Green Dot Corporation (NYSE: NYSE:GDOT), a leading fintech company, conducted its second quarter 2024 earnings call, revealing an 11% year-over-year increase in non-GAAP revenue, primarily driven by its B2B segment. Despite facing headwinds in retail and elevated costs due to regulatory and compliance initiatives, the company is optimistic about its future growth.
Green Dot announced its revenue guidance for the year has been raised to between $1.6 billion and $1.7 billion, with expectations for revenue growth to accelerate in the latter half of the year and margins to improve.
Investments in compliance infrastructure and risk management are significant, aiming to enhance customer protection and profitability. The company expects adjusted EBITDA and non-GAAP EPS to be at the lower end of their respective ranges, reflecting the impact of increased expenses.
Key Takeaways
- Non-GAAP revenue increased by 11% year-over-year, with the B2B segment as the primary growth driver.
- Adjusted EBITDA and non-GAAP EPS faced pressure from retail challenges and compliance costs.
- Revenue guidance for the year has been updated to $1.6-$1.7 billion.
- Significant investments have been made in compliance and risk management.
- The company is optimistic about mid-30% revenue growth for the full year and expects mid-to-high-single-digit growth in the Money Movement and Corporate and Other segments.
- New BaaS partners have been signed, with launches expected in early 2025.
Company Outlook
- Green Dot anticipates revenue growth to accelerate in the second half of 2024.
- Margins are expected to expand in the third and fourth quarters.
- Investments in compliance and risk management aim to improve customer experience and meet regulatory obligations.
- The company is focused on simplifying operations and optimizing profitability.
Bearish Highlights
- Increased expenses for regulatory and compliance initiatives have impacted earnings.
- The return to growth in the Consumer segment has been delayed due to competition and risk management processes.
Bullish Highlights
- Green Dot has successfully renewed contracts with key partners and launched new programs.
- The BaaS pipeline is growing due to a consolidated go-to-market strategy and industry disruptions.
- A major BaaS partner's agreement has been renewed with improved economics.
Misses
- Revenue in the tax business is expected to remain flat in Q3, with growth anticipated in Q4.
Q&A Highlights
- The company addressed questions regarding the impact of compliance investments on profitability.
- Discussion on the BaaS segment's growth and the onboarding of new partners.
- Clarification on the outlook for the Consumer segment and the timeline for returning to growth.
Green Dot remains committed to advancing in the fintech space, with a clear focus on addressing market opportunities, enhancing compliance, and capitalizing on industry disruptions. The company's leadership expressed thanks to its team and investors for their continued support and looks forward to future successes.
InvestingPro Insights
Green Dot Corporation's (NYSE: GDOT) recent earnings call highlighted a positive trend in non-GAAP revenue, particularly within its B2B segment, and an optimistic revenue guidance for the upcoming year. However, to provide a more comprehensive investment perspective, let's delve into some key metrics and insights from InvestingPro.
InvestingPro Data shows a market capitalization of $470.91 million, suggesting a moderate-sized player in the fintech industry. Despite a challenging period, as reflected by a negative P/E ratio of -19.01, the company's revenue growth remains positive, with a 4.82% increase over the last twelve months as of Q1 2024, and an even more impressive quarterly revenue growth of 8.63% in Q1 2024.
A notable InvestingPro Tip is that analysts are forecasting net income growth for Green Dot this year, which aligns with the company's own projections for accelerated revenue growth and margin improvements in the second half of the year. This optimism is tempered by the fact that two analysts have revised their earnings estimates downwards for the upcoming period, which could be indicative of the increased expenses and investment in compliance infrastructure impacting profitability.
Moreover, the company's current price to book ratio stands at 0.54, which may attract value-oriented investors seeking assets that are potentially undervalued. It's also important to mention that Green Dot does not pay a dividend, which could influence the investment decisions of income-focused shareholders.
For those interested in further insights and analysis, InvestingPro offers additional tips on Green Dot Corporation, which can be found at https://www.investing.com/pro/GDOT. These tips provide valuable information for investors looking to make informed decisions about their investments in the fintech sector.
Full transcript - Green Dot Corp (GDOT) Q2 2024:
Operator: Good afternoon, and welcome to the Green Dot Second Quarter 2024 Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Tim Willi, Senior Vice President, Finance. Please go ahead.
