Green Dot Corporation (NYSE:GDOT) Q4 2018 Earnings Conference Call February 20, 2019 5:00 PM ET
Dara Dierks - Investor Relations
Steven Streit - President and Chief Executive Officer
Mark Shifke - Chief Financial Officer
Conference Call Participants
Andrew Schmidt - Citigroup
Bradey Berning - Craig-Hallum Capital Group
Andrew Jeffrey - SunTrust Robinson Humphrey
Robert Napoli - William Blair & Company
Joseph Vafi - Loop Capital Markets
Ramsey El Assal - Barclays
Steven Kwok - KBW
Ashish Sabadra - Deutsche Bank
Reggie Smith - JPMorgan
Good day, everyone, and welcome to the Green Dot Corporation Fourth Quarter 2018 Earnings Conference Call. Please note that the contents of this call are being recorded.
And I'd now like to turn the call over to Dara Dierks. Please go ahead with your presentation.
Thank you, and good afternoon, everyone. On today's call, we'll discuss Green Dot's fourth quarter 2018 performance and thoughts about 2019. Following those remarks, we'll open the call for questions. For those of you who haven't yet accessed our earnings release that accompanies this call and webcast that can be found at ir.greendot.com. As a reminder, our comments include forward-looking statements, among other things, our expectations regarding future results and performance. Please refer to the cautionary language in the earnings release and in Green Dot's filings with the Securities and Exchange Commission, including our most recent Form 10-K and 10-Q for additional information concerning factors that could cause actual results to differ materially from the forward-looking statements.
During the call, we will make reference to our financial measures that do not conform to generally accepted accounting principles. For the sake of clarity, unless otherwise noted, all numbers we talk about today will be on a non-GAAP basis. Information may be calculated differently than similar non-GAAP data presented by other companies. Quantitative reconciliations of our non-GAAP financial information to the directly comparable GAAP financial information appear in today's press release. The content of this call is the property of the Green Dot Corporation and is subject to copyright protection.
Now, I'd like to turn the call over to Steve.
Thank you, Dara, and welcome, everyone, to Green Dot Corporation's Q4 2018 earnings call. Today, we'll start with a review of yet another outstanding quarter of performance, capping another amazing year of double-digit, top and bottom-line growth and the year that saw material advancement of our long-term strategy to become a large scale, highly-innovative and ever-evolving financial technology ecosystem that drives when the best and brightest in financial services and technology come together to invent, create and grow.
In addition to providing an overview of our financial performance for the quarter and the year, I'll also reveal our new and exciting Six-Step Plan for 2019 detailing this year strategic and tactical road map for growth. Then, we'll finish up with Mark's commentary on the numbers, including a review of our 2019 financial outlook. So let's get to the numbers.
Green Dot's products and platform model generated Q4 total consolidated operating revenue of $238 million, a 12% year-over-year increase. We note that this growth is 100% organic and quite robust, especially given that our revenue performance in Q4 of last year was itself a Q4 record. For the full year, total consolidated operating revenue came in at $1.042 billion, representing a year-over-year increase of 17%, approximately 2 points of this growth was attributed to around $20 million from UniRush in Q1, while the remainder was fully organic, helped in large part by the revenue contribution from our new and existing BaaS platform programs that grew at a faster pace than our previously established product lines, although they also grew collectively by double-digits.
Adjusted EBITDA for the quarter was $44 million on a consolidated basis, representing a year-over-year growth rate of 37%. The leverage in our operating model continued to deliver very strong margin expansion of over 300 basis points on a year-over-year basis, which was consistent with a margin trajectory we laid out earlier in 2018. This impressive Non-GAAP profitability was achieved despite our strategic decision to reinvest some of the material revenue outperformance back into growth and support initiatives such as hiring across the organization, especially in the areas of risk management, technology, compliance and other control and governance parts of the Company.
For the full year, adjusted EBITDA grew by 22% from $206 million in 2017 to $251 million in 2018, representing full-year margin expansion of about 100 basis points, a really terrific result given that we are expanding margins while funding so many new and important long-term strategic initiatives concurrent with spending to expand our operating platform.
Consolidated non-GAAP EPS for the quarter was $0.56, representing a year-over-year growth rate of 93%, marking the 10th consecutive quarter in which we have posted double-digit or better year-over-year growth in non-GAAP EPS. On a full-year basis, non-GAAP EPS grew from $2.16 to $3.29, representing year-over-year growth of 52%. Incredibly, looking at the last four years, earnings have grown from $1.35 in 2015 to the $3.29 we earned in 2018 in the face of the most concentrated period of growth and infrastructure investments in the Company's history.
In other words, our 35% EPS CAGR over the last three years occurred while at the same time, our non-GAAP operating expenses increased by over $240 million. In our Account Services segment total revenue in that segment increased by 11% to $200 million with 5.34 million quarterly active accounts up around 1% year-over-year. Our key metrics for the portfolio's health and vibrancy continue to be extremely strong. Specifically, the number of active accounts receiving direct deposit grew by 10% year-over-year and purchase volume grew by very large 11% year-over-year to a new Q4 record of $6 billion.
So how can our direct deposit and purchase volume metrics be so strong and yet actives be up only 1%. The reason is that we are somewhat a victim of our own success in converting more and more of our quarterly active accounts to direct deposit active accounts. Here's how the math works. An active account is defined as a single card that has at least one customer generated transaction in the quarter. So, for example, a customer who buys one card every two weeks to say low their wages to the card and then pay bills, shop online or whatever their purpose may be, that one customer would be generating six active accounts in the quarter, but when that same customer buys Just one card in the quarter, decides to enroll in direct deposit and then keep same card in their wallet and uses it the same way every two weeks to pay bills, shop online or whatever their purpose may have been, that same customer is now generating account of just one active account in the quarter.
To this point, of the major Green Dot Bank issued card portfolios. The number of weekly active accounts grew around 8.5% on average in the quarter as compared with a number of weekly active accounts in last year's Q4. The reason is that more customers appear to be increasingly using the card as their top of wallet card with transactions occurring every week, whereas a short-term customer, who doesn't use our card as their top of wallet card, will only use the card occasionally, maybe once every few weeks, but not every week.
While the mix shift towards direct deposit and more engaged customers is clearly better for profitability and growth. The lower churn also means fewer accounts issued are short-term customers, which weighs down on unit sales and therefore the quarterly active account metric. Our Processing and Settlement Services segment continues to build on its growth momentum, achieving another record-setting result in the quarter. Revenue in this segment grew 11% to $45 million, driven by increasing transaction counts and cash transfers and SimplyPaid corporate disbursements.
Green Dot's long-term strategy is to create a unique sustainable and highly valuable FinTech ecosystem that fuels the engine of innovation for Green Dot and its many business partners, innovation sells and it's our belief that continuing to focus our energy and resources on our strategy to build the industry's most prolific platform for FinTech innovation, BaaS, Banking-as-a-Service, will help keep Green Dot vital and growing for many years to come.
A tangible illustration of this vitality is the increasing success we're having in penetrating Green Dot's growing TAM. Our total addressable market that we believe has expanded over the years to effectively represent the aggregate size of the domestic TAMs of all of our BaaS partners. To that point, here is an illustration of the success we're having and increasingly penetrating that total addressable market. In 2016, we estimate that approximately 30 million customers used our products and services that year. This may have been a Walmart gift card or reloadable prepaid card or check-in account or maybe they received a tax refund or a tax refund loan, where TPG was the processor.
Note that only a fraction of these customers shop in our legacy definition of active accounts. In 2017, the customers we touch with products and services grew to around 35 million customers, as we added secured credit cards SimplyPaid, Uber and Apple Pay Cash products. Then, in 2018, we served just over 50 million customers, who used a Green Dot product or service as we added into it TaxHawk and other programs, while BaaS partners who went live in prior years continue to see broadening adoption. Because Green Dot started out as a monoline prepaid Company with the legacy active card KPI that reflects only that legacy card business, some might think that the active card KPI is the sum total of our entire active customer base. But of course nowadays our card programs are just one part of Green Dot's diverse product suite and our actual customer base is much larger than that.
