Green Dot Reports First Quarter 2020 Results

Nachrichtenquelle: Business Wire (engl.)
11.05.2020, 22:05  |  126   |   |   

Green Dot Corporation (NYSE: GDOT) today reported financial results for the quarter ended March 31, 2020.

“These have been unprecedented times and they have tested all of us in ways no one could have imagined. I am proud of the team’s unwavering dedication to our customers and each other throughout these uncertain times, and I’m excited to be on board as one of the newest members of the Green Dot team,” said Dan Henry, CEO. "The first quarter has always been the Company’s strongest quarter in terms of revenue and profitability. With no one knowing the extent of the negative and lasting impacts of COVID-19, we were very fortunate to have a strong Q1 performance."

GAAP financial results for the first quarter of 2020 compared to the first quarter of 2019:

  • Total operating revenues on a generally accepted accounting principles (GAAP) basis were $362.2 million for the first quarter of 2020, up from $340.5 million for the first quarter of 2019.
  • GAAP net income was $46.8 million for the first quarter of 2020, from net income of $64.0 million for the first quarter of 2019.
  • GAAP diluted earnings per common share was $0.87 for the first quarter of 2020, from diluted earnings per share of $1.17 for the first quarter of 2019.

Non-GAAP financial results for the first quarter of 2020 compared to the first quarter of 2019:1

  • Non-GAAP total operating revenues1 were $346.5 million for the first quarter of 2020, up from $325.7 million for the first quarter of 2019, representing a year-over-year increase of 6%.
  • Adjusted EBITDA1 was $92.1 million, or 26.6% of non-GAAP total operating revenues1 for the first quarter of 2020, down from $119.0 million, or 36.5% of non-GAAP total operating revenues1 for the first quarter of 2019.
  • Non-GAAP net income1 was $60.4 million for the first quarter of 2020, down from $82.5 million for the first quarter of 2019.
  • Non-GAAP diluted earnings per share1 was $1.13 for the first quarter of 2020, down from $1.51 for the first quarter of 2019.

     

1

Reconciliations of total operating revenues to non-GAAP total operating revenues, net income to adjusted EBITDA, net income to non-GAAP net income, and diluted earnings per share to non-GAAP diluted earnings per share, respectively, are provided in the tables immediately following the consolidated financial statements. Additional information about the Company's non-GAAP financial measures can be found under the caption “About Non-GAAP Financial Measures” below.

Key Metrics

The following table shows Green Dot's quarterly key business metrics for each of the last five calendar quarters. Please refer to Green Dot’s latest Quarterly Report on Form 10-Q for a description of the key business metrics.

 

2020

 

2019

 

Q1

 

Q4

Q3

Q2

Q1

 

(In millions)

Gross dollar volume

$

14,294

 

 

$

10,636

 

$

9,827

 

$

10,019

 

$

12,977

 

Gross dollar volume from direct deposit sources

$

10,654

 

 

$

7,112

 

$

6,843

 

$

7,208

 

$

10,217

 

Active accounts at quarter end

5.74

 

 

5.04

 

5.18

 

5.66

 

6.05

 

Direct deposit active accounts at quarter end

2.99

 

 

2.14

 

2.14

 

2.31

 

2.87

 

Purchase volume (1)

$

8,282

 

 

$

6,287

 

$

6,047

 

$

6,470

 

$

8,200

 

Number of cash transfers

12.13

 

 

12.08

 

11.73

 

11.25

 

10.98

 

Number of tax refunds processed

9.70

 

 

0.07

 

0.11

 

2.52

 

9.39

 

(1)

In 2020, purchase volume excludes volume generated by certain BaaS programs where the BaaS partner earns interchange and Green Dot earns a platform fee.

