Blackhawk Network Holdings' CEO Presents at Blackhawk Network to Acquire InteliSpend Prepaid Solutions Conference Call (Transcript)

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 |  About: Blackhawk Network Holdings, Inc. (HAWK)
by: SA Transcripts

Blackhawk Network Holdings, Inc. (NASDAQ:HAWK)

Blackhawk Network to Acquire InteliSpend Prepaid Solutions Conference Call

October 22, 2013 09:00 AM ET

Executives

Bill Tauscher - Chairman and Chief Executive Officer

Talbott Roche - President

Jerry Ulrich - Chief Financial Officer & Chief Administrative Officer

Analysts

Sara Gubins - Bank of America Merrill Lynch

Bryan Keane - Deutsche Bank

Ashwin Shirvaiker - Citibank

Ramsey El-Assal – Jefferies

Wayne Johnson - Raymond James

Gil Luria - Wedbush Securities

David Chiaverini - BMO Capital Markets

Operator

Good day, ladies and gentlemen, and welcome to the Blackhawk Network to Acquire InteliSpend Prepaid Solutions Conference Call. My name is Adrian and I will be your operator for today. At this time, all participants are in listen-only mode. We will conduct a question-and-answer session towards the end of the conference. (Operator Instructions). As a reminder, this call is being recorded for replay purposes.

I would like to turn the call over to Bill Tauscher, Blackhawk’s Chief Executive Officer. Please proceed, sir.

Bill Tauscher

Good morning, everybody, and thank you for starting your day with us. We have some exciting news today. I need to begin the presentation with just reminding everybody that we will be making some forward-looking statements and we’ve included a portion in the presentation normal language for Safe Harbor.

The organization agenda we have for today is I am going to spend a little bit time talking about the strategic rationale for this acquisition and then going to turn it over to Talbott who will give you an overview of InteliSpend and Jerry will end our presentation before questions talking about the transaction itself.

The incentive business, when you look at the prepaid product aspects of it is at least as big as the third party gift card market that of course Blackhawk has its roots in. The Mercator data which we often quote that came out in August of this year for 2012 sizes the business is about $36 billion and we’ll look at some data that says it’s somewhere roughly depending on the estimates about half open loop and half close loop.

It’s a very complementary business to our consumer folks focused retail gift card market as many of the functional aspects of the businesses are parallel as other financial aspects. This space unlike ours is very fragmented and we believe there is a large potential for consolidation as we move forward.

InteliSpend’s revenue growth potential as we have sized it and its EBITDA margins are in line with Blackhawk growth targets that we have provided continuously and previously since we went public. So there is a very good fit in terms of the financial structure of the business. One of the very nice things about it is that has less of the seasonal aspect and because of the corporate nature and the commitment and timeframes for those corporate commitments is good revenue visibility. I’d call it’s got a very clear opportunity here to leverage a digital product solutions and has been investing so heavily in as well as its international presence.

And finally as we move down the road and in time, there are some natural eventual infrastructure and backlog synergies in that we have parallel fulfilment, customer care and processing systems in both of the two companies. If you look at the next slide, the market characteristics that I talk about briefly, this is the growth market, it’s estimated Mercator this year to grow about 10% which is slightly faster than the overall gift card market but slower in line -- a little bit slower than the third party gift card market.

It is divided between incentives that are used for employees, customers, sales and various channel dealers and otherwise. As I said earlier, the estimates on the split of the business, this is an open loop business today, obviously Blackhawk is both an open loop and the close loop business and therein lie some synergies as well, but this is an open loop business, open loop in the incentive space is growing faster than close loop, the same thing that we’re actually experiencing in our third party space currently. And depending on the surveys and the studies it’s believed that somewhere between 40% and 50% of the overall business, open loop that is.

If you look at a couple of key items that are drivers of growth in this business, first, we have an industry that as the economy has been improving in 2013 and early results appear that 2014 will be the same. Companies have been increasing their budget both for incentive programs and most importantly for prepaid cards.

There is a natural shift going on here as incentive programs migrate from the historical roots of merchandise and travel to prepaid gift cards and open loop cards for their incentive programs. In fact today, you know that migration has been driving steady growth in the incentive prepaid space, we're still only at 52% of companies are using gift cards for their incentive programs, obviously a lot of running field left to go.

And finally, nearly half of the companies who source prepaid gift cards are still getting them direct from the merchants. As we move into a more complicated world of digital and as we deliver other services the trend we believe is clearly there for a company to supply a comprehensive set of content and services as opposed to a direct supply and the trend indicates that.

