GDOT - Green Dot Reports First Quarter 2022 Results

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 unaudited 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.

2022

2021

Q1

Q4

Q3

Q2

Q1

(In millions)

Consolidated *

Gross dollar volume

$

17,436

$

16,353

$

16,404

$

17,399

$

20,666

Number of active accounts

4.93

5.07

5.37

6.03

6.35

Purchase volume

$

7,192

$

7,065

$

7,356

$

8,870

$

10,445

Consumer Services

Gross dollar volume

$

6,621

$

6,300

$

6,811

$

8,188

$

10,156

Number of active accounts

3.04

3.10

3.38

3.97

4.07

Direct deposit active accounts

0.69

0.76

0.83

0.92

0.97

Purchase volume

$

5,017

$

4,881

$

5,166

$

6,455

$

7,138

B2B Services

Gross dollar volume

$

10,815

$

10,053

$

9,593

$

9,211

$

10,510

Number of active accounts

1.89

1.97

1.99

2.06

2.28

Purchase volume

$

2,175

$

2,184

$

2,190

$

2,415

$

3,307

Money Movement

Number of cash transfers

8.87

9.95

10.05

10.19

10.32

Number of tax refunds processed

9.61

0.12

0.43

4.15

7.44

^*

Represents the sum of Green Dot's Consumer Services and B2B (as defined herein) Services segments.

Range

Low

High

(In millions, except per share data)

Adjusted EBITDA

$

230.0

$

240.0

Depreciation and amortization*

(62.0

)

(62.0

)

Net interest expense

(0.2

)

(0.2

)

Non-GAAP pre-tax income

$

167.8

$

177.8

Tax impact**

(39.4

)

(41.8

)

Non-GAAP net income

$

128.4

$

136.0

Non-GAAP diluted weighted-average shares issued and outstanding

55.3

55.3

Non-GAAP earnings per share

$

2.32

$

2.46

*

Excludes the impact of amortization of acquired intangible assets

**

Assumes a non-GAAP effective tax rate of approximately 23.5% for full year.

2

For additional information, see reconciliations of forward-looking guidance for these non-GAAP financial measures to their respective, most directly comparable projected GAAP financial measures provided in the tables immediately following the reconciliation of Net Income to Adjusted EBITDA.

GREEN DOT CORPORATION
CONSOLIDATED BALANCE SHEETS

March 31, 2022

December 31, 2021

(unaudited)

Assets

(In thousands, except par value)

Current assets:

Unrestricted cash and cash equivalents

$

1,320,743

$

1,322,319

Restricted cash

5,899

3,321

Settlement assets

500,258

320,377

Accounts receivable, net

68,600

80,401

Prepaid expenses and other assets

65,916

81,380

Income tax receivable

—

1,354

Total current assets

1,961,416

1,809,152

Investment securities available-for-sale, at fair value

2,168,888

2,115,501

Loans to bank customers, net of allowance for loan losses of $9,058 and $5,555 as of
March 31, 2022 and December 31, 2021, respectively

24,663

19,270

Prepaid expenses and other assets

203,674

136,400

Property, equipment, and internal-use software, net

139,308

135,341

Operating lease right-of-use assets

10,305

10,967

Deferred expenses

11,068

16,855

Net deferred tax assets

49,105

15,048

Goodwill and intangible assets

460,130

466,943

Total assets

$

5,028,557

$

4,725,477

Liabilities and Stockholders’ Equity

Current liabilities:

Accounts payable

$

66,605

$

51,353

Deposits

3,605,722

3,286,889

Obligations to customers

214,587

124,221

Settlement obligations

506

15,682

Amounts due to card issuing banks for overdrawn accounts

479

513

Other accrued liabilities

109,200

128,294

Operating lease liabilities

5,832

6,918

Deferred revenue

20,167

28,903

Income tax payable

10,919

291

Total current liabilities

4,034,017

3,643,064

Other accrued liabilities

3,239

3,531

Operating lease liabilities

7,357

8,209

Total liabilities

4,044,613

3,654,804

Stockholders’ equity:

Class A common stock, $0.001 par value; 100,000 shares authorized as of March 31,
2022 and December 31, 2021; 54,293 and 54,868 shares issued and outstanding as of March 31,
2022 and December 31, 2021, respectively

