Unverified Participant Steven W. Streit - Chairman, President & Chief Executive Officer Mark L. Shifke - Chief Financial Officer.

Sanjay Sakhrani - Keefe, Bruyette & Woods, Inc. Tien-Tsin Huang - JPMorgan Securities LLC Ramsey El-Assal - Jefferies LLC Ashish Sabadra - Deutsche Bank Securities, Inc. Ashwin Shirvaikar - Citigroup Global Markets, Inc. (Broker).

Good day, and welcome to the Green Dot Corporation Fourth Quarter 2015 Earnings Conference Call. Please note that the contents of this call are being recorded. I would now like to turn the conference over to Derra Stark (00:17), Investor Relations for Green Dot..

Thank you, and good afternoon, everyone. On today's call, we will discuss 2015's fourth quarter performance and thoughts about 2016. Following these remarks, we will open the call for questions. For those of you who have not yet accessed the earnings press release that accompanies this call and webcast, it can be found at www.ir.greendot.com.

Additional operational data has been provided in the supplemental table within our press release. As a reminder, our comments include forward-looking statements about, among other things, our expectations regarding future results and performance.

Please refer to the cautionary language in the earnings release and in Green Dot's filings with the Securities and Exchange Commission, including the most recent Form 10-Q that we filed on November 9, 2015, for additional information concerning factors that could cause actual results to differ materially from the forward-looking statements.

During the call, we will make reference to financial measures that do not conform to generally accepted accounting principles. This information may be calculated differently than similar non-GAAP data presented by other companies.

Quantitative reconciliations of our non-GAAP financial information to their most directly comparable GAAP financial information appears in today's press release. The content of this call is property of the Green Dot Corporation and is subject to copyright protection. Now, I'd like to turn the call over to Steve..

Thank you, Derra (01:50), and welcome, everyone, to our fourth quarter earnings call. For the call today, I will cover the highlights of the quarter and the year and review our long-term strategic roadmap.

We'll also talk about our six-step plan to drive material EPS growth so that you know what we're planning and you can track our progress along the way. Then, Mark will share some additional financial detail and provide our financial outlook for 2016 with some preliminary thoughts on 2017.

Today, we also want to acknowledge the feedback we recently received from one of our largest stockholders, Harvest Capital Strategies. Our investors are customers of Green Dot, and disappointing one of our customers is something our company, our board and I as Founder and Chairman take very seriously.

I can assure you we want to make Harvest a fan, and we are taking their feedback into careful consideration. We intend to engage with Harvest in an effort to resolve the situation peacefully and respectfully. At the same time, we're committed to doing what's in the best interest of all of Green Dot shareholders.

Most importantly, what's better than talking about performance is actually performing and delivering shareholder value. Mark and I and the amazingly talented Green Dot worldwide team is dedicated to growing our business and driving EPS. So, with that, let's get into the call.

We performed as expected in Q4, with our acquisitions keeping us essentially even in year-over-year non-GAAP revenue at $151 million, despite the declining revenue from our legacy business line. Flow through to profit and EPS was materially lower in the quarter because of two reasons, primarily.

One, we paid higher commissions to Walmart in the quarter than in the prior year period; and, two, the legacy revenue we lost was of much higher margin than the acquired revenue we gained in this particular quarter.

On a full year consolidated basis, 2015 was a very strong year for Green Dot, with double-digit growth in non-GAAP revenue and adjusted EBITDA, again driven by acquisitions.

The standalone revenue and adjusted EBITDA run rates of our acquired entities plus the extra profit delivered from integration synergies made a huge positive impact on the year and allowed us to stay flat in non-GAAP EPS at $1.35 despite a significant year-over-year revenue decline related to the discontinuation of MoneyPak and a lower revenue from the private label portfolio.

With everyone's great efforts, our acquisitions were able to fill in the large void caused by the declines in our legacy business lines and serve to maintain and even grow our year-over-year financial results while we continue to invest in all the cool new things that are designed to get our private label program and our cash transfer businesses back on track.

Now with those new products rolling out as we speak and all the new cost saving initiatives and new products being deployed now and through the rest of the year, we believe we're in really good shape to have all the pots boiling at the same time as we exit 2016, both legacy business lines and acquired entities delivering revenue, and our platform and processing investments delivering expense savings allowing the consolidated Green Dot to deliver material EPS growth.

My thanks to our leadership teams at TPG and AccountNow, in particular, for their terrific efforts. I also want to call out Renee Opell who is an operations leader in our Enterprise Product Delivery office, who spearheaded the integration efforts for AccountNow and AchieveCard.

The integration efforts on just those acquisitions alone delivered an additional approximate $13 million of adjusted EBITDA through the end of the fourth quarter of the year, starting within just a few months of closing those deals.

I think that result is a testament to not only the strength of our operating team, but also to the efficiency of the Green Dot operating platform which we believe has a lot more efficiency still to come. Now I'd like to talk about Green Dot's six-step plan to get to $1.75 or better of EPS in 2017.

As background, Green Dot's card business is based on portfolio economics. We have millions of cardholders in different vintages within the portfolio.

So when something happens, good or bad, it takes time for that event to unfold and the results to be seen, so when you roll out lower fee cards for example, it might take six months or more for those lower fee cards to become a large enough mix of the portfolio to start actually pushing overall portfolio revenue lower. The reverse is also true.

When you do something good like replace the older lower fee cards with new more profitable cards, like we just got done doing on Walmart and like we are about to do everywhere else, it also takes some time, about six months or so, from launch for those new cards to become a big enough part of the mix to start pushing revenue higher and then build upward momentum from there.

So with that in mind, here's our simple six-step plan. Number one, launch new, more appealing prepaid products with materially better unit economics at all 100,000 Green Dot retailers. This is already completed at Walmart with all remaining major retailers completed by April. Number two, bring back MoneyPak with new risk controls.

