Green Dot - Earnings Call - Q1 2025

Executive Summary

• Strong Q1: non-GAAP revenue up 24% YoY to $555.96M and adjusted EBITDA up 53% YoY to $90.56M; non-GAAP EPS $1.06 vs $0.59 a year ago, with all three segments showing profit growth.
• Beat vs S&P Global consensus: revenue $557.49M* vs $503.20M* and EPS $1.06* vs $0.71*; prior quarter also beat; YoY, Q1 2024 EPS missed estimates but revenue beat [GetEstimates].
• Guidance raised for FY25: non-GAAP revenue to $2.0–$2.1B (from $1.85–$1.90B), adjusted EBITDA to $150–$160M (from $145–$155M), and non-GAAP EPS to $1.14–$1.28 (from $1.05–$1.20) vs prior.
• Strategic and commercial momentum: Walmart distribution and product programs extended to January 2033; Samsung Wallet Tap to Transfer and Crypto.com partnerships highlight Arc’s embedded finance traction; portfolio repositioning incurred a $25M realized loss but expected to lift yields; TailFin JV funds a $70M Walmart incentive (equity loss) without incremental cash outlay.
• Narrative/catalysts: accelerating B2B/embedded finance growth and raised FY guidance, Walmart extension, and high-profile partnerships are likely the near-term stock drivers; watch subsequent partner launches/timing and Consumer trajectory moderation.

What Went Well and What Went Wrong

• What Went Well
  • Broad-based profit growth: “all three of our reporting segments posted profit growth this quarter for the first time in several years” (CFO).
  • B2B acceleration: >40% B2B revenue growth YoY, margin expansion ~40 bps; renewals improved economics; pipeline momentum with new launches.
  • Strategic wins: Walmart relationship extended to 2033 and new partnerships with Samsung and Crypto.com on the Arc platform (embedded finance).
• What Went Wrong
  • Consumer softness continues: Consumer Services revenue fell to $95.26M (from $100.61M Q1’24) and management still expects upper-single-digit decline for 2025; no return to active account growth in 2025.
  • GAAP noise: realized $24.50M loss on AFS securities due to portfolio repositioning; GAAP “Other (expense), net” rose to $(25.70)M; non-GAAP adjustments were material.
  • Staffing headwinds: rapid!/PayCard revenue still pressured by weak staffing vertical; although losses/fraud costs improved, revenue remains under strain.

Transcript

Operator (participant)

Note: this event is being recorded. I would now like to turn the conference over to Mr. Timothy Willi of Investor Relations. Please go ahead, sir.

Timothy Willi (SVP of Finance and Corporate Development)

Thank you, and good afternoon, everyone. Today we are discussing Green Dot's first quarter 2025 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 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 Green Dot Corporation and is subject to copyright protection. Now, I'd like to turn the call over to Bill. Bill.

William Jacobs (Chairman and CEO)

Good afternoon, and thank you for joining our first quarter 2025 earnings call. Today, I will start with some comments on the quarter and some corporate updates. I will turn it over to Chris to provide an update on our business development efforts and the success we are seeing there, including new business wins and key renewals. Jess will then discuss our financials in more detail. After Jess has finished discussing our financials, I will conclude with some final comments and observations before taking your questions. First, I would like to provide you with some context on why we decided to undergo the process of evaluating our strategic alternatives, which we announced in early March. The board has an obligation and a fiduciary duty to ensure that we create and maximize value for the company's shareholders.

It is something that boards do on a regular basis, whether it is known to the public or not. In the case of Green Dot, we firmly believe that we have unique and valuable assets and a strong management team. The company has a strategy that the board believes in, and there are some very good things happening that validate the strategy and its potential, as you will hear throughout this call. However, given market dynamics, the board and management team agreed that it makes sense to review the strategic alternatives to gain a better understanding of the company's inherent value and potential in the marketplace, and to help ensure that we are delivering the highest value to our shareholders. That said, there is not much more to say at this time, but we will provide updates when appropriate. Now, let me turn to the quarter.

