Chime Financial Q1 2026 Earnings Call Transcript

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Provided by Quartr
May 6, 2026

Key Takeaways

  • Positive Sentiment: Chime reported strong top-line and profitability momentum — added nearly 700,000 active members (record 10.2M), delivered 25% revenue growth, achieved its first quarter of positive GAAP EPS and raised full-year guidance while authorizing an additional $200 million share repurchase.
  • Positive Sentiment: Product monetization is accelerating — early traction from the new Chime Prime tier is increasing direct deposit intent, retention and Chime Card use, while liquidity products drove scale: MyPay is a $400M+ run rate with transaction profit up >10x to $64M and Instant Loans originations hit $180M in Q1 with improving loss rates.
  • Positive Sentiment: AI and engineering changes are materially boosting velocity and operating leverage — 84% of March code was developed with AI, the Jade copilot and Archimedes AI-native development factory aim to speed product launches and enable proactive, action-oriented member features that can deepen relationships and lower long-term costs.
  • Negative Sentiment: Management flagged near-term seasonality and investment headwinds — Q1 benefited from tax-refund tailwinds, Q2 net adds are expected to be lower, transaction margin should normalize from 76% to 70–72%, and Chime will incur incremental sales/support spend to scale Chime Prime, which may pressure near-term margins.
AI Generated. May Contain Errors.
Earnings Conference Call
Chime Financial Q1 2026
00:00 / 00:00

There are 13 speakers on the call.

Speaker 7

Good afternoon and welcome to Chime's First Quarter Fiscal 2026 earnings call. Following the speaker's remarks, we will open the line for your questions. As a reminder, this conference is being recorded, and a replay of this call will be available on our investor relations website for a reasonable period of time after the call. I'd like to turn the call over to Peter Stabler, Vice President of Investor Relations. Thank you. You may begin.

Speaker 8

Good afternoon, everyone, and thank you for joining us for Chime's First Quarter 2026 earnings conference call. Joining me today are Chris Britt, our Co-founder and CEO, and Matt Newcomb, our CFO. Mark Troughton, our President, will participate in Q&A. As a reminder, we will disclose non-GAAP financial measures on this call. Definitions and reconciliations between our GAAP and non-GAAP results can be found in our earnings release and our earnings presentation posted on our IR website at investors.chime.com. We will also make forward-looking statements on this call, including statements about our business, future outlook, and goals. Such statements are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from those described. Many of those risks and uncertainties are described in our SEC filings, including our Form 10-K filed on March 6, 2026.

Speaker 8

Forward-looking statements represent our beliefs and assumptions only as of the date such statements are made. We disclaim any obligation to update any forward-looking statements except as required by law. With that, I'll hand it over to Chris.

Speaker 3

Thanks, Peter, and thank you all for joining us today. 2026 is off to a strong start. In Q1, we delivered strong active member growth, continued taking share from the largest banks, achieved GAAP profitability, and accelerated product velocity. Last month, we launched Chime Prime, our new premium membership tier. Prime offers higher cashback rewards, high-yield savings, greater access to liquidity, and premium perks for members who make Chime their primary financial partner. Early signs are encouraging, and I'll share more in a moment. The strength of our brand and offerings have never been clearer. We added nearly 700,000 active members in Q1, bringing total active members to a record 10.2 million. Consumers are drawn to Chime's expanding product suite and low-fee model.

Speaker 3

As a result, Chime again ranked number one in U.S. checking account openings per J.D. Power's Q1 survey and 50% ahead of the next competitor. While members earning $75,000+ remained our fastest-growing segment. Unaided brand awareness also continues to rise among consumers earning up to $100K. Turning to the quarter, revenue grew 25% year-over-year, exceeding the high end of our guidance range. Coupled with strong cost discipline, we delivered over 13 points of adjusted EBITDA margin expansion year-over-year, demonstrating the powerful fixed cost leverage in our business model. Q1 also marked our first quarter of positive GAAP EPS, a major milestone for our shareholders, and we expect to deliver positive GAAP EPS for our full-year results. Our Q1 results highlight our core competitive advantages, primary relationships, our trusted brand, a low cost to serve, and rapid innovation powered by ChimeCore, now accelerated with AI.

Speaker 3

Understandably, the health of the American consumer is a major focus for investors today, fueled by geopolitical uncertainty, high energy costs, and overall affordability concerns. We've looked closely at our members' behavior, as we've reported for the past several quarters, we continue to see broad consumer resilience. Even with fuel spending up, overall purchase volumes and saving rates remain strong and consistent, average account balances among our recurring direct depositors continue to grow, aided in part by year-over-year growth in the average tax refund. We've yet to see any meaningful changes in the number of our members receiving unemployment benefits. In terms of lending, our credit loss rates continue to improve, reflecting the strength of our short-duration loan portfolio underwritten by recurring direct deposits and our ability to rapidly fine-tune our lending risk models.

Speaker 3

These factors dramatically lower our loan portfolio risk and are what separate us from other lending businesses. Turning to our 2026 priorities, as we mentioned last quarter, our first priority is to extend our lead as the best financial partner for everyday Americans. This starts by leveraging our proprietary tech stack and cost to serve advantage to provide products and services that enable our members to unlock financial progress while maintaining our position as the market's low-cost leader. Our membership tiers embody our central brand promise of offering the most rewarding fee-free banking experiences in the market for everyday Americans. At the same time, they reinforce a simple idea. The more members engage with Chime as their primary financial partner, the more value they unlock. Our membership tiers drive deeper direct deposit relationships, increase product usage, and expanded RPAM, as evidenced again this quarter.

