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.

Thank you, Dan, and good afternoon. Our second quarter non-GAAP earnings were stronger than expected due to the hard work of our team members in managing costs, improving operations, and renegotiating agreements with vendors. I will comment further on our earnings outperformance and margin expansion in a moment. But first, consolidated GAAP and non-GAAP revenue during the quarter, as well as our active account totals, continue to be impacted by the discontinuance of the government stimulus received by our customers in the prior year quarter, and to a lesser degree, the timing of tax season in 2022 versus 2021. In previous earnings calls, I mentioned that we believe about 4 billion in GDV was received directly by our account holders related to various government stimulus programs during the first quarter of 2021. While this GDB was received in the first quarter, it was late in that quarter, and much of that GDB was monetized in the second quarter of 2021 via interchange revenue from spending activity, monthly account fees, ATM fees, et cetera, and resulted in the activation of otherwise dormant accounts. Also, our account holders received an additional $1 billion in Q2 and another $1 billion in Q3 of 2021. meaning Q2 and Q3 of 2021 reflected a disproportionate amount of the prior year stimulus benefits. We also had a tougher comparison in our tax business, which was strong in the second quarter of 2021 due to an extension of the tax season, but reverted to a more normal cadence in 2022, with the first quarter of 2022 reflecting the majority of tax-related revenue. Despite this significant headwind, we were able to minimize the impact on a year-over-year basis with gains in average revenue per account and growth in our B2B segment, driven by the growth of a large BAS partner and consistent performance from our pay card business. Our adjusted EBITDA of $67.5 million increased 7%, and our adjusted EBITDA margin expanded to 19%, up approximately 140 basis points year-over-year, while non-GAAP EPS of 74 cents increased 9% versus the prior year. We have been very focused on improving the long-term cost structure of the company, and we are starting to see the benefits of our efforts in these areas. For example, our customer service cost per active account has improved year over year by approximately 7%, and our fraud-related losses have declined by about 17% as a percentage of GDV. We also successfully negotiated various network amendments and vendor concessions that resulted in favorable outcomes in the quarter. Some of these benefits should not be expected to recur, but for the most part, we have taken material steps to improve both our short-term and long-term cost structure. That being said, while we have made important strides, we believe we are only in the early phase of this effort. And, of course, we will need to balance these objectives with the requirements of operating in a highly regulated environment. Our GAAP operating profit, net income, and EPS were all adversely impacted by the recognition of the previously disclosed Republic settlement, which was recorded as a $13 million charge within other general and administrative expenses. As it relates to our segment results and key trends, our consumer services segment revenue declined about 31 million, or 17%, as stimulus programs in the prior year period resulted in significant headwinds to our key metrics. The adoption of overdraft protection resulted in continued expansion of revenue per average active, which increased 18% versus the prior year, and is up 37% over the first quarter of 2020. Due to this improvement in revenue per account, along with cost management, segment profit increased by about $4.5 million, or more than 8% to $60 million, in a margin of 40%, which is the highest margin we have seen in over two years, despite the decline in year-over-year revenue. As we have discussed in prior quarters, there are several factors that have impacted our account growth. First, we are still faced with headwinds from the impact of the stimulus program and the subsequent headwind as those funds are exhausted and accounts go dormant. Second, within our direct business, we made deliberate decisions to focus on our go-to brand while legacy brands are not receiving the marketing support to grow their account base. Third, as we mentioned last quarter, and as I will discuss a bit more in guidance, we have underspent on marketing relative to our plan, and this directly correlates to account growth. In the near term, we should no longer face the headwinds associated with the stimulus. Our growth in GoTo will begin to outpace the declines of the legacy brands, and we intend to step up our marketing in the second half of the year compared to our previous forecasts. coupled with more focus and directed initiatives surrounding growth of direct deposit accounts. These efforts, along with the progress on customer care and fraud, should result in reduced rate of decline and ultimately growth in the coming quarters. More importantly, as we complete our technology transformation, the feature functionality we can develop with greatly improved speed to market will also result in higher rates of activity and reduced attrition. Our B2B services segment revenue increased $31 million, or 27%, to $144 million due to continued growth in our BAS programs, both existing and new, and our employer programs. Similar to our consumer segment, the loss of stimulus programs compared to the prior year resulted in year-over-year declines for certain key metrics. Segment profit of just under $23 million increased about $4.5 million, or 25%, just slightly below