EX-99.01 2 v57703exv99w01.htm EX-99.01 exv99w01
Exhibit 99.01
Green Dot Reports Third Quarter 2010 Financial Results
Monrovia, CA — November 3, 2010 — Green Dot Corporation (NYSE: GDOT), a leading prepaid financial services company, today reported financial results for its third quarter ended September 30, 2010.
“We are happy to report another strong quarter, including a 44% increase in non-GAAP total operating revenues to $94.1 million, a 19% increase in non-GAAP net income to $13.0 million and non-GAAP diluted earnings per share of $0.30,” said Steve Streit, Green Dot’s Chairman and Chief Executive Officer. “Our commitment to provide mass access to simple, inexpensive, low hassle products that allow consumers to solve their basic financial and payment needs continues to drive our growth.”
GAAP financial results for the third quarter of 2010 compared to the third quarter of 2009:
  •   Total operating revenues on a generally accepted accounting principles (GAAP) basis increased 36% to $88.9 million for the third quarter of 2010 from $65.3 million for the third quarter of 2009
 
  •   GAAP net income decreased 14% to $9.0 million for the third quarter of 2010 from $10.5 million for the third quarter of 2009
 
  •   GAAP basic and diluted earnings per common share were $0.22 and $0.20, respectively, for the third quarter of 2010 and $0.28 and $0.22, respectively, for the third quarter of 2009
Non-GAAP financial results for the third quarter of 2010 compared to the third quarter of 2009:1
  •   Non-GAAP total operating revenues1 increased 44% to $94.1 million for the third quarter of 2010 from $65.3 million for the third quarter of 2009
 
  •   Non-GAAP net income1 increased 19% to $13.0 million for the third quarter of 2010 from $10.9 million for the third quarter of 2009
 
  •   Non-GAAP diluted earnings per share1 was $0.30 for the third quarter of 2010 and $0.27 for the third quarter of 2009
 
  •   EBITDA plus employee stock-based compensation expense and stock-based retailer incentive compensation expense (adjusted EBITDA1) increased 22% to $24.4 million for the third quarter of 2010 compared to $20.0 million for the third quarter of 2009
Key business metrics for the quarter ended September 30, 2010:
  •   Number of general purpose reloadable debit cards activated was 1.5 million, an increase of 36% over the third quarter of 2009
 
  •   Number of cash transfers was 6.9 million, an increase of 53% over the third quarter of 2009
 
  •   Number of active cards (as of quarter end) was 3.3 million, an increase of 50% over the third quarter of 2009
 
  •   Gross dollar volume was $2.5 billion, an increase of 69% over the third quarter of 2009
Refer to our Quarterly Report on Form 10-Q for a description of these key business metrics.
 
1   Reconciliations of total operating revenues to non-GAAP total operating revenues, net income to non-GAAP net income, diluted earnings per share to non-GAAP diluted earnings per share and net income to adjusted EBITDA, respectively, are provided in the tables immediately following the consolidated statements of cash flows. Additional information about the Company’s non-GAAP financial measures can be found under the caption “About Non-GAAP Financial Measures” below.

 

 

“Our strong cash flow from operations affords us significant flexibility to pursue growth opportunities, and our balance sheet remains strong with over $135 million in unrestricted cash and cash equivalents and we have no long-term debt,” said John Keatley, Green Dot’s Chief Financial Officer.
The following tables show our quarterly key business metrics for each of the last seven calendar quarters:
                                                         
    Q3     Q2     Q1     Q4     Q3     Q2     Q1  
    2010     2010     2010     2009     2009     2009     2009  
    (in millions)  
Number of GPR cards activated
     1.5       1.5       1.8       1.4       1.1       0.9       0.9  
Number of cash transfers
     6.9       6.4       5.9       5.1       4.5       4.1       3.5  
Number of active cards (as of quarter end)
     3.3       3.2       3.4       2.7       2.2       2.0       1.7  
Gross dollar volume
   $ 2,516     $ 2,375     $ 2,846     $ 1,745     $ 1,486     $ 1,345     $ 1,207  
Conference Call
The Company will host a conference call to discuss third quarter 2010 financial results today at 5:00pm ET. Hosting the call will be Steve Streit, chief executive officer, and John Keatley, chief financial officer. The conference call can be accessed live over the phone by dialing (877) 941-4774, or for international callers (480) 629-9760. A replay will be available one hour after the call and can be accessed by dialing (877) 870-5176 or for international callers (858) 384-5517; the conference ID is 4369579. The live call and the replay, along with supporting materials, can also be accessed through the Company’s investor relations website at http://ir.greendot.com/. A replay of the webcast will be available for 30 days.
Forward-Looking Statements
This earnings release may be deemed to contain forward-looking statements, which are subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements include, among other things, statements regarding future events that involve risks and uncertainties. Actual results may differ materially from those contained in the forward-looking statements contained in this earnings release, and reported results should not be considered as an indication of future performance. The potential risks and uncertainties that could cause actual results to differ from those projected are discussed in greater detail in the Company’s Securities and Exchange Commission filings, including its quarterly reports on Form 10-Q, which are available on the Company’s investor relations website at http://ir.greendot.com/ and on the SEC website at www.sec.gov. All information provided in this release and in the attachments is as of November 3, 2010, and the Company assumes no obligation to update this information as a result of future events or developments.

