NetSpend 2011 Annual Report Download - page 26

Table of Contents
We may not increase cardholder direct deposit participation and therefore may not achieve all of our strategic growth objectives.
Product features such as direct deposit loading onto reloadable prepaid debit cards have increased the attractiveness of such cards and
increased their utility to underbanked consumers. Because direct deposit active cardholders on average initiate more debit transactions and
generate more revenues for us than active cardholders without direct deposit, increasing cardholder adoption of direct deposit is an important
part of our strategy. We are devoting significant resources to the further development of our direct deposit programs and our growth profile
depends on a resulting increase in direct deposit participation by our cardholders. Some of our existing contracts with our retail distributors
prohibit us from directly promoting direct deposit to their customers. It is possible that other distributors will in the future insist on similar
restrictions, which could limit our ability to grow direct deposit participation. If we are unable to increase direct deposit participation as
projected, we will be unable to meet our growth projections, and our business and results of operations will be adversely affected.
We have engaged, and may engage in the future, in mergers, acquisitions or strategic transactions that could disrupt our business and
harm our financial condition.
We may in the future further expand our distribution channels, technology platform or other aspects of our business through the
acquisition of other businesses, assets or technologies. Any such transactions can entail risk, may require a disproportionate amount of our
management and financial resources and may create operating and financial challenges, including:
• difficulty integrating the acquired technologies, services, products, operations and personnel of the acquired business;
• disruption to our existing business;
• increased regulatory and compliance requirements;
• negative impact on our cash and available credit lines for use in financing future growth and working capital;
• inability to achieve projected synergies;
• increasing costs and complexity associated with the maintenance of adequate internal control and disclosure controls and
procedures; and
• loss of key personnel.
The anticipated benefit to us of any strategic transactions, acquisitions or mergers may never materialize. Future investments, acquisitions
or dispositions could result in dilutive issuances of our equity securities, a reduction in our cash reserves, the incurrence of additional debt,
contingent liabilities or amortization expenses, or write-offs of goodwill, any of which could have an adverse effect on our business, financial
condition and operating results.
If we are unable to adequately protect our intellectual property and other proprietary rights, we may lose a valuable competitive advantage
or be forced to incur costly litigation to protect our rights.
Our success depends in part on developing and protecting our intellectual property and other proprietary rights. We rely on a combination
of patent, copyright, trademark and trade secret laws, employee and third-party nondisclosure agreements and other methods to protect our
intellectual property and other proprietary rights. In addition, we license technology from third parties. We have one registered patent and have
applied for additional patents related to some of the unique features of our products. Our patent applications may not become issued patents. If
they do not become issued patents, our competitors would not be prevented from using these inventions.
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