our revenue growth. resulting in margins of 15.9%, which were down approximately 25 basis points versus last year. While BAS partner programs containing a fixed profit limit our ability to expand margins overall for this segment, we achieved solid underlying margin expansion for other BAS programs and the employer business during the quarter. Our money movement segment saw revenue decline 12 million, or 18%, to 54 million. This quarter had a couple of headwinds that made it a challenging comparison. Last year, the segment benefited from an extension of the tax season and higher revenue transactions in the second quarter, and it also saw elevated transactions on the Green Dot Network related to last year's stimulus volumes. Segment profit declined $8 million due in large part due to the headwind of more higher margin tax revenue in the second quarter of 2021 versus this year, but margins in this division still remain healthy at almost 56%. Turning to our financial position, our business continues to produce strong cash flow, generating approximately $72 million in operating cash flow during the quarter, an increase of approximately $39 million versus the prior year. We ended the quarter with $94 million of cash at the holding company Our cash balance, the strength of our cash flow together with access to our 100 million revolver provides us sufficient liquidity to invest in our strategic priorities while selectively returning cash to our shareholders via our previously announced share repurchase program. Before handing it back to Dan for his closing comments, I wanted to provide some commentary about the impact of the non-renewals that he referenced and our guidance for 2022. As Dan mentioned earlier, we had several contracts where we could not come to an agreement that both we and our partners believe would serve the best interest of both parties, and they will not be renewed. We are also in the midst of a dispute with Uber over their obligations under our agreement with them. We won't be getting into the details about the specific circumstances of non-renewals or terminations, but at a high level, I would reiterate that we are increasingly focused and more disciplined about the structure of our contracts. We want to ensure that our partners' expectations are met and exceeded, while also making sure that we are being compensated and allocating our resources appropriately. That said, the impact of these circumstances will have some modest impact on our 2022 results, but will have a greater impact on 2023. While not yet providing guidance for 2023, we believe it's important to be transparent with the market about developments at the company, both good and challenging. and feel it is appropriate to communicate this development instead of catching investors off guard when we give our 2023 guidance. While we have considerable work to do around our planning for 2023, in the spirit of transparency, we currently expect to grow adjusted EBITDA in 2023 on top of our full year 2022 expectations. We expect that EPS will grow at a faster rate than EBITDA as we continue to execute on our share repurchase program. which will have a full year of effect in 2023. This directional guidance is preliminary and subject to change as it may be impacted by a variety of factors, including those described in our public filings. In this regard, we are endeavoring to continue to improve our customer care, fraud detection, and other operations as a regulated financial institution and may experience additional costs and expenses that are currently being budgeted. For example, we expect to incur additional expenses to improve our anti-money laundering compliance controls, policies, and procedures, which could impact our adjusted EBITDA margins and other results of operations. Now, turning to 2022 guidance. Based on the trends we are observing in our business today, we are making the following adjustments to our 2022 guidance. We are reaffirming our revenue range of $1.39 billion to $1.43 billion We are reaffirming our adjusted EBITDA of $230 million to $240 million. We are raising our non-GAAP EPS range to $2.35 to $2.49 per share, due largely to a lower share count during the year. You all have taken note that while we have exceeded our own expectations for the quarter on an adjusted earnings basis, we have not meaningfully adjusted our forward guidance. There are several reasons for this beyond the uncertainties previously mentioned. First, due to the team's hard work in managing vendors and other issues, we have been successful in achieving positive financial outcomes in the second quarter. But as I noted, some of these benefits will not recur. We think these items amount to about $7 million on a pre-tax basis in the second quarter. Second, you may recall from previous calls that we reduced direct-to-consumer marketing spend compared to our own expectations early in the year due to higher-than-expected acquisition costs. We believe the market conditions are improving related to acquisition costs, and therefore, compared to our previous expectations, we're increasing direct-to-consumer marketing spend. Third, as a result of lower marketing spend in the first half of the year than planned, we may have lower active accounts and associated reload volumes in the second half of the year than anticipated. And fourth, the timing of partner deconversions in the back half of the year is uncertain. With respect to the third quarter, as compared to the equivalent prior year quarter, we anticipate revenue to be approximately flat, our adjusted EBITDA margin to be approximately between 12% and 13%, with non-GAAP EPS expected to be in the range of $0.34 to $0.38 per share.