 

 

About Non-GAAP Financial Measures
To supplement the Company’s consolidated financial statements presented in accordance with GAAP, the Company uses measures of operating results that are adjusted to exclude interest expense (income), net, income tax expense, depreciation and amortization, employee stock-based compensation expense and stock-based retailer incentive compensation expense. This earnings release includes non-GAAP total operating revenues, non-GAAP net income, non-GAAP earnings per share data, non-GAAP weighted average shares issued and outstanding and adjusted EBITDA. These non-GAAP results are not in accordance with, or an alternative or substitute for, results prepared in accordance with accounting principles generally accepted in the United States of America, and should be read only in conjunction with the Company’s consolidated financial measures prepared in accordance with GAAP. The Company’s non-GAAP financial measures may be different from similarly-titled non-GAAP financial measures used by other companies. The Company believes that the presentation of non-GAAP financial measures provides useful information to management and investors regarding underlying trends in its consolidated financial condition and results of operations. The Company’s management regularly uses these supplemental non-GAAP financial measures internally to understand, manage and evaluate the Company’s business and make operating decisions. For additional information regarding the Company’s use of non-GAAP financial measures and the items excluded by the Company from one or more of its non-GAAP financial measures, investors are encouraged to review the reconciliations of the Company’s non-GAAP financial measures to the comparable GAAP financial measures, which are attached to this earnings release, and which can be found by clicking on “Financial Information” in the Investor Relations section of our website at http://ir.greendot.com/.
About Green Dot
Green Dot is a leading prepaid financial services company providing simple, low-cost and convenient money management solutions to a broad base of U.S. consumers. Green Dot also owns and operates the Green Dot Network, a leading prepaid card reloading network in the United States. Consumers can access the Green Dot Network and use it for a wide variety of transactions, including cash loading onto prepaid cards and adding funds to a PayPal account through MoneyPak®. Green Dot sells its cards and offers reload services nationwide at approximately 50,000 retail stores, including Walmart, Walgreens, CVS, Rite Aid, 7-Eleven, Kroger, Kmart, Meijer, and Radio Shack, which provide consumers convenient access to its products and services. Green Dot’s products include MasterCard® and Visa® branded prepaid debit cards and the Green Dot MoneyPak®. Green Dot is headquartered in the greater Los Angeles area. For more details, visit www.greendot.com and www.moneypak.com.
Contacts
Investor Relations
Don Duffy, 626-739-3942
IR@greendot.com
Media Relations
Liz Brady, 646-277-1226

 

 

GREEN DOT CORPORATION
CONSOLIDATED BALANCE SHEETS
                 
    September 30,     December 31,  
    2010     2009  
    (Unaudited)          
    (in thousands, except par value)  
Assets
                
Current assets:
                
Unrestricted cash and cash equivalents
   $ 135,581     $ 56,303  
Settlement assets
     11,784       42,569  
Accounts receivable, net
     23,985       29,157  
Prepaid expenses and other assets
     6,776       7,262  
Income taxes receivable
     —       5,452  
Net deferred tax assets
     4,335       4,634  
 
            
Total current assets
     182,461       145,377  
Restricted cash
     5,163       15,381  
Accounts receivable, net
     3,175       1,130  
Prepaid expenses and other assets
     641       1,047  
Property and equipment, net
     16,045       11,973  
Deferred expenses
     5,894       8,200  
 
            
Total assets
   $ 213,379     $ 183,108  
 
            
 
                
Liabilities and Stockholders’ Equity
                
Current liabilities:
                