It was a strong quarter and start to the year, with results outpacing our internal expectations. Adjusted revenue was up 24%, while adjusted EBITDA was up 53%, and we saw growth in all three of our operating segments. The team remained focused on building our revenue engine, driving scale in our operations, and investing in our infrastructure to support our customers, while also ensuring we can manage growth across the enterprise as we execute on our strategic plan. We also continued strengthening our management team with the addition of Kim Olson as our Chief Risk Officer. Kim brings a wealth of experience in building and effectively managing enterprise risk organization and has extensive experience across the financial services industry.

As we begin seeing early signs of return to growth, it is imperative that we continue investing in the right people and infrastructure to manage risk and set the stage for sustainable growth and profitability. Kim and her team will be critical to that effort, and we are fortunate to have her on the team. While there was significant progress and success in the quarter, I believe the most notable were our new business wins, which Chris will discuss, as well as the recent extension of our longstanding agreement with Walmart. I am thrilled we've been able to renew and extend this longstanding partner, who has been an important part of Green Dot's story for almost 20 years.

We have been working diligently every day to work with Walmart to win the business, and we are grateful and proud that the value we've delivered is being recognized by this long-term extension. We look forward to working with Walmart in the coming years and continuing to find a way to deliver value for Walmart and their customers. Now, let me turn it over to Chris to discuss the momentum we are seeing and some of our recent client wins and renewals. Chris.

Chris Ruppel (COO)

Thank you, Bill, and good afternoon, everyone. As Bill highlighted, it was a solid start to the year as we continued building on the momentum of recent quarters and have begun to see signs of a return to growth. Over the last couple of years, I've discussed with you our efforts to develop strong, efficient business development capabilities that would be an engine for sustainable long-term revenue growth. We continue to see progress across the enterprise. Pipelines remain robust. In fact, year to date, we have signed nearly the same amount of revenue as we did throughout all of 2024. In addition to signing new business, we also renewed existing partners, with a recent highlight being the renewal of our Walmart distribution agreements.

This was a strong quarter and an exciting start to 2025, and we expect these trends to continue with additional business wins and partner launches, which we look forward to updating you on in the coming months. Now, let me turn to some new business wins. As you may have seen earlier this week, Samsung announced the launch of the new Samsung Wallet features that are powered in part by ARC, Green Dot's comprehensive and configurable embedded finance platform. Through this partnership, Samsung's Wallet, nearly 12 million U.S. users, will have access to Tap to Transfer, a peer-to-peer tool enabling users to quickly transfer funds from Samsung Wallet to other digital wallets or contactless debit cards.

As one of the world's largest and most well-known consumer electronics brands, we are thrilled that they have entrusted us to help deliver their product vision and look forward to building upon the relationship and leveraging the breadth of our embedded finance platform with Samsung. We are already collaborating and have identified additional features and functionality that can drive value for Samsung and their customers for years to come. Additionally, last week, we announced a new partnership with Crypto.com, a leading digital asset platform with 140 million global users. Crypto.com provides a platform to invest in digital currencies and deliver additional products and services. Crypto.com will leverage ARC, our embedded finance platform, as an on-ramp and off-ramp for customers' cash accounts, enabling them to easily fund accounts using U.S. dollars, either digitally or with cash at thousands of Green Dot Network cash access locations nationwide.

Additionally, Crypto.com will launch a new interest-earning savings vault powered by ARC, with additional features and functionality planned for the future. Crypto.com is recognized as a technology leader that places extreme importance on the customer experience, both the ease of use and the security of their customer funds. We are very excited that they have chosen Green Dot and our ARC platform and look forward to launching later this year and building out and deepening our relationship in the future. Last, let's talk about renewals. Over the last two years, we have navigated countless renewals across our business with very high levels of success, renewing more than 60% of our non-GAAP revenue with multi-year extensions. This strength in renewals is further highlighted by the extension of multiple product and distribution programs with Walmart. This partnership dates back to 2006 and now extends to 2033.

