Green Dot Corporation
Q4 2020 Earnings Call Transcript

Published: 23 Feb 2021

[Operator:]

Good day, and welcome to the Green Dot Corp. Fourth Quarter 2020 Earnings Conference Call. All participants will be in a listen-only mode. After today’s presentation, there will be an opportunity to ask questions. Please note that this event is being recorded. I would now like to turn the call over to Ali Lubert, Vice President of Communications. Please go ahead.

[Ali Lubert:]

Thank you, and good afternoon, everyone. Today, we are discussing Green Dot’s fourth quarter 2020 financial and operating results. Following remarks, we will open the call for questions. Our most recent earnings release that accompanies this call and webcast can be found at ir.greendot.com.

[Dan Henry:]

Thank you, Ali, and welcome, everyone, to Green Dot’s Q4 2020 earnings call. We thank you all for being with us today. Once again, we are pleased to report a better-than-expected quarter, driven primarily by strong demand and continued growth across all account programs. We have got a lot to cover today. Before I pass it over to Jess for a comprehensive report on our financial results, I would like to share my perspectives on our progress to date and our plans and priorities moving forward into 2021 and beyond. First, I look at Q4 financials. Non-GAAP revenue grew by 15%, adjusted EBITDA increased by 59%, and non-GAAP EPS of $0.31 translated to a growth of 121%. During the quarter, we saw revenue growth from fees charged to our BaaS partners and we benefited from heightened deposit balances on products in our retail and direct channels as a result of the first federal government stimulus and to a lesser degree, the second stimulus. While the various federal government programs contributed to growth in 2020, it is important to note that COVID-19 also had a negative impact on growth trajectories of several of our businesses, including PayCard and Uber Cash. We also faced some revenue headwinds during the quarter in our Money Processing business as well as in interest income. We will share more on that in a bit. But overall, I am very pleased we delivered another strong quarter and are making the necessary investments for Green Dot to continue playing in a central role in banking and payments for low to moderate-income consumers.

[Jess Unruh:]

Thanks, Dan. Good afternoon, everyone. Green Dot delivered another quarter with strong year-over-year growth that exceeded the guidance we provided during our last earnings call. In Q4 2020, non-GAAP revenue grew 15% to $275 million, and we delivered adjusted EBITDA of $35 million and non-GAAP EPS of $0.31. We experienced a few significant tailwinds as well as headwinds in the quarter that I will walk you through. Overall, we are pleased with the strength of the consolidated performance.

[Operator:]

We will now begin the question-and-answer session. And our first question today will come from Ramsey El-Assal with Barclays. Please go ahead. One moment please. Please go ahead with your question.

[Ramsey El-Assal:]

Okay. Thanks for taking my question, again. I wanted to ask about potential – the impact of incremental stimulus that you made very clear is not in your preliminary guidance. But given that you’ve seen the impact of stimulus now a couple of times already on the model, you probably have a pretty decent idea about what that would mean. Given the outline of stimulus is sort of out there in the media, I mean, can you help us think through what that might translate into in terms of a P&L impact?

[Jess Unruh:]

Do you want me to take that?

[Dan Henry:]

Yes. Please, Jess.

[Jess Unruh:]

All right. Anyway, I am glad to go on.

[Dan Henry:]

Pretty good. Thanks.

[Jess Unruh:]

Yes. So I think what we have heard thus far from the federal government is something like $1,400 per individual, an extension of the unemployment benefits, I think through potentially September of 2021. So the next stimulus, if it is approved, feels a lot like what we saw in Q2 and Q3 of 2020. And so the way we think about the benefit to the P&L is looking at, what I will call revenue yield on GDV dollars. And so you can – if you think about it simplistically, if everyone were just to turnaround and spend the money, right, that would all end up in purchase volume and then be reflected as interchange revenue. And just for simple math, we earned 120 basis points on the interchange that fluctuates a little bit, but there are other streams of income like ATM withdrawals, monthly maintenance fees, all of which have higher yields and interchange. And so I guess you don’t have the – obviously, the channel level detail that we do, but the way we think about it is go through each of the channels, look at the revenue yields. But what you can do at home effectively is look at the revenue yield on account services revenue. So if you take the GDV, which is purely associated with account services, look at the revenue dollars in the segment disclosures and that would give you a good sense for what that revenue yield translates to and then apply that to whatever you think that GDV will be. So last year, we had about $4 billion across one-time stimulus payments in Q2 and better unemployment benefits across Q2 and Q3. What we saw in late December is really going to benefit 2021. So there you can sort of approximate what the revenue impact is. And then from a margin standpoint, certainly it will be above our consolidated corporate margins because you don’t have the incremental fixed costs generally associated with that flow through. And it should be somewhere in the 30s. You got to remember that stimulus also brought in quite a bit of cost for us in 2020. We had heightened dispute losses. We had customer service issues, et cetera. And so it wouldn’t be our highest flow-through that we would see on just typical spend. There is generally some higher costs that come with it.

