Green Dot Reports Third Quarter 2010 Financial Results

Nov 3, 2010

MONROVIA, Calif., Nov 03, 2010 (BUSINESS WIRE) -- Green Dot Corporation (NYSE: GDOT), a leading prepaid financial services company, today reported financial results for its third quarter ended September 30, 2010.

"We are happy to report another strong quarter, including a 44% increase in non-GAAP total operating revenues to $94.1 million, a 19% increase in non-GAAP net income to $13.0 million and non-GAAP diluted earnings per share of $0.30," said Steve Streit, Green Dot's Chairman and Chief Executive Officer. "Our commitment to provide mass access to simple, inexpensive, low hassle products that allow consumers to solve their basic financial and payment needs continues to drive our growth."

GAAP financial results for the third quarter of 2010 compared to the third quarter of 2009:

Total operating revenues on a generally accepted accounting principles (GAAP) basis increased 36% to $88.9 million for the third quarter of 2010 from $65.3 million for the third quarter of 2009
GAAP net income decreased 14% to $9.0 million for the third quarter of 2010 from $10.5 million for the third quarter of 2009
GAAP basic and diluted earnings per common share were $0.22 and $0.20, respectively, for the third quarter of 2010 and $0.28 and $0.22, respectively, for the third quarter of 2009

Non-GAAP financial results for the third quarter of 2010 compared to the third quarter of 2009:¹

Non-GAAP total operatingrevenues¹increased 44% to $94.1 million for the third quarter of 2010 from $65.3 million for the third quarter of 2009
Non-GAAP net income¹ increased 19% to $13.0 million for the third quarter of 2010 from $10.9 million for the third quarter of 2009
Non-GAAP diluted earnings per share¹ was $0.30 for the third quarter of 2010 and $0.27 for the third quarter of 2009
EBITDA plus employee stock-based compensation expense and stock-based retailer incentive compensation expense (adjusted EBITDA¹) increased 22% to $24.4 million for the third quarter of 2010 compared to $20.0 million for the third quarter of 2009

Key business metrics for the quarter ended September 30, 2010:

Number of general purpose reloadable debit cards activated was 1.5 million, an increase of 36% over the third quarter of 2009
Number of cash transfers was 6.9 million, an increase of 53% over the third quarter of 2009
Number of active cards (as of quarter end) was 3.3 million, an increase of 50% over the third quarter of 2009
Gross dollar volume was $2.5 billion, an increase of 69% over the third quarter of 2009

Refer to our Quarterly Report on Form 10-Q for a description of these key business metrics.

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 strong cash flow from operations affords us significant flexibility to pursue growth opportunities, and our balance sheet remains strong with over $135 million in unrestricted cash and cash equivalents and we have no long-term debt," said John Keatley, Green Dot's Chief Financial Officer.

The following tables show our quarterly key business metrics for each of the last seven calendar quarters:

	Q3 2010	Q2 2010	Q1 2010	Q4 2009	Q3 2009	Q2 2009	Q1 2009
	(in millions)
Number of GPR cards activated	1.5	1.5	1.8	1.4	1.1	0.9	0.9
Number of cash transfers	6.9	6.4	5.9	5.1	4.5	4.1	3.5
Number of active cards (as of quarter end)	3.3	3.2	3.4	2.7	2.2	2.0	1.7
Gross dollar volume	$2,516	$2,375	$2,846	$1,745	$1,486	$1,345	$1,207

