Green Dot Corporation (NYSE:GDOT) Q2 2023 Earnings Call Transcript

Green Dot Corporation (NYSE:GDOT) Q2 2023 Earnings Call Transcript August 3, 2023

Green Dot Corporation misses on earnings expectations. Reported EPS is $0.01102 EPS, expectations were $0.34.

Operator: Good day, and welcome to the Green Dot Corporation Second Quarter Earnings Conference Call. All participants will be in a listen-only mode. After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Tim Willi, Senior Vice President of Finance. Please go ahead.

Tim Willi: Thank you, and good afternoon, everyone. Today, we are discussing Green Dot’s second quarter 2023 financial and operating results. Following our remarks, we’ll open the call for your questions. Our most recent earnings release, that accompany 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.

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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. 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, 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 bank seamlessly, affordably and with confidence. We recognize that access to the banking system should not be a privilege. Our core value is 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 a strategy of integrating banking, technology and network platform, so that we may provide market-leading financial tools at 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 in payment networks in the U.S. with our Green Dot Network.

In addition, we own a diverse set of distribution channels where we distribute demand deposit accounts directly to consumers or through retail locations. We also support all sizes of businesses through our distribution of rapid! PayCard 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 roadmap, so we can bring products to market in a more agile and timely way. So how are we doing on this journey?

Jess 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 deconversion of several partners, the ongoing evolution of our direct business as we let several legacy brands attrit or sunset, while we focus on the growth of GO2bank, the impact on partner interest sharing from higher interest rates and difficult year-on-year comparisons as we realized several one-time benefits in expenses last year. Despite these challenges and headwinds, as we move forward, we see evidence of stabilizing account trends, a growing pipeline and no shortage of opportunities for Green Dot as the market for embedded finance continues to evolve and grow.

Along these lines, I am pleased to confirm our newest BaaS embedded finance partner, which we have referenced in previous calls. Ceridian, a global leader in human capital management technology has selected Green Dot as a U.S. banking partner for Dayforce Wallet, Ceridian’s market-leading on-demand pay solution. We look forward to announcing a national launch and sharing more details of this program and partnership in the coming months. I am also very pleased to announce we have signed a meaningful new partner in our 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 a demand deposit account among other tools and features to their customers.

PLS 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 2023 is and remains the 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 Ruppel, 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 proving 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 activities 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 has been a challenging road for many of our team members in a 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 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 a 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 cost 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 Jess.

Jess Unruh: Thanks, George, and good afternoon, everyone. Overall, our consolidated results came in line with our expectations and as George said is 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 GO2bank brand and our direct-to-consumer channel at the expense of legacy brands that are now in runoff.

While our retail channels impacted by secular changes and the non-renewable 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 and payment experiences that are designed to help our retail partners continue to build enduring and loyal customer relationships through digital financial experiences, not just products on shelves. We also signed a new partner in POS [ph] and we are focused on making our cost structure in retail more efficient. In our direct-to-consumer business, we continue to fully commit our marketing spend to support our GO2bank brand, and as a result, we deliberately put legacy brands such as Rush, AccountNow and others into runoff.

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 GO2bank. As expected, many did not convert an attrition of these legacy brands accelerated. As a result of the attrition of legacy brands over the last two years and its own rapid growth GO2bank 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, GO2bank continued to have strong year-over-year growth in direct deposit accounts up approximately 40%, which resulted in strong growth and revenue per account. With that context in place, let me provide some color on the performance of the 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-teens year-over-year. Though I would note, that excluding the impact of the non-renewal revenue declines in the retail channel were 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 have seen in over two years. This is fueled in part by some moderating decline retail, but also in the direct channel as GO2bank builds momentum. Direct deposit accounts represent approximately a core of our total accounts in segment, and these 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 GO2bank helping to offset the attrition in legacy portfolios. As I’ve said many times, this is an evolution, but we are encouraged by what we are seeing from GO2bank 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 expected structure in the first half of 2022, and in particular the second quarter of 2022 causing margin compression and making the year-over-year a pretty tough comparison.

