Green Dot Corporation (



Q4 2011 Earnings Call

January 27, 2012 5:00 PM ET


Chris Mammone – VP, IR

Steven Streit – Chairman, President and CEO

John Keatley – CFO

William Sowell – COO


Glenn Fodor – Morgan Stanley

David Scharf – JMP Securities

Ramsey El-Assal – Jefferies

Sakhrani – KBW

Julio Quinteros – Goldman Sachs

Bryan Keane – Deutsche Bank

Jim Kissane – Credit Suisse

Tien-Tsin Huang – JP Morgan

John Rowan – Sidoti & Company

Greg Smith – Sterne Agee

Gil Luria – Wedbush Securities

Bob Napoli – William Blair

Andrew Jeffrey – Suntrust

Mike – Piper Jaffray



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Good afternoon, and welcome to the Green Dot Corporation Fourth Quarter 2011 Earnings Conference Call. All participants will be in listen-only mode. (Operator Instructions) Please note this event is being recorded. I would now like to turn the conference over to Chris Mammone, Vice President of Investor Relations. Please go ahead.

Chris Mammone

Thank you, and good afternoon. By now, everyone should have access to our fourth quarter 2011 press release. You can find it at, under the Investor Relations section. Throughout this conference call, we will be presenting non-GAAP financial information, including non-GAAP total operating revenues, adjusted EBITDA, non-GAAP net income, non-GAAP diluted earnings per share and free cash flow.

This information is now calculated in accordance with GAAP and may be calculated differently than other companies’ similarly titled non-GAAP information.

Quantitative reconciliations of our non-GAAP financial information to their most directly comparable GAAP financial information appears in today’s press release and in the appendix of the presentation that accompanies this call.

Also, we’re providing 2012 guidance on a non-GAAP basis with a reconciliation to GAAP, which appears on the financial information

GAAP, which appears on the financial information section of our Investor Relations website.

Finally, before we begin our formal remarks, we need to remind everyone that part of our discussion today will include forward-looking statements. These statements are subject to numerous risks and uncertainties that could cause actual results to differ materially from what we expect, and you should, therefore, not put undue reliance on them. Some of these risks are mentioned in today’s Form 8-K filing with the Securities and Exchange Commission. Others are discussed in our quarterly report on Form 10-Q for the third quarter which is available at

With those formalities out of the way, I would like to turn the call over to Steve Streit, Founder, Chairman and Chief Executive Officer of Green Dot Corporation. Steve?

Steven Streit

Great. Thank you Chris and welcome everyone to our Q4 earnings call. Also with me this afternoon is Green Dot’s CFO John Keatley and after my section John will walk you through some of the financial highlights for the quarter and we’ll also provide our 2012 financial outlook.

Well Q4 was a solid quarter and 2011 was another strong year for Green Dot. Our Q4 non-GAAP revenue grew 26% year-over-year to $123 million and our full year non-GAAP revenue grew 29% versus 2010 to $485 million. Q4 non-GAAP earnings grew 40% year-over-year to $17.8 million and for the full year we grew non-GAAP earnings by 26% to $68.7 million.

Active cards grew to $4.2 million as of December 31 representing year-over-year growth of 24%. We’re very pleased to continue our track record of high growth during 2011 and as outlined in the guidance portion of this call little bit later we believe there is much more to come in 2012.

Clearly one of the year’s biggest achievements was receiving approval from the Federal Reserve Board of Governors to purchase Bonneville Bank in Provo, Utah and become a bank holding company. This is a huge milestone for Green Dot and as you can imagine we’re very proud. We believe that owning a bank and becoming a bank holding company will provide some very important benefits for a company our customers and our shareholders. First shareholders. First Green Dot as a bank holding company is now overseen directly by the Board of Governors of the Federal Reserve System and our subsidiary bank Green Dot Bank is now regulated directly by the Federal Reserve in the State of Utah with the FDIC providing deposit insurance.

In the long run we believe that being directly supervised our regulators will understand our business top to bottom will provide a sustainable advantage versus our structure as a non-bank entity with multiple regulators at the state and federal level and subject to the review and consent of third-party bank issuing partners and their regulars.

Second, we now have greater creative freedom of course subject to applicable banking rules to develop and launch new products and services. Our goal is to always be an innovation machine at Green Dot and we believe that the bank will provide increased flexibility and speed to market as we rollout a wider range of products to meet the needs of new and existing Green Dot customers.

Third becoming the bank holding company strengthens our competitive advantage as our experience has been that many public sector entities and other institutions are only allowed the contract directly with the bank for financial services. For example the United States Treasury, many state governments have regulations that require them to contract directly only with banks.

We believe that having the bank that can deal directly with our clients will mitigate many risks inherent in the non-bank contracting structure that can help open new doors for us with government accounts and other organizations that of similar bank required.

Fourth we expect that acquiring the bank will result in cost savings as Green Dot accounts migrate to our bank from Synovus Bank. Our bank team led by Lewis Goodwin is busy beginning the migration of accounts current a file of the Synovus Bank on to the new Green Dot Bank and we expect a substantial majority of the Green Dot branded card portfolio that will be issued out of Green Dot Bank by the end of 2012.

Over time we believe our bank will also contribute to our company’s consolidated revenue and earnings to be a float income. Finally, we believe the level of regulatory accountability and financial transparency required to be a publicly traded bank

Required to be a publicly traded bank holding company is a good thing for the long term growth and long term sustainability of our company and that should benefit our investors.

On the topic of vertical integration, we’re pleased to tell you about the acquisition of certain assets of eCommLink also known as ECL. ECL was a card transaction processor located in Nevada, a specialized and prepaid card processing for a number of program. They’ve purchased their technology assets including their processing platform. Our technology team headed by John MacIlwaine will build upon that platform in order to customize it and make it enterprise ready for Green Dot’s full ray of offering. That build out will cost us so many of course, but once in production we expect this investment to generate significant cost savings and margin expansion.

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