The new MoneyPak is expected to be on sale in the first half of the year. Number three, launch high-potential initiatives that map to our strategic roadmap. An example would be the Green Dot Money project or the secured credit card project.

Number four, launch major platform initiatives that drive around $11 million or more in expense reductions in 2016. For example, the new risk and call center platforms and further integrations of our acquisitions. Number five, make opportunistic and accretive acquisitions using cash or debt.

For example, there're still a handful of attractive prepaid assets that remain in the market. And last but certainly not least, number six, continue to buy back stock at a rate of $50 million annually. So with that plan in mind, let's talk about what's already well in process to achieve that goal of $1.75 in 2017.

There's not enough time to go into detail on all the things we're doing, but I would like to share a few of the bigger news items on the call today and then encourage you to review the investor deck for more detailed information. First, Green Dot Bank received regulatory approval in late January to use its bank charter to engage in consumer lending.

The ability to engage in certain lending activities enables the bank to increase its profit contribution to the consolidated Green Dot over time and can help increase our brands' relevance and importance to our customer segment. Green Dot Bank's first lending product on a national scale will be the Green Dot Bank secured credit card.

Next, Green Dot's new lending marketplace initiative, Green Dot Money, is in development with plans to launch in summer.

While it's in the early stages of development, we believe this initiative has the potential to generate increased customer loyalty and high margin revenue from placement fees paid to Green Dot by the marketplace lenders who are successfully paired with borrowers.

We also think the lending marketplace concept is a really smart way for us to provide unsecured credit to our customer base without putting our company and our bank at risk. Unsecured lending, especially to consumers with low FICO scores, is very risky business.

Both Green Dot Money, the loans, both the upside and the downside belong to the marketplace lenders who are experienced and confident in their ability to underwrite low income consumer. Green Dot's role would simply be the matchmaker – no capital at risk. Next, we have some distribution partners to announce.

First, Green Dot is pleased to welcome OneMain Financial to our family of Green Dot partners. OneMain customers will soon be given the option to place their loan proceeds on a co-branded prepaid card in lieu of getting the loan on a check or traditional bank deposit.

Taking the loan proceeds on a Green Dot card allows the customer to access their loan proceeds more quickly and conveniently and free of charge at any of our free ATMs and elsewhere. OneMain issues a lot of loans with a lot of GDV annually, and so this has the potential to become a nice sized program for us.

OneMain is a great company and a highly pro consumer lender, and I want to thank Dave Hogan and Jay Levine for their partnership. Next, since last quarter, Green Dot signed a number of new retail stores and new check cashing locations.

In particular, I'd like to welcome AAFES, the Army and Air Force Exchange Service, to the list of Green Dot retail locations. America's military service men and women represent a large customer segment for Green Dot's products and services, and we are so proud to now be available on base for America's military personnel and their families.

On the product front, we have completed the launch of the new Walmart MoneyCard product and the new Green Dot Everyday Visa product at all Walmart stores nationwide.

Both prepaid products launched on time and on budget and offer superior features for customers and superior unit economics for Green Dot compared to all previous MoneyCard and Green Dot card versions in the past.

The rollouts of the new Green Dot Everyday prepaid cards, both MasterCard and Visa, and the new Green Dot 5% Cash Back Debit Card will be at Green Dot's remaining 90,000 or so retail locations on schedule and on budget with substantially all retailer stock in the new products by the end of April.

The rollout of the new MoneyPak product is on schedule to launch in the first half of the year. The new MoneyPak with mobile and web-based risk controls is designed to help us safely win back former users of the original MoneyPak product.

And TPG, Green Dot's tax refund processing subsidiary, rolled out a new Green Dot prepaid card integration where customers of EROs using TPG's refund processing services are offered the opportunity to receive their tax refund on a Green Dot prepaid card.

Additionally, select customers can receive up to a $750 advance of their tax refund amount loaded to that Green Dot prepaid card. The program rolled out in January to a select group of independent tax preparers nationwide.

In Q4, Green Dot completed the first wave of account conversions from its legacy TSYS processing platform to its new MasterCard PTS processing platform. This wave consisted of approximately 33 million consumer records or approximately 30% of all accounts on file.

Migrating so many millions of customers with so many billions of dollars in deposits is not something you do with haste. Green Dot's customer size makes it a top 20 debit card issuer. So we've definitely taken our time to make sure we get it right. Nevertheless, we're on track to complete the remaining conversion waves over the course of 2016.

Once completed, starting in 2017 on a full-year basis, the net savings, in other words what we'll save annually versus what we spend cumulatively on development and the portion we'll depreciate annually, is expected to generate a positive $0.09 of incremental non-GAAP EPS in 2017, growing as volumes grow in future years.

And lastly, but not certainly least, since Q4, Green Dot completed an additional $10 million in share buybacks as part of the company's previously announced $150 million repurchase authorization. So far in the first six months since the buyback program received regulatory approval, Green Dot has repurchased $50 million of its shares.

The company is committed to executing the remaining $100 million over the next 24 months. On the topic of capital, as a general rule, we haven't talked a lot about Green Dot Bank. But it's probably a good time to give you some insight into why we feel our bank is such an important and strategic part of Green Dot.

A bank is the entire regulatory underpinning of any prepaid program. Relying on a small third-party bank to run your entire company is very risky as evidenced by the challenges at the prepaid industry's largest (12:55) rental banks.

Next, by being our own bank, we get to set our own risk policies and product roadmaps in accordance with regulation of course and good common sense.

All the stuff we've done and plan to be doing with GoBank and all the new features on our prepaid cards and our ability to issue a secured credit card or the ability to legally operate Green Dot Money nationwide without spending hundreds of thousands of dollars on obtaining additional licenses is all an advantage of owning a bank.