Speaker 3

Building on the success of Chime Plus, our basic membership tier that rewards members who set up direct deposit, we're really excited about the launch of Chime Prime, which offers an even richer set of rewards to members making at least $3,000 of qualifying direct deposits per month. As with Chime Plus, there are no fees. Chime Prime members unlock a market-leading 5% cash back on the category of their choice when they spend with their Chime Card. Categories include groceries, restaurants, gas, utilities, or travel. For example, a family spending $1,500 on groceries per month would receive $75 in cash back on Chime Prime.

Speaker 3

Prime also includes 3.75% APY on savings, a rate nine times the national average, up to 70 points of credit score improvement, higher levels of liquidity through MyPay and Instant Loans, and premium travel and lifestyle perks like access to exclusive airport lounges and special access to concerts. Early results show that our new Prime tier is increasing direct deposit intent and improving retention among existing direct depositors. Prime members are also more likely to adopt Chime Card for everyday spend. Helping to drive a continued shift we're seeing from debit to credit spending, which delivers a higher take rate for us. The benefits from this more premium tier deepens our relationship with higher-earning members who are becoming a larger portion of our member base.

Speaker 3

Turning to our short-term liquidity products, Q1 was another strong quarter for MyPay, which is already a $400 million-plus run rate business. We rolled out our variable MyPay pricing plan and expanded access to earned wages earlier in the pay cycle, addressing our most frequent member requests, while at the same time retaining our leadership as the low-cost provider in the market. With higher origination volumes, improved yield, and low steady loss rates, MyPay transaction profit was up over tenfold year-over-year. We're also making great progress with Instant Loans, which we believe positions the product to become a meaningful contributor to transaction profit growth over the coming quarters. Members qualifying for Chime Prime are pre-qualified for Instant Loans, and continued optimization of our underwriting models is enabling us to broaden member access while we reduce loss rates.

Speaker 3

Our first priority at North Star is to help our members unlock financial progress. In service of this goal, our product roadmap for this year will expand to meet even more of their everyday financial needs with investing, joint accounts, and custodial accounts all coming soon. With a broader portfolio of products, we believe we'll continue to deepen our member relationships. The evidence at the cohort level is clear and compelling. The longer a Chime member stays with us, the greater the average product attach rate, purchase volume, and transaction profit. This compounding dynamic is the core of our long-term growth model. Our second priority is scaling Chime Enterprise, our expanded earned wage access and suite of financial wellness tools completely free to employees through their employers. As we've mentioned, the sales cycle for enterprise accounts tend to be long, but our pipeline and customer count is growing steadily.

Speaker 3

We're excited to announce that we've signed 4 new employer partners in Q1, including First Student, the largest provider of student transportation in the nation, with over 65,000 employees. As we prepare to roll out with First Student, our Workday partnership will support seamless integration and implementation. Our third priority is to deeply embed AI across Chime and into the member experience. For a full-stack fintech like Chime, with proprietary data, integrated infrastructure, deep bank partnerships, and a trusted brand, AI compounds our structural advantage and further differentiates us from incumbent banks. As the primary account for millions of members, we have a real-time view of their financial lives, paychecks, spending, bills, balances, all flowing through our platform. Because ChimeCore powers everything from the ledger to the app experience, we can take action, not just provide insights.

Speaker 3

With a member's permission, we can move money to where it earns more, extend credit in the moment it's needed, and stop unwanted charges before they post, capabilities no third-party app could replicate. With Jade, our AI copilot rolling out now, we're bringing this to life. Jade will help us move from reactive tools to proactive financial management, helping members spend smarter, save more, pay bills on time, borrow responsibly, and build long-term wealth. Early results from scaled beta testing have been encouraging and will continue to expand access over the coming months. While AI will accelerate innovation across the industry, it won't replicate the foundations of our model: bank partnerships, payment networks, and compliance infrastructure. As choice expands, consumers will choose the platform that delivers the best products at the lowest cost from a brand that they trust. AI is already transforming the way we work.

Speaker 3

In product and engineering, AI-powered development is quickly becoming the norm. 84% of the code we shipped in March was developed with AI, up from 29% just 4 months ago. That's driving a meaningful increase in velocity. We're now taking the next step with Archimedes, our AI-native software factory, where we can move from idea to a shipped product with AI agents doing the majority of the development. More broadly, Archimedes represents a fundamental shift in how we build at Chime, from AI-assisting humans to AI at the center of how we design and develop products while maintaining the quality, control, and compliance our platform requires. AI is driving operating leverage at scale, increasing levels of output while keeping headcount flat. We're at a unique moment where AI is unlocking entirely new possibilities in financial services.

Speaker 3

Because we're not burdened by legacy systems, we can move faster, build better, and lead this transformation. With our platform, model, and momentum, we're uniquely positioned to shape what comes next. AI isn't just a tailwind for our business. It's an accelerant of our core advantages, further expanding what we can deliver for our members and for our business. I'll turn it over to Matt to cover our financial results and provide an updated outlook for Q2 and the full year.

Speaker 6

Thanks, Chris. In Q1, our fourth quarter as a public company, we again demonstrated both strong execution and the resiliency of our model. We're continuing to execute on multiple dimensions of growth with 19% growth in active members, 5% growth in average revenue per active member, or RPAM, and a 9 percentage point improvement in transaction margin in Q1. These are compounding growth levers. Together drove 41% growth in transaction profit in the quarter. With a clear number 1 share gainer in a massive market, with a radical cost to serve advantage, and a technology and product innovation advantage that continues to extend our lead over the competition. Powered by our deeply engaged primary account relationships, we have a durable, low credit risk, 70%+ transaction margin business that we're scaling over a largely fixed OpEx base.