While it's certainly possible that some percentage of those 50 million or so customers in 2018 might be using multiple Green Dot products, for example, maybe they're using a PayCard from RapidPay, but also receive the tax refund from TurboTax, where we're the processor and therefore maybe we're counting them twice. These numbers indicate that perhaps 15% of the entire U.S. adult population was a Green Dot customer in 2018, a TAM penetration increase of over 60% over just the past three years.
Now, I'd like to share some recent business updates and then reveal our six-step Plan for 2019. First, I'll start with a new partnership in our Banking-as-a-Service business line or BaaS with our partners at Intuit. In addition to entering the second season for the BaaS-driven Visa Turbo prepaid card program. We're pleased to announce that Intuit is now using Green Dot's BaaS platform for Intuit's QuickBooks Desktop payroll product offering.
Starting with the Intuit Turbo PayCard product, available to all employees of small businesses that use QuickBooks Desktop payroll services. The offering will enable small businesses to pay their employees in an easy, cost effective fully digital way be it a Green Dot issued Intuit Turbo PayCard removing the need for pay per checks. We greatly value, our partnership with Intuit and are honored to expand our relationship with such a great organization.
On the topic of PayCard, you may know that Green Dot's, RapidPay division is one of the largest and most successful PayCard programs in America and the RapidPay team continues to grow their business beautifully. In Q4, the rapid team closed over 200 new companies that will now be using Green Dot RapidPay for their employees PayCard disbursement needs. Some of the notable new client wins at RapidPay in Q4 include George Washington University, the University of Illinois, Benny's hottest restaurants, Eddie Bauer and a Pac Sunwear and even the Fresno School District, all are now RapidPay customers.
In our Retail division, we're pleased to announce a multi-year extension with Kroger, a multi-year extension with 711 and a renewal with Community Choice Financial, a long-time partner with our inside brand of prepaid cards. We've also signed a new retailer, where you can purchase and reload Green Dot products. It's a C-store chain called Road Runner, but 92 stores located in the south. Across our approximately 100,000 location retail network, we're pleased to announce that our GoBank checking account product is now available in approximately 55,000 retail doors coast to coast, up from just 12,000 stores selling that product last quarter.
Next, Our Money Processing division has expanded the number of retailers that can accept e-cash transactions, where we can provide payment cash on or cash off services using a barcode sent in real-time to the customers' mobile phone. And then the cashier simply scans a barcode on the phone screen to facilitate the transaction. So, now, in addition to Walmart stores, customers can now complete e-cash transactions at all CVS and Walgreen stores.
And lastly, I am pleased to let you know that Green Dot continues to deepen its relationship with Walmart across a number of different initiatives. First, in Q4, the MoneyCard was featured in the major promotion with Wal-Mart's new family mobile phone service, where by Green Dot was given exclusive shelf space in the Walmart electronics area at select stores and tied into a promotion where the customer can enroll to auto bill pay for their phone service. In the November and December time period, Green Dot's Visa gift card products were given incremental placement at 4,000 Walmart stores, securing a large amount of incremental pegs on those mass displays, which helped to generate record gift card sales in Q4.
During Black Friday through Cyber Monday, walmart.com promoted our MoneyCard account, which features 3% cash back in all purchases at walmart.com. In March, Green Dot will begin selling our Green Dot Everyday card at all Walmart stores in Puerto Rico, along with the MoneyCard product. And in April, Green Dot will expand sales of our Green Dot Everyday card in all Walmart money services areas located inside 1,400 Walmart stores.
And lastly, this tax season, Green Dot integrated the Walmart MoneyCard into our tax refund processing business at TPG, where TPG pro-channel tax preparation partners can now offer their customers the ability to load their tax refunds on a Walmart MoneyCard. It's a great example of how Green Dot can bring its full complement of synergistic business units together to help drive success for all of our partners in our ecosystem.
In this case, tax preparers who get to sell the popular and highly regarded MoneyCard, and grow their card sales and associated revenue. TPG that gets to offer a valuable promotion to potential new tax preparers in order to grow its share of tax processing. Walmart who owns commission from the usage of the MoneyCard and increased sales in store and online with those customers spend and of course success for our mutual customers, our end users to get a great FDIC-insured prepaid card with a built-in savings account, free online bill pay and more, so they can more quickly receive their tax refund safely and electronically and earn cash back when they use the card at Walmart.
Green Dot's long 12-year partnership with Walmart now includes many different products and services sold across the US and Puerto Rico in practically all Walmart stores, super centers and neighborhood markets. From prepaid cards, the savings accounts from cash loading services. The cash out for PayPal from gift cards to checking accounts and from cash back cards in tax refund cards to processing deposit for community banks. Plus we provide program management and retail operating support such as bank issuing compliance processing and Settlement supply chain and merchandising, category management and analysis technology services and point of sale integrations and more.
We're very proud of our partnership with Walmart and we work hard to earn their business every day. I'm now pleased to announce Green Dot six-Step Plan for 2019. For those of you who are new to our company, each year we published six-Step Plan that details the strategies and tactics we intend to execute each year. The goal is to help investors better understand management's agenda for the year and also to make it easier to track our progress during each quarterly earnings call.
This year we are categorizing our six-Step initiatives by product platform and Corporate Strategy. First, let's start with products. Step one is about launching two new innovative and exciting products. We intend to design, develop and launch two new account products this year that target Generation Z and that we intend to primarily sell direct to consumers to Green Dot, direct and through our network of leading retail stores are, there are various definitions of Gen Z or digital natives most demographers defined as generation is starting in the mid 1990s with the millennial generation tapers off. So age wise this group includes school age children of older millennials up the youngest in up to young adults in their mid-and late '20s at the oldest and who share common preferences in attitudes with their slightly older millennial big brothers and sisters.
When the first iPhone was released in 2007 Gen Z kids were pre-teens and teens starting the come of age appointed human development where our most intimate preferences habits and attitudes are formed there are around 75 million Americans in this age group that are tightly bound together by the common use of always on Internet smartphones app stores and streaming on demand everything.
So when it comes to how customers interact with the world in the products to choose to use their in-Gen Z simply doesn't remember it any other way, with their common immersion and digitized social experiences and their video gaming instant gratification after school past times these consumers are different even from older millennials, and we believe they'll embrace something very different that what you and I today known to be a bank account it's a product concept, we call Genzyme mode MOD, which stands for mobile only digital everything and we think it's a demographic and product design philosophy where Green Dot has a strong natural advantage as such creating increasingly innovative products that can help expand Green Dot's penetration of our TAM is step number one.
Step number 2 is about our long-held strategy of increasing average purchase volume and retention from our base of active account holders and attracting new customers we believe, intend to use our account products as a long-term primary account higher purchase volume and attracting more committed customer base should in turn lead to higher revenue and a better gross margin on those accounts.
Furthermore, increasing purchase volume and increasing retention are symptoms of increasing appeal engagement and relevance of a product to its user base. To this point over the course of 2018 Green Dot increased total purchase volume by 20% to $26 billion and step two is to continue that trend.
Now let's talk about step number 3, which is about designing, building and releasing two new iterations of our Banking-as-a-Service platform called and power true innovation for Green Dot and its partners like designing products and Genzyme mode, our BaaS platform must continually evolve to ensure that Silicon Valley's best and brightest product designers can have an ever-growing collection of tools and capabilities that allow them to build what they want, BaaS 3.0 builds upon all the features, functionality and robust risk controls of BaaS 1.0 and 2.0 and as a new user experience capability that powers the creativity of the designer with a highly flexible illustration of a wide variety of creative designs inflows for applications and websites.
We believe these enhancements including our next iteration of automated risk management will allow us to support fully diversified applications across all BaaS platform products. This isn't about putting your clients' logo on this screen, or that screen to create the appearance of a custom website. This is about being able to simultaneously power hundreds of apps, websites, bank accounts and physical card programs, though two of which look the same, work the same or do the same things all within the ecosystem of one powerful platform, a platform built atop an increasingly efficient high scale and high reliability banking and program management infrastructure.
