Green Dot Stockholders:
Green Dot is a financial services company in which
The reason for this letter is to address a proxy fight brought by one
shareholder, Harvest Capital Strategies, a subsidiary of
A brief history: Green Dot, whose mission is to provide a full range of
affordable and accessible financial services to underbanked Americans,
was founded by
In my opinion, Green Dot’s CEO and management team have done a valiant job - in a highly regulated and carefully monitored industry serving millions of unbanked consumers with a trusted service - for which they have been given no credit by the dissident shareholder. Management has also refused to use predatory practices, like high over-draft fees, that some of their competitors have used to drive short-term profitability, which are highly unfair to underbanked consumers and are at risk of being banned by pending regulations. At the same time, like any company, we have made mistakes and don’t pretend to be perfect.
Consider this: between 2013 and 2015 revenue from sources others than
Green Dot’s largest customer grew from
Green Dot’s management and Board have listened carefully to the arguments of the dissident, and all shareholders, since we are eager to improve the business as best we can. Management’s Six-Step Plan has been underway for a considerable period of time with the results quite encouraging thus far.
I support management’s plan and the promise of Green Dot’s CEO,
You will obviously need to do what you consider in your best interests, but I would ask you to contemplate the message you want to send to every CEO and Board that has stayed true to the long-term, and has the grit and resilience to turnaround its business, as well as every Founder and entrepreneur in America contemplating the prospect of running a public company.
Sincerely yours,
1https://www.sequoiacap.com/companies/
About Green Dot
Forward-Looking Statements
This press 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. Actual results may differ
materially from those contained in the forward-looking statements
contained in this press release. 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, 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
About Non-GAAP Financial Measures
To supplement the Company's consolidated financial statements presented
in accordance with accounting principles generally accepted in
Supplemental Non-GAAP Financial Information |
||||||||||||||||||||
2013 | 2014 | 2015 | ||||||||||||||||||
YTD | YTD | YTD | ||||||||||||||||||
(in thousands) | ||||||||||||||||||||
Reconciliation of total operating revenues to non-GAAP total operating revenues (1) | ||||||||||||||||||||
Total operating revenues | $ | 573,621 | $ | 601,552 | $ | 694,700 | ||||||||||||||
Stock-based retailer incentive compensation (2)(3) | 8,722 | 8,932 | 2,520 | |||||||||||||||||
Contra-revenue advertising costs (3)(4) | - | - | 1,977 | |||||||||||||||||
Non-GAAP total operating revenues | $ | 582,343 | $ | 610,484 | $ | 699,197 | ||||||||||||||
2013 | 2014 | 2015 | ||||||||||||||||||
YTD | YTD | YTD | ||||||||||||||||||
(in thousands) | ||||||||||||||||||||
Reconciliation of net income to non-GAAP net income (1) | ||||||||||||||||||||
Net income | $ | 34,040 | $ | 42,693 | $ | 38,415 | ||||||||||||||
Employee stock-based compensation expense (5) | 14,703 | 20,329 | 27,011 | |||||||||||||||||
Stock-based retailer incentive compensation (2) | 8,722 | 8,932 | 2,520 | |||||||||||||||||
Amortization of acquired intangibles (6) | - | 4,530 | 23,205 | |||||||||||||||||
Change in fair value of contingent consideration (6) | - | (698 | ) | (8,200 | ) | |||||||||||||||
Other charges (income) (7) | - | (6,433 | ) | 2,619 | ||||||||||||||||
Transaction costs (6) | - | 6,681 | 1,330 | |||||||||||||||||
Amortization of deferred financing costs (7) | - | - | 1,534 | |||||||||||||||||
Impairment charges (7) | 3,357 | - | 5,881 | |||||||||||||||||
Income tax effect (8) | (9,415 | ) | (12,107 | ) | (22,367 | ) | ||||||||||||||
Non-GAAP net income | $ | 51,407 | $ | 63,927 | $ | 71,948 | ||||||||||||||
Diluted earnings per share* | ||||||||||||||||||||
GAAP | $ | 0.76 | $ | 0.90 | $ | 0.72 | ||||||||||||||
Non-GAAP | $ | 1.15 | $ | 1.35 | $ | 1.35 | ||||||||||||||
Diluted weighted-average shares issued and outstanding** | ||||||||||||||||||||
GAAP | 37,156 | 41,770 | 51,875 | |||||||||||||||||
Non-GAAP | 44,837 | 47,385 | 53,422 | |||||||||||||||||
* 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 is the most directly comparable GAAP measure for the periods indicated. | ||||||||||||||||||||
2013 | 2014 | 2015 | ||||||||||||||||||
YTD | YTD | YTD | ||||||||||||||||||
(in thousands) | ||||||||||||||||||||
Reconciliation of GAAP to non-GAAP diluted weighted-average shares issued and outstanding (1) | ||||||||||||||||||||
Diluted weighted-average shares issued and outstanding* | 37,156 | 41,770 | 51,875 | |||||||||||||||||
Assumed conversion of weighted-average shares of preferred stock | 6,859 | 5,235 | 1,518 | |||||||||||||||||
Weighted-average shares subject to repurchase | 822 | 380 | 29 | |||||||||||||||||
Non-GAAP diluted weighted-average shares issued and outstanding | 44,837 | 47,385 | 53,422 | |||||||||||||||||
* Represents the diluted weighted-average shares of Class A common stock for the periods indicated. | ||||||||||||||||||||
2013 | 2014 | 2015 | ||||||||||||||||||
YTD | YTD | YTD | ||||||||||||||||||
(in thousands) | ||||||||||||||||||||