Speaker 6

These are the ingredients of a business model with strong long-term earnings power. In Q1, we again demonstrated our rapid progress along that path. Our Q1 adjusted EBITDA margin of 18% improved over 1,300 basis points year-over-year. Our incremental adjusted EBITDA margin was 73% in the quarter, and we were GAAP profitable. Given the strength in the business, we are raising full year guidance. Having exhausted our prior repurchase program, we are also announcing an additional $200 million share repurchase authorization. While markets are volatile, our long-term earnings power is not, and this authorization allows us to continue to opportunistically take advantage of market dislocations in our share price. Let me dive into more detail on our Q1 operating results, starting with active members.

Speaker 6

We have a consistent track record as the leading share gainer in a market of nearly 200 million Americans making up to $100K. In Q1, we added nearly 700,000 net new active members quarter-over-quarter. Some of this growth was driven by particularly strong seasonal tailwinds. As a reminder, each year in Q1, tax refund-related activity drives seasonally higher levels of re-engaged active members. This year, we saw the number of members using our embedded tax filing service grow over 50% year-over-year. Also, this year's later start to tax season concentrated more of this re-engagement later in the quarter. That said, our overall growth algorithm continues to perform well, with several other drivers contributing to this quarter's strong performance. First, our top of funnel remains strong.

Speaker 6

Our brand awareness continues to grow, and new value propositions like Chime Card's cashback rewards on everyday spend are clearly resonating with members. Looking ahead, we're excited about the opportunity to use rewards more broadly to drive both new member growth and retention, and expect to continue to experiment this year. Second, our early engagement initiatives, which make it easier to get started with Chime, continue to be successful. These initiatives have enabled us to engage members we wouldn't have otherwise engaged, driving all-time high activation rates, lowering our CAC, and improving our payback periods to 5-6 quarters. We're also finding that they are increasingly an on-ramp to more deeply engaged direct deposit relationships, not just lightly engaged members. Given this progress, we believe we are on track to exceed our original goal of 1.4 million net new actives for 2026. Second is RPAM.

Speaker 6

We have a high-quality member base. We serve the majority of our members in a primary account capacity, which gives us deep levels of engagement, strong retention, and high levels of RPAM. As our members' primary account relationship, we've also earned both the trust and mind share to drive strong product cross-sell. 15% of our active members use 6 or more products each month, and their RPAM is north of $500, double our average. In Q1 specifically, overall RPAM increased 5% year-over-year to $263, driven by strength in both payments and platform revenue. Combined payments and OIT revenue increased 19% year-over-year. Resilient member spend trends along with larger tax refund deposits drove PV and OIT volume growth of 15%. We're also continuing to drive strong adoption of Chime Card across both new and existing members.

Speaker 6

As of March, nearly half of our members are using a secured credit card, either our legacy Credit Builder card or increasingly our new Chime Card on a monthly basis. That's up from just over a third of members in September prior to our Chime Card launch. This progress has increased the portion of total purchase volume that is on credit to nearly 25% in March, up from 16% in September. Chime Card is a win-win. Members benefit from cash back rewards on their everyday spend, and we benefit from the higher net interchange rates we earn on credit. As Chris noted, we're excited for Chime Prime's potential to drive Chime Card adoption even higher. Platform-related revenue increased 50% year-over-year, driven by continued strong performance across our liquidity products.

Speaker 6

Our success earning direct deposit relationships enables us to offer liquidity products profitably at low cost and with low risk. In Q1, we completed the rollout of our new variable pricing model for MyPay, while also maintaining loss rates at our steady-state target of 1%. Together, this grew our MyPay transaction margin to 62%, and overall MyPay transaction profit dollars to $64 million, up 10x year-over-year. We're also seeing strong performance for Instant Loans, our 3- to 12-month installment loan products. We're scaling access. In Q1, we originated $180 million of Instant Loans. We're also offering longer duration loans to repeat borrowers, which come with better economics. In Q1, we doubled origination volume quarter-over-quarter for 9- and 12-month loans. We're driving lower loss rates.

Speaker 6

We continue to see loss rates improve as much as 50% for repeat borrowers compared to first-time borrowers. Taken together, we're very excited about the progress of this product and its path to becoming a meaningful driver of transaction profit growth over the coming quarters. Third is transaction profit. Our low-cost operating model has enabled us to offer what we believe is the most compelling breadth of services for mainstream consumers, delivered at over 70% transaction margin. We don't believe any incumbent offers consumers anywhere near the level of utility and value that Chime offers, including for higher earners. In Q1, as a result of our recent transition to ChimeCore, as well as continued strong loss rates performance, we improved our transaction margin to 76%, up 9 percentage points year-over-year.

Speaker 6

Together with our growth in actives and RPAM, overall transaction profit grew 41% year-over-year to $491 million. We're compounding growth across multiple dimensions, and we're driving this growth with strong unit economics. We continue to acquire members efficiently with 5 to 6-quarter transaction profit payback period. Just as important is the durability of our cohorts, driven by our deeply engaged, long-lasting primary account relationships. Our cohorts are underpinned by everyday, recurring, non-discretionary spend. Our cohorts double in RPAM as they season, as members attach to more products over time. Our cohorts see over 100% dollar-based transaction profit retention, net of churn. Taken together, this drives LTV to CACs of over 8x. It's these unit economics that allow us to drive strong operating leverage while continuing to make meaningful investments in growth.