Lastly, the bank saves Green Dot a lot of money every year. In 2015, Green Dot Bank contributed $21 million in pre-tax profit contribution to Green Dot Corporation through cost savings and interest income. This is money that our competitors pay to another bank that we get to pay to ourselves.

On a tax-adjusted basis, this means the bank contributed around $0.25 per share in non-GAAP EPS to Green Dot in 2015, and we can expect it to contribute more in 2016 should volumes grow. In fact, our bank is a big reason why we believe our operating platform is so much more efficient than anyone else in our industry.

Now, of course, we do need to keep around $150 million in restricted cash tied up as Tier 1 capital. That's money we could use to buy back shares or otherwise invest. So let's look at that.

If we sold the bank, we'd still need to hold around $50 million in restricted cash to hold as a security deposit for the third-party issuing bank and for certain state security bonds that non-banks typically need to carry. So, that would free up only $100 million.

Then, we need to pay that other bank the annual issuing fees that we currently pay to ourselves. So, on a purely financial comparison, putting aside all the risk and strategic benefit, we would either earn at least $21 million in pre-tax earnings every year and growing as volumes grow from that $100 million in freed up capital just to break even.

So unless we think we could consistently generate an annual risk-free return of, say, $20 million to $30 million pre-tax or better on $100 million of capital, then perhaps we can feel justified in keeping that level of restricted cash in the bank. Nevertheless, we do think our Tier 1 capital requirements are high and could come down over time.

And we do believe the bank will have the opportunity to earn more money over time on new programs like lending, higher interest earnings on float and the like.

Green Dot's long-term strategic roadmap, the summary of which is in the IR deck that accompanies this call, has been a remarkably prophetic and resilient document over the years since we first started formulating the key concepts in preparation for becoming a bank holding company.

It predicted the need for Green Dot to develop deep mobile expertise and become a fintech leader if it intended to be relevant to consumers in the future, with new key agreements and close high-value new opportunity.

It predicted the changing regulatory landscape and predicted the risk of relying on small third-party banks as the foundation for our business. It predicted the consolidation of the prepaid industry and the needs of reserve cash to make strategic acquisitions to grow and diversify as competition intensifies.

It anticipated the need to invest in national marketing of the Green Dot brand name so that our products could have brand appeal and pricing power as the industry matured and the product itself became more commoditized. Of course, we didn't get everything right. While we anticipated competition, we missed the timing and fortitude of that competition.

In 2009 and 2010, as our plan was first being developed, who could have guessed that American Express would spend an estimated $1 billion trying to beat Green Dot. We also missed the MoneyPak issue. In those days, victim-assisted fraud was not a defined term or a common activity.

Luckily, our long-term strategic plan did predict two strategic outcomes exactly right.

At number one, if we stuck to our plan and focused on long-term outcomes, when all the dust settled, Green Dot would reign supreme as the absolute hands-down undisputed champion of the prepaid wars; the best brand, the best products, the most customers, the most revenue, and the most profit.

And when the hard work was done, like recruiting the best team, buying a bank, becoming a fintech leader, creating the best products, building a great brand, diversifying revenue, renewing Walmart under a long-term agreement, that we would then be in a position to materially grow EPS.

While the 2013 private label fee changes and the 2015 MoneyPak discontinuation created a revenue Detour on our road to growth, make no mistake that with the launch of our new prepaid products and the many new initiatives underway, we are now back on the main highway and we absolutely intend to arrive in style at our destination of material EPS growth in future years.

More than half of all American households have an annual income of less than $50,000 with this population segment getting bigger every year.

This is Green Dot's customer base and we want to be their bank for prepaid cards, debit cards, checking accounts and now secured credit cards and, through our online lending market place, unsecured loans and perhaps even more over time.

Because of our team's collective long-term focus, strategic prowess, and operational discipline, we believe Green Dot has made it through the jungles of uncertainty and is now free to pursue its destiny as the bank of this America. Green Dot isn't a prepaid card marketer nor a prepaid card program manager.

Green Dot is a big, growing, ubiquitously distributed and increasingly famous fintech-powered branchless bank. As Green Dot's largest shareholder, I believe our ability to now monetize all our hard work and drive material EPS growth is clear, obvious and well within reach. And with that, I'll hand it over to Mark Shifke.

Mark?.

For full year total non-GAAP operating revenues to be between $700 million and $705 million. Adjusted EBITDA is forecast to be between $154 million and $158 million. Adjusted EPS is forecast to be between $1.35 and $1.40 per share. Both of these include the $11 million in expenses I just described.

Excluding the one-time and unusual launch expenses, adjusted EBITDA is forecast to be between $165 million and $169 million and non-GAAP EPS to be between $1.48 and $1.53 a share. In terms of capital management, we have already repurchased an additional $10 million of stocks since Q4, in addition to having completed our $40 million ASR last year.

We anticipate completing another $50 million of purchases this year. Any future share repurchase activity is not included in our EPS guidance. We are assuming approximately 52 million average diluted shares outstanding in our adjusted EPS forecast. For 2017, we expect to build on the momentum from 2016.

As you'll see in the supplemental slides that accompany this presentation, we've identified a six-step plan to drive earnings per share growth to achieve $1.75 in non-GAAP EPS in 2017. We expect revenue growth in 2017 will benefit from a full year of all the new products being in market.

We expect also to benefit from $20 million in cost savings that flow from a full year of actions we're taking in 2016, as well as a new processor relationship, ongoing savings from the GoBank technology platform, efficiencies from new risk and call center technologies, and further integration of previously acquired entities.

To sum it up, we believe 2016 represents the end of Detour. While the headwinds still weigh on our legacy business throughout 2016, we can see a recovery in sight, if all goes as planned with material EPS growth in 2017.