Tim Willi: Thank you and good afternoon everyone. Today we are discussing Green Dot's second quarter 2024 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.greendot.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 in Green Dot's 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 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. 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. The content 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.
George Gresham: Good afternoon, and thank you for joining our second quarter earnings call. It was a solid quarter that was generally in line with our expectations, and we continue to make progress on many fronts, including the finalization of our consent order, which you would have all seen by now. Consistent with our prior disclosures, much of the order relates to matters arising and resolved several years ago. I am pleased that we have come to an agreement with our regulators related to these issues and, as you would expect, we have been diligently working to address the requirements contained within the order. Ensuring we are good stewards of our customers' funds is our top priority, and one we take very seriously. Security, risk management, and regulatory compliance are the most important aspects of our job, and critical to our mission of being responsible stewards of our customers' money and our shareholders' capital. This experience will costly, will make us a better company for all of our stakeholders, and I continue to believe the investments not only ensure the safety of our customers' money, but will also prove to be a competitive advantage. I look forward to these standards being applied uniformly and transparently across the embedded finance and payments and landscapes. During the second quarter, we delivered results that were in line with our internal expectations, as we navigated remaining headwinds associated with the conversions in the first half of 2023, and elevated spending on compliance and regulatory initiatives. We kept our heads down, stayed focused on our goals, and saw continued progress on a variety of fronts. In addition to the regulatory work we have been doing, we are making steady progress and pragmatically moving forward on our plan to continually improve Green Dot's performance and return to growth. Our most urgent priorities have been and remain, first, compliance. Ensuring we are good stewards of our customers' funds, as demonstrated by building exceptional risk management capabilities, implementing state-of-the-art compliance focus technologies, and driving a culture that puts stewardship, compliance, and partner and customer needs first. Second, revenue. Building sustainable and predictable business pipelines and onboarding capabilities, to replenish partners and revenue streams lost in prior years so both Green Dot Corporation and Green Dot Bank, can remain financially healthy for years to come. And third, margins. Being good stewards of our investor funds by managing costs, improving margins, and bringing our product to market at low marginal cost. Let me now hand it over to Jeff for his comments, before I make some additional comments regarding these priorities. Jess?
Jess Unruh: Thank you, George, and good afternoon, everyone. Non-GAAP revenue grew 11% year-over-year, primarily from continued growth in our B2B segment, and modest growth in our Money Movement segment. Adjusted EBITDA of $34 million, the non-GAAP EPS of $0.25, both decreased from last year, due to specular headwinds in retail, portfolio of sunsetting in our direct channel, and partner program deconversions in early 2023. At the same time, we've incurred incremental expenses associated with our ongoing investment in regulatory and compliance initiatives, while benefiting from a reduction in processing expenses from last year's processor conversion. Our GAAP results for the quarter, reflected incremental $24 million reserve for the final consent order on top of the $20 million reserve, established in the previous year. Now I'll touch on the factors that influence the performance of our segments, and will refer you to our press release and quarterly slide deck, for our segment results and key metrics. First is our Consumer Services segment, which is comprised of our retail and direct channels. Consumer segment revenue remains under pressure, due principally to the secular headwinds in the retail channel that continue, to impact a number of active accounts on our platform. Year-over-year growth has also been impacted by a program deconversion in the first half of 2023. Excluding this program, segment revenue decline was in the low 20% and we've generally seen stability in volumes per active, and a bit of improvement in revenue per active. Looking forward, as we lap the deconverted program, and our new program with PLS begins to ramp, we anticipate a more moderate revenue decline, towards the latter half of the year. Our direct channel repositioning is progressing well. We phased out multiple legacy brands in Q2, 2023, which resulted in year-over-year headwinds. Nevertheless, the direct channel revenue is showing signs of sequential stabilization, following years of persistent declines. In the quarter, GO2bank continued to see growth in revenue, while legacy portfolios continued to retreat. Looking at the quarter on a proactive basis, GO2bank revenue proactive continued to grow at a faster pace than the direct channel as a whole. GO2bank currently makes up approximately 75% of the direct channel revenue. As I previously mentioned in our first quarter call, when GO2bank reaches 85% of the direct channel, we will likely stop providing separate commentary on this product. Profitability in the Consumer segment remains under pressure from the revenue decline discussed. Excluding the program deconversion last year, profit