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Green Dot (NYSE:GDOT)

Q1 2012 Earnings Call

April 26, 2012 5:00 pm ET

Executives

Christopher Mammone -

Steven W. Streit - Founder, Chairman, Chief Executive Officer and President

John L. Keatley - Chief Financial Officer

Analysts

Roman Leal - Goldman Sachs Group Inc., Research Division

Ramsey El-Assal - Jefferies & Company, Inc., Research Division

James F. Kissane - Crédit Suisse AG, Research Division

Steven Kwok - Keefe, Bruyette, & Woods, Inc., Research Division

Andrew W. Jeffrey - SunTrust Robinson Humphrey, Inc., Research Division

Gregory Smith - Sterne Agee & Leach Inc., Research Division

Bryan Keane - Deutsche Bank AG, Research Division

Glenn Fodor - Morgan Stanley, Research Division

Robert P. Napoli - William Blair & Company L.L.C., Research Division

Michael J. Grondahl - Piper Jaffray Companies, Research Division

Thomas C. McCrohan - Janney Montgomery Scott LLC, Research Division

David M. Scharf - JMP Securities LLC, Research Division

Ashwin Shirvaikar - Citigroup Inc, Research Division

Gil B. Luria - Wedbush Securities Inc., Research Division

John J. Rowan - Sidoti & Company, LLC

Operator

Good afternoon, ladies and gentlemen. Thank you for standing by. Welcome to the Green Dot Corporation First Quarter 2012 Earnings Conference Call. [Operator Instructions] The contents of this call are being recorded. I would now like to turn the conference over to Mr. Christopher Mammone, Vice President of Investor Relations for Green Dot. Please go ahead, sir.

Christopher Mammone

Thank you, and good afternoon, everyone. On today's call, Steve Streit, our Chairman and Chief Executive Officer; and John Keatley, our Chief Financial Officer, will discuss 2012 first quarter performance and updated thoughts regarding our 2012 outlook, which we first shared with you in the March 9 press release announcing our proposed acquisition of Loopt, Inc. Following their remarks, we will open the call for questions.

Slides that accompany this call and webcast can be found at ir.greendot.com and will remain available after the call. Additional operational statistics have been provided in a supplemental table within our press release.

As a reminder, today's call is being recorded. Our comments include forward-looking statements, including statements about the projected financial impact of acquisitions and the loss of the TurboTax program to Green Dot. Please refer to the cautionary language in the earnings release and in Green Dot's filings with the SEC, including the 2011 Form 10-K, for additional information concerning factors that could cause actual results to differ materially from the forward-looking statements.

During the call, we will make reference to financial measures that do not conform to generally accepted accounting principles. This information may be calculated differently in other companies similarly titled non-GAAP information. Reconciliations of those non-GAAP financial measures with their most comparable GAAP measures are included as supplemental tables in today's earnings release and are also available at ir.greendot.com.

All statements made by Green Dot officers on this call are the property of Green Dot Corporation and subject to copyright protection. Noted in the replay noted in our press release, Green Dot has not authorized and disclaims responsibility for any recording, replay or distribution of any transcription of this call.

Before I hand it over to Steve, just a couple of guidelines for today's Q&A session. [Operator Instructions] Now I'd like to turn the call over to Steve Streit.

Steven W. Streit

Okay, very good. Thank you, Chris, and welcome, everyone, to our Q1 earnings call. Also with me this afternoon is Green Dot's CFO, John Keatley.

After my remarks, John will walk you through some of the financial highlights for the quarter and also provide some updated thoughts on our 2012 financial outlook.

Our Q1 performance reflects a very strong start to the year, particularly when you normalize results, the discontinued TurboTax program, excluding the impact of TurboTax in the comparable periods, new card activations were up 23% year-over-year in the quarter, GDV was ahead by 33% and first time reloaders posted nice gains at 22% year-over-year.

Though the core business remains strong, and excluding the impact of acquisitions in the quarter, we're on track to meet the annual growth ranges we shared with you during our previous earnings call.

I'm also pleased to let know that we were able to grow past the TurboTax loss and in fact, post increases in all of our key operating metrics, and here are some highlights to share.

Even with the loss of TurboTax, our Q1 non-GAAP revenue grew 18% year-over-year to $145.5 million. Excluding the impact of TurboTax from the comparable periods, revenue grew 27% versus this time a year ago.

Q1 non-GAAP earnings grew 23% year-over-year to $0.48, and active cards grew to 4.7 million as of March 31, representing pro forma year-over-year growth up 20%.

Based on this pace of growth through Q1, we remain on track to meet the top line growth range that we communicated to you in January, when we first issued our outlook for 2012. John will discuss our results with a bit more granularity here in just a few minutes.

Now let's talk about Loopt for a moment. Most of you know that we acquired privately held Loopt, Inc. of Mountain View, California last month. The Loopt acquisition brought us a group of highly skilled, talented and creative mobile UX and mobile software engineers, who among other things, were early inventors of geolocation-based mobile communication, and in fact, hold the patent for geolocation mobile messaging.

This is the process for sending a commercial message to a mobile device based on the location of that mobile device. Our belief is that this patented technology is at the heart of practically every mobile commerce and mobile payments play out there, and we believe this intellectual property will become highly strategic to Green Dot and our distribution partners as mobile banking, mobile commerce and mobile payment strategies emerge and mature in the years to come.

So beyond the value of the patent, why do we feel so positive about the acquisition of Loopt? Well, it's Green Dot's thesis, that starting now and increasing rapidly over time, the business of banking and payments will be conducted in the palm of your hand. In fact, our view is that for many consumers, hard drive-based desktop or laptop computer itself is simply a bridge to cloud-based mobile computing, much in the same why that a landline telephone for many consumers were simply a bridge to a wireless cell phone.

We believe that many younger consumers will skip this step of buying a computer altogether and will simply start out their adult life with a mobile device and perhaps a tablet. And older consumers, like me, will continue to evolve our behavior to become more and more cloud-based mobile-centric, and less and less hard drive computer-based-centric.

It's our belief as a company that the adoption of mobile banking and mobile computing in general can be just as pronounced with less affluent prepaid card users as of more fluent customer segments. The reason is, that many lower-income consumers will find the smartphone and the monthly data plan cost to be much more affordable than the price of a decent laptop with an ISP connection, plus the cost of a cell phone and monthly service. This is perhaps why smartphone adoption has done so well with less affluent customers. For example, in Green Dot customer base alone, over 55% currently have smartphones.

So in other words, the smartphone maybe an expensive cell phone, but it is a very cheap Internet connected computer. So given our beliefs around mobile, we felt it was vital that Green Dot move early and decisively to acquire the core capabilities and ingenuity needed to create and deploy leading mobile-based products and services for our prepaid customers today and our future customers of new contemplated products and services for tomorrow.

