Q2 2023 Green Dot Corporation Earnings Call
Yeah.
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Good day and welcome to the Green Dot Corporation second quarter earnings Conference call.
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I would now like to turn the conference over to Tim Willi.
Senior Vice President of Finance. Please go ahead.
Thank you and good afternoon, everyone. Today, we are discussing green dots second quarter 2023 financial and operating results. Following our remarks, we'll open the call for your questions.
Our most recent earnings release that accompanies this call and webcast can be found at IR that green Dot com.
As a reminder, our comments may include forward looking statements and expectations regarding future results and performance.
Further to the cautionary language in the earnings release and in Green dots filings with the Securities and Exchange Commission.
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 will refer to our financial measures that do not conform with generally accepted accounting principles for the sake of clarity unless otherwise noted all numbers, we talk about today will be on a non-GAAP basis.
Formation, maybe calculated differently than similar non-GAAP data presented by other companies.
A reconciliation of our non-GAAP financial information to the directly comparable GAAP financial information.
In today's press release.
<unk> of this call is property of the Green Dot Corporation and is subject to copyright protection now I'd like to turn the call over to George.
Good afternoon, everyone and thank you for joining our second quarter 2023 earnings call.
At Green Dot our mission is to give consumers and businesses the power to banks seamlessly affordably and with confidence.
We recognize that access to the banking system should not be a privilege.
Our core value of stewardship since we take care of something for others that is critically important to them, whether they are depositors or investors.
To fulfill this mission and live up to our values. We are executing our strategy of integrating banking technology and network platforms. So that we may provide market, leading financial tools that low cost.
Each of these platforms are already in place we own the bank, we own the technology and we own one of if not the largest cash money movement and payment networks in the U S with our Green Dot network.
In addition, we have a diverse set of distribution channels, where we distribute demand deposit accounts directly to consumers or through retail locations.
I also support all sizes of businesses through our distribution of rapid pay card demand deposit accounts, we facilitate cash flow management through our tax products group for thousands of additional businesses.
And we support some of the largest companies in the world with sophisticated embedded financial solutions tailored to their particular needs.
To fully realize the potential of this strategy. We are highly focused on integrating these assets enhancing our technology and optimizing our product road map. So we can bring products to market in a more agile and timely way.
So how are we doing on this journey.
Jeff will cover our financial results in more detail, but for the second quarter. Our non-GAAP revenue was up 2% compared to the same quarter in the prior year, while both non-GAAP and GAAP earnings metrics declined.
This decline is attributable to a variety of factors, namely the de conversion of several partners. The ongoing evolution of our direct business as we let several legacy brands a trip or sunset.
We focus on the growth of go to bank the impact on partner interest sharing from higher interest rates.
And difficult year on year comparisons as we realized several onetime benefits and expenses last year.
Despite these challenges and headwinds as we move forward, we see evidence of stabilizing account trends the growing pipeline and no shortage of opportunities for Green Dot is the market for embedded finance continues to evolve and grow.
Along these lines I am pleased to confirm our newest staff embedded finance partner, which we have referenced in previous calls.
<unk> a global leader in human capital Management Technology has selected Green Dot as a U S based partner for day for smaller <unk> market, leading on demand pay solution.
We look forward to announcing a national launch and sharing more details of this program a partnership in the coming months.
I am also very pleased to announce we have signed a meaningful new partner enough Financial Service Center channel, which is part of our consumer segment.
We are thrilled to launch a new partnership with the Pls family of financial service companies to offer demand deposit account among other tools and features to their customers.
Tls is one of the nation's largest community based financial service providers and we have a shared commitment to providing the services and tools that empower consumers, particularly those in the LMI community.
Green dot could not be more proud to be working with ceridian and pls and I look forward to sharing more details on our partnerships in the coming quarters business development more broadly remains a key priority and as we complete the technology conversion. This is one of the areas, where we are redirecting our energies and focus while too.
<unk> thousand 23 is and remains a year of execution focused on internal initiatives 2024 will be the year of execution focused on building enduring revenue streams.
