Green Dot Corp (GDOT) 2018 Q4 法說會逐字稿

Good day, everyone, and welcome to the Green Dot Corporation Fourth Quarter 2018 Earnings Conference Call. Please note that the contents of this call are being recorded.

And now I'll like to turn the call over to Dara Dierks. Please go ahead with your presentation.

Thank you, and good afternoon, everyone. On today's call, we'll discuss Green Dot's fourth quarter 2018 performance and thoughts about 2019. Following those remarks, we'll open the call for questions. For those of you who haven't yet accessed our earnings release that accompanies this call and webcast, it can be found at ir.greendot.com. As a reminder, our comments include forward-looking statements, among other things, our expectations regarding future results and performance. Please refer to the cautionary language in 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 will be on a non-GAAP basis. Information may be calculated differently than similar non-GAAP data presented by other companies. Quantitative reconciliation of our non-GAAP financial information to the directly comparable GAAP financial information appears in today's press release. The content of this call is a property of the Green Dot Corporation and is subject to copyright protection.

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

Thank you, Dara, and welcome, everyone to Green Dot Corporation's Q4 2018 Earnings Call. Today we'll start with our review of yet another outstanding quarter of performance, capping another amazing year of double-digit top and bottom line growth and a year that saw material advancement of our long-term strategy to become a large-scaled, highly innovative and ever evolving financial technology ecosystem that thrives when the best and brightest in financial services and technology come together to invent, create and grow.

In addition to providing an overview of our financial performance for the quarter and the year, I'll also reveal our new and exciting Six-Step plan for 2019 detailing this year's strategic and tactical roadmap for growth. Then we'll finish up with Mark's commentary on the numbers, including a review of our 2019 financial outlook.

So let's get to the numbers. Green Dot's products and platform model generated Q4 total consolidated operating revenue of $238 million, a 12% year-over-year increase. We note that this growth is 100% organic and quite robust, especially given that our revenue performance in Q4 of last year was itself a Q4 record. For the full year, total consolidated operating revenue came in at $1.042 billion, representing a year-over-year increase of 17%, approximately 2 points of this growth was attributed to around $20 million from UniRush in Q1 while the remainder was fully organic helped in large part by the revenue contribution from our new and existing BaaS Platform programs that grew at a faster pace than our previously established product lines, although they also grew collectively by double digits.

Adjusted EBITDA for the quarter was $44 million on a consolidated basis, representing a year-over-year growth rate of 37%. The leverage in our operating model continue to deliver very strong margin expansion of over 300 basis points on a year-over-year basis, which was consistent with the margin trajectory we laid out earlier in 2018. This impressive non-GAAP profitability was achieved despite our strategic decision to reinvest some of the material revenue outperformance back in the growth and support initiatives such as hiring across the organization, especially in the areas of risk management, technology, compliance and other control and governance parts of the company. For the full year, adjusted EBITDA grew by 22% from $206 million in 2017, to $251 million in 2018, representing full year margin expansion of about 100 basis points, a really terrific result given that we are expanding margins while funding so many new and important long term strategic initiatives conforming with spending to expand our operating platform.

Consolidated non-GAAP EPS for the quarter was $0.56, representing year-over-year growth rate of 93%, marking the 10th consecutive quarter in which we have posted double-digit or better year-over-year growth in non-GAAP EPS. On a full year basis, non-GAAP EPS grew from $2.16 to $3.29, representing year-over-year growth of 52%. Incredibly, looking at the last 4 years, earnings have grown from $1.35 in 2015 to the $3.29 we earned in 2018 in the face of the most concentrated period of growth and infrastructure investments in the company's history. In other words, our 35% EPS CAGR over the last 3 years occurred while at the same time our non-GAAP operating expenses increased by over $240 million.

In our Account Services segment, total revenue in that segment increased by 11% to $200 million with 5.34 million quarterly active accounts up around 1% year-over-year. Our key metrics for the portfolio's health and vibrancy continue to be extremely strong, specifically the number of active accounts receiving direct deposit grew by 10% year-over-year and purchase volume grew up by a very large 11% year-over-year to a new Q4 record of $6 billion.

So how can our direct deposit and purchase volume metrics be so strong and yet actives be up only 1%? The reason is that we are somewhat a victim of our own success in converting more and more of our quarterly active accounts to direct deposit active accounts. Here's how the math works: An active account is defined as a single card that has at least one customer generated transaction in the quarter. So for example, a customer who buys one card every 2 weeks to, say, load their wages to the card and then pay bills, shop online or whatever their purpose may be, that one customer would be generating 6 active accounts in the quarter. But when that same customer buys just one card in the quarter, decides to enroll in direct deposit and then keeps that card in their wallet and uses at the same way every 2 weeks to pay bills, shop online or whatever their purpose may have been; that same customer is now generating account of just one active account in the quarter.

To this point, of the major Green Dot Bank issued card portfolios, the number of weekly active accounts grew around 8.5% on average in the quarter as compared with a number of weekly active accounts in last year's Q4. The reason is, is that more customers appeared to be increasingly using the card as their top of wallet card with transactions occurring every week; whereas a short-term customer who doesn't use our card as their top of wallet card, they only use the card occasionally, maybe once every few weeks but not every week. While the mix shift towards direct deposit and more engaged customers is clearly better for profitability and growth, the lower churn also means fewer accounts issued to short-term customers, which weighs down on unit sales and therefore the quarterly active account metric. Our Processing and Settlement Services segment continues to build on its growth momentum, achieving another record-setting results in the quarter. Revenue in this segment grew 11% to $45 million, driven by increasing transaction counts and cash transfers and SimplyPaid corporate disbursements.

Green Dot's long-term strategy is to create a unique, sustainable and highly valuable FinTech ecosystem that fuels the engine of innovation for Green Dot and its many business partners. Innovation sell and it's our belief that continuing the focus our energy and resources on our strategy to build the industry's most prolific platform for FinTech innovation, BaaS, Banking-as-a-Service, will help keep Green Dot vital and growing for many years to come.

A tangible illustration of this vitality is the increasing success we're having in penetrating Green Dot's growing TAM, a total addressable market that we believe has expanded over the years to effectively represent the aggregate size of the domestic TAMs of all of our BaaS partners. To that point, here's an illustration of the success we are having in increasingly penetrating that total addressable market. In 2016, we estimate that approximately 30 million customers used our products and services that year. This may have been a Walmart gift card or a reloadable prepaid card or checking account or maybe they received a tax refund or a tax refund loan or a TPG was a processor. Note that only a fraction of these customers show up in our legacy definition of active accounts.

In 2017, the customers we touched with products and services grew to around 35 million customers, as we added secured credit cards, SimplyPaid, Uber and Apple Pay Cash products. Then in 2018, we served just over 50 million customers who used the Green Dot product or service as we added Intuit, TaxHawk and other programs while BaaS partners that went live in prior years continued to see broadening adoption. Because Green Dot started out as a monoline prepaid company with the legacy active card KPI that reflects only that legacy card business, some might think that the active card KPI is the sum total of our entire active customer base. But, of course, nowadays our card programs are just one part of Green Dot's diverse product suite and our actual customer base is much larger than that. While it's certainly possible that some percentage of those 50-million-or-so customers in 2018 might be using multiple Green Dot products, for example, maybe they're using a PayCard from RapidPay, but also received a tax refund from TurboTax where we're the processor. And therefore, maybe we counted them twice, these numbers indicate that perhaps 15% of the entire U.S. adult population was a Green Dot customer in 2018, a TAM penetration increase of over 60% over just the past 3 years.

Now I'd like to share some recent business updates and then reveal our Six-Step Plan for 2019. First, I'll start with the new partnership and our Banking-as-a-Service business line or BaaS with our partners at Intuit. In addition to entering the second season for the BaaS driven Visa Turbo prepaid card program, we're pleased to announce that Intuit is now using Green Dot's BaaS platform for Intuit's QuickBooks Desktop Payroll product offering, starting with the Intuit Turbo Pay Card product available to all employees of small businesses that use QuickBooks Desktop Payroll services. The offering will enable small businesses to pay their employees in an easy cost effective, fully digital way via the Green Dot issued Intuit Turbo Pay Card removing the need for paper checks. We greatly value our partnership with Intuit and are honored to expand the relationship with such a great organization.

