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Green Dot Corporation (NYSE:GDOT)

Q4 2011 Earnings Call

January 27, 2012 5:00 PM ET

Executives

Chris Mammone – VP, IR

Steven Streit – Chairman, President and CEO

John Keatley – CFO

William Sowell – COO

Analysts

Glenn Fodor – Morgan Stanley

David Scharf – JMP Securities

Ramsey El-Assal – Jefferies

Sakhrani – KBW

Julio Quinteros – Goldman Sachs

Bryan Keane – Deutsche Bank

Jim Kissane – Credit Suisse

Tien-Tsin Huang – JP Morgan

John Rowan – Sidoti & Company

Greg Smith – Sterne Agee

Gil Luria – Wedbush Securities

Bob Napoli – William Blair

Andrew Jeffrey – Suntrust

Mike – Piper Jaffray

Presentation

Operator

Good afternoon, and welcome to the Green Dot Corporation Fourth Quarter 2011 Earnings Conference Call. All participants will be in listen-only mode. (Operator Instructions) Please note this event is being recorded. I would now like to turn the conference over to Chris Mammone, Vice President of Investor Relations. Please go ahead.

Chris Mammone

Thank you, and good afternoon. By now, everyone should have access to our fourth quarter 2011 press release. You can find it at www.greendot.com, under the Investor Relations section. Throughout this conference call, we will be presenting non-GAAP financial information, including non-GAAP total operating revenues, adjusted EBITDA, non-GAAP net income, non-GAAP diluted earnings per share and free cash flow.

This information is now calculated in accordance with GAAP and may be calculated differently than other companies’ similarly titled non-GAAP information.

Quantitative reconciliations of our non-GAAP financial information to their most directly comparable GAAP financial information appears in today’s press release and in the appendix of the presentation that accompanies this call.

Also, we’re providing 2012 guidance on a non-GAAP basis with a reconciliation to GAAP, which appears on the financial information

GAAP, which appears on the financial information section of our Investor Relations website.

Finally, before we begin our formal remarks, we need to remind everyone that part of our discussion today will include forward-looking statements. These statements are subject to numerous risks and uncertainties that could cause actual results to differ materially from what we expect, and you should, therefore, not put undue reliance on them. Some of these risks are mentioned in today’s Form 8-K filing with the Securities and Exchange Commission. Others are discussed in our quarterly report on Form 10-Q for the third quarter which is available at sec.gov.

With those formalities out of the way, I would like to turn the call over to Steve Streit, Founder, Chairman and Chief Executive Officer of Green Dot Corporation. Steve?

Steven Streit

Great. Thank you Chris and welcome everyone to our Q4 earnings call. Also with me this afternoon is Green Dot’s CFO John Keatley and after my section John will walk you through some of the financial highlights for the quarter and we’ll also provide our 2012 financial outlook.

Well Q4 was a solid quarter and 2011 was another strong year for Green Dot. Our Q4 non-GAAP revenue grew 26% year-over-year to $123 million and our full year non-GAAP revenue grew 29% versus 2010 to $485 million. Q4 non-GAAP earnings grew 40% year-over-year to $17.8 million and for the full year we grew non-GAAP earnings by 26% to $68.7 million.

Active cards grew to $4.2 million as of December 31 representing year-over-year growth of 24%. We’re very pleased to continue our track record of high growth during 2011 and as outlined in the guidance portion of this call little bit later we believe there is much more to come in 2012.

Clearly one of the year’s biggest achievements was receiving approval from the Federal Reserve Board of Governors to purchase Bonneville Bank in Provo, Utah and become a bank holding company. This is a huge milestone for Green Dot and as you can imagine we’re very proud. We believe that owning a bank and becoming a bank holding company will provide some very important benefits for a company our customers and our shareholders. First shareholders. First Green Dot as a bank holding company is now overseen directly by the Board of Governors of the Federal Reserve System and our subsidiary bank Green Dot Bank is now regulated directly by the Federal Reserve in the State of Utah with the FDIC providing deposit insurance.

In the long run we believe that being directly supervised our regulators will understand our business top to bottom will provide a sustainable advantage versus our structure as a non-bank entity with multiple regulators at the state and federal level and subject to the review and consent of third-party bank issuing partners and their regulars.

Second, we now have greater creative freedom of course subject to applicable banking rules to develop and launch new products and services. Our goal is to always be an innovation machine at Green Dot and we believe that the bank will provide increased flexibility and speed to market as we rollout a wider range of products to meet the needs of new and existing Green Dot customers.

Third becoming the bank holding company strengthens our competitive advantage as our experience has been that many public sector entities and other institutions are only allowed the contract directly with the bank for financial services. For example the United States Treasury, many state governments have regulations that require them to contract directly only with banks.

We believe that having the bank that can deal directly with our clients will mitigate many risks inherent in the non-bank contracting structure that can help open new doors for us with government accounts and other organizations that of similar bank required.

Fourth we expect that acquiring the bank will result in cost savings as Green Dot accounts migrate to our bank from Synovus Bank. Our bank team led by Lewis Goodwin is busy beginning the migration of accounts current a file of the Synovus Bank on to the new Green Dot Bank and we expect a substantial majority of the Green Dot branded card portfolio that will be issued out of Green Dot Bank by the end of 2012.

Over time we believe our bank will also contribute to our company’s consolidated revenue and earnings to be a float income. Finally, we believe the level of regulatory accountability and financial transparency required to be a publicly traded bank

Required to be a publicly traded bank holding company is a good thing for the long term growth and long term sustainability of our company and that should benefit our investors.

On the topic of vertical integration, we’re pleased to tell you about the acquisition of certain assets of eCommLink also known as ECL. ECL was a card transaction processor located in Nevada, a specialized and prepaid card processing for a number of program. They’ve purchased their technology assets including their processing platform. Our technology team headed by John MacIlwaine will build upon that platform in order to customize it and make it enterprise ready for Green Dot’s full ray of offering. That build out will cost us so many of course, but once in production we expect this investment to generate significant cost savings and margin expansion.

John Keatley will share more financial color on this acquisition in his section of today’s broadcast. So this now means that Green Dot is the only prepaid company in the space and one of the few bank holding companies of all of America that owns and operates all the key assets needed to become a vertically integrated company.

For example going forward we’ll issue the cards from our own bank, process those cards on our own processing platform, create design and distribute these products for a distribution footprint of 59,000 retailers. We’ll sell them via our direct IT connectivity into our retailers POS systems. We load those accounts to our own proprietary Green Dot reload network and we’ll service those customers through Green Dot websites, phone apps and Green Dot managed call centers in the U.S. and abroad.

Our focus on quality control and efficiency is key to our ability to produce great consumer financial products at the lowest possible card. This philosophy is how we sell our products for much less to most of our competitors and consistently deliver solid revenue in earnings growth year-on-year as we’ve illustrated in this call.

