Green Dot Corporation
Q1 2016 Earnings Call Transcript

Published: 5 May 2016

[Operator:]

Good afternoon, and welcome to the Green Dot Corp. First Quarter 2016 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 this event is been recorded. I would now like to turn the conference over to Derra Deeks (00

[Unverified Participant:]

Thank you, and good afternoon, everyone. On today's call, we will discuss 2016's first quarter performance and thoughts about the remainder of the year. Following these remarks, we will open the call for questions. For those of you who've not yet accessed the earnings press release that accompanies this call and webcast, it can be found at 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 among other things, our expectations regarding future results and performance. Please refer to cautionary language in the earnings release and in Green Dot's filings with the Securities and Exchange Commission, including the most recent Form 10-K that we filed on February 29, 2016, 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. For the sake of clarity, unless otherwise noted, all numbers we talk about today, including revenue per active card will be on a non-GAAP basis. The information may be calculated differently than similar non-GAAP data presented by other companies. Quantitative reconciliation of our non-GAAP financial information to the 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. Steve?

[Steven W. Streit:]

Thank you, Derra (02

[Mark L. Shifke:]

Thank you, Steve. As you can clearly tell from Steve's prepared remarks, Green Dot has had a very busy quarter and delivered results that exceeded our expectations across the board. For 2016, we are providing our financial results two ways, we will first provide our fully-loaded results inclusive of the approximately $11 million and non-recurring and unusual expenses related to the launch of our new prepaid card products at 100,000 retailers, and we will also provide the results without those non-recurring and unusual expenses included, so you can get a clean look at our company's true underlying performance. In both cases, we will exclude expenses associated with the Harvest proxy contest, which were approximately $800,000 in Q1. So, inclusive of non-recurring and unusual launch costs, Green Dot delivered $228.2 million in non-GAAP total operating revenue, $78.3 million in adjusted EBITDA and $0.78 in non-GAAP earnings per share. Without those unusual and non-recurring expenses, Green Dot delivered $228.2 million in non-GAAP total operating revenue, $80.2 million dollars in adjusted EBITDA, and $0.80 in non-GAAP earnings per share. These results are quite robust, especially as we enter the year facing a materially lower revenue run rate that we started 2015 due to the MoneyPak ecosystem active card declines over the course of last year, and having to absorb the new higher Walmart commission rate on the MoneyCard program that won't lap until this month. The primary reason for the strong beat that exceeded our expectations is the quality of our portfolio. While our portfolio of active cards declined by 12% year-over-year, in large part as a result of the discontinuation of MoneyPak last year, our corresponding Account Services segment revenue declined by only 1.9%. The reason is that, the revenue per active card jumped 11.2% year-over-year, reaching a new company high. Strong growth in revenue per active was achieved in all our prepaid channels and brands, including legacy portfolios, acquired portfolios, online channels and retail channels. This trend towards increasing customer quality as reflected in our revenue per active measurements has been increasing year-over-year for the past five years, accelerating with the removal of MoneyPak last February. As such, we believe these quality trends are real and sustainable. Furthermore, as Steve mentioned, these Q1 results were generated from the active portfolio of our old suite of prepaid cards. Our new suite of prepaid cards with materially better unit economics were not yet a big enough part of mix of active cards to make an impactful contribution in Q1. The early performance results on our new cards are looking very strong, and those cards should contribute more to our consolidated performance as they become a larger part of the active card portfolio over time. To be clear though, we only have 30 days to 60 days of new card data to analyze, and there's always risk that the new products don't end up behaving exactly as we've modeled. By the Q2 call, we should have a clearer picture on how the new cards are selling, their usage characteristics and the resulting longer-term revenue generation expectations. Our Processing and Settlement segment, which includes revenue from tax refund transactions processed at TPG and the revenue from cash reload transactions and MoneyPak fees was essentially flat in revenue year-over-year on a slightly lower number of transactions. More specifically, aggregate transaction count was down 4% in the segment, but aggregate revenue per transaction was up around the same amount. The lower transaction count from TPG was largely a timing issue where we expect the majority of those fewer transactions to be made up in Q2. On cash transfers or reloads, the total transaction count is the net of 751,000 fewer MoneyPak units, which were sold in Q1 2015 before the product was discontinued offset by a year-over-year increase of 371,000 more swipe reloads process over our network this year than last. In addition, to Green Dot card customers performing more swipe reloads year-over-year, reload transaction count on our network by customers of non-Green Dot card programs, what we call third-party reloads was also up sequentially, and year-over-year with the revenue concentration percentage of third-party reloads on our network up 9% year-over-year. Over time, we would expect to see continued, but gradual year-over-year improvement in revenue per transaction from our cash transfer business line attributable primarily to the discontinuation of free reloads on the new Walmart MoneyCard portfolio, generating