Green Dot Corp (GDOT) 2017 Q3 法說會逐字稿

Good afternoon, and welcome to the Green Dot Corporation Third Quarter 2017 Earnings Conference Call. (Operator Instructions) 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 will discuss 2017 third quarter performance and thoughts about the remainder of the year. Following these remarks, we'll open the call for questions. For those of you who haven't yet accessed the earnings release that accompanies this call and webcast, it can be found at ir.greendot.com.

As a reminder, our comments include forward-looking statements 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 reference to our financial measures that do not conform to Generally Accepted Accounting Principles. For the sake of clarity, unless otherwise noted, all numbers we talk about today, 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. Quantitative reconciliations of our non-GAAP financial information to the directly comparable GAAP financial information appears in today's press release.

The content of this call is property of the Green Dot Corporation and is subject to copyright protections.

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

Thank you, Dara, and welcome everyone to Green Dot Corporation's Third Quarter Earnings Call.

Lots to talk about today, including details about the solid growth across our enterprise, especially from our prepaid business lines, details about our new partnership with Intuit and an update on the Apple Pay Cash program. As Mark will discuss in more detail, we are raising our annual guidance for the third consecutive quarter and now expect revenue, EBITDA and EPS to significantly exceed the 2017 forecast we initially projected just 9 months ago.

First, let me provide the high-level financial results for you, and then Mark will add some color during his section of the call.

Q3 total consolidated operating revenue came in at $201.6 million, representing a 30% year-over-year growth rate and accelerating from the 28% reported in Q2. Excluding UniRush, revenue grew 12% year-over-year to $172.8 million, which is the second successive quarter with double-digit year-over-year organic growth despite the year-ago period being a tougher comp this quarter than last. Adjusted EBITDA for the quarter was $33.9 million on a consolidated basis, representing year-over-year growth of 43%. Consolidated non-GAAP EPS for the quarter was $0.34, which equates to year-over-year growth of 62%. This marks the eighth consecutive quarter where top and bottom line results exceeded our expectations, the fifth consecutive quarter of year-over-year margin expansion and the fifth consecutive quarter where we have posted either double or triple-digit year-over-year growth in non-GAAP EPS.

These terrific bottom line results were achieved while simultaneously incurring incremental expenses associated with the large-scale buildout of both talent and technology needed to support the launches of Apple Pay Cash and the new Intuit program mentioned in our earnings release, which we'll discuss later, despite having no revenue from these programs to offset the spend. In fact, we believe the efficiency of our high-scale operating platform is becoming one of our biggest competitive weapons as it allows us to invest in potential growth for tomorrow while still delivering strong margins today.

Equally compelling are the performance trends leading up to these Q3 results and the business momentum across all of our divisions that we believe provides added confidence that our growth is sustainable. For example, I'm pleased to share that during Q3, Green Dot returned to organic active card growth, posting an increase of 5% year-over-year. This marked the first quarter of organic active card growth since Q2 2015, and we are proud to have achieved this important milestone 2 quarters earlier than we had forecasted. On a consolidated basis, active cards were up 28% to 5.2 million active cards in the period, GDV was up 47%, spend was up 39%, while the percentage of active cards receiving direct deposit was up a spectacular 90% year-over-year.

Another indication of positive momentum is the number of active customers using our mobile apps, which has grown over 200% since launching our new prepaid products in 2016. And savings-involved transactions have grown nearly 150% year-over-year. Speaking of which, hundreds of thousands of Walmart MoneyCard account holders are now using their free price savings account to stash away money for a rainy day, and in just 1 year, have deposited more than $600 million in savings. In fact, Green Dot is proud to say that we just won the American Bankers Association's award for economic inclusion for this innovative savings account that's truly helping our customers with the way to start building a nest egg for themselves and their families, often for the very first time in their lives. Together, all of this positive usage activity across all of our account products drove revenue growth 33% year-over-year for the consumer accounts segment.

Another positive sign of health in our prepaid business is the momentum we're seeing in the retail demand for our products. For example, in Q3, Walgreens added a secondary fixture featuring Green Dot products in their stores nationwide, and Dollar General, Family Dollar and fred's all began selling our new MoneyPak product, bringing total distribution for MoneyPak to approximately 60,000 locations, greatly exceeding our goal of adding 20,000 retailers by year end. We even continued to add new retailers after all these years, like Sheetz and Tops convenience stores adding over 700 new retail locations in the quarter.

But the strongest evidence of the renewed retail demand for our products is coming from the world's biggest retailer. Our long-term partners at Walmart have greatly expanded Green Dot's of distribution footprint starting in late Q3 by adding the Walmart MoneyCard product to over 3,000 supercenter checkout lanes and materially increasing our MoneyCard facings within their money services areas. Walmart also increased shelf space for a Green Dot brand everyday product and expanded the shelf space for Walmart Visa gift card products to enable better inventory levels for the holidays.

In aggregate, this is very significant incremental placement at Walmart. Remember that our products have to compete dollar for dollar, square inch by square inch with every other imaginable consumer product that fights for shelf space in a Walmart, especially at the coveted checkout lane position. So this is quite an achievement that we believe can help provide further momentum for our consumer accounts segment into next year.