On last quarter's call, our Chief revenue Officer, Chris Ruble spoke about how we are instituting a more uniform regimented approach to how we go about identifying and pursuing opportunities and we are making significant strides in improving this model and our pipeline which is strong.
As it relates to our long discussed technology transformation I am pleased to share. We are now nearly complete with this process, having executed seven conversion events from our legacy processor to our new platform.
With the final activity is expected to be completed this month.
The Finalization of this effort puts us in a position to operate as a more efficient nimble and scalable company going forward.
This has been a two plus year journey driven by our legacy processors exit from the business. It's been a challenging road for many of our team members and are consuming focus for management, while we will have post conversion cleanup work remaining bringing this phase of work to completion allows us to redirect our focus and energy to other priorities and opportunities including.
Additional enhancements to our technology and product offerings and of course growth in.
In addition to being stewards of consumer deposits a responsibility we take extremely seriously. We are also stewards of shareholder capital, which is why we continue to focus on making expense management and margin expansion are part of our corporate DNA.
We are making significant strides in evolving our culture to having a dedicated focus on managing costs and allocating capital with a considerate and thoughtful approach.
While the current period is carrying excess costs due to the technology conversion, we expect those costs to abate as we move into 2024.
We will of course continue to make investments in our regulatory responsibilities and obligations in order to better serve customers.
In summary, we are making important strides on our journey, but we are only in the middle innings with plenty to do.
I want to thank all of our team members, our partners and our investors for coming along with US as we execute this strategy.
Now, let me hand, it over to Jeff.
Thanks, George and good afternoon, everyone.
Overall, our consolidated results came in line with our expectations and as George said, it was a solid quarter of progress towards our goals.
I'll walk you through our key financial highlights and then I'll provide color on our updated guidance for the year.
Our GAAP and non-GAAP revenue for the quarter grew 1% and 2% respectively year over year, while adjusted EBITDA was down year over year for the reasons George discussed I'll provide color on each of our segments.
First in our consumer segment as you know our consumer segment is comprised of both our retail and direct to consumer distribution channels. Overall. This segment is impacted by changing consumer patterns within retail the non renewal of a retail program.
And our dedicated focus on our go to bank brand in our direct to consumer channel at the expense of legacy brands that are now in run off.
While our retail channels impacted by secular change in the Nonrenewals a program we are taking steps to reposition this business.
Specifically, we are actively working with our retail partners on strategies that encompass a wide range of embedded account containing experiences that are designed to help our retail partners continue to build an enduring and loyal customer relationships through digital financial experiences not just products on shelves.
Also signed a new partner in Pls, and we're focused on making our cost structure in retail more efficient.
And our direct to consumer business, we continue to fully commit our marketing spend to support our go to bank brand.
As a result, we deliberately put legacy brands, such as rush account now and others into run off.
As mentioned on our first quarter call, we sunset some brands in the second quarter as we continue to move through our platform conversions. We had success in converting a portion of those accounts to go to bank as expected many did not convert and attrition of these legacy brands accelerated.
As a result of the attrition in legacy brands over the last two years.
And its own rapid growth <unk> bank has become a larger part of that channel and its growth rate will have a more pronounced impact as we move forward.
In the second quarter go to banking TDD to have strong year over year growth in direct deposit accounts of approximately 40%, which resulted in strong growth in revenue per account.
With that context in place now you can provide some color on the performance of this segment during the quarter.
Segment revenue was down 14% driven by the year over year decline in active accounts.
Revenue in our retail channel was down in the upper teen year over year, though I would note that excluding the impact of the non renewal revenue declines in the retail channel we are in the low teens.
The direct channel saw mid single digit declines in revenue consistent with the first quarter.
I believe it's worth pointing out that the decline in direct deposit accounts continues to moderate with its slowest rate of decline in over a year and the smallest sequential decline that we've seen in over two years.
This is fueled in part by some monitoring declined retail, but also in the direct channel is go to bank builds momentum.
