Good day and welcome to the Green Dot Corporation First Quarter 2020 Earnings Call. Today’s conference is being recorded. And at this time, I would like to turn the conference over to Ms. Michelle Blaya. Please go ahead.

Thank you, and good afternoon, everyone. On today’s call, we’ll discuss Green Dot’s first quarter 2020 performance. Following the remarks, we’ll open the call for questions. For those of you who haven’t 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 and 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. Quantitative reconciliation of our non-GAAP financial information to the directly comparable GAAP financial information appears in today’s press release. The content of this call is a property of the Green Dot Corporation and is subject to copyright protection. Now, I’d like to turn the call over to Dan.

Thank you, Michelle, and welcome, everyone, to the Green Dot Corporation Q1 2020 earnings call. Today, we will discuss Q1 results and the impact of COVID-19 and share some of my early thoughts around the areas of focus for Green Dot going forward. Before we jump in, I would like to first thank the board of directors who provided me this opportunity and responsibility to take the lead here at Green Dot. A particular amount of gratitude and appreciation is owed to Bill Jacobs and Chris Brewster who provided day-to-day leadership on an interim basis prior to my arrival and we are all very thankful for their continued leadership. The real shout-out, however, goes to the entire team at Green Dot. During the interim period, the company executed the busiest quarter of the year, tax season, without a hitch, delivering results well in excess of plan, but the true heroics of the team really began on February 3 when 300 of our developers in Shanghai found themselves having to shift quickly to a remote work environment amidst the height of COVID-19 in China. Then, on March 16, all call centers in the Philippines and India were closed due to COVID-19, which took our global call center staffing from 1,900 to 500 in just one day. Facing directly into the challenge, the customer service and IT infrastructure teams scrambled to bring online work-from-home capabilities for our call center representatives across the globe so that we could continue to serve customers during this critical time. And work-from-home directives hit here in the US a few weeks later and, again, the team adapted to complete remote working arrangements while continuing to serve our customers and partners. If that wasn’t enough, in April, our systems and people were tested once again when the first wave of relief funds from the CARES Act flooded customers’ accounts through direct deposit, creating almost equivalent of a full tax season of refund loads in a single day. Yes, these have been unprecedented times and they have tested all of us in ways no one could ever imagine. I’m proud of the team’s unwavering dedication to our customers and each other throughout these turbulent conditions and I’m excited to be on board as one of the newest members of the Green Dot team. I’ll now hand the call off to Jess Unruh who will report on the company’s Q1 results and comment on guidance for the remainder of 2020, after which I will wrap up with some of my initial observations of the company and some current thoughts around our areas of focus and go-forward strategy. Jess, over to you.

Thanks, Dan. Good afternoon, everyone. Before I get started, I’d like to say thank you to our employees. Despite the many challenges during this unprecedented time, they have been steadfast in their support of our company, coworkers, customers and partners. I’m going to cover our financial results for Q1 and then spend most of my time discussing recent trends in light of the impact of COVID-19. Our Q1 2020 non-GAAP revenues grew 6% to $347 million and we delivered adjusted EBITDA of $92 million and non-GAAP EPS of $1.13. These results exceeded the guidance we shared on our Q4 earnings call despite headwinds in late March from COVID-19. As a refresher, we expected our Q1 non-GAAP revenue to be approximately 30% to 31% of our full year guidance or roughly $330 million and we expected adjusted EBITDA to be around 48% of our full year guidance of roughly $86 million. The year-over-year revenue growth in the quarter was driven by both of our segments. Non-GAAP revenues in our Processing and Settlement segment increased 14%, driven by strong performance in both tax processing and money processing services. The number of tax refunds processed grew 3%. We also expanded the adoption of our taxpayer advance programs and introduced new tax processing services in 2020 that had exceeded our expectations. Revenues from our money processing services increased as a result of 10% growth in the number of cash transfers principally from third-party reload partners. Non-GAAP revenues in our Account Services segment grew 2% as a result of an increase in BaaS program management service fee revenues earned from platform partners and continued growth in the number of direct deposit active accounts from our BaaS and PayCard programs. This growth was partially offset by a decline in the number of active accounts in our…

