Green Dot Corp (GDOT) 2016 Q4 法說會逐字稿

Good day, and welcome to the Green Dot Corporation fourth quarter 2016 earnings conference call. Please note that the contents of this call are being recorded. Please note this event is being recorded.

I would now like to turn the conference over to Dara Dierks. Please go ahead.

Thank you, and good afternoon, everyone. On today's call, we'll discuss 2016 fourth-quarter performance and [fast] about 2017. Following these remarks, we'll open the call for questions. For those of you who have yet accessed the earnings press release that accompanies this call and webcast, it can with found at ir.greendot.com.

As a reminder, our comments include forward-looking statements about, among other things, our expectations regarding future results and performance. Please refer to the cautionary language in the earnings release and in Green Dot's filings with the Securities and Exchange Commission, including our most recent Form 10-K and 10-Q for additional information concerning factors that could cause actual results to differ materially from the forward-looking statements.

During the call, we will make our reference to financial measures that do not conform to generally accepted accounting principles. For the sake of clarity, unless otherwise noted, all numbers we talk about today, including revenue per active card, will be on a non-GAAP basis. Information may be calculated differently than similar non-GAAP data presented by other companies.

Quantity of reconciliations of our non-GAAP financial information to the most directly comparable GAAP financial information appears in today's press release. The content of this call is property of the Green Dot Corporation and is subject to copyright protections.

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

Thank you, Dara, and welcome, everyone, to our fourth-quarter earnings call. Today, we'll cover a review of the quarter and full year, we'll talk about our two reporting segments and our increasingly diversified consolidated enterprise. We'll provide some more information on the recently announced pending acquisition of UniRush, and we'll provide our updated six-step plan for 2017. Then lastly, Mark will provide our financial guidance for 2017, both with and without the UniRush acquisition, so you can easily see the guidance in parts and on a consolidated basis.

I'm pleased to report that Q4 was a strong quarter for Green Dot with both of our reporting segments and all of our revenue divisions performing within or better than our expectations. Total non-GAAP operating revenue came in at $163.2 million, representing an 8% year-over-year growth rate. Adjusted EBITDA for the quarter was $21.8 million, representing year-over-year growth of 72% and margin expansion of around 500 basis points year over year. And non-GAAP EPS for the quarter was $0.19, which equates to year-over-year growth of 217%, or more than three times the prior-year period.

For the full year 2016, total non-GAAP operating revenue came in at $719.7 million, representing a year-over-year growth rate of 3%. Remember that we previously reported that we needed to grow by $35 million just to be flat on a year-over-year basis. So this result means we've generated around $55 million of good margin organic revenue from our new prepaid products and our new initiatives.

Inclusive of approximately $11 million in our usual expenses relating to the launch of our new prepaid products with higher-unit economics, adjusted EBITDA for 2016 came in at $156.3 million, growing 3% over the prior year, with non-GAAP EPS at $1.46, representing an 8% increase over 2015.

Results of the quarter and the year overall are, in large part, due to the discipline we've deployed around our road map for growth laid out in late 2015, and the corresponding six-step plan to deliver at least $1.75 in EPS in 2017. As background, when Green Dot launched its IPO in 2010, we were essentially a monoline prepaid card program manager with a majority of our revenue coming from just one product sold in one retailer, the Walmart MoneyCard.

Since that time, one of our most important long-term strategies has been to diversify and grow Green Dot's revenue base, both organically and through acquisitions so that we can derisk our earnings and have multiple platforms of future growth.

That plan has been very successful for us in that, including the acquisition of UniRush with its PayCard business, we you now have two reporting segments under which resides six revenue divisions, each with its own set of unique products or distribution channels, yet all of them synergistic to the other and strategically on point with our mission to reinvent banking for the masses.

As one measure of that success, since our IPO year of 2010, on a pro forma basis in 2017, we'll have more than doubled our revenue and our EBITDA with no one product now representing greater than around 25% of our revenue.

Each of our six revenue divisions has a dedicated leader and each has its own product road map and revenue plan. Let me quickly discuss each so you can have a better more updated view of today's increasingly diverse consolidated Green Dot.

Let's start with our account services reporting segment. Within that segment, consumer accounts is our largest revenue division and houses our prepaid card products, our GoBank checking account products and open loop gift cards. This is the division that investors and analysts tend to think of when they think of Green Dot Corporation because this division essentially represented the entire Company's revenue at the time of our IPO in 2010.

By comparison now in 2017, the consumer accounts division is expected to represent only about half of Green Dot's consolidated revenue. 2016 was a good year for consumer accounts, with the launch of our new prepaid products with better unit economics, and improving behavior across our customer base for these products.

As you know, the ongoing story in this business line is that we've lost a large number of active accounts since the discontinuation of the original MoneyPak in 2015. While the revenue generating behavior for the remaining customers of those legacy active accounts and the strong revenue generating behavior from the new customers of our new prepaid products has created materially higher revenue per active card.

So in 2016, the net results of double-digit revenue per active-card growth offset by double-digit, active-card declines has led to single-digit, overall revenue growth for this division. But because the incremental higher revenue per active card has little costs associated with it, it has helped to significantly expand our consolidated margin contribution.

So this division is providing significant fuel to the consolidated margin expansion we see. But we don't expect this division to deliver greater than single-digit, top-line growth until we begin to grow total actives which isn't forecast to happen until early 2018.