On the topic of PayCard, you may know that Green Dot's RapidPay division is one of the largest and most successful PayCard programs in America and the RapidPay team continues to grow their business beautifully. In Q4, the rapid team closed over 200 new companies that will now be using Green Dot RapidPay for their employees PayCard disbursement needs. Some of the notable new client wins at RapidPay in Q4 includes George Washington University, the University of Illinois, Benihana Restaurants, Eddie Bauer and a PacSun wear and even the Fresno School District all are now RapidPay customers.

In our retail division, we are pleased to announce the multiyear extension with Kroger. A multi-year extension with 7-Eleven and a renewal with Community Choice Financial, a long time partner with our inside brand of prepaid cards. We've also signed a new retailer where you can purchase and reload Green Dot products. It's a C-store chain called RoadRunner with 92 stores located in the South. Across our approximately 100,000 location retail network, we are pleased to announce that our GoBank checking account product is now available in approximately 55,000 retail doors coast-to-coast up from just 12,000 stores selling that product last quarter.

Next, so many processing division has expanded the number of retailers that can accept e-cash transactions, where we can provide payment, cash on or cash-off-services using a bar code sent in real time to the customer's mobile phone and then the cashier simply scans the barcode on the phone screen to facilitate the transaction. So now in addition to Walmart stores, customers can now complete e-cash transactions at all CVS and Walgreens stores.

And lastly, I'm pleased to let you know that Green Dot continues to deepen its relationship with Walmart across a number of different initiatives. First in Q4, the MoneyCard was featured in the major promotion with Walmart's new family mobile phone service, whereby Green Dot was given exclusive shelf space in the Walmart electronics area at select stores and tied into a promotion where the customer can enroll to auto bill pay for their phone service. In the November and December time period, Green Dot's Visa gift card products were given incremental placement at 4,000 Walmart stores, securing a large amount of incremental pegs on those mass displays, which help to generate record gift card sales in Q4.

During Black Friday through Cyber Monday, walmart.com promoted our MoneyCard account, which features 3% cashback on all purchases at walmart.com. In March, Green dot will begin selling our Green dot everyday card at all Walmart stores in Puerto Rico along with the MoneyCard product. And in April, Green Dot will expand sales of our Green Dot everyday card in our Walmart money services areas located inside 1,400 Walmart stores.

And lastly, this tax season, Green dot integrated the Walmart MoneyCard into our tax refund processing business at TPG where TPG Pro channel tax preparation partners can now offer their customers the ability to load their tax refunds on a Walmart MoneyCard. It's a great example of how Green Dot can bring it's full complement of synergistic business units together to help drive success for all of our partners in our ecosystem. In this case, tax preparers who get to sell the popular and highly regarded MoneyCard and grow their card sales and associated revenue; TPG that gets to offer a valuable promotion to potential new tax preparers in order to grow its share of tax processing. Walmart, who earns commission from the usage of the MoneyCard and increase sales in store and online when those customers spend. And of course, success for our mutual customers, our end-users who get a great FDIC insured prepaid card with a built-in savings account, free online bill pay and more, so they can more quickly receive their tax refund safely, electronically and earn cash back when they use the card at Walmart. Green Dot's long 12-year partnership with Walmart now includes many different products and services sold across the U.S. and Puerto Rico in practically all Walmart stores, supercenters and neighborhood markets. From prepaid cards to savings accounts, from cash reloading services to cash out for PayPal, from gift cards to checking accounts and from cash back cards and tax refund cards to processing deposits for community banks. Plus, we provide program management and retail operating support such as bank issuing, compliance, processing and settlement, supply chain and merchandising, category management and analysis, technology services and point-of-sale integrations and more. We are very proud of our partnership with Walmart and we work hard to earn their business every day.

I'm now pleased to announce Green Dot Six-Step Plan for 2019. For those of you who are new to our company, each year we publish a Six-Step Plan that details the strategies and tactics we intend to execute each year. The goal is to help investors better understand management's agenda for the year and also to make it easier to track our progress during each quarterly earnings call. This year, we are categorizing our Six-Step initiatives by product, platform and corporate strategy.

First, let's start with products. Step one is about launching 2 new innovative and exciting products. We intend to design, develop and launch 2 new account products this year that target generations Z and that we intend to primarily sell direct-to-consumers through Green Dot Direct and to our network of leading retail stores. While there are various definitions of Gen Z or digital natives, most demographers define this generation starting in the mid-1990s where the millennial generation tapers off. So age-wise, this group would include school-aged children of older millennials at the youngest end, up to young adults in their mid and late 20s at the oldest end who share common preferences and attitudes with their slightly older millennial big brothers and sisters. When the first iPhone was released in 2007, Gen Z kids were preteens and teens starting to come of age, a point in human development where our most intimate preferences, habits and attitudes are formed. There are around 75 million Americans in this age group that are tightly bound together by their common use of always-on-internet, smartphones, app stores, and streaming on-demand everything. So when it comes to how customers interact with the world and the products they choose to use therein, Gen Z simply doesn't remember it any other way. With their common immersion and digitized social experiences and their video gaming instant gratification after school pastimes, these consumers are different, even from older millennials. And we believe they'll embrace something very different that with you and I today known to be a bank account. It's a product concept we call Gen Z MODE, M-O-D-E, which stands for mobile-only digital everything. And we think it's a demographic and product design philosophy where Green Dot has a strong natural advantage. As such, creating increasingly innovative products that can help expand Green Dot's penetration of our TAM is step number one. Step number two is about our long-held strategy of increasing average purchase volume and retention from our base of active account holders and attracting new customers who we believe intend to use our account products as a long-term primary account. Higher purchase volume and attracting a more committed customer base should in turn lead to higher revenue and a better gross margin of those accounts. Furthermore, increasing purchase volume and increasing retention are symptoms of increasing appeal, engagement and relevance of a product to its user base. To this point, over the course of 2018, Green Dot increased total purchase volume by 20% to $26 billion and step 2 is to continue that trend.

Now let's talk about step number 3, which is about designing, building and releasing 2 new iterations of our Banking-as-a-Service platform called BaaS. In order to power true innovation for Green Dot and its partners, like designing products in Gen Z MODE, our BaaS platform must continually evolve to ensure that Silicon Valley's best and brightest product designers can have an ever-growing collection of tools and capabilities that allow them to build what they want. BaaS 3.0 builds upon all the features, functionality and robust risk controls of BaaS 1.0 and 2.0 and adds a new user experience capability that powers creativity of the designer with a highly flexible illustration of a wide variety of creative designs and flows for applications and websites. We believe these enhancements, including our next iteration of automated risk management, will allow us to support fully diversified applications across all BaaS platform products.

This isn't about putting your clients logo on this screen or that screen to create the appearance of a custom website, this is about being able to simultaneously power 100s of apps, websites, bank accounts and physical card programs, no 2 of which look the same, work the same or do the same things. All within the ecosystem of one powerful platform, a platform built atop an increasingly efficient high scale and high reliability banking and program management infrastructure. BaaS 3.0 intends to take bespoke to a whole new level. Then once BaaS 3.0 is in production, we then intend to begin work on BaaS 4.0 for release in the first half of 2020. In addition to several new functions and capabilities, BaaS 4.0 will build upon the robust risk controls from previous BaaS version by enabling the new and more versatile set of automotive program management and compliance tools designed so that we can prudently and responsibly manage growth while enabling our partners to benefit from our years of experience and operating what we believe to be far and away the largest fastest-growing and most profitable FinTech bank holding company in America. So step 3 is about evolving the BaaS platform as a key and unique strategic asset that's designed to power innovation and revenue for many years to come.