BaaS 3.0 intends to take bespoke to a whole new level. Then once BaaS 3.0 is in production, we then intend to begin work on BaaS 4.0 for release in the first half of 2020. In addition to several new functions and capabilities BaaS 4.0 will build upon the robust risk controls from previous BaaS versions by enabling the new and more versatile set of automated program management and compliance tools design so that we can prudently and responsibly managed growth while enabling our partners to benefit from our years of experience and operating what we believe to be far and away the largest, fastest growing and most profitable Fintech bank holding company in America.
So step three is about evolving the BaaS platform as a key and unique strategic asset that's designed to power innovation and revenue for many years to come.
Step four, is about packaging the tremendous power Green Dot's unique set of assets like our bank, our BaaS platform, our regulatory risk management, legal and compliance teams and our program management capabilities and one integrated bundle and making all of it easily consumable to a broader segment of BaaS partners, product designers and developers. In an effort to further expand our reach much deeper in the Green Dot's growing TAM. Today, Green Dot makes these assets the bank, the vast platform, program management and so forth only available to large partners with large technology and product teams that work to our business development group to establish an enterprise level partnership with Green Dot.
It's a heavy, high touch process that makes sense for large and complex programs, and we certainly intend to continue that type of business development and account management format for enterprise partners where it makes sense. But Green Dot has a goal to make our BaaS platform accessible to a larger group of designers and developers who can easily access and consume the platform directly on their own without having to go through our business development team nor be assigned a dedicated account management team. Instead envision offering, we're a business owner, product manager or developer can simply log onto the best platform, apply for credentials and upon being granted access could begin to use our robust set of tools and APIs to design and build their own financial services project at their own pace.
Then once submitted for certification, upon approval their project would go from the development and testing environment into production, complete with bank issuing and program management already built in. So let me help put this into context. Imagine you run a medium sized e-commerce store and you want to easily create a loyalty debit card that provide your customers with instant cash back rewards and other incentives to help you build loyalty and better compete with larger competitors. Or imagine you are the app developer who wants to include the ability for your apps users to have a prepaid card to facilitate payments and purchases within your app.
Or imagine you're social media influencers with 2 million followers, if you want to create a loyalty bank account that showcases your personal brand and that flatters your followers' lifestyle. With the right administrative controls and robust and rigid partner approval and on-boarding process, a fully automated risk management and compliance capability and a strong technology and developer support infrastructure, we believe that using our BaaS platform as a modern grassroots distribution platform is a very big idea that could power growth and mass innovation for years to come.
It's a project we call bOS, little b, capital OS which stands for bank operating system as in you're the boss with Green Dot's bank operating system. Little b, capital OS. I want to be clear that this is a big idea. And we believe bank OS has the potential to become one of the biggest initiatives in Green Dot's history. The potential customers for bOS, think of just app developers alone could be substantial, but it will require the right dedicated leadership, a significant amount of technology and government work and investment and the right support from nearly every division across the company.
But Green Dot has an amazing track record for delivering on big ideas and enterprise scale innovation. And we feel confident we can achieve this vision and in so doing, potentially create an opportunity for tremendous long-term value for Green Dot and its investors.
So step four is about successfully building out much of the key technology and operating components of bOS 1.0 this year in order to launch it into production by 2020. As we think about our first four steps. It's clear that Green Dot is a technology-driven enterprise that innovates and grows through big ideas that actually launch into production. It's one thing to talk about an idea for API driven Fintech platform in the name of BaaS, or to come up with a cool idea for an app based millennial bank account and call it go bank. It's another thing to design, build and successfully launched the idea in a production to be used by millions.
Turning ideas into revenue takes great executive leadership and at Green Dot for the past seven years, one of those executives has been Kuan Archer, our current COO and Head of Technology. With that as a backdrop, I'm proud and excited to announce that Kuan has been promoted to President Chief Products and Technology Officer starting next week. In this new role, Kuan will be able to fully focus his time, energy and talent on leading our large team of technology and product development leaders across the US and China to efficiently deliver on the innovative and powerful strategies before us.
I'm happy and excited for Kuan and for Green Dot and its investors who can benefit from the increasing capabilities and efficiencies of Green Dot's technology division under Kuan's dedicated leadership. Step five is about continuing to improve and scale our operating infrastructure to ensure better performance, increasing customer satisfaction and higher efficiency. As I've said over the years, the operating parts of our business located deep inside the widget factory aren't necessarily the parts of our business that make for the best cocktail party conversation. But the performance of these areas have a direct impact on our ability to run a compliant, profitable and growing company.
We have historically had great success over the years with these infrastructural improvement programs, proof of which can be seen in our increase in account usage metrics on the one hand, and the over 600 basis points of margin expansion we've seen since 2013. So step five is about increasing the capacity, quality and efficiency of our operating platform. To that point, we are pleased to announce that Rob [Su] will be joining Green Dot as our Chief Operating Officer. Starting next week on the 25th. Rob has spent the last 21 plus years at Citigroup, managing a variety of large-scale operations at Citi cards, mortgage auto, consumer finance and retail banking.
He was most recently Chief Operations Officer for the US Consumer Bank for Citi, and he has deep experience in driving improvements across large-scale, complex and highly regulated operating platforms.
Rob skill sets should align perfectly with our 2019 Six-Step Plan and beyond and we are very excited to have Rob on our team. Lastly Step six is about the smart and accretive allocation of capital to enhance shareholder value over time. We spent the last year, focused on integrating a string of acquisitions made in prior years and hiring and increasingly season in the high performing executive team. We also invested considerable time and money in expanding our capacity, like building out a more mature and higher skilled banking and associated risk management infrastructure to ensure we can digest the growth from acquisitions and from the many organic initiatives we've launched into the market.
While expanding our capacity and reinforcing our operating platform will always be an ongoing work in progress, we are in a very good place now to again become more aggressive in searching for appropriate acquisitions, which are subject to regulatory approval and to consider another share buyback. While the M&A pipeline are potentially robust, we have nothing to share today on anything near term. Specific to buybacks, we do have a Board authorization subject to regulatory approval for an additional $150 million share repurchase on top of the $150 million in share repurchases, we completed under our prior share repurchase authorization.
Given the free cash flow that Green Dot generates, we believe we're in a very favorable position to review opportunities to deploy that cash and activities we feel are highly accretive, strategic and consistent with our long-term vision of Green Dot as a large scale, highly innovative and ever evolving financial technology ecosystem.
2019 is Green Dot's 20th anniversary year in business. And I'm so proud to be the Founder and CEO of this awesome company that began in 1999 at a little $80 desk I purchased from OfficeMax and assembled in the corner of my bedroom and my then home in San Marino, California, just a few blocks from where I still live today. And only a few months after assembling that desk, I met one of my first investors, the cousin of a former boss of mine who took a chance on a guy with a crazy idea, whom he had only known for a few weeks. The name of that early investor is Mark Shifke who today 20 years later is Green Dot's CFO, and he will now provide his Q4 report along with our 2019 financial outlook. Mark?
Thank you, Steve. Our strong Q4 results capped a year of tremendous performance across practically every revenue and operating division in the Company. GAAP total operating revenue was $238 million, representing 12% year-over-year consolidated growth. This was the seventh consecutive quarter of double-digit year-over-year organic revenue growth and was accomplished despite the incredibly difficult compare of lapping last year's Q4 record breaking growth of 31%. Given that strong comp, we think that's quite a result on a full year basis, the Green Dot achieved total consolidated revenue of $1.042 billion, a growth rate of 17% year-over-year, of which practically all apps and two months of UniRush revenue in January and February was organic.
Our full year revenue exceeded the midpoint of our initial guidance range by $52 million. Q4 adjusted EBITDA of $44 million represents year-over-year consolidated growth of 37% with the adjusted EBITDA margin in the quarter coming in at 18.4%, a Q4 record. This strong year-over-year margin expansion of over 300 basis points was the net result of improving margin flow through across the business. And in particular, from our base of direct deposit active accounts, we're improving purchase volume and higher retention, have a positive impact on profitability, not only do we derive strong margin from our long established programs, but we generated better-than-expected margins on accounts sourced from our BaaS partners as well.
