Green Dot Corp (GDOT) 2012 Q1 法說會逐字稿

Good afternoon, ladies and gentlemen. Thank you for standing by. Welcome to the Green Dot Corporation first quarter 2012 earnings conference call. During today's presentation, all parties will be in a listen-only mode. Following the presentation, the conference will be open for questions. The contents of this call are being recorded.

I would now like to turn the conference over to Mr. Christopher Mammone, Vice President of Investor Relations for Green Dot. Please go ahead, sir.

Thank you, and good afternoon everyone. On today's call, Steve Streit, our Chairman and Chief Executive Officer, and John Keatley, our Chief Financial Officer, will discuss 2012 first quarter performance and updated thoughts regarding our 2012 outlook which we first shared with you in the March 9 press release announcing our proposed acquisition of Loopt, Inc. Following their remarks, we will open the call for questions.

The slides that accompany this call and webcast can be found at ir.greendot.com, and will remain available after the call. Additional operational statistics have been provided in a supplemental table within our press release.

As a reminder, today's call is being recorded, and our comments include forward-looking statements, including statements about the projected financial impact of acquisitions and the loss of the TurboTax program to Green Dot. Please refer to the cautionary language in the earnings release and in Green Dot's filings with the SEC, including the 2011 form 10-K 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, and this information may be calculated differently than other companies' similarly titled non-GAAP information. Reconciliations of those non-GAAP financial measures to their most comparable GAAP measures are included as supplemental tables in today's earnings release and are also available at ir.greendot.com.

All statements made by Green Dot officers on this call are the property of Green Dot Corporation and subject to [copyright text]. Other than the replay noted in our press release, Green Dot has not authorized and disclaims responsibility for any recording, replay, or distribution of any transcription of this call.

Now, before I hand it over to Steve, just a couple of guidelines for today's Q&A session. In an effort to get to everyone in queue, we ask that you limit yourself to one question and one follow-up, and then queue back for any additional questions.

Now, I'd like to turn the call over to Steve Streit.

OK. Very good. Thank you, Chris. And, welcome everyone to our Q1 earnings call. Also with me this afternoon is Green Dot CFO, John Keatley.

After my remarks, John will walk you through some of the financial highlights for the quarter and also provide some updated thoughts on our 2012 financial outlook.

Our Q1 performance reflects a very strong start to the year, particularly when you normalized result (technical difficulty) the discontinued TurboTax program. Excluding the impact of TurboTax in the comparable period, new card activations were up 23%, year over year, in the quarter; GDV was ahead by 33%; and, first-time reloaders posted nice gains at 22%, year over year.

So, the core business remains strong and excluding the impact of acquisitions in the quarter, we're on track to meet the annual growth ranges we shared with you during our previous earnings call.

I'm also pleased to let you know that we were able to grow past the TurboTax loss and, in fact, post increases in all of our key operating metrics. And, here are some highlights to share.

Even with the loss of TurboTax, our Q1 non-GAAP revenue grew 18%, year over year, to $145.5 million. Excluding the impact of TurboTax in the comparable period, revenue grew 27%, versus this time a year ago.

Q1 non-GAAP earnings grew 23% year over year, to $0.48.

And, active cards grew to 4.7 million as of March 31, representing pro forma year-over-year growth of 20%. Based on this pace of growth through Q1, we remain on track to meet the top line growth range that we communicated to you in January when we first issued our outlook for 2012.

John will discuss the results with a bit more granularity, here in just a few minutes.

Now, let's talk about Loopt for a moment. Most of you know that we acquired privately-held Loopt, Inc., of Mountain View, California, last month. The Loopt acquisition brought us a group of highly skilled, talented, and creative mobile UX and mobile software engineers who, among other things, are early inventors of geo location-based mobile communication and, in fact, hold the patent for geo location mobile messaging. This is a process for sending a commercial message to a mobile device, based on the location of that mobile device.

Our belief is that this patented technology is at the heart of practically every mobile commerce and mobile payments play out there, and we believe this intellectual property will become highly strategic to Green Dot and our distribution partners as mobile banking, mobile commerce, and mobile payment strategies emerge and mature in the years to come.

So, beyond the value of the patent, why do we feel so positive about the acquisition of Loopt? Well, it's Green Dot's thesis that starting now, and increasing rapidly over time, the business of banking and payments will be conducted in the palm of your hand. In fact, our view is that for many consumers, a hard drive-based desktop or laptop computer itself is simply a bridge to Cloud-based mobile computing, much in the same way that a landline telephone for many consumers is simply a bridge to a wireless cell phone. We believe that many younger consumers will skip the step of buying a computer altogether, and will simply start out their adult life with a mobile device and perhaps a tablet. And, older consumers like me will continue to evolve our behavior to become more and more Cloud-based, mobile centric and less and less hard drive computer-based centric.

It's our belief as a company that the adoption of mobile banking, and mobile computing in general, will be just as pronounced with less affluent prepaid card users as with more affluent customer segment. The reason is that many lower income consumers will find the smartphone and the monthly data plan cost to be much more affordable than the price of a decent laptop with an ISP connection, plus the cost of a cell phone and monthly service.

This is perhaps why smartphone adoption has done so well with less affluent customers. For example, in Green Dot's customer base alone, over 55% currently have smartphones. So, in other words, a smartphone may be an expensive cell phone, but it is a very cheap internet-connected computer.

So, given our beliefs around mobile, we felt it was vital that Green Dot move early and decisively to acquire the core capabilities and ingenuity needed to create and deploy leading mobile-based products and services for our prepaid customers today and our future customers of new contemplative products and services for tomorrow.

The ability for Green Dot to be a mobile innovator in the financial services industry is central to our strategic world view of how we believe consumer preferences and behaviors will evolve over time and, therefore, central to our Company's consumer-centric strategy of positioning ourselves for long-term growth.

We believe the development and deployment of Cloud-based mobile banking and payment capabilities needs to be part of our DNA as a company and part of our corporate muscle memory in everything we bring to market. Therefore, this is not a core capability that we can or should lease from a consultant or outsource to a third-party development team. This is why we feel fortunate and excited to have acquired Loopt and why we believe that over time, the value delivered to our Company and to you as shareholders will dwarf the $43 million purchase price.

The Loopt team, which we now simply call Green Dot Silicon Valley, or Green Dot North, for short, is already working closely with their technology brothers and sisters here at Green Dot South, in Monrovia. And, in only a few short weeks since closing that acquisition, our new combined team has made very good early stage progress on our new mobile apps, as part of our new products and services under development. So, so far, we're very pleased with how things are progressing in a very short period of time.

