Green Dot Corporation (GDOT) Q4 2019 Earnings Report, Transcript and Summary

Good day and welcome to the Green Dot Corporation Fourth Quarter 2019 Earnings Conference Call. [Operator Instructions] Please note that the contents of this call are being recorded. I would now like to turn the conference over to Dara Dierks, Investor Relations for Green Dot. Please go ahead ma'am.

Thank you and good afternoon everyone. On today's call we'll discuss Green Dot's Fourth Quarter 2019 performance and talk about fiscal 2020. Following those remarks we'll open the call for questions. For those of you who haven't yet accessed our earnings release that accompanies this call and webcast, it can be found at ir.greendot.com. As a reminder our comments include forward-looking statements 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 our most recent Form 10-K and 10-Q for additional information concerning factors that could cause actual results to differ materially from the forward-looking statements. During the call, we'll make reference to our 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 will be on a non-GAAP basis. Information may be calculated differently than similar non-GAAP data presented by other companies. Consolidated reconciliation of our non-GAAP financial information to the directly comparable GAAP financial information appears in today's press release. This 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 Bill.

Thank you Dara and welcome everyone to the Green Dot Corp. Q4 2019 Earnings Call. Today we'll focus on a few topics including our fourth quarter results, a few business updates, our 2020 guidance and finally an update on our CEO search. But first, I would like to spend a moment to thank Green Dot's founder; Steve Streit; and Mark Shifke, Green Dot's most recent CFO and long-time investor for their many years of service to the company. They have laid an incredible foundation which positions us well to continue to lead and transform the financial services industry in the future. Since Chris Brewster and I have stepped into our roles in December we have been very pleased with the entire Green Dot organization. The company has an exceptional team that we can all be proud of. With a lot of hard work and a great team effort we finalized our 2020 budget and operating plan in January. And the good news is, we expect to be at/or better than the preliminary forecast you heard about on the Q3 earnings call which we will share in more detail today. We have also aligned priorities among the operating teams of our various businesses including much more significant budgeting and financial accountability. We expect this to drive better long-term alignment to our financial performance. As many of you recall, Chris is the former CFO of Cardtronics. He has brought a lot of discipline to the organization and he and I have an excellent working relationship as we are sharing internal and external business responsibilities through this transition period. Chris has been spending a lot of time with our internal operating teams getting this work done. In addition to add more vigor to our operating teams we brought in Nick Utton, the former CMO of Mastercard E*TRADE as well as other financial firms to advise us on our consumer engagement plans and he has already begun to identify inefficiencies and ways to improve those throughout the course of the year. Importantly, we have also spent a great deal of time visiting our customers and business partners. I've personally been allocating a significant amount of my time to these visits. The good news is, we continue to win attractive new business partnerships some of which we recently announced and others which we expect to talk about in the coming months. In addition we continue to renew important and growing relationships like Apple who recently agreed to a multiyear extension for the Apple Cash program. We've gathered a lot of helpful feedback from these meetings. Partners truly appreciate that Green Dot is a one-stop shop; meaning that, they value our