on the consumer division declined in low single-digits thanks to effective expense control, reduced risk expenses, and the positive impact of the processor conversion that balanced out some of the revenue declines. Now I'll turn to the B2B segment, which is comprised of our vast and rapid PayCard channels. Revenue growth remains driven by a significant vast partner. It's worth mentioning that aside from the growth from this major partner, the other vast partnerships grew revenue year-over-year, for the first time in several quarters, even as we navigated through the lingering impact of partner deconversions that occurred in the first half of 2023. In terms of our key metrics, purchase volume and active sustained positive momentum following the launch of new partners and growth of existing partners. I'm optimistic that the momentum will persist, and we should anticipate continued year-over-year growth, from the entire vast channel. Our rapid PayCard channel had revenue growth as pricing strategies, continued to offset the pressure on active accounts. The business continues to face headwinds as the staffing industry, which is one of the largest verticals, has retrenched over the last year and a half. That said, year-to-date sales activity has improved versus last year, and we've initiated several programs designed to boost employer and employee engagement, enhance activations, and improve retention. For the first time in several quarters, we saw modest profit growth in the B2B segment. The vast divisions saw modest growth in profits, despite headwinds from the deconversions, while rapid PayCard had solid growth in profits and a margin expansion. Turning to our Money Movement segment, which is comprised of our tax processing business and our Green Dot Network business, which we refer to as GDN. Revenue growth remains driven by our tax processing division, which had a strong tax season. Our GDN business continues to face headwinds that, stem from the decline in our own active account base. While those headwinds continue to weigh on the quarter, our third-party business saw growth in transactions, due to growth of existing partners and new partner launches. Profitability in the segment remains solid, as both our tax processing business and our Green Dot Network's have a margin expansion in the quarter, with tax processing benefiting from some timing-related items, while GDN continues to focus on managing its expense base. The Corporate and Other segment reflects the interest income we earn at our bank, net of the revenue share on interest we pay to vast partners, as well as salaries, technology, and administrative costs, and some smaller inter-company adjustments. Revenue was down from last year reflecting the lingering impact of the rising rate environment and seasonal declines in deposits at the bank. Expenses were up slightly from last year, as ongoing expense reduction initiatives are offset by the elevated costs associated with regulatory and compliance investments. Now let me turn to guidance. We are raising our non-GAAP revenue guidance, to a range of $1.6 billion to $1.7 billion. We believe our adjusted EBITDA and non-GAAP EPS results, may be at the low end of their respective ranges of $170 million to $180 million, and $1.45 to $1.59, based on continued headwinds in retail, and the timing of expenses associated with regulatory and compliance investments. As we think about the back half of the year, our outlook on the cadence of earnings is largely unchanged. At a consolidated level, we anticipate a modest acceleration in revenue growth moving from Q2 to Q3, and a more noticeable increase in Q4, due to more normalized comparisons and the ramp of our new PLS program. We believe adjusted EBITDA margins in Q3, to be similar to or slightly improved compared to 2023, while Q4 margins are projected to expand 400 to 500 basis points for revenue growth, and favorable expense comparisons relative to last year. Turning briefly to the segments, we anticipate mid-teens percentage declines in the Consumer segment revenues from the full year. Following 20-plus percentage point declines in the first half, we expect revenue declines to moderate to the mid-teens in Q3 and shift to low to mid-single-digit growth in Q4, as we ramp program deconversions and portfolios sunsetting in the first half of 2023, coupled with the ramp of our new PLS program. Margin for the year expected to increase about 500 to 600 basis points, as a result of improvements expected in Q3 and Q4 from improved risk management and cost control efforts. In the B2B segment, we forecast full year revenue growth in the mid-30% range with revenue growth in the second half of the year closer to 30%. Margin is still expected to be down 150 to 200 basis points, compared to 2023, but there should be sequential improvement in both Q3 and Q4. I anticipate revenue growth in the mid-to-high-single digits from the Money Movement segment. Due to the timing of revenues in the tax business, I would expect revenues to be flat year-over-year in Q3, and mid-to-high-single-digit revenue growth in Q4 from the continued growth of our third-party business in the Green Dot Network and incremental cash transfer volume from our new PLS program. Margins are expected to expand 250 to 300 basis points with some modest expansion in the third and fourth quarters year-over-year. In the Corporate and Other segment, revenue should be in the mid to upper single-digits reflecting our efforts to optimize yield on our cash investments. Expenses should be up in the mid-teens related to our spending on regulatory infrastructure, and an increase in expenses in Q4 as a result of a lower bonus accrual in the prior year. I expect our cash rate to be 22.5%, with a fully-demeaned share count of 54 million shares outstanding. Now, let me turn it back to George.