Accounts payable and accrued liabilities
   $ 11,331     $ 9,777  
Settlement obligations
     11,784       42,569  
Amounts due to card issuing banks for overdrawn accounts
     33,181       23,422  
Other accrued liabilities
     14,071       13,916  
Deferred revenue
     11,227       15,048  
Income tax payable
     2,986       —  
 
            
 
                
Total current liabilities
     84,580       104,732  
Other accrued liabilities
     4,398       2,761  
Deferred revenue
     50       97  
Net deferred tax liabilities
     3,886       4,154  
 
            
Total liabilities
     92,914       111,744  
 
            
 
                
Stockholders’ equity:
                
Convertible preferred stock, $0.001 par value: 5,000 shares authorized as of September 30, 2010, 25,554 shares authorized as of December 31, 2009; no shares issued and outstanding as of September 30, 2010, 24,942 shares issued and outstanding as of December 31, 2009; liquidation preference of $0 and $31,322 as of September 30, 2010 and December 31, 2009, respectively
     —       31,322  
Class A common stock, $0.001 par value; 100,000 shares authorized as of September 30, 2010, no shares authorized as of December 31, 2009; 7,589 shares issued and outstanding as of September 30, 2010, no shares issued and outstanding as of December 31, 2009
     5       —  
Class B convertible common stock, $0.001 par value, 100,000 shares authorized as of September 30, 2010, 50,000 shares authorized as of December 31, 2009; 33,269 and 12,860 shares issued and outstanding as of September 30, 2010 and December 31, 2009, respectively
     34       13  
Additional paid-in capital
     58,706       12,603  
Retained earnings
     61,720       27,426  
 
            
Total stockholders’ equity
     120,465       71,364  
 
            
Total liabilities and stockholders’ equity
   $ 213,379     $ 183,108  
 
            

 

 

GREEN DOT CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
                                 
    Three Months Ended     Nine Months Ended  
    September 30,     September 30,  
    2010     2009     2010     2009  
    (in thousands except per share data)  
Operating revenues:
                                
Card revenues
   $ 40,592     $ 30,849     $ 124,978     $ 93,011  
Cash transfer revenues
     26,484       17,256       73,630       49,383  
Interchange revenues
     27,044       17,213       81,106       46,554  
Stock-based retailer incentive compensation
     (5,216 )     —       (7,673 )     —  
 
                        
Total operating revenues
     88,904       65,318       272,041       188,948  
 
                                
Operating expenses:
                                
Sales and marketing expenses
     30,305       17,182       87,777       52,430  
Compensation and benefits expenses
     17,621       12,666       50,474       32,827  
Processing expenses
     14,579       9,951       43,131       27,092  
Other general and administrative expenses
     10,976       7,587       33,997       18,721  
 
                        
Total operating expenses
     73,481       47,386       215,379       131,070  
 
                        
 
                                
Operating income
     15,423       17,932       56,662       57,878  
Interest income
     111       64       269       179  
Interest expense
     (23 )     (3 )     (48 )     (3 )
 
                        
Income before income taxes
     15,511       17,993       56,883       58,054  
Income tax expense
     6,540       7,522       22,589       24,344  
 
                        
Net income
     8,971       10,471       34,294       33,710  
Dividends, accretion, and allocated earnings of preferred stock
     (1,255 )     (7,060 )     (16,094 )     (22,886 )
 
                        
Net income allocated to common stockholders
   $ 7,716     $ 3,411     $ 18,200     $ 10,824  
 
                        
 
                                
Basic earnings per common share:
                                
Class A common stock
   $ 0.22     $ —     $ 0.87     $ —  
 
                        
Class B common stock
   $ 0.22     $ 0.28     $ 0.87     $ 0.90  
 
                        
 
                                
Basic weighted-average common shares issued and outstanding
                                
Class A common stock
     4,266       —       1,442       —  
 
                        
Class B common stock
     28,627       12,051       18,232       12,046  
 
                        
 
                                
Diluted earnings per common share:
                                
Class A common stock
   $ 0.20     $ —     $ 0.81     $ —  
 
                        
Class B common stock
   $ 0.20     $ 0.22     $ 0.81     $ 0.70  
 
                        
 
                                
Diluted weighted-average common shares issued and outstanding
                                
Class A common stock
     36,132       —       22,884       —  
 
                        
Class B common stock
     31,862       15,262       21,441       15,545  
 
                        

