EX-99.01 2 a03312019-exb9901earningsr.htm EXHIBIT 99.01 Exhibit
Exhibit 99.01
a2018greendotlogov1a04.jpg

Green Dot Reports First Quarter 2019 Results
GAAP and non-GAAP total operating revenues of $341 million and $326 million, respectively, each up organically 6%
GAAP net income and GAAP diluted EPS of $64 million and $1.17, respectively
Adjusted EBITDA and non-GAAP EPS of $119 million and $1.51, up 9% and 8%, respectively
Updated 2019 financial outlook to reflect investment in growth
Pasadena, CA - May 8, 2019 - Green Dot Corporation (NYSE: GDOT) today reported financial results for the quarter ended March 31, 2019.
For the first quarter of 2019, Green Dot reported total operating revenues of $340.5 million and GAAP net income and GAAP diluted earnings per common share of $64.0 million and $1.17, respectively. Green Dot also reported non-GAAP total operating revenues1 of $325.7 million, and adjusted EBITDA1 and non-GAAP diluted earnings per common share1 of $119.0 million and $1.51, respectively.
Said Green Dot Founder and CEO, Steve Streit, “Green Dot delivered solid Q1 financial results, including 6% growth in our total operating revenues. More importantly, we have seen new business line momentum increase dramatically over the past 90 days with positive developments in both our Product and Platform product lines. In our new product initiatives, customer research and key stakeholder feedback has served to validate our assumptions around both the potential breadth and depth of appeal of our new and revolutionary product concepts; while demand for our BaaS platform product line has greatly increased above our original expectations. While there are always uncertain outcomes associated with launching new products, new technologies and new platform business models, we believe our future prospects are looking materially stronger and incrementally more assured as we remain focused on executing our 2019 Six Step Plan to drive long-term enterprise value for our shareholders for years to come.”
GAAP financial results for the first quarter of 2019 compared to the first quarter of 2018:
Total operating revenues on a generally accepted accounting principles (GAAP) basis were $340.5 million for the first quarter of 2019, up from $320.3 million for the first quarter of 2018, representing a year-over-year increase of 6%.
GAAP net income was $64.0 million for the first quarter of 2019, compared to $70.0 million for the first quarter of 2018, representing a year-over-year decrease of 9%.
GAAP diluted earnings per common share was $1.17 for the first quarter of 2019, compared to $1.29 for the first quarter of 2018, representing a year-over-year decrease of 9%.
Non-GAAP financial results for the first quarter of 2019 compared to the first quarter of 2018:1 
Non-GAAP total operating revenues1 were $325.7 million for the first quarter of 2019, up from $307.2 million for the first quarter of 2018, representing a year-over-year increase of 6%.
Adjusted EBITDA1 was $119.0 million, or 36.5% of non-GAAP total operating revenues1 for the first quarter of 2019, up from $109.5 million, or 35.6% of non-GAAP total operating revenues1 for the first quarter of 2018, representing a year-over-year increase of 9%.
Non-GAAP net income1 was $82.5 million for the first quarter of 2019, up from $75.9 million for the first quarter of 2018, representing a year-over-year increase of 9%.
Non-GAAP diluted earnings per share1 was $1.51 for the first quarter of 2019, up from $1.40 for the first quarter of 2018, representing a year-over-year increase of 8%.

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 financial statements. Additional information about the Company's non-GAAP financial measures can be found under the caption “About Non-GAAP Financial Measures” below.


Key Metrics
The following table shows the Company's quarterly key business metrics for each of the last five calendar quarters. Please refer to the Company’s latest Annual Report on Form 10-K for a description of the key business metrics.
 
