Who didn’t feel the brunt of the brutal winter? Well Green Dot did, but not enough to jar Q1 results. An unexpected one-time revenue event, plus a bump on active cards and purchase volume gave investors something to smile about.
By Jeffrey Green (@epaymentsguy)
Greater card activation combined with improved efficiencies and higher-margin revenue from better customer usage behavior helped prepaid card provider Green Dot Corp. to generate a 3 percent increase in first quarter revenue.
This growth came despite the impact of bad weather, plus the Target breach, because much of the cost associated with those events was offset by a one-time addition of $5.6 million in revenue. That revenue came from the release of fee waivers, which Green Dot imposes when it shuts down cards with questionable activity until cardholders contact the company, Chairman and CEO Steve Streit told analysts during a conference call to discuss the quarter’s earnings.
During the quarter, Green Dot experienced a 2 percent loss in revenue caused by 22 days where extreme weather slowed card sales, reloads and spending, including in such key markets as New York, Massachusetts and Pennsylvania, Streit said. Moreover, post-breach, the company lost another 1 percent of revenue by suspending and taking some card products lacking the same protections as general purpose reloadable cards off shelves for 45 days while it evaluated their risk, he added, noting the company also incurred mass-reissuance expenses for cards believed to have been affected in the Target breach.
In terms of how Green Dot might be affected by American Express’ recent deal with Walmart to distribute Serve prepaid cards, Streit noted that Serve for quite some time has sat next to Green Dot cards at Walgreen, CVS and Family Dollar stores, and it has not affected sales. Streit doubted the effect of Serve cards being sold at Walmart would be any different. Walmart, which also distributes Amex’s Bluebird prepaid cards, contributes about 61 percent of Green Dot’s revenue.
“It’s only up a couple of weeks, so no dancing girls or fireworks yet,” Streit said in reference to Amex’s expected heavy marketing push of Serve at Walmart stores.
Operating revenues for the quarter ended March 31 totaled $159.3 million, up from $154.1 million. The company’s net income dropped 3.4 percent, to $15.3 million from $15.9 million.
Cardholders initiated 11.67 million cash transfers during the quarter, up 3.7 percent from 11.25 million a year earlier. Active cards at the end of the quarter totaled 4.72 million, up 5.1 percent from 4.49 million.
Gross dollar volume for the quarter was $5.29 billion, up 4.3 percent from $5.07 billion, while purchase volume on Green Dot’s cards totaled $3.87 billion, up 8.1 percent from $3.58 billion.
Card revenues and other fees for the quarter totaled $68.2 million, up 5.4 percent from $64.7 million. Cash-transfer revenues were up 4.5 percent, to $46.3 million from $44.3 million. Interchange revenues totaled $47.2 million, up 0.9 percent from $46.8 million.
On Feb. 11, Green Dot Bank took over the issuing and processing of its cards sold at Walmart that previously was handled by GE Capital Bank, which will help reduce costs moving forward, Streit said.
On March 31, Green Dot announced a new process called “Reload @ the Register,” which is designed to make reloading cash onto a prepaid card quicker, easier and more intuitive than using a paper reload “chit.”
Due to the real-time nature of the transactions, Green Dot can immediately credit reloaded funds to the customer’s card account without any further actions by the customer or the retailer.