Speaker 6

In Q1, non-GAAP OpEx as a percent of revenue fell 5 percentage points year-over-year, with leverage across all OpEx categories. In Q1, we grew our adjusted EBITDA margin to 18%, up 13 percentage points year-over-year at an incremental margin of over 70%. In total, we delivered $119 million of adjusted EBITDA and $53 million of GAAP net income. Turning to our guidance. In the second quarter, we expect revenue between $633 million and $643 million, resulting in year-over-year revenue growth between 20% and 22%. We expect adjusted EBITDA between $72 million and $77 million and an adjusted EBITDA margin between 11% and 12%. For the full year, we expect revenue between $2.66 billion and $2.69 billion, resulting in year-over-year revenue growth between 22% and 23%.

Speaker 6

We expect full-year adjusted EBITDA of between $416 million and $431 million and an adjusted EBITDA margin of 16%. We now expect an incremental adjusted EBITDA margin of approximately 60% for 2026. There are a few things to keep in mind about our second quarter and full year guide. As a reminder, we have a seasonal business. Many of our metrics, including active members, transaction volumes, and RPAM, benefit from tax refund-related activity in Q1. In particular, because tax refund-related activity drives more members to reengage with us in the first quarter, we benefit from seasonally high quarter-over-quarter net adds each Q1, but lower net adds each Q2. We expect to see this typical seasonality again this Q2.

Speaker 6

We also see seasonally elevated transaction margin in Q1 due to higher purchase volume, as well as both lower utilization and higher repayment rates on our liquidity products. As such, we expect transaction margin to normalize from 76% in Q1 to between 70%-72% for the rest of the year. Finally, while we'll continue driving operating leverage at attractive incremental margins, as we've noted previously, we are investing into sales and marketing and member support costs to support the recent launch of our Chime Prime premium membership tier this year, particularly in Q2. With that, I'll open it up to Q&A.

Speaker 7

Thank you. We'll take our first question from Tien-Tsin Huang with JPMorgan. Please go ahead. Your line is open.

Speaker 9

Hi. Great, really great results here, guys. Nice to talk to you all. Just Matt Newcomb, you went through a lot with the ads, so I won't ask you to go through it again, but just thinking about drafting off of the strong tax rebate season and some of the initiatives you guys have put in as you're thinking around additions and how it's going to track for the rest of the year. Has that changed at all? It does feel like you've gotten a little bit more momentum on the Instant Loans, and it's showing up already. How impactful might that be here as we recast our forecast for the rest of the year? Thanks.

Speaker 6

Thanks, Tien-Tsin Huang. Yeah, we're really pleased with the continued momentum that we're seeing on our actives growth. You know, as I mentioned, our overall growth algorithm remains really strong. Top-of-funnel remains very healthy. Our brand awareness continues to grow. You're seeing this result corroborated by third-party data. J.D. Power came out with their latest survey in Q1, where Chime again ranked number 1 by a large margin in terms of checking account openings. I think our product velocity is really helping this as well. New products like Chime Card and more recently, Chime Prime are clearly resonating with members. All of this also supports our early engagement initiatives. We're continuing to see, you know, great progress that's led to shorter payback periods and LTV to CAC north of 8x.

Speaker 6

That being said, you know, we also saw that, you know, some of the We also saw some outsized seasonal tailwinds on actives growth in the quarter as well. As a reminder there, every Q1 we see seasonally high re-engagement related to tax refunds. This quarter, there are really sort of two factors that magnified this. We saw a later start to tax season than in years prior, that concentrated more of the re-engagement later in the quarter. As a reminder, we measure monthly actives as of the last month of the quarter. We also saw really strong engagement with our embedded tax filing service this year.

Speaker 6

In sum, you know, we're continuing to see broad momentum, but it is true some of the performance in terms of net adds in Q1 was related to seasonal factors. In aggregate, we're feeling very good about exceeding the 1.4 million annual target that we set out at the beginning of the year. Broadly speaking, to follow the similar seasonal trends that we've seen in years prior. Maybe I'll pass to Mark to touch on Instant Loans.

Speaker 5

Hi, Tien-Tsin, it's Mark. I think on Instant Loans, we've been very pleased with the progress there. Just to give you an indication there, we originated $180 million in the quarter of Instant Loans. We expect that to accelerate going forward. Just to remind everybody, Chime Prime members automatically qualify for Instant Loans. We do expect some significant growth to come from the Instant Loan product. In addition to Chime Prime, we're continuing to offer longer duration loans to our repeat borrowers. Those borrowers operate at 50% better loss rates. The model that we've developed here over the last 12 to 18 months seems to be working well.

Speaker 5

In terms of what it can do overall, we're not giving sort of specific guidance and I do think this will still be small compared to MyPay, but I think it's fair to say that we expect Instant Loans can become a material contributor to transaction profit over the coming quarters.

Speaker 9

All right. It's great stuff. Thank you, guys.

Speaker 7

Thank you. We'll take our next question from James Faucette with Morgan Stanley. Please go ahead. Your line is open.

Speaker 4

Thank you so much, and apologies for the background noise. A couple of quick questions here is that you mentioned that the above $75,000 income cohort was kind of your fastest-growing segment. Can you just help us understand how you think about segmentation? As part of that, I thought the comments around products attached were also very compelling. How do those members, as they come in at that higher income bracket, what is their attach rate or pacing compared to maybe the rest of the customer base as a whole?