[Ramsey El-Assal:]

Thanks. That’s super helpful. It sounds like there is a little bit of – presuming that, that gets passed, there is a little bit of upside sort of potentially baked into the environment, let’s just say.

[Jess Unruh:]

Certainly.

[Ramsey El-Assal:]

A second question – my second question, I wanted to ask about the GO2bank launch. Any color that you can share with us there on the pace of adoption how you might see that play out as the year progresses? Any changes in the types of customers you are acquiring, usage patterns, spend categories? Any color around GO2bank would be greatly appreciated?

[Dan Henry:]

Yes. So, Ramsey, this is Dan. I will take that. It’s really been great to see the response we have gotten so far from the customers. So I mean all I can really say is, as what we said on the call is, we are seeing demand for our secured credit card is 20% higher than we thought and signing up for overdrafts is stronger than we thought and registration is even stronger than we thought. So, the long-term plan of this is as we envision, just heads down, continue to execute, continue to invest marketing dollars, acquire customers, predominantly acquire customers on direct deposit that give us great recurring revenue and very good lifetime value, so far so good.

[Ramsey El-Assal:]

Okay. All right. Terrific. Well, thanks for taking my questions this evening.

[Dan Henry:]

Thank you, Ramsey.

[Jess Unruh:]

Thank you, Ramsey.

[Operator:]

And our next question will come from Andrew Jeffrey with Truist Securities. Please go ahead.

[Andrew Jeffrey:]

Thanks. Good afternoon. Appreciate you taking the questions. Dan, I am intrigued by some of your comments on SMB and I am wondering if you can elaborate a little bit on where you think the opportunities are there. Is it – did some of these small businesses that you are targeting are distinct from those that might otherwise use some of the other SMB sort of banking options in the market? I am thinking about Square Cash, for example. Is it more of a targeted demographic or is it more of a targeted solution set? And maybe a couple of examples of use cases would be helpful?

[Dan Henry:]

Sure, Andrew. I appreciate the question. And to be real candid on it, I mean, look, we – it’s just more and more of a theme that we are seeing kind of proliferate amongst our partners and also from our customers. So, really starting with is – with Uber and you just think of what’s happening in the world is so many workers are becoming independent contractors and has been with solutions out there offered by Amazon and Etsy for small manufacturers, whatever sort of products able to setup and sell and distribute. And we are not talking about businesses that are doing millions a year of turnover. We are talking about business doing tens of thousands of dollars a year of turnover and sales. And this is a business/consumer, typically a sole proprietorship, that is not to unlike a low-income consumer in a way that traditional financial institutions just either are not equipped or don’t really want to be bothered with such – what they consider small customers. So it’s going to be – we are going to just target with our products and our solutions and then also target against this demographic, if you will, of small and micro business. And we really kind of came to the determination on this as what we are working on and building together with partners like QuickBooks and Uber and Gig Wage and Kabbage. And so kind of feel that together collectively, we can reach what is target of tens of millions of small businesses that what we are hearing they have unique needs compared to larger businesses out there.

[Andrew Jeffrey:]

Okay. That’s helpful. And just as a follow-up, as you gain more SMB or micro merchant customers, do you think it will make sense to vertically integrate the tech stack in the digital world, offering omni solutions or web design or even reselling third-party payment solutions or something like that as far as the means of driving monetization?