The ability for Green Dot to be a mobile innovator in the financial services industry is central to our strategic world view of how we believe consumer preferences and behaviors will evolve over time. And therefore, central to our company's consumer-centric strategy, positioning ourselves for long-term growth.

We believe the development and deployment of cloud-based mobile banking and payment capabilities needs to be part of our DNA as a company and part of our corporate muscle memory in everything we bring to market.

Therefore, this is not a core capability that we can or should lease from a consultant or outsource to a third-party development team. This is why we feel fortunate and excited to have acquired Loopt and while we believe that over time, the value delivered to our company and to you, our shareholders, dwarf the $43 million purchase price.

Loopt team, which we now simply call Green Dot Silicon Valley or Green Dot North for short, is already working closely with their technology brothers and sisters here at Green Dot South in Monrovia. And in only a few short weeks since closing that acquisition, our new combined team has made very good early-stage progress on our new mobile apps as part of our new products and services under development. So, so far, we're very pleased with how things are progressing in a very short period of time.

On the topic of vertical integration, I'd like to give you a quick update on our bank integration plans on the development of our processing platform.

First I'll update you on our bank. I'm pleased to report that the migration of accounts from Synovus Bank to Green Dot Bank is progressing on schedule. The first card is expected to be issued out of Green Dot Bank by summer, with Synovus migration expected to be substantially complete by Q1 of next year.

So congratulations to Lou Goodwin and his super team at Green Dot Bank for their hard work, and my sincere thanks to our long-time friends and partners at Synovus Bank for helping us execute a smooth transition thus far.

Now let's talk about our processing platform, as we continue to work on building out the assets of the company formerly known as eCommLink that we purchased earlier this year.

First, you may have read that we recently recruited Ralph Calvano to oversee Green Dot's processing division. Ralph is a well-known and highly experienced processing veteran, who prior to joining Green Dot, are in the prepaid processing solutions division at Fidelity National Information Services, also known as FIS, and Ralph was there for the past 9 years. Those of you who don't know, FIS is one of the largest and most respected bank and prepaid processing companies in America, and Ralph has a talented group of engineers already assembled here at Green Dot, will also work to recruit others to round out his processing team.

Secondly, let me speak for a moment to help characterize where we are in the development process. Processing platform itself is already working today in a non-production test environment and the system we purchased from eCommLink was a working platform that fully supported and processed a number of prepaid programs prior to its sale to Green Dot. So we're not building the platform from scratch. Rather, the focus of our development work is on greatly strengthening the underpinnings of the platform for scale, speed and redundancy, and on integrating the platform into Green Dot's specific services and features.

So a way to think about this is, let's say we bought a Ford Crown Victoria. Now we need to turn it into a Highway Patrol police cruiser. So the car is already built and drivable, but now we have to put in bigger engine, bigger radiator, better brakes, more safety features, rollbars, blue lights on top, 2-way radio. To be sure, processing is serious and complex business, and we are well aware of the risks involved in rolling out such a platform.

Remember that, today, Green Dot already does its own end-to-end financial transaction processing for many billion of dollars in cash loaded through the Green Dot reload network. So we understand the nature of the beast. And as such, we'll continue to take our time and proceed with heavy doses of caution and risk aversion before the system would ever go live into production. But the important takeaways here that I want to share, is that our people are in place and we're proceeding on plan.

And now I'll hand the call over to John Keatley, who will provide more color on our strong Q1 financial performance and updated thoughts on 2012 guidance. And then, after John's remarks, of course, we'll open the phones for Q&A. John?

John L. Keatley

Thanks, Steve. Steve mentioned our Q1 performance reflects a very strong start to the year, particularly, when normalizing results for the discontinued TurboTax program.

As we previously announced, we have revised guidance we provided in January due to the cost associated with the Loopt acquisition. And I'll share those details with you in a moment.

First topic that I'd like to discuss is our revenue growth in Q1. As you can see on Slide 3, our non-GAAP total operating revenues grew 18% year-over-year in Q1 and 27% year-over-year normalized for TurboTax. Clearly, this is a high rate of growth and it's consistent with our historical trend.

Even with the loss of the tax program, we showed strong earnings growth and margin expansion in Q1. As you can see on Slide 6, our adjusted EBITDA grew 21% year-over-year, and we saw a modest 60-basis-point increase to our adjusted EBITDA margin, which climbed to 25.6% during the quarter, primarily due to efficiency gains in processing and expenses.

Our non-GAAP net income, which is shown on Slide 7, was $21.2 million, an increase of 21% compared to the same quarter last year. Non-GAAP EPS came in at $0.48, up 23% year-over-year.

In terms of our key operating metrics, we saw strong growth across the board and even managed to turn in positive growth in the areas most impacted by the TurboTax departure, which as we expected, turned out to be new card activations and GDV.

Slide 8, shows our growth in active card and new card activations. Active cards grew 10% year-over-year to 4.7 million actives as of March 31 and 20%, excluding the impact of the discontinued tax program in the comparable period. One thing you may notice is that our non-GAAP total operating revenues in Q1 grew significantly faster than our active card portfolio. The main driver of this was the cards acquired for tax refunds declined as a share of our active card portfolio in Q1, as compared to last year.

Cards used for tax refunds typically have shorter lives and lower lifetime revenue than other cardholders. New card activations increased 1% year-over-year to 2.2 million, but were up 23% excluding the discontinued tax program. Returning customers continued to be a significant source of activations, accounting for 38% of all new card activation.

Slide 9 shows the growth in our 2 key transactional metrics: Gross dollar volume and cash transfers. Our GDV grew to 4.8 billion, an increase of 5% year-over-year or 33%, excluding the discontinued tax program.

A portion of GDV from direct deposits declined from 58% last year to 50% this year, due to the loss of TurboTax. Excluding TurboTax, the volume of direct deposit funds loaded to cards increased 42% year-over-year. Most of this growth came from increased payroll and government benefit direct deposit.

This is a positive trend for us, as these sources of direct deposit tend to be recurring in nature and are correlated with higher lifetime revenue. As usual, the cash portion of our GDV continued to grow very steadily in Q1, up 25%.

Cash transfers continued to grow rapidly in Q1, increasing 26% year-over-year and topped $10 million in the quarter for the first time ever, driven by both increased reloads from our portfolio of cardholders and more reloads from our network partners' portfolios. A portion of cash transfer revenue from third-party reloads increased to 21% during the quarter versus 16% in the year-ago period.

Walmart represented 64% of non-GAAP total operating revenues during Q1, a step up of one percentage point from the 63% in Q4 of 2011. This is consistent with our expectation due to the mix shift associated with the decline in our tax refund volume.

Our balance sheet continues to be a source of strength to the business. Post the funding of the Loopt acquisition, we ended the quarter with $269 million of total cash and investment securities, including $118 million of unrestricted cash and cash equivalents, $138 million of investment securities, $13 million of restricted cash and no debt.

