Green Dot Corporation

Good day and welcome to the Green Dot Corp. Fourth Quarter 2020 Earnings Conference Call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press the star then one. Please note that this event is being recorded. I would now like to turn the call over to Allie Luber, Vice President of Communications. Please go ahead.

Thank you and good afternoon, everyone. Today we are discussing Green Dot's fourth quarter 2020 financial and operating results. Following remarks, we'll open the call for questions. Our most recent earnings release that accompanies this call and webcast can be found at ir.greendot.com. As a reminder, our comments may include forward-looking statements and expectations regarding future results and performance. Please refer to the cautionary language in the earnings release and in Green Dot's filings with the Securities and Exchange Commission, including our most recent Form 10-K and 10-Q, for additional information concerning factors that could cause actual results to differ materially from the forward-looking statements. During the call, we'll make reference to our financial measures that do not conform with generally accepted accounting principles. For the sake of clarity, unless otherwise noted, All numbers we talk about today will be on a non-GAAP basis. Information may be calculated differently than similar non-GAAP data presented by other companies. Quantitative reconciliation of our non-GAAP financial information to the directly comparable GAAP financial information appears in today's press release. The content of this call is property of the Green Dot Corporation and is subject to corporate protection. Now I'd like to turn it over to Dan.

Thank you, Allie, and welcome everyone to Green Dot's Q4 2020 earnings call. We thank you all for being with us today. Once again, we are pleased to report a better than expected quarter, driven primarily by strong demand and continued growth across all account programs. We've got a lot to cover today. Before I pass over to Jess for a comprehensive report on our financial results, I'd like to share my perspectives on our progress to date and our plans and priorities moving forward into 2021 and beyond. First, a look at Q4 financials. Non-GAAP revenue grew by 15%, adjusted EBITDA increased by 59%, and non-GAAP EPS of 31 cents translated to a growth of 121%. During the quarter, we saw revenue growth from fees charged to our BAS partners, and we benefited from heightened deposit balances on products in our retail and direct channels as a result of the first federal government stimulus, and to a lesser degree, the second stimulus. While the various federal government programs contributed to growth in 2020, it is important to note that COVID-19 also had a negative impact on growth trajectories of several of our businesses, including Paycard, and Uber Cash. We also faced some revenue headwinds during the quarter in our money processing business as well as in interest income. We'll share more on that in a bit, but overall, I'm very pleased we delivered another strong quarter and are making the necessary investments for Green Dot to continue playing an essential role in banking and payments for low to moderate income consumers. I'd like to take a few minutes to focus on key areas of progress and achievement over the past year. First, we built and launched GoToBank, our flagship challenger bank designed to address the unique needs and challenges of today's low to moderate-income consumers who are struggling to make ends meet and could truly benefit from better banking and payment solutions. We built this platform from the ground up, offering a total value proposition that includes tools like consumer-friendly overdraft, access to a secured credit card, high value rewards and other features that are meaningful and are already resonating with this audience. The results we're seeing with GoToBank are very promising and exceeding expectations. For example, more than half of our customers have opted in for overdraft protection and applications for our secured card are 20% higher than our original forecast. This level of demand gives us confidence in our strategy and our continued investment to market and expand this product. It's also important to note the investment we're making in GoToBank will reap rewards far beyond our direct-to-consumer lines of business, as we'll be able to leverage the technology, tools, and intelligence of this product on behalf of our BAS partners as well. And speaking of BAS, this business also had a productive fourth quarter and year. During 2020, we announced plans to partner and launch new platforms with a variety of exciting companies like Amazon, Cabbage, Google, GigWage, Intuit, and others. In Q4, Amazon launched the Flex debit card powered by Green Dot. We also announced plans to collaborate with Google Pay and offer Plex accounts to our go-to bank customers. And we announced our investment in and partnership with GigWage, a fast-growing and high-potential startup focused on bringing innovative payments and functionality to the rapidly growing gig economy. These partnerships and investments illustrate our new BAS strategy to partner only with select high-impact and high-potential companies looking for a true end-to-end partner to deliver modern, seamless, and accessible banking and payment solutions to consumers and small businesses. On that note, allow me to frame up this opportunity and define what we mean by small business. Just as the traditional banking system is not equipped to serve low to moderate income consumers in the U.S., they are also not equipped to serve many of today's small and micro businesses. Whether it's a micro merchant selling their wares on Amazon or Etsy, an independent gig worker, or a startup with limited cash flow or resources, these entrepreneurs and job creators face similar challenges and need a banking partner who can support their unique needs. Our partnerships with Intuit, Cabbage, Amazon, Uber, and GigWage are all focused on this growing audience and economy, and we're in the process of building differentiated value-based experiences for the small business sector. It's important to appreciate the powerful and unique collection of assets we have at Green Dot, including our bank, technology stack, distribution network, reload network, experienced customer service, and fraud controls. This full solution set is unmatched in the FinTech banking as a service arena and provides Green Dot with competitive differentiation through its portfolio of turnkey solutions. The quality of partners that have chosen to work with us proves that. It is our intention to press this advantage and to continue investing in our platform and our partners so that we can together deliver powerful, seamless, embedded payment solutions to tens of millions of consumers. Final comment on the Bass business. I am thrilled to announce Amit