Speaker 3

Thanks, James. It's Chris here. Yeah, we're really excited about the progress that we're making across really a wide range of segments that we serve. We reported again, I think this is the third quarter in a row where we've announced that specifically the 75K plus segment of income is the fastest-growing for us. We really have a mainstream service here that appeals to consumers across income segments. I think, you know, we not only see it in our own data, but we also see it in the J.D. Power data, you know, the external data that said that, you know, we open up the most checking accounts. When you double-click into those reports, they actually break out by income levels, and you see Chime also near the top of the list for higher-earning demos as well.

Speaker 3

You know, when we look at the sort of higher income demo specifically, we see retention rates that are similar to or right at the same level as the rest of the portfolio. Just as a reminder, 90% plus retention rates after the first year. We see very high levels of product attached that are similar to all of our cohorts as they continue to age. Just, you know, a reminder on that, we have some information in the supplemental that shows how our cohorts continue to drive outsized RPAM as they age. The more tenured cohorts are doing over $400 of RPAM. We see that members of our member base that attach 6 or more products actually generate $500 or more of RPAM.

Speaker 3

You know, obviously a higher earning customer has the ability to spend more, which is the key driver Of our economic model, but it also gives us an ability to offer a wider range of products, including lending and credit products. With our Chime Prime product, which gives you 5% in a category of your choice and 3.75% APY, this is extremely powerful and something that is broadly compelling. I think we now have even more reasons for our members to stick with us for life, and I think that's particularly relevant to these higher earning segments as well.

Speaker 4

That's great to hear. Then I wanted to follow up on one of the other comments you made in terms of accelerating product development and the benefits that you're getting from some of the AI development tools, et cetera. How should we think about kind of what that accelerated product roadmap can look like? I mean, really I'm trying to think about it from a business and financial standpoint. Does this help accelerate? Is it more so that it improves your ability to attract members, et cetera? Or should we think about it more as accelerating incremental products for your members and from that, instead of really accelerating member growth, per se, that it's really about finding incremental ways to serve existing members, et cetera? Thanks.

Speaker 3

Well, I think we really see it as a force multiplier for us. It starts with the way that we actually get work done around here. We talked in our intro remarks about Archimedes, which is our software factory that allows our developers to basically run what is essentially a multi-agent development pipeline, so we can build products much faster from idea into production with AI handling the vast majority of that work. We're gonna be able to get more products into the hands of our members even faster. We've got a really exciting roadmap for the rest of the year that we've outlined with investing and joint accounts and custodial accounts.

Speaker 3

The thing that I think we're, you know, most excited about is the progress that we're making on our actual AI copilot called Jade, which is gonna allow our members to not just get financial advice, but and tips, but also to given our unique position of having enjoying this primary account relationship, we can give advice and then allow with their permission, to take action on the behalf of our members to help them make financial progress. You should expect to see exciting developments on that front, and I think it's gonna give us one more reason for consumers to come to Chime, use us as a primary bank account.

Speaker 3

I think over time, you're going to see that this technology advantage that we have relative to incumbents is going to only expand in the coming quarters as we deploy these AI tools, both in development and in the consumer product itself.

Speaker 4

That's great color and commentary there, Chris. Thank you so much.

Speaker 3

Sure. Thank you.

Speaker 7

Thank you. We'll take our next question from Adam Frisch with Evercore. Please go ahead. Your line is open.

Operator

Thanks, guys. Great results here. Two questions for you. One, the fiscal year guide was increased more than the 1Q, which is great to see. The business momentum is pretty obvious. Was the second quarter guide more conservatism given the seasonality there, and not a read on decelerating momentum in the business or anything like that into the second half? My second question was, for Chime Prime, what are the early adoption eligibility or activation rates? Anything you can tell us about if you're seeing kind of lift and direction deposit conversion and all that kind of good stuff that would go along with that program. Thanks.

Speaker 6

Thanks, Adam. Matt here. I'll talk first about the guide, and then I'll hand it over to Chris to talk a little bit about our early results on Chime Prime. As you mentioned, we're really pre-pleased with really the broad-based business strength we're seeing and the momentum heading into the rest of the year. Just as you said, we're raising our expectations on both revenue and adjusted EBITDA for the full year. As it relates to Q2 specifically, a couple points to keep in mind. First, on the top line, we do face a more difficult year-over-year growth comparable in Q2. In the year ago period, we saw a 500 basis point revenue growth acceleration from Q1, which is primarily due to how we were scaling MyPay at the time.

Speaker 6

If you were to actually look at Q1 and Q2 on a 2-year stack basis, what you'd see is that revenue growth in Q2 is very comparable to Q1. On top of that, with the launch of Chime Prime, that will also lead to some higher rewards costs beginning in Q2. Those are 2 factors as it relates to top line. On bottom line, 2 things to point out. On a sequential basis, we do expect to see our normal step down from Q1 seasonally high transaction margin. We mentioned in our prepared remarks that we expect transaction margin to land in the 70-72% zone for the remaining quarters of the year. Also, as we telegraphed last quarter, we expect to invest behind our Chime Prime launch in Q2, both in sales and marketing and member support.

Speaker 6

On an incremental basis, we expect adjusted EBITDA margins in the low 50s in Q2. From a phasing perspective, this is all, you know, in line with our plans. Again, to reiterate, we're raising our expectations for the full year on both revenue and adjusted EBITDA, and on the full year, just as you said, not only are we flowing through our outperformance from Q1, we're raising our expectations for the remainder of the year as well. Maybe I'll just talk about Chime Prime results. Thanks for the question on that. It's really early days, but we're feeling really good. Just as a reminder, we launched Chime Prime to the public on April 2nd.