Step 4 is about packaging the tremendous power of Green Dot's unique set of assets like our bank, our BaaS platform, our regulatory risk management legal and compliance teams and our program management capabilities into one integrated bundle and making all of it easily consumable to a broader segment of BaaS partners, product designers and developers, in an effort to further expand our reach much deeper into Green Dot's growing TAM. Today, Green Dot makes these assets the bank, the BaaS platform, program management and so forth only available to large partners with large technology and product teams that work through our business development group to establish an enterprise-level partnerships with Green Dot. It's a heavy, high touch process that makes sense for large and complex programs, and we certainly intend to continue that type of business development and account management format for enterprise partners where it makes sense. But Green Dot has a goal to make our BaaS platform accessible to a larger group of designers and developers who can easily access and consume the platform directly on their own without having to go through our business development team nor be assigned a dedicated account management team. Instead, envision offering where a business owner, product manager or developer can simply log onto the BaaS platform, apply for credentials. And upon being granted access, could begin to use our robust set of tools and APIs to design and build their own financial services project at their own pace. Then once submitted for certification, upon approval of their project will go from the development and testing environment into production, complete with bank issuing and program management already built in.

So let me help put this into context. Imagine you run medium-sized e-commerce store and you want to easily create a loyalty debit card that provides your customers with instant cash back rewards and other incentives to help you build loyalty and better compete with larger competitors. Or imagine you're the app developer who wants to include the ability for your apps users to have a prepaid card to facilitate payments and purchases within your app. Or imagine you're a social media influencer with 2 million followers and you want to create a loyalty bank account that showcases your personal brand and that flatters your followers lifestyle. With the right administrative controls, a robust and rigid partner approval and onboarding process, a fully automated risk management and compliance capability, and a strong technology and developers support infrastructure, we believe that using our BaaS platform as a modern grassroots distribution platform is a very big idea that could power growth and mass innovation for years to come. It's a project we call bOS, b-O-S, which stands for bank operating system. As in, you're the boss with the Green Dot's bank operating system, bOS. I want to be clear that this is a big idea and we believe bank OS has the potential to become one of the biggest initiatives in Green Dot's history. The potential customers for bOS, think of just app developers alone could be substantial. But it will require the right dedicated leadership, a significant amount of technology and government work and investment and the right support from nearly every division across the company. But Green Dot has an amazing track record for delivering on big ideas and enterprise scale innovation, and we feel confident we can achieve this vision. And in so doing, potentially create an opportunity for tremendous long-term value for Green Dot and its investors. So step 4 is about successfully building out much of the key technology and operating components of bOS 1.0 this year in order to launch it into production by 2020.

As we think about our first 4 steps, it's clear that Green Dot is a technology-driven enterprise. It innovates and grows through big ideas that actually launch into production. It's one thing to talk about an idea for an API-driven FinTech platform and name it BaaS or to come up with a cool idea for an app base millennial bank account and call it GoBank. It's another thing to design, build and successfully launch the idea into production to be used by millions. Turning ideas into revenue takes great executive leadership. And at Green Dot, for the past 7 years, one of those executives has been Kuan Archer, our current COO and Head of technology.

With that as a backdrop, I'm proud and excited to announce that Kuan has been promoted to President, Chief Products and Technology Officer starting next week. In this new role, Kuan will be able to fully focus his time, energy and talent on leading our large team of technology and product development leaders across the U.S. and China to efficiently deliver on the innovative and powerful strategies before us. I'm happy and excited for Kuan and for Green Dot and its investors who could benefit from the increasing capabilities and efficiencies of Green Dot's technology division under Kuan's dedicated leadership.

Step 5 is about continuing to improve and scale our operating infrastructure to ensure better performance, increasing customer satisfaction and higher efficiency. As I've said over the years, the operating parts of our business located deep inside the widget factory aren't necessarily the parts of our business that make for the best cocktail party conversation. But the performance of these areas have a direct impact on our ability to run a compliant, profitable and growing company. We have historically had great success over the years with these infrastructural improvement programs, proof of which can be seen in our increasing account usage metrics on the one hand and the over 600 basis points of margin expansion we've seen since 2013.

So step 5 is about increasing the capacity, quality and efficiency of our operating platform. To that point, we are pleased to announce that Rob Strub will be joining Green Dot as our Chief Operating Officer starting next week on the 25th. Rob has spent the last 21-plus years at Citi Group managing a variety of large-scale operations at Citi Cards, mortgage, auto consumer finance and retail banking. He was most recently Chief Operations Officer for the U.S. Consumer Bank for Citi and he has deep experience in driving improvements across large-scale, complex and highly regulated operating platforms. Rob's skill sets should align perfectly with our 2019 Six-Step Plan and beyond and we are very excited to have Rob on our team.

Lastly, step 6 is about the smart and accretive allocation of capital to enhance shareholder value over time. We spent the last year focused on integrating a string of acquisitions made in prior years and hiring an increasingly seasoned and high-performing executive team. We also invested considerable time and money in expanding our capacity by building out a more mature and higher scale banking and associated risk management infrastructure to ensure we can digest the growth from acquisitions and from the many organic initiatives we've launched into the market. While expanding our capacity and reinforcing our operating platform will always be an ongoing work in progress, we are in a very good place now to again become more aggressive in searching for appropriate acquisitions, which are subject to regulatory approval and to consider another share buyback.

While the M&A pipeline is potentially robust, we have nothing to share today on anything near term. Specific to buybacks, we do have a board authorization subject to regulatory approval for an additional $150 million share repurchase. On top of the $150 million in share repurchases we completed under our prior share repurchase authorization. Given the free cash flow that Green Dot generates, we believe we're in a very favorable position to review opportunities to deploy that cash and activities we feel are highly accretive, strategic and consistent with our long-term vision of Green Dot as a large-scale, highly innovative and ever evolving financial technology ecosystem.

2019 is Green Dot's 20th anniversary year in business. And I'm so proud to be the founder and CEO of this awesome company that began in 1999 at a little $80 desk I purchased from OfficeMax and assembled in the corner of my bedroom on my then home in San Marino, California, just a few blocks from where I still live today. And only a few months after assembling that desk, I met one of my first investors, the cousin of a former boss of mine who took a chance on a guy with a crazy idea whom he had only known for a few weeks. The name of that early investor is Mark Shifke, who today 20 years later, is Green Dot's CFO and who will now provide his Q4 report along with our 2019 financial outlook. Mark?

Thank you, Steve. Our strong Q4 results capped the year of tremendous performance across practically every revenue and operating division in the company. GAAP total operating revenue was $238 million, representing 12% year-over-year consolidated growth. This was a seventh consecutive quarter of double-digit year-over-year organic revenue growth and was accomplished despite the incredibly difficult compare of lapping last year's Q4 record-breaking growth of 31%. Given that strong comp, we think that's quite a result. On a full year basis, Green Dot achieved total consolidated revenue of $1.042 billion, a growth rate of 17% year-over-year, of which practically all apps and 2 months of UniRush revenue in January and February was organic. Our full year revenue exceeded the midpoint of our initial guidance range by $52 million. Q4 adjusted EBITDA of $44 million represents year-over-year consolidated growth of 37% with the adjusted EBITDA margin in the quarter coming in at 18.4%, a Q4 record.

This strong year-over-year margin expansion of over 300 basis points was the net result of improving margins flow through across the business. And in particular, from our base of direct deposit active accounts where improving purchase volume and higher retention have a positive impact on profitability. Not only do we derive strong margins from our long established programs, but we generated better-than-expected margins on accounts sourced from our BaaS partners as well.

On a full year basis, Green Dot achieved total adjusted EBITDA of $251 million, representing a growth rate of 22% over 2017 and reflecting year-over-year margin expansion of 100 basis points. Our full year EBITDA exceeded the midpoint of our initial guidance range by $12.5 million.

Non-GAAP EPS came in at $0.56 per share for the quarter, up 93% year-over-year. This is the 10th consecutive quarter of double-digit or better non-GAAP EPS growth. The outperformance on non-GAAP EPS was primarily driven by better-than-expected adjusted EBITDA combined with strong interest income from the investment of cash deposits held at Green Dot bank and a lower year-over-year effective tax rate. On a full year basis, Green Dot achieved total non-GAAP EPS of $3.29 per share, representing year-over-year growth rate of 52%. Our full year earnings per share exceeded the midpoint of our initial guidance range by $0.44 per share or 15%. Green Dot, once again, generated excellent cash flow from operations with $251 million of cash from operations in 2018, a 15% year-over-year increase. We ended the year with $169 million of unencumbered cash on our balance sheet or approximately $120 million more than at 2017's year-end.

