Green Dot (GDOT) 9 May 242024 Q1 Earnings call transcript

Hello, and welcome to the Green Dot Corp.

First Quarter 2024 Conference Call. [Operator Instructions] Please note, this event is being recorded.

I would now like to turn the conference over to Mr. Tim Willi, Senior Vice President, Finance. ahead. go Please

good Green and results. Today, are we Thank first afternoon, quarter the Dot's operating XXXX discussing you, everyone. financial and

Following the our open your remarks, questions. call for we'll

earnings and recent Our this that found ir.greendot.com. be call most at webcast release can accompanies

recent may comments the including refer regarding in Please statements. concerning forward-looking statements the Green XX-K release Securities and cautionary Commission, language Form Dot's our future reminder, differ and most cause for and with results materially and XX-Q, a Exchange additional our forward-looking that include the factors As earnings actual filings performance. to to expectations and results in from the information could

During do the financial our with will principles. measures to not call, that generally we refer conform accepted accounting

of talk reconciliation unless non-GAAP numbers differently a GAAP in today's clarity, to be on press than all noted, by information the about appears Quantitative directly of presented basis. data will other sake Information be we non-GAAP release. otherwise companies. similar our For may calculated information financial today the financial comparable non-GAAP

Corporation this The Dot the Green copyright is subject property to of of call protection. is content and

Now to I'd the George. to like over turn call

we I making thank then our turning like our call. joining you to open to will closing and Jess up comments will over and progress it it detailed brief first earnings discussion. start make more quarter afternoon, Good during financial for the before for by some your on I'd quarter a comments, questions. for some

Federal proposed fourth earnings material are release no our Board. regarding there the the order from developments consent quarter to since report received First, Reserve

and company's that order matters in addressed CEO commenced relate disclosed, prior previously to the in have the the proposed we XXXX. transition to consent practices activities As

our we an making We I that will strive and have organization, I functions to risk activities and with a investments remain in and advantage. compliance management and are times, time, an a to in competitive and industry leader significant a all in management top ensure priority, be in business control performed risk believe, as manner applicable and as be our continue compliance many As in sound recognized regulations. laws safe which, mentioned compliance

Turning to are solid year. for a quarter, start the we to off the

results headwinds ago, year our they de-conversions reflect quarter, generally expect our in the client line the from we with second the for While of ongoing continue expectations a half improved in were and momentum year. to

would initiatives continue value progress Jess maximize are initiatives it on results I to see discuss on we our to couple like of a these detail. that in I more assets touch mentioned key to of on the calls over ensuring we've briefly our differentiators. to to previous and handing critical before

overshadowed efficiencies return. scale by a we improvements. leverage, and operating are the further expenses its drive be making The we These capital. that on organization. well-managed, to and driving and may efficiency efforts building First, focused a to utilize But associated team enable with higher compliance are growth-focused in us that can and on continues building infrastructure our will investments company somewhat and in elevated progress efficient be processes returns regulatory

for and focused growth revenue steady and Second, company coming predictable we are positioning on in the streams accelerating and earnings revenue years. the more

XXXX our move on basis improved business and we are momentum expect as on beyond. focused on and through in scale XXXX, front at we We this sustainable ensuring a grows

in center new in financial very And X PLS, we services division and We encouraging. our new and partners over Dot Our new development business pipelines clients just a in customer Network. the Green PayCard retail signed division. our launched XXX are solid

belief being all discussions embedded continue business discussed and is potential the our that having my of of finance quite evolution. are models partners of that in see still growing the stages stages We The which opportunities exciting. in drive the of in we early to a various number are are across we of terms continues channels, to discussion

are new a driving offerings seeing, money the capabilities opportunity are and we expanding investments enhancements making and drive more and core across deeper launch suite partners; efficiently and conjunction variety in activity our the engagement to movement; of In product product that with we our infrastructure areas, to monetization. will namely

assets the embedded be our Given and a possibilities of are time It's limitless. exciting part the landscape. capabilities, to very financial

to I'll financials. over you turn it to the Jess? walk Now through Jess

and afternoon, George, everyone. good you, Thank

last of BXB secular our down Non-GAAP headwinds revenue both million $X.XX from year-over-year, a ongoing growth combination of processing EPS largely retail, sunsetting our from in X% expenses incremental de-converting of continued of result as year. year EBITDA in non-GAAP programs partner conversion $XX a well portfolios incurring investment compliance in initiatives, and grew regulatory a primarily reduction processor were segment. year-over-year, as with as and in benefiting Adjusted of our expenses from last associated while

