Good afternoon, and welcome to the Green Dot Corporation First Quarter 2018 Earnings Conference Call. All participants will be in listen only mode. [Operator Instructions] After today's presentation there will be an opportunity to ask question. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Dara Dierks, Green Dot Investor Relations. Please go ahead.

Thank you, and good afternoon, everyone. On today's call, we'll discuss 2018 first quarter performance and thoughts about the remainder of the year. Following those remarks, we'll open the call for questions. For those of you who haven't yet accessed the earnings release that accompanies this call and webcast, it 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, including revenue per active card, 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 appears 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 Q1 2018 earnings call. Today, we'll start with a review of our outstanding financial performance in the quarter, which represents another consecutive quarter where we've exceeded our top and bottom line expectations. I'll then provide an update on how we're executing on our 2018 Six-Step Plan, which will be followed by Mark's detailed overview of our quarterly results and an increase to our 2018 full year revenue and earnings outlook. Our disciplined execution against our long-term strategic plan of building a differentiated products and platform model continues to yield very impressive results. Total consolidated operating revenue came in at $315 million, representing a 25% year-over-year growth rate, an acceleration over last year's Q1 growth rate of 11%. Excluding the UniRush acquisition, which lapped in February, organic revenue grew 16% year-over-year. Adjusted EBITDA for the quarter was $104 million on a consolidated basis, representing year-over-year growth rate of 16%. You'll notice that our year-over-year adjusted EBITDA margins compressed by 240 basis points in the quarter. As we shared in our last call, we expected that the newer branded product lines and the large-scale Banking-as-a-Service program launches that were expected to contribute material revenue growth in the quarter would have a much lower contribution margin than our established product lines and that is exactly what happened, causing consolidated margins to compress somewhat year-over-year, with margins on those programs expected to expand over future periods as those programs scale. Having said that, our annual guidance calling for around 100 basis points of consolidated EBITDA margin expansion for the full year 2018, despite the materially lower margins on those new programs and the burden of all the associated large upfront investments, speaks to the powerful leverage in our operating model. Consolidated non-GAAP EPS for…

Thanks, Steve. To echo Steve's comments, the strong momentum in our six revenue divisions plus our bank combined to once again deliver better-than-expected results. Total operating revenue of $315 million represented a year-over-year consolidated growth rate in the quarter of 25%. Growth excluding UniRush was also very strong, accelerating by 16%. As a reminder, on last quarter's call, we said that starting in 2019, we intend to make the following revisions: first, for GAAP reporting, we intend to present net interest income generated at Green Dot Bank from the investment of customer deposits as a component of GAAP total operating revenues, which is more consistent with how other companies report banking net interest income. Historically, we have reported that line item below operating income, which is consolidated along with other net interest income generated outside of the bank. Second, in an effort to provide more transparency into our economic margins, we intend to present a new non-GAAP revenue figure that reduces GAAP total operating revenue by commissions and certain processing related costs associated with certain BaaS partner programs, where the partner, and not Green Dot, controls customer acquisition. In order to provide a smooth transition, we will guide and report results in 2018, as we always have, using our current GAAP presentation and non-GAAP measures. We also will provide supplemental reporting that shows what our results would look like under our new presentation of revenues. That being said, interest income generated from customer account balances held at the bank was $5.3 million in the first quarter of 2018, reflecting year-over-year growth of 89%. And total commissions and certain processing-related costs associated with certain BaaS partner programs, where the partner, and not Green Dot, controls customer acquisition, was $13.2 million during the quarter. That would mean that consolidated non-GAAP operating revenue…

[Operator Instructions] The first question comes from Ramsey El-Assal with Jefferies.

It's actually Damian on for Ramsey. I just wanted to ask on the adjusted EBITDA margin guidance. I'm just wondering if you can kind of help us think through the timing of that for the rest of the year, and what we can expect to the Banking-as-a-Service platform just to scale so that it isn't so dilutive on margins. I know you're guiding to margin expansion for the full year but what should we expect -- or should we expect margin expansion to be relatively muted going forward as you continue to add new clients?