Okay now let’s talk about some business developments. We’re pleased to report some newly – renewals with major retail distribution partners. We have secured new multi year exclusive agreements with multiyear exclusive agreements with Rite-Aid and Kmart. These renewals call for expanded and more prominent ends to replacement. And in the case of Kmart involves a complete relaunch of their prepaid category.

Staying with the distribution theme you may have seen that we released more detail about our assumed launch AARP Foundation product, the AARP Foundation prepaid Master Card from Green Dot is particularly timely given the Federal Government March 2013 deadline when all remaining social security benefit recipients will be required to receive those payments through ACH electronically.

Initially the card will be available online in all these locations nationwide with rollouts to more Green Dot retailers plan throughout the year.

Okay, now we’ll hand the call over to John Keatley with more color on our strong Q4 financial performance and will have an overview of our 2012 guidance. And then after John’s report we’ll begin the Q&A section. John?

John Keatley

Thanks Steve. In Q4 we continue to show strong top-line growth and significant margin expansion hitting the high end of our revised full year adjusted EBITDA guidance and growing our adjusted net income by 40% year-over-year. We also showed strong growth in terms of our operating metrics with new card activations up 29% year-over-year in the quarter and first time reloaders growing even faster at 32% year-over-year.

The first topic that I’d like to discuss is our revenue growth in Q4. As you can see on slide 9, our non-GAAP total operating revenues grew 26% year-over-year in Q4. Clearly this is a high rate of growth and it’s consistent with our historical growth rate but it fell short of our revised guidance for the year. The biggest reason for the revenue mix versus guidance was that we misjudged the retention of cards acquired by customers getting tax refund a segment of customers that grew considerably this year.

Our forecast had been adjusted to accurately reflect the revenues associated with these cards going forward. We also showed strong margin expansion in Q4.

Our adjusted EBITDA margin increased nearly 3 percentage points year-over-year from 23.1% last year to 25.9% this year. We saw our efficiency gains in each major expense category with the exception of other general and administrative expenses, where we incurred higher expenses primarily related to the closing of our bank acquisition.

Q4 was the second quarter that provides a clean year-over-year comparison with respect to our Wal-Mart commission. Looking at Q3 and Q4 together, we saw an increase in our EBITDA margin of approximately 140 basis point in the second half of 2011 versus the second half of 2010.

Our non-GAAP net income shown on slide 11 was $17.8 million, an increase of 40% for the quarter and our non-GAAP EPS came in at $0.40, a 38% year-over-year increase. In terms of our key operating metrics we saw a strong growth across the Board, active cards grew 24% year-over-year to 4.2 million active as of December 31.

Our gross dollar volume as shown on page three grew to $3.8 million, an increase of 41% year-over-year. And our full year GDP was $16 million an increase of 55% year-over-year. The faster growth in GDP relative to active cards is primarily the result of our higher direct deposit penetration this year.

The portion of our GDP from direct deposit grew to 46% compared to 38% last year and total funds from direct deposit grew 69% year-over-year. Cash transfers grew 26% to $9.1 million driven by both increased reloads from our portfolio of cardholders and more reloads from our network partners portfolios.

The portion of cash transfer revenue from third-party reloads increased to 19% during the quarter versus 15% in the year ago period. New card activations increased 29

New card activations increased 29% year-over-year to $2 million with first time reloaders growing even faster at 32% year-over-year. Returning customers continued to be an important source of activation, accounting for 36% of all new card activations. We generated very strong cash flows in 2011. We ended the year with $270 million of total cash in investment securities including $225 million of unrestricted cash and cash equivalents, $31 million of investment securities, $13 million of restricted cash and no debt. This is an increase of $97 million versus the end of 2010. Clearly our balance sheet remains a source of strength for the business.

I’d like to talk a little bit about our expectations regarding the financial impact of two recent acquisitions Bonneville bank and the processing assets of eCommLink, a prepaid processor.

As Steve mentioned these two acquisitions and the subsequent integration of these assets into our business are two important components of our vertical integration strategy we expect we’ll deliver meaningful cost savings overtime. Fees that we paid at Synovus and – account for approximately one-third of the processing expenses on our income statement.

We expect that these acquisitions will allow us to significantly reduce these expenses over the next several years as we build out our own in-house card issuing and processing capabilities.

In terms of our 2012 guidance, we expect another year of very strong top-line and bottom line growth. Our non-GAAP total operating revenues are expected to grow 22 to 24% based on these key assumptions. Improvement in average active cards over the year are greater than 20%, growth in cash transfers are greater than 20% and GDP growth in excess of 30% year-over-year. Recall that this guidance reflects the fact that we no longer have the intuit program which contributed approximately 5% of revenue in 2011. The implied top-line growth on our business excluding in to it is 25% to 29%. Also I’d like to point out that this revenue was heavily concentrated in the first quarter of the year so the grow over in Q1 will be roughly $8 million and the margin on this revenue was roughly consistent with the rest of our business.

We projected adjusted EBITDA growth of 20% to 24% which implies that our margins will stay roughly flat 2012 at approximately 25%. This guidance reflects the fact that 2012 adjusted EBITDA growth will be impacted by the investments we continue to make new growth initiatives.

We expect non-GAAP EPS to grow to approximately at $1.85 to $1.90 per share an increase of 19% to 22% year-over-year reflecting higher depreciation cost associated with the heavy CapEx investments in our infrastructure.

Now with that I’d like to turn the call back to Steve. Steve?

Steven Streit

Great. Thank you, John. And operator, let’s go ahead and open the phone lines to receive questions.

Question-and-Answer Session

Operator

(Operator Instructions). Our first question comes from Glenn Fodor at Morgan Stanley.

Glenn Fodor – Morgan Stanley

Hi, thanks for taking my question. Congratulations on the renewals.

Steven Streit

Thanks Glenn.

Glenn Fodor – Morgan Stanley

With these early – just remind me where these early renegotiations or were they up for just the scheduled renewal?

Steven Streit

Good question. My understanding is and I could probably get something more precise is they were roughly up for renegotiation but we never wait till the last date of release something. So, I guess little bit above they were before the renewal date they were before the renewal date, but we’re at coming towards the natural conclusion I guess.

Glenn Fodor – Morgan Stanley

Got it, okay understood. And then as far as financial incentives are changing – changes to the pricing agreement that you have with these retails, can you give us any sort of color of changes to the contract, is it in line with what you’ve seen historically, was there anything greater this time around?

Steven Streit

Yeah John can comment better, but they are similar to what we’ve had historically and John.

John Keatley

Yeah that’s right, no dramatic changes in terms, we generally don’t discuss individual retailer economic specifically, but nothing dramatic.

Glenn Fodor – Morgan Stanley

Okay, great. And then just on the promos that promotion, people taken advantage of promotions last quarter, there were no big areas upside to our estimates and metrics this quarter. So, I just wanted to see from your perspective, was that taken advantage of promos last quarter was it additive to numbers this quarter or are you seeing any sort of benefits from that yet or is this is more of, we’ll see it over the next couple of quarters?