On the topic of vertical integration, I'd like to give you a quick update on our bank integration plan and on the development of our processing platform. First, I'll update you on our bank. We're pleased to report that the migration of accounts from Synovus Bank to Green Dot Bank is progressing on schedule, with the first cards expected to be issued out of Green Dot Bank by summer, with Synovus migration expected to be substantially complete by Q1 of next year. So, congratulations to Lew Goodwin and his super team at Green Dot Bank for their hard work. And, my sincere thanks to our long-time friends and partners at Synovus Bank for helping us execute a smooth transition thus far.

Now, let's talk about our processing platform, as we continue to work on building out the assets of the company formerly known as eCommLink, which we purchased earlier this year. First, you may have read that we recently recruited Ralph Calvano to oversee Green Dot's processing division. Ralph is a well-known and highly experienced processing veteran who prior to joining Green Dot ran the prepaid processing solutions division at Fidelity National Information Services, also known as FIS, and Ralph was there for the past nine years. For those of you who don't know, FIS is one of the largest and most-respected bank and prepaid processing companies in America. And, Ralph has a talented group of engineers already assembled here at Green Dot and will also work to recruit others to round out his processing team.

Secondly, let me speak for a moment to help characterize where we are in the development process. The processing platform itself is already working today in a non-production test environment, and the system we purchased from eCommLink was a working platform that fully supported and processed a number of prepaid programs prior to its sale to Green Dot. So, we're not building the platform from scratch. Rather, the focus of our development work is on greatly strengthening the underpinnings of the platform for scale, speed, and redundancy, and on integrating the platform and the Green Dot specific services and features.

So, a way to think about this is, let's say we bought a Ford Crown Victoria, and now we need to turn it into a highway patrol police cruiser. So, the car is already built and drivable, but now we have to put in a bigger engine, bigger radiator, better brakes, you know, more safety features, roll bars, blue lights on top, two-way radio. To be sure, processing is serious and complex business, and we are well aware of the risks involved in rolling out such a platform.

Remember that today, Green Dot already does its own end-to-end financial transaction processing for many billions of dollars in cash loaded through the Green Dot reload network. So, we understand the nature of the beast and, as such, we will continue to take our time and proceed with heavy doses of caution and risk aversion before the system would ever go live into production.

But the important takeaways here that I want to share is that our people are in place and we're proceeding on plan.

And, now, I'll hand the call over to John Keatley, who will provide more color on our strong Q1 financial performance and updated thoughts on 2012 guidance. And, then, after John's remarks, of course, we'll open the phones for Q&A. John?

Thanks, Steve. As Steve mentioned, our Q1 performance reflects a very strong start to the year, particularly when normalizing results for the discontinued TurboTax program. As we previously announced, we have revised guidance we provided in January due to the costs associated with the Loopt acquisition, and I'll share those details with you in a moment.

The first topic that I'd like to discuss is our revenue growth in Q1. As you can see on slide 3, our non-GAAP total operating revenues grew 18% year over year in Q1, and 27% year over year normalized for TurboTax. Clearly, this is a high rate of growth, and it's consistent with our historical trend.

Even with the loss of the tax program, we showed strong earnings growth and margin expansion in Q1. As you can see on slide 6, our adjusted EBITDA grew 21% year over year, and we saw a modest 60-bp increase to our adjusted EBITDA margin, which climbed to 25.6% during the quarter, primarily due to efficiency gains in processing expenses.

Our non-GAAP net income, which is shown on slide 7, was $21.2 million, an increase of 21% compared to the same quarter last year.

Non-GAAP EPS came in at $0.48, up 23% year over year.

In terms of our key operating metrics, we saw strong growth across the board and even managed to turn in positive growth in the areas most impacted by the TurboTax departure which, as we expected, turned out to be new card activations and GDV. Slide 8 shows our growth in active cards and new card activations. Active cards grew 10%, year over year, to 4.7 million actives, as of March 31, and 20% excluding the impact of the discontinued tax program in the comparable period.

One thing you may notice is that our non-GAAP total operating revenues in Q1 grew significantly faster than our active card portfolio. The main driver of this was that cards acquired for tax refunds declined as a share of our active card portfolio in Q1, as compared to last year. Cards used for tax refunds typically have shorter lives and lower lifetime revenue than other cardholders.

New card activations increased 1%, year over year, to 2.2 million, but were up 23% excluding the discontinued tax program. Returning customers continued to be a significant source of activations, accounting for 38% of all new card activations.

Slide 9 shows the growth in our two key transactional metrics -- gross dollar volume and cash transfers. Our GDV grew to $4.8 billion, an increase of 5% year over year, or 33% excluding the discontinued tax program. The portion of GDV from direct deposits declined from 58% last year to 50% this year, due to the loss of TurboTax. Excluding TurboTax, the volume of direct deposit funds loaded to cards increased 42% year over year.

Most of this growth came from increased payroll and government benefit direct deposits. This is a positive trend for us, as these sources of direct deposit tend to be recurring in nature and are correlated with higher lifetime revenue.

As usual, the cash portion of our GDV continued to grow very steadily in Q1, up 25%.

Cash transfers continued to grow rapidly in Q1, increasing 26% year over year, and topped $10 million in a quarter for the first time ever, driven by both increased reloads from our portfolio of cardholders and more reloads from our network partners' portfolios. The portion of cash transfer revenue from third-party reloads increased to 21% during the quarter, versus 16% in the year-ago period.

Walmart represented 64% of non-GAAP total operating revenues during Q1, a step up of 1 percentage point from the 63% in Q4 of 2011. This is consistent with our expectation due to the mix shift associated with the decline in our tax refund volume.

Our balance sheet continues to be a source of strength to the business. Post the funding of the Loopt acquisition, we ended the quarter with $269 million of total cash and investment securities, including $118 million of unrestricted cash and cash equivalents, $138 million of investment securities, $13 million of restricted cash, and no debt.

Now, I'd like to talk a little bit about our expectations regarding the financial impact of the recent acquisition of Loopt, which closed in March. Although we previously updated our 2012 guidance to reflect the impact of the Loopt acquisition, we thought it would be helpful to reiterate these updates on this call.

Our guidance for non-GAAP total operating revenues remains unchanged, at 20% to 24%, as we are discontinuing the lines of business that Loopt pursued prior to the acquisition, and we don't expect revenues from new products that we are developing with Loopt until 2013.