Now diving into the segments. The accounts services segment delivered GAAP revenue of approximately $200 million in Q4, representing organic year-over-year growth of 11% driven primarily from the growth of purchase volume and increased retention of customer accounts. GDV or total deposits made to our accounts increased by 16% year-over-year, illustrating how our customers are increasingly using our products as a primary bank account and debit card. Our Processing and Settlement Services segment generated $45 million in GAAP revenue in Q4, equating to 11% year-over-year growth. The strong results were driven by organic growth in all the segments' various product lines.

As a reminder, starting next quarter, we will begin using a new presentation for non-GAAP revenue, which we believe better reflects the economics of Green Dot's business and more closely conforms to how banking institutions treat interest income on customer deposits. The new non-GAAP revenue presentation format will include net interest income generated at Green Dot bank from the investment of customer deposits and will be reduced by commissions and certain processing-related costs associated with certain BaaS partner programs where the partner and not Green Dot controls customer acquisition.

Under that new presentation, our Q4 non-GAAP revenue would have been $237 million, including $7 million of interest income this quarter offset by $8 million of processing costs and commissions. On a full year basis, under our new presentation, full year non-GAAP operating revenue would have been $1.024 billion, adjusted EBITDA would've been $274 million and non-GAAP EPS would remain the same.

Now let's discuss our financial outlook for 2019. Green Dot's multi-year evolution into a diversified FinTech leader that powers an increasingly prosperous platform ecosystem has helped to generate robust and improving financial results since our first BaaS program launched in 2016. For example, total net revenue from programs on the BaaS platform grew at a CAGR of approximately 300% from 2016 through 2018. And in 2018, contributed approximately 1 quarter of our total consolidated year-over-year net revenue growth. But more importantly than just the incremental revenue from the BaaS programs in any one period, is that our evolution into a leading FinTech ecosystem has spawned a strategic roadmap that we believe has the potential to drive the development of new products, new partnerships and new business models that can create opportunities to fuel organic growth for many years to come.

For full year 2019, Green Dot is expecting non-GAAP net operating revenue to be in the range of $1.114 billion to $1.134 billion, equating to year-over-year revenue growth of approximately 10% at the midpoint of $1.124 billion. Under our prior reporting approach, that midpoint would equate to GAAP operating revenue of $1.148 billion and year-over-year revenue growth of also 10%. We are expecting adjusted EBITDA to be in a range of $315 million to $321 million, which at the midpoint of $318 million equates to year-over-year growth of 16% and margin expansion of approximately 150 basis points. Under our prior reporting approach, that midpoint would equate to adjusted EBITDA of $288 million and year-over-year adjusted EBITDA growth of 15%.

And lastly, we expect our non-GAAP EPS to be in a range of $3.59 to $3.67 per share, equating to year-over-year growth of 10% at the midpoint. Non-GAAP EPS is not impacted by our change in accounting presentation. Our non-GAAP EPS range assumes a tax rate of approximately 24%, a fully diluted share count of 55.5 million shares, net interest expense of $3 million, and depreciation and amortization of $50 million.

If you notice the flow-through of adjusted EBITDA to EPS is less efficient this year, the reason is that our expected 2019 EPS result has in total a $0.26 headwind compared to 2018, due in large part to a material increase in DNA, primarily as a result of technology development expenses associated with the launch of Apple Pay Cash, Intuit, Stash and other smaller partners along with our continued investments associated with the ongoing development of our BaaS platform.

Together, new DNA creates $0.15 year-over-year negative variance. The remaining $0.11 of variance is related to our tax rate, which is expected to be approximately 100 basis points higher in 2019 and to a higher year-over-year share count due to the normal cadence of equity award grants. This expected share count does not assume a share repurchase. For Q1, under our new non-GAAP revenue presentation that I discussed a few moments ago, we expect to generate revenue of between $323 million to $327 million, although some of that revenue could slip into Q2 depending on the timing of tax refund for the remainder of the season, which as many of you know has been slow to launch given the government shutdown earlier in the season and the complexities of the new tax law, which some have opined, has caused consumers to file their taxes later than normal.

This Q1 expectation represents a grow over of around 6% at the midpoint of our net revenue guidance range compared to last year's tremendous Q1, which included not only strong growth from our existing product lines but also included material revenue from new BaaS programs like the Q1 launches of Intuit and TaxHawk. Plus, growing revenue from BaaS programs that had just recently launched at that time, like Apple Pay Cash and Uber rewards. Then on top of all of that, last year's Q1 also benefited by around $20 million from 2 months of the UniRush acquisition, which didn't last until the end of February. We expect year-over-year adjusted EBITDA margins in this Q1 to be flat to slightly compressed by perhaps 50 basis points or less due to higher SG&A and OpEx this year, partially offset by the margin expansion we expect to continue in our established product lines.

As you think about our full year non-GAAP net revenue guidance of 10% at the midpoint, we are modeling the cadence of that growth to be single digits in the first half of the year largely due to the unusually tough year-over-year comp I just described and then improving as we get into the second half of the year, where we expect accelerating double-digit growth in Q3 and then Q4. The reasons for the stronger back half of the year expectation are: one, the large year-over-year comparison hurdle related to the new BaaS tax programs and the UniRush acquisition in last Q1, should become less of a grow over factor as we get later into the year; two, growth from new BaaS programs like Stash and from previously launched BaaS programs, like Uber rewards and Apple Pay cash, is expected to build momentum as the year progresses; and three, we expect to continue to benefit from double-digit GDV and purchase volume growth on our base of quarterly active accounts, which we modeled to grow on low single digits year-over-year. And with that, I would like to ask the operator to open the phone for questions. Operator?

(Operator Instructions) And today's first question will be Andrew Schmidt with Citi.

In terms of just the expectations for Q1, could you talk about what's already embedded in there in terms of just a shift in terms of tax filings in the first quarter and the second quarter? Just curious in terms of the current guide, what you're expecting?

Well, let me make sure I understand the question, you're saying what new programs are in there? Or what are we expecting in terms of how we get to the 6% expected midpoint? Or...

It's more about your expectation for tax filings. Is there already an assumption built in for a shift into Q2? Or are you assuming some sort of normalized pattern this year?

Well, kind of both because there's always a lot of 2 -- Q2 volume from taxes. But this year, it's maybe a bit more pronounced. We haven't even had -- if you think about -- for those of you who follow tax season of other companies and the tax ecosystem, normally you have a big tax deposit, generally 2 of them throughout the quarter. And you have the first big one is normally mid-February -- it used to be early February, but call it mid-February would be a big disbursement day and then another one in late February or March. We haven't even had the first one yet. So the first one is expected at the very end of February either on the 27th or 28th, our tax division would know better, but I think it's the 27th. And then one in March so that's definitely later than what it's been. When that happens, at least in terms of Green Dot for the card side of our business, that means the revenue and the spend from the deposits that hit those cards won't really be felt until Q2. But the RT revenue or the tax processing revenue we get is taken at the time of the process. And so that would be in Q1. So I wouldn't think it's materially different. You never know and it could be that more spills into Q2 this time than traditionally, but I wouldn't think it's dramatically different, what do you think Mark?

Yes, that sounds about right. As Steve said, at this point in the year, we would have seen something. And at this point, we haven't. It's just slower. So we're flying a little blind and trying to be prudent in how we forecast the quarter.

That makes sense. And then in terms of just the full tax season, I got a lot of questions on how the tax law changes affects both filings the amount of refunds, what's the expectation here for just the impact of the U.S. tax -- revised U.S. tax law will have on filing behavior and then correspondingly refund amounts et cetera, particularly for your core demographic?

Right, I was going to say, I mean, you have a couple of answers, you have how does it affect the tax ecosystem and how does it affect the part that we care about, the answer is, is that...

You could spend the next 2 hours.