As we think about Q1 expectations, tax season plays a big part in our Q1 results, both because of the way tax refunds impact card sales and interchange from the GDV provided by tax refunds to our customers, but also because the tax season is the bread and butter of our tax refund processing subsidiary, TPG.

Nearly, all of that division's revenue and earnings happens between January and April. This year, as you have no doubt read in the news, the IRS has intentionally slowed down refund disbursements and checks sent out and as of earlier this week with about 30% behind the same date last year in disbursements.

So our year-over-year comps to-date at TPG and for the prepaid sales related to tax season are a bit hard to read. Ultimately, all the tax refunds get processed and all the refunds get disbursed, but the timing this year is clearly way different than last.

So it could be that some checks and disbursements to cards flows into the year more in March and April than it did last year.

In any event, based on IRS disbursement trendings to-date and our understanding of how checks and refunds will flow out of the IRS over the next 45 days, we are estimating that we will end up delivering around 30% of our full year mid-point revenue expectation of $703 million to come in Q1, with any timing difference on tax refund-related revenue being pushed into April.

Now, let's go to the phones for Q&A..

Thank you. We will now begin the question-and-answer session. As a courtesy, we please ask that you limit yourself to one question and a single follow-up. If you have further questions, you may reenter the question queue. At this time, we will pause momentarily to assemble our roster. And our first question will come from Sanjay Sakhrani of KBW.

Please go ahead..

Hi, Sanjay.

Hello?.

Hi, Mr. Sakhrani. Are you there? Your phone may be muted..

Yeah, I'm sorry.

Can you hear me now?.

Yeah. Hi, Sanjay..

Right. Okay. Thanks for all the color. I guess, I'm just trying to figure out how we should think about the core growth going forward.

I understand 2016 has some headwinds, but maybe as we look out to 2017, how should we think about your revenue growth profile and kind of the EBITDA margins you could achieve?.

You mean on the legacy business or the consolidated enterprise?.

Consolidated enterprise..

Well, so I'll give you our aspirational growth. It's always hard for any CEO to come up with guidance for the long term that's taken specifically. So let me give you our aspiration. The double-digit number, that 10% growth, is what we aspire to.

We hit it and exceeded it, as you know, this year despite our legacy business having some challenges, a lot of challenges, but that was through acquisitions. Our macro prepaid our core heritage Green Dot, that macro is not growing as fast as it used to grow. So that means for us to hit that 10% number we have to have other products and services.

That's why Green Dot Money is so important. That's why the ability to have credit is so important and some of the other new tactics that we have out there, better merchandising or promotions or marketing. But aspirationally, that 10% number is what we stuck to. We've hit it many years. Some other years we've not.

But that still is our aspiration long term..

When we think about the margins of the business?.

Well, I've said this for many, many years and I'll say it again because it's true. Anything without a 2 before it is not appropriate for a business. Three of the past four years had a 2 in front of it. 2013 maybe did not. Maybe that was 17% or 18%. But in every other year over the past four years, we've hit it. We hit it again in 2015.

We are forecast to easily hit it again in this year for our company in 2017. So we're always looking at that number as a guide and a gauge of our success. We want it to be in the 20%s; and how big in the 20%s, how far up can we go in the 20%s depends on our ability to continue to create efficiencies and grow revenue on our scale platform..

(29:46).

Hey, Sanjay. It's Mark. I just was going to echo and just further step up (29:51) what Steve has said. I think we have some tailwinds pushing us in the direction of nice margin. As we're going into the year, our products have higher unit economics both on card and cash transfer. And we're realizing the benefits of our investments in technology.

So we are looking over time to seeing increasingly greater gross margins..

Okay, great. And just my follow-up on a unit economic increase that you guys are seeing. It looks like AMEX is retrenching from prepaid and I noticed some of the slides at the back of your deck kind of speak to their spacing relative to yours.

Is that allowing you to take up the unit cost and how do you compare relative to your peers in terms of cost for card?.

One of the biggest – great question and one that is fun to answer, because I think we've done such a great job here. One of the biggest early strategic concepts we had, going back years ago on the strategic roadmap, was that every business – look, we invented the product, right, but every business at some point commoditizes. Nobody is special forever.

So we have to invest in the brand, give Green Dot some star power, make it important so you're not just a piece of plastic hanging on the shelf. We've done that really, really quite well. I don't think anybody questions the power of the brand.

And that means, when people go up to the rack, they see value in the Green Dot brand beyond the fact that it's a prepaid card just like you think Kellogg's brand Frosted Flakes may be a better quality than Uncle John's (31:25) Frosted Flakes or something else. So, for that reason, we've done a really good job with being able to have pricing power.

And if you look at the slide deck, that goes along with this call, we have photographs front and back. All of our fees are always on the back of the package. So consumers can easily see them, and you can easily see them as an investor.

And if you take a look at the fees, what you'll notice is that they are higher than our old products but still below the market. In other words, if you think of the high watermark as net spend, so that'd be the highest price on the market, it used to be that we are way rock-bottomed than the other (31:55) people in the middle.

We're now sort of in the middle, and that's been still on top and nobody is really less at this point except for our own products, which would be the Walmart MoneyCard, which is still the lowest priced product in the market.

So we've been able to increase pricing power, and we think that that's going to be really helpful and beneficial to us over time. At the same time, I want to be clear about this, we've added a lot of value to the card. So this isn't like we raised pricing and said, hey, that's the end of that.

A Green Dot prepaid card today or a Walmart MoneyCard could be, Sanjay, your checking account. It has all the same features better because frankly our mobile apps are better likely than the bank you're using, unless you're using Chase which has a really good mobile app, but our mobile app is really, really good.

And the features on it, the ability to deposit checks and look at your budget and use an embedded FDIC-insured savings account and all the ATMs and everything else, it's a really great product that increasingly has more value for our consumer.