Direct deposit accounts represent approximately a quarter of our total accounting segment indeed.
Indeed, the accounts are more highly engaged with higher volumes and revenues than non direct deposit accounts.
Revenue per account continues to improve as we drive deeper engagement rates, particularly with <unk> bank.
Helping to offset the attrition in legacy portfolios as I've said many times. This is an evolution, but we are encouraged.
We're seeing from <unk> bank and the impact it's having on the direct channel and the increased likelihood that it can help drive continued moderation in the rate of decline for the consumer segment overall and believe that we're moving closer to an inflection point.
Segment profit was down year over year by 27% due to the decline in revenue and as we discussed last year. We negotiated numerous one time benefits in our expense structure in the first half of 2022 and in particular in the second quarter of 2022, causing margin compression and making the year over year.
Year, a pretty tough comparison.
In the <unk> segment, which consists of our bass and take our channels aggregate revenue growth was 26% largely remains driven by our best channel where revenue was up approximately 30%.
Growth of one of our larger bass customers continues to power the topline while we faced headwinds on revenue enacted from the roll off of two best partners.
In the bake our channel our revenue and active account growth has moderated due to macro shifts in the temporary staffing industry, one of our primary verticals, where inflation and recession fears have impacted hiring decisions.
We experienced after declines in this vertical in late 2022 through May of this year and we saw a rebound in June .
Our revenue was also impacted by a shift in the mix of purchase volume that is weighing on interchange rates and changes in consumer ATM behavior.
That said strong sales activity and leading indicators in the core pay card product as well as continued growth in our EW, a offering gives us confidence that momentum in this channel should reaccelerate in the coming quarters.
Profit in the <unk> segment was down 23% as expected driven largely by the impact of client de conversion in the bass business and the dynamics I, just discussed and to take our channel.
We had margin compression from onetime expense structure benefits last year similar to our consumer segment and pressure on margins in the pay card business due to the lower interchange rate.
We face what we believe to be temporary pressure on revenue growth. We continued to invest in to take our business at sales momentum has been strong while also incurring expenses to support the launch of our newest SaaS partner.
Shifting to our money movement segment revenue was down 8% year over year from a declining cash transfer volume and timing of tax refund volume.
The Green Dot network business continues to see year over year revenue declines moderate from the mid teens in 2022 to a mid single digit decline in the second quarter of 2023.
Revenue declines remain driven principally from the impact of the decline in active accounts in our other segments. While continued growth from third party transactions up year over year in the mid teens helped offset some of the overall decline.
Third party programs now comprise over 60% of our total cash transfer volume.
Our tax refund volume was down year over year because of timing shifts versus last year on a year to date basis revenue in our tax processing channel was up low single digits year over year.
Profitability remained strong with flattish profits and some modest margin expansion in both taxing Green Dot network.
Our final segment corporate another reflect the interest income we earn in our bank.
Net of the revenue share on interest to be paid avast partners as well as salaries and administrative costs and some smaller intercompany adjustments.
Interest income net of partner sharing was down year over year as expected due to a higher rate environment.
As a reminder, the rapidly rising rate environment as 2022 created an imbalance between the blended yields we earn on our cash and investments and the rate we pay our best partners and effectively creates a headwind for revenue in this segment.
Salaries and other general administrative expenses were up just slightly from last year as our cost cutting efforts helped to offset the incremental costs associated with our technology conversions.
Now turning to guidance, we are reaffirming our revenue range of one $3 76 billion to 146 2 billion and expect to be above the midpoint of this range.
We are narrowing our adjusted EBITDA range to $182 million to $188 million, while keeping our midpoint at $185 million.
Likewise, we are narrowing our non-GAAP EPS range to $1 80 to $1 90.
We are encouraged by our results and trends in Q2, and the progress we're making towards our goals.
Turning to the back half of the year, let me provide you with a bit more color around that your models at a high level revenue should generally be evenly split between the third quarter and the fourth quarter.
It was about 40% of adjusted EBITDA and non-GAAP EPS in the third quarter and the balance in the fourth quarter.