On a full-year basis, Green Dot achieved total adjusted EBITDA of $251 million, representing a growth rate of 22% over 2017 and reflecting year-over-year margin expansion of 100 basis points. Our full year EBITDA exceeded the midpoint of our initial guidance range by $12.5 million. Non-GAAP EPS came in at $0.56 per share for the quarter of 93% year-over-year. This is the 10th consecutive quarter of double digit or better non-GAAP EPS growth. The outperformance on non-GAAP EPS was primarily driven by better than expected adjusted EBITDA, combined with strong interest income from the investment of cash deposits held at Green Dot Bank and a lower year-over-year effective tax rate. On a full-year basis, Green Dot achieved total non-GAAP EPS of $3.29 per share, representing year-over-year growth rate of 52%.
Our full year earnings per share exceeded the midpoint of our initial guidance range by $0.44 per share or 15%. Green Dot once again generated excellent cash flow from operations with $251 million of cash from operations in 2018, a 15% year-over-year increase. We ended the year with $169 million of unencumbered cash on our balance sheet or approximately $120 million more than at 2017 year-end. Now, diving into the segments. The account services segment delivered GAAP revenue of approximately $200 million in Q4, representing organic year-over-year growth of 11%, driven primarily from the growth in purchase volume and increased retention of customer accounts, GDV or total deposits made to our accounts increased by 16% year-over-year illustrating how our customers are increasingly using our products as a primary bank account and debit card.
Our processing and settlement services segment generated $45 million in GAAP revenue in Q4, equating to 11% year-over-year growth. The strong results were driven by organic growth in all the segment's various product lines. As a reminder, starting next quarter we will begin using a new presentation for non-GAAP revenue, which we believe better reflects the economics of Green Dot's business and more closely conforms to how banking institutions treat interest income on customer deposits. The new non-GAAP revenue presentation format will include net interest income generated at Green Dot Bank from the investment of customer deposits and will be reduced by commissions and certain processing-related costs associated with certain BaaS partner programs, where the partner and now Green Dot controls customer acquisition.
Under that new presentation, our Q4 non-GAAP revenue would have been $237 million including $7 million of interest income this quarter, offset by $8 million of processing costs and commissions. On a full year basis, under our new presentation, full year non-GAAP operating revenue would have been $1.024 billion, adjusted EBITDA would have been $274 million and non-GAAP EPS would remain the same.
Now, let's discuss our financial outlook for 2019. Green Dot's multi-year evolution into a diversified FinTech leader that powers an increasingly prosperous platform ecosystem has helped to generate robust and improving financial results since our first BaaS program launched in 2016. For example, total net revenue from programs on the BaaS platform grew at a CAGR of approximately 300% from 2016 through 2018, and in 2018, contributed approximately one-quarter of our total consolidated year-over-year net revenue growth, but more importantly than just the incremental revenue from the BaaS programs in any one period is that our evolution into a leading FinTech ecosystem has formed a strategic roadmap that we believe has the potential to drive the development of new products, new partnerships and new business models that can create opportunities to fuel organic growth for many years to come.
For full year 2019, Green Dot is expecting non-GAAP net operating revenue to be in a range of $1.114 billion to $1.134 billion, equating to year-over-year revenue growth of approximately 10% at the midpoint of $1.124 billion. Under our prior reporting approach, that midpoint would equate to GAAP operating revenue of $1.148 billion and year-over-year revenue growth of also 10%. We are expecting adjusted EBITDA to be in a range of $315 million to $321 million, which at the midpoint of $318 million equates to year-over-year growth of 16% and margin expansion of approximately 150 basis points.
Under our prior reporting approach, that midpoint would equate to adjusted EBITDA of $288 million and year-over-year adjusted EBITDA growth of 15%. And lastly, we expect our non-GAAP EPS to be in a range of $3.59 to $3.67 per share, equating to year-over-year growth of 10% at the midpoint. Non-GAAP EPS is not impacted by our change in accounting presentation. Our non-GAAP EPS range assumes a tax rate of approximately 24%, a fully diluted share count of 55.5 million shares. Net interest expense of $3 million and depreciation and amortization of $50 million.
You will notice the flow-through of adjusted EBITDA, to EPS is not sufficient this year. The reason is that our expected 2019 EPS result has, in total, a $0.26 headwind compared to 2018, due in large part to a material increase in D&A, primarily as a result of technology development expenses associated with the launch of Apple Pay Cash Intuit Stash and other smaller partners along with our continued investments associated with the ongoing development of our BaaS platform. Together, new D&A creates a $0.15 year-over-year negative variance. The remaining $0.11 of variance is related to our tax rate, which is expected to be approximately 100 basis points higher in 2019 to a higher year-over-year share count due to the normal cadence of equity award grants.
This expected share count does not assume a share repurchase. For Q1, under our new non-GAAP revenue presentation that I discussed a few moments ago, we expect to generate revenue of between $323 million to $327 million. Although, some of that revenue could slip into Q2 depending on the timing of tax refunds for the remainder of the season which, as many of you know, has been slow to launch given the government shutdown earlier in the season and the complexities of the new tax law which, some have opined, has cost consumers to file their taxes later than normal.
This Q1 expectation represents a grow-over of around 6% at the midpoint of our net revenue guidance range compared to last year's tremendous Q1, which included not only strong growth from our existing product lines, but also included material revenue from new BaaS programs like the Q1 launches of Intuit and TaxHawk, plus growing revenue from BaaS programs that had just recently launched at that time like Apple Pay Cash and Uber Rewards. Then on top of all that, last year's Q1 also benefited by about $20 million from two months of the UniRush acquisition, which didn't lap until the end of February.
We expect year-over-year adjusted EBITDA margins in this Q1 to be flat to slightly compress by perhaps 50 basis points or less due to higher SG&A and OpEx this year, partially offset by the margin expansion we expect to continue and our established product lines. As you think about our full year non-GAAP net revenue guidance of 10% at the midpoint, we are modeling the cadence of that growth to be single digits in the first half of the year, largely due to the unusually tough year-over-year comp I just described, and then improving as we get into the second half of the year, where we expect accelerating double-digit growth in Q3 and then Q4.
The reasons for the stronger back half of the year expectation are, one, large year-over-year comparison hurdle related to the new BaaS tax programs and the UniRush acquisition in last Q1 should become less of a grow over factor as we get later into the year. Two, growth from new BaaS programs like stash and from previously launched BaaS programs like Uber rewards and Apple Pay Cash is expected to build momentum as the year progresses. And three, we expect to continue to benefit from double-digit GDV and purchase volume growth on our base of quarterly active accounts, which we model to grow in low single-digit year-over-year.
And with that, I would like to ask the operator to open the phone for questions. Operator?
Thank you. And we will now begin the question-and-answer session. Today's first question will be Andrew Schmidt with Citi. Please go ahead.
Thanks for taking my questions here and thanks for the detailed power commentary, very helpful. In terms of just the expectations for Q1. Could you talk about what's already embedded in there in terms of just a shift in terms of tax filings in the first quarter to second quarter? Just curious in terms of the current guide what you're expecting?
Well, let we make sure I understand the question. You're saying what new programs in there or what are we expecting in terms of how we get to the 6% expected midpoint or?
It's more about your expectations with tax filings. Is there already an assumption built in for toward shift into Q2 or are you assuming some sort of a normalized pattern this year?
Well kind of both because there's always a lot of Q2 volume from taxes, but this year, it's maybe a bit more pronounced. We haven't even had -- if you think about, for those of you who follow taxes in other companies in the tax ecosystem, normally you have a big tax deposit is generally two of them throughout the quarter. And we have the first big one is normally mid February, used to be early February, but call it mid February would be a big disbursement day and then another one in late February or March.
We haven't even had the first one yet. So the first one is expected at the very end of February either on the 27 or 28. Our tax division was no better, but I think it's the 27 and then one in March, so that's definitely later than what it's been when that happens, at least in terms of Green Dot for the card side of our business. That means the revenue in the spent from the deposits have hit those cards won't really be felt until Q2. But the RT revenue or the tax processing revenue we get is taken at the time of the process and so that would be in Q1.
So I wouldn't think it's materially different. You never know and it could be that more spills into Q2 this time than traditionally, but I wouldn't think it's dramatically different. What do you think Mark?
That sounds about right. As Steve said, at this point in the year, we would have seen something. And at this point, we have it, it's just slower. So we're flying a little blind and trying to be prudent in how we forecast the quarter.