more paid reloads, and the contribution from unit sales of new higher-priced MoneyPak as those sales may increase over time. We continued to generate strong cash flows in Q1, and maintain a very solid balance sheet. Cash flow from operations in the quarter was $78.3 million and our unencumbered cash position increased to approximately $151.2 million. Subsequent to the quarter close, we announced that we entered into a definitive agreement with Bank of America Merrill Lynch to purchase a total of $50 million of our Class A common stock under an accelerated stock repurchase transaction. We have now repurchased $100 million of our Class A common stock since September 2015, when our regulators first approved the program. We are committed to executing the remaining $50 million under our $150 million repurchase authorization by 2017. Now, let's discuss our updated guidance for 2016 and the implications on 2017. In the Q4 call, we guided Q1 to equal approximately 30% of our full year revenue forecast of $703 million at the midpoint. So this implied our expectation for Q1 revenue to be about $211 million. However, we achieved $228 million. Of the approximately $17 million in revenue over-performance in the quarter relative to our expectations, we estimate that around $12 million was a result of the timing of tax processing revenue from TPG and tax refund related card sales and reload revenue coming in Q1 instead of drifting into Q2 as we thought it might. In other words, because of the slow start to the tax season in January, we thought around $12 million of revenue normally hitting Q1 would drift into Q2, but it didn't happen that way as March tax related revenue was really accelerated, making up for most of the slow start in January. So, we estimate that $12 million of the over-performance in Q1 is simply timing based. However, we estimate that the balance of the $17 million over-performance, or $5 million, was attributable to achieving a higher number of active cards than expected and more revenue per active card than we expected, as a quality of that legacy active portfolio outperformed our forecast. While we are encouraged by the quality of earnings from our existing active card portfolio in Q1 and even more encouraged by the early strong performance on our new suite of prepaid cards with better unit economics that we expect will make up a larger part of our active card base over the remainder of the year, it's only the first quarter of the year and we only have 30 days to 60 days of data on those new cards, which we don't feel is enough data from which to draw reliable conclusions. As such, we don't feel comfortable at this point changing our model for Q2, Q3, or Q4. We would rather wait another quarter to get more clarity on how our existing portfolio behaves and to see how our new cards perform in both unit sales and revenue per active card. However, since we did over perform Q1 by $5 million relative to our forecast, we do believe it is appropriate to add that $5 million to our full year revenue guidance number. As such, we are increasing our revenue guidance from a range of $700 million to $705 million to a new range of $705 million to $710 million to reflect that this over performance is now in the books. For our full year revised adjusted EBITDA guidance, on a fully loaded basis, including those non-recurring and unusual expenses, we are going from a range of $154 million to $158 million to a new range of $156 million to $160 million. Without those non-recurring and unusual expenses, we are going from a range of $165 million to $169 million to a new range of $167 million to $171 million. Taking into account the over-performance in Q1 as well as the impact of the recently executed $50 million ASR on our share count, we have revised our full year non-GAAP EPS guidance both with and without those non-recurring and unusual expenses. As previously disclosed, initial shares delivered to us under the ASR were 1.9 million. On a weighted average basis, this will reduce our diluted share count by 1.4 million shares. As our stock price has risen, we also have taken into account the increase in diluted equity awards. We now expect our diluted share count for the year to be between 51.3 million and 51.6 million. As such, including those non-recurring and unusual expenses, we are going from the previous guidance range of $1.35 to $1.40 to a new range of $1.39 to $1.44. Without those non-recurring and unusual expenses, we are going from the previous guidance range of $1.48 to $1.53 to a new range of $1.52 to $1.57. As it relates to our six-step plan commitment to achieve at least $1.75 in non-GAAP EPS in 2017, clearly, we believe our operating performance thus far in 2016, including the completion of the $50 million ASR plus the strong financial results we delivered in Q1, gives us significant incremental comforting confidence in our ability to meet or beat that target. We will formally introduce guidance for 2017 later this year. As we look at Q2, we expect to incur around $8 million of the total $11 million in full year launch expenses in that quarter and much of the tax refund related revenue we thought would drift into Q2 actually stating Q1. So, given those items, for Q2, we are providing the following guidance. We expect Q2 revenue to be approximately $168 million. Including the $8 million in non-recurring and unusual launch expenses, we forecast to achieve adjusted EBITDA of approximately $28 million and non-GAAP EPS of approximately $0.21. Excluding the $8 million in non-recurring and unusual launch expenses, we forecast to achieve adjusted EBITDA of approximately $36 million and non-GAAP EPS of $0.31. When you put that altogether, first half revenue is expected to be approximately $396.7 million. Adjusted EBITDA, with and without the unusual expenses of roughly $10 million, is expected to be approximately $106 million and $116 million respectively. And EPS, with and without the unusual launch expenses, is expected to be approximately $1 and $1.13 respectively. And with that, I would like to ask the operator to open the phone for questions. Operator?