So, yes, the pricing has come up aligned with some more margin, but the features and the value have also come up for the consumer as well..

Okay. Thank you..

Our next question will come from Tien-Tsin Huang of JPMorgan. Please go ahead..

Hi. Thanks for all the details. I guess, my question, kind of, building on what Sanjay was asking about. Just the visibility into some of these things.

I guess the cost side, I think it sounds like you have some good visibility there, but just with the price changes and I don't know if the elasticity has changed and then you got MoneyPak 2.0 coming out, a lot of new stuff coming up on the rack (33:30) where do you have high visibility versus low visibility? Can you write that (33:34) maybe for us and give us an idea on the range of outcomes?.

Yeah. I think so. Whenever you're launching so many new products, you really have to be thoughtful and careful. Nothing at Green Dot is on a whim or pulled out of your left pocket or something like that, because we're highly regulated enterprise. Everything's got to be thoughtfully worked out.

Have a lot of research behind it, a lot of operational dress rehearsal, if you will. And that's no different with these cards. So we've actually been in the market undercover for some time at a large number of 7-Eleven stores and CVS stores with a higher price card to see what would happen.

In those cases, we're actually charging a higher fee than we ended up charging, just to see what is the elasticity, how would those play out. We also did a price increase some time ago for other services with a large segment of customers about a year and a half ago. So we've been planning this for a very long time.

And we wanted to see what would happen over the course of the year or year and a half if we took the fee from $5.95 to $7 95 and we researched that.

So between our actual in-market test for the last number of months and the fee changes we did about a year and a half ago, we have a good sense for what happens with the behavior which the answer is, nothing. It stays exactly the way it is. And so we think we are in good shape there. We've been on sale for about 20 days, something like that at Walmart.

And that's been going well also. So we think we have good visibility into what the fee collection will be, how the early acquisition rates will be for these cards. Now, what don't we know? Behavioral curves and retention happens over time. It's just been (35:08). You have to build your cohorts.

So it's going to take us some months to get to a six-month cohort or a nine-month cohort to see how these cards are performing in relation to other cards. The only data we have is what we did with the fee changes we did a year and a half ago. So there is some risk there.

It could be that there's something about these cards that in a year look different, a year in rears than what we think. But so far so good and they've been fairly well researched. So we think we are pretty good on that. That we have the most visibility in, so I'd rank that, Tien-Tsin, number one, most visibility.

MoneyPak, we are budgeting and thinking very little about because we just don't know. There's an example where the visibility is not clear. We know that people still look for the product. We know that everybody knows the name of the product. We know there's still a market for the product.

How quickly will people come back? How will it be adopted? We don't know so that we've sort of weighed down in our modeling, right? And then the initiatives with the least amount of visibility meaning the ones that we have to wait to find out would be Green Dot Money and the secured credit card.

It makes incredible sense on paper, right? We have so many millions of people who come to our websites every month, who call our call centers every month and we know that through research and actually trying it, we have a credit pilot that's been going on for about three months.

We know that when people see the opportunity to apply for credit, our customers will do that quickly. So we don't have a lot of risk on how many folks are filling out an application. That we feel pretty good about. What we don't know is, with our marketplace lenders, the average approval rate in other channels is about 20%.

So that's in fact what the approval rate is in real life.

In our marketplace, will there be something about our customer base that is less underwritable than other low income populations or is there something about the use of the Internet where you'll get a lot of garbage applications that are not able to be translated to something underwritable? That you don't know, right? So we need to figure out the underwriting approval rate and how that model plays out.

So I think that would be the one that is most speculative but a really safe bet, I guess, you'd say, and then the one that we're most sure about as are the ones that we're rolling out right now, which is our card products, because we know how they perform. They're in the market. We know what the fees are.

And after 15 years of experience, we understand how to model the monthly fees..

Okay. That's good to know. Just a quick follow-up there.

Just on the sales and marketing front then, just to make sure these things get out there and the education as such, is that budgeted in there and how much flex is there on your sales and marketing for advertising?.

So any marketing expense we plan on spending is part of that adjusted EBITDA forecast that Mark just gave you. And, again, at this point, the company is large enough and our marketing program's flexible enough where there is no incremental marketing needed for it in terms of spend.

I mean, Tien-Tsin, to give you a sense and I remember, I think, I had this stat at the investor conference we did together back in December, we have 10 million consumers who come to one of our website properties every month. Whether we want them to or not, they come for various reasons. They saw a TV ad. They're buying the card.

They're checking their balance, whatever the case may be. You have 13 million who call our worldwide call centers every year – every month, I'm sorry. So every month, you have 13 million people talking to hopefully an IVR machine, a computer.

If they go to a desktop and talk to an operator, they're talking to somebody in the Philippines or one of our remote facilities. And there's an opportunity to inform those people automatedly, in other words on the IVR, interested in a loan, go to greendotmoney.com.

So we think that we have plenty of opportunity to get consumers to try our products just with that. And lastly, we have this awesome relationship with Steve Harvey, who has really been a fabulous spokesperson for us in terms of the scores, how it's working, the notoriety. He does a great job with our product.

And so there's always an opportunity to have him mention this product or any other. So, between all of our web properties and the size of our company and our installed customer base, we're feeling pretty good that there's no incremental marketing needed..

Okay. That's good to know. Thanks Steve for the update..

You bet..

Our next question will come from Ramsey El-Assal from Jefferies. Please go ahead..

Sure. I guess my first question has to do with Harvest Capital's activist campaign to put new directors on the board.

How have you responded to them?.

Yeah. Well, it's a good question and I appreciate it, and I guess here – well, let me think how to describe it. Firstly, I'm quite sincere in saying that we appreciate Harvest's activism in our stock and that's not to say I agree with all of Jeff Osher's points or his conclusions.