John Keatley

Well a little of both Glenn. We did have some new initiatives in Q4 that we’re successful and help to drive that new card activation number up to 29% and help lift our number of first time reloaders up over 30%. We also had some promotions that were delayed until next year. And we also had some promotions that result in counter revenue and that was the case again in Q4, we have our direct deposit incentives. We also offered incentives for customers to activate online resulting in some counter revenue. So we saw some impact, some benefit in Q4 and some of those initiatives were delayed until next year.

Glenn Fodor – Morgan Stanley

All right thanks for the color. I appreciate it.

Operator

The next question comes from David Scharf at JMP Securities.

David Scharf – JMP Securities

Great, thanks for taking my question.

Steven Streit

You bet.

David Scharf – JMP Securities

General question about the margin outlook next well I guess this year John and particularly your comment about more investment initiatives keeping margins flat. I mean is that fair amount of this associated with just under the start-up or integration cost associated with Bonneville and eCom or are we talking about on average expectations for more sales and marketing expense on a sort of per new activation basis?

John Keatley

Yeah. I think in terms of the general trend on margins if you look at the second half of 2011 we saw about a 1.5 point margin expansion over 2010, I think that’s a pretty good kind of steady state run rate kind of margin expansion we expect to see in the business. 2012 is an exception for a couple of reason as you mentioned we do have some overlap expenses related to the bank and to building up the processor. We’ll be continuing to pay – in 2012.

At the same time we’re building out our own processing platform same at the bank we’ll be continuing to pay in licensing and fees to Cenovus, well at the same time we’re ramping up our bank in our own issuing capability. We have a similar issue with our office moved, we’re taking possession of our new office space in Pasadena right about now and we’ll have to recognize rent expense on it even though we don’t actually pay rent or move in to the building until the end of the year and that will result in a negative hit of about a $1 million this year as well.

So, we have some overlap misused this year. Sales and marketing in general we do expect some we do expect some increased advertising cost as we’ve mentioned before, we expect online to continue to become a more important channel to us and will allocate a significant amount of advertising dollars to that channel. So those are some of the factors, kind of impacting our margin expansion next year.

David Scharf – JMP Securities

Got it. Just couple of other quick ones, as you look at cash transfer revenue and particularly the ATM surcharging, I know last quarter that there was some discussion of the impact kind of adding the free ATM network moment. Is there anything you can expand upon there, with that something that was meaningfully affluent the quarter?

Steven Streit

No we don’t really have anything new to share on that, as we mentioned before, there is a requirement in around the middle and July of 2012 that would begin to offer free ATMs on the Wal-Mart portfolio. And but we haven’t disclosed exactly how would do that or the timing, but as we’ve mentioned before we expect the retention and usage benefit that will largely offset any loss revenues from those ATM transactions.

David Scharf – JMP Securities

Got you. And then, lastly I just want to make sure, I understood your commentary related to kind of in your misjudging the retention of cards by a lot of those on a late tax refund customers, I mean, are you implying that the money wasn’t spent is quickly is typically the tax refund accounts, do you spend that money and that’s why perhaps GDP was down sequentially?

Steven Streit

Well its I would say the higher level it’s a general comment about 2012, we had a strong first quarter. We had a strong first quarter very strong new card activations and GDV and we raised our guidance at that time. One of the things we misjudged and then fully appreciate here until the end of the year was just how much shorter the tax refund card (inaudible) is their life and their lifetime revenue and that impacted us throughout the rest of the year and into Q4.

David Scharf – JMP Securities

You mean 2011 all right?

Steven Streit

Oh sorry I meant 2011 and…

John Keatley

Yeah just a modeling I mean the best way to look at it to be blunt there was a modeling mistake. We thought those cards have retained similarly to other times of direct deposit cards, they don’t. So they were not nearly as productive as a regular deposit card and we fix them all are going forward, but I think t you can check that one up to mistake on the model.

David Scharf – JMP Securities

Got you. Is there anything in that I can tie into there is a sequential decrease in GDP in fourth quarter?

Steven Streit

You can tie well…

David Scharf – JMP Securities

I mean my understanding is a lot of those typically tax refunds.

Steven Streit

Yeah, yeah.

David Scharf – JMP Securities

Taken out of an ATM you usually don’t rack up GDP and maybe there is some other explanations for the decrease and the gross dollar volume number?

Steven Streit

Yeah that’s right, I mean Q4 is a quarter that largely clean up tax activity in general and that the late filing date is October 15, so Q4 is basically a clean quarter with very little activity tax refunds or tax activity in general. So that would explain sort of the slower growth year-over-year growth in GDP in Q4.

David Scharf – JMP Securities

Okay, great. Thank you very much.

Operator

The next question comes from Ramsey El-Assal at Jefferies.

Ramsey El-Assal – Jefferies

Hi guys.

Steven Streit

Hi

Ramsey El-Assal – Jefferies

You mentioned full income from Green Dot bank potentially coming online at some point is that something you expect in ‘12 I would assume if you’re migrating some accounts over given the interest rate environment is probably not going to provide a whole lot of upside there but I was just wondering if that source of fund is accounted for new guidance.

Steven Streit

After there had been – after the Fed’s speech yesterday we minimized our return amount. Now it’s where we’ve always said that the float is minimal but the balances get can get fairly significant and John what do we did last year from float is like 40 50 basis points once a year something.

John Keatley

Yeah, it’s about a $1 million of revenue in our average balances cash balances were enabled at 200 of the year yeah about 0.5%.

Steven Streit

So as the balances grow in the bank then that $1 million is growing with accrued loss and so that’s part of that float. But yeah within this trade set at 40 50 basis points a year for the kinds of investments we use it’s not going to make anybody rich but it is an add over time and it is a positive and at the interest rate environment increases over time that can be more positive.

Ramsey El-Assal – Jefferies

Thanks. On the, – congratulations on the AARP deal as well. I saw that Bancorp Bank was the issue they were added in Green Dot bank and I was just wondering what the reasoning was there was that the Green Dot bank was still sort of tied up in the approval process while the deal is getting structured or…

Steven Streit

Yeah very good that’s exactly right. There we sort of had a gate by which we had to pick a bank and literally that date was a week before we received approval in November so Bancorp is a fine bank, Frank Angelo and his team over there are personal friends and good partners and so we’re using them for that card that thing is actually right.

Ramsey El-Assal – Jefferies

Okay. And one quick last one. So, some of the promotional expenses such as the direct deposit incentive and the 2% deal at Wal-Mart some of your accounting is counter revenue. When do those promotions end and when they end do you expect an uptick there in terms of maybe there is consumers have been incentive properly so they might continue spending, continuing being customers, is that – something that, have those deals ruled off here or the enterprise ruling offer, what’s the timing there?

