Green Dot Reports Second Quarter 2011 Financial Results
Green Dot Reports Second Quarter 2011 Financial Results
Jul 28, 2011
MONROVIA, Calif., Jul 28, 2011 (BUSINESS WIRE) -- Green Dot Corporation (NYSE: GDOT), a leading prepaid financial services company, today reported financial results for the second quarter ended June 30, 2011.
"We are pleased with our second quarter results. In Q2 we reported a 29% increase in non-GAAP total operating revenues to $119.4 million and a 26% increase in EBITDA to $29.1 million," said Steve Streit, Green Dot's Chairman and Chief Executive Officer. "We continue to be on track with our full year 2011 guidance of non-GAAP total operating revenues and adjusted EBITDA."
GAAP financial results for the second quarter of 2011 compared to the second quarter of 2010:
- Total operating revenues on a generally accepted accounting principles (GAAP) basis increased 27% to $115.0 million for the second quarter of 2011 from $90.3 million for the second quarter of 2010
- GAAP net income was $12.1 million for the second quarter of 2011 compared to $12.5 million for the second quarter of 2010
- GAAP basic and diluted earnings per common share were $0.29 and $0.27, respectively, for the second quarter of 2011 and $0.32 and $0.29, respectively, for the second quarter of 2010
Non-GAAP financial results for the second quarter of 2011 compared to the second quarter of 2010:1
- Non-GAAP total operatingrevenues1increased 29% to $119.4 million for the second quarter of 2011 from $92.8 million for the second quarter of 2010
- Non-GAAP net income1 increased 5% to $16.3 million for the second quarter of 2011 from $15.5 million for the second quarter of 2010
- Non-GAAP diluted earnings per share1 was $0.37 for the second quarter of 2011 and $0.36 for the second quarter of 2010
- EBITDA plus employee stock-based compensation expense and stock-based retailer incentive compensation expense (adjusted EBITDA1) increased 26% to $29.1 million for the second quarter of 2011 compared to $23.1 million for the second quarter of 2010
Key business metrics for the quarter ended June 30, 2011:
- Number of general purpose reloadable (GPR) debit cards activated was 1.82 million for the second quarter of 2011, an increase of 23% over the second quarter of 2010
- Number of cash transfers was 8.28 million for the second quarter of 2011, an increase of 29% over the second quarter of 2010
- Number of active cards (as of quarter end) was 4.10 million, an increase of 27% over the second quarter of 2010
- Gross dollar volume was $3.6 billion for the second quarter of 2011, an increase of 53% over the second quarter of 2010
Refer to the Company's Quarterly Report on Form 10-Q for a description of these key business metrics.
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1 |
Reconciliations of total operating revenues to non-GAAP total operating revenues, net income to non-GAAP net income, diluted earnings per share to non-GAAP diluted earnings per share and net income to adjusted EBITDA, respectively, are provided in the tables immediately following the consolidated statements of cash flows. Additional information about the Company's non-GAAP financial measures can be found under the caption "About Non-GAAP Financial Measures" below. | |
"Our results in the second quarter show that our growth continues at a rapid pace. Non-GAAP total operating revenues grew 29% year-over-year on growth in our active card portfolio of 27%. Additionally, GDV grew 48% year-over-year to $3.6 billion, which shows that our customers continue to incorporate our products into their everyday lives and are using them more frequently. GAAP net income declined slightly year-over-year primarily because Q2 2010 benefited from an exceptionally low tax rate and lower commission rates paid to one of our largest distribution partners," said John Keatley, Green Dot's Chief Financial Officer.
