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Green Dot Reports First Quarter 2019 Results

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 operating1 revenues 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%.

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.

20192018
Q1Q4Q3Q2Q1
(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.

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
LowHigh
(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.

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.

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.
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.

GREEN DOT CORPORATION

CONSOLIDATED BALANCE SHEETS

March 31, 2019December 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,
20192018
(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,
20192018
(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 ServicesProcessing and Settlement ServicesCorporate and OtherTotal
(In thousands)
Operating revenues $239,633$110,649$(9,768)$340,514
Operating expenses 176,78754,51527,827259,129
Operating income $62,846$56,134$(37,595)$81,385
Three Months Ended March 31, 2018
Account ServicesProcessing and Settlement ServicesCorporate and OtherTotal
(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,
20192018

(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,
20192018

(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,
20192018
(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,
20192018
(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,
20192018
(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 2019LowHigh
(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
LowHigh
(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
LowHigh
(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).

Contacts:

Investor Relations
IR@greendot.com

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