Also in our accounts services segment is a revenue division called Green Dot Direct. Green Dot Direct is the amalgamation of several direct-to-consumer websites and direct-to-consumer direct-mail programs that we've either developed organically or through acquisitions over the last few years. Green Dot Direct includes greendot.com, walmartmoneycard.com, accountnow.com, achievecard.com, readydebit.com, gobank.com, and soon, rushcard.com.

By keeping the consumer facing brands as they are, but consolidating and streamlining marketing, on-boarding and back-office program management, we've been able to develop a powerful and profitable direct-to-consumer capability at a time when more and more consumers are going online and to their phones to find suitable bank accounts.

Given the macro of increasing online preference and the cost synergies we expect to achieve from the acquisition of UniRush and RushCard, we believe our direct division has the opportunity to be a growth leader in the Company for some years to come. Next, in the account services segment, contingent upon the closing of the UniRush acquisition, we'll have our newest revenue division called pay card and wage disbursement services.

The brand of the UniRush PayCard offering is called Rapid! Pay. With over 2,000 corporate clients and around 275,000 monthly active employees receiving their pay through the Rapid! Pay offering, we believe this division can become a significant contributor to the consolidated Green Dot.

The electronicacation of W-2 payroll is a growing macro. And given our bank, Green Dot's enhanced product selection that can help expand the number of products Rapid! Pay offers its client base and the number of large corporate clients we work with, we believe our new pay card and wage disbursement services division can be a very nice complement to Green Dot's other business units.

Finally, in the accounts services segment, is our wholly-owned bank subsidiary, Green Dot Bank. Since its founding, the bank has been an efficiency driver and an innovation enabler for Green Dot Corporation.

For example, GoBank mobile checking, the Uber disbursement programs, the new prepaid products of check deposit, check writing and the embedded savings account offering. Our secured Visa credit card, TPG small business lending program, and many of our new business opportunities have all been facilitated through our bank. But it's also fair to say that Green Dot Bank has not historically had the regulatory flexibility to maximize its earnings potential as a standalone entity.

In fact, with the exception of the modest interest income the Bank earns from balance sheet investment activities and the small amount of non-interest income it earns from its branch operations in Provo, Utah, the Bank's financial contribution is in the form of cost savings by serving as our issuing bank rather than earnings. But going forward, pending regulatory approval, we believe Green Dot Bank can generate EPS for more material returns on investing core deposits and perhaps other business activities that can generate both interest and non-interest income.

In addition, in December 2016, we were successfully able to reduce our minimum tier 1 capital ratio requirement from the former 15% minimum down to just below 10%. As such, we now have a significant amount of extra capital in the Bank.

Subject to receiving regulatory approvals, we plan to dividend the surplus back to Green Dot parent which we can then use for general corporate uses, including funding share buybacks, making acquisitions or paying off debt. We are early in the evolution of the Bank as an independent money maker. But our plan is to make the Bank more capital efficient and build out its capabilities as a future contributor in its own right.

Now let's talk about our processing and settlement-reporting segment. The first revenue division in this segment is money processing. Its biggest product is our ubiquitous swipe reload service available at around 100,000 retailers nationwide. This division also owns our new MoneyPak product which is catching on with increasing retail distribution and higher sales and a product called ECash, which is a mobile barcode cash-deposit solution that allows consumers the ability to safely use our retail network to pay certain bills or to put cash into their PayPal account and other types of online wallets and accounts.

While this division saw the most pain during the 2015 discontinuation of our original MoneyPak product, necessity is the mother of invention and we believe our money-processing area now has perhaps the highest potential growth prospects of any division in the Company. New money processing products include our new simply paid corporate disbursement platform that allows corporate clients the ability to replace checks with electronic deposits through recipient's debit card and the ability for large corporations to instantly send wages to far-flung and dispersed groups of 1099 workers.

For example, SimplyPaid is the platform we use to you power Uber's Instant Pay to any debit card service for their drivers. We believe the potential growth opportunities are significant as the economy expands and as large corporations look to replace checks and ATH with more efficient and faster electronic payments.

Because many of these modern disbursement solutions almost always have faster payments, mobile banking and financial technology at their core, our money-processing division also tends to be from where much of our Fintech innovation springs forth.

Lastly, in the processing and settlement-reporting segment is our tax-processing revenue division called TPG. TPG is purely a B2B processing technology play that serves as the backend refund processor for leading online of brick and mortar tax services, including thousands of independent tax-prep services and accounting firms nationwide. Through TPG's integration in the leading tax industry software providers, we're also increasing our cross-sell opportunities by offering GPR cards from our consumer accounts division and small business loans from Green Dot Bank to help expand our tax-related services and generate incremental revenue beyond TPG's cores processing services.

TPG's financial performance on its core business is fairly static as it's linked directly to the nation's tax filing macro, which has also been historically fairly static. But we believe that the recent success of our cross-selling efforts with cards, loans and other ancillary products has a potential to improve TPG's consolidated revenue and EPS contribution over time.

As you'll hear in more detail during Mark's section of today's call, our two reporting segments inclusive of these six revenue divisions are designed to operate as a strategically linked, but highly diverse and robust group of business, that on a consolidated basis, after giving effect to the proposed acquisition of UniRush by the end of the quarter, are expected to contribute between $815 million and $830 million of revenue in 2017. Now that you have a better idea of Green Dot's diversified businesses, let's take a moment to look at 2016 and review how we did with our six-step plan to achieve at least $1.75 in EPS in 2017. We'll also use this section to announce our new six-step plan for the year.

Step one was to launch new, more appealing products with materially better unit economics at all 100,000 Green Dot retailers. We did that. These new products are, so far, doing very well for us and seem to be attracting a more committed customer base or making the cards an increasingly integrated part of their personal financial management.