My deep thanks and appreciation to our terrific Green Dot Bentonville team that partners with Walmart every day to both grow the business and help our cardholders save money and live better every day. And of course, my great thanks and appreciation to our partners at Walmart, truly a spectacular success story all the way around.

Now I'd like to talk about our increasingly important and relevant Banking as a Service, or BaaS Platform business strategy. With the great advances we made over the past several years in building out our unique enterprise-level, integrated banking and technology platform, Green Dot now benefits from being both a products company and a platform company, meaning we generate revenue from our own internally designed, developed and distributed products and services like Green Dot brand prepaid cards or GoBank brand checking accounts or MoneyPak brand cash processing services, plus many others. And we generate revenue from partnering with America's biggest and best consumer, technology and financial services companies that use Green Dot's platform to design, develop and distribute their own products and services like the Walmart MoneyCard or the Uber Visa debit card. We call this platform business line Banking as a Service or BaaS for short.

Our BaaS revenue model is fairly simple. We make money through the negotiated fees we get paid by the platform partner for services provided, or we generate revenue from our portion of the rev shares negotiated with the platform partner.

Today, we're announcing a new multiyear partnership with Intuit to create a branded prepaid card for their TurboTax customers. This is yet another example of how Green Dot's products and platform business strategy has the opportunity to deliver long-term compounding revenue growth.

We're incredibly excited and proud about working with Intuit in a new partnership, where they're using our BaaS Platform for bank issuing through Green Dot Bank with product design, technology development and ongoing program management through Green Dot Corporation. Let me provide some quick context.

First, TPG, our tax processing business, has been Intuit's long-time partner as the integrated tax refund processor for TurboTax. So it's wonderful to see the revenue and business synergies we talked about when we first acquired TPG back in 2014 continue to materialize. We expect this program to be an incremental driver of active cards and revenue for our consumer accounts division in Q1 2018 and, therefore, a future driver of more reloads through our money processing division as those new customers begin using their cards.

Our expected incremental revenue and EPS contribution from this Intuit program will be included in our full year 2018 guidance, which we will provide as we normally do during our Q4 call.

I want to thank our Green Dot TPG executive team and our talented group of mobile product and technology leaders who worked so hard to bring this opportunity together. And of course, I want to thank Intuit for their trust and confidence in Green Dot.

Now let me update you on another of our Banking as a Service partnerships, Apple Pay Cash. Today is a special day because with the iOS public beta update released earlier today, you can now use Apple Pay to send and receive money with friends and family. My personal belief is that sending and receiving money with Apple Pay and the associated Apple Pay Cash card are elegant and beautifully designed experiences exactly as you would expect from Apple, and I would encourage you to try the service and judge it for yourself.

Our previous commentary still holds that we expect economics related to Apple Pay Cash to be immaterial for the remainder of this year. Our hope is that by the time we report the fourth quarter, we'll have enough usage data to begin to include estimates for this program in our consolidated 2018 outlook.

Speaking more generally, as Green Dot looks to expand the breadth of our mobile banking and mobile payments capabilities, I want to help you all better understand the economic model for spend-based mobile P2P services and mobile payments in general and why we think these types of initiatives deserve our continuing investment.

The easiest way to think about it is that the spend-based P2P mobile payments model is most analogous to a typical Green Dot fee-free prepaid card model, where we incur certain fixed expenses to build out and support the program, like SG&A per people that's ongoing and CapEx for infrastructure that gets depreciated over a multiyear period upon launch. Then we incur ongoing variable costs per transaction for things like payment network fees, processing fees, fraud losses, call center expenses and so forth, which are based on the number of transactions and/or the dollar size of those transactions.

On the revenue side of the income statement, as the issuing bank, we have revenue earned from the issuers interchange on purchase transactions and interest earned on the investment of retained balances that sit on the accounts. But the bigger revenue driver of the 2 is interchange. The more money spent through the account on purchase transactions, the more interchange revenue we earn. The less money spent through the account on purchase transactions, the less revenue we earn.

Given Green Dot's roots in innovation and the successful development of many new products and services over the years, we have a great deal of experience on how new programs tend to launch and scale over time. One thing we've learned is that you never truly know how any new program will behave in the wild until it launches and you learn.

If you think about a standard technology product adoption curve, we believe the mobile payments ecosystem is still quite nascent, with most mobile payment transactions being made today by just those innovators and early adopters of new technologies, perhaps only 10% to 15% of the ultimate opportunity. So we believe it will take some time for the mobile payments ecosystem to fill out, with retail acceptance on the one side and customer adoption on the other. But as the adoption curve expands from early adopters to early majority adopters and then to late majority adopters, it is our belief that mobile payments and spend-based P2P programs have an excellent chance to grow adoption, usage and revenue over time.

So the summary of my portion of today's Q3 call is: great top and bottom organic and consolidated financial results, strong and continuing business momentum across our multiple revenue divisions in both our reporting segments, and exciting new platform partnerships with Intuit starting in Q1 and Apple Pay Cash starting in public beta launch today.

And with that, I'll 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 a commentary on our 2 reporting segments, then I'll provide our revised upward guidance for the remainder of 2017.

I'm pleased to echo Steve's commentary that Q3 2017 was an outstanding quarter for Green Dot, delivering $201.6 million in consolidated total operating revenue, representing a year-over-year growth rate in the quarter of 30%. Both of our operating segments outperformed our expectations.

