Green Dot Corporation

Good day and welcome to Green Dot's third quarter 2021 earnings conference. 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 touchtone phone. 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 Tim Willey, SVP of Investor Relations and Corporate Development. Please go ahead.

Thank you. Good afternoon, everyone. Today, we are discussing Green Dot's third quarter 2021 financial and operating results. Follow our 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 the Green Dots filings with the Securities and Exchange Commission. Include in our most recent form 10-K and 10-Q or 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 copyright protection. Now, I'd like to turn the call over to Dan.

Good afternoon, everyone, and thanks for joining us as we announce our third quarter 2021 results. This was another solid quarter for Green Dot as we exceeded our guidance with consolidated non-GAAP revenue up 18%, adjusted EBITDA up 37%, and non-GAAP EPS up 72%. compared to the prior year. Much like previous quarters, our Q3 results were driven in part by unique circumstances stemming from the pandemic, including shifts in tax season and filing deadlines and government stimulus programs, as well as customer behaviors and trends that have continued reinforcing the value and potential of the products we offer, both directly and through our valued partners. We are driving forward with our plan to invest the financial outperformance back into our infrastructure and create a stronger, leaner, more scalable platform and enterprise. I believe great companies are built with great people, and I'm pleased to highlight two additions we have made to our leadership bench. The first being Mike Althaus, our new Chief Compliance Officer, and most recently, the appointment of George Gresham, our new chief finance and chief operating officer. You will hear from George in a few minutes, but first a few highlights from each segment during the quarter. Starting with our consumer segment, which includes our retail and direct to consumer distribution channels. We continue to investing in expanding our suite of consumer banking products available both digitally and across our expansive retail network. For example, GoToBank is being rolled out to an additional 30,000 retail locations nationwide, including Kroger, Walmart, Family Dollar, Walgreens, Dollar Tree, and others. Now, consumers can acquire our best-in-class digital bank account at more than 63,000 retail locations, and we plan to surpass 70,000 by the end of the year. As you know, the opportunity to display and market our GoToBank products across this vast retail network is a powerful competitive advantage for building brand awareness, trust, and loyalty. We also introduced rebranded Green Dot Bank products in 700 of the nearly 10,000 7-Eleven locations nationwide, and we'll continue expanding our presence in 7-Eleven stores in the months to come. Looking at Walmart, we've continued strengthening and deepening this important partnership by introducing new tools and capabilities that are highly valuable to customers, and we are also ramping up marketing efforts to drive acquisition. The conversion of Walmart money cards to demand deposit accounts earlier this year gives Walmart's million-plus money card customers full access to digital-first banking and checking account features. We are collaborating closely with Walmart to elevate our customer acquisition efforts for this product, both through direct mail and digital marketing. This is a clear example of our ability to work with our retail partners as they build out omni-channel ecosystems and extend their financial service offerings beyond the store presence only and into the digital ecosystem where customers are increasingly seeking convenient payment and money movement solutions. We also announced partnerships with Finicity and Experian aimed at empowering customers with tools and features to help them build, improve, and protect their credit. These solutions reinforce our commitment to understanding and serving our core customers who tend to be low to moderate income consumers living paycheck to paycheck who can greatly benefit from seamless, affordable, accessible solutions. Now, moving over to the B2B segment, which includes BAS, or Banking Platform Services as we call it, and our employer platform, Rapid. Starting with Banking Platform Services, This is one of our main areas of strategic investment and growth at Green Dot, as we partner with some of the most highly respected and innovative brands in the world to design and deliver seamless banking and payment solutions for their customers. As we focus on strengthening our technical foundation internally, we are also upgrading the talent that supports our partners. The combination of great tech and great talent is what brings exceptional products to market. For example, last month, And to it, the global technology platform that makes QuickBooks launched a new service, Money by QuickBooks, the latest addition to QuickBooks comprehensive solution suite powering small business. The Money by QuickBooks mobile app gives entrepreneurs, freelancers, and sole proprietors complete control over their money with the ability to accept payments and manage expenses, plus debit card and bill payment capabilities and more. Green Dot is proud to be the banking platform service provider behind this important new offering from QuickBooks. Another one of our partners, Cabbage from American Express, has begun increasing acquisition marketing for their Cabbage checking account, which is also powered by Green Dot. Serving and powering America's small business with seamless, safe, value-driven banking and cash management solutions is something Green Dot is well positioned for. By partnering with companies like Cabbage and Intuit, we're building and delivering solutions that are designed to reduce stress, save money, and build confidence for today's small business owners through solutions like small business banking and checking, bill pay, remote check capture, debit cards, and rewards. We anticipate continued scalable growth in years to come from our banking platform services business, as we work closely with partners to roll out these innovative, in-demand solutions that are designed for today's small business owners and consumers. Now, over to our employer platform business, branded as Rapid. This business saw solid growth in Q3, with revenues up 20% year over year and quarterly actives up 14% year over year. We added 295 employers during the quarter, bringing our total to nearly 5,500 small and medium-sized businesses, a 19% year-on-year increase. And we continue to see growth from new client acquisitions and expansion as the economy recovers. Wrapping up with our third segment, money movement, which includes money processing, also known as Green Dot Network or GDN, and our tax processing business known as TPG. We launched 11 new GDN partner programs during the quarter, including PayActive, Alterna Prepaid, Spruce, WealthEye, and others. And we expanded cash disbursements at Walmart by launching ADP Cash Out, allowing end users or employees to cash out funds as needed from their pay card at Walmart locations. This is a very valuable feature to these workers. Now looking at tax processing, or TPG, In the third quarter, as we saw continued shifts in refunds from tax delays, we remained focused on enhancing our tax processing business and platform. It was announced that we will not be moving forward with the acquisition of TRS. Though we are disappointed, this decision does not detract from the strength or potential of our tax processing business, nor does it alter our strategy to invest in our tax processing platform to enhance long-term sustainable growth. Our tax business remains strong, highly efficient, and well positioned in the marketplace. We will continue to execute on our plan to grow the business by leveraging a strong reputation, differentiated product set, and exceptional client experience. To summarize, we are very pleased with the quarter's results, our year-over-year growth, and increase in average revenue per card. These are early indicators that our new mindset to focus on higher quality, sustainable bottom line growth is taking hold. With that, I'm very happy to introduce our new Chief Finance and Chief Operating Officer and fellow board member, George Gresham. George's knowledge and experience successfully leading financial and operational strategies in our industry is unparalleled, and we are grateful to have him on board. Now I'll pass it over to George.