In the B2B segment, which consists of our BaaS and PayCard channels, aggregate revenue growth of 26% largely remains driven by our BaaS channel where revenue was up approximately 30%. The growth of one of our larger BaaS customers continues to power the top line while we faced headwinds on revenue and actives from the roll off of two BaaS partners. In the PayCard 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 tiers have impacted hiring decisions. We experienced active declines in this vertical in late 2022 through May of this year, and we saw a rebound in June. 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 PayCard product as well as continued growth in our EWA offering give us confidence that momentum in this channel should reaccelerate in the coming quarters. Profit in the B2B segment was down 23% as expected, driven largely by the impact of client deconversions in the BaaS business and the dynamics I just discussed in the PayCard channel. We had margin compression from one-time expense structure benefits last year similar to our consumer segment and pressure on margins in the PayCard business due to the lower interchange rate. While we face what we believe to be temporary pressure on revenue growth, we continue to invest in the PayCard business as sales momentum has been strong, while also incurring expenses to support the launch of our newest fast partner.

Shifting to our Money Movement segment, revenue was down 8% year-over-year from a decline in 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 remains strong with flattish profits and some modest margin expansion in both tax and Green Dot Network. Our final segment Corporate and Other reflects the interest income we earn in our bank, net of the revenue share on interest we pay to best 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 of 2022 created an imbalance between the blended yields we earn on our cash and investments and the rate we pay our vast partners and effectively creates a headwind for revenue in the segment. Salaries and other general and 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 $1.376 billion to $1.462 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 a $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 to round out your models. At a high level, revenue should generally be evenly split between the third quarter and the fourth quarter with 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 impression in the third quarter from the second quarter levels before rebounding a bit in the fourth quarter. Now we 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 profits to decline 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 B2B 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. In 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 light of recent rate hikes. All the while, expenses should begin to reflect our progress in cutting costs as we move through the platform conversions. 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.

George Gresham: Thank you, Jess. 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 BaaS partner Ceridian has been onboarded and we are excited to have POS is a new customer and our FSC channel while also signing over 300 new customers in our PayCard and EWA 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’s 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 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.

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Q&A Session

Operator: Thank you. We will now begin the question-and-answer session. [Operator Instructions] Your first question today comes from Ramsey El-Assal from Barclays. Please go ahead.

Shray Gurtata: Hi, this is Shray on for Ramsey. Thanks for taking my questions. My first questions on the B2B segment, so it came in well ahead of expectations. Could you provide some insight on how much the beat was driven by the roll offs of the BaaS contract non-renewal versus the growth in the remaining BaaS and PayCard business?

George Gresham: I’ll take that one. So the beat in BaaS, I think we made a reference in the prepared remarks so that BaaS continues to power the top line results. In particular, one of our BaaS 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 BaaS partners. Make sure I’m answering your question.

Shray Gurtata: Yes, absolutely. That’s helpful. And then just as a follow-up, when and what – when and at what pace do the 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.

George Gresham: Yes, I think the impact of Ceridian in 2023 will be relatively small. These programs take a while to ramp up. So we just launched the Ceridian program. So it’ll have obviously a more material impact in 2024, and then POS will launch in 2024 and ramp throughout the year. And in both – in the case of both programs, there’s an existing base that we’ll attempt to convert and then ramp new acquisition as well. So like any of our programs, I think it’ll take time for those to materialize and become more meaningful for the P&L.

Shray Gurtata: Got it. Appreciate it.

Operator: Thank you. Your next question comes from Michael Perito from KBW. Please go ahead.

Michael Perito: Hey guys, good afternoon. Thanks for taking my questions.

George Gresham: Hey, Michael.

Michael Perito: I wanted to start on the some of the segment commentary that Jess provided at the end there. I think I – if I heard you correctly, the B2B segment revenue year-on-year growth [indiscernible] 20%. I just want to make sure, I heard that correctly and just kind of that suggests a little bit of a year-on-year growth slowdown in the back half of the year as relative to where you were in the first half. Is that correct?

Jess Unruh: I just 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 you’re going to have some of these vast partners that we’re rolling off. I think in our first quarter call we did mention that we had some impact from those programs in the first quarter and certainly that had exceeded our expectations in the first quarter, and then in the second quarter, those programs are essentially completely gone.