The following tables show the Company's quarterly key business metrics for each of the last six calendar quarters:
| Q2
2011 |
Q1
2011 |
Q4
2010 |
Q3
2010 |
Q2
2010 |
Q1
2010 |
|||||||||||||||||||||
| (in millions) | ||||||||||||||||||||||||||
| Number of GPR cards activated | 1.82 | 2.21 | 1.53 | 1.47 | 1.48 | 1.79 | ||||||||||||||||||||
| Number of cash transfers | 8.28 | 7.98 | 7.26 | 6.89 | 6.41 | 5.93 | ||||||||||||||||||||
| Number of active cards (as of quarter end) | 4.10 | 4.28 | 3.40 | 3.28 | 3.24 | 3.37 | ||||||||||||||||||||
| Gross dollar volume | $ | 3,632 | $ | 4,609 | $ | 2,672 | $ | 2,516 | $ | 2,375 | $ | 2,846 | ||||||||||||||
Conference Call
The Company will host a conference call to discuss second quarter 2011 financial results today at 4:30 pm ET. In addition to the conference call, there will be a webcast presentation of accompanying slides accessible on the Company's investor relations website. Hosting the call will be Steve Streit, Chief Executive Officer, and John Keatley, Chief Financial Officer. The conference call can be accessed live over the phone by dialing (877) 407-4018, or (201) 689-8471 for international callers. A replay will be available one hour after the call and can be accessed by dialing (877) 870-5176 or (858) 384-5517 for international callers; the conference ID is 375932. The live call and the replay, along with supporting materials, can also be accessed through the Company's investor relations website at http://ir.greendot.com. A replay of the webcast will be available for 30 days.
Forward-Looking Statements
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 full year 2011 guidance 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 Company's dependence on revenues derived from Walmart and three other retail distributors, the Company's reliance on retail distributors for the promotion of its products and services, demand for the Company's products and services, competition and the Company's ability to operate in a highly regulated environment. These and other risks are discussed in greater detail in the Company's Securities and Exchange Commission filings, including its quarterly report on Form 10-Q, which is available on the Company's investor relations website at http://ir.greendot.com and on the SEC website at http://www.sec.gov. All information provided in this release and in the attachments is as of July 28, 2011, 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 GAAP, the Company uses measures of operating results that are adjusted to exclude net interest income, income tax expense, depreciation and amortization, employee stock-based compensation expense and stock-based retailer incentive compensation expense. This earnings release includes non-GAAP total operating revenues, non-GAAP net income, non-GAAP earnings per share data, non-GAAP weighted-average shares issued and outstanding and adjusted EBITDA. 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 accounting principles generally accepted in the United States of America, 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 non-GAAP financial measures, investors are encouraged to review the reconciliations of the Company's 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 is a leading prepaid financial services company providing simple, low-cost and convenient money management solutions to a broad base of U.S. consumers. Green Dot also owns and operates the Green Dot Network, the nation's leading prepaid card reload network. Green Dot products are available online at http://www.greendot.com and at approximately 55,000 retail stores, including Walmart, Walgreens, CVS, Rite Aid, 7-Eleven, Kroger, Kmart, Meijer, and Radio Shack. Green Dot is headquartered in the greater Los Angeles area. For more details, visit http://www.greendot.com.
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GREEN DOT CORPORATION CONSOLIDATED BALANCE SHEETS |
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| June 30, 2011 |
December 31, 2010 |
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| (Unaudited) | ||||||||||
| (in thousands, except par value) | ||||||||||
| Assets | ||||||||||
| Current assets: | ||||||||||
| Unrestricted cash and cash equivalents | $ | 172,961 | $ | 167,503 | ||||||
| Investment securities available-for-sale, at fair value | 25,988 | -- | ||||||||
