Q2 2021 Green Dot Corp Earnings Call
[music].
Good afternoon, and welcome to the Green Dot Corp, second quarter 2021 earnings conference call on.
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Please note. This event is being recorded I would now like to turn the conference over to Alison Leubert Vice President of Communications. Please go ahead.
Thank you and good afternoon, everyone. Today, we are discussing green dot second quarter 2021 financial and operating results. Following remarks, we'll open the call for questions on <unk>.
Recent earnings release that accompanies this call and webcast can be found at IR Dot Green Dot Dot com.
As a reminder, our comments may include forward looking statements and expectations regarding future results and performance.
Please refer to the cautionary language in the earnings release, and and Green Dot filings with the Securities and Exchange Commission, including our most recent form 10-K and 10-Q for 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 that do not conform with generally accepted accounting principles.
To take a clarity unless otherwise noted all numbers, we talk about today will be on a non-GAAP basis information may be calculated differently than similar non-GAAP data presented by other companies.
Quantitative reconciliation of our non-GAAP financial information to the directly comparable GAAP financial information appears in today's press release.
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Now I'd like to turn to turn the call over to Dan.
Thank you Allie.
Greetings, everyone and thank you for joining us.
We are pleased to share the results from our second quarter, which significantly exceeded expectations and all 3 of our reporting segments outperformed our internal forecast.
And some timing considerations and also contributed to the Q2 I'm sorry.
Our consolidated non-GAAP revenue grew 19% to $358 million and we delivered EBITDA of 63 million and non-GAAP EPS and 68 cents.
This continues to be a remarkable year of unprecedented circumstances, including the shifting tax season, and filing deadlines and stimulus new customer behaviors and trends and other dynamics and have impact for our industry across the board.
The good news for US is when normalizing for those factors and stripping down our results for the core fundamentals for second quarter showed ongoing strength and momentum and reinforce our confidence and our operations and strategy moving forward.
Last year, we said our intention is to bring together a highly capable leadership team streamline and strengthen our platforms and deliver exceptional digital banking and payment solutions to our customers and partners.
We shared our belief that these initiatives would take some time to bear fruit and as.
As evidenced by our Q2 financial results our plan is working.
We will be raised and our annual guidance slightly based on these results, which Jeff will expand on shortly.
Before I pass it over to him I'd like to take the opportunity to share a few highlights from the quarter.
As a reminder, we now break down on numbers into 3 key segments first our consumer segment, which includes green dot retail and direct businesses second our <unk> segment, which includes bass for banking platform services, and our employer business brand and as rapid.
And third our money movement segment, which includes our tax processing business TPG and our money processing network also known as Green Dot network for GDS.
Starting with our consumer segment.
And of our business when normalized for stimulus continues to deliver solid year on year growth. Our consumer segment. Overall has nearly 4 million active accounts and close to 1 million direct deposit accounts.
Although we experienced a decline and active accounts of 3%, which we believe is due to the stimulus timing, we saw purchase volume up 5% and our direct deposit accounts increased 2% year over year.
1 of the most meaningful and exciting achievements in this segment was the launch of Goto Bank and retail.
This clearly illustrates green dot is power and competitive advantages and combining our best in class products with a tremendous reach and capabilities of our retail network now.
Now our top rated digital bank designed for the 100 million plus Americans living paycheck to paycheck.
Okay and available and more than 40000 retail locations.
And why.
<unk> Bank is now and Walmart dollar General 711, and family dollar and we will be aggressively adding to that list and the second half of the year.
Our retail network is unsurpassed and its reach with more than 90000 locations nationwide. This is more than all of the bank branches and America combined.
Ability to display and market, our Goto bank products and crosses fast retail network is a powerful competitive advantage for growing our business.
It builds brand awareness trust and loyalty.
We also announced that Walmart money card accounts are now demand deposit accounts, even Walmart million plus moneycard customers access to more traditional banking and checking account features.
And we have been pleased to see our consumer friendly overdraft being used by more and more customers at no charge.
And fac and the second quarter, 67% of Goto bank customers, who use our overdraft feature used its fee free.
Tools like this can be a lifeline to customers, who would otherwise be unable to cover critical expenses.
It is our belief that giving customers flexibility and control on encouraging financial accountability.
For the best outcomes for customers and that's exactly what our consumer from the overdraft is designed to do.
Wrapping up the consumer segment you.
