Green Dot Corporation

Good afternoon and welcome to the Green Dot Corp Second Quarter 2021 Earnings Conference Call. All participants will be in 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 star then one on your telephone keypad. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Alison Lubert, Vice President of Communications. Please go ahead.

Thank you and good afternoon everyone. Today we are discussing GreenDOT's second quarter 2021 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 statement. 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 members 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 copyright protection. Now, I'd like to turn the call over to Dan.

Thank you, Ally.

Greetings, everyone, and thank you for joining us. We are pleased to share the results of our second quarter which significantly exceeded expectations. All three of our reporting segments outperformed our internal forecast, while some timing considerations also contributed to the Q2 upside. Our consolidated non-GAAP revenue grew 19% to $358 million, and we delivered EBITDA of $63 million and non-GAAP EPS of $0.68. This continues to be a remarkable year of unprecedented circumstances. including a shifting tax season and filing deadlines, stimulus, new customer behaviors and trends, and other dynamics that have impacted our industry across the board. The good news for us is when normalizing for those factors and stripping down our results to the core fundamentals, the second quarter showed ongoing strength and momentum and reinforced our confidence in our operations and strategy moving forward. Last year, we set our intentions to bring together a highly capable leadership team streamline and strengthen our platforms, and deliver exceptional digital banking and payment solutions to our customers and partners. We shared our belief that these initiatives would take some time to bear fruit, and as evidenced by our Q2 financial results, our plan is working. We will be raising our annual guidance slightly based on these results, which Jess will expand on shortly. Before I pass it over to him, I'd like to take the opportunity to share a few highlights from the quarter. As a reminder, we now break down our numbers into three key segments. First, our consumer segment, which includes Green Dot's retail and direct businesses. Second, our B2B segment, which includes BAS or banking platform services, and our employer business, branded as Rapid. And third, our money movement segment, which includes our tax processing business, TPG, and our money processing network, also known as Green Dot Network, or GDN. Starting with our consumer segment. This area of our business, when normalized for stimulus, continues to deliver solid year-on-year growth. Our consumer segment overall has nearly 4 million active accounts and close to 1 million direct deposit accounts. Although we experienced a decline in active accounts of 3%, which we believe is due to stimulus timing, we saw purchase volume up 5% and our direct deposit accounts increased 2% year-over-year. One of the most meaningful and exciting achievements in this segment was the launch of GoToBank in retail. This clearly illustrates Green Dot's power and competitive advantages when combining our best-in-class products with the tremendous reach and capabilities of our retail network. Now, our top-rated digital bank, designed for the 100 million-plus Americans living paycheck to paycheck, is showcased and available in more than 40,000 retail locations nationwide. GoToBank is now in Walmart, Dollar General, 7-Eleven, and Family Dollar, and we will be aggressively adding to that list in the second half of the year. Our retail network is unsurpassed in its reach with more than 90,000 locations nationwide. This is more than all the bank branches in America combined. The ability to display and market our go-to bank products across this vast retail network is a powerful competitive advantage for growing our business. It builds brand awareness, trust, and loyalty. We also announced that Walmart money card accounts are now demand deposit accounts, giving Walmart's million-plus money card customers access to more traditional banking and checking account features. And we have been pleased to see our consumer-friendly overdraft being used by more and more customers at no charge. In fact, in the second quarter, 67% of GoToBank customers who used our overdraft feature used it fee-free. Tools like this can be a lifeline to customers who would otherwise be unable to cover critical expenses. It is our belief that giving customers flexibility and control while encouraging financial accountability leads to the best outcomes for customers, and that's exactly what our consumer-friendly overdraft is designed to do. Wrapping up the consumer segment, you may have seen we recently announced new partnerships with Experian and Finicity. which are aimed at helping consumers improve their credit and overall financial situations using more seamless and secure tools and channels. These solutions illustrate our commitment to understanding and addressing the real needs, pain points, and barriers affecting the 100 million plus Americans living paycheck to paycheck and giving them seamless and intuitive tools and features that offer them a leg up.

