Green Dot(US:GDOT)2021-08-05 16:00PART I – FINANCIAL INFORMATION Item 1. Financial Statements This section presents Green Dot Corporation's unaudited consolidated financial statements for Q2 2021, covering balance sheets, income statements, and cash flows, with detailed notes Consolidated Balance Sheets The consolidated balance sheet shows total assets increased to $4.29 billion as of June 30, 2021, driven by cash and investment securities, with total liabilities also growing due to higher deposits Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Total Assets | $4,288,564 | $4,115,267 | | Unrestricted cash and cash equivalents | $1,891,100 | $1,491,842 | | Investment securities available-for-sale | $1,090,513 | $970,969 | | Total Liabilities | $3,220,864 | $3,105,435 | | Deposits | $2,864,782 | $2,735,116 | | Total Stockholders' Equity | $1,067,700 | $1,009,832 | Consolidated Statements of Operations Green Dot reported a significant increase in Q2 2021 profitability, with total operating revenues growing 16.8% to $369.4 million and net income surging to $24.9 million Q2 2021 vs Q2 2020 Performance (in thousands, except per share data) | Metric | Q2 2021 (Three Months) | Q2 2020 (Three Months) | Change (%) | | :--- | :--- | :--- | :--- | | Total operating revenues | $369,373 | $316,240 | 16.8% | | Operating income | $31,803 | $5,390 | 490.0% | | Net income | $24,933 | $3,294 | 656.9% | | Diluted EPS | $0.45 | $0.06 | 650.0% | YTD 2021 vs YTD 2020 Performance (in thousands, except per share data) | Metric | YTD 2021 (Six Months) | YTD 2020 (Six Months) | Change (%) | | :--- | :--- | :--- | :--- | | Total operating revenues | $762,859 | $678,409 | 12.4% | | Operating income | $65,788 | $64,239 | 2.4% | | Net income | $50,668 | $50,139 | 1.1% | | Diluted EPS | $0.91 | $0.93 | -2.2% | Consolidated Statements of Cash Flows Net cash provided by operating activities decreased to $119.5 million for the six months ended June 30, 2021, while investing activities used $265.7 million and financing activities provided $544.8 million Cash Flow Summary (Six Months Ended June 30, in thousands) | Activity | 2021 | 2020 | | :--- | :--- | :--- | | Net cash provided by operating activities | $119,456 | $161,516 | | Net cash used in investing activities | ($265,700) | ($24,732) | | Net cash provided by financing activities | $544,849 | $734,473 | | Net increase in cash | $398,605 | $871,257 | Note 19—Segment Information Effective Q1 2021, Green Dot realigned its reporting into three new segments: Consumer Services, B2B Services, and Money Movement Services, with historical data restated to conform to this structure - The company realigned its operations into three new reportable segments: Consumer Services, B2B Services, and Money Movement Services, starting in Q1 2021121 Segment Revenue (Three Months Ended June 30, in thousands) | Segment | 2021 | 2020 | | :--- | :--- | :--- | | Consumer Services | $182,093 | $162,639 | | B2B Services | $112,589 | $76,619 | | Money Movement Services | $66,019 | $65,667 | Segment Profit (Three Months Ended June 30, in thousands) | Segment | 2021 | 2020 | | :--- | :--- | :--- | | Consumer Services | $55,790 | $58,412 | | B2B Services | $18,174 | $16,327 | | Money Movement Services | $38,192 | $27,842 | Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses consolidated financial results, key business trends, and segment performance, highlighting 17% Q2 2021 revenue growth driven by Consumer and B2B services, and investments in GO2bank Consolidated Financial Results (Three Months Ended June 30) | Metric | 2021 | 2020 | Change (%) | | :--- | :--- | :--- | :--- | | Total operating revenues | $369,373,000 | $316,240,000 | 16.8% | | Total operating expenses | $337,570,000 | $310,850,000 | 8.6% | | Net income | $24,933,000 | $3,294,000 | 656.9% | - Revenue growth was driven by the Consumer and B2B Services segments, benefiting from a shift to digital payments during the COVID-19 pandemic and economic stimulus funds135136 - The company plans to continue investing in marketing for its new GO2bank product and in building a modern, scalable core banking platform to accelerate future revenue growth and expand margins140141 Consolidated Key Metrics Q2 2021 key metrics showed mixed results, with Gross Dollar Volume and Purchase Volume increasing, while Active Accounts and Cash Transfers declined, partly due to stimulus timing Key Metrics (Three Months Ended June 30) | Metric | 2021 | 2020 | Change (%) | | :--- | :--- | :--- | :--- | | Gross Dollar Volume (in millions) | $17,399 | $15,107 | 15.2% | | Number of Active Accounts (in millions) | 6.03 | 6.25 | (3.5)% | | Purchase Volume (in millions) | $8,870 | $8,477 | 4.6% | | Cash Transfers (in millions) | 10.19 | 12.48 | (18.3)% | Segment Results Q2 2021 saw B2B Services revenue grow 47% and Consumer Services revenue increase 12%, while Money Movement Services revenue remained flat, with varied segment profit trends - Consumer Services revenue grew 12% in Q2, but segment profit fell 4.5% due to increased marketing for GO2bank and higher customer support costs187191 - B2B Services revenue grew 46.9% in Q2, driven by a 43% increase in Gross Dollar Volume from BaaS programs, with segment profit growing 11.3% despite margin compression192196 - Money Movement Services revenue was nearly flat, but segment profit grew 37.2% in Q2, boosted by tax season