Green Dot 2013 Annual Report Download - page 47

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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.
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:
Year 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.
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 continued to incur additional compensation and benefits expense
associated with our acquisition of Loopt, including remaining retention-based incentives of up to $5.0 million, which
we recognized on a straight-line basis from January through September 2013.
Processing Expenses — Processing expenses totaled $77.4 million for the year ended December 31, 2012, an
increase of $6.5 million, or 9% 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. Processing expenses were partially offset by
an increase in volume incentives from the payment networks.
Other General and Administrative Expenses — Other general and administrative expenses totaled $71.9 million
for the year ended December 31, 2012, an increase of $15.3 million, or 27%, from the comparable period in 2011.
This increase was primarily the result of a $5.8 million increase in depreciation and amortization of property and
equipment, a $3.8 million increase in rent expense, and a $2.0 million increase in professional service fees. The
increase in depreciation and amortization is primarily associated with investments in IT infrastructure and product
development. The increase in rent expense was primarily due to additional rent expense associated with our new
corporate office space located in Pasadena, California, which became our new headquarters facility in September
2012. We took control of the office space in January 2012 to construct tenant improvements, and accordingly, recorded