Now I'd like to talk a little bit about our expectations regarding the financial impact of the recent acquisition of Loopt, which closed in March. Although we previously updated our 2012 guidance to reflect the impact of the Loopt acquisition, we thought it would be helpful to reiterate these updates on this call. Our guidance for non-GAAP total operating revenues remains unchanged at 20% to 24%, as we are discontinuing the lines of business that Loopt pursued prior to the acquisition, and we don't expect revenues from new products that we are developing with Loopt until 2013.

As previously disclosed, we expect to incur $14 million of additional cost in 2012 associated with this acquisition. Approximately $6 million to $7 million of these expenses are from retention incentives for key employees and the cost of closing and integration of the acquisition, and the remainder is the ongoing operating expenses of Loopt. These incremental expenses reduce our expected range for adjusted EBITDA to $133 million to $138 million and brings our non-GAAP EPS guidance down to $1.65 to $1.70 per share for the full year.

In addition, while we are still in the early stages of integration and our assumptions could change, we expect the Loopt acquisition to be accretive beginning in 2013 as we leverage the Loopt team and technology to deliver new revenue-generating products and new features for existing products.

There are no changes at this time with respect to expected growth in our key operating metrics for the full year. We continue to expect greater than 20% growth in active cards, cash transfer growth in excess of 20% and GDV growth of at least 30%.

As we look out towards the remainder of the year, I want to offer some additional guidance on how changes in that tax refund portion of our portfolio will impact our metrics and financial results.

First, the termination of the TurboTax agreement will continue to impact our results. It was a material contributor to our revenues and many of our key metrics in Q2, as the attached slide illustrate, and we expect a approximately $6 million revenue grow-over, associated with TurboTax in Q2 as compared to same period last year.

Secondly, we've taken the prudent step of strengthening our customer identification processes on all customers, and tax refund customers in particular. The reason for this increased screening is that we want to be sure that our portfolio is beyond reproach in terms of how we mitigate the risks associated with tax refund fraud, which has been so widely publicized, and the risks associated with operating a bank that attracts the sheer volume of customers that we do in any given year. We are constantly updating our risk policies and controls to ensure a safe, sound and compliant program. But in so doing, we may in fact, cause some pressure on the growth of our new card activation and GDV metric.

So with that, I'd like to turn the call back to Steve. Steve?

Steven W. Streit

John, thank you very much. And operator, let's go ahead and open the lines now for Q&A.

Question-and-Answer Session

Operator

[Operator Instructions] And the first question we have comes from Roman Leal of Goldman Sachs.

Roman Leal - Goldman Sachs Group Inc., Research Division

First of all, it's good that you're keeping the operating metrics or the guidance on those key operating metrics intact and all-in, including the loss into distribution. But it seems like they imply an acceleration for the rest of this year. And given your commentary that the changes you're making with respect to your tax refund process and customers, it just feels like that may be a little difficult for the rest of the year. So I just wanted to get your commentary on that. What makes you so confident that you can still keep the same growth rates?

Steven W. Streit

Yes, sure. The story, I guess, is a little different with each of the metrics. First off, absent the loss of TurboTax, we showed very strong growth across all of the metrics on a year-over-year basis in excess of the rate that we spelled out in our guidance. Cash transfers really was very minimally impacted by the loss of TurboTax and is showing very strong growth. There a lot of strong drivers. In terms of our GDV growth, it will continue throughout the year. We're seeing increased direct deposit penetration, particularly for payroll and government benefits, and that's going to continue to drive GDV growth. And we're seeing strong growth on our active cards and new card activation, particularly when you back out the impact of TurboTax. And to be fair, there are some unknowns as we look out towards rest of the year. Tax refund cards have really declined as a portion of our overall portfolio and we'll continue to see that impact over the remainder of the year. But we feel confident that we are still on track to hit those benchmarks.

Roman Leal - Goldman Sachs Group Inc., Research Division

And then just a quick follow-up on Loopt. So it seems that you don't expect that to contribute to the top line until 2013. But are you still on track to roll out some new products from the bank side sometime this year?

John L. Keatley

Yes, we'll have -- our goal is to have a product in beta for us to review and for us to look, if you will, with friends and family here this year and then to roll it out when it's appropriate and when it's ready for prime time, if you will. And the Loopt team is certainly a big part of that because the mobile app is so central to that product. So we believe that we're on track to continue to do development. But our most important goal is to make sure that the product is fabulous and delightful to consumers, and does what we want it to do. So I'm not predicting any given day or month, we have a lot of work to go and all that, but we feel pretty good about it.

Operator

Ramsey El-Assal, Jefferies.

Ramsey El-Assal - Jefferies & Company, Inc., Research Division

I had a question on the AmEx Bluebird pilot. Have you guys noticed, in terms of tracking the same-store sales on the Walmart pilot locations there, have there been any impact on your volumes, on your sales activity? Do you have an indication of how the pilot is performing?

John L. Keatley

Well, let me think how to answer that. We have some information which I'll characterize as more internal information and nothing formal or packaged in a way that I could respond back. Also, that's not our pilot, it's American Express's pilot and it's Walmart pilot. And frankly, even if I had details I would refer you to either one of those organizations for that question. I think the more salient point is that you see our numbers and you see our sales. So nothing yet that would cause headwinds to our forecast. And as you saw, we're leading them. So, so far so good. But to be fair, it's still a fairly small pilot in a relatively small number of Walmart stores. So we have to see how that plays out.

Ramsey El-Assal - Jefferies & Company, Inc., Research Division

Okay, fair enough. I also, if I understand the program correctly. I think John mentioned on some inter-quarter comments that he made that he provided some cards to Rite Aid, that they in turn gave their unbanked employees for direct deposit of their paycheck. Is this potentially a new distribution strategy or channel for Green Dot in terms of actually going to the employer? Or was it more sort of a one-off for a long time customer?

Steven W. Streit

I would describe it more as the latter. I mean, here is our sense. We know payroll well. We understand employee-driven payroll versus consumer-driven payroll, which is what we have today. Somebody just buys the card and they hook up their paycheck for direct deposit. And the people who buy the card on their own and use it for direct deposit are our best customers. It's a recurring source. They use the card for their everyday expenses and they're paying the fewest fees but generate the most revenue and the most profit. So we like those customers a lot. When you do it on the employer side and when the employer is mandating or instructing their employee to get the card, some do, some don't. And the margins and usability and retention of those cards is not as good as the regular version of the card that the consumer chooses on their own. So the answer is we did it as a long term -- Rite Aid has been a long-term client, they were our very first client and so we're happy to help and our program is in place. We have been asked to do that for other retailers and we may well and there are some that we may pitch when the strategy is right. But I would think it's fair to say that we're not aggressively going after employer-driven payroll.