But I suppose the job of the activist is to say and write sensational things of solicited reaction and I actually don't take it personally. Will the Harvest filing make us a better company, will it make me a better CEO? I actually think it will. We're certainly all paying attention, that's for sure.

And being open to a wide variety of input, criticism, opinions and perspectives is a really good thing and I've taken the underlying meaning of every one of Harvest comments seriously even if I don't take Jeff's actual words or conclusion seriously. So it any event, Green Dot has a good board. We have some very seasoned folks on the board as you know.

And we've talked about the most appropriate things we can do. And here is what we decided. First and foremost, we all agreed that the best thing we can do for ourselves and our shareholders is to continue to execute our plan and grow EPS because nothing succeeds like success.

We feel we've done a very good job of strategically guiding our company to a great place over many years and now we are in a position to show Harvest and all of our investors what we can do. Next, from a tactical perspective, we think it's a fair statement that we could benefit from expanding our board and seeking to invite different perspectives.

People may not realize this, but we have new faces on the board. In fact, four out of the seven board members besides me are new to the company in just past few years. So it's not an all boys or actually we have a lot of women on the board, so not an all girls club or anything like that.

But we do like the idea of having some fresh faces and new perspectives to help guide the ship. And to that end, it's a good time to tell you that we have decided to increase the size of our board and expand its membership.

Mary Dent from our non-gov committee did in fact call Jeff Osher at Harvest and then our board also sent Harvest a letter, letting them know that we are expanding our board and that would very much like Harvest to help us recruit new members and for them to suggest some names of candidates who they feel would be great additions to our board.

In other words, whether or not there's a proxy fight down the road, if there is great people, let us have the names, we can put them on without a proxy fight and save everyone a lot of money and we can make that as part of a committee selection process.

But we also think that many of our top 10 shareholders would also have great ideas for superstar board members for Green Dot.

Green Dot is such a cool and important company that I'm sure many talented people would love to serve on our board and so to that end, Mark and I and others from Green Dot's Board will be calling and meeting with our top 10 shareholders to get their thoughts on all of this and to see if they can introduce us to some great board members who would be rock stars and who could add value.

So that's sort of where we left it. And beyond that, we're hoping that our performance over time will speak for itself..

This is kind of a related question. There was some press out recently about you guys potentially exploring strategic alternatives. I guess, I know this is a tough thing to comment on and I have a feeling of what you might say.

But can you comment on the validity of reports and is there any kind of formal process in place to look at strategic alternatives for the company?.

Well, I kept leaving – I keep leaving post-it notes in Jamie Dimon's bathroom saying, when you get time, call please (42:47), but he hasn't responded yet. The answer is, clearly I can't comment on rumors in the press. We'll look at what can I say. Let me say it this way. The answer is, no. We've not hired a banker to explore options to sell the company.

We're working with a banker as part of what you do when you have a 13B filing, and that's part of the normal protocol but not for the purpose of selling the company. But at the same time, look, I'm the largest shareholder of the company by far.

I've bought shares over the years, about $4.5 million of extra shares personally, and on top of that, I haven't sold shares since November of 2010. So it's five years. So, clearly, I, like every other investor, has an obligation and a desire to maximize their value.

So, I guess, what I'm trying to say is, while we're not preparing coffee cake and tea for the open house or anything like that at Green Dot, of course, as Chairman of the Board and largest shareholder, of course, as a board with heavyweight people like we have on the Green Dot Board, would we be open to offers, would we have conversations, are we open-minded to that topic? Of course.

It'd be silly to say we're not. Is it something that we're pursuing? No..

Okay, great. I appreciate your responses..

Sure. You bet..

Our next question will come from Ashish Sabadra from Deutsche Bank. Please go ahead..

Steve, thanks for the incremental color. Just quickly, Mark, you talked about revenue for the first quarter, but just as we think about the cadence for the full year, I understand you don't want to give quarterly guidance.

But just thinking about the cadence as the headwinds anniversary and new products come on, how should we think about the cadence on the revenue growth side?.

On the revenue growth side?.

Yeah..

You mean how we grow through the quarters, you mean?.

Yeah..

Oh, gosh, we're so seasonal. Well, (44:41) I don't mean to step on it, but....

Look, I think the way we have thought about this is, we were really focusing a little bit on where is the first quarter likely to come out relative to where it did last year and thinking about how tax season is somewhat off this year than it was last year.

I think last year, something – a little over 30% of our overall revenue showed up in Q1, and something – over 50% of our EBITDA was in Q1 as well. And I think this year we're seeing, with the delay of tax, that it's going to be more like 30% or less of our revenue and probably 40% to 45% of our EBITDA will be in Q1.

And what's not showing up in Q1, we are expecting to show up in Q2.

And then, during the course of the year, as Steve was – earlier alluded to, as you see a portfolio build, what you're looking at is a combination of old cards are trading, new cards coming on, the new cards coming on at higher unit economics and the more they season, the greater the revenue and the greater the EBITDA.

So you would see that growing and we would expect our exit rate at the end of 2016 to be above our entrance rate..

That's sort of why 2017, the sort of overview color that Mark gave comes together fairly easily when you build your own models and we try to give you all enough information on this call to build your model and follow along at home and this way you can see where we are.

At the end of the year, we're cutting expenses, but at the same time increasing the revenue being delivered from the portfolio, so revenue is going up as the year goes on, expenses coming down as the year goes on.

During the Detour periods at Green Dot, it was exactly opposite of that and that is expenses are going up as we invested in technology and did all these cool things, but at the same time revenue is going down so we had the worst of both worlds and now we are going back into a more normalized rhythm.

If you check in your page, you just (46:41) find helpful I think, it's page 18 of our investor deck, is a chart. It only shows our legacy business. It doesn't show the consolidated entity, but this is I think really what you're talking about. That's our cards business – our retail cards business.