[Dan Henry:]

When you say vertically integrating the solutions, Andrew, what you…

[Andrew Jeffrey:]

No. I mean for small business that might need – I know there are other companies offering services like web design or fulfillment. I mean do you intend to offer more of those services for a customer lifecycle or is it really strictly about the money management and payment?

[Dan Henry:]

No. What we’re going to be focused on is this just the unique money management and financial solutions for a small business. Now as you know, we don’t do acquiring, and that’s a big piece of what most small businesses are going to be looking for. So we won’t be playing in that space. But for the small business who needs a bank account, needs to be able to pay some of their employees, we will leverage our Rapid Pay card from – they need access to small denomination credit, maybe to fund receivables, all those things, the ability to get a secured credit card, build a credit score, access to credit, buy now pay later solutions. All of those things are in the potential what we can bring to today’s small business.

[Andrew Jeffrey:]

Okay, thank you. Appreciate it.

[Dan Henry:]

Absolutely. Thank you, Andrew.

[Operator:]

And our next question will come from George Sutton with Craig-Hallum. Please go ahead.

[George Sutton:]

Thank you. I wondered if you could talk about the incremental investment side of the equation and break it down, if you could, into the core banking and management platform spend separate from the SMB build, I am just wanting to try to compartmentalize those, if possible?

[Dan Henry:]

Sure. George, I’ll start with that just in terms of the logic behind it, and then Jess can share with you any sort of numbers if there are such numbers to share. But first up on the small business piece, there is not going to be a huge incremental increase in SG&A spend for the small business piece. I mean we are in the process of building solutions for a number of our BaaS partners. And what we’re – we have got fungible IT and development resources that we’ll be able to use. And there is – as we lay out kind of the future functionality that we would create for small and micro business against the future functionality that we’re creating for our GO2bank customers, there is 70%, 80% overlap there. So, incremental builds for a small business is going to be somewhat nominal for us. So that’s the reason why we’re going to pursue this aggressively is because the incremental cost to go after it is not that dramatic. Now in terms of core banking and card management, this is a big project, right. It’s – and it’s absolutely mission-critical. You’ve maybe heard me talk before of Green Dot made a number of acquisitions over the years, never integrated them. So now we are running on using 6 or 7 different outsourced processing platforms and even sponsor banks aren’t Green Dot Bank. And as we look at how to really create operating efficiencies at Green Dot, the effort to consolidate everybody onto one other outsourced platform makes no sense. So what we’re going to be doing is contracting for software to run a core banking platform and card management system. And these are from – these will be – we haven’t made our final decision yet, but these will be from absolutely top industry standard operators that have these solutions and hundreds of financial institutions around the world. So it’s proven technology, plenty of IT resources that know how to operate it. And from an affordability standpoint, yes, there is an initial cost to license these solutions. But once we pay for that license fee, our ongoing operating cost will be dramatically less than what we’re paying to third parties today. And so that’s why, one, from an efficiency, profitability standpoint, maintaining margin expansion, that’s critical. We’ll take a variable cost of our outsourcing processors and turn it into a much smaller fixed cost. And we will then control this platform, if you will, and it’s going to allow us to move much faster on creating new solutions and innovation. And where I really get excited as we think about – between our own customers and products that we have running on our platform, and then we have customers from partners running on the same platform, the things that we can do in terms of connectivity of those ecosystems gets really exciting down the road.

[George Sutton:]

Perfect. And one other question on the GO2bank app side, we have been tracking the downloads, what we are looking at looks like a substantially larger number in the initial days than what you were seeing going back to the unlimited offering. Can you just give us some perspective of the relative success that you’ve seen versus other prior programs?

[Dan Henry:]

On a relative basis, we can say that it’s probably been our most successful launch of a new program. I mean the downloads are outpacing what you track from Green Dot Unlimited, I think, around this time last year. So what’s nice is we might be able to say it’s probably the best received product launch that Green Dot has ever done, but we are also going to say it’s going to be the last Green Dot product – Green Dot branded product launch that we are going to do. GO2bank is it – this is our product. We are looking for customers to commit to GO2bank as their primary bank account, and we will commit to that customer to provide them future functionality unlike anything else that they will get from any financial institution or any other neo bank or any other challenger bank out there in the space.

[George Sutton:]

Prefect. Thanks.