Conference Call

The Company will host a conference call to discuss third quarter 2010 financial results today at 5:00pm ET. 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) 941-4774, or for international callers (480) 629-9760. A replay will be available one hour after the call and can be accessed by dialing (877) 870-5176 or for international callers (858) 384-5517; the conference ID is 4369579. 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 may be deemed to contain 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 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 are discussed in greater detail in the Company's Securities and Exchange Commission filings, including its quarterly reports on Form 10-Q, which are 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 November 3, 2010, 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 interest expense (income), net, 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 results are not in accordance with, or an alternative or substitute for, results 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 consolidated 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 our 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, a leading prepaid card reloading network in the United States. Consumers can access the Green Dot Network and use it for a wide variety of transactions, including cash loading onto prepaid cards and adding funds to a PayPal account through MoneyPak(R). Green Dot sells its cards and offers reload services nationwide at approximately 50,000 retail stores, including Walmart, Walgreens, CVS, Rite Aid, 7-Eleven, Kroger, Kmart, Meijer, and Radio Shack, which provide consumers convenient access to its products and services. Green Dot's products include MasterCard(R) and Visa(R) branded prepaid debit cards and the Green Dot MoneyPak(R). Green Dot is headquartered in the greater Los Angeles area. For more details, visit http://www.greendot.com and http://www.moneypak.com.


GREEN DOT CORPORATION
CONSOLIDATED BALANCE SHEETS

	September 30, 2010		December 31, 2009
	(Unaudited)
	(in thousands, except par value)
Assets
Current assets:
Unrestricted cash and cash equivalents	$	135,581	$	56,303
Settlement assets		11,784		42,569
Accounts receivable, net		23,985		29,157
Prepaid expenses and other assets		6,776		7,262
Income taxes receivable		--		5,452
Net deferred tax assets		4,335		4,634
Total current assets		182,461		145,377
Restricted cash		5,163		15,381
Accounts receivable, net		3,175		1,130
Prepaid expenses and other assets		641		1,047
Property and equipment, net		16,045		11,973
Deferred expenses		5,894		8,200
Total assets	$	213,379	$	183,108

Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable and accrued liabilities	$	11,331	$	9,777
Settlement obligations		11,784		42,569
Amounts due to card issuing banks for overdrawn accounts		33,181		23,422
Other accrued liabilities		14,071		13,916
Deferred revenue		11,227		15,048
Income tax payable		2,986		--

Total current liabilities		84,580		104,732
Other accrued liabilities		4,398		2,761
Deferred revenue		50		97
Net deferred tax liabilities		3,886		4,154
Total liabilities		92,914		111,744

Stockholders' equity:
Convertible preferred stock, $0.001 par value: 5,000 shares
authorized as of September 30, 2010, 25,554 shares authorized as of
December 31, 2009; no shares issued and outstanding as of September
30, 2010, 24,942 shares issued and outstanding as of December 31,
2009; liquidation preference of $0 and $31,322 as of September 30,
2010 and December 31, 2009, respectively		--		31,322
Class A common stock, $0.001 par value; 100,000 shares authorized as
of September 30, 2010, no shares authorized as of December 31,
2009; 7,589 shares issued and outstanding as of September 30, 2010,
no shares issued and outstanding as of December 31, 2009		5		--
Class B convertible common stock, $0.001 par value, 100,000 shares
authorized as of September 30, 2010, 50,000 shares authorized as of
December 31, 2009; 33,269 and 12,860 shares issued and outstanding
as of September 30, 2010 and December 31, 2009, respectively		34		13
Additional paid-in capital		58,706		12,603
Retained earnings		61,720		27,426
Total stockholders' equity		120,465		71,364
Total liabilities and stockholders' equity	$	213,379	$	183,108


GREEN DOT CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2010			2009			2010				2009
	(in thousands except per share data)
Operating revenues:
Card revenues	$	40,592		$	30,849		$	124,978		$	93,011
Cash transfer revenues		26,484			17,256			73,630			49,383
Interchange revenues		27,044			17,213			81,106			46,554
Stock-based retailer incentive compensation		(5,216	)		--			(7,673	)		--
Total operating revenues		88,904			65,318			272,041			188,948

Operating expenses:
Sales and marketing expenses		30,305			17,182			87,777			52,430
Compensation and benefits expenses		17,621			12,666			50,474			32,827
Processing expenses		14,579			9,951			43,131			27,092
Other general and administrative expenses		10,976			7,587			33,997			18,721
Total operating expenses		73,481			47,386			215,379			131,070