That makes sense. And then in terms of just the full taxes and gotten a lot of questions on how the tax law change effects for both filings, the amount of refunds. What's the expectation here for just the impact of new US tax -- revised US tax have on filing behavior and then correspondingly refund amount et cetera particularly for your core demographic.
Right, I was going to say, I mean you have a couple of answers you have. You how does it affect the tax ecosystem and how does it affect the part that we care about. The answer is that the
We can spend the next 2 hours.
No, for the Green Dot customer, which is the folks getting the prepaid cards and in some ways taking advantage of the tax processing, although that's a little bit more mainstream in that demographic? There's not a huge impact for us. Ironically, we've seen a lot of press reports about tax refunds being lower. That may be true for Middle America and upper class American to the extent their refunds. We don't think that's the case for lower-income Americans. We're expecting that the tax refunds will be similar or maybe even slightly larger depending on the way those turn out.
So I don't think there's anything particularly unusual or dramatic except for that there's definitely a delay by at least two weeks that we know of and then we'll see how the rest of it turns out. In terms of tax filing numbers, the IRS publishes an actual filing guide that you can look up and I wish I had it in front of me. Otherwise, I would tell you what it was and we can get the address or the website later, the after hours. But you can actually go and they will tell you what the pacing is a filing relative to previous years and we are behind at this point in the season, but it always catches up.
Listen, whenever it is, everybody files their taxes. So it's just a question of when it hits. But in terms of refunds in our part of the revenue, we think we have a good fix on what's going to happen and how, just going to be a few weeks later and then that means some of that spend revenue, interchange revenue and some of that will go into Q2 to a greater extent than what it has been in previous years.
Got it. That's helpful. And then a question on the product roadmap. Bank OS, thanks for the additional acronym by the way, that's for now. Bank OS, just trying to -- I guess, that full rollout in first half 2020. How is that juxtaposed with the existing banking-as-a-service strategy? Is it the right way to think about it? Banking-as-a-service more focused on enterprise customers and this bank OS would be more sort of for the mid-sized customers. I guess just a little more clarity on that would be helpful.
Yes, thanks for the question because it's actually one of the cooler ones we thought of and including the acronym I love the name and I'm glad you picked up on it, bank OS or bOS, because you're the bOS, and so first I want to be clear that while BaaS 4.0 is expected to be released in the production in mid 2020. On bOS, we just said 2020, because that may take a little while longer. But -- so here's how it works. If you think of the world of development and the sort of the biggest companies, the enterprise size companies need a lot of support because they're doing big projects at a very big scale and that's what we have today.
So today, anyone on BaaS, banking-as-a-service, that platform is going to be like the companies we have, the Intuit and the Apples and the Uber's and the rest and the Walmart. These are very large partners with very large scale programs, large product teams, large technology teams, large compliance teams and so the engagement from Green Dot will be like-minded. We're going to have sales accounts teams and a lot of discussions and it's a fairly long sales cycle, and in fact too long, would love to figure out how to get it shorter, but enterprise sales is what it is, and if you've ever done it, what I'm talking about.
With bOS, it's a whole different kind of a customer base. This is about the app store developer, or as I said in the prepared remarks, the social media influencer or the mid-sized retailer or the smallest store owner with three employees who wants to do some sort of payroll card, who wants to do some sort of rewards card for their own customer base, it could be the church who wants to do a fund raising card for their thousand Parishioner to make money off a part of the interchange, it could be anybody that's qualified to be on our network and to pass our strict vendor management rules and all the things that go along with being a regulated institution.
But the concept of the everyday program or just like the app store being able to come in and create a product to their specifications, the plastic looks a certain way or the app looks a certain way, it has this reward. No, it doesn't have that reward, it has this fee, no it has that fee and to be able to have that individual or that program or that product manager develop it at their own pace and at their own speed is pretty cool. And we just think there are so many people out there, and to give you an example and I'll tell you where I got the inspiration for bOS. We're sitting at the Worldwide Developer Conference with Apple going back '02, I forgot when did the product announce -- get announced, it could have been three years already...
That was in 2017.
Whenever it was and I was --.
Yes, when I was there with our partners at Apple and I was watching the great show they had with the WWDC. And I was looking at the platform and the power of the app store. And in that conference, they saluted a nine-year-old boy or something like it, eight years old, who is the youngest app developer and Tim Cook introduced them and they applauded and then they introduce the oldest app store developer who is a woman in her 90s from China and everyone applauded and so forth. And I remember thinking wow, think about the app store and the millions of apps and the power that having a consistent API and development platform that anybody who is skilled enough to figure out how to do it could make an app, and as long as they complied with certain vendor management rules and as long as your technology passed certification, then you could have your app on the App Store.
And just think about the ecosystem that's created, and in that literally as I was sitting there, I texted Kuan Archer, who I always text first with my weirder ideas, but -- so why can't we do this and the answer is, well, we can if we can build out all these things we have to do. We've done a lot already as part of why we are investing so much in BaaS. So this has been something we've been working on for a long time, but the thought that you could have APIs that are robust enough to work at scale, a platform that can handle it and then because we're a bank and because you're dealing with money, a tremendous amount of risk management tools and overlays that go onto that platform.
But the fact is whether you a high school kid or whether you're a school teacher or a app developer with some video gaming app, whatever it is you may be making, and you want to have a bank account that in some way or not just a bank account, because we have a lot of things in our platform that are not just banking. For example, we power the PayPal cash off program at Walmart and a lot of things that are not just bank accounts, but the thought that anybody could come in and do that if they complied with the rules, and were talented enough to figure how to do it is very empowering.
And when you think of the scale of that it's impressive. And I want to be clear that there is always risk these large programs. I'm not trying to make it sound like a slam dunk, it is not. And hopefully you picked that up from my prepared remarks. This is not a slam dunk; a lot of work has to go into it. But as a company out there that you may be familiar with called Twilio, wonderful CEO & Founder and a really cool company and another model is very similar to what I'm referring to. We could have in theory, in their case maybe not in our case, but I don't want to give a number, I don't know what they described as public or not, but a lot of developers able to use their platform simultaneously, that drives your overall growth.
That's the concept behind bOS and we'll see how it comes out, but that's the intent behind it. Does that make sense? I have explained it.
Our next questioner today will be Andrew Jeffrey with SunTrust. Please go ahead.
HI, good afternoon, guys. Appreciate you taking the question. And Mark, I'll always press you for a little more disclosure on BaaS but the growth rate contributions helpful, so thank you.
We do that for you.
Yes, I am flattered. Just too maybe dig in a little bit more on BaaS and the way the product and the platform is evolving. Steve, do you mean to signal or is it right for us to interpret some of the new investments such as bOS as perhaps a move away from enterprise type customers and the reason I ask is you put up out sized organic revenue growth last year and I think a lot of that had to do with BaaS, and I just wonder if this is more of a normalized outlook or if it works, if you're contemplating new BaaS signings that might currently be in the pipeline, recognizing how longer sales cycle is.
Right. So the answer is in no way we want to give up on our enterprise clients. We don't have nearly enough of them. We want more of them. We're ideally suited to big large, enterprise partnerships. We're very good at that and that always has the opportunity to drive the platform far faster than any individual. But I don't think it's a game of one or the other and so, bOS is a product of BaaS is just that is the product, that's a little bit more locked down. If you think about BaaS being fully customized, you have a partner like Apple, who comes in, says hey we want to do, A, B and C and this completely never been done before.
And it's entirely bespoke every aspect of it is brand new or a product like Uber, the Uber account where they need rewards in instant pay functionality that only makes sense for Uber drivers. So it's very, very customized and for big clients like that where you can get hundreds of thousands of customers or many millions of customers, it certainly makes sense to do that and we invested time and energy into doing a custom offering because you'll make it back and those are great partners. And we always want to do more of that and there are a lot of the companies in America.
So we don't want to give up that at all. In fact, we're investing in and more enterprise level sales people and trying to figure out how we shorten that launch timeline to make it a little bit more faster pace. I think the clip of new closings is too slow and so we're working on that. But that's always something we want to do.