George Gresham: Thank you, Jess. Before taking your questions, I would like to spend some time discussing the actions we are taking to address, the three priorities I mentioned at the outset of this call. First, on the compliance front, we have been very busy in making substantial investments in our infrastructure. We have built our plan, and are allocating these investment dollars after taking into consideration, the conversations we have had with our regulatory stakeholders, and aligning that feedback with our own internally identified initiatives. Our spending on regulatory and compliance infrastructure in 2024, is anticipated to be $15 million to $20 million higher than that in 2022, which is the material and deliberate investment in this area of our company, and has been made in the face of partner attrition and a smaller reported active account base. The areas we are investing in include improved systems to help us better onboard, and verify newly acquired accounts, enhanced BSA, AML monitoring and reporting systems, enhanced fraud management systems, and the addition of internal audit, compliance, and risk management personnel. Beyond the dollars invested, we have been highly focused on changing the culture to one that prioritizes risk management. There are many benefits to these investments and actions. First and most important, they enhance the safeguarding of our customers' deposits and financial transactions, which is an obvious imperative for remaining a strong financial institution. Second, they enhance our end-to-end customer experience, resulting in an improved customer retention, a key lever for improving our profitability. Also, these investments allow us to more efficiently comply with our regulatory obligations, allowing us to grow at scale with effective and enhanced risk management. The next priority, revenue generation, is critical to sustaining and strengthening our company and our bank. As you know, coming out of COVID, we ended our partnerships with several key partners and intentionally sunset various consumer brands, to streamline our focus on GO2bank, resulting in a period of declining account bases and profitability. These factors have been exacerbated, by sustained downward pressure on our retail channel. These changes led to reductions in several key metrics, including active accounts, purchase volumes, and cash transfers, as well as total BaaS partners since 2022. However, they have also enabled us to more easily streamline and simplify our business, as we invested in building a more powerful and efficient platform, to serve our direct customers and partners, priming us for steady, scalable, long-term growth. What else have we or are we doing to build our revenue-generating capacity? We have been actively investing in our product features and functionality and, as I mentioned, improved and simplified our products. We have also been investing in the infrastructure required to onboard partners and evolve with their strategies. Most importantly, we have built out and standardized our business development capabilities. These efforts are starting to bear fruit. For example, our probability-weighted pipeline has more than doubled over the last year. Just last month, after extensive planning and preparation, we successfully launched the PLS Xpectations Plus Debit Card program, which is off to a very strong start. Our tax division, Santa Barbara Tax Products Group, is performing exceptionally well after introducing a market-leading product and technology platform last year. We have renewed and extended contracts with some of our largest partners, and most importantly, we are very pleased to announce the renewal and extension of our largest BaaS partner by revenue for a multi-year period with improved financial terms. We have signed a large merchant processor and an auto lender in our BaaS Group, and are expecting to launch these new partners in early 2025. In our Green Dot Network, we signed a leading embedded finance platform that wanted to strengthen its capabilities, and enable its partners and their customers to have access, to the convenience that Green Dot Network offers. We also continue to sign in renewed partners, including a variety of fintechs and digital banks, demonstrating the differentiated value of, and demand for this asset. We continue to win and add partners in our rapid PayCard and EWA business, with the total partner count now greater than 7,000. That is a lot of success, and I am tremendously pleased with the work our revenue product, technology, and support teams have done to get us in a position, to replace lost revenue and retain the partnerships we have. Understand, however, we take very seriously the risk profile of each partner, and each account we choose to be associated with, and this risk perspective will cause us to turn down opportunities. It's also important to point out companies that want to leverage the power of embedded finance, and work with us have intensified their focus on compliance and regulatory capabilities. The companies in our pipelines are increasingly focused on ensuring, they are working with a partner that will enable them to deliver financial services, while managing risk to their customer base and their reputations. We and our partners are in this together. We have a shared interest in serving our mutual customers, with a high quality experience and compliance at the forefront. The third priority I discussed was margins. Again, another