| Settlement assets | 17,070 | 19,968 | ||||||||
| Accounts receivable, net | 29,320 | 33,412 | ||||||||
| Prepaid expenses and other assets | 9,217 | 8,608 | ||||||||
| Income tax receivable | 4,237 | 15,004 | ||||||||
| Net deferred tax assets | 4,911 | 5,398 | ||||||||
| Total current assets | 263,704 | 249,893 | ||||||||
| Restricted cash | 10,294 | 5,135 | ||||||||
| Investment securities available-for-sale, at fair value | 14,039 | -- | ||||||||
| Accounts receivable, net | 3,658 | 2,549 | ||||||||
| Prepaid expenses and other assets | 697 | 643 | ||||||||
| Property and equipment, net | 22,345 | 18,034 | ||||||||
| Deferred expenses | 7,187 | 9,504 | ||||||||
| Total assets | $ | 321,924 | $ | 285,758 | ||||||
| Liabilities and Stockholders' Equity | ||||||||||
| Current liabilities: | ||||||||||
| Accounts payable | $ | 15,942 | $ | 17,625 | ||||||
| Settlement obligations | 17,070 | 19,968 | ||||||||
| Amounts due to card issuing banks for overdrawn accounts | 39,948 | 35,068 | ||||||||
| Other accrued liabilities | 15,305 | 21,633 | ||||||||
| Deferred revenue | 12,698 | 17,214 | ||||||||
| Total current liabilities | 100,963 | 111,508 | ||||||||
| Other accrued liabilities | 5,304 | 3,737 | ||||||||
| Deferred revenue | 31 | 44 | ||||||||
| Net deferred tax liabilities | 5,010 | 5,338 | ||||||||
| Total liabilities | 111,308 | 120,627 | ||||||||
| Stockholders' equity: | ||||||||||
| Class A common stock, $0.001 par value; 100,000 shares authorized as of June 30, 2011 and December 31, 2010; 25,002 and 14,762 shares issued and outstanding as of June 30, 2011 and December 31, 2010, respectively | 23 | 13 | ||||||||
| Class B convertible common stock, $0.001 par value, 100,000 shares authorized as of June 30, 2011 and December 31, 2010; 17,161 and 27,091 shares issued and outstanding as of June 30, 2011 and December 31, 2010, respectively | 17 | 27 | ||||||||
| Additional paid-in capital | 116,125 | 95,433 | ||||||||
| Retained earnings | 94,429 | 69,658 | ||||||||
| Accumulated other comprehensive income | 22 | -- | ||||||||
| Total stockholders' equity | 210,616 | 165,131 | ||||||||
| Total liabilities and stockholders' equity | $ | 321,924 | $ | 285,758 | ||||||
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GREEN DOT CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) | |||||||||||||||||||
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||
| 2011 | 2010 | 2011 | 2010 | ||||||||||||||||
| (in thousands, except per share data) | |||||||||||||||||||
| Operating revenues: | |||||||||||||||||||
| Card revenues | $ | 53,924 | $ | 42,228 | $ | 108,248 | $ | 84,386 | |||||||||||
| Cash transfer revenues | 32,387 | 24,364 | 63,536 | 47,146 | |||||||||||||||
| Interchange revenues | 33,075 | 26,183 | 70,789 | 54,062 | |||||||||||||||
| Stock-based retailer incentive compensation | (4,356 | ) | (2,457 | ) | (10,236 | ) | (2,457 | ) | |||||||||||
| Total operating revenues | 115,030 | 90,318 | 232,337 | 183,137 | |||||||||||||||
| Operating expenses: | |||||||||||||||||||
| Sales and marketing expenses | 42,774 | 31,433 | 85,313 | 57,472 | |||||||||||||||
| Compensation and benefits expenses | 21,666 | 16,593 | 42,803 | 32,853 | |||||||||||||||
| Processing expenses | 17,330 | 13,872 | 37,063 | 28,552 | |||||||||||||||
| Other general and administrative expenses | 13,910 | 11,266 | 27,303 | 23,021 | |||||||||||||||
| Total operating expenses | 95,680 | 73,164 | 192,482 | 141,898 | |||||||||||||||
| Operating income | 19,350 | 17,154 | 39,855 | 41,239 | |||||||||||||||
| Interest income | 232 | 86 | 335 | 158 | |||||||||||||||
| Interest expense | (96 | ) | (2 | ) | (97 | ) | (25 | ) | |||||||||||
| Income before income taxes | 19,486 | 17,238 | 40,093 | 41,372 | |||||||||||||||
| Income tax expense | 7,416 | 4,730 | 15,322 | 16,049 | |||||||||||||||
| Net income | 12,070 | 12,508 | 24,771 | 25,323 | |||||||||||||||
| Dividends, accretion, and allocated earnings of preferred stock | -- | (7,917 | ) | -- | (16,349 | ) | |||||||||||||
| Net income allocated to common stockholders | $ | 12,070 | $ | 4,591 | $ | 24,771 | $ | 8,974 | |||||||||||
| Basic earnings per common share: | |||||||||||||||||||
| Class A common stock | $ | 0.29 | $ | 0.32 | $ | 0.59 | $ | 0.66 | |||||||||||