54

55

Additional paid-in capital

388,299

401,055

Retained earnings

737,994

699,370

Accumulated other comprehensive loss

(142,403

)

(29,807

)

Total stockholders’ equity

983,944

1,070,673

Total liabilities and stockholders’ equity

$

5,028,557

$

4,725,477

GREEN DOT CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)

Three Months Ended March 31,

2022

2021

(In thousands, except per share data)

Operating revenues:

Card revenues and other fees

$

212,828

$

186,012

Cash processing revenues

100,028

90,915

Interchange revenues

78,856

111,226

Interest income, net

8,905

5,333

Total operating revenues

400,617

393,486

Operating expenses:

Sales and marketing expenses

83,526

118,903

Compensation and benefits expenses

66,264

74,967

Processing expenses

112,092

97,669

Other general and administrative expenses

87,143

67,962

Total operating expenses

349,025

359,501

Operating income

51,592

33,985

Interest expense, net

87

37

Other expense, net

770

1,086

Income before income taxes

50,735

32,862

Income tax expense

12,111

7,127

Net income

$

38,624

$

25,735

Basic earnings per common share:

$

0.70

$

0.47

Diluted earnings per common share:

$

0.70

$

0.46

Basic weighted-average common shares issued and outstanding:

54,556

53,651

Diluted weighted-average common shares issued and outstanding:

55,230

55,068

GREEN DOT CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)

Three Months Ended March 31,

2022

2021

(In thousands)

Operating activities

Net income

$

38,624

$

25,735

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

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

13,804

13,200

Amortization of intangible assets

6,517

6,944

Provision for uncollectible overdrawn accounts from purchase transactions

4,700

2,994

Provision for loan losses

10,499

1,410

Stock-based compensation

14,858

17,237

Losses in equity method investments

1,708

875

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

(290

)

659

Impairment of long-lived assets

2,263

—

Other

(583

)

42

Changes in operating assets and liabilities:

Accounts receivable, net

7,101

(11,515

)

Prepaid expenses and other assets

13,306

(1,786

)

Deferred expenses

5,787

6,091

Accounts payable and other accrued liabilities

(4,430

)

20,201

Deferred revenue

(8,934

)

(7,159

)

Income tax receivable/payable

12,023

7,169

Other, net

(1,311

)

(1,425

)

Net cash provided by operating activities

115,642

80,672

Investing activities

Purchases of available-for-sale investment securities

(288,958

)

(95,332

)

Proceeds from maturities of available-for-sale securities

86,106

34,364

Proceeds from sales and calls of available-for-sale securities

2,875

5,198

Payments for acquisition of property and equipment

(19,010

)

(10,474

)

Net changes in loans

(14,693

)

(6,488

)

Investment in TailFin Labs, LLC

(35,000

)

(35,000

)

Purchases of other investments

(31,934

)

—

Other investing activities

—

(529

)

Net cash used in investing activities

(300,614

)

(108,261

)

Financing activities

Borrowings on revolving line of credit

50,000

—

Repayments on revolving line of credit

(50,000

)

—

Proceeds from exercise of options and ESPP purchases

92

1,780

Taxes paid related to net share settlement of equity awards

(2,707

)

(8,551

)

Net changes in deposits

318,280

859,868

Net changes in settlement assets and obligations to customers

(104,691

)

395,482

Contingent consideration payments

—

(1,000

)

Repurchase of Class A common stock

(25,000

)

—

Net cash provided by financing activities

185,974

1,247,579

Net increase in unrestricted cash, cash equivalents and restricted cash

1,002

1,219,990

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

1,325,640

1,496,701

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

$

1,326,642

$

2,716,691

Cash paid for interest

$

180

$

84

Cash refund from income taxes

$

(11

)

$

(20

)

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

Unrestricted cash and cash equivalents

$

1,320,743

$

2,711,791

Restricted cash

5,899

4,900

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

$

1,326,642

$

2,716,691

GREEN DOT CORPORATION
REPORTABLE SEGMENTS
(UNAUDITED)

Three Months Ended March 31,

2022

2021

Segment Revenue

(In thousands)

Consumer Services

$

158,757

$

184,341

B2B Services

133,900

105,975

Money Movement Services

97,316

90,367

Corporate and Other

4,705

(878

)