2019
 
2018
 
Q1
 
Q4
Q3
Q2
Q1
 
(In millions)
Gross dollar volume
$
12,977

 
$
9,809

$
9,088

$
9,413

$
11,719

Number of active accounts at quarter end
6.05

 
5.34

5.43

5.86

6.01

Purchase volume
$
8,200

 
$
6,276

$
5,918

$
6,325

$
7,470

Number of cash transfers
10.98

 
10.91

10.68

10.56

10.10

Number of tax refunds processed
9.39

 
0.07

0.10

2.79

8.75

Said Mark Shifke, Green Dot’s Chief Financial Officer, “We believe now is the right time to accelerate investment in initiatives designed to materially grow both the Products and Platform parts of our business, creating the opportunity to achieve material incremental growth into 2020 and beyond. To that end, we intend to invest an incremental $60 million for the purpose of aggressively marketing our new products that are set to launch later this year, and to advance the development and deployment of our BaaS 3.0 and BaaS 4.0 technology platforms in order to meet the increasing demand for these services and capitalize on the resulting revenue opportunities sooner and more assuredly. We expect the incremental $60 million investment could deliver over one million incremental active accounts at the exit of 2019, which, at that number of incremental active accounts, would be expected to deliver incremental lifetime revenue of approximately $200 million to $300 million, at an approximate average contribution margin of 50%. As a result of this $60 million incremental investment, we are revising our 2019 full year adjusted EBITDA and Non-GAAP EPS outlook.”
2019 Financial Guidance
New Revenue Presentation
As mentioned previously during Green Dot's quarterly earnings calls, Green Dot has adjusted its presentation of revenue beginning with its report on the results of operations for the first quarter of 2019 to better reflect its successful evolution into a diverse technology-focused bank holding company that generates its revenue through a unique “Products and Platform” operating model.
Beginning with the first quarter in 2019, Green Dot has presented net interest income generated at Green Dot Bank from the investment of customer deposits as a component of GAAP total operating revenues, whereas previously that item was reported below operating income and consolidated along with net interest income generated outside the bank. Net interest income at Green Dot Bank has become an increasingly important revenue component as Green Dot Bank's ability to invest its growing customer balances and generate interest income is one of several unique advantages of Green Dot being not just a leading consumer technology company, but also a federally regulated bank. Net interest income generated outside of Green Dot Bank will continue to be reported below the line as it is currently. Prior year results have been reclassified to conform to current year presentation.
Also beginning this quarter in 2019, Green Dot has presented a new non-GAAP revenue figure that reduces our GAAP total operating revenue by commissions and certain processing-related costs associated with certain “Banking as a Service,” or “BaaS," partner programs, where the partner and not Green Dot controls customer acquisition. Green Dot believes that a net revenue presentation better reflects the relevant amount of revenue Green Dot generates in respect of these types of BaaS platform programs.

2
For additional information, see reconciliations of forward-looking guidance for these non-GAAP financial measures to their respective, most directly comparable projected GAAP financial measures provided in the tables immediately following the reconciliation of Net Income to Adjusted EBITDA.



Accordingly, Green Dot's outlook for non-GAAP revenues and adjusted EBITDA reflect this new presentation.
Updated Outlook
Green Dot has provided its updated outlook for 2019. Green Dot’s updated outlook is based on a number of assumptions that management believes are reasonable at the time of this earnings release. Information regarding potential risks that could cause the actual results to differ from these forward-looking statements is set forth below and in Green Dot's filings with the Securities and Exchange Commission.
Total Non-GAAP Operating Revenues2 
Green Dot expects its full year non-GAAP total operating revenues2 to be between $1.114 billion and $1.134 billion, representing 10% year-over-year increase at the mid-point.
For Q2, Green Dot expects non-GAAP total operating revenues2 to be approximately $261 million, representing a 3% year-over-year increase.
Adjusted EBITDA2 
Green Dot now expects its full year adjusted EBITDA2 to be between $255 million and $261 million, representing a 6% year-over-year decline at the mid-point, versus its previous guidance of $315 million and $321 million.
Non-GAAP EPS2  
Green Dot now expects its full year non-GAAP EPS2 to be between $2.82 and $2.91, representing a 13% year-over-year decline at the mid-point, versus its previous guidance range of $3.59 to $3.67.
The components of Green Dot's non-GAAP EPS2 guidance range are as follows:
 