Speaker 3

A bit early to get a read, but we are seeing already that it has demonstrated to be effective in driving higher levels of direct deposits. That's a plus, obviously. Because as a reminder, you have to do $3,000 of direct deposit to get access to those benefits, including that hefty cashback on Prime of 5%. The other thing that we're excited about is just looking at the retention rates among people who qualify for Prime. We're already seeing that in the 1st month or so here, that it does appear to drive higher levels of direct deposit retention. At the same time, we're seeing overall continued increase in the adoption of Chime Card.

Speaker 3

In other words, Prime members who qualify for Prime are more likely to be adopting Chime Card. They're taking it up at a higher rate, which is a great tailwind for our mix of payments volume, which is increasingly shifting towards credit. These are all, you know, really, really great tailwinds for us. We've got lots of exciting marketing campaigns and product initiatives this over the next few months. In fact, you'll see tomorrow, during the NBA game, you'll see our first spot with our newest brand ambassador, John Cena, America's champ, who's gonna talk about all the great benefits of Chime Prime and is very relevant to the consumers we serve. Yeah, feeling like great progress on that front and continued great tailwinds on this mix of spend towards credit.

Operator

Great. Thanks, guys.

Speaker 3

Thanks, Adam.

Speaker 7

Thank you. We'll take our next question from Will Nance with Goldman Sachs. Please go ahead. Your line is open.

Speaker 12

Yeah, thanks for taking the question. Maybe I could just follow up a little bit on some of the commentary around Chime Prime, and I guess specifically on unit economics. You're clearly embedding some incremental customer acquisition costs in the second quarter. How are you thinking about the impact of that push as it relates to net adds specifically, and particularly in 2Q? I mean, is there any expectation of an offset to some of the seasonal weakness that you alluded to earlier in the second quarter? Just more broadly, what are you looking at to gauge success? Then maybe if I could just sneak in a numerical question for Chime Prime. I think you previously talked about like a $1.75 net interchange for the new card.

Speaker 12

Taking into account the higher rewards rate, you know, is something in like the 130-140 range on the new card, is that the right way to think about it? Just correct me if I'm wrong there.

Speaker 6

Thanks for the questions, Will. This is Matt. I'll chime in on both of those. Yeah, it, as we discussed, we're really excited about this launch. We are ramping up a bit of investment behind the launch, that's gonna be really across a wide range of marketing efforts. That's certainly part of our plans and OpEx phasing for the year. As it relates specifically to, you know, the cadence of net adds over the quarter, I think, you know, the best baseline expectation is to take a look at the cadence of seasonal net new adds that we've seen over the last few years.

Speaker 6

Again, Q1 being the outsized one, Q2 being the seasonally lower net adds quarter, whereas Q3 and Q4 are in the middle. I think that is the right cadence to expect for us. As it relates to take rates, we've discussed in the past how Chime Card earns around 175 basis points. We've now launched both Chime Prime as well as a new 2% category of your choice cashback offer on Chime Plus. That's an improvement from the previous Plus offering. The way to think about take rates is on our Plus offering, for take rates to be in that 175 basis point zone, whereas Chime Prime will be slightly below that.

Speaker 6

Not as low as what you alluded to, but slightly below those ranges. Those are the ranges we see today. I'll have to caveat that these will shift a bit and fluctuate a bit over time, as members choose the categories that they choose to spend in, but that's sort of the appropriate range to think about for us today.

Speaker 12

That's awesome. Glad I asked on the Chime Prime side. Just, maybe sticking with the take rate commentary. I was wondering if you could help pick apart some of the sequential moves in take rates from Q4 to Q1. I know there's been, I mean, you just alluded to some of the movements in the rewards offerings, but I also know there's some seasonal factors that impact the take rate in the first quarter. If you could just unpack that and, you know, specifically in the context of credit mix going up, you know, several points sequentially from Q4 to Q1. You know, what are some of the offsets that drove the take rate this quarter? Thank you.

Speaker 6

Yeah, great question. There's really sort of 3 factors to keep in mind as it relates to take rates, you know, specifically in Q1. We've talked about 1 already, which is, of course, credit mix and how the continued adoption of Chime Card is continuing to drive higher credit mix. In Q1, that landed right around 25% of total spend, up from about 16%, well, before we launched Chime Card in September. On that front, what I'll say is we're certainly continuing to see momentum both on new members but also existing members. New members coming into Chime, nearly 60% of them are spending with Chime Card. Among those, they're spending about 70% of their Chime spend on the card.

Speaker 6

For existing members, we're seeing that those who have adopted Chime Card are using it for an increasing portion of their Chime spend. Good momentum on that front. Again, that's helping to drive take rates up in the quarter. The second thing to point out, as you did, Will, is seasonality. Interchange rates are another metric in our business that are affected by tax refund-related seasonality in Q1. More specifically, because outsized deposit volumes from tax refunds result in purchase volume with higher ticket prices, what you see is interchange rates because there's both a variable and a fixed component are actually a bit lower each Q1. Again, that's a very typical seasonal pattern. We saw that again this year.

Speaker 6

You know, as I would encourage you to do with the rest of our business, you really gotta look at things on a year-over-year basis. Then lastly, as we shared in our prepared remarks, we are doing more to experiment with member rewards to drive both new member growth and retention. That includes not just the cashback rewards on Chime Card, which is, you know, clearly doing well and resonating with members, but it's also including initiatives like limited-time cashback and referral offers, introductory bonuses, and other initiatives. These types of member rewards are accounted for as contra revenue, which makes the calculated net take rate of payments revenue on purchase volume look a touch lower. That, of course, is all included in our transaction profit payback period.

