Q3 2019 Earnings Call
Greetings welcome to Green Dot Corporation third quarter 2019 earnings call.
This time all participants are in listen only mode. They question and answer session will follow the formal presentation.
Hey, what's your acquire operator systems during the conference. Please press Star Zero and your telephone keypad.
Please note. This conference is being recorded I will now turn the conference over to direct or you may begin.
Thank you and good afternoon, everyone on today's call will discuss screen, that's their quarter 2019 performance and doubts about the army during the year. Following those remarks open the call for questions for those of you haven't yet access or earnings release that accompanies this called webcast can be found that IR deck Green dot.
As a reminder comments include forward looking statements among other things our expectations regarding future results in performance.
Please refer to the cautionary language in our needs release and agree that's highly into the Securities and Exchange Commission include your most recent Form 10-K in 10- Q4 additional information concerning factors that could cause actual results to differ materially from the forward looking statements. During the call, we'll make reference to our financial measures do not conform to generally accepted.
Principles, but does it give clarity unless otherwise noted all numbers, we talk about today will be on the non-GAAP basis information may be calculated differently than similar non-GAAP data presented by other companies quantitative reconciliations for non-GAAP financial information to the directly comparable GAAP financial information. It appears in today's press release the.
This call is propagate the green Dot calibration and is subject to copyright protection now I'd like to turn the call over to Steve.
Thank you there I'd welcome everyone to the Green Dot Corporation, Q3, 2019 earnings call well be very full agenda today, starting with a review of our Q3 financial results and as part of today's presentation. Our team must prepare to supplemental investor deck, the Mark and I will reference throughout the call may want to take a moment now to access that deck, which is available on our website agreed.
Dot dot com forward slash <unk> or <unk>.
Focus on three key topics today.
First an update on our card program sold through our retail it online channels, which I'll refer to as our consumer business, including the details of our new seven year contract renewal with Walmart for the money card program and will have a review of the performance of our newest outpaced the bank account product called the limited Cashback Bank account, which launched on July Thirtyth.
Next to love, an update of our baths or bake it as a service business line, where we continue to see exceptional momentum with significant year over year growth, new large enterprise deals or the burn into it and an exciting new fintech joint venture with Walmart and then given that we now have certainty around the economics of the Walmart renewal and more informed assumptions around the other parts of our business Mark will do.
Got your preliminary thoughts on 2020 guidance that you should consider when thinking about your models for next year. So let's start with a review of our Q3 results Green Dot generated Q3 consolidated non-GAAP total operating revenues of $229 million, which is just a 1% year over year increase as a result to the anticipated decline and the number.
Consolidated active accounts there year over year decline was around 250000 accounts and net basis comprised of around 620000 fewer active accounts for more consumer business, which most for onetime use accounts offset by an increase of 370000 accounts year over year from our other card programs, principally driven by the builder.
The momentum of our banking as a service platform called bass, our processing a settlement segment continued its stable growth trajectory posting gains across all of its products and services for several years now we've talked quite a bit about green dots unique products implied for business model and on our call today, Mark and I want a high like this model more granular lead that we.
I have in the past, we typically talk about green dots performance across two segments account services and processing and settlement services those segments represent our product types like card programs that money movement surfaces.
Well, we then further consider our go to market strategies for those products and services, either bringing products to market through our own marketing efforts such as our branded card program sold in retail and through our digital channels effectively our product model, which will call our consumer business on this call or we partner with enterprises that user collection of unique platform assets to this.
<unk> developed their own be spoke products and services and then distribute them through their own channels of trade. This is what we've historically referred to as her platform model, which will now referred to on this call that our platform services business.
The platform services business consists of several leading product lines, including Green Dot TPG tax processing, which is the number one tax processor in America rapid pace corporate Paycard, one of the leading pay card a wage disbursement companies in America Green Dot network cash processing far away. The number one cash processing network in America, serving hundreds of <unk>.
Runners.
Then we have green dots, leading bake it as a service platform of course bass, and then Green Dot bank the unique and powerful integrated bank that is able to issue or products and provide various capital a deposit taking surfaces to all of our consolidated businesses and its many partners. While we've not historically highlighted our platform services business. We believe it's important to now do so it.
Order to help our investors understand the breadth growth and of course profitability of our platform services business separate and apart from our large and profitable even if recently challenged consumer business now, let's update you want or consumer business. Please refer to the supplemental investor deck in the section entitled on limited by the numbers the outpaced.
Branchless bank in market, which green Dot now compete is vibrant and over the past year or so has become very crowded with numerous competitor spending lots of money to market free baking apps. Our response has been to develop new products, starting with the unlimited Cashback Bank account that focuses on value not just price are strongly held belief is that.
Our target customers will happily pay for real value, while still early days with only 13 weeks since the launch our value strategy is showing solid results. So far first let's start at the top of the funnel.
In total we've opened over 1.1 million you wouldn't limited accounts and just the first 13 weeks post launch which over half familiar to those new customers have already made an initial deposit as at the end of October and became active depositing customers. This it makes a limited the fastest selling consumer accounted or company's history since the original nationwide.
Onto the Walmart Moneycard back in 2007, I also want to point out that we've achieved these results, while being disciplined and our marketing investment gating to spend prudently to ensure that our average customer acquisition cost overtime allows us to be profitable are the expected average lifetime revenue and margin of a newly opened to count in other words our goal was.
The spend as much as possible to acquire new accounts as quickly as possible rather the goal is to invest in a sustainable matter in order to generate steady and profitable growth.
For the sake of clarity I want to point out that unlimited replaced our green Dot classic prepaid card and the retail channel and a replaced our green Dot, 5% Cashback card on Green Dot Dot com. So these newer limited accounts are not all incremental since we would have still open to a certain number of accounts from the sale of those predecessor products, but as we will highlight shortly.
Limited has already having a very positive impact on our overall consumer business turning to the next page. Let me help put these top of the funnel statistics into perspective for you.
Green dots consumer business includes six consumer brands that we sell through retail stores and online. These primary brands, our green Dot Walmart Gobank account no rush card and insight. We also have a few other specialty brands at a relatively small and either retired or only offered through limited channels. The three primary brands Green.
Got Wal Mart and Gobank are sold it both retail stores and online.
Our total consolidated 90 day active account number includes accounts with the deposit purchase right Tim transaction in a given 90 day period that means onetime use customers in our retail channel meet that definition and are counted as an active accounted the period. In addition to customers who become regular monthly depositors'. So the 90 day consolidated active account.
Number is very sensitive to the number of new account sold at retail stores, even though the majority of those accounts acquired to the retail channel our purchase for onetime immediate use it is like paying a bill online are used case, where we make perhaps just $10 or so and lifetime revenue as compared to a customer acquired online or in the retail channel that passes or.
