Green Dot 2014 Annual Report Download - page 40

variable costs, primarily sales commissions and costs associated with manufacturing and distributing card packages,
partially offset by declines in advertising costs. While commissions rates paid to our retail distributors and the cost of
manufacturing and distributing card packages remained consistent with the prior year, the increase in these variable
costs was driven by period-over-period growth in units sales of our products and services. Other general and
administrative expenses increased primarily due to increases in depreciation and amortization of property and
equipment, amortization of acquired intangible assets, losses from customer disputes, and professional services.
Compensation and benefits expenses decreased primarily due to an increase to our overall capitalization rate
associated with internally-developed software, a decline in retention-based incentives associated with our acquisition
of Loopt, and a decrease in third-party contractor expenses, partially offset by an increase in employee stock-based
compensation. Processing expense decreased primarily due to a reduction in fees paid to third-party issuing banks
as our subsidiary bank now serves as the issuing bank for our account products.
For 2015, we expect our total operating expenses to increase as a result of increased headcount and facilities
costs associated with our acquisitions in the fourth quarter of 2014 and first quarter of 2015. We also expect to incur
additional processing expenses in 2015 related to our planned processor migration. The migration requires us to run
parallel processors for a period of time as we gradually migrate our portfolios onto the new platform.
During the year ended December„31, 2014, we recorded $7.1 million related to net cash proceeds received in
connection with the settlement of a lawsuit and a change in the fair value of contingent consideration. We recorded
this settlement, net of the reimbursement of legal and other costs incurred in connection with the litigation, and the
change in fair value, as other income on our consolidated statements of operations. We do not expect a similar benefit
in 2015.
Income tax expense for the year ended December„31, 2014 was $26.2 million, compared to $18.5 million for the
year ended December„31, 2013. Income tax expense increased primarily as a result of generating higher taxable
income and a higher effective tax rate.
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 from our prepaid
financial services.
Number of Cash Transfers — represents the total number of reload transactions that we conducted through our
retail distributors in a specified period. We sold 46.59 million, 45.44 million, and 41.79 million reload transactions for
the years ended December„31, 2014, 2013, and 2012, 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 4.70 million, 4.49 million, and 4.37 million
active cards outstanding as of December„31, 2014, 2013, and 2012, respectively.
Gross Dollar Volume — represents the total dollar volume of funds loaded to our GPR card and reload products.
Our gross dollar volume was $19.3 billion, $18.3 billion, and $17.2 billion for the years ended December„31, 2014,
2013, and 2012 respectively. We review this metric as a measure of total customer adoption and traction for our products
and services.
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
$14.2 billion, $13.4 billion, and $12.6 billion for the years ended December„31, 2014, 2013, and 2012 respectively. We
use this metric to analyze interchange revenue, which is a key component of our financial performance.
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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 and checking accounts, such as GoBank, 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, if applicable, when a consumer purchases a GPR card, gift card,
or a checking account product. Other revenues consist primarily of revenue associated with our gift card program,
transaction-based fees and fees associated with optional products or services, which we offer to cardholders from time
to time.