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Prepaid card issuer and services provider Green Dot Corp. lost considerable reload volume and revenues in the first quarter because of the discontinuance of its popular MoneyPak product, but the company late Thursday said its core businesses demonstrated good organic growth and recent acquisitions gave a big boost to the top line.
Pasadena, Calif.-based Green Dot posted just under 10.1 million cash transfers, or reloads, in the first quarter, down 20% from 12.6 million a year earlier. That slippage was largely the result of the discontinuance early this year of MoneyPak, a long-established Green Dot product sold in stores that enabled the reloading of prepaid cards. Consumers also could use MoneyPak to replenish PayPal Inc. accounts and for money transfers.
But the product also was popular with fraudsters, so much so that Green Dot announced last summer that it would be discontinued. “We technologically killed it on February 1st,” Green Dot chairman and chief executive Steve Streit told analysts Thursday.
The shut-down cost Green Dot about $12 million in the quarter, and the company now expects the full-year impact to be about $25 million more than the $40 million it forecasted earlier. The forecasting difficulties arose from the need to estimate which of numerous alternatives former MoneyPak users would take, including doing reloads at the point of sale on Green Dot cards, and how those choices would affect fee revenues, interchange and other factors. “We thought more reloads would convert to swipe than did,” Streit said.
Green Dot lost legitimate business by shutting down MoneyPak, according to Streit, though it also will see lower customer-service and fraud expenses. “It’s painful to lose good business,” Streit said, adding later that “we believe the decision to discontinue MoneyPak was the right decision.”
Despite the loss of MoneyPak, total operating revenues increased 43% to $227.2 million from $159.3 million a year earlier. Net income jumped 167% to $40.8 million from $15.3 million in 2014’s first quarter.
The quarter ending March 31 was the first to reflect revenues from three recent Green Dot acquisitions. They included Santa Barbara Tax Products Group (TPG), a tax-refund processor serving nearly 25,000 independent tax preparers and accountants that Green Dot bought last October for $320 million in cash and stock. TPG processed 8.52 million tax-refund transactions in the first quarter. Also now under Green Dot’s wing are two smaller prepaid card program managers, AccountNow Inc. and Achieve Financial Services LLC.
The acquisitions furthered Green Dot’s strategy of diversification and reduced reliance on Wal-Mart Stores Inc. as a distributor. Wal-Mart accounted for 64% of Green Dot’s revenues in 2013 and 54% in 2014. In the first quarter, that percentage had declined to 40%, with most of that, 29%, coming from the Green Dot-issued Walmart MoneyCard sold at Wal-Mart stores.
While Green Dot is diversifying, it still faces uncertainties with Wal-Mart. In December, the retailer extended its five-year contract with Green Dot, set to expire this month, only until the end of 2015. Asked by an analyst if he had any new information from Wal-Mart, Streit said, “None that I can share with you.”
Green Dot said it had 5.38 million active cards at quarter’s end, up 13.5% from 4.74 million a year earlier. Purchase volume increased 21% to $4.68 billion from $3.89 billion. Gross dollar volume grew 19% to $6.35 billion from $5.34 billion a year earlier.