“Overall, the year-over-year trends in our key metrics and revenues in January and February were strong and then we saw a marked slowdown in late March and early April as the impact of COVID-19 intensified. As April progressed, we saw a surge in GDV from stimulus funds deposited onto our account programs,” said Jess Unruh, interim CFO. "We believe that the long-term strategy to grow our business will remain intact despite the impact of COVID-19. However, in the near term, it is very difficult for us to forecast our revenues because the COVID-19 situation is rapidly evolving, and both the duration and severity of the economic impact are unknown."

2020 Financial Guidance

As the duration and severity of the COVID-19 pandemic is unknown, Green Dot is withdrawing its financial outlook for the full year 2020. Green Dot has already taken and will continue to implement incremental actions to reduce expenses to mitigate the financial impact of COVID-19 on the company.

Business Update Related to COVID-19

We have taken steps to ensure the health and safety of our employees and continued service to our customers and partners, while at the same time seeking to mitigate the impact of the pandemic on our financial condition and results of operations.

Employees and business continuity plan

Over the course of the first quarter in 2020, Green Dot enacted business continuity plans in Shanghai, China and across the United States, mandated that its employees work from home, required contractors to work remotely and implemented strict travel restrictions. While Green Dot's employees have been successful in maintaining its operations, Green Dot has experienced disruption in staffing levels at its third-party call centers across the globe and will continue to work with their partners to restore these staffing levels.

Trends in key metrics and revenue

Overall, the year-over-year trends in Green Dot's key metrics and revenues in January and February were strong and then exhibited a marked slowdown in late March and early April as the impact of COVID-19 intensified. As April progressed, key metrics and revenue improved as a result of stimulus funds. Furthermore, the Federal Reserve recently announced reductions in short-term interest rates that have lowered the yields on Green Dot's cash and investment balances and therefore, Green Dot expects a reduction in the amount of interest income it earns for the remainder of the year.

The extent of the impacts from these conditions is currently uncertain and dependent on various factors, including the severity and transmission rate of the virus, the nature of and duration for which the preventative measures remain in place, the extent and effectiveness of containment and mitigation actions, the type of stimulus measures and other policy responses that the U.S. government may adopt, and the impact of these and other factors on our employees, customers, retail distributors, partners and vendors.

Balance sheet and liquidity

In response to the economic conditions arising from the pandemic, Green Dot has taken steps to strengthen its financial condition, including drawing down the full $100 million available under its revolving credit facility, instituting an enterprise-wide headcount freeze and delaying or reducing non-critical projects.

Conference Call

Green Dot will host a conference call to discuss first quarter 2020 financial results today at 5:00 p.m. ET. Hosting the call will be Dan Henry, Chief Executive Officer, and Jess Unruh, interim Chief Financial Officer. The conference call can be accessed live from Green Dot's investor relations website at http://ir.greendot.com/. A replay of the webcast will be available at the same website following the call. The replay will be available until Monday May 18, 2020.

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 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 impact of the COVID-19 pandemic on Green Dot’s business and the Green Dot’s measures taken in response to the pandemic, the timing and impact of revenue growth activities, Green Dot's dependence on revenues derived from Walmart, impact of competition, Green Dot's reliance on retail distributors for the promotion of its products and services, demand for Green Dot's new and existing products and services, continued and improving returns from Green Dot's investments in new growth initiatives, potential difficulties in integrating operations of acquired entities and acquired technologies, Green Dot's ability to operate in a highly regulated environment, changes to existing laws or regulations affecting Green Dot's operating methods or economics, Green Dot'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 Green Dot's involvement litigation or investigations. These and other risks are discussed in greater detail in Green Dot'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 Green Dot'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 May 11, 2020, and Green Dot assumes no obligation to update this information as a result of future events or developments.

