Green Dot Reports Second Quarter 2018 Results
PASADENA, Calif.--(BUSINESS WIRE)--Aug 8, 2018--Green Dot Corporation (NYSE: GDOT) today reported financial results for the quarter ended June 30, 2018.
For the second quarter of 2018, Green Dot reported total operating revenues of $258.3 million and GAAP net income and GAAP diluted earnings per common share of $29.8 million and $0.55, respectively. Green Dot also reported adjusted EBITDA 1 and non-GAAP diluted earnings per common share 1 of $57.6 million and $0.74, respectively.
Said Green Dot Founder and CEO, Steve Streit, “Our long term strategic plan to be a ‘New Kind of Bank’ is yielding very impressive organic results. By a New Kind of Bank, we mean a bank that uses technology, ubiquitous digital and retail brick and mortar distribution and large partnerships to acquire customers instead of branches, and that generates revenue from increasing customer satisfaction, not from increasing customer penalty fees. We’re very pleased with how we are executing both on our longer term corporate strategies and with our progress toward hitting our targets in the 2018 six step plan.”
GAAP financial results for the second quarter of 2018 compared to the second quarter of 2017:Total operating revenues on a generally accepted accounting principles (GAAP) basis were $258.3 million for the second quarter of 2018, up from $222.5 million for the second quarter of 2017, representing a year-over-year increase of 16%. GAAP net income was $29.8 million for the second quarter of 2018, up from $19.3 million for the second quarter of 2017, representing a year-over-year increase of 55%. GAAP diluted earnings per common share was $0.55 for the second quarter of 2018, up from $0.37 for the second quarter of 2017, representing a year-over-year increase of 49%.
Non-GAAP financial results for the second quarter of 2018 compared to the second quarter of 2017: 1Adjusted EBITDA 1 was $57.6 million, or 22.3% of total operating revenues for the second quarter of 2018, up from $50.1 million, or 22.5% of total operating revenues for the second quarter of 2017, representing a year-over-year increase of 15%. Non-GAAP net income 1 was $40.1 million for the second quarter of 2018, up from $29.0 million for the second quarter of 2017, representing a year-over-year increase of 38%. Non-GAAP diluted earnings per share 1 was $0.74 for the second quarter of 2018, up from $0.55 for the second quarter of 2017, representing a year-over-year increase of 35%.
The Company believes the following measures are the primary indicators of quarterly and annual revenues and expenses:
Gross Dollar Volume - represents the total dollar volume of funds loaded to the Company’s account products. The Company uses this metric to analyze the total amount of money moving onto its account programs, determine the overall engagement and usage patterns of its account holder base and serves as a leading indicator of revenue generated through its Account Services segment products, inclusive of interest income generated on deposits held at Green Dot Bank, fees charged to account holders and interchange revenues generated through the spending of account balances.
Number of Active Accounts - represents any bank account within our Account Services segment that is subject to United States Patriot Act compliance and, therefore, requires customer identity verification prior to use and is intended to accept ongoing customer cash or ACH deposits. This includes general purpose reloadable prepaid card accounts, demand deposit or “checking” accounts, and credit card accounts in the Company’s portfolio that had a purchase, deposit or ATM withdrawal transaction during the applicable quarter. The Company uses this metric to analyze the overall size of its active customer base and to analyze multiple metrics expressed as an average across this active account base.
Purchase Volume - represents the total dollar volume of purchase transactions made by the Company’s account holders. This metric excludes the dollar volume of ATM withdrawals. The Company uses this metric to analyze interchange revenue, which is a key component of its financial performance.
Number of Cash Transfers - represents the total number of cash transfer transactions conducted by consumers, such as a point-of-sale swipe reload transaction, the purchase of a MoneyPak or an e-cash mobile remittance transaction marketed under various brand names, that the Company conducted through its retail distributors in a specified period. This metric excludes disbursements made through the Company’s Simply Paid wage disbursement platform. The Company reviews this metric as a measure of the size and scale of its retail cash processing network, as an indicator of customer engagement and usage of its products and services, and to analyze cash transfer revenue, which is a key component of the Company’s financial performance.
Number of Tax Refunds Processed - represents the total number of tax refunds processed in a specified period. The Company reviews this metric as a measure of the size and scale of its tax refund processing platform and as an indicator of customer engagement and usage of its products and services.