| Class B common stock | $ | 0.29 | $ | 0.32 | $ | 0.59 | $ | 0.66 | |||||||||||
| Basic weighted-average common shares issued and outstanding: | |||||||||||||||||||
| Class A common stock | 22,144 | 13 | 19,848 | 6 | |||||||||||||||
| Class B common stock | 18,109 | 12,985 | 20,311 | 12,949 | |||||||||||||||
| Diluted earnings per common share: | |||||||||||||||||||
| Class A common stock | $ | 0.27 | $ | 0.29 | $ | 0.56 | $ | 0.61 | |||||||||||
| Class B common stock | $ | 0.27 | $ | 0.29 | $ | 0.56 | $ | 0.61 | |||||||||||
| Diluted weighted-average common shares issued and outstanding: | |||||||||||||||||||
| Class A common stock | 42,358 | 16,325 | 42,446 | 16,112 | |||||||||||||||
| Class B common stock | 20,212 | 16,311 | 22,594 | 16,107 | |||||||||||||||
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GREEN DOT CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) | |||||||||||
| Six Months Ended June 30, | |||||||||||
| 2011 | 2010 | ||||||||||
| (In thousands) | |||||||||||
| Operating activities | |||||||||||
| Net income | $ | 24,771 | $ | 25,323 | |||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||||
| Depreciation and amortization | 5,496 | 3,363 | |||||||||
| Provision for uncollectible overdrawn accounts | 30,721 | 22,640 | |||||||||
| Employee stock-based compensation | 4,323 | 3,500 | |||||||||
| Stock-based retailer incentive compensation | 10,236 | 2,457 | |||||||||
| Amortization of discount on available-for-sale investment securities | 69 | -- | |||||||||
| Provision for uncollectible trade receivables | 26 | (22 | ) | ||||||||
| Impairment of capitalized software | 237 | 62 | |||||||||
| Deferred income taxes | 107 | 31 | |||||||||
| Excess tax benefits from exercise of options | (2,059 | ) | -- | ||||||||
| Changes in operating assets and liabilities: | |||||||||||
| Settlement assets | 2,898 | 31,654 | |||||||||
| Accounts receivable, net | (27,764 | ) | (20,188 | ) | |||||||
| Prepaid expenses and other assets | (713 | ) | 2,101 | ||||||||
| Deferred expenses | 2,317 | 2,558 | |||||||||
| Accounts payable and other accrued liabilities | (5,207 | ) | 5,239 | ||||||||
| Settlement obligations | (2,898 | ) | (31,654 | ) | |||||||
| Amounts due issuing bank for overdrawn accounts | 4,880 | 8,553 | |||||||||
| Deferred revenue | (4,529 | ) | (3,437 | ) | |||||||
| Income tax payable/receivable | 12,866 | 2,341 | |||||||||
| Net cash provided by operating activities | 55,777 | 54,521 | |||||||||
| Investing activities | |||||||||||
| Purchases of available-for-sale investment securities | (40,062 | ) | -- | ||||||||
| (Increase) decrease in restricted cash | (5,159 | ) | 10,229 | ||||||||
| Payments for acquisition of property and equipment | (11,231 | ) | (6,489 | ) | |||||||
| Net cash (used in) provided by investing activities | (56,452 | ) | 3,740 | ||||||||
| Financing activities | |||||||||||
| Proceeds from exercise of options | 4,074 | 420 | |||||||||
| Excess tax benefits from exercise of options | 2,059 | -- | |||||||||
| Net cash provided by financing activities | 6,133 | 420 | |||||||||
| Net increase in unrestricted cash and cash equivalents | 5,458 | 58,681 | |||||||||
| Unrestricted cash and cash equivalents, beginning of year | 167,503 | 56,303 | |||||||||
| Unrestricted cash and cash equivalents, end of period | $ | 172,961 | $ | 114,984 | |||||||
| Cash paid for interest | $ | 6 | $ | 20 | |||||||
| Cash paid for income taxes | $ | 2,363 | $ | 13,676 | |||||||
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GREEN DOT CORPORATION Reconciliation of Total Operating Revenues to Non-GAAP Total Operating Revenues (1) (Unaudited) | ||||||||||||||||||
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||
| 2011 | 2010 | 2011 | 2010 | |||||||||||||||
| (in thousands) | ||||||||||||||||||
| Reconciliation of total operating revenues to non-GAAP total operating revenues | ||||||||||||||||||
| Total operating revenues | $ | 115,030 | $ | 90,318 | $ | 232,337 | $ | 183,137 | ||||||||||
| Stock-based retailer incentive compensation (2)(3) | 4,356 | 2,457 | 10,236 | 2,457 | ||||||||||||||
| Non-GAAP total operating revenues | $ | 119,386 | $ | 92,775 | $ | 242,573 | $ | 185,594 | ||||||||||
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Reconciliation of Net Income to Non-GAAP Net Income (1) (Unaudited) | ||||||||||||||||||