Moving over to B2B.

which includes Banking as a Service or Banking Platform Services and our employer platform, Rapid. We made some notable strides in this segment as well. Starting with Banking Platform Services, Green Dot Partners are some of the most highly respected and innovative brands in the world, such as Apple, Amazon, Uber, Intuit, Walmart, and Cabbage, to design and deliver seamless banking and payment solutions to their customers. In the second quarter, Cabbage from American Express announced a much anticipated launch of its new business checking account, which is powered by Green Dot. Cabbage Checking gives small to medium-sized business owners fee-free and frictionless business checking account services. We are committed to serving and innovating on behalf of this important customer segment and are thrilled to be partnering with companies like Cabbage and others to power the millions of small and medium-sized companies that are a growth engine for our economy and will benefit from better financial tools and services designed to meet their needs. Early results for cabbage checking and our other small business products show demand for these types of solutions is strong, and we are excited to continue investing and innovating in this space. We are making great progress with our partners as we continue investing in and strengthening these relationships. Now, over to our employer platform business, Branded as Rapid. This business saw solid growth in Q2. Revenues were up 29% year-over-year, and quarterly actives were up 20% year-over-year. We added 348 employers during the quarter, bringing our total to nearly 5,200 small and medium-sized businesses. This was a 9% year-on-year increase compared to 2020. I'll wrap with our third segment, money movement, comprised of our money processing and tax processing businesses. We saw higher than expected results in Q2 while making progress on a number of important milestones. Starting with money processing, also referred to as the Green Dot Network, or GDN. We launched four new GDN partners, including Fair Fintech, LendUp, Dabble, and Greenwood, and contracted an additional two new programs with current partners, PayActive and ADP, during the second quarter. We also partnered with Paying Near Me, to make it easier for millions of Walmart customers to pay bills using cash at Walmart stores. And we plan to extend this convenience to more major retailers in our network in coming quarters. GDN's barcode reload and payment product, known as eCash, has seen a 32% increase year-on-year growth due to new partner launches and retailer footprint expansion. And we expanded GDN fraud control capabilities by introducing geolocation capture on reloads. We are consistently rolling out new and enhanced integrations with some of the largest retailers in the world and will continue adding solutions like PayNearMe, eCash, and others, further increasing the value and usefulness of the GreenNet network. Now, looking at our tax processing business. Before jumping into the quarter's performance, we are very pleased to share that the DOJ has approved our acquisition of Republic Bank's tax refund business. and we are working toward a Q3 closing. As we shared earlier, this acquisition presents strong synergies and significant growth opportunities, particularly as we prepare to introduce new products to tax processing clients. It also adds further scale and diversity to our already strong tax business, including tax-related underwriting and lending capabilities, while strengthening our core tax solutions platform and setting us up for long-term growth and success. We expect the TRS business to deliver incremental EBITDA of 13 to 16 million in 2022 with additional synergies in 2023 and beyond. We appreciate the support of our regulators in this process and we'll keep you updated on the transaction as we are working hard to close as quickly as possible. As for our Q2 results for TPG, it's important to note how shifts in tax filing deadlines and other dynamics and delays in 2020 and 2021 impacted volumes each quarter. Setting these quality shifts and volumes aside, we expect results for this part of the business to be relatively flat for the full year compared to 2020. I'll wrap this segment by acknowledging how much effort has gone into strengthening and enhancing our tax processing business and platforms by our IT group and the team at TPG. We are launching new products and services aimed at helping the 30,000 plus tax preparers who rely on us to better serve their clients. The investments we made to sustain and bolster this business will benefit us significantly in years to come, particularly with the acquisition of TRS, which expands our reach and capabilities and ultimately our bottom line. To summarize, as I've said before, 2021 is a year of both investment and growth. We are pleased with our growth in the second quarter, and it affords us the ability to reinvest back into areas that present significant opportunity and potential like GoToBank. This has been a great quarter, marked by stronger than anticipated results and progress on a number of important milestones. We are becoming a leaner, stronger, more focused company. There's still a lot of work ahead to capitalize on the plethora of large-scale opportunities we are pursuing. However, the evidence continues to show that our dramatic turnaround is materializing, and it is exciting to see the momentum build and our hard work and new mindset begin to pay off.