But in addition to that, if you can take those APIs and the features and say, look, we're not going to do a custom program like we did for Apple for everybody. That would be ridiculous. We can't do that. But people don't need that. So just think about any app that you're looking at or some of the examples I gave to illustrate the point. Somebody like that building their account as they need all those custom tools. So you're going to lock down risk management, you're going to lock down BSA and AML controls; you going to lock down the way we take deposits or CIP.
Those will not be negotiable and how you do it. The bank is the bank and how we do it is how we do it, but what the plastic looks like and the fees you charge and the features that you put on it and on and on that you have great latitude on. And so we think it's an exciting opportunity, but it's not one or the other, we think both are important and bOS clearly is a couple of years down the road in 2020, the BaaS is right now.
Okay. And Mark, maybe for you again, and I hate to harp on this, but I'm just trying to understanding if I take your comments about 25% of the 2018 growth having come from BaaS, it implies and I recognize there's a couple of months of the -- the acquisition.
UniRush, yes, and I want to point out before you go further end of that. Yes, but Andrew just -- before you go faster I want to be sure that Mark was quoting the number in our new net revenue construct as 25%. It was close to about 40% or something like that. If you stood, if you did apples-to-apples on the way we were reported, right.
Okay, that's. So I think that goes to answer the question, but it still implies that the core business grew pretty robustly in 2018. So can you comment a little bit on kind of the trajectory of growth in the core Green Dot retail business whether that's decelerating or should stay about the same in 2019?
Well, Q4 was in the same capacity, isn't it similar I think for most of the year. In Q4, about half of our growth was driven by BaaS programs and half from our established product lines, meaning the typical Green Dot stuff, not just cards, but we have other programs besides cards. So it's been half and half and I think Mark been like that for most of the year.
Most of the year. That's exactly right. Look, it's, we're thrilled with how 2018 played out. It's having launched some programs in 2017 completed M&A in 2017 and then to grow over all of that in 2018 we thought was just remarkable. And no surprises to the upside and we're hopeful that we're on the right trajectory in the right path to continue to have that kind of opportunity in 2019.
And the next questioner today will be Brad Berning with Craig-Hallum. Please go ahead.
Good afternoon guys, congrats on the Intuit announcements and wanted to see if you guys could talk a little bit more about just thoughts on timing of when product rollouts could happen for that. If you have a lot of talk about that yet. And then kind of trying to size up the TAM little bit for QuickBooks domestic as far as number of employers, number of companies that use it or the number of payroll in kind of companies that use that are number play, just some kind of sense of magnitude of what does this mean.
Right. It's a fair question, but one, we can't answer. And I'll tell you why, is one of just the governance ring fences we have around our best partnerships is where the partner, the platform, the facilitator of it and to the extent better help is asked for or needed for design work or other parts of it we do that. But only the company itself can release numbers. So for example with Apple Pay cash that's why never give numbers that's up Apple to do that, or Intuit. So it's a fair question and maybe that what we can do just to help to some of the lay work as we can find out some of the public disclosures and help with that, or if you will cover Intuit or have people over there they may be willing to speak to it.
But payroll, certainly a big business at Intuit. They do a great job with it and we're so excited to be part of that ecosystem and whatever we think is in there would be part of our guidance for this year because that's in a program that we announced and that's out there, but if we haven't announced a program yet, then it's not part of guidance.
Understood 0:56:47.5, I am not get into Intuit (inaudible) asked enough, Right. So, but, and then one follow-up on the pipeline discussion. Just wanted to get a better sense of your excitement about where we're at and getting things towards the goal line and things that you guys have been working on for a while., Where we at in the process and some of these? Do you feel like things are mostly in the RP process or things mostly in the development process or are we getting closer to the goal line and things? Just want to get your sense of enthusiasm for the opportunity set in the pipeline.
Well, I want to be thoughtful with my comments because I don't want to excite or disappoint. I think the answer is the pipeline is good. The parties or the kinds of opportunities in the pipeline are good, but that if I had a magic wand I would prefer that they were to close faster up, so which is no secret here in the building and Brett Narlinger, who's our Head of Revenue such a great guy and such a great partner makes me look mellow relative to his energy and aggressiveness in revenue. So I know he shares this thought with me, but we have to figure out and maybe how to make the offering a little simpler perhaps or do something where it isn't quite so customized.
Because we want the deal to close a little bit more quickly. So I would say be opportunities are good. The pace is slower than what I like. And if we get them we got them, but the guidance doesn't rely on us getting them, but to your point would love to have more. I don't know if I have even answered that kind of even answered your question, but that's probably the best I can do.
And our next questioner today will be Robert Napoli with William Blair. Please go ahead.
Hi, thanks you. Good afternoon. Good to talk to you as well, Steve. The -- just looking at the active accounts are flat year-over-year, but the activity per account continues to go up at a healthy level. And I know, Mark, you said expect accounts to grow low single digit next year, what is driving. Can you just talk about the mix shift and how much left of mix shift there is to continue to get the higher purchase Volume transactions per account and is the average life of an account expanding?
Yes, in terms of mix shift. I'm not sure.
What he's saying is can we keep growing with how much more can we squeeze the.
Yes, the counter planned and transaction per counter up 10%.
Yes, and which -- as we've discussed for some time, that's really being driven by our direct deposit active growth, that was very healthy growth in the quarter. Our expectation is that we should be continuing to grow our direct deposit accounts, and as we do, you will see those metrics in terms of GDV per active purchase volume per active continue to increase.
Yes. I think, Bob, to the question and Mark is right, if we are at about half of our account base, give or take, as direct deposit and every year we're adding a couple of hundred thousand more for growing 10% or what do we go for the full year, guys, 13 something percent year-over-year is I think what the average in the normalized number was? If you took out UniRush, yes. So it's a lot of customers coming in to do that and we're only not even quite the halfway. So, the answer is, we have a lot of folks and a lot of room to grow and we continue to do that and we think we can do it certainly this next year, because we're seeing in the trend, but that doesn't mean we shouldn't want to grow active.
So we want to have more actives, we want to have more people in there, because you ultimately have to have fresh customers coming in to keep growing. And so we have a long way to go with the customer base we have. We did add, oh my gosh, it was over 1 million accounts something year-over-year with the tax business, something else. We had a lot of accounts. Year-over-year and that's great.
Q4 was not great and we thought it would be bigger than that, in fact I think Bob, you the one who asked the question, where I thought we were at about 5% and thought we had a lot of room, if you remember that we, you want to answer that? And where we, we made the mistake was to get a fresh number for the earnings call, is we looked at the most recent number which was weekly number, which was up at that point, about 7%. We ended up higher, but that's where it was and we missed this component that well, as we continue to get more and more direct depositors, you just don't have the churn without the churn, you don't have the unit counts and Q4 is not a big unit number any of anyway it's not one of our bigger acquisition quarters.
And so that was the artifact of that that occurrence. But we always want to have more account holders. So I wouldn't say we are satisfied with being up 1%, that's not great. It's not relevant to our performance, and I'm glad that the people are having real customers who want to buy a real account to enroll the direct deposit. And that's all very good stuff.
So the answer is can we continue to grow that way. Yes, certainly for some time to come. Do we want to have more new customers those real customers that are there to have a real account that they use as their bank account? Yes. Do we want to have more? Yes. There you go.
Thanks, and just my quick follow up would be, just on the BaaS program, are you seeing more, I mean it seems like there is more venture investment going into BaaS types of programs or companies, are you seeing more competition and what M&A, obviously you're investing and developing, I mean do you feel like, are you seeing more competition, do you feel like you're ahead of the competition today or are these investments that you need to, to move ahead keep up with the competition?
So on the platform side, we don't see a lot. Now having said that, is it maybe that we're not aware of the deals we don't get, you know, but in terms of the companies that were pitching. There are not a lot of companies that we are aware of that have, what we have, which is this integration of the regulated bank charter combined with really big iron technology. In other words, it isn't just a technology capability. It's a true technology company that would rival most Silicon Valley companies if only a tech company. And then on top of that, of course, you have this program management function, which we don't talk about a lot because I lovingly called the widget factory.