I results, GAAP want to items. our Regarding X point out

our ending new core First, for we interest that us of the different quarter beneficial onetime our system had and banking management million decided is we core selected this system. This partnership in incurred card no for system the in that mutual a to been vendor banking the developing implemented for charges was that from the We initiative. agreement due XXXX. $XX long

this we proposed unchanged million additional the in accrued until we Second, $XX liability as receive that it we the information. order estimated earlier relates year, consent that remain XXXX to disclosed

on I contains go-to-market want Before with, that you to to about comprise reportable now discuss X appendix and our our and important market including insight transparency on to quarterly segments, We'll years data X various incremental provide segments, our with continue business the X an your help mention to channels our revenue understand to that better it's each our quarterly the our that presentation modeling. familiar keep believe metrics channels for segments of outlooks. with and I I are investor and helping reporting

results since amount provide increased rather information the about than quarter numbers have segment the focus how segments reciting on providing the presentation. in they investor and we the our factors Turning I quarterly will what of actual and the channels insight about influenced and to performed results, details we

revenue retail direct retail metrics was to channels. continue associated trends is where and The First volume account by accounts Services the pressure. channel macroeconomic the of driven our comprised acquisition, is year-over-year continued decline largely impact purchase like Consumer active and and come segment, in our segment therefore, which to under

second in conversion decline previous The first a principally of B quarters higher year-over-year revenue force the was program program year. was XXXX. than during still full because and That last of quarter in largely

with of Excluding for Consumer the quarter fourth the retail was that impact, XXXX. segment rate whole a and consistent the of decline as

financial the work store a to physical retail our of to continue they productivity to omnichannel locations delivery turn increasingly also digital pursuing the while with We retail and of with variety our initiatives improve as services. of digital partners partners

retail we for provide through well, with the our metrics now our in that positive As and the as of we rollout see we initial partner, are with to work support newest balance would launch lined division PLS, expect XXXX.

into a transform on are direct multiyear brand the channel to journey single a nearing GOXbank. focused We of our end

the several This brands before, of XXXX and a XXXX. legacy quarter into shared investment I've culminating of with sunset the As of putting GOXbank legacy we the the complete, in developing capital made is second brands at while largely end process program. conscious to marketing all decision deemphasize

on the on be revenue am basis, quarter a bit encouraged aggregate results a after a growth to sunset. though the year-over-year second line stabilizing appears that channel be a for As result, basis, sequential challenged top I to of this with continue

likely would basis. For in reporting increase to growth I see point share channel some to this will the on GOXbank quarter, in separately. GOXbank growth expect more XX% revenue and sequential over we we direct steady XX% tough saw GOXbank and comparison, a of represents time. future, revenue, is on against when over GOXbank the a channel At note mid-teens than the now we revenue, the continue stop of that

you I'll performance now, insights provide direct the shift continue its the in help general channel. For understand ongoing into some to to

The our effectively retail the decline double were profitability points margins in Consumer manage the I ability of in I our which division that evolves. de-conversion allocate resources in as expenses the down that for while profits revenue program, digits on and segment estimate both reflects this the stable, pressure discussed. to in low just Adjusting were to channels

is BaaS of rapid! channels. driven accounts remains growth BXB of PayCard from a Revenue of in segment first the our to which roll-off partner, largely while and half and comprised partners significant BaaS active faced on we the now Turning our by BaaS this revenue X XXXX. segment, headwinds in

this With to us outlook bottomed channel I in we see business sequential confidence this coming with active channel. the This the quarters. revenues, for in progress, second in have channel of to year-over-year with this that launch out accounts continue pipelines, existing volume growth of seen solid new purchase partners quarter we year in have revenue along development growth in our last believe in gives the and growth solid with solid just seen partners, and that