Steven Streit

In most of the deals and there are really number of promotions that fall in bucket, most of them are continuing although on a somewhat restricted basis. We’re changing the terms under which we the criteria under which we offer the $10 direct deposit incentive, just to get more targeted with it and make sure really incentivizing the right kind of direct deposit behavior. So we expect it to ramp down somewhat gradually, but it will always be, it will be an ongoing part of our promotion model.

Ramsey El-Assal – Jefferies

All right, great thanks a lot that’s helpful.

Steven Streit

Yes, you bet. Thank you.

Operator

Our next question comes from Sanjay Sakhrani at KBW.

Sakhrani – KBW

Thank you, good evening. Just a couple of questions, first I was just hoping to get some color on your pipeline of distribution deals? And then just secondly on the outlook, I was wondering one, if that includes the economics related to the renewals and to whether or not you assume any pipeline….

Steven Streit

Sanjay I can’t, I heard the first question by pipeline, I apologize but I can’t hear the call.

Sakhrani – KBW

Sorry, can you hear me now?

Steven Streit

That sounds better, yeah thanks.

Sakhrani – KBW

Okay, great sorry about that. The second question just on the outlook, I was wondering one, does that include the economics related to the renewals and to do you assume any pipeline wins out to this year? Thanks.

John Keatley

I can answer the – Will you want to take the first one?

William Sowell

Kindly do pipeline I’ll talk about that.

Steven Streit

Let’s put it up. So the answer is the pipeline looks good, we’re always cautious to count our chickens before their hatched internally little own on the conference call. But I feel like we’ll have some good wins this year and when it’s appropriate to talk about that, we will but I think a pipeline

No, but I think a pipeline can never be full enough but I think we have some good opportunities in there. And then in terms of whether or not those pipeline opportunities are baked in forecast I’ll let John talk about that.

John Keatley

Yeah. First in terms of the renewals being reflected in the outlook yes they are all of our current deal terms are reflected in outlook for next year. And then in terms of the pipeline we put a range we have a revenue growth range of 20% to 24%. We don’t lead any additional partnership deals or new products to hit the low end of the range new announcements either in terms of distribution or new products would push us towards the high end of the range.

Sakhrani – KBW

Okay. And then just I mean I’m sorry one final one. Just on the bank acquisition I was wondering are there any kind of you guys did a good job of explaining some of the areas where you can get some efficiencies and gains but are there any longer terms opportunities from the bank such as with your larger partners and becoming their issuer?

Steven Streit

Oh gosh possibly we’ve had a lot of inbound calls about hey god can your bank help us with our programs. It’s not something we’re interested in doing now it’s not a specific part of our business plan for the bank, yes at some point we thought there was a strategic reason to issue a card for a program that was not a Green Dot sponsored program and it was a compelling enough reason I suppose we have taken under consideration with our regulators about it and talk it through but I wouldn’t count on that being any part of our business model in anytime soon.

Sakhrani – KBW

Okay, great. Thank you.

Steven Streit

Thank you.

Operator

The next question comes from Julio Quinteros at Goldman Sachs.

Julio Quinteros – Goldman Sachs

Hi, it’s actually Roman Leal here in for Julio.

It’s actually Roman Leal here in for Julio. I have two quick questions on the I guess in the margin outlook and then your kind of overall outlook. I know you mentioned in 2012 you’re still going to be kind of in this highbred model where you’re still paying total in your banks at the same time doing your – you’re kind of working towards to an hurricane house what’s the – can you help us kind of walk through the trajectory there I mean 50% of your in processing in key time by 2012 is it losses and more same thing with the issuing side?

Steven Streit

Yeah. I think you mentioned to there you mentioned the bank and the process there the transition to the bank will be will happen quite a bit faster, our goal is really by the end of 2012 to be largely if not entirely moved from Cenovus over to our own bank, Building out on our process it will take quite a bit longer and that transition will really happen at the end of 2013 beginning of 2014 and in to 2014 as we want to make sure that everything is working appropriately before we shift those accounts over to our own platform.

John Keatley

Okay. Can you help us understand the Wal-Mart relationship with I believe to competing tax refund prepaid cards. What’s – what do you think the impact of that has in your business particularly in your 1Q outlook?

Steven Streit

Well we talk with the Wal-Mart team headed by (inaudible) and he is one of our new VP’s of revenue about that question before the call to make sure that we have the latest investment speaking on the matter. And for us is that it may be that for somebody who would like to have their tax returns done by Jackson Hewitt or H&R Block in the lobby of a Wal-Mart and they may in fact take the Jackson Hewitt card or the H&R Block card to get their refund. At the same time the Wal-Mart Money Card is being promoted more heavily this

Money card is being promoted more heavily this year than ever for taxes with entire front end displays that give you taxes loaded and this is a great way to get you tax refund faster and safer and so on. And there is a belief that that will drive sales above what they’ve been historically for that tax product, so their conclusion was that it’s at the end of the day that they didn’t expect it to be a material change in our performance one way or the other in that with the displays and the promotion and they’re positive by the end of the day, so we’ll wait and find out, but we’re not expecting anything materially negative about it.

Julio Quinteros – Goldman Sachs

Okay thanks.

Operator

The next question comes from Bryan Keane with Deutsche Bank.

Bryan Keane – Deutsche Bank

Hi guys. I just had a couple of follow up questions. I guess do you expect any other contract renewals in 2012 to impact guidance. In other words I mean is it possible we’ll see other renewals that could move the guidance around a little bit in terms of more margin pressure or expenses associated with that renewal?

Steven Streit

I wouldn’t think so John is better up the economics, but we’ve been in a retailers many years we sell a tremendous amount of products for retailers and the relationships are fairly well established where there could be some minor changes left or right, but we know we had all these years we’re fairly consistent and so we don’t see anything radical happening.

Bryan Keane – Deutsche Bank

Okay, yeah because I think the fear will be if you had other feature renewals that would impact guidance going forward in 2012, so that’s good to know. I guess another question just on the tax refund accounts, how much revenue does that generate and how can we get comfortable with the fact that that’s not going to be an issue in 2012 I know it’s come up a few quarters in a row now in 2011 and its now in 2011 that is surprised you guys, maybe you can just help us to get comfortable with that in 2012?

John Keatley

Yeah, in the learning there with really that these cards will drive a lot of GDV, the account for a lot of direct deposit volume and not that impactful, in terms of revenue and even less than impactful, in terms of EBITDA. In fact, that’s part of the reason in Q4, the EBITDA came in and lying the plant even though revenue fell a bit short. We’ve now gone through a full year, but tax as a portion of our business, roughly double from 2010 to 2011. And so we’ve now gone through a full year with that accounting for such a large portion of our business and have a pretty good understanding of it and fully backed it into our numbers going forward.

Bryan Keane – Deutsche Bank

Yes, we have real lesson in modeling for modeling forward and you learn as you go to the industry and try to be an open minded company and we do our best call BSNL itself in appropriate. So, we leant a lot, in terms of what kind of promotions to sent, what kind of behavior and tax cards expenses and that we’re paying people $10 to do direct deposit in some cases and they would have done household still need to keep doing that, that was one lesson learned, that was expense.