Asian process, and then makes recurring monthly deposits. Those accounts are called monthly depositing actives and depending on the portfolio a monthly depositing active could be worth as much as $200 are more over its lifetime as such the vast majority around 90% in fact of green dots consumer account revenue comes from customers who.
Our regular monthly depositors and use our accounts as their day to day Bank account.
So the number of monthly depositing active it's an interesting view of the data because it serves both as a leading indicator of portfolio health and a bit directional momentum in other words are you, losing depositing act as month over month or are you gaining.
The 90 day active number was still relevant is more of a lagging indicator. Please turn to the next page of the deck on.
On this chart you can see that the number of 90 day activity across all six portfolio is in our consumer business declined year over year by around 586000 accounts in aggregate by July Thirtyth. The date, we launched a limited.
Then by the end of October the rate of decline had slowed materially losing just 50000 more accounts. During the 13 weeks that followed in other words the launch of been limited by itself was able to dramatically slowed the acceleration of 90 day active losses amongst all six branded consumer portfolios and just a 13 weeks after lunch as you'll recall.
Our high level commentary on the Q2 call was that we expected the declined a 90 day consolidated active accounts to widen in Q3 moderate in Q4, and then bottom and begin growing off its low in Q1 2020. It may be that we don't bottom now until perhaps Q1 of next year, and then start climbing back to now or the year over year gap so perhaps.
At quarter to later than we first expected primarily because we have not yet launch the new moneycard and the new Gen SIOP, which we expect to help Additionally drive active customer accounts once they launch in the first half of next year, but the trend. The 90 day activity like consumer business is very encouraging.
The picture is even better when you look at monthly depositing actives, where the consumer business and this leading indicator across all six portfolios. The number of monthly depositing active declined by around 200000 accounts for the started the year through July Thirtyth. The date, we launched unlimited then from August 1st to the end of October the rate of decline slow dramatically in moderated.
Losing just around 30000 more accounts in other words unlimited by itself was able to dramatically slowed the losses, a monthly depositing active amongst all six branded consumer portfolios ingest. The 13 weeks. After launch now let's turn to the next page to review the Green Dot brand all by itself well the impact of the unlimited product that arent.
Our consumer business inclusive of all six brands is certainly impressive seeing a limited impact on the Green Dot brand is truly inspiring.
This next chart you can see that the number of 90 day active accounts for just the Green Dot brand declined year over year by around 160000 accounts by July Thirtyth. The date, we launched a limited.
Then by the end of October we slowed the pace of year over year losses, you around 47000 accounts in other words the launch of a limited has already now or the year over year losses for the Green Dot brand in 90 day active the picture is even better when you look at the data for monthly Depositing Act is for just the Green Dot brand from the start of the year through July Thirtyth. The date, we love.
Still limited the Green Dot brand lost 35000, depositing Actives then from August 1st at the end of October the number of monthly depositing actives bottomed and climb back past the losses to actually grow by 20000 accounts over and above where we started the year. Another words unlimited was able to stop the losses of monthly depositing actives on the Green Dot.
Brand and get back to growth both relative to the started the year and on a year over year basis. Finally, let's look at the direct deposit accounts for the Green Dot brand from the start of 2019 through July Thirtyth. When we launched a limited the number of direct deposit accounts were essentially flat up just 3000 accounts during that entire seven month.
Area.
But then starting with the launch of a limited through the end of October we gained around 40000, new direct deposit accounts in other words in just a 13 weeks since launch but limited we've gone from essentially a flat number of net direct deposit accounts to growing by 40000 accounts ingest those three months. This puts a limited other trajectory to become the highest.
I have traded consumer account direct deposit portfolio and our company's entire history, it's difficult to compare unlimited performance with the account numbers released by some of our privately held competitors our belief which has been echoed by at least one third party research firm is that when the privately held Neal banks release account data to the press there often quoting the number of accounts that were Oh.
Opened on their platform, regardless of whether there was accounts have ever received the deposit. We also believe some privately held competitors double count new customers because a single new account may also come with an integrated savings account that may or may not be used by the customer in green dots case, well, we speak about a certain number of active accounts were referring to a net number of active account.
[noise] comprised of new deposit is in the period plus existing customers, who continue to make transactions in the period minus customers that are traded in the period lastly, well most of our new accounts come with the free FDIC insured savings account along with the transactional debit card account, we only count that customer wants.
The next page of the deck, we have shared some account level K.P. eyes, you may find helpful. All statistics, our comparisons between the new unlimited product and the Green Dot products. It replaced first note. The average gross dollar volume or total deposits per unlimited account is up by 25% direct deposit enrollment is up by 30% and read.
Pension for count is up so far by 30% as well the higher engagement and usage has exceeded our initial expectations. While also validating our strategy to prioritize our marketing budget to attract quality over quantity on a unit economic basis, usually the first 13 weeks as a cohort unlimited is so far turning out to be great value to both the customer.
And the Green Dot with net lifetime revenue and margin dollars per account expected to be within 10% or so of the products. It replaced although we believe there are some tweaks, we can make over the coming quarters that may close that 10% Delta and bring revenue contribution margins more in line with the products unlimited replaced.
Well, we're pleased with these early results the ultimate success of unlimited would be judged based on the actual purchase volume behavior and actual retention rates relative to our model as the portfolio continues to grow and season.
Next let's review Green Dot digital engagement, which we believe is a harbinger of future product usage and retention as a point of reference we use a third party data service called similar web for these independent statistics in order to compare our company's performance with that of our competitors.
This first page shows the number of App downloads for Green Dot apps as compared with all the leading U.S. Neal Bank apps. Some important takeaways on this slide one are older products do not require an app in order to use the account and in fact, most of our legacy active customers do not use any app. Nonetheless, our sheer size has always helps make.
Green Dot digital leader amongst our peers.
To our strategic decision to make certain important product features and services only available in the App has helped propel our digital engagement beyond our peers for several years now and three since launch of a limited on July Thirtyth through the end of Q3 Green Dot had grown to be tied or little ahead of the leading U.S. Neal Bank gap.
And even beating it by around 30000 App downloads in September the last month of data available.
At this point, it's important to call out that the bank account products offered by many of our competitors are typically free and in aggregate. We believe they spent well in excess of $100 million a marketing to achieve this level of app download performance by comparison Green Dot products are not free and we believe our marketing investments even in Q3 well below.
I just don't limited have historically been just a fraction of our competitors now let's go to the next page would chose digital user engagement and in particular time spent with the App, we've taken a great care and the strategic design to be unlimited up and we believe it is a segment leader our App is lightning fast Super easy to navigate contains a myriad of.