sales industry, Our rapid! that second staffing our PayCard continue accounts pricing macro experience early half variety one to continue investment remain little growth backdrop, wage control make from momentum we the is of the of temporary revenue And we strategies introduced over XXXX. capabilities. largest solid pressure for a under consecutive to verticals. industry which quarter the in in of to while in have our we and as channel Active we had the second due headwinds benefited access further

better impact the BXB client the channel segment and with to The BaaS in with of business driven rapid! the PayCard the margin improved decline the de-conversions certain and a fixed profitability profitability impact in continues in while BaaS by partners, compression performance. structures profit of in revenue be

of face to as channel business had start launch We active decline driven to as our of TPG, our accounts The segment, trends Dot headwinds accounts moderate by which Green our the portfolios Network turning Revenue which Movement with the business primarily transactions PLS in direct growth associated was is tax business, in continued and those retail our to comprised to Network continue lapping the own refer channel. legacy we to anticipate Money in of from issued strong Now sunsetting a Green to with our the the which decline. Dot season. TPG. tax and

segment business revenue improve of have the margins reaccelerate begin third-party the in we strong in TPG, stable Network headwinds. as and with in while the some We to participants new quarters. despite pipeline solid remained Dot launch coming to to network managed a Green expect Profitability volumes partners

reflects technology our to interest Last which pay costs as is and Other salaries, at BaaS segment, share adjustments. revenue our bank, and the smaller we well partners the intercompany interest administrative net as income of and Corporate we on earn some

investments, Revenue lingering expense associated which initiatives reduction we the reflecting were Expenses impact rising compliance seasonally from environment, calls. offset were costs elevated the year, on strong as by into by discussed offset deposit the of ongoing the the prior have bank. was inflows last modestly down rate regulatory up with and the

turn the let We our a Now guidance. start had solid me to to year.

We adjusted are non-GAAP to $X.XX. million XXXX $XXX billion of billion, for million $X.XX $XXX the reiterating revenue of EBITDA our in to of to non-GAAP guidance and of EPS range $X.XX $X.X

outlook for unchanged. Our segments earnings is the of the largely cadence and

We declines second revenue combination retail, Consumer to quarter. from lapping first a the double-digit headwinds in expect retail secular to direct program sunset low similar in portfolios and face a of of with the quarter the decline the segment the of channel de-conversion

the in possibility headwinds. we of However, contribution see the that growth growth the the launch PLS in flat direct aforementioned revenue momentum for lapping the possible some from see channel fourth retail, the could the and it's GOXbank year to in with a expect segment of growing quarter. second better half with And of

with revenue conversion completion a outlook, the full year other of a the we my also exhibit expect reduction comments processing processor and in pattern similar active margins, cost from on to XXXX. accounts with our line In metrics

be partners range segment business. but over the down as recovery We year-over-year. quarter, and I second with in across improving in channel XXX expect in margins to XXXX come as the existing well in quarter the the now rapid! Growth quarter growth launched revenue will margins project decline new the and still growth from the third anticipate BaaS BaaS XXX We second margins year. PayCard to with partners the mid-XX% steady BXB in to first points to be basis

growth I the anticipate mid- the for in high-single to digit Money revenue Movement segment.

Dot will and In from the the Dot the Network likely year, over second growth basis growth retail expect year I half due increase of the in business of XXX our an first and launch partner Green of are Network. Network. revenue expected modest the PLS to the in tax acceleration channel Dot year. course tax the the of acceleration launches driven in and by points a decline growth the for to Margins revenue of with to year new in expand lower XXX Green the half Green modest have of The the

Other In on single digits, modest and in be segment, while the which efforts Expenses I optimize discussed our upper some benefit to XXXX to our yields incorporating should and to reflecting mid-teens Corporate the should revenue investment mid on also will our rate idea, cash cuts, than our earlier. investments you our more an be To infrastructure infrastructure in spending million $XX give in the related up in be that regulatory regulatory XXXX. in projected will us.