With that, I'll pass it over to Jess to give you a breakdown of our numbers. Thanks, Dan. Good afternoon, everyone.

I'll cover our strong second quarter results and provide thoughts around provincial performance for the remainder of the year, including raising our guidance for both revenue and earnings. In the second quarter, all three of our reporting segments delivered year-over-year revenue growth we saw tax refund volumes rebound from a significantly delayed tax season in Q1. All in, our consolidated non-GAAP revenue grew 19% to $358 million, which was an acceleration from the 9% growth in Q1. Illustrating our emphasis on maintaining a fixed cost structure, contribution margins were exceptionally strong, which resulted in adjusted EBITDA of $63 million and non-GAAP EPS of 68 cents. Our results for the quarter exceeded the guidance we provided during our last earnings call, and I'd like to spend a moment covering some of the moving pieces. The beat on our adjusted EBITDA guidance can be broken down into two primary categories. The first is better than anticipated performance of $9 million. We have been and continue to be cautious with our guidance in light of the lingering effects of COVID on the economy. Certainly, the economy is more stable now than it was a year ago. we are still experiencing a very dynamic environment, and therefore, forecasting all the potential variables has been a challenge. Our consumer services and B2B services segments each performed better than we anticipated due to the strong gross dollar volume growth, normalizing for stimulus, and a better margin flow through on the related revenue. The second category driving the material upside in Q2 was the timing benefit of roughly $12 million. The tax season recovered faster than we anticipated, and $4 million of the forecasted earnings from our tax processing business shifted from Q3 to Q2. And portions of our growth-oriented investments, such as marketing spend and hiring plans to support our new modern banking platform, were pushed into the second half of 2021. Turning to liquidity, we continue to produce substantial cash flow generating $119 million of operating cash flow year-to-date, down year-over-year, due in large part to the timing of corporate tax payments. And our cash at the holding company at quarter end was $172 million. Our cash balance and the strength of our operating cash flow, together with our $100 million revolver available to us, provide us with sufficient liquidity to invest in our strategic initiatives that Dan mentioned, We received approval from the DOJ to proceed with our acquisition of the tax processing business from Republic Bank Corp. We expect to fund that acquisition with a combination of our revolver and cash on balance sheet. Focusing on our segment results. In our consumer services segment, gross dollar volume and the number of active accounts declined year over year by 6% and 3% respectively. These declines were largely due to very challenging comparisons created by the timing of stimulus programs in 2020 versus 2021. Excluding stimulus funds in 2020, gross dollar volume in our consumer services segment increased 9% year-over-year. Lastly, our direct deposit actives increased 2%. Despite the gross dollar volume headwind from stimulus, revenue in our consumer services segment grew 12% on higher purchase volume of 5%, largely attributable to stimulus funds received in the first quarter of 2021 being spent in the second quarter of 2021 in organic growth from products in both our retail and direct divisions and the continued rollout of our new overdraft protection program. To reiterate my remarks on prior earnings calls, the impressive performance in this segment is a stark contrast to the declining revenue growth rates over the last few years. And while stimulus has undoubtedly provided a tailwind, our strategic focus is creating organic momentum Expenses in our consumer services segment increased year over year, and our margin declined because of higher third-party call center support costs to meet the increased demand in our customer service center as a result of the federal relief programs. As I mentioned on our last call, improving our customers' overall experience and building a service infrastructure capable of handling a larger ecosystem is one of our growth-oriented investments in 2021 and will be a focal point in the second half. Expenses also increased due to the timing of marketing expenses to promote our recently launched GoToBank product and growth in transaction losses due to the year-over-year increase in purchase volume. Overall, our growth-oriented investments resulted in the consumer segment profit declining by $3 million, or 4%, as we prioritized investments in customer experience and marketing. In our B2B services segment, Gross dollar volume and purchase volume grew year-over-year by 43% and 3%, respectively, while the number of active accounts declined 4%. Like our consumer services segment, we believe that the decline in our active accounts was driven by the timing of stimulus funds. The growth in gross dollar volume is a result of continued growth in our BAS programs and employer programs, even in the face of year-over-year headwinds from stimulus in the second quarter of 2020. segment revenue grew 47%. Like our consumer segment, our B2B segment experienced heightened transaction losses associated with GED and purchase volume growth, and we experienced an increase in processing expenses in line with corresponding revenue increases in our BAS partner fees and interchange revenue. Overall, our B2B segment profit grew $2 million, or 11%. As expected, The segment margin declined year-over-year consistent with Q1 from BASPR arrangements that contain a fixed profit. Revenue in our money movement segment was up 1% year-over-year, driven by the rebound in the tax season. You may recall that the number of tax refunds processed in the first quarter of 2021 was down year-over-year by 23% due to the significant delay in the tax season. In Q2, our tax refund processed were up 118% And on a year-to-date basis, our first half volumes have recovered to flat. The number of cash transfers we processed in the quarter were down 18%. As we discussed on our last earnings call, we have a headwind associated with our decision not to renew a significant reload partner in Q4 2020. However, the loss volume in revenue came at a low margin, so the bottom line impact has been muted. Overall, segment profit increased $10 million, or 37%. Now I'd like to focus on guidance for the remainder of 2021. We are raising our non-GAAP revenue guidance in light of our Q2 performance and early trends we are seeing in Q3 to a range of 1.33 billion to 1.35 billion. We are also raising our guidance range for adjusted EBITDA to 215 million to 225 million and our non-GAAP EPS range to $2.13 to $2.27. Based on the midpoint of our adjusted EBITDA range, the implied second half earnings is approximately $84 million. As we have shared in our last two earnings calls, we believe strategic opportunities exist in 2021 to reinvest profit upside back into our modern banking platform, customer service, and go-to bank. Additionally, timing matters I discussed previously shifted $12 million of profits from the second half to the first half. Keep in mind that we expect our corporate and other costs to increase in the second half of the year as we invest in our new modern making platform. We expect this investment to begin delivering a payback in 2022 with a reduction in processing expenses, which will become more substantial in 2023. We're excited about the progress we're making and the milestones we've achieved thus far. That re-accelerating top line is a positive indicator that we are on the right track. We are committed and focused on our growth-oriented investments in 2021 and believe they will deliver compelling expected returns. These investments, coupled with our roadmap for product innovation, will help us further our mission of being the go-to financial partner for hardworking Americans and small businesses to empower their financial well-being.