You can see evidence of this increasing customer quality in the usage metrics. For example, in Q4, GDB's ProActive card is up 14%. Spend ProActive card is up 13%. And direct-deposit penetration as a percentage of active accounts is up again in Q4, growing 20% on a year-over-year basis. In the quarter, 65% of all deposits to our accounts were made through direct deposit.

Given the risk and uncertainty going into 2016 associated with launching a completely redesigned suite of products for brands as established as Green Dot and Walmart, we are thrilled to see customers adopt the products and use them the way we had intended. And of course, also thrilled to see the economics play out the way we modeled or even better. So, given the success of these new products, we can you now set our sights on active-card growth.

There are only two ways to achieve active-card growth. One way is to issue more new cards. The other way is to retain the cards you have.

We intend to issue more cards by refreshing our marketing with a new, more mainstream message that's intended to make our products more relevant and compelling to a larger total available market. We plan to expand card issuing activities into new channels like tax, more aggressive online and direct-mail strategies, and pay cards to our new UniRush Rapid! Pay revenue division once that transaction closes.

We also believe we have the opportunity to create new private label programs and expand our share of shelf in existing retail locations. This is a proven strategy for us and we have already begun to execute on this plank at CVS and several of our large Retail Partners. We intend to retain cards longer by using our own no-cost, Green Dot media touch points to educate customers on how to use their card as an everyday financial problem solver.

For example, Green Dot Bank direct-deposit customers can get their pay up to four days before their scheduled payday. They're eligible to win a $5,000 payday bonus every Friday just for using their card in the prior week. They can write checks to pay their rent and deposit checks using their mobile phone camera. They can save money in a free Green Dot Bank savings account and be eligible to win a cash prize every month for doing so.

And of course, with Green Dot, even if they accidentally spend beyond their available balance, they will never get ripped off by paying overdraft fees or penalty fees. These features aren't just appealing to low-income customers. They're appealing to many other segments of customers as well.

As such, for 2017 step one of our new six-step plan is to drive new acquisition strategies and new retention strategies to narrow the year-over-year loss in active cards each quarter, and to return to active card growth by the beginning of 2018.

Step two was to relaunch MoneyPak with new risk controls. We did that. And the new MoneyPak is now in over 30,000 Green Dot retailers with our goal to increase that number by the end of the year.

Sales volume continues to ramp and the customer experience has been well-rated, despite the new risk controls that create some additional customer requirements in order to use the product. With the new MoneyPak now back in stores and sales growing, we believe we also have an opportunity to create new and compelling use cases for consumers to buy MoneyPak, with the goal of expanding the MoneyPak product's total available market beyond just the loading of prepaid cards. As such, for 2017, step two in our new six-step plan will be to secure shelf space for the new MoneyPak at an additional 20,000 retailers by end of the year and to launch at least one new unique and compelling use case for the new MoneyPak product, with the goal of materially increasing unit sales.

Step three was to make modest investments in high potential initiatives that align with our road map for growth. In 2016, we launched four new initiatives under this step. There was a Green Dot money lending marketplace, the Green Dot Platinum Visa secured credit card, the Uber checking account by GoBank, and our SimplyPaid 1099 disbursement platform for paying workers in the gig economy.

So how did we do? First, the Uber checking account from GoBank is a big success. We acquire a sizeable number of new accounts every month. Drivers are happy with their GoBank account and use it as we had hoped. And both Green Dot and Uber have succeeded in delivering real value for a whole new set of customers. The SimplyPaid 1099 disbursements platform is also working quite well.

Each month, this cutting edge Green Dot payments platform sends millions of instant payment transactions right to the checking accounts of tens of thousands of 1099 workers. No checks in the mail. No ACH deposits seven days later.

Next, the Green Dot Platinum Visa secured credit card program has done well relative to expectations, and is showing real potential with thousands of applications, many cards issued, and customers properly using the card to help build their credit scores for the future. While still too small to be a meaningful contributor to this year's financial performance, the secured credit card program is showing legitimate potential, and as such, we'll continue to invest in this one in 2017. The Green Dot money lending marketplace has not been as impressive.

While we get a lot of applications and the site is well-reviewed, the number of approvals granted by lenders in the marketplace has not been sufficient to make the program financially meaningful for us. Having said that, the technology is very strong and usable for many other initiatives in the Company, and we're continuing to bring in lenders like LendUp, CCFI, INOVA, [OpLoans], and Avant, who have the opportunity to underwrite our applicants and make loans.

It doesn't cost us anything material to keep the business operational and we do earn a few thousand dollars in referral fees every month. So it remains worthwhile for us to give the lending marketplace more time to see if it has an opportunity to generate meaningful results down the road. So I would say we're three out of four on new initiatives.

While still relatively small in 2016, we believe these and other new initiatives can he create new areas of material organic growth for us, and have the potential to become a meaningful portion of our consolidated revenue over time. Creating entirely new products and new sales channels from scratch is a very difficult process that's fought with risk and uncertainty.

I'm very pleased to say we've succeeded in efficiently launching several new initiatives that we believe make Green Dot a leading player and a very strong competitor in important new Fintech growth macros. More importantly, is that these new Fintech macros have the opportunity to drive growth rates within total available markets that are much larger than Green Dot's traditional markets, and as such, have the prospect of providing Green Dot with significant new organic growth opportunities over the years ahead.