That's a great question. So I think what we've said is during the first half of this year, we are seeing margin compression mainly from the revenue mix being more weighted toward our relatively newer programs. In the back half of the year, we're expecting to see margin expansion, assuming we have the same contribution margin we have today from our established programs as well as our newer programs. And we're expecting to see a little bit more operating leverage in the back half of the year from SG&A being a lower percentage of revenue than it was in the first half. So in general, back half of the year margin expansion; first half of the year, a bit of margin compression.

And the question to the point of when the new programs scale, it really depends on the program and the revenue characteristics. But in general, especially in Q1, you have the impact of all the tax programs. Remember, we had the TurboTax program, TaxHawk. We did a tax program with Walmart MoneyCard this year, which did quite well through a lot of TPG pro-tax channel folks. And so you have all these -- so you don't really have the revenue. You have the cards; the cost of issuing; the call center cost; the CIP, which is the customer identification and onboarding cost; supply chain of sending the cards out to people's homes. All that is a cost that happens now and the revenue doesn't play out until those tax refunds hit the card, people start spending money and that kind of thing, and so it tends to get better over time. So it'll scale in the normal course and the margins will, we hope, expand and we plan to have expand year-over-year as they are again this year. But no question in the period, when you issue so many new plastics and it takes time for the money to catch up, you're going to have that moderately compressive reaction, which is something we expected and hopefully signaled okay to you guys.

Great. And as a follow-up, I wanted to ask on the core business then, the GDV per active card. It seemed to pop this quarter, an implied 27% growth rate. Are there any onetime factors to call out there or is that just kind of overall improvement in the fundamentals? And then kind of along those lines longer term, I mean, how do you think about GDV per active card trending maybe for the remainder of the year and maybe if there's a ceiling coming up on that. It just seems to kind of keep heading north, and I just wanted to see your expectations for that.

Yes. It just turned out fabulously well actually in the sense that, I think I had it in my prepared remarks, that we had a big GDV boost obviously from all the tax cards, right, because an average tax refund is anywhere from, call it, $2,000 to $4,000, give or take. And so that's a big hit of GDV in the quarter to the extent those cards have funded. A lot of them will be issued in the quarter but not fund until Q2. But as I mentioned in the prepared remarks, only about 30% of the GDV growth was from those new programs. 60-plus percent, 62%, I think, was the number from the script, is actually from our established product line. So you see this fabulous growth in GDV, yes from the new programs, which is always important. But from just the good old fashioned Walmart MoneyCards and Green Dot classic Visa cards and MasterCards and GoBank, which continues to do extremely well and all the other programs we've launched. So it's pretty broad-based. About a third of that GDV growth from the new tax programs, about two third from our established product lines. So really a success story. When you think about will there be a ceiling? Gosh, there's a theoretical ceiling, of course. But if you think of a regular full-service checking account like one you'd have a Chase or B of A or somewhere being what is typical for the average American consumer and where prepaid cards have been historically, we have a lot of room to grow. And so even though we're up tremendously year-over-year and frankly, several years in a row or a lot of quarters, I think GDV has grown every year for as long as we've tracked it. I think we still have a long way to go before we come anywhere near what you'd call maxed out.

Yes. I mean, further to that same point, what you're seeing is an increase in direct deposit penetration in the portfolio. And as that trend continues, we should see continuing growth in GDV per active.

The next question comes from Andrew Jeffrey with SunTrust. Please go ahead.

I guess, the first thing, Steve, just to clarify. When you talk about the platform programs and the extent of the growth they've driven, can we interpret that as being materially or materially all the new tax programs as opposed to say Uber or Apple Pay Cash? Is that the right way to think about it?

Well, kind of, sort of. So we can't, as you can imagine, break apart individual programs for you all, but I can give you this guidance only because we kind of had a feeling we would get that question. So if you think about the growth in Q1, think of that in thirds, with 1/3 of that growth being from the Banking-as-a-Service programs, which would include tax but also has Apple Pay Cash and has the Uber programs and some other things in there. But 1/3 is from the new programs, the BaaS programs. 1/3 of that growth is from our established programs, the legacy business, if you will; and 1/3 of that growth was from 2 months of the UniRush acquisition, which had not lapped until March. So it's really 1/3 and 1/3 and 1/3, and again, it shows you, Andrew, this broad-based growth we're enjoying from new products, old products and in this case, the acquisition in the quarter as well.