First, the Account Services segment delivered consolidated revenue of $170.2 million, representing year-over-year growth of approximately 33%. In addition, on a consolidated basis, active cards grew by 28% in the quarter to 5.23 million active cards. GDV increased 47% year-over-year to $7.9 billion, and purchase volume grew by 39% to $5.2 billion.

Along with that robust consolidated growth, we again achieved double-digit organic revenue growth, which was driven by both a return to organic active card growth of 5% year-over-year and significant growth in the percentage of our active base receiving direct deposit.

Total operating revenue also increased in our Processing and Settlement Services segment. The number of cash transfers or reloads increased by 5% year-over-year, which was the strongest year-over-year growth since the fourth quarter of 2014. We also benefited from the continuing trend in improved revenue per cash transfer, along with a strong performance from our SimplyPaid 1099 instant payment solution.

Together, these factors propelled the segment's revenue to $39.1 million in the quarter, representing year-over-year growth of approximately 19%.

Adjusted EBITDA for Q3 came in at $34 million, up 43% year-over-year. This result reflects material outperformance relative to our guidance despite absorbing incremental expenses in the quarter related to the buildout of several large-scale initiatives.

Non-GAAP EPS came in at $0.34 per share, up 62% year-over-year. We achieved this outperformance primarily from a combination of the flow-through from our better-than-expected EBITDA result and a year-over-year decline in depreciation. We also benefited from modestly higher interest income on cash investments held at our bank subsidiaries.

These positive factors were offset by both a higher effective tax rate and a modestly higher share count compared with the prior year period, attributable primarily to the dilutive impact of the accounting for equity awards against the rising share price.

We also continued to generate excellent cash flow, with $19.6 million in net cash provided by operating activities during the quarter and $163.3 million year-to-date.

We exited Q3 with nearly $56 million of unencumbered cash on our balance sheet.

So now let me talk about guidance for the remainder of 2017.

On the Q2 call, we provided revenue guidance for Q3 of $188 million at the midpoint, but actually achieved $201.6 million. So we exceeded our revenue expectations in the quarter by $13.6 million. We expect that the business drivers of our strong momentum will be sustainable for the rest of the year. As such, we're raising our annual revenue guidance to a range of $878 million to $882 million from our previous range of $855 million to $865 million. This increased range raises the midpoint by $20 million, which is about $6 million more than our Q3 outperformance. Our revised range equates to year-over-year consolidated growth of 22% for the full year at the midpoint.

Now let's discuss full year revised EBITDA guidance. As you'll recall from our Q2 call, our guidance for the second half of the year included a call out that we expected to spend an incremental $6 million beyond our original full year guidance in order to fund the buildout of new initiatives, which you now know also includes the newly announced Intuit program. It turns out we only spent some of that $6 million in Q3, with the majority having shifted into Q4.

Despite that incremental spend, we are pleased to still be able to raise our full year adjusted EBITDA guidance range by an additional $6 million to a new range of $200 million to $202 million, up from the previous range of $194 million to $196 million. The new midpoint of $201 million represents estimated year-over-year consolidated adjusted EBITDA growth of approximately 29%.

That revised adjusted EBITDA range translates to a non-GAAP EPS guidance range of $2.10 to $2.12, up from the previous non-GAAP EPS range of $1.99 to $2.03. At the midpoint, this new non-GAAP EPS range equates to estimated year-over-year growth of approximately 45%.

As you can tell from our financial results for this quarter and the year-to-date as well as the business narrative of all the exciting things happening in the company, we believe Green Dot is in a very good place with its products and services in high demand and 2 exciting new Banking as a Service platform programs set to launch soon that have the opportunity to generate revenue growth next year and beyond.

At the same time, as Steve and I have said previously, there is a good bit of uncertainty in how new programs, in particular, new mobile payments programs, might play out. While we would expect that contribution margins on our established and high-scale product lines will continue to be a positive story in 2018, we would not expect the contribution margin from our new programs to be nearly as robust. In fact, our expectation is that new programs will take time to mature and reach scale before they start to approach the kind of contribution margins consistent with our established business lines. Also, as you think about 2018, we want to remind you that we will annualize the UniRush acquisition in late Q1.

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

(Operator Instructions) Our first question comes from Ramsey El-Assal with Jefferies.

So I wanted to ask about Intuit. This is effectively the same program that you guys used to service some time ago. It left, and now it's come back. I guess, first, was it a competitive takeaway?

It is, yes. I think you may know -- or our analysts may know, NetSpend had that contract since 2012 and we were able to sign that contract with Intuit. And it's a great contract for us and a great opportunity. And Intuit's a fabulous company, so clearly, we're quite pleased with it.

Okay, great. And then changing channels, what -- how should we think about your -- I mean, great that you got the active card, the organic active card growth inflecting solidly positive here early. How do we think the sort of normalized growth rate there?