Michael Perito: Got it. Okay. And have you guys, just in terms of active accounts and deposits, have you guys quantified like what’s left with the programs that 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?

Jess Unruh: If my memory serves here, I believe in the BaaS channel, all those active are gone.

Michael Perito: 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, a couple of the other more bank oriented best providers this quarter on their calls, made comments about some of the competition, not necessarily increasing, but kind of more velocity of opportunities from fallout from smaller players and other partners that were, which just curious what you guys are seeing, has there been any notable change in the competition in the BaaS space in the last 90 to a 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.

George Gresham: Hey, Michael. It’s George. So the answer in short is, 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 either that capital’s getting consumed and they’re facing new capital raise obligations at a much higher rate or they’re 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 and have strong cash flow and do not need to access the capital markets in any short term basis in order to compete.

So I think in addition to just maybe some less well capitalized providers leading the market, the market – the potential market participants, the buyers with that market’s increasing in the sense that there are all sorts of businesses who their businesses are changing, retail’s the 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, which was a bricks and mortar distribution point for a company like Green Dot now might be a embedded finance solution opportunity for us. And so there’s some changing market dynamics beyond just the capital markets as well.

Michael Perito: Good. Got it. That makes sense. Very helpful guys. Thank you for taking my questions.

George Gresham: Thank you, Michael.

Operator: Thank you. Your next question comes from Matthew Hurwit from JMP. Please go ahead.

Matthew Hurwit: This is Matt from Jefferies. First question is just consumer services ARPU decreased quarter-on-quarter. I’m just curious if you can just elaborate a little further on the dynamics there. Thanks.

Jess Unruh: Yes. We had – we mentioned a roll-off of a retail program. We mentioned it as part of our guide for the full year earlier in our Q4 call. So that has an impact to some degree on the ARPU in the Consumer Services segment.

Matthew Hurwit: Perfect. And then…

Jess Unruh: So then we’ll lack that.

Matthew Hurwit: Right. Okay. Thanks. And then just on EWA, could you share any progress there? I know it’s an exciting product, and it sounds like there’s some momentum, that would be helpful. Thanks.

George Gresham: Sure, Matthew. We were excited about EWA. We remain excited about EWA. The market is spectacular opportunity for us. The growth rate on an admittedly small base was extremely high this quarter within that business unit. And importantly, there is a subtlety where in order for us to provide EWA in the market, we do integrations with different payroll packages and six months ago, our penetration into the market for payroll packages was very, very small, whereas as of the end of this quarter, we’re integrated into a very substantial portion of the U.S. addressable payroll market, which allows our sales team to be much more aggressive in selling this product. So no change, excited before, still excited. It’s going to be a great opportunity for the company over the next coming years.

Matthew Hurwit: Got it. Thanks.

George Gresham: You bet.

Operator: Thank you. Your next question comes from Cris Kennedy from William Blair. Please go ahead.

Cris Kennedy: Yes. Good afternoon. Thanks for taking my questions. 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 kind of the growth of Green Dot going forward?

George Gresham: Well, thank you for your question, Cris. I mean I do hope at some level, this change we’re going through has a ephemerable – ephemeral characteristic to it, so that it fades off a bit. We will always be base 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. We’ll continue into 2024. But as I mentioned in our prepared remarks, keep in mind, as we come to work every day and try to motivate our team, we’re focused very much on inwardly looking 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 doing 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 takes away from some of these opportunities. So that’s going to be a big shift for us. You’ll see it in our messaging, in our communication, in our pipeline, in our announcements. So that’s going to be our focus in 2024. 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 can’t 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 points of product offerings and capabilities. And our other businesses that we don’t typically think of as embedded finance, by the way, PayCard, EWA, 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 of these rollouts 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 and let you ask your follow-up.

Cris Kennedy: Yes. I guess – is there going to be a time where you’re going to kind of lay out what your long-term growth objectives and – will be for the company?