Operator

Jim Kissane, Credit Suisse.

James F. Kissane - Crédit Suisse AG, Research Division

First, for Steve. Steve, can you give us an update on the renewal pipeline and maybe the new business pipeline on the retail side?

Steven W. Streit

Sure. The pipeline looks pretty good, although it's not just on retail. If you were sort of a -- you had a secret view into the whiteboard in the office, so to speak, you'd see the pipeline segregated by retail channels, by online and digital channels and by other verticals and then there's pipelines under each. And the pipeline looks pretty good. As you know, we don't tease or announce until it's a done deal and until our partner is comfortable with making announcements in any given deal, and as those come to fruition, we'll be able to talk more fully about them. But I feel pretty good about the pipeline. In terms of renewal, we do have renewals that are always up at various retailers. We have one we're working on now and so far so good. But that's somewhat steady-state. So I think that we feel good about the new prospects and continuing our existing prospects.

James F. Kissane - Crédit Suisse AG, Research Division

And a quick question for John, John, can you give us a sense on what portion of the cards, what portion of the GDV is related to tax refunds? And maybe versus last year, stripping out Intuit obviously, how would it compare year-to-year?

John L. Keatley

Yes, the portion of our GDV from tax refund, it's always a significant component in Q1. It was an even larger component last year. I think one of the metrics we provided is that, excluding tax, our GDV from direct deposits was up 42% year-over-year. But we haven't actually broken out the portion of GDV from tax specifically.

James F. Kissane - Crédit Suisse AG, Research Division

But would it have gone up adjusted for TurboTax?

John L. Keatley

Adjusted for TurboTax, in general, we saw just really very modest growth in our tax refund programs. Even if you back out TurboTax, the tax program declined as a share of our overall portfolio. And that really explains some of the dynamics you see in our metrics, increased revenue per card, increased interchange as a percent of GDV. A lot of those dynamics that you see there can be explained by the declining share of the tax as a portion of our business, even excluding Intuit.

Operator

Sanjay Sajhrani of KBW.

Steven Kwok - Keefe, Bruyette, & Woods, Inc., Research Division

This is actually Steven Kwok filling in for Sanjay. I guess the first thing I was wondering about was on the GDV growth, with regards to the 30% target. I know this quarter was 33% on an apples-to-apples basis. But in light of the 5% growth, how do you expect to achieve the 30%? Should we expect a ramp up? Or are there drivers that we should know about that's going to lead to that?

John L. Keatley

Yes, there are some drivers that we think will continue to push our GDV up. A couple of them are the rapid growth in our direct deposit, both for payroll and government benefits. We continue to see increased GDV per card. If you back the tax out of our business, we're continuing to see higher usage per card. And that's another dynamic at work. But you're right, to be fair, we need to see solid acceleration in that metric to grow over the loss of the TurboTax business and still post a 30% gain in GDV. It appears to be on track, but you're right that we need to see some solid growth in that metric to get there.

Steven Kwok - Keefe, Bruyette, & Woods, Inc., Research Division

And then, I guess, with regards to the Loopt acquisition, how should we think about the timelines to the expenses? And also, what operating expense line will it fall into?

Steven W. Streit

The Loopt expenses are primarily comp and benefits. So you've got -- we really had a very small hit in Q1 or expense in Q1 associated with Loopt. We had less than $1 million of closing costs associated with the transaction. So the balance of the $14 million is spread fairly evenly over the remainder of the year. And it's primarily comp and benefit, it's both the ongoing operating expenses of the business and then another big component of it are the retention incentives that we're paying to key employees, which will also roll through comp and benefits.

Steven Kwok - Keefe, Bruyette, & Woods, Inc., Research Division

And final question. I notice there was a pickup in the interest income line this quarter. I was wondering what was that related to? And if that run rate is sustainable?

John L. Keatley

Yes. I guess, there are really 2 things at play. One is our -- the average interest rate that we're earning on our cash and the other one is the amount of cash. The amount of cash on our books has gone up quite a bit. And we're getting a very small yield but slightly higher yield than we are getting before on those investments, on some very conservative highly liquid investment securities that we hold.

Operator

Andrew Jeffrey, SunTrust.

Andrew W. Jeffrey - SunTrust Robinson Humphrey, Inc., Research Division

First, from a high-level perspective, John, there, historically, has been a less than perfect, in fact, a relatively low or even insignificant correlation between GDV growth and card revenue. Is there anything you'd anticipate changing? It seems like consumers are more active in accessing cash via ATMs or cash back at the point-of-sale. How should we think about that metric as affecting the businesses? Is it a longer-term behavioral indicator rather than a short-term kind of revenue driver? I'm just trying to think about what that really means to -- what GDV really means to you.

John L. Keatley

Yes, I want to make sure I caught the question. Did you say the correlation between GDV growth and revenue growth?

Andrew W. Jeffrey - SunTrust Robinson Humphrey, Inc., Research Division

And card revenue. Yes, right.

John L. Keatley

Yes. Well, in general, from the longer history of the business, those metrics track more closely. Over the last 2 years, as tax refund cards grew as a share of our portfolio, that correlation kind of broke down. The reason for that is we had a lot of customers receiving large tax refunds on their card and then they would very quickly pull off most or all of that money at an ATM machine or through cash back transactions at retail stores. And really, none of that would roll through into interchange revenue. And really, none of it -- only a small portion of it would convert to revenue at all. So the relationship between GDV and interchange revenue and the relationship between GDV and overall revenue kind of started to break down as tax grew as a portion of our business. What we're seeing here in 2012 is the tax refund cards are declining as a share of our portfolio in part due to the discontinuation of the TurboTax program. But also, just in the rest of our business, we're seeing that it's growing more slowly than the rest of our portfolio. And that relationship is starting to restore more to what it was historically. But to your overarching question, the significance of that metric, it is a -- it's not a perfect predictor of revenue and the correlation with revenue does change based on the mix in our portfolio. But we do feel it is a good and useful measure of sort of the vibrancy of our network and our portfolio and the way customers are using their cards. You can think about the number of customers that we can acquire and then within each customer, you can capture a larger share of their wallet. So we think that GDV is an important metric, but it doesn't tell the whole story by itself.

Andrew W. Jeffrey - SunTrust Robinson Humphrey, Inc., Research Division

But it sounds like that relationship is getting better or moving back to what it's been historically.

John L. Keatley

That's right.

Andrew W. Jeffrey - SunTrust Robinson Humphrey, Inc., Research Division

More so, okay. And then, a question, follow-up, just regarding expense items. You pick -- you got really nice processing leverage again this quarter. Sales and marketing is up. Can we think about you getting generally more aggressive with sales and marketing, especially as you get more scale on the processing side of your business?