You May ask and we recently announced new partnerships with Experian and finished D, which are aimed at helping consumers and improve their credit and overall financial situations using more seamless and secure tools and channels.
These solutions illustrates our commitment to understanding and addressing the real needs pinpoints and bears affecting the 100 million plus Americans living paycheck to paycheck, and given and seamless and intuitive tools and features and offer them a leg up.
Yeah.
Moving over to B to B, which includes banking as a service for banking platform services and our employer platform rapid and we've made some notable strides on this segment as well.
Starting with banking platform services Green Dot partners for some of the most highly respected and innovative brands and the world such as Apple Amazon Uber into Walmart and cabbage to design and deliver seamless banking and payment solutions to their customers.
And the second quarter cabbage from American Express and Thats, a much anticipated launch of its new business checking account, which is powered by green dot.
Cabot's checking give small to medium sized business owners see free and frictionless business checking account services.
We are committed to serving and innovating on behalf of this important customer segment and are thrilled to be partnering with companies like cabbage and others to power the millions of small and medium sized companies that are a growth engine for our economy and will benefit from better financial tools and services designed to meet their needs earlier.
Early results for average checking and our other small business products show demand for these types of solutions is strong and we are excited to continue investing and innovating in this space.
We're making great progress with our partners as we continue investing in and strengthening these relationships.
Now over to our employer platform business Brent is rapid.
This business saw solid growth in Q2.
Revenues were up 29% year over year and quarterly actors were up 20% year over year, we added 348 employers during the quarter, bringing our total to nearly 5200 small and medium sized businesses. This was a 9% year on year increase compared to 2020.
Okay.
I'll wrap with our third segment money movement comprised of our money processing and tax processing businesses.
A higher than expected results and Q2, while making progress on a number of important milestones.
Starting with mine and processing also referred to as the Green Dot network for GDN.
We launched 4 new GDN partners, including fair Fintech lend up dabble in Greenwood and contracted an additional 2 new programs with current partners pay active and ADP during the second quarter.
We also partner with paying for me to make it easier for millions of Walmart customers to pay bills, using cash and Walmart stores and we.
Plan to extend this convenience to more major retailers on our network and coming quarters.
Judy and barcode reload and painted product known as cash and a 32% increase year on year growth due to new partner launches and retailer footprint expansion.
And we expanded Judy and fraud control capabilities by introducing geolocation capture on reloads.
We are consistently rolling out new and enhanced integrations with some of the largest retailers and the world and we will continue adding solutions like paint and E cash and others further increasing the value and usefulness of the Green Dot network.
Now looking at our tax processing business.
Before jumping into the quarters performance, we're very pleased to share with the Doj has approved our acquisition of Republic bank's tax refund business and we're working toward Q3 closing.
As we shared earlier this acquisition presents strong synergies and significant growth opportunities, particularly as we prepare to introduce new products to tax losses from clients.
It also adds further scale and diversity to our already strong tax business, including tax related underwriting and lending capabilities, while strengthening our core tax solutions platform and setting us up for long term growth and success.
We expect the Trs business to deliver incremental EBITDA of 13 to 16.002 million 22 with additional synergies in 2023 and beyond.
We appreciate the support of our regulators and this process and we'll keep you updated on the transaction as we are working hard to close as quickly as possible.
As for our Q2 results for TPG, it's important to note, how shifts and tax filing deadlines and other dynamics and delays in 2020 and 2021 impacted volumes each quarter.
Setting these quarterly shifts and volume side, we expect results for this part of the business to be relatively flat for the full year compared to 2020.
Yeah.
And I'll wrap this segment by acknowledging how much effort has gone and the strengthening and enhancing our tax processing business and platforms by our it group and the team at TPG and we're launching new.
New products and services aimed at helping the 30000 plus tax repairs rely on us to better serve their clients.
The investments, we made to sustain and bolster this business will benefit us significantly and years to come, particularly with the acquisition of Trs, which expands our reach and capabilities and ultimately our bottom line.
To summarize and.
As I've said before 2021 is a year of both investment and growth.
We are pleased with our growth and the second quarter and and affords us the ability to reinvest back into areas that presents significant opportunity and potential like go to bank.
This has been a great quarter.
Mark by stronger than anticipated results and progress on a number of important milestones.
We are becoming a leaner stronger more focused company.
Still a lot of work ahead to capitalize on the plethora of large scale opportunities we are pursuing.
