more of a low end growth strategy, newer customers tend to get approved for lower amounts than existing customers that we know that we have a longer tenure with. I would say most of the improvements and first credit offers has come from just improvements in overall underwriting. The big change with respect to new customer offers came with our new pricing model when we moved to the $5 minimum, 5% pricing a couple of years ago. It really impacts the customers as they are growing, you know, beyond the you know, the limits of which the fee cap was causing some constraints. Where we are seeing some, obviously, positive uplift to ARPU and origination size per user. Got it. Okay.

Analyst: And then just thinking about. It sounds like and I am multitasking this. I may have gotten this wrong, but it sounds like you have pulled forward some of your collections And I am curious, I guess, like you, I would assume that would carry forward for some reason, it is not. I am curious. Are people shutting down the accounts? Like, why. What were displaying that fall off toward the back of the collection period? Are you seeing that folks just are not are not receiving income in that account and are not active in that account, that linked account anymore? Or, like, what is what is driving that?

Kyle Beilman: Yeah. Yeah. I mean, that tends to be the typical thing that you see from a lost perspective is, you know, people abandon the accounts or, you know, have stopped their income coming into those accounts that we underwrote. I would say nothing's really changed And the pull forward is really, again, a function of the servicing and kind of collections upgrades that we put into place and you know, it is we expected those results to carry through, but, you know, in hindsight, we did not really change much around the decisioning process from an underwriting perspective to really expect you know, meaningful loss rate impact. And I think that was just a learning for us in how we kinda think about you know, what is servicing and collections impact versus, say, the decisioning where decisioning is probably more of a driver for ultimate walk rate as opposed to the servicing and collection instruments. Understood. That makes sense. Okay. Thank you.

Jason Wilk: Like, Reggie, the big takeaway is that loss rate from the from the provision perspective were still flat to down year over year, but as a operator and also an investor, excited about September performance with 28 DPD rate being below 2%. Mean, there is a lot to like about that, and that was, again, the first full month of v 6, which has been a big focus area of the company to get that stuff rolled out and that. that is what I would be using to assess credit performance of the company.

Analyst: Yeah. And I think it is echo, I think, what Chris is getting at earlier, I think you know, we see the DQ rate go down, and, you know, we hear about the underwriting. that is great. I think, you know, what we are wondering is, like, you know, why not push it? And, obviously, we get. You know, you just you just have to the Coastal Bank agreement, and you wanna be very cautious there and careful. But it just seems like there is probably more risk on the table or more opportunity that. that is not necessarily being tapped into and so Yeah. And I think great to see the Yeah.

Kyle Beilman: I mean, just to speak to that, I think where we see that big opportunity is particularly at the higher end of our limit spectrum. And Jason talked about the ability to go up to a thousand for those customers. And being a little bit more risk on being able to help support more of their needs with the higher limits and I do not think that really changes the you know, sort of the margin picture to be dilutive at all. it is just ARPU accretive and value proposition accretive, which is why we are so excited about it. Yeah. No. That comes to loud and clear. I get it. Thank you. Thanks, Reggie. Thank you.

Operator: I am showing no further questions in the queue at this time. This concludes today's program. Thank you all for participating. You may now disconnect.