[Operator:]

Yes, sir. And our first question comes from Ramsey El-Assal from Jefferies. Please go ahead.

[Steven W. Streit:]

Hi, Ramsey.

[Christen Chen:]

Hi. This is Christen Chen for Ramsey. Thanks for taking my question.

[Steven W. Streit:]

Oh. Hi, Christen.

[Christen Chen:]

Hi. How are you guys doing?

[Steven W. Streit:]

Great.

[Christen Chen:]

So, the Q1 numbers came in very strong and you talked about how $12 million of that was supposed to be in Q2, so I guess just parsing that a little bit more, are there any other underlying drivers aside that tax impact that is causing the Q2 numbers to come in below our estimates?

[Steven W. Streit:]

Well, it depends, I suppose, how you built – the question was hard to hear in the studio. The question was their estimates were higher in Q2 than our implied guidance what we just gave. And she is saying other than the $12 million in timing, is there something else causing Q2 to be lower than her estimates. The Street was at $170 million (43

[Christen Chen:]

Yes, that's correct.

[Steven W. Streit:]

Yeah. So, part of it was the timing and I'm not sure because I don't know how you structured the model. But our first half, I think, is actually a little better than consensus when you put the first half together. Maybe the quarters worked out differently. And I think we need to look at your model to answer better.

[Mark L. Shifke:]

Yeah. Overall, I think, we are higher than where you all are coming out in your models for the year. And in terms of the geography, we were clearly higher in Q1. I think what – and we'd have to go back and see what you're doing for your Q2 model to understand what differences there could be.

[Steven W. Streit:]

But I think the first half, you're likely more on track. Hard to know I guess, what we can do is offline, to the extent we're allowed, we can go through the different inputs of what our Q1 did in terms of performance and see if we can walk through that with you and maybe by doing that we can help you tie that better. Yeah.

[Christen Chen:]

Okay. That's fair. And then, I believe when you first provided your 2016 guidance that share buybacks were not included, can you just help us size up what was the EPS contribution from the buybacks in this quarter and, kind of, remaining part of the buyback, like do you guys factor any of that into your current guidance?

[Mark L. Shifke:]

Yeah, sure. So, this is Mark. What we said was, for the year, we raised our EPS guidance by $0.04 and said that $0.02 of that is coming from the ASR and $0.02 is coming from the revenue beat.

[Steven W. Streit:]

Yeah. You don't get the full benefit of the buyback because it's nine-twelfth of the year. So you average that share count, and then of course, it has a bigger impact next year, because you have the full benefit of the share reduction plus whatever more you get back from the ASR this year.

[Mark L. Shifke:]

It obviously didn't have any impact in Q1 since we didn't execute it until Q2.

[Steven W. Streit:]

Right.

[Christen Chen:]

Sure, sure. And then just last one from me and I will hop (45

[Steven W. Streit:]

Sure.

[Christen Chen:]

Can you just speak of the relative profitability of the TPG tax card? I mean, are these customers kind of the one and done customers versus kind of the typical Green Dot customers? Or, I guess, can you just help us understand how the profit profile stocks up?

[Steven W. Streit:]

Sure. Yeah, I think it's fair to say that the number of cards we sold to the TPG ERO channel for Q1 was somewhat immaterial to our results. So, nothing that would have I think moved the result one way or the other. But we've got a good amount of learnings of it. And generally, tax cards pay off in the quarter although our past experience with other tax cards is that anywhere from 10% to 15% of those will become long-term better customers. So, for easy math, let's call it 85% to 90% of those disbursement customers will, in fact, use it to get their money off at an ATM or will spend it down. And maybe another 10%, 15%, sometimes more, if you have incentives, will become regular long-term customers. So, they're good customers and they certainly generate good revenue, but they're not always long-term customers.