Steven W. Streit

I think, generally, that, that is the trend, that we do plan to increase our advertising spend over time. That really was only part of the story, though, this quarter. We had a couple of things going on. We do big replenishments of our retailers, the packaging that we have in the stores each year at the beginning of the year in tax season. Initially, we have a more expensive package at Walmart stores with the clear window on the front so the customers can actually see the card inside the package. So that more expensive package drove up our sales and marketing expenses. We also had a big reset at Walgreens. We're printing a lot of packages and shipping those out to those stores. Those are actually -- those 2 factors were actually the bigger driver of the increase in sales and marketing expense than the advertising.

Operator

Greg Smith, Sterne Agee.

Gregory Smith - Sterne Agee & Leach Inc., Research Division

Steve, can you talk a little bit about what you're seeing when your cards are being sold side-by-side with other cards or maybe you used to be the only card being sold in a retailer. Now there's maybe 2 or even 3 other brands? What are you starting to see?

Steven W. Streit

Well, probably too early to know because the only ones doing it are 7-Eleven and Blackhawk. But Blackhawk, we were new addition. In other words, the other cards were already there when we got in. And we're selling very well at Blackhawk stores and we continue to sell very well at 7-Eleven. So I don't know that there's any conclusions yet. When I've talked to some of the buyers, for example, at those retailers, what they tell me is they're seeing a general expansion of the category and that they're pleased with their overall share as a retailer, which tells me that everybody must be growing because we seem okay. To be fair, it's very early on. And so as we sort of do, in the sake of complete transparency, as we sort of list our SWAT analysis, strengths, weaknesses, opportunities and threats, we go through it. We'll have sessions where sometimes we categorize a new quality product from the shelf like an AMEX product or something like that as an opportunity because now you have more companies advertising the space, the retailer like 7-Eleven has more square footage or linear footage dedicated to the category, more signage. And that's certainly a time-honored way over the years that categories have grown for all parties. Other times, we think of it as a threat. And gosh, what if it doesn't grow and what if that takes a proportional bite out of our total sales? And we don't know. There's not enough retailers doing it today. My sense is, over time, more will start, and then we'll have more data to look at it a year from now or 2 years from now. So the answer is, so far, so good. But we're the first and largest player in the category that is underpenetrated, and so we are trying, as with others, to be to get traction. So we're the big dog on the block. We intend to stay the big dog. But we watch these trends as you do. I wish I had a more -- frankly, more concrete answer but that's probably the best I can give.

Gregory Smith - Sterne Agee & Leach Inc., Research Division

No, that's helpful. And then just the new rules in New Jersey, did those affect your cards at all?

Steven W. Streit

It affects the gift card product that we sell at Walmart. And so you may have read that gift card companies are taking the products off the rack in New Jersey. I'm not sure. I need to get verification from our Walmart team. But I want to say that we may be taking them off the shelf there in New Jersey as well, for the gift card. It's an immaterial amount of revenue or earnings for the company. So it won't change any financial outlooks, good, bad or indifferent. But it may well be that, that's the end result.

Operator

Bryan Keane of Deutsche Bank.

Bryan Keane - Deutsche Bank AG, Research Division

I just want to ask a big picture question that I get constantly and I'm sure you guys answer a lot. But I want to make sure everybody's clear on the -- what's the technology advantage that Green Dot has over the competition? What do you see the major advantage there?

Steven W. Streit

Well, it depends in what area. There's so much technology that is required to run, I guess, any company today, but certainly our company. So it depends which area you're focused on. If you talk about our retail connectivity, then the answer is it's a fairly significant advantage because it's highly audited and regulated IT that has to be directly connected to the retailers' cash register and point-of-sale systems. That can take years to integrate. And that's sort of your main tool for monitoring fraud and use and complying with a host of federal laws and everything else. So that technology would be somewhat unique and highly valuable. Another technology which is maybe more commoditized, which we still need to run the company, but is not part of the secret sauce, if you will. And then we have other kinds of technology that are highly proprietary. The stuff we have now at Loopt, for example, or the way we process our cards and fee the cards and audit them and handle the internal documentation. And then the way we integrate that all into our regulatory module, remember we're also a bank and a bank holding company. So how we take all that data and issue reports and comply with various laws and regulations as a bank is something unique to our hybrid of the retail world and a banking world. So it's probably a non-answer but I guess it just depends. Some things we do are very basic that it doesn't matter. Other things are very specialized.

Bryan Keane - Deutsche Bank AG, Research Division

And is there way yet for you guys to measure market share if you're winning or losing share in the marketplace?

Steven W. Streit

Well, our guess is that we're gaining, and I'll tell you why. But it's a guess, because there's only 2 public companies, and the private companies don't always tell. And if they do tell, you can never be sure. Here's why I think we are -- and by the way I apologize if I sound sick, I have a cold. So if I sound like I do, it's because I do. The way we sort of get out that is that you see our sales numbers quarter after quarter, year after year, and we continue to grow at a fairly rapid clip, despite the fact that we have a fairly large customer base. When you're doing 8 million, 9 million, 10 million new accounts a year and your active cards are roughly 1/2 that, that's a lot of people. So when you're growing 20%, 30%, every quarter year-over-year, that's a big base to grow over. And we keep hitting those growth numbers. When you look at -- our only other public competitor is a fine company, I don't mean this in any way as a negative towards them, but their growth has been far less than that and in some quarters flat year-over-year. If you look at the private companies, some have grown, many have not, some have gone backwards. So if you sort of look at who are the share gainers in prepaid and who are maintaining share or losing share? My guess is Green Dot would have to be gaining share because we're growing quarter over quarter whereas competitors are not. But there is no, "Oh, gosh, we were selling green beans and working for Del Monte." You can actually go out and buy reports of the green bean industry and see how every brand is selling at retail. No, that doesn't exist yet for a prepaid. So I can't give you an audited response. But that's my anecdotal response based on that mathematics.

Bryan Keane - Deutsche Bank AG, Research Division

Just last question for me, John. The customer identification process that's going into effect, you said it might have an impact on GDV and I think maybe card activations. Can you help quantify that?

John L. Keatley

It's really difficult. I mean, like any bank or financial institution, we are continually upgrading and enhancing our customer identification processes, our risk management processes, in general, and constantly beefing them up. And it's possible that as you do that, you may impact the ease with which customers can buy and use your product and it could impact our new card activation GDV growth. But it is very difficult to quantify that because it's hard to know it before you see the impact.

Steven W. Streit

Yes, you sort of run the controls offline to see what would happen and you -- you're constantly tinkering. And we don't know. We've had some tinkering sessions, if you will, where we've been able to activate more cards because we fix something or modify something in the logic tree, that enables more honest customers to get through more quickly. We've done things over the years where we think; "Oops," and you go back and revisited. I wish I could tell you that there's a science -- a perfect science to risk management, there's not. Every bank has to do their own analysis and their own policies and their own procedures to ensure their compliance and their good standing. And we're no different. So I think what John is saying and what I would say is that, it could be that there's no impact to acquisition. It could be there's some. But we wanted to make sure that we err it on the cautious side and say, look, we're changing things. We're a big company. We're now a bank holding company. We're far and away the biggest in this space and getting bigger, and we take that leadership role seriously. And part of that is always changing our risk management and making sure we're staying one step ahead of the bad guys and sometimes, you're not sure how that will play out.