Parikh is joining Green Dot to lead this business line. You may have seen our press release announcing Amit's appointment earlier today. Amit is joining us from Apple, where he worked across the Apple Pay business and held a variety of leadership roles, building new partnerships and features. We are thrilled to have him on board to help grow and scale our Bass business. Now, moving over to the retail side of the house, this team has been hard at work as well and we're beginning to see the fruits of our labor. Here are a number of noble highlights and milestones to share. We launched Pay As You Go and our new 2x2, that's 2% cashback and 2% savings, products across all retail. These two product offerings are delivering net new sales at 10% and 11% respectively. Of note, Pay As You Go launched nationally in Walmart during the fourth quarter and is already delivering 17% incremental sales growth to the Green Dot brand. We also partnered to offer the Walmart Money Card as a money management tool to help more Americans manage their government stimulus payments. All current retail products are now demand deposit accounts and offer opt-in overdraft. Legacy cardholders will convert to demand deposit accounts over the course of 2021. We are expanding prominence in retail. For example, we expanded J-Hook facings at 7-Eleven locations nationwide and have gone from an average of five to 14 facings per display across 8,000 locations nationwide. We also grew and strengthened our Green Dot network, launching 14 new partner programs for cash funding and payments in the fourth quarter alone. We also renew our largest client in our financial services and check cashing group for six years and are rolling out Green Dot branded demand deposit account products across the full channel later this year, 2021. The ongoing success of our retail operations continues to provide meaningful cash flow that can be harvested and reinvested to support Green Dot's multiple growth strategies. Overall, a lot of progress in retail and more to come. In our tax business, TPG, we secured a long-term contract renewal with a key tax processing partner. With this renewal, we will experience a one-time decline in this program's revenues in 2021, but are now set up for long-term stability, predictability, and growth going forward. And we are confident about the growth opportunity in this channel. Now, for our Rocky Balboa story of 2020. Despite COVID's impact on business and employment across the country, our pay card team at Rapid still delivered 6% revenue growth during the year. The sales team at Rapid doubled down their efforts, took advantage of remote virtual sales world, and added close to 1,300 new corporate employers to our Rapid client list. These strong new client wins, expanded product set, and new and improved mobile app provide a springboard for our pay card business to grow an anticipated 20% in 2021. Upon my arrival here, Green Dot's objective in 2020 was to preserve, stabilize, and invigorate top line growth in every one of our business lines. With complete confidence and candor, I can say we accomplished this objective. And most importantly, We now have exceptional leaders across each of these business lines who are aligned and committed to our shared objectives of driving growth and margin expansion for Green Dot. As you can imagine, we dedicated a lot of resources over the past year toward identifying critical areas for investment and improvement at Green Dot. With each of our business lines under solid leadership and on their path to growth and margin expansion, we will now be placing considerable energy and investment in creating operational improvements and efficiencies. Looking forward into 2021, we'll be investing time and resources into improving the customer experience we deliver and updating our core banking platform and card management solutions. We believe these investments possess a demonstrable ROI that will lead to higher LTVs and greater customer satisfaction. Core banking and card management systems are a mission-critical build as this will allow us the ability to consolidate multiple and disparate outsourced processors onto our own platform. This will eliminate significant third-party expenses, turn a big variable cost into a smaller fixed cost, and most importantly, increase our ability to innovate and preserve margins over the long term. Owning and controlling this part of our business is critical to delivering on our vision to build seamless banking and payment experiences for customers on a massive scale. We've already begun a company-wide effort to elevate our customer experience as we recognize many of our systems, policies, and practices need to be improved. We spent a lot of time in 2020 laying the groundwork for these changes, and 2021 will be the year we build and implement them. Our goal continues to be providing a world-class, customer experience. These improvements will require incremental investments in 2021 in both our people and technology. Current systems will need to be maintained as we build new solutions. And hence, we expect some redundant expenses until we're able to benefit from improved efficiencies. As Jess will share in a bit, despite these meaningful growth investments, we still expect to deliver EBITDA growth in 2021. I'm gratified to share many of the investments we made in 2020 are setting the stage for growth and expanding margins in our key business lines. In 2021, we expect retail, direct-to-consumer, BAS, and pay card to grow revenue year over year. For our retail and direct channels, that is a significant achievement given these businesses were in a decline just a few years ago. As we support these business segments with long overdue investments and operational improvements, we'll ultimately be able to keep our fixed costs fixed and improving margins will see their way to the bottom line. As we think about guidance for 2021, it's important to note that although 2020 is behind us, COVID and the unpredictable impacts it has on consumers and the economy remain. Given that continued uncertainty, we are taking a conservative approach in our guidance for 2021. And though we anticipate another stimulus, that too remains uncertain, and therefore, our guidance and growth models do not include that potential tailwind. We are committed to delivering efficiencies across the business to creating meaningful operating leverage and to enhancing our margins and profitability. We will continue to invest in customer experience, enhancement of our products, and building scalable platforms, all of which will lead to a significant increase in profitability across the enterprise. I would like to thank our employees who have been working tirelessly to support our customers and build our business through these challenging times. And also, thank you to our shareholders for their continued trust and support. And with that, I'll pass it over to Jess.