Speaker 6

In the scheme of things, it's fairly small amounts, but we are excited about the potential. That's 1 additional factor to keep in mind as it relates to take rates.

Speaker 7

Thank you. We'll take our next question from Andrew Jeffrey with William Blair.

Speaker 2

Thank you. Good afternoon. I wanted to ask a little bit about learnings from variable pricing in MyPay and if that's sort of a lever you can pull to drive monetization. Obviously, the performance there has been terrific with the 10-fold increase in transaction profit contribution. I, you know, I wonder if you could just elaborate a little bit on what you've seen and what the outlook is for those initiatives.

Speaker 5

Yeah, sure. I'll pick that one up. Look, at a high level, we've been very pleased with the MyPay performance. $40 billion business now, 62% transaction profit margins and still operating at a 1% loss rate here inside in a product that really has been out for less than 2 years. From a pricing perspective, if you remember, as Chris outlined in the early remarks, the real reason we did this was that we were limited by a fixed fee model. The variable fee model enables us to actually give members access to greater MyPay limits earlier in the pay cycle. That effectively, to your point, enables us to actually accelerate advancing more MyPay to members.

Speaker 5

Having said that, you know, we obviously wanna make sure we're advancing this to people who can actually repay us in this situation. What we're not wanting to do here is to create a debt burden that our members cannot handle. That's been an important part of developing our underwriting model. You know, I think as you look at the yields here, you guys will probably have noticed that if you looked year-over-year, our yield on MyPay increased about 35%. If you looked at Q1 relative to Q3 last year, it increased about 20%. That was really driven by the price change that came in starting in Q4 and then finishing in Q1. Those were key contributors to that.

Speaker 5

That takes year-over-year growth in the MyPay profit. I think it's also important to continue to bear in mind that even at our 2.6% or 2.7% MyPay yield, we are half the cost of our nearest competitors in the space. That continues to be one of the reasons why we bring more people into our portfolio and continue to attract and retain members year after year after year. I think we feel really good that we now have the pricing structure and the underwriting model in place to start to expand MyPay access to those who can handle it.

Speaker 2

I appreciate that, Mark. Thank you. Then as a, as a follow-up, one of the things that I hear sort of repeatedly from investors is about the purchase volume per MAU KPI, which seems to me to kinda miss the point. Nonetheless, investors seem to care about it, and I know there were some seasonal factors influencing 1Q. Can you talk a little bit about your expectations for that KPI and whether it's, you know, something that should maybe get as much attention or not get as much attention as it seems to?

Speaker 6

I'll pick up that one. Thanks, Andrew. You know, at the highest level, what I would say first is, as we've shared the last few quarters, we're seeing very consistent overall trends in purchase volumes. I would say that really is one of the key advantages of our business model and our focus on earning primary account relationships. Our spend is highly concentrated in non-discretionary everyday categories, you know, that's a type of spend that's very resilient across business cycles. If you take a look at our cohorts, our tenured cohorts, we're seeing very consistent growth in spending, that's true across both discretionary and non-discretionary categories. It's true across income groups. At the same time, we're seeing account balances increase year-over-year. Again, this is a healthy consumer willing and able to spend.

Speaker 6

That's translated into pretty consistent pace of payments in OIT revenue growth. That grew 19% year-over-year in Q1. As it relates to the per active metrics specifically, you know, as we shared previously, the reason that purchase volume plus OIT volume per active is down on a year-over-year basis is largely the result of these early engagement initiatives that have been very successful for us. They've helped us engage new members we wouldn't have otherwise engaged. This has strengthened our unit economics. That being said, it has had the effect of diluting the headline purchase volume per active metric since these initiatives have driven faster growth of these newly engaged actives who aren't yet spending as much on Chime. It's creating a larger denominator.

Speaker 6

We do expect these trends to start to normalize in the back half of this year, in particular, as we start to lap last year's launch of these early engagement initiatives. You know, to kind of hit your question head on, this is really just a phenomenon of these successful early engagement initiatives. It's not a reflection of any sort of concerning underlying spend trends. On that front, we see a lot of resilience and consistent trends.

Speaker 7

Thank you. We'll take our next question from Timothy Chiodo with UBS. Please go ahead.

Speaker 10

Great. Thanks a lot. On Chime Prime, I know the overall paybacks are very attractive. Five to 6 quarters, the LTV to CAC is 8 or higher. Those are great numbers. For Chime Prime, I heard you say obviously a much higher RPAM, and I also heard that some of the early data suggests that the retention is even higher. Absent a meaningfully higher CAC, that would suggest really, really attractive LTV to CAC paybacks. I was wondering if you could talk a little bit about that CAC and just how much higher it might be for these clearly more attractive customers. Cognizant that clearly that higher CAC is well worth it in the context of the RPAM and the retention. Thanks.

Speaker 6

Thanks, Tim. It's Matt here again. We're really excited about Chime Prime. As Chris mentioned, early signs of a lot of potential benefits across the business. That's true across retention. That's true across Chime Card attach. That's true across direct deposit conversion and attach. Yeah, we're very excited about the potential there. That being said, it's very early days here. We've just started to roll this out. It is too early to give you a sense, specifically, on, you know, sort of what the unit economic equation specific to Chime Prime looks like. Again, we think this is a great add to our overall product mix and value props. We're excited to keep you posted in the coming quarters.

Speaker 10

Thank you.

Speaker 7

Thank you. We'll take our next question from Patrick Moloney with Piper Sandler. Please go ahead. Your line is open.