George Gresham: Yes, absolutely. So in the short term, I should say, first of all, our cadence is 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 Q4 call in early 2024, obviously, we’ll be giving guidance about 2024. And we hope to be able to wrap within that guidance more at least directionally on a quantitative basis about what we think the business might look like over a multi-year period.

Cris Kennedy: Right, thank you.

George Gresham: You’re welcome.

Operator: Thank you. [Operator Instructions] Your next question comes from George Sutton from Craig Hallum. Please go ahead.

George Sutton: 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?

George Gresham: 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.

George Sutton: And when you say next couple of weeks, so should be completed, I don’t know how quickly a conversion would necessarily take.

George Gresham: Well, the [indiscernible] team that has to actually execute these conversions. It stays under 24-hour watch as the conversion gets managed through an evening, late at night. So it’s not 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 – the conversion happens 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 to enhance technology, develop new capabilities, as we deploy our product roadmap.

So we’re a technology company, we’re going to be keep – we’re going to continue to have investments in technology, but that’s what’s involved with the conversions as they remain.

George Sutton: Got you. Thank you. And Jess, you ran through real quick brands that you had sunsetted. Can you just walk through the brands that you sunsetted and what kind of a conversion you were able to make into the GO2bank?

Jess Unruh: Yes. We – I would say the two primary brands that we sunset one was called RushCard, which Green Dot had acquired back in 2017, I believe, and then AccountNow, which is a program that was acquired back in 2015. So both purely direct-to-consumer businesses. And I think we’ve – when you try to convert existing customers to a new product like GO2bank not – this is not unique to us, there’s a – generally you’re not going to get the vast majority of those accounts to migrate. So I’d say with AccountNow we had less success and more success with Rush, but generally the rule of thumb is somewhere between 10% to 30% is going to convert.

George Sutton: Got you. Okay. Thanks, guys.

George Gresham: Thank you, George.

Operator: Thank you. Your next question comes from Joel Riechers from Truist Securities. Please go ahead.

Joel Riechers: Hi guys, this is Joel for Andrew. I was just wondering, and if you could provide some info regarding the cadence of the GO2bank 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 broad product to scale or I mean, if that’s just going to be fully addressed by the tech conversion if you could just provide some color there that would be great.

George Gresham: Sure, Joel. Joel, I’ll start. I hope I cut your question. I hope I’m not being obtuse as I tried to answer it, but the – if I understood the first part of your question was what is the kind of the cadence of the marketing spend on GO2bank? And I think we’ve mentioned in the past, we spent somewhere in the neighborhood of $40 million to $50 million a year on direct-to-consumer marketing. And what we very specifically mean by that, we do specific targeted marketing for distribution of our direct-to-consumer product GO2bank. So that could take the form of direct-to-consumer mail, TV spots, search engine, optimization type work, et cetera. So that cadence can be put in the front loaded 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 of this type.

So we tend to front load some of that investment, and it tends to taper off towards Q3 and Q4 as a general rule. And I 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 are unruly in our investment in direct-to-consumer marketing, that can drive up the price in that particular sub distribution channel. And that causes our cost per funded to go up to a point that at certain points we deem unacceptable. So generally, the answer to the second part of your question is no. We don’t expect any dramatic change. Certainly, not in the short-term in our direct-to-consumer marketing in GO2bank.

GO2bank is growing very nicely, doing very well as a product. And we’re very happy with our cost per funded accomplishments. And so we’re going to be steady as she goes. I expect at least in the near-term.

Joel Riechers: Great. Thank you. It’s super helpful. And then just in terms of BaaS contract restructuring, will the pass through revenue cause any long-term drag on EBIT margin, or do you guys think that’s something that could be addressed over time just through renegotiations?

Jess Unruh: I think at least in the near-term, it’ll 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’ll look like long-term, but at least in the near-term, it’ll continue to have some margin compression.

Joel Riechers: Thank you.

George Gresham: Thank you.

Operator: This concludes our question-and-answer session for today. I would now like to turn the conference back over to Mr. Gresham for any closing remarks.

George Gresham: 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 extraordinarily 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 and couldn’t be more pleased with our partnerships with Ceridian and POS 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 turn this company in the right direction. 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.

Operator: The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.