[Christen Chen:]

All right. Thanks, guys.

[Steven W. Streit:]

You bet.

[Mark L. Shifke:]

Sure.

[Operator:]

And our next question comes from Sanjay Sakhrani from KBW. Please go ahead.

[Steven W. Streit:]

Hi, Sanjay.

[Tai DiMaio:]

Hi. This is actually Tai DiMaio on for Sanjay.

[Steven W. Streit:]

Okay.

[Tai DiMaio:]

Thanks for taking my question. I guess my first question is on revenue per active card. It continues to ramp up pretty nicely. I mean is there a cohort of customers that are highly active that are kind of – or a model customer that you think you can drive this metric, do you want to average over time to for the legacy card (47

[Steven W. Streit:]

Well, where we're seeing the biggest difference is in your reloaders, which seems to be intuitive. But we make a lot more money off of cash reloaders and we do off of one into others and we make more money off direct depositors and we do off of cash reloaders. So, you're trying to get people to first buy the card, then reload it once. If they reload it once, hopefully, they'll reload it twice, and better you have to become direct depositors. I think just the whole card's reloadability and the ad campaigns we've done and some of the things we've done to try to make this more of a lifestyle product are beginning to pay off. And frankly from a mathematical point of view, also MoneyPak going away has helped because MoneyPak, as we said, when we first move the product had a lot of casual users with it. So you're sort of left with the customers who are real honest customers, if you will, not that they weren't honest, but genuine customers, looking for long term usability versus the convenience customer, that's maybe a better way to say it. And so, that also helps. What's great about this quarter is that not only did we recover lot of active cards at 4.75 million actives, but they were real customers, meaning they bought the card with the intention to reload it more so in quarters or years passed. So part of it is that the products maturing, people look at it as a more legitimate product, not just for us, but I would expect to see the same trends in our competitors, it's more of a macro industry kind of a thing and we're benefiting from that. But then, we've also done a lot just to encourage reloading and to make the card more usable with better features and benefits. And the new products take that even one or two steps further. So, we're very encouraged from the growth and it makes a huge difference because that incremental revenue on a card that you have issued just falls after partner rev shares and other expenses to the bottom line add a much higher incremental margin to the margin on a virgin new card that you sell. So, it's certainly a positive impact to the model.

[Tai DiMaio:]

Okay. And I mean, just to clarify, the higher unit economic cards that you guys have been pricing up, that didn't have a big impact this quarter, right?

[Steven W. Streit:]

It did not. That's one of the most – oh, I forgot how we phrased it in the prepared remarks, but one of the most encouraging parts of the result is that we just didn't have enough new cards. They were only on sales for, oh, let's call it, 45 days or 60 days at Walmart, and then only in Rite Aid for few weeks for our Green Dot brand in the quarter. So we just didn't have a lot of them in there relative to the 4.75 million active. And so, everything you're seeing is from the contribution of our legacy cards, which have lower fees, $3 a month in the case of one portfolio, $595 in the case of the other, and other kinds of features and services that make those unit economics inferior to our new card. So, when you see this kind of strong performance from your existing base, and you see that the new cards are generating a lot more revenue and usage in the first 60 days of life, if that continues, and if those new cards continue to do better in that fashion, you'd have a way bigger company. So, we're very optimistic about that, but too early for us to change the model or draw any conclusions from it, except that it's a great opportunity to feel optimistic.

[Tai DiMaio:]

Okay. And then my last question is on the incremental product launch costs. So, you had roughly $2 million this quarter, and then you're guiding to $8 million next quarter, so mostly the majority is going to be done by the second half of the year, can you remind us what the lag time is, I guess, before you expect those initiatives to kind of then roll into revenues?

[Mark L. Shifke:]

Yeah, this is – so I would say there are two different things we're really focused on, one is the one-time cost associated with pulling out all of our cards and putting brand new different cards across 100,000 retailers. And you have that expenditure, some of it is an immediate expense, some of it is amortized over a quarter or two, and that's what you're seeing from the $11 million in one-time cost. That's separate and apart from our initiatives around Green Dot Money, and other kinds of things that we talked about, and we're not indicating that there are any one-time cost associated with those initiatives.