[Dan Henry:]

Thank you, George.

[Operator:]

And our next question will come from Bob Napoli with William Blair. Please go ahead.

[Bob Napoli:]

Thank you. Good afternoon, Dan and Jess. Thanks for taking the question. So Jess, as we think about 2022, I see you – and longer term, Dan, and I guess, Jess, you talked about high single-digit revenue growth and low double-digit earnings growth. Is that kind of the model that you are looking at for the medium to long-term? And are you going to give segment – different segment information than we’ve received in the past?

[Jess Unruh:]

Bob, I’ll take a crack at answering that. To your latter question, yes, segment is absolutely still on our plate, and we were hoping to have it done for this call, but we need a little bit more time. On your first question around margins, I think what we talk about with respect to the core banking platform, we have roughly $50 million of processing expense with third-party providers, and that’s sort of the nugget we’re going after. Now it won’t go away completely. Obviously, we’ll be changing some of that variable into a much smaller amount of fixed costs that we’ll carry because we’ll have SaaS licenses and other things and we will have people to man those infrastructures, etcetera. But not to get too far ahead on what margins will look like in 2022. That’s the nugget we’re chasing and expect to start to deliver on that and start to see those results flush through in 2022. So I think I would not suspect us to have sort of that steady margin year-over-year getting into 2022. As Dan mentioned in his prepared remarks, we’ve got redundant expenses in the system. So there is a lot of pieces to the puzzle. But yes, it was certainly margin expansion in 2022. I don’t want to necessarily get ahead of myself and quote what I think that margin will be.

[Bob Napoli:]

And segmentation, like settling of the BaaS business or small business or I don’t know, the thoughts on giving additional segment information or different segment...

[Jess Unruh:]

Yes. Look, don’t hold me to it. I would say our retail and our direct business have very similar characteristics. And then obviously, our BaaS and PayCard are very much tailored towards a B2B relationship. So those are a natural sort of fit together and then you have our money movement services. So that’s a possibility of what the segments could look like. But again, don’t hold me to it.

[Bob Napoli:]

And then I guess, the Walmart, Ribbit with Green Dot has the TailFin relation, what is going on with the relationship with Walmart in that regard? I think you both had invested in TailFin, Green Dot and Walmart then you have the Ribbit relationship.

[Dan Henry:]

Yes, Bob. Glad you got that question out there. That Walmart, Ribbit investment in a FinTech JV of – yet to be decided, it’s not unlike many other investments that Walmart has made as – including the investment that they have made in Green Dot over the years. So we’ve had really, really productive conversations with Walmart recently. As you know, we’ve got close to 6 years left on our existing agreement with Walmart. We’ve been in there for 20 years plus. And as evidence of the things – some of the things we’ve rolled out at Walmart this past year that we just mentioned on the call, I can say, I don’t know exactly what the details are of the Ribbit and the JV and what Walmart and they are thinking about going down. Who knows, but I do know what we’re in discussions with Walmart about currently are quite exciting.

[Bob Napoli:]

Great. Thank you. Appreciate it.

[Dan Henry:]

Thank you, Bob.

[Operator:]

Your next question will come from Andrew Schmidt with Citi. Please go ahead.

[Andrew Schmidt:]

Hey, Dan. Hey, Jess. Thanks for taking my questions and thanks for all the context on the call. I want to dig a little bit into the core banking, card management system overhaul. I do agree, I think that’s a big opportunity. On the expense side, the benefits are fairly clear. But on the revenue side, I wonder if you could talk a little bit more about that. I can see greater agility, faster speed to market and things like that. But are there new use cases that you could roll out that could help accelerate revenue growth? And if you could give us some examples. I think you alluded to some earlier connectivity of ecosystem, things like that. But anything on the new use case front from the systems overhaul and the streamlined IT infrastructure would be helpful.

