Green Dot - Q1 2023
May 4, 2023
Transcript
Operator (participant)
Good afternoon, welcome to the Green Dot Corporation first quarter 2023 conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your touchtone phone. To withdraw from the question queue, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Timothy Willi, Senior Vice President of Investor Relations and Corporate Development. Please go ahead.
Timothy Willi (SVP of Finance and Corporate Development)
Thank you, Anne. Good afternoon, everyone. Today, we are discussing Green Dot's first-quarter 2023 financial and operating results. Following our remarks, we'll open the call for your questions. Our most recent earnings release that accompanies this call and webcast can be found at ir.greendot.com. As a reminder, our comments may include forward-looking statements and 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 Form 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 refer to our financial measures that do not conform with 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 reconciliation of our non-GAAP financial information to the directly comparable GAAP financial information appears in today's press release. The content of this call is property of the Green Dot Corporation and is subject to copyright protection. Now, I'd like to turn the call over to George.
George Gresham (CEO)
Good afternoon, everyone, thank you for joining the first quarter 2023 earnings call. Today, we will cover the following topics. We will review our first quarter results. I will address what we've accomplished and our upcoming milestones as we execute on our 2023 operating plan. We will be joined by our Chief Revenue Officer, Chris Ruppel, who will share his perspective on growth opportunities and strategy as we put more energy and focus behind our business development efforts. Jess will provide further details on our Q1 results and outlook on the rest of the year. Lastly, I will share some closing comments before opening it up to your questions. First, a few comments on our results. For the first quarter, our non-GAAP revenue was $412 million and was up 4% year-over-year.
Adjusted EBITDA of $82.5 million was down 9%, and non-GAAP EPS of $0.99 per share was down approximately 7%. GAAP revenue was also up about 4%, with operating income of $51 million and fully diluted earnings per share of $0.69 per share, both down about 1%. Our first quarter financial results were slightly better than expected at a core level, and I am pleased with how the year started. Jess will walk you through the quarter's results in more detail. Now, let me turn to what we've accomplished as we work toward positioning the company for improved growth and profitability in the coming quarters and in 2024 and beyond. Let's start with our processor conversion. We've now completed three major conversions onto our new platform, moving us closer to completion, which we expect to achieve in the second quarter.
Upon completion, we will begin realizing annual cost savings of approximately $35 million, which will begin ramping in mid third quarter and deliver significant additional savings in 2024 and beyond. Our entire organization has been focused on these efforts. I am grateful for their hard work and commitment and look forward to the tangible benefits we will realize when this exercise is complete. Second is onboarding new business. We are scheduled to go live with a new BaaS partner in the second quarter, a launch we have been working diligently to prepare for in recent months. This launch primes our BaaS team to accelerate revenue growth in 2024. It sets the stage for improved year-on-year metrics as we move further past recent partner non-renewals. Third is business development to drive revenue growth.
During the quarter, we signed six new partners onto our Green Dot Network, and PayCard added over 350 new PayCard partners and nine new earned wage access agreements. Meanwhile, we are continuing to receive and pursue new opportunities in BaaS as well as our retail and financial services channel. Chris will provide more details on his outlook and plans for growth in just a few minutes. Fourth is expense management. As I discussed on our year-end call, we are highly focused on acting as stewards of our investors' capital, which means making expense management and driving scale a part of our corporate DNA. We undertook a small workforce reduction earlier this year and are maintaining an active focus on costs to ensure we are driving maximum efficiency without sacrificing opportunities for long-term growth.
During the quarter, other general and administrative costs were down 12% from last year, and we still see opportunities to reduce expenses. Before passing to Chris, I'd like to quickly touch on our financial strength. The last two months have seen the banking industry receive attention on the safety of consumer deposits and the liquidity profile of the industry. Green Dot has a strong financial position. At the end of the first quarter, our regulatory capital ratios were well above required minimums. Cash balances are just over 20% of total deposits, providing us with substantial liquidity, and the vast majority of our deposits are fully insured. Our partners and customers value the strength and conservative nature of our balance sheet, and we are committed to maintaining our strong financial position. Now I would like to turn the call over to Chris Ruppel, our Chief Revenue Officer.