obvious point of focus, but our previous un-consolidated acquisitions, multiple processors, multiple customer service approaches, and disaggregated compliance and risk management functions made for high complexity and eroded margins. So what are we doing on this front? First, we undertook a complicated and lengthy process, to convert our processing platforms. Undertaking this project resulted in substantial savings, but more importantly, it served as a catalyst to simplify how we operate the company, which ultimately enables us to better manage risk and serve our customers. Second, as I alluded to earlier, we have embarked on a company-wide simplification process that has resulted, or will result in simplified technology, a simplified product footprint, fewer consumer brands to manage, and higher partner acceptance standards. This work is not done. We are working to optimize profitability while ensuring that Green Dot Corporation and Green Dot Bank remain strong financial institutions. In addition to that primary goal of ensuring we remain financially strong, is the reality that as we drive scale, it enables us to invest in the critical components of our business on a sustainable basis for the benefit of all of our stakeholders. We have significant scale today, and we need to rush down the path to leverage that scale through expanding margins. Keep in mind that we've seen considerable profit impacts since 2022, from partner losses and brand discontinuations, amounting to roughly $60 million, alongside a rise in regulatory compliance costs of nearly $20 million. This totals a reduction in adjusted EBITDA of approximately $80 million. Nevertheless, our management team has mitigated these setbacks and stabilized the company, amid a backdrop of post-COVID and post-stimulus economy, technological upgrades, increased regulation, and a complex turnaround effort. While the work isn't finished, I'm extremely proud of the team for steering us through this challenging time, and for laying a more robust, reliable groundwork for future growth. We continue to work diligently on our priorities, and there's no doubt in my mind that we are a better company than we were a year ago, two years ago, or four years ago. We are making progress towards our goal, of ensuring that we not only remain a strong organization, but that we build upon that, which I believe will be a competitive advantage that will serve as the pathway is creating value, for all of our stakeholders. The markets we serve and the opportunities they hold are not going anywhere, and we will emerge from this transition as the most asset-rich, differentiated, compliant, well-managed company in the fintech space. Thank you for your interest in Green Dot. Jess and I are now happy to take your questions. Operator?
Operator: [Operator Instructions] Our first question is from Ramsey El-Assal with Barclays (LON:BARC). Please go ahead.
Ramsey El-Assal: Hi. Thanks so much for taking my question this evening. My question is on the B2B segment revenues, which came in ahead of our model. Could you disaggregate how much of the segment's gross was driven by the largest BaaS partner that you mentioned, versus from the remainder of the segment? I'm just trying to get an idea about the sort of balance of growth in the segment?
Jess Unruh: Hi, Ramsey, it's Jess. So the predominant growth came from that key BaaS partner, but we took note in the prepared remarks, to call out that even if you put that key BaaS partner aside, we had growth from the existing partnerships, and some of the newer partnerships that we launched last year, including Dayforce (NYSE:DAY). So although we don't break those out, certainly the key BaaS partner was the primary driver, but nonetheless, the other programs also grew.
Ramsey El-Assal: Got it. And a quick follow-up, and apologies if you covered this already. I missed some of the prepared remarks, unfortunately. Could you - what about the next sort of 12 to 18 months? Are there any other large renewals that are sort of pending? Are you feeling now sort of like things are relatively stable just in terms of, contract discussions?
George Gresham: Hi, Ramsey, thanks. This George. I would say over the course of the last year, if you would have asked that question a year ago, we probably would have given you a very different answer, but here, as we sit today, as it relates to our key BaaS partners, this year in '24, we've renewed and extended the vast majority of our current BaaS revenue. And in our prepared remarks, I also mentioned that we've signed. I pointed out a couple of reasonably important new BaaS partners that are under contract, and were currently onboarding and will be launched in early-ish 2025. And let me also say that the partners that Jess was referring, to beyond the largest of our BaaS partners have generally been performing very well, have been growing year-over-year, and have relatively healthy trends. And last, before I stop rattling on, we don't contain within our BaaS group the PLS opportunity, although I mentioned that that partner, which is contained within our retail, which is in our consumer business, launched earlier this summer in July, and has just been performing very, very well. So we're super excited about that. So I probably over-answered your question, but let me pause and see if you have any follow-up.
Ramsey El-Assal: No, that's perfect. I appreciate the thoroughness of it. Thanks so much.
George Gresham: Thank you.