Well, Mark, do you want to take that one? Or I could take it? Okay. So the answer is, look, we beat our internal estimates, oh my gosh, by more than 6 months on the return to active card growth, and that was to breakeven and have that inflection point. So to grow 5% is terrific. And the underlying reason for it, Ramsey, is that all this direct deposit activity means people are using their cards as you would your checking account or your bank account. And that longer retention means that you don't have what we used to call the leaky bucket syndrome, where you have to add 5 new customers to replace the 5 customers you're losing in effect. And so now what's happening is that we're attracting better customers, and that retention is showing up in that active card growth. So that's all good stuff, and we would expect that trend to continue into next year where you're going to see active card growth continue at some pace. It's hard to say exactly what it is until we forecast the year and we continue to see the improving usage of the cards, but at this point, it's a great sign to be positive this early. And we would expect that to kind of single-digit-or-so active card growth to be there for our organic business. Now of course, we have way higher active card growth on a consolidated basis, but organically, we're back in the positive territory and would expect to stay there.

Okay. Lastly for me, I wanted to talk about one of the other -- or ask you about one of the other key drivers in the business more recently. On the -- I guess, the 2016 pricing action that's sort of permeating and penetrating the portfolio, when should we think about sort of full penetration there in terms of a tailwind from those pricing actions fully anniversarying as it were?

Well, it's not quite working that way, and I'll explain it better how to think about it. So we're more than halfway through, but not yet 2/3 through. So we're sort of between 1/2 and 2/3 depending on the portfolio. Remember, Green Dot has many, many different portfolios, and we have something like 40 or 45 different bins in the company. Bins, meaning card programs. So when I give a global statement like that, it may mean that 1 program is X% through and the other one, Y% through. But in general, we're between 1/2 and 2/3 through. But it's not the fees necessarily that have driven that increase in year-over-year activity. It's the usage. When you see GDV numbers like this, up quarter after quarter, if you look at the last trend for the last, call it, 6, 7 quarters, and then spend and interchange, it's all that goodness that drives the growth. And now on top of that, you have the benefit of active card growth in general, which is a very helpful tailwind as well. So the answer is, we haven't yet lapped the new fee plans. And because of the customers who are still left over from the old cards are the best customers, these are the folks on direct deposit, who have had the cards for years and years, they're going to be with us for a long time. So I don't know that we'll ever be 100% through the new cards, but all of them together are generating more revenue because they're using it more like you would use your bank account. And that's what's driving that growth. So even when we lap the monthly maintenance fee portion, that's but one part of the revenue generated from the cardholders. And our goal is to have a lot more upside to come in direct deposit and increasing loads, and more spend, and better ways to use the card and all the things you do to grow a portfolio.

That's exactly right. I mean, the direction of the portfolio is a greater mix towards direct deposit customer, greater usage of the card. And as Steve said, that's driving the higher GDV, the higher spend, which we think will continue.

The next question comes from Ashish Sabadra with Deutsche Bank.

I just wanted to see if you can help us quantify that tailwind there. I think last time in 2013, it was almost $0.5 million -- 0.5 million active card headwind in 2013 when you lost it. So is the program much bigger in size now? Is there a way for us to think about sizing that program?

Oh gosh, it'll be included, the program, meaning both active cards and revenue. And what that throws off for the year will be part of our consolidated 2018 guidance, which we'll give next quarter. And we hesitate to get overly granular about it because it's Intuit's program, and we're respectful of Intuit's need to guide what they want to guide. And at the same time, from our point of view, we want to make sure it's part of our overall portfolio. It's one of many programs we have. So it's hard for me to give precise guidance. If that was your recollection, you have a better memory than I do, going back to 2013. You can certainly use that as a helpful guide, but it's our intent to make the program as big as we can make it and as profitable as we can make it while still serving customers with a great high-value product. So no specific guidance on it, but clearly, it's a great program and a good win.

That's good. That's good. And just maybe a quick question around the organic growth in the quarter. I believe, Mark, you mentioned double-digit organic growth. I wasn't sure if you gave an exact number on the organic growth. And then just quickly, how we think about organic growth for fourth quarter.

Yes, sure. So I don't think we gave a specific organic growth in this quarter. I think we did. It was a little under 12%.

Yes. I think it was part of the prepared remarks, if I remember correctly.

I'm glad someone was listening to me. I try.

Yes.

Yes, so 12%. And I think we've seen great trends throughout the year, and I think we would expect those same positive trends to continue for the remainder of the year. And I think that's what was underlying our guide in excess of the beat in Q3.

The next question comes from Andrew Jeffrey with SunTrust.

Steve, I appreciate the commentary on usage changes because I think it's pretty important to understand what's going on in your success. Could you talk a little bit about maybe the demographics of your customers, whether those have changed? Green Dot initially was about -- still is about financial inclusion. But I get the sense that perhaps the nature of your customers has changed, and whether or not the demographics has shifted more toward early adopting millennials. And as a corollary, whether payroll in particular, is playing a role -- an important role in the direct deposit success and traction you're seeing.