No, for the Green Dot customer, which is the folks getting prepaid cards and in some ways taking advantage of the tax processing although that's a little bit more mainstream in that demographic. There's not a huge impact for us, ironically we've seen a lot of press reports about tax refunds being lower, that may be true for middle America and upper-class America to the extent there refunds. We don't think that's the case for lower income Americans who we're expecting that the tax refunds will be similar or maybe even slightly larger depending on the way those turn out. So I don't think there's anything particularly unusual or dramatic except for that there's definitely a delay by at least 2 weeks that we know of. And then we'll see how the rest of it turns out, in terms of tax filing numbers, the IRS publishes an actual filing guide that you can look up and I wish I had it in front of me, otherwise, I would tell you what it was and we could get you the address or the website later in the after hours. But you can actually go and they'll tell you what the pacing is of filings and relative to previous years. And we are behind at this point in the season. But it always catches up. Listen, whenever it is everybody files their taxes. So it's just a question of when it hits. But in terms of refunds and our part of the revenue, we think we have a good fix on what's going to happen and how. So it's going to be a few weeks later and then that means some of the spend revenue, interchange revenue and some of that would go into Q2 to a greater extent than what it's been in previous years.

Got it, that's helpful, and then I had question on the product roadmap, the bank OS -- look, thanks for the additional acronym by the way that's good. Bank OS, just trying to -- I guess that full rollout first half 2020, how is that juxtaposed with the existing Banking-as-a-Service strategy? Is the right way to think about it, Banking-as-a-Service, more focused on enterprise customers and this bank OS would be more sort of midsize customers? I guess just a little more clarity on that would be helpful.

Yes, no, thanks for the question because it is actually` one of the cooler ones we've thought of and including the acronym, I love the name and I'm glad you picked on it, bank OS or bOS because you're the boss. And first of all I want to be clear that while BaaS 4.0 is expected to be released in the production in mid 2020; on bOS, we just said 2020 because that may take a little while longer. But -- so -- here's how it works. If you think of the world of development and the sort of the biggest companies, the enterprise-sized companies need a lot of support, because they're doing big projects at a very big scale and that's what we have today. So today anyone on BaaS, Banking-as-a-Service platform, is going to be like the companies we have, the Intuits and the Apples and the Uber and the rest and the Walmarts, these are very large partners with very large scale programs, large product teams, large technology teams, large compliance teams and so the engagement from Green Dot will be like-minded. We're going to have sales accounts teams and a lot of discussions and it's a fairly long sales cycle. And in fact too long we'd love to figure out how to get at shorter. But enterprise sales is what it is and if you have ever done it, you know what I'm talking about.

With bOS, it's a whole different kind of a customer base. This is about the app store developer or as I said in the prepared remarks, the social media influencer or the mid-sized retailer or the small store owner with 3 employees, who wants to do some sort of payroll card or wants to do some sort of rewards card for their own customer base. It could be the church who wants to do a fundraising card for their 1,000 parishioners to make money off a part of the interchange. It could be anybody that's qualified to be on our network and to pass our strict vendor management rules and all the things that go along with being regulated institution. But the concept of the everyday program are just like the app store being able to come in and create a product to their specifications, the plastic looks a certain way or the app looks a certain way, it has this reward, no it doesn't have that reward. It has this fee, no it has that fee, and to be able to have that individual or that programmer or that product manager develop it at their own pace and at their own speed is pretty cool. And we just think there are so many people out there and to give you an example and I'll tell you where I got the inspiration for bOS. We're sitting at the Worldwide Developer Conference with Apple going back '02 -- I forget when did the product announced -- get announced? Could have been 3 years already

That was in '17.

Whenever it was.

'17 or '18.

Yes. And I was there with our partners at Apple and I was watching the great show they have at their WWDC and I was looking at the platform and the power of the App Store. And in that conference they saluted a 9-year-old boy or something like it 8 years old, who was the youngest app developer and Tim Cook introduced him and they applauded. And then they introduced the oldest app store developer who is a woman in her 90s from China and everyone applauded and so forth. And I remember thinking, wow, think about the app store and the millions of apps and the power that having a consistent API in development platform that anybody who is skilled enough to figure out how to do it, could make an app and as long as they comply with certain vendor management rules and as long as their technology pass certification, then you could have your app on the App Store. And just think about the ecosystem that's created. And in that -- literally, I was just sitting there, I texted Kuan Archer, who I always text first with my weirder ideas. But I tell you -- so why can't we do this? And the answer is well we can if we can build out all these things we have to do. We've done a lot already. It's part of why we're investing so much in BaaS, so this has been something we've been working on for a long time. But the thought that you could have APIs that are robust enough to work at scale, a platform that can handle it, and then because we're a bank and because you're dealing with money, tremendous amount of risk management tools and overlays that go onto that platform. But the fact is whether you're a high school kid or whether you're a schoolteacher or an app developer with some video gaming app, whatever it is you may be making, and you want to have a bank account that in some way -- or not just a bank account because we have a lot of things in our platform that are not just -- banking, for example, we power the PayPal CASH off program at Walmart and a lot of things that are not just bank accounts. But the thought that anybody could come in and do that, if they complied with the rules and were talented enough to figure out how to do it is very empowering and when you think of the scale of that, it is impressive. There is -- and I want to be clear that there's always a risk to these large programs, I'm not trying to make it sound like a slam dunk. It is not. And hopefully you picked that up from my prepared remarks. This is not a slam dunk, a lot of work has to go into it. But there's a company out there that you may be familiar with called Twilio, wonderful CEO and founder and a really cool company. And they are another model that's very similar to what I'm referring to where you could have in theory in their case, may be not in our case. But I don't want to give a number, I don't know what they describe is public or not. But a lot of developers able to use that platform simultaneously that drives your overall growth. That's the concept behind bOS. And we'll see how it comes out, but that's the intent behind it. Does that make sense how I've explained it?

Yes, yes, that's very helpful. I appreciate the context.

And our next questioner today will be Andrew Jeffrey with SunTrust.

Mark, I always press you for a little more disclosure on BaaS, but the growth rate contribution is helpful. Just to maybe dig in a little bit more on BaaS and the way the product and the platform is evolving. Steve, do you mean to signal or is it right for us to interpret some of the new investments such as boS as perhaps a move away from enterprise-type customers? And the reason I ask is, you put up outsized organic revenue growth last year and I think a lot of that had to do with BaaS. And I just wonder, if this is more of a normalized outlook or if it were -- or if you're contemplating new BaaS signings that might currently be in the pipeline recognizing how long your sales cycle is?

Right. So the answer is in no way would we want to give up on our enterprise clients. We don't have nearly enough of them. We want more of them. We're ideally suited to big, large enterprise partnerships. We're very good at that. And that always has the opportunity to drive the platform far faster than any individual. But I don't think it's a game of one or the other. And so bOS is a product of BaaS. It's just that it's the product that's a little bit more locked down. If you think about BaaS being fully customized, you've a partner like Apple, who comes in and says, "Hey we want to do A, B and C," and it's completely never been done before. And it's entirely bespoke every aspect of it is brand-new. Or a product like Uber, the Uber account where they need rewards and Instant Pay functionality that only makes sense for an Uber driver. So it's very, very customized. And for big clients like that where you can get hundreds of thousands of customers or many millions of customers, it certainly makes sense to do that and to invest the time and energy into doing the custom offering. Because you'll make it back and those are great partners and we always want to do more of that and there's a lot of big companies in America. So we don't want to give up that at all. And in fact, we're investing in more enterprise-level salespeople and trying to figure out how we shorten that launch time line to make it a little bit more faster pace. I think the clip of new closings is too slow, and so we're working on that. But that's always something we want to do. But in addition to that, if you can take those APIs and those features and say, "Look we're not going to do a custom program like we did for Apple or for everybody, that would be ridiculous. We can't do that," but people don't need that. So just think about any app that you're looking at, or some of the examples I gave to illustrate the point. Somebody like that building their account doesn't need all those custom tools. So you're going to look down risk management. You're going to lock down BSA and AML controls. You're going to lock down the way we take deposits for CIP. Those will not be negotiable in how you do it. The bank is the bank and how we do it is how we do it. But what the plastic looks like and the fees you charge and the features that you put on it and on and on, that you have great latitude on. And so we think it's an exciting opportunity, but it's not one or the other. We think both are important and bOS clearly is a couple of years down the road in 2020. BaaS is right now.