Operating income		15,423			17,932			56,662			57,878
Interest income		111			64			269			179
Interest expense		(23	)		(3	)		(48	)		(3	)
Income before income taxes		15,511			17,993			56,883			58,054
Income tax expense		6,540			7,522			22,589			24,344
Net income		8,971			10,471			34,294			33,710
Dividends, accretion, and allocated earnings of preferred stock		(1,255	)		(7,060	)		(16,094	)		(22,886	)
Net income allocated to common stockholders	$	7,716		$	3,411		$	18,200		$	10,824

Basic earnings per common share:
Class A common stock	$	0.22		$	--		$	0.87		$	--
Class B common stock	$	0.22		$	0.28		$	0.87		$	0.90

Basic weighted-average common shares issued and outstanding
Class A common stock		4,266			--			1,442			--
Class B common stock		28,627			12,051			18,232			12,046

Diluted earnings per common share:
Class A common stock	$	0.20		$	--		$	0.81		$	--
Class B common stock	$	0.20		$	0.22		$	0.81		$	0.70

Diluted weighted-average common shares issued and outstanding
Class A common stock		36,132			--			22,884			--
Class B common stock		31,862			15,262			21,441			15,545


GREEN DOT CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)

	Nine Months Ended September 30,
	2010				2009
	(in thousands)
Operating activities
Net income	$	34,294		$	33,710
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization		5,405			3,552
Provision for uncollectible overdrawn accounts		34,912			18,089
Employee stock-based compensation		5,246			1,983
Stock-based retailer incentive compensation		7,673			--
Provision (benefit) for uncollectible trade receivables		(24	)		112
Impairment of capitalized software		388			315
Deferred income tax expense		31			(1,731	)
Change in operating assets and liabilities:
Settlement assets		30,785			3,289
Accounts receivable		(31,761	)		(19,668	)
Prepaid expenses and other assets		817			(3,105	)
Deferred expenses		2,306			3,568
Accounts payable and accrued liabilities		3,877			2,544
Settlement obligations		(30,785	)		(3,289	)
Amounts due to card issuing banks for overdrawn accounts		9,759			4,996
Deferred revenue		(3,868	)		(4,988	)
Income taxes payable (receivable)		8,438			2,238
Net cash provided by operating activities		77,493			41,614

Investing activities
Decrease (increase) in restricted cash		10,218			(13,028	)
Purchases of property and equipment		(10,321	)		(5,547	)
Net cash used in investing activities		(103	)		(18,575	)

Financing activities
Repayments on line of credit		--			(77	)
Borrowings on line of credit		--			77
Proceeds from exercise of warrants and options		1,888			162
Exercise of call option on warrant		--			(1,958	)
Redemption of preferred and common shares		--			(617	)
Net cash provided by (used in) financing activities		1,888			(2,413	)

Net increase in unrestricted cash and cash equivalents		79,278			20,626
Unrestricted cash and cash equivalents, beginning of year		56,303			16,692
Unrestricted cash and cash equivalents, end of period	$	135,581		$	37,318

Cash paid for interest	$	40		$	42
Cash paid for income taxes	$	14,215		$	24,009


GREEN DOT CORPORATION
Reconciliation of Total Operating Revenues to Non-GAAP Total Operating Revenues (1)

	Three Months Ended September 30,				Nine Months Ended September 30,
	2010		2009		2010		2009
	(in thousands)
Reconciliation of total operating revenues to non-GAAP total operating revenues
Total operating revenues	$	88,904	$	65,318	$	272,041	$	188,948
Stock-based retailer incentive compensation (2)(3)		5,216		--		7,673		--
Non-GAAP total operating revenues	$	94,120	$	65,318	$	279,714	$	188,948