Total segment revenues

394,678

379,805

BaaS commissions and processing expenses (8)

6,512

13,681

Other income (9)

(573

)

—

Total operating revenues

$

400,617

$

393,486

Three Months Ended March 31,

2022

2021

Segment Profit

(In thousands)

Consumer Services

$

54,288

$

53,527

B2B Services

22,264

17,533

Money Movement Services

61,460

48,814

Corporate and Other

(47,686

)

(46,514

)

Total segment profit *

90,326

73,360

Reconciliation to income before income taxes

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

13,804

13,200

Stock based compensation and related employer taxes

15,169

17,182

Amortization of acquired intangible assets

6,517

6,944

Impairment charges

2,263

—

Other expense

981

2,049

Operating income

51,592

33,985

Interest expense, net

87

37

Other expense, net

770

1,086

Income before income taxes

$

50,735

$

32,862

*

Total segment profit is also referred to herein as adjusted EBITDA in its non-GAAP measures. Additional information about the Company's non-GAAP financial measures can be found under the caption “About Non-GAAP Financial Measures."

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

Three Months Ended March 31,

2022

2021

(In thousands)

Total operating revenues

$

400,617

$

393,486

BaaS commissions and processing expenses (8)

(6,512

)

(13,681

)

Other income (9)

573

—

Non-GAAP total operating revenues

$

394,678

$

379,805

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

Three Months Ended March 31,

2022

2021

(In thousands, except per share data)

Net income

$

38,624

$

25,735

Stock-based compensation and related employer payroll taxes (3)

15,169

17,182

Amortization of acquired intangible assets (4)

6,517

6,944

Change in fair value of contingent consideration (4)

300

—

Transaction and related acquisition costs (4)

413

—

Amortization of deferred financing costs (5)

36

42

Impairment charges (5)

2,263

—

Legal settlement (gain) expenses (5)

(426

)

10

Losses in equity method investments (5)

1,708

875

Change in fair value of loans held for sale (2)(5)

(552

)

—

Extraordinary severance expenses (6)

121

2,015

Other expense, net (5)

187

235

Income tax effect (7)

(5,783

)

(6,958

)

Non-GAAP net income

$

58,577

$

46,080

Diluted earnings per common share

GAAP

$

0.70

$

0.46

Non-GAAP

$

1.06

$

0.83

Diluted weighted-average common shares issued and outstanding

GAAP

55,230

55,068

Non-GAAP

55,501

55,664

Reconciliation of GAAP to Non-GAAP Diluted Weighted-Average
Shares Issued and Outstanding
(Unaudited)

Three Months Ended March 31,

2022

2021

(In thousands)

Diluted weighted-average shares issued and outstanding

55,230

55,068

Weighted-average unvested Walmart restricted shares (10)

271

596

Non-GAAP diluted weighted-average shares issued and outstanding

55,501

55,664

GREEN DOT CORPORATION
Supplemental Detail on Non-GAAP Diluted Weighted-Average Common Shares Issued and Outstanding
(Unaudited)

Three Months Ended March 31,

2022

2021

(In thousands)

Class A common stock outstanding as of March 31:

54,293

54,389

Weighting adjustment

534

(142

)

Dilutive potential shares:

Stock options

214

514

Service based restricted stock units

198

523

Performance-based restricted stock units

233

361

Employee stock purchase plan

29

19

Non-GAAP diluted weighted-average shares issued and outstanding

55,501

55,664

Reconciliation of Net Income to Adjusted EBITDA ⁽¹⁾
(Unaudited)

Three Months Ended March 31,

2022

2021

(In thousands)

Net income

$

38,624

$

25,735

Interest expense, net (2)

87

37

Income tax expense

12,111

7,127

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

13,804

13,200

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

15,169

17,182

Amortization of acquired intangible assets (2)(4)

6,517

6,944

Change in fair value of contingent consideration (2)(4)

300

—

Transaction and related acquisition costs (2)(4)

413

—

Impairment charges (2)(5)

2,263

—

Legal settlement (gain) expenses (2)(5)

(426

)

10

Losses in equity method investments (2)(5)

1,708

875

Change in fair value of loans held for sale (2)(5)

(552

)