I'm now going to turn it over to Talbott and let her talk to you about this new wonderful company we just acquired.

Talbott Roche

Thank you, Bill, and good morning, everyone. Just starting now on slide 7, a brief review of the InteliSpend history. InteliSpend come staff as a division of Maritz which is one of the largest and leading corporate incentives providers in the industry. They were actually a former joint venture between Maritz and American Express Incentive Services and have grown to be a formidable leader in the space. However, InteliSpend represented approximately 5% of Maritz business.

So overall a small piece of their business and I think in the space of increasing regulatory and compliance requirements on their open loop products has decided to part with the entity. They offer today a broad range of open loop solutions including in markup leading and patented DirectSpend product. That product is unique in its ability to restrict access to specific merchant locations, thereby directing the spend to participating merchants on an open loop product. This affords them the opportunity to offer unique products into the market space and collect additional merchant commissions on top of regular open loop product economic. The company has a 180 employees approximately and it’s headquartered in Fenton, Missouri.

Turning to their customer base. InteliSpend enjoys a strong diverse leading customer base with 1,500 direct customers, many of which are blue chip companies, actually today 68% of the Fortune 100 are customers -- active customers of InteliSpend today. They also have broad variety of programs and solutions to these leading entities and have a very strong high retention rate over the long period of time with these customers. In addition to their direct customer relationship, InteliSpend has developed a strong channel partner, a group of strong channels partners totaling upto 300 and they have to come a choice for ultimate prepaid solutions to these channel partners and develop through the years strong integration and provide compliance support to these channel partners.

Looking at their actual product solutions, they serve two market segments of the overall incentive and rewards marketplace. The first thing, the corporate incentives market and the second thing, the consumer promotions market, both of which Bill touched on are growing markets that are increasingly adopting prepaid product solutions.

Within each of those market segments InteliSpend has developed statistic programs and products to meet the diverse needs of the different micro segment. They’ve also developed around these specific card products tailored and integrated services that allow these programs to be customized in specific needs of each customer, and these include specific merchant selection, online digital and ordering catalogue, fulfilment services, et cetera.

Then moving on to slide 10, just to touch on the InteliSpend merchant network. In InteliSpend, on top of their openly product solutions which they offer into these different market segments has developed this unique merchant network, which has strong participation from leading retail brands and entertainment brands in their rank card or direct spend program that I spoke up earlier. This delivers extra value to their customers, the employees, and the award recipients that their programs serve and it provides great synergies with Blackhawk’s broad network of retail participants.

So in summary InteliSpend offers us some very strong market leading characteristics. Bill already spoke about the large and growing market that they service in corporate and consumer reward and how it’s increasingly moving towards prepaid solutions.

InteliSpend developed over the years a comprehensive solutions suite with patent pending rather patented technology to serve their market with unique product solutions that can be customized has become very sticky overtime.

They have this proprietary direct spend network which is a strong complement to Blackhawk’s expansive retail network. They have also world class program management capabilities, so over the years have become recognized as a leader in providing world class program management and service to their count, a strong and growing blue chip client base and also a strong and developed channel partner network. The business that they are in of corporate and consumer award also has high visibility on revenue. So long-term relationship, very sticky with predictable revenue streams.

The business is experiencing growth both in revenue and expanding its profitability. And last but certainly not least they bring an experienced management team with decades of experience who have come from both, [Merits] as well as American Express in the incentive space.

And with that I will hand it over to Jerry to take us through the transaction detail.

Jerry Ulrich

Alright thanks Talbott. I think as we disclosed in the press release this was an asset purchase, the purchase price is approximately a seven to eight times multiple are expected 2014 adjusted EBITDA that price is net of some acquired positive working capital and the present value of future tax benefits from the asset purchase. It’s financed through cash on hand plus some borrowings under an existing revolving credit facility with Safeway, we do expect to refinance the revolving credit facility with Safeway with a commercial credit facility and probably turn that into a term loan with rates that we have been quoted so far in the range of LIBOR plus 150 and 175 basis points.

It is subject to an HSR Hart-Scott-Rodino process, we’ve requested early terminations so that we can close by the end of this month, but the latest timeframe is November 12, and there are of course some other customary closing conditions.

We look the next slide going forward to our estimates of the future impact. If we close at the end of October, we expect for the fourth quarter that there will be an immaterial impact on both revenue and earnings. For fiscal 2014 we estimate low value and the range of $600 to $650 million that will drive net revenues in [Arp Harlan] adjusted operating revenues of between $50 and $60 million and an adjusted EBITDA between $9 and $11 million for 2014.