So for 2017, our new step three will be to continue to make appropriate investments in growing these new successful initiatives from 2016 while making modest investments in a new crop of high potential initiatives that align with our road map for growth. In particular, we believe we can use our retail distribution, money processing capabilities, mobile technology prowess, and our bank charter to create new and compelling consumer products that can further establish Green Dot as among the most successful Fintech payments and banking franchises in the country.

Step four of our six-step plan was to execute against a series of enterprise-wide platform initiatives designed to drive multi-year cost reductions, including as much as $20 million in savings by 2017, that would contribute to our stated goal of $1.75 in non-GAAP EPS. Our team has done an amazing job on this front, and I'm very pleased at how every department delivered as designed.

While we had a fairly significant setback with the troubled Wave 3 processor migration last May, we believe we have still succeeded in trimming a sufficient amount of expenses through several enterprise-wide efficiency projects and through further consolidations of previous acquisitions to make up for the processor migration headwind and achieve our EPS goal for the year.

So for 2017, step four of our new six-step plan will be to continue to drive incremental platform savings from a continued focus on rigid expense control across the enterprise and savings from integrating the UniRush acquisition over the course of this year.

Step five of our six-step plan was about making accretive acquisitions. Of course, we announced the UniRush deal and we continue to keep our eyes open for new acquisition opportunities that meet our requirements. So for 2017, step five of our new six-step plan will remain the same as we will continue to look for other acquisitions that are strategic, synergistic and easily accretive.

Before going to step six, let me talk about the acquisition of Rush for a moment. Last month we announced an agreement to acquire UniRush, LLC and its operating businesses RushCard, a leading online direct-to-consumer general purpose reloadable prepaid-card provider, and Rapid! PayCard, a leading corporate payroll-card provider. The RushCard program has, for many years, been one of the most important and respected prepaid programs in America.

We really like this deal, as it materially expands our scale in the direct-to-consumer vertical while giving us an immediate foothold in the growing PayCard macro with the UniRush Rapid! Pay business. The RushCard GPR program will be consolidated into the Green Dot direct-revenue division that houses our other direct-to-consumer properties, while Rapid! Pay will operate as our sixth revenue division called PayCard, and wage disbursement services inside of our account services reporting segment.

With the acquisition, Green Dot will now rank among the nation's largest mobile, online, and direct-mail providers of bank accounts, debit cards, and related financial services, with Rapid! Pay helping us to become one of the largest providers of PayCards and wage disbursement solutions in the country.

I'll let Mark get into the financial details of the UniRush acquisition during his section of the call a little bit later on. Lastly, step six of our six-step plan was about returning capital to shareholders in the form of share repurchases. In April of 2016, we repurchased $50 million in shares through an accelerated share-repurchase program.

And for 2017, step six will carry over and remain as part of our new six-step plan. We are committed to share buybacks and still have another $50 million remaining in the original buyback authorization, which we expect to execute in 2017.

As we look back at 2016, not only was it a successful year for our business initiatives, but we also made several important shareholder-friendly governance changes. In December, we announced that the Board of Directors has approved subject to stockholder approval, amendments to the Company's certificate of incorporation that will declassify the Board of Directors.

In September, the Board amended our bylaws and adopted proxy access and majority voting. We've also refreshed the Board, including five new Directors in just the last year, and separated the Board Chair and CEO roles with an appointment of an independent Chairman.

All in all, it was a successful and, many ways, transformative year for Green Dot, and I greatly appreciate our investors' support in allowing our team of talented executives across the enterprise to deliver these outstanding results against so many key initiatives. I especially want to thank all of our Green Dot team members from the United States, China and the Philippines, where approximately 900 direct employees and another approximately 1,000 contract employees work every day to make Green Dot what it is to such a diverse set of stakeholders, regulators, legislators, business partners, vendor partners, fellow employees and of course, investors and customers.

Green Dot is a mission-based culture and every day we strive to serve. I'm so deeply appreciative that despite such a difficult beginning to the year, our team was able to post such strong results from top to bottom. As we head into 2017, we believe that Green Dot is an increasingly important and powerful financial-services franchise, and stands at the forefront among the nation's leading and most successful Fintech banking platforms.

I'm honored to be Green Dot's Founder and CEO, and am eager to see what the year brings. And with that, I'll now hand the call over to Mark Shifke for his CFO report. Mark?

Thanks, Steve. I'd like to start by providing some insight into our performance in the quarter, followed by commentary on our two business segments and how they each contributed to our results. Of course, I'll also provide our 2017 financial guidance and Q1 soft guidance as we look to the new year.

First, I'm pleased to report that Q4, 2016, was another strong quarter for Green Dot, delivering $163 million in non-GAAP total operating revenue, and almost $720 million for the year. Equating to year-over-year, non-GAAP revenue growth of 8% in the fourth quarter, and 3% year-over-year growth for the full year 2016. Revenue growth in the fourth quarter came from both our reporting segments.

First, let's discuss our account services segment, which includes our consumer accounts revenue division and our Green Dot direct-revenue division. Non-GAAP account services segment revenue grew by 7% year over year, driven by strong revenue per active account growth of 17% year over year. The strong increase in revenue per active is a result of the materially better unit economics of our new prepaid products. Combined with the customer base for those new products, loading more money to the cards and spending more money off the cards.

You can also see the evidence of improving customer behavior in our long-term direct deposit enrollment trend, which posted another quarter of strong growth with 20% more active cards receiving direct deposit in Q4, 2016 than a year-ago period.