Some be of this ongoing. investment will not

shares I diluted short Additionally, we tax came we expense our compare some plan. of anticipate where to expect of outstanding. in rate XX with count QX bonus XX.X% million fully up a in our as as we reduced XXXX, be substantial share quarter the to jump accruals operating we fourth original of

turn me it George. to let Now back

Jess. you, Thank

let our and beyond. for question, provide just taking on comments and some XXXX Before your additional vision me priorities

As a accelerating importantly, to move the as a Jess we more half we to solid second through the And path year. off we start. are indicated, growth see of

first growth. operating Comparisons forgiving and become momentum is headwinds. launch a move is and lingering number traction this The partners growth for More efficiencies. see more we existing we is past year-over-year continue improve our point beginning important from as we to quarter driving partners, our new quarter as toughest of gain on

will momentum half to as headwinds itself the year. the While second the our make the in of in a XXXX our see from clearly lap more half, bit results those it headwinds, harder momentum the we first in reveal

I our and on activity and momentum a us clear believe partner opportunity provide with to investments XXXX that Additionally, and product in infrastructure build pipeline in beyond.

build leadership allocate drive the to on It which measure processes. culture on maximizing decisions. our to also those and an our This return company continue and driven, ensuring is discipline by by scale guide processes we driving part, returns and eye the strong a improving We of financial in includes capital with on capital. has those

a And long-time mentioned and I growth development Banking of new with payments make provider. contributions embedded experience appointed call, Service. as product Manager new a on and she'll as I in up recently recently, management, the risk look welcomed General our we most As services team veteran to Renata resources. as our that payments to human we year-end head Caine executives Renata our to substantial is leading and to the forward a and

have some in year-end platform. assets integrated discussed or, call, one I tremendous that I on they a valuable, as we set are more of Last, importantly, our individually believe whether detail quite as are viewed

We have increasingly and businesses, understand better their operations operations been create ability to their value. these our to and outlook market the unique about transparent help

growing large change vision the that for call, same and Simply year-end also create While our some I growing opportunity. the vast, strategy opportunities important in of Markets review understands big market I the and creates level think do going finance changes. won't as is our to ensure detail market are the through and it's put, opportunity. embedded and

As the finance in have pieces one of to integrated providers market. only the the fully said I of embedded be many all we times, had

positioned just to our employer, efforts, company, We will value platform will network a growth drive retailer, it our a are well we financial and power important, strategy. not building drive as that for tax are partners technology proprietary an direct-to-consumer a their only be to Whether services or their businesses. a empower retention, but

believe embedded proposition how and employ a differentiated as having the marketplace. we who finance strategy and market, with work own compelling to are this looking value evolving are they to that Enterprises in bring their to of and part business rethink I

thank want be done, notable making work and progress, much work their While are I we team for to to and commitment. there will the be always

it Let questions. me now your open for Operator? up

first Instructions] Switzer comes [Operator Tim Your question from KBW. from

about had expenses. I a your follow-up the regulatory on comment

color year they're some mentioned year? breakdown bit be long a Not or And investment compared you're where of maybe a or or over or over rate of the about that all are be last towards regulatory will -- maybe which temporary spending that You little what term? $XX temporary the expenses like Could this course spending in will like of more provide more million going this year. run permanently. to the of just on your those then you

for question. Sure, Thanks that Tim.

to that of X-year that. of nature what First, the compliance you're And oversight so metric comparison, those take referring the are a think of focused in is would note investments traditional as activities. we and

side, both people the cetera. So on internal compliance capabilities department, et the side, audit, BSA/AML technology

categories. traditional those in fall they So

year, been in think We've see of half and maybe investment therefore, those first half would place, next transitional important, and second a that this you say on data you. And of that activities are it's more not year. be we're quantify the just some heightened because a minor you those half, going the of an made will not investments first focused element million transitional in year I'm that of would of kind this to that we decline to. reference I making. for $XX point

X take strong, leaders key with intend fintech/sponsored the I various we to space, the heightened the level I down the this road sure the that develop couldn't then entire a from in this steady, to see leader industry make more capabilities X or at would it to time differentiator can be and be at a fintech oversight where respect capabilities certainly opportunity, be years capability. stable marketplace of we in that to regulators, activity. in as the be bank in through important regulatory a needs course, time just us to to for the And note goes bank