About Non-GAAP Financial Measures

To supplement Green Dot's consolidated financial statements presented in accordance with accounting principles generally accepted in the United States of America (GAAP), Green Dot uses measures of operating results that are adjusted to exclude, among other things, non-operating net interest income and expense; income tax benefit and expense; depreciation and amortization, including amortization of acquired intangibles; certain legal settlement charges; employee stock-based compensation and related employer payroll taxes; change in the fair value of contingent consideration; impairment charges; extraordinary severance and related restructuring expenses; realized gains or losses on the sale of investment securities; commissions and certain processing-related costs associated with BaaS products and services where Green Dot does not control customer acquisition, other charges and income; and income tax effects. This earnings release includes non-GAAP total operating revenues, adjusted EBITDA, non-GAAP net income, and non-GAAP diluted earnings per share. 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 Green Dot's financial measures prepared in accordance with GAAP. Green Dot's non-GAAP financial measures may be different from similarly-titled non-GAAP financial measures used by other companies. Green Dot 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. Green Dot's management regularly uses these supplemental non-GAAP financial measures internally to understand, manage and evaluate Green Dot's business and make operating decisions. For additional information regarding Green Dot's use of non-GAAP financial measures and the items excluded by Green Dot from one or more of its historic and projected non-GAAP financial measures, investors are encouraged to review the reconciliations of Green Dot'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 Green Dot's website at http://ir.greendot.com/.

About Green Dot

Green Dot Corporation, [NYSE:GDOT], is a financial technology leader and bank holding company with a mission to power the banking industry’s branchless future. Enabled by proprietary technology and Green Dot’s wholly-owned commercial bank charter, Green Dot’s “Banking as a Service” platform is used by a growing list of America’s most prominent consumer and technology companies to design and deploy their own bespoke banking solutions to their customers and partners, while Green Dot uses that same integrated technology and banking platform to design and deploy its own leading collection of banking and financial services products directly to consumers through one of the largest retail banking distribution platforms in America. Green Dot products are marketed under brand names such as Green Dot, GoBank, MoneyPak, AccountNow, RushCard and RapidPay, and can be acquired through more than 100,000 retailers nationwide, thousands of corporate paycard partners, several “direct-2-consumer” branded websites, thousands of tax return preparation offices and accounting firms, thousands of neighborhood check cashing locations and both of the leading app stores. Green Dot Corporation is headquartered in Pasadena, California, with additional facilities throughout the United States and in Shanghai, China.

GREEN DOT CORPORATION

CONSOLIDATED BALANCE SHEETS

 

March 31, 2020

 

December 31, 2019

 

(unaudited)

 

 

Assets

(In thousands, except par value)

Current assets:

 

 

 

Unrestricted cash and cash equivalents

$

1,563,740

 

 

$

1,063,426

 

Restricted cash

2,567

 

 

2,728

 

Investment securities available-for-sale, at fair value

10,003

 

 

10,020

 

Settlement assets

281,197

 

 

239,222

 

Accounts receivable, net

61,590

 

 

59,543

 

Prepaid expenses and other assets

57,071

 

 

66,183

 

Income tax receivable

1,584

 

 

870

 

Total current assets

1,977,752

 

 

1,441,992

 

Investment securities available-for-sale, at fair value

297,522

 

 

267,419

 

Loans to bank customers, net of allowance for loan losses of $1,057 and $1,166 as of March 31, 2020 and December 31, 2019, respectively

19,641

 

 

21,417

 

Prepaid expenses and other assets

46,038

 

 

10,991

 

Property and equipment, net

147,530

 

 

145,476

 

Operating lease right-of-use assets

25,043

 

 

26,373

 

Deferred expenses

10,502

 

 

16,891

 

Net deferred tax assets

9,097

 

 

9,037

 

Goodwill and intangible assets

513,324

 

 

520,994

 

Total assets

$

3,046,449

 

 

$

2,460,590

 

Liabilities and Stockholders’ Equity

 

 

 

Current liabilities:

 

 

 

Accounts payable

$

37,366

 

 

$

37,876

 

Deposits

1,616,355

 

 

1,175,341

 

Obligations to customers

84,044

 

