Green Dot Corporation

Good day and welcome to the Green Dot second quarter 2022 conference call. All participants will be in a listen-only mode. Should you need assistance, please signal conference specialists 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. And 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 Mr. Tim Willey, Senior Vice President in Investor Relations. Please go ahead, sir.

Thank you, and good afternoon, everyone. Today, we are discussing Green Dot's second quarter 2022 financial and operating results. Following our remarks, we'll open a 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 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 will 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 to discuss our second quarter results. Green Dot delivered a solid second quarter, with non-GAAP revenue down just slightly in the face of tough comparisons to last year. Adjusted EBITDA increased in 7%, driven by 140 basis points of margin expansion, and non-GAAP EPS up 9% to $0.74 per share. I'm proud of the results our team delivered, which George will cover in greater detail shortly. I would like to take this time to discuss several high-level themes I believe are important to our organization and deliver additional clarity for our investors as we progress in our plan to transform Green Dot into a next-generation financial services platform. There are three topics I'd like to discuss before handing it over to George. They are our operational performance, our business development initiatives, and the macro environment. First, our financial and operational performance. As I mentioned earlier, we are pleased with our second quarter results. As a market intuitively focuses on metrics like revenue and EBITDA, there are other financial and operational levers that help drive the revenue and EBITDA you see in the headlines. As I have highlighted in prior calls, We have built out our management team while being very focused on creating a culture of operational efficiency, disciplined investment, and holding our people and teams accountable. And I believe we are seeing tangible progress on this front. While no single effort or metric may be clearly visible to investors in any given quarter, in aggregate, they do have an impact. As I look at our progress in conjunction with our continued work to improve operations as a highly regulated financial institution, we are making Green Dot a better company in the long term. On the revenue front, I would like to highlight that our average revenue per active account, which was up 18% this quarter, continues improving as customers are increasingly engaged. They continue spending more on their cards and are opting to utilize more products and services like Overdraft, which we believe is the most customer-friendly product of its type in the industry. This demonstrates that the consumers we are focused on serving value the products and services we're delivering, and they are making us a part of their daily routines and financial lives. Just as important, it bolsters my confidence about our opportunity to more deeply engage our customers as we work with partners to build out future product offerings on our new tech stack. Turning to our expenses and operational efficiency, fraud and customer care are two critical areas where we've been focused and have seen significant progress. In prior quarters, surges in volume and activity from stimulus adversely impacted results due to rising costs and suboptimal performance. Through increased investment and focus, we're seeing dramatic improvements in productivity and operating leverage in these areas, helping to drive margin expansion and other near and long-term benefits. Customer care and risk management work hand in hand to deliver top-tier customer experiences, and with continued focus in these areas, we expect accounts and revenues will grow. This is just the most recent example of progress from our ongoing initiatives to improve operational efficiencies. We plan to continue finding new opportunities to improve operations and reduce expenses each quarter. Second is business development and the discipline we are instilling in this part of the organization as we strengthen our pipeline, onboard new partners, and reevaluate and refine the nature of some partners to better align with our long-term vision. With George coming on board, I've had the opportunity to be more involved in business development and restarting that engine. We are no longer focused on simply signing up partners or customers. Rather, we are highly focused on adding significant partners and working with current and new partners to build exceptional, scalable products that create long-term growth opportunities. We are being more targeted and disciplined in our efforts here, ensuring that prospective partners we engage align with our vision and will value us as a strategic partner to help them grow their business. We are finding this discipline helps us to target and focus on the highest quality prospects. As I have met with potential partners, I've been encouraged by the number of companies looking for a partner with our vision and ability to invest and be with them for the long haul. We are seeing momentum build, and I look forward to the opportunity to discuss new partners in our investor day in November. While we are excited about our growing pipeline, we are also seeing some turnover in our customer base. There are three partners that have recently indicated they will not be renewing their contracts with us. Although we cannot go into specifics on each customer, we are confident that we can manage through these transitions and deliver on new customer wins derived from our strong and growing pipeline. On a more positive note, we are very pleased to announce we have renewed our contract with a major Bass partner who we worked hard to prove our strengths and capabilities over the last few years. We are thrilled this partner has acknowledged our commitment while also understanding the vision that we have for Green Dot and our capabilities in the future. Additionally, I remain encouraged by our discussions with our largest retail partner, Walmart. We have five years remaining in our contract with them, and as I have shared previously, we remain very encouraged and look forward to partnering with them to roll out more tools and features for their customers to enjoy. The last topic that I want to discuss is a macro environment and competitive landscape, which we believe we are well positioned to navigate and even capitalize on. Much has changed in the economy and the competitive environment since the beginning of the year, and even since we last reported earnings. On the economic front, we saw a solid backdrop throughout the quarter, That said, we appreciate the market's concerns about an economic slowdown and how that may impact us. And we believe our business model is resilient, even in a slowdown. Our consumer customers continue to benefit from an attractive job market. And if we were to see some slowdown in job growth or even job losses, many of our customers would likely qualify for government benefits and have those distributed through our cards. Additionally, post stimulus, we believe even more consumers are aware that Green Dot offers some of the fastest, most secure ways to receive government benefits. Longer term, we also anticipate that as consumers leave or are pushed out of the traditional banking system, they will seek alternative solutions like Green Dot, and we are well positioned as an attractive option for those customers. Competitively, we are cautiously optimistic that the market is becoming more rational and may create opportunities on many fronts. Many of the neobanks and fintechs that we have competed with over the last two years that have received tremendous levels of funding from marketing, hiring, and product development are now facing very different and challenging circumstances. This is not just solely about our consumer business, but also in areas like our Bass business and Paycard, specifically Earned Wage Access, where privately funded competitors may also need to reevaluate how they run their businesses. Many unprofitable or marginally profitable competitors are now facing the need to preserve cash, and in many cases, generate profitability much sooner than expected. We believe this may result in a pullback in not only marketing budgets, but also areas like product development and hiring. There have been numerous competitors that have been announcing layoffs or hiring freezes. I would also point out that many competitors have essentially been attracting customers with free products and services who may now need to reconsider their models and create new fees and revenue streams. This would help level the playing field, as we would no longer have to compete against the landscape of competitors giving away free products. To the extent that any of these trends remain in place, we believe we are positioned to benefit on several fronts. First, we would welcome a more normalized environment for marketing and customer acquisition costs. We have the profitability and capital to continue investing in our brands, product development, and marketing. This type of environment also presents opportunities to add talent to our team. Lastly, through conversations we're having with new and prospective partners, we believe market conditions and uncertainty are causing companies to be more thoughtful about who they choose to work with. While we endeavor to continue shoring up our weaknesses in our operations, the financial strength of Green Dot, our stability, bank charter, and strategy to invest and upgrade our tech stack are resonating more and more with companies looking for a long-term partner. As market conditions shift and present headwinds to many, including our industry peers and customers, we remain grounded in our strategy, our position, and our purpose, and we see these emerging challenges as potential opportunities to compete in a more normalized environment, which we look forward to. With that, I'd like to turn the call over to George to discuss our financial results.