This story has been updated with analyst comments and additional information from the company's earnings.
Austin, Texas-based Green Dot was able to secure a multi-year renewal with tech giant Apple's Apple Cash digital wallet, its largest BaaS partner by revenue, with "improved financial terms," CEO George Gresham said on the company's second-quarter earnings call Thursday.
The renewal spells good news for Green Dot, especially in light of its
"A main highlight this quarter… is they announced their renewal of their agreement with Apple, with Apple being their largest [BaaS] partner by revenue," Switzer said. "The renewal of your biggest partner right after receiving a consent order I think is a positive, because it indicates that their partners are still confident that Green Dot will still be able sufficiently provide the services they want."
Green Dot's topline earnings per share missed analyst expectations, while revenue beat. Earnings per share came in at a 54-cent-per-share GAAP loss for the three months ended June 30. Wall Street analysts expected a 2-cent-per-share GAAP loss. Revenue was $407.1 million, an 11% year-over-year increase and 5.5% more than Wall Street's $382.5 million average revenue estimate. For net income, the company posted a $28.7 million loss, 27.7% below analyst estimates.
In addition to Apple, the company also provides BaaS services for Amazon Flex, Intuit Quickbooks and human resources software and services provider Dayforce, according to a February investor presentation.
"[Apple has] been the primary driver of growth in [Green Dot's] BaaS division," Switzer said, noting that the partnership accounts for 44% of Green Dot's total revenue.
B2B Services revenue, which includes the bank's BaaS offering and its pay card business, came in at $252.1 million, an increase of 39.5% year over year, according to the company's earnings supplement.
By another measure, BaaS revenue landed at $231 million, up 44% year over year, and pay card revenue hit $21 million, up 4% over the second quarter of last year.
Notably, KBW's Switzer said Q2 marked the first time "in several quarters" that Green Dot grew BaaS revenue on a year-over-year -basis without accounting for revenue from the Apple deal.
The company also signed "a large merchant processor and an auto lender in our BaaS Group, and are expecting to launch these new partners in early 2025," Green Dot's Greshman said.
Meanwhile, Green Dot's consumer segment, which includes its retail prepaid card business and digital bank offering, tallied a 25.1% decline in revenue to $96.7 million compared to last year's second quarter, according to the earnings supplement. Its retail prepaid card business logged a 31% decline to $60 million from last year's quarter, according to the earnings presentation.
The second quarter marks the fifth sequential quarterly decline in retail revenue for Green Dot, according to a research note from William Blair.
"After years of focusing on improving internal operations and the technology stack, we believe Green Dot is pivoting its focus to growth, but turning around the Retail division – 23% of 2023 revenue, [down] 33% in the first half – could prove challenging," according to the note.
Declines in retail revenue were "driven largely by secular headwinds and the deconversion of a retail program that created headwinds for both 1Q and 2Q24," according to the earnings presentation. Active retail accounts declined by 28% year over year to 1.23 million.
Green Dot reported total banking assets of $5.5 billion, up almost 15% from the beginning of the year, according to the earnings supplement.
The company tweaked its outlook for the full year, now expecting adjusted earnings at the low end of its guidance range of $1.45 to $1.59 a share.
Shares of Green Dot were trading up 13.6%, or $1.20, to $10.05 today at market close in New York following the company's earnings call Thursday. Green Dot has a market capitalization of $527.3 million.