Features and functions that integrates seamlessly with the account and the constant interactive messaging between the App and the users mobile phone is designed to make the products sticky and relevant.
While we're still in very early days the user engagement metric is encouraging because it could be an indicator of future retention and purchase behavior, which are the two most important factors in generating lifetime revenue and margin.
We expect the new Walmart Moneycard, App and the new Gen Xenapp to be released in the first half of next year will be even better still we think the app based Branchless bank in market is an exciting space in which to compete and we believe there is lots of room for lots of winters, a rising tide does in fact float all boats and we truly wish success for all but the fact is the number.
One Neal Bank in America in terms of the number of active accounts the number of App downloads digital user engagement revenue and profit isn't a Neal bank at all in fact, it's a bank called Green Dot.
In summary, we believe green dots consumer business has shown extreme resiliency in light of all the direct competition spending so heavily on the marketing a free banking apps. Additionally, we think green dots consumer business is well positioned to remain ahead of the pack as it has been for his entire 20 year run because we have several deep competitive moat that we think we'd be nearly impossible to.
Replicate consider the following.
First green Dot has massive scale and we believe were the lowest cost provider in the fin tech industry, where a highly efficient vertically integrated fin tech platform with more than 50 million end users consumer products and services every year, great scale brings great efficiency. According to CB insights the largest Neal bank in the World is new bank.
In Brazil, with an estimated 5 million total customers and likely a fewer number of customers that are active.
The number one so called Challenger bank of the U.S. or Neal Bank aside from Green Dot is believed to have perhaps 1 million or so active customers based on piecing together data from different third party research reports assuming that analysis is accurate that green dot is the number one app based Branchless bank in the world and the largest in the U.S. by more than a five ex Lee.
But even without considering many of the bass related accounts, which only increase the scale efficiencies Green Dot realizes next green Dot has broad distribution across multiple channels, while we certainly spend marketing dollars on digital acquisition, just like our competitors. Unlike our competitors, we're able to supplement that digital acquisition spend with very low.
Cost large scale brick and mortar distribution of approximately 100000 major retailers through thousands of seasonal tax preparation offices and the large digital tax preparation services through our platform b to b channels, including corporate Paycard partnerships and bass partnerships, where large and growing list of America's largest consumer brands and technology companies does.
Attribute our products directly to their customers through their own channels of trade are broadly diversified distribution enables us to bring down our average cost of acquisition for example over the last four years, we believe the Neal bank marketed collectively spend several hundred million dollars to acquire a total of just three to 4 million active no fee accounts in aggregate well generating we estimate.
Hundreds of millions of dollars it losses in the process.
Whereas during that same period green dots consumer business acquired around 20 million active paying customers at a single digit blended new acquisition cost and generated hundreds of millions of dollars in revenue in the process. We believe that no competitor can match, our overall customer acquisition cost or even come close.
Next green Dot isn't the Neo bank, where federally regulated bank and have access to our own free FDIC insured deposits that can be used to generate interest revenue stronger customer relationships or both and lastly, green dot is a diverse enterprise with many different products and services offered through several different channels to provide some context.
On that diversity in 2020, we expect that around half of our non-GAAP consolidated revenue will come from our platform services business to help contextualize the value of our competitive mode at the height of the free prepaid movement from 2012 to around 2014, we believe green Dot had perhaps it doesn't free competitors some.
Quite large like Chase at American Express collectively spending hundreds of billions of dollars, a marketing and incentives to pull away green dot customers.
Ultimately all of those free prepaid programs every single one of them transition their models sold or shuttered to be clear, we never take our leadership for granted just as we did in the past the successfully navigate various competitive challenges we're upping our game to offer the consumer more value for the money better customer service better and.
Our elegant technology, and we're investing in much better and more effective social media and digital marketing strategies.
Our new unlimited Cashback Bank account is a good example of this and as sales in usage trends indicate there would appear to be many customers out there who are happily willing to pay for real value.
We recognize that we have more work to do to get a consumer business back into growth trajectory and that green dots ongoing leadership and the free Neal Bank era is not guaranteed in fact, our lower year over year exit rate of consolidated consumer active accounts is one of the several significant 2020 headwinds Mark will talk about later, but what is certain.
Is that green Dot will use its 20 years of deep knowledge of its customer base and its unmatchable infrastructural advantages our competitive moat. If you will to prudently compete with all comers and we expect to do so profitably lastly on the topic of unlimited. We're pleased to let you know that green Dot now has a new trademark branding position and new Spokesbot.
Most of our new branding position is green Dot bank, the extreme value bank and one of the ways. We intend to get the word out is through a new TV in social media partnership with LNG generous. The Ela shows seen daily across America is the number one show on daytime TV, reaching 17 million weekly viewers plus al. It is one of the biggest pool.
Personalities in the world on social media with more than 200 million followers across the various leading social media platforms Green Dot bank and the unlimited Cashback Bank account will be integrated into the Ellen show on TV and through her social media content in a variety of ways with the goal of millions of Americans learning about the extreme value of Green Dot Bank view on limits.
Cashback Bank account and then hopefully going on line to open an account for themselves now, let's talk about the Walmart Moneycard as disclosed last week Green Dot of Walmart have entered into a new seven year agreement for Green Dot to continue the issue and manage the Walmart Moneycard program. The key operating in business terms are similar to our previous moneycard agreement, but the base.
Capture economics have increased by several basis points for 2020, we estimate that the year over year headwind degree Thats consolidated margins will be around 150 basis points, which is similar or little better than the impact of consolidated margins at the last renewal in 2015.
We are always proud to serve Walmart and our billions of mutual customers and we're thrilled and truly honored to be partnered with the world's largest retailers on this program for many years to come now, let's talk about green Dot bass, our leading banking as a service platform over the past few earning calls we've shared or optimism about the healthy and growing pipeline and suggests.
Did we could close at least one large scale bass partnership that we would announce in the future I'm proud to say, we delivered three very significant new deals that we believe further solidify green dot standing as the unmatched number what bass platform and Fintech plus our sales pipeline for new best partnerships remains robust and we are engaged in negotiations.
With several large brand name technology companies for partnerships that we help to announce in the coming months, Here's a review of our recently announced wins first we were announced during their keynote speech at the money 2020 conference that it was launching a new initiative called Huber money. Most importantly, as relates to our investors. We were also announced that the entire core of the driver pay.
That said rewards debit card program will be built to top the green Dot bass platform. The relationship is a significant expansion beyond the current program and that the rubber debit program will be integrated into the drivers out as the preferred way all drivers received their wages and the current program wages defaulted to the drivers own existing bank account and then they could respond.
