NetSpend Holdings (NASDAQ:NTSP), a provider of general-purpose reloadable prepaid debit cards, is expected to price its IPO this week.
Business Overview (from prospectus)
NetSpend is a leading provider of general-purpose reloadable prepaid debit cards, or GPR cards, and related alternative financial services to underbanked consumers in the U.S. We believe we are one of the largest dedicated providers of GPR cards in the U.S., with approximately 2.0 million active cards as of June 30, 2010 and a gross dollar volume of debit transactions and cash withdrawals of $8.8 billion for the twelve months ended June 30, 2010. We primarily focus on the estimated 60 million underbanked consumers in the U.S. who do not have a traditional bank deposit account or who rely on alternative financial services. We empower underbanked consumers by providing innovative and affordable financial products and services tailored to meet their particular financial services needs and preferences in a manner that traditional banking institutions have historically not met. In addition, our products and services provide our retail distributors an opportunity to enhance their customer relationships and generate incremental, ongoing revenue streams. We believe that by providing value to both underbanked consumers and our retail distributors we are well-positioned to continue to take advantage of the significant opportunities within two large, fast-growing markets — the prepaid card market and the market for financial services targeting underbanked consumers.
Offering: 18.5 million shares at $10 - $12 per share. Net proceeds will be used to pay a portion of debt of $58.5 million and the remaining will be used for general corporate purpose.
Revenues totaled $137.0 million in the six months ended June 30, 2010, an increase of 24.9% from the comparable period in 2009...Direct operating costs were $63.0 million in the six months ended June 30, 2010, an increase of 21.6% from the comparable period in 2009...Salaries, benefits, and other personnel costs were $26.6 million in the six months ended June 30, 2010, an increase of 12.8% from the comparable period in 2009...Advertising, marketing, and promotion costs were $7.4 million in the six months ended June 30, 2010, an increase of 19.4% from the comparable period in 2009...Net income remained flat at $11.1 million in the six months ended June 30, 2010, from the comparable period in 2009...
The financial services industry, including the prepaid card market, is subject to intense and increasing competition. We directly compete with a number of companies that market open-loop prepaid debit cards through retail and online distribution, including Green Dot Corporation (NYSE:GDOT), Account Now, Inc. and Blackhawk Network Inc. Many transaction processors, such as First Data Corporation, Total System Services (NYSE:TSS), Inc., Fidelity National Information Services (NYSE:FIS) and Galileo Processing, Inc., have prepaid platform capability and are increasingly in direct competition with us for prepaid program management opportunities with large distributors. We compete against large retailers such as Wal-Mart (NYSE:WMT) seeking to integrate more profitable financial services into their product offerings. We also anticipate increased competition from alternative financial services providers who are often well-positioned to service the underbanked and who may wish to develop their own prepaid debit card programs. In the past year our retail distributors Pay-O-Matic, Inc. and Checksmart Financial Company have both begun to distribute their own GPR cards through their stores. While the increased desire of banks, retailers and alternative financial services providers to develop successful prepaid debit card programs frequently creates new business opportunities for us, it could also have an adverse effect on our business, including through increased price competition and loss of distributor relationships.