Operator

[Operator Instructions] Glenn Fodor, Morgan Stanley.

Glenn Fodor - Morgan Stanley, Research Division

Just to continue on the question a couple ago on sales and marketing. I mean, it grew faster than revenues this quarter. Last quarter, it didn't. But in prior years it has. It's been pretty lumpy. But at some point, do you expect the pattern will reverse and you'll have a positive spread there?

Steven W. Streit

What was the last part you said, do we expect we'll have a....

Glenn Fodor - Morgan Stanley, Research Division

You'll have a positive spread where you can grow slower than revenue growth?

Steven W. Streit

Our expectation is that we're not going to show leverage on that line item, actually. I mean, I think we plan to continue to increase our spending on advertising in every area where we're seeing a very positive return on it. So in general, we expect it to grow in line with revenues. You're right that it is fairly lumpy. We have advertising campaigns. We have new packaging resets at our retailers. So it does tend to bump around a fair amount. But in general, we expect it's an item that will roughly grow with our revenues.

Glenn Fodor - Morgan Stanley, Research Division

I mean, do you envision it's possibly you could see upside there? I mean, deliver more mobile solutions in your mobile offerings, but lower that line item just because of more efficient delivery channel in both case?

Steven W. Streit

Yes, it's a very fair point, right up. As we -- something what we've said publicly in that, as we sell products and channels that are not retail and as we have more digital distribution, let's say, that enable these, the efficiency does pick up. We don't have the packaging cost on those things, but then you have acquisition costs. So, yes, I don't know. I wouldn't bet on anything today, I guess. But it's a fair point.

Operator

Robert Napoli, William Blair.

Robert P. Napoli - William Blair & Company L.L.C., Research Division

The Loopt acquisition. When you acquired a company that has a lot of very young entrepreneurial employees, that had a business plan that was not to be acquired, I guess, at this point. Now they're part of Green Dot, you paid a lot for that talent, if you will, and what they have developed so far. I know you're making retention payment, but how are you going to keep those people motivated? And we've heard rumors that you've lost some of the employees already, is that true or not true? And how confident are you you're going to be able to keep the talented employees of Loopt?

Steven W. Streit

Well, first of all, I've not heard we've lost any employees at Loopt, and I'll call Sam as soon as we get off the conference call and ask him. I've actually not heard that when we meet quite a bit. And we have a big integration celebration here a week ago and all were present and accounted for, so I don't think that's true. On the other question of how do you keep the folks in Silicon Valley motivated? It's probably the same way we try to keep any employee motivated, and that is we're a mission-oriented company. People love to wake up and change the world and we have probably as big of a soapbox in platform as you can get in any industry or in any career today at Green Dot, which is why we have an easier and easier time of recruiting top talents. So one way is make sure they have a meaty mission to bite their teeth into. The other way is you pay them well, and treat them well, and have good benefits. The other way is you have good retention payments. And then you try to have some good laughs throughout the day. I'm somebody -- and Bob, you know me fairly well from our road trips and other things. I enjoy people and I enjoy a lot of laughter in the workplace and I enjoy big opportunities. And I think, to your point, because of their entrepreneurs spirit and where they are, they appreciated those things. We're not -- for a fairly large company, and for a bank holding company, we're not stodgy or anything of the sort. We're fairly upbeat and have a lot of fun and try to change the world in a positive way, and I think they buy into that. But to your point, if we ever become irritating or they start feeling, like any of our employees, that we're more of a burden than a blessing, they'll leave. And that's the way it goes. In California, there are no noncompetes that are legal and people in California work for their employer because they want to or because maybe they're not good enough to find a job elsewhere. But in our case, we'd like to think of it because we're their employer of choice.

Robert P. Napoli - William Blair & Company L.L.C., Research Division

Follow-up question. On the number of active cards, I guess, and the -- it looks like attrition, I guess, on a quarterly basis. And how many of those that you add, were the new card activations, had used the card previously, were the convenience users? And I mean, do you expect to see a different mix of convenience users versus BP uses? How many of those? Maybe try to give a little bit of color around that if you could.

Steven W. Streit

Yes. No, I got you. The percent of our new card activations from repeat customers, I forgot their exact number, I think, it was 36%. It was virtually unchanged from a year ago. So we continue to see a lot of customers coming back and buying another card. So no significant change in behavior on that front.

Steven W. Streit

By the way, Bob, while you're asking John that question, Sam Altman, shot me an e-mail. Sam runs -- the CEO and founder of Loopt. He said, "We haven't lost anyone." So, bad rumor.

Operator

Mike Grondahl, Piper Jaffray.

Michael J. Grondahl - Piper Jaffray Companies, Research Division

Could you just highlight for us. I didn't see it in the slides, the first time reloaders, and maybe just highlight a little bit how the online channel did?

Steven W. Streit

The first time reloaders were up 22% year-over-year in the quarter. And then the other question was online channel.

John L. Keatley

Yes, the online channel continues to be a strong contributor. I mean, it declined in terms of activations from the standpoint that TurboTax went away, and that was an entirely online channel for us. But backing out TurboTax, it continues to show strong growth and it's an important contributor of new cards and a very important contributor of direct deposit customers. So it's an area we continue to invest in and we plan to continue to spend heavily in that channel going forward.

Operator

Tom McCrohan, Janney.

Thomas C. McCrohan - Janney Montgomery Scott LLC, Research Division

How important is the overall and online channel to your future long-term success?

Steven W. Streit

Well, it's very important, but for different reasons than we might expect. So -- and I don't know, Tom, if you had the chance to hear my talk up at the beginning of the conference call. But we talked about our sort of world view on the mobile handset. Did you get a chance to hear that at all?

Thomas C. McCrohan - Janney Montgomery Scott LLC, Research Division

Unfortunately not. Sorry, Steve.