We will continue powering the Walmart MoneyCard and offering Green Dot products in Walmart, and they will remain a valued partner in the Green Dot Network. Over the last several years, we have worked diligently with the Walmart team to demonstrate our value as a partner, and we are thrilled to continue strengthening our long-term partnership. I think it's important to point out that these wins and renewals are an example of the progress we're making on an increasingly regular basis. The results of our organizational focus on developing meaningful relationships are that we can now talk regularly about new customer wins and the renewals of some of our largest customers. I think this dynamic clearly illustrates that we have made substantial progress in how we align the company to support our partners and our go-to-market strategy. This is not about luck.

As Bill stated in his comments, for several years, the company has focused on a strategy of investing in areas that would position us for growth and success in the embedded finance market, and those investments are paying off. I would frame the drivers of our success across several themes. First is the development of our products and services. We have been more focused on investing in and developing capabilities that align with the future of embedded finance. We have a more robust platform with a unified set of products and services. Our new customer wins are a proof point that these investments and our vision are increasingly leading customers to view us as a valuable partner that can support their growth. Next is business development.

Our business development organization continues to mature, and we are getting better at ensuring that the marketplace understands and appreciates the breadth and depth of our capabilities. Important to our efforts has been the launch and expansion of our embedded finance platform brand, ARC, which has been well received and is resonating in the market. Third is to ensure that we are aligned with the right partners, specifically partners that turn to us for comprehensive and scalable products and features that will grow their customer base and revenues by leveraging our ARC platform. Additionally, we are focused on working with partners that place a high priority on compliance, risk management, and security, just as we do. Ultimately, we believe this results in stronger, lower-risk partnerships that can generate long-term sustainable growth. Last, we are investing in infrastructure to support our growth.

After several years of work and investment in our infrastructure, we are positioned to launch partners more quickly and efficiently and help them drive growth and effectively manage our risk. We will continue to focus on improvements in our capabilities to launch new partners more efficiently, which is foundational to our growth strategy. Before handing it over to Jess, I would also like to highlight recent changes to the revenue organization. First, we appointed Crystal Bryant-Minter, who previously led our money processing business, as the new General Manager of our pay card division. Crystal has proven herself to be a strong, results-driven leader. She was instrumental in repositioning money processing to focus on third-party partnerships and expanding our product capabilities.

Since taking over money processing, she grew third-party transactions from less than 50% of our transactions to now accounting for over 70% of total transactions, and she was critical in building our partnership with Samsung. With Crystal now leading our pay card business, money processing has been moved under Renata Caine, our GM of BaaS. Renata joined us a little over a year ago to run our BaaS business, and she and the team have succeeded in building very strong pipelines, signing numerous new partners, and renewing several key relationships. Now, with money processing and BaaS, which are both powered by the ARC platform under Renata's leadership, I believe we will see further momentum, brand awareness, and growth for both businesses overall. In summary, we continue to build on our momentum as the market is increasingly aware of our capabilities as an embedded finance platform and valued partner.

With that, let me turn it over to Jess to discuss our first quarter results. Jess.

Jess Unruh (CFO)

Thank you, Chris, and good afternoon, everyone. In the first quarter, our non-GAAP revenue grew 24% year over year, and adjusted EBITDA increased 53%. For the first time in many years, segment profit was up across all three of our segments. Our B2B and money movement segments delivered particularly strong results. Non-GAAP EPS of $1.06 was up 80% from last year, driven by this strong performance. Now, let me touch on the factors that influence the performance of our segments. Refer to our press release and quarterly slide deck for segment results and key metrics. First up is our B2B segment, which is comprised of our BaaS channel powered by our ARC platform and our Rapid Employer Services. Revenue growth of over 40% continues to be driven by a significant BaaS partner, along with growth in the rest of the BaaS portfolio.