Looking forward this really forms the core of incentives business units. So InteliSpend has a significant business that they have developed over the last 10 to 12 years, but we bring of course new digital product capabilities as Talbott mentioned. And the catalogue of those digital products who allow us to grow faster in terms of this channel.

In addition the international presence that Blackhawk has today will allow us to address larger customers that are looking for a global solution. And then finally of course all of this together with a small existing incentive business at Blackhawk allows us to potentially grow the numbers overall in this space beyond what we’ve estimated to be InteliSpend group itself above.

So, with that I'm going to turn it back to the operator and open up the call for the questions.

Question-and-Answer Session

Operator

(Operator Instructions). First question comes from Sara Gubins from Bank of America Merrill Lynch. Please proceed.

Sara Gubins - Bank of America Merrill Lynch

Hi, thanks. Good morning. Could you just tell us how much you are paying for the deal?

Jerry Ulrich

Hi Sara. We are not going to disclose the exact purchase price, but I think if you look at the forward EBITDA multiples you will kind of derive a range obviously with the filing had pushed it above 71 million and we can say that it’s less than a 100 million. So it's in that range.

Sara Gubins - Bank of America Merrill Lynch

Okay. Thank you. And you mentioned a very short management team, are there incentives being provided for management today?

Jerry Ulrich

Yes. We've got both a bonus program that’s appropriate for this business unit as well as a long term incentive program that we're putting in place.

Sara Gubins - Bank of America Merrill Lynch

Okay. You also mentioned relatively limited seasonality, could you give us a split by quarter or maybe is it in anyway reasonable for us to think it’s sort of 25% per quarter?

Jerry Ulrich

Well, there is a little bit of -- first of all there is a little bit of waiting for the end of the year, but that actually drives a little bit more revenue in the first half of the following years. So if you think about the programs being loaded and then driving the revenue streams after the cards are activated and so forth. So there is some effect there in the first half of the year which is positive. We will put them on our fiscal quarter. So as you know Sara, we have a little bit of upside at fourth quarter in terms of 16 week fourth quarter. So we’ll end up with a little bit more detailed guidance when we have our 2014 guidance in the February call after a year.

Bill Tauscher

But regardless it really is much closer to flat certainly in comparison to our business which is so skewed to the fourth quarter. So and as Jerry said we've got a little more business in the first half because of our fiscal year a little longer fourth quarter which is just the way we count. But this is a business that pretty much over the course of the year will help smooth or otherwise very strong seasonality.

Sara Gubins - Bank of America Merrill Lynch

Great. And then last question. Could you give us some more color on how the financial model of this business works? Are there commissions that you are paying out more than just a little bit mechanics of how it works? Thank you.

Jerry Ulrich

Yeah. In terms of the revenue stream depending on the program, there are program fees, there is also generally speaking redemption kind of metrics that go along with the products. So cards that are used in the corporate space or either incentives, rewards or rebates typically have exploration dates ranging from 3 months to 12 months to the extent that the cards are not redeemed that is part of the revenue stream. So those are primary sources. Talbott mentioned the merchant program related to the DirectSpend product. So again the merchants are interested in driving traffic into their stores so they could provide some commission support. So those are the primary revenue streams for the business.

Bill Tauscher

If you look at our business of course, we have a very healthy business an open loop that has many other same revenue characteristics as this business does. And then of course we have our close loop business with our fees that were provided by our card partners.

Essentially what you have here is the combination of those two pieces in a product when they have their DirectSpend and then when they don’t have their DirectSpend or their rent merchant commissions you have open loop economics. If you looked at Jerry’s numbers, the overall net revenue as a percent of load value is very much in line with our business.

Sara Gubins - Bank of America Merrill Lynch

Thank you.

Operator

Next question comes from the line of Bryan Keane of Deutsche Bank. Please proceed.

Bryan Keane - Deutsche Bank

Hi guys good morning. I guess I was just curious on, is this a competitive bidding process for InteliSpend or is this something where Blackhawk InteliSpend gone together and so they were set to complete the merger proceedings.

Jerry Ulrich

That's a good question Bryan. In the press release we mentioned, Raymond James did represent Maritz and InteliSpend in this process, so there was a competitive process run by them.

Bryan Keane - Deutsche Bank

Okay. And maybe you could just describe a little bit the international opportunity, where do you think or how fast can Blackhawk leverage these assets internationally?