Range
 
Low
 
High
 
(In millions except per share data)
Adjusted EBITDA
$
255.0

 
$
261.0

Depreciation and amortization*
(49.5
)
 
(49.5
)
Net interest expense **
(0.7
)
 
(0.7
)
Non-GAAP pre-tax income
$
204.8

 
$
210.8

Tax impact***
(48.1
)
 
(49.5
)
Non-GAAP net income
$
156.7

 
$
161.3

Diluted weighted-average shares issued and outstanding
55.5

 
55.5

Non-GAAP earnings per share
$
2.82

 
$
2.91

*
Excludes the impact of amortization of acquired intangible assets
**
Excludes the impact of amortization of deferred financing costs
***
Assumes a non-GAAP effective tax rate of 23.5% for full year.

2
For additional information, see reconciliations of forward-looking guidance for these non-GAAP financial measures to their respective, most directly comparable projected GAAP financial measures provided in the tables immediately following the reconciliation of Net Income to Adjusted EBITDA.



Conference Call
The Company will host a conference call to discuss first quarter 2019 financial results today at 5:00 p.m. ET. Hosting the call will be Steve Streit, Chief Executive Officer, and Mark Shifke, Chief Financial Officer. The conference call can be accessed live over the phone by dialing (888) 348-8307, or for international callers (412) 902-4242. A replay will be available approximately two hours after the call concludes and can be accessed by dialing (844) 512-2921, or for international callers (412) 317-6671; and entering the conference ID 10130791. The replay of the webcast will be available until Wednesday, May 15, 2019. The call will be webcast live from the Company's investor relations website at http://ir.greendot.com/.
Forward-Looking Statements
This earnings release contains 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 the Company's future performance and returns on investment contained under "Updated Outlook" and in the quotes of its executive officers and other 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 include, among other things, the timing and impact of revenue growth activities, the Company's dependence on revenues derived from Walmart, impact of competition, the Company's reliance on retail distributors for the promotion of its products and services, demand for the Company's new and existing products and services, continued and improving returns from the Company's investments in new growth initiatives, potential difficulties in integrating operations of acquired entities and acquired technologies, the Company's ability to operate in a highly regulated environment, changes to existing laws or regulations affecting the Company's operating methods or economics, the Company's reliance on third-party vendors, changes in credit card association or other network rules or standards, changes in card association and debit network fees or products or interchange rates, instances of fraud developments in the prepaid financial services industry that impact prepaid debit card usage generally, business interruption or systems failure, and the Company's involvement litigation or investigations. These and other risks are discussed in greater detail in the Company's Securities and Exchange Commission filings, including its most recent annual report on Form 10-K and quarterly report on Form 10-Q, which are available on the Company's investor relations website at 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 May 8, 2019, 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 accounting principles generally accepted in the United States of America (GAAP), the Company uses measures of operating results that are adjusted to exclude non-operating net interest income and expense; income tax benefit and expense; depreciation and amortization, including amortization of acquired intangibles; employee stock-based compensation and related employer payroll taxes; change in the fair value of contingent consideration; impairment charges; extraordinary severance expenses; realized gains or losses on the sale of investment securities; commissions and certain processing-related costs associated with BaaS products and services where the Company does not control customer acquisition, other charges and income; and income tax effects. This earnings release includes non-GAAP total operating revenues, adjusted EBITDA, non-GAAP net income, and non-GAAP earnings per share. It also includes full-year 2019 guidance for non-GAAP total operating revenues, adjusted EBITDA, non-GAAP net income and non-GAAP EPS. These non-GAAP financial measures are not calculated or presented in accordance with, and are not alternatives or substitutes for, financial measures prepared in accordance with GAAP, and