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||
| 2011 | 2010 | 2011 | 2010 | |||||||||||||||
| (in thousands, except per share data) | ||||||||||||||||||
| Reconciliation of net income to non-GAAP net income | ||||||||||||||||||
| Net income | $ | 12,070 | $ | 12,508 | $ | 24,771 | $ | 25,323 | ||||||||||
| Employee stock-based compensation expense,
net of tax (4) |
1,524 | 1,203 | 2,671 | 2,142 | ||||||||||||||
| Stock-based retailer incentive compensation, net of tax (2) | 2,700 | 1,783 | 6,324 | 1,504 | ||||||||||||||
| Non-GAAP net income | $ | 16,294 | $ | 15,494 | $ | 33,766 | $ | 28,969 | ||||||||||
| Diluted earnings per share* | ||||||||||||||||||
| GAAP | $ | 0.27 | $ | 0.29 | $ | 0.56 | $ | 0.61 | ||||||||||
| Non-GAAP | $ | 0.37 | $ | 0.36 | $ | 0.76 | $ | 0.69 | ||||||||||
| Diluted weighted-average shares issued and outstanding** | ||||||||||||||||||
| GAAP | 42,358 | 16,325 | 42,446 | 16,112 | ||||||||||||||
| Non-GAAP | 44,120 | 42,734 | 44,263 | 41,791 | ||||||||||||||
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| * | Reconciliations between GAAP and non-GAAP diluted weighted-average shares issued and outstanding are provided in the next table. | |
| ** | Diluted weighted-average Class A shares issued and outstanding and diluted weighted-average Class B shares issued and outstanding are the most directly comparable GAAP measure for periods ending in 2011 and 2010, respectively. | |
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GREEN DOT CORPORATION Reconciliation of GAAP to Non-GAAP Diluted Weighted-Average Shares issued and Outstanding (1) (Unaudited) | |||||||||||||||
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
| 2011 | 2010 | 2011 | 2010 | ||||||||||||
| (in thousands) | |||||||||||||||
| Reconciliation of GAAP to non-GAAP diluted weighted-average shares issued and outstanding | |||||||||||||||
| Diluted weighted-average shares issued and outstanding* | 42,358 | 16,325 | 42,446 | 16,112 | |||||||||||
| Assumed conversion of weighted-average shares of preferred stock | -- | 24,942 | -- | 24,942 | |||||||||||
| Weighted-average shares subject to repurchase | 1,762 | 1,467 | 1,817 | 737 | |||||||||||
| Non-GAAP diluted weighted-average shares issued and outstanding | 44,120 | 42,734 | 44,263 | 41,791 | |||||||||||
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____________ | |||||||||||||||
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* Represents the number of shares of Class A common stock for periods ending in 2011 and shares of Class B common stock for periods ending in 2010. | |||||||||||||||
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Supplemental Detail on Non-GAAP Diluted Weighted-Average Shares Issued and Outstanding (Unaudited) | |||||||||||||||
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
| 2011 | 2010 | 2011 | 2010 | ||||||||||||
| (in thousands) | |||||||||||||||
|
Supplemental detail on non-GAAP diluted weighted-average shares issued and outstanding |
|||||||||||||||
| Stock outstanding as of June 30: | |||||||||||||||
| Class A common stock | 25,002 | 2,209 | 25,002 | 2,209 | |||||||||||
| Class B common stock | 17,161 | 13,011 | 17,161 | 13,011 | |||||||||||
| Preferred stock | -- | 24,942 | -- | 24,942 | |||||||||||
| Total stock outstanding as of June 30: | 42,163 | 40,162 | 42,163 | 40,162 | |||||||||||
| Weighting adjustment | (148 | ) | (754 | ) | (187 | ) | (1,529 | ) | |||||||
| Dilutive potential shares: | |||||||||||||||
| Stock options | 2,103 | 3,055 | 2,283 | 2,888 | |||||||||||
| Warrants | -- | 271 | -- | 270 | |||||||||||
| Employee stock purchase plan | 2 | -- | 4 | -- | |||||||||||
| Non-GAAP diluted weighted-average shares issued and outstanding | 44,120 | 42,734 | 44,263 | 41,791 | |||||||||||
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GREEN DOT CORPORATION Reconciliation of Net Income to Adjusted EBITDA (1) (Unaudited) | |||||||||||||||||||
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||
| 2011 | 2010 | 2011 | 2010 | ||||||||||||||||
| (in thousands) | |||||||||||||||||||
| Reconciliation of net income to adjusted EBITDA | |||||||||||||||||||
| Net income | $ | 12,070 | $ | 12,508 | $ | 24,771 | $ | 25,323 | |||||||||||
| Interest income, net | (136 | ) | (84 | ) | (238 | ) | (133 | ) | |||||||||||
