Green Dot 2011 Annual Report Download - page 47

37
Operating Expenses
The following table presents a breakdown of our operating expenses among sales and marketing, compensation
and benefits, processing, and other general and administrative expenses:
Years Ended December 31,
2011 2010
Amount
% of Total
Operating
Revenues Amount
% of Total
Operating
Revenues
(in thousands, except percentages)
Operating expenses:
Sales and marketing expenses . . . . . . . . . . . . . . . . . . . . . $ 168,747 36.1% $ 122,890 33.8%
Compensation and benefits expenses . . . . . . . . . . . . . . . 87,671 18.8 70,102 19.3
Processing expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70,953 15.2 56,978 15.7
Other general and administrative expenses . . . . . . . . . . . 56,578 12.0 44,599 12.2
Total operating expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . $ 383,949 82.1% $ 294,569 81.0%
Sales and Marketing Expenses — Sales and marketing expenses totaled $168.7 million for the year ended
December 31, 2011, an increase of $45.8 million, or 37%, from the comparable period in 2010. The increase was
primarily the result of increased numbers of GPR cards and cash transfers sold, compared with the corresponding
period in 2010, and an increase in sales commissions due largely to increased sales commissions paid to Walmart as
a result of entering into our amended prepaid card agreement with Walmart and GE Capital Retail Bank in May 2010.
Compensation and Benefits Expenses — Compensation and benefits expenses totaled $87.7 million for the year
ended December 31, 2011, an increase of $17.6 million, or 25%, from the comparable period in 2010. This increase
was primarily the result of a $15.1 million increase in employee compensation and benefits, which included a $2.3
million increase in employee stock-based compensation. The period-over-period growth in employee compensation
and benefits is due to additional employee headcount as we continued to expand our operations to support key growth
initiatives, new product development and new sales efforts, and growth in our IT infrastructure and risk operations.
The increase in compensation and benefits expenses was also due to a $2.5 million increase in third-party call center
contractor expenses as the number of active cards in our portfolio and associated call volumes increased during the
year ended December 31, 2011. However, our call center costs, as a percentage of our total operating revenues, were
lower than the comparable period in 2010 as a result of volume incentives received from our third-party providers.
Processing Expenses — Processing expenses totaled $71.0 million for the year ended December 31, 2011, an
increase of $14.0 million, or 25%, from the comparable period in 2010. The increase was primarily the result of period-
over-period growth of 24% in the number of active cards in our portfolio and 55% in gross dollar volume and a $7.7 million
increase in ATM processing fees as the volume of ATM transactions increased during the year ended December 31,
2011. Processing expenses were partially offset by volume incentives from the payment networks. While we expect
processing expenses to be favorably impacted by the transition of our card issuing program with Columbus Bank and
Trust Company to our subsidiary bank, which we expect will commence in the second half of 2012, there can be no
assurance that our processing expenses will decline on a year-over-year basis in absolute dollars or as percentage
of total operating revenues in 2012 because these expenses are subject to a variety of factors, many of which are
outside our control.
Other General and Administrative Expenses — Other general and administrative expenses totaled $56.6 million
for the years ended December 31, 2011, an increase of $12.0 million, or 27%, from the comparable period in 2010.
The increase in other general and administrative expenses was primarily the result of a $4.7 million increase in
depreciation and amortization of property and equipment, a $3.0 million increase in our provision for uncollectible
overdrawn accounts related to purchase transactions, and a $2.9 million increase in transaction losses, primarily
associated with customer disputed transactions, which fluctuate based on changes in gross dollar volume. These
increases were partially offset by a decrease of $4.0 million in professional service expenses. During the year ended
December 31, 2010, we incurred significant professional services expenses in connection with our initial public offering,
which was completed in July 2010. We expect to incur additional rent expense of between $2.6 million and $2.9 million
associated with our new headquarters while we are in the process of completing tenant improvements prior to occupying
them in the second half of 2012.