In the case of our Green Dot direct-revenue division, smarter and more efficient online marketing strategies and continued efficiency from ongoing integration of the AccountNow and Achieve Card acquisitions drove expanded margins.

Now, let's discuss the processing and settlement segment which had year-over-year, non-GAAP revenue growth of 11%. This segment includes our tax-processing business line and our money-processing business line. Our tax-processing business was largely dormant in Q4 due to seasonality. But it was an active quarter for our money-processing division. We saw a revenue growth driven largely by the increasing transaction volume on our SimplyPaid disbursements platform from our 1099 Instant Pay program. The growing sales in the new MoneyPak product, as it achieved greater distribution and the increasing non-GAAP revenue per cash transfer, which grew 9% year over year reflecting the continuing trend of fewer free reloads and more paid reloads, as our new prepaid products become a larger portion of our active card base.

We also enjoyed solid performance on margins across the consolidated business. On non-GAAP operating revenue, that was up 8% year-over-year in the quarter, adjusted EBITDA was up a robust 72% year over year in the quarter to $21.8 million, reflecting a margin improvement of 500 basis points on a year-over-year basis. Despite absorbing approximately $3 million in incremental expenses in the quarter relative to our expectations.

This dramatically higher operating margin, combined with a lower tax rate and lower D&A in the quarter, drove significantly higher non-GAAP EPS in the quarter of $0.19 per share. $0.03 better than we expected and over three times greater than the $0.06 per share we earned in Q4, 2015. For the full year, adjusted EBITDA was up 3% year over year, to $156.3 million. Despite absorbing approximately $11 million in unusual supply-chain expenses related to the stocking of our new prepaid products with higher unit economics at our network of 100,000 retailer stores.

Absent the unusual launch expenses, this equates to an apples-to-apples margin expansion averaged across the full year of around 150 basis points. This full year margin expansion, and in particular, Q4's strong margin performance, is illustrative of the financial benefits we're realizing from our increasingly more efficient operating platform, that supports our increasingly diverse lines of business across the consolidated enterprise.

Now let's discuss the UniRush transaction and then our thoughts on guidance for 2017. As we recently disclosed, we are acquiring UniRush for $147 million, plus a minimum $4 million annual earn-out payment for five years post closing. So effectively, $167 million gross.

The annual earn-out payment could become greater if certain revenue growth hurdles in their GPR program are achieved in a given year. Although any potential increases not expected to be material to the overall price of the acquisition. We do not expect to be responsible for any financial obligations in respect of regulatory findings, such as the recently announced CFPB settlement.

We also will be indemnified through a cash/escrow reserve funded by seller, in respect to the UniRush's prior operations. In addition, we expect to realize material tax benefits from the acquisition structure. Essentially the entire purchase price may be amortized over 15 years for tax purposes, which on a net present value basis equates to approximately $44 million, bringing the net cost of the acquisition, including the minimum earn-out payments, to $123 million. As we stated in the press release, we expect to benefit from material synergies as we integrate the Rush GPR business into our direct-to-consumer Green Dot Direct division. So, [post full] synergies, which we expect to achieve around 18 months from closing, the EBITDA margin should be in the mid-20% range, consistent with our other direct, consumer properties. Closing consideration will be paid using primarily a mixture of cash on-hand and debt.

So now let me talk about guidance for full year 2017 and directional guidance for Q1. Assuming we close the UniRush acquisition by end of this quarter, we expect to add full year, total non-GAAP operating revenue of $70 million to $80 million. Full year adjusted EBITDA of approximately $7 million to $8 million, and non-GAAP EPS of approximately $0.04 to $0.05 a share.

So using the midpoints of the UniRush forecasted low-end and high-end results for the full year, we estimate Green Dot's 2017 full year total non-GAAP consolidated operating revenue to be between $815 million and $830 million, representing year-over-year growth of 14% at the midpoint. Consolidated adjusted EBITDA to be between $184 million and $191 million, representing year-over-year growth of 20% at the midpoint. And consolidated non-GAAP EPS to be between $1.85 and $1.93 per share, representing year-over-year growth of 29% at the midpoint.

As Steve mentioned, we anticipate completing another $50 million share repurchase this year. But because the exact timing of the repurchase activity, and the exact number of shares repurchased is unknown, we have not included any share repurchase benefit into our full year, non-GAAP, EPS guidance.

To calculate our full year non-GAAP EPS guidance, we are assuming approximately 52.7 million weighted average diluted shares outstanding, D&A of approximately $37 million, and a tax rate of 35.6%.

Lastly, Green Dot's outlook reflects an expectation that Green Dot will be reimbursed for incremental processing expenses it expects to incur in the first half of 2017, related to paying two processors until we are able to successfully migrate our remaining customer accounts from our former processor to our new processor. This migration was originally scheduled to have been completed in the third quarter of 2016, but it is now scheduled to be completed in the second quarter of 2017.

Now let's talk about our expectations for Q1. We want to highlight that we've adjusted the expected timing of revenue derived from our tax processing division. And in doing so, have shifted our expectation of approximately $8 million of revenue from Q1 into Q2, in order to reflect the pace and timing of this year's tax season, which has been somewhat unusual relative to past years. Perhaps because of the new PATH Act, which delayed refunds for a large group of lower income tax filers, or perhaps for other reasons that are still unclear, the IRS estimates that the total tax filing ecosystem, inclusive of all filing segments, is down by approximately 17% as of February 10, on a year-over-year basis.