With that, I'll turn it over to the operator for questions.

We will now begin the question and answer session. To ask a question, you may press star then 1 on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then 2. Please limit yourself to one question and one follow-up. If you have further questions, you may re-enter the question queue.

At this time, we will pause momentarily to assemble our roster. And our first question will come from Bob Napoli of William Blair.

Please go ahead.

Thank you. Congratulations. Nice quarter, Dan and Jess. Good to see. Thanks, Bob. So just, I mean, a lot of things to dig into there. And the B2B services, I think that's where you had the largest upside relative to our expectations. Can you maybe give a little more color on, I mean, the Bass Partners and the revenue growth there and what, you know, kind of how you've retold that business, if you would?

Yeah, I can comment, Bob, as Jess, on the performance and the revenue side. So first and foremost, you can see that there was really strong gross dollar volume growth in the quarter, up 43% in the B2B side of the house. So that's That GDB growth is coming largely from continued expansion of some of our mature portfolios and programs with some help with some of the newer programs we launched in late Q4. But predominantly, it's our mature programs continuing to ramp. And even with the headwind on stimulus, we still see a large influx of GDB coming through some of the programs are being used as a P2P platform. Others, you know, just continue to expand their active accounts and their marketing campaigns, et cetera. And that's been partially offset by some headwinds from some of the programs that were impacted by COVID starting in, you know, late Q2 or early Q3. So all in sort of organic growth coming from those mature programs with some help from the newer programs.

Okay. Thank you. Then maybe just to follow up on GoToBank, the Walmart money card. I don't know if you can give some growth metrics on GoToBank specifically, but as it relates to the Walmart money card, the conversion of that to DDA accounts, how meaningful? It seems like a real shift in the strategy there that could be meaningful. I'd love a little more color on that.