However, the evidence continues to show that our dramatic turnaround is materializing.
And it is exciting to see the momentum build and our hard work and new mindset begin to pay off.
With that I'll pass it over to Jeff to give you a breakdown of our numbers.
Thanks, Dan and good afternoon, everyone.
And I'll cover our strong second quarter results and provide thoughts around financial performance for the remainder of the year, including raising our guidance for both revenue and earnings.
And the second quarter, all 3 of our reporting segments delivered year over year revenue growth and <unk>.
Saw tax refund volumes rebound from a significantly delayed tax season Q1.
All in our consolidated non-GAAP revenue grew 19% to $358 million, which was an acceleration from the 9% growth and Q1.
Illustrating our emphasis on maintaining a fixed cost structure contribution margins were exceptionally strong which resulted in an adjusted EBITDA of $63 million and non-GAAP EPS of <unk> 68 assets.
Our results for the quarter exceeded the guidance, we provided during our last earnings call and.
I'd like to spend a moment and covering some of the moving pieces.
The beat on on our adjusted EBITDA guidance can be broken down into 2 primary categories.
The first is better than anticipated performance of $9 million.
We have been and continue to be cautious with our guidance in light of the lingering effects of COVID-19 on the economy.
And the economy is more stable now and it was a year ago. However, we are still experiencing a very dynamic environment and therefore are forecasting all the potential variables has been a challenge.
Our consumer services and <unk> services segments, each performed better than we anticipated.
And a strong gross dollar volume growth normalizing for stimulus.
And a better margin flow through on the related revenue.
The second category driving the material upside in Q2 with the timing benefit of roughly $12 million.
The tax season recovered faster than we anticipated and $4 million of the forecasted earnings from our tax processing business shifted from Q3 to Q2.
And portions of our growth oriented investments such as marketing spend and hiring plans to support our new modern banking platform were pushed into the second half of 2021.
Turning to liquidity, we continue to produce substantial cash flow generating $190 million of operating cash flow year to date.
Down year over year due in large part to the timing of corporate tax payments and our cash at the holding company at quarter and was $172 million.
Our cash balance and the strength of our operating cash flow together with our $100 million revolver available to us for.
US with sufficient liquidity to invest and our strategic initiatives.
Dan mentioned, we received approval from the Doj to proceed with our acquisition of the tax processing business from Republic Bank Corp. We expect to fund that acquisition with a combination of our revolver and cash on balance sheet.
Focusing on our segment results.
And our consumer services segment gross dollar volume and the number of active accounts declined year over year by 6% and 3% respectively.
These declines were largely due to very challenging comparisons created by the timing of stimulus programs in 2020 versus 2021.
Excluding stimulus funds in 2020 gross dollar volume and our consumer services segment increased 9% year over year.
Lastly, our direct deposit active increased 2%.
Despite the gross dollar volume headwind from stimulus revenue and our consumer services segment grew 12% on higher purchase volume of 5% largely attributable to stimulus funds received and the first quarter of 2021 being spent and the second quarter of 2021 and organic growth from products and both our retail and direct divisions.
And the continued rollout of our new overdraft protection programs.
To reiterate my remarks on prior earnings calls the impressive performance in this segment is a stark contrast to the declining revenue growth rates over the last few years and while stimulus has undoubtedly provided a tailwind our strategic focus is creating organic momentum.
Expenses and our consumer services segment increased year over year, and our margin declined because of higher third party call center support costs to meet the increased demand and our customer service center as a result of the federal relief programs.
As I mentioned on our last call and improving our customers overall experience and building a service infrastructure capable of handling a larger ecosystem is 1 of our growth oriented investments from 2021 and will be a focal point and the second half.
Expenses also increased due to the timing of marketing expenses to for.
Our recently launched <unk> product.
And growth and transaction losses due to the year over year increase and purchase volume.
Overall, our growth oriented investments resulted and the consumer segment profit declining by $3 million or.
For 4% as we prioritize and investments and customer experience and marketing.
Okay.
And our <unk> services segment gross dollar volume and purchase volume grew year over year by 43% and 3% respectively. While the number of active accounts declined 4%.
Like our consumer services segment, we believe that the decline and our active accounts was driven by the timing of stimulus funds.
The growth and gross dollar volume as a result of continued growth and our baas programs and employer programs even in the face of your of your headwinds from stimulus and the second quarter of 2020.
Overall segment revenue grew 47%.