Steven W. Streit

Yes, that's okay. Take out the transcript, if you can, because I spoke quite a bit about it and the answer is, it's extremely important. We really do have a view that -- not just for banking, but almost any industry you can think of, that involves computers today. Say, when we think about online, when somebody says you have to go online, you think about going to a computer and doing something. More and more that's going to be on the palm of your hand and smartphones, I think, will become the Internet connected computer that people rich and poor use more than their laptop. And for those of you who travel on business, I know -- I'm sure you do and I'm sure others do. More and more, you don't even take a laptop on the plane. You're taking your iPad or your some tablet, typically an iPad and when you get to the hotel using your iPad or a lot of times you've answered all the e-mails in the car and whatever research you needed before you ever got to the hotel room. This is pretty massive change in just the past few years of behavior at all levels of economic spectrum. I gave a statistic of 55% of Green Dot customers today have either an iPhone or Android, a BlackBerry smartphone, Internet connected smartphone with a data plan. That's pretty impressive. That number would have been 1/2 that only a 1 or 2 years ago. So you just see this progression at all economic levels. And for any bank, not to have a resident, a core expertise of mobile programming for any products they offer now in the future, could almost be characterized as neglect. You really have to be expert on the mobile handset to compete, we think, not only in the long term, but maybe even in the near term.

Thomas C. McCrohan - Janney Montgomery Scott LLC, Research Division

And then in terms of kind of building up that capability and then Loopt was part of it, was it any one of the 9-inning investment cycle? Or how far did that get you in terms of where you need to be?

Steven W. Streit

In terms of the Loopt get us to the knowledge we need, is what the question was?

Thomas C. McCrohan - Janney Montgomery Scott LLC, Research Division

Yes, do you have the talent and resources with Loopt to get to where you need to be long term?

Steven W. Streit

We think so, yes. You never know because what happens is once you get on something right, you get excited about it, you take some success. And so we'll continue to recruit and do things over the years as we have with everything we do. But it sure brings us a tremendous lot of firepower. Not only do you have the intellectual property, which is going to be very helpful to us, but you also have technologists to live in the mobile world. So they understand how to make them look cool and work cool. And some of the stuff that Sam and Alok and his team, the company formerly known Loopt, have shown me in the past 2 weeks is just fun stuff. And we'll sit at a restaurant somewhere in the Bay Area and look at all these new cool features and it's fun, it's exciting. It's a real renaissance of technology innovation at both, for both our current engineers at Green Dot and our new engineers at Green Dot Silicon Valley. So we couldn't be more thrilled with it to be honest with you. And when these new apps come out and the new products come out, people will ooh and aah and sort of understand where we're going with this. But there's no question that our world view is that for us to be a long-term, high-growth company, not just for this quarter, next, and next, but for years to come, we need to follow the consumer. And there's no question that the consumer is leading us to the handset.

Operator

David Scharf, JMP Securities.

David M. Scharf - JMP Securities LLC, Research Division

I wanted to focus on the first-time reload metric and make sure I understand the dynamic. I think you said it was up 22%. And it always seem to be, obviously, a good forward indicator for repeat usage and lengthening the average account life. That figure has dropped off considerably from last year's levels, around 30%. And I would have thought that TurboTax really wouldn't impact that figure, given how you've described the behavioral aspects of a tax refund, which is get the money, run to an ATM and take the cash away, that those people really don't enter that load metrics. So can you give a little color on the trends there?

John L. Keatley

Sure. I mean, in general, so let me clarify one thing first. The first time reloaders grew 22% year-over-year, once you back out Intuit. New card activations were up 23% year-over-year once you back out Intuit. For the new card activations, it grew essentially in line with first-time reloaders. So what that tells you, in some quarters, we're seeing that the first-time reloaders has grown a bit faster than new card activations in general, that's a positive sign in our mind, we'd like to see more and more of our customers converting to become reloaders. In this particular quarter, they grew essentially in line with each other. So that shows you that the same percentage of customers who are buying the card were converting into reloaders as they were a year ago. So that, by itself, is not really a good sign or a bad sign. But it shows you that we're continuing to -- the fact that it's up more than 20% year-over-year is certainly a positive thing. We're continuing to acquire more customers and convert them into reloaders than we were a year ago and it's an important input to our own models here.

Steven W. Streit

More of it -- maybe it's confusing, it's more of a relative metric than it is a trend metric, I guess.

David M. Scharf - JMP Securities LLC, Research Division

So I would have thought that TurboTax falling out wouldn't have had that much of an impact on the growth rate. It still would have been around 30% like the last few quarters since those tax refund customers tend not to be reloaders anyway.

John L. Keatley

Yes, that's true. We do see some. With the direct deposit guys, we'll count them as a reloader upon their second load, if someone gets a card online and they get a federal refund and then they get a state refund as well. We'll count the first funding as the initial load and if they have to do, get a state refund as well, the second one will count as a reload. So even some of the tax customers count as reloaders in the way we've measured the metric.

David M. Scharf - JMP Securities LLC, Research Division

Just one follow-up. Steve, not to have you, once again, launch into the description that you gave at the beginning on Loopt. But can you help me understand a little more about the intellectual property? Because I'm aware that there are quite a number of so-called location-based marketing companies out there and we read a lot about these that are involved in GPS-oriented text messages offers, couponing and so forth. How exactly does Loopt's IT differ than some of these other...

Steven W. Streit

Well, it doesn't. This was a patent that Sam and his team got put on the federal registry in October of last year, August of last year, something like that. So it's a fairly new patent. And it's very clean and broad patent. And the answer is that all these -- not all, many of the ones you're speaking about that have geolocation technology that predicates sending a message of commerce to that phone user would be in conflict to violation of the patent by our reading. And some of those companies, somebody referring to in other large companies have called us and inquired about licensing that patent. And there seems to be, from the companies we've talked to, all of which are large companies, some public, some private, a general sense of recognition that the patent is real and that the IP is solid. We're currently doing a third-party valuation of the patent to understand how we license it. Green Dot, we don't license patents for a living. So this is something that we want to get better educated on and make sure we're buttoned up on. And we'll use the patent for our own use. We'll use it strategically to partner with other company and do, sometimes, patent swaps and other kinds of IP swaps, which are fairly common in the world. And in some cases, we'll use it defensively, to make sure that competitors who otherwise are looking to do what we can do, don't. And so we need to sort out that patent strategy. But we do think the patent is good and we think the value is significant.

Operator

Ashwin Shirvaikar of Citi.

Ashwin Shirvaikar - Citigroup Inc, Research Division

I guess, follow-up on Loopt. What is the economic or financial model as the Loopt product and apps get introduced then? And how should we think of -- I can see obviously, no material revenue this year, $14 million loss. But what might that number look like, say, for example, next year?