And the user really has disperse new cards and their out of the product number as quickly as they run into their nearest ATM so that was a lesson. We’ll glad to have the business conversed by the way with somebody use as Wal-Mart money card of Green Dot card, which is where tremendous amount of tax has come not just on programs like intuit or tax program just in the same way that you may use your bank account, you are checking account received the taxes our customers do the same thing with our cards. Those guys are fabulous, they do stay alone for long-time, they are using the card as part of their long-term financial solutions.

So, we’ve learnt a lot about how the segment tax customers and how to look at different kinds of segments of acquisition and that’s how you learn of acquisition and that’s how you learn and grow and so that cause the modeling hiccup, but you live and learn.

Bryan Keane – Deutsche Bank

Okay, any idea what percentage of revenue that the tax portion is, just if we can get a sense of that hence for 2012?

John Keatley

We have not – we have not broken that out specifically, no.

Bryan Keane – Deutsche Bank:. And then just last question from me, there is a lot of exciting things going on with the bank, but I guess I’m just curious on any new major product releases expected for 2012? Thank you so much.

Steven Streit

Yeah, thank you for the questions. Oh gosh, I’d love to talk about lot of, Michael I can give you a heads up since one of the public caller here to, we’ve been working for quite a bit about a year behind the scenes on a product that we think will be pretty cool that will not be a prepaid product that all that we think will have tremendous adoption and acceptance from customers. And that will be part of our new bank and so, as soon as we can roll that out and make sure to working great and looking great, we’ll share it with all of our investors and public.

And but no question, there is a number of product initiatives that have kind of been put on hold that were put on hold until approval of the bank and now with the approval of the bank we’ve been able to meet with our regulators and discuss some plans and move a little bit more quickly in terms of our new product rollout initiative. So I think it’s a good question and one that you should keep an eye on that.

Bryan Keane – Deutsche Bank

Okay and great, but that is 2012 for the new product.

Steven Streit

That will be 2012, less IT lets me down and they promise me they won’t.

Bryan Keane – Deutsche Bank

Okay, super. Thanks so much.

Steven Streit

Yeah, okay.

Operator

The next question comes from Jim Kissane at Credit Suisse.

Jim Kissane – Credit Suisse

Thanks a lot guys, not to be the dead horse John, can you give us a better sense of maybe what the cost of building out the processing platform will be able to the next couple of years. And will you be capitalizing any of those cost or mostly of those cost or mostly expensed.

John Keatley

Yeah sure we announced that we’ve purchased the assets of processing platform from eCommLink for about 2.5 million so that’s already done. There will be a additional expenses of approximately $10 million most of which will be capitalized. Going forward as we build out the platform and then there will be ongoing operating cost once the platform has been built out to operate the platform so it won’t be – we won’t be saving all of the expenses on processing we’ll be spending less on it and as we bring it in house that we’ll continue to have ongoing expenses associated with that as well. So, hopefully that gives you a ballpark sense.

Jim Kissane – Credit Suisse

That’s great. So, from a longer term perspective say 2014 2015 what do you think the margin impact is the incremental margins from running your own processing platform. Can you give us a sense there?

Steven Streit

Yeah. We shared a couple of numbers in terms of the size of the expense line items we’re going after here. If you think of our total processing line item on our P&L about one third of that are the fees that we pay to TSYS and Synovus and that would be heavily weighted towards TSYS the processing fees more expenses. And I have – I’m not planning to give a specific percentage but a now a very significant piece of that bucket of expenses will go away once we brought these functions in house.

Jim Kissane – Credit Suisse

Okay, great. One last question, any sense on the outlook for direct deposit maybe as a percentage of GDV any targets there for this year? Thanks.

John Keatley

We expect it continues to go up it’s part of the reason that GDV part of the reason that GDV will continue to grow faster than active card. It obviously grew pretty significantly throughout 2011. As I mentioned before there is really very little tax refund volume in Q4, so that kind of gives you a – the year-over-year growth in the direct deposit volume gives you a good sense of the growth of the – of the really high quality portion of the – of direct deposit. And we expect that trend to continue next year.

Jim Kissane – Credit Suisse

Perfect, thank you.

Operator

The next question comes from Tien-Tsin Huang at JP Morgan.

Tien-Tsin Huang – JP Morgan

Hi thanks all good afternoon, hi guys…

Steven Streit

Hey Tien-Tsin how are you?

Tien-Tsin Huang – JP Morgan

Good, good just a few questions if you don’t mind, just I guess first on the pricing side, I’m curious about the outlook for both the Wal-Mart and the Green Dot brand cards, any need to tweak some of the consumer fees in light of what’s happening competitively?

Steven Streit

Well we think we got shape, the – you’re right that competitors have brought prices down, but they brought him down to our level or higher. So there is rush card announcement today that is more expensive than Green Dot, (inaudible) card, with all the respect to – and I would never want to peak the higher of a consumer advocate.

But there is a lot of fees on there that we would never charge and the card itself would certainly not rank among the lowest price cards on the market by long shot. And the Amex card as you know, as no monthly fee, but if anyone uses that card to do just more than one ATM a month that’s way more expensive than the Green Dot product and it’s not an FDIC insured card, not issued by the bank and you cannot use it for direct deposit.

So when you look at the actually true FDIC insured general-purpose re-loadable cards Tien-Tsin, I’m pretty confident that we’re still at the bottom of the market and I think most of consumer reviews report that. So I

So I think what it’s done is our pricing both in Wal-Mart and nationwide with our Green Dot brand has forced competitors to come down to our level, but we’re not seeing anything of any competitor size that has been below that in a sustainable way, so we feel good that we’re in good shape.

Having, said that we always reserve the right to look at our marketplace. And to look at opportunities for additional retention are for better acquisition or to do different kinds of promotions with retailers. And we use our pricing power liberally to make sure that we’re always number one in the hearts and minds of our consumers.

Tien-Tsin Huang – JP Morgan

Very good. Thanks for that. Just I guess in light of so much activity is happening in the world, I’m curious just in terms of visibility for revenue card growth as you look to 2012 is it – has it changed a lot relative to 2011, because I’m just trying to get a sense of if you’ve changed your philosophy at all around guidance, if maybe you’re laying them in the little bit more conservatism given what’s happening.

Steven Streit

We’d never say that even if we felt it. John why don’t you take that?

John Keatley

Well I think the world may not have changed as much as it might seem from reading the media reports and the press releases out there I think of the in the retail environment we’ll find the things that worked in the past continue to work, the way customers use our cards has stayed mostly the same and they’re doing different things there. They’re downloading our mobile apps and finding relocations in ATMs using their cellphone and they’re engaging with the product in a little bit of a different way and they’re more likely to – direct deposit but essentially the way they use the product have not changed a whole lot. So we don’t think the world has changed quite as much as it might seem from the outside and so I’d say our visibility is probably about the same as it was in the past.