Like our consumer segment, our <unk> segment experienced heightened transaction losses associated with <unk> and purchase volume growth and we experienced an increase and processing expenses in line with corresponding revenue increases and our best partner fees and interchange revenue.
Overall, our <unk> segment profit grew $2 million or 11%.
As expected the segment margin declined year over year, consistent with Q1 for our vast partner arrangements that contain a fixed profit.
Revenue and our money movement segment was up 1% year over year, driven by the rebound and the tax season and you.
You may recall that the number of tax refunds processed and the first quarter of 2021 was down year over year by 23% due to the significant delay and the tax season and.
And Q2, our tax refund processing, we're up 118 per cent and on a year to date basis, our first half volumes have recovered to flat.
The number of cash transfers reprocessed and the quarter were down 18% as we discussed on our last earnings call. We have the headwind associated with our decision not to renew significant reload partner and Q4.2020.
However, the loss volume and revenue came at a low margin for the bottom line impact has been muted.
Overall segment profit increased $10 million.
Or <unk> 37 per cent.
Now I'd like to focus on guidance for the remainder of 2021.
We are raising our non-GAAP revenue guidance in light of our Q2 performance and early trends, we're seeing and Q3.
To a range of $1.33 billion to 135 billion.
We are also raising our guidance range for adjusted EBITDA to $215 million to $225 million and our non-GAAP EPS range to $2.13.
For $2.27 assets.
Based on the midpoint of our adjusted EBITDA range. The implied second half earnings is approximately $84 million.
As we have shared in our last 2 earnings calls, we believe strategic opportunities exist in 2021 to reinvest profit upside back into our modern banking platform customer service and go to bank. Additionally.
Additionally, timing matters I discussed previously shifted $12 million of profit from the second half to the first half keep in mind that we expect our corporate and other costs to increase from the second half for the year as we invest and our new modern making platform.
We expect this investment to begin delivering a payback in 2022 with a reduction and processing expenses, which have become more substantial and 2023.
We're excited about the progress, we're making and the milestones we've achieved thus far.
Net re accelerating top line is a positive indicator that we are on the right track, we are committed and focused on our growth oriented investments and 2021 and believe it will deliver compelling expected returns.
These investments coupled with our roadmap for product innovation will help us further our mission of being the go to financial partner for hard working Americans and small businesses to empower their financial wellbeing.
With that I'll turn it over to the operator for questions.
We will now begin the question and answer session to ask a question you May Press Star then 1 on your telephone keypad.
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At this time, we will pause momentarily to assemble our roster.
And our first question will come from Bob Napoli of William Blair. Please go ahead.
Thank you Ken.
Congratulations nice quarter.
Dan and Jeff good to see.
Yes.
So just I mean, a lot of things to dig into there, but net and.
And the B to B.
Services, I think Thats, where you had the largest upside relative to our expectations could you maybe give a little more.
Color on I mean.
The best partners and the revenue growth, there and what kind.
Kind of how you reef total debt business.
If you would.
Yes, I can comment Bob this is Jeff on.
On the performance on the revenue side, So first and foremost you can see that.
There was really strong gross dollar volume growth from the quarter up 43% and the <unk> side of the house, so and that's.
That that GDP growth is.
Coming largely from continued expansion of our some of our mature portfolios and programs with some help.
With some of the newer programs, we launched in late Q4, but predominantly it's that's our mature programs continuing to ramp and even with the.
The headwind on stimulus, we still see a large influx of GDP coming through.
Some of the programs.
Or being used as a PTP platform others.
And just continue to expand their active accounts and their marketing campaigns et cetera.
And partially offset by some headwinds from some of the programs that.
Or impacted by Covid starting in late.
Q2 early Q3.
So all in and sort of organic growth coming from those mature programs with some help from the from the newer programs.
Okay.
And then maybe just a follow up on day.
Go to bank, the Walmart moneycard and the conversion of the.
Maybe I hope you can give some growth metrics on greater banks, specifically, but as it relates to the Walmart moneycard the conversion of debt to DDA accounts, how meaningful it seems like.
<unk> shift and the strategy there that could could be meaningful and I'd love a little more color on that.
Alright and share Bob.
On that.
The switch of getting the Walmart money card to admit demand deposit accounts is it that is now clearly it's a bank issued accounts no longer a prepaid card and.
And so with that then.
A very consumer friendly overdraft product that we've created a launch and now Walmart can extend that to their card holders and so.