John L. Keatley

Well, it's all part of Green Dot so you wouldn't see it broken down numbers specifically for the former Loopt. You'd see it just in terms of Green Dot's performance metrics. But to sort of roll it forward, once we have the apps working and the integrations complete, and using the Green Dot product or service or one of any of our bank's products and services becomes mobile-centric, what we should see is a more efficient operation, we should see more efficient call-center costs as people can more easily access customer service. You should see longer retention, as customers feel more engaged with the product through a number of important apps and features that they can use on the go. And we should see it in different kinds of retention that today we cannot do. When people sit in front of the TV set and see one of our national ads and at the end we say, "Or get the card free online at greendot.com," which is how we generally end the commercial. You're asking that person to get up from their couch, wherever they're watching and go into a room where the computer is booted up, go online and order the card. And a lot of them do, but that's a lot of separation. What we see in consumer testing and what you probably read about elsewhere is this multitasking, especially with younger consumers, where they're watching the TV, they've got the cell phone in their left hand doing whatever they do and texting somebody and they have their iPad in the right hand browsing, looking, downloading, messing around, and you may see that in your own family as you look around the room. The ability to be able to acquire a card from the cell phone app or to do other things from your mobile handset, while you're watching TV, while you're out, when you see a Green Dot display in a grocery store, we think these things will be additive and deepens the relationship with the consumer. So while there may be certain services that we charge a specific fee for relative to the app, I would more think of it as a deepening relationship to the product for the customer.

Ashwin Shirvaikar - Citigroup Inc, Research Division

And just, again, thinking slightly longer term in terms of the Walmart commission reset. Quantify -- you can kind of tell, I'm trying to figure out not so much this year, but how the financial model plays out in the next couple of years. So can you talk about the Walmart commission reset for next year?

John L. Keatley

Yes, sure. The commission that we paid at Walmart on the Walmart MoneyCard is going to step up. It's -- it happens on the third anniversary of our contract, so it's going to be May 2013. This step up is just right around 4 percentage points year-over-year. And then that new rate will stay in effect through the remainder of the contract.

Operator

Gil Luria, Wedbush Securities.

Gil B. Luria - Wedbush Securities Inc., Research Division

I apologize if you talked about this, I had some technical difficulty. You spent some time talking about the volume metrics. But in terms of the prices you charge for your products, the fees for your products, those haven't changed in almost 3 years. And I think there's been a lot of expectation that a lot of new competition would come in and drive prices low and then cause you to reduce your prices. Hasn't really been new competitions, not from new banks. Some of your existing competitors have put new products out there at comparable price points. Do you expect that to change? Do you expect to have to take your prices down in the -- over the next 1 or 2 years?

Steven W. Streit

Well, let me think about how to answer that. Have to is a strong word. I don't think we have to. But let me say a quick word about price in the spirit of candor and transparency. We focus on cost a lot at Green Dot. Vertical integration plays like the process or the bank or being able to develop special software with engineers at Loopt and our own engineers here at Green Dot South. And we spent a lot of money on that. And we do, I think, a pretty good job of driving efficiency throughout the system, whether it's in the way we manage our worldwide network of call centers or the way we do technology development or anything else we do at the company. And the reason is, not just to deliver a better margin, although over the years we've been able to do that, I suppose. But because cost is a weapon, the lowest cost provider has more options by definition than anyone else in any given industry, and that's what allows us to be vendors to Walmart, that's what allows us to lower consumer pricing over the year or give away free ATM networks where nobody else does that, and all the things we do that plows value back into the product. So we will always research and experiment. We have a couple of experiments going on right now with pricing in the market. And we will always look at pricing as an offense, a defense, and an arrow in our quiver, to make sure that we can continue to capture share and have high growth and have lots of optionalities. So I want to be clear that, has anything happened that has made us lower prices? No. Have we lowered prices since our big reset in '09? No. We've added new services, we've given new free ATM networks and what not. But does that mean we would not lower pricing at some point in the future? I would never say that either. We always want to reserve that optionality. And the company with the highest scale and the best cost infrastructure, the best products, the most customers has optionality in cost and price that others don't. And so I just want to answer it in that complete way.

Gil B. Luria - Wedbush Securities Inc., Research Division

So it doesn't seem like it's going to be driven externally. And on that point, the interest from banks of getting it to the reloadable prepaid market has come and gone over the last couple of years with some of the other developments that they'd had to go through. What's the latest on the developments that you see? You are, sometimes, in contact with them about possible partnership? Do you see more or less interest in, let's say, at the same time, last year 6 months ago, from the big banks to introduce products.

Steven W. Streit

Well, so the answer is not interest in Green Dot working with them. I heard from a friend who works at a large processor that it's her opinion that banks are making more inbound calls to her for processing for prepaid. So maybe, Gil, like I just had some market research analysis for you there, by talking to my friend. It may be that this bank is interested. Chase has a product that's been out there now for a number of months in pilot in certain markets. U.S. Bank has had a product now for a very long time. SunTrust has a had product for a while. Oh gosh, BB&T has had a product now for over a year. Regions Bank has had a product now for 8 months to 1 year. And so there are, to be fair, a number of banks with prepaid offerings today. ING has one, Capital One has one. So I think that it's fair to say there are many, many banks today that offer prepaid cards to one segment of customers or another or for one use or another. And whatever it is, it is, and our growth is what it is. So -- but we don't see a lot of over-the-top interest and we haven't seen a lot of aggressive push marketing for these services. But it may well be that banks, over time, have prepaid accounts just like we have checking and savings account, and that would not surprise me.

Operator

John Rowan, Sidoti & Company.

John J. Rowan - Sidoti & Company, LLC

John, I just want to make sure I understand, you said -- when you're giving guidance for the second quarter, you said the grow-over -- I just want to make sure I understand what you mean when you're giving some type of expectation for revenue in the second quarter.

John L. Keatley

Sure, so what I said was the grow-over from the discontinuation of the TurboTax program was about $6 million. So we expect that our revenue attributable to TurboTax will be about $6 million lower in Q2 of 2012 than what it was in Q2 of 2011.

John J. Rowan - Sidoti & Company, LLC

Okay. I just wanted to make sure you we're not saying revenue is going to be up $6 million from the second quarter.

John L. Keatley

No.

John J. Rowan - Sidoti & Company, LLC

And then just, okay, one more follow-up. If I'm not mistaken, on the last quarter conference call, you guys talked a lot about vertical integration and some of the possibilities you had heading into 2013, even more specifically into 2014, to lower your operating expenses. Can you maybe just go over what you said for 2013 and where were some of the opportunities you had to reduce cost?

John L. Keatley

Sure. Yes, I mean, if you look at 2013, I think we've got some -- we have some headwinds and some tailwinds in terms of our margins. We have the reset and the increase of our Walmart commission rates on the money card program, which will affect about 2/3 of the year, from May onwards. We'll also be offering free ATMs to Walmart customers for the full year in 2013. On the plus side, we continue to get scale and get leverage on our fixed costs as we grow, and that's a source of margin expansion for us. We will be well into or essentially completed the migration from Synovus Bank to Green Dot Bank, and that will be at a lower cost. And we'll be beginning to convert accounts to our own processor, although that is really more of a 2014 opportunity. So there are -- I think, we have some headwinds and some tailwinds as you look at 2013.

Operator

Well, that's all the time we have for questions today. The conference call has now concluded. We thank you all for attending today's presentation. At this time, you may disconnect your lines. Thank you, and have a good day.

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