Green Dot Reports Second Quarter 2016 Total Operating Revenues of $173.5M

• Including unusual incremental launch expenses of $7.2M, the Company reports GAAP results of $8.0M and $0.16 for net income and EPS, respectively
• Including unusual incremental launch expenses of $7.2M, the Company reports non-GAAP results of $32.4M and $0.27 for adjusted EBITDA and non-GAAP EPS, respectively

PASADENA, Calif.--(BUSINESS WIRE)-- Green Dot Corporation (NYSE: GDOT), today reported financial results for the second quarter ended June 30, 2016.

For the second quarter of 2016, Green Dot reported GAAP revenue of $173.5 million and non-GAAP total operating revenues1 of $173.6 million. Green Dot also reported $0.16 in GAAP diluted earnings per common share. The Company reported adjusted EBITDA1 of $32.4 million and $0.27 in non-GAAP diluted earnings per common share1, including $7.2 million of unusual incremental launch expenses. Net cash provided by operating activities in the quarter totaled $19.5 million. As of June 30, 2016, Green Dot's consolidated balance sheet held total unencumbered cash of $101.1 million.

"I'm pleased to report a strong second quarter for Green Dot, delivering results ahead of our expectations for revenue, adjusted EBITDA and adjusted EPS," said Steve Streit, Green Dot Chief Executive Officer. "We continue to execute against our six-step plan. In the second quarter we experienced improving revenue from our legacy portfolio and superior unit economics from new card products, which generated strong year over year organic growth in our prepaid card business lines. Other new initiatives are also going well. We successfully rolled out MoneyPak which is currently on sale at over 17,000 locations with new Green Dot retailers, including CVS agreeing to sell the new MoneyPak within the year. Our partnership with Uber is growing. The Uber Debit from GoBank account has registered over 80,000 drivers and advanced over $80 million in wages to GoBank accounts so far and continues to add drivers weekly. More recently, we extended the Instant Pay option to enable instant payments to most bank accounts with MasterCard, Visa or Discover debit cards. The Instant Pay to any debit card pilot launched just a few weeks ago and driver adoption is growing rapidly with 60,000 transactions completed in just that short period of time since its limited launch.”

“Finally, we remain committed to executing on our $150 million share repurchase plan, and we are also actively seeking opportunities to improve returns from Green Dot Bank. We are working with our regulators to give us greater flexibility to invest stable core deposits into higher yielding but safe investments, to dividend excess capital held at the bank back to the holding company, and to expand into lending. Green Dot is positioned for long-term success and remains committed to delivering on its six-step plan to achieve at least $1.75 in Non-GAAP EPS in 2017," concluded Streit.

GAAP financial results for the second quarter of 2016 compared to the second quarter of 2015:

• Total operating revenues on a generally accepted accounting principles (GAAP) basis were $173.5 million for the second quarter of 2016 from $170.2 million for the second quarter of 2015
• GAAP net income was $8.0 million for the second quarter of 2016 from GAAP net income of $3.5 million for the second quarter of 2015
• GAAP basic and diluted earnings per common share were both $0.16 for the second quarter of 2016 from $0.07 and $0.06, respectively, for the second quarter of 2015

Non-GAAP financial results for the second quarter of 2016 compared to the second quarter of 2015:1

• Non-GAAP total operating revenues1 were $173.6 million for the second quarter of 2016 from $170.8 million for the second quarter of 2015
• Including unusual incremental launch expenses of $7.2 million:

• Adjusted EBITDA1 was $32.4 million, or 18.7% of non-GAAP total operating revenues1 for the second quarter of 2016 from $34.2 million, or 20.1% of non-GAAP total operating revenues1 for the second quarter of 2015
• Non-GAAP net income1 was $14.1 million for the second quarter of 2016 from $14.8 million for the second quarter of 2015
• Non-GAAP diluted earnings per share1 was $0.27 for the second quarter of 2016 from $0.28 for the second quarter of 2015

The following table shows the Company's quarterly key business metrics for each of the last six calendar quarters. Please refer to the Company's latest Annual Report on Form 10-K for a description of the key business metrics.