It's really a sign of a few things 1 it's assignment.
The true value of the product the overdraft program that we have.
Walmart.
And is very protective of their customers and rolling and rolling out products that really serve them and the customers embrace so and.
And I think it's it really.
Speaks well for the product and we've got out there and the product is.
And even though 67% on overdrafts are fee free because customers can cure them without a fee.
Still a profitable program. So it will benefit both us and Walmart by having a Walmart money card customers use it.
And then the other and more important as you know it really.
And it's evidence of the wonderful relationship we're building with the new financial services team at Walmart and how we are bringing not just walmart, but bringing all of our partners.
Real solutions to help solve the pain points and the challenges of working Americans and this country.
And the go to bank.
Go to bank is doing really well so I mean, we don't we don't share the specific metrics on that but.
And that is.
Where we're still inside the consumer segment or the green dot products that we have out at retail and then they go to bank products and.
We tried to illustrate and that.
Narrative and I do appreciate you staying awake, Bob during that call as I listen to myself I realize I better take some accident.
[laughter], Alright, gosh, I think Josh and I apologize for everybody right now I'm gonna stay at once or do better next time, I put myself to sleep with that 1.
So I don't think it came across and the scripts I mean, how are you.
We've got go to banks now racked and 45000 retail locations.
And I'm, sorry by day, and Challenger maker Neo bank out there that can do that and.
And so when we talk about the power of our consumer segment and the ability for us to build brand awareness and go to bank. When you see that card on display inside of retail and you're also getting.
Direct messages of how we reach them through TV through online.
And it builds and extremely powerful brand and when we go to.
Okay. Thank you Dan appreciate it.
Thank you Bob.
The next question comes from Andrew Jeffrey of True Securities. Please go ahead.
Hi, Dan.
Fortunately I've got a cup of coffee sitting next to me here. So we're all day.
That's great. Thank you and I think it's I think it's I think it's a compelling backstory.
Baxter, Oregon and more focused than.
And peers.
Can you elaborate a little bit on the go to bank unit Economics, I think you've mentioned in the past, perhaps a 6 month breakeven and.
And maybe if you could just elaborate and deep.
<unk> that a little bit and and I just wonder are we at a point this year where for.
Perhaps the breakeven and get extended and as you invest for share and then they come back down and 22 and 'twenty 3 just kind of thinking about.
And the investments and how we should frame that was up from a unit perspective.
Sure and and routes.
And I will talk just terms of like the unit economics, because we talk about kind of the profitability of the entire program.
On a a nuance how you play that because we have quite of a prime the pump to get at is a certain based on customers that will then be able to generate the free cash flow to fund go forward marketing, but on a unit basis, and what I can share and I have shared.
Many times before is that.
When we get a customer on direct deposit and would go to bank and we also offer the customers access to our secured credit card. We also offer customers access to consumer friendly overdrafts and it becomes a fee free card if they're on direct deposit and.
And so if we're looking at the unit economics, just on our direct deposits group of customers on go to bank.
Some of the new secured credit cards, a portion of that music consumer friendly overdraft.
When we blend and that group together and then look at the average unit economics per customer.
And we could be looking at 15% to $20 a month of contribution per account and not revenue but contribution so.
I just get so bullish on this business and this program and I also don't have sphere of competition and just because the total market. We believe is $100 million.
Working Americans living paycheck to paycheck is the available market.
And if we have a customer thats generating $20 a month of contribution.
That's $240 a year, so I'll make that conservative and cut it from 240 to 200.
And we get them.
Customer and our direct deposit pool generate 200 hours a year of contribution for us.
If we get a million of them, that's an incremental $200 million year contribution for the company.
And less than 1% on what we see as a total available market and.
And to acquire that customer.
And on direct deposit and.
There's a lot of ways of people cut those numbers.
And Youll see and the press by you know other folks are out there. They are trying to always raise money to fund their engine.
And they will try to do quota very low customer acquisition cost number.
And.
And I look at we look at.
At the end of the day, what does it ultimately caused us to acquire a direct deposit customers.
And we May go out and acquire 20 customers.
And ship 20 cards and of those 20, a certain percentage get funded up those that get funded a certain smaller percentage still become direct deposit customers.
And we look at all the costs to acquire 1 single direct deposit customer it ranges and.
And between 101 hundred $30 to acquire a direct deposit customer.