As previously disclosed, we expect to incur $14 million of additional costs in 2012 associated with this acquisition. Approximately $6 million to $7 million of these expenses are from retention incentives for key employees and the costs of closing and integration of the acquisition. And, the remainder is the ongoing operating expenses of Loopt.

These incremental expenses reduce our expected range for adjusted EBITDA to $133 million to $138 million, and brings our non-GAAP EPS guidance down to $1.65 to $1.70 per share for the full year.

In addition, while we are still in the early stages of integration and our assumptions could change, we expect the Loopt acquisition to be accretive beginning in 2013, as we leverage the Loopt's team and technology to deliver new revenue-generating products and new features for existing products.

There are no changes at this time with respect to expected growth in our key operating metrics for the full year. We continue to expect greater than 20% growth in active cards, cash transfer growth in excess of 20%, and GDV growth of at least 30%.

As we look out towards the remainder of the year, I want to offer some additional guidance on how changes in the tax refund portion of our portfolio will impact our metrics and financial results. First, the termination of the TurboTax agreement will continue to impact our results. It was a material contributor to our revenues and many of our key metrics in Q2, as the attached slides illustrate, and we expect an approximately $6 million revenue grow over associated with TurboTax in Q2, as compared to the same period last year.

Secondly, we've taken the prudent step of strengthening our customer identification processes on all customers, and tax refund customers in particular. The reason for this increased screening is that we wanted to be sure that our portfolio is beyond reproach in terms of how we mitigate the risks associated with tax refund fraud, which has been so widely publicized, and the risks associated with operating a bank that attracts the sheer volume of customers that we do in any given year. We are constantly updating our risk policies and controls to ensure a safe, sound, and compliant program, but in so doing, we may in fact cause some pressure on the growth of our new card activation and GDV metrics.

And, with that, I'd like to turn the call back to Steve. Steve?

John, thank you very much. And, Operator, let's go ahead and open the lines now for a Q&A.

Thank you, sir. We will now begin the question-and-answer session. (Operator Instructions) We please ask that you limit yourself to one question and a single follow-up. At this time, we will pause momentarily to assemble our roster.

And, the first question we have comes from Roman Leal of Goldman Sachs.

Hi. Thank you for taking my questions. First of all, you know, it's good that you're keeping the operating metrics, or the guidance on those key operating metrics, intact in an all-in including the [lost Intuit] distribution. But, it seems like they imply an acceleration for the rest of this year. And, given your commentary that, you know, the changes you're making with respect to your tax refund process and customers, it just feels like that that may be a little difficult for the rest of the year. So, I just wanted to get your commentary on that. What makes you so confident that you can still keep these same growth rates?

Yes, sure. Hey, Roman.

Hey.

You know, the story I guess is a little different with each of the metrics. You know, first off, absent the loss of TurboTax, we showed very strong growth across all of the metrics on a year-over-year basis, in excess of the rate that we spelled out in our guidance. Cash transfers really was very minimally impacted by the loss of TurboTax and is showing very strong growth.

There are a lot of strong drivers in terms of our GDV growth that will continue throughout the year. We're seeing increased direct deposit penetration, particularly for payroll and government benefits. And, that's going to continue to drive GDV growth, you know. And, we're seeing strong growth on our active cards and new card activations, particularly when you back out the impact of TurboTax.

You know, and to be fair, there's some unknowns as we look out towards the rest of the year. Tax refund cards have really declined as a portion of our overall portfolio, and we'll continue to see that impact over the remainder of the year. But, we feel confident that we are still on track to hit those benchmarks.

OK. And, then, just a quick follow-up on Loopt. So, it seems that you don't expect that it contributes to top line until 2013, but are you still going to try to roll out some new products from the bank side sometime this year?

Yes, we'll have, our goal is to have a product in beta for us to review and for us to play with, if you will, with friends and family, here this year and, then, to roll it out when it's appropriate and when it's ready for primetime, if you will. And, the Loopt team is certainly a big part of that, because the mobile app is so central to that product.

So, we believe that we're on track to continue to do development, but our most important goal is to make sure that the product is fabulous and delightful to consumers and does what we want it to do. So, I'm not predicting any given day or month. We have a lot of work to go and all that, but we feel pretty good about it.

Thank you.

Ramsey El-Assal, Jeffries.

Hi, guys. Congratulations on a great quarter. I had a question on the AMEX Bluebird pilot. Have you guys noticed, in terms of tracking the same store sales in the Walmart pilot locations there, has there been any impact on your volumes, on your sales activity? And, in other words, do you have any indication of how the pilot's performing?

Well, let me think how to answer that. We have some information which I would characterize as more internal information and nothing formal or packaged in a way that I could respond back. Also, that's not our pilot. It's American Express' pilot, and it's Walmart's pilot. And, frankly, even if I had details, I would defer you to either one of those organizations for that question.

I think the more salient point is that you see our numbers and you see our sales. So, nothing yet that would cause headwinds to our forecasts, and, as you saw, we're leaving them. So, so far, so good. But, to be fair, you know, it's still a fairly small pilot in a relatively small number of Walmart stores. So, you know, we have to see how that plays out.

OK. Fair enough. I also, if I understand the program correctly, I think John mentioned on some inter-quarter comments that he made that you'd provided some cards to Rite Aid that they in turn gave their unbanked employees for a direct deposit of their paycheck. Is this potentially a new distribution strategy or channel for Green Dot in terms of actually going to the employer? Or, was it more, sort of, a one-off for a long-time customer?

I would describe it more as the latter. I mean, here's our sense. We know payroll well. We understand employee-driven payroll versus consumer-driven payroll which is what we have today. Somebody just buys the card, and they hook up their paycheck for direct deposit. And, the people that buy the card on their own and use it for direct deposit are our best customers. It's a recurring source. They use the card for their everyday expenses, and they're paying the fewest fees that generate the most revenue and the most profit. So, we like those customers a lot.

When you do it on the employer side, and when the employer is mandating or instructing their employee to get the card, some do. Some don't. And, the margins and usability and retention of those cards is not as good as the regular version of the card that the consumer chooses on their own.

So, the answer is we did it as a long-term -- Rite Aid has been a long-term client. They were our very first client and, so, we're happy to help. The program was in place. We have been asked to do that for other retailers, and we may well. And, there are some that we may pitch when the strategy is right. But, I would think it's fair to say that we're not aggressively going after employer-driven payroll.

OK. Well, thanks a lot. Thanks for taking my comments.

Sure. You bet.

Jim Kissane, Credit Suisse.

Thanks, and good job guys. First, for Steve. Steve, can you give us an update on the renewal pipeline, and maybe the new business pipeline on the retail side? Thanks.