[Steven W. Streit:]

Yeah, one of the – that's a good point. One of the cool things and we describe them as high opportunity initiatives where you don't have to spend a lot of money to roll them out. I sort of have a friend who runs a Chinese restaurant, and he's always bragging that the cost of food is so low, because you have five ingredients in the restaurant, and from that you have 100 different menu items. And it's actually a good comparison to what we're doing, because at Green Dot, we have this massive cash load network. We now – because of our GoBank investment, and because of our technology platform can accept checks, which no other prepaid card provider does in the way we can do it as the issuing bank. You can write checks to pay a rent and do other things. We have all these different features that we have coming, and that can drive that revenue. But I forget the – I'm not going to forgot the...

[Mark L. Shifke:]

No, the point is that, in terms of...

[Steven W. Streit:]

Oh, the cost. Yeah.

[Mark L. Shifke:]

...costs, because we have this massive platform at scale.

[Steven W. Streit:]

Thank you. Yes. So, the point is you can reuse all that technology and create new products. So, if you look at Green Dot Money, it's about building a website. We already have the customers coming into the building; we already have the ability to take payments and cash out of retail load network, right. So you're able to get customer at no cost of acquisition, and turn them into something powerful and potentially. So that's what we mean by those initiatives. So, we've not budgeted anything incremental into our model. All the cost of rolling out those new products and those new services are already in our budget, and we're taking whatever hit there is in that model. The $11 million is simply for the re-merchandising and re-stocking of those 100,000 retailers related to our new prepaid cards. Does that answer it better?

[Tai DiMaio:]

Yeah, yeah. That's perfect. Thank you.

[Mark L. Shifke:]

Okay.

[Operator:]

And our next question comes from Vasu Govil from Morgan Stanley. Please go ahead.

[Vasu Govil:]

Hi, thanks for taking my question. I guess, I wanted to start-off with some clarification on the TPG revenues that were brought forward into this quarter. I think, you said $12 million of revenues pull forward from 2Q to 1Q, but then I think on transactions, you made a comment that some transactions are pushed out into 2Q, could you help me reconcile those two things?

[Mark L. Shifke:]

Yeah, so what we said in terms of timing of Q1 to Q2 wasn't just TPG. It was initially a view of our tax-related revenue associated with TPG, and our broader card business. And when tax refunds were coming out slower than originally anticipated, because the IRS was slowing things down, we thought some of that would roll into – more of it would roll into Q2. As it turned out, March re-accelerated and caught us up not entirely, but for the most part with our revenue estimates on both TPG and our card business. And so what you'll find is, in that reconciliation as we said, look, our true beat was $5 million and $12 million was that readjustment of timing. In Q2, still some of the revenue and number of transactions that we would have thought TPG would have had in Q1 if everything were on time didn't happen, and so there's still some lag from tax revenue associated with our Q2 results.

[Steven W. Streit:]

And this is awfully confusing, isn't it?

[Mark L. Shifke:]

It's a pretty simple thing. I guess the answer is, if you think about first half, because we always tax refunds in Q2 as well, it's not always in just Q1. So we sort of think of a bucket of all the tax refund transactions we do over the first half of the year. The question is, how much will come in Q1, how much will come in Q2. We thought a lot more would slip into Q2, and we also sell cards into reloads based on the tax refund business unrelated to TPG, just organic activity from our customers. So with a slower start to the tax season, we assume that more would come in Q2 than it did. When the tax season really accelerated to March, we realized that a lot more actually hit in Q1, and that was that $12 million. So it's more transactions hit in Q1 than we thought, and more card sales and reloads in our prepaid business hit in Q1. So it's kind of unrelated to the total number of transactions. And then the second part is to your question, we expected X number of transactions to hit in Q1, and we're a little bit short on that for TPG, but then we're seeing that being made up for Q2. And so, the total will likely be similar, but it's just that the timing is a little bit different. So it's a kind unrelated metrics, I guess.

[Vasu Govil:]

Got it.

[Mark L. Shifke:]

I don't know if it confused you more or made it better, but...

[Vasu Govil:]

No, no that's very helpful. Thank you.

[Mark L. Shifke:]

Okay.

[Vasu Govil:]

And I guess, another question, well, my next question was on the two renewals that you did with CVS and 7-Eleven, any change in economics that we should be aware of?

[Mark L. Shifke:]

None that we disclosed, we generally don't discuss economics retailer-to-retailer, but nothing material as it relates to the entire company.

