Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with our 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-K. Certain information contained in the discussion and analysis set forth below includes forward-looking statements. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors, including those set forth under “Cautionary Note Regarding Forward-Looking Statements,” “Item 1A. Risk Factors” and elsewhere in this Annual Report on Form 10-K.
Overview
Company Overview
Dave was founded in 2017 to provide a faster, more transparent, and lower-cost alternative to traditional financial institutions for Americans living paycheck to paycheck. Through our mobile-first platform, we deliver innovative financial products designed to help underserved consumers manage their money more effectively. Our mission is to level the financial playing field by providing intuitive, transparent, and accessible solutions that empower our Members to navigate life's financial challenges with confidence.
Since inception, over 19 million Members have signed up for the Dave app, with over 14 million having used at least one of our products. We have provided Members with over $22 billion in ExtraCash, offering critical liquidity when they need it most, and have donated over $25 million to charity and important causes.
Customers value our products, as demonstrated by more than 750,000 App Store reviews with an average 4.8-star rating. Dave has earned multiple Best Place to Work recognitions from Built In over the past several years, reflecting our ongoing investment in becoming an exceptional workplace.
Market Opportunity
According to the Financial Health Network in 2025, approximately 185 million Americans, representing 69% of the U.S. population, are classified as financially "coping" or "vulnerable," up from 66% in 2021. A December 2025 PYMNTS report found that 67% of U.S. consumers were living paycheck to paycheck, up from 57% in 2021. This population pays approximately $43 billion annually in basic checking fees and over $225 billion in annual fees and interest for short-term credit, according to FHN research. We estimate our total addressable market to be approximately 185 million Americans who do not have access to affordable and effective banking solutions.
We believe these high costs reflect the cost structure of incumbents. Legacy institutions with brick-and-mortar networks, antiquated technology, and inefficient customer acquisition strategies have significant costs to serve, which they pass on to customers. By leveraging technology and AI, we have dramatically reduced our cost to serve, enabling us to provide banking and credit products at lower costs with a stronger value proposition.
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 depend on Member growth and activity, product expansion, competition, industry trends, and general economic conditions.
Member Acquisition and Engagement
Revenue growth depends on efficiently acquiring new Members and driving product cross-sell. In fiscal year 2025, customer acquisition cost remained stable at approximately $19 while payback periods have improved to under four months, our fastest on record, reflecting our focus on directing acquisition spend toward the highest return opportunities.
ARPU expansion is primarily driven by ExtraCash volume and the adoption of Dave Checking by Members. Dave Debit Card actives generate approximately 1.7x higher monthly ARPU than non-card users and 11 times the average monthly transaction volume, indicating materially higher engagement and lifetime value. Dave Debit Card spend reached $534 million in the fourth quarter of 2025, a 17% increase year-over-year. Our mid-2025 subscription fee increase from $1 to $3 improved customer lifetime value without materially affecting conversion or retention. Subscription revenue grew 92% year-over-year in the fourth quarter of 2025.
Credit Performance
ExtraCash profitability depends on approving creditworthy Members while maintaining disciplined delinquency and write-off rates. In fiscal year 2025, approval rates reached all-time highs, improving conversion efficiency. In February 2025, we completed the transition to a simplified fee structure with a mandatory 5% overdraft service fee (including a $5 minimum), enhancing unit economics and monetization.
In September 2025, we deployed CashAI v5.5, which nearly doubles the feature set of prior versions. Early results demonstrate improved risk ranking, higher average approval amounts, and lower delinquency rates. CashAI has leveraged insights from over 180 million ExtraCash originations, a proprietary cash flow dataset that we believe provides a structural advantage in real-time credit decisioning. The short average term of ExtraCash (approximately 11 days) creates rapid feedback loops, enabling iterative model refinement.
Economic conditions, particularly unemployment and consumer spending, materially influence Members' settlement capacity. Our real-time underwriting continuously evaluates transaction-level data to detect changes in income, spending, and employment. However, severe economic deterioration could materially increase delinquencies and write-offs despite model refinements.
Funding and Interest Rate Sensitivity
ExtraCash receivables funding costs are a material operating expense. Our variable-rate Debt Facility exposes us to interest rate risk, and elevated rates have increased borrowing costs, reducing ExtraCash unit economics.
In March 2025, we entered into the Program Agreement with Coastal under which Coastal issues and maintains deposit accounts and sponsors access to debit and ACH networks. As of the fourth quarter of 2025, all new Members are being onboarded to Coastal, and we expect the transition of existing Members to be substantially finalized by the end of 2026. This partnership is expected to reduce our funding obligations and free up capital as we transition ExtraCash receivables to an off-balance-sheet structure. Coastal retains interest in an amount equal to a variable rate based on the Fed Funds Rate plus a margin while such receivables are on Coastal's balance sheet. Elevated rates have increased borrowing costs, reducing ExtraCash unit economics.
Higher interest rates create dual impacts: increased funding costs reduce gross margins, while elevated rates may increase Member demand for supplemental liquidity but simultaneously reduce settlement capacity. We actively manage funding costs through bank partner relationships and debt facility negotiations.
Competition
We compete with traditional banks and credit unions, neobanks such as Chime and Varo Bank, short-term credit and earned wage access providers such as Earnin, MoneyLion, and Brigit, and broader fintech platforms such as Affirm, Cash App, and Venmo. Many competitors possess greater financial resources, longer operating histories, and larger customer bases.
We believe we compete effectively based on: our superior value proposition of providing up to $500 in short-term credit (in the form of discretionary overdraft through a bank partner) with no interest, late fees, or credit check; proprietary underwriting technology through CashAI; strong customer satisfaction reflected in our App Store rating; an integrated product ecosystem driving higher engagement and lifetime value; and structural cost advantages through efficient, technology-driven operations.
Competitive pressures could increase marketing spend or reduce competitive positioning. Our long-term success depends on continued product differentiation and technological leadership. See "Item 1. Business" and "Item 1A. Risk Factors" for additional information.
Macroeconomic Conditions
Our business is sensitive to macroeconomic conditions. Interest rate changes directly impact funding costs and Members' settlement capacity. Unemployment affects Members' ability to repay ExtraCash. Consumer spending patterns and inflation influence cash flow and credit demand.
Our real-time underwriting adapts to changing conditions through continuous transaction-level analysis. However, severe macroeconomic deterioration, including recession, significant unemployment increases, or persistent inflation, could materially impact our business, financial condition, and results of operations.
Our business is subject to moderate seasonal trends, with ExtraCash demand and Dave Checking transaction volumes generally correlating to consumer spending cycles, including increased activity during the holiday season and around tax refund periods. These seasonal patterns may result in fluctuations in our quarterly and annual results of operations.