Key operating metrics within the BaaS channel, such as active accounts and purchase volume, continue to show solid growth as we collaborate with existing partners and launch new ones. As Chris mentioned, we are dedicated to helping partners expand their programs and identify opportunities to broaden the range of products and services offered to their customers. We are seeing notable progress in these efforts, and as we launch new partners, we are heavily engaged with them on this front. Based upon the success we are experiencing with existing partners, coupled with a pipeline of new launches and prospects, I'm optimistic that we will continue to see momentum in our BaaS channel. Our Rapid Employer Services channel continued to experience revenue declines due to decreased active accounts and volumes, primarily because of the challenges faced by our larger staffing industry partners.

As previously discussed, the staffing industry, one of our largest verticals, has struggled for nearly two years and hasn't recovered. Although there is optimism about stabilization, we haven't seen a rebound. However, our year-to-date sales performance in pay card outside the staffing vertical has been strong compared to last year, positioning us for growth once the staffing sector recovers. We're also planning incremental investments in sales and support for earned wage access, or EWA, to ensure that we capitalize on that market, which is a logical extension to our current pay card offering. The B2B segment experienced approximately 40 basis points of margin expansion due to improved profitability in both the BaaS and Rapid operations. This improvement was driven by overcoming deconversion headwinds, achieving revenue growth in the BaaS channel, renewals of key BaaS partners in 2024 that provide for improved economics, and focusing on efficiency and scale.

Notably, we significantly reduced transaction losses and fraud management expenses in our Rapid Employer Services, resulting in profit growth despite the decline in revenue. Next is our money movement segment, which includes the tax processing business and our money processing business. The tax business experienced a strong start to the year during their most important quarter. Although the number of tax refunds processed decreased, our tax processing revenue increased 10% year over year due to the expansion of our taxpayer advance programs and a favorable mix shift in distribution channels that resulted in higher revenue per transaction. The results for the quarter relative to our internal forecast is, in part, influenced by timing. Nevertheless, we anticipate that our tax business is poised to exceed its operating plan for the year.

Our money processing business, driven mainly by cash transfer volumes on the Green Dot Network, faced a 1% revenue decline due to a decrease in our active account base in the consumer segment. However, as we enhance the consumer segment's performance, these challenges are easing. More important, third-party cash transfer volumes grew 5% year over year, marking the fourth consecutive quarter of growth and now accounting for over 70% of our transactions. This momentum is fueled by both existing and new partners, with a strong pipeline of launches anticipated through the balance of 2025. With money processing operations more closely integrated with the BaaS channel under the ARC brand, I anticipate continued growth in third-party transactions. Profitability in the segment remains strong, with margins up just under 600 basis points and the highest level that we have seen.

Both tax and money processing saw margin improvement as the tax division benefited from higher margin revenue, and money processing saw a modest increase in margins as the team continues to manage expenses and position for revenue growth. Now I'll turn to our consumer services segment, which is comprised of our retail and direct channels. While the consumer segment remains under pressure due to secular headwinds in the retail channel, segment revenue and active account declines moderated relative to prior years. This improvement is largely due to our partnership with PLS and efforts to enhance customer experience, functionality, and retention. The PLS partnership has positively impacted the retail channel, resulting in the slowest year-over-year declines in several years. Additionally, key metrics like GDV and revenue per active account in retail have each improved by 4% compared to the first quarter of last year.