But if you don't have that man, that's really hard to do, it's ugly nobody wants to do it. If you're not doing it somewhat of a thankless job because it's the whole belly of the beast of how these things run, but I'm not aware, Bob, and you may be of any competitor out there who has the bank that's able to do this and the capital base to do it. Remember? we have a big capital base and allows us to do a lot of these things, but the bank and the technology capability to build a platform that can serve the biggest and best in Silicon Valley and beyond and the program management function that's already at very high scale with call centers around the world and all the infrastructure you need to pull that off.
I'm actually not aware of another company that has that but doesn't mean to say we don't have competitors. We always do and always will. But we think we feel pretty good with our offering. We just need to pick up pace.
Our next questioner today will be Joseph Vafi with Loop Capital. Please go ahead.
Hey guys, good afternoon. Just one more on BaaS' versus, let's call it the core business makes you really kind of two business is almost at this point that share pricing back and then maybe a little early, but do you have a feel the ROI on the BaaS business over time. Sure rival that of their kind of core, retail cards business could be higher, could be lower and obviously, I think there's probably more growth in BaaS, but I'd say the maturity of the platform is still far from mature. But if we look down the road in the few years which would you think, one of those two businesses inherently at maturity more attractive business model than the other?
Well, I think your observations are right and that is they're two separate businesses, if you will, that's why we call it products and platform, but Green Dot is our own consumer of our own platform. In other words, step one was about these two new Gen Z products being developed and Gen Z mode. And as we develop that we're building out our platform to make sure that our own developers are talking the platform set of our company saying, hey, make sure you build this and make sure build that so are our own consumers of our own platform. So you're right, it has a common processing back ended as you called it, it's probably a good description.
So we think they are different business models, and we like them both. In terms of the scalability and over time, the margin and the growth opportunity, clearly the BaaS platform would have the bigger of the two because there's only somebody products you can sell and so many customer segments, you can sell them to no matter how prolific you are as a product company. But on BaaS over time, you could have a thousands of developers with all kinds of programs each one innovating, whatever it is, they are innovating, selling it to their customer base, very much like what the app stores, maybe not as broad-based, not everyone's going to want to have a bank account. But maybe everybody wants an app.
But the concept is still there. So clearly the long-term growth opportunity is bigger for the platform than it is for the product side of our business, but they go hand in hand beautifully. Anything we invest in building out the platform and making them more robust directly impacts our success on the product side of our company and makes the cost to build those products less. And the cost of upgrading them less, so they really do go hand in hand together, but the reason we're investing in the platform is as you look past as a public company. It's not just about growing for one quarter or one year, although clearly we're always concerned with that.
But it's about how do we grow for many years and for decades, and what do we need to do that and because of a regulated bank. And we take that obligation and responsibility seriously, how do we do that but make sure that we're building in all the risk controls, so that you really know who these people are. And you really understand what the products do. And the answer is you can do that with a lot of the software that's out there, a lot of the controls you can build in. And we already do it at high scale with a lot of big partners.
So it's not something far into to Green Dot in terms of what our muscle memory is and what our strength is as a company, but it's a big hairy project, but we think one that really can the pay dividends over time.
Okay, that's helpful and then I know you mentioned that perhaps the cadence of new wins you'd like it to be a little faster and perhaps part of that is due to a lot of productization going on pro BaaS customer now, and maybe over time, we get to a little bit more of a cookie cutter approach. Do you have a bead or radar lock yet on how that kind of cookie cutter process to speed things along could come about and what some of the key factors might be that at that done? Thanks.
Yes. It's a wonderful question but not when I can easily answer. Every account is different and the attraction of BaaS if you will the enterprise part of the platform is that it's custom that is truly bespoke. So it's hard to answer that but anyhow, we're really glad to be where we are after only three years you're looking at 300% CAGR, not even 3 years, 2.5 years and is already contributing half of our growth and it's a platform that today in a very short time is serving successfully, literally the largest technology companies in the world. So we feel pretty good about it, but a lot more runway to go for sure.
And our next questioner today will be Ramsey El Assal with Barclays. Please go ahead.
Thanks for taking my question guys. I wanted to ask about capital deployment balance sheet deployment and buyback specifically. Can you remind us again how it works with your regulators? How much lead time do you need for them to give you the nod that you can go ahead and return cash? And I guess have you have initiated that discussion and then also just bolted on there? Did you -- I might have missed is how much unencumbered cash there now on the balance sheet? And then I have a quick follow-up.
We have not initiated the conversation with our regulators for a share repurchase program. We have board authorization and once we do initiate dialog, I wouldn't hazard a guess on that the pace at which the regulators would entertain the conversation with the Q&A may be back and forth between us. They are great and responsive, but I can't predict how quickly they would respond to any request.
And then how much cash we have on the balance sheet?
$169 million on the balance sheet.
Okay, great. And then quick follow-up, can you talk about the sales organization and the sales process when it comes to BaaS? I mean the products themselves seem so diverse. Do you have a dedicated BaaS team? Are these inbound leads that you work? I mean how does the sales approach go to kind of targeting this kind of very diverse mix of offerings that are all related to this unified platform?
Right. Well, so a lot of it is inbound some is outbound but normally it's outbound with an inside job I guess. After all these years we know a lot of folks and lot of people know me or Mark or somebody on the team. So lot of it is, hey, Steve, I got a call from such and so call them back. That's not actually uncommon. And so a lot of leads will come in that way. And then we have a great sales team that's dedicated to BaaS into our bigger projects. And they would go out engage and I want to be clear because these guys worked so hard, it isn't that they're doing.
We're not doing any wrong to make it not as fast as like, it's just that anything in life you are learning. This is a brand new concept it is not -- it is like this 10 banks out there doing this. So this is something that you have to say what is the client liking, what do they not react to, they said they wanted it, why do they need to wait another month before getting back in LOI. And we try to figure that out and improvement and that's so life works and we're running the company.
So I think they're doing a great job. And I have every confidence that we'll figure out a faster path to getting those things close, but certainly not stopping us from hitting our goals and agendas, but, so we do have a dedicated sales team in fact that Brad's hiring a few more. And it's an area of key focus for the company because it's such a great opportunity to grow and use the same and reuse use and reuse the same APIs and infrastructure that we're going to build anyhow, and our building anyhow for our own stuff, so it's just a wonderfully synergistic business model.
And our next questioner will be Steven Kwok with KBW. Please go ahead.
Great. Thanks for squeezing me in. Just wanted to go back to the TAM, that you've talked about --of about 15% and increasing over 60% over the last past three years. Can you talk about the rate of progression that you've seen over the past three years? Has that rate increase accelerated to the same? And then also looking forward where do you expect the TAM to go to over the, let's say the next three years? Thanks.
Yes. You bet. So we went from -- in the analysis we did from 30 to 36 to 50, so it's picked up. But we have a lot of big clients on the platform. If we get some other big clients with the products that serve other kinds of markets. Then the TAM could get bigger. I think the more notable thing isn't so much the TAM because at this point when you have partners like Uber and Apple and Walmart, you're pretty much covering almost everybody, I think there's not too many people who don't use those products and some part or another.
We're probably missing the Android side, I suppose, so we can still get bigger yet. But we have a big TAM, I think the story there is our penetration of the TAM and the ability to say, well, look how many of these folks can we sell products to and how many people is Green Dot serving every year and it's a big company when you look at all of our products and divisions together and all of them contributing revenue over the course of the year. And I really appreciate you asking the question because the -- look, when we launched the company to go public in 2010, we were a mono line Company at one product was a prepaid card we had them in two flavors.
Walmart flavor and Green Dot flavor and Walmart was 70% or something like that of our revenue, probably a bigger part of our profit based on how the scale of those in those days. And there was one KPI active cards because people bought them as convenience products along with the Chiclets and the Wrigley's gum.
So it's just such a different industry today in such a different product today. And so I think what we're showing by releasing that kind of penetration number is how everything works together, new products serve people, new clients and bringing new customers to you, the ability for us to start thinking larger about how do we marry our tax business with our retail cards business and on and on. And we think it's a great example of how BaaS is not just about making money on that particular number of accounts issued in a particular quarter, but it is changing the entire ecosystem of the company.
And we're just getting warmed up and as we learn how to get better at it and learn how to tie things to better -- together better as technology talks to each other. So, as you know for any technology company have different platforms as you buy companies and platforms don't generally socialize well together, you have to force them together and have them socialize and we're just early on that.