Onto an AD for the over debit card within the drivers App and then sign up but they wanted to change the way they received their wages, but now that the account has offered as part of the main enrollment flow, we expect to onboard more accounts on a run rate basis that we currently on board next bluebirds expanded the loyalty component of the you'll be debit card program to a lot more drivers to get more rewards.
Which in turn is expected to generate longer retention and more usage of our accounts and lastly, hubers using more parts of our best platform than ever before by now integrating our retail cash processing that work into the writers that in this new use case for the best platform. We will writers can now funder rubric cash account using green dots increase.
Really popular Ecash mobile barcode system. This new bass integration will allow for writers, who don't have plastic, meaning a debit card or credit card to now pay for the ruble ride with cash.
He has been a great and growing partner for Green Dot since the very beginning of our best platform business line and we're thrilled to be able to announce has expanded and much deeper level of integrated partnership with Uber next I'm pleased to announce at Green Dot has expanded its partnership with into it and agreed to a multiyear contract extension.
As you may recall into it currently uses green dot TPG as its backend processor for tax refund processing on turbotax and Green Dot issues. It manages the into turbo card for tax refund disbursements now in this new expanded partnership Intuit intends to integrate our best platform into their enterprise wide technology platform in order to facilitate abroad.
Array of opportunities.
Into it as an amazing company and a longtime green dot partner and we're very pleased to expand and deepen our relationship.
Last but absolutely not least I'm very proud and excited to announce a significant new partnership between Green Dot and Wal Mart or we have deepened our partnership with the creation of a new joint venture called Tailfin Labs LLC. The name comes from a hybrid of the words retail and Fintech Tailfin. This newly created Walmart Green Dot joint venture.
Designed to serve as an accelerator to bring innovative creative and compelling financial solutions to Walmart customers through all channels of Congress worldwide, Walmart controls the JV with 80% of the equity and Green Dot with 20% Green Dot will contribute capital into the JV on an annual basis for the first five years from which the JV can pay for R&D.
And build out whatever products or services are created.
Green dots value is expected to be as the product development and operating partner, helping to jointly I'd, a new big ideas and then accelerate those big ideas to market through our bass platform and green dots unique and proven ability to develop and operate be spoke fin Tech solutions.
Walmart is not only an innovative partner with a leading technology capability of their own but it's also a world class distribution platform partner and will provide it's highly trusted brand name and massive customer base across its omni channel platform, where the products. The JV develops can be distributed and commercialized the.
The way Green Dot intends to make money from the JV is by earning a repsher other products or services. We made jointly develop and then bring to market.
We believe that the intersection of retailing and financial technology as a potential gold rush of potential innovation that is still in its earliest stages of discovery and that bringing together an omni channel retailing giant like Walmart and enterprise grade Fintech innovator like Green Dot can create a fertile soil for such innovation to germinate develop and block.
Them.
Over the past 13 years Green Dot a Walmart have created many new products and services that have become consumer staples in the financial services space and we're thrilled to now take that history of successful and profitable innovation to a new and much deeper level them to gauge mint and collaboration with the founding of tail fit labs LLC lastly on this topic.
To create further alignment on all the new exciting things, we seek to accomplish together over the many years to come Green Dot will grant Walmart 975000 shares of our common stock effective January Onest 2020, and the stock will best equally over 36 months see here's the thing about green dots bass platform, it's not just to set up.
Standard Bank account Apiay eyes, or Predefine developer sandbox, although we certainly have all that to rather green dots bass is an entire ecosystem a best in class essential integrated technologies and capabilities designed for large enterprise partners. They build what they want how they want it without limits, we believe that the.
Other bass providers simply provide the basic tech platform at the hub of the account in order to enable the basic functions of the bank account, that's where those platforms largely begin and end. We believe this requires the partner to stitch together other relationships to enable their programs. For example, the partner will need to find the bank issue, where that small enough to be durbin exempt, but large enough to have sufficient sources of cash.
It will do enable deposit growth.
Then they'll need to negotiate and contract with an outsource call center or building in house customer care solution negotiate with the free ATM networks and do the I.T. worked to integrate them spend millions on fraud tools see IP controls and hiring the experts to run and manage the hundreds of program details and on and on and on the point is that we believed by the time to program is built.
And up and running customers of competing bass platforms find themselves spending a fortune to provide a fairly basic bank account app that looks like just about every other fairly basic bank account app and often losing millions of dollars an opex as they go want to take cash deposits provide cashback rewards offer sweep accounts to generate higher interest rate savings there.
How about putting a customer's photo from their mobile phone other debit card small business merchant accounts that can pay the merchant faster I've got a custom settlement process to facilitate one thing or another not on their platforms you won't.
Then you have the scale issue, we believe that anyone of green dots large enterprise bass programs generates more transactions per second demand than all the programs and all the other competing best platforms combined.
Hi scale brings high risk and large companies can't afford for their technology and banking partner to be learning on the job. Together. These are just some of the reasons why we believe green Dot bass is number one in a league of one.
2019 has been a good year with respect to making significant progress in achieving green dots long term strategy of expanding our town with more modern and mainstream App based consumer products for a new generation of customers and we have certainly made tremendous progress and the expansion of our platform business with bass in particular, but it's been a disappointing year with regard to X.
Q should against our financial guidance as the consumer business struggled to regained its footing before we launched unlimited.
I understand the valuation penalties associated with slower consolidated growth and the challenging optics created by negative growth in our consumer business that masks the outstanding growth in our platform services business.
Nevertheless, we don't believe our platform services business is being properly valued based in its significant growth and increasing revenue contributions relative to our total enterprise value for example, green dots entire consolidated enterprise trades at less than four times. Its 2019 platform services non-GAAP revenue compared to smaller appears a trade at as much.
Which is 11 times revenue as we have outlined over the last two calls we have a focus strategy to return to consumer business growth and believe the early success of unlimited in such a short timeframe is a great first step, but regardless of our challenges and the consumer business. The stark differences and valuation between our consolidated business inclusive of Green Dot is industry leading.
Bass platform as compared to the private and publicly traded comps a much smaller competitors has become hard to ignore as such ensuring we highlight the strength of our best platform and other platform businesses will be a focus for us going forward. In addition to highlighting the attractive in leading asset we have an are improving consumer business.
You are loyal investors should expect to hear continue disclosure about these two businesses going forward as we continue our active focus on enhancing shareholder value by making the right strategic decisions for our customers our partners our regulators our employees and our investors.
And with that will go over to Mark shifting for his report.
Thanks, Steve as a reminder, starting in Q1, we began using a new presentation for gap to include net interest income generated at Green Dot bank from the investment of customer deposits and introduced a new non-GAAP revenue measure to reduce GAAP revenue by commissions and certain processing related costs.