[Dan Henry:]

Yes, Andrew, and I’ll take a shot at that, but I’m going to ask Jess even to quantify what we think are going to be some of the expense savings from this because we do have a big processing expense line inside of Green Dot, and I don’t want to mislead anybody to think that, that entire expense line is going to go away but a meaningful piece of it will. But in – just in terms of flexibility and opportunity for us with this, just fundamentally, I mean, if you think the structure of how we will manage consumer accounts will change and improve. So the ability for us to have one customer with multiple products or accounts will be a tremendous benefit, and the ability to then offer credit products to consumers and then to small business. And I want to be really, really clear here on credit products. We’re not talking about large loans where we’re taking credit risk, and we’re not talking about financing automobiles and homes and such. We’re talking about things like very consumer-friendly overdraft that we offered on our GO2bank product, things maybe small merchant cash advances or cash advances on receivables for a small business. Things of that nature where we’ve got really good line of sight into our customers, financial lives and any credit that we extend would be very short term and very low risk. So we just – it’s really hard to quantify and say, hey, if we have our own core banking platform and card management system that there is – we can do this product, this product and that product. We’ll just be able – we’ll be able to do what we’re doing now and what’s on our current road map much more efficiently and at a lower cost basis because we’re not going to be paying piece of every transaction to a third-party provider. And most importantly, we are not going to be waiting in line for that third-party provider to create something for us but only after they have created or finished projects they have for other clients.

[Andrew Schmidt:]

Makes sense. Thank you. Jess, did you have a clarification?

[Jess Unruh:]

No. Just to add on to Dan’s point, the processing line item on a year-to-date basis is like $284 million. So of that, there is about a $50 million subset that is tied to our third-party processes. I just want to reiterate that.

[Andrew Schmidt:]

Right. Yes, that’s super helpful. Thank you for that. And then just a quick follow-up, it sounds like the GO2bank launch is going better than expected. How about on the customer acquisition cost side? Is that trending in line with your expectations and maybe just any thoughts on just the marketing budget for that this year or incremental expense?

[Dan Henry:]

The cost per acquisition is in line with what we’re looking for, maybe a little bit less, still early indications on that. And then from a marketing spend standpoint, I’ll let Jess address that one.

[Jess Unruh:]

Yes, the group. We’re going to spend approximately $5 million incrementally year-over-year. And so part of that investment we talked about, growth-oriented investments is in part marketing the GO2bank product. Clearly, we’ve seen some really good early indications of success there, and that’s a testament to all the marketing research that the teams did in advance of launching this product. And then, as Dan mentioned, also customer service enhancements and then the core banking platform. So $5 million...

[Dan Henry:]

And Jess, you might want to mention that we’re – the marketing spend is kind of heavily loaded in the first quarter as compared to prior years of marketing spend.

[Jess Unruh:]

Yes. We take advantage of the tax season. That’s a great acquisition time for us. And clearly, we have a lot of different channels in order to do that.

[Andrew Schmidt:]

Got it. Makes sense guys. Thanks a lot.

[Dan Henry:]

Welcome. No one is yet to congratulate us on a really good fourth quarter that’s beat everybody’s expectations. So – anyway, not that I’m fishing for compliments, but just kind of quiet on that front.

[Operator:]

And our next question will come from George Mihalos with Cowen. Please go ahead.

[George Mihalos:]

Hey, guys. Thanks for taking my questions and congrats on a strong fourth quarter.

[Dan Henry:]

Well, thank you, George. Thank you.

[George Mihalos:]

Just two quick ones for me. I guess, firstly, as you look out into 2021, how have you thought potentially and maybe what are the puts and takes of the business model in sort of a higher rate environment? How are you guys thinking about that if you were thinking about that at all at this point?

[Dan Henry:]

Puts and takes in terms of a higher interest rate environment?

[George Mihalos:]

Yes, just a rising rate environment broadly to the extent that, that comes to fruition.

[Dan Henry:]

I think that will be good for us because we’ll have Bill make much better returns on all the cash we have at our Green Dot Bank.

[George Mihalos:]

And to be clear, that’s not factored into the guide, that would be additive.

[Jess Unruh:]

That would be additive. We haven’t forecasted any rate increases from Fed into any of our guidance.

[George Mihalos:]

Okay, okay. That’s helpful. Just – I guess a point of clarification. The one-time impact as it relates to the tax processing revenue from the renewal, how big of an impact is that going to have on revenue?

[Jess Unruh:]

That’s going to be somewhere in the neighborhood of $9 million.

[George Mihalos:]

Okay, great. Thanks guys.

