Green Dot 2012 Annual Report Download - page 41

31
ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
This Annual Report on Form 10-K, including this Management’s Discussion and Analysis of Financial Condition
and Results of Operations, contains forward-looking statements regarding future events and our future results that are
subject to the safe harbors created under the Securities Act of 1933 and the Securities Exchange Act of 1934 (the
“Exchange Act”). All statements other than statements of historical facts are statements that could be deemed to be
forward-looking statements. These statements are based on current expectations, estimates, forecasts and projections
about the industries in which we operate and the beliefs and assumptions of our management. Words such as “expects,”
“anticipates,” “targets,” “goals,” “projects,” “intends,” “plans,” “believes,” “seeks,” “estimates,” “continues,” “endeavors,”
“strives,” “may” and “assumes,” variations of such words and similar expressions are intended to identify forward-
looking statements. In addition, any statements that refer to projections of our future financial performance, our
anticipated growth and trends in our businesses, and other characterizations of future events or circumstances are
forward-looking statements. Readers are cautioned that these forward-looking statements are subject to risks,
uncertainties, and assumptions that are difficult to predict, including those identified below, under “Part I, Item 1A. Risk
Factors,” and elsewhere herein. Therefore, actual results may differ materially and adversely from those expressed
in any forward-looking statements. We undertake no obligation to revise or update any forward-looking statements for
any reason.
In this Annual Report, unless otherwise specified or the context otherwise requires, “Green Dot,” “we,” “us,” and
“our” refer to Green Dot Corporation and its consolidated subsidiaries.
Overview
Green Dot is a leading financial services company providing simple, low-cost and convenient money management
solutions to a broad base of U.S. consumers. We believe that we are the leading provider of general purpose reloadable,
or GPR, prepaid debit cards in the United States and that our Green Dot Network is a leading reload network for
prepaid cards in the United States. We distribute our products and services nationwide at more than 60,000 retail store
locations and on the Internet, which provide consumers convenient access to our products and services. We are also
the provider of GoBank, an innovative checking account developed for distribution and use via mobile phones, which
is expected to be available to U.S. consumers generally during the second or third quarter of 2013.
Financial Results and Trends
Total operating revenues for the year ended December 31, 2012 were $546.3 million compared to $467.4 million
for the year ended December 31, 2011. Total operating revenues were favorably impacted by increases in card revenues
and other fees, cash transfer revenues and interchange revenues and a decrease in the amount of stock-based retailer
incentive compensation. These revenues increased primarily due to period-over-period growth in all of our key metrics
described below. Our total operating revenues were adversely impacted by the expiration and nonrenewal in October
2011 of our joint marketing and referral agreement with Intuit under which we established the TurboTax program.
Net income for the year ended December 31, 2012 was $47.2 million, compared to $52.1 million for the year ended
December 31, 2011. Net income declined primarily due to increases in sales commissions and employee headcount,
including the payment of $5.2 million of retention-based incentives for former employees of Loopt, Inc., or Loopt, which
we acquired in March 2012. Net income also declined due to increases in costs of manufacturing and distributing card
packages, driven by the transition of our card issuing program with Synovus Bank to our subsidiary bank and the
launch of new products, increases in television and online advertising and associated expenses and increases in
depreciation and amortization of property and equipment as we continue to invest in infrastructure and product
development. In particular, our product development investments included our investments in GoBank, which is
expected to be available to U.S. consumers generally during the second or third quarter of 2013.
During the third and fourth quarters of 2012 we began facing increased competition at some of our largest retail
distributors. In October 2012, we saw the launch of new competing products at Walmart and at other retail distributor
stores. We believe this increased competition impacted our financial results for the second half of 2012. Due to the
inherent uncertainties of the competitive environment and how it may evolve, we cannot accurately predict the impact
of these developments; however, we expect that our card revenues and other fees, cash transfer revenues and
interchange revenues will continue to be negatively impacted by increased competition during 2013. In addition, during
the third quarter of 2012, new card activations from legitimate customers were negatively impacted by the voluntary
risk control mechanisms we began implementing earlier in 2012. We believe these voluntary risk control mechanisms
impacted our financial results during the second half of 2012 and it is likely that our risk control mechanisms will
continue to adversely affect our new card activations from legitimate customers for the foreseeable future and that our
operating revenues, excluding stock-based retailer incentive compensation, will be negatively impacted as a result.