 

 

GREEN DOT CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
                 
    Nine Months Ended  
    September 30,  
    2010     2009  
    (in thousands)  
Operating activities
                
Net income
   $ 34,294     $ 33,710  
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
                
 
                
Depreciation and amortization
     5,405       3,552  
Provision for uncollectible overdrawn accounts
     34,912       18,089  
Employee stock-based compensation
     5,246       1,983  
Stock-based retailer incentive compensation
     7,673       —  
Provision (benefit) for uncollectible trade receivables
     (24 )     112  
Impairment of capitalized software
     388       315  
Deferred income tax expense
     31       (1,731 )
Change in operating assets and liabilities:
                
Settlement assets
     30,785       3,289  
Accounts receivable
     (31,761 )     (19,668 )
Prepaid expenses and other assets
     817       (3,105 )
Deferred expenses
     2,306       3,568  
Accounts payable and accrued liabilities
     3,877       2,544  
Settlement obligations
     (30,785 )     (3,289 )
Amounts due to card issuing banks for overdrawn accounts
     9,759       4,996  
Deferred revenue
     (3,868 )     (4,988 )
Income taxes payable (receivable)
     8,438       2,238  
 
            
Net cash provided by operating activities
     77,493       41,614  
 
                
Investing activities
                
Decrease (increase) in restricted cash
     10,218       (13,028 )
Purchases of property and equipment
     (10,321 )     (5,547 )
 
            
Net cash used in investing activities
     (103 )     (18,575 )
 
                
Financing activities
                
Repayments on line of credit
     —       (77 )
Borrowings on line of credit
     —       77  
Proceeds from exercise of warrants and options
     1,888       162  
Exercise of call option on warrant
     —       (1,958 )
Redemption of preferred and common shares
     —       (617 )
 
            
Net cash provided by (used in) financing activities
     1,888       (2,413 )
 
                
Net increase in unrestricted cash and cash equivalents
     79,278       20,626  
Unrestricted cash and cash equivalents, beginning of year
     56,303       16,692  
 
            
Unrestricted cash and cash equivalents, end of period
   $ 135,581     $ 37,318  
 
            
 
                
Cash paid for interest
   $ 40     $ 42  
Cash paid for income taxes
   $ 14,215     $ 24,009  

 

 

GREEN DOT CORPORATION
Reconciliation of Total Operating Revenues to Non-GAAP Total Operating Revenues (1)
                                 
    Three Months Ended     Nine Months Ended  
    September 30,     September 30,  
    2010     2009     2010     2009  
            (in thousands)          
Reconciliation of total operating revenues to non-GAAP total operating revenues
                                
Total operating revenues
   $ 88,904     $ 65,318     $ 272,041     $ 188,948  
Stock-based retailer incentive compensation (2)(3)
     5,216       —       7,673       —  
 
                        
Non-GAAP total operating revenues
   $ 94,120     $ 65,318     $ 279,714     $ 188,948  
 
                        
Reconciliation of Net Income to Adjusted EBITDA (1)
                                 
    Three Months Ended     Nine Months Ended  
    September 30,     September 30,  
    2010     2009     2010     2009  
    (in thousands)  
Reconciliation of net income to adjusted EBITDA
                                
Net income
   $ 8,971     $ 10,471     $ 34,294     $ 33,710  
Interest income, net
     (88 )     (61 )     (221 )     (176 )
Income tax expense
     6,540       7,522       22,589       24,344  
Depreciation and amortization
     2,042       1,227       5,405       3,552  
Employee stock-based compensation expense (3)(4)
     1,746       800       5,246       1,983  
Stock-based retailer incentive compensation (2)(3)
     5,216       —       7,673       —  
 
                        
Adjusted EBITDA
   $ 24,427     $ 19,959     $ 74,986     $ 63,413  
 
                        
 
                                
Non-GAAP total operating revenues
   $ 94,120     $ 65,318       279,714     $ 188,948  
 
                        
Adjusted EBITDA / non-GAAP total operating revenue (adjusted EBITDA margin)
     26.0 %     30.6 %     26.8 %     33.6 %
 
                        
Reconciliation of Net Income to Non-GAAP Net Income (1)
                                 
    Three Months Ended     Nine Months Ended  
    September 30,     September 30,  
    2010     2009     2010     2009  
    (in thousands, except per share data)  
Reconciliation of net income to non-GAAP net income
                                