Tien-Tsin Huang – JP Morgan

Okay.

Steven Streit

I think – I think in terms point out something that’s interesting I thought about that here in joint venture. If you have to pick a point and time when everything should have picked the fan sort of speak would have been 2011, I mean we have the implementation of Durbin and you have concerns over my gosh bill pay was being altered in this way or that way and the new competitors came on the scene if you call Amex had a big, big splash and target had a big splash.

And there are articles everyday about how each article made it sounds like the earth was coming to an end for prepaid. And in the fact that was again just a matter of really significant year of growth offer huge customer base, again for us. Not to say we take articles or legislation or anything lightly we don’t as you know we are active and making the world is on the right side of those issues. But 2012 looks to be a lot more comp if you will, this is going to be a things are pop out. But a lot more comp and lot more certain, certainly in 2011, I think that will be fair statement.

Tien-Tsin Huang – JP Morgan

All right, good. Now I’ll be appreciated why I’m asking because obviously and how do things that are moving?

Steven Streit

Well, yeah I mean, yeah I mean the guidance with the guidance is.

Tien-Tsin Huang – JP Morgan

Sure.

Steven Streit

We don’t want to be a over exuberant, we don’t want to be overly cautious and we’re trying to strike a balance. In 2011 was the first full year as a public company, we thought was a year where we delivered a quite lot of promise from the IPO roadshow to our investors and anyone who invested long and lot of our investors are long investors. That we did what we told them we do, I can’t say we’ve been well rewarded by the market for doing that. And so it’s fair to say that as we learn going forward, we look a guidance as a way that we can maybe help make sure we’re doing better in our communications.

Tien-Tsin Huang – JP Morgan

Okay now it’s all good. Two more if you don’t mind, just given the complexity of Q1 is there, John can you give us a little bit of help, in terms of give us some sense on the revenue in the first quarter and how about some of the other metrics first quarter but how about some of the other metrics given the serve comps with in to it and particularly around activations and active card, anything you can provide?. I can put you on the spot.

John Keatley:. I mean we’re really only prepared to give the revenue number now but as you can imagine it certainly impacts the loss of in to it and the fact that tax refund volume is heavily concentrated in Q1 we mentioned in the prepared remarks that it’s about an $8 months grow overall we think that there is about $8 million of revenue from Q1 of 2011 that, that goes away as a result of not having that program. And you could expect a similar impact on new card activation and on active cards the impact to cash transfers is quite a bit less just because the lot of those tax refund cards don’t reload. But you could expect a roughly similar kind of impact on those two other metrics in a much smaller impact on cash transfer.

Tien-Tsin Huang – JP Morgan

Okay, perfect. Last one I promise and I’ll jump off, just the use of cash going forward obviously is building up pretty heavily here, any I know you did a couple of small things but any limitations that we should consider on use of cash like acquisitions or in buybacks, things like that. Thanks.

John Keatley

Limitations meaning things were lot to do.

Tien-Tsin Huang – JP Morgan

Yeah I guess given those bank licenses and…

John Keatley

Things that chosen.

Tien-Tsin Huang – JP Morgan

Given the bank license and the charter some of the other things that you’re aiming to do curious if there is any kind of limitation there that we should be aware off?

John Keatley

Well there always restrictions on minimum liquidity in capital requirements for both the holding company and the bank but we’re radically well above that today.

Tien-Tsin Huang – JP Morgan

Right.

Steven Streit

So we’ve been maybe it’s a personal bank but we feel like (inaudible) we get the cash question all the time that is just the right time to have a lot of cash on the balance sheet and in the balance sheet and affect that through off such a largest manage cash you can did high class problem it’s young the competitors is been forced to lower price as we are seeing you mentioned earlier investors private equity DCs or investing in growth companies in the prepaid space like they use to and we think a right time will be coming make strategic acquisitions in investor on organic low initiative that will provide the way better value for investors been simply paying a dividend or doing something quickly to address concern.

So the question on respectable but we will go – not believe them lots of cash it a good thing at this stage were company’s development and as we look at making a cool acquisitions that will why should you tell all that.

Tien-Tsin Huang – JP Morgan

Right good stuff. Thanks for the time.

Steven Streit

Sure, thanks.

Operator

The next question comes from John Rowan Sidoti & Company.

John Rowan – Sidoti & Company

Good evening.

John Keatley

Hi, John,

John Rowan – Sidoti & Company

John I should make sure you understood the first quarter guidance’s you’re not saying that revenues going be up $8 million year-over-year but there is an $8 million basically (inaudible) if you will on a comparable basis to 2011 first quarter, my understand that really.

John Keatley

That’s right.

John Rowan – Sidoti & Company

Okay and the card lifetime is there in shift in the typical card lifetime?

John Keatley

We actually did feel a little bit of a decline in our average card lifetime which we attribute to be high proportionate card coming to the tax refund channel a lot of these cards very short lived. They get the tax refund and there gone so over the course of 2011 we saw little bit not of really big movement of we did see a little bit of a decline in the average now when you pull out those tax card. The average lifetime was constant and a certain segment a customer’s we saw an increase.

John Rowan – Sidoti & Company

Okay and then just one last question on the operating margin you said relatively flat year-over-year for 2011 but how does that trend throughout the year I mean do you see better margins in the first quarter maybe give me a sense of how it trends?

John Keatley

Yeah we typically stay away from that kind of specific quarter-by-quarter margin commentary the way we time our promotional and advertising spend change from year-to-year so – my comment was really more of an average across the year rather than for any specific quarter.

John Rowan – Sidoti & Company

Okay and that was essentially that the operating margin would stay roughly 18% what it was in – 2011?

John Keatley

Yeah we typically talk about our adjusted EBITDA margins or adjusted EBITDA divided by adjusted non-GAAP revenues that, that would be around 25%.

John Rowan – Sidoti & Company

Okay fair enough thank you.

John Keatley

Thanks.

Operator

The next question comes from Greg Smith with Sterne Agee.

Greg Smith – Sterne Agee

Hey guys just first on a quick modeling question on the guidance what you’re expectation for the tax rate share account in 2012?

John Keatley

No real change in tax rates around 38% for the year very modest increases in the average share account fairly consistent with what you’ve seen in the past I think it’s been on the order of 1% for or less than 1% a quarter roughly as (inaudible) it’s been.

Greg Smith – Sterne Agee

Okay and then the, this came up briefly the AARP going to the Bancorp was a little bit of a surprise but is there any possibility that the Wal-Mart business could move either to Green Dot Bank or to the Bancorp possibly prior to 2015?

Steven Streit

Well it would be inappropriate Greg to comment that’s a contract between GE and Wal-Mart and Green Dot and without GE on the call rather it would be unfair to even speculate.

Greg Smith – Sterne Agee

Okay, fine. Fair enough. And then just are you seeing with all the increased bank fees there is obviously the expectation that that’s going to create a wider population of potential Green Dot customer. Are you seeing any of that is there anything tangibly you can talk to where you’re seeing new customers anyway you can tell where they’re coming from. Is this in fact happening and can you provide any color data to convince that I guess?