[Dan Henry:]

Thank you, George.

[Operator:]

And our next question will come from John Hecht with Jefferies. Please go ahead.

[John Hecht:]

Good afternoon and congrats on a good quarter. Dan, I know you talked about the – going forward, BaaS is going to be not just lobbying for a bunch of numbers but getting some high-quality partnerships. But I’m wondering, can you talk about the BaaS pipeline, give us any sense for any movement there and if so is any different or changing characteristics of kind of new upcoming BaaS partnerships?

[Dan Henry:]

Yes. Sure, John. Appreciate that. And the nice thing is we have already a lot of very high-quality BaaS partners in hand. So I hope my comments were never misleading to any of our existing partners. But what we’re working on and so exciting is the conversations we’re having with our existing partners are about how do we take this to the next level? What next can we add in terms of future functionality to the solution? We are focused on creating seamless, meaningful payment solutions that are embedded in the solutions and applications of our partners. So if I think of all of our partners including – not just Walmart, everybody thinks Walmart as a retail partner. I mean they are a partner. So, inclusive of Walmart and QuickBooks and Kabbage and Amazon just launched with Flex, we are already talking about what’s the next future functionality we add to that Flex account. So I can say with all of our partners, we’re in discussions with, okay, what’s the next chapter in terms of future functionality that we bring here. So one, existing base of business is all real positive. And then in terms of the pipeline, there is – at any given time, now with our refocus on large, impactful or really powerful new solutions out there, at any given time, we’re in half a dozen conversations with potential new partners. Does that help you?

[John Hecht:]

Absolutely. Thanks for that that context and the color. Second question is just looking at some of the metrics, user engagement, obviously, has been picking up. I know it’s early with the GO2bank, but can you distinguish customers you’ve got through that channel versus earlier customers? And is there any tendency for greater interaction or I guess, better revenue growth at the customer level or at an earlier part of their lifecycle?

[Dan Henry:]

John, I would say that the approach of GO2bank is different than the approach of Green Dot products of the past. So without knowing exactly who our customers are, I would say that we probably are with GO2bank attracting a different kind of type of customer, and that we’re offering a bank account that has – that’s designed specifically to serve the needs of consumers living paycheck to paycheck in this country, which is estimated to be close to 100 million consumers. So – and I do believe that the revenue potential and the profitability of these customers will be much greater than what the customers at Green Dot would market to in the past is when we – it is a fee-free product when a customer signs up for direct deposit, and that is by design, right. We want the customer to commit to this product. We want the statistical averages low $1,200 to $1,500 a month through the product, sign up for our consumer-friendly overdraft, sign up for a secured credit card, really embrace the full suite of services and measure their lifetime with us not in months but in years. And my experience and the experience of others we brought on to our team to lead this initiative tell us with a great degree of confidence that these customers that we are acquiring today, they will be with us for years.

[Jess Unruh:]

Maybe one early sign of positive engagement, certainly, that’s exceeding our expectation is the opt-in of the overdraft. You have to be a direct deposit customer. And so given the outside – I guess, opt-in, if you will, on the GO2bank product, certainly lead us to believe that we’re going to have a strong DD enrollment in that product, certainly better than what we had seen with Unlimited and some of the predecessor products.

[John Hecht:]

Yes. And I just want to make sure, did you say it’s something north of 50% were opting in? What was that specific figure?

[Jess Unruh:]

Well, I didn’t give a specific figure. I was just saying that we’re seeing something well above expectations.

[John Hecht:]

Okay, thank you.

[Operator:]

And our next question will come from Ashish Sabadra with Deutsche Bank. Please go ahead.

[Ashish Sabadra:]

Thanks for taking my questions. Let me add my congrats for the fourth quarter. Maybe just on the quarter itself, the card revenues and other fees was pretty strong. It has been pretty strong over the last two quarters. Just how should we think about the sustainability of the growth there? And if you can parse out what has been driving such a strong growth on those line items? Thanks.