And it shows you what happened to our legacy revenue when we discontinued MoneyPak. It goes all the way down. It shows that it bottoms out in Q4 2015.

Because of the seasonality of tax, it comes a little bit up and then you start having our new products sell and populate the portfolio with higher fee cards and then we are forecast to hit the end of the Detour in Q2 2016.

In other words, we think we will still have pain as you have the old cards in our portfolio and then the reverse course has started going up in Q2 2016. So that's sort of the plan of how the year shapes up because of the new initiatives and the new cards.

Does that make sense?.

Yeah, no. It does and thanks. That's very helpful. Maybe just a quick follow-up would be the comments on 2017.

When you talked about the EPS of $1.75, what were your revenue assumptions around to get to that EPS number? And then if there were any delays in the product launches or anything, could you still make it up through margin expansion? So a two-point question around what's the revenue assumption and then if there is any delays, could you still make up that number?.

Yeah. That's a great question. I think the way we're thinking about this is looking at things as if we had a 24-month year in front of us and that 2017 was just a natural progression of where we are exiting 2016 and continuing.

So we actually will say, look, to get to $1.75, we're not going to assume anything special happens just because we changed to a new year, but instead we would just continue, as the portfolio ramps. And then, on the margin side, we already have visibility into $20 million of efficiencies in part.

We had one-time costs for supply chain launch, and we've paid for that already. We're not looking to pay for that out of future profitability. But as a management team, we've come together and figured out the way to drive efficiencies on the front-end and then realized the benefit, as revenue grows over time..

No. That's helpful. And maybe then a final question would be on the buyback. You mentioned $50 million of potential buyback this year.

Just in terms of the buyback, is it going to be more opportunistic or expecting to spread it out through the year?.

Yeah. That's a great question. We intentionally have left our EPS guidance without effect for the buyback, because, of course, you know EPS would be impacted by both the timing of when we bought back shares and the price at which we bought back shares.

All things being equal, we would prefer to buy sooner rather than later to have more of an impact on this year and next..

Okay. Thanks. Thanks for the color..

Sure..

Our next question will come from Ashwin Shirvaikar of Citigroup. Please go ahead..

Great. Thanks. So, I guess, the question I had for you was, you have a number of these new initiatives with regards to what the bank side of the enterprise can do.

Can you talk a little bit about the capital requirements as well as the cash flow expectations this year and next?.

Sure.

You mean at the bank itself or the consolidated business?.

Both. I was just kind of wondering with regards to what sort of investments you would need to make in order to launch all of these products and then on (50:36).

Yeah, so, the great news is, any CapEx, and we have Jess Unruh here, who is our Chief Accounting Officer, CapEx peaks, as we start rolling out just these – the process and the other things that have been driving a lot of that. So we already have built into that CapEx the cost of anything we'd need to build for all of our products.

And it's very, very little, because that's what we've been doing over the past three years. So we've been working on the processor, the GoBank Product Technology Platform. By the way, let me talk about that, because nobody asked about it, but it's kind of important. The word GoBank is a product.

In other words, you sell a product under the GoBank brand name. But it's also the underpinning guts, if you will, the technology platform that allows you to deposit a check or to do person-to-person payments or host an embedded savings account and sweep money back and forth.

All of that, right? Now, all of our prepay products sit on that same GoBank platform.

If you were to buy a Walmart MoneyCard and download the mobile app, you would be shocked to see the similarities of GoBank, but that's allowed us to shutter, if you will, over time to shutter our old code that's 10 years plus old and retire those legacy processes, so we are saving a lot of money as opposed to spending money in investments.

It sort of the opposite of what you think. In other words as we roll out new products, we are saving money, not spending money on the new products. The past three years were the spending years and now we are able to get to some of that money back in terms of ROI. So whatever you see in the plan is already paid for.

There is not a lot of incremental spending. We have a lot of technologists. We're able to do Green Dot Money in-house. If we need to bring in an occasional surge resource from a contractor, we do. But I don't think there's anything remarkable. Mark, what....

In fact – and consistent with that, I think we would expect for next year, our depreciation and amortization will actually be lower than it is for this year, so....

Yeah, (52:28)..

I think that's consistent with the fact that we met our spend as we need to and we are not looking for incremental this year..

Yeah, the last two years has been just so punishing for a number of reasons. We are in this long-term strategic plan. You invest in this technology, you can't stop nor would it be smart to stop halfway through, you assemble teams and you are writing code and you are hitting certain timelines.

And then the legacy business hits the skids with MoneyPak coming off the shelf and the private label portfolio with lower fees. So you have your highest level of CapEx spending in history for the company at the same time that you have the lowest level of revenue generation from the legacy business. So it was just the combination of those.

We didn't plan it that way. It isn't what we thought would happen, but if you look in rears factually, that's what happened. And so now it's just such a joy to be able to look forward and say, wow, the process will roll out over the next number of months. The new products are all in real life on the GoBank platform.

They live, they exist, you can buy them and use them. That's been done. Green Dot Money is under deployment, and people are working at it. I was at our Shanghai tech facility a few weeks back going through what I'd call stack reviews, with all of our leaders out there who were showing me the various products and how it's coming along.

So I think we're in better shape than we've been. No guarantees. You never know. I mean, anything can happen, I suppose. But this is certainly one of the better times we've felt in quite a while about the company..

And when you think of entering into or engaging in consumer lending, a secured credit card seems like an interesting product. What is the risk profile of the consumer that you're targeting? And why would they choose to use Green Dot as opposed to – there are a number of bank and non-bank choices available nowadays.

Any thoughts on just the competitive landscape within lending, which seems to be very busy?.