Sure. The pipeline looks pretty good, although it's not just on retail. If you were sort of a -- if you had a secret view into the whiteboard in the office, so to speak, you'd see the pipeline segregated by retail channels, by online and digital channels, and by other verticals. And, then, there's pipelines under each.

And, the pipeline looks pretty good. As you know, we don't tease or announce until it's a done deal and until our partner is comfortable with making announcements in any given deal. And, as those come to fruition, we'll be able to talk more fully about them. But, I feel pretty good about the pipeline.

In terms of renewal, we do have renewals that are always up at various retailers. We have one we're working on now, and so far, so good. But, that's a somewhat steady state. So, I think that we feel good about new prospects and continuing our existing prospects.

And, a quick question for John. John, can you give us a sense on what portion of the cards, what portion of the GDV is related to tax refunds? And, maybe, versus last year, stripping out Intuit, obviously? How it compared year to year? Thanks.

Yes. The portion of our GDV from tax refund, you know, it was a significant component in Q1. It was an even larger component last year. I think the, you know, one of the metrics we provided is that excluding tax, our GDV from direct deposits was up 42% year over year. But, we haven't actually broken out the portion of GDV from tax specifically.

Got you. But, would it have gone up, adjusted for TurboTax?

Adjusted for TurboTax, you know, in general, we saw just really very modest growth in our tax refund programs. Even if you back out TurboTax, our tax programs declined as a share of our overall portfolio, and that really, you know, explains some of the dynamics you see in our metrics -- increased revenue per card, increased interchange as a percent of GDV. A lot of those dynamics that you see there can be explained by the declining share of tax as a portion of our business, you know, even excluding Intuit.

That makes sense. Thank you.

Sanjay Sakhrani of KBW.

Hi. This is actually Steven Kwok filling in for Sanjay. A good quarter, and thanks for taking my questions. I guess the first thing I was wondering about was on the GDV growth with regard to the 30% target. I know this quarter was 33% on an apples-apples basis. But, in light of the 5% growth, how do you expect to achieve the 30%? Should we expect a ramp up? Or, are there drivers that we could know about that can lead to that?

Yes. You know, there are some drivers that we think will continue to push our GDV up. A couple of them are the rapid growth in our direct deposit, both for payroll and government benefits. You know, we continue to see increased GDV per card. If you back the tax out of our business, we're continuing to see higher usage per card. And, that's another dynamic at work.

But, you're right. To be fair, you know, we need to see solid acceleration in that metric to grow over the loss of the TurboTax business and still post a 30% gain in GDV. You know, it appears to be on track, but you're right that we need to see some solid growth in that metric to get there.

Right. And, then, I guess with regards to the Loopt acquisition, how should we think about the timeline for the expenses? And, also, what operating expense line will this fall into?

The Loopt expenses are primarily Comp and Benefits. So, you've got, you know we really had a very small hit in Q1, or expense in Q1, associated with Loopt. We had less than $1 million of closing costs associated with the transaction. So, the balance of the $14 million is spread fairly evenly over the remainder of the year, and it's primarily Comp and Benefits. It's both the ongoing operating expenses of the business and, then, another big component of it are the retention incentives that we're paying to key employees which will also roll through Comp and Benefits.

Sure. And, then, final question. I notice some of the pickup in the Interest Income line this quarter. I was wondering what was that related to and if that run rate is sustainable? Thanks.

Yes. You know, I guess there are really two things at play. You know, one is our, the average interest rate that we're earning on our cash, and the other one is the amount of cash. The amount of cash on our books has gone up quite a bit. And, we're getting a very small yield but a slightly higher yield than we were getting before on those investments, on some very conservative, highly liquid investment securities that we hold.

Great. Thanks for taking my questions.

Sure.

Thank you.

Andrew Jeffrey, SunTrust.

Hi, guys. Thanks for taking the questions. First, from a higher level perspective, John, there historically has been a less than perfect, in fact a relatively low, or even insignificant, correlation between GDV growth and card revenue. Is there anything that you'd anticipate changing? It seems like consumers are more active in accessing cash via ATMs or cash back at the point of sale. How should we think about that metric as affecting the business? Is it a longer-term behavioral indicator, rather than a shorter-term, kind of, revenue driver? Just trying to think about what that really means to, you know, what GDV really means to you.

Yes. I want to make sure I caught the question. Did you say the correlation between GDV growth and revenue growth?

And card revenue. Yes. Right.

Yes. Well, you know, in general, in the longer history of the business, those metrics tracked more closely. Over the last two years, as tax refund cards grew as a share of our portfolio, that correlation kind of broke down. The reason for that is we had a lot of customers receiving large tax refunds on their card and, then, they would very quickly pull off most or all of that money at an ATM machine or through, you know, cash-back transactions at retail stores.

And, really, none of that would roll through into interchange revenue. And, really, none of it, only a small portion of it would convert to revenue at all. So, the relationship between GDV and interchange revenue and the relationship between GDV and overall revenue kind of started to break down as tax grew as a portion of our business.

What we're seeing in 2012 is the tax refund cards are declining as a share of our portfolio, in part due to the discontinuation of the TurboTax program, but also just in the rest of our business. We're seeing that it's growing more slowly than the rest of our portfolio. And, that relationship is starting to restore more to what is was historically.

So, you know, to your overarching question, the significance of that metric, it is a, it's not a perfect predictor of revenue, and the correlation of revenue does change based on the mix in our portfolio. But, we do feel it is a good and useful measure of, sort of, the vibrancy of our network and our portfolio and the way customers are using their card. You can think about the number of customers that we can acquire, and then within each customer, you can capture a larger share of their wallet. So, we think that GDV is an important metric, but it doesn't tell the whole story by itself.

But, it sounds like the relationship is getting better, or moving back to what it's been historically.

That's right.

More so. OK. And, then, a question, follow-up just regarding expense items. You picked, you had really nice processing leverage again this quarter. Sales and Marketing is up. Can we think about you getting generally more aggressive with Sales and Marketing, especially as you get more scale on the processing side of your business?

You know, I think generally that is the trend, that we do plan to increase our advertising spend over time. That really was only part of the story though this quarter. We had a couple of things going on. You know, we do big replenishments of our retailers, the packaging that we have in the stores, each year at the beginning of the year and tax season. And, this year, we have a more expensive package at Walmart stores with a clear window on the front, so that customers can actually see the card inside the package. So, that more expensive package drove up our Sales and Marketing expenses. We also had a big reset at Walgreens. We were printing a lot of packages and shipping those out to those stores.