Net income
   $ 8,971     $ 10,471     $ 34,294     $ 33,710  
Employee stock-based compensation expense (4)
     1,010       464       3,163       1,150  
Stock-based retailer incentive compensation (2)
     3,017       —       4,626       —  
 
                        
Non-GAAP net income
   $ 12,998     $ 10,935     $ 42,083     $ 34,860  
 
                        
 
                                
Diluted earnings per share*
                                
GAAP
   $ 0.20     $ 0.22     $ 0.81     $ 0.70  
Non-GAAP
   $ 0.30     $ 0.27     $ 0.99     $ 0.86  
 
                                
Diluted weighted-average shares issued and outstanding*
                                
GAAP
     36,132       15,262       22,884       15,545  
Non-GAAP
     43,918       40,203       42,534       40,529  
 
*   Reconciliations between GAAP and non-GAAP diluted weighted-average shares issued and outstanding are provided in the next table.
 
**   Diluted weighted-average Class A shares issued and outstanding diluted weighted-average Class B shares issued and outstanding are the most directly comparable GAAP measure for periods ending 2010 and 2009, respectively.

 

 

GREEN DOT CORPORATION
Reconciliation of GAAP to Non-GAAP Diluted Weighted-Average Shares Issued and Outstanding (1)
                                 
    Three Months Ended     Nine Months Ended  
    September 30,     September 30,  
    2010     2009     2010     2009  
    (in thousands)  
Reconciliation of GAAP to non-GAAP diluted weighted-average shares issued and outstanding
                                
Diluted weighted-average shares issued and outstanding*
     36,132       15,262       22,884       15,545  
Assumed conversion of weighted-average shares of preferred stock
     5,693       24,941       18,455       24,984  
Weighted-average shares subject to repurchase
     2,093       —       1,195       —  
 
                        
Diluted weighted-average shares issued and outstanding
     43,918       40,203       42,534       40,529  
 
                        
 
*   Refer to shares of Class A common stock for periods ending in 2010 and shares of Class B common stock for periods ending in 2009.
Supplemental Detail on Non-GAAP Diluted Weighted-Average Shares Issued and Outstanding
                                 
    Three Months Ended     Nine Months Ended  
    September 30,     September 30,  
    2010     2009     2010     2009  
    (in thousands)  
Supplemental detail on non-GAAP diluted weighted-average shares issued and outstanding
                                
Stock outstanding as of September 30:
                                
Class A common stock
     7,589       —       7,589       —  
Class B common stock
     33,269       12,060       33,269       12,060  
Preferred stock
     —       24,942       —       24,942  
 
                        
Total stock outstanding as of September 30
     40,858       37,002       40,858       37,002  
Weighting adjustment
     (179 )     (10 )     (1,534 )     28  
Dilutive potential shares:
                                
Stock options
     3,180       2,950       3,011       2,921  
Warrants
     55       261       198       578  
Employee stock purchase plan
     4       —       1       —  
 
                        
Non-GAAP diluted weighted-average shares issued and outstanding
     43,918       40,203       42,534       40,529  
 
                        
  (1)   To supplement the Company’s consolidated financial statements presented in accordance with GAAP, the Company uses measures of operating results that are adjusted to exclude various, primarily non-cash, expenses and charges. These financial measures are not calculated in accordance with GAAP and should not be considered as alternatives to or substitutes for operating revenues, operating income, net income or any other measure of financial performance calculated and presented in accordance with GAAP. These financial measures may not be comparable to similarly-titled measures of other organizations because other organizations may not calculate their measures in the same manner as we do. These financial measures are adjusted to eliminate the impact of items that the Company does not consider indicative of its core operating performance. You are encouraged to evaluate these adjustments and the reasons we consider them appropriate.
 
      The Company believes that the non-GAAP financial measures it presents are useful to investors in evaluating the Company’s operating performance for the following reasons:
  •   stock-based retailer incentive compensation is a non-cash GAAP accounting charge that acts as an offset to the Company’s actual revenues from operations as the Company has historically calculated them. This charge results from the monthly lapsing of the Company’s right to repurchase a portion of the 2,208,552 shares it issued to its largest distributor, Walmart, in May 2010. By adding back this charge to the Company’s GAAP 2010 and future total operating revenues, investors can make direct comparisons of the Company’s revenues from operations prior to and after May 2010 and thus more easily perceive trends in the Company’s core operations. Further, because the monthly charge is based on the then-current market value of the shares as to which the Company’s repurchase right lapses, adding back this charge eliminates fluctuations in the Company’s operating revenues caused by variations in its month-