This would imply a bit more margin pressure in the third quarter from the second quarter levels before rebounding a bit in the fourth quarter.
Now, let me provide a bit more color on the full year financial outlook for each of the segments.
In the consumer segment, we expect revenue and segment profit declined year over year in the mid teens.
Margins for the full year should approximate the full year margins that we saw in 2022 with sequential improvements in each of Q3 and Q4.
In the <unk> segment, we look for revenue growth for the year to be approximately 20% with flattish segment profits.
While full year margins should be down roughly 300 basis points from 2022, we should see sequential improvement in both the third and fourth quarters.
And the money movement segment, we expect revenue and profit to be essentially flat with last year.
In the corporate and other segment, we have an earnings headwind from higher interest revenue share.
In our Q4 2022 call. We provided an estimated headwind for 2023 in a range of $15 million to $20 million. This range has increased several million dollars in.
In light of recent rate hikes all.
All the while expenses should begin to reflect our progress in cutting costs as we move through the platform conversions for.
For the full year I expect our non-GAAP effective tax rate to be 23, 5% and the diluted weighted average share count to be approximately 52 million shares with that I'll turn it back to George.
Thank you, Jeff and as I look back on the first half of the year, we have accomplished quite a bit.
We're in the final stretch of completing the technology platform conversions and are on track to realize our goal of $35 million in cost savings and become a more nimble streamlined company.
Just as important this enables us to reallocate resources to focus on other areas and opportunities for the company.
Our newest SaaS partner Ceridian has been on boarded.
And we are excited to have Pls is a new customer in our FSC channel. While also signing over 300, new customers in our pay card and AWS business and six additional partners to the Green Dot network.
Lastly, we took moves to further reduce our cost structure, while increasing our investment in sound regulatory compliance and we continue to be very focused on driving a culture of efficiency and smart investment throughout the organization.
That said there is still plenty of work to do but I am pleased with where we are on our transformation and I am very grateful for the hard work and dedication of the Green Dot team as.
As we work to deliver on our goals for 2023 and beyond while also being good stewards of the trust and capital that our customers and investors have given us.
Thank you for your interest in Green Dot and now let's open the line for questions.
Thank you we will now begin the question and answer session.
To ask a question. Please press Star then one touch time to time.
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At this time, we will pause momentarily to assemble our roster.
Your first question today comes from Ramsey El <unk> from Barclays.
Please go ahead.
Hi, This is Sri on for Ramsey. Thanks for taking my questions. My first questions on the <unk> segment. So it came in well ahead of expectations.
Could you provide some insight on how much of the beat was driven by the roll off of the best contract non renewal versus the growth in the remaining bass and pay card business.
I'll take that one.
The beat in Bath, I think we made a reference in the prepared remarks.
Bass continues to power the topline results.
In particular, one of our best partners.
In principle is driving a lot of that growth and then that's helping offset some of the loss revenue from the roll off of the best partners to make sure I'm answering your question.
Yeah, absolutely that's helpful. And then just as a follow up wondering what when and at what pace through the associated associated revenues with the ceridian signing ramp up throughout the year or is that more of a 2024 impact and if so how should we think about the ramp and the corresponding P&L impact for next year. Thanks.
Yes, I think the impact of Ceridian in 2023 will be relatively small.
These programs take a while to ramp up so we just we just launched in soybean program.
So we didn't have obviously a more material impact in 2024, and then Pls will launch in 2024 and ramp throughout the year.
And then both in the case of both programs there is an existing base.
We will attempt to convert and then ran.
<unk> new acquisition as well so like any of our programs I think it will take time for those to materialize.
Become more meaningful to the P&L.
Got it I appreciate it.
Thank you. Your next question comes from Michael Perito from K B W.
Please go ahead.
Okay.
Hey, guys. Good afternoon, thanks for taking my questions.
Hey, Michael I wanted to I wanted to start.
Some of the segment commentary that Jeff provided at the end there I think if I heard you correctly, the <unk> segment revenue year on year growth.
