Green Dot 2012 Annual Report Download - page 24

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renegotiates, terminates or fails to renew, or to renew on similar or favorable terms, its agreement with us or otherwise
chooses to modify the level of support it provides for our products.
Our future success depends upon our retail distributors’ active and effective promotion of our products
and services, but their interests and operational decisions might not always align with our interests.
Most of our operating revenues are derived from our products and services sold at the stores of our retail distributors.
Revenues from our retail distributors depend on a number of factors outside our control and may vary from period to
period. Because we compete with many other providers of consumer products, including competing prepaid cards,
for placement and promotion of products in the stores of our retail distributors, our success depends on our retail
distributors and their willingness to promote our products and services successfully. In general, our contracts with
these third parties allow them to exercise significant discretion over the placement and promotion of our products in
their stores; they could give higher priority to the products and services of other companies for a variety of reasons,
and this risk is expected to become greater as we enter an environment in which our competitors are bringing to market
at the stores of our retail distributors products and services that are, or that may be perceived to be, substantially
similar to or better than ours. Accordingly, losing the support of our retail distributors might limit or reduce the sales of
our cards and MoneyPak reload product. Our operating revenues may also be negatively affected by our retail
distributors’ operational decisions. For example, as retail distributors introduce and promote competing products at
their store locations, as Walmart began to do in October 2012, the growth of our product sales may decline at those
stores. Similarly, if a retail distributor reduces shelf space for our products or implements changes in its systems that
disrupt the integration between its systems and ours, our product sales could be reduced or decline. Even if our retail
distributors actively and effectively promote our products and services, there can be no assurance that their efforts
will maintain or result in growth of our operating revenues.
Our operating revenues for a particular period are difficult to predict, and a shortfall in our operating
revenues may harm our results of operations.
Our operating revenues for a particular period are difficult to predict, especially in light of recent developments in
the competitive environment of our market and related uncertainty. Our card revenues and other fees, cash transfer
revenues and interchange revenues, collectively, may grow at a slower rate than in prior periods, as it did in 2012, or
may decline, as we currently estimate it will in 2013. Our ability to meet financial expectations could be adversely
affected by various factors such as increasing competition within the store locations of many of our largest retail
distributors, and our continued implementation of voluntary risk control factors, which we believe is likely to, among
other things, continue to adversely affect our new card activations from legitimate customers for the foreseeable future.
We also expect seasonal or other influences, including potential fluctuations in stock-based retailer incentive
compensation caused by variations in our stock price, to cause sequential quarterly fluctuations and periodic declines
in our operating revenues, operating income and net income. For example, in recent years, our results for each of the
first three quarters have been favorably affected by large numbers of taxpayers electing to receive their tax refunds
via direct deposit on our cards, which caused our operating revenues to be typically higher in the first halves of those
years than they were in the corresponding second halves of those years.
Our ability to increase card usage and cardholder retention and to attract new long-term users of our products can
also have a significant effect on our operating revenues. We may be unable to generate increases in card usage,
cardholder retention or attract new long-term users of our products for a number of reasons, including our inability to
maintain our existing distribution channels, the failure of our cardholder retention and usage incentives to influence
cardholder behavior, our inability to predict accurately consumer preferences or industry changes and to modify our
products and services on a timely basis in response thereto, and our inability to produce new features and services
that appeal to existing and prospective cardholders. As a result, our operating results could vary materially from period
to period based on the degree to which we are successful in increasing card usage and cardholder attention and
attracting long-term users of our products.
Any of the above factors could have a material adverse impact on our business, operating results and financial
condition.
The industry in which we compete is highly competitive, which could adversely affect our operating results.
The prepaid financial services industry is highly competitive and includes a variety of financial and non-financial
services vendors. We expect competition to intensify even further in 2013 as existing competitors and new market
entrants are bringing to market products and services that are, or that may be perceived to be, substantially similar to
or better than ours. For example, Walmart began selling an American Express-branded checking account alternative
product at its store locations in October 2012. This competition is expected to negatively impact our operating revenues,
excluding stock-based retailer incentive compensation, and could cause us to compete on the basis of price or increase