Given the ongoing efforts to enhance customer retention, the forthcoming launch of Dolphin Tech, and the renewal of our various agreements with Walmart, I am confident that the decline in retail will continue to moderate. This trend highlights our capability to strengthen customer engagement while simultaneously targeting new markets, such as the FSC channel, where we can secure and expand market share. Our efforts to reposition the direct channel continue. Due to reduced marketing spend over the last year, revenue declined by approximately 9%. We are focusing on developing a more robust product set to drive customer acquisition and improve retention. While first quarter revenue decreased, direct channel margins improved nearly 200 basis points. We remain committed to balancing growth investment with profitability. Enhancing platform features and user experience will support future revenue growth. Additionally, new smaller channel partnerships present incremental growth opportunities.

Overall, segment margins were up just over 200 basis points, and profitability increased modestly due to our efforts to manage operating expenses, including substantial improvements in transaction and fraud management expenses compared to last year. The corporate and other segment reflects the interest income we earn at our bank, net of the revenue share on interest we pay to BaaS partners, as well as salaries, technology, and administrative costs, and some smaller intercompany adjustments. Revenue increased year over year due to rate cuts that improved the balance between yields on our cash and investments and interest shared with partners. Expenses decreased compared to last year, primarily due to the timing of various expenditures related to compliance and risk management investments in the first quarter of 2024. During our Q4 call, we outlined our strategy to reposition a portion of our investment portfolio to increase yields.

Our GAAP results for Q1 reflect a realized loss of $25 million on our investment securities, attributed to the sale of bonds that took place in early April. We remain on track to achieve improved yield performance throughout the year. Now let me provide you with updated guidance for 2025. We are performing better than our internal projections. While some first quarter benefits are due to timing, I believe that certain aspects represent overperformance for the year. Provided the current volatility in the economy does not directly impact customer behavior or our business in general, we expect to deliver results above our initial guidance. We are raising guidance as follows. We expect non-GAAP revenue of $2 billion-$2.1 billion, up from our prior guidance of $1.85 billion-$1.9 billion.

We expect adjusted EBITDA of $150 million-$160 million, up from our previous guidance of $145 million-$155 million. Non-GAAP EPS of $1.14-$1.28, as compared to our prior guidance of $1.05-$1.20. Turning to our outlook for the rest of the year, we expect consolidated revenue growth in Q2 and Q3 to be consistent with Q1 and a low teens growth rate in Q4, as we lapse some discrete revenue items in Q4 of last year that we discussed on our prior call. We anticipate our adjusted EBITDA cadence to be largely in line with our prior commentary, with some timing shifts benefiting Q1 and impacting Q2 and Q3. Our segments are expected to play out as follows.

B2B segment revenue is expected to moderate over the remaining quarters, but will still show strong growth with a full-year expectation of growth in the low to mid 30% range for 2025. I now expect margins in our B2B segment to be down a bit versus 2024 due to revenue mix. The money movement segment revenue should grow low single digits in 2025, driven by the tax business and a continuing trend of growth in third-party cash transfer volumes that will move the money processing channel back to sustainable revenue growth after several years of transition. I would expect margins to be up versus last year, given the strength of the tax processing business. The consumer segment revenue is still expected to see revenue decline in the upper single digits, with mid single digit declines in the second and third quarters, and more pronounced decline in the fourth quarter.

The fourth quarter decline on a year-over-year basis reflects discrete revenue items that benefited the fourth quarter of 2024. Excluding the impact of declines in non-core revenue, such as breakage and project-based revenue, the recurring revenue base of the consumer segment would be down in the low to mid single digits, reflecting our progress in this part of the business. Overall, we expect consumer segment margins to be down 450-500 basis points and at a level comparable to 2023. Excluding the benefits of the non-core revenue in 2024 that I just mentioned, I estimate that margins would be down approximately 200 basis points. In our corporate segment, we use corporate financing proceeds to reposition our investment portfolio into higher-yielding floating-rate assets, reducing our overall duration exposure. This repositioning, combined with organic balance sheet growth, should result in approximately $15 million of revenue growth.