Sure, Bob. you know on that the the switch of getting the Walmart money cards to admit demand deposit accounts is it you know that's now clearly it's a bank issued accounts no longer prepaid card and so with that then the very consumer-friendly overdraft products that we've created have launched now Walmart can extend that to their cardholders and so so it's a it's really a sign of a few things one it's a sign that you know, the true value of the product, the overdraft program that we have. I mean, Walmart is very protective of their customers and they're only going to be rolling out products that really serve them and the customers embrace. So I think it really speaks well for the product we've got out there. The product is, even though 67% of the overdrafts are fee-free because customers can cure them without a fee, it's still a profitable program. So it will benefit both us and Walmart by having Walmart money card customers use it. And then the other and more important is it really, to me, it's evidence of the wonderful relationship we're building with the new financial services team at Walmart and how we are bringing not just Walmart but bringing all of our partners real solutions to help solve the pain points and the challenges of working Americans in this country.

And the GoToBank?

go-to-bank is doing really well. We don't share the specific metrics on that, but that is where we're still inside the consumer segment are the Green Dot products that we have out at retail and then the go-to-bank products. What we try to illustrate in that And I do appreciate you staying awake, Bob, during that call. As I listened to myself, I realized I better take some action and speech lessons. My gosh. I mean, Josh, I apologize to everybody. Right now I'm going to say it once. I'll do better next time. I put myself to sleep with that one. So I don't think it came across in the script. I mean, we've got go-to banks now racked in 45,000 retail locations. And I'm sorry, but if there's any challenger bank or neobank out there that can do that. And so when we talk about the power of our consumer segment and the ability for us to build brand awareness on GoToBank, when you see that card on display inside of retail and you're also getting direct messages of how we reach you through TV or through online, we're going to build an extremely powerful brand with GoToBank.

Thank you, Dan. Appreciate it. Yeah, thank you, Bob.

The next question comes from Andrew Jeffrey of Truist Securities. Please go ahead.

Hi, Dan. Fortunately, I've got a cup of coffee sitting next to me here, so we're all good.

That's great, Andrew. Thank you.

I think it's a compelling neobank story and more focused than peers. Can you elaborate a little bit? on the go-to bank unit economics. I think you've mentioned in the past perhaps a six-month break-even. Maybe if you could just elaborate and detail that a little bit. And I just wonder, are we at a point this year where perhaps the break-evens get extended as you invest for share and then they come back down in 22 and 23, just kind of thinking about the investments and how we should frame those up from a unit perspective?

Sure. And Andrew, I'll just you know, and I will talk just in terms of like the unit economics because we talk about kind of the profitability of the entire program, you know, that's a, it's kind of a nuance how you play that because we have to quote unquote prime the pump to get a certain base of customers that will then be able to generate the free cash flow to fund go forward marketing. But on a unit basis, what I can share and I have shared many times before is that, you know, the When we get a customer on direct deposit with GoToBank, and we also offer the customers access to our secured credit card, we also offer customers access to the consumer-friendly overdraft, and it becomes a fee-free card if they're on direct deposit. And so if we're looking at the unit economics just on our direct deposit group of customers on GoToBank, some of them use secured credit cards, a portion of them use the consumer-friendly overdraft. When we blend that group together and then look at the average unit economics per customer, we could be looking at $15 to $20 a month of contribution per account. Not revenue, but contribution. So I just get so bullish on this business and this program, and I also don't have fear of competition. It's because the total value market, we believe, is $100 million working Americans living paycheck to paycheck is the available market. If we have a customer that's generating $20 a month of contribution, that's $240 a year. So I'll make that conservative and cut it from $240 to $200. So a customer in our direct deposit pool generating $200 a year of contribution for us, if we get a million of them, that's an incremental $200 million a year of contribution for the company. and less than 1% of what we see as a total available market. And to acquire that customer on direct deposit, there's a lot of ways of people cut those numbers. And you'll see in the press by other folks who are out there, they're trying to always raise money to fund their engine. They'll quote a very low customer acquisition cost number. And we look at, at the end of the day, What's it ultimately cost us to acquire a direct deposit customer? So we may go out and acquire 20 customers and ship 20 cards, and of those 20, a certain percentage get funded. Of those that get funded, a certain smaller percentage still become direct deposit customers. So when we look at all the costs to acquire one single direct deposit customer, it ranges between $100 and $130 to acquire a direct deposit customer. So there's your math, Andrew, to where it's about a six-month payback on a direct deposit customer. I hope that helps.

