Green Dot 2013 Annual Report Download - page 45

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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:
Year Ended December 31,
2013 2012
Amount % of Total Operating Revenues Amount % of Total Operating Revenues
(In thousands, except percentages)
Operating expenses:
Sales and marketing expenses $ 218,370 38.1%$ 209,870 38.4%
Compensation and benefits expenses 127,287 22.2 114,930 21.0
Processing expenses 89,856 15.7 77,445 14.2
Other general and administrative expenses 88,976 15.4 71,900 13.2
Total operating expenses $ 524,489 91.4%$ 474,145 86.8%
Sales and Marketing Expenses — Sales and marketing expenses totaled $218.4 million for the year ended
December 31, 2013, an increase of $8.5 million, or 4% from the comparable period in 2012. This increase was primarily
the result of an increase in the sales commissions, driven by period-over-period growth of 9% in the number of cash
transfers sold and an increase in the sales commission rate we pay to Walmart for the MoneyCard program, which
increased in May 2013 by approximately four percentage points. The increase in sales and marketing expenses was
also due to higher costs of manufacturing and distributing card packages related to new product launches. The increase
was partially offset by a decline in advertising and marketing expenses as we reduced our television and online
advertising. In 2014, we expect to incur additional sales and marketing expenses, as discussed above under "Financial
Results and Trends."
Compensation and Benefits Expenses — Compensation and benefits expenses totaled $127.3 million for the year
ended December 31, 2013, an increase of $12.4 million or 11%, from the comparable period in 2012. This increase
was primarily the result of a $14.9 million increase in employee compensation and benefits, which included a $2.0
million increase in employee stock-based compensation expense. The period-over-period growth in employee
compensation and benefits is due to our efforts to attract and retain technology personnel and higher incentive
compensation earned by employees. These increases were partially offset by a reduction in third-party contractor
expenses.
Processing Expenses — Processing expenses totaled $89.9 million for the year ended December 31, 2013, an
increase of $12.5 million, or 16% from the comparable period in 2012. The increase was primarily the result of period-
over-period growth of 6% in purchase volume, higher usage of our fee-free ATM network and certain costs to prepare
for the transition of our card issuing program with GE Capital Retail Bank to Green Dot Bank, which was completed
in February 2014. Processing expenses were partially offset by a reduction in third-party issuing bank fees as we
transitioned our card issuing program with Synovus Bank to our subsidiary bank in November 2012. While we expect
processing expenses to be favorably impacted by the February 2014 transition of our card issuing program with GE
capital Retail Bank to Green Dot Bank, 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 2014 or in future years because
these expenses are subject to a variety of factors, many of which are outside our control. We benefited from volume
incentives from the payment networks in 2012 and to a lesser extent in 2013. Although we expect to benefit from
volume incentives in 2014, we may not benefit from the same level of volume incentives in 2014 as we did in the past.
Other General and Administrative Expenses — Other general and administrative expenses totaled $89.0 million
for the year ended December 31, 2013, an increase of $17.1 million, or 24%, from the comparable period in 2012.
This increase was primarily the result of a $9.0 million increase in depreciation and amortization of property and
equipment associated with our investment in technology to support our new products launches and improve our core
infrastructure, a $5.7 million increase in transaction losses, primarily associated with customer disputed transactions,
and a $4.2 million increase in impairment charges associated with capitalized internal-use software. These increases
were partially offset by a reduction in professional service fees and rent expense.