There's there's your math Andrew tour its about a 6 month payback on a direct deposit customers.
Hope that helps.
Yes, it does help bankers really important.
Understand.
Yeah, and then just as a follow up.
I'm sorry.
Yes go ahead.
Hi.
My follow up.
There's been some chatter and idle.
And I know.
And I noticed that it's kind of on.
<unk>.
On the Durbin Amendment Reg.
And 2.
And I don't think Theres any any specific discussion on the durbin and carve out for.
And for prepaid or for smaller shops do you have any view on.
Thanks for the risk.
Debit interchange.
And I don't have any view on that right now and I see the same kind of chatter.
That's out there.
What.
So I really don't I don't have any comment on at this point on.
And they were well below the asset size banks from a Dell and maintain our German exemption.
Okay and I appreciate it thanks.
Thank you Andrew.
The next question comes from Ramsey El <unk> of Barclays. Please go ahead.
Hi, Dan Thanks for taking my question this evening.
And the consumer segment.
And there was more revenue per active account versus our model and I know theres a lot of moving parts, especially with stimulus, but I'm. Just wondering if you could comment on that metric over time kind of going forward should we shall I read that as increase it seems like it's ticked up over the over the months and years is that increased engagement should we think of that as kind of continuing.
Northward.
And you said that day.
I'll just I'll give the optimistic CEO answer and then Jess you can see if you wanted to.
Yeah, Ramsey I would say that yes.
No.
We have 4 million active accounts and our consumer base and so on.
And I want to get that out there again whenever I get a chance to give everyone kind of calm.
Context in terms of the size of just our consumer business compared to other offerings that are out there that are getting some evaluations.
So our current basis $4 million and roughly $1 million of them are on direct deposit.
As we continue to grow and invest and Goto bank and drive that as the best Bank on the planet and for working Americans.
And I expect that our percentage of direct deposit customers as our total active accounts will increase.
And a direct deposit customer by their nature, when they make our product their bank accounts, yes, they will be increasing and revenue per account. There. So I would say that you are correct that the that the average revenue per active accounts and the consumer segment should be trending upward.
Okay.
And I guess.
Along similar lines.
Can you talk about the.
The product pipeline with go to bank I think there is a you know originally the conception of it you might add functionality to that platform over time, I don't know what that might be bitcoin.
Trading or stock related stuff for PDP or Theres, all kinds of things you can kind of add to it is that is that still a roadmap should we expect some some kind of product announcements associated with go to bank and the wood.
Over the near and medium term.
Yes, you should expect we'll be adding feature functionality and benefits of the products continually and so we will.
And so but it certainly is.
Half of this year, we will add some feature functionality and benefits and we intend to be doing so on all along and it keep in mind that.
And we're focused on creating products.
And to serve the needs and solve the pain points.
Working Americans and Laura monitoring from consumers and so.
Don't expect us to be you know.
Offering products and features and functionality that would be directed towards more of a high income consumer or be looking more for things that really really benefits from our customer base, but yes, absolutely. We've got a very robust product roadmap, that's a very unique and powerful things we plan to be rolling out and the and the near term.
Great terrific. Thank you.
Thank you rich.
The next question comes from Andrew Schmidt of Citi. Please go ahead.
Hey, Dan Hey, Jess Hope, you're doing well thanks for taking my questions.
I wanted to actually dig in along the same lines and the last question, but more around direct deposit active account growth, obviously this quarter a fairly tough comp.
From an active accounts perspective, but.
Between adding more distribution.
Moving a product functionality and things like overdraft, which can help the customer acquisition retention and things like that.
And what's the right way to think about direct deposit active account growth over the intermediate term.
And once we get through this sort of the.
Period of tough comps and start to normalize a bit.
Andrew when you ask whats the right way to think about direct deposit accounts.
Consumer service line and is typically yeah.
Yes.
And we kind of like I say, we're going to get through this these this anomaly of stimulus payments and delayed tax season and such.
What what I expect to see is.
Got it.
And consistent quarter on quarter growth and our direct deposit customer base.
Which.
Q2 to 3.3 to 4.4 to the first quarter and then typically historically, there's always been a slight drop.
From Q1 and Q2.
Q1 is a is a quarter of a pretty strong acquisition for direct deposit customers during tax season, and then there is always a.
Our percentage of customers, who get their tax refunds on a direct deposit basis in Q1.
And on almost.