Steven Streit

It’s so hard to pin down because I would look in your shopping basket and ask why you bought a certain brand of product or certain product you may have trouble giving me a definite answer you may not say because it saw commercial APM just you just leave. And so people don’t always know exactly, we know that greater than half of our customers are banked today so there is certainly no stranger to banks but that’s remain consistent for sometime but it’s up historically for 11 years but I mean over a last few years it has been consistent.

We know a direct deposit at Wal-Mart at Skyrock and that’s probably indicative of a more mainstream bank familiar customer because the direct deposit enrollment process is not fast or easy you probably we had to do it at your job and other places you have to fill out a form and take it to your HR clerk and go through a process so if you’ve never done that before it’s kind of a hot process to learn to the fact they were up so much in direct deposit would lead us to believe that our customers have done it before in another bank or understanding of how that process works.

And you can see the GDV climbing so dramatically year-over-year or the past few years far faster than it did in the old days. And that would also indicate a higher income level and the higher trust and familiarity for the product. So it’s hard to say exactly that Joe Smith came for this reason and Sally Jones came for that reason. But directionally we see the mainstreaming of the product and that would be indicative of a product that’s having a wider appeal.

Greg Smith – Sterne Agee

Okay, great thanks guys.

Steven Streit

Thank you.

Operator

The next question comes from Gil Luria of Wedbush Securities.

Gil Luria – Wedbush Securities

Good afternoon. Help us understand how retailers that have to decide what – what reload cards they want to put up on the shelves make that decision, what the roll is of the brand on the card. So specifically if you have a retail that had to decide which cards to put on their shelves. How big of a component in that decision is the brand. So you bring to the table the NASCAR brand, ARP brand and even the Green Dot brand as a broad value. And you’re competing with a card that brings before the PayPal brand. Is that going to be what the retailer decides on, if they like the PayPal brand better they’ll just put that one on the shelf or they’ll put both of them on the shelf or other considerations the retailers, before they make that decision?

Steven Streit

You never know well there is lot of consideration. So and the buyer at the retailer may have one opinion and Green Dot also announced recent multi-year extensions to exclusive distribution agreements with Rite-Aid and Kmart, two important long-term retail partners, which call for expanded and more prominent in-store placement of Green Dot’s general purpose re-loadable GPR card products conservative view on infrastructure. And so the first thing now a days that retailers need to consider is if I am having multiple brands of cards on different networks or multiple reload chips for lack of a better phrase reload tax of different brand then it becomes the retailer’s obligation to aggregate those loads.

For example at Green Dot if we’re the only product on the shelf where we were loading a 100 sum of bank program we can perform that compliance on behalf of the retailer because we see all those transactions that are able to stand in for compliance. If we’re not seeing the transactions that burden of compliance falls completely to the retailer. So, those are some of the concerns and issues that rise up in some of the larger retailers are concerns over compliance issues and money laundering issues and many of the customer service variety issues but to be fair we see retailers of different kinds where some who feels strongly that this is the financial service product they want it highly regulated, they want it ironclad they want to make sure that the compliance won’t get them in the trouble or cause him headline risk and they’ve been with Green Dot for years and continue to be.

It’s also fair to say that we have other great retailers 7/11 being one of them who has never been exclusive and they sell products Western Union product and they had a First Data product for a long time and all kinds of things and their view is more the merrier and let’s see how it goes and we’re supportive of all those philosophies because at the end of the day we support our retailers initiatives whatever they may be. But putting a regulated financial product on the shelf is different than putting a different brand of chewing gum or different brand of cola it involves IT connectivity involves heavy compliance burden and it and you’re dealing with people’s money so you need to be cautious of the company you’re dealing with but I am bad answer your question but all those things are consideration when you walk into a retailer.

Gil Luria – Wedbush Securities

Sounds good thank you.

Operator

The next question comes from Bob Napoli at William Blair.

Bob Napoli – William Blair

Thank you. I was hoping you can give a feel for same store sales growth if you will, what areas, what distribution channels are growing fastest for you, how was the direct channel, what percentage of the business is at direct channel now and how fast is that growing?

Steven Streit

Sure hey Bob, in general I think if you look at 2011 the vast majority of our card sales growth was same store sales growth, our main distribution channels and our main retailers at the beginning of the year remained our main retailers at the end of the year, so most of the growth there is same store growth. We did have some new retail launches, some of them are smaller retailers and probably the most significant one Black Rock didn’t happen until towards the end of the year, so didn’t really start to impact the numbers until very late in the year.

And our online channel continues to grow in terms of the significance we expected t continue to grow in 2012, maybe at some point in the future we will break it out specifically, but for the moment we haven’t done that. Also I just want to follow-up on Greg’s earlier question, sorry Bob, but the number of diluted share count for – that we’ve assumed for 2012 is around 45.5 million, I just want to give you that number.

Bob Napoli – William Blair

Okay, the Black Rock John, I mean how – what kind of early signs are you seeing out of Black Rock that network?

John Keatley

Outstanding it’s going fairly well and the rollout continues and sales have been on a per store basis at/or above our projection, so we feel good about that.

Bob Napoli – William Blair

Steve, I mean were you surprised by Mark leaving, what are your thoughts around and maybe just a little more color on your confidence in the depth of the management team?

Steven Streit

Yeah, you haven’t talked about it, no, the answer is, was not a surprise for any of us. And first of all, let me say as you know in the (inaudible) on roadshow, Mark is a great guys and good friend of me in our whole executive team and we’re thanking for all this contributions over the years that are great party from last week and have a lot of fun and got to have some niece closure.

But you know Green Dot is a different company now then it was nine years ago and of those of you on the call enormous the startup guy at heart you like to feel of the small startup. And it’s fairly say that this move wasn’t surprise, anyone internally. And we’ve done a good job and putting together very season in senior revenue team over the past year as well as promoting some long time internal candidates and leadership positions in revenue. And anticipation and when they distribute the case. And Mark was very helpful in participatory in that.

So the transition of responsibility has been smoothly and orderly (inaudible) we also a pretty good about our prospects are going forward, the team is humming. Mark has been often in the transition and very helpful and life goes on, but he has been a contributor and good friend and he will be for years to come.

Bob Napoli – William Blair

I guess, I missed the number, what was the percentage of the business in the fourth quarter that was direct deposit. What was that year ago?

John Keatley

Oh, I think it was 46% in Q4 of our total GDV, which was up from 38% in Q4 of last year.

Bob Napoli – William Blair

Okay. And then just you reload network, the third-party utilization of that reload network, how was the growth of that and do you think that remain is that significant competitive advantage for you to view a such?