state-of-art technology offerings as well as the fact that we have our own bank reducing the amount of steps that they would need to go through to implement and update the programs they want to offer clients. Now let me give a brief recap of our fourth quarter results. Green Dot generated Q4 consolidated non-GAAP total operating revenues of $238.4 million. EBITDA for Q4 was $21.8 million and EPS for Q4 was $0.14 per share. We were pleased the quarter turned out pretty much as we expected at the time of the third quarter earnings call. Next I'll provide a brief business update. I'll start with our Consumer Business. As part of our 2020 budgeting process, we have aligned all products on their own P&L. We expect this will better align spending on a profitable consumer acquisition strategy. This also means we are not chasing account growth for the sake of active card growth unlike many of the neo-banks that have popped up over the last few years. We spend where we believe customer acquisition costs are best aligned with lifetime value of the customer. From a product standpoint, we continue to be pleased with our Unlimited product, but for competitive reasons we are no longer going to provide specific product performance that allows our competitors to react to. Jess, will provide some additional commentary on overall consumer account trends, but I want to call out that while our active accounts did decline sequentially in Q4 versus Q3 our direct deposit accounts remained steady at over 2.1 million accounts. Our retail strategy will support our consumer account initiatives and I'm pleased that we launched 750 stores at checkout at Walgreens in November for the Green Dot Unlimited card and a large deployment at Family Dollar as well. On the BaaS side, we continue to make strong progress signing up new customers, strengthening the relationships with our current customers as well as making sure each program has appropriate pricing and financial returns for Green Dot. Last year, we announced new large enterprise deals with Uber and Intuit and more recently as I mentioned earlier we renewed our relationship with Apple and the Apple Cash program. We are pleased to share that we have signed an agreement with a significant player in the S&B segment to deliver small business banking accounts. We are very excited about this program and feel that it opens up a significant new TAM for the 30 million small and medium businesses in America. Once we are closer to launch, we will be happy to share the name. Finally, our joint venture with Walmart TailFin is underway and planning to release its first product in 2020. And we are very honored to be selected to participate in this joint venture with Walmart committing $35 million on an annual basis to the program. Additional details of this relationship will be released in our 2019 10-K. We believe the investment is prudent as this joint venture has the opportunity to produce several large-scale programs over the next 7-plus years. Let me shift to 2020 financial guidance. Based on our current budget for the fiscal year, we now expect non-GAAP net operating revenue to be in the range of $1.08 billion to $1.1 billion; adjusted EBITDA to be in the range of $175 million to $185 million; and we expect our non-GAAP EPS to be in the range of $1.60 to $1.74 per share. This guidance takes into account the headwinds that management discussed on the Q3 earnings call. Jess will cover those again in more detail. As many of you know Steve Streit, Green Dot's founder retired in December. Prior to Steve's retirement, we have been in active succession planning so we were fortunate to have met with many qualified executives over the course of 2019. Since Steve's retirement we actively met with multiple great candidates for the CEO position and while we do not have an announcement to make today the goal is to fill this position in the next few months. I would now like to turn the call over to Jess Unruh to go over the Q4 financials in more detail as well as some additional detail on 2020. Jess?