So to please, a didn't, But if answered question. your I free follow-up. hopefully, ask I feel

of your is growth you for segment. believe, had segment, BXB I were this like of guide generally And question seems it full that's people other expectations the when some the And you helpful. had BaaS segment I lot the the and the about will people kind BaaS the or grew some by current I you come -- don't really a on maybe year-over-year maybe But in more than the about talked of was quarter. expecting talk will that coming online launching segment, consistent you if No, But the Yes. course know maybe your could over a growth year? growth partners of be your trajectory driven bit quicker. partners be little of

to is a up partners. has one Thanks, is for back forecast largest by the in powered being principally Jess. Tim. That had of relative This our February. the Yes, call come bit little we year the BaaS

You would have couple past of not reason. consistent the this the sole seen But over trend years. that's

We also over half we 'XX partners that large, that growing. of have the year, being course program is that other and 'XX, also partner. a and performance launched back of by and Ceridian, through last principally are the outsized driven is have the we But which single existing ramping by

comes Sutton question next from Your from George Craig-Hallum.

Can talk the more George. from for bit a the James core banking It's decision on you to away platform? walk about

to is James. of been conversion do used what When had technology joined me Thanks, investment processor technology in This I system. of undertook was had with That was tell you let last what couple there One year. George. a years card That that initiated. that we you. I we ACI. vendor call categories a management X was our tell Yes, ago, well, can

rate systems system, Distinct focused of core BDA things. traditional banking calculations, relationship small and core accounts business, had sorts on about from interest bank with Temenos, type that, as we features, kind banking credit, vendor, the account which another of a think was

currently. amount they Now technology investment have in capabilities tremendous those legacy a that in our are stacks investment, as we of

focus us management the current it of investment the those It's a we core focus a be from there the of context a card And play. way solutioning more became approach longer-term to that to as frankly, system system, obvious might in wasn't that cost better banking of sorts to So changed saving our activities. capabilities.

ended through And vendor, and so that that's where up working our we ended with up. we

with I of could core you new one Does change of recall, used BaaS that of Because you. along products products. various the advantages the many times idea I partners own think going once, the your banking Got build just forward? sort across that was as

that changed. not No. has No,

I'm processing just card So the again, that made beyond make going I to distinctions reference management environment to.

So baked we which rather getting over last basic did right, as think top a back, so stuff, transaction capability, and cetera, call it, transaction of year. authorizations processing, authorization is, that et processing of the what on network, that

product in a Then are on internally, of what set call features stacks. we'd that, top our of, organized

technologies So stack we stack, our have associated a other and BaaS we have of some a contemporary businesses. legacy we with have

activity the processor And And which undertaking important eliminating stacks, investment product legacy that that is within features stacks them. the to have been older so conversion the unchanged. we've which of activity, that is was

that do do and to that. continue to we'll continue We

fact, on year In significant of our this investments that most some are focused effort.

term credit map system we the we road, So period, when are longer on we that the our we to et consolidated features credit the account poised or those banking our should but a enhance example. a our offerings a small question then think across do launch down about current has down might cetera, road, road will product Or think third-party business in stack? built offerings, better and platform we basis? credit core the already then about be the implement When not question consumer be,

and How impacted launch and decision. we simplification that you're is decision. about asking features, unimpacted underway is future So that this the by by consolidation this and products

ahead plenty to of have way. us a in However, timely, we that make coordinated of decision runway

choice. the work, at I impacted this not by clear, want So to simplification all be very is

me. one Makes for Last sense.

So for and raising as bit. I'm wrong, bringing you're BXB sounds me if I growth, it down outlook Consumer interpreted it, like correct but the a

year? the differentials the gives segments, those between the what of maintaining given you in EBITDA confidence guide X full margin sort the year So for

a Consumer in coming BXB up. you're Yes, coming bit, correct down

up we're through managing Money do, the then, we well. of moved And in slightly think as business. Movement, expenses course, as I always

a Other, So think variety team. I and for costs management on forecast come down within have of efforts our the Corporate by

guidance. confident feel $XXX to $XXX achieving in still million we EBITDA the So million

William Blair. next Kennedy from Your Instructions] from Cris question [Operator comes

embedded that just taken the have or broadly last market XX of some months how position about so of Green the changes take advantage talk the place talk over can to you Dot in and Can finance that? about

been Thanks been They're finance embedded a for an for time relatively going of industry models in a that about now, have question. there's Cris. and a been that Well, array about is lot the companies -- of relationships This contracts in long quite business to immature marketplace. Sure, it's changes. sense and stop. talking there's the not nevertheless, although idiosyncratic