[Vasu Govil:]

Got it. Thank you. And my very last question is on, GoBank; we haven't heard any stats on how the enrollments are going on, and I'm wondering if you can give us an update there? And I think a while back, you had shared some estimates on what the average revenue per account was, I think roughly you had said $11 just wondering if that's still trending around there, or if there's been any change?

[Steven W. Streit:]

Good question, maybe we can put a slide in the Investor deck. So the answer is, there's different incarnations of GoBank. GoBank is a – as you know a product that we sell on Walmart and online at GoBank.com it's a mobile checking account. GoBank is also a small business checking account that we have out with Uber and hopefully we'll have more of those kinds of integrations coming up, so it's a separate account there. And it's also a platform, which is where we run all of our prepaid products now. So we talked about last quarter that we retired our prepaid legacy systems, and put it all on what is, what we call the GoBank platform, the technology platform. So if you look at the brand of account, call (56

[Vasu Govil:]

Got it, thank you very much.

[Steven W. Streit:]

Yeah. You bet.

[Operator:]

And our next question comes from Josh Elving from Feltl & Company. Please go ahead.

[Joshua James Elving:]

Hi, thanks. So I hate to beat a dead horse, but just one or two more on TPG...

[Steven W. Streit:]

Yeah.

[Joshua James Elving:]

So, just to be clear, year-over-year revenue in that segment was roughly flat on a little bit lower transactions, which were above 4% (57

[Steven W. Streit:]

Yeah. So the transaction count is not just TPG. So that segment includes all of our reloads, our cash reloads from the Green Dot retail network, and it includes TPG transactions. And I believe we disclosed that in the segment. The number of tax refund transactions we did was, just to recall, 8 million and change or something in the quarter. And then the number of reload transactions we did was 9.3 million or something like that from memory. Well, if you look at the segment report, we'll get the exact numbers to you.

[Joshua James Elving:]

Yeah. I am sorry. Go ahead.

[Mark L. Shifke:]

Yeah.

[Steven W. Streit:]

So those two things combined are the total number of transactions. And then if you just take the revenue from that segment, and the transactions from that segment, we had about 4% fewer transactions that timed into Q1 year-over-year, but our revenue per transaction was slightly higher by few cents and they evened out. And so that's how that works and – is that the question you were asking?

[Joshua James Elving:]

Yeah. I misspoke on the TPG transactions process. I go that number. And so, I guess one of my questions was, the average revenue per file, I believe was closer to $8 in say, 2014. And due to, I believe it was some kind of mix among prepares (59

[Steven W. Streit:]

Well, it's been fairly stable. I know that when we launched the company, and Mark, you may have a better memory for this. You had their version of GAAP that we announced as part of the sale, which was different then Green Dot's EY definition of GAAP as we've turned it into a public company, and that may have been the difference. I think it's fairly stable as the mix shift of TPG business goes into the pro-channel, when you have, and it varies year-to-year. If you look at it year-to-year there's no solid trend one way or the other. The pro-channel has slightly higher margins and more revenue than the online channels do. And so, that's why you have the slight transaction changes that are not dramatic, but I don't know, that it's a trend good or bad, but this year the way it worked out is that we had a slight mix shift towards the pro-channel, and so that generated that extra 4%, so just coincidentally worked out to just about right, and worked out in that fashion.

[Joshua James Elving:]

Okay, fair enough. And then on the other G&A line, that was up a little bit on a year-over-year basis, can you kind of tell me again, what's in there and perhaps why that was up a fair amount year-over-year, it was $38 million versus $28 million last year?

[Mark L. Shifke:]

Yeah, so a good chunk of that is non-cash charge associated with the change in value for our contingent liability for the TPG transaction. That – as you know when we first acquired TPG, we put up a contingent liability for the earn-out and we had to reserve for that at the end of 2014 and 2015, we reduced that by about close to $8 million. And we didn't reduce it again this year. So, on a year-over-year basis, we're going to see a lot of that associated with that non-cash change and the contingent liability. On a cash basis, you're probably seeing a little bit more associated with combination of the Walmart commission which we didn't have in Q1 of last year, a little bit on sales and marketing, a little bit in depreciation and amortization, and the proxy costs.

[Joshua James Elving:]

Okay, thank you.

[Steven W. Streit:]

Sure. You bet. Thank you.

[Operator:]

And that concludes our question-and-answer session. I'd like to now turn it back over to Mr. Streit for any closing remarks.