The following table shows the Company’s quarterly key business metrics for each of the last six calendar quarters under these revised definitions. Metrics previously reported in the Company’s latest Annual Report on Form 10-K have been restated for comparability with the new or revised metrics reflected above.
For comparative purposes, the following table shows the Company’s quarterly key business metrics for each of the last six calendar quarters under the prior year definitions described in the Company’s latest Annual Report on Form 10-K.
Said Mark Shifke, Green Dot’s Chief Financial Officer, “The strong momentum in the Account Services Segment, including strong results from both the Products and Platform parts of our business, and the Processing and Settlement Segment, inclusive of our various Cash Processing and Tax Refund Processing product lines, combined once again to deliver truly outstanding organic results for the quarter. Clearly, we are very pleased with both our results and the underlying strategies and initiatives driving them. This strong performance enables us to once again raise both top and bottom line full year guidance for 2018.”
Updated Outlook for 2018
Green Dot has provided its updated outlook for 2018. Green Dot’s outlook is based on a number of assumptions that management believes are reasonable at the time of this earnings release. Information regarding potential risks that could cause the actual results to differ from these forward-looking statements is set forth below and in Green Dot’s filings with the Securities and Exchange Commission.
Total Operating RevenuesGreen Dot now expects its full year total operating revenues to be between $1,022 million and $1,032 million, versus its previous guidance range of $1,002 million and $1,012 million. For Q3, Green Dot expects total operating revenues to be approximately $222 million.
Adjusted EBITDA 2Green Dot now expects its full year adjusted EBITDA 2 to be between $244 million and $248 million, versus its previous guidance range of $240 million and $245 million. For Q3, Green Dot expects adjusted EBITDA 2 to be approximately $38 million.
Non-GAAP EPS 2Green Dot now expects its full year non-GAAP EPS 2 to be between $3.03 and $3.08, versus its previous guidance range of $2.93 and $3.00. For Q3, Green Dot expects non-GAAP EPS 2 to be approximately $0.41.
The components of Green Dot’s non-GAAP EPS 2 guidance range are as follows:
Supplemental Financial Presentation Information
As mentioned during Green Dot’s previous quarterly earnings call on February 21, 2018, Green Dot will adjust its presentation of revenue beginning in 2019 to better reflect its successful evolution into a diverse technology-focused bank holding company that generates its revenue through a unique “Products and Platform” operating model.
Beginning in 2019, Green Dot will be presenting net interest income generated at Green Dot Bank from the investment of customer deposits as a component of GAAP total operating revenues, whereas today that item is reported below operating income and is consolidated along with net interest income generated outside the bank. Net interest income at Green Dot Bank is becoming an increasingly important revenue component as Green Dot Bank’s ability to invest its growing customer balances and generate interest income is one of several unique advantages of Green Dot being not just a leading consumer technology company, but also a federally regulated bank. Net interest income generated outside of Green Dot Bank will continue to be reported below the line as it is currently.
Also beginning in 2019, Green Dot will be presenting a new non-GAAP revenue figure that reduces GAAP total operating revenue by commissions and certain processing-related costs associated with certain “Banking as a Service,” or “BaaS,” partner programs, where the partner and not Green Dot controls customer acquisition. Green Dot believes that a net revenue presentation will better reflect the relevant amount of revenue Green Dot generates in respect of these types of BaaS platform programs.
The following table provides supplemental financial presentation information for second quarter 2018 and 2017 under the new format discussed above:
The Company will host a conference call to discuss second quarter 2018 financial results today at 5:00 p.m. ET. Hosting the call will be Steve Streit, Chief Executive Officer, and Mark Shifke, Chief Financial Officer. The conference call can be accessed live over the phone by dialing (888) 348-8307, or for international callers (412) 902-4242. A replay will be available approximately two hours after the call concludes and can be accessed by dialing (844) 512-2921, or for international callers (412) 317-6671; and entering the conference ID 10122519. The replay of the webcast will be available until Wednesday, August 15, 2018. The call will be webcast live from the Company’s investor relations website at http://ir.greendot.com/.