I asked Chris to take on this role because Green Dot is a collection of businesses that need to methodically approach their addressable markets on a coordinated basis using repeatable processes and systems. Chris will share some of his background in his comments, but he has built successful business development systems several times. He's a clear thinker and a solid all-around businessperson who has been successful multiple times. He has the skills and experience to optimize the strengths of the Green Dot platform. With that, let me hand it over to Chris.
Chris Ruppel (CRO and President)
Thank you, George. Good afternoon, everyone. When George asked me to consider taking on this role, it was not a hard decision for me to make. There's tremendous opportunity at Green Dot as we leverage our unique go-to-market channels, our bank, and our new technology platform to capitalize on the rise of embedded finance. My prior experience aligns with the opportunities and challenges we face today. I co-founded and built our PayCard business for almost 20 years. Then was asked to run GO2bank, where I worked with the team to set the stage for re-acceleration of its growth and performance. In both roles, I've had to build cohesive team cultures that prioritize product development, optimize marketing, and in the case of PayCard, build a top-tier sales and business development engine.
As we look forward, I believe it's largely a matter of aligning the various divisions, improving the prioritization and allocation of product development and marketing resources to capture the opportunities in the market. With the rise of embedded finance, it's important we take a cohesive approach to product, marketing, and business development to make sure that we are fully leveraging our unique capabilities and position in the market. After spending time reviewing the broader organization and the marketplace, we're going to align our six operating divisions and organize our go-to-market strategy around four primary opportunities. The first opportunity is embedded finance, where we'll have a tighter alignment between our traditional BaaS business and our Green Dot Network. The BaaS market is increasingly looking for sophisticated money movement services, as well as the convenience the Green Dot Network offers consumers and small businesses.
The second opportunity is focused on consumers for our traditional retail business and our direct channel, which is primarily GO2bank. We are creating a culture that will facilitate greater focus and collaboration to optimize insights and data analysis about the combined customer base and their behaviors. PayCard will remain focused on employer products as we build on the core PayCard business while working to capitalize on the emerging EWA opportunity. Tax will maintain its focus on serving the needs of tax preparers and taxpayers through new products and the integration of existing Green Dot products. We see clear opportunities to bring more products and services to over 27,000 businesses that prepare taxes for the millions of consumers that they work with. By moving to this structure as well as creating some additional support functions, there should be numerous benefits and improvements for Green Dot.
I think of the improvements and benefits along 4 themes. First is product development. This new structure will enable us to better align and prioritize our product development roadmap to improve speed to market and the pace of innovation, particularly in areas such as embedded finance and the consumer segment. Second is our go-to-market strategy. We'll be more closely aligning the divisions, which will enable us to have more clarity and effectively prioritize the opportunities that have the most strategic and financial value. We'll also begin to standardize our sales and marketing processes to improve our ability to identify and close new opportunities. Third is partner support. This new structure will improve our partner support model as the market opportunities become larger and more complex. This will enable us to have deeper insights into new opportunities where we can gain wallet share with our partners.
This new structure will also create clear incentives for collaboration and cross-selling efforts. Overall, with this structure in place, the creation of a standardized approach to business development and marketing efforts, I believe we'll be very well positioned to sell our solutions in the market and expand wallet share with our partners. With that, I will now hand it over to Jess to discuss the numbers.
Jess Unruh (CFO)
Thank you, Chris. Good afternoon, everyone. As George mentioned in his earlier comments, the quarter was a bit better than we expected, due in part to cost management, timing of marketing spend, and extending the life of some attriting partnered portfolios. Let's turn to the segments. In our consumer segment, revenue was down 12% year-over-year, driven in part by the non-renewal of a program in retail and by a decline in accounts from the dynamics we have discussed in the past. Specifically, active accounts in a retail channel remain impacted by a change in consumer foot traffic patterns and more digital competition. The direct channel continues to be impacted by attrition in legacy brands as we invest solely in building our GO2bank brand. This dynamic continues to weigh on overall growth rates.