Bill Tauscher

Just to describe it quickly, obviously if you have 68% of the Fortune 100, you have got multi-national corporations, global corporations by definition. And as all corporations move to manage their various efforts more on a global basis, there is a growing request for incentive programs that operate on a global basis.

Besides currency and the processing of that, it also has to do with the ability to offer both open loop cards in different countries and of course close loop as we bring that to this party. And obviously Blackhawk’s presence in most of the developed nations and in 20 countries overall is helpful for that. All of that’s probably sometime during the course of next year. As we bring it onboard, there is certain things we have to do in order to get the right customer experience from a seamless standpoint. All the building blocks are there with our close loop content and our open loop offerings, but it will take us probably into the second half of next year to really put that in place in a way that we have seamless and we provide for those customers the same kind of service what InteliSpend gives them domestically.

Bryan Keane - Deutsche Bank

Okay. And then just last question from me. Talbott I know you have talked about before that the corporate market is right for mobile and for some of the mobile opportunities. So maybe you can just highlight exactly why that is and will corporate be one of the first channels to adopt the mobile platform?

Talbott Roche

Bryan that’s a great question. We see this as an opportunity to augment InteliSpend’s already very robust physical product line with our digital capabilities. And yes we do see a stronger demand signal coming out of corporate incentive programs where the focus will be more around immediacy of delivery and less around the appropriateness of the physical gifting experience where consumer might be more sensitized to that. So that is a opportunity here for enhancing growth that we’ll be working on over the coming years.

InteliSpend obviously having such a great strong foundation with so many leading partners and customers in the marketplace we think that we’ll be able to accelerate our mobile solutions into their network.

Bryan Keane - Deutsche Bank

Do they have a mobile solution or they’re going to leverage your guidance?

Jerry Ulrich

Their mobile solution was in development that we’ll be combining the efforts and growing out sometime next year.

Talbott Roche

Yeah, and to be specific we should say digital solution since it’s not specific to mobile software online.

Bryan Keane - Deutsche Bank

Thank you, thanks a lot.

Operator

The next question comes from the line of Ashwin Shirvaiker of Citibank. Please proceed.

Ashwin Shirvaiker - Citibank

Thank you. I guess you know the first question here is, there was an initial comment on the call which said that this part of the market is probably in need of consolidation. So is this acquisition is sort of a first step in the process or what’s the market shift that can kind of spend ahead in this market perhaps is a good way to ask?

Bill Tauscher

Well, it is a true statement that market is fragmented. If you look at a market that on the open loop side, the latest numbers we have are about $15 billion in InteliSpend, Jerry gave you the number that’s estimated next year to be between $600 million and $650 million. That’s obviously a number like 4% in fact a little as than 5%. And InteliSpend is one of the very dominant players in the business. So yeah, there is an opportunity for consolidation. As always, consolidation can come in two ways. We think some of the industry changes that are coming that Talbott spoke about with digital and that I spoke about with international can drive and will drive some of those changes. And to the extent InteliSpend who has a great customer base and a great reputation can be leveraged for some really strong organic growth, that's one way to consolidate an industry and of course Blackhawk for years accomplished that. But there is clearly an opportunity for other consolidation place given the foundation and core that InteliSpend will represent for us.

Ashwin Shirvaiker - Citibank

Okay, got it. And with regards to the customer base it sounds, just a clarification. It seems like a very diversified customer base, but I just want to clarify is there any kind of concentration of customers. Also the specific customers contracts, they can be exclusive, how often they could have come up for the renewals and things like that. If you could give us some color on the nature of contracts and their relationships?

Bill Tauscher

Well, the contracts for the corporate customers tend not to be exclusive in fact, but in practice for individual programs operate that way. I can tell you it's a very sticky business. As an example InteliSpend's top 10 customers have been with them for 7 years, minimum all 10. There is a stickiness here of literally in the high 90% as you look at the data. So this is a very sticky business in that regard, though there is some opportunity for dislocation as the digital transformation begins here.

Having said that, there is also a channel part of the business and again it tends to be exclusive given the integration of systems, the forward integration of systems and the whole supply chain with that channel. There are some long-term contracts with the channel. It’s the only place there is any real business concentration. One of the large channel members will remain merits who we do have a long-term contract with. But by and large it’s not necessarily a business of long-term exclusive contracts, but it is the business of long-term stickiness and exclusive business practices.