Okay. And Mark, maybe for you, again and I hate to harp on this but I'm just trying to understand. If I take your comments about 25% of '18 growth having come from BaaS, it implies and I recognize there's a couple months of the acquisition.

UniRush. Yes, I want to point out before you go further, Andrew...

Yes. Sorry, with the UniRush in there.

Yes, but Andrew, just before you go past here, I want to be sure that Mark was quoting the number in our new net revenue construct, it was 25%, it was close to about 40% or something like that if you stood -- if you did apples-to-apples on the way we were...

Okay, okay, that, that -- so I think that goes to answer the question but is still implies that the core business grew pretty robustly in '18. Can you -- okay, okay, so can you comment a little bit on kind of the trajectory of growth in the core Green Dot retail business whether that's decelerating? Or should stay about the same in '19?

Well, Q4 was in the same capacity, this has been similar, I think, for most of the year. In Q4, about half of our growth was driven by BaaS programs and half from our established product lines meaning the typical Green Dot stuff, not just cards but we have other programs beside cards. So it's been half and half. And I think Mark, it's been like that for most of the year?

Most of the year, that's exactly right. Look we -- it's -- we're thrilled with how '18 played out. It's -- having launched some programs in '17, completed M&A in '17. And then to grow over all of that in '18, we thought was just remarkable. And surprised us to the upside, and we're hopeful that we're on the right trajectory and the right path to continue to have that kind of opportunity in '19.

And the next questioner today will be Brad Berning with Craig-Hallum.

Congrats on the Intuit announcement and wanted to see if you guys could talk a little bit more about just thoughts on timing of when product rollouts could happen for that, if you're allowed to talk about that yet? And then kind of -- try to size up the TAM a little bit for QuickBooks, domestic as far as number of employers, number of companies that use it or the number of payroll kind of companies that use or number of employees just kind of sense of magnitude what does this mean?

Right. It's a fair question but one we can't answer and I'll tell you why, is one of just the governance ring fences we have around our BaaS partnerships is we're the partner, the platform, the facilitator of it and to the extent that our help is asked for or needed for design work or other parts of it, we do that. But only the company itself can release numbers, so for example with Apple Pay Cash, that's why I never give numbers, that's up to Apple to do that, or Intuit. So it's a fair question and it may be that what we can do just to help do some of the legwork is we can find out some of the public disclosures and help with that or if you cover Intuit or have people over there they may be willing to speak to it. But payroll is certainly a big business at Intuit, they do a great job with it and we're so excited to be part of that ecosystem. And whatever we think is in there would be part of our guidance for this year because that's in our program that we announced and that's out there. But if we haven't announced a program yet, then it's not a part of guidance.

Understood. I'm not getting told no, I'm not asking enough right? But -- and then one follow-up on the pipeline discussion, just want to get a better sense of your excitement about where we're at and getting things towards the goal line and things you guys have been working on for a while. Where are we at in the process on some of these? Do you feel like things are mostly in the RFP process? Or are things mostly in the development process? Or are we getting closer to the goal line on things? Just want to get your sense of enthusiasm for the opportunities set in the pipeline.

Well, I want to be thoughtful with my comments because I don't want to excite or disappoint. I think the answer is the pipeline is good. The parties or the kinds of opportunities in the pipeline or good but that if I had a magic wand I would prefer that they were to close faster, so -- which is no secret here in the building and Brett Narlinger who is our Head of revenue is such a great guy, such a great partner. It makes me look mellow relative to his energy and aggressiveness in revenue. So I know he shares this thought with me. But we have to figure out maybe how to make the offering a little simpler perhaps or do something where it isn't quite so customized because we want the deal to close a little bit more quickly. So I would say, the opportunities are good, the pace is slower than what I'd like. And if we get them, we get them, but the guidance doesn't rely on us getting them. But to your point, we would love to have more. I don't know if I even answered your question, but that's probably the best I can do.

Our next questioner today will be Robert Napoli with William Blair.

There -- just looking -- the active accounts are flat year-over-year but the activity per account continues to go up at a healthy level. And I know Mark, you said expect accounts to grow low single digit next year. What is driving -- can you just talk about the mix shift and how much left of mix shift there is to continue to get the higher purchase volume transactions per account? And is the average life of an account expanding?

Yes, in terms of mix shift I'm not sure...

What he's saying, can we keep growing with -- how much more can we squeeze the...

And the accounts are flattened and transaction per account were up 10%.

Yes, which -- we've discussed for some time that's really being driven by a direct deposit active growth. That was very healthy growth in the quarter. Our expectation is that we should be continuing to grow our direct deposit accounts. And as we do, you'll see those metrics in terms of GDV proactive -- purchase volume proactive continue to increase.

Yes, I think Bob to the question and Mark is right, if we're at about half of our account base give or take as direct deposit and every year, we're adding a couple of hundred thousand more if we're growing 10% -- or what did we grow for the year, guys? 13-something percent year-over-year? Is I think what the average of the normalized number was? If you took out the UniRush...

I would just go with that.

So it's a lot of customers coming in to do that and we're only not even quite to halfway. So the answer is we have a lot of folks and a lot of room to grow and we continue to do that and we think we can do it certainly this next year because we're seeing it in the trend. But that doesn't mean we shouldn't want to grow actives. So we want to have more actives, we want to have more people in there because you ultimately have to have fresh customers coming in to keep growing. And so we have a long way to go with the customer base we have. We did add, oh my gosh, it was over 1 million accounts or something year-over-year with the tax business and everything else. We added a lot of accounts year-over-year and that's great. Q4 was not great and we thought it would be bigger than that. In fact, I think, Bob you were the one who asked the question where I thought we were at about 5% and thought we had a lot of room if you remember that I don't know where you the 1 who asked that and where we made the mistake was to get a fresh number for the earnings call as we look at the most recent number, which was a weekly number, which was up at that point about 7%. We ended up higher, but that's where it was and we missed this component that, wow, as we continue to get more and more direct depositors, you just don't have the churn. Without the churn, you don't have the unit counts and Q4 is not a big unit number anyway. It's not one of our bigger acquisition quarters. And so that was the artifact of that occurrence. But we always want to have more account holders. So I wouldn't say we're satisfied with being up 1%, that's not great. It's not relevant to our performance and I'm glad that the people we're having are real customers who went to buy a real account to enroll in direct deposit and that's all very good stuff, so the answer is can we continue to grow that way, yes, certainly for some time to come, do you want to have more new customers? That -- real customers, that are there to have a real account that they use as their bank account, yes. Do we want to have more? Yes.

Just my quick follow up would be just on the BaaS program, are you seeing more -- I mean it seems like there is more venture investment going into BaaS types of programs or companies. Are you seeing more competition? And what -- I mean, obviously, you're investing and developing I mean do you feel like -- are you seeing more competition? Do you feel like your ahead of that competition today? Or are these investments that you need to move ahead or stay -- keep up with the competition?

Yes, so on the platform side, we don't see a lot. Now having said that it may be that we're not aware of the deals we don't get. But in terms of the companies that we're pitching, there are not a lot of companies that we're aware of that have what we have, which is just integration of the regulated bank charter combined with, really, a big iron technology. In other words, it isn't just a technology capability, it's a true technology company that would rival most Silicon Valley companies if we're only a tech company. And then on top of that, of course, you have this program management function, which we don't talk about a lot because I lovingly call it the widget factory. But if you don't have that man that's really hard to do. It's ugly. Nobody wants to do it. If you're not doing it, somewhat of a thankless job because it's a whole belly of the beast of how these things run. But I'm not aware Bob and you may be of any competitor out there who has the bank that's able to do this and the capital base to do it too. Remember, we have a big capital base that allows us to do a lot of these things. But the bank and the technology capability to build the platform that can serve the biggest and best in Silicon Valley and beyond and the program management function that's already at very high scale with call centers around the world and all the infrastructure you need to pull that off. I'm actually not aware of another company that has that. But doesn't mean to say we don't have competitors. We always do and will always will but we think we feel pretty good with our offering we just need to pick up the pace.

Our next questioner today will be Joseph Vafi with Loop Capital.

Just one more on BaaS versus let's call it the core business. I mean because it's really kind of 2 businesses almost at this point that share processing back-end and maybe a little early, but do you have a feel yet of the ROI on the BaaS business over time should rival that of the kind of core retail cards business? Could be higher? Could be lower? Obviously I think there's probably more growth in BaaS, but let's say the maturity of the platform is still far from, mature, but if you look down the road in a few years, would you think one of those 2 businesses is inherently at maturity and more attractive business model than the other?

Well, I think your observations are right and that is that there are 2 separate businesses, if you will. That's why we call products and platform. But Green Dot is our own consumer of our own platform. In other words, step one was about these 2 new Gen Z products being developed in Gen Z MODE. And as we develop that, we're building out our platform to make sure that our own developers are talking to the platform side of our company saying, "Hey make sure you build this and make sure you build that." So we're our own consumers of our own platform. So you're right, it has a common processing back-end as you called it. It's probably a good description.

So we think they're 2 different business models and we like them both. In terms of the scalability and over time the margin and the growth opportunity, clearly, the BaaS platform would have the bigger of the 2 because there's only so many products you can sell and some of -- so many customer segments you can sell them to no matter how prolific you are, as a product company. But on BaaS, over time, you could have thousands of developers with all kinds of programs each one innovating whatever it is they're innovating, selling it to their customer base, very much like what the app store is. Maybe not as broad based, not everyone's going to want to have a bank account but maybe everybody wants an app. But the concept is still there.

So clearly the long-term growth opportunity is bigger for the platform than it is for the product side of our business, but they go hand-in-hand beautifully. Anything we invest in building out the platform and making it more robust directly impacts our success on the product side of our company and makes the cost of building those products less and the cost of upgrading them less. So they really do go hand-in-hand together, but the reason we're investing in the platform is as you look past as a public company is not just about growing for 1 quarter or 1 year, although clearly we're always concern with that, but it's about how do we grow for many years and for decades and whether we need to do that. And because we're regulated bank and we take that obligation and responsibility seriously, how do we do that to make sure that we're building in all the risk controls so that you really know who these people are and they really understand what the products do. And the answer is you can do that with a lot of the software that's out there and a lot of the controls you can build in. And we're already doing it at high scale with a lot of big partners. So it's not something far into Green Dot in terms of what our muscle memory is and what our strength is as a company, but it's a big harry project but we think one that really can pay dividends over time.

Okay, that's helpful. And then I know you mentioned that perhaps the cadence of new wins, you like it to be a little faster and perhaps part of it is due to a lot of productization going on for BaaS customer now. And maybe over time, we get to a little bit more of a cookie-cutter approach, do you have a bead or radar lock yet on how that, kind of, cookie-cutter process to speed things along could come about? And what some of the key factors might be to get that done?

Yes, it's a wonderful question but not one I can easily answer. Every account is different and the attraction of BaaS, if you will, the enterprise part of the platform is that it's custom that is truly bespoke. So it's hard to answer that. But anyhow, we're really glad to be where we are after only 3 years you're looking at 300% CAGR, not even 3 years, 2.5 years and it's already contributing half of our growth. And it's a platform that today in a very short time is serving successfully, literally, the largest technology companies in the world. So we feel pretty good about it, but a lot more runway to go for sure.

And our next questioner today will be Ramsey El-Assal with Barclays.

Wanted to ask about capital deployment, balance sheet deployment and buyback specifically. Can you remind us again how it works with your regulators? How much lead time do you need for them to give you the nod that you can go ahead and return cash? And I guess, have you initiated that discussion? And then also just bolted on there. Did you -- I might have missed this, how much unencumbered cash is now there on the balance sheet? And then I have a quick follow-up.

Sure, we've not initiated the conversation with the regulars for a share repurchase program. We have board authorization and that -- once we do initiate dialogue, I wouldn't hazard a guess on the pace of which the regulators would entertain the conversation, what the Q&A may be back and forth between us. They are great and responsive, but I can't predict how quickly they would respond to any request.

And then how much cash do we have on the balance sheet?

$169 million on the balance sheet.

Okay, great, and then follow-up. Can you talk about the sales organization and the sales process when it comes to BaaS? I mean, the products themselves seems very diverse, do you have a dedicated BaaS team? Are these inbound leads that you work? I mean, how does the sales approach go to, kind of, targeting this kind of very diverse mix of offerings that are all related to this unified platform?

Right. Well, so a lot of it is inbound. Some is outbound, but normally it's outbound with an inside job, I guess. After all these years, we know a lot of folks and a lot of people know me or Mark or somebody on the team. So a lot of it is, "Hey, Steve I got a call from such and so call them back." So that's not actually uncommon, and so a lot of leads will come in that way.

And then we have a great sales team that's dedicated to BaaS and to our bigger projects and they would go out and engage. And I want to be clear because these guys work so hard. It isn't that they're doing -- we're not doing anything wrong to make it not as fast as I'd like, it's just that anything in life you're learning. This is a brand-new concept. There's not -- it isn't like there are 10 banks out there doing this, so this is something that you have to say, "Well what is the client liking? What do they not react to? They said they wanted it, why did they need to wait another month before getting back an LOI?" And you try to figure that out. And improve it, there's how life works when you are running a company so I think they're doing a great job and I have every confidence that we'll figure out a faster path to getting those things closed. But certainly, not stopping us from hitting our goals and agendas, but -- so we do have a dedicated sales team. In fact, I think Brett's hiring a few more, and it's an area of key focus for the company because it's such a great opportunity to grow and use the same and reuse the same APIs and infrastructure that we're going to build anyhow and are building anyhow for our own stuff. So it's just wonderfully synergistic business model.

And our next questioner today will be Steven Kwok with KBW.

Just want to go back to the TAM that you talked about of about 15%, and increasing over 60% over the last -- past 3 years. Can you talk about the rate of progression that you see in over the past 3 years? Has that rate of increase accelerated? Is it the same -- of the same and then also looking forward, where do you expect that the TAM to go to, let's say, the next 3 years?

Yes, you bet. So it went from, in the analysis we did, from 30 to 36 to 50, so it's picked up, but we have a lot of big clients on the platform. If we get some other big clients with the products that serve other kinds of markets then the TAM can get bigger. I think the more notable thing isn't so much the TAM because at this point, when you have partners like Uber and Apple and Walmart, you're pretty much covering almost everybody. I think, there's not too many people that don't use those products in some part or another. We're probably missing the Android side I suppose. So we can still get bigger yet, but we have a big TAM. I think, the story there's our penetration of the TAM and the ability to say well look how many of these folks can we sell products to and how many people is Green Dot serving every year? And it's a big company when you look at all of our products and divisions together and all of them contributing revenue over the course of the year. And I really appreciate you asking the question because the -- look, when we launch the company to go public in 2010, we were a monoline company, had one product. It was a prepaid card. We had them in 2 flavors: Walmart flavor and Green Dot flavor. And Walmart was 70% or something like that of our revenue probably bigger part of our profit based on how the scale goes in those days. And it was one KPI, active cards because people bought them as convenience products along with the Chiclets and the Wrigley's gum. So it's just such a different industry today and such a different product today. And so I think what we're showing by releasing that kind of penetration number is how everything works together, new products that serve people, new clients that bring new customers to you, the ability for us to start thinking larger about how do we marry our tax business with our retail cards business and on and on. And we think, it's a great example of how BaaS is not just about making money on a particular number of accounts issued in a particular quarter, but it's changing the entire ecosystem of the company. And we're just getting warmed up and as we learn how to get better at it and learn how to tie things to better -- together better as our technology talks to each other, so as you know for any technology company you have different platforms as you buy companies and platforms don't generally socialize well together. So you have to force them together and have them socialize. And we're just early on in that. So I think we're trying to illustrate, number one, that we've a lot bigger opportunity than folks may think if you are just thinking about cards. Although, that certainly a great opportunity and has been growing nicely -- very nicely, in fact. But that we also have all these other new products, and other opportunities and other target audiences that we can raise to the gifts of our BaaS partners.

