Green Dot 2013 Annual Report Download - page 40

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Income tax expense for the year ended December 31, 2013 was $18.5 million, compared to $28.9 million for the
year ended December 31, 2012. Income tax expense declined primarily as a result of our recognition of general business
credits related to 2012 and 2013 and a decline in income before income taxes. Although we expect to recognize general
business credits in 2014 and beyond, we believe our effective tax rate for the foreseeable future will be higher than
our effective tax rate for the year ended December 31, 2013.
Since the second half of 2012, we have experienced increased competition at most of our largest retail distributors.
Although we cannot accurately measure the precise effect of increased competition on our results of operations, we
believe that it has negatively impacted our total operating revenues in 2013. In addition, the number of active cards in
our portfolio and the number of cash transfers were negatively impacted during 2013 by enhanced risk controls we
began voluntarily implementing in 2012. For example, during 2013, we declined approximately two million new card
activations. We believe the increased competition and enhanced risk controls will continue to have an adverse effect
on our business, results of operations, and financial condition looking forward into the foreseeable future.
As previously announced, we expanded our distribution channels by more than 27,000 new retail locations, such
as Dollar General, Family Dollar, Dollar Tree, and The Home Depot, we have expanded our product offerings at Walmart
stores. Consequently, we expect to incur additional sales and marketing expenses during the first half of 2014 related
to these initiatives as we recognize the cost of new card packages over the related sales period and the cost of
personalized GPR cards, when activated, over the average card lifetime, as defined below under "Critical Accounting
Policies and Estimates." We also plan to support our new products and partnerships through a mix of strategic marketing
campaigns. It follows that we expect our sales and marketing expenses to increase on a year-over-year basis in
absolute dollars and as a percentage of total operating revenues.
Key Metrics
We review a number of metrics to help us monitor the performance of, and identify trends affecting, our business.
We believe the following measures are the primary indicators of our quarterly and annual revenues.
Number of Cash Transfers — represents the total number of MoneyPak and POS swipe reload transactions that
we sell through our retail distributors in a specified period. We sold 45.44 million, 41.79 million, and 34.27 million
MoneyPak and POS swipe reload transactions in the years ended December 31, 2013, 2012, and 2011, respectively.
Number of Active Cards — represents the total number of GPR cards in our portfolio that had a purchase, reload
or ATM withdrawal transaction during the previous 90-day period. We had 4.49 million, 4.37 million, and 4.20 million
active cards outstanding as of December 31, 2013, 2012, and 2011, respectively.
Gross Dollar Volume — represents the total dollar volume of funds loaded to our GPR card and reload products.
Our gross dollar volume was $18.3 billion, $17.2 billion, and $16.1 billion for the years ended December 31, 2013,
2012, and 2011 respectively. While we continue to view our gross dollar volume as a key metric, we review this metric
in conjunction with purchase volume and give greater weight to our purchase volume when assessing our operating
performance because we believe it is a better indicator of interchange revenue performance.
Purchase Volume — represents the total dollar volume of purchase transactions made by customers using our
GPR and gift card products. This metric excludes the dollar volume of ATM withdrawals. Our purchase volume was
$13.4 billion, $12.6 billion, and $11.1 billion for the years ended December 31, 2013, 2012, and 2011 respectively.
Key components of our results of operations
Operating Revenues
We classify our operating revenues into the following four categories:
Card Revenues and Other Fees — Card revenues consist of monthly maintenance fees, ATM fees, new card fees
and other revenues. We charge maintenance fees on GPR cards to cardholders on a monthly basis pursuant to the
terms and conditions in our cardholder agreements. We charge ATM fees to cardholders when they withdraw money
at certain ATMs in accordance with the terms and conditions in our cardholder agreements. We charge new card fees
when a consumer purchases a GPR or gift card in a retail store. Other revenues consist primarily of fees associated
with optional products or services, which we generally offer to consumers during the card activation process. Optional
products and services include providing a second card for an account, expediting delivery of the personalized GPR
card that replaces the temporary card obtained at the retail store and upgrading a cardholder account to our premium
program — the VIP program — which provides benefits for our more active cardholders.
Our aggregate monthly maintenance fee revenues vary primarily based upon the number of active cards in our
portfolio and the average fee assessed per account. Our average monthly maintenance fee per active account depends
upon the mix of Green Dot-branded and co-branded cards in our portfolio and upon the extent to which fees are waived