Ashwin Shirvaiker - Citibank

Got it. So you’re emphasizing relationships other than contracts, which is perfectly understandable. Last question is on, there is a comment also on the reason this was being directed was due to this regulatory burden. I wanted to understand that statement. Are there different set of regulatory rules for this part of the market relative to other parts of the prepaid market?

Bill Tauscher

No, the regulatory requirements are virtually the same. So this is where we've got a big business already in the open loop product, InteliSpend has developed all the, anti-money laundering, know your customer type compliance, they work with the same banks that we work with, so there is a good strong overlap there. But if you think about a channel partner for example that’s trying to do their own open loop program, today it gets harder and harder because you’ve got requirements around the [Zurban Act], you certainly have any money laundering requirements with things and rules and so forth. So it’s really just a matter that it becomes more specialized, much easier to turn it over to a program manager that has all that covered and try to develop that internally yourself.

Ashwin Shirvaiker - Citibank

And last question is a clarification, I assume to be missing the growth rate you provide one?

Bill Tauscher

I think what we said is that this business is growing in a manner similar to Blackhawk’s target goals so very much in line both from a growth rate and a margin standpoint as we look forward.

Ashwin Shirvaiker - Citibank

Got it. Congratulations guys, thanks.

Operator

The next question comes from the line of Ramsey El-Assal of Jefferies. Please proceed.

Ramsey El-Assal - Jefferies

I wanted to [present] a little bit into the kind of segments in the business in terms of consumer promotions versus corporate incentives. What is one of those categories kind of larger than the other in the business? And I guess just kind of a follow-up to that, is there overlap in the client base or is it a separate sort of sales process and a separate sort of client segment that you go after for each type of product?

Bill Tauscher

Their business is little heavier on the corporate incentive side, but there certainly would be overlap. So a given account can have multiple growth program within the business. So back to the overview that Bill provided, there is overlap with companies that provide rewards to their employees, they might also have a consumer incentive or promotional programs going so that would be, may be a rebate program. So the typical kind of approach is you establish a relationship with an account and then you work through that account and look for various areas within the business to expand the incentives and promotions programs.

Talbott Roche

Yes, and the good news is that those programs will be sourced by different budgets within that account. So you typically have a different buyer for consumer program, probably a marketing funded expensed by a company versus an employee or sales incentives were holiday year and gifting program which should come out of the HR team. But they are both growing segments.

Ramsey El-Assal - Jefferies

Okay. And you may have addressed as I joined the call a little bit late, but can you provide a little more color on the timing of the cost synergies, is this all fiscal ‘14 sort of efforts to get the businesses aligned or is this something that will stretch out into ‘15?

Jerry Ulrich

Well, I think some of it would stretch into 2015, particularly a full year impact. I think there as Bill described some overlaps or commonalities in terms of the types of things we do fulfilment for example of our GiftCardMall to individual consumers. They obviously have a bigger fulfilment business to individual recipients of rewards, awards and rebate. So there is certainly some overlap there. We’re obviously running processing platform at Blackhawk. They have an open loop program, also need the processing platform. So I think there are some of those things that can extend it further into the future. The immediate focus of course will be to work the product side. And as we said leverage some of the capabilities that we have for them and then as we go forward start to look for some of those back office cost synergies.

Ramsey El-Assal – Jefferies

And last one from me is just balance sheet deployment strategy going forward. How should we kind of contextualize this acquisition with your balance sheet deployment? Are you in the process now kind of rolling at sub segment which means you are going to curious for this higher leverage level than you have in the recent past or how should we sort of frame up how are you looking at that going forward?

Bill Tauscher

No, I think as you know, the business generally from the beginning has been a cash flow positive business and as we become more profitable over the years to generating more cash, certainly during the IPO process we had questions about how we would deploy that capital. And as the growth business we certainly believe we will continue to grow organically at quite a nice rate but we see this as an opportunity add maybe a little bit of leverage. We are not going crazy here, but we think that’s an opportunity to deploy some of our cash flow as well as provide some leverage and therefore some higher returns from a shareholders standpoint.

Unidentified Company Representative

As you know our core business produces cash as it grows and we are in the oracle position of having a growth business that produces cash and of course as our earning expand, that cash is expand. So clearly this is the signal of what other ways we intend to use that cash.

Ramsey El-Assal - Jefferies

And the cash flow characteristics of this business you are buying are similar to your existing cash flow generation?

Jerry Ulrich

Yes, there.

Ramsey El-Assal - Jefferies

Okay, thank you.