—

Extraordinary severance expenses (2)(6)

121

2,015

Other expense, net (2)(5)

187

235

Adjusted EBITDA

$

90,326

$

73,360

Non-GAAP total operating revenues

$

394,678

$

379,805

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

22.9

%

19.3

%

GREEN DOT CORPORATION
Reconciliation of Forward Looking Guidance for Non-GAAP Financial Measures to
Projected GAAP Total Operating Revenues ⁽¹⁾
(Unaudited)

FY 2022

Range

Low

High

(In millions)

Total operating revenues

$

1,422

$

1,460

Adjustments (8)(9)

(28

)

(30

)

Non-GAAP total operating revenues

$

1,394

$

1,430

Reconciliation of Forward Looking Guidance for Non-GAAP Financial Measures to
Projected GAAP Net Income ⁽¹⁾
(Unaudited)

FY 2022

Range

Low

High

(In millions)

Net income

$

56.6

$

64.2

Adjustments (11)

173.4

175.8

Adjusted EBITDA

$

230.0

$

240.0

Non-GAAP total operating revenues

$

1,430

$

1,394

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

16.1

%

17.2

%

Reconciliation of Forward Looking Guidance for Non-GAAP Financial Measures to
Projected GAAP Net Income and GAAP Diluted Weighted-Average Shares Issued and Outstanding ⁽¹⁾
(Unaudited)

FY 2022

Range

Low

High

(In millions, except per share data)

Net income

$

56.6

$

64.2

Adjustments (11)

71.8

71.8

Non-GAAP net income

$

128.4

$

136.0

Diluted earnings per share

GAAP

$

1.03

$

1.17

Non-GAAP

$

2.32

$

2.46

Diluted weighted-average shares issued and outstanding

GAAP

55.1

55.1

Weighted-average unvested Walmart restricted shares (10)

0.2

0.2

Non-GAAP

55.3

55.3

(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 stock-based compensation from period to period, and recorded stock-based compensation expenses and related employer payroll taxes, net of forfeitures, of approximately $15.2 million and $17.2 million for the three months ended March 31, 2022 and 2021, 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 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 the 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, stock-based compensation and related employer payroll taxes, changes in the fair value of contingent consideration, transaction costs, impairment charges, extraordinary severance expenses, certain legal settlement charges, earnings or losses from equity method investments, changes in the fair value of loans held for sale, 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 an 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 adjustments to the non-GAAP financial measure 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. 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 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 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 transaction costs, 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 long-lived assets, earnings or losses from equity method investments, legal settlement expenses, changes in the fair value of loans held for sale, 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, earnings and losses from equity method investments, and fair value changes on loans held for sale, which are all included below operating income, are included within other general and administrative expenses on Green Dot's consolidated statements of operations.

(6)

During the three months ended March 31, 2022, Green Dot recorded charges of $0.1 million related to extraordinary severance expenses, which were paid out in connection with reductions in force and other involuntary terminations of employment. Although severance expenses may arise throughout the fiscal year, the nature of these costs are not indicative of its core operating performance. 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 and stock options expense as of March 31, 2022.

(8)

Represents commissions and certain processing-related costs associated with BaaS products and services where Green Dot does not control customer acquisition. This adjustment is netted against Green Dot's B2B Services revenues when evaluating segment performance.

(9)

Represents other non-interest investment income earned by our bank. This amount is included along with operating interest income in our Corporate and Other segment since the yield earned on these investments are generated on a recurring basis and earned similarly to its investment securities available for sale.

(10)

Represents the weighted average of the unvested balance of restricted shares issued to Walmart in January 2020. Walmart is entitled to voting rights and participate in any dividends paid on the unvested balance and therefore, the shares are included in the computation of non-GAAP diluted earnings per share.

(11)

These amounts represent estimated adjustments for items such as non-operating net interest income, income taxes, depreciation and amortization, employee stock-based compensation and related employer taxes, changes in the fair value of contingent consideration, transaction costs from acquisitions, amortization attributable to deferred financing costs, impairment charges, extraordinary severance expenses, earnings and losses from equity method investments, changes in the fair value of loans held for sale, legal settlement gains and expenses and other income and expenses. Employee stock-based compensation expense includes assumptions about the future fair 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).