Reconciliation of Net Income to Adjusted EBITDA (1)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2010			2009			2010			2009
	(in thousands)
Reconciliation of net income to adjusted EBITDA
Net income	$	8,971		$	10,471		$	34,294		$	33,710
Interest income, net		(88	)		(61	)		(221	)		(176	)
Income tax expense		6,540			7,522			22,589			24,344
Depreciation and amortization		2,042			1,227			5,405			3,552
Employee stock-based compensation expense (3)(4)		1,746			800			5,246			1,983
Stock-based retailer incentive compensation (2)(3)		5,216			--			7,673			--
Adjusted EBITDA	$	24,427		$	19,959		$	74,986		$	63,413

Non-GAAP total operating revenues	$	94,120		$	65,318			279,714		$	188,948
Adjusted EBITDA / non-GAAP total operating revenue (adjusted EBITDA margin)		26.0	%		30.6	%		26.8	%		33.6	%


Reconciliation of Net Income to Non-GAAP Net Income (1)

	Three Months Ended September 30,				Nine Months Ended September 30,
	2010		2009		2010		2009
	(in thousands, except per share data)
Reconciliation of net income to non-GAAP net income
Net income	$	8,971	$	10,471	$	34,294	$	33,710
Employee stock-based compensation expense (4)		1,010		464		3,163		1,150
Stock-based retailer incentive compensation (2)		3,017		--		4,626		--
Non-GAAP net income	$	12,998	$	10,935	$	42,083	$	34,860

Diluted earnings per share*
GAAP	$	0.20	$	0.22	$	0.81	$	0.70
Non-GAAP	$	0.30	$	0.27	$	0.99	$	0.86

Diluted weighted-average shares issued and outstanding*
GAAP		36,132		15,262		22,884		15,545
Non-GAAP		43,918		40,203		42,534		40,529

*			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 diluted weighted-average Class B shares issued and outstanding are the most directly comparable GAAP measure for periods ending 2010 and 2009, respectively.


GREEN DOT CORPORATION
Reconciliation of GAAP to Non-GAAP Diluted Weighted-Average Shares Issued and Outstanding (1)

	Three Months Ended September 30,				Nine Months Ended September 30,
	2010		2009		2010		2009
	(in thousands)
Reconciliation of GAAP to non-GAAP diluted weighted-average shares issued and outstanding
Diluted weighted-average shares issued and outstanding*		36,132		15,262		22,884		15,545
Assumed conversion of weighted-average shares of preferred stock		5,693		24,941		18,455		24,984
Weighted-average shares subject to repurchase		2,093		--		1,195		--
Diluted weighted-average shares issued and outstanding		43,918		40,203		42,534		40,529

Refer to shares of Class A common stock for periods ending in 2010 and shares of Class B common stock for periods ending in 2009.


Supplemental Detail on Non-GAAP Diluted Weighted-Average Shares Issued and Outstanding

	Three Months Ended September 30,						Nine Months Ended September 30,
	2010			2009			2010			2009
	(in thousands)
Supplemental detail on non-GAAP diluted weighted-average shares issued and outstanding
Stock outstanding as of September 30:
Class A common stock		7,589			--			7,589			--
Class B common stock		33,269			12,060			33,269			12,060
Preferred stock		--			24,942			--			24,942
Total stock outstanding as of September 30		40,858			37,002			40,858			37,002
Weighting adjustment		(179	)		(10	)		(1,534	)		28
Dilutive potential shares:
Stock options		3,180			2,950			3,011			2,921
Warrants		55			261			198			578
Employee stock purchase plan		4			--			1			--
Non-GAAP diluted weighted-average shares issued and
outstanding		43,918			40,203			42,534			40,529

(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 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 acts as 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 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 month-end stock prices 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 $1.7 million and $0.8 million for the three months ended September 30, 2010 and 2009, respectively, and approximately $5.2 million and $2.0 million for the nine months ended September 30, 2010 and 2009, 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 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;
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 Walmart 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 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

News Release

Green Dot Reports Third Quarter 2010 Financial Results