| Income tax expense | 7,416 | 4,730 | 15,322 | 16,049 | |||||||||||||||
| Depreciation and amortization | 2,965 | 1,800 | 5,496 | 3,363 | |||||||||||||||
| Employee stock-based compensation expense (3)(4) | 2,462 | 1,658 | 4,323 | 3,500 | |||||||||||||||
| Stock-based retailer incentive compensation (2)(3) | 4,356 | 2,457 | 10,236 | 2,457 | |||||||||||||||
| Adjusted EBITDA | $ | 29,133 | $ | 23,069 | $ | 59,910 | $ | 50,559 | |||||||||||
| Non-GAAP total operating revenues | $ | 119,386 | $ | 92,775 | $ | 242,573 | $ | 185,594 | |||||||||||
| Adjusted EBITDA/non-GAAP total operating revenues (adjusted EBITDA margin) | 24.4 | % | 24.9 | % | 24.7 | % | 27.2 | % | |||||||||||
| (1) | To supplement the Company's consolidated financial statements presented in accordance with GAAP, the Company uses measures of operating results that are adjusted to exclude various, primarily non-cash, expenses and charges. These financial measures are not calculated or presented in accordance with GAAP and should not be considered as alternatives to or substitutes for operating revenues, operating income, net income or any other measure of financial performance calculated and presented in accordance with GAAP. These financial measures may not be comparable to similarly-titled measures of other organizations because other organizations may not calculate their measures in the same manner as we do. These financial measures are adjusted to eliminate the impact of items that the Company does not consider indicative of its core operating performance. You are encouraged to evaluate these adjustments and the reasons we consider them appropriate. | |
The Company believes that the non-GAAP financial measures it presents are useful to investors in evaluating the Company's operating performance for the following reasons:
- stock-based retailer incentive compensation is a non-cash GAAP accounting charge that is an offset to the Company's actual revenues from operations as the Company has historically calculated them. This charge results from the monthly lapsing of the Company's right to repurchase a portion of the 2,208,552 shares it issued to its largest distributor, Walmart, in May 2010. By adding back this charge to the Company's GAAP 2010 and future total operating revenues, investors can make direct comparisons of the Company's revenues from operations prior to and after May 2010 and thus more easily perceive trends in the Company's core operations. Further, because the monthly charge is based on the then-current fair market value of the shares as to which the Company's repurchase right lapses, adding back this charge eliminates fluctuations in the Company's operating revenues caused by variations in its stock price and thus provides insight on the operating revenues directly associated with those core operations;
- the Company records employee stock-based compensation from period to period, and recorded employee stock-based compensation expenses of approximately $2.5 million and $1.7 million for the three-month periods ended June 30, 2011 and 2010, respectively. By comparing the Company's adjusted EBITDA, non-GAAP net income and non-GAAP diluted earnings per share in different historical periods, investors can evaluate the Company's operating results without the additional variations caused by employee stock-based compensation expense, which may not be comparable from period to period due to changes in the fair market value of the Company's Class A common stock (which is influenced by external factors like the volatility of public markets and the financial performance of the Company's peers) and is not a key measure of the Company's operations;
- adjusted EBITDA is widely used by investors to measure a company's operating performance without regard to items, such as interest expense, income tax expense, depreciation and amortization, employee stock-based compensation expense, and stock-based retailer incentive compensation expense, that can vary substantially from company to company depending upon their respective financing structures and accounting policies, the book values of their assets, their capital structures and the methods by which their assets were acquired; and
- securities analysts use adjusted EBITDA as a supplemental measure to evaluate the overall operating performance of companies.