Thanks, Bill. Good afternoon, everyone. As Bill mentioned, during the fourth quarter our non-GAAP revenues grew 1% to $238 million and we delivered adjusted EBITDA of $22 million and non-GAAP EPS of $0.14. These results are consistent with the guidance we shared on our Q3 earnings call. We discussed the results of our business across two reportable segments: Account Services which represents all of our account programs; and Processing and Settlement Services which represents all money movement services. Last quarter we also introduced a supplemental view of our business: our Consumer Business and our Platform Services Business. Our Consumer Business is a subset of our Account Services segment and represents all of our account programs that we market directly to consumers through our retail and digital channels such as Green Dot, Walmart, GoBank and Rush. Our Consumer Business is a subset of our Account Services segment and represents all of our account programs that we market directly to consumers through our retail and digital channels, such as Green Dot, Walmart, GoBank and Rush. Our Platform Service business represents our products and services that we bring to market through enterprise partnerships and includes the entirety of our Processing and Settlement segment plus the results of Green Dot Bank, BaaS and PayCard programs, which represent the remaining account programs within our Account Services segment. Our results for Q4 reflect the continued trends we discussed on our last call. Non-GAAP revenues from our Account Services segment declined 6% year-over-year, principally from the performance of our Consumer Business. As previously communicated, our Consumer Business has faced challenges over the course of 2019. Simply put, we are not acquiring a sufficient number of new accounts to offset the natural attrition of certain account programs, which is partly due to competition and partly due to execution. Our account programs within our Platform Services Business has exhibited strong growth and continue to be comprised of a high percentage of direct deposit accounts. We were successful in expanding relationships with existing partners, while adding new partners over the course of 2019. In addition to fees from account holder activity, we also earned fees directly from our BaaS partners for the use of our platform and our program management services. In Q4, our Processing and Settlement Services segment grew non-GAAP revenues by 33% year-over-year, as our cash transfer volume growth accelerated to 11% and our SimplyPaid disbursement volume grew 48%. Cash transfer volume continues to grow from third-party programs both existing and new partners and growth in our SimplyPaid disbursements, reflects continued growth for some of our largest BaaS partners. We experienced year-over-year margin compression in the quarter largely due to our marketing efforts concentrated in the back half of 2019 to promote our unlimited product within our Consumer Business. Our non-GAAP EPS over performed our expectations as a result of a lower effective tax rate and fewer diluted weighted average shares outstanding. To recap our full year 2019 results, we delivered non-GAAP revenue of $1.058 billion, adjusted EBITDA of $241 million, and non-GAAP EPS of $2.79. We continue to generate excellent cash flow from operations with $190 million for the year ended December 31, 2019. We ended the year with $95 million of unencumbered cash on our balance sheet and minimal debt. Let me shift to 2020 financial guidance. As Bill stated, we now expect non-GAAP total operating revenues to be between $1.080 billion to $1.1 billion, representing 3% organic growth at the midpoint; adjusted EBITDA to be between $175 million to $185 million; and non-GAAP EPS to be between $1.60 and $1.74. This is slightly better than the range we provided in November on our Q3 earnings call. Our expectations for 2020 are as follows: our Platform Services Business will generate over 50% of our consolidated revenues. The growth of this business will come from both our money movement services and our account programs. With respect to our money movement services, which we refer to as our Processing and Settlement Services segment we expect continued growth in cash transfer volume and relatively flat growth in tax refund processing volume. With respect to the Platform Services account programs we expect continued growth in active accounts primarily direct deposit accounts. We expect to continue to grab more market share in the PayCard space and our BaaS account programs continue to expand with existing partners as well as new partners that will launch in 2020. Additionally, we expect the fees we earn directly from our BaaS partners to increase year-over-year. We made a concerted effort to tighten our pricing models such that we achieve a target EBIT margin. In our Consumer Business, we expect that active accounts and direct deposit active accounts will continue to decline, but those declines will moderate in the second half of 2020. We believe the trends will moderate because we have spent a considerable amount of time refining our marketing strategy to produce an improved ROI in 2020 and expect to launch some initiatives in retail to help pick up account acquisition. Combining our Consumer and Platform Service account programs, we expect direct deposit actives which are our highest value accounts to grow throughout 2020, while total active accounts decline in Q1 and the rate of decline moderates throughout 2020. As we look at trends in revenue from our Account Services segment, Gross Dollar Volume or GDV will become an increasingly important metric, because it more closely aligns with revenues from account holder activity and fees from our BaaS partners. In 2020, we expect our EBITDA margin to compress, as a result of absorbing, an increased revenue share rate associated with the renewal of the Walmart, MoneyCard program, a decline in interest income from a depressed interest rate environment and another 300 basis points, between our continued investment, in people and technology, to support new initiatives, partnerships and a digital transformation of our operational capabilities. Our non-GAAP EPS will be largely depressed, from the year-over-year decline, in adjusted EBITDA. Additionally, our depreciation expense is expected to increase to approximately $63 million, compared to $50 million in 2019, as a result of our CapEx investments over the past few years. We anticipate our non-GAAP effective tax rate will be around 22%, in line with 2019. And a diluted weighted average share count of approximately 54.5 million. We still expect to generate strong operating cash flows, in 2020. In 2019, we invested our cash flow and CapEx, in share repurchases. In 2020, we expect to focus our capital, on growth investments and other corporate purposes. For the first quarter, we expect non-GAAP revenues to be approximately 30% to 31%, and adjusted EBITDA to be around 48% of our full year 2020 guidance. As a reminder, we experienced some seasonality in our business. And typically the first quarter is the highest in terms of revenue, and adjusted EBITDA. First quarter seasonality is impacted by a concentration of cash-related transactions, processed through our ecosystem. In summary, we remain focused on restoring the health of our Consumer Business. And expect continued momentum for our Platform Service Business, into 2020. With that, I'll hand it back over to the operator for questions. Thank you.

Thank you. [Operator Instructions] And our first question will come from Ramsey El-Assal of Barclays. Please go ahead.

Guys and thanks for taking my question. Nice results, tonight. So I wanted to ask more about, the thought of kind of stabilizing active account decline, as the sort of mix shift to other businesses that are not as dependent on selling sort of more cards through traditional channels. You'd mentioned you have some programs, kind of planned. And that you expect the active account decline to stabilize, in the middle of this year. Can you just give us a little more granularity and color on your confidence level there? And maybe a little bit more on those -- the levers you have to work in order to address that sort of active account decline?

I think the answer is pretty clear. There's no question that the way retail operates in the United States today is different, than it has operated in the last couple of years. You may have seen Walmart's earnings yesterday, where they said, as a matter of fact, that their store revenues were tepid, as other retailers. So I think we just have to recognize the fact that people going into a store. And grabbing a card off, a J-hook and putting some money on at the cash register is not really the way consumers are going to operate in the future. And that's why we are more interested in our BaaS program, which signs up a customer. And then gets a large number of consumers in that manner. And the direct channel of obtaining customers. And I think that, we just have to recognize that, that's the way consumers are going to operate going forward.

Yeah. And just to provide some more color on active trends. So I think about the platform side of the house, that's a high direct deposit penetration base. And so as that's a growing business, we expect the direct deposit base and the actives to grow year-over-year. And on the consumer side as Bill mentioned we still expect Q1 to be down relatively consistent with Q4. And then some of those trends will moderate through the rest of the year as we get better with our marketing spend, optimize it, et cetera, et cetera.

And let me just add one other thing. As we look at the universe of customers, we see that our direct deposit customers are increasing and becoming a significant piece of the portfolio. The place where the cards are declining are those people who went into the store and bought a card. Well, the overwhelming majority of those people were sort of one-and-done customers. They went into the store, they got a card, they had to pay a bill, and they never use it again. And frankly that customer historically we were making $1 or $2 on that customer. So, the fact that that business is declining from an economic standpoint is not that much of an issue to us. We're happy that the direct deposit customers is a growing segment and is clearly more valuable.

Okay. And then a follow-up for me is on Starboard. Obviously you have an activist in the stock now. I just was wondering if you had any comment there in terms of whether you're aligned with their objectives, what you expect to come of that relationship? Any comment there would be helpful. And then I'll hop back in the queue.

Sure. Look the Starboard is now a significant investor in the company. I have spoken with them on several occasions and they actually want the same thing that we want. They want to see the company prosper. They have a strong desire for us to hire the best CEO for the company. By the way that's exactly what I want to do and that's exactly what our Board wants to do. Frankly, I want to hire this CEO as quickly as possible, so that I'm no longer the CEO. And my conversations with Starboard have been professional. And I think we're completely aligned. If at some point, we end up where we're not aligned, then the situation may be different because everybody knows who Starboard is. But at the present time, I'm pretty optimistic that we both have the exact same goals for the company.

Fantastic. That's very helpful. Appreciate taking my questions.

Our next question will come from Bob Napoli of William Blair. Please go ahead.

Thank you for the question. And just on the growth of the BaaS can you give us any feel for what the size of the BaaS business is today and the growth rate of the BaaS business within the Platform business?

I will say this. So I think we gave in our color commentary was the Platform business as a whole was over 50% of our consolidated revenues in 2020. So, without pulling apart the Platform business specifically, you can see that that implies a pretty healthy growth rate on the Platform business overall and that is predominantly coming from the BaaS and the Money Processing businesses.

Okay. And then is the Platform business -- what are the margins on the Platform business versus the Consumer business over the medium to long-term currently? And I mean I would imagine you're investing a lot more there, what would the margins look like for that business?

I would say on -- without getting too specific here, BaaS in particular, has similar contribution margins to that of the Consumer business. So that's a -- obviously, a subset of the Platform business. With respect to sort of long-term margin outlook, that's going to be impacted by a lot of different factors including competition over the course of this year, the outlook on interest rates, the impact of operational improvements that we're currently investing in. So, I think we'd like to give the new CEO an opportunity to opine on long-term margins. So, I'll defer that discussion until the new CEO can weigh in.

Bob, let me just make a comment on margin. We're in a very competitive market. And I believe that the important thing for us to do in a competitive environment that we're in is to protect the revenue of the company. And if we have to have some margin compression in the near-term because we are competing against people who have -- who are not running their businesses in order to make a profit, they're running their businesses in order to just get consumers regardless of whether they're making any money or not, while we're trying to run a very responsible business with a very disciplined approach with product P&Ls to make sure that we're investing the shareholders' money in an appropriate manner. And because of that, we will see some margin compression, because we're not going to lose business to people who are spending irrationally. And over time, I'm confident that our approach will win out as some of these other companies frankly run out of money.

And last question just to sneak in. What is the difference? Have you been -- what do you feel is the difference between the product set that some of these new high-growth companies that have raised a lot of equity. The difference in their product set versus the current Green Dot product set? And how do you narrow that gap?

Yeah. So I think the fundamental difference is likely the fee. I think the feature set is similar. We do a constant sort of analysis of us versus competitors. We see that in a lot of cases our feature set is better than most. I think the main factor here is that we've decided to provide rewards in exchange for what we think is a valuable return, and thus getting a profit versus others who I think are doing land grab and they have a different strategy.

Thanks. Thank you. Appreciate it.

And our next question will come from Andrew Schmidt of Citi. Please go ahead.

Hi, Bill. Hi, Jess. Thanks for taking my question. Jess, I think you made a comment about two factors affecting the Consumer Business execution and then competition. Obviously competition has been well documented. But I'm wondering if either of you could dig into these factors a little bit more? Talk about what's controllable from your point of view versus what's not? And maybe just some sharper comments around the execution component would be helpful.