should be read only in conjunction with the Company's 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 historic and projected non-GAAP financial measures, investors are encouraged to review the reconciliations of the Company's historic and projected 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 the Company's website at http://ir.greendot.com/.
About Green Dot
Green Dot Corporation, [NYSE:GDOT], is a financial technology leader and bank holding company with a mission to power the banking industry’s branchless future. Enabled by proprietary technology and Green Dot’s wholly-owned commercial bank charter, Green Dot’s “Banking as a Service” platform is used by a growing list of America’s most prominent consumer and technology companies to design and deploy their own bespoke banking solutions to their customers and partners, while Green Dot uses that same integrated technology and banking platform to design and deploy its own leading collection of banking and financial services products directly to consumers through one of the largest retail banking distribution platforms in America. Green Dot products are marketed under brand names such as Green Dot, GoBank, MoneyPak, AccountNow, RushCard and RapidPay, and can be acquired through more than 100,000 retailers nationwide, thousands of corporate paycard partners, several “direct-2-consumer” branded websites, thousands of tax return preparation offices and accounting firms, thousands of neighborhood check cashing locations and both of the leading app stores. Green Dot Corporation is headquartered in Pasadena, California, with additional facilities throughout the United States and in Shanghai, China.


Contacts
Investor Relations
IR@greendot.com

Media Relations
Brian Ruby, 203-682-8286
Brian.Ruby@icrinc.com



GREEN DOT CORPORATION
CONSOLIDATED BALANCE SHEETS
 
March 31, 2019
 
December 31, 2018
 
(unaudited)
 
 
Assets
(In thousands, except par value)
Current assets:
 
 
 
Unrestricted cash and cash equivalents
$
1,676,470

 
$
1,094,728

Restricted cash
4,355

 
490

Investment securities available-for-sale, at fair value
19,981

 
19,960

Settlement assets
339,220

 
153,992

Accounts receivable, net
34,108

 
40,942

Prepaid expenses and other assets
49,010

 
57,070

Income tax receivable

 
8,772

Total current assets
2,123,144

 
1,375,954

Investment securities available-for-sale, at fair value
205,599

 
181,223

Loans to bank customers, net of allowance for loan losses of $948 and $1,144 as of March 31, 2019 and December 31, 2018, respectively
18,943

 
21,363

Prepaid expenses and other assets
8,777

 
8,125

Property and equipment, net
126,954

 
120,269

Operating lease right-of-use assets
15,480

 

Deferred expenses
13,033

 
21,201

Net deferred tax assets
11,275

 
7,867

Goodwill and intangible assets
542,941

 
551,116

Total assets
$
3,066,146

 
$
2,287,118

Liabilities and Stockholders’ Equity
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
47,072

 
$
38,631

Deposits
1,624,732

 
1,005,485

Obligations to customers
189,671

 
58,370

Settlement obligations
20,351

 
5,788

Amounts due to card issuing banks for overdrawn accounts
1,370

 
1,681

Other accrued liabilities
120,056

 
134,000

Operating lease liabilities
5,909

 

Deferred revenue
24,034

 
34,607

Note payable

 
58,705

Income tax payable
7,040

 
67

Total current liabilities
2,040,235

 
1,337,334

Other accrued liabilities
18,522

 
30,927

Operating lease liabilities
15,878

 

Net deferred tax liabilities
12,796

 
9,045

Total liabilities
2,087,431

 
1,377,306

 
 
 
 
Stockholders’ equity:
 
 
 
Class A common stock, $0.001 par value; 100,000 shares authorized as of March 31, 2019 and December 31, 2018; 53,148 and 52,917 shares issued and outstanding as of March 31, 2019 and December 31, 2018, respectively
53