 

69,377

 

Settlement obligations

5,892

 

 

13,251

 

Amounts due to card issuing banks for overdrawn accounts

291

 

 

380

 

Other accrued liabilities

118,602

 

 

107,842

 

Operating lease liabilities

8,052

 

 

8,764

 

Deferred revenue

19,094

 

 

28,355

 

Income tax payable

16,607

 

 

3,948

 

Total current liabilities

1,906,303

 

 

1,445,134

 

Other accrued liabilities

9,997

 

 

10,883

 

Operating lease liabilities

23,096

 

 

24,445

 

Line of credit

100,000

 

 

35,000

 

Net deferred tax liabilities

19,048

 

 

17,772

 

Total liabilities

2,058,444

 

 

1,533,234

 

 

 

 

 

Stockholders’ equity:

 

 

 

Class A common stock, $0.001 par value; 100,000 shares authorized as of March 31, 2020 and December 31, 2019; 52,854 and 51,807 shares issued and outstanding as of March 31, 2020 and December 31, 2019, respectively

53

 

 

52

 

Additional paid-in capital

306,151

 

 

296,224

 

Retained earnings

675,604

 

 

629,040

 

Accumulated other comprehensive income

6,197

 

 

2,040

 

Total stockholders’ equity

988,005

 

 

927,356

 

Total liabilities and stockholders’ equity

$

3,046,449

 

 

$

2,460,590

 

GREEN DOT CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

 

Three Months Ended March 31,

 

2020

 

2019

 

(In thousands, except per share data)

Operating revenues:

 

 

 

Card revenues and other fees

$

141,394

 

 

$

129,577

 

Processing and settlement service revenues

123,066

 

 

107,579

 

Interchange revenues

90,866

 

 

92,541

 

Interest income, net

6,843

 

 

10,817

 

Total operating revenues

362,169

 

 

340,514

 

Operating expenses:

 

 

 

Sales and marketing expenses

116,738

 

 

98,701

 

Compensation and benefits expenses

53,065

 

 

61,475

 

Processing expenses

71,095

 

 

51,632

 

Other general and administrative expenses

62,422

 

 

47,321

 

Total operating expenses

303,320

 

 

259,129

 

Operating income

58,849

 

 

81,385

 

Interest expense, net

49

 

 

1,471

 

Income before income taxes

58,800

 

 

79,914

 

Income tax expense

11,955

 

 

15,871

 

Net income

$

46,845

 

 

$

64,043

 

 

 

 

 

Basic earnings per common share:

$

0.89

 

 

$

1.21

 

Diluted earnings per common share:

$

0.87

 

 

$

1.17

 

Basic weighted-average common shares issued and outstanding:

51,894

 

 

53,050

 

Diluted weighted-average common shares issued and outstanding:

52,673

 

 

54,551

 

GREEN DOT CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

 

Three Months Ended March 31,

 

2020

 

 

2019

 

 

(In thousands)

Operating activities

 

 

 

Net income

$

46,845

 

 

 

$

64,043

 

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

Depreciation and amortization of property, equipment and internal-use software

13,697

 

 

 

10,882

 

 

Amortization of intangible assets

7,279

 

 

 

8,174

 

 

Provision for uncollectible overdrawn accounts from purchase transactions

1,316

 

 

 

2,496

 

 

Employee stock-based compensation

11,385

 

 

 

14,815

 

 

Amortization of premium (discount) on available-for-sale investment securities

138

 

 

 

(140

)

 

Amortization of deferred financing costs

42

 

 

 

996

 

 

Impairment of capitalized software

 

 

 

100

 

 

Changes in operating assets and liabilities:

 

 

 

Accounts receivable, net

(3,363

)

 

 

4,338

 

 

Prepaid expenses and other assets

9,023

 

 

 

6,974

 

 

Deferred expenses

6,389

 

 

 

8,168

 

 

