BM Technologies, Inc. (BMTX)·Q2 2024 Earnings Summary

Executive Summary

• Q2 2024 was seasonally weak but operationally constructive: operating revenue was $12.5M (down sequentially from $16.2M in Q1, roughly flat YoY), GAAP diluted EPS was $(0.41), and Core EBITDA was $(0.9)M; one-time NextGen costs of $1.6M weighed on results .
• Interchange and card revenue rose 57% YoY to $2.3M, validating the Durbin-exempt bank switch; servicing fees fell on lower average serviced deposits (primarily BaaS) .
• Management maintained an outlook for positive Core EBITDA in FY 2024 and highlighted a potential BaaS wind-down that could lift pro forma Core EBITDA by ≥$1M per quarter on a run-rate basis .
• Strategic/product catalysts: NextGen platform completed, rewards engine launched (30% adoption among actives; +1.4 transactions/month cohort uplift), and 15 IDV SaaS clients signed YTD to address university enrollment fraud .

What Went Well and What Went Wrong

What Went Well

• Durbin-exempt economics drove a 57% YoY increase in interchange and card revenue to $2.3M, supporting the strategy shift to a new partner bank .
• Technology transformation completed; cash-back rewards launched in July with early traction: 30% adoption among active users, +1.4 transactions per month in the cohort, and ~$20K rebates paid to students in the first month .
• IDV SaaS product gaining momentum (15 universities YTD), designed to reduce enrollment fraud and deepen higher education relationships; can be sold beyond existing disbursement clients .

What Went Wrong

• Servicing fees declined YoY (to $6.9M vs $7.7M) amid lower average serviced deposits (total $685M vs $922M YoY), mostly due to BaaS deposit runoff and rate sensitivity; total spend fell 4% YoY .
• Seasonally weak quarter plus $1.6M one-time NextGen implementation costs pressured profitability (GAAP EPS $(0.41); Core EBITDA $(0.9)M; Core EBITDA margin −7%), reversing Q1’s positive Core EBITDA .
• BaaS remains unprofitable in the current regulatory and interest-rate environment; management signaled an expiration in Feb 2025 and potential wind-down considerations .

Financial Results

Summary vs prior periods and estimates

Note: Wall Street consensus estimates via S&P Global were unavailable for BMTX; beat/miss vs estimates cannot be determined.

Revenue Breakdown (segments)

KPIs

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• “Our Q2 2024 interchange and card revenue increased 57% year-over-year, validating our strategy of switching to a Durbin-exempt bank.” — Luvleen Sidhu .
• “Average serviced deposits totaled $685 million… a decrease from $828 million for the first quarter of 2024 and $922 million in the second quarter of 2023… substantially all of the reduction… occurred within our BaaS vertical.” — Ajay Asija .
• “We have launched our new platform architecture… the Cash Back Rewards Engine… and our Identity Verification Service (IDV)… we have gone live with 2 Higher Education clients, with 13 others in implementation in Q2.” — James Donahue .
• “In the event of a wind-down [of BaaS], we expect our pro forma core EBITDA to increase at least $1 million per quarter on a run rate basis.” — Ajay Asija .
• “We anticipate delivering positive core EBITDA for the full year 2024.” — Ajay Asija .

Q&A Highlights

• BaaS wind-down logistics: Management acknowledged wind-down parameters exist but did not detail notice periods; reiterated unprofitability of BaaS under current conditions .
• NextGen costs: $1.6M implementation in Q2 is truly one-time; no expectation of recurrence in Q3/Q4 .
• Upcoming product suite: “Finance, insurance and wellness benefits” to be launched before year-end; details via a forthcoming press release .
• IDV reach: Product is being sold beyond current disbursement clients; viewed as a door-opener for new university relationships and integration synergies .
• Rewards adoption/behavior: 30% of actives enrolled within first month, cohort shows +1.4 transactions/month; sign-up designed to be friction-light (three screens) .
• AI impact: Proprietary LLM aimed at service quality and OpEx reduction (call center, engagement) rather than near-term revenue monetization .

Estimates Context

• Wall Street consensus estimates via S&P Global were unavailable for BMTX (we attempted retrieval but mapping was not available), so formal beat/miss assessments versus consensus cannot be provided for Q2 2024. The absence of S&P Global consensus limits estimate comparison for revenue and EPS.

Key Takeaways for Investors

• Durbin-exempt interchange uplift is translating into tangible revenue improvement (57% YoY in Q2), and should be a tailwind as student spend increases into the fall seasonality .
• Near-term profitability headwinds reflect seasonality plus $1.6M one-time NextGen costs; with those costs behind and fall peak ahead, Core EBITDA trajectory should improve in H2 if deposit trends stabilize .
• BaaS optionality: A wind-down post-Feb 2025 could structurally improve Core EBITDA by ≥$1M/quarter run-rate; monitor management’s strategic decision path and timing .
• Product-led growth: Rewards engine early metrics are encouraging; IDV SaaS broadens university monetization and strengthens competitive moat; forthcoming “finance/insurance/wellness” bundle may further drive engagement .
• Rate sensitivity remains material (every 25 bps cut ~$(2)M revenue headwind previously disclosed); macro trajectory of rates will influence servicing fees and profitability .
• Strategic interest: Board exploring options amid inbound interest for the higher ed business at values above the current stock price; potential corporate actions could be a catalyst .
• Trading setup: Into the fall enrollment peak, watch for sequential revenue/Core EBITDA improvement, rewards adoption expansion, and IDV client adds; stock narrative likely shifts on BaaS strategy clarity and concrete H2 operating leverage .