Thank you, Jess. As you heard, the team delivered a solid Q1. This is something I can take no credit for. However, I am very grateful for it. The first quarter has always been the company’s strongest quarter in terms of revenue and profitability. With no one knowing the extent of the negative and lasting impacts of COVID-19, we are very fortunate to have banked this quarter before the world changed. Due to work-from-home requirements, my arrival to Green Dot on March 26 as of now has to be virtual but, nonetheless, we are making very good progress. Driven by the urgency created by the pandemic, the leadership team and I began working aggressively to eliminate unnecessary expenses. So far, we’ve reduced planned SG&A expense by close to $30 million for the remainder of the year. These reductions in expenses will not impact our ability to serve our partners and customers nor will these expense reductions [ph] temper (00:14:14) our future growth. Consequently, when we all emerge from this current economic situation, Greed Dot will be a leaner, more efficient operation. My decision to join Green Dot comes from my desire to build a lasting and transformative company that delivers inventive financial service offerings that improve the financial lives of our customers. With Euronet and Netspend, I’ve had some great practice, and I’m really looking forward putting some of that experience to work here at Green Dot. This company has a tremendous collection of assets, a bank, a proven, modern and scalable tech platform, millions of customers and over 100,000 points of retail distribution with its own cash deposit network. And if that’s not enough, partnerships with some of the largest and most powerful consumer companies on the planet – Apple, Intuit, Uber, Walmart and others. I believe that at…

Thank you. [Operator Instructions] And we’ll take our first question here from Ramsey El-Assal with Barclays.

Hi Dan. Thanks very much for doing this call and welcome back to the game that we were – I wanted to ask you about just one kind of tactical question and another one a little higher level. Are you getting a boost from accounts on file from the stimulus? In other words, are you capturing that volume? Are there any newly acquired customers who are signing up with Green Dot in order to capture the volume who might end up being a Green Dot customer ongoing? Or is it more just you had customers that were already had their accounts linked to the IRS and the money just sort flowed automatically? Can we think of this as an acquisition tool or is it really more just kind of a one-off benefit for the existing customers? And I have one follow-up.

Yes, Ramsey. It’s both. We had our customers we’ve had for a long time with direct deposit and also through our tax business. We got a big surge of GDV with the stimulus from the CARES Act. But I also believe that we’re seeing a nice little pop, if you will, in terms of card ordering and activation and I believe that’s for customers who were needing stimulus, but also it’s for customers who were kind of in need of a formal electronic payment or the way the world is changing now in terms of having to order so many goods and services online. Really a lot of cash-based consumers don’t have that option of cash anymore. I think we are benefiting a little bit in both ways.

A little bit in both ways? Okay. And then my follow-up question is a little bit broader and it’s sort of building on something you said at the end of your prepared remarks about challenger banks and I’m just wondering if you could kind of give us your updated thoughts on how COVID could impact the competitive landscape in your industry. Are these challenger banks also receiving kind of a one-time maybe lifeline as it were from stimulus type payments? Obviously, many of them were pre-profit. Do you think you’ll come out of this in a better competitive position or it will just be something that’s somewhat similar with you guys having to again work harder and smarter to gain “lost ground?”

Well, I think COVID is requiring pretty much every business in the country to work harder and smarter. I believe that the neobanks that have customers who were on direct deposits have a little bit of a benefit, but I believe that everyone is going to have some challenges here because when we’ve got 20 million Americans currently unemployed and I believe that the lower income consumers in this country are probably disproportionately impacted. And I think that Green Dot has – we’ve got a nice diversified business, we’re in a much better position I think than just kind of a monoline neobank to weather this storm. And the other nice thing is we get positive free cash flows, strong revenues and cash in the bank, we don’t need to go out and raise our series C, D, E and F, as many others have to. So I think collectively we’re all solving a big need in the country. So, I hope that everybody makes it through this, but I do think the challenger banks are going to have a bit of a challenge in the coming 12 months.

And we’ll take our next question here from Andrew Jeffrey with SunTrust. Please go ahead.

Hi. Good afternoon. Appreciate taking the question. Dan, welcome. Look forward to working with you again.

Yeah, Andrew, nice to hear your voice. Q – Andrew Jeffrey : Yeah. Likewise. I’d like to maybe build on Ramsey’s question a little bit with regard to challenger banks. One of the points of consternation, I guess, is the way I’ll say it among investors I think in the last 12 or 18 months that Green Dot has been, the level of sales and marketing spend aimed at maintaining the competitive position and maybe combating some of these newer entrants. Do you have a view or can you give us some insight this year as to whether maybe even directionally do you think sales and marketing has elevated, is that something you can bring down? How should we be thinking about Green Dot’s competitive response COVID-19 notwithstanding? A – Dan Henry : I think that what you’re going to see is kind of a philosophical change in the approach in terms of consumer marketing. As I referenced in the call, we tend to spend significant amount of time and energy this calendar year to prepare ourselves for 2021. And Green Dot I believe has a bit of a history of kind of, hey, every year or so, here is a new product and let’s market and promote that new product. And my philosophy is, at Green Dot, you know what, we’re a bank – we own a bank. So, we really should stop calling these marketing companies challenger banks and neobanks because none of them are banks. They are all just marketing companies, marketing products and pieces that they put together from other third-party service providers. So, our go-forward strategy and philosophy is going to be leverage our actual bank charter to be able to issue real DDA accounts and provide customers a long-term solution for their financial and…

And we’ll take our next question here from Bob Napoli with William Blair. Please go ahead. Q – Bob Napoli : Good afternoon. Dan, welcome back, and good luck to you guys. I guess, just you talked about a number of key initiatives or things that were underleveraged and I think the BaaS business, the tax business, what is your, like, I guess, the top priority? What are your top priorities from the business and product perspective? And the BaaS business was I think growing at a high rate, they had Uber as a client. Has that business slowed down a lot? A – Dan Henry : Yeah. I think in terms of kind of top priorities, the arrival of Daniel Eckert, I couldn’t be more thrilled with that. Q – Bob Napoli : Nice hire. [indiscernible] A – Dan Henry : Yeah. And he’s a great guy and the vantage point that he’s had over the last 10 years at Walmart, if you think about being able to bring somebody in to [indiscernible] (00:30:45) one of Daniel’s main responsibilities is going to be the BaaS business, the partner business. And so, to be able to have Daniel sitting in the room with our partners at Apple and Uber and Intuit and others [indiscernible] (00:31:00) and to be able to talk about what’s possible, what solutions we can bring to these partners by leveraging the assets we have of a bank and a platform, a retail distribution, what have you. So, yeah, we will continue to be driving deeper in that business. Our philosophy on BaaS is to the term I’m going to use is sweep the stairs from the top, so we’ll be focusing on our current large partners and other large partners in the space and the industry…

And we’ll take our next question from Andrew Schmidt with Citi. Please go ahead. Q – Andrew Schmidt : Hey, Dan and Jess, thanks for taking my question. And welcome, Dan, glad to have you. A – Dan Henry : Thank you, Andrew. Nice to be here. Q – Andrew Schmidt : So, this theme was asked a little bit over the course of the past few questions, but I just want to hone in on it. You mentioned that Green Dot and Netspend had squandered from the opportunity over the last several years and [ph] ceded some of the advantage to the challenger banks, as they’re called. Could you just talk a little bit more about your strategy to kind of reinvigorate Consumer business and kind of to take that opportunity back, whether it involves faster product cycle times. You talk about creating more value for the mass market consumer. Maybe a few more details that underlie that would be helpful. A – Dan Henry : Yeah. I’ll share what I can. I mean, I think that what’s most important – remember, I’m trying to having flashbacks two years ago. What’s most important is remember like this is a not a zero-sum game. So, if you think about the unbanked, underbanked, low to moderate income consumer in the country, it’s huge. I mean, it could be 50% of the population. So, there’s plenty of room out there for a very successful Green Dot, a very successful Netspend, a very successful three or four other neobanks. So I think that’s first and foremost. I think everybody seems to treat this industry like it’s a football game, somebody is going to win and somebody is going to lose. And that’s really not my thing in that case. I think actually the…

And we’ll take our next question from George Sutton with Craig-Hallum. Please go ahead. Q – George Sutton : Thank you. Dan, welcome, and I think I’m a good example. I took $200 out before this crisis started. I think I still have the same $200 [indiscernible] (00:39:49) cash. A – Dan Henry: [indiscernible] good for nothing. Q – George Sutton : Exactly. So, you are absolutely committed to the bank, I hear that. But you mentioned you’re planning to get better data about the different segments and the different offerings and I’m curious how much of a look at the sacred cows such as – are you planning to make some changes with this information or are these more refinements. A – Dan Henry : I would say it’s the latter. It’s more refinements. The guy that was in the seat before me I think was brilliant and had really great instincts and that worked well for him for a long time. I don’t think I’m that smart and so I like data, I like numbers, I like to testing things and I like expanding margins and bottom line growth. And so, we’ll look at the data and Jess and his team will run the numbers, we’ll see what’s the highest and best use of our capital. And when I say capital, it’s not just dollars, but it’s also time and energy and people. Q – George Sutton : I understand. One other thing, I think it was Jess in his prepared comments mention you drew down some of our facility and part of that usage maybe for strategic activities. Is there something upcoming that isn’t clear or was that just a generic message? A – Jess Unruh : Yeah. I think it’s just a generic message. So, making sure we have enough dry powder that gives us the most optionality as we look – give Dan some time to dig through the [indiscernible] (00:41:47) strategic review process and understand what is the best use of our capital and then that provides us with some dry powder down the road, if we need it for strategic initiatives.

And we’ll take our next question from Reggie Smith of JPMorgan. Please go ahead. Q – Reggie Smith : Good evening, gentlemen. Thanks for taking my questions. I guess, the first one is kind of high level, Dan, I was curious, have you thought about, I guess, stepping back into the industry seems a very kind of shift with some kind of retail customer acquisition and now things are being activated digitally, you’ve got – as you get a chance of [indiscernible] (00:42:34) of the world, kind of how do you think about, I guess, competing in that space? I know historically Green Dot, Netspend had a stronghold on the check cashing in the retail space. But how do you play with some of these guys that may have larger installed bases than yourself or different features to get people to even take [indiscernible] (00:43:03) card and so it’s almost like an add-on type feature. So, what are your thoughts there? A – Dan Henry: Well, to me, kind of what we’re thinking moving is – well, one of the reasons I was excited about taking this opportunity at Green Dot is when you look at the collective assets of Green Dot. It’s funny if you dissect the word fintech, where fin is financial and tech is technology. Well, everybody’s got technology, but nobody’s really got the financials. Everybody borrows the bank. So, if you take that definition literally, you might be one of the only fintechs out there [indiscernible] (00:43:50) a bank. So, yeah, there are bigger players that are kind of [ph] waiting in the space (00:44:00) and providing financial services, which is tremendous revenue because many of those companies are our partners – Apple, Uber, Walmart, Intuit. And so, I believe that we can really, as I…

And we’ll now take our next question here from Steven Kwok with KBW. Please go ahead. Q – Steven Kwok : Hi. Thanks for taking my questions and hope everyone is doing well. Dan, welcome aboard. My first question is just around the 10% down revenue guidance. I was just wondering how much of that is baking in the stimulus benefit, if you could help break apart what are you seeing or what’s your assumptions on both the BaaS side and then on the consumer side as well, like how should we think about that in the second quarter? Thanks. A – Jess Unruh : Sure. Hey, Steven, it’s Jess. I think obviously in the prepared remarks we’ve talked about the benefit from stimulus funds, especially with respect to our trends in late April and early May, and we continue to see those trends improving. So, it will be hard to know exactly what’s going to happen in the back half of May and certainly even harder to know what’s going to happen in June. So, we think because of the lack of visibility in the short term, I think it’s prudent for us to provide a guide that 10% down. Q – Steven Kwok : Got it. And then just on the expense side. If let’s say, this type of environment continues, like how much additional expenses are there for you guys to take out? Could you please elaborate on like what level of expense reduction would you be willing to do? A – Jess Unruh : I would say from a fixed cost basis, our marketing dollars or something we can focus on and then, of course, because like everyone else we have payroll to evaluate and understand whether we’d make any action there. But for the time being, yeah, we feel pretty good.

And we’ll take our next question from Joseph Vafi with Canaccord. Please go ahead. Q – Joe Vafi : Hi gentlemen. Good afternoon. Thanks for taking my questions. And Dan, welcome onboard to Green Dot. I just wanted to... A – Dan Henry : Thank you, Joe. Q – Joe Vafi : Hi. How are you? I just wanted to ask one of the previous questions just a different way if you kind of – I know, Dan, you... A – Dan Henry : No. I tried to tell you we’re not selling the bank. Ask as many times as you want, we’re not going to sell the bank. Q – Joe Vafi : No, I’m not [indiscernible] the bank. I know you’re not going to sell it. A – Dan Henry : Okay. Go ahead. Q – Joe Vafi: No, no. I just wanted to ask on looking at the different businesses, if you’ve got a feel for where you think the ROIs are higher at this point or where you sense they may be higher, especially if you look at the BaaS business kind of versus kind of – as one big bucket versus the consumer as another big bucket? And then I have a quick follow-up. A – Dan Henry : Yeah. I think kind of where we are right now and I’m still early in my review of the company, I think it’s obvious to anybody who follows the company, our tax processing business, TPG, has good numbers as you can see that in the first quarter every year. But l I think that both – if you look at just general sort of the Consumer business and the BaaS business, both of those businesses are excellent businesses with some very, very exciting growth potential, which…

And we’ll take our next question from George Mihalos with Cowen. Please go ahead. Q – George Mihalos: Hey, Dan, welcome back, and look forward to working with you again. A – Dan Henry : Thanks, George. Good to hear your voice. Q – George Mihalos : Wanted to circle back to a question that I think Reggie had asked or maybe you can elaborate on a little bit. But when you look at the market now compared to when you were running Netspend, I think when you sold Netspend to TSYS, there were a lot of motivations for doing so beyond costs, there were additional channels you were able to kind of tap into from a growth perspective. Is the current environment different at all than the one where you sort of sold Netspend into TSYS? Meaning, is the idea of being part of sort of a multi-product, multi-channel sort of institution not as attractive as maybe what was the case seven years ago? A – Dan Henry : George, thanks for that question. And just to be clear, answered this many times [indiscernible] public platform. But I didn’t sell Netspend. Netspend was bought. And so, Netspend was [indiscernible] (00:55:42) great people there and it was a wonderful transaction for everyone. Don’t get me wrong. And I think it is evidenced by the growth of Netspend post-acquisition. The environment and the potential growth of that business was there and I think it continues to be there. So, from the standpoint of the environment different today than it was then, I really don’t see it as much different. If you think back then, we had American Express and Chase Bank and lots of other competition out there. So, I don’t see that as much unlike this current wave of challenger…

All right. And we’ll take our last question here from John Hecht with Jefferies. Please go ahead. Q – John Hecht : Thanks guys very much. Really appreciate all the color and kind of the goals and strategies going forward here and how you’re kind of developing, so thank you. So, a little bit more just technical questions here. Within the interchange revenues, how much of that’s physical versus eCommerce or what have you seen for the last few weeks? Obviously, it’s more eCommerce now, but anything striking with respect to those trends? A – Jess Unruh : I mean, yeah, clearly, we’ve seen, as you’d expect, an uptick in card not present transactions. So, you see obviously PIN, which you would traditionally see in store migrate to signature and even more so to online and in-app and so that in theory should give us greater interchange return. Now, I would say that there are some headwinds to interchange, in that with the interchange rates you get at the highest tiers are all related to travel and things like that. So, obviously, those categories of MCCs are shrinking while others sort of card not present categories are increasing. So, overall, it’s a benefit to interchange rates, but there are some implied headwinds within it. Q – John Hecht : Okay. Thanks for that. And then within BaaS, I wondered can you talk about – I mean, do you talk about pipeline and anything that you can talk about how you see the BaaS opportunity set over the next several quarters? A – Dan Henry : The pipeline is very strong and I think that’s where we are to be completely transparent is we’re actually in a position to be selective in terms of the partners that we go with. So we’re going to be spending time through marketing and chasing after partners, but probably be a little bit more selective in terms of the partners we work with. It’s more of [indiscernible] focus more on quality as opposed to quantity in terms of partners that we’re pursuing.

And at this time, I’d like to turn the call back to Mr. Dan Henry for any additional or closing remarks.

Thank you, operator. Hey Jess, thank you very much for doing our first virtual Zoom earnings call, it’s kind of unique. And thanks everybody for dialing in and listening and talk to you here in about three months again. Operator: And this concludes today’s call. Thank you for your participation. You may now disconnect.