Now 20%.
I just wanted to make sure I heard that correctly and just kind of does that suggest a little bit of a year on year growth slowdown in the back half of the year relative to where you were in the first half is that is that correct.
I did say, 20% year over year for the full year.
In 2023.
With respect to second half versus first half I have to go back and look and see what.
I think partly youre going to have some of these SaaS partners that were rolling off.
I think in our first quarter call. We did mention that we had.
Some some impact from those programs in the first quarter.
Certainly I think has exceeded our expectations in the first quarter and then in the second quarter of those programs are essentially completely gone.
Got it Okay and have you guys just in terms of active accounts and deposits have you guys quantified, but whats left with the programs better are going to be gone in the next few.
Months here in terms of when looking at the end of period kind of Q2 numbers.
If my if my memory serves your I believe in the mass channel all those actors are gone.
Got it okay.
And then.
Obviously, the updated segment commentary and guidance is helpful. On the financial front, so maybe kind of a big picture question. You know a couple of the other more bank oriented bass providers. This quarter on their calls made comments about <unk>.
Some of the.
Competition.
Not necessarily increasing but kind of more velocity of opportunities from fallout from smaller players and other partners that we're we're just curious what you guys are seeing has there been any notable change in the competition in the Bath space in the last 90 to 100 days or so.
And if so.
Any kind of quality opportunities in the pipeline today that maybe weren't there six months ago or just wondering how that all kind of looks from your perspective.
Hey, Michael it's George So the answer in shortage, yes, there are more opportunities we think our pipeline is getting healthier.
In some of the previous calls we've had.
Where we've talked about the implications of the changing capital markets on our competition.
I think remain relevant.
Many of our competitors.
Raised their capital in.
Low very low interest rate environments.
And then went to market aggressively based on that low cost capital and obviously that capital is getting consumed and they're facing new capital raise obligations at a much higher rate.
Or.
Unable to sustain their business models with respect to.
The capital environment, and so that's all very positive to us.
Since we of course are well capitalized.
Strong cash flow.
Do not need to access the capital markets in any short term basis in order to compete so.
So I think in addition to just maybe some.
Less well capitalized providers, leaving the market.
Market the.
The potential market.
Participants the buyers that market's increasing.
In a sense that there are all sorts of businesses.
Their businesses are changing retail is a classic example of this where they.
Are having changing consumer patterns and behaviors and they're seeking to integrate financial services into those relationships.
And then that legacy retailer with bricks.
Bricks and mortar distribution point for a company like Green Dot now might be a embedded finance solution opportunity for us.
And so there is some sort of some changing market dynamics beyond just the capital markets as well.
Got it that makes sense.
Helpful guys. Thanks, Thank you for taking my question.
Thank you Michael.
Okay.
Thank you. Your next question comes from Matthew <unk> from JMP.
Please go ahead.
Hi, guys. This is Matt <unk> from Jefferies.
First question, just consumer services, our Peru decreased quarter on quarter I'm just curious.
You can just elaborate a little further on the dynamics there. Thanks.
Yeah, We had mentioned a roll off of a reload excuse me a retail program. We mentioned it as part of our guide for the full year earlier than our Q4 call.
So that has an impact on some degree on the RP in the consumer services segment.
Okay, so that will land.
Right Okay.
And then just on AWS.
Could you share any progress there I know, it's an exciting product.
I'd like.
There is some momentum.
That'd be helpful. Thanks.
Sure Matthew.
We were excited about <unk>, we remain excited about AWS the markets.
Spectacular opportunity for us.
The growth rate.
Admittedly small base.
Was extremely high this quarter within that business unit.
And importantly, there's a subtlety where in order for us to provide ease of UA.
And the market, we do integrations with different payroll packages.
Six months ago, our penetration into the market for payroll packages was very very small wares.
As of the end of this quarter were integrated into a very substantial portion of the U S addressable payroll.
Market, which allows our sales team to be much more aggressive.
Selling this product so.
So no change excited before still excited and it's going to be a great opportunity for the company over the coming years.