Accounts payable and other accrued liabilities

9,859

 

 

 

(10,217

)

 

Deferred revenue

(9,355

)

 

 

(10,718

)

 

Income tax receivable/payable

11,805

 

 

 

15,729

 

 

Other, net

(930

)

 

 

(255

)

 

Net cash provided by operating activities

104,130

 

 

 

115,385

 

 

 

 

 

 

Investing activities

 

 

 

Purchases of available-for-sale investment securities

(60,267

)

 

 

(35,782

)

 

Proceeds from maturities of available-for-sale securities

25,509

 

 

 

12,948

 

 

Proceeds from sales of available-for-sale securities

10,047

 

 

 

101

 

 

Payments for acquisition of property and equipment

(15,743

)

 

 

(19,312

)

 

Net decrease in loans

1,584

 

 

 

1,754

 

 

Investment in TailFin Labs, LLC

(35,000

)

 

 

 

 

Net cash used in investing activities

(73,870

)

 

 

(40,291

)

 

 

 

 

 

Financing activities

 

 

 

Repayments of borrowings from notes payable

 

 

 

(60,000

)

 

Borrowings on revolving line of credit

100,000

 

 

 

 

 

Repayments on revolving line of credit

(35,000

)

 

 

 

 

Proceeds from exercise of options

23

 

 

 

705

 

 

Taxes paid related to net share settlement of equity awards

(1,480

)

 

 

(11,826

)

 

Net increase in deposits

442,017

 

 

 

620,998

 

 

Net decrease in obligations to customers

(34,667

)

 

 

(39,364

)

 

Contingent consideration payments

(1,000

)

 

 

 

 

Net cash provided by financing activities

469,893

 

 

 

510,513

 

 

 

 

 

 

Net increase in unrestricted cash, cash equivalents and restricted cash

500,153

 

 

 

585,607

 

 

Unrestricted cash, cash equivalents and restricted cash, beginning of period

1,066,154

 

 

 

1,095,218

 

 

Unrestricted cash, cash equivalents and restricted cash, end of period

$

1,566,307

 

 

 

$

1,680,825

 

 

 

 

 

 

Cash paid for interest

$

283

 

 

 

$

1,094

 

 

Cash (refund from)/paid for income taxes

$

(95

)

 

 

$

38

 

 

 

 

 

 

Reconciliation of unrestricted cash, cash equivalents and restricted cash at end of period:

 

 

 

Unrestricted cash and cash equivalents

$

1,563,740

 

 

 

$

1,676,470

 

 

Restricted cash

2,567

 

 

 

4,355

 

 

Total unrestricted cash, cash equivalents and restricted cash, end of period

$

1,566,307

 

 

 

$

1,680,825

 

 

GREEN DOT CORPORATION

REPORTABLE SEGMENTS

(UNAUDITED)

 

Three Months Ended March 31, 2020

 

Account Services

 

Processing and Settlement Services

 

Corporate and Other

 

Total

 

(In thousands)

Operating revenues

$

245,350

 

 

$

125,630

 

 

$

(8,811

)

 

 

$

362,169

 

Operating expenses

211,543

 

 

67,319

 

 

24,458

 

 

 

303,320

 

Operating income

$

33,807

 

 

$

58,311

 

 

$

(33,269

)

 

 

$

58,849

 

 

Three Months Ended March 31, 2019

 

Account Services

 

Processing and Settlement Services

 

Corporate and Other

 

Total

 

(In thousands)

Operating revenues

$

239,633

 

 

$

110,649

 

 

$

(9,768

)

 

 

$

340,514

 

Operating expenses

176,787

 

 

54,515

 

 

27,827

 

 

 

259,129

 

Operating income

$

62,846

 

 

$

56,134

 

 

$

(37,595

)

 

 

$

81,385

 