With that, I'll turn it back over to Dan. Thanks, George. In closing, I continue to remain confident that we are indeed making Green Dot a better company that will deliver value for our investors. Our technology transformation continues to move forward. We're making progress on a variety of internal initiatives to drive efficiency, and our efforts to re-energize business development pipelines are showing progress. I look forward to the remainder of the year and sharing our plans for the next several years when we have our Investor Day on November 9th in New York City. We are committed to transforming Green Dot into a highly differentiated, top-tier, next-generation financial services platform that will create value for our customers, partners, and shareholders. With that, I now turn it back over to the operator to take your questions.

Thank you. We will now begin the question and answer session. To ask a question, you may press star then 1 on your touchtone phone. If you're using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then 2. And at this time, we'll pause momentarily to assemble our roster. And the first question will come from Ramsey Al-Hassal with Barclays. Please go ahead.

Hi, thanks so much for taking my question this evening. I wanted to ask about the non-renewals, and you mentioned a discussion you're having with Uber. Is this kind of a coincidental series of events, or are you kind of methodically or systematically taking a bit of a tougher stance when it comes to renewing deals in general? Is it part of a broader drive to kind of get the the terms of these contracts in some type of order, or is this just happens to be a pretty contentious season for this type of stuff?

Um, Hey Ramsey, it's Dan. Appreciate the question. Um, you know, it's, it's more of the latter. I mean, you know, we, we hate to lose any, any partners and any revenue, um, any, any contribution of course. But as we think about our longterm plan and vision and what we really want to be the best in the world at, um, I believe that for the long term, we are striving to be probably more uniform in what we do, and long term we'll probably be quite okay without these partners.

Okay. And then on the pipeline side of BAS, maybe give us a little color on the contract pipeline in terms of you know, the optionality that you might have to, you know, refill some, you know, fill in some of these losses or offset some of these losses over time.

Yeah, I can say that, you know, with a lot of confidence that, you know, we've, we're in great discussions with a number of partners and our approach of being, you know, more focused in terms of looking for partners that really share with us kind of a vision and a desire to to really service, you know, low and moderate income consumers and small business really is proving to be a solid strategy. So, and I expect that you'll be hearing more about some perspective and live new partners or soon to be live new partners before the end of the year.

Got it. Thanks so much. The next question will come from Andrew Smith with Citi. Please go ahead.

Hey, Dan, George, Tim. Thank you for taking my questions. I think just to start off, it does seem like the environment is becoming more rational, and that can help things like CAC, as you alluded to. Just to be clear, are you seeing, you know, more CAC efficiency today, or is that something, you know, to come in the back out? Because it does seem like that could be a pretty significant benefit both to the cost structure and then also obviously to user growth. Any comment there will be helpful. Thanks.

Hey, Andrew, this is George. The answer, if you might recall, I think a similar question was asked in our last earnings call a few months ago. And at that time, we didn't have any evidence that our competitors in direct-to-consumer had changed their behavior, but that's changed. So most recently, it's clear to us that certain competitors are pulling back, decreasing capital allocation to direct-to-consumer, which, of course, lowers the cost for us. some of the changes that I communicated earlier in the call. So, yes, we see that market is improving, and therefore we're going to accelerate marketing investment into that improving market in the back half of the year.

Got it. Very helpful. And then, you know, if I could dig in a little bit on the comments about FY23, and I understand that you know, the, um, the comments meant to be more directional in nature, but we'll hear more about this at the analyst day, I'm sure. But is there any sort of, you know, um, you know, magnitude you can give us in terms of EBITDA growth that you're planning relative to this year, just anything to, you know, give us a little insight into 2023, because there are a lot of moving parts and it is early. I understand that the environment is shifting, but, but any other details just, uh, to help get clarity on the, you know, out here would be helpful. Thanks.

Sure. I mean, I'll disappoint you in the sense we can't give any kind of specifics. I mean, as far as like the trends we might think about in the next year, first I'd say with respect to the timing of any impacts on partner changes. either onboarding or offboarding, are notoriously difficult to predict here sitting six months from the beginning of the year or five months from the beginning of the year. So that's a challenge. But we do expect new partners to come on board. We expect to have further operational savings. We expect to have... contributions from product features that we'll be adding to our existing customer base, different than but similar to an overdraft feature, for example. So there's a mix of things. But I just want to emphasize, again, we have a lot of work to do to go through our planning and budgeting, and so we should be able to go through that quite thoroughly in November.

Got it. Thank you very much. I'll jump back in the queue. Thanks a lot, guys.

Thank you, Andrew.

The next question will come from Andrew Jeffrey with the Truist Securities. Please go ahead.

Hey, guys. Appreciate you taking the question. You know, Dan and George, I heard you both mention the requirements and the rigors of running a regulated financial institution. And I just wonder if you're kind of messaging. I also heard the comments about perhaps more anti-fraud and KYC spend that you might need to make. Is this sort of an ongoing evaluation process? Have you learned something new about sort of fraud on the platform? I'm just wondering what the incremental commentary is referring to and if this is kind of a moving target for you.

