News Release

Provides Preliminary Commentary on 2016

PASADENA, Calif.--(BUSINESS WIRE)--Nov. 5, 2015-- Green Dot Corporation (NYSE:GDOT) today reported financial results for the third quarter ended September 30, 2015.

For the third quarter of 2015, Green Dot reported consolidated GAAP and non-GAAP total operating revenues¹ of $146.4 million and $146.5 million, respectively, and adjusted EBITDA of $22.2 million. Green Dot also reported break-even GAAP diluted earnings per share and $0.15 in non-GAAP diluted earnings per share.¹

GAAP and non-GAAP earnings per share results during the third quarter of 2015 were impacted in part by 7.1 million additional shares year-over-year attributable to acquisitions subsequent to the third quarter of 2014, and GAAP earnings per share were further impacted by an increase of $5.9 million, or approximately $0.06 diluted earnings per common share, in amortization associated with acquired intangible assets from those recent acquisitions, as compared to the prior year period.

Green Dot generated net cash from operations of $114 million year to date. During the third quarter, under the Company’s existing $150 million share repurchase authorization, Green Dot repurchased $40 million in common stock pursuant to an accelerated share repurchase program (ASR) launched during the quarter, and received approximately 1.8 million shares, representing an estimated 80% of the shares expected to be repurchased. The Company expects to complete the $40 million ASR program by Q1 of next year.

“This quarter’s results and the outlook for the remainder of the year reflect the significant change we made to our business when we discontinued MoneyPak earlier this year. The direct and indirect loss of revenue caused by the loss of MoneyPak is contributing to year-over-year declines in our legacy business lines, which are being offset by the contributions from our recently acquired businesses. Looking forward, however, we are feeling more optimistic. The MoneyPak related declines have now been stable for a number of months and we’re seeing the ecosystem effects now stabilizing, as well. So we believe that, taking into account the new initiatives planned for next year, we expect to have the opportunity to turn the corner and get back to growth as we head into 2017. The new initiatives for next year include, among others, new product offerings in our branded and private label business lines that have the potential to generate higher unit sales and better unit economics, in addition to introducing a new version of our MoneyPak product with enhanced risk controls. We also expect to begin to realize revenue synergies from our TPG acquisition with the deployment of an integrated Green Dot Account/TPG tax refund program distributed through a number of TPG’s tax preparation partners in Q1 next year,” said Steve Streit, Green Dot Chairman and Chief Executive Officer.

Consolidated GAAP financial results for the third quarter of 2015 compared to the third quarter of 2014:

• Total operating revenues on a generally accepted accounting principles (GAAP) basis were $146.4 million for the third quarter of 2015 from $144.7 million for the third quarter of 2014.
• GAAP net income was $0.2 million for the third quarter of 2015 from $13.9 million for the third quarter of 2014.
• GAAP basic and diluted earnings per common share were break-even for the third quarter of 2015 versus $0.30 for the third quarter of 2014.

GAAP results during the third quarter of 2015 were negatively impacted by an increase of $5.9 million, or approximately $0.06 diluted earnings per common share, in amortization associated with acquired intangible assets from our recent acquisitions, as compared to the prior year period.

Consolidated non-GAAP financial results for the third quarter of 2015 compared to the third quarter of 2014:¹

• Non-GAAP total operating revenues¹ came in at $146.5 million for the third quarter of 2015 versus $146.8 million for the third quarter of 2014.
• Non-GAAP net income¹ was $7.9 million for the third quarter of 2015 from $16.6 million for the third quarter of 2014.
• Non-GAAP diluted earnings per share¹ was $0.15 for the third quarter of 2015 versus $0.36 for the third quarter of 2014.
• Adjusted EBITDA¹ was $22.2 million, or 15% of non-GAAP total operating revenues¹ for the third quarter of 2015 from $32.0 million, or 22% of non-GAAP total operating revenues¹ for the third quarter of 2014.