So that, I is still think, case. the

I So type into a regulation the and does the what I primarily environment, not say, through not happens regulatory-light by the that bank fintech layer mean that, that focused would past. that And is oftentimes, regulation the banks. to see on in as

opposed sense tailored-built, to that embedded to finance designed -- the for offerings more specific starting market trying is ways -- more maturing the the of the it needs account as not finance mature structures, embedded a needs the the knowledgeable to becoming to practices, need becoming the as and sense tailored in some taking are buyers business are finance or it's got and pricing, are custom industry. go, to models. plenty embedded about these scalable fit the So is mature, And to an structure but product opposed legacy into in one somewhat

on at is happened. looking by as now as change that's least information, the quite market underway intent activities being think is, view supported bank, that's bank. to think to it's a of of not traditionally our the Since well you So bank fintech. by managed regulatory is that many, then fintech, non-bank the fintech regulators I far And at BSA/AML, the are are many the concerned, right at the the oftentimes through the managed

bank in significant is which change that the will in on we have markets. impacts the fintech think early-stage so market, an And relationships

Green of I you too on new kind an kind evolutionary put how So looking plays in kind to no we're embedded long finance market there, regulatory Dot. regulatory with X is tell that these and there early aspects holistic think change more positioned in our the out, product-focused, along developing, it of in been how emerging, circumstances through sense if the have and of entrants focused

looking at embedded cycle fintech life looking model, type a bank, you're entire You're the the model. at finance delivery of

new We exposed that can to we work long to regulatory ensure, oversight some we've as situated, leader that be of we are business who need well been think we're will in have I on the which and win to So to differentiator. the so we do. compliance oversight, competitors said that that regulatory earlier,

asset And then have issuing, integrated product, support, processing, offer we a extremely market, assets those to solution have have Network, of institution, for of very solution, the a one few non-branch an vertical positioned complex serve is the we Green bank since the we buying risk absolutely to financial operational we're parties. in we and decision which offer fraud well also, critical an a to an integrated third management, Dot

And scale. we're already at

market-leading We have more scale a low to at come, so we should do be able cost. to

strategy. I follow-up if our question, opportunity have ask your an took in hopefully, your didn't. to addressed I question But but I rephrase please a So

I historically. today? always that. Green separately, What's very your Dot's acquisitions No, have M&A that's clear. appreciate strategy part been then of on just And thoughts

that say, Sure. cautious In the short put term, I'd M&A, about it extremely way. I would

that obvious view, doesn't an in to of which aggressive would advantaged priorities the short appetite, in obvious, we currently additional place, introduce I put those equity low. And managing our into our organization significant our complexity term, for trading we're think us at I'm consider a in We're obviously, the be hope be value is that to market. given I to on sure it's out fronts. it's appetite discount, our my

with business compliance. platform continue we're that new own to finance, respect execute touched need exceptional to bringing on embedded earlier, our on sure our consumer and I do what offerings product on we So and is focus consolidations, small to to make regulatory market,

And time, we've priorities, those stabilized I will down when consider the bit, think, then to road acquisition. it a be

I making, whether longer them And make comes, investment one term, products of very And small services that's those have a that services decision the acquire that would focused be time internally we focused on and and We'll that build those consumer are credit. activities type kind areas And so versus to buy when very, the mentioned areas market. or are on build we that. the earlier, around in around to business of activities. expect we're

further I conference to would over the at like no any closing are There turn to remarks. this questions back Gresham time. for Mr.

and you, our people to in investors Green want and I Dot thank operator. story. the analysts interested Well, And the thank

We from that going access set are for been on We've to services that the Americans mission to here years. trying to all at excluded that XX-plus activities. continue financial are We're mission. to of provide that

I gratitude Green colleagues, close, my we I stewards before And great Dot. focused They're job us they're extraordinarily to be. my our a that to investors in and want dedicated need friends And our They're where express and take getting and to customers. moment mission. doing great to to coworkers a for particular on at

you and thank talk Bye-bye. much to time. to next So you very everyone,

today's Thank Thank attending you. now concluded. conference you The has for presentation.

disconnect. now may You