Green Dot's operations are comprised of two reportable segments: 1) Account Services and 2) Processing and Settlement Services. The Account Services segment consists of revenues and expenses derived from Green Dot's deposit account programs, such as prepaid cards, debit cards, consumer and small business checking accounts, secured credit cards, payroll debit cards and gift cards. These deposit account programs are marketed under several of Green Dot's leading consumer brand names and under the brand names of Green Dot's Banking as a Service, or "BaaS," partners. The Processing and Settlement Services segment consists of revenues and expenses derived from Green Dot's products and services that specialize in facilitating the movement of cash on behalf of consumers and businesses, such as consumer cash processing services, wage disbursements and tax refund processing services. The Corporate and Other segment primarily consists of eliminations of intersegment revenues and expenses, unallocated corporate expenses, depreciation and amortization, and other costs that are not considered when management evaluates segment performance.

GREEN DOT CORPORATION

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

(Unaudited)

 

Three Months Ended March 31,

 

2020

 

 

2019

 

 

(In thousands)

Total operating revenues

$

362,169

 

 

 

$

340,514

 

 

Net revenue adjustments (8)

(15,628

)

 

 

(14,797

)

 

Non-GAAP total operating revenues

$

346,541

 

 

 

$

325,717

 

 

Reconciliation of Reportable Segment Revenues to Non-GAAP Reportable Segment Revenues (1)

(Unaudited)

 

Three Months Ended March 31,

 

2020

 

 

2019

 

 

(In thousands)

Account Services

 

 

 

Operating revenues

$

245,350

 

 

 

$

239,633

 

 

Net revenue adjustments (8)

(12,035

)

 

 

(11,425

)

 

Non-GAAP operating revenues

$

233,315

 

 

 

$

228,208

 

 

 

 

 

 

Processing and Settlement Services

 

 

 

Operating revenues

$

125,630

 

 

 

$

110,649

 

 

Net revenue adjustments (8)

(3,593

)

 

 

(3,372

)

 

Non-GAAP operating revenues

$

122,037

 

 

 

$

107,277

 

 

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

(Unaudited)

 

Three Months Ended March 31,

 

2020

 

 

2019

 

 

(In thousands, except per share data)

Net income

$

46,845

 

 

 

$

64,043

 

 

Employee stock-based compensation and related employer payroll taxes (3)

11,578

 

 

 

15,583

 

 

Amortization of acquired intangible assets (4)

7,279

 

 

 

8,174

 

 

Amortization of deferred financing costs (5)

42

 

 

 

996

 

 

Impairment charges (5)

 

 

 

100

 

 

Extraordinary severance and other restructuring expenses (6)

736

 

 

 

2,856

 

 

Other income (5)

(212

)

 

 

(133

)

 

Income tax effect (7)

(5,895

)

 

 

(9,077

)

 

Non-GAAP net income

$

60,373

 

 

 

$

82,542

 

 

Diluted earnings per common share

 

 

 

GAAP

$

0.87

 

 

 

$

1.17

 

 

Non-GAAP

$

1.13

 

 

 

$

1.51

 

 

 

 

 

 

Diluted weighted-average common shares issued and outstanding

 

 

 

GAAP

52,673

 

 

 

54,551

 

 

Non-GAAP

53,583

 

 

 

54,551

 

 

GREEN DOT CORPORATION

Reconciliation of GAAP to Non-GAAP Diluted Weighted-Average

Shares Issued and Outstanding

(Unaudited)

 

Three Months Ended March 31,

 

2020

 

2019

 

(In thousands)

Diluted weighted-average shares issued and outstanding

52,673

 

 

54,551

 

Weighted-average unvested restricted shares

910

 

 

 

Non-GAAP diluted weighted-average shares issued and outstanding

53,583

 

 

54,551

 

Supplemental Detail on Diluted Weighted-Average Common Shares Issued and Outstanding

(Unaudited)

 

Three Months Ended March 31,

 

2020

 

 

2019

 

 

(In thousands)