 
53

Additional paid-in capital
384,447

 
380,753

Retained earnings
593,186

 
529,143

Accumulated other comprehensive income (loss)
1,029

 
(137
)
Total stockholders’ equity
978,715

 
909,812

Total liabilities and stockholders’ equity
$
3,066,146

 
$
2,287,118





GREEN DOT CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
 
Three Months Ended March 31,
 
2019
 
2018
 
(In thousands, except per share data)
Operating revenues:
 
 
 
Card revenues and other fees
$
129,577

 
$
130,060

Processing and settlement service revenues
107,579

 
100,240

Interchange revenues
92,541

 
84,698

Interest income, net
10,817

 
5,344

Total operating revenues
340,514

 
320,342

Operating expenses:
 
 
 
Sales and marketing expenses
98,701

 
91,968

Compensation and benefits expenses
61,475

 
54,507

Processing expenses
51,632

 
48,425

Other general and administrative expenses
47,321

 
43,718

Total operating expenses
259,129

 
238,618

Operating income
81,385

 
81,724

Interest expense, net
1,471

 
1,260

Income before income taxes
79,914

 
80,464

Income tax expense
15,871

 
10,433

Net income
$
64,043

 
$
70,031

 
 
 
 
Basic earnings per common share:
$
1.21

 
$
1.36

Diluted earnings per common share:
$
1.17

 
$
1.29

Basic weighted-average common shares issued and outstanding:
53,050

 
51,439

Diluted weighted-average common shares issued and outstanding:
54,551

 
54,234






GREEN DOT CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
 
Three Months Ended March 31,
 
2019
 
2018
 
(In thousands)
Operating activities
 
 
 
Net income
$
64,043

 
$
70,031

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation and amortization of property and equipment
10,882

 
8,922

Amortization of intangible assets
8,174

 
8,236

Provision for uncollectible overdrawn accounts
23,573

 
18,385

Employee stock-based compensation
14,815

 
9,360

Amortization of (discount) premium on available-for-sale investment securities
(140
)
 
320

Amortization of deferred financing costs
996

 
398

Impairment of capitalized software
100

 

Changes in operating assets and liabilities:
 
 
 
Accounts receivable, net
(16,739
)
 
(12,626
)
Prepaid expenses and other assets
6,974

 
(6,111
)
Deferred expenses
8,168

 
7,183

Accounts payable and other accrued liabilities
(10,217
)
 
(18,936
)
Deferred revenue
(10,718
)
 
(6,480
)
Income tax receivable/payable
15,729

 
10,136

Other, net
(255
)
 
51

Net cash provided by operating activities
115,385

 
88,869

 
 
 
 
Investing activities
 
 
 
Purchases of available-for-sale investment securities
(35,782
)
 
(13,774
)
Proceeds from maturities of available-for-sale securities
12,948

 
17,676

Proceeds from sales of available-for-sale securities
101

 
124

Payments for acquisition of property and equipment
(19,312
)
 
(13,386
)
Net decrease (increase) in loans
1,754

 
(1,143
)
Net cash used in investing activities
(40,291
)
 
(10,503
)
 
 
 
 
Financing activities
 
 
 
Repayments of borrowings from notes payable
(60,000
)
 
(5,625
)
Proceeds from exercise of options
705

 
7,802

Taxes paid related to net share settlement of equity awards
(11,826
)
 
(15,898
)
Net increase in deposits
620,998

 
271,092

Net (decrease) increase in obligations to customers
(39,364
)
 
9,115

Contingent consideration payments

 
(202
)
Net cash provided by financing activities
510,513

 
266,284

 
 
 
 
Net increase in unrestricted cash, cash equivalents and restricted cash
585,607

 
344,650

Unrestricted cash, cash equivalents and restricted cash, beginning of period
1,095,218

 
1,010,095

Unrestricted cash, cash equivalents and restricted cash, end of period
$
1,680,825

 
$
1,354,745

 
 
 
 
Cash paid for interest
$
1,094

 
$
1,118

Cash paid for income taxes
$
38

 
$
80

 
 