This earnings release contains forward-looking statements, which are subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements include, among other things, statements regarding the Company’s future performance contained under “Updated Outlook for 2018” and in the quotes of its executive officers and other future events that involve risks and uncertainties. Actual results may differ materially from those contained in the forward-looking statements contained in this earnings release, and reported results should not be considered as an indication of future performance. The potential risks and uncertainties that could cause actual results to differ from those projected include, among other things, the timing and impact of revenue growth activities, the Company’s dependence on revenues derived from Walmart, impact of competition, the Company’s reliance on retail distributors for the promotion of its products and services, demand for the Company’s new and existing products and services, continued and improving returns from the Company’s investments in new growth initiatives, potential difficulties in integrating operations of acquired entities and acquired technologies, the Company’s ability to operate in a highly regulated environment, changes to existing laws or regulations affecting the Company’s operating methods or economics, the Company’s reliance on third-party vendors, changes in credit card association or other network rules or standards, changes in card association and debit network fees or products or interchange rates, instances of fraud developments in the prepaid financial services industry that impact prepaid debit card usage generally, business interruption or systems failure, and the Company’s involvement litigation or investigations. These and other risks are discussed in greater detail in the Company’s Securities and Exchange Commission filings, including its most recent annual report on Form 10-K and quarterly report on Form 10-Q, which are available on the Company’s investor relations website at ir.greendot.com and on the SEC website at www.sec.gov. All information provided in this release and in the attachments is as of August 8, 2018, and the Company assumes no obligation to update this information as a result of future events or developments.
About Non-GAAP Financial Measures
To supplement the Company’s consolidated financial statements presented in accordance with accounting principles generally accepted in the United States of America (GAAP), the Company uses measures of operating results that are adjusted to exclude net interest income and expense; income tax benefit and expense; depreciation and amortization, including amortization of acquired intangibles; employee stock-based compensation and related employer payroll taxes; incremental expenses related to the delay in migration of the Company’s remaining customer accounts from its former processor to its new processor; change in the fair value of contingent consideration; transaction costs; impairment charges; extraordinary severance expenses; legal settlement expenses; other charges and income; and income tax effects. This earnings release includes adjusted EBITDA, non-GAAP net income, and non-GAAP earnings per share. It also includes full-year 2018 guidance for adjusted EBITDA, non-GAAP net income and non-GAAP EPS. These non-GAAP financial measures are not calculated or presented in accordance with, and are not alternatives or substitutes for, financial measures prepared in accordance with GAAP, and should be read only in conjunction with the Company’s financial measures prepared in accordance with GAAP. The Company’s non-GAAP financial measures may be different from similarly-titled non-GAAP financial measures used by other companies. The Company believes that the presentation of non-GAAP financial measures provides useful information to management and investors regarding underlying trends in its consolidated financial condition and results of operations. The Company’s management regularly uses these supplemental non-GAAP financial measures internally to understand, manage and evaluate the Company’s business and make operating decisions. For additional information regarding the Company’s use of non-GAAP financial measures and the items excluded by the Company from one or more of its historic and projected non-GAAP financial measures, investors are encouraged to review the reconciliations of the Company’s historic and projected non-GAAP financial measures to the comparable GAAP financial measures, which are attached to this earnings release, and which can be found by clicking on “Financial Information” in the Investor Relations section of the Company’s website at http://ir.greendot.com/.
About Green Dot
Green Dot Corporation is a pro-consumer bank holding company and financial technology innovator with a mission to reinvent personal banking for the masses. Green Dot employs a unique “products and platform” operating model whereby it uses its robust banking and technology assets to design, build and distribute its own branded financial services products directly to consumers through a large-scale omni-channel national distribution platform; while also allowing qualified third party partners to access those same banking and technology assets to design, build and distribute their own bespoke financial services directly to their consumers through their own distribution platforms. Through its six revenue divisions plus Green Dot Bank, Green Dot is a leading provider of prepaid cards, debit cards, checking accounts, secured credit cards, payroll debit cards, consumer cash processing services, wage disbursements and tax refund processing services. With approximately 100,000 major name U.S. retail stores selling its products, several leading direct-to-consumer websites, thousands of tax preparation offices, several apps available in the two leading app stores and distribution through several enterprise-scale “Banking as a Service,” or BaaS, partnerships, Green Dot is one of the most broadly distributed banking franchises in the United States. Green Dot Corporation is headquartered in Pasadena, California, with additional facilities throughout the United States and in Shanghai, China.
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