Associated with certain bass partner programs with a partner and not green dot controls customer acquisition.
Three consolidated non-GAAP operating revenue grew 1% year over year to $229 million, including $7 million of interest income and net of $11 million of commissions and processing related costs associated with certain best partner programs.
From a segment perspective, the account services segment delivered non-GAAP revenue of approximately $184 million, representing a year over year decline of 5%.
This decline was the result of the expected year over year decrease in quarterly active accounts for more consumer business, partially offset by an increase in active accounts for more platform services business. Despite a fewer number of consumer active accounts, we increased consolidated direct deposit accounts year over year by 4%, which in turn contribute.
Did two year over year growth of 8% in GDV and 2% in purchase volume and corresponding growth in interchange revenue of 4%.
Our processing and settlement services segment had a great quarter and generated approximately $52 million and non-GAAP revenue representing year over year growth of roughly 29%. This continued growth is attributable to higher transaction volumes across this segment's product lines.
Q3, consolidated adjusted EBITDA of $25 million outperformed our expectations by around $10 million due to savings from lower than expected SDMA cost higher than expected operating efficiencies and lower than budgeted marketing spend.
In Q4, we expect our adjusted EBITDA performance to offset the Q3 overperformance ending the year at the lower end of our full year adjusted EBITDA guidance range. The reasons for the expected lower margins in Q4 or that we do not expect to enjoy the same level of savings in Q4 that we enjoyed in Q3 and we expect the margin flow.
Through from revenue in Q4 to be somewhat lower as platform services revenue, while still profitable does not fully make up for the last margins on the lower consumer account revenue.
non-GAAP EPS for the quarter came in at 20 cents per share Green dot generated $205 million of cash flow from operations through the first nine months of 29 team had ended Q3 was $79 million of unencumbered cash on our balance sheet and no debt.
Let's now turn to this slide entitled trends in Green dots consumer business. Some platform services business. This slide is intended to help show the trajectories of our consumer business and our platform services business as we think about exit rates heading into 2020.
You can see that our consumer business delivered a non-GAAP revenue CAGR of 15% from 2016 to 2018, but and 29. He will have declined year over year by 8% to around $626 million.
Based on the 2019 exit run rate, we expect the consumer business to enter 2020 at a materially lower non-GAAP revenue run rate that it had at the exit of 2018. However, during that same period, our platform services business thrived led by our banking as a service platform with a non-GAAP revenue CAGR of 28 per.
Sent from 2016 to 2018, and 29 team who have grown year over year by another 26% to around $435 million.
Based on the 2019 exit rate.
We expect the platform services business to enter 2020, Adam materially higher non-GAAP revenue run rate than it had heading into 2019, so as Steve discussed the headwinds in 2019 and heading into 2020 are primarily related to our consumer accounts business. This is what the new green Dot unlimited product coming.
By with the forthcoming new Walmart Moneycard, and the New Jersey App, both scheduled to be lost in the first half of next year are intended to help remediate over the course of 2020.
As it relates to our expected for your consolidated 2019 results, we expect to finish the year with non-GAAP operating revenue at roughly $1.06 billion, adjusted EBITDA around $240 million and non-GAAP EPS around $2.73 per share.
Now, let's turn to a discussion of next year.
Given that we now have certainty around the economics of the Walmart renewal and more informed assumptions around exit run rates for our consumer business and our platform services business inclusive of the best platform and our bank, we want to provide our preliminary high level thoughts on 2020.
I want to note that we have not completed our comprehensive budgeting process for next year, and we won't be providing formal 2020 guidance until the February call. However, we do want to share our thoughts on next year that you should consider when thinking about your models as Steve shared we're very pleased with the early results from the unlimited product launch but.
We are starting to see losses moderate in our consolidated active account trends and are seeing clear growth in our green Dot brand active account trends. Nevertheless, we are expecting to exit this year with several hundred thousand fewer 90 day active accounts in our consumer business than we had at the exit of 2018, so while we expect to narrow the.
GAAP in actives in our consumer business over the course of 2020, the 2019 exit rate will create a material year over year headwind at the start of the year.
We Additionally expect to exit 29 team with a lower interest income run rate on the investing of consumer deposits at the bank as a result of several short term interest rate cuts this year and the possibility that more cuts could take place next year.
On the positive side, we expect that our platform services business led by the continued expansion of our best platform will exit 2019, with a materially higher non-GAAP revenue run rate than this business had at the exit of 2018.
In fact, we expect at the higher exit rate on platform services will make up for the lower exit rate on our consumer business and interest income combined so we expect topline exit rate headwinds and tailwinds to largely offset each other on the bottom line the margin flow through that we expect to boost from the lower exit rate on the consumer.
Her business is largely expected to be offset by the margin flow through we expect to gain from the higher exit rate on the platform services business combined with savings, we expect to realize from platform operating efficiencies over the course of 2020.
Then there are four unique year over year Bottomline headwinds that together, we expect will cause a material decrease in the amount of year over year. Adjusted EBITDA, we expect to generate first we expect 100% of the lower interest income to impact margins. Then there was a Walmart renewal, which as Steve mentioned is expected to generator.
Proximately 150 basis points of consolidated year over year margin compression.
Next we expect to see higher year over year Este DNA expenses, primarily in the areas of technology operations risk management compliance customer care and facilities associated with supporting the launch and ongoing operations for all the new enterprise bass deals, we announced last week plus several more in the pipeline that we.
Expect to announce in 2020.
While we don't ordinarily need to materially increase as DNA in order to onboard and run bass programs. These new best programs are not ordinary because of the size of the partners and the nature of the programs they intend to create and launch in aggregate. These new partnerships have the opportunity to become very large as they launch and then scale and mature.
Overtime generating incremental infrastructure operating team and platform capacity demands.
Finally, we want to reserve some amount of incremental year over year marketing dollars to invest an unlimited post the two new products, we intend to launch in the first half of next year.
We're very pleased with the efficiency of the marketing investments we've made so far on 2019, and we want the flexibility to do more next year should we continue to see the opportunity to acquire high quality customers, what we believed to be industry, leading and profitable customer acquisition costs. So while the lower exit rate on consumer Act is is expected.
To be largely offset by the higher exit rate on platform services as savings from platform operating efficiencies. The other items interest income the Walmart renewal incremental s. DNA and a modest amount of incremental year over year marketing dollars are expected together to create a net 60 million to 65 million dollar adjusted EPS.
Headwind into 2020, most of which we would expect to lap in 2021 taken altogether. This commentary implies that we do not currently expect to guide much more than flat on the topline and perhaps $65 million lower year over year on adjusted EBITDA. When we provide 2020 guidance during our February .