Those two factors are actually a bigger driver of the increase in Sales and Marketing expense than the advertising.

Got it. Thank you.

Yes.

Greg Smith, Sterne, Agee.

Hey, guys. Steve, can you talk a little bit about what you're seeing when your cards are being sold side-by-side with other cards, where maybe you used to be the only card being sold in a retailer and now there's maybe two, or even three, other brands? What are you starting to see?

Well, probably too early to know, because the only ones doing it are 7-Eleven and Blackhawk. But, Blackhawk, we were a new addition. In other words, the other cards were already there when we got in. And, we're selling very well at Blackhawk stores, and we continue to sell very well at 7-Eleven. So, I don't know that there's any conclusions yet. When I've talked to some of the buyers, for example, at those retailers, what they tell me is that they're seeing a general expansion of the category and that they're pleased with their overall share as a retailer, which tells me that everybody must be growing, because we seem OK.

But, to be fair, it's very early on. And, so, as we sort of do, in the sake of complete transparency, as we sort of list our SLOT analysis -- you know, strengths, weakness, opportunities, and threats -- and we go through it, we'll have sessions where sometimes we categorize a new quality product on the shelf, like an AMEX product or something like that, as an opportunity, because now you have more companies advertising in the space. The retailer, like at 7-Eleven, has more square footage or linear footage dedicated to the category, more signage. And, that's certainly a time-honored way over the years that categories have grown for all parties.

Other times, we think of it as a threat. And, gosh, you know, what if it doesn't grow? And, what if that takes a proportional bite out of our total sales?

And, we don't know. There's not enough retailers doing it today. My sense is over time, more will start. And, then, we'll have more data to look at a year from now, or two years from now.

So, the answer is, so far, so good. But, you know, we're the first and largest player in a category that is under-penetrated. And, so, we're trying, as with others, to be, you know, to get traction. So, we're the big dog on the block. We intend to stay the big dog. But, we watch these trends as you do. I wish I had a more, you know, frankly, a more concrete answer, but that's probably the best I can give.

Well, that's helpful. And, then, just the new rules in New Jersey. Do those affect your cards at all?

They affect the gift card product that we sell at Walmart. And, so, you may have read that gift card companies are taking the products off the rack in New Jersey. I'm not sure. I'd need to get verification from our Walmart team. But, I want to say that we may be taking them off the shelf there in New Jersey as well, for the gift card.

It's an immaterial amount of revenue or earnings for the Company. So, it won't change any financial outlooks, good, bad, or indifferent. But, it may well be that that's the end result.

OK. Thank you.

Yes.

Bryan Keane of Deutsche Bank.

Hi, guys. I just want to ask a big picture question that I get constantly, and I'm sure you guys answer a lot, but I want to make sure everybody's clear on the, you know, what's the technology advantage that Green Dot has over the competition? Or, what do you see the major advantage there?

Well, it depends in what area. There's so much technology that is required to run, I guess, any company today, but certainly our company. So, it depends which area you're focused on.

If you talk about our retail connectivity, then the answer is it's a fairly significant advantage, because that's highly audited and regulated IT that has to be directly connected to the retailer's cash register and point of sale systems. That can take years to integrate. And, that's sort of your main tool for monitoring fraud and use and complying with a host of federal laws and everything else. So, that technology would be somewhat unique and highly valuable.

You have other technology which is maybe more commoditized, which we still need to run the Company, but is not part of the secret sauce, if you will.

And, then, you have other kinds of technologies that are highly proprietary, the stuff we have now at Loopt, for example, or the way we process our cards and feed the cards and audit them and handle the internal documentation. And, then, the way we integrate that all into our regulatory module. Remember, we're also a bank and a bank holding company. [And], how we take all that data and issue reports and comply with various laws and regulations as a bank is something unique to our hybrid of a retail world and a banking world.

So, it's probably a non-answer, but I guess it just depends. Some things we do are very basic, that it doesn't matter. Other things are very specialized.

And, is there a way yet for you guys to measure market share, if you're winning or losing share in the marketplace?

Well, our guess is that we're gaining, and I'll tell you why. But, I, it's a guess, because there's only two public companies, and the private companies don't always tell. And, if they do tell, you can never be sure.

Here's where I think we are. And, by the way, I apologize if I sound sick. I have a cold. So, if I sound like I do, it's because I do.

The way we sort of get at that is that you see our sales numbers quarter after quarter, year after year, and we continue to grow at a fairly rapid clip despite the fact that we have a fairly large customer base. When you're doing 8 million, 9 million, 10 million new accounts a year and your active cards are roughly one-half that, that's a lot of people. So, when you're growing 20%, 30% every quarter, year over year, that's a big base to grow over. And, we keep hitting those growth numbers.

When you look at our only other public competitor, who's a fine company. I don't mean this in any way as a negative towards them, but their growth has been far less than that, and in some quarters, flat, year over year. If you look at the private companies, some have grown. Many have not. Some of have gone backward.

So, if you sort of look at who are the share gainers in prepaid and who are maintaining share or losing share, my guess is Green Dot would have to be gaining share, because we're growing quarter over quarter, whereas competitors are not. But, there is no -- oh gosh, if we were selling green beans and working for Del Monte, you can actually go out and buy reports of the green bean industry and see how every brand is selling at retail. That doesn't exist yet for prepaids. So, I can't give you an audited response, but that's my anecdotal response based on that mathematics.

OK. Just last question for me, John. The customer identification process that's gone into effect, you said it might have an impact on GDV and, I think maybe, card activations. Can you help quantify that?

You know, it's really difficult. I mean, like any bank or financial institution, we're continually upgrading and enhancing our customer identification processes, our risk management processes in general and constantly beefing them up. And, it's possible that as you do that, you may impact the ease with which customers can buy and use your product, and it could impact our new card activation, GDV growth. But, it is very difficult to quantify that, because it's hard to know it before you see the impact.

You run, you sort of run the controls offline to see what would happen, and you're constantly tinkering. And, we don't know. We've had some tinkering sessions, if you will, where we've been able to activate more cards, because we fix something or modify something in the logic tree that enables more honest customers to get through more quickly. We've done things over the years, where we think, oops, and you go back and revisit it.

I wish I could tell you that there's a science, a perfect science, to risk management. There's not. Every bank has to do their own analysis and their own policies and their own procedures to ensure their compliance and their [good] standing. And, we're no different.