I expect corporate expenses to be up year-over-year in Q2 through Q4, primarily related to the year-over-year timing and our ongoing investments in our regulatory compliance and infrastructure. We also intend to make investments to support new partner launches in our B2B and money movement segment. Overall, I anticipate corporate segment expenses to be up in the high single digits. In summary, while we still anticipate declines in our consumer segment, we believe our new FSC partnerships will continue to moderate those declines. I'm further encouraged by our outlook for growth in both the B2B and money movement segments, which will be the second consecutive year where both of these segments are expected to show growth. This expectation reinforces my confidence that our investments in these areas are enabling us to capitalize on the vast opportunity within those markets.

As a final note, we are excited to have renewed various agreements with Walmart and its affiliates through January 2033. In connection with these renewals, we and Walmart have agreed to allocate existing funds within TailFin, our joint venture, to provide a $70 million incentive payment to a Walmart affiliate. This payment doesn't require any incremental cash flow from us. However, TailFin will recognize an expense of $70 million, and we will report the corresponding equity loss in our TailFin investment on our GAAP financial statements. With that, let me turn it back over to Bill for some closing comments.

William Jacobs (Chairman and CEO)

Thank you, Jess. It was a strong start to the year, and as Chris indicated, we are winning in the marketplace. We are thrilled to welcome new customers such as Crypto.com and Samsung, with more to be announced in the coming months.

Just as important, those customers that have worked with us for many years continue to place their trust in us to help them deliver on their own aspirations for embedded finance, and we are thrilled that they recognize the value of partnering with us. Over the years, Green Dot has evolved and responded to many changes, and I think our results are beginning to show that we have made the right decisions. During the last several years, the company has undertaken numerous initiatives and made substantial investments to position Green Dot to return to sustainable, predictable growth. We have made investments in modernizing our technology stack, building a more robust platform of products and services, and invested in our business development efforts.

We are also continuing to make investments to ensure that our infrastructure can support the requirements of a growing customer base, including critical areas such as onboarding, customer care, and risk management. I am increasingly confident that we are positioned to win in the embedded finance market and build on our recent momentum. I would like to thank the team for all their hard work serving our customers and stakeholders. With that, we are happy to take your questions. Operator.

Operator (participant)

Thank you. We will now begin the Q&A session. To ask a question, you may press star then one on your touch-tone phone. If you're using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star, then two.

Jess Unruh (CFO)

At this time, we'll pause momentarily to assemble our roster. The first question will come from Tim Switzer with KBW. Please go ahead.

Tim Switzer (Analyst)

Hey, good afternoon. Thank you for taking my questions. [audio distortion]. Congratulations on some of the new partnerships you guys have announced and the renewal with Walmart. I'm a little curious on for Crypto.com and Samsung, can you clarify maybe which segments the revenue for this will run through, and then what does the ramp for these look like over the next, say, year or two as they come on board?

William Jacobs (Chairman and CEO)

Go ahead, Chris.

Chris Ruppel (COO)

Sure, Tim. Yeah, thank you for the question. I think the revenue for these clients will run through either our BaaS or money movement channels, depending on the services that they're taking advantage of on the ARC platform.

We do believe that the revenue from these partnerships and our ability to work with these partners and expanding the services will have a significant impact over time to their businesses and will scale. At this point, though, I do not think we would want to get into the details of either partnership and where we think that that might lead, but I believe we have a strong belief in our partners and their businesses and the strength of their user bases and believe that they will both have the ability to grow with us and on the ARC platform for many years. I appreciate the question.

Tim Switzer (Analyst)

Okay. Are you able to provide any details, qualitative or not, on the economics of the new MoneyCard deal with Walmart versus the previous terms? As you guys were going through the renewal process, what kind of discussions were there in regards to potentially offering new capabilities or products that Green Dot can deliver for them?