Earnings call. If we are more successful and narrowing the year over year Delta and the number of active accounts in our consumer business over the course of 2020.
If we find that our best platform and other product lines within our platform services business grow beyond the 2019 exit rate than we would expect 2020 to build over the four quarters and lead to a much improved 2020 exit rate heading into 2021, while the headwinds to adjusted EBITDA would be expected to largely lap in 2021.
As well.
But in an effort to make sure. We don't get ahead of ourselves and that we don't unintentionally repeat the forecasting challenges we experienced this year, we aren't likely to guide 2020 much beyond what we can see at the time of the Q4 call in February .
And with that I would like to ask the operator to open the phone for questions operator.
Thank you if he would like to ask your question. Please press star one and your telephone keypad confirmation tell indicate your line is in the question Q.
Press Star to if he would like to remove your question from the Q and for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star he is.
Our first question asked from Bob Napoli with William Blair. Please proceed.
Hey, Bob you.
Hey, Bob one second before you sure.
One of your that sounded not.
Before we begin the question is a one introduced to our investors and analysts on the call today, just unruh. Many of you know Jess he's there with our company for quite some time as co operational Chief Financial Officer, and Chief Accounting Officer, and as a company continues to expand that we do more things Jess is going to be increasingly supporting mark and I look at investor conferences in here in the company.
In all aspects of getting our finances done on a day to day basis. So Mike just introduce himself say a few words and they'll go into your question Bob. Thanks.
Thanks, Steve I'm excited to be here. Some of you have met me at conferences.
Mr calls for those who don't my name is just on unit then at Green Dot for a little over 10 years prior to Green Dot It was it Ernst and young for many years at Green Dot has been the chief accounting officer for the past five years and operational CFO for the past three years and oversee accounting fads reporting tax data procurement and our shared service operations.
So they create opportunity are you, okay, Bob would that Nigeria voice. So let's go and take your question. Okay. A lot going on here that's for sure.
Just on the platform services.
Business the the growth rate.
How sustainable is the growth rate of that business and can you break out any while we have we have an idea of what the tax pieces.
But what is the basket, which pieces are growing faster or what do you know so what kind of a growth rate do you expect for platform services and how big is that bad business and and I would think that would be the fastest growing.
Piece of the business I think that's right a lot of our platform services businesses.
I've been around for a long time or money processing network, TPG, which was or tax processor.
And pay card rapid pay card so lot of those been around for a while ambassadors without question among those pieces the fastest growing and the CAGR. We expect to continue but we don't want to guide anything specific until we have all the facts and figures ready for guidance, calling February but into CAGR is indicative of what it's doing and you know Bob that we announced.
Last week fairly significant number of expansions and new partnerships and the pipeline looks robust and so those new partnerships you build them you deploy them and then they grow in season over time, just like now we're benefiting from the ones that we've launched over the past years as they've grown and season. So the vast platform as a lot of growth, we think to it and every time, we get more information on it we share.
Eric and as we promised and because you're going to continue to highlight the platform services portion of the company with more granularity and in particular on the guidance call. So that you and others can have a better appreciation for how to size it and how they view it relative comparison to our accounts business.
And then I guess, the consumer business the unlimited.
Product and the other products I mean that the.
What if what effect you said that the it's equal to or 90% of the profitability of the prior products and when do you.
By the time you enter exit 2020 would you expect that business to have year over year growth.
So yeah, what we said unlimited and for those of you who I know it's hard when you have a lot of calls if you're going to at the same time, but we put a deck together Samir interruption 18 put this together it's actually quite good it's called supplemental earnings call deck, very creative title and but in there. It has a section called unlimited by the numbers.
And it actually gave us with granularity and actual charts more than really most companies, we do but we really wanted to investors down a sense of it.
What our decline was and then the launch of unlimited and what that portfolio has done and what so impressive about it frankly, even even from US and we designed the products you don't always know how these things work is picture our six main consumer portfolios that had been declining in particular since the more aggressive marketing of our free competitors and that's in the question affected.
So we've talked about that so you have all these six portfolios like a boulder coming downhill and you've seen that decline, especially starting an accelerating in Q2 of this year.
This big Boulder coming down then unlimited comes in and steps in front of the Boulder and has actually been able to slow it dramatically and a lot of our leading edge all of our leading edge metrics has stopped the boulder and is now pushing it back up the hill. Despite the fact that you still have losses in the other five portfolios. It. It's just a very impressive result for such a young.
Product and the quality of the customers as we show them. The deck is a pretty strong. So if you haven't you have downloaded that we really urge you to do that we think it tells you a lot of information in a very transparent in fact based away. So so what we're forecasting is that a limited on its own will help the entire consolidated consumer business bottom sometime in Q1.
So, but Q calendar Q2, given there were about a quarter later than we thought we'd be but pretty close and then in pushing that boulder up. So the boulder is already going up but we need to go past, where we used to come down to some other was how do I want to cities were narrowing the gap and then the board will need to go past that gap and then grow in the absolute we've already growing in the absolute on.
Direct deposit accounts by a lot and we've already growing to be absolute on 30 day reloading actives for the Green Dot brand, but we've only flattened out in consolidated actives, although that's incredibly impressive for 13 weeks give me when a rate of decline was so it's very very positive story and we'll have more granular information on it when we guide and 2020 in the February .
Call because but then we'll have another three months data and we'll see where we're going with it will have more visibility to the other launches as they come.
But without question, it's about as positive as story as we could have ever I hope to have.
And and we're really quite pleased with it but it's 13 weeks you know.
Great. Thank you yes.
Our next question is from Andrew Jeffrey with Suntrust Robinson Humphrey. Please proceed.
Hi, Good afternoon, guys. Thanks for taking the question.
Yes, I mean clearly the the 2020 guide is below it but we are looking for but at the metrics are encouraging and there are couple of things one I guess.
It seems to be worth calling out Steve and maybe you can elaborate a little bit.
Yes, correct me, if you take I'm wrong, and its characterization, but seems like 90% of your consumer business revenues. Despite the overall business declining.
Our really sticky right around direct deposit or monthly depositors.
It's been incredibly low on Zillions shockingly, so, yes, very very resilient.
So I mean, I guess for those who are worried that the legacy business sort of broadly defined by non direct deposit goes away that chip yet you know which is it your Tony in assumption that should be a pretty powerful bulwark etcetera. It is I mean, that's sort of the look.
We.
We have we want to be transparent and there's nothing worse.
Then then clobbering analysts or investors with the surprise.
We just hate it and we've done.
Without meaning to obviously, we have a lot of people to finance team in in our product team work really hard, but we've done a pretty poor job.
Of.
