Green Dot 2014 Annual Report Download - page 41

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 products in our portfolio at any given point in time and upon the extent to which fees are waived based
on various incentives provided to customers in an effort to encourage higher usage and retention. Our aggregate ATM
fee revenues vary based upon the number of cardholder ATM transactions and the average fee per ATM transaction.
The average fee per ATM transaction depends upon the mix of products in our portfolio at any given point in time and
the extent to which cardholders use ATMs within our free network that carry no fee for cash withdrawal transactions.
Our aggregate new card fee revenues vary based upon the number of GPR cards and checking accounts activated
and the average new card fee. The average new card fee depends primarily upon the mix of products that we sell
since there are variations in new account fees based on the product and/or the location or source where our products
are purchased. Our aggregate other fees vary primarily based upon account sales of all types, gift card sales, purchase
transactions and the number of active accounts in our portfolio.
Cash Transfer Revenues — We earn cash transfer revenues when consumers fund their cards through a reload
transaction at a Green Dot Network retail location. Our aggregate cash transfer revenues vary based upon the mix of
locations where reload transactions occur, since reload fees vary by location. We earn tax refund processing service
revenues when a customer of a third party tax preparation company chooses to pay their tax preparation fee through
the use of our tax refund processing services. Tax refund processing service revenues were included in the cash
transfer revenues caption on our consolidated statement of operations for the year ended December 31, 2014.
Interchange Revenues — We earn interchange revenues from fees remitted by the merchant’s bank, which are
based on rates established by the payment networks, when customers make purchase transactions using our products.
Our aggregate interchange revenues vary based primarily on the number of active cards in our portfolio, the average
transactional volume of the active cards in our portfolio and on the mix of cardholder purchases between those using
signature identification technologies and those using personal identification numbers and the corresponding rates.
Stock-based retailer incentive compensation — In May„2010, we issued to Walmart 2,208,552 shares of our Class„A
common stock, subject to our right to repurchase them at $0.01 per share upon a qualifying termination of our prepaid
card program agreement with Walmart. We recognize each month the fair value of the 36,810 shares issued to Walmart
for which our right to repurchase has lapsed using the then-current fair market value of our Class„A common stock.
We would be required to recognize the fair value of all shares still subject to repurchase if there were an early expiration
of our right to repurchase, which could occur if we experienced certain changes in our control or under certain other
limited circumstances, such as a termination of our commercial agreement with Walmart. We record the fair value
recognized as stock-based retailer incentive compensation, a contra-revenue component of our total operating
revenues. Beginning in May 2015, our right to repurchase any shares issued to Walmart will have lapsed completely
and as a result, we will not record stock-based retailer compensation thereafter under our current agreement with
Walmart.
Operating Expenses
We classify our operating expenses into the following four categories:
Sales and Marketing Expenses — Sales and marketing expenses consist primarily of the sales commissions we
pay to our retail distributors and brokers, advertising and marketing expenses, and the costs of manufacturing and
distributing card packages, placards and promotional materials to our retail distributors and personalized GPR and
GoBank cards to consumers who have activated their cards. We generally establish sales commission percentages
in long-term distribution agreements with our retail distributors, and aggregate sales commissions are determined by
the number of prepaid cards, checking account products and cash transfers sold at their respective retail stores and,
in certain cases, by the revenue generated from the ongoing use of those cards. We incur advertising and marketing
expenses for television, online and in-store promotions. Advertising and marketing expenses are recognized as incurred
and typically deliver a benefit over an extended period of time. For this reason, these expenses do not always track
changes in our operating revenues. Our manufacturing and distribution costs vary primarily based on the number of
GPR and GoBank accounts activated by consumers.
Compensation and Benefits Expenses — Compensation and benefits expenses represent the compensation and
benefits that we provide to our employees and the payments we make to third-party contractors. While we have an in-
house customer service function, we employ third-party contractors to conduct call center operations, handle routine
customer service inquiries and provide consulting support in the area of IT operations and elsewhere. Compensation
and benefits expenses associated with our customer service and loss management functions generally vary in line
with the size of our active card portfolio, while the expenses associated with other functions do not.
Processing Expenses — Processing expenses consist primarily of the fees charged to us by the payment networks,
which process transactions for us, the third-party card processor that maintains the records of our customers' accounts
33