Yeah, it does help. I think that's really important just to understand. And then just as a follow-up, sorry.

Yes, go ahead.

Just as my follow-up, there's been some chatter, and I know the Fed is I don't think there's been any specific discussion of the Durban carve out for prepaid or for small issuance. Do you have any view on risk to debit exempt interchange?

I don't have any view on that right now. I see the same kind of chatter that's out there. I don't have any comment on it at this point. well below the asset-sized banks to be able to maintain our government exemption.

I appreciate it. Thanks. Yeah. Thank you, Andrew.

The next question comes from Ramsey Ellisow of Barclays. Please go ahead.

Hi, Dan and Jess. Thanks for taking my question this evening. In the consumer segment, there was more revenue per active account versus our model. And I know there's a lot of moving parts, especially with stimulus. But I'm just wondering if you can comment on that metric over time kind of going forward. Should I read that as increased? It seems like it's ticked up over the months and years. Is that increased engagement? Should we think of that as kind of continuing northward?

Yeah, Ramsey, I'll give the optimistic CEO answer, and then, Jess, you can see if you want to talk about that. Yeah, Ramsey, I would say that, yes, you're the – Now, we have 4 million active accounts in our consumer base. So I want to get that out there again whenever I get a chance just to give everyone kind of some context in terms of the size of just our consumer business compared to other offerings that are out there that are getting silly valuations. So our current base is 4 million, and roughly a million of them are on direct deposit. As we continue to grow and invest in go-to banks, and drive that as the best bank on the planet for working Americans. I expect that our percentage of direct deposit customers as our total active accounts will increase. And a direct deposit customer, by their nature, when they make our product their bank account, yes, they will be increasing the revenue per account there. So I would say that you are correct, that the average revenue per active account in the consumer segment should be trending upward.

Okay. Along similar lines, can you talk about the product pipeline with GoToBank? I think there's a – originally, the conception is that you'll add functionality to that platform over time. I don't know what that might be. Bitcoin – trading or stock related stuff or P2P or there's all kinds of things you can kind of add to it. Is that still a roadmap? Should we expect some kind of product announcements associated with GoToBank in the whatever near medium term?

Yes, you should expect, we'll be adding feature functionality and benefits to the product continually. And so we will, yeah, so certainly, you know, second half of this year we will add some future functionality and benefits and we intend to be doing so all along and keep in mind that we are focused on creating a product to serve the needs and solve the pain points of working Americans and low to moderate income consumers and so don't expect us to be you know offering products and functionality that would be directed towards more of a high-income consumer We'll be looking more for things that really, really benefits our customer base. But yes, absolutely, we've got a very robust product roadmap with some very unique and powerful things we plan to be rolling out in the near term.

Great. Terrific. Thank you. Thank you, Reese.

The next question comes from Andrew Schmidt of Citi. Please go ahead.

Hey, Dan. Hey, Jess. Hope you're doing well. Thanks for taking my questions.

I wanted to actually dig in along the same lines of the last question, but more around direct deposit active account growth. Obviously, this quarter, a fairly tough comp from an active account perspective, but between adding more distribution, improving the product functionality and things like overdraft, which can help customer acquisition retention and things like that, what's the right way to think about direct deposit active account growth over the intermediate term?

Once we get through this sort of period of tough comps and start to normalize a bit.

Andrew, when you ask what's the right way to think about direct deposit accounts, just... Consumer services, specifically. Yeah. I mean, Andrew, if we kind of like say we're going to get through this period anomaly of stimulus payments and delayed taxes and such, what I expect to see is, you know, kind of consistent quarter-on-quarter growth in our direct deposit customer base, which Q2 to 3, 3 to 4, 4 to the first quarter, and then typically, historically, there's always been a slight drop in from Q1 to Q2 because Q1 is a quarter of pretty strong acquisition for direct deposit customers during tax season. And then there's always a percentage of customers who get their tax refund on a direct deposit basis in Q1 that then almost, they're not one and done customers, but they're kind of seasonal in that they only use the product for tax season. And then you'll see a drop from Q1 to Q2. And then from that point forward, you see the you see quarter-on-quarter increase in direct deposit count. That's what I have seen historically. Last time around, that's how I see in other businesses that I follow, and that's what I fully expect to see here at Green Dot. Again, the total bill market is tremendous. We have marking dollars we're going to spend, and we know that when we spend those dollars properly and thoughtfully, we're going to acquire a certain number of direct deposit customers. As long as our product is sound, our customer service is good, and we have decent retention, we're going to see growth in direct deposit customers each quarter, provided that our marketing spend is consistent.