Financial guidance not intentionally but it's been so hard to sort of understand the month over month in quarter over quarter declines when you're looking at a 90 day group of cars, many of which one and done some of which you know past the IP customer identification, but then don't reload. Let me have all these portfolios and millions of customers and you're trying to figure out okay, who is going to try.
Right and when and how much dollar those guys worth who is going to sign on and when and how many dollars or are those guys worth and we've just and then of course, we don't know what our competitors plans are so when big marketing campaigns rollout.
We see it and so we've really missed this falling.
We want to call. It you know the the falling knife whatever want to call. It starting primarily in Q2 in March you can really see it on the charts we supplied.
And just continues to accelerate the say Wow, Luckily we had a limited that was rolling out and we're working on it.
Goodness, we did.
And it's really good product. So we knew the product would do well because of all the research and testing, but you never know until you know and thankfully instant very very well. So yes, I think people should be encouraged by that without question did so again I've designed a lot of products and all the ones pretty much the green dot cells and this would be the best when that we've had.
Well since a Walmart moneycard, no seven and if you take some time to flip to the deck and look at the direct deposit metrics and the rest Theres no way you can come away not being impressed with the results, but at the same time you have this exit rate issue. So one of the things we wanted to highlight in our and it isn't guidance, we want to be thoughtful about that its commentary to your model lets call.
I'll, let you know because it isn't truly guidance, but is that we have we don't have tenant she's in the company. We have won the same when we've been talking about now four year and that is that it's the decline of our legacy consumer business portfolios all of them pretty much in though in the one and done you know the single use customers, we call them segment and the cash flow.
Adding segment the direct deposit segment has been pretty strong and if we hadn't done something even that would have ultimately decade, and you can kind of see that in the consolidated chart, but even when everything else was going down quickly we were still going up and direct deposit and now of course resuming up and direct deposit. So I think I think your comment that about the resiliency is absolutely fact based and the fab.
That a lot of folks we were up this money 2020 conference last week, it's great conference for us for those be who are able to attend and witness some of it.
It was a wonderful opportunity for us to meet a lot of people and and and I think people really amazed with just the quality of the products and all the things that we're rolling out and and all that but it's not obvious to the naked eye until we put it all together for our investors of what those model inputs are so the only issue we have on the business or there's a consumer accounts has been.
Offset by the growth in the platform. So that takes care of that and then of course, if the consumer business continues to come back. We'll then that will be pop and along with the platform business, but right now platform is overcoming the losses in consumer on the bottom line you have these four other inputs that are not about company performance at all and the fact that pretty good things in the absolute they just are what the arts who wanted to make.
Sure that investors know about them in talking to analysts last week at the conference I could tell people are aware of them, but not putting the pieces together when you see would street consensus is for next year. You can just kind of tell that people aren't thinking about it sets. We wanted to point out is that hey look you know the fed to lowering interest rates you know, we make money and interest rates, let's remind you how that impacts us everyone knows.
We renewed the Walmart agreement for very long time seven years of stability.
Added 150 basis point consolidated margin hit and that's been a very good thing the market reacted well to it and it's a very good deal for us, but it's still 150 bips right. So we wanted to call out these things that aren't about company performance and they're in the public domain, but when you see what the overall consensus estimates were for next year, you could tell that people hadn't yet.
Putting together if you will in the models and that's why I wanted to make sure you guys did.
So that we didn't have a disconnect when we guided for next year.
And then you know in terms of the stock price there were several.
Good analyst reports, including Yours, Andrew and others have talked about the stock price and as a price for Armageddon nor price for runoff in this then the other thing.
It's hard to know what people always think but I think the information today is a good.
Counterbalance to that concern and the stock price isn't when we get this isn't really reflection of any kind of mathematical we don't think any kind of mathematical.
Formula to be actual EPS metric or something else would say a reaction to the fact that we've missed guidance for a couple of quarters and that we've had trouble sizing our consumer business and the melt off of it.
And and and we get that that causes evaluation penalty. So what we're trying to do by giving these model inputs today say look the platform business is I don't think anyone questions is real rocket ship for us in a very exciting part of our business. So I think that's understood by most.
On the consumer business now with the charts that we provided with unlimited knowing that we still have other new products to come out, but a limited by itself becomes a hard to ignore the the trends on that they're pretty clear in an obvious.
And so I don't know how investors will take.
If you will the reminder of the model inputs of before we give guidance for next quarter.
But hopefully it's in a way to provide some certainty and to provide some.
Or our belief of certainty and to get our arms around a model that we struggled to get arms around so so hopefully people take it that way and understand the the help we're trying to be in making sure that we're not out of sync with the market in February .
Yes, well I have among military business model next year I appreciate that getting on trying to it.
Maybe I can ask now I'll jump back in to Q.
Sure from this perspective, if we're looking at something Thats in the neighborhood of 180.
Considering.
The headwinds, but also considering the growth in these new products and recognizing that the Walmart cadence is a one time then you go on infrastructure program.
Is that kind of a base case for what you would.
Being durable ongoing.
Sure on the other side of this consumer decline.
The most part of new products are kicking in and that's kinda high value EBITDA is one way of thinking about it the green dot is generating.
I think so I mean, if you if you look at I mean, the onetime hits or what they are and the interest rates I don't.
I think you all know that I'm done them on the board and by the Federal Reserve for District, 12, but clearly I don't have any information or knowledge that to the general public wouldn't have that interest rates and those kinds of things, but maybe if you just look at what the interest rates are you can make up your own decision of what do you think there'll be a year from now at the exit rate.
But to your point the Walmart renewal is a one shot deal.
For seven years, it's a very long term stability and a lot of time for us to overgrow that with efficiencies and bigger sales and whatnot.
You have the SGN, a which is for any platform. That's growing you have to invest in that we've done that for years off the same time saving money in other areas like.
Customer care and automation for various things and we've done a good job with that every year, I think and and benefited from that again as you know this Q3, that's one of the reasons why we.
Now the EBITDA performance, we did so a lot of these to your point are one time, they reset and then as you have the consumer account division building back up we need to build up to about 600000 accounts in total to get back to where we were at our all time peak in 2018, okay.
And and so we've already come back quite a bit as you can see from the charts and we have to keep going.
We'll know more in February if we'll do that in Q3 year Q4, not even in the year I don't know I don't want to pre sell it.
Because I don't want to be wrong.
But that's why we wanted to give everyone. The charts you can sort of make up your own mind and everyone can do their own analysis, because they're pretty spectacular and and frankly better than what we would have guessed are predicted at this point. So I think you're right I think we have a real chance for the platform to continue to grow I think that's a fairly.
