NetSpend 2011 Annual Report Download - page 37

Table of Contents
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our
consolidated financial statements and related notes included elsewhere in this Annual Report on Form 10-K. In addition to historical
consolidated financial information, the following discussion contains forward-looking statements that reflect our plans, estimates and beliefs.
Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to
these differences include those discussed below and elsewhere in this Form 10-K, particularly in "Risk Factors."
Overview
We are a leading provider of general-purpose reloadable prepaid debit cards, or GPR cards, and related alternative financial services to
underbanked consumers in the United States. We empower underbanked consumers by providing innovative and affordable financial products
and services tailored to meet their particular financial services needs and preferences in a manner that traditional banking institutions have
historically not met. In addition, our products and services provide our retail distributors an opportunity to enhance their customer relationships
and generate incremental, ongoing revenue streams.
We have built an extensive and diverse distribution and reload network in the U.S. to support the marketing and ongoing use of our GPR
cards. We market our cards through multiple channels, including retail distributors, direct mail and online marketing programs and to corporate
employers as an alternative method of wage payment for their employees. Beginning in 2008, we decided to focus primarily on our GPR cards
and we ceased marketing gift cards entirely in August 2010.
We have developed a proprietary technology platform. Our in-house platform is end-to-end in that it encompasses the critical functions
required for us to acquire cardholders, process transactions, maintain account-level data, communicate with cardholders, manage risk, ensure
regulatory compliance and connect to our Issuing Banks and distributors. These integrated capabilities allow us to customize our products and
services for different markets, distribution channels and customer segments. Further, by processing transactions on our own platform, we gain
unique and extensive insight into the attitudes, characteristics and purchasing behavior of our cardholders.
We operate as a program manager for the FDIC-insured depository institutions that issue the card products that we develop, promote and
distribute. Our cardholders may use their GPR cards to make purchase transactions at any merchant that participates in the MasterCard, Visa or
PULSE networks and to withdraw funds from participating ATMs. MetaBank holds the majority of our cardholder funds. In January 2010, we
acquired approximately 4.9% of the outstanding equity interests in Meta Financial Group, Inc. ("MFG"), MetaBank's holding company.
Our principal operating company, predecessor and current subsidiary, NetSpend Corporation ("NetSpend"), was incorporated in Texas in
1999. In May 2004, Oak Investment Partners acquired a controlling equity interest in our operating company through a recapitalization
transaction pursuant to which we, as a newly-formed holding company, incorporated in Delaware and acquired all of the capital stock of
NetSpend. In 2008, we acquired Skylight Financial, Inc., or Skylight, a payroll card provider, in a stock
-for-stock merger. Entities affiliated
with one of our significant shareholders, the JLL Funds, were previously the majority owners of Skylight.
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