[Jess Unruh:]

Yes. I think over the past couple of quarters, we’ve been mentioning that BaaS fees, so these are fees that we actually charge to our BaaS partners, have been increasing. And in part, some of that is tied to the processing volume you’re seeing and the uptick year-over-year in that particular line item. So there is one particular engagement or agreement with the BaaS partner where we passed through some of those processing costs really associated with merchant acquiring. So part of that is driving the outsized performance on card revenues and other fees. And I would say second to that is going to be monthly maintenance fees as you have heightened deposit balances, more active customers in the mix. And then to a lesser extent, you’ve got some ATM volume as well.

[Ashish Sabadra:]

That’s very helpful. And maybe just a question on the use of cash, how should we think about – you’ve talked about obviously the investment opportunities. But how do we think about potential tuck-in M&As or buybacks? Any color on that front? Any color on M&A pipeline? Thanks.

[Dan Henry:]

Nothing really to report on the M&A pipeline we are always going to be open and looking for opportunities. In terms of the use of cash, I like seeing our cash balance grow. So I’m going to – Jess and I might arm wrestle a couple of times on share repurchases and such, but as for right now, I’d like to see our cash balance grow for – healthily for a few more quarters.

[Ashish Sabadra:]

That’s very helpful. Thanks.

[Operator:]

And our next question will be a follow-up from Bob Napoli with William Blair. Please go ahead.

[Bob Napoli:]

Thank you. Yes, some of the questions were answered. And Dan, we expect you to have a good quarter. So it’s expected.

[Dan Henry:]

Thanks Bob. Feel like my mom. Yes I could always do better. Thank you.

[Bob Napoli:]

Just, do you have any thoughts on like the product set out of GO2bank and how you want to expand that product set over the next few years? Are there different items on the agenda that – I mean, I think always adding to the platform, if you would?

[Dan Henry:]

Yes. I’m opening up something we look at. It’s – without kind of telling you like details of what we’re doing, what we’re looking at is just kind of like product sets where one, first and foremost, just a payments transaction account for the consumer. So to give them early access to wages, information at their fingertips in terms of what their balance is, what their last transactions were, so that they can, in essence, have the same knowledge of what they have as if they had that cash in their pocket. So that’s we want to see is really, really mission-critical. And then also the things that are kind of not typical with other traditional financial institutions, like eliminating authorization holds on accounts much faster than others do, just to give people access to those funds. So just – we are mentioning consumer-friendly overdraft such that. So then with the fundamental of like a transaction tool for a low-income consumer, again, I can’t overemphasize how important that is because it’s got to be different than what is designed for people with excess capital. So transaction tool, we’ll get that box check, and I think we’ve got most future functionality there in place. But then, in general, we’re going to be focused on credit solutions for consumers around credit building, buy now pay later type of solutions, rewards programs. We’ve got rolled out a very powerful rewards program already with initially GO2bank. So we continue to focus on how we can help our customers stretch their dollars, investment options. So our partnership with Stash is – illustrates the ability – and I love Stash and their mission of being able to make investing available and just part of mainstream financial health. So we want to be able to offer similar sorts of solutions for the GO2bank consumer and then also just general wellness, just things that kind of help with our customers’ peace of mind, such as savings and insurance and things of that nature. Because this is a mission that we have to really deliver solutions to this customer that no one else is able to.

[Bob Napoli:]

And with most – many of those products have to wait until the core banking platform is updated. I mean some of those you really know?

[Dan Henry:]

No, they do not. So that’s the thing we are – I hate this expression because it’s a bit – we’re building a plane while we’re flying it sort of thing. So we’re going to – we’re not going to like say, okay, everybody stop, tools down. We now got to launch core banking card management. No. We’re going to keep building on GO2bank, keep going up with future functionality and upgrades on our – on the retail business, our tax business, our pay card business, while simultaneously strengthening the foundation. And so that’s why we’re going to have a short-term jump up in SG&A this year because we’re going to maintain our existing systems, our existing momentum while building this new platform.

[Bob Napoli:]

Thank you. Appreciate it.

[Dan Henry:]

Thank you, Bob.

[Operator:]

And this will conclude our question-and-answer session. I’d like to turn the conference back over to Dan for closing remarks.

[Dan Henry:]

Thank you, operator. Thank you, everybody, for the time and the questions. Look forward to catching up with everyone over the weeks to come, and looking forward to getting back to work. Very excited about 2021. Thank you.

[Operator:]

The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect your lines at this time.