Regulatory Environment
We operate in a complex and evolving regulatory environment. Regulatory developments and increased supervisory scrutiny of bank-fintech partnerships could result in changes to our product structures, increased compliance costs, or new operational requirements. We continue to monitor these developments. See "Item 1. Business—Regulatory Environment" and "Item 1A. Risk Factors" for additional discussion.
Recent Developments
On February 25, 2026, the Company’s Board of Directors authorized a new share repurchase program to buy back up to $300 million of its outstanding Class A common stock. The new program replaces the existing share repurchase program, which provided for up to $125 million repurchasing authority. As of February 25, 2026, approximately $113.2 million remained available under the existing program.
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 consolidated financial statements of Dave included in this report.
During the second quarter of 2025, we revised the presentation of certain items within our consolidated statement of operations. These changes have been applied retrospectively to all periods presented and did not impact previously reported net income or earnings per share.
Specifically:
Financial network and transaction costs now appear as a separate line item within operating expenses (formerly included in other operating expenses).
Advertising and marketing is now presented as advertising and activation under operating expenses and includes Member activation costs (activation costs were formerly included in processing and servicing costs and other operating expenses).
Technology and infrastructure costs now appear as a separate line item within operating expenses (formerly included in other operating expenses).
Operating Revenues
Service based revenue, net
Service based revenue, net primarily consists of processing fees, optional tips, overdraft service fees and subscriptions charged to Members, net of processor-related costs associated with ExtraCash disbursements. Service based revenue, net also consists of lead generation fees from our Side Hustle advertising partners and revenue share from our surveys partner. We discontinued optional tips and optional processing fees from our business model in February 2025.
Transaction based revenue, net
Transaction based revenue, net primarily consists of interchange and ATM revenues from our Checking Products, net of interchange fees, ATM-related fees and interest earned by Members. Also included in transaction based revenue are fees earned from funding and withdrawal-related transactions, maintenance fees on inactive accounts, volume support from a certain co-branded agreement and deposit referral fees that are recognized at the point in time the transactions occur, as the performance obligations are satisfied and the variable consideration is not constrained.
Operating Expenses
We classify our operating expenses into the following six categories:
Provision for credit losses
The provision for credit losses primarily consists of an allowance for expected credit losses at a level estimated to be adequate to absorb credit losses inherent in the outstanding ExtraCash receivables, inclusive of outstanding processing and overdraft service fees and tips, along with outstanding amounts aged over 120 days or which become uncollectible based on information available to us during the period. We currently estimate the allowance balance required using historical loss and collections experience, and, if relevant, the nature and volume of the portfolio, economic conditions, and other factors such as collections trends and cash collections received subsequent to the balance sheet date. Changes to the allowance have a direct impact on the provision for credit losses in the consolidated statement of operations. We consider ExtraCash receivables aged more than 120 days or which become uncollectible based on information available to us as impaired. All impaired ExtraCash receivables are deemed uncollectible and subsequently written off and are a direct reduction to the allowance for credit . Subsequent recoveries, if any, of ExtraCash receivables written-off are recorded as a reduction to the provision for credit in the consolidated statements of operations when collected.
Processing and servicing costs
Processing and servicing costs consist of fees paid to our processing partners for the recovery of ExtraCash, optional processing fees, optional tips, overdraft service fees and subscriptions. These expenses also include costs paid for services to connect Members’ bank accounts to our application. Except for processing and servicing costs associated with ExtraCash originations which are recorded net against revenue, all other processing and service costs are expensed as incurred.
Financial network and transaction costs
Financial network and transaction costs primarily consist of program management fees, card network association fees, payment processing costs, losses related to Member-disputed transactions, bank card fees and fraud-related losses.
Advertising and activation costs
Advertising and activation expenses primarily consist of fees paid to our advertising and marketing platform partners for online, social media, and television campaigns, as well as promotional partnerships. These expenses also include activation-related costs, such as third-party fees (e.g., Plaid) incurred to onboard new Members to our platform. Advertising and activation costs are expensed as incurred, even though they may provide benefits over an extended period.
Compensation and benefits
Compensation and benefits expenses represent the compensation, inclusive of stock-based compensation and benefits, that we provide to our employees and the payments we make to third-party contractors. While we have an in-house customer service function, we employ third-party contractors to conduct call center operations and manage routine customer service inquiries and support.
Technology and infrastructure
Technology and infrastructure costs are associated with third-party Software-as-a-Service (“SaaS”) solutions, including cloud-based platforms that support the development, maintenance, scalability, and security of our products and internal systems.
Other Operating Expenses
Other operating expenses primarily include charitable commitments, depreciation and amortization of property and equipment and intangible assets, legal fees and settlements, rent, sales tax-related costs, office expenses, public relations, professional services, travel and entertainment, and insurance. These costs generally reflect our investments in infrastructure, business development, risk management, and internal controls. As such, they may fluctuate based on strategic priorities and are not always directly correlated with revenue or transaction volume.
Other (Income) Expenses
Other (income) expenses consist of interest income, interest expense, gain on extinguishment of debt, changes in fair value of earnout liabilities and changes in fair value of warrant liabilities.
Provision (Benefit) for Income Taxes
Provision (benefit) for income taxes reflects federal and state income taxes and changes in our valuation allowance against deferred tax assets. The benefit for the year ended December 31, 2025 includes the full release of our valuation allowance due to improved expectations of future taxable income.
Results of Operations
Comparison of the Years Ended December 31, 2025 and 2024
Operating revenues
For the Year Ended
Change
(in thousands, except for percentages)
December 31,
Service based revenue, net
Processing and overdraft service fees, net
Tips
Subscriptions
Other
Transaction based revenue, net
Total
Service based revenue, net—
Processing fees, net
Processing fees, net of processor costs associated with ExtraCash originations, for the year ended December 31, 2025 were $466.8 million, an increase of $248.0 million, or 113%, from $218.8 million for the year ended December 31, 2024. The increase was primarily driven by an approximately 17% increase in average monthly transacting Members, an increase in total ExtraCash origination volume from approximately $5.1 billion to approximately $7.6 billion, a rise in the average ExtraCash amounts that increased from $170 to $205 period over period and increases to our fee structure that took place during February 2025. In addition, both the average processing and overdraft service fees increased modestly during the current period. We expect processing and overdraft service fees to continue to increase in line with growth in ExtraCash volume and Member engagement.
Tips
Tips for the year ended December 31, 2025 were $7.5 million, a decrease of $60.1 million, or 89%, from $67.6 million for the year ended December 31, 2024. The decline was primarily due to the elimination of the Member tipping option in February 2025.