Got it, just a quick follow up around large renewals like over the next 2 years and what's the progress around those? I believe you have a large partner that's renewing mid of next year.

Large partner renewing? Doesn't ring a bell. I don't know, Mark?

I have no idea.

Okay, yes. So we do have -- as many of you know the Walmart MoneyCard contract renewing in -- or having the opportunity to renew in May of 2020, so about 1.5 years to go. And there are 2 ways to do that: One is that there's a 2-year stem on the contract. In other words, you just flick a switch and under the same economic terms of contract extends out through 2022, May of 2022. Or Walmart could choose to renegotiate the contract or something else in between. We'd be happy with any of those renewals. We love working with Walmart. They are a fabulous partner and one of my favorite partners and we do anything for them. They're great people and a great company. And that contract comes up. So we work hard every day. There's no point in time, especially after 12 years. There's no day that you're renewing a contract or no week that you're having a particular conversation. If you're doing your job properly as a partner, you're hopefully showing your value every day, every quarter, every month and we work hard to do that. We're not perfect and I'm sure there are things that we can do better and we will. But we have high hopes that we can renew sooner than later to take that potential overhang off of the stock to the extent that investors are worried about it. So either way, we have a good 1.5 year to ago and certainly would be our goal long before then to have an answer or good news before that, but we don't know and we never take renewals for granted and it could go any way. So we'll see how that process plays out.

And the next questioner today will Ashish Sabadra with Deutsche Bank.

Quick question on the interchange revenue over the last 7 quarters through third quarter, interchange revenues have grown faster than the overall company revenues. Fourth quarter was the first one when growth was good but slower than the overall company revenues and that despite deposit growing pretty fast. I was just wondering what were the puts and takes? And how should we think about that line item going forward?

Percentages, I'll leave for one of our accounting folks. I'm staring down Jess or Samir in the after call, maybe do that math.

I think it's really -- it's coming from -- in '17, you saw fee revenue going up as a consequence of our adding or modifying our [MMF] in 2016. But since then, in '18 and beyond, you've seen behavior driving our revenue. So interchange revenue was going to be a key driver of our growth as distinct from some of that fee revenue. And it's coming from, again, our direct deposit volume is increasing, creating great GDV. And off of that GDV, you're seeing great purchase volume.

Well, and to the extent, I think, your question was Ashish about interchange rate going on. Is that what you'd ask? And I apologize, that's hard to ask a little bit.

No, my question was -- actually Mark's response was helpful. My question was just the growth was slower than the overall company revenue growth. So my question was like why aren't we seeing better revenue growth with direct deposit growing so much faster.

The reason is because of as the percentage of consolidated revenue is that we have more revenue coming from places beside just cards. So if this were a few years ago, almost all the revenue were from Cards but we have revenue now that increasingly is big from our processing settlement division, which has no interchange component to it and other products like that. So I think it's more a reflection or like tax processing, for example, so these are all things that have nothing to do with cards or interchange. And so as the company grows and other divisions grow, interchange, just like cards themselves, become a smaller part of the overall mix and that maybe what you're seeing without knowing the actual part of the income statement. It's hard to reconcile the math, but it may likely be that and we're happy to help you with -- to the extent we can after the call.

Sure. That's helpful. And then maybe a quick question on the TurboTax Intuit, the payroll -- Sorry, the payroll card win. Was -- is this a conversion where the existing customers on the payroll card will be converted over to the Green dot platform as well? Or is it just for new cards, which are issued on that payroll card?

I don't -- I can't imagine there's any process or conversion. Just hearing that phrase gives me nightmares. So I don't think there's any processing or conversion. But how Intuit chooses to market the new product to existing cardholders, I don't know. That's completely their opportunity and their side to do and we'll be here to support them. But it's a big business and we're certainly very excited and honored to be part of it, but how Intuit is planning to roll out and the marketing of that, I can't speak to.

Okay, we have Reggie as our last analyst?

Reggie Smith with JPMorgan.

So I got dropped off earlier, so I'm not sure if this was covered but, obviously, great growth over the last 3 years. Looking at the guidance this year, just curious how should we think about kind of the longer-term growth of the business, both kind of topline and EPS? And then I've a follow-up.

Sure. So it's our long stated public goal. We've had it for years to do our best to grow 10% -- not 10%, double-digit top and bottom line. This year at the midpoint is 10% as our guidance. And that's always going to our goal forever unless something really changes radically because it should be our goal. We're a growth company, and as you get to the law of large numbers and now over $1 billion of revenue and everything else, it clearly becomes harder every year but that's you have to have new initiatives, like we talked about in our Six-Step plan this year to meet that challenge. This year, the guidance at 10% is over growing just an unbelievable year. Just think about -- I mean especially in Q1, we're growing fully organically in our guidance, 6% at the midpoint, over a quarter a year ago that saw the addition of Intuit, huge account; TaxHawk, a good account; the recent additions of Apple Pay Cash and the Uber rewards account, which is growing very well, so that was all building in the quarter. And then on top of that, you have 2 months of the UniRush acquisition that [we had] so you had another $20 million-plus there, all in one quarter that now we're over growing fully organically a year later. And then -- so that's the big part of it. So the guidance we're giving at 10% of the midpoint all organic, we think, it's pretty robust given the size of the company and the overgrow of all that excitement that we had a year ago. Doesn't mean we don't want to do more, doesn't mean we can't do more, but it's no cakewalk. We have work to do and that Six-Step Plan is not only for investors to hear but for our employees too. We have real work to do. But we feel very optimistic about it, and obviously, the business, as you can tell, Reggie, from just looking up the numbers and one of the other analyst earlier in the call pointed out that not only did BaaS grow, but our established business lines continue to deliver. And it's our goal for that to continue into 2019.

Got you. Okay. Perfect. I guess you talked about direct deposit growth being 10% pretty strong and it sounds like some of the kind of one and dones are either not using the card or they have kind of moved over to kind of direct deposit. So it appears that the card is being used the way you want it to be used. I guess, kind of looking at that money transfer line, it's still, you're showing pretty good growth there. How do you reconcile? How should we reconcile the momentum you're seeing there with the growth in direct deposit? Is -- are direct deposits included in that? Or like -- what's driving the strength there, given how well you guys are at converting people to direct deposit?

Right. Well, again, there's strength in numbers. The Green Dot Network, which is a very old part of the company, we debut that in 2004, if my memory is correct. Serviced a lot of companies. So we do -- I hate to give a wrong number but it's got to be at this over 300 or 400 different banks and programs. [Helena] would know better, but it's something like that. And all of those we're doing reloading. So you're right that if you are on direct deposit at Green Dot, you're not a heavy cash freeloader. So a person who's not on direct deposit, but who uses a card over and over will do a lot more cash reloads and we make good revenue on that and it's a good service.

But all these other programs are also doing cash reloads and have nothing to do whatsoever with Green Dot. And in fact, we power a lot our competitors, which we've done for years back when Amex was in the old days a big competitor. They were still using our network to load cash to their cards. So we have a coopetition, you have a lot of upstarts that on one hand are doing their best to beat our brains out on the issuing side, but we service them on the reload side. And so anytime, we can stick our foot into the ecosystem as opposed to a product, we like that. And our network is a good example of that. So the growth that you're seeing in cash transfers is about our own customers, yes. It's about everyone else's customers who are part of that, yes. And it's also because our Money Processing division comes up with new products and cool ideas like e-cash and PayPal would be a part of that and credit card bill pay. And -- so you're always trying to come up with new things to drive that business, but it's a good ecosystem and still healthy after all these years.

Well, we are done. I know we went long, but we appreciate all the great questions. Have a wonderful night on the East Coast and a day here in the Los Angeles in the West Coast. And we'll see you at a conference near you. Bye-bye.

The conference has now concluded. Thank you all for attending today's presentation and you may now disconnect your lines.