The rate of decline in the direct deposit accounts has moderated notably on a year-over-year basis. I point this out because our direct deposit accounts are more highly engaged with higher volume and revenue than non-direct deposit accounts. To the extent that the decline in direct deposit accounts continues to moderate, it should help slow the rate of decline for the overall segment. Within this segment, the retail channel saw revenue decline in the mid-teens year-over-year from the non-renewal program and lower accounts. Turning to the direct division and GO2bank. The direct channel continues to see improved performance, and we remain encouraged by the growth of GO2bank.
Revenue in this channel, which was just over 30% of total segment revenue in the quarter, was down mid-single digits from the prior year versus double-digit declines in each quarter of 2022. While accounts were down in the mid-teens, revenue per account continued to grow due to improving engagement rates, particularly with GO2bank, and is helping to offset the drag from the attrition in legacy portfolios. Within the direct channel, we believe the moderation in revenue declines is evidence that we're moving closer to an inflection point for revenue in this channel. The legacy brands continued to see declines in revenue of approximately 30% in the quarter, with slightly larger declines in accounts in GDV.
However, GO2bank saw revenue growth of 40% over last year, driven by solid growth in direct deposit accounts and GDV, as well as strong growth in revenue per account as we drive more engagement in this customer base. As a result, GO2bank in the quarter represented a bit more than 50% of the revenue in the direct channel and now comprises roughly 15% of the consumer segment. Again, this is a journey, but we are encouraged by what we're seeing from GO2bank, its growing impact on the direct channel, and the increasing potential for the direct channel to have a positive impact on the overall consumer segment. While there are many moving parts in this segment, the metrics on a per account basis remain positive.
Revenue per account was up low double digits due to higher volumes per account, as well as growth in our overdraft product while being partially muted by the non-renewal program in retail. We continue to see positive trends as we retain the more highly engaged consumers while continuing to hone our top-of-the-funnel strategies in the direct channel to acquire, engage, and retain higher value accounts. While retail and direct saw solid growth in revenue per active account, the direct channel has higher revenue per account and continues to see faster growth. The overall segment will benefit from the gradual improvement in mix over time. Last, looking at profits and margins. We continue to be effective in managing the cost structure of the business as we work to reposition this segment.
Many of our expenses are volume related and will come down with a decline in revenue, while we also continue to focus on making improvements in areas such as risk and customer care, particularly in the direct channel. I would also point out that in the first quarter, marketing spend was somewhat lower than prior year and our own expectations for Q1. However, we expect to deploy those funds in the coming quarters. While this provided some benefit to Q1 results, it does not have any impact on our outlook for the full year. In the B2B services segment, which is comprised of the BaaS and PayCard channels, aggregate revenue growth was driven by our BaaS channel, where revenue was up approximately 30%.
The growth of one of our larger BaaS customers continues to power the top line while we faced headwinds on revenue and actives from the roll-off of two BaaS partners. This impact modestly outperformed our expectations as some of the deconversion activity did not happen as quickly as we'd expected. That said, we expect the roll-off to be completed in the second quarter. Accounts, GDV, and purchase volume were all up year-over-year in the pay card channel. Similar to last quarter, non-discretionary spending such as grocery and fuel are making up a larger % of spending, and those categories typically have lower interchange rates. As it relates to ATM transactions, volumes were up, but consumers continued to be more sensitive to finding surcharge-free ATMs, which is impacting our fee revenue.
Segment profit was flat year-over-year as the impact of the BaaS fixed profit structure continues to weigh on the aggregate segment margin. The PayCard business had margin compression during the quarter from the lower interchange rates, more fee-free ATM transactions, and higher costs to support the solid growth in accounts and volume. Turning to the money movement segment, there was modest growth in revenue and a slight decline in segment profit. Our tax business, which we refer to as TPG, had mid-single digit revenue growth from a solid seasonally strong quarter driven by growth in Refund Transfer volumes and a successful Taxpayer Advance program. Green Dot Network saw a mid-single digit revenue decline in line with the decline in cash transfers, principally from the impact of the decline in active accounts in our other segments.