Selected Business Updates

Green Dot is pleased to announce the following business developments, which all map to Green Dot’s previously-disclosed Six-Step Plan.

Business Development:

• In July, the Walmart MoneyCard gained additional placements in the Customer Service area of 4,600 Walmart stores.
• Green Dot has entered into a multi-year extension with Walgreens for the retailer to sell all of Green Dot’s new prepaid products and conduct reload transactions.
• Earlier this year, Green Dot and Uber entered into an agreement to extend an "Instant Pay" functionality to debit cards issued by GoBank. This feature allows driver partners to get their earnings instantly deposited to their Uber Debit Card from GoBank account. Since the program began in March, Uber Debit by GoBank has registered over 80,000 drivers.
• In addition, Green Dot and Uber have been piloting "Instant Pay" to any debit card, which enables instant payments to most bank accounts with MasterCard, Visa or Discover debit cards. The “Instant Pay” to any debit card pilot program is currently running in 45 cities, and since the program launched, Green Dot has completed over 60,000 “Instant Pay” transactions to drivers enrolled in the program.

New Products:

• The new MoneyPak product launched in April beginning with Rite Aid and Walgreens stores, followed by Kroger, Gerlands, Weis, Stater Bros, Hannaford and Food Lion. The product is expected to be rolled out in CVS stores nationwide beginning in September. The rollout to additional retailers is expected to continue throughout the year.
• The new Green Dot Everyday Visa and MasterCard product and the new Green Dot 5% Cash-Back Visa Debit Card product launched at Walgreens, CVS, Rite Aid, 7-11, Dollar General, Family Dollar, Dollar Tree, Kmart, Kroger, Meijer, Gerlands, Weis, Stater Bros, Hannaford and Food Lion in the second quarter.

New Partnerships:

• During the second quarter, Green Dot has added another 1,550 new retail locations to its retail footprint with a distribution agreement with Office Depot and Office Max.
• Green Dot is pleased to welcome the fifth largest convenience store chain, Corner Store, and its 1,251 locations as a new Green Dot retail distributor.

Capital Allocation:

• In April of 2016, Green Dot implemented the repurchase of a total of $50 million of its Class A common stock under an accelerated stock repurchase transaction. Under the agreement, Green Dot received an initial delivery of approximately 1.9 million shares. The final number of shares to be repurchased and the aggregate cost per share to Green Dot will be based on Green Dot’s volume-weighted average stock price during the term of the transaction, which is expected to be completed by November 2016. Green Dot has now repurchased $100 million of its Class A common stock since September of 2015 when Green Dot’s regulators first approved the program.

Accolades:

• Leading financial site and search engine, CardHub.com, released its annual ranking of the top prepaid cards. Green Dot’s Reloadable Prepaid Card and Green Dot's Walmart MoneyCard were recognized in the “Alternative Checking Account” category. This win supplements other awards received by Green Dot earlier this year, including the PayBefore 2016 Pay Awards and PYMNTS Project Innovation Awards.

Said Mark Shifke, Green Dot’s Chief Financial Officer, “Based on our robust Q2 performance, we're increasing our full year revenue guidance by $3 million from a range of $705 million to $710 million to a new range of $708 million to $713 million. Of that, we expect to generate $152 million of revenue in Q3 implying $157 million in Q4."

"While total adjusted EBITDA declined slightly year-over-year, our result of $32.4 million was materially better than our expectation of $28 million. Furthermore, our strong adjusted EBITDA over-performance included the absorption in the quarter of $7.2 million of incremental and unusual launch expenses plus the fact that we had not yet fully lapped the Walmart commission rate increase until May. This over-performance was the result of strong underlying organic margin expansion, which was driven by what we believe to be four sustainable and repeatable factors- 1) higher revenue per active card from our installed base of older prepaid cards, 2) better unit economics from our new suite of prepaid cards, 3) a continuing trend of higher revenue per reload transaction, and 4) an increasingly more efficient operating platform allowing more of that incremental revenue to fall to the bottom line. While we are currently tracking towards the higher end of our current adjusted EBITDA range of $156 million to $160 million, we have decided to maintain our current guidance range until more certainty emerges in the second half around the net costs we expect to incur related to the delay of the "Wave 4” processor conversion and around the performance of certain new initiatives."