And does that hold true for active cards as well that about 1/3 of the growth was UniRush?

Well, so let me think. You're going to make me disaggregated anyhow, aren't you? Okay, hold on, let me think about this. What can I disclose? So we said -- well, hold on, we had some things in the script, didn't we? On active cards that I can use? Jess, help me, remind me what did I say in the prepared remarks? We know what the internal numbers are. The answer is some of that growth is from -- let's think of it this way, this is not any big deal. I can disclose this because I think it's a really positive number. That's a lot of active cards in the quarter, right, about 1 million more accounts year-over-year. About half of that 1 million came from the new programs and 0.5 million actually came from good old-fashioned Green Dot, which again is just a fabulous statistic. We don't normally break apart the accounts that way but that's probably something that I can tell you that isn't too dangerous and it's a great stat.

And then good to hear the MoneyPak is back, as you say. Can you just describe briefly for us what the value prop is? With all the focus on direct deposit and mobile and changes in the way -- changes in your demographics and changes in the way folks use your cards, who's using MoneyPak? What's the use case? What's the value prop? I'm just trying to understand that distinct from the traditional GPR products.

Yes, well, MoneyPak is a deposit slip. That's the easiest way to think of what the product is, except it's made out of cardboard instead of white paper. But it's a deposit slip. And when you go to reload a prepaid card, whether it's our card or anyone on the Green Dot Network, and we have, as you know, over 200 or maybe now 300 programs on the Green Dot Network, you can swipe your card at the point of sale if it's a card-based program. And you swipe the card and then the money gets put on it, and you don't need the MoneyPak in that one use case. But what if, Andrew, you had a Green Dot card or a card that's on our network, and I wanted to put money on your card. I don't have the card, you do. Well, the MoneyPak is a deposit slip that allows you to do that as a third party and to put money on the card. So people use it that way. It's a very efficient form of domestic money transfer because I can put money on -- in fact I use it this way, I can put money on my daughter's GoBank account even though I don't have her card with me. She has a card at college, but I can put money on her GoBank account and using that as a very inexpensive form of domestic money transfer. So that's another example. We also use MoneyPak to pay certain bills and for PayPal and other kinds of sources. So it's a -- credit card bill pay is another reason why people buy MoneyPak. So there's a lot of different reasons why folks buy MoneyPak. I haven't looked at it recently to give you anything more detailed, but my guess is that the majority of MoneyPak, although I may be wrong, Helena Mao, who runs the division would need to tell me, is still that third person domestic money transfer use, a parent to a child, a husband to a wife, a truck driver or somebody who's giving money to a family member on their Green Dot card or it could be another card that's part of our network. So that's still probably the biggest use cases, would be my guess.

Okay. And then one last one for me just as a follow-up on that. Is the growth you're seeing in cash transfers and MoneyPak, in particular, more a function of same-store sales or new distribution partners?

It's both. It's growing well month-over-month, year-over-year. And we see expanding growth in the retailers where it's been. And then, of course, as you add new retailers, you get nicer growth from there as well.

The next question comes from Andrew Schmidt with Citi.

I guess, a related question then. In the tax season, you had some commentary in your prepared remarks. How did that play out relative to expectations? And what does that imply for the second quarter, I guess, just from a tax revenue perspective?

So the answer is every -- let me think about this because it could be a great stat. I just want to be accurate. I think, Mark, every product line and KPI we tracked was above expectation. Was there any KPI that was below expectation? I don't think so.

No, I think that the timing of tax season is coming in as we anticipated and we're just outperforming on the actual results.

So that went well. So the answer is tax season, but everything went beyond expectation, which drove the revenue beat and the EBITDA beat. And then the other question is what does that mean for Q2. Well, Q2 should be another good second half, if you will -- not half, but a stub period for tax season because while people getting a refund do tend to file their taxes sooner in the quarter and get their money on, the IRS, for good reason, has delayed -- I say for good reason, because Green Dot is a part of how we protect the government from tