Green Dot(GDOT) - 2023 Q3 - Quarterly Report

Financial Performance - Total operating revenues for Q3 2023 were $353.0 million, a 2.7% increase from $343.7 million in Q3 2022[131] - Net loss for Q3 2023 was $6.3 million, compared to a net income of $4.7 million in Q3 2022, representing a decline of 148.1%[131] - Total operating revenues for Q3 2023 were $353.03 million, a slight increase from $343.75 million in Q3 2022[168] - Total operating revenues for the nine months ended September 30, 2023, were $1,135.3 million, an increase of $28.2 million or 2.5% from the prior year[179] Revenue Segments - B2B Services segment revenues increased by 26% in Q3 2023, driven by a 53% increase in gross dollar volume[135] - Consumer Services segment revenues decreased by 13% in Q3 2023, with active accounts declining by 14% year-over-year[134] - Money Movement Services segment revenues decreased by 15% in Q3 2023, primarily due to a 9% decrease in cash transfers processed[136] - Segment revenues for Consumer Services decreased to $118.2 million for Q3 2023, down $17.6 million or 12.9% year-over-year[188] - B2B Services segment revenues increased by $40.98 million, or 25.9%, for the three months ended September 30, 2023, compared to the prior year[194] - Money Movement Services segment revenues decreased by $5.58 million, or 14.8%, for the three months ended September 30, 2023[200] Active Accounts and Transactions - The number of consolidated active accounts decreased by 15% for Q3 2023 compared to the prior year[133] - Number of active accounts decreased by 0.66 million or 15.2% year-over-year, totaling 3.67 million as of September 30, 2023[148] - Direct deposit active accounts in Consumer Services decreased by 21% to 0.52 million for Q3 2023[190] - The number of cash transfers processed in Money Movement Services decreased by 9.3% to 8.31 million for Q3 2023[200] Expenses - Total operating expenses for Q3 2023 increased by $26.9 million, or 8%, compared to Q3 2022, driven by higher processing expenses[139] - Total operating expenses for Q3 2023 were $359.9 million, an increase of $26.9 million or 8% from the prior year, with processing expenses rising by $37.1 million or 30%[172][174] - Sales and marketing expenses decreased to $56.5 million for Q3 2023, down $10.5 million or 16% year-over-year, primarily due to lower sales commissions and supply chain expenses[172] - Compensation and benefits expenses totaled $59.2 million for Q3 2023, a decrease of $2.7 million or 4% from the prior year, mainly due to reduced stock-based compensation[173] Interest Income - Net interest income decreased by 26% in Q3 2023, attributed to increased interest shared with BaaS partners[137] - Net interest income for Q3 2023 was $8.40 million, down from $11.45 million in Q3 2022[168] - Net interest income decreased to $8.4 million for Q3 2023, down $3.0 million or 26% year-over-year, due to increased interest shared with BaaS partners and partially offset by higher yields on cash balances[170] - Net interest income decreased by 26% for the three months ended September 30, 2023, and by 6% for the nine months ended September 30, 2023, compared to the prior year[206] Cash Flow and Capital - Total cash provided by operating activities for the nine months ended September 30, 2023, was $132.4 million, a decrease from $252.1 million in the same period of 2022[211] - The company reported a net cash used in financing activities of $255.3 million for the nine months ended September 30, 2023, primarily due to a net decrease in customer deposits of $238.4 million[213] - As of September 30, 2023, the company had unrestricted cash and cash equivalents totaling $711.4 million, along with $2.2 billion of available-for-sale investment securities[209] Regulatory and Capitalization - The company was categorized as "well capitalized" under applicable regulatory standards as of September 30, 2023[224] - As of September 30, 2023, Green Dot Corporation's Tier 1 leverage ratio was 19.1%, significantly above the regulatory minimum of 4.0%[225] - Common equity Tier 1 capital for Green Dot Corporation was $738,601 thousand, representing a ratio of 41.0%, well above the regulatory minimum of 4.5%[225] - Total risk-based capital for Green Dot Corporation was $758,043 thousand, with a ratio of 42.1%, exceeding the regulatory minimum of 8.0%[225] - Green Dot Bank's Tier 1 leverage ratio stood at 10.4%, above the regulatory minimum of 4.0%[225] Future Outlook - The company expects continued decline in consolidated operating profit year-over-year in fiscal year 2023 due to macro-economic factors and non-renewals in segments[145] - The company plans to invest in a modern banking platform and anti-money laundering program to enhance long-term financial results[143] - The company anticipates continuing to invest in new products and programs, including enhancements to its core banking and card management systems[217] - The company expects capital expenditures in 2023 to be lower than in 2022 but higher than the average level of annual investments in recent years[217] Market Conditions - The Federal Open Market Committee increased the federal funds target rate to a range of 5.25%-5.50% in July 2023, impacting net interest income[227] - Each quarter point change in interest rates would result in a $0.3 million change in annual interest expense if the credit agreement is fully drawn[228] - The company believes inflation risks are largely offset by higher interest rate yields on cash and investment portfolios[230] Risk Management - Green Dot Corporation actively monitors interest rate exposure and may use derivative financial instruments to manage risks[229] - Credit risk associated with settlement assets is mitigated due to an average outstanding period of two days[234]