Chris Ruppel (COO)

I also appreciate the question, and we value our partnership with Walmart and believe that we have a significant runway and opportunity to improve the programs within Walmart, both with the Walmart MoneyCard extension in conjunction with our TailFin JV to be able to invest in product capabilities and bring those to Walmart consumers. In addition to, as we improve our Green Dot products, as we do in the normal course of our business, and has been a focus for us as we have been improving our platform to look at products and feature sets that can have even greater appeal for consumers.

We have the ability now, over a longer term, to distribute those products through Walmart locations. We believe there is, in our discussions with Walmart, continued focus on ways that we can use TailFin funding to improve the customer experience and innovate. We have talked before about some of that being a refresh of the UI that the customers will be able to experience and move forward with in the Walmart MoneyCard program as we finish that project, which we are actively involved in on the program. We believe there is quite a bit of ability to continue to innovate, to leverage the TailFin funding to improve the programs in Walmart. Excited about that opportunity.

Jess Unruh (CFO)

Yeah, I would add that now that we've signed a long-term extension, the relationship between the two companies is even stronger, and I'm sure that our ability to deliver additional products for the customers is going to grow as time goes by. Just one last comment would be, outside of the Tailfin capital that we talked about in the prepared remarks, there are no other changes to the economics on the MoneyCard program.

Tim Switzer (Analyst)

Got it. Okay. That's helpful. Thank you. If I could squeeze in one more, could you guys maybe review your different divisions in terms of maybe which ones have less synergies or connections with the other divisions and how things like the tech stack for each division would make it either easier or a little bit more complicated in terms of a potential divestment? For example, I think the pay card and the tax business are both on kind of a different tech stack than the rest of the company.

Jess Unruh (CFO)

Yeah. Bill, do you want to take that one? Otherwise, I'm happy to do it.

William Jacobs (Chairman and CEO)

By and large, we've, over the last couple of years, tried to bring our tech into focus, and there are a couple of divisions—you've named the two—that are somewhat autonomous, more so the tax business than anything else. We, as a company, are always looking at what's the best way to deliver value to our shareholders. If it turns out that it made sense for us to divest of a division, that's something that the company would always look at. That's kind of the reason that we embarked upon our strategic review.

We feel that the assets that the company has are pretty terrific, and we thought that the market was not giving the value that we think is appropriate. We started this strategic review to sort of look at all these questions, including the one that you asked.

Tim Switzer (Analyst)

Got it. Appreciate all the color there. Very helpful. Thank you.

Operator (participant)

The next question will come from Ramsey El-Assal with Barclays. Please go ahead.

Ramsey El-Assal (Analyst)

Hi. Thank you so much for taking my question tonight. I wanted to ask about consumer services, and active accounts came in a bit higher than we expected in the quarter. Taking a step back, can you give us your thoughts on sort of what ending we are in for consumer active account growth, and what are the sort of building blocks to see a return to positive growth there?

Jess Unruh (CFO)

I would say in the prepared remarks, Ramsey, I mentioned that certainly the growth, or the decline, I should say, is definitely moderating. PLS is a big contributor to that moderation. I would say there are a few other players in the FSC channel, which is relatively niche for us, that we are focused on from a business development pipeline. Certainly, if we win those deals, those could also further moderate the declines. As Chris just mentioned, with the renewal with Walmart, certainly we are focused on expanding our capabilities and offerings there. I would not anticipate a return to active growth in the consumer business in 2025, but certainly some of our business development efforts and work with some of our existing partners can certainly help. Chris, I do not know if there is anything else you want to add.

Chris Ruppel (COO)

I would just say we've talked about over the last several years, as we're modernizing the platform and as we look at starting to get closer to the completion of that modernization over the next 12 months, we believe that we can start to focus and apply resources, and we're seeing more and more capabilities to do that on product innovation. We think that will help us in our embedded finance business and bringing new products and services to partners, but also direct to consumers as we move towards a consolidated platform. I think we'll start to see some benefits of that as we can bring new product features into the market in some areas that we have not in some time.