timing offsetting a decline in cash transfer revenue197198 Liquidity and Capital Resources As of June 30, 2021, Green Dot's primary liquidity source was $1.9 billion in unrestricted cash, with both the company and Green Dot Bank categorized as 'well capitalized' under regulatory standards - The company's primary source of liquidity was $1.9 billion in unrestricted cash and cash equivalents as of June 30, 2021203 - Green Dot Corporation and Green Dot Bank were both categorized as 'well capitalized' under regulatory frameworks as of June 30, 2021218219 - The company has a commitment to purchase Tax Refund Solutions from Republic Bank & Trust Company for approximately $165 million in cash, expected to close in Q3 2021107212 Item 3. Quantitative and Qualitative Disclosures about Market Risk The company discloses its market risk exposures, primarily interest rate and credit/liquidity risks, with limited exposure to foreign currency and equity price risks, managed through investment policies - The company has limited exposure to foreign currency exchange rates, interest rates, and equity prices, and does not use derivatives for speculative purposes220 - Interest rate risk exists from the low-rate environment impacting investment income and from potential borrowings under its variable-rate credit facility221222 - Credit and liquidity risk is managed by maintaining an investment policy that restricts investments to highly liquid, low-credit-risk assets and by monitoring settlement risk with retail partners224225226 Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective as of June 30, 2021, with no material changes to internal control over financial reporting identified during the quarter - The CEO and Interim CFO concluded that disclosure controls and procedures were effective as of the end of the period227 - There were no material changes in internal control over financial reporting during the quarter ended June 30, 2021228 PART II – OTHER INFORMATION Item 1. Legal Proceedings This section refers to Note 17 for details on ongoing legal proceedings, including class action lawsuits alleging misleading statements about business strategy and financial performance - The company is a defendant in a class action lawsuit (Koffsmon v. Green Dot Corp., et al.) alleging misleading statements regarding its business strategy and financial performance between May 2018 and November 2019112 - A related shareholder derivative suit (Hellman v. Streit, et al) was also filed, asserting breach of fiduciary duty and other claims based on the same alleged wrongdoing112 Item 1A. Risk Factors This section outlines significant risks to the company's business, including the ongoing impact of COVID-19, reliance on major partners, intense competition, product innovation needs, and extensive regulatory scrutiny COVID-19 Risks The COVID-19 pandemic continues to affect operations, partner businesses, and costs, with ongoing uncertainty regarding future impacts on consumer spending and operational expenses despite past stimulus benefits - The COVID-19 pandemic has caused operational disruptions, including a shift to a remote workforce and higher transaction losses, though government stimulus has helped mitigate some negative effects233234 Risks Related to Our Business The company faces significant business risks, including dependence on Walmart for 23% of Q2 2021 revenue, intense competition, the need for successful product innovation, and potential declines in consumer spending - A significant portion of operating revenue is derived from Walmart, which accounted for 23% of total operating revenues for the three months ended June 30, 2021238 - The company faces intense competition from larger, more established financial institutions as well as new 'challenger' banks offering low-cost alternatives246248 - Future success depends on the successful launch and adoption of new products like GO2bank, as significant investments in new products may not be successful243 Regulatory and Legal Risks As a bank holding company, Green Dot is subject to extensive and changing regulation, including requirements to support Green Dot Bank, risks related to brokered deposits, and compliance with laws like BSA, with potential impacts from payment network rule changes - As a bank holding company, Green Dot is subject to comprehensive supervision by the Federal Reserve and must comply with minimum capital and leverage requirements272 - If Green Dot Bank ceases to be 'well-capitalized,' it could be prohibited from accepting brokered deposits, which constitute a vast majority of its current deposits, materially affecting operations273 - Changes in payment network rules or a decline in interchange rates, which represented 27% of total operating revenues in Q2 2021, could adversely affect financial results279280 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities during the period - None300 Item 5. Other Information The company reported no other information for this item - None301 Item 6. Exhibits This section lists the exhibits filed with the 10-Q report, including CEO/CFO certifications and Inline XBRL data files for the financial statements - The exhibits include certifications from the CEO and Interim CFO as required by Sections 302 and 906 of the Sarbanes-Oxley Act304 - The financial statements are provided in Inline XBRL format as part of the filing304