So I think we're trying to illustrate the number one that we have a lot bigger opportunity than folks may think if you're just thinking about cards, although that's certainly a great opportunity and has been growing nicely, very nicely in fact. But that we also have all these other new products and other opportunities in other target audiences that we can embrace through the gifts of our best partners.
Got it. And just a quick follow-up around large renewals like over the next two years and what's the progress around those it believe you have a large partner that we knew in mid of next year.
Large partner renewing, doesn't ring a bill. I don't know, Mark.
I have no idea.
Okay. Yes, so we do have as many of you know are the Walmart MoneyCard contract renewing and/ or having the opportunity to new in May of 2020. So we have about a 1.5 year to go. And there are two ways to do that. One is that there is a two-year stem on a contract, another way just flick a switch and under the same economic terms of contract extends out to 2020 to May of 2022 or Walmart can choose to renegotiate the contract or something else in between. We'd be happy with any of those renewals. We love working with Walmart. They are fabulous partner and one of my favorite partners. And we do anything for them. They're great people and a great company.
And that contract comes up. So we work hard every day. There's no point in time especially after 12 years. There is no day that you're renewing the contract or no week that you have in a particular conversation. If we doing your job properly as a partner you hopefully showing your value every day, every quarter, every month and we work hard to do that. We're not perfect. And I'm sure there are things we can do better and we will.
But we have high hopes that we can renew that sooner than later. To take that potential overhang off the stock to the extent investors are worried about it. So either way, we have a good year and a half to go and certainly would be our goal long before than they have an answer and or good news before that, but we don't know and we never take renewals for granted and it could go anyway. So we'll share that process plays out.
And the next questioner will be Ashish Sabadra with Deutsche Bank. Please go ahead.
Hi, thanks for taking my question. So a quick question on the interchange revenue over the last seven quarters through third quarter interchange revenues has grown faster than the overall company revenues. Fourth quarter was the first one and then growth was good, but slower than the overall company revenues. And that's despite direct deposit growing pretty fast. So I was just wondering what were the puts and takes and how should we think about that line item going forward?
Percentages, I leave for one of our accounting folks may, I am staring down just sort of smear in the after call maybe do that math.
I think it's really, it's coming from in 2017 you saw fee revenue going up as a consequence of our adding or modifying our MMS in 2016. But since then 2018 and beyond you've seen behavior driving our revenue, so interchange revenue is going to be a key driver of our growth as distinct from some of that fee revenue and it's coming from again our direct deposit volume is increasing, creating great GDV and offer that GDV you're seeing great purchase volume.
Well and to the extent I think your question was, Ashish, about interchange rate going up. Is that what you had asked and I apologize it's hard ask a little bit.
No, my question was, actually Mark's response was helpful. My question was just the growth. Yes, growth was slower than the overall company revenue growth. So my question was like why we aren't seeing better revenue growth with direct deposit growing so much faster.
Yes, what we --the reason is because as a percentage of consolidated revenue is that we have more revenue coming from places besides just cards. So in this for a few years ago, almost all the revenue from cards, but we have revenue now that increasingly is big from our Processing and Settlement Division, which has no interchange component to it and other products like that. So I think it's more a reflection or like tax processing, for example. So these are all things that have nothing to do with cards or interchange, and so as the company grows, and our other divisions grow interchange just like cards themselves become a smaller part of the overall mix.
And that maybe what you're seeing without knowing the actual part of the income statement. It's hard to reconcile the math, but it may likely be that and where we help happy to help you with to the extent we can after the call.
Sure. That's helpful. And then maybe a quick question on the Turbo tax into it payroll card win. Is this a conversion where the existing customers on the payroll card will be converted over to the Green Dot platform as well or is it just for new cards which are issued on that payroll card?
I don't -- I can't imagine is any processor or conversion just hearing that phrase gives me nightmare. So I don't think there's any processing or conversion, but how Intuit chooses to mark at the new products to existing cardholders. I don't know. That's completely their opportunity and their side to do and will be here to support them, but it's a big business and we're certainly very excited and honored to be part of it, but how Intuit is planning the rollout in the marketing of that I can't speak to. Okay, we have Reggie, as your last analyst, okay, very good.
Yes, sir. Reggie Smith with JPMorgan. Please go ahead.
Yes, good evening, guys, how are you? Good. So I got dropped off earlier. So I'm not sure if this was covered, but obviously great growth over the last three years. Looking at the guidance this year, just curious how should we think about kind of the longer-term growth of the business, both kind of top line and EPS. Yes and a follow up.
Yes. Sure. Well, so it's our long stated public goal. We've had it for years, to do our best to grow 10% not 10% double-digits top and bottom line this year at the midpoint, it's 10% our guidance and that's always going to be our goal forever, unless something really changes radically because it should be our goal. We're a growth company. And as you get to the law of large numbers, and now over $1 billion of revenue and everything else, it clearly becomes harder every year, but that's where you have to have new initiatives like we talked about in our six Step Plan this year to meet that challenge.
This year the guidance at 10% is over growing just an unbelievable year. I mean just think about I mean especially in Q1. We're growing fully organically in our guidance 6% at the midpoint over a quarter a year ago that saw the addition of Intuit huge account, TaxHawk, good account. The recent additions of Apple Pay cash and the Uber rewards account, which is growing very well. So that was all building in the quarter and then on top of that you got two months of the UniRush acquisition that had, say another $20 million plus there, all in one quarter that now we're over growing fully organically, a year later and then, so that's a big part of it.
So the guidance we're giving a 10% at the midpoint all organic, we think it is pretty robust given the size of the company and the over grow of all that excitement that we had a year ago. Doesn't mean we don't want to do more. Doesn't mean that we can do more, but it's no cakewalk. We have work to do and that six step Plan is not only for investors to hear, but for our employees too. We have real work to do. But we feel very optimistic about it and obviously the business as you can tell, Reggie from just looking at the numbers in one of our other analyst earlier in the call, pointed out that not only the best grow but our established business lines continue to deliver and it's our goal for that to continue into 2019 .
Got you. Okay, perfect. I guess you talked about direct deposit growth being 10% pretty strong and it sounds like some of the kind of one downs are either not using the card or are they kind of moved over to kind of direct deposit, so it appears that the card is being used the way you want it to be used. I got to kind of looking at that money transfer line still you shown pretty good growth there. How do you reconcile? How should we reconcile the momentum you're seeing there with the growth in direct deposit? Is direct deposit included in that? Or like what's driving the strength there given how well you guys are converting people to direct deposit?
Right. Well, again, there is strength in numbers. The Green Dot Network, which is a very old part of the company, we debut that in 2004. My memory is correct, service a lot of companies. So we do, I have to give a wrong number, but it's got to be at this point over 300 or 500 different banks and programs, how many would know better, but it's something like that. And in all of those are doing reloading. So you're right that if you're on direct deposit at Green Dot you're not a heavy cash reloader. So a person who is not on direct deposit but who uses our card over and over.
We'll do a lot more cash reload and we make good revenue on that and it's a good service, but all these other programs are also in cash reload that have nothing whatsoever to do with Green Dot and in fact we power a lot of our competitors, which we've done for years back when Amex was in the old days a big competitor. They were still using our network to load cash to their cards. So we have a co competition.
You have a lot of upstarts that on one hand are doing their best to beat our brains out on the issuing side, but we service them on the reload side. And so anytime we can stick our foot in the ecosystem as opposed to a product we like that, and our network is good example of that. So the growth you're seeing in cash transfers is about our own customers, yes, it's about everyone else customers who are part of that. Yes. And it's also because our Money Processing division comes up with new products and cool ideas like e-cash and PayPal would be a part of that and credit card bill pay, and so you're always trying to come up with new things to drive that business , but it's a good ecosystem and still healthy after all these years.
Got you, okay, perfect, thank you. Great quarter, guys.
End of Q&A
Thank you, Reggie, Appreciate it. Well, we are done. I know we went long but we appreciate all the great questions. Have a wonderful night on the East Coast in a day here in Los Angeles and the West Coast and we'll see you at a conference near you, Bye- Bye.
The conference has now concluded. Thank you all for attending today's presentation. And you may now disconnect your lines.