Got it thanks.
You bet.
Thank you.
Next question comes from Chris Kennedy from William Blair.
Please go ahead.
Yeah. Good afternoon. Thanks for taking the question George I mean, you've done a lot of changes at the company.
And hopefully in 2024, those are kind of behind you and when you think about how you're pivoting the company and the opportunities associated with embedded finance, how should we think about.
The growth of Green Dot going forward.
Well. Thank you for your question, Chris I mean I.
Do hope at some level. This change we're going through has a favorable and femoral characteristic to it so that it.
It's off a bit we will always be faced with change we are operating in a.
Dynamic world.
With technological change and business pattern change.
But our most immediate focus as I've mentioned in the past is to get our.
Capabilities integrated with each other so that we can provide a vertically integrated set of solutions to partners.
We're well down that path, we still have work to go that work will continue into 2024, but as I mentioned in our prepared remarks.
Keep in mind is as we come to work every day.
And try to motivate our team we're focused very much on <unk>.
Inwardly lithium technology change right now and that really consumes a lot of.
Intellectual capability.
That is about to shift and that shift is going to go from.
During that sort of work to focusing on externally on our market opportunities. We are doing that today of course.
But when we spend a lot of time on.
Some of the changes we've been managing it just inherently it takes away from some of these opportunities so thats going to be a big shift for us you'll see in our messaging and our communication and our pipeline.
And our announcements.
So and so that's going to be our focus in 'twenty four we're very very excited to be shifting to that focus here in the back half of this year now what does it mean objectively for growth.
I Cant guide you to any particular metric at this point, but.
The embedded finance market is tremendously vast we're extremely unique we have highly differentiated point of of.
Product offerings and capabilities.
And our other businesses that we don't typically think of as embedded financed by the way pay card DWA, our TPG tax processing businesses.
We're all extremely we're extremely optimistic about all of those opportunities and we think those businesses are all growth businesses as well.
And this year has been a difficult year.
As we've had some some of these rollouts and in our discussion today.
But those are going to be behind us shortly our trading portfolio is going to be behind us.
So we're excited about the future. We think we have a lot of opportunity to dramatically change our growth rate. So I'll stop there I've rambled on a bit let you ask your follow up.
Yes, I guess.
Is it.
Is there going to be a time, where you're going to kind of lay out what your long term growth objective and will be for the company.
Yes, absolutely so.
In the short term I should say first of all our cadences.
When we do our next call.
Reporting our third quarter results, we hope to make some additional qualitative more qualitative comments about these topics and then when we do our Q.
Q4 call in early 2024, obviously, we'll be giving guidance about 24, and we hope to be able to wrap within that guidance more at least directionally.
On a quantified a quantitative basis about what we think the business might look like over a multiyear period.
Okay. Thank you.
Youre welcome.
Thank you again, if you have a question. Please press Star then one.
Your next question comes from George Sutton from Craig Hallum.
Please go ahead.
Thank you George you mentioned, you're in the final stretch of the Tech conversion can you just tell us what exactly is involved in the final stretch.
We have two remaining conversions. So I mentioned, we had seven we've done seven we have two remaining scheduled to be done in the next couple of weeks.
And when you say next couple of weeks, so should be completed I don't know how quickly or conversion.
Necessarily tick.
Well.
The <unk> team that has to actually execute these conversions and stays under 24 hour.
Watch as the conversion gets managed through an evening late at night.
So it's not it's not the the the work is involved in leading up to the conversion of course in preparing platforms.
And doing all you can to manage the process effectively and then we discuss the conversion happens late late in the evening.
So the vast majority of all the work associated with doing.
Each of the nine conversions has already been complete.
But nevertheless, there's two events remaining but I would clarify George that.
I don't want to make.
This is a significant episode I don't want to make too much of it I mean, we will.
And plan to continue enhanced technology.
Develop new capabilities.
As we deploy our product roadmap. So you know we're a technology company, we're going to be we're going to continue to have.