This trend has moderated significantly from the double-digit declines that we saw in each of the quarters in 2021 and 2022. As we discussed last quarter, we are seeing solid growth in third-party volumes, which represented just a bit below 60% of total transactions, helping to offset fewer reloads associated with declines in our active account base. Our final segment, corporate and other, reflects the interest income we earn in our bank, net of revenue share on interest we pay to our BaaS partners, as well as salaries and administrative costs and some smaller intercompany adjustments. Interest income, net of partner interest sharing, was down year-over-year due to a higher rate environment. As we discussed last quarter, the rapidly rising rate environment has created an imbalance between the blended yield we earn on cash and investments and the rate we pay our BaaS partners.
Salaries and other general administrative expenses were up 5% versus last year, due in large part to the expenses associated with the technology conversions. Turning to guidance. We are reiterating our full year guidance of revenue in a range of $1.38 billion-$1.46 billion, adjusted EBITDA in a range of $180 million-$190 million, and non-GAAP EPS of $1.77-$1.93. We're happy with the first quarter results and we're off to a good start to the year. I remain confident in the range that we are currently targeting. We intend to spend the marketing dollars we pushed in Q1 throughout the remainder of the year. It's still early in the year. There is a healthy debate when it comes to the economic outlook.
I'd like to have another quarter of performance on the books before deciding whether to change our targets for the year. To help you with your modeling, let me provide a bit more color on how we see the general cadence for the rest of 2023. Our outlook for revenue is for flattish to slight revenue declines in the second quarter and third quarter, with the prospect of some growth in the fourth quarter as we ramp up an exciting BaaS partner and other smaller partners across the business. I continue to expect about two-thirds of EBITDA to incur in the first half of the year, in line with our seasonal patterns, while margins are expected to be the lowest in the second and third quarters, and the fourth quarter should be more or less flat with the prior year.
As a general matter, I expect our Q2 margin to be down year-over-year due to some one-time cost benefits in 2022 that we discussed last year on our earnings call. I would also like to provide a bit more color on our active accounts, which I know is a key metric that the market follows. As we move through the second and third quarters, we expect declines in accounts in the consumer segment to accelerate beyond what we have recently experienced. We want to make sure that you are aware of this as you build your models. Specifically, in the direct channel, we will be sunsetting some brands in the second quarter as we complete our platform conversions. While we are making efforts to convert those accounts to GO2bank, we expect that many will not convert and will accelerate the attrition of these legacy brands.
As I mentioned, we've seen our year-over-year declines in active accounts moderate, and this accelerated attrition in the second quarter could slow that momentum a bit in the consumer segment. That said, our focus on making GO2bank the driving force of this channel remains intact. In fact, after this occurs, GO2bank will become a larger part of that channel, and its growth rate will have more pronounced impact as we move forward. In the B2B segment, we will experience the continued runoff of deconverting partners but expect growth of PayCard and launching a new BaaS partner to result in improving account metrics as we work through the second half of the year. Now let me provide a bit more color on full-year financial outlook for each of the segments.
In the consumer segment, I expect revenue and segment profit to decline year-over-year in the mid-teens, a bit higher than our initial thoughts for the year due to the accelerated attrition of the legacy brands that I just mentioned earlier. In our B2B segment, I expect revenue growth in the upper teens with flattish segment profit. Turning to the money movement segment, I still expect revenue growth in the low single digits with flattish segment profits. In the corporate and other segment, we still face the $15 million-$20 million earnings headwind from the higher revenue share while expenses should begin to reflect our progress in cutting costs as we move through the platform conversions. For the full year, I expect our non-GAAP effective tax rate to be 23.5% and the diluted weighted average share count to be approximately 52 million shares.
With that, let me turn it back over to George for his closing comments.