 

 

      end stock prices and thus provides insight on the operating revenues directly associated with those core operations.
  •   The Company records employee stock-based compensation from period to period, and recorded employee stock-based compensation expenses of approximately $1.7 million and $0.8 million for the three months ended September 30, 2010 and 2009, respectively, and approximately $5.2 million and $2.0 million for the nine months ended September 30, 2010 and 2009, respectively. By comparing the Company’s adjusted EBITDA, non-GAAP net income and non-GAAP diluted earnings per share in different historical periods, investors can evaluate the Company’s operating results without the additional variations caused by employee stock-based compensation expense, which is not comparable from period to period due to changes in the fair market value of the Company’s Class A common stock (which is influenced by external factors like the volatility of public markets and the financial performance of the Company’s peers), and is not a key measure of the Company’s operations;
 
  •   Adjusted EBITDA is widely used by investors to measure a company’s operating performance without regard to items, such as interest expense, income tax expense, depreciation and amortization, employee stock-based compensation expense, and stock-based retailer incentive compensation expense, that can vary substantially from company to company depending upon their respective financing structures and accounting policies, the book values of their assets, their capital structures and the methods by which their assets were acquired; and
 
  •   securities analysts use adjusted EBITDA as a supplemental measure to evaluate the overall operating performance of companies;
The Company’s management uses the non-GAAP financial measures:
  •   as measures of operating performance, because they exclude the impact of items not directly resulting from the Company’s core operations;
 
  •   for planning purposes, including the preparation of the Company’s annual operating budget;
 
  •   to allocate resources to enhance the financial performance of the Company’s business;
 
  •   to evaluate the effectiveness of the Company’s business strategies; and
 
  •   in communications with the Company’s board of directors concerning the Company’s financial performance.
The Company understands that, although adjusted EBITDA and other non-GAAP financial measures are frequently used by investors and securities analysts in their evaluations of companies, these measures have limitations as an analytical tool, and you should not consider them in isolation or as substitutes for analysis of the Company’s results of operations as reported under GAAP. Some of these limitations are:
  •   that these measures do not reflect the Company’s capital expenditures or future requirements for capital expenditures or other contractual commitments;
 
  •   that these measures do not reflect changes in, or cash requirements for, the Company’s working capital needs;
 
  •   that these measures do not reflect interest expense or interest income;
 
  •   that these measures do not reflect cash requirements for income taxes;
 
  •   that, although depreciation and amortization are non-cash charges, the assets being depreciated or amortized will often have to be replaced in the future, and these measures do not reflect any cash requirements for these replacements; and
 
  •   that other companies in the Company’s industry may calculate these measures differently than the Company does, limiting their usefulness as comparative measures.

 

 

  (2)   This expense consists of the recorded fair value of the shares of Class A common stock for which the Company’s right to repurchase has lapsed pursuant to the terms of the May 2010 agreement under which they were issued to Walmart Stores, Inc., a contra-revenue component of the Company’s total operating revenues. Prior to the three months ended June 30, 2010, the Company did not record stock-based retailer incentive compensation expense. The Company will, however, continue to incur this expense through May 2015. In future periods, the Company does not expect this expense will be comparable from period to period due to changes in the fair value of its Class A common stock. The Company will also have to record additional stock-based retailer incentive compensation to the extent that a warrant to purchase its Class B common stock vests and becomes exercisable upon the achievement of certain performance goals by PayPal. The Company does not believe these non-cash expenses are reflective of ongoing operating results.
 
  (3)   The Company does not include any income tax impact of the associated non-GAAP adjustment to non-GAAP total operating revenues or adjusted EBITDA, as the case may be, because each of these non-GAAP financial measures is provided before income tax expense.
 
  (4)   This expense consists primarily of expenses for employee stock options. Employee stock-based compensation expense is not comparable from period to period due to changes in the fair market value of the Company’s Class A common stock (which is influenced by external factors like the volatility of public markets and the financial performance of the Company’s peers) and is not a key measure of the Company’s operations. The Company excludes employee stock-based compensation expense from its non-GAAP financial measures primarily because it consists of non-cash expenses that the Company does not believe are reflective of ongoing operating results. Further, the Company believes that it is useful to investors to understand the impact of employee stock-based compensation to its results of operations.