Class A common stock outstanding as of March 31:

52,854

 

 

 

53,148

 

 

Weighting adjustment

(50

)

 

 

(98

)

 

Dilutive potential shares:

 

 

 

Stock options

57

 

 

 

168

 

 

Service based restricted stock units

338

 

 

 

679

 

 

Performance-based restricted stock units

351

 

 

 

641

 

 

Employee stock purchase plan

33

 

 

 

13

 

 

Diluted weighted-average common shares issued and outstanding

53,583

 

 

 

54,551

 

 

Reconciliation of Net Income to Adjusted EBITDA (1)

(Unaudited)

 

Three Months Ended March 31,

 

2020

 

2019

 

(In thousands)

Net income

$

46,845

 

 

$

64,043

 

Interest expense, net (2)

49

 

 

1,471

 

Income tax expense

11,955

 

 

15,871

 

Depreciation and amortization of property, equipment and internal-use software (2)

13,696

 

 

10,882

 

Employee stock-based compensation and related employer payroll taxes (2)(3)

11,578

 

 

15,583

 

Amortization of acquired intangible assets (2)(4)

7,279

 

 

8,174

 

Impairment charges (2)(5)

 

 

100

 

Extraordinary severance and other restructuring expenses (2)(6)

736

 

 

2,856

 

Other (income) expense (2)(5)

(20)

 

 

 

Adjusted EBITDA

$

92,118

 

 

$

118,980

 

 

 

 

 

Non-GAAP total operating revenues

$

346,541

 

 

$

325,717

 

Adjusted EBITDA/Non-GAAP total operating revenues (adjusted EBITDA margin)

26.6

%

 

36.5

%

(1)

To supplement Green Dot’s consolidated financial statements presented in accordance with GAAP, Green Dot 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 Green Dot does. These financial measures are adjusted to eliminate the impact of items that Green Dot does not consider indicative of its core operating performance. You are encouraged to evaluate these adjustments and the reasons Green Dot considers them appropriate.

Green Dot believes that the non-GAAP financial measures it presents are useful to investors in evaluating Green Dot’s operating performance for the following reasons:

  • Green Dot records employee stock-based compensation from period to period, and recorded employee stock-based compensation expenses and related employer payroll taxes, net of forfeitures, of approximately $11.6 million and $15.6 million for the three months ended March 31, 2020 and 2019, respectively. By comparing Green Dot’s adjusted EBITDA, non-GAAP net income and non-GAAP diluted earnings per share in different historical periods, investors can evaluate Green Dot’s operating results without the additional variations caused by employee stock-based compensation expense and related employer payroll taxes, which may not be comparable from period to period due to changes in the fair market value of Green Dot’s Class A common stock (which is influenced by external factors like the volatility of public markets and the financial performance of Green Dot’s peers) and is not a key measure of Green Dot’s operations;
  • adjusted EBITDA is widely used by investors to measure a company’s operating performance without regard to items, such as non-operating net interest income and expense, income tax benefit and expense, depreciation and amortization, employee stock-based compensation and related employer payroll taxes, changes in the fair value of contingent consideration, impairment charges, severance costs related to extraordinary personnel reductions, certain legal settlement charges and other charges and income 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.

Green Dot’s management uses the non-GAAP financial measures:

  • as measures of operating performance, because they exclude the impact of items not directly resulting from Green Dot’s core operations;
  • for planning purposes, including the preparation of Green Dot’s annual operating budget;
  • to allocate resources to enhance the financial performance of Green Dot’s business;
  • to evaluate the effectiveness of Green Dot’s business strategies;
  • to establish metrics for variable compensation; and
  • in communications with Green Dot’s board of directors concerning Green Dot’s financial performance.

Green Dot 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 Green Dot’s results of operations as reported under GAAP. Some of these limitations are:

  • that these measures do not reflect Green Dot’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, Green Dot’s working capital needs;
  • that these measures do not reflect non-operating 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 Green Dot’s industry may calculate these measures differently than Green Dot does, limiting their usefulness as comparative measures.