[Steven W. Streit:]

Yeah. I guess, on screen we're showing some other questions, operator. So my eyes aren't great. So I can't see that suspending. Or do we have any more questions in queue or no? Paul? (01

[Operator:]

Okay. Give me one second. Give me one second, then.

[Steven W. Streit:]

Okay.

[Operator:]

Next question comes from Mike Grondahl from Northland Securities. Please go ahead.

[Steven W. Streit:]

Mike, congrats it's you. All I could see was black lighting on the screen, and I couldn't tell if we had a caller or not, I'm sorry. But I'm glad we got you.

[Mike Grondahl:]

Oh, no problem at all. Hey, couple of quick questions, Walmart revenues, did they grow year-over-year?

[Steven W. Streit:]

So, the concentration what we reported, and the concentration was down year-over-year, but I don't think we report the actual revenue any more as a segment.

[Mark L. Shifke:]

We don't.

[Mike Grondahl:]

Okay. And then, a sort of different question on TPG, forgetting about the quarter for a second, if we just think of the entire tax season for TPG. Will TPG revenues grow over last year?

[Steven W. Streit:]

Well, it's hard to know until the entire tax season plays out. You know from our disclosures that they were 4% lower in Q1, but our CEO there believes that we're going to see that made up and that will end up where we thought we would be in square year-over-year. So I think, Mike, that's a fairly stable channel. And when we bought the company, we were very clear that we didn't buy it for growth, although if can do some of these new initiatives like selling card, I'll give you out of the cost of cards and all that other stuff, it could be up. When we look at it straight on the transaction volume, we bought it for a margin, and for diversification, and for scale in half (01

[Mike Grondahl:]

Okay. And then maybe a question for Mark. Interest expense seemed to be about $5 million or so. What's driving that?

[Mark L. Shifke:]

Well, Mike, I think that was probably more like $3 million, and what we did this year, we had a trial – well, it was driven mainly by TPG, where we put our new trial program in place. We wanted to ensure that there was more than adequate funding if it really took off, and we didn't want to expose our balance sheet to the program. So that was a financing cost, it's one-quarter, only. You won't see that showing up again in rest of the year. And that's the year-over-year difference. But as Steve said, we're very pleased with the results we saw. We think we'll be able to do this program for less money next year, and overall it was profitable.

[Mike Grondahl:]

Got you, good. And then, hey, maybe just last question, Steve. A lot of these new developments you're describing, whether it's MoneyPak or Green Dot Money, Uber, Member Benefits, could you point out to us which ones are not in your $1.75 guidance or do they also sort of wrap up and support that?

[Steven W. Streit:]

Well, we would have all of them in for very small amounts of money. Not all, because some for example Member Benefits would be a new deal. So you can't forecast everything, and when you look at your deal pipeline, you have some things in your deal pipeline that you think will be really big, you have others that are good steady run of the course kinds of deals. And so I don't think we forecast for every single item on there. But all of them, if you will, if you think of all the new initiatives together, whether it's Uber or the Union deal, or the Member Benefits or whether it's something else like additional shelving display or something like that. All gets put into mix and we're not forecasting, but it's not possible to do when you build your model a year-out to say, hey listen, what if we renew that contract, there could be seven more cards here. So, it isn't quite that precise. But I would say that all of them, we always rely on our business development pipeline to be additive in some form or fashion year-over-year. But it would not be terribly material. Any one of those things would not be terribly material to our ability to hit the $1.75.

[Mike Grondahl:]

Got it.

[Steven W. Streit:]

Is that kind of where you're getting at?

[Mike Grondahl:]

Yeah, I was just trying to figure out, the puts and takes around that.

[Steven W. Streit:]

Sure.

[Mike Grondahl:]

There's a lot of new developments in this release, and I'm just trying to figure out.

[Steven W. Streit:]

It is. We've been busy for sure, it's funny to say that, Mike, because you follow the company for long time hearing (01

[Mike Grondahl:]

Okay. Hey, thanks a lot.

[Steven W. Streit:]

You bet.

[Operator:]

And our next question – our last question comes from Reggie Smith from JPMorgan. Please go ahead, sir.

[Mark L. Shifke:]

Oh, great.

[Steven W. Streit:]

Yeah. Super. Hi, Reggie, I'm glad we made it you.

[Reggie Smith:]

Hey, guys I wasn't sure if I hit star one, or pound one, and I've been going back and forth, I don't know. I'm happy, I was in the queue.