Yo, yeah. Well, so, look, as it relates to unsecured lending now, I'll tell you about the secured card in a minute. Unsecured lending, that we don't have plans to do. Look, there is no question that our customers who we love – I mean our customers are our family, but just like maybe your crazy Uncle Bob at home or whatever, everyone (54:51).

You have to know your customers like you know your family. And there is no question that a large percentage of our customers would love unsecured credit. There is also no question that they wouldn't pay us back oftentimes. So you have to be very careful with unsecured credit.

And so I think we have – we're under a great idea with Green Dot Money, because it's a lending marketplace that does not use Green Dot Bank's capital or the holding company's capital. It's experienced lenders who have been doing lending to low FICO score consumers in many cases for 30 years, 40 years, 50 years.

They know how to do that in a way that is risk-free for Green Dot. They know how to make money out of it. We know how to introduce to the customers, but there's no risk. So that's how we think about the unsecured part of our world.

On the secured card side of our word, just like the name implies, the customer actually makes a deposit in Green Dot Bank, a collateral deposit – a security deposit and their credit line on that card is equal to whatever they have deposited in the bank.

The reason why Green Dot is such a natural fit for the product is, number one, people who are new to credit or people who have damaged credit are the people who are interested in a secured card. It helps build your credit. It helps establish a credit file if you're a young person. Let's say you turned 18 or 19, you're going to school.

It's a great opportunity to build a credit file in a responsible way. But you always spend on the card equal to the collateral deposit you put into the bank. So there's no risk to the bank. Now, what happens is, over time, every six months, we're going to evaluate that behavior.

If the customer has paid as agreed, if they're staying within their credit line, if the transaction types are appropriate and all the other things you look at in the risk model, well, then you gradually raise their credit line so that it ultimately becomes an unsecured credit card.

But it has training wheels for the first six months or so or maybe longer, so the bank has a really good understanding of who they're lending money to. That's how the product works.

For us at Green Dot, it's ideal because we also happen to own this massive Green Dot network location of 100,000 retailers where you can swipe a card, give money to the cashier, and that money magically appears in Green Dot Bank, right, or any other bank that's part of our network.

That means that today, the way you get a secured credit card from a major bank and all of them sell it or most of them sell it, would have a secured card, you have to go to the branch. You have to somehow give them money, write a check, mom and dad has to write a check, if you've low income you have to get a check, we don't have a check.

It's just not a great match for that kind of a product. At Green Dot, our customers know how to load money on their prepaid card. I mean even with the MoneyPak issues, we have 39 million reloads at retail in 2015.

So it's very logical to say the consumer, look, thank you for applying, you are automatically approved, here is your card, go to any Green Dot retailer, swipe it at the register and put however much money in your Green Dot Bank collateral account as you want and that will be a credit line and then perform well, we'll raise it, you will develop a credit history.

So it's a very logical match. How big that is? How many consumers will have the discipline to put money away and perform? The answer is a lot will. A lot more will say they will, but won't. But ultimately we think it's a great add-on opportunity that's very consistent with our brand and our core products..

Great. One last quick question. When I look at the Harvest Capital presentation, right, and they obviously – they believe that EPS can get to $2.56 by 2018, which is basically something like $2.5 (58:13) on a ratable basis by 2017 and your counter is $1.75 (58:19).

And so I am kind of looking at that and thinking is there – are they being overly aggressive in some of their assumptions? Are there things that they feel that should be done that you feel shouldn't be other than same bank capital.

So trying to figure out the gap between – it's not often that you see an activist comes out with a number and management comes back and says here's a lower number..

Yeah. Oh gosh, how do I say this because I want to be respectful and polite. Look, I think if you're the activist and I don't know I've never been an activist, we've been out this 15 years and I've never had anything like had happened, so I can't tell you I'm experienced at it.

But my sense is that Harvest's job or any activist is to create excitement and thought around that process. But look, a lot of the things in the bridge slide that they have that shows the way to get to that EPS number, you just can't do. You can't loan 80%, even if you wanted to.

You can't loan 80% of your customers unsecured credit without driving the company into insolvency in six months. You can't do that even if your regulators will let you do it, which they never let you do it anyhow. You can't lever up the balance sheet to do things that are not otherwise safe and secure in that way.

There's also other math that you'd have to look at and try to figure out the math is accurate. But I think – look, I think directionally what Harvest is saying is a fair point and that is, hey, look at, if you grow revenue and you cut expenses, that you should be able to do a better job at EPS than what you've done so far.

And the answer is, they're right. We couldn't necessarily do it in previous years while you're rolling out new technology products and while your legacy business is melting like an ice cube. So you may not be able to do it then, but directionally they are right.

But when you see some of the points they make, I'm actually in violent agreement with many of them. And that is roll out new products with better fee schedules, check, they're right. Cut expenses, check, they're right.

Use the bank for other kinds of uses besides issuing prepaid cards, and now again, that's a regulated activity and we were lucky and fortunate to get approved by our regulars to lend, but we just can't go off and do that, right? So I don't know what the difference is and it's probably not a great use or an appropriate use of my time to go through and I don't have the deck in front of me, so I forget what they have in there, but many of the objectives were just not things you can do credibly or easily, but forgetting about their number versus our number, the concept that should we be able to make more money and cut more money and therefore cut expenses and therefore deliver wider EPS, the answer is, yes, we should.

Yes, we will. And that point is well taken even if the actual recommendations are not plausible.

I guess, is that a fair way to answer it?.

Yeah, yeah, I appreciate the detail. Thank you for that..

Sure..

Okay. Folks, I think we're done for the day. I don't have a watch in front of me, but my cell phone says we're done. Thank you all for listening. We appreciate it. We'll see you at shared confidences and one-on-ones coming up. And we look forward to meeting with many of our shareholders to come. Thank you everybody and have a good day..

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines..