Good afternoon and welcome to the Green Dot Corp Fourth Quarter 2022 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Tim Willi, Senior Vice President of Investor Relations and Corporate Development. Please go ahead.

Thank you and good afternoon everyone. Today, we are discussing Green Dot’s fourth quarter 2022 financial and operating results. Following our remarks, we will open the call for your questions. Our most recent earnings release that accompanies this call and webcast can be found at ir.greendot.com. As a reminder, our comments may include forward-looking statements and 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 will make reference to our financial measures that do not conform with 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 maybe 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 property of the Green Dot Corporation and is subject to copyright protection. Now, I would like to turn the call over to George.

Good afternoon, everyone and thank you for joining our fourth quarter and full year 2022 earnings call. Today, we will cover the following topics. We will review our fourth quarter and full year earnings along with our accomplishments for 2022. I will provide a preview of our 2023 guidance and priorities for the coming year. Jess will provide you more detailed 2022 results and 2023 guidance. And I will share some closing comments before opening it up to your questions. Let’s jump in. Our fourth quarter financial results came in at or above the high-end of our guidance range. Non-GAAP revenue of $337 million was up 5% year-over-year, EBITDA margins were 10.5% and non-GAAP EPS of $0.34 per share was up 26%. For the full year, we finished with non-GAAP revenue of $1.43 billion, up 3% year-over-year, EBITDA margins of 17%, non-GAAP EPS of $2.59 per share, up 17%, and free cash flow of $193 million. As I recap 2022 first, let me say I am proud of our team and the focus and hard work they put into moving Green Dot forward. Let me take you through a few highlights. First, our fundamental performance. We finished the year ahead of initial guidance due to a combination of solid revenue performance, diligence in managing costs and improvements in key operational areas such as fraud and customer care. Second, our technology transformation. We completed our first platform conversion in the fourth quarter and are moving forward on remaining conversions. The first conversion went well and we intend to complete the rest of the conversions by midyear. Third, we had notable business wins. We had a significant business win in our BaaS division in late 2022, which we look forward to announcing soon along with continued wins in our Green Dot network…

Thank you, George and good afternoon everyone. With the press release and slide deck, you should have all the necessary financial numbers and metrics. Let me provide some qualitative commentary about each segment to help you better understand the quarter and what’s going on in the business. Turning first to the Consumer Services segment comprised of our retail and direct-to-consumer channels. Like prior quarters, aggregate revenue declines largely remain a function of the decrease in active accounts in both channels. As a reminder, the declines are driven by very distinct dynamics within each channel as well as a small amount of stimulus benefit that still had a lingering impact in the early part of the fourth quarter that we believe is now fully behind us. I covered the unique channel dynamics last quarter and I will quickly repeat those today. We believe our retail channel is facing headwinds associated with a secular change in consumer foot traffic and the competitive environment as consumers now have numerous direct-to-consumer options. In our direct channel, the declines are driven by two factors. First, we made a very deliberate decision at the beginning of 2021 to deemphasize legacy brands while we invest solely in the GO2bank brand from scratch. Second, we pulled back our marketing spend for GO2bank in the first half of 2022, which had a negative impact on account growth plans for 2022. With the natural attrition of the legacy brands and muted first half marketing spend overall accounts are down year-over-year in our direct channel. That said we put the marketing dollars back to work, while many of our competitors have pulled back and we are encouraged by what we are seeing in the GO2bank brand as we exited the year. Now turning to the results and some color around the…

Thank you, Jess. 2022 was a good year for Green Dot and we should not forget that. Despite a sizable headwind from the impact of stimulus in 2021, we were able to modestly grow revenue and we grew EBITDA 10% and adjusted EPS 17%. I’m very proud of those results and the work of the team. We have plenty of work to do in 2023 that I believe will benefit us tremendously. There is no doubt in my mind that a tremendous opportunity for growth, it’s in front of us and I am quite excited about the company we will be and our positioning as we exit 2023. Every one of our divisions as opportunities to introduce new products and strategies to drive growth and we are seeing it in several of them already. The market for embedded finance solutions is immense and growing, including within our existing retail client base. GO2bank continues to build momentum. Our rapid! PayCard business continues to grow nicely and will move aggressively to capture the emerging opportunity for multibillion-dollar market of early way to access. Our Green Dot Network is a unique asset in the market that will enable our embedded finance solutions and our TPG Tax businesses poised to offer a variety of new credit and SMB products since 2024, which should expand its already healthy margins. But there are some near-term headwinds that impact our 2023 guidance. As we have discussed throughout this call, there are numerous avenues to higher core earnings power as we move through the year and head into 2024. We will begin to realize the cost savings from our technology conversions which will bring us substantial savings. We will onboard a significant new customer and BaaS as well as numerous other partners across our business and the headwinds from rate hikes should subside. In closing, while we are focused on the task at hand and we have hard work to do in 2023 it’s what lies ahead that really gets me energized. We have vast end-markets with unbound opportunities. Thank you for your interest in Green Dot. And now I’d like to turn it back to the operator for questions. Operator?

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

Hi, this is [indiscernible] for Ramsey. I had a question on your B2B pipeline. Could you give us some insight into the developments there and how your strategy has changed since the partner non-renewals, whether it’s a heightened focus on contract structure or trying to find specific types of partners? Thanks.

Sure. Thanks for the question and the participation. I would say the way we’re thinking about embedded finance, I guess I’ll broaden the nature of your question as we think about embedded finances, providing financial solutions to businesses that are providing financial solutions to their customers. Our technology roadmap, our capabilities that we’re building across various vertically integrated capabilities bank, technology etcetera, are all designed to meet the objective you’re asking about, that could be around BaaS related opportunities that we think of traditionally, like SMB or gig, wealth type opportunities in those industries, or they could be within our own retail customer base, as retailers also are seeking solutions that better serve their customers as customer behaviors change. So the way we are changing over time is we’re integrating these capabilities into a packaged set of solutions that will have modularity to them, so that we can offer different types of solutions to different partners, and do that at a very low marginal cost. So there’s two elements to our strategy is to be able to provide flexibility to the end user business that we’re providing services to, so that they can customize solutions for their consumers and do that at a low cost, important to be able to do at a low cost is the fact that we own our own bank. And we will have a technology platform that will have a significantly lower marginal cost in the market than what we have today. And then, of course, it’s incumbent upon us to package that and deliver that in appropriate marketing structures so that our end user partner can understand those capabilities in the right way. So that’s how we think about building the pipeline in that market. And that pipeline will grow because of those efforts, and because of the general environmental changes that are happening to businesses that drive their need to consume this sort of service. So I’ll pause there. I’ve said a lot and see if you have a clarifying question to get me back on track.

No, that’s super helpful. Appreciate it. Thank you.

Sure.

The next question comes from George Sutton of Craig-Hallum. Please go ahead.

Thank you. George, could you just walk through what the first conversion specifically was, and what it might enable you to do? Where might it limit you? And what we should expect, for example, for the second conversion?

Sure, George. So we offer a number of different types of products and services and capabilities were most I think, well understood to be associated with DDA accounts, traditional banking accounts, etcetera. That’s certainly the key the product that we’re selling today. We also have some gift programs that are not particularly strategic for us and therefore, those programs provide the right kind of test case for us to start the conversion work on. And so the first conversion that we did in the fourth quarter was a significant but minority portion of our total gift program and that was done in November of 2022. The next conversion, which is imminent, will be the remainder of that gift population. And then we will start the process of migrating our DDA account portfolios through Q1 and Q2. And then towards the end of that we you may be familiar with a small secure card credit portfolio which will also be converted before June. So that’s the sequence of conversions by product, what does it do for us? So for example, today we have 10s of millions of active gifts accounts, but we have many more gift accounts are inactive. So dormant legacy accounts, because of the legacy contractual relationships we have with our current processor, we pay fees for the account, whether they’re active or inactive. For us, there is different fee structures, but nevertheless, there is a financial consequence for us to be maintaining legacy accounts. And so when we migrate those activities onto our own processing platform, of course, we don’t have a variable cost structure with respect to active accounts on processing. But as importantly, we don’t pay for dormant accounts in that environment. And that will be true for gift and DDA and secured credit products as well in any other future type of account that we put onto these platforms. So I’ll pause there and see if I’ve answered your question. If I can clarify further.