Updated Outlook for 2016

Green Dot has provided its updated outlook for 2016. Green Dot’s outlook is based on a number of assumptions that management believes are reasonable at the time of this earnings release. Information regarding potential risks that could cause the actual results to differ from these forward-looking statements is set forth below and in Green Dot's filings with the Securities and Exchange Commission.

In 2016, Green Dot has incurred unusual incremental product launch expenses for the cost of deploying hundreds of merchandisers to Green Dot’s network of nearly 100,000 retail locations for the purpose of removing and destroying old inventory and replacing that old inventory with new inventory. The Company currently expects these costs will total $11 million in 2016. Green Dot's 2016 outlook includes these unusual incremental launch expenses.

Non-GAAP Total Operating Revenues2

• Green Dot now expects full year non-GAAP total operating revenues2 to be between $708 million and $713 million.
• For Q3, Green Dot expects non-GAAP total operating revenues2 to be approximately $152 million

Adjusted EBITDA2

• The Company expects full year adjusted EBITDA2 between $156 million and $160 million, including unusual incremental launch expenses.
• For Q3, Green Dot expects adjusted EBITDA2 to be approximately $22 million including an estimated $1 million (of the total full year $11 million) in unusual incremental launch expenses.

Non-GAAP EPS2

• The Company expects non-GAAP EPS2 for the full year between $1.39 and $1.44, including $11 million in unusual incremental launch expenses.
• For Q3, Green Dot expects non-GAAP EPS2 of approximately $0.16 including an estimated $1 million (of the total full year $11 million) in unusual incremental launch expenses.

The Company's non-GAAP EPS2 full year range for 2016, including incremental launch expenses, is calculated as follows:

Conference Call

The Company will host a conference call to discuss second quarter 2016 financial results today at 5:00 p.m. ET. Hosting the call will be Steve Streit, Chief Executive Officer, and Mark Shifke, Chief Financial Officer. The conference call can be accessed live over the phone by dialing (888) 348-8307, or for international callers (412) 902-4242. A replay will be available approximately two hours after the call concludes and can be accessed by dialing (877) 870-5176, or for international callers (858) 384-5517; and entering the conference ID 10088864. The replay of the webcast will be available until Thursday, August 11, 2016. The call will be webcast live from the Company's investor relations website at http://ir.greendot.com/.

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 future performance contained under "Updated Outlook for 2016" and in the quotes of its executive officers and other future events that involve risks and uncertainties. Actual results may differ materially from those contained in the forward-looking statements contained in this earnings release, and reported results should not be considered as an indication of future performance. The potential risks and uncertainties that could cause actual results to differ from those projected include, among other things, the timing and impact of revenue growth activities, the Company's dependence on revenues derived from Walmart and three other retail distributors, impact of competition, the Company's reliance on retail distributors for the promotion of its products and services, demand for the Company's new and existing products and services, continued and improving returns from the Company's investments in new growth initiatives, the extent to which the Company’s processing technology partner covers the Company’s expenses and other losses associated with the processor migration issues that began in May 2016 and have caused a delay in the Company’s processor migration until at least the first half of 2017, potential difficulties in integrating operations of acquired entities and acquired technologies, the Company's ability to operate in a highly regulated environment, changes to existing laws or regulations affecting the Company's operating methods or economics, the Company's reliance on third-party vendors, changes in credit card association or other network rules or standards, changes in card association and debit network fees or products or interchange rates, instances of fraud developments in the prepaid financial services industry that impact prepaid debit card usage generally, business interruption or systems failure, and the Company's involvement litigation or investigations. These and other risks are discussed in greater detail in the Company's Securities and Exchange Commission filings, including its most recent annual report on Form 10-K and quarterly report on Form 10-Q, which are available on the Company's investor relations website at ir.greendot.com and on the SEC website at www.sec.gov. All information provided in this release and in the attachments is as of August 4, 2016, and the Company assumes no obligation to update this information as a result of future events or developments.

