Green Dot (GDOT)

Q3 2011 Earnings Call

October 27, 2011 5:00 pm ET


Christopher Mammone -

John L. Keatley - Chief Financial Officer

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


Wayne Johnson - Raymond James & Associates, Inc., Research Division

Andrew W. Jeffrey - SunTrust Robinson Humphrey, Inc., Research Division

Bryan Keane - Deutsche Bank AG, Research Division

James E. Friedman - Susquehanna Financial Group, LLLP, Research Division

Ashwin Shirvaikar - Citigroup Inc, Research Division

John J. Rowan - Sidoti & Company, LLC

Jason Kupferberg - Jefferies & Company, Inc., Research Division

Tien-Tsin T Huang - JP Morgan Chase & Co, Research Division

Roman Leal - Goldman Sachs Group Inc., Research Division

Bill Carcache - Macquarie Research

Thomas C. McCrohan - Janney Montgomery Scott LLC, Research Division

Gil B. Luria - Wedbush Securities Inc., Research Division

Robert P. Napoli - William Blair & Company L.L.C., Research Division

Glenn Fodor - Morgan Stanley, Research Division



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Good day, and welcome to the Green Dot Corporation Third Quarter 2011 Earnings Conference Call. [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 for Green Dot. Mr. Mammone, the floor is yours, sir.

Christopher Mammone

Thank you, and good afternoon. By now, everyone should have access to our third 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 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're providing 2011 guidance on a non-GAAP basis with a reconciliation to 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. Most are discussed in our 2010 annual report on Form 10-K, 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 W. Streit

Chris, thank you, and welcome to Green Dot, and welcome everyone to our Q3 earnings call.

Also with me this afternon is Green Dot's Chief Financial Officer and my good friend, John Keatley. We appreciate you all listening in, so let's dive straight into an overview of our Q3 financial results.

We're pleased to report that in Q3, we achieved yet another very successful quarter, and here are some some highlights for you.

Non-GAAP total operating revenues increased 26% for the quarter, the $119 million. Adjusted EBITDA also grew 26% for the quarter to $31 million. As a reminder, our financial results for the quarter are now reported on an apples-to-apples comparison to last year because we have now fully lapped the Walmart renewal from back in May 2010.

Adjusted EBITDA margins were flat year-over-year at 26%. I'm pleased with this result given that we continue to spend at historically high levels as we invest in people, new initiatives and infrastructure.

Furthermore, you may recall that the midpoint of our previously announced full year 2011 margin guidance is approximately 24%. So as you can see, we're tracking well above that. The number of new cards activated grew by 33% year-over-year to 2 million activations in the quarter. New customers who reloaded their card for the first time also grew a robust 33% year-over-year to nearly 850,000 new reloading cardholders in the quarter. So we're not just attracting more customers, we're also attracting more of our most profitable customers. By the way, nearly half of all activations in Q3 were customers who have purchased at least one other Green Dot card in the past.

Our reported data makes it fairly easy to calculate churn and retention, if you will, on a plastic-by-plastic basis. But if you were to think about churn and retention on a customer basis, you can see that we retain many customers for many years, although that same customer may buy multiple cards over their lifetime with us.

The number of active cards as of the end of Q3 was up 27% year-over-year to 4.2 million active cards. Gross dollar volume once again displayed very solid growth in the quarter, up 63% year-over-year to $4.1 billion loaded to our products in Q3.

The ramp-up in direct deposit activity on our cards continued in Q3, with dollars loaded via direct deposit up 126% year-over-year, representing 51% of GDV loaded to our cards in Q3.

And finally, cash transfers to our Green Dot reload network increased by 29% year-over-year to 8.9 million cash transfers in the quarter.

So I really want to thank and congratulate the entire Green Dot organization for delivering another outstanding quarter.

John Keatley will provide some more detailed color on these results when I hand the call over to him in just a few minutes.

And I'll provide you with some business update. You may have read about a recent agreement with Blackhawk Network to sell Green Dot brand general purpose reloadable the debit cards through their network of retail partners. This deal has the potential to increase our distribution around 10,000 additional locations over time and greatly enhances our reach into the supermarket channel, with chains like Safeway, Albertsons and others.

I'm also pleased to announce that Green Dot launch tour is in the process of launching new product SKUs and new merchandising programs at Walmart and Walgreens and with other retailers still to come.

In Walmart, we have agreed to double the number of products we sell by adding to the current MoneyCard suite of offerings, including 2 new MasterCard branded products that are targeted to specific use of segments of Walmart customers. We expect the expanded MoneyCard category of the new merchandising and placement initiatives in other major retailers nicely contribute to the new card activations number.

Still very early on the development of our online customer acquisition channel, but are pleased to report that new cards activated and funded through and now ranks as our fourth largest distributor of our cards.

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