Operator: The next question is from Tim Switzer with KBW. Please go ahead.
Tim Switzer: Hi, good afternoon. Thank you for taking my question.
George Gresham: Hi, Tim.
Tim Switzer: My first question is on the growth outlook here. You guys mentioned, probably for the company, accelerating growth as they move through the back half of the year. It seems like we're kind of implying year-over-year growth 20% or higher, by the end of the year should we assume a continued acceleration above that level in 2025. Given all the momentum you have in BaaS and some of the other areas?
George Gresham: Jess, why don't you take the first kind of the guidance part of that question, and then I'll chime in at the tail.
Jess Unruh: Yes, I think your implied growth rates in the back half of the year are - in the zip code of, mid-teens to upper-teens area. So accelerating growth throughout the year.
George Gresham: Yes, so underlying, yes, Tim, if you don't mind, I'll just expand a bit. Underlying that, of course, are the initiatives started now two years ago, even prior to my having this role with respect to retirement of some brands, migrating some brands off the portfolio, the sunsetting of some partnerships, et cetera. For the most part, those activities we will have rolled through, by the back half of this year. And in the back half of last year, we had some very elevated costs associated with dispute-related losses, our migration off of the processing platform onto ACI, et cetera. Obviously, we don't expect to replicate those costs. Then as we think, obviously, we're not in a position to give 2025 guidance, but we do believe, the last question, that our current partnerships. We've had a lot of success in renewing and extending those contracts, even in the midst of the pending overhang of the consent order. So we're very pleased with that. That makes us feel good about future years. I'd also point out that I think, if you look at our free cash flow year-to-date, it's about comparable to prior year, even though the core underlying business has shrunk a bit. But nevertheless, we're generating really high free cash flow yields. Now, we also make a $35 million contribution to TailFin have for the last five years. The last contribution was made in this year in '24. Now, that's treated as an investment for all the right reasons, but we will not be making a similar contribution next year. So irrespective of business activities, et cetera, which we feel pretty optimistic about. Our cash flow will be at least $35 million better, irrespective of trends in the underlying business. So I'll stop again. Maybe I've over-answered your question, but I got to take my opportunity where I can.
Tim Switzer: Yes, no, that was great. Thank you. And then my other questions on the expense side of things, you guys mentioned, the spending on regulatory infrastructure should peak or has already peaked. Should we expect that now staying flat as you continue to just continue investing on top of that, or there are not true or maybe lower expenses, or if you could redeploy that elsewhere. And then where else would you guys like to be investing right now?
George Gresham: Okay. Great. I'm going to, again, take an opportunity to expand on your question. It's good. It's something I want to talk about. We and the companies you follow and our other analysts follow obviously, are operating in a regulatory environment of, I think, some intensity. We - Green Dot, are not in the business of regulatory arbitrage. We're in the business of building a vertically integrated solution set, for consumers and B2B partners. And so, the vast majority, if not all, of the regulatory activities that have to happen within the value chain that I'm discussing, happen within our four walls. And that's good because we can control those. We can manage those activities. And we have invested, as I mentioned, considerably in improving our capabilities. Now, again, caveating that we're not giving '25 guidance, we have both invested significantly in the buildup of our operating compliance platforms. So, we've added people in the compliance department, internal audit, BSA, AML, et cetera, et cetera. And those will be ongoing costs. But we've also invested in activities this year that, look backwards in some way, in the contemplation of the consent order, et cetera. We've been doing a lot of work that probably, and I expect not to repeat. So I don't want to breakout those two elements of our regulatory costs. But simply put, I would expect some of those costs not to repeat. The last part of your question, which is an excellent question, is what would we want to invest in? What we are investing in this year, is we have some portion of technology debt we're continuing to eradicate. That's very important. As Jess mentioned, we have seen persistent declines in our retail distribution business unit greater than our expectation. That product has not received material investment for some time. This year we are investing materially in a complete refresh of the user experience for the Green Dot product, the Walmart (NYSE:WMT) MoneyCard product, and the GO2bank product. Those investments are underway, and importantly, two of those three products run on a legacy technology platform, which inhibits our ability to launch new features. So that investment is also being made to migrate off of that legacy platform, and much of that investment is being invested by the TailFin joint venture. So it's not coming directly out of our entity's capital pool. So we're making those investments, and in the future, I hope to significantly accelerate our onboarding and product featuring capabilities, for our business-to-business, BaaS, embedded finance capabilities. We are making some of those investments this year, but I would characterize those investments as modest, relative to what we would like to do. So as we gain new accounts and start growing again and create some capital growth availability, we would - and hopefully, reduce capital spending in some other areas, we would primarily direct that into our B2B acquisition capabilities. And to a lesser extent, the enhancement of the features and functionalities that we offer consumers through our direct and retail channels.
