Release Date: August 15, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- BM Technologies Inc (BMTX, Financial) reported a 10% increase in operating revenues for the first half of 2024 compared to the same period in 2023.
- Interchange and card revenue increased by 57% year-over-year, driven by the switch to a Durbin exempt bank.
- The company successfully launched a new cashback rewards engine, which has already shown positive engagement metrics.
- BM Technologies Inc (BMTX) signed 15 universities for its new identity verification (IDV) product, with a strong pipeline for future sales.
- The company retained over 99% of its higher-education and institutional clients, demonstrating strong customer loyalty.
Negative Points
- Core EBITDA for the second quarter was a loss of approximately $880,000, showing only a slight improvement from the previous year's loss.
- Servicing fees decreased to $6.9 million in Q2 2024 from $7.7 million in Q2 2023, due to lower average service deposits in the BaaS business.
- Average service deposits in the BaaS vertical decreased significantly, down 47% compared to the second quarter of 2023.
- The BaaS business remains unprofitable in the current regulatory and interest rate environment, with potential wind-down expected to increase core EBITDA by at least $1 million per quarter.
- Total operating expenses included $1.6 million of one-time costs related to the implementation of the next-gen platform, impacting overall profitability.
Q & A Highlights
Q: With the potential for the BaaS wind down, is there an advance notice period required?
A: (Jamie Donahue, President) Yes, there are parameters for any program wind down, but that's all we can share at this point. We wanted to provide our view on that side of our business.
Q: Can you provide more details on the finance, insurance, and wellness benefits you plan to offer? Also, will there be any more next-gen platform implementation costs in Q3 or Q4?
A: (Ajay Asija, CFO) The one-time costs of $1.6 million were just for Q2, and we do not anticipate them to recur in Q3 or Q4. (Jamie Donahue, President) We will release a press statement ahead of the launch detailing the features, but it will expand on our marketplace with financial wellness and other products.
Q: Will the ID verification product be sold to universities you do not currently work with on the disbursement side?
A: (Jamie Donahue, President) Yes, we plan to sell it to universities that are not currently disbursement clients. We believe it will open doors for other business lines.
Q: Is there an advantage for non-disbursement universities to choose your ID verification product?
A: (Jamie Donahue, President) Yes, our existing disbursement clients appreciate the integration and symmetry we provide. We see a symbiotic relationship when customers use both IDV scoring data and our disbursements.
Q: Do you have additional products planned for universities over the next two to three years?
A: (Jamie Donahue, President) Absolutely. We have a roadmap within that 36-month horizon to bring other value-added products and services to our university clients.
Q: How are universities using the ID verification product currently?
A: (Jamie Donahue, President) Universities are using it for samples of their applicant pool during the testing phase, but some have applied it to their entire enrollment population or even done a look-back on existing students.
Q: Will the new AI technologies you are piloting be revenue-generating or primarily for increasing retention?
A: (Jamie Donahue, President) Initially, the technology will service our customers better and reduce operational expenses. We expect a lift on the OpEx side, not necessarily from revenue at this point.
Q: Have you seen behavioral changes from students using the new rewards engine?
A: (Jamie Donahue, President) Yes, 30% of active customers have signed up for the service, and there has been an increase of 1.4 more transactions per month for that cohort. We have also put $20,000 back in students' pockets through rebates and rewards.
Q: How does the 1.4 additional transactions per month compare to your expectations?
A: (Jamie Donahue, President) It is slightly above plan. We are impressed with the performance and adoption rates and look forward to sharing more metrics in the coming quarters.
Q: What does it take for a student to adopt the rewards program?
A: (Jamie Donahue, President) The process is designed to be frictionless, involving three screens for the user to select and sign up for the service, choosing which vendors they want to get rewards from.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