About Non-GAAP Financial Measures

To supplement the Company's consolidated financial statements presented in accordance with accounting principles generally accepted in the United States of America (GAAP), the Company uses measures of operating results that are adjusted to exclude net interest income and expense; income tax benefit and expense; depreciation and amortization; employee stock-based compensation expense; stock-based retailer incentive compensation expense; contingent consideration; other charges and income; transaction costs; and impairment charges. This earnings release includes non-GAAP total operating revenues, non-GAAP net income, non-GAAP earnings per share, non-GAAP weighted-average shares issued and outstanding and adjusted EBITDA. It also includes full-year 2016 guidance for non-GAAP total operating revenues, adjusted EBITDA, non-GAAP net income and non-GAAP EPS. These non-GAAP financial measures are not calculated or presented in accordance with, and are not alternatives or substitutes for, financial measures prepared in accordance with GAAP, and should be read only in conjunction with the Company's financial measures prepared in accordance with GAAP. The Company's non-GAAP financial measures may be different from similarly-titled non-GAAP financial measures used by other companies. The Company believes that the presentation of non-GAAP financial measures provides useful information to management and investors regarding underlying trends in its consolidated financial condition and results of operations. The Company's management regularly uses these supplemental non-GAAP financial measures internally to understand, manage and evaluate the Company's business and make operating decisions. For additional information regarding the Company's use of non-GAAP financial measures and the items excluded by the Company from one or more of its historic and projected non-GAAP financial measures, investors are encouraged to review the reconciliations of the Company's historic and projected non-GAAP financial measures to the comparable GAAP financial measures, which are attached to this earnings release, and which can be found by clicking on “Financial Information” in the Investor Relations section of the Company's website at http://ir.greendot.com/.

About Green Dot

Green Dot Corporation, along with its wholly owned subsidiaries, is a pro-consumer financial technology innovator with a mission to provide a full range of affordable and accessible financial services to the masses. Green Dot is the largest provider of reloadable prepaid debit cards and cash reload processing services in the United States. Green Dot is also a leader in mobile technology and mobile banking with its award-winning GoBank mobile checking account and a top 20 debit card issuer among all banks and credit unions in the country. Through its wholly owned subsidiary, TPG, Green Dot is additionally the largest processor of tax refund disbursements in the U.S. Green Dot's products and services are available to consumers through a large-scale "branchless bank" distribution network of more than 100,000 U.S. locations, including retailers, neighborhood financial service center locations, and tax preparation offices, as well as online, in the leading app stores and through leading online tax preparation providers. Green Dot Corporation is headquartered in Pasadena, Calif., with additional facilities throughout the United States and in Shanghai, China.

The Company'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 the Company's branded and private label deposit account programs. These programs include Green Dot-branded and affinity-branded GPR card accounts, private label GPR card accounts, checking accounts and open-loop gift cards. The Processing and Settlement Services segment consists of revenues and expenses derived from reload services through the Green Dot Network and the Company's 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.

• 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 resulted 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 total operating revenues, investors can make direct comparisons of the Company’s revenues from operations prior to May 2015, when the repurchase right fully lapsed, 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 $7.4 million and $6.4 million for the three months ended June 30, 2016 and 2015, 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 net interest income and expense, income tax benefit and expense, depreciation and amortization, employee stock-based compensation expense, stock-based retailer incentive compensation expense, contingent consideration, other charges and income, transaction costs, and impairment charges 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.

View source version on businesswire.com: http://www.businesswire.com/news/home/20160804006437/en/

Investor Relations
[email protected]
or
Media Relations
Brian Ruby, 203-682-8286
[email protected]

Source: Green Dot Corporation

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