 
 
Reconciliation of unrestricted cash, cash equivalents and restricted cash at end of period:
 
 
 
Unrestricted cash and cash equivalents
$
1,676,470

 
$
1,268,137

Restricted cash
4,355

 
86,608

Total unrestricted cash, cash equivalents and restricted cash, end of period
$
1,680,825

 
$
1,354,745





GREEN DOT CORPORATION
REPORTABLE SEGMENTS
(UNAUDITED)
 
Three Months Ended March 31, 2019
 
Account Services
 
Processing and Settlement Services
 
Corporate and Other
 
Total
 
(In thousands)
Operating revenues
$
239,633

 
$
110,649

 
$
(9,768
)
 
$
340,514

Operating expenses
176,787

 
54,515

 
27,827

 
259,129

Operating income
$
62,846

 
$
56,134

 
$
(37,595
)
 
$
81,385

 
Three Months Ended March 31, 2018
 
Account Services
 
Processing and Settlement Services
 
Corporate and Other
 
Total
 
(In thousands)
Operating revenues
$
227,624

 
$
102,012

 
$
(9,294
)
 
$
320,342

Operating expenses
169,710

 
50,451

 
18,457

 
238,618

Operating income
$
57,914

 
$
51,561

 
$
(27,751
)
 
$
81,724


The Company's operations are comprised of two reportable segments: 1) Account Services and 2) Processing and Settlement Services. The Account Services segment consists of revenues and expenses derived from the Company's deposit account programs, such as prepaid cards, debit cards, consumer and small business checking accounts, secured credit cards, payroll debit cards and gift cards. These deposit account programs are marketed under several of the Company's leading consumer brand names and under the brand names of the Company's Banking as a Service, or "BaaS," partners. The Processing and Settlement Services segment consists of revenues and expenses derived from the Company's products and services that specialize in facilitating the movement of cash on behalf of consumers and businesses, such as consumer cash processing services, wage disbursements and tax refund processing services. The Corporate and Other segment primarily consists of eliminations of intersegment revenues and expenses, unallocated corporate expenses, depreciation and amortization, and other costs that are not considered when management evaluates segment performance.



GREEN DOT CORPORATION
Reconciliation of Total Operating Revenues to Non-GAAP Total Operating Revenues (1) 
(Unaudited)
 
Three Months Ended March 31,
 
2019
 
2018
 
(In thousands)
Total operating revenues
$
340,514

 
$
320,342

Net revenue adjustments (8)
(14,797
)
 
(13,132
)
Non-GAAP total operating revenues
$
325,717

 
$
307,210


Reconciliation of Reportable Segment Revenues to Non-GAAP Reportable Segment Revenues (1) 
(Unaudited)
 
Three Months Ended March 31,
 
2019
 
2018
 
(In thousands)
Account Services
 
 
 
Operating revenues
$
239,633

 
$
227,624

Net revenue adjustments (8)
(11,425
)
 
(9,425
)
Non-GAAP operating revenues
$
228,208

 
$
218,199

 
 
 
 
Processing and Settlement Services
 
 
 
Operating revenues
$
110,649

 
$
102,012

Net revenue adjustments (8)
(3,372
)
 
(3,707
)
Non-GAAP operating revenues
$
107,277

 
$
98,305


Reconciliation of Net Income to Non-GAAP Net Income (1) 
(Unaudited)
 
Three Months Ended March 31,
 
2019
 
2018
 
(In thousands, except per share data)
Net income
$
64,043

 
$
70,031

Employee stock-based compensation and related employer payroll taxes (3)
15,583

 
10,486

Amortization of acquired intangibles (4)
8,174

 
8,236

Amortization of deferred financing costs (5)
996

 
398

Impairment charges (5)
100

 

Extraordinary severance expenses (6)
2,856

 
106

Other (income) expense (5)
(133
)
 

Income tax effect (7)
(9,077
)
 