The strong belief and one that's a fair belief we have to have and then you can see the consumer business coming back strongly and when that comes back to come back. So I think we're at a pretty good place as we approach the exit rate of about 2020 into 2021, but you never know and I'm sure. We'll have competitive reaction to our success our competitors here this call.
When I talked about our marketing plans of back in Q1, Thats what generated we think a lot of our competitors altering their marketing plan as the come back and clobber US beginning in April so I need to.
Maybe a little bit less transparent on these calls but.
Transparence, you're not consumers are going to do what they're going to do and when they see a great product and they see it well marketed like we're doing with Yellen show and the great job that LNG generous is doing with is what are wonderful person and what a great career. She is established it was so proud to have rather spokesperson and as we do those kinds of things.
Well, we're hopeful we'll hopefully rebound into the be back in good shape for 2021, once again will be up to the top of the mountain like we were after the free prepaid wars back several years ago, but we don't want to get ahead of ourselves. So we're giving you everything we know and when we guide in February we're not going to guide an ounce beyond what we can see as an exit rate at that time.
Right, so we're going to be thoughtful and prudent about it and do and go from there.
Thank you.
Our next question is from Renzi assay with Barclays Investment Bank. Please proceed.
Hi, guys. Good evening is today I mean on forever.
Welcome to the college ask it have you.
So I just wanted to drill down into your confidence in sort of the bottoming out of the decline in Q1 I know you quoted.
Moneycard launching an agenda the app launched at the beginning of next year, but maybe you can talk us through sort of your confidence.
And the slowdown in the decline in Q4, the bottoming out in Q1, and then what kind of growth you're thinking kind of get too.
With that.
Well I don't want to give too many forward looking belief statements on where we can get too.
And the Damian I know you didnt.
It was intentional but want to make sure I didn't say beginning of next year for the launches of the new products at first half because it on and again, we want to be.
Want to make sure we hit everything we say, but yes, the new product. So we have high hopes for as well.
You know if you look at the rate here's what I would do if our building a model because I'm not going to give you an answer but I'll sort of trying to do some bread crumbs for you.
Is if you look at the month over month on the charts. We gave growth right. You know many weeks what they are we told the how many weeks and so forth you can plot on a graph in a model how many active accounts, we lost per week per month take your pick.
You know starting with the beginning of the year of 2019.
Down to the peak at the launch of Unlimited and then how many we've gained.
And and then he can sort of take that exact model is add to it because these are net actives in other words each month number of actives is by definition the net of who is a trident.
And who is new and who is active in that month right. So it's in that number and.
And you can figure that now what you don't know is where we fall off our pace will increase our patient that you don't know and that will have to figure out but it can give you sort of a good sense of a run rate as you go through the end of 2020, and that's what I would probably do if I were building a model and Didnt have insight information and frankly, that's kind of how we build our models because you just don't know I don't know what the competitive reaction is going.
To be right you don't know these things, but at least that gives you a sense of how to look at it and then he can make your own conclusions and decisions.
All right, Yeah, what will be doing our modeling on our side, but maybe another question then on margins.
So you announced the sort of 60 to 65 million dollar incremental headwind for next year I'm thinking about than this year, you had to $60 million of spend.
You know the onetime marketing spend so is that 2028. In addition to the lower the $60 million lower EBITDA in 2018 or is it in lieu of it and then maybe just longer term as you think about you know your business do you think that the level of investment in your business jury required to sort of hit the same level of.
Growth has changed.
As a result of all of this or do you think it's it's relatively the same.
Oh, there's going to sound really dumb I'm not sure I understand the.
The question are you, saying.
Are you, saying is the investment we need to make in 2020.
More than the investment we made this year to achieve the same level of growth on a limited is that kind of what you're saying, we're asking well there's two parts to it. So the first half is there's it's going to be $60 million to $65 million or the negative EBITDA. In 2020. That's is that in addition to the negative 60 million that you that you took this year of the Mark Oh factor related.
Well there isn't.
That number what we're saying is that if we did 240 million, which is what we set our guidance was for this year to finish the year hat and he took 65 million off that you'd be at 175 million or something like that and that would be our exit rate that would be or exit run rate heading into next year not because of company performance per se those were offset the platform in the can.
Tumor business offset each other largely it's because of as we mentioned the onetime hit from the Walmart renewal, which lapse the interest rates, which is anyone's guess.
It's the increase in SDMA, which you don't do every year, but the size the programs, we announced our ER.
Are pretty big programs. You know these are any any one of these are sizable let alone all of them together and plus you have tailfin.
Which can be quite whatever we come up in vending there could be quite significant we don't know so you're not going to do that every year right nor have we done that every year. So a lot of those will reset and they're going to 2021. So.
That that number that we're in indicating that could be our guidance. At 175 includes everything that's we're saying that that number is so it isn't 175 minus another 60 for marketing and Thats, what you're asking our marketing expense.
On a year over year basis isn't probably much different it's pretty flat.
What we spent.
2019 in total for the full year.
Versus what we're planning to spend next year.
But we want a little bit of a.
Little bit of room, because we've done so well with the way we've a gated our marketing with a limited effect you may have heard much commentary there were actually spend less in Q3, the what we budgeted because we're achieving our goals. The trick is look we're not a startup you know we've been here for awhile and the trick to marketing if you can do it and you're lucky any.
Do the right things and you have a good product is not to spend your money as fast as you can see you can have a headline number all we acquired this many accounts whatever it is the tricked into a <unk> acquire enough accounts slowly, but surely over time, so you're growing but in a way that's profitable on a cost of acquisition versus unit economic basis, and that's what we do so it's about gating that.
And and if we can continue to do that successfully we want to make sure we have a little more room next year, because we're launching those other products. So that's that's why we made that but that that 65 million in total headwind that net headwind is that the full number inclusive of whatever else you think might be in there.
Thanks for the commentary Yeah, you bet, so team here's what we're going to do.
Mark is signaling me that were at the top of the hour in my eyes aren't good enough to see what's on the screen in front of me. So I don't know how many were finished and that we're going to have a I know I've got a call yeah. Yeah for those of you don't know because we don't want to black box anyone on any information we want to make sure you get would you want to ask is after each earnings call. We do a group call with a lot of analyst and others, who joined and if you're not.
Analyst on that I believe you certainly can be right can anyone beyond that are out of the do it.
I think we're done okay, well I mean, I'll get hold of Duffy, who runs our crts or Investor Relations and we'll get beyond that and then we'll have the follow up calls, but really appreciate you being here today Im glad you got to ask your questions I know, there's one or two that we won't get too, but we thank you all for joining US today, we'll see you at the City conference next in the work in a few days right. Okay sealant. Thank you bye bye.
This concludes today's conference you may disconnect your lines at this time and thank you for your participation.