Speaker 11

Hey, guys. This is Will Copps. I'm from Patrick Moloney. Thanks for the question. As it relates to Chime Enterprise, are you thinking about any sort of future percentage of total member adds coming from the segment? What's the CAC relative to other traditional channels for member acquisition? Thank you.

Speaker 5

Hi, Will. It's Mark here. I'll pick that up. I think, the enterprise is progressing really well, as Chris indicated in the prepared remarks. The value prop is really strong. It's a broader financial wellness product. The EWA is totally fee-free and, you know, anytime we approach a large enterprise, we find that 5%-10% of their employee base is already on direct deposit with Chime, which gives us an edge. It's resonating really well in the market. It's still early days for us. You know, these enterprise sales cycles are quite long, and it takes a little while to get the boat out of the water.

Speaker 5

I think the good news is, we think the boat is out of the water, and that's actually translating into a good pipeline here, with a steady drumbeat of conversions, including some large ones like we're announcing today with First Student, which is the largest student transportation company in the U.S. The momentum is strong. As we've indicated, it's one of our priorities. We're not giving specific guidance with respect to Enterprise's contribution to net add. We think the fact that it's a priority will probably tell you that we believe it has the potential for it to be a meaningful contributor. We're not giving specific guidance related to that. As it relates to CAC, you know, the CAC on Enterprise is materially lower.

Speaker 5

Really it's the CAC there really is a fixed cost of the enterprise division and the sales cycle rather than a sort of variable CAC. That CAC will start off higher, although considerably lower than our consumer channel, and then it will reduce as we get more adds through that, through that same sales cost base. That's how we think of the enterprise channel.

Speaker 7

Thank you. We'll take our next question from Alex McGrath with KeyBanc Capital Markets. Please go ahead. Your line is open.

Speaker 1

Hi, guys. Thanks for taking my question, or questions, maybe two, if I can squeeze a second one in. First on Prime for Chris. I'm curious, when we think about the ramp of this offering and some of the forthcoming products or features that you mentioned outside of the really strong initial offering, how do you think about the catalyst that those forthcoming products represent, whether it's account types or, you know, at some point more unsecured credit? Just be curious to understand how those can act as catalysts for the ramp as we think forward.

Speaker 3

Yeah. We think that the progress we've made year to date has been great. This new offering is incredibly compelling. I mean, if you think about, you know, the cost of fuel today. If you're a Chime member that selects the gas category and you're spending, say, $800 a month on gas, you're getting $40 cash back. It's a really, really powerful offering that I think is broadly appealing, and that's very consistent with how we're thinking about our product roadmap. We wanna create an even broader set of products for our members to engage with us and not just to avoid fees and not just to get access to short-term liquidity and credit building, but to also play a role in helping to shape the long-term financial health and progress for our members.

Speaker 3

That's why we'll be launching investment accounts, a combination of allowing people to buy equities directly. We'll have a robo offering, for people who are maybe, you know, feeling a little less sophisticated or less comfortable investing in the market to try to get them moving in that direction. You know, we're really excited about using AI to guide people towards all of these exciting new products. We think that as we evolve them and we offer an even more comprehensive set of services, that we can truly be even more broadly appealing to consumers, even in the 100K plus category. We have the core products and services to meet their needs.

Speaker 3

I think, I think the combination of these services together will allow us to, will be a catalyst to drive even more awareness of Chime's product offerings and open up new segments of the population who've heard of Chime to really take another look at it. I think, I think you're already seeing the progress in the net adds that we're adding each quarter. Expect more and more product offerings coming down the pike, including more products in the area of credit and lending. We're gonna keep, you know, pushing on those fronts as well. I think Mark mentioned that, you know, the Chime Prime tier comes with a, you know, instant approved instant loan product.

Speaker 3

We're gonna continue to have credit and lending products to serve that segment as well. Down the line, we anticipate having some form of an unsecured credit card product as well. That's not something we have on the sort of short-term roadmap.

Speaker 1

Understood. I appreciate that. Maybe if I could squeeze one in just on underwriting. Having heard from some peers in the ecosystem talk about step changes in underwriting model quality as a result of AI-related improvements. Curious to maybe sort of a pulse check. Obviously, you guys have made a ton of progress and, you know, hitting target loss rates around MyPay. Sort of curious to pulse check the maturity of models and if there are opportunities that you all see, you know, that didn't exist 12 months ago with respect to model quality. Thank you.

Speaker 5

Yeah. I'll pick that one up. I think Look, there are two things. One, it's important to just bear in mind the key advantages we have on the underwriting side, right? The first one is we, as a primary account, we have a lot of unique data. Secondly, we're actually underwriting against a recurring direct deposit, so we sit top of the repayment stack. Those are two very significant advantages that we leverage. In addition to that, we obviously continue to use those data signals through increasingly sophisticated models. We've been using advanced machine learning on these things for some time. We do think there will be increased advantages with AI, and we want to continue to sort of lead that.

Speaker 5

You know, I think if you have a look at our underwriting performance and you look at something like MyPay, a year ago, we were sitting at 1.7% loss rate, and now we're sitting around 1%. I think that while there are still meaningful improvements ahead with AI, I think a lot of the advantage is coming from the unique data and the position we have in the recurring direct deposit stack.

Speaker 7

Thank you. At this time, we've reached our allotted time for questions. I'll now turn the call back over to Chris Britt for any additional or closing remarks.

Speaker 3

Great. Thanks again. I wanna congratulate the team on a great quarter, and looking forward to seeing you all on the road.

Speaker 7

Thank you. This brings us to the end of today's meeting. We appreciate your time and participation. You may now disconnect.

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