The answer is it's -- the direct deposit story is a success across the board, and in some ways, a part of the macroeconomics of the country, just have a higher employment in the service sector, and the economy is rocking, from a historical perspective. So a rising tide that floats all boats. So some of that is just unique to the macro and not unique to Green Dot, but we'll certainly take it. But what is unique to Green Dot is the job we've done with encouraging direct deposit enrollment, designing the products to have an expectation of using it as your full-service bank account as opposed to a disposable product, and that's all helped. But payroll helps, but our retail business is robust, the acquisitions we've made in the direct business, the ones we bought like UniRush and AccountNow over the years, but also our own walmartmoneycard.com and greendot.com are all doing incredibly well with direct deposit enrollment. So we've found a nice niche there in how to do it. And a lot of our marketing efforts will go into doing more of that future years because it's the easiest win you can have and it's with a customer base that you already have today. So if you have 5.3 million active customers, that's a really nice base to mine from to grow your business. And so that's the story with direct deposit. With the usage, it's funny you say that because I literally was looking at a KPI -- unrelated to the earnings call, by the way, but just looking at a KPI before walking into the studio. And we're just doing very, very well with millennials. And I don’t know if you asked that question because you saw a research or was just curious about it. But in fact, if you look at -- and I know this because I just read it. If you look at millennials on the Green Dot Everyday product, which is the granddaddy of the industry and the product essentially we invented way back when, that product used to be, if you define millennials as being born 1982 or later, 1982, '83, '84, so that would make you, what, 34, 35 years old -- and everyone has different definitions of millennial, but that's what we cut it off at the company. We used to be in the low 40s -- low 40s percent of millennials, and we're now sitting here looking at 55%, 56% of our customer base for Green Dot Everyday being millennials, which is a definite turn to the younger side relative to where that product used to be, which is, we think, great. And that's part of what you're seeing in the direct deposit and a fabulously healthy sign. On the other side, our cash back products, which are the newer products that we've invented, appear to still be fairly balanced, 50% pre-1982, 50% born younger than 1982, but they're more likely to be direct depositors and more serious customers. So there's something about the message of cash back and being able to write a check to pay your bill and so forth where consumers of all ages who are looking at that as, "Oh, this is an interesting product and it's easy to get. And I'll use this instead of what I was using before." So we've attracted a really nice mix of customers, Andrew. Yes, millennials, in the case of our original product, Green Dot Everyday, but we're not any younger with the cash back products, but the mix is a very healthy mix of people who are serious about using it as their real bank account not as something as a toy or a disposable product. So really good outcome with the new products.

Okay. That's helpful.

And Andrew, I just want to -- just to echo what Steve said and add a little bit. If you think about -- if you go back and look at the TAM we had as a prepaid card-focused company and then you look at us today with the Banking as a Service Platform, that TAM broadens dramatically. And the opportunity to grow GDV and increase our transaction processing volumes, we think, increased materially. So I think it's consistent with what Steve said that we're opening the door to a much broader group of interested and committed customers.

That's certainly what it seems like. And then I wonder, Mark, as a follow-up, if we can get a little more granularity, appreciating the fact that you do have some new programs out there, and you scaled nicely through investment this year. Is it -- should we think about Green Dot as likely having operating leverage in 2018? Perhaps not as much as you're going to see this year, but directionally, should the margins be up?

Well, look, that's a great question. We're still in the middle of our budgeting process, so we really don't want to, at this point, get into margin direction next year. We're looking forward to giving you more color on that in our next call. I would say, though, at a high level, we would expect a continuation to see the contribution margins on our existing high-scale product lines to still be a positive story in 2018. And at the same time, you would expect to see that balance against low to lower margins on new programs until they have time to mature and reach scale, and then once again start getting into the kind of contribution margins you see on our existing lines.

Yes, it's a balance to manage that, Andrew, because look, we've invested in new products, appropriately so. Really glad we did, obviously, and we've had a really good track record of investing in the right spots. And so you have our existing products that are really doing well with margins. And as Mark pointed out, that'll continue to expand or we think it will. But then you have these new programs, and there's no way they'll be at scale. No new program starts at scale, and every program we've ever launched takes time to build to a margin that we consider strong or acceptable. So we'll see how they go, and we'll model it all together, and we'll give you better results for Q4 when we guide the year. And at the same time, we're in the middle of a lot of expense management programs that we do every year. That's an on -- that's like painting the Golden Gate Bridge. It never ends. But it's really an important part of managing the margins because by definition, every year means investment in this pocket and that pocket, but that means you need to cut here or there. And so you're oftentimes rearranging the furniture a little bit to make sure that you're feeding the programs that need it and starving out the ones that maybe don't longer -- or don't need it any longer to make sure you have the right margin results. So we'll give you more granularity in Q4.

The next question comes from Robert Napoli with William Blair.

So it's been that long. It's really been 2012 since you lost Intuit. Time flies when you're having fun.

Time flies when you're having misery back in those days. But yes, it was 5 years, yes.

Yes. The -- so how is UniRush doing? So there's 9 -- about 935,000 UniRush cards? How is that doing versus what you expected?

Oh, I don't know what the expectation was for active cards. The acquisition's been very, very strong for us and performing at or, frankly, way ahead of anything we had forecast for it. So we're very, very pleased with the acquisition. And frankly, all of our acquisitions are rocking. TPG, which Bob, you'll remember, when we bought it back in 2014, our estimates for that acquisition was that if we're lucky, it will be flat because we bought it for diversification of revenue and, more so, diversification of adjusted EBITDA and EPS. And it certainly did that. It's certainly been the gift that keeps on giving. But then we had plans about how could we grow a business that for 20-some-odd years had been somewhat stagnant. And it's worked out incredibly well by selling Green Dot products through that channel and so forth. And now, of course, the Intuit program. So we feel good about all of our acquisitions, but UniRush has been an especially good one. And the team at RushCard, in particular, and then Rapid! pay, which was the other part of UniRush, great management team, and they've done a wonderful job executing. And Dave Petrini, who's the GM who runs that whole direct division for us here at Green Dot, has done a great job. We have a lot of integration left to go, a lot of juice left in the orange, if you will, as we look to right-size expenses and integrate those platforms. But so far, we're very, very pleased.

