Green Dot Reports Mixed Results, but CEO Streit Says Prospects Are Improving

With its contested annual shareholder meeting coming up in less than three weeks, embattled Green Dot Corp. chief executive Steve Streit on Wednesday said the prepaid card card and mobile-banking provider and tax-payment processor’s prospects are improving as key measures of customer activity strengthen.

Pasadena, Calif.-based Green Dot reported first-quarter operating revenues of $228 million, up just 0.4% from $227.2 million a year earlier, while net income fell 19.5% from $39.6 million to $31.9 million due mainly to higher operating costs and one-time expenses. The number of quarter-end active cards fell by 630,000, or 11.7%, to 4.75 million, and purchase volume grew only 0.5% to $4.71 billion.

But in a late-afternoon conference call with analysts, Streit emphasized the positive and said the company is making progress on a six-point plan to improve its financial and operational performance. “We are clearly off to a positive start of the year,” Streit said.

Streit attributed the big drop in active cards to the February 2015 discontinuance of Green Dot’s MoneyPak reload product, which in addition to its popularity with legitimate customers also was highly popular with fraudsters. “That was a MoneyPak-related decline,” he said in response to an analyst’s question about the slippage.

Green Dot recently introduced a new version of MoneyPak as well as a suite of new card products that Streit and chief financial officer Mark Shifke said will be more profitable than the ones they’re replacing. But they’ve been in the market for only a few weeks at Wal-Mart Stores Inc. and other merchants in Green Dot’s 100,000-location retail network, so their impact on the the bottom line has yet to be felt.

But Streit said Green Dot is attracting more profitable customers, ones who use their cards regularly for spending and direct deposits, thus generating more interchange and fee revenues than customers who use their cards just once, or infrequently.  Streit noted that despite the decline in active cards, revenue per active card grew 11% in the first quarter and purchase volumes per active card jumped 17%.

“We’ve been accelerating with our quality customers … we’re getting a higher-quality bunch,” Streit said.

Green Dot took the occasion of the earnings report to announce a number of new initiatives. They include a new deal with the big pharmacy chain CVS that will give Green Dot cards more prominent placement both on prepaid card racks and at checkout counters. Green Dot also signed a multi-year extension of its contract with the 7-Eleven convenience-store chain to sell cards and conduct reload transactions. The company also added 732 new stores to its network, including the retail chains Stater Brothers, Gerlands, and Kwik Trip.

In addition, Member Benefits Corp., a financial-services provider for 2 million labor-union members in the hotel, health-care and property-services sectors, has named Green Dot as its exclusive prepaid card provider.

On May 23, Green Dot will hold its annual shareholder meeting, at which a major investor, Harvest Capital Strategies, is running a slate of three director nominees to challenge Green Dot’s slate. Harvest is seeking Streit’s ouster and board changes, saying the company’s financial performance is subpar, and that under existing leadership many executives have departed.