George Gresham (CEO)
Thanks, Jess. In closing, we got off to a solid start for the year financially and operationally. We made clear tangible progress on our technology conversions and our efforts to reduce expenses. I'm happy with our progress, there is still work to be done, every employee at Green Dot is focused on accomplishing the goals that we have laid out for the year, we are off to a solid start. At Green Dot, we are responsible for overseeing and protecting something worth caring for and preserving. We accept consumer deposits, we accept investor capital that allows us to fulfill our mission of providing people the power to bank seamlessly, affordably, and with confidence. We have 1,200 dedicated employees coming to work every day to fulfill that mission. This is why stewardship sits at the center of our values.
Green Dot is a dynamic company that has and will continue to go through change, but we operate in vast markets with tremendous opportunities in front of us. If we keep our focus on our core value while we execute along this journey, our customers, partners, investors, and team members will prosper along the way. Thank you for your interest in Green Dot. Now let's open the line for your questions. Operator?
Operator (participant)
We will now begin the question-and-answer session. To ask a question, you may press star then one on your touch-tone phone. If you are using a speaker phone, please pick up your handset before pressing the key. To withdraw your question, please press star then two. We ask that you limit yourself to one question and one follow-up. The first question comes from Ramsey El-Assal with Barclays. Please go ahead.
Speaker 5
Hi, this is Shreyas for Ramsey. Thank you for taking my questions. My first question is, could you guys comment a bit more on the magnitude of macro pressure that's factored into your guide? Does the guide contemplate any further deterioration of macro, or is it more of a steady state?
Jess Unruh (CFO)
Yeah, I think I'll take that one. This is Jess. I think, you know, Q1 was off to a solid start, so we haven't seen any substantial impact from a worsening economy. I think it's fair to say that if the economy were to worsen dramatically, there could be some pressure on things like interchange rates. Could see higher interest rates above and beyond what the Fed just recently did. Of course, we would take cost management actions to offset some of those trends. To put it bluntly, we haven't factored in a worsened economy within our guidance specifically, but certainly, we would have opportunities to offset some of that as it progressed through the year.
Speaker 5
Got it. Super helpful. My follow-up is for Chris. Specifically in sales and the other revenue-generating parts of the business, organizationally, are you where you want to be to properly execute on the strategy you outlined?
Chris Ruppel (CRO and President)
Thanks for the question. In terms of, when you say where we want to be, do you have something in mind specific to that? To the viewpoint?
Speaker 5
Yeah, just or, you know, whether it's the roles or the go-to-market strategy or, you know, is everything in place for you to start executing on what you outlined earlier?
Chris Ruppel (CRO and President)
Sure. Thank you for the clarification. Yeah, we are in a position to execute on our go-to-market. We've made some realignments internally. You know, we have very strong teams and are working towards moving, you know, our strategies forward. I think, as it relates to, you know, product development and our go-to-market motion, there are some elements that we're taking the team and building, putting building blocks in place to have greater discipline around the way we're executing. The core fundamentals and the teams exist and, you know, they're not blockers to our ability to execute.
Speaker 5
Perfect. Thanks for the color. Appreciate it, guys.
Operator (participant)
The next question is from Joel Roeske of Truist. Please go ahead.
Speaker 8
Hi, guys. This is Joel on for Andrew Jeffrey. I have a question for Chris on GO2bank. You know, we see companies like SoFi using high APYs to draw in, you know, $3 billion in deposits. Square started to drive spend on its, you know, 51 million Cash App that may use products like Cash Card. I'm just kind of curious, you know, what features or products and product enhancements could be added to GO2bank to drive monetization and engagement? Are there really any limitations on the types of products GO2bank can offer based on your guys' charter? Thanks.
Chris Ruppel (CRO and President)
Thanks for the question. I think, you know, we have, just for reference today, we do have a high APY savings capability built into GO2bank today. And then there is a feature set that is geared towards path, essentially we call path to credit, but it's credit improvement, which is a secured card product and other things to help our customers improve their credit scores. There are also, you know, but there are additional roadmap items that we'll be building in over time that create cardholder value.