The Company's management uses the non-GAAP financial measures:
- as measures of operating performance, because they exclude the impact of items not directly resulting from the Company's core operations;
- for planning purposes, including the preparation of the Company's annual operating budget;
- to allocate resources to enhance the financial performance of the Company's business;
- to evaluate the effectiveness of the Company's business strategies; and
- in communications with the Company's board of directors concerning the Company's financial performance.
The Company understands that, although adjusted EBITDA and other non-GAAP financial measures are frequently used by investors and securities analysts in their evaluations of companies, these measures have limitations as an analytical tool, and you should not consider them in isolation or as substitutes for analysis of the Company's results of operations as reported under GAAP. Some of these limitations are:
- that these measures do not reflect the Company's capital expenditures or future requirements for capital expenditures or other contractual commitments;
- that these measures do not reflect changes in, or cash requirements for, the Company's working capital needs;
- that these measures do not reflect interest expense or interest income;
- that these measures do not reflect cash requirements for income taxes;
- that, although depreciation and amortization are non-cash charges, the assets being depreciated or amortized will often have to be replaced in the future, and these measures do not reflect any cash requirements for these replacements; and
- that other companies in the Company's industry may calculate these measures differently than the Company does, limiting their usefulness as comparative measures.
| (2) | This expense consists of the recorded fair value of the shares of Class A common stock for which the Company's right to repurchase has lapsed pursuant to the terms of the May 2010 agreement under which they were issued to Wal-Mart Stores, Inc., a contra-revenue component of the Company's total operating revenues. Prior to the three months ended June 30, 2010, the Company did not record stock-based retailer incentive compensation expense. The Company will, however, continue to incur this expense through May 2015. In future periods, the Company does not expect this expense will be comparable from period to period due to changes in the fair value of its Class A common stock. The Company will also have to record additional stock-based retailer incentive compensation expense to the extent that a warrant to purchase its Class B common stock vests and becomes exercisable upon the achievement of certain performance goals by PayPal. The Company does not believe these non-cash expenses are reflective of ongoing operating results. | |
| (3) | The Company does not include any income tax impact of the associated non-GAAP adjustment to non-GAAP total operating revenues or adjusted EBITDA, as the case may be, because each of these non-GAAP financial measures is provided before income tax expense. | |
| (4) | This expense consists primarily of expenses for employee stock options. Employee stock-based compensation expense is not comparable from period to period due to changes in the fair market value of the Company's Class A common stock (which is influenced by external factors like the volatility of public markets and the financial performance of the Company's peers) and is not a key measure of the Company's operations. The Company excludes employee stock-based compensation expense from its non-GAAP financial measures primarily because it consists of non-cash expenses that the Company does not believe are reflective of ongoing operating results. Further, the Company believes that it is useful to investors to understand the impact of employee stock-based compensation to its results of operations. | |
SOURCE: Green Dot Corporation
Green Dot Corporation
Investor Relations
Don Duffy, 626-739-3942
IR@greendot.com
or
Media Relations
Liz Brady, 646-277-1226