So, I think what John is saying and what I would say is that it could be that there's no impact acquisition. It could be, there's some. But, we wanted to make sure that we erred on the cautious side to say, look it, we're changing things. We're a big company. We're now a bank holding company. We're far and away the biggest in the space and getting bigger, and we take that leadership role seriously. And, part of that is always changing our risk management and making sure we're staying one step ahead of the bad guys. And, sometimes, you're not sure how that will play out.

As a reminder, when you're asking a question, please limit yourself to one question and a single follow-up. Glenn Fodor, Morgan Stanley.

Hey, everybody. Thanks for taking my question. Just to continue on the question a couple ago on Sales and Marketing. I mean, it grew faster than revenues this quarter. Last quarter, it didn't. But, in prior years, it has. It's been pretty lumpy, but at some point, do you expect the pattern will reverse and you'll have a positive spread there?

What was the last part you said? Do we expect we'll have a --?

You'll have a positive spread where it can grow slower than revenue growth?

You know, our expectation is that we're not going to show leverage on that line item, actually. I mean, I think we plan to continue to increase our spending on advertising in every area where we're seeing, you know, a very positive return on it. So, in general, we expect it to grow in line with revenues.

You're right that it is fairly lumpy. We have advertising campaigns. We have new packaging, resets at our retailers. So, it does tend to bump around a fair amount. But, in general, we expect it's an item that will roughly grow with our revenue.

Great. Do you envision it's possible it's the upside there? You know, you deliver more mobile solutions, and your mobile offerings could lower that line item, just because it's a more efficient delivery channel?

It's a very, yes, it's a very fair point, right? As we -- I'm trying to think what we've said publicly and not. As we sell products in channels that are not retail and as we have more digital distribution, let's say, that maybe it will be that the efficiency does pick up. You don't have the packaging costs and those things. But, then you have acquisition costs. So, yes, I don't know. I wouldn't bet on anything today, I guess. But, it's a fair point.

OK. Great. Thank you. Appreciate it.

Robert Napoli, William Blair.

Thank you. Good afternoon. The Loopt acquisition, you acquired a company that has a lot of very young entrepreneurial employees that had a business plan that was, you know, not to be acquired, I guess, at this point. Now, they're a part of Green Dot. You paid a lot for that talent, if you will, and what they've developed so far. I know you're making retention payments, but how are you going to keep those people motivated? And, we've heard rumors that you've lost some of the employees already. Is that true, or not true? And, how confident are you you're going to be able to keep the talented employees of Loopt?

Well, first of all, I've not heard we've lost any employees at Loopt, and I'll call Sam as soon as we get off the conference call and ask him. I've actually not heard that, and we meet quite a bit, and we had a big integration celebration here a week ago. And, all were present and accounted for. So, I don't think that's true.

On the other question of how do you keep the folks in Silicon Valley motivated is probably the same way we try to keep any employee motivated. And, that is we're a mission-oriented company. People love to wake up and change the world, and we have probably as big of a soapbox and platform as you can get in any industry or in any career today at Green Dot, which is why we have an easier and easier time of recruiting top talent.

So, one way is to make sure they have a [meaning] mission to bite their teeth into. The other way is you pay them well, and treat them well, and have good benefits. The other way is you have good retention payments. And, then, you try to have some good laughs throughout the day.

I'm somebody, and Bob, you know me fairly well from our road trip and other things. I enjoy people and I enjoy a lot of laughter in the workplace. And, I enjoy big opportunities. And, I think to your point, because of their entrepreneurial spirit and where they are, they appreciate those things. We're not a, for a fairly large company and for a bank holding company, we're not stodgy or anything of the sort. We're fairly upbeat and have a lot of fun and try to change the world in a positive way. And, I think they buy in to that.

But, to your point, if we ever become irritating or they start feeling like any of our employees that we're more of a burden than a blessing, they'll leave. And, that's the way it goes. You know, California, there are no non-competes that are legal. And, people in California work for their employer because they want to, or because maybe they're not good enough to find a job elsewhere, I guess. But, in our case, we like to think it is because we're their employer of choice.

OK. Follow-up question on the number of active cards, I guess. And, the, you know, what it looks like attrition, I guess, on a quarterly basis. And, how many of those that you add were, the new card activations, has used the card previously, where the convenience users and --? I mean, do you expect to see a different mix of convenience users versus repeat users? You know, how many of those --? Maybe, try to give a little bit of color around that, if you could?

Yes. No, I got you. You know, the percent of our new card activation from repeat customers, I forget the exact number, I think it was 36%. It was, you know, virtually unchanged from a year ago. So, we continue to see a lot of customers coming back and buying another card. So, no significant change in behavior on that front.

Hey, by the way, Bob, while you were asking John that question, Sam Altman shot me an email -- Sam was the CEO and founder of Loopt -- that said, haven't lost anyone. So, bad rumor.

Mike Grondahl, Piper Jaffray.

Yes, thanks for taking my question. Could you just highlight for us, I didn't see it in the slides, the first-time reloaders? And, maybe just highlight a little bit how they online channels [in]?

Sure. First-time reloaders were up 22%, year over year, in the quarter. And, then, the other question was online channels.

Yes, the online channel continues to be a strong contributor. You know, I mean it declined in terms of activations from the standpoint that TurboTax went away, and that was, you know, an entirely online channel for us. But, backing out TurboTax, it continues to show strong growth. And, it's an important contributor of new cards and a very important contributor of direct deposit customers. It's an area we continue to invest in, and we plan to continue to spend heavily in that channel going forward.

Tom McCrohan, Janney.

Thanks for taking my question. How important is the [obal] and online channel to your future long-term success?

Well, it's very important, but for different reasons than we might expect. And, I don't know, Tom, if you had a chance to hear my talk up at the beginning of the conference call, but we talked about our, sort of, world view on the mobile handset. Did you get a chance to hear that at all?

Unfortunately, no. Sorry, Steve.

Yes. No, that's OK. Check out the transcript if you can, because I spoke quite a bit about it. And, the answer is, it's extremely important. We really do have a view that, not just for banking but almost any industry you can think of that involves computers today, say, when we think about online, when somebody says, I have to go online, you think about going to a computer and doing something. More and more, that's going to be in the palm of your hand, and smartphones, I think, will become the internet-connected computer that people rich and poor use more than their laptop.

And, for those of you who travel on business, I know, I'm sure you do, and I'm sure others do, more and more you don't even take a laptop on the plane. You're taking your iPad or some tablet, typically an iPad. And, when you get to the hotel, you're using the iPad or a lot of times, you've answered all the emails in the car or done whatever research you needed before you ever got to the hotel room. That's a pretty massive change in just the past few years of behavior at all levels of the economic spectrum.