Subscriptions
Subscriptions for the year ended December 31, 2025 were $37.2 million, an increase of $12.6 million, or 51%, from $24.6 million for the year ended December 31, 2024. The increase was primarily attributable to the growth in the number of paying Members on our platform, in addition to subscription fee increases for new Members that took place during June 2025.
Transaction based revenue, net
Transaction based revenue, net for the year ended December 31, 2025 was $42.3 million, an increase of $6.6 million, or 19%, from $35.7 million, for the year ended December 31, 2024. The increase was primarily driven by higher interchange revenue, resulting from the growth in Members engaging with our Checking Products, as well as increased card spend and transaction volume, which rose approximately 23% period over period. Additionally, transaction based revenue, net increased primarily due to fees earned from higher Members' funding and withdrawal-related transactions, maintenance fees on inactive accounts, and volume incentives from our card network partners. These increases were partially offset by a slight decrease in ATM revenue due to temporarily reduced fee rates, as well as a slight increase in interest due to Members.
Operating expenses
For the Year Ended
Change
(in thousands, except for percentages)
December 31,
Provision for credit losses
Processing and servicing costs
Financial network and transaction costs
Advertising and activation costs
Compensation and benefits
Technology and infrastructure
Other operating expenses
Total
Provision for credit losses —The provision for credit losses totaled $91.0 million for the year ended December 31, 2025, compared to $54.6 million for the year ended December 31, 2024, resulting in an increase of $36.4 million, or 67%. This increase reflects year-over-year growth in ExtraCash volume, continued expansion of our Member base, and credit performance trends consistent with the portfolio's expected maturation and our strategic emphasis on optimizing unit-level profitability.
The year-over-year increase in provision for credit losses comprises two principal drivers aligned with management's expectations and historical seasonality. The provision for credit losses for ExtraCash receivables aged over 120 days and those deemed uncollectible increased by $23.9 million, driven by higher receivable volumes and loss timing consistent with a growing Member base and maturing loan portfolio. Provision expense for ExtraCash receivables aged 120 days and under increased by $12.5 million, reflecting increased outstanding balances and anticipated loss patterns characteristic of the period. In aggregate, these factors reflect the impact of portfolio expansion, average ExtraCash balance increasing from $170 to $205, and the rise in total ExtraCash origination volume from $5.1 billion to $7.6 billion for the years ended December 31, 2024 and 2025, respectively.
Management regularly updates ExtraCash eligibility requirements, new Member conversion processes, and risk detection capabilities to align with expected loss emergence patterns and to respond to economic conditions and seasonal shifts in Member activity. Under the current expected credit loss ("CECL") model, management estimates lifetime expected credit losses based on historical experience, current conditions, and reasonable and supportable
forecasts. Our CECL methodology pools ExtraCash receivables based on shared risk characteristics, such as vintage and payment behavior, and applies historical loss rates adjusted for observed and forecasted economic trends, including anticipated seasonal effects.
The outstanding balance of ExtraCash receivables is subject to variability based on seasonal differences in Member activity across the trailing 120-day measurement period. Additionally, the calendar day on which a period ends can materially affect provision expense due to intra-week fluctuations in outstanding balances. This inherent timing effect, together with the seasonal pattern of origination and loss emergence, contributes to variability in our period end provision for credit losses.
Historical loss rates utilized in our allowance for credit losses for the year ended December 31, 2025 remained relatively stable compared to the prior year, reflecting expected shifts in overall collections performance. These loss rates may be influenced by the timing of collections activity relative to period-end measurement dates and the composition of aged receivables outstanding at any given reporting date. Changes in these historical loss rates directly affect both the allowance for credit losses and the corresponding provision for credit losses. All uncollectible ExtraCash receivables are written off against the allowance for credit losses, reducing the allowance accordingly.
For additional details regarding the aging composition of ExtraCash receivables and a complete roll-forward analysis of the allowance for credit losses, refer to the detailed tables presented in Note 5 — ExtraCash Receivables, Net in the accompanying consolidated financial statements.
Processing and servicing costs —Processing and servicing costs totaled $33.5 million for the year ended December 31, 2025, compared to $29.4 million for the year ended December 31, 2024. The increase of $4.1 million, or 14%, was primarily driven by increases in ExtraCash origination volume from $5.1 billion to approximately $7.6 billion, partially offset by cost savings due to price reductions from our processors and rebates from our card network partners.
Financial network and transaction costs —Financial network and transaction costs totaled $28.2 million for the year ended December 31, 2025, compared to $24.7 million for the year ended December 31, 2024. The increase of $3.5 million, or 14%, was primarily driven by increases in debit card network fees and debit card processing costs due to a 23% increase in transaction volume period over period, partially offset by decreases in negative balance expenses due to continued fraud mitigation efforts.
Advertising and activation costs —Advertising and activation costs totaled $66.0 million for the year ended December 31, 2025, compared to $53.4 million for the year ended December 31, 2024. The increase of $12.5 million, or 23%, was primarily driven by higher media spend to support Member acquisition and engagement, consistent with the growth in ExtraCash origination volume from $5.1 billion to $7.6 billion year over year. Spending was weighted toward the second half of the year to align with seasonal demand patterns around the holiday period. Customer acquisition cost remained stable at approximately $19 while payback periods have improved to under four months, reflecting continued focus on directing spend toward the highest return opportunities.
Compensation and benefits —Compensation and benefits expenses totaled $103.4 million for the year ended December 31, 2025, compared to $105.8 million for the year ended December 31, 2024. The decrease of $2.4 million, or 2%, was primarily attributable to the following:
a decrease in stock-based compensation of $7.4 million, primarily due to the vesting of certain performance-based restricted stock units, restricted stock units and stock options during the year ended December 31, 2025 compared to the year ended December 31, 2024; offset by
an increase in payroll and related costs of $3.8 million, primarily due to increased compensation, employer related taxes and performance bonuses; and
an increase in contractor and consulting fees of $1.2 million, as we continued to leverage specialized skills and flexible workforce arrangements to support key operating initiatives and capacity needs.
Technology and infrastructure —Technology and infrastructure expenses totaled $12.1 million for the year ended December 31, 2025, compared to $11.0 million for the year ended December 31, 2024. The increase of $1.1 million, or 10%, was primarily driven by increased investment levels in supporting the reliability, security, and scalability of our systems. Management continues to focus on efficiency and operational resilience in technology-related spend, ensuring that resources are aligned with business growth, cybersecurity, and Members' needs.
Other operating expenses —Other operating expenses totaled $33.4 million for the year ended December 31, 2025, compared to $33.5 million for the year ended December 31, 2024. Although the total remained relatively flat year over year, the underlying composition shifted due to the following:
an increase in legal fees of $0.9 million primarily due to ongoing litigation, settlement, compliance, employment and general corporate related matters;
an increase in professional services of $1.1 million related to expenditures for external consulting and compliance-related services resulting from our ongoing initiatives to support key operational and regulatory priorities, including enhancement of processes, internal controls, and adherence to applicable reporting standards.
an increase in general and administrative expenses of $0.5 million primarily due to state sales tax expenses and company travel; offset by
a decrease in charitable contribution expenses of $2.0 million, primarily due to decreased amounts pledged to charitable meal donations related to Members' tips; and
a decrease in depreciation and amortization of $0.6 million, primarily due to certain previously capitalized internally developed software and leasehold improvement assets becoming fully amortized or depreciated during the prior year, partially offset by amortization of new internally developed software placed into service during the current year.
Other (income) expense
For the Year Ended
Change
(in thousands, except for percentages)
December 31,
Interest income
Interest expense
Gain on extinguishment of convertible debt
Changes in fair value of earnout liabilities
Changes in fair value of public and private warrant liabilities
Total
Interest income — Interest income totaled $1.6 million for the year ended December 31, 2025, compared to $3.0 million for the year ended December 31, 2024. The decrease of $1.4 million, or 47%, was primarily attributable to lower average investment balances and declining interest rates during 2025.
Interest expense — Interest expense totaled $7.0 million for the year ended December 31, 2025, compared to $8.0 million for the year ended December 31, 2024. The decrease of $0.9 million, or 12%, was primarily attributable to lower prevailing interest rates during 2025, as well as the elimination of interest expense associated with the convertible note held by FTX Ventures Ltd., which was repurchased in January 2024.
Gain on extinguishment of convertible debt — The gain on extinguishment of convertible debt totaled $0 for the year ended December 31, 2025, compared to $33.4 million for the year ended December 31, 2024. The decrease was attributable to the repurchase of the $105.7 million outstanding balance of the convertible note with FTX Ventures Ltd. for $71.0 million in January 2024. The gain was reduced by unamortized debt issuance costs of $0.03 million at
the extinguishment date and third-party costs totaling $1.3 million in conjunction with the settlement of the convertible note.
Changes in fair value of earnout liability —Changes in fair value of earnout liabilities totaled an expense of $3.3 million for the year ended December 31, 2025, compared to an expense of $1.0 million for the year ended December 31, 2024. The increase of $2.3 million, or 240%, was primarily driven by a fair value adjustment related to the earnout shares liability, which is sensitive to fluctuations in our Class A common stock price. While our stock price has generally appreciated over the last 24 months, the increase in our Class A common stock price during the year ended December 31, 2025 as compared to the increase during the year ended December 31, 2024 led to a larger remeasurement of the liability at a higher fair value, resulting in the higher expense recognized year over year.
Changes in fair value of warrant liability —Changes in fair value of our warrant liability resulted in an expense of $9.9 million for the year ended December 31, 2025, compared to an expense of $1.7 million for the year ended December 31, 2024. The increase of $8.2 million, or 471%, was primarily driven by fair value adjustments related to our public and private warrant liabilities, which are remeasured each period based on changes in the DAVEW warrant price and our Class A common stock price. The warrant liability increased in value during the year ended December 31, 2025 due to a significant increase in the DAVEW warrant price and our Class A common stock price during the year ended December 31, 2025 as compared to the year ended December 31, 2024, which led to a remeasurement of the liability at a higher fair value, resulting in the higher expense recognized year over year.
Provision (benefit) for income taxes
For the Year Ended
Change
(in thousands, except for percentages)
December 31,
Provision (benefit) for income taxes
Total
Benefit for income taxes for the year ended December 31, 2025 increased by approximately $30.3 million, or 1,222%, compared to the provision for income taxes for the year ended December 31, 2024. The increase was primarily due to the release of $58.7 million of our valuation allowance on deferred tax assets as a discrete tax benefit during the year ended December 31, 2025, and the increase in stock-based compensation deductions as a result of our Company’s appreciated stock price.
Comparison of the Years Ended December 31, 2024 and 2023
Operating revenues
For the Year Ended
Change
(in thousands, except for percentages)
December 31,
Service based revenue, net
Processing and service fees, net
Tips
Subscriptions
Other
Transaction based revenue, net
Total
Service based revenue, net—
Processing fees, net
Processing fees, net of processor costs associated with ExtraCash originations, for the year ended December 31, 2024 were $218.8 million, an increase of $66.3 million, or 43%, from $152.5 million for the year ended December 31, 2023. The increase was primarily attributable to increases in transacting Members, increases in total ExtraCash origination volume from approximately $3.6 billion to approximately $5.1 billion year over year and average ExtraCash origination amounts that increased from $152 to $170 as of the years ended December 31, 2023 and 2024, respectively.
As a percentage of total ExtraCash volume, processing fees remained relatively flat, year over year. Additionally, the average processing fees Members paid to expedite ExtraCash increased modestly, while the percentage of Members that chose to pay a processing fee to expedite ExtraCash remained relatively flat for the year ended December 31, 2024 as compared to the year ended December 31, 2023, respectively. Going forward, we expect processing fees to increase as expedited ExtraCash volume and average expedited ExtraCash sizes increase, however, processing fees have not always trended ratably. Prior to the implementation of percentage-based processing fees in late 2023, processing fees did not scale ratably with expedited ExtraCash origination amounts.
Tips
Tips for the year ended December 31, 2024 were $67.6 million, an increase of $10.6 million, or 19%, from $56.9 million for the year ended December 31, 2023. The increase was primarily attributable to higher tips from Members due primarily to increases in transacting Members, increases in total ExtraCash origination volume from approximately $3.6 billion to approximately $5.1 billion year over year and average ExtraCash origination amounts that increased from $152 to $170 as of the years ended December 31, 2024 and 2023, respectively.
As a percentage of total ExtraCash volume, tips decreased from 1.57% to 1.33% for the year ended December 31, 2024 as compared to the year ended December 31, 2023. The average tip Members chose to leave increased modestly while the percentage of Members that chose to leave a tip decreased modestly for the year ended December 31, 2024 as compared to the year ended December 31, 2023. Tip amounts may not always trend ratably as tips can vary depending on the total amount of the ExtraCash, amount of tips Members choose to leave and the percentage of Members who leave a tip.
Subscriptions
Subscriptions for the year ended December 31, 2024 were $24.6 million, an increase of $3.1 million, or 15%, from $21.5 million for the year ended December 31, 2023. The increase was primarily attributable to an increase in paying Members on our platform.
Other
Other revenue for the year ended December 31, 2024 was $0.5 million, a decrease of $0.9 million, or 65% from $1.3 million for the year ended December 31, 2023. The decrease was primarily attributable to lower revenues resulting from the elimination of our Legacy Rewards product in 2023.
Transaction based revenue, net
Transaction based revenue, net for the year ended December 31, 2024 was $35.7 million, an increase of $8.8 million, or 33%, from $26.9 million, for the year ended December 31, 2023. The increase was primarily attributable to interchange revenue earned from the growth in Members engaging with our Checking Products and card spend of $1.9 billion for the year ended December 31, 2024, an increase of 40%, from $1.4 billion for the year ended December 31, 2023, in addition to increases in fees earned from Members' funding and withdrawal-related transactions, offset by an increase of $1.2 million in interest due to Members.
Operating expenses
For the Year Ended
Change
(in thousands, except for percentages)
December 31,
Provision for credit losses
Processing and servicing costs
Financial network and transaction costs
Advertising and activation costs
Compensation and benefits
Technology and infrastructure
Other operating expenses
Total
Provision for credit losses —The provision for credit losses totaled $54.6 million for the year ended December 31, 2024, compared to $58.4 million for the year ended December 31, 2023. The decrease of $3.8 million, or 6%, was primarily attributable to a decrease of $10.3 million related to ExtraCash receivables aged over 120 days and those that have become uncollectible based on information available to us, offset by an increase in provision expense of $6.6 million related to ExtraCash receivables aged 120 days and under.
The decrease in provision expense of $10.3 million related to ExtraCash receivables aged over 120 days and those which have become uncollectible based on information available to us, period over period was attributed to improved collections performance due primarily to underwriting modifications related to ExtraCash eligibility requirements and risk detection. This decrease in provision expense occurred despite increases in transacting Members, average ExtraCash originations from $152 to $170 and total ExtraCash origination volume from $3.6 billion to approximately $5.1 billion for the years ended December 31, 2023 and 2024, respectively. All impaired ExtraCash receivables deemed uncollectible are subsequently written-off and are a direct reduction to the allowance for credit losses.
The increase in provision expense of $6.6 million related to ExtraCash receivables aged 120 days and under was primarily attributed to an increase in receivables outstanding related to the 43% increase in ExtraCash origination volume, offset by improved collections performance during the year ended December 31, 2024 as compared to the year ended December 31, 2023. This resulted in an increase to the allowance for credit losses and corresponding increase in provision expense during the year ended December 31, 2024 as compared to December 31, 2023. We anticipate volatility in ExtraCash receivables outstanding each period as they are directly correlated with the timing and volume of Member ExtraCash originations and collections during the last 120 days prior to the end of the period.
Historical loss and collections rates utilized in the calculation of the provision for credit losses improved slightly as compared to historical rates due to continued improvement in historical collections performance. Any changes to our historical loss and collections experience directly affect the historical loss rates utilized in the calculation of the allowance for credit losses. The changes in the allowance for credit losses, period over period, have a direct impact on the provision for credit losses.
For information on the aging of ExtraCash receivables and a roll-forward of the allowance for credit losses, refer to the tables in Note 5 ExtraCash Receivables, Net in the accompanying consolidated financial statements of Dave included in this report.
Processing and servicing costs —Processing and servicing costs totaled $29.4 million for the year ended December 31, 2024, compared to $28.1 million for the year ended December 31, 2023. The increase of $1.2 million, or 4%, was primarily driven by an increase in process transaction volume year over year, offset by technology enhancements made to our ExtraCash payments structure along with discounts and cost savings due to rebates and price reductions from our processors.
Financial network and transaction costs —Financial network and transaction costs totaled $24.7 million for the year ended December 31, 2024, compared to $22.7 million for the year ended December 31, 2023. The increase of $2.0
million, or 9%, was primarily driven by an increase in certain expenses related to our Checking Products primarily attributable to processing fees, card fees and fraud related costs associated with the growth in Members and the number of transactions processed.
Advertising and activation costs —Advertising and activation costs totaled $53.4 million for the year ended December 31, 2024, compared to $56.7 million for the year ended December 31, 2023. The decrease of $3.2 million, or 6%, was primarily attributable to reductions in our non-media marketing spend including our brand refresh, efficiencies achieved by partnering with new marketing agencies, and optimizing our promotion strategy. We also improved the efficiency of our media investment by reallocating marketing spend to more efficient channels via improved measurement, tracking and attribution.
Compensation and benefits —Compensation and benefits expenses totaled $105.8 million for the year ended December 31, 2024, compared to $93.3 million for the year ended December 31, 2023. The increase of $12.5 million, or 13%, was primarily attributable to the following:
an increase in stock-based compensation of $10.7 million, primarily due to the vesting of certain performance-based restricted stock units during the year ended December 31, 2024 compared to the year ended December 31, 2023, offset by a reduction in stock-based compensation expense related to stock options granted in prior years that have fully vested; and
an increase in payroll and related costs of $1.8 million, primarily due to average headcount and salary increases and bonuses.
Technology and infrastructure —Technology and infrastructure expenses totaled $11.0 million for the year ended December 31, 2024, compared to $10.6 million for the year ended December 31, 2023. The increase of $0.4 million, or 4%, was primarily due to increased costs to support the growth of our business and development of new products and features.
Other operating expenses —Other operating expenses totaled $33.5 million for the year ended December 31, 2024, compared to $31.5 million for the year ended December 31, 2023. The increase of $2.0 million, or 6%, was primarily attributable to the following:
an increase in legal fees of $3.5 million primarily due to ongoing litigation, settlement, compliance, employment and general corporate related matters;
an increase in depreciation and amortization of $2.1 million, primarily due to increased internally developed capitalized costs, and depreciation related to leasehold improvements and equipment purchases;
an increase in administrative expenses of $0.2 million, primarily due to higher sales tax expense; offset by
a decrease in contractor and consulting fees of $1.8 million due to the average increase in employee headcount and corresponding reduction in external support for IT security, finance, marketing, design and customer service resources;
a decrease in insurance related costs of $1.1 million, primarily related to reductions in director and officer insurance premiums; and
a decrease in charitable contribution expenses of $0.9 million, primarily due to decreased amounts pledged to charitable meal donations related to Members' tips.
Other (income) expense
For the Year Ended
Change
(in thousands, except for percentages)
December 31,
Interest income
Interest expense
Gain on extinguishment of convertible debt
Changes in fair value of earnout liabilities
Changes in fair value of public and private warrant liabilities
Total
Interest income — Interest income totaled $3.0 million for the year ended December 31, 2024, compared to $5.3 million for the year ended December 31, 2023. The decrease of $2.3 million, or 44%, was primarily attributable to an average lower balance of investments held during the year ended December 31, 2024 as compared to the year ended December 31, 2023.
Interest expense — Interest expense totaled $8.0 million for the year ended December 31, 2024, compared to $11.8 million for the year ended December 31, 2023. The decrease of $3.8 million, or 32%, was primarily attributable to a reduction of interest expense related to the repurchase of the convertible note with FTX Ventures Ltd. in January 2024.
Gain on extinguishment of convertible debt — The gain on extinguishment of convertible debt totaled $33.4 million for the year ended December 31, 2024, compared to $0 for the year ended December 31, 2023. The increase was primarily attributable to the repurchase of the $105.7 million outstanding balance of the convertible note with FTX Ventures Ltd. for $71.0 million in January 2024. The gain was reduced by third-party and unamortized debt issuance costs totaling $1.3 million in conjunction with the settlement of the convertible note.
Changes in fair value of earnout liability —Changes in fair value of earnout liabilities totaled an expense of $1.0 million for the year ended December 31, 2024, compared to a benefit of $0.02 million for the year ended December 31, 2023. The increase of $1.0 million, was primarily attributable to fair value adjustments associated with certain earnout shares liability due to increases in our underlying Class A Common Stock price as of the year ended December 31, 2024 as compared to the year ended December 31, 2023.
Changes in fair value of warrant liability —Changes in fair value of warrant liability totaled an expense of $1.7 million for the year ended December 31, 2024, compared to total a benefit of $0.3 million for the year ended December 31, 2023. The increase in expense of $2.0 million, or 765%, was primarily attributable to fair value adjustments associated with our public and private warrant liabilities due to increases in our publicly traded warrants price and underlying Class A Common Stock price for the year ended December 31, 2024 as compared to the year ended December 31, 2023.
Provision for income taxes
For the Year Ended
Change
(in thousands, except for percentages)
December 31,
Provision for income taxes
Total
Provision for income taxes for the year ended December 31, 2024 increased by approximately $2.4 million, or 1,968%, compared to the year ended December 31, 2023. This increase was primarily due to a significant increase in income for the year ended December 31, 2024 compared to the year ended December 31, 2023, including a non-recurring gain on extinguishment of convertible debt of $33.4 million.
Non-GAAP Financial Measures
In addition to our results determined in accordance with GAAP, we believe the following non-GAAP measure is useful in evaluating our operational performance. We use the following non-GAAP measure to evaluate our ongoing operations and for internal planning and forecasting purposes. We believe that the non-GAAP financial information may be helpful in assessing our operating performance and facilitates an alternative comparison among fiscal periods. The non-GAAP financial measure is not, and should not be viewed as, a substitute for GAAP reporting measures.
Adjusted EBITDA (Loss)
"Adjusted EBITDA (loss)" is defined as net income (loss) adjusted for interest income or expense, provision (benefit) for income taxes, depreciation and amortization, stock-based compensation, dormant account fees, legal settlement and litigation expenses, gain on extinguishment of convertible debt, changes in fair value of earnout liabilities, changes in fair value of public and private warrant liabilities, and other discretionary or non-recurring items determined by management. Adjusted EBITDA (loss) 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 (loss) 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 (loss), we may incur future expenses similar to those excluded when calculating this measure. In addition, our presentation of this measure 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 (loss) may not be comparable to other similarly titled measures computed by other companies, because not all companies calculate Adjusted EBITDA (loss) in the same fashion.
Because of these limitations, Adjusted EBITDA (loss) 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 (loss) on a supplemental basis. You should review the reconciliation of net income to Adjusted EBITDA (loss) below, and no single financial measure should be relied upon to evaluate our business.
The following table reconciles net income (loss) to Adjusted EBITDA (loss) for the years ended December 31, 2025, 2024 and 2023:
For the Year Ended
(in thousands)
December 31,
Net income (loss)
Interest expense, net
Provision (benefit) for income taxes
Depreciation and amortization
Stock-based compensation
Discretionary income
Legal settlement and litigation expenses
Gain on extinguishment of convertible debt
Changes in fair value of earnout liabilities
Changes in fair value of public and private warrant liabilities
Adjusted EBITDA (loss)
Liquidity and Capital Resources
We have historically financed our operations through cash generated from operations, equity financings, borrowings under our credit facility, and proceeds from the Business Combination. In 2025, we achieved consistent profitability
and positive operating cash flow, which has strengthened our liquidity position and reduced our reliance on external financing.
As of December 31, 2025 and 2024, our cash and cash equivalents, marketable securities, investments and restricted cash totaled $123.2 million and $91.9 million, respectively. The increase in cash and cash equivalents, investments and restricted cash was primarily driven by the following:
Sources and Uses of Cash
Our primary sources of liquidity include:
Cash generated from operations, including processing and overdraft service fees, subscription revenue, and transaction based revenue;
Borrowings available under our Debt Facility with Victory Park Management, LLC; and
Our primary uses of cash include:
Funding ExtraCash originations;
Operating expenses, including processing and servicing costs, financial network and transaction costs, advertising and activation costs, compensation and benefits, technology infrastructure, and other operating expenses;
Share repurchases under our authorized repurchase program; and
Interest related to our debt obligations.
Debt Facility
We maintain a credit facility (the "Debt Facility") with Victory Park Management, LLC ("VPC" or "Agent"). At December 31, 2025, $75.0 million of term loans under the Debt Facility were outstanding. Interest payments on term loan borrowings are required on a monthly basis. See Note 11, Debt Facility, in the notes to our consolidated financial statements for additional information regarding the terms of the Debt Facility.
As of June 30, 2025, we were not in compliance with the Minimum Receivable Loan-to-Value ratio covenant under the Debt Facility. The Agent provided a limited waiver of this covenant for that period. On July 14, 2025, we entered into the Fifth Amendment to the Financing Agreement, which, among other updates, removed the Loan-to-Value ratio covenant from the agreement entirely. As of December 31, 2025, we were in compliance with all covenants under the Debt Facility.
The Debt Facility matures in December 2026, at which time the full $75.0 million outstanding principal balance will become due. No principal repayments have been made since inception of the facility. We are evaluating our alternatives with respect to the Debt Facility, which may include refinancing, extending the maturity, repaying the balance in full from available cash and operating cash flows, or a combination thereof. As of December 31, 2025, our cash and cash equivalents, investments, and restricted cash totaled $123.2 million, and we generated $290.0 million of cash from operations during the year ended December 31, 2025. We believe we have sufficient liquidity to satisfy the obligation at maturity; however, there can be no assurance that refinancing or replacement financing, if pursued, will be available on acceptable terms or at all. See Note 11, Debt Facility, in the notes to our consolidated financial statements for additional information regarding the terms of the Debt Facility.
Share Repurchase Program
In March 2025, our Board of Directors authorized a share repurchase program of up to $50.0 million (the "March Repurchase Plan"). Through August 2025, we repurchased 213,525 shares of our Class A common stock for approximately $31.9 million under the March Repurchase Plan. In August 2025, the Board authorized a new share repurchase program of up to $125.0 million, which replaced the March Repurchase Plan (the "August Repurchase Plan"). During the fourth quarter of 2025, we repurchased an additional 60,965 shares of our Class A common stock for approximately $11.8 million. As of December 31, 2025, approximately $113.2 million remained available under the repurchase authorization. The timing and amount of future repurchases, if any, will depend on market conditions, share price, and other factors. See Note 21, Treasury Shares, for additional information.
Convertible Note Repurchase
In January 2024, we repurchased the $105.7 million outstanding balance of the convertible note issued to FTX Ventures Ltd. for $71.0 million, representing a discount of approximately $34.7 million. This transaction eliminated future interest obligations and reduced our overall debt burden. See Note 9, Convertible Note, in the notes to our consolidated financial statements for additional information.
Assessment of Liquidity
We believe that our existing cash and cash equivalents, together with cash generated from operations and available borrowings under the Debt Facility, will be sufficient to meet our working capital requirements, capital expenditure needs, and fund our operations for at least twelve months from the date of this Annual Report on Form 10-K and for the foreseeable future.
The amount and timing of any future funding requirements will depend on many factors, including operating performance, growth initiatives, and market conditions. We may from time to time seek to raise additional capital through equity or debt financings. There can be no assurance that additional financing will be available on terms acceptable to us, or at all.
Material Cash Requirements
The following summarizes our material cash requirements as of December 31, 2025:
ExtraCash
We fund ExtraCash originations primarily through operating cash flow and, as needed, borrowings under the Debt Facility. In connection with our partnership with Coastal, we expect to transition a portion of ExtraCash receivables to an off-balance sheet structure, which is expected to reduce our funding obligations and improve capital efficiency over time. See "Bank and Processing Partners" in Item 1 for additional information.
Contractual Obligations
In the normal course of business, we enter into agreements with vendors and service providers that may include minimum purchase commitments or other payment obligations. We believe we will be able to fulfill these obligations through cash generated from operations and existing cash balances.
Debt Obligations
As of December 31, 2025, we had $75.0 million of term loans outstanding under the Debt Facility. Interest payments are due monthly, and principal repayment is subject to the terms of the facility agreement. See Note 11, Debt Facility, for additional information regarding repayment terms and maturities.
Off-Balance Sheet Arrangements
As of December 31, 2025, we did not have any off-balance sheet arrangements, as defined by SEC regulations, that have or are reasonably likely to have a current or future material effect on our financial condition, results of operations, liquidity, capital expenditures, or capital resources.
As described in "Item 1. Business—Bank Partners," under our Program Agreement with Coastal, we expect to transition ExtraCash receivables to an off-balance sheet structure as existing Members migrate to Coastal, which we anticipate will be substantially finalized by the end of 2026. Once receivables are originated and retained on Coastal's balance sheet, this arrangement may constitute an off-balance sheet arrangement in future periods. We will continue to evaluate and disclose the nature and impact of this arrangement as the transition progresses.
Additionally, we may use cash to acquire businesses and technologies. The nature of these potential transactions, however, makes it difficult to predict the amount and timing of such cash requirements.
Cash Flows Summary
(in thousands)
For the Years Ended December 31,
Total cash provided by (used in):
Operating activities
Investing activities
Financing activities
Net increase in cash and cash equivalents and restricted cash
Cash Flows From Operating Activities
We recorded net income of $195.9 million for the year ended December 31, 2025, net income of $57.9 million for the year ended December 31, 2024 and a net loss of $48.5 million for the year ended December 31, 2023. We reported cash flows provided by operating activities of $290.0 million for the year ended December 31, 2025, cash flows provided by operating activities of $125.1 million for the year ended December 31, 2024 and cash flows provided by operating activities of $33.8 million for the year ended December 31, 2023.
During the year ended December 31, 2025, net cash provided by operating activities was $290.0 million, an increase of $164.9 million compared to $125.1 million for the year ended December 31, 2024. The increase was primarily driven by higher net income, which grew from $57.9 million to $195.9 million year over year, reflecting continued growth in ExtraCash origination volume and Member engagement, the transition to our simplified fee structure, and the $58.7 million income tax benefit from the release of our deferred tax asset valuation allowance.
Excluding non-cash items, changes in operating assets and liabilities were a net use of cash, driven by an increase in receivables related to revenue from ExtraCash of $16.7 million, a decrease in accrued expenses of $2.0 million, and an increase in prepaid expenses and other current assets of $1.9 million. These uses were partially offset by an increase in other current liabilities of $3.9 million, an increase in accounts payable of $1.6 million, an increase in other non-current liabilities of $1.4 million, and an increase in legal settlement accrual of $0.7 million.
During the year ended December 31, 2024, net cash provided by operating activities was $125.1 million, an increase of $91.3 million compared to $33.8 million for the year ended December 31, 2023. The increase was primarily driven by higher net income of $57.9 million compared to a net loss of $48.5 million in the prior year, reflecting improved operating performance across the business, including lower provision for credit losses, reduced marketing spend, and continued growth in service based and transaction based revenues. Excluding non-cash items, changes in operating assets and liabilities were a net use of cash, driven by an increase in prepaid expenses and other current assets of $8.2 million and an increase in receivables related to revenue from ExtraCash of $6.2 million. These uses were partially offset by an increase in accrued expenses of $4.1 million, an increase in legal settlement accrual of $3.8 million, an increase in non-current liabilities of $2.9 million, an increase in accounts payable of $1.3 million, an increase in other current liabilities of $0.3 million, and a decrease in prepaid income taxes of $0.1 million.
During the year ended December 31, 2023, net cash provided by operating activities was $33.8 million, an increase compared to the year ended December 31, 2022, primarily driven by improved operating results, including a lower net loss, reduced provision for credit losses, and decreases in processing costs, marketing expenses, and compensation and benefits. Excluding non-cash items, changes in operating assets and liabilities included net uses of cash from an increase in receivables related to revenue from ExtraCash of $4.1 million, a decrease in accounts payable of $5.9 million, a decrease in legal settlement accrual of $6.1 million, and a decrease in other current liabilities of $0.5 million. These uses were partially offset by a decrease in prepaid income taxes of $0.7 million, a decrease in prepaid expenses and other current assets of $3.3 million, and an increase in accrued expenses of $1.7 million.
Cash Flows From Investing Activities
During the year ended December 31, 2025, net cash used in investing activities was $202.7 million. This amount included payments for internally developed software costs of $6.5 million, the purchase of property and equipment of $0.3 million, net ExtraCash originations and collections of $195.8 million, and the purchase of investments of $190.0 million, offset by the sale of marketable securities of $0.1 million and the sale and maturity of investments of $189.8 million.
During the year ended December 31, 2024, net cash used in investing activities was $45.8 million. This amount included payments for internally developed software costs of $7.3 million, the purchase of property and equipment of $0.3 million, net ExtraCash originations and collections of $111.5 million, the purchase of investments of $111.3 million, and the purchase of marketable securities of $59.3 million, offset by the sale of marketable securities of $60.1 million and the sale and maturity of investments of $183.7 million.
During the year ended December 31, 2023, net cash used in investing activities was $14.4 million. This amount included payments for internally developed software costs of $7.9 million, the purchase of property and equipment of $0.7 million, net ExtraCash originations and collections of $63.0 million, the purchase of investments of $120.0 million, and the purchase of marketable securities of $34.4 million, offset by the sale of marketable securities of $33.7 million and the sale and maturity of investments of $177.9 million.
Cash Flows From Financing Activities
During the year ended December 31, 2025, net cash used in financing activities was $56.3 million, which consisted of the $13.3 million for the payment of taxes for shares withheld related to net share settlements and $43.7 million related to repurchases of Class A Common Stock, offset by $0.8 million for proceeds received for stock option exercises.
During the year ended December 31, 2024, net cash used in financing activities was $71.0 million, which primarily consisted of the $72.3 million paydown of the convertible note with FTX Ventures Ltd. and associated costs, offset by $1.3 million in proceeds from the issuance of common stock for stock option exercises.
During the year ended December 31, 2023, net cash provided by financing activities was $0.02 million, which primarily consisted of payments of $0.01 million for fractional shares that resulted from our reverse stock spilt and $0.03 million in proceeds from the issuance of common stock for stock option exercises.
Critical Accounting Estimates
Our consolidated financial statements have been prepared in accordance with U.S. GAAP. The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the consolidated financial statements, as well as the reported revenues and expenses incurred during the reporting periods. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Our critical accounting estimates and assumptions are evaluated on an ongoing basis, including those related to the following:
(i) Allowance for credit losses; and
(ii) Income taxes.
Actual results may differ from these estimates under different assumptions or conditions. We believe that the accounting estimates discussed below are critical to understanding our historical and future performance, as these estimates relate to the more significant areas involving management’s judgments and estimates. Please refer to Note 2 in our accompanying consolidated financial statements for the years ended December 31, 2025 and 2024 included in this Annual Report on Form 10-K.
While our significant accounting estimates are described in the notes to our consolidated financial statements, we believe that the following accounting estimates require a greater degree of judgment and complexity and are the most critical to understanding our financial condition and historical and future results of operations.
Allowance for Credit Losses
ExtraCash receivables from contracts with Members as of the balance sheet dates are recorded at their original receivable amounts reduced by an allowance for expected credit losses. We pool our ExtraCash receivables, all of which are short-term in nature and arise from contracts with Members, based on shared risk characteristics to assess their risk of loss, even when that risk is remote. We use an aging method and historical loss rates as a basis for estimating the percentage of current and delinquent ExtraCash receivables balances that will result in credit losses. We consider whether the conditions at the measurement date and reasonable and supportable forecasts about future conditions warrant an adjustment to our historical loss experience. In assessing such adjustments, we primarily
evaluate current economic conditions, expectations of near-term economic trends and changes in customer payment terms and collection trends. For the measurement dates presented herein, given our methods of collecting funds, and that we have not observed meaningful changes in our customers’ payment behavior, we determined that our historical loss rates remained most indicative of our lifetime expected losses. We immediately recognize an allowance for expected credit losses upon the origination of the ExtraCash receivable. Adjustments to the allowance each period for changes in the estimate of lifetime expected credit losses are recognized in operating expenses—provision for credit losses in the consolidated statements of operations.
When we determine that an ExtraCash receivable is not collectible, the uncollectible amount is written-off as a reduction to both the allowance and the gross asset balance. Subsequent recoveries are recorded when received and are recorded as a recovery of the allowance for expected credit losses. Any change in circumstances related to a specific ExtraCash receivable may result in an additional allowance for expected credit losses being recognized in the period in which the change occurs.
Income Taxes
We follow ASC 740, Income Taxes (“ASC 740”), which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the 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 $3.3 million and $2.0 million of uncertain tax positions as of December 31, 2025 and 2024, respectively, related to state income taxes and federal and state research and development tax credits.
We are subject to income tax in jurisdictions in which we operate, including the United States. For U.S. income tax purposes, we are taxed as a Subchapter C corporation.
We recognize deferred taxes for temporary differences between the basis of assets and liabilities for financial statement and income tax purposes. The Company regularly assesses the need for a valuation allowance against its deferred tax assets each quarter. In making that assessment, the Company considers both positive and negative evidence in the various jurisdictions in which it operates related to the likelihood of realization of the deferred tax assets to determine, based on the weight of available evidence, whether it is more likely than not that some or all of the deferred tax assets will not be realized. We recorded a valuation allowance against our deferred tax assets, net of deferred tax liabilities, at December 31, 2024. Based upon management’s assessment of all available evidence at December 31, 2024, we concluded that it was more-likely-than-not that the deferred tax assets, net of deferred tax liabilities, will not be realized. As of December 31, 2025, based on all available positive and negative evidence, having demonstrated sustained profitability, which is objective and verifiable, and taking into account anticipated future earnings, the Company has concluded that it is more likely than not that its U.S. federal and state deferred tax assets will be realizable. As such, we released $58.7 million of our valuation allowance associated with the U.S. federal and state deferred tax assets during the year ended December 31, 2025.
On June 27, 2025, California enacted legislation requiring financial institutions to utilize a single sales factor apportionment method, effective for tax years beginning in 2025. The new law decreased the Company's California apportioned income and state income tax expense in 2025 and was reflected in the our consolidated financial statements for the year ended December 31, 2025.
On July 4, 2025, new U.S. tax legislation H.R.1, known as the One Big Beautiful Bill Act ("OBBBA"), was enacted. The OBBBA introduces significant amendments to corporate taxation, including the modification of research and development (R&D) expense capitalization, additional limitations on interest expense deductions, and provisions for accelerated depreciation of fixed assets. During the third quarter of 2025, we completed our assessment of the OBBBA and will elect to accelerate the amortization of our previously capitalized and unamortized U.S. research and development costs over a one-year period as permitted under the new legislation. As a result of the election, we
expect a decrease to our deferred tax assets and income tax payable resulting from the restoration of full expensing of U.S. research and experimentation expenditures. The impact of this election was reflected in the our consolidated financial statements for the year ended December 31, 2025, and did not have a material impact on our effective tax rate or results of operations.
Recently Issued Accounting Standards
Refer to Note 2, “Significant Accounting Policies,” of our consolidated financial statements included in this report for a discussion of the impact of recent accounting pronouncements.