The following table shows the Company's quarterly key business metrics for each of the last seven calendar quarters. Please refer to the Company's latest Quarterly Report on Form 10-Q for a description of the key business metrics described:

Green Dot Interim CFO Mark Shifke stated, “As we incorporate our Q3 results with trends through October, we expect to finish the full year slightly below our previous non-GAAP total operating revenue guidance range. Meanwhile, our adjusted EBITDA and non-GAAP EPS continue to track within the ranges we provided at the beginning of the year despite the strong headwinds presented by lower revenues due to the MoneyPak discontinuation and higher Walmart commissions. While it is premature to formally guide 2016, we expect to enter the year at a lower year-over-year revenue run rate on our legacy business given the need to lap the full effects of MoneyPak-related declines. Consequently, we expect to have about a 5% revenue headwind going into the year. So, while we believe that the breadth and scale of our new, organic initiatives beginning in Q1 can enable us to generate incremental revenue over the course of next year, we are not expecting very much absolute revenue growth, if any at all, in the aggregate, because we first need enough growth to make up for that headwind. The expected revenue ramp over the course of 2016 should position us well heading into 2017. In terms of capital management, we intend to execute additional share repurchases next year, and we continue to aggressively look for accretive acquisitions.”

Updated Outlook for 2015

Non-GAAP Total Operating Revenues²:

• Green Dot now expects full-year non-GAAP total operating revenues to come in slightly below $700 million, which is the low end of its previous guidance range.

Adjusted EBITDA²:

• The Company now expects its adjusted EBITDA² for the full year to finish near the low end of the previous range of $150-$160 million.

Non-GAAP EPS²:

• Green Dot now expects its non-GAAP EPS² for the full year to finish near the midpoint of the range of $1.24-$1.35, which assumes depreciation and amortization of property and equipment of $39 million, an effective tax rate of 37.5% and non-GAAP diluted weighted-average shares issued and outstanding of 53.5 million.

Green Dot's outlook is based on a number of assumptions that Green Dot 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.

Conference Call

The Company will host a conference call to discuss third quarter 2015 financial results today at 5:00 p.m. ET. In addition to the conference call, there will be a webcast presentation of accompanying slides accessible on the Company's investor relations website. Hosting the call will be Steve Streit, Chairman and Chief Executive 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 10073354. The replay will be available through Thursday, November 12, 2015. 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 guidance for 2015 and preliminary expectations for 2016 contained under "Updated Outlook for 2015" or 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 Company’s supply chain management efforts on its revenue growth, 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 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 November 5, 2015, 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; income tax expense; depreciation and amortization; employee stock-based compensation expense; stock-based retailer incentive compensation expense; acquisition-related adjustments; and other 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 2015 guidance for non-GAAP total operating revenues, adjusted EBITDA, non-GAAP diluted earnings per share, and non-GAAP weighted-average shares issued and outstanding. 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 ir.greendot.com.

About Green Dot

Green Dot Corporation, along with its wholly owned subsidiary bank, Green Dot Bank, is a pro-consumer financial technology innovator with a mission to reinvent personal banking for the masses. Green Dot invented the prepaid debit card industry and 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. 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.

Beginning in 2015, the Company's operations are comprised of two reportable segments, Account Services and 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 unallocated corporate expenses, depreciation and amortization, intercompany eliminations and other costs that are not considered when the Company's 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 $7.5 million and $5.5 million for the three months ended September 30, 2015 and 2014, respectively. By comparing the Company’s adjusted EBITDA, non-GAAP net income and non-GAAP diluted earnings per share in different historical periods, investors can evaluate the Company’s operating results without the additional variations caused by employee stock-based compensation expense, which may not be comparable from period to period due to changes in the fair market value of the Company’s Class A common stock (which is influenced by external factors like the volatility of public markets and the financial performance of the Company’s peers) and is not a key measure of the Company’s operations;
• adjusted EBITDA is widely used by investors to measure a company’s operating performance without regard to items, such as interest expense, income tax expense, depreciation and amortization, employee stock-based compensation expense, stock-based retailer incentive compensation expense, contingent consideration, other charges, 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/20151105006785/en/

Source: Green Dot Corporation

Green Dot Corporation
Investor Relations
Christopher Mammone, 626-765-2427
IR@greendot.com
or
Media Relations
Brian Ruby, 203-682-8286
Brian.Ruby@icrinc.com