Sure, sure. So, I think in 2019, I think we had launched our products later than anticipated. It was maybe the first execution issue. And then second I think is more around our marketing strategy. And so, we've spent a considerable amount of time in the last few months here dissecting our marketing strategy. As Bill mentioned in his prepared remarks, we have a gentleman by the name of Nick Utton, who's coming in to help us refine that process, and really focused on the highest ROI and NPV per channel. And not getting into the details of which channels we'll be going into for competitive reasons, but I'd say those are the controllable factors. So launching things as we've projected in our guidance, and then two is ensuring that the ROI and marketing spend is as efficient as possible.

Okay. Thank you for that. And then, on the expense base, I definitely understand the need to spend to sort of keep up with some of these competitors. But are there opportunities to rightsize the expense base? It seems like there could be some opportunities here. I mean you're doing some from just an ROI point of view in terms of just investment efficiency. But are there other opportunities or large buckets that we should consider?

Yes. There are things that we can do. There are things we can do better, and there are things that we're doing in terms of the expense base. Let me give you a couple of examples. Our numbers included hiring a certain number of employees in 2020. We are in a hiring freeze. So, I assume that we will hire some people in 2020. And we put in our plan the expense for those people, but in order for us to hire anybody in the company today both Chris and I have to go through that request, and we're frankly being pretty tough about it. So that's one of the ways that we can manage the expense base. We have also put in the plan for 2020, a certain amount of money, which for want of a better term I call the CEO fund. It's not the CEO fund for me, but we've put some money in the budget assuming that the new CEO is going to have some ideas as to how we should spend money and rather than add that to the budget later on, we've allocated a certain amount of money. He or she may decide that that's not money that needs to be spent, but that's another way that we're trying to manage the expense side. The third thing that we're doing, which I'm pretty excited about, because I think there's a lot of opportunity is frankly, we have not been as diligent in our vendor management programs as we could have been in terms of whether it's the cards we buy or whatever else we spend money. And we are really on a company-wide basis of looking at all those contracts. And as new contracts are getting signed, going back and trying to manage those expenses as well as we can. I think my overall point in response to your question really is throughout the company. I think Chris and I are taking a very diligent look on how the company spends money and making sure that we're disciplined that we're spending money the right way.

I guess, if I could follow that Bill just briefly that we have two substantial projects in the operational area of the company that involves some technology lift, which is well underway. One is largely focused on customer service and a substantial amount of automation around customer service; the other is around fraud prevention. I think arguably we have not been at state-of-the-art in either of those types of operational activities. I think with the completion of these projects, we should be there or close to there and I expect that to have some meaningful financial benefits for us on the cost side.

I think that – what I'd like to add is obviously both Chris and I are here on an interim assignment, pretty much at the request of the Board. But we've decided early on that we would operate in these jobs as if we were going to be in the job for the next 10 years because we didn't believe that it was appropriate for the company for a three or four month period to have a caretaker and let the business run as it had run while we were looking for a new CEO. So obviously with Chris' phenomenal background as a public company, CFO, we've made some substantial changes in the company because we just wanted to get – we wanted to get going and we wanted to give the new CEO as strong a platform as possible.

Very helpful. Very comprehensive. Thank you, guys. Appreciate it.

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

Hi, guys. Appreciate you taking the questions this afternoon. Maybe I want to go back and ask you perhaps to elaborate a little bit on Bob's question about the nature of competition and kind of weave it into the conversation of marketing and how you view the market as a whole. So maybe you could opine a little bit on – and I'll just throw out a name Chime, the one that's on the news maybe the biggest neo-bank in the U.S. Do you feel like irrespective of consumer behavior that they're gunning for Green Dot i.e. unbanked and underbanked customers or JPMorgan Chase, one. And if the answer is kind of the big banks, the established banks, more mainstream customers, how does that frame up against the level of marketing that you think you're going to need to defend the brand, notwithstanding the fact that margins are going to be compressed perhaps structurally about what's happening in the market?

I don't think you can say that – if we're using Chime as an example. I don't think we can – you can say that Chime is trying to be JPMorgan or whether Chime is trying to be Green Dot. I think at the present time Chime is saying "I've raised a bunch of money. And I'm going to spend that money in as many different ways as I can. And I'm going to try to get as many customers I can, regardless of who they are. And at some point when I have all these customers either somebody is going to come along and buy me for a lot of money or I'm going to figure out a way to make money with these customers." And I think for example, since you brought up Chime as the example you're using, when you look at Chime buying a sponsorship in an NBA basketball team, it's just hard for me to say, okay I understand how that's going to bring customers to me and that's going to be profitable customers to me. Clearly when Chime announces in the last day that they've got a deal to pay consumers above market rate on savings, they're not coming at Green Dot to do that. They're obviously coming after Chase or Citi to do that. So we see them sometimes competing with us on the direct business. We see them competing against the big banks. I just think that they're -- at this point they're saying we're going to get everybody and figure it out later.

Okay. All right. I'll circle back on that off-line maybe. Yes.

Any time.

One of the things you mentioned too and I just want to clarify this because I've -- there's been a lot of talk in the market about structure. And now we see Lending Club going out and buying a bank yesterday. Historically, and Steve has always submitted that the vertical integration and bank ownership is a critical point of differentiation in that perhaps without that you wouldn't have won some of the referenced BaaS customers you have. Are you reaffirming commitment to that structure? And do you believe that's integral to differentiating Green Dot in the marketplace? And I'm thinking on the Platform side obviously.

Right. We believe strongly that being a bank is a competitive advantage on that Platform business. In the last six or seven weeks that I've been in this job, I've spent most of my time visiting every single one of our major corporate customers. And what I hear from those customers ranges from we wouldn't have done a deal with you if you were not a bank to we think you being a bank is a really strong part of why we like doing business with Green Dot. So I'm committed to us being a bank because I think it really does give us the competitive advantage. And one of our customers said to me that I know that I'm giving my customers to you and I have enough of a relationship and I have enough influence on you that I know you're going to manage my customers in a professional manner. One of our competitors said to that same customer, well you don't have to worry about it. If the bank we've set you up with doesn't work out, we have 40 other banks you can use. And the customer said to me that's -- that scared me to death. Because what that meant is that this other bank could do something wrong that had nothing to do with me or my customers, but it could severely affect me and my customers. And if I do business with you Green Dot, I don't have to worry about that. And that was really a strong message to me and I personally and I believe the company going forward is going to be committed to this structure.

Okay. That's helpful. You bring up a pretty important regulatory point as far as I'm concerned. I'll jump back in the queue. Thanks.

Our next question will come from Mayank Tandon of Needham & Company. Please go ahead.

Hey, good evening. This is actually Kyle Peterson on for Mayank. Thanks for taking the questions. Just wanted to get a little more color on marketing. I know you guys have talked to a lot on this call about kind of rationalizing the customer acquisition process and you think that kind of budgeting on a product basis can make things kind of run a little more smoothly. So I guess like how should we think about the marketing budget for you guys going forward as you guys are kind of launching new products? I know there's been a couple legs up in the marketing run rate kind of in 2019 just when Unlimited was launched and such. So I just wanted to get your color on kind of what level of marketing does this business need?

Sure. Well I'll speak to 2020 and not get ahead of myself in 2021. So for 2020, we expect to have roughly flat marketing spend year-over-year that maybe a different mix of channels and clearly for competitive reasons, I don't want to give any sort of behind-the-scenes color on that. But as a whole, we're spending about the same amount of money for the full year 2020 as we did in 2019.

I would just add to that the -- maybe the sort of operational difference year versus year has to some extent been brought to us by Nick Utton who's a very, very, very seasoned financial consumer product marketing executive. And it's really all about being very data-driven, knowing exactly what research to do given the market that you're going after and tailoring your messages and the media that you use to go after that market very much based on what the research is telling you. So I think he's bringing us a set of marketing disciplines that have not necessarily always been in effect here.

And just -- we throw the name of Nick Utton around, because we know him well. But just for a point of reference, I'm sure most of you remember the MasterCard Priceless campaign, which ran for several years. And Nick was the founder of that whole marketing approach, which really changed the whole structure of how MasterCard operated in its competition with Visa.

Okay. That's really helpful color. And then I guess just kind of as we think about the business through the year, I know you guys gave a little bit of an outlook on 1Q just how the tax business plays into everything. So should 2Q be the trough of the year here? It seems like some of the consumer and platform trends should start to improve in the back half. And then 1Q obviously you get the benefit of the tax. So I just want to I guess clarify that it seems like 2Q probably is the trough of the year?

I think you're on the right path. I think we have some initiatives in the back half that would provide a little bit of a bump in the latter quarters. So I think you are directionally correct yeah.

All right. Good luck. That’s helpful color. Thanks, Jess.

And our next question will come from Steven Kwok of KBW. Please go ahead.

Thanks for taking my questions. Just wanted to drill down a little bit deeper around the CEO search. In terms of -- like for the strategy that's going forward, is the CEO -- does he have the potential to come in or she, and change the way how the outlook has been set, or has the Board decided upon a path towards what Green Dot can do going forward and the CEO is going to be implementing that strategy? Just wanted to get the thoughts on that.

So you really asked I think two different questions. I think you asked about the strategy and I think you asked about the numbers. We did a pretty bottoms-up budgeting process, Chris and I did during the month of January, which drove us to the consensus that we talked about today. And that was presented to the Board about 10 days ago and approved by the Board as the plan for the company in 2020. I think in fairness when we hired the CEO and that person is engaged and in the job, I think that that CEO is obviously going to look at both the numbers that the Board approved and the basis, on which we're doing business. And he or she is going to decide whether they believe -- whether the CEO believes that that's exactly the right direction that the company should be going and is going to manage the company in that manner. I think that the -- as I've gotten more and more into the numbers, I have a pretty high confidence level that the numbers that we laid out today are achievable by the company. And we're going to hire a terrific CEO and I think that we'll achieve those numbers. And under his leadership or her leadership maybe things will get better later in the year. This is a big battleship and it doesn't turn on a dime.

Got it. And my follow-up was just around the guidance. If we just look at the revenues, essentially it was raised $20 million to $30 million while EBITDA was raised $5 million to $10 million. Could you talk about what the incremental margins of dollars of revenues coming on? How should we think about the margin on a longer-term basis?

In respect to the incremental revenue that -- above the soft guide is that what you're referring to specifically?

Yes. Just you raised the revenue $20 million to $30 million versus it being flat. And so I'm just wondering what the flow-through of revenues going forward to the EBITDA line?

Yes. Maybe another way to phrase it would be we did -- that was -- in our Q3 call it was a soft guide. Over the course of the next three, four months we did a lot of fine-tuning around assumptions. So I can't peg it to one or two things. I would say it's a more fulsome budgeting planning process that that entails. And the results are what you see in that guided plan versus going through and saying well what changed from soft guide to full plan.

Got it. Thanks for taking my questions.

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

Thanks for taking my question. So a question on the retail strategy. You talked about several new retail initiatives. You highlighted the rollout at Walgreens and Family Dollar. And then -- but also the tepid consumer presence in the retail channel. So how do we think about the moat that you have in the retail channel? And what you can do with the retail channel even with the tepid consumer footprint in the retail channel how you can reinvigorate that channel? And essentially how that provides a competitive edge compared to the neo-banks who don't really have that channel? So any thoughts on that front?

Yes. I guess, I'll start out by saying in the retail channel obviously, the macro has compression in terms of growth. Green Dot within that channel is either maintaining or growing market share. So as a category overall, we're doing well within that sort of shrinking background of visitors coming through the doors. We have some plans in place in 2020, obviously to launch and get new pegs -- get new packaging that makes it easier to ring up at point of sale. So there's a few initiatives in there to help sort of slow the decline in the retail business and start picking up account acquisition again.

Yes. But there are some relatively straightforward operational things that can be done. One of the shifts in brick-and-mortar retail is away from what I'll call the conventional cash register lanes and automated scanner checkout. And we wound up in a situation where in some of these retailers it was relatively difficult to buy and load our cards that you pull off the j-hook at the automated scanner line. And that certainly has a negative impact on volumes. That's being dealt with. And it's going to get dealt with over the -- relatively early in this year and that should be helpful.

That's very helpful. And maybe just a quick question on the cash. There is $95 million of unencumbered cash. The business generates a lot of good free cash. And has the Board are -- as an interim management have you looked at the capital structure? And is there opportunity to return some of that cash to the shareholders particularly, given where the stock is compared to even a year back? So how do we think about capital structure capital allocation, or do we wait for the new CEO before any changes on that front? Thanks.

We have not spent time thinking about whether we should be doing a buyback. We've spent time trying to build the business, get the business operating in a successful manner investing in the business where we think on a P&L basis it makes sense. I think you raised an excellent question that over the next three to six months we will have to look more carefully at capital utilization and whether we should or should not do a buyback. I think -- I fundamentally believe that the company is a growth company. I think that there's a -- I think the company has got a great future and I think that we have some great products to invest in. And we'll look at that. One of the things probably the new CEO will spend more time on.

That’s helpful. Thanks, Bill.

And our next question will come from Joseph Vafi of Canaccord. Please go ahead.

Hey, gentlemen. Thank you for time this afternoon. I was wondering, if we could delve a little bit more on the CEO search itself. Clearly, Green Dot grew up as a Consumer Business but the enterprise business is clearly becoming bigger and more strategic. And that's two kind of different businesses and wondering how you're contemplating finding an individual that can drive both of those forward at the same time given they're kind of very different customer sets?

Just to add two more pieces to that puzzle. We are also a technology firm and we also are a regulated firm. So the search for the CEO is not completely straightforward. As you can imagine operating in a regulated environment as opposed to an unregulated environment is a little bit different. We think and the instructions that we've given are – the search firm that we're using is Korn/Ferry. And obviously one of the world's foremost search firms. And we've sort of said to them that the person who gets this job has to understand the payment’s industry, has to understand technology and probably has to at least understand what it's like to operate in a regulated environment. And of course that's sort of those are the broad strokes and nobody is a perfect match. But that's kind of the starting point and we go from there.

I think what I would add to that Bill is it may not be possible to find somebody that scores 100 on all four of those parameters. But as you may recall we've also have a couple of other openings in the C-suite and what we the capability set we get in a CEO can be – we have to be thoughtful about that. Once that decision is made and that will inform what gets done on a couple of the other C-suite positions.

That's helpful. And then just maybe one more, it sounds like as the business moves forward the strategic direction in the Consumer Business it's going to change a little bit focusing on those highest value and the direct deposit customers and overall actives is perhaps, if it's not P&L worthy it's not. I'm just wondering, if are there any other initiatives, or how do we gain comfort on that direct deposit account number and keeping it stable this year? And then getting it to continue to hopefully grow here as we exit the year? Thanks a lot.

Yeah. On the direct deposit front, I mean, I think largely the base of DD customers is coming off the platform side of the house. Obviously, on the consumer side, equally important but most of the growth in DD to come from the platform business. The Unlimited product has done a really good job of attracting a longer retention customers. So over the course of the last six months, we've seen – not only are we doing a better job of retaining the sort of legacy Green Dot products account holders but also the Unlimited product has added incremental direct deposit customers. We need to focus on the portfolio as a whole in the Consumer side. So that means some of the churn on these legacy products, it's been a sort of natural trend over the course of 2019. And so, we have some initiatives underway to better life cycle the market to those customers, those existing customer base, while also pushing Unlimited and then some other product launches that will come throughout 2020.

Our final question will come from Bob Napoli of William Blair. Please go ahead.

Thank you. I just wanted to follow-up on the other new product launches if you would. I mean I think, Jess, you just brought them up. There were several products that were targeted for launch last year and Unlimited was just the first one. I think there are at least two others. Do you have included in the budget for this year, the launch of additional new products? And can you give any color on those products?

Yes. On the consumer side, we have a new Walmart MoneyCard that will be launching in the first half of 2020. It'll have a new sort of set of features that we believe consumers will find valuable. And that product will be accompanied by new packaging that will be easier to ring up at point of sale. Separately, we have our Gen Z product that we talked about last year and I'll sort of answer that in two parts. So first, the technology behind the Gen Z product will be the backbone of all of our mobile apps, both on the consumer side, as well as the platform side. So, it's been an investment in a sort of streamlined forward-looking platform for all of our mobile applications. And separately, with respect to the Gen Z product itself, we've spent a lot of time with Nick Utton, our new marketing adviser to evaluate our go-to-market strategy and we'll launch that product when we're comfortable with the approach.

I'll add one other thing. I mentioned in my remarks that, we've entered into this joint venture with Walmart called TailFin. And both, we and Walmart are extremely excited about it. And I'm confident that we will be releasing our first TailFin product in 2020. So though it's not a Green Dot-only product, it is a product that comes out of the Green Dot factory working with Walmart. And you may or may not know, Walmart has done very few joint ventures and we actually feel honored that they are willing to do a joint venture to us. And I spent a full day with the Walmart team a week ago and they've got some really big plans for this joint venture. So, I'm very excited about it.

Great. And just -- is Nick is an employee of the company, or is he a consultant to the company?

No, I'm actually very happy that you asked that question because, we wanted to make sure that Nick -- that it's clear that Nick is not an employee. He is an -- he now is an independent marketing consultant to us and several other firms after having full-time gigs with MasterCard and E-TRADE and others.

Thank you. Appreciate it.

This concludes our question-and-answer session as well as our call. Thank you for attending today's presentation. You may now disconnect.