I gave a statistic that 55% of Green Dot customers today have either an iPhone or Android or Blackberry smartphone, an internet-connected smartphone with a data plan. That's pretty impressive. That number would have been one-half that, only a year of two ago.

So, you just see this progression at all economic levels, and for any bank not to have a resident, a core expertise of mobile programming for any products they offer now or in the future could almost be characterized as neglect. You really have to be expert on the mobile handset to compete, we think, not only in the long term, but maybe even in the near term.

And, in terms of kind of building up that capability, you know, Loopt was part of [it]. Was it any one of the, you know, nine-inning investment cycle? Or, how far did that get you in terms of where you need to be? And, I'll jump off. Thanks.

In terms of, did Loopt get us to the knowledge we need? Is that what the question was?

Yes. Do you have the talent and the resources with Loopt to get to where you need to be long term?

We think so, yes. You never know, because what happens is once you get on something, right, you get excited about it. You taste some success. And, so, you know, we'll continue to recruit and do things over the years as we have with everything we do.

But, it sure brings us a tremendous lot of fire power. Not only do you have the intellectual property which is going to be very helpful to us, but you also have technologists who live in the mobile world. So, they understand how to make it look cool and work cool. And, some of the stuff that Sam and [Aluk] and his team at the company formerly known as Loopt have shown me in the past two weeks is just fun stuff. And, we'll sit at a restaurant somewhere in the Bay Area and look at all these new cool features, and it's fun. It's exciting. It's a real renaissance of technology innovation for both our current engineers at Green Dot and our new engineers at Green Dot Silicon Valley.

So, we couldn't be more thrilled with it, to be honest with you. And, when these new apps come out and the products come out, people will ooh and aah, aah and sort of understand where we're going with this.

But, there's no question that our world view is that for us to be a long-term high growth company, not just for this quarter and next and next, but for years to come, we need to follow the consumer. And, there's no question that the consumer is leading us to the handset.

David Scharf, JMP Securities.

Hi. Good afternoon. Thanks for taking my question. I wanted to focus on the first-time reload metric and make sure I understand the dynamic. I think you said it was up 22%. And, it always seemed to be obviously a good forward indicator for repeat usage and length. I think the average account life. That figure's dropped off considerably from last year's levels, around 30%. And, I would have thought that TurboTax really wouldn't impact that figure, given how you've described the behavioral aspect of a tax refund, which is, you know, get the money, run to an ATM, and take the cash away, that those people really don't enter that reload metric. So, can you give a little color on the trend there?

Sure. I mean, you know, in general, so let me clarify one thing first. The first-time reloaders grew 22% year over year, once you back out Intuit. New card activations were up 23%, year over year, once you back out Intuit. So, the new card activations were, grew essentially in line with first-time reloaders.

So, what, you know, that tells you -- in some quarters, we've seen that the first-time reloaders has grown a bit faster than new card activations in general. You know, that's a positive sign in our mind. We like to see more and more of our customers converting to become reloaders. In this particular quarter, they grew essentially in line with each other. So, it shows you that the same percentage of customers who are buying the card were converting into reloaders as they were a year ago.

That, by itself, is not a really good sign or a bad sign, but, you know, it shows you that we're continuing to. The fact that it's up more than 20% year over year is certainly a positive thing. We're continuing to acquire more customers and convert them into reloaders than we were a year ago. And, it's an important input to our own models here.

It's more of a -- maybe, it's confusing -- it's more of a relative metric than it is a trend metric, I guess.

So, OK. So, I would have thought that TurboTax falling out wouldn't have had that much of an impact on that growth rate. It still would have been around 30%, like the last few quarters, since those tax refund customers tend not to be reloaders anyway.

Yes, that's true. We do see some. You know, with the direct deposit guys, we'll count them as a reloader upon their, you know, their second load. So, if someone gets a card online and they get a federal refund and, then, they get a state refund as well, we'll count the first funding as the initial load. And, if they happen to get a state refund as well, the second one will count as a reload. So, even some of the tax customers count as reloaders in the way we measure the metric.

That's helpful.

Yes.

Just one follow-up. Steve, not to have you once again launch into the description that you gave at the beginning on Loopt, can you help me understand a little more about the intellectual property? Because, I'm aware that there are quite a number of so-called location-based marketing companies out there.

Yes.

And, we read a lot about these that are involved in, you know, GPS-oriented, you know, text messages offers, couponing, and so forth. How exactly does Loopt's IP differ than some of these other --?

Well, it doesn't. This was a patent that Sam and his team got put on the federal registry in October of last year, August of last year, something like that. So, it's a fairly new patent, and it's a very clean and broad patent. And, the answer is that all these, not all, many of the ones you're speaking about that have geo location technology that predicates sending a message of commerce to that phone user would be in conflict or violation of the patent, by our reading.

And, some of those companies, some that you're referring to and other large companies, have called us and inquired about licensing that patent. And, there seems to be from the companies we've talked to, all of which are large companies, some public, some private, a general sense of recognition that the patent's real and that the IP is solid.

We're currently doing a third-party valuation of the patent to understand how we would license it. You know, Green Dot, we don't license patents for a living. So, this is something that we want to get better educated on and make sure we're buttoned up on. And, we'll use the patent for our own use. We'll use it strategically to partner with other companies and do sometimes patent swaps and other kinds of IP swaps, which are fairly common in the world. And, in some cases, we'll use it defensively, to make sure that competitors who otherwise are looking to do what we can do, don't.

And, so, we need to sort out that patent strategy. But, we do think the patent's good, and we think the value is significant.

Ashwin Shirvaikar of Citi.

Hi. Thank you. Just, you know, following up on Loopt, what is the economic or financial model as the Loopt products and apps get introduced? And, how should we think of it? I can see obviously, you know, no material revenue this year, $14 million loss. But, what might that number look like, say for example, next year?

Well, it's all part of Green Dot. So, you wouldn't see a broken down number specifically for the former Loopt. You'd see it just in terms of Green Dot's performance metrics.

But, to sort of roll it forward, once we have the apps working and the integrations complete and using the Green Dot product or service or one of any of our bank's products or services, becomes mobile centric, what we should see is a more efficient operation. We should see more efficient call center costs, as people can more easily access customer service. We should see longer retention, as customers feel more engaged with the product through a number of important apps and features that they can use on the go. And, we should see it in different kinds of retention that today we cannot do.

You know, when people sit in front of the TV set and see one of our national ads and at the end we say, or get the card free online at greendot.com, which is how we generally end the commercial, you're asking that person to get up from their couch or wherever they're watching it and go into a room where their computer is booted up, go online, and order the card. And, a lot of them do, but that's a lot of separation.