Operator

The next question comes from the line of Wayne Johnson from Raymond James.

Wayne Johnson - Raymond James

Hi, yes good morning. A couple of questions, one follow up. So on the integration on the cost side you have mentioned the duplicative overhead and that maybe realized later on the process. So the guidance that you have given us on both the revenue and EBITDA basis for InteliSpend for 2014, is that a standalone assessment or does that assume any successful cross selling of services between the two companies or any overhead reduction at all?

Jerry Ulrich

That guidance line is pretty much standalone. So as I mentioned towards the end there are we think additional opportunities as we leverage some of the capabilities from Blackhawk and cross pollinates some things back to our customers base as well.

Wayne Johnson - Raymond James

Okay. And then just thinking about this from a distribution stand point, how does this impact the grocery stores and what you're offering there and can you just kind of flush that out a little bit on how this will be an overlay on to the existing model in that way?

Bill Tauscher

Well, I think certainly the grocery stores represent our retail footprint reaching the consumers. So as we have indicated, this is a very complimentary play. From a channel standpoint, this is a B2B sale. Although the rewards often end up being delivered directly to a consumer, but that's the direct fulfilment piece I mentioned that's they have a very substantial and a cost effective fulfilment capability. We do some of that also for GiftCardMall or we're fulfilling direct to consumer, but is going to a little bit larger scale than ours.

Now we can point out that our grocery partners certainly sell into the incentive space, grocery gift cards in fact are fairly popular. We do see an opportunity to work with them and maybe expand some presence with them on gift cards.

Wayne Johnson - Raymond James

Terrific. Thank you for the update.

Operator

The next question comes from the line of Gil Luria of Wedbush Securities. Please proceed.

Gil Luria - Wedbush Securities

Yes, good morning. Thanks for taking my question. Could you a little bit tell us how much this relates to your mid-term guidance of 20% revenue and earnings growth? This is above and beyond or does this help you get towards those goals? And next year will you be reporting growth on an organic basis as well as a stated basis?

Bill Tauscher

Well, I think Gil the guidance that we talked about on our third quarter earnings call stands as the separate organic growth for our core business. This acquisition presents an incremental growth opportunity. When we get down to providing that 2014 guidance and reporting going forward, we certainly will provide some information to help you with understanding what the core is doing versus this business. But as typical overtime things will tend to overlap a bit and become a little bit greater in terms of the core growth versus the incremental growth from a new business.

Gil Luria - Wedbush Securities

Of course. And you gave us the order of magnitude of $70 million to $100 million net of acquired positive working capital and future tax benefits. Could you give us order of magnitude for what those benefits are going to be?

Bill Tauscher

Approximately $50 million on a present value basis for the future tax benefits.

Gil Luria - Wedbush Securities

And the acquired working capital?

Bill Tauscher

That’s the small piece we're not going to break out that be too.

Gil Luria - Wedbush Securities

Got it. Thank you very much.

Operator

(Operator Instructions). The next question comes from the line of David Chiaverini of BMO Capital Markets. Please proceed.

David Chiaverini - BMO Capital Markets

Yes thanks good morning. I was just curious about the revenue split between program management fees and commissions and fees for the open loop programs?

Jerry Ulrich

Yeah. Similar to our core business we’ll probably not going to get into the line items on the exact revenue split. If you think about again the nature of incentives and reward cards, there is an expiration period, so you certainly have a higher percentage related to unredeemed balances. In the retail world our cards don’t have expiration date. So that unredeemed portion is much smaller. So and again typical in this industry that represents material portions of the revenues. But then also program fees related to fulfilment of the product on a transactional basis typically you have an ordering tool that customers will utilize and there will be some kind of fulfilment fee to get physical cards into the hands of the recipients. So the revenue splits not necessarily even, but across those three primary categories I mentioned earlier.

David Chiaverini - BMO Capital Markets

And what percent of the load value is typically unspent for this type of product?

Jerry Ulrich

That's not something I think that we would talk about in specifics right now.

David Chiaverini - BMO Capital Markets

Got it. Okay, thanks a lot.

Jerry Ulrich

Okay.

Operator

There are no more questions at the present time. So I’d like to hand the call over to Jerry Ulrich for closing remarks.

Jerry Ulrich

Alright. Well, thanks very much everybody for participating today. And we’ll certainly be available for follow-up questions, Patrick Cronin standing by on the investor relations line. So again thank you for joining us today.

Operator

Thank you for your participation in today’s conference. This concludes the presentation. You may now disconnect. Good day.

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