Well, that’s helpful. It sort of relates to my next question. So you guys have privately told us this that Chris Ruppel is a rock star for lack of a better term. And greatly executed on the PayCard business and scaled it. At what point will he have a technology platform that he can really aggressively sell against?

Well, he has a technology platform today that he can sell, and we are selling, and we are selling it with success. And as we move through our migrations, we will, of course, be consolidating legacy accounts onto that new platform, the platform is in place, obviously, we put activity onto the platform, I don’t want to suggest that’s the end state of our technology and best investment. I’ve mentioned in previous calls that migrating a processor is one important element. And that’s what you and I have been talking about. For the last couple minutes, we have also implemented and now have active contemporary modern fraud and risk management, BSA/AML tools that have been implemented and are operating. So that’s an important element, we will continue to invest in technology around creating better API structures and more flexibility in our systems in order to drive out cost and drive flexibility in the future. So Chris has a full quiver of arrows to sell today. I think he’s going to be immensely successful in his new role, selling what we have, and what we have to sell is going to improve over time.

Perfect. Thanks for the details.

Sure. Thank you, George.

The next question comes from [indiscernible] of Truist Securities. Please go ahead.

Hi, guys. Thanks for taking my question. I just had around the BaaS pipeline. So just to clarify, baked into the guidance is just the impact of the two previously announced non-renewals right there. And it we don’t think there’s going to be kind of anything else sneaking up on us?

That’s if I understand, let me let me rephrase it, make sure I’m getting your question correct. Baked into the guidance or the roll off of the two previously announced account losses and the roll-on of announced but as of yet unnamed partner that we’ve won and we are currently implementing. So those three accounts are all incorporated within to – within our guidance for 2023 although the roll-on of the new account is pretty modest as to its impact in 2023, because of the timing of implementation?

Right. Okay, that makes sense. Thank you. And then, just as a question around context of the two previous non-renewals, are you guys able to provide any color like was that the result of competition or just because you didn’t think the economics were that compelling there?

Well, first, it’s important to understand each partner and each type of BaaS relationship has its own peculiarities. So for example, certain partners might be financial – providers of some sort of financial solution unrelated to DDA account, for example. And so if that type of partner, they may have entered into BaaS relationship in order to on the short-term facilitate their provisioning of services to their broader client base, okay, they want to add some features to their core offering, which might be an investment account or something like that. If you have a partner of that character, they are inevitably going to want to tighten their control over the entire value chain because they are offering a suite the value of financial services value to their clients I think that’s an example of the sort of circumstance that at least in one of those cases we found ourselves in. And we have some relatively in these cases these two cases aged type relationships that had economics in the renewal phase that were probably disadvantageous from our point of view. So I’d say it’s a mix of a client’s own particular strategic direction and their view of financial services, and our willingness to price products that we might not be interested in the market.

Okay, thank you very much.

You’re welcome.

This concludes our question-and-answer session. I would like to turn the conference back over to George Gresham for any closing remarks.

Well, I just want to thank the audience, our employees, our investors, our Board for your support as we move through 2023. We have an amazing future ahead of us in a lot of exciting milestones to accomplish this year, and we’re looking forward to updating you in our next call. Thank you very much.

The conference is now concluded. Thank you for attending today’s presentation and you may now disconnect.