We do not have, at this point, a great indication of the impact of those, and we want to allow some time for that to take effect. We are optimistic about being able to improve the appeal of our products, and in particular, the products in some of our legacy businesses.

Ramsey El-Assal (Analyst)

Got it. One follow-up from me, and apologies if you already covered off on this in your prepared remarks, a great deal of which I missed, unfortunately. Can you comment on the macro backdrop that is sort of baked into your guidance, into your annual guidance? Are you contemplating any further deterioration or more of a steady state from what we are seeing today?

William Jacobs (Chairman and CEO)

What we have said in our prepared remarks is that looking at the macro environment as we see it today, that is what the numbers we have talked about.

A change in the macro environment would obviously have us relook at those numbers, but what we've put out is based upon how we see the environment today.

Ramsey El-Assal (Analyst)

Got it. Thank you very much.

Operator (participant)

The next question will come from Chris Kennedy with William Blair. Please go ahead.

Chris Kennedy (Analyst)

Good afternoon. Thanks for taking the question. Can you just talk broadly about the operating environment for embedded finance and banking as a service today versus a couple of years ago?

Chris Ruppel (COO)

Sure, Chris. I'm happy to take that. I appreciate the question. I think that we have seen a pretty significant change in the market. There are, and I would say it's characterized by sort of three key factors. The first is that there is a growing awareness of what was sort of a disconnect between technology platforms and issuing banks and some of the negative outcomes that that can cause.

That certainly has adjusted the market, put a risk premium on having a sort of a secondary relationship with the sponsoring banks and programs relative to a technology platform. That favors our value proposition first. The second is that the partners that we see coming to us are less exploratory and have a better sense of what they'd like to do with embedded finance, have a fuller strategy around how to grow that business, their business, and how it's going to improve what they're trying to do in their overall strategy and customer journey. They have very strong, I said, opinions and strategic plans on how they want to improve their customer experience with embedded finance. We see that in terms of them maturing in the market and understanding how it could be leveraged.

The third is that we see, just because of that, maturing, increasing demand. We are seeing a market that still has a very long runway of possibility to it. We see that partners who are looking at the space are increasing their investments, both on their side and looking at ways that they can improve the relationship. I think we see that in the market. Our research supports that. We think that it is also evidenced by—we have talked in past earnings calls about our pipeline and the growth we have seen over multiple years in our pipeline. I think all of those things point to having the right value proposition relative to the macro market, the market itself, maturing in people's expectations and understanding of how to utilize embedded finance to improve their customer value proposition, and then the depth of that market. Yep.

Chris Kennedy (Analyst)

Really appreciate that. And then just a quick follow-up. Can you also throw in what you're seeing on the competitive environment within embedded finance? Thanks again.

Chris Ruppel (COO)

Competitively, we are seeing that it is an active marketplace. There are key providers in the market that we see regularly. I do believe there is, in the selection process, a value placed on at-scale partners that are established and that offer a level of expertise and capability beyond just a large tech investment in a platform that might have been made. We see the level of the maturity is also looking for partners that have the same level of maturity, the same level of organizational capability to support at-scale partners.

The marketplace, although it continues to be competitive, we see that we are having an ability to have our value proposition, our capabilities, and resonate in the market. We are able to differentiate ourselves because of the vertical integration of our embedded finance platform, the bank, our program management services, and risk programs. That is helpful in the market. It is a competitive marketplace and one that we see as a growing, continuing to be a growing market.

Chris Kennedy (Analyst)

Great. Thanks for taking the questions.

Operator (participant)

This concludes our Q&A session. I would like to turn the conference back over to Mr. William Jacobs for any closing remarks. Please go ahead, sir.

William Jacobs (Chairman and CEO)

Thank you. And thank you, everybody, for joining our call today. This has been an exciting quarter for Green Dot, and I hope you all see the progress the company's made, and we look forward to talking to you more often. Thanks a lot.

Operator (participant)

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.