And is there -- maybe on Walmart, I had a lot of questions, but I think, just try to hit Walmart. I mean, your competitor was pretty excited about expanding in Walmart, NetSpend and the MoneyCenter, but it sounds like you have a pretty big expansion as well. Is Walmart allocating a lot more resources to prepaid? Or how was -- how do you feel about your position? Is your competition getting a stronger position than they had?

Oh, well, look, I don't know. In the old days, I would have tracked it more closely. I don't -- I think that Walmart -- I don't want to speak for them. Let me think about how to say this. They clearly believe in prepaid, but more importantly, they clearly believe in the products that we make in their brand name and in ours based on the amount of shelf space they've given us historically and on the inclusion of the checkout lanes. From my prepared remarks, it's hard to express how competitive that is, to be on a J hook at the checkout lane of a Walmart. That's like throwing the pass in the Super Bowl if you're a quarterback. And they have our other products in Action Alley. So it's very exciting. I think that our -- I don’t know what the percentage of shelf space is, but we're certainly a predominance of sales in Walmart and have been for some time with all of our various brands. Remember, we have many products in Walmart. The MoneyCard, GoBank, Green Dot Everyday MasterCard and Visa, Swipe Reloads and probably some things I'm forgetting. So they're a great partner of ours and a great client. And they've been very generous with expanding our footprint, and we're really proud to have earned it.

The next question comes from Jeff Cantwell with Guggenheim Securities.

A question here coming from one of those millennials you were just speaking about. I appreciate all the color you just gave on Apple Pay Cash. I actually just had a similar type of question for you regarding the Intuit deal. It sounds like you want to wait out guidance for that. So I was just hoping to understand, to the fullest extent possible, how your BaaS model may be different depending on the client. If it is different in terms of the revenue you're going to drive, depending on whether it's Apple, Intuit or Walmart. So I thought it would just be helpful if we can compare and contrast the revenue model for Intuit versus Apple Pay Cash.

Yes. Well, so they're all different. What's cool about the platform and that whole strategy is that it's very bespoke. It's like going to a tailor and the tailor has the skills to make any kind of suit you want, and it's up to the purchaser to decide they want it made out of wool or they want it made out of -- I don't know how they made that clothing, a stupid analogy because I wear stuff JCPenney or Walmart, so I don't know. But -- so in any event -- but that's sort of how it works. And the revenue models, therefore, are somewhat bespoke. We have some partners who pay us a per-transaction fee for processing services or services provided. You have other partners, Walmart being the most famous because this is public, where there's a rev share that's negotiated. We don't disclose the rev share nowadays. I don't think we do. And that's a rev share model. And then -- so it's all different. And depending on the nature of the opportunity of the program, some will say, "No. We really only want a fee on that." Others, "We are willing to invest in a rev share if we think the program's high potential." And then the program can be almost anything the sponsor wants it to be, assuming we believe it's a high-quality program for consumers and highly compliant and one that we can appropriately manage the risk on because, ultimately, we own all that. So we're only interested in working with the best and biggest companies for the most impressive and exciting programs. So the revenue models can be different. That's different from our products side of the house, where we're inventing and creating products that we determine for ourselves fit a particular consumer need. And then we market them, and there's no rev share there, expect for whatever we're paying distributors in the normal course. Or if it's Green Dot Direct, which is increasingly a bigger part of our business. There's no rev share. That's just we sell online and you're paying for whatever marketing you have to get the clicks. So that's how the models work between the product and platform sides of the business. Does that kind of answer the question?

Yes, yes, it does. I guess, one other question. Could you just clarify one thing on Apple Pay Cash? I think you may have said on another call a few months ago that you generate interest income on those account balances that are in Apple Pay Cash. Is that correct or no?

So any product we have -- and what I was comparing it to was not talking about Apple Pay Cash per se, but how spend-based P2P models work and mobile payments models work in general. And the answer is, just like on our prepaid cards, any balance that remains on account is an account at Green Dot Bank. And those overnight balances are invested, and they're called investable balances. And so we have some return annually. And it shows up as -- at the bank as interest income and impacts EPS, but does not impact adjusted EBITDA. And it's a nice source. At scale, it ends -- I don't what it adds today, Jess would know better, but several cents a share as interest income. And so as that grows, that's a nice plus to our EPS. But of the models in the mobile payments game, like in anything in cards, whether it's on a mobile device or a plastic card, is spend equals revenue. And so you're always looking to get that spend.

Got it. Great. I appreciate that. And then, just if I could squeeze one last in, are you going to provide any information on those balances or on the Apple Pay Cash volumes, broken out separately in the future, just curious?