(13,373
)
Non-GAAP net income
$
82,542

 
$
75,884

Diluted earnings per common share
 
 
 
GAAP
$
1.17

 
$
1.29

Non-GAAP
$
1.51

 
$
1.40

 
 
 
 
Diluted weighted-average common shares issued and outstanding
54,551

 
54,234






GREEN DOT CORPORATION
Supplemental Detail on Diluted Weighted-Average Common Shares Issued and Outstanding
(Unaudited)
 
Three Months Ended March 31,
 
2019
 
2018
 
(In thousands)
Class A common stock outstanding as of March 31:
53,148

 
51,842

Weighting adjustment
(98
)
 
(403
)
Dilutive potential shares:
 
 
 
Stock options
168

 
535

Service based restricted stock units
679

 
1,337

Performance based restricted stock units
641

 
915

Employee stock purchase plan
13

 
8

Diluted weighted-average common shares issued and outstanding
54,551

 
54,234



Reconciliation of Net Income to Adjusted EBITDA (1) 
(Unaudited)
 
Three Months Ended March 31,
 
2019
 
2018
 
(In thousands)
Net income
$
64,043

 
$
70,031

Interest expense, net (2)
1,471

 
1,260

Income tax expense
15,871

 
10,433

Depreciation and amortization of property and equipment (2)
10,882

 
8,922

Employee stock-based compensation and related employer payroll taxes (2)(3)
15,583

 
10,486

Amortization of acquired intangibles (2)(4)
8,174

 
8,236

Impairment charges (2)(5)
100

 

Extraordinary severance expenses (2)(6)
2,856

 
106

Adjusted EBITDA
$
118,980

 
$
109,474

 
 
 
 
Non-GAAP total operating revenues
$
325,717

 
$
307,210

Adjusted EBITDA/Non-GAAP total operating revenues (adjusted EBITDA margin)
36.5
%
 
35.6
%

Reconciliation of Forward Looking Guidance for Non-GAAP Financial Measures to
Projected Non-GAAP Total Operating Revenues (1) 
(Unaudited)
 
 
 
 
FY 2019
 
 
 
 
Range
 
 
Q2 2019
 
Low
 
High
 
 
(In millions)
Total operating revenues
 
$
276

 
$
1,167

 
$
1,187

Net revenue adjustments (8)
 
(15
)
 
(53
)
 
(53
)
Non-GAAP total operating revenues
 
$
261

 
$
1,114

 
$
1,134






GREEN DOT CORPORATION
Reconciliation of Forward Looking Guidance for Non-GAAP Financial Measures to
Projected Adjusted EBITDA (1) 
(Unaudited)
 
 
FY 2019
 
 
Range
 
 
Low
 
High
 
(In millions)
Net income
 
$
83.8

 
$
88.5

Adjustments (9)
 
171.2

 
172.5

Adjusted EBITDA
 
$
255.0

 
$
261.0

 
 
 
 
 
Non-GAAP total operating revenues
 
$
1,134

 
$
1,114

Adjusted EBITDA / Non-GAAP total operating revenues (Adjusted EBITDA margin)
 
22.5
%
 
23.4
%

Reconciliation of Forward Looking Guidance for Non-GAAP Financial Measures to
Projected Non-GAAP Net Income (1) 
(Unaudited)
 
 
FY 2019
 
 
Range
 
 
Low
 
High
 
(In millions, except per share data)
Net income
 
$
83.8

 
$
88.5

Adjustments (9)
 
72.9

 
72.8

Non-GAAP net income
 
$
156.7

 
$
161.3

Diluted earnings per share
 
 
 
 
GAAP
 
$
1.51

 
$
1.59

Non-GAAP
 
$
2.82

 
$
2.91

 
 
 
 