Tim Switzer: That was great. Appreciate all the color. Thank you, guys.
George Gresham: Sure, you bet, Tim. Thanks for the questions.
Operator: The next question is from George Sutton with Craig-Hallum. Please go ahead.
James Rush: Hi, guys. James on George, thanks for taking my questions. First question is probably for Jess, but it sounds like the return to growth in the Consumer segment is getting pushed out a bit. I guess what's changed there, relative to your prior expectation?
Jess Unruh: Yes, I would say principally in the retail business, George alluded to it. We have continued pressure from digital offerings, competition, executive trends, et cetera, but also note that we enhanced our risk management processes. And in doing so, that pushes out some higher risk, lower value accounts. So that does have an impact on our active account trends, and has some impact on segment profits. I think that's slowing some of our expectations so that retail, the declines are not necessarily moderating as quickly as we would have liked.
James Rush: And then on the banking and the service side, congrats on growing the pipeline there and adding a couple of new partners. I guess what do, you think is driving the growth in the pipeline. And then any anecdotes you can share on the couple of new partners you added, whether was a Green Dot what do you think sort of led to those wins?
George Gresham: Sure. Well, a couple things led to the growth of the pipeline. One is, when I became the CEO, I asked Chris Ruppel to become the Chief Revenue Officer, and the purpose of that was to consolidate and standardize our go-to-market efforts where they had been disparate before. And that team has done a very nice job - in focusing on the right types of opportunities to address, getting them under contrast, getting them in the pipeline, and doing it under a relatively challenged environment. So that's job one. And they've done a great job. And I want to express my gratitude to them for that. Also, there's been a lot of disruption in the broader fintech industry, of course, disruption with sponsor banks and fintech providers. You know all these stories. And that creates a churn within the market. And I think we're well-positioned to capitalize on the best of that churn. The best opportunities within that churn, I think we're well-positioned to be a safe landing for some of those companies, since we have now for two years been devoted to significant enhancements in our compliance and regulatory oversight. And this is very important to all prospects now. So that's an important factor. And third, the overarching secular trend, which companies are waking up. They have important customer relationships. Some of them might be financial in nature. And they want to provide a more financial solution, so that they can have longer-term, more meaningful, more depthful relationships. So I think those three factors have all been working in our favor, and leading to some of our success so far.
James Rush: And then lastly, from me, on the renewal of the large thing to the service partner, any changes in the relationship or new economics of that renewal that you can share? And also, I'd be curious to know if this is something that went up as a competitive process? Thanks.
George Gresham: Sure. I don't have a response for the latter part of your question, but I did allude to in the outset of my, I guess, toward the end of my prepared remarks that the agreement is for a longer term than it has been in the past, which allows us substantial amount of runway to provide other solutions and problem-solving initiatives to this partner. They're important, and that's great. And the economics, which I think we've talked about in the past, have been relatively static. So by that, we mean the revenue growth, or lack thereof, does generally not impact the margin, the dollar margin of that account. And the account has been adjusted in order to allow some opportunity for us to have growth in that relationship as revenue grows. I wouldn't call it linear, but it's better than it was before, and we're quite pleased with that relationship.
James Rush: That was good. Congrats on the progress.
George Gresham: Thanks, James. Appreciate it.
Operator: This concludes our question-and-answer session. I would like to turn the conference back over to George Gresham for any closing remarks.
George Gresham: Thank you, operator. As I do from time-to-time in closing, I would say the company's gone through a journey over the last couple of years, been some downs for sure. We've had some challenges that we've weathered, and I want to take an opportunity to express my deep gratitude to our team members, around the world who are contributing so much to Green Dot. We have a great team of people, and really appreciate all their hard work and effort, and of course, appreciate our investors and those of you interested in our story. So, we're going to keep swinging. We've got a great future ahead of us, and really looking forward to getting there. Thank you all for your interest in the company. Bye-bye.
Operator: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.
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