No, we wouldn't. I know we wouldn't for Intuit. We have the great blessings and fortune to nowadays be a fairly good-sized company that's highly diversified with many, many products. Not including our platform products, we have something like 30 different products in the company, with each division -- as you know, we have 6 revenue divisions having their own group of products that are managed by general managers and product managers. So we don't disclose any one product or any one service. Even Walmart no longer gets disclosed like they did in the old days because we've grown big enough where we no longer have the need to do it, and investors have understood now after so many years how that works. So we won't be disclosing Intuit, Apple or any of our platform programs independently. If Apple chooses to talk about it on their earnings calls, it's their program, and that's one of the rules of being a platform provider to companies of those caliber -- calibers. And that is that it's their business, and they'll talk about the business in the way they want to talk about their business. We're awfully proud to be their bank and their service provider and their enabler to create their dreams. But after that, it's their program.

The next question comes from Tien-tsin Huang with JPMorgan.

It's Reggie filling in for Tien-tsin. I had 2 quick questions. One, I wasn't sure if you guys have covered it, but I was curious, I heard that direct deposits were up 90% year-over-year. Just curious if you guys disclosed what proportion of your volume was through direct deposits. Also curious about I guess kind of average life of cards. That's a metric that I haven't heard discussed, I guess, recently. Just curious where the numbers are for both of those 2 measures.

So we didn't, in the prepared remarks, disclose the percentage, but not for any reason, only because there's only so many metrics I can write in the script for the market and include. But it's about, from memory, I want to say 76%. And Jess will tell me if I'm right.

Correct.

Oh, the memory worked. So 76% of all deposits to the company over the quarter were via direct deposit. And the percentage of penetration of direct deposit relative to active cards was up 90%, both because we were up handsomely, I forget a number, on an organic basis, but of course, all of those acquisitions really also propelled that number year-over-year, with UniRush not yet lapping. So that's part of that reason why that was up so much. UniRush, as you remember from the acquisition call, does fabulously well with direct deposit, as do most of our online businesses and, increasingly, our retail businesses. The second question you had was about retention of direct deposit customers. And I don't know that we've ever broken that apart, but I remember way back when in our public disclosures, maybe even in our S-1, going back to the year 2010, that we said that direct deposit customers were worth something like 4x or some number like that of a non-direct deposit customer. I've not looked at an updated metric of that, but I think, Reggie, it's fair to say that a direct deposit customer is worth a great deal more because you've onboarded them. I mean, you're paying the same fee to onboard a customer, whether they use the card for a day or 10 years. So you just have such an advantage of incremental margin flow-through on an established card, using it more, spending it more and keeping it for longer periods of time. So direct deposit customers, clearly, are a big plus to the model.

Got you. No, I guess I was actually asking for the broader portfolio, like what the average life of a card was. I think years ago, it was something like 9 months.

Oh, gosh, that was in the K. I have no idea. We should update that. And I don't know. Let Jess get back to you about that later. He's our co-Operational CFO and also the keeper of the keys as Chief Accounting Officer, and he would know those numbers. But you're right, there was a number in the K, and I'm sure it's still there, that blended it altogether, and the number was 8 or 9 months or something like that. Not a great, useful number because with so many portfolios and so many segments that you're blending every card sold a minute ago with every card that's been retained for years, and you put it all in a big cauldron and mix it up, and it comes up with that 8- or 9-month number, but not particularly helpful. But I know we disclosed it because it's something you disclose, and we'll get it for you.

Understood. And I guess a follow-up to that, as you think about direct deposit, the penetration is so high, how should we think about money transfers? Does that eventually kind of go away or flat line? Are people still going into the stores and buying reloads?

They are. Listen, our cash reloaders are fabulous customers. And because of the reasons I just stated, direct deposit gets a lot of the fanfare. But no, our reloads were up in the quarter. What was it, 5%, Mark? Cash transfers? Or is that the....

(inaudible)

What have you noticed? It's in the earnings release, Reggie, if you look at the trend. But no, our reloads are great. In fact, we're now up above pre-MoneyPak, if I remember. Are -- did we -- have we lapped that? We'll get back to you with the number. I don't want to quote it because...

But the general point is, yes, the transactions are up 5%, and the revenue per transaction is up as well. So we're seeing a nice, positive trend in both the number of cash transfers as well as the amount we're generating on them. So it's very positive.

Yes. It's still a growth business for us, and so -- and by the way, I want to be clear, direct depositors also load cash. So it isn't one or the other. And some of our best cash reloaders, users of products like MoneyPak or Swipe Reloads are, in fact, direct depositors. You may have a daytime job on direct deposit, but you moonlight at night with cash or you're a waiter or what have you. So it's very, very common that you'll see cash reloads to direct deposit cards. Extremely common. That would be not unusual at all.

Understood. And I guess just one last question if I could sneak it in. I saw loan balances were up. I didn't catch the commentary there. Is that related to some of your loan products? Or is that something else?

What kind of balance was that? Loan balance?

Loan balances on the balance sheet, I thought they were up sequentially.

Okay. It could be -- yes, it could be secured card.

Deposits on the (inaudible)

You know what we'll do? I know we have the after calls coming up. And Reggie, what we'll do is before we get on the phone with you, whenever it's scheduled and sequenced, is Jess will pull some of the accounting data that's part of our public disclosures and he'll have that for you. I do a pretty good job of memorizing most of the stuff, but I don't have that one.

I mean, the only takeaway is we are not -- you're not looking at unsecured credit being extended, and that would not be...