(2) 

 

Green Dot does not include any income tax impact of the associated non-GAAP adjustment to adjusted EBITDA, as the case may be, because each of these non-GAAP financial measures is provided before income tax expense.

(3) 

 

This expense consists primarily of expenses for restricted stock units (including performance-based restricted stock units), performance-based stock options and related employer payroll taxes. Employee stock-based compensation expense is not comparable from period to period due to changes in the fair market value of Green Dot’s Class A common stock (which is influenced by external factors like the volatility of public markets and the financial performance of Green Dot’s peers) and is not a key measure of Green Dot’s operations. Green Dot excludes employee stock-based compensation expense from its non-GAAP financial measures primarily because it consists of non-cash expenses that Green Dot does not believe are reflective of ongoing operating results. Green Dot also believes that it is not useful to investors to understand the impact of employee stock-based compensation to its results of operations. Further, the related employer payroll taxes are dependent upon volatility in Green Dot's stock price, as well as the timing and size of option exercises and vesting of restricted stock units, over which Green Dot has limited to no control. This expense is included as a component of compensation and benefits expenses on Green Dot's consolidated statements of operations.

(4) 

 

Green Dot excludes certain income and expenses that are the result of acquisitions. These acquisition-related adjustments include items such as the amortization of acquired intangible assets, changes in the fair value of contingent consideration, settlements of contingencies established at time of acquisition and other acquisition related charges, such as integration charges and professional and legal fees, which result in Green Dot recording expenses or fair value adjustments in its GAAP financial statements. Green Dot analyzes the performance of its operations without regard to these adjustments. In determining whether any acquisition-related adjustment is appropriate, Green Dot takes into consideration, among other things, how such adjustments would or would not aid in the understanding of the performance of its operations. These items are included as a component of other general and administrative expenses on Green Dot's consolidated statements of operations, as applicable for the periods presented.

(5)

Green Dot excludes certain income and expenses that are not reflective of ongoing operating results. It is difficult to estimate the amount or timing of these items in advance. Although these events are reflected in Green Dot's GAAP financial statements, Green Dot excludes them in its non-GAAP financial measures because Green Dot believes these items may limit the comparability of ongoing operations with prior and future periods. These adjustments include items such as amortization attributable to deferred financing costs, impairment charges related to internal-use software, credit-related impairment and/or realized gains or losses on the sale of investment securities, legal settlement expenses and other income and expenses, as applicable for the periods presented. In determining whether any such adjustment is appropriate, Green Dot takes into consideration, among other things, how such adjustments would or would not aid in the understanding of the performance of its operations. Each of these adjustments, except for amortization of deferred financing costs and credit-related impairment and/or realized gains and losses on the sale of investment securities, which are included as a component of non-operating interest income/expense, are included within other general and administrative expenses on Green Dot's consolidated statements of operations.

(6)

During the three months ended March 31, 2020, Green Dot recorded charges of $0.7 million related to compensation in connection with transition and employment agreements of certain former executives. In 2019, Green Dot recorded charges for severance costs related to extraordinary personnel reductions. Although severance expenses are an ordinary part of its operations, the magnitude and scale of this ongoing reduction in workforce for redundancies is not expected to be repeated. This expense is included as a component of compensation and benefits expenses on Green Dot's consolidated statements of operations.

(7)

Represents the tax effect for the related non-GAAP measure adjustments using Green Dot's year to date non-GAAP effective tax rate. It also excludes both the impact of excess tax benefits related to stock-based compensation and the IRC §162(m) limitation that applies to performance-based restricted stock units expense as of March 31, 2020.

(8)

Represents commissions and certain processing-related costs associated with Banking as a Service ("BaaS") products and services where Green Dot does not control customer acquisition.

 

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