 
Diluted weighted-average shares issued and outstanding
 
55.5

 
55.5





(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 or presented 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 the Company does. 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 the Company considers 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:
the Company records employee stock-based compensation from period to period, and recorded employee stock-based compensation expenses and related employer payroll taxes of approximately $15.6 million and $10.5 million for the three months ended March 31, 2019 and 2018, 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 and related employer payroll taxes, which may not be 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 non-operating net interest income and expense, income tax benefit and expense, depreciation and amortization, employee stock-based compensation and related employer payroll taxes, changes in the fair value of contingent consideration, impairment charges, severance costs related to extraordinary personnel reductions, and other charges and income 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;
to establish metrics for variable compensation; 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)
The Company does not include any income tax impact of the associated non-GAAP adjustment to adjusted EBITDA, as the case may be, because each of these non-GAAP financial measures is provided before income tax expense.
(3)
This expense consists primarily of expenses for restricted stock units (including performance-based restricted stock units) and related employer payroll taxes. 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. The Company also believes that it is not useful to investors to understand the impact of employee stock-based compensation to its results of operations. Further, the related employer payroll taxes are dependent upon volatility in the Company's stock price, as well as the timing and size of option exercises and vesting of restricted stock units, over which the Company has limited to no control. This expense is included as a component of compensation and benefits expenses on the Company's consolidated statements of operations.
(4)
The Company excludes certain income and expenses that are the result of acquisitions. These acquisition related adjustments include items such as the amortization of acquired intangible assets, changes in the fair value of contingent consideration, settlements of contingencies established at time of acquisition and other acquisition related charges, such as integration charges and professional and legal fees, which result in the Company recording expenses or fair value adjustments in its GAAP financial statements. The Company analyzes the performance of its operations without regard to these adjustments. In determining whether any acquisition related adjustment is appropriate, the Company takes into consideration, among other things, how such adjustments would or would not aid in the understanding of the performance of its operations. These items are included as a component of other general and administrative expenses on the Company's consolidated statements of operations, as applicable for the periods presented.
(5)
The Company excludes certain income and expenses that are not reflective of ongoing operating results. It is difficult to estimate the amount or timing of these items in advance. Although these events are reflected in the Company's GAAP financial statements, the Company excludes them in its non-GAAP financial measures because the Company believes these items may limit the comparability of ongoing operations with prior and future periods. These adjustments include items such as amortization attributable to deferred financing costs, impairment charges related to internal-use software, realized gains or losses on the sale of investment securities, legal settlement expenses and other income and expenses, as applicable for the periods presented. In determining whether any such adjustment is appropriate, the Company takes into consideration, among other things, how such adjustments would or would not aid in the understanding of the performance of its operations. Each of these adjustments, except for amortization of deferred financing costs and realized gains and losses on the sale of investment securities, which are included as a component of interest income/expense, are included within other general and administrative expenses on the Company's consolidated statements of operations.
(6)
During the three months ended March 31, 2019, the Company recorded charges of $2.9 million for severance costs related to extraordinary personnel reductions. Although severance expenses are an ordinary part of its operations, the magnitude and scale of this ongoing reduction in workforce for redundancies is not expected to be repeated. This expense is included as a component of compensation and benefits expenses on the Company's consolidated statements of operations.
(7)
Represents the tax effect for the related non-GAAP measure adjustments using the Company's year to date non-GAAP effective tax rate. It also excludes both the impact of excess tax benefits related to stock-based compensation and the portion of the GAAP IRC §162(m) limitation related to performance based restricted stock units expense as of March 31, 2019.
(8)
Represents commissions and certain processing-related costs associated with Banking as a Service ("BaaS") products and services where Green Dot does not control customer acquisition.
(9)
These amounts represent estimated adjustments for non-operating net interest income, income taxes, depreciation and amortization, employee stock-based compensation and related employer taxes, contingent consideration, impairment charges, severance costs related to extraordinary personnel reductions, and other income and expenses. Employee stock-based compensation expense includes assumptions about the future fair 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).