Oh, no, he knows that, yes. He's just probably asking about the cost (inaudible)

Yes, I wasn't sure if you had seen some momentum in the secured card program and if this was kind of the start of that. That's what I was (inaudible)

Both. No, listen. Let me riff on that because the secured card -- there's so much stuff to talk about on the call that we don't mean to leave any really good kids by the sideline here. That's a really good program for us, and it's up for a couple of reasons, if that's what you are referring to. One is, remember, we made an acquisition that we announced last call. The name of the portfolio was primor. We didn't pick the brand name. Ultimately, it'll all be part of the Green Dot platinum Visa program, which is our flagship brand for that. So part of it is growth because we bought a portfolio that was about equal in size to our own organic portfolio. And the other reason why is because we're growing organically with it. That secured credit card is a wonderful product for a Green Dot customer. It's safe, it's easy to enroll, you can use our reload network to deposit your initial cash deposit and pay your monthly bill, if you so choose to. And you're -- if you use it responsibly, you're building your credit profile for the future. So it's been a very popular program. And while the size of it pales in comparison to our prepaid division, it's only a division that's not even a year old, and that's one that has legs and one that we continue to be really fond of. And Jess will have more info for you in the after call. Okay.

(Operator Instructions) The next question comes from Joseph Vafi with Loop Capital.

Just a high-level question here on some of these strategic partnerships. I know they're all a little different and your partners are looking for different capabilities from you. But is there something you can thematically point to as a technology or industry trend or something that is perhaps kind of driving a little bit of an uptick here in strategic partner deals that's specific to you, and what you're doing broadly with your portfolios and with technology?

Oh, yes. It's a great question and one that allows me to brag about our awesome team at Green Dot. Look, we have a unique, integrated offering that -- I don’t want to sound braggadocious -- this is pride in our team, not bragging, that everybody wants to have. So now, suddenly having a bank is cool. But when we became a bank, and it took us years to do that, that's a huge bar to have to cross and -- to be a regulated bank. And it's a very hard thing to achieve, and we achieved it some years back, and it's hard to really maintain it. Making sure that we serve our regulators appropriately and that we treat out bank -- and that obligation, to be part of the American banking system, is something that is a mission in the company that we take very, very seriously. And we invest a tremendous amount of time and resources making sure that we are both a great bank and a cool bank. And I think it's fair to say that we may well be the coolest bank holding company in the country. And so number one, we're a bank, and that's very unique. As you know, many have applied for a bank. You've heard a lot of talk about that, but we're it. Then on top of that, we have great chops in mobile technology which is a unique specialty. When you design a mobile app to have a dog face or dog ears on, and that's one thing. That's one kind of mobile app and one kind of technology. For those of you who don't know what I'm talking about, I'm talking about the filters on Snapchat and whatnot, which all our kids play with and, frankly, I do, too. That's one kind of technology. When you're talking about building a bank account on a mobile app, the amount of information security that has to be built in, and customer identification, and passive risk controls, meaning the things you do with device ITs and geo -- IPs and geolocation and everything, that's a very unique kind of programming that is not every day off-the-street program. And you really have to have great chops to build an app like that and do it successfully and run it in a safe and sound and compliant manner. And we know how to do that. You add that to being an at-scale company. So now, you'll say, "Well, how many companies, a, are a bank; and b, have deep mobile and modern, agile technology, Silicon Valley chops?" That narrows the field quite a bit. Then you add on top of that, and they can do it at high scale. Meaning that we know how to handle huge enterprise-level programs, whether it's from Walmart where we cut our teeth after 10 years and they've been such a great teacher and mentor. I can't tell you in enough words what a great company Walmart is and what a great partner they've been to me, personally, and to our company over the years. And so you'll learn at their knee about how you do these things at big, big scale. And then that leads to another program, and that leads to another program. So by the time you get a Walmart and an Apple and an Uber and then an Intuit, there's a -- remember back in the 1980s, for those of you old enough to remember this, IBM sort of ruled the roost in technology. And it was very common that people would say, "Well, you're not going to get fired by hiring IBM when you're trying to build a technology stack." I'm very, very proud of the amazing job Kuan Archer, our Chief Operating Officer, has done with his technology and all the people we've hired from big companies over the years, and our executive team coming all together. People understand that if you have a really complex, really big, really sensitive, big-scale program that requires a regulated bank and cutting-edge Silicon Valley technology, there aren't 10 companies you're going to call. And so where our challenge has been is what to say yes to and what to say no to. And while we're very, very proud of the yeses, which we've announced over time, including our call today, what we don't announce are all the programs we say no to. We're very, very protective of our reputation and very protective of the partners we choose to serve and deeply protective of our bank and ensuring that whatever we issue is the gold standard. So -- but I think that's why you're seeing that pace pick up. There just are not a lot of people who do what Green Dot does on the platform side certainly.

What a great call to end the call on. I'm just so proud of our team at Green Dot.

Look, we're out of questions, and we appreciate you joining us today.

We have a couple of conferences coming up in a week or so, right? One with Bob Napoli in Boston or someplace, and then we're going to be in Philly, and we're going to be again in New York. So maybe we'll see you at various conferences or a one-on-one meeting coming up. And we sure do appreciate you listening.

Have a great day, everybody.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.