Green Dot (GDOT) Beats Q2 Earnings Estimates, Cuts '19 View

Green Dot Corporation (NYSE:GDOT) reported impressive second-quarter 2019 results, with earnings and revenues beating the Zacks Consensus Estimate.

However, the stock declined a massive 41.1% since the earnings release as both quarterly and yearly guidance disappointed. Management guided 2019 non-GAAP EPS in the range of $2.71-$2.77, which is below the current Zacks Consensus Estimate of $2.83 and the previous guidance of $2.82-$2.91. For the third quarter, expected non-GAAP EPS of 2 cents is way below the consensus estimate of 26 cents.

Non-GAAP operating revenues for 2019 are expected in the range of $1.06-$1.08 billion, below the current consensus estimate of $1.10 billion and the previous guidance of $1.114-$1.134 billion. For the third quarter, non-GAAP operating revenues are anticipated between $225 and $230 million, below the consensus estimate of $239.6 million.

Adjusted EBITDA for 2019 is expected between $240 million and $244 million versus the previous guidance of $255 million to $261 million. For the third quarter, adjusted EBITDA is projected between $12 million and $14 million.

Green Dot shares have declined 65% year to date, against the 40.7% rally of the industry it belongs to.

Quarterly non-GAAP EPS of $90 beat the consensus mark by 27 cents and increased 21.6% year over year, driven by better operating performance.

Green Dot Corporation EPS Diluted (TTM)

Non-GAAP operating revenues of $265 million beat the consensus mark by $4 million. Revenues benefited from strength in the BaaS Platform product line and the processing and settlement segment.

Let’s delve deeper into the results.

Key Metrics

Gross dollar volume grew 6.4% year over year to $10 billion. Purchase volume increased 2.3% from the prior-year quarter to $6.5 billion. The reported quarter ended with 5.7 million active accounts (down 3.4% y/y) and 11.3 million cash transfers (up 6.5% y/y). The number of tax refunds processed was 2.5 million compared with 2.8 million in the year-ago quarter.

Segmental Revenues

Account Services non-GAAP operating revenues came in at $206.3 million, up 1.8% from the year-ago quarter driven by increase in direct deposit active accounts despite an overall decline in the number of active accounts. Processing and Settlement Services non-GAAP operating revenues of $66.4 million grew 14.3% from the year-ago quarter driven by increased transaction volumes across product lines.

Operating Results

Adjusted EBITDA of $74.6 million increased 18.4% on a year-over-year basis. Adjusted EBITDA margin of 28.2% increased from 24.9% in the year-ago quarter.

Balance Sheet & Cash Flow

Green Dot exited the quarter with cash, cash equivalents and restricted cash balance of $1.1 billion compared with $1.7 billion at the end of the prior quarter. The company has no long-term debt. It generated $51.7 million of cash from operating activities and capex was $18.4 million.

Zacks Rank & Stocks to Consider

Green Dot currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Some top-ranked stocks in the broader Zacks Business Services sector include ICF International (NASDAQ:ICFI) , Accenture (NYSE:ACN) and Charles River Associates (NASDAQ:CRAI) , each carrying a Zacks Rank #2 (Buy).

The long-term expected EPS (three to five years) growth rate for ICF, Accenture and Charles River is 10%, 10.3% and 13%, respectively.

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