[Steven W. Streit:]

Yeah. Very good.

[Reggie Smith:]

Few quick questions, I guess on active card count, it was down I guess 12% year-over-year, I was kind of surprised by that given, I guess there's a seasonality there. Can you give us any color on may be what's driven the decline, is that deactivations, is it slower activations may be some color on average life right now. And then as an extension of that, how should we expect the cadence of that active card number to trend throughout the year, should we see a sequential decline as we historically do in 2Q?

[Steven W. Streit:]

Yeah, generally I would guess, and maybe Mark's a better one to answer that. We always have, without regard to what your level is, decrease in active card from Q1 to Q2, because you have an influx of tax customers who are buying the card for that purpose, they use it, they go away. And so I think that trend has been around for many, many years. In terms of why the year-over-year decline, and as you know we forecast a decline, and we did better than our forecast, that was one of the reasons we did so much better in the quarter, as we thought we'd have couple hundred thousand cards less than what we ended up with. And the result is that, year-over-year MoneyPak declined, we started at 5.4 million or a little bit under in Q1 of last year, we took MoneyPak off the shelf in February, we had some small retailers still selling it a little bit after that, but then by the end the Q, it's totally gone. And if you recall that cadence of the year the UCO systems (01

[Mark L. Shifke:]

You're spot on.

[Steven W. Streit:]

Okay. I'm accessing the mental memory here, so going down to 4.5 million. So we lost 700,000 or 800,000; or my gosh 900,000 active cards in the year, as a run rate going into Q1 that we picked up, about little less than 300,000 cards here for Q1. So the answer is, that's a MoneyPak-related decline. At the same time, you can tell by the revenue per card, if you're going to lose customers, you may as well lose customers that are low value and that's what happened. So, the customers who are using MoneyPak or relying on MoneyPak were people who are using it for one and done purposes and people who are using it for short-term use, and as a result, it just didn't impact our revenue and EBITDA as it otherwise could have. And at the same time, we've been accelerating with our quality customers. So not only were the customers we lost negligible customers anyhow, but the customers we picked up really awesome customers who are seeing the ads on the Steve Harvey Show, and they know the Green Dot brand and so forth. And so we're getting a higher quality bunch. So, it's a nice confluence of occasion to see that the customers we lost were the right ones if you have to lose them, and that the ones we're getting are the right ones. And of course, the Holy Grail would be to pick up enough steam with the new products, where without regard to the numbers of actives, that as long as the actives we have are real honest to win these customers, who are using their card for their top-up wallet use. Well, that would be fabulous, you'd see your EBITDA margins expand, and you saw some of that in Q1, and you'd see the company quite healthy. So we're pretty optimistic about the future, but we just don't want to get overly optimistic, because we've been alive long enough to know that things can go wrong, and go bump in the night. But that's the impact you see. So, nothing that I would be worried about in terms of the year-over-year, it's part of the plan, it's something that we've seen and what you're seeing now when you look at reload rates, and active card rates which are your two biggest drivers, both are up sequentially year-over-year for the first time, since we got rid of MoneyPak. So it's good stuff, it shows that the company is healing, and that we're out of the emergency room if you will, and now back on to a more steady path.

[Reggie Smith:]

Understood, I know you alluded to the Walmart concentration, are you able to provide that right now?

[Steven W. Streit:]

Yes, because it's a disclosed number. This is going to be by memory, just – so correct me, if I'm wrong. I'm going to say it's 36% point something in the quarter. Reggie, we'll get it for you, if I'm wrong, it's not by lot. I think, last year we were like a 39%, and this year we're at 36% and change. So it's almost the same amount of revenue. It's a lower concentration.

[Reggie Smith:]

Understood. All right. I guess, I'll follow-up with you guys later on, appreciate the time.

[Steven W. Streit:]

You bet. Thanks so much.

[Reggie Smith:]

Thanks.

[Steven W. Streit:]

And operator, now my – horrible eye see nothing, but the screen. So I think we are now done. Am I right?

[Operator:]

Yeah. There are no further questions in the queue, sir.

[Steven W. Streit:]

Okay. Well, listen, thank you everybody for listening to our Q1 call. We know it's a lot of information, and we look forward to talking with you soon. Have a great evening everybody on the East Coast and a great day in Los Angeles.

[Operator:]

This concludes the conference. Thank you for attending today's presentation. You may now disconnect the lines. Thank you.