Reconciliation of net income to adjusted EBITDA (1) | ||||||||||||||||||||
Net income | $ | 34,040 | $ | 42,693 | $ | 38,415 | ||||||||||||||
Net interest (income) expense (4) | (3,368 | ) | (2,788 | ) | 1,207 | |||||||||||||||
Income tax expense | 18,460 | 21,682 | 19,707 | |||||||||||||||||
Depreciation of property and equipment | 27,099 | 36,984 | 38,509 | |||||||||||||||||
Employee stock-based compensation expense (4)(5) | 14,703 | 20,329 | 27,011 | |||||||||||||||||
Stock-based retailer incentive compensation (2)(4) | 8,722 | 8,932 | 2,520 | |||||||||||||||||
Amortization of acquired intangibles (4)(6) | - | 4,530 | 23,205 | |||||||||||||||||
Change in fair value of contingent consideration (4)(6) | - | (698 | ) | (8,200 | ) | |||||||||||||||
Other (income) charges (4)(7) | - | (6,433 | ) | 2,619 | ||||||||||||||||
Transaction costs (4)(6) | - | 6,681 | 1,330 | |||||||||||||||||
Impairment charges (4)(7) | 3,360 | - | 5,881 | |||||||||||||||||
Adjusted EBITDA | $ | 103,016 | $ | 131,912 | $ | 152,204 | ||||||||||||||
Non-GAAP total operating revenues | $ | 582,343 | $ | 610,484 | $ | 699,197 | ||||||||||||||
Adjusted EBITDA/non-GAAP total operating revenues (adjusted EBITDA margin) | 17.7 | % | 21.6 | % | 21.8 | % | ||||||||||||||
2013 | 2014 | 2015 | ||||||||||||||||||
YTD | YTD | YTD | ||||||||||||||||||
(in thousands) | ||||||||||||||||||||
Supplemental Detail on Non-GAAP Diluted Weighted-Average Shares Issued and Outstanding (1) | ||||||||||||||||||||
Stock outstanding as of December 31: | ||||||||||||||||||||
Class A common stock | 37,729 | 51,146 | 50,502 | |||||||||||||||||
Class B common stock | - | - | - | |||||||||||||||||
Preferred stock (on an as-converted basis) | 6,859 | 1,515 | 1,519 | |||||||||||||||||
Total stock outstanding as of December 31: | 44,588 | 52,661 | 52,021 | |||||||||||||||||
Weighting adjustment | (1,032 | ) | (6,139 | ) | 858 | |||||||||||||||
Dilutive potential shares: | ||||||||||||||||||||
Stock options | 1,078 | 640 | 293 | |||||||||||||||||
Restricted stock units | 203 | 220 | 243 | |||||||||||||||||
Warrants | - | - | - | |||||||||||||||||
Employee stock purchase plan | - | 3 | 7 | |||||||||||||||||
Non-GAAP diluted weighted-average shares issued and outstanding | 44,837 | 47,385 | 53,422 | |||||||||||||||||
(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: | ||
The Company’s management uses the non-GAAP financial measures:
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:
(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. The Company does not believe these non-cash expenses are reflective of ongoing operating results. Our right to repurchase any shares issued to Walmart fully lapsed during the three months ended June 30, 2015. As a result, we no longer recognize stock-based retailer incentive compensation in future periods. | |
(3) | This expense consists of certain co-op advertising costs recognized as contra-revenue under GAAP. The Company believes the substance of the costs incurred are a result of advertising and is not reflective of ongoing total operating revenues. The Company believes that excluding co-op advertising costs from total operating revenues facilitates the comparison of our financial results to the Company's historical operating results. Prior to 2015, the Company did not have any co-op advertising costs recorded as contra-revenue. | |
(4) | 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. | |
(5) | This expense consists primarily of expenses for employee stock options and restricted stock units. 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. | |
(6) | The Company excludes certain income and expenses that are the result of acquisitions. These acquisition related adjustments include 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 the Company recording expenses or fair value adjustments in its GAAP financial statements. The Company analyzes the performance of its operations without regard to these adjustments. In determining whether any acquisition related adjustment is appropriate, the Company takes into consideration, among other things, how such adjustments would or would not aid in the understanding of the performance of its operations. | |
(7) | The Company 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 the Company's GAAP financial statements, the Company excludes them in it's non-GAAP financial measures because the Company believes these items may limit the comparability of ongoing operations with prior and future periods. These adjustments include amortization attributable to deferred financing costs, impairment charges related to internal-use software, expenses incurred with our proxy contest and other charges related to gain or loss contingencies. In determining whether any such adjustments is appropriate, the Company takes into consideration, among other things, how such adjustments would or would not aid in the understanding of the performance of its operations. | |
(8) | Represents the tax effect for the related non-GAAP measure adjustments using the Company's year to date effective tax rate. | |
View source version on businesswire.com: http://www.businesswire.com/news/home/20160516006578/en/
Source:
Green Dot Corporation
Investor Relations
IR@greendot.com
or
Media
Relations
Brian Ruby, 203-682-8286
Brian.Ruby@icrinc.com
or
John
Christiansen / Meghan Gavigan, 415-618-8750
jchristiansen@sardverb.com
/ mgavigan@sardverb.com