Well, I'd say, Andrew, that it's – These issues are always important to every institution as we manage a business like this. It's important to partners. It's important to us. Obviously, regulators are always active in this area, so it's an area that we need to be attentive to, focused on, and we intend to be exactly that as we move through the year. So that's the main point we want to make on this topic.

Okay. You weren't making any comments about next year as far as perhaps heightened spend in that area. I just wanted to clarify that.

Pointing out one of the many uncertainties that impact a company like ours. Okay.

And then on the BAS front, do you see sort of a changing competitive environment at all? You know, there have been some high-profile players that have gotten apparently more aggressive in the space. It's obviously a space that's gotten a lot of press and visibility. I just wonder if you can talk about sales cycle and maybe the types of customers you think you're going to win and sort of how competitive just overall the market is, recognizing that you're gaining discipline on the contract terms.

Yes, I'd love to comment on that because what we're seeing is is, you know, I think it's a combining of a lot of factors out there. So you see that a lot of players that thought they wanted to get into financial services and looking for vast partners and those providers of those services, I think they're finding that it's harder than people thought to grow a customer base with such offerings. So I think it's you're having fewer, I think, organizations interested in launching, you know, services or opportunities on a BAS platform. Some of the BAS platforms out there are then now having their partners are not living up to expectations of their growth, so that's impacting those providers. Some of those providers are being impacted by, you know, the explosion of the venture bubble. And so it is creating a lot of... concern questions and churn out there, I believe. And for us, um, and Andrew, you've heard me say this since I got here is that, you know, I, I don't want to be out there opening up our charter for every Joe FinTech that wants to do something in payments. We really want to be focused on partners that can be of scale, um, and partners that are focused on solving the problems that we're focused on solving, which is really serving, um, consumers and small businesses that aren't very well served by traditional finance institutions for various litany of reasons. We feel very good these days when we go competing and chasing after partners that we know fit our criteria because the partners that we're looking for are ones that are really looking for a partner that can be with them long term. That's another thing we're able to settle strong with.

Thank you. The next question will come from George Sutton with Craig Hallam.

Please go ahead.

Thank you. Just a clarification on the three partners not renewing. You referred to last quarter as – pulling back pretty significantly, I think, as a result of an M&A change. Is that included in those three or would that be separate?

That's separate. That's a long glide path down client that's independent of our conversation today.

Gotcha. Okay. And then were any of these three, because I know fixed fee contracts have been a challenge for you. I'm curious if any of these three were under a fixed fee contract.

No.

Gotcha. Okay. Well, we're thrilled to have Dan out marketing. We're thrilled to have George then structuring the deals. So I'm curious if the business development work as you see it today relative to the size of the deals that are moving away. Can you just give us some perspective on A versus B?

George, I just say that, you know, we're obviously focused on, you know, this from the, you know, you know, George and I, I mean, we're focused on that bottom line. We said in this call that we, even with these losses, we are expecting to see the bottom line grow 23 over 22. And so we expect to be able to do that through continued organic growth as well as some of these new wins.

Gotcha. Thank you.

The next question will come from Bob Napoli with William Blair. Please go ahead.

Thank you. Good afternoon. Uh, so I guess, uh, the, what, what is working, uh, the best in, in bass and, you know, what products are selling? What are you most excited about with your, uh, your bass, uh, business?

Hey, Bob, it's Dan. Um, what am I most excited about with the bass business? I'll tell you what I'm most excited about the bass business is just the clarity that we're gaining. Um, And we were just on a call earlier today with the team and just talking through some of the recent opportunities that we're planning on bringing on board and how they fit our new criteria of partners that have real good growth potential and are aligned with us in terms of truly serving the consumer. And that's just real, real important to us. Yeah. So I just kind of say it and not say any more. But if we've got partners or if there's a prospective partner out there who's looking for a way to nickel and dime somebody or take advantage, we're not interested. And so I'm really excited about the cadre of partners that we have and the few we have at our sites to bring on board.

How is GoToBank? Can you give any metrics on GoToBank? And how is it performing relative to your expectations there? And I think that's key to growing your account base again, is GoToBank. So any color on size of GoToBank, how it's performing versus your expectations, the profit model, LTV to CAC. I guess the competitors probably have pulled back a fair amount.