Those are, you know, we have areas today as an example, where we have made continual improvements to our overdraft programs to provide, you know, a greater amount of liquidity for our customers in a, in a reasonable, with a reasonable approach that's, you know, financially sound. I think we'll continue to take that approach as we move forward. From a product development standpoint, I think over the long run, I don't believe that there'll be limitations in what we're able to achieve from a bank charter perspective. Like, you know, all things, we would need to consider the regulatory environment as we're moving forward in our product development and roadmap.
Speaker 8
The next question is from Matthew Hart of Jefferies. Please go ahead.
Speaker 7
Hi, everyone. Thanks for taking my questions. The first one is in B2B. GDV was up 63%, but actives declined due to the deconversion. That's a quarter end number, and there's a new partner starting this quarter. Could you give a sense of what the puts and takes are in terms of GDV for these partners coming and going or where it might be this quarter, just with those dynamics?
Jess Unruh (CFO)
This is Jess. I'll take that one. With respect to this quarter, certainly the deconversion of the partners is impacting that active base. GDV is in part driven by continued growth of some of our existing BaaS partners. I would add that there are some particular BaaS partners who offer high-yield savings, and that has drawn a lot of growth and deposits into those programs. We do not pay for that high-yield savings on those accounts, that is a reason why you'll see sort of an uptick in GDV despite some of these deconversion activities.
Speaker 7
Gotcha. Okay, thanks. In terms of the new reorg around the four opportunities you outlined, is that, for reporting purposes or just sort of from an operating perspective? Maybe a mapping if it is in reporting a mapping from the current reporting to that structure, if you could.
Jess Unruh (CFO)
For Chris, I'll jump in before Chris thinks about the impact of his reorg. From a reporting standpoint, the main operating divisions are still intact. I think Chris is just reorganizing his group on how to best tackle the go-to-market strategy and how best to, you know, improve BD pipeline conversion, et cetera.
Speaker 7
I see. Okay, thanks.
Operator (participant)
The next question is from Bob Napoli of William Blair. Please go ahead.
Speaker 9
Hey, guys. Thanks for taking the questions. This is Dave on for Bob Napoli. On the competitive environment for the direct channel in GO2bank, are you guys seeing a trend of more rational pricing from competitors on the customer acquisition front, just given, you know, the tighter environment for venture-backed fintechs? Thanks.
Chris Ruppel (CRO and President)
This is Chris. I'll take that question. you know, the information that we get, of course, is anecdotal, so I'll couch my comments with that. We are seeing, again, the evidence that, you know, in the market that there is some pullback in areas around the marketing budgets. you know, we've seen some public reporting of that. I think generally that leads to, you know, most of our, most of the neobank competitors have started to really pay more attention to path to profitability in their public statements and discussions around the business. I think ultimately that leads to better competitive forces as it relates to rational marketing spend and pricing and models in terms of their overall dynamics that require profitability.
I think that, for us, you know, in comparison, we have products and marketing budgets in which we're producing, you know, profitable cardholders and are acquiring customers at a level where we are generating, you know, solid returns on the marketing investments. I think we'll continue on that path and with that discipline as we move forward, and are, believe that that will, you know, over the long run, real yield the best results.
Speaker 9
Great. If I could ask a quick follow-up. Clearly a lot of technology and cost-related initiatives are taking place this year, and we'll likely see more benefit next year and beyond. Once the business starts returning to growth, in 2024 and further out, how should we kinda think about operating leverage within Green Dot, longer term from an EBITDA margin perspective? Thanks again.
George Gresham (CEO)
Thanks for that question. This is George. Obviously, we've been on a journey here to re-orchestrate our ability to deliver products and services at a much more efficient level than we had been able to in the past. That journey is about to pass an extraordinarily important milestone at the end of this quarter with the next few migrations onto our new processing platform. That migration, you know, we put some measures before you with respect to the implications of that from a financial perspective. We see a number of opportunities beyond that in order to create simplification in our business, to continue to migrate to a consolidated approach on technology solutions. Those efforts will continue into 2024.
When we think about the business and the implications of that, you know, we have a scalable business that on the marginal dollar of revenue should generate meaningful marginal EBITDA returns. That is what we're building here. I think we're well on that path, and I think we'll start to enjoy the benefit of that in 2024.