What we see in consumer testing, and you've probably read about elsewhere, is this multitasking, especially with younger consumers, where they're watching the TV. They've got their cell phone in their left hand doing whatever they're doing, texting somebody, and they have their iPad in their right hand, browsing, looking, downloading, messing around. And, you may see that in your own family as you look around the room. The ability to be able to acquire a card from a cell phone app or to do other things from your mobile handset while you're watching TV, while you're out, when you see a Green Dot display in a grocery store, we think these things will be additive and deepens the relationship with the consumer.

So, while there may be certain services that we charge a specific fee for relative to the app, I would more think of it as a deepening relationship to the product for the customer.

Got it. That's helpful. And, just, again, thinking slightly longer term, in terms of the Walmart commission reset, can you possibly quantify --? You can kind of tell I'm trying to figure out, not so much this year, but how the financial model plays out in the next couple of years. So, can you talk about the Walmart commission reset for next year?

Yes, sure. The commission that we pay to Walmart on the Walmart MoneyCard is going to step up. It's, you know, it happens on the third anniversary of our contract. So, it's going to be May 2013. The step up is just right around 4 percentage points, year over year. And, then, that new rate will stay in effect through the remainder of the contract.

Gil Luria, Wedbush Securities.

Thanks for taking my question. I apologize if you talked about this. I'm having some technical difficulty. You spent some time talking about the volume metric. But, in terms of the [unit] prices you charge for your products, [or fees] for your products, those haven't changed in almost three years. And, I think there's been a lot of expectation that a lot of new competition would come in and drive prices low and then cause you to reduce your prices. Hasn't really been new competition, not from new banks. Some of your existing competitors have put new products out there at comparable price points. Do you expect that to change? Do you expect to have to take your prices down in the, over the next year or two?

Well, let me think about how to answer that. Have to, is a strong word. I don't think we have to. But, let me say a quick word about price in the spirit of candor and transparency. You know, we focus on cost a lot at Green Dot, vertical integration plays like the process or the bank or being able to develop special software with engineers at Loopt and our own engineers here at Green Dot South. And, we've spent a lot of money on that, and we do, I think, a pretty good job of driving efficiencies throughout the system, whether it's in the way we manage our worldwide network of call centers, or the way we do technology development, or anything else we do at the Company.

And, the reason is, not just to deliver a better margin, although over the years we've been able to do that I suppose, but because cost is a weapon. The lowest-cost provider has more options by definition than anyone else in any given industry. And that's what allows us to be vendors to Walmart, and that's what allows us to lower consumer pricing over the year or give away free ATM networks when nobody else does that, and all the things we do that plows value back into the product.

So, we will always research and experiment. We have a couple of experiments going on right now with pricing in the market. And, we will always look at pricing as an offense, a defense, and an arrow in our quiver to make sure that we can continue to capture share and have high growth and have lots of optionality.

So, I want to be clear that, has anything happened that has made us lower prices? No. Have we lowered prices since our big reset in 2009? No. We've added new services. We've given new free ATM networks and whatnot. But, does that mean that we would not lower pricing at some point in the future? I would never say that either. We always to reserve that optionality, and the company with the highest scale and the best cost infrastructure, the best products, the most customers has optionality in cost and price that others don't. And, so, I just want to answer it in that complete way.

Got it. So, it doesn't seem like it's going to be driven externally. And, on that point, the interest from banks [expressing] interest in reloadable prepaid market has come and gone over the last couple of years with some of the other developments that they've had to go through. What's the latest on the developments that you see? You're sometimes in contact with them about possible partnerships. Do you see more or less interest than, let's say, the same time last year, six months ago, from the big banks that introduce products?

Well, so the answer is, not interest in Green Dot working with them. I heard from a friend who works at a large processor that it was her opinion that banks are making more inbound calls to her for processing for prepaid. So, it may be, Gil, I just did some market research analysis for you there by talking to my friend. It may be that there's banks interested. Chase has a product that's been out there, now for a number of months, in pilot in certain markets. US Bank has had a product now for a very long time. SunTrust has had a product for a while. Oh gosh, EB&T has had a product now for over a year. Regions Bank has had a product now for 8 months to 1 year. And, so, there are, you know, to be fair a number of banks with prepaid offerings today. ING has one. Capital One has one.

So, I think that it's fair to say there are many, many banks today that offer prepaid cards to one segment of customers or another, or for one use or another. And, whatever it is, it is. And, our growth is what it is. But, we don't see a lot of over-the-top interest, and we haven't seen a lot of aggressive [push-]marketing for these services. But, it may well be that banks over time have prepaid accounts just like they have checking and savings accounts, and that would not surprise me.

John Rowan, Sidoti and Company.

Good evening, guys. John, I just want to make sure I understand. You said, when you were giving guidance for the second quarter, you said the, grow over. I just want to make sure I understand what you mean, when you were giving some type of expectation for revenue in the second quarter.

Sure. So, what I said was the grow over from the discontinuation of the TurboTax program was about $6 million. So, we expect that our revenue attributable to TurboTax will be about $6 million lower in Q2 of 2012 than what it was in Q2 of 2011.

OK. I just wanted to make sure you're weren't saying revenue was going to be up $6 million from the second quarter. And, then, just --.

No.

OK. One more follow-up. On, if I'm not mistaken on this, on the last quarter conference call, you guys talked a lot about vertical integration and some of the possibilities you had heading into 2013, but even more specifically into 2014, to lower your operating expenses. Can you maybe just go over again what you said for 2013, and where were some of the opportunities you had to reduce cost?

Sure. Yes. I mean, as you look at 2013, I think we've got some, we have some headwinds and some tailwinds in terms of our margin. We have the reset and the increase of our Walmart commission rates on the MoneyCard program which will affect about two-thirds of the year, you know, from May onward. We'll also be offering free ATMs to Walmart customers for the full year 2013.

You know, on the plus side, we continue to get scale and get leverage on our fixed costs as we grow. That's a source of margin expansion for us. We will be well into, or you know, essentially completed the migration from Synovus Bank to Green Dot Bank, and that will be, you know, at a lower cost. And, you know, we'll be beginning to convert accounts to our own processor, although that is really more of a 2014 opportunity.

So, there are, you know, I think we have some headwinds and some tailwinds as you look at 2013.

Well, that's all the time we have for questions today. The conference call has now concluded. We thank you all attending today's presentation. At this time, you may disconnect your lines. Thank you and have a good day.