We're not 1 and done and customers, but theyre kind of seasonal and that they only use the product for tax season, and then you'll see a drop from Q1 and Q2 and then from that point forward do you see that you see quarter on quarter increase and direct deposit accounts.
And that's that.
That's what we that's what I have seen historically last time around that's how about IC and other other businesses and I follow and Thats, what I fully expect to see here at Green Dot and it's again.
<unk>.
The total debt market.
Is tremendous.
We have marketing dollars and we're going to spend and we know that when we spend those dollars properly and.
And thoughtfully.
We're going to acquire a certain number of direct deposit customers and as long as our product is sound and our customer service is good and we have decent retention.
We're going to see growth and direct deposit customers each quarter provided that our marketing spend is consistent.
Okay. That's helpful. So consistently positive.
Direct deposit active card growth on Europe.
Okay.
No absolutely and that's what I like.
And I've I've tried really hard since I got here and if it did not sound arrogant I mean, it's just it's just fundamentals it just works.
We've done that before you spend the margin dollars you get the customers because theres plenty.
There's plenty of them out there and there's also there's millions coming in and every year it'll become adults and need a bank accounts. So theres just the market's there if you spend the money you acquire the customer and keep the customers. They spend the dollars and you get the growth it really is and the and Thats Andrew.
And I believe is.
It's just that simple, it's just that simple and that's where I just have such confidence that we will be able to grow the business not easy, but it's true.
Yes.
Keep it simple right got it.
And then just for my follow up modern banking platform. Hopefully I was hoping you could give us an update on where we stand with that and selected vendors whether it implementation and started and then.
When we should expect the bulk of the work complete and 2022.
Yes.
Yes, yes, we have selected our software vendors.
And we're working and we're in more work has begun with both of them both of them and.
I would say that we are probably.
Jess.
Keep me.
Keep me honest.
And conservative here, but your line.
First quarter second quarter of 'twenty 2 is when we expect the bulk of the work to be done and we expect to be.
By before this year is over we will begin.
Having products active on our new platform.
Yes, yes, migrate and savings with the intention of having.
And having being substantially complete and Q2 of <unk>.
And in 'twenty 2.
Got it thank you Dan Jeff I appreciate it.
Thank you Andrew.
The next question comes from Steven Kwok of <unk>. Please go ahead.
Alright, Thanks for taking my question first 1 I have was just around how we should think about the cadence between the third quarter and fourth quarter given that there were some things that were shifted between third and second quarter.
If you could help that would be great.
Sure Steven I'll take a crack at it for.
On a revenue perspective.
We would expect Q3 and Q4 on a year over year basis to be up high single digits year over year.
From the from an EBITDA standpoint, and we talked about and implied from the $84 million and the second half and I did.
Anticipate that being spread evenly across the 2 quarters.
And you should expect sequentially, you'll see a decrease naturally and adjusted EBITDA as we get further from <unk>.
Stimulus and Q1 Q2, and then a tax season substantially completed by the end of Q2 as well.
Got it that's helpful. And then Dan you mentioned about the investment opportunity and stuff could you just talk about perhaps like what type of ROI as youre seeing and has that changed.
For your time at Green Dot.
Steven can you I'm, sorry explain when investment opportunities investment and marketing and go to bank or what are you referring to.
Just around the.
The areas that you're focused on and include.
Including go go go back what you mentioned on.
Understand.
Yes, so and we talked about and investment opportunities I think what we've referred to as adjusted invest marketing dollars.
In terms of driving Goto bank and.
And driving customer acquisition with Deutsche Bank, and I've already given the unit economics on that so I think that the return on investment there is.
And there's very strong and so we will be very aggressive for those dollars and then the other areas are and of investing is more of investing and internal systems and internal operational improvements and the business. So around the modern banking platform. As 1 example customer service tools as another example, so thats when we when we speak of a messy.
And that's what we're referring to.
Understood. Thanks for taking my question.
Absolutely. Thank you Steven.
This concludes our question and answer session I would like to turn the conference back over to Dan Henry for any closing remarks.
Yeah, Hi.
I just wanted to thank you all for for the time and the interest here.
I'm very very proud of what the team has accomplished since my arrival and I think that this quarter.
And really illustrates that.
Some of the fundamentals that we're putting in place are really beginning to take route. So excited what we delivered this quarter.
We're excited as this.
Just journey continues thank you all.
The conference has now concluded. Thank you for attending today's presentation and you may now disconnect.