Speaker 9
Thanks for the color.
George Gresham (CEO)
Yep.
Operator (participant)
Again, if you have a question, please press star then one. The next question is from George Sutton with Craig-Hallum. Please go ahead.
Speaker 6
Hey, guys. James on for George. Nice quarter. Couple of questions on the B2B segment. You wrote on the press release, looking forward to onboarding some major partners later this year. Partners being plural sounds like you've got multiple new opportunities in the pipeline in addition to just the big new partner being onboarded this quarter. Could you help us get a sense of scale of these potential partners, sort of whether these are new customers coming to the market for the first time or if they're potential competitive takeaways? It was great to see the quarter-over-quarter margin improvement. I think that's the first time we've seen that in a very long time. I guess, do you think that margin expansion can continue? I've got one follow-up.
George Gresham (CEO)
Thanks, James. This is George again. On your first question, you know, we have a pipeline that is becoming more healthy as Chris gets his executional elements in place. These BaaS partners we're making reference to, these are long-term onboarding initiatives, at least one of them we've talked about for some time. We expect that partner to go live mid-year, but they will ramp relatively slowly. Then we'll bring on additional partners, at least a additional partner in the back half of the year, and depending on how things play out, possibly a third. We're happy with the way the pipeline's developing. Just keep in mind that they are complicated onboarding projects, which will probably have a muted effect on 2023.
As far as the kind of the source of the win, in one case, it was a takeaway from essentially an in-source solution, where the firm had put together a bank sponsor, a processor, other service elements, et cetera, moving to a vertically integrated solution that we provide uniquely in the market. In the other case, it was a greenfield opportunity for the first time for the partner to offer embedded finance solutions to their customer base. We're very excited about these opportunities as a proof point. Don't expect them to have a dramatic impact on our actual financial results this year. Obviously, it's great to be planting these seeds for our future success.
Speaker 6
Great. Anything on the margin expansion in the quarter? I mean, do you think margin should continue to expand?-
George Gresham (CEO)
Yeah, I'm sorry about that. I think as Jess said in his prepared comments, we expect to see some margin compression in Q2 and Q3, which will probably be the most challenging quarters for this year as we have these legacy accounts rolling off the platform. We expect that to stabilize in towards the end of the year.
Speaker 6
Gotcha. Then Chris, since you haven't gotten enough questions already, I guess as you look at all the opportunities ahead of you at Green Dot, what excites you the most? Or what do you think could be the biggest potential value driver for Green Dot over the next few years?
Chris Ruppel (CRO and President)
Thank you. This is Chris. Thank you for the question. I think we, you know, as you look at the marketplace and our ability to, you know, both the addressable market that we can go after and our ability to execute, we're most excited about our continued success in the embedded finance space. An expanding opportunity in what we consider sort of the GDN or our money movement business. Within PayCard, our ability to grow our earned wage access business along with the payroll card business. I think those are sort of near term and in medium term, the largest opportunities to go after that have the most significance for the business.
You know, like Over the long run, I think as we're building our consumer business, you know, as we're able to take our lessons from GO2bank and apply those into our other brands, the consumer business product feature sets, and our ability to acquire customers and move that across the entire consumer channel, which includes our retail business, that will yield additional significant results over. That's over a longer-term view.
Speaker 6
Thanks. Thanks, guys.
Operator (participant)
This concludes our question and answer session. I would like to turn the conference back over to George Gresham for closing remarks.
Chris Ruppel (CRO and President)
Thank you, operator. Let me just offer my gratitude to the community that's following Green Dot. In particular, as we move through the second quarter, our colleagues and teammates at the company are really working hard to implement these migrations that, you know, were initiated maybe two years ago. I want to express my personal gratitude to the teammates and colleagues and employees around the world at Green Dot for all their hard work and effort. It's recognized and appreciated. I'd extend the same to our investors who are with us today and our board members. Thank you very much, everybody, and look forward to catching up with you soon.
Operator (participant)
The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.