We believe that low- and moderate-income Americans will still ultimately file their taxes by the deadline of April 18, and that these citizens will want to claim their sizable EITC, ACTC, and other tax-related payments. But we're unsure how the timing of those filings could impact Q1. So we wanted to call this out as a bit of an unknown for us and a broader tax industry as we watch the quarter play out.

So, assuming no contribution from the UniRush acquisition, and $8 million of tax-related revenue moved out of Q1 and into Q2, we are estimating Q1 to deliver around $230 million in non-GAAP revenue for the quarter. Which equates to a little more than 30% of our estimated full-year guidance at the midpoint, excluding UniRush. On both the Q1 and full-year basis, our consolidated guidance implies a low single-digit revenue growth rate for the year on the core business, which is consistent with what we communicated at the JPMorgan conference a few months ago. But we understand it may feel a little bit out of step, given the sequence of actual revenue growth we've experienced since launching our new suite of prepaid products in Q1 of last year.

As a refresher, in 2016, Q1 revenue was down 1% year over year. Q2 revenue was up 2% year over year. Q3 revenue was up 6% year over year. And Q4 revenue, as you know, was up 8% year over year. So then why are we not forecasting higher revenue growth on the core business for 2017?

There are two key reasons we would like to share. First, as Steve mentioned in his prepared remarks, the revenue growth in our consumer accounts division is derived by the net of double-digit higher revenue growth per active card, offset by year-over-year declines in the number of active cards. We expect the number of active cards to stabilize over the course of 2017 and begin to grow in 2018. And as you know, actual growth in revenue per active remains robust. But we want to be conservative with how we both model active card growth and revenue per active card growth over the course of the year.

The second related reason is that tax season can have a material impact on the number of active cards in the portfolio. And revenue per active card derived from usage like interchange from spend, ATM fees and such. The card model is driven by active card-growth assumptions and revenue per active assumptions. And even small adjustments to both inputs can yield a big improvement in the model.

With the unusual trends in tax season we discussed earlier, and given that even with a muted low single-digit revenue growth forecast on the core business, we are still able to amply deliver on our non-GAAP EPS goals and then some. We believe it's prudent to keep our expectations for both the number of active cards and the average revenue per active card on the conservative side, so we don't accidentally get over our skis.

Of course, if results play out better than expectations, we will certainly be pleased to let you know. Lastly, I just want to touch on what Steve said in his remarks about the Company's performance. We have accomplished so much in 2016. And I must say that Steve and I believe the business is in a very good place, both in terms of current operating performance and our prospects for future growth.

As background, I started my involvement with Green Dot as an [angel] Investor and Board member in 2000. More than a decade later in 2011, I got the entrepreneurial bug and left my job in the M&A group at JPMorgan's Investment Bank to join Steve in Green Dot in an operating capacity, becoming the Company's first M&A leader. I remained in that role as an SVP of Corporate Finance, based in New York, until around two years ago when Steve and the Board asked me to also serve first as Interim and then full-time CFO.

I agreed so long as the Company didn't mind me staying based in New York, which I still am today. While I get great satisfaction out of being CFO, and take immense pleasure in seeing all we have worked on come to fruition, I needed to be honest with Steve and the Board, and myself that the constant weekly travel back and forth from JFK to LAX, and the many consecutive days each month away from my family in Manhattan is taking its toll.

With the Company now in a solid place and our many new initiatives taking root, I've indicated to Steve and the Board that while I'm happy and honored to he remain CFO for as long as needed, that we should attempt to locate a strong and experienced CFO who can be based full-time at Green Dot's Headquarters in Pasadena.

Then, once we find that new CFO, and he or she is established in the position, I would then return to my former Green Dot role as SVP Corporate Finance, staying based in New York and traveling to Pasadena only as needed. To that end, Steve and I have begun a recruitment process to begin that transition.

These processes can take generally four to six months or longer. And I'm absolutely committed to being the Company's CFO for as long as needed. So you won't see any changes in my role for some time to come. But Steve and I wanted to be transparent and give you the heads up now even though the transition likely won't happen for some months to come. And as mentioned, once we have the new CFO in place, I will remain with the Company in my former SVP Corporate Finance role based in New York.

With that, I would like to ask the operator to open the phone for questions. Operator?

We will now begin the question-and-answer session.

(Operator Instructions)

Our first question comes from Ramsey El-Assal, with Jefferies. Please go ahead.

Hi, Ramsey.

Hi, good evening. This is actually Christen Chen in for Ramsey.

Oh hi, Christen. Sure.

Just digging a little bit more on RushCard, on the synergies, how much of that is cost versus revenue synergies in your plan? And how much of those synergies are factored into guidance?

I know you said that without synergies $0.04 to $0.05. So it would imply there's definitely a few cents of that in your guidance.

And then, just quickly a clarifying question. I may have missed this, but did you guys say your guidance includes the $50 million share buyback?

Sure, so let's -- so, good questions.

The first one is our guidance does not include any potential benefit from the $50 million share buyback. So that's not put into EPS.

Okay.

So when and if we do that, that will be additional. And then the question on Rush. The synergies are mostly cost.

The Green Dot Direct division is the amalgamation of all these websites. And one of the ways we save money is by combining all the marketing expenses and controlling our ecosystem with online clicks and search marketing and all the things you do to generate online sales. So you could argue that there's some revenue efficiency.

But when we think of that in integration, it's almost all cost efficiency, certainly for the first year and a half. And the answer is, you're right, that none of that really is baked into 2017. We're saying $0.04 to $0.05, which is essentially Rush's net income layered on top of Green Dot.

So we're not really factoring any kind of synergy for this year.

Okay. Perfect. And just quickly.