Investments in technology, but that's what's involved with the conversions as they remain.
Got you, Thank you and Jeff you.
Ran through real quick brands that you had sunset. It could you just walk through the brands that you sunset at and what kind of conversion you were able to make into the go to bank.
Yes, we are I would say the two primary brands that we sunset one was called Rush card, which green Dot has acquired backing.
2017, I believe and then count now it's the program that.
It was acquired back in 2015, so both purely direct to consumer businesses.
And I think we've we've.
When you're trying to convert existing customers to a new product like go to bank.
This is not unique to us there is a generally youre not going to get the vast majority of those accounts to migrate.
So I would say with account now we had less success.
And more success with rush, but generally the rule of thumb is somewhere between 10% to 30% is going to converge.
Got you okay. Thanks, guys.
Thank you George.
Thank you. Your next question comes from Joel Rochus from <unk> Securities.
Please go ahead hi.
Hi, guys. This is Joel on for Andrew.
I was just wondering if you could provide some info regarding the cadence of the go to bank marketing ramp and then whether or not you think that's going to need to be followed by a period of additional investment to kind of bring the block product at scale.
Or if that's just going to be fully addressed by it and tech in Brooklyn.
If you could just provide some color there that'd be great.
Sure Joe I'll start.
Hope I got your question I hope I'm, not being too so as I tried to answer it but.
If I.
I understood. The first part of your question was what is the kind of the cadence of the marketing spend on go to bank.
And.
Yes, I think we've mentioned in the past we spent somewhere in the neighborhood of $40 million to $50 million a.
The year on direct to consumer marketing and what we what we very specifically mean by that we do specific targeted.
Targeted marketing for distribution of our direct to consumer product go to bank.
So that could take the form of direct to consumer mail TV spot.
Search engine optimization type work et cetera.
So that.
Cadence can be.
And the Frontloaded a bit in the year.
Because during the tax season, and when people are receiving refunds.
From the IRS, they're more receptive to offers this type so we tend to frontload some of that investment and it tends to taper off towards Q3, and Q4 as a general rule.
Wouldn't expect any material changes from that general rule and if I understood. The second part of your question.
Whether we expect any material increase in that investment.
We target our investment based on.
Cost effectiveness cost per funded accounts and so.
We know that if we.
Our unruly and our investment in direct to consumer marketing that can drive up the price in that particular sub distribution channel.
And that causes causes our cost per per funded to go up.
To a point that.
Certain points, we deem unacceptable. So generally the answer to the second part of your question is no. We don't expect any dramatic.
<unk> certainly not in the short term in our direct to consumer marketing and go to bank go to banks growing very nicely.
Very well as a product.
And we're very happy with our cost per funded accomplishments.
So we're going to we're going to be steady as she goes alright, I expect at least in the near term.
Great. Thank you that's Super helpful. And then just in terms of bass contract restructuring.
Will the pass through revenue cause any long term drag on EBIT margin or do you guys think thats something that can be addressed over time just through renegotiations.
I think at least in the near term.
It will continue to be a drag it's hard to say what any renegotiation.
Or what the ultimate economics will shake out to be so it's hard to say what it look like long term, but at least in the near term.
Continue to have some margin compression.
Thank you.
Thank you.
This concludes our question and answer session for today I would now like to turn the conference back over to Mr. <unk> for any closing remarks.
Thank you operator, let me just say in closing.
And with all sincerity I want to extend my heartfelt gratitude to our team members.
Who work so hard.
To make.
The lives better for the consumers we serve the partners we serve.
We've had teams.
Strong narrowly dedicated to the technology conversion, we've made reference to today.
And I just want to.
Really thank them for their hard work and sacrifices.
Couldn't be more pleased with our partnerships with Ceridian Mpls and all of our other partners across the organization and of course.
Thank you to our investors for coming along with US on this ride as we as we turn this company.
Company in the right direction I appreciate it so much. Thank you for your interest in Green Dot today, and we look forward to talking to you next time bye bye.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
[music].
Okay.
[music].
Yeah.
[music].