John Keatley

Yeah, we do actually the third-party portion of our cash transfer revenues continues to grow in Q4, it was 19% of our cash transfer revenues came from third-party program like Rush Card American Express PayPal and that was up from 15% in Q4 the previous year. So, it continues to account for a larger and larger portion of our cash transfer volume and that really something that set us apart both with new card issuers that are looking for reload network and for retailers that want to hook up with one that liable with reload network we can bring them almost the entire industry evolving in to their store.

Bob Napoli – William Blair

Thanks. And are there like the AARP card I mean are there or how many programs or the market moving types of programs are out there, are you seeing more opportunities or less opportunities and are there things out there that moved the needle what types of programs would move the needle more than others?

Steven Streit

Well we’re very proud of the AARP Foundation Program for couple of reasons, it’s unclear whether they will do in sales right that will up to that I’ve been in sales for a long time and you never know until you know no matter what the research says but hopefully it will do well. But we’re very proud of the associated with such a great organization I’m turning 50 in four weeks so I’ll be in AARP member.

And but it’s hard to know how it will sell but the fact is that we continue to be able to track the Green Dot enterprise level governmental or suitable governmental partnerships of the highest quality the highest caliber and the highest reputation and that’s sort of a Green Dot thing if you will so we’re proud of the relationship and we need to see how it sells in the stores but they’re fabulous organization and we’re proud of that. In terms of the other part of your question what market moving programs are out there whether it’s TSYS Wal-Mart or this one or that one.

Our belief that Green Dot is up the best helping hand we have is soon to be end of our own ARM the reality is that with our distribution and with our ability to innovate and build new products in our cash transfer network that can do all kinds of things besides reloads. And the fact that we now have a bank that gives us a platform for innovation of new kinds of products that have nothing to do with prepaid but attract segment of Americans that today are not attracted to prepaid.

And you put all that together we get most excited about the program that originates within the four walls of Green Dot’s place or facilities here in Monrovia. I know you’ve ever been to our facilities you know that’s a joke. So that sort of how we view it but listen there is a lot of programs out there and we love being partners with ones that are high caliber and high quality like AARP. But we’re obviously most excited about the ones that we are able to control.

Bob Napoli – William Blair

Thank you.

Operator

The next question comes from Andrew Jeffrey at Suntrust.

Andrew Jeffrey – Suntrust

Hi guys. Thanks for taking the question.

Steven Streit

Sure.

Andrew Jeffrey – Suntrust

So I understand the dynamic around the need to invest for to bring in the bank and to scale the processing platform and the pardon me the result on 2012 margin but should I am not asking to give ‘13 guidance, but when we think about the ultimate gains it sounds like ‘12 is an investment year but then is it reasonable to think then when you get those investments behind you and you scale the platform and shift volume into Green Dot bank then ‘13 is kind of a year that looks more normalized and hence could be kind of a margin catch up here in other words ‘12 almost feels like it’s a little bit of a transition period for you on the margin side?

Steven Streit

Yeah. But I think that’s a reasonable way to look at it I mentioned that it is going to take some time to complete the process and start that transition there. It could happen faster, our hope is that it will happen faster than what I mentioned earlier which will be having the bulk of the transition happen in 2014 really, we would like to hit out faster timeline and then see more of that benefit in 2013 an then 2014 becomes the year where you see the full benefit of our own processor being on board and the bank. Now those are the opportunities that we called out, there are other margin opportunities that we are pursuing, there is also just sort of natural scale efficiency in the business to, but I think that in general that’s a fairway to look at it.

Andrew Jeffrey – Suntrust

Okay, so to be clear the true period of absolute duplicative costs is 12?

Steven Streit

You also have 13 for the process, but…

Andrew Jeffrey – Suntrust

Some, but the full overlap occurs in 12 and you start to gain some of the incremental benefit in 13.

Steven Streit

Yeah and then it accelerates more in 14 with the process.

Andrew Jeffrey – Suntrust

Okay.

Steven Streit

I think that’s a good way to look at it.

John Keatley

And I think it also is (inaudible), you didn’t ask question, but it occur to me as I am hearing John respond that it’s sort of indicative of the way we are thinking about the business, everything we do about Green Dot whether it’s the bank or new product or a processing platform it’s about long-term sustainability, it’s the reason why we have our Washington D.C. presence and it’s the reason why we invest so much on the compliance and regulatory side and we are closely with consumer advocates. We will review ourselves as a long-term, high quality, high growth public company and so we make moves that may not pay off in any given quarter or any given two quarters, but that are essential for the long-term stability and sustainability of the business.

Andrew Jeffrey – Suntrust

Okay fair enough. And then just a couple of housekeeping questions John I think you said 45.5 million share for ‘12, did you mean

John Keatley

I believe we have assumed 45.5 and is that turns out not to be the carefully follow-up…

Andrew Jeffrey – Suntrust

Okay. But look like 44.5 in supplemental materials so?

John Keatley

In (inaudible) 2012.

Andrew Jeffrey – Suntrust

Yeah

John Keatley

Okay when we follow-up to confirm I believe we assume 45.5.

Andrew Jeffrey – Suntrust

Okay and then you mentioned enough taken CapEx could you quantify refer?

John Keatley

Well I mentioned the biggest piece it which is the CapEx associated with shifting to around processor and then $10.

Andrew Jeffrey – Suntrust

It’s $10 million.

John Keatley

$10 million upstand that which the vast majority will be capitalize.

Andrew Jeffrey – Suntrust

Okay all right thanks.

Operator

Our last question comes from Mike at Piper Jaffray.

Mike – Piper Jaffray

Thanks for taking my question real quick do you think your market share is expanding or declining and then secondly on the AARP business how big an opportunities you think that is and of our current customers today what person are over the age of 50 or 55? Thank you.

John Keatley

To know that about 25% of our customers over the age of 50 so we know that next question about market share is a good one is always two public company in the space us and dynamics says report any prepaid card sales at all with any kind of miracle backing. So when you don’t know when anyone else selling a card to be honestly know so the only think you know is our relative position and that’s been our market share between the two of us.

We’ve made some assumptions of what Rush Card and some of the other smaller private programs do but they’re just at assumption so given that our growth has been significantly faster and this is not in any way meant to be a negative statement but just a factual statement on reporting, even that a growth has been so significantly higher than expense over the past year and a half its fair to say that maybe our market share has increased relative with the only public company we have as a comp but I couldn’t tell you what’s going to happen with – who know right. So, I guess I don’t know but our growth is certainly not slowing down and it’s certainly significantly higher than the only competitor we’re able to see.

Mike – Piper Jaffray

Okay, thank you.

Operator

That concludes our question and answer session. I would like to turn the conference back over to management for any closing remarks.

Chris Mammone

No closing remarks per say except we appreciate everybody hanging in there for the last hour and ten this has been the album version of the Green Dot conference call we’ve been kind of a little bit long and we appreciate your time today and look forward to seeing at a number of conferences that we’re heading in San Francisco and New York and a lot of travel in February so we look forward to hopefully seeing you all there in person.

Operator

The conference is now concluded. Thank you for attending today’s event. You may now disconnect.

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