Green Dot 2012 Annual Report Download - page 47

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Cash Transfer Revenues — Cash transfer revenues totaled $165.2 million for the year ended December 31, 2012,
an increase of $31.1 million, or 23%, from the comparable period in 2011. The increase was primarily the result of
period-over-period growth of 22% in the number of cash transfers sold. The increase in cash transfer volume was
driven both by growth in our active card base and growth in cash transfer volume from third-party programs participating
in our network. Third party programs participating in our network contributed approximately 23% of total cash transfer
revenues for the year ended December 31, 2012, versus approximately 17% of total cash transfer revenues for the
year ended December 31, 2011. We believe our cash transfer revenues for the second half of 2012 were adversely
impacted by changes in our competitive environment and our implementation of voluntary risk control mechanisms,
as discussed above under “Financial Results and Trends.”
Interchange Revenues — Interchange revenues totaled $164.6 million for the year ended December 31, 2012,
an increase of $23.5 million, or 17%, from the comparable period in 2011. The increase was primarily the result of
period-over-period growth of 4% in the number of active cards in our portfolio and a 13% increase in purchase volume.
We believe our interchange revenues for the second half of 2012 were adversely impacted by changes in our competitive
environment and our implementation of voluntary risk control mechanisms, as discussed above under “Financial
Results and Trends.” Although we expect these challenges to impact our interchange revenues in 2013, we expect to
experience a seasonal pattern in our interchange revenues during 2013 similar to 2012, as we believe purchase volume
will be higher during the first quarter of 2013, as compared to the remaining quarters of 2013, due to taxpayers electing
to receive their tax refunds via direct deposit on our cards.
Stock-based Retailer Incentive Compensation — Our right to repurchase lapsed as to 441,720 shares issued to
Walmart during the year ended December 31, 2012. We recognized the fair value of the shares using the then-current
fair market value of our Class A common stock, resulting in $8.3 million of stock-based retailer incentive compensation,
a decrease of $9.1 million, or 53%, from the comparable period in 2011. The decrease was the result of a lower stock
price in the year ended December 31, 2012 compared with the corresponding period in 2011.
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,
2012 2011
Amount % of Total Operating Revenues Amount % of Total Operating Revenues
(In thousands, except percentages)
Operating expenses:
Sales and marketing expenses $ 209,870 38.4%$ 168,747 36.1%
Compensation and benefits expenses 114,930 21.0 87,671 18.8
Processing expenses 77,445 14.2 70,953 15.2
Other general and administrative expenses 71,900 13.2 56,578 12.0
Total operating expenses $ 474,145 86.8%$ 383,949 82.1%
Sales and Marketing Expenses — Sales and marketing expenses totaled $209.9 million for the year ended
December 31, 2012, an increase of $41.1 million, or 24% from the comparable period in 2011. The increase was
primarily the result of a $24.1 million increase in sales commissions, driven by period-over-period growth of 22% in
the number of cash transfers sold, 1% in the number of GPR cards activated, and 17% in total operating revenues.
Costs of manufacturing and distributing card packages also increased as a result of the transition of our card issuing
program with Synovus Bank to our subsidiary bank and the launch of new products. The increase in sales and marketing
expenses was also due to a $7.1 million increase in advertising and marketing expenses, as we invested in our brand
by running increased television and online advertising. In 2013, we expect to incur additional sales and marketing
expenses as the sales commissions we pay to Walmart for the MoneyCard program are scheduled to increase in May
2013 by approximately four percentage points.
Compensation and Benefits Expenses — Compensation and benefits expenses totaled $114.9 million for the year
ended December 31, 2012, an increase of $27.3 million or 31%, from the comparable period in 2011. This increase
was primarily the result of a $20.9 million increase in employee compensation and benefits, which included $5.2 million
of retention-based cash incentive payments associated with our acquisition of Loopt. This growth was also due to
additional employee headcount from the Loopt acquisition as well as our continued expansion of our operations to
support key growth initiatives. A $6.3 million increase in third-party contractor expenses also contributed to the increase
in compensation and benefits expenses. We will continue to incur additional compensation and benefits expense