It's good to see that the direct-deposit growth continues at that kind of 20% plus range. Do you just have any visibility to what an up-limits or how high this number could go in the future?

Oh, gosh. What a good question. Kind of. We look at all the programs that are out there.

We bought a number of programs and we look at others and we see what those programs can do. RushCard, for example, would be on the highest end of the scale of the programs we see of direct deposit. GoBank and our Company would be the all-time winner. GoBank has the highest direct deposit of any of our products. And as a checking account, you'd expect that.

We think we have a lot of upside to go because the entire prepaid category just continues to emerge as something more mainstream and less nichey. And the more mainstream it is and the more the employment picture improves, the more people use it for direct deposits. We think we're certainly nowhere near the top, but it's hard to give you a precise number of what is the top, you know.

Fair enough. Thanks for taking my questions.

You bet. Thank you.

Our next question comes from Eric Wasserstrom with Guggenheim. Please go ahead.

Hi, Eric.

Hi, Eric.

Eric. Eric, are you there? Maybe you're on mute? Okay.

Well, we can come back to Eric. You want to go, operator, to the next name?

Eric? Okay. Our next question --

You ever had one of those conversations where your iPhone's on mute and 10 minutes into it, you realize nobody's heard you.

Our next question is from Steven Kwok, with KBW. Please go ahead.

Hi guys. Good quarter. Thanks for taking my questions.

Thank you.

The first one, going back to the UniRush acquisition, I believe their, by now, deposits are at MetaBank. Are there any plans to move it over to Green Dot Bank?

Not on day one. So when we think of the efficiencies and the sequence of how we drive it, back office is the first thing you work on, because that's where the biggest savings are. Things like risk management or call center or supply chain, that type of thing.

And then later on in the curve, as you get towards the first year of integration, then you work on bank and processing because it's just more difficult. And you save money, but it's not a massive amount of money. So we'll get there eventually.

Having said that, MetaBank is a good partner and we know the folks well. We all sort of know each other in the industry and if they have a reason why they want to keep the deposits and it makes sense for us to do that, we're not against that either.

So ultimately in theory, everything would be on the Green Dot stack, but not in the first year for the Bank. We would probably keep that for a little later.

Got it. And then just when we look at the revenues per active card, and then the revenues per cash transfer, that's been continuing to increase.

At what point does that level out? Or how should we think about the trajectory? And then, like, for the new cards that are coming in, what's the incremental revenues on those cards?

This has been one of the lighting upsides to the model. We knew that the monthly maintenance fee was somewhat higher, but not by a lot. On the Walmart MoneyCard it's $60, and not everybody pays it. So you're not looking at huge differences there.

The biggest increases have been in the usage metrics, things like direct deposit, as Christen pointed out in the first call. Or spend, which generates interchange, this kind of thing. There's been tremendous upside there, more than we would have initially modeled, which is why we sort of meet and beat throughout the course of the year. And so we don't know what the limit is.

We're forecasting conservatively because we don't know, I guess, is the honest answer. So we're tracking what we have. We're holding it steady in the model, which is why we have that low single-digit growth.

But it's been coming in really strong and with some of the new features we have like the savings account, the prize-linked savings, which you may have seen. There was a ton of press coverage on it. NPR did a nice piece, and others. People are looking at these products as their bank, not just as something you buy for a few days to do something with. Although, certainly we have still a lot of those customers as well.

A lot more folks are using them for direct deposits and to pay their bills and for savings accounts and all those types of things. The more our customers do that, the more not only will the revenue continue to grow, but the bottom line just expands exponentially because there's no cost really against that extra usage. That's where you're seeing this tremendous margin expansion.

That Q4-over-Q4 comparison, where we grew by 500 basis points in margin, even though we still had extra costs that we hadn't baked in, is indicative of kind of what we're doing with the platform. And it's a fairly clean comparison. And this shows you the efficiency we're getting from more usage on a per-card basis. We think we have more to go.

We're not forecasting more to go, but we think we have more to go. And it's been a really good upside to the business.

And just as a quick follow-up. You mentioned you're holding it. And so you're holding at the fourth-quarter levels? Or are you holding at a year-over-year level?

Neither, in the gigantic black box that Terry Lee and his boss, Paul, have in the back room, we sort of take conservative swag of what we think is likely based on metrics we feel like we can hit, or that are already existing. Or if they're not already existing, ones that we think are obviously in the pipeline. And we hold it there.

I don't want to imply anything specific about the model, except to say that on a dial, if you all the way up is super aggressive and all the way down is super conservative, we're somewhere in the low, middle range of that. We just want to be cautious as we watch it play out.

Great. Thanks for taking my questions.

You bet, Steven, thank you.

Our next question is from Oscar Turner with SunTrust. Please go ahead.

Good afternoon. Thanks for taking my question.

You bet, hi, Oscar.

Hi. Another question on UniRush. Seems like the revenue card per card for that portfolio is materially below that for the rest of Green Dot. Just wondering if there's an opportunity to boost that figure up to the corporate average over time?

Well, that's a good question. It may be hard to determine from the press release because we mixed in their PayCard numbers, which is entirely different usage patterns, with their GPR products.

And so I don't know that that's exactly right. But it could be right.

And ultimately, what you'll see is all of these things come up to a certain level because as we get them on the same bank or we put in the same features, we obviously want to take the best ideas from the best companies and move those to the most profitable products. And we've done that. That's part of the reason why Green Dot Direct has been a growth leader for us.