Okay, that's helpful. So consistently positive direct deposit. Absolutely. Okay.

No, absolutely. And that's what I'd like to say. I've tried really hard since I got here to not sound arrogant. I mean, it's just fundamentals. It just works. We've done this before. You spend the marketing dollars. You get the customers because there's plenty of them out there. And there's also – there's millions coming in every year, you know, become adults and need a bank account. So there's just – the market's there. If you spend the money, you acquire the customer and keep the customer. They spend the dollars, and you get the growth. It really is. And that's, you know, Andrew, I believe is – It's just that simple. It's just that simple. And that's where I just have such confidence that we will be able to grow the business. It's not easy, but it's simple. Keep it simple, right? Got it. Makes sense. And then just for my follow-up, Modern Banking Platform. I was hoping you could give us an update on where we stand with that, who selected vendors, where the implementation started, and then when we should expect the bulk of the work to complete in 2022. Thanks. Yeah, we have selected our software vendors. We're working and we're in work. Work has begun with both of them. And I would say that we are probably, Jess, you kind of keep me honest and conservative here, but first quarter, second quarter of 22 is when we expect the bulk of the work to be done. We expect to be But before this year is over, we will begin having products active on our new platform.

Yep.

Yeah, migrate in phases with the intention of being substantially complete in Q2 of 2022. Got it. Thank you, Dan and Jess. Appreciate it. Thank you, Andrew.

The next question comes from Stephen Clock of KBW. Please go ahead.

Hi, thanks for taking my question. Yes, the first one I have was just around how we should think about the cadence between the third quarter and fourth quarter, given that there were some things that were shifted between third and second quarter. If you could help, that would be great.

Sure, Stephen, I'll take a crack at it. From a revenue perspective, we'd expect Q3 and Q4 on a year-over-year basis to be up high single digits year-over-year. From the From an EBITDA standpoint, we talked about an implied sort of $84 million in the second half, and I'd anticipate that sort of being spread evenly across the two quarters. And you could expect, you know, sequentially you'll see a decrease naturally in adjusted EBITDA as we get further from stimulus in Q1, Q2, and then a tax season essentially completed by the end of Q2 as well.

That's helpful. And then, Dan, you mentioned about the investment opportunities and stuff. Could you just talk about perhaps what type of ROIs you're seeing, and has that changed since your time at Green Dot?

Stephen, can you, I'm sorry, explain investment opportunities, investment in marketing of GoToBank, or what are you referring to?

Just around the areas that you're focused on, including GoToBank, which you mentioned.

I understand. Yeah, so when we talk about investment opportunities, I think what we'll refer to is, yes, invest marketing dollars in terms of driving GoToBank and driving customer acquisition with GoToBank. I've already given the unit economics on that, so I think that the return on investment there is very strong, and so we will be very aggressive with those dollars. And then the other areas of investing is more of investing in internal systems and internal operational improvements in the business. So around the modern banking platform is one example. Customer service tools is another example. So when we speak of investing, that's what we're referring to.

Understood. Thanks for taking my question.

Absolutely. Thank you, Stephen.

This concludes our question and answer session. I would like to turn the conference back over to Dan Henry for any closing remarks.

Everyone, I just want to thank you all for the time and the interest here. I'm very, very proud of what the team has accomplished since my arrival, and I think that this quarter really illustrates that some of the fundamentals that were put in place are really beginning to take root. Excited about what we delivered this quarter. Very excited as this journey continues.

Thank you all.

The conference is now concluded. Thank you for attending today's presentation and you may now disconnect.