Yeah. Bob, this is George. We can't give you a ton of metrics, but I would tell you that go-to-bank remains our key point of focus with respect to direct-to-consumer distribution. So we distribute go-to-bank via that channel, which sits in the consumer segment, of course, and to a lesser extent through the retail channel. GoToBank is doing very well. We believe it's a good product in the market. We think that it's got a lot of durability. The average life per account is very strong. The average revenue per account is very strong. All of those metrics line up for us. However, when we make comments about marketing spend, as we did in our prepared remarks today, we're essentially talking about GoToBank because it sits within the direct-to-consumer marketing channel. And so if we pull marketing because of what we perceive as unattractive marketing, acquisition costs within that channel, you know, that's, that will have a short term impact, negative impact on go to bank. And as we accelerate marketing and as we will in the second half of the year, that will have a positive benefit. So we're super happy with the product. It's performing as we want it to. And we're going to continue to invest in it and we'll accelerate that investment through the balance of the year.

Thanks. The last question, just on the tech upgrade, I mean, that's a very important project, I think, for Green Dot. How is it going? Where are the risks? I mean, what is, I guess, the backup plan or if this takes longer? I mean, just any color on the tech upgrade would be helpful.

Yeah, absolutely. True words couldn't be said when you said it's very important. It is very important to us. It's central to our activities right now. And I didn't include it in our remarks today, but to remind you, there's really kind of four parts to this initiative. There's a processing migration. We have risk management tools we're implementing. We're rewriting some code on the front end of the business, and we're migrating to cloud. So it's got a lot of complexity to it. The part that we've talked most about, the platform migration, and we've made some quantified statements about that is relative to our last call, largely on schedule and consistent with what I would have said in the past. I'd tell you there's a lot of moving parts between here and there that have shifted. But we have successfully done environment testing on part of that work. We're doing the environment testing on the latter part of that work. So a lot of moving parts. Super excited about it. We're entering in a very important phase over the next nine months with respect to that platform migration. And we're excited to keep you updated on it.

Sorry, I have to ask this one. I forgot. This spend being sold, did you – Why didn't, I mean, it seems, I mean, obviously, Green Dot strategically looks like the best buyer, but it went to private equity.

Hey, Bob, yeah, no, we did not bid on it. We did not participate on it. It was, wasn't an attractive asset to us.

Great. Thank you.

Thanks, Bob. The next question will come from Mike Grondahl. with Northland Securities. Please go ahead.

Hey, thanks, guys. Hey, George, could you just repeat what you said about 23 adjusted EBITDA and EPS? I just want to make sure I got what you said.

Yeah, I said, you know, based on what we know today, have a lot of work still to do. We expect to be able to grow EBITDA year-over-year basis relative to the midpoint of the guidance for 22 that we just gave. And we would expect EPS to grow at a faster rate as our share count decreases via our share repurchase program.

Got it. Got it. And then I think it was on the last call or two calls ago, I think you thought or hoped that active accounts would grow by year end, year over year. Any update there?

Yes, that's correct. We did say that. And as you would note in our comments around guidance, one of the elements of context we gave was with respect to the decreased marketing in the first half of the year that impacts that statement. So if you look specifically at the consumer segment, Now I'd say it'd be more accurate to expect that we expect our average accounts by the end of the year by Q4 to be largely comparable with our Q2 exit. And with respect to the partner segment, we would expect those accounts to decline.

Got it. And then maybe lastly, Because the three contracts that are not renewing were not fixed fees, can we assume that those three were above the BAS margin of 15.9% so they're kind of be margin dilutive?

I don't think we can go into that level of detail on those particular accounts or those individual accounts with respect to their relative dilutive or creative characteristics to the margins, Mike. But I would say to add a little bit of color to, you know, to the situation, obviously these accounts would have been, you know, some had some level of maturity to them in a sense that they would have been signed in a different era, relatively speaking. and have terms that are kind of reflective of that. And so as these renewals come up and, you know, those terms we find to be, you know, difficult, you know, obviously we have to make difficult decisions around them. And that's what we've done. But I want to put an emphasis on some of Dan's comments he made with respect to the changing market dynamics You know, we do think there remain market participants who have received extraordinarily inexpensive capital. That environment's changing for them. and we think it may be that some of these partners had serious financial issues themselves that they need to resolve, and certain providers may be willing to provide services to these sorts of accounts for losses, and we're simply not in a position to be prepared to do that.

Good, good. Okay. Hey, best of luck in the back half.

Thanks a lot, Mike. Thanks, Mike.

This concludes our question and answer session. I would like to turn the conference back over to Mr. Dan Henry for any closing remarks. Please go ahead, sir.

Thank you, operator, and thank you, everybody, for listening. We're very, very pleased with our results for the second quarter, and we're really very excited about our potential going forward. So I appreciate all your support. And with this, we will hang up and get back to work. Thank you all.

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