We'll look for improvement in cost. We'll look for improvement in revenue. They do some really good things with direct deposit. We'll take those ideas and put it into the overall consolidated enterprise.

So any time you do these acquisitions, we want to take the best ideas and put them all together to benefit the other divisions. And I would imagine we'll do the same with Rush card.

Okay. Thanks. That's helpful.

And then, just on the EBITDA margin, your guide implies almost 100 basis points of margin expansion next year, after pretty strong margin expansion this year, especially in the fourth quarter.

Can you provide on what's driving that, I guess margin expansion upside? How much of that is UniRush synergies versus the more efficient operating platform, which seems to have driven margin upside this year?

Great question, Oscar. I would say the two drivers are unit economics and our platform efficiencies. And in fact, on a combined basis taking Rush into account for our consolidated guidance, it has somewhat of a dampening effect at the moment on our consolidated margin. But as we indicated, we expect that to pick up again as we drive efficiencies into 2018.

Okay. Thank you.

You bet.

(Operator Instructions)

Our next question comes from Ashwin Shervaikar, with Citi. Please go ahead.

Hi, Ashwin.

Hi, Steve, Hi, Mark. Good, good, thanks. You've announced here a number of new initiatives on top of the initiatives that you already had, that you made progress on during the course of 2016.

And what I was hoping you could walk through was some of these initiatives in free shelf space, roll-outs strength into the number of active cards heading into 2018. What is the investment needed for some of these? And when do you expect to get sort of a revenue boost from those? If you can ballpark lay it out, that would be useful.

Well, so the good news is that our expense base and CapEx base has been well-controlled. CapEx you may have noticed, Mark, I'm sorry. I forget if you already said it in your prepared remarks. I was in the restroom. (laughing) Just kidding. But let's go down.

Our D&A, we're projecting D&A for 2017 to be down from 2016. I think, to your point, Steve, our cost structure is not increasing in order to drive these initiatives.

So that's the good news. And what we do is, the numbers of initiatives are determined by the product road maps in each of those six-revenue divisions. And of those GMs, or in the case of a few of our divisions' divisional CEOs, come in and they say hey, here's our initiatives and here's what we're going to put forth. And here's why we think to go and do drive revenue or expanded margins or whatever the initiative is. We go through it and once they're locked in, we have to deliver on them.

So there's a lot of initiatives. It sounds like a lot as I read them throughout the entire consolidated Company.

But if you're at a particular division, it's not a lot. It may only be three or something in your group, for the year. And then you focus on them and deliver them. Kind of hard to go through all of them. It depends on which division. I'm happy to answer those questions now or in the after calls.

But the good news is they're all part of that cost basis, because I think we have a lot of resources. And even the phrase I used, Green Dot Media. And I'm known to be cheap and I don't get offended when people say that, people always make fun of my car and that kind of thing. But I do believe in being appropriate with expenses.

And so when people want to spend money, the question is, well, why is that? Green Dot Media is a phrase you heard me use on the prepared remarks. We have millions and millions of people every month who come to our websites, our call center, our IVR machines, this kind of thing. Why do we have to pay for marketing when we can get the same impressions, if you will, by just putting a message on the IVR, putting a banner on our own websites?

So all the marketing we're doing for secured credit card or for -- let's just put it on our own media. And so we're always trying to boot strap and do things efficiently. We do spend money, obviously. We have a big expense base.

What you see is what you get. Anything new we're doing is within the cost base that we forecasted.

Just wanted to explicitly get that out there. With regards to sort of stabilizing active cards, would that mean then that you're roughly going to be $84.1 million through the year? Or did you mean that some of these initiatives hit and you could you be at a higher number by the end of the year?

Well, in the base or likely-case or middle-case scenario, whatever you want to call it, we're forecast to be down in actives, to stabilize in actives as the year goes by and then to be up in actives as we get to 2018.

We've actually been incredibly accurate with calculating those card declines and increases over time. Now of course, you've got to merge in Rush, which will be a higher number of cards and that will reset the bar.

But we would expect the active cards to stay roughly where they are. They'll come down a little bit in Q1 if our model is accurate. They'll stabilize in two, they'll come up a little bit in three and four, and then they'll start to rise overall in Q1 of 2018.

And if we do better, some of these initiatives kick in, then that curve will be accelerated. If we do worse or things go south, we won't be as strong. We've been fairly accurate with those projections so far.

Okay. And last quick clarification question.

As the timing of your platform conversions got pushed out over the last 12 months or so, has the prospective benefit from it also gotten spread out, pushed out? Obviously, it has got pushed out.

Has it changed in totality because of the delay? And what's the assumption specific dollar assumption that you're making for this year for the benefit from a 2Q conversion?

We haven't disclosed a specific benefit for the processor, but it's been a headwind, except for the fact that our processing partner has been a good partner and has helped to make us whole for those issues.

But otherwise it would have been a negative headwind, right? Because we're spending money to run two simultaneous processors each with their own minimums and their own pricing and everything else. We'll get those efficiencies as we successfully roll out wave four, and then we'll be done with that. And then you'll see that efficiency kick in. It's all been helpful.

It's a large Company, so you have lots of different systems and lots of different platforms and every team is always working on what they do. We haven't given a specific number on processor but it's going to be part of those saves.

Got it. Okay.

You bet, Ashwin.

Operator, believe it or not, unless there's another screen I think -- are we done with questions? That was very short.

We are done with questions.

Okay. Well, in that case, I want to thank everybody for listening today. We appreciate your support over the year. And we hope to do it again in 2017.

Thank you everybody. Have a great day.

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