Green Dot (GDOT)

Q2 2011 Earnings Call

July 28, 2011 4:30 pm ET


John Keatley - Chief Financial Officer

Dara Dierks -

Steven Streit - Founder, Chairman, Chief Executive Officer and President


Glenn Fodor - Morgan Stanley

Christopher Mammone - Deutsche Bank AG

John Rowan - Sidoti & Company, LLC

Tien-Tsin Huang - JP Morgan Chase & Co

Jason Kupferberg - Jefferies & Company, Inc.

Roman Leal - Goldman Sachs Group Inc.

Andrew Jeffrey - SunTrust Robinson Humphrey, Inc.

Ashwin Shirvaikar - Citigroup Inc

Gil Luria - Wedbush Securities Inc.



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Greetings, and welcome to the Green Dot Corporation Second Quarter 2011 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Dara Dierks, an associate from Green Dot Investor Relations. Ms. Dierks, you may begin.

Dara Dierks

Thank you, operator. By now everyone should have access to our second quarter 2011 press release. It can also be found 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 and non-GAAP diluted earnings per share. 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 are providing 2011 guidance on a non-GAAP basis with a reconciliation to GAAP, which appears in the financial information section of our IR site.

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. Similar risks are mentioned in today's Form 8-K filing with the Securities and Exchange Commission. Others are discussed in our 2010 annual report on Form 10-K, which is available at

With that, I would like to turn the call over to Steve Streit, Founder, Chairman and CEO of Green Dot Corporation. Steve?

Steven Streit

Thank you, Dara, and welcome everyone to our Q2 earnings call. With me here at Monrovia, California headquarters is my close partner and Green Dot CFO, John Keatley. There's a lot of information we want to share with you today, including important updates on a variety of regulatory matters, and we appreciate you listening in.

So first, let's start with our Q2 financial results. Every quarter since going public almost exactly 1 year ago, Green Dot has met or exceeded the guidance we gave on the road show, and we have consistently achieved the financial results needed to meet or beat our annual guidance for 2011. We know there was some concern from the street last quarter that Q1 was huge, but it's as good as it gets, and that we couldn't continue to grow at that pace.

Well, while it's true that Q1 was our biggest season, we're proud to say our goal is to make sure that high growth is always in season at Green Dot, and in Q2 we've done that. The dot is green indeed, and I'll share with you some highlights.

Non-GAAP total operating revenues increased 29% for the quarter to $119.4 million. Adjusted EBITDA grew 26% for the quarter to $29.1 million. On an apples-to-apples basis adjusted for the Walmart renewal in May of 2010, adjusted EBITDA actually grew a stunning 42%. I'm also pleased to report that while growing both revenue and adjusted EBITDA nicely, we also expanded margins by 2 percentage points on a pro forma basis despite the heavy investments we continue to make in staffing, product development, marketing and the bank holding company application.

The number of new cards activated increased 23% year-over-year to 1.8 million new accounts activated in the quarter. New customers who reloaded their card for the first time grew 29% year-over-year to nearly 800,000 new reloading cardholders in the quarter. The number of active cards at the end of Q2 was up 27% year-over-year, a 4.1 million active cards.

Gross dollar volume was again way up in the quarter, up 53% year-over-year to $3.6 billion loaded to our products in Q2. Direct deposit activity on our cards continue to soar in Q2, with dollars loaded via direct deposit of 103%, representing 48% of GDV loaded to our cards.

And finally, cash transfers through our Green Dot reload network increased by 29% year-over-year, $8.3 million cash transfers in the quarter. I want to thank and congratulate our Green Dot team members from across the company and around the world who worked so hard to deliver another outstanding quarter. John Keatley will provide some more detailed color on these metrics in his financial report coming in just a few minutes.

On the biz dot [ph] front, I want to welcome some new clients of note to our company. First, I'm pleased to welcome American Express as a customer of our Green Dot reload network. Green Dot is proud to be the only method of reloading cash through an American Express prepaid card. This includes their AMEX PASS prepaid card targeted to young people and their new GPR AMEX prepaid card targeted to bank customers that you have all heard so much about. We're proud of our partnership with American Express and are excited they've chosen Green Dot to help them serve new segments of prepaid customers with their new and innovative products.

Next, I'd like to welcome ADP, the payroll processing giant, as another new customer to our company. ADP has a new payroll prepaid card product in the market called ALINE. It's issued by First California Bank, and that card will be reloadable on the Green Dot reload network so the customers can be receiving their payroll on the card. They can also deposit cash in any one of our 55,000 Green Dot retail locations nationwide.

Our Green Dot interactive channel continues to click along nicely and is really starting to deliver meaningful value to the company. New cards activated and funded through and increased 90% year-over-year, and we're still very early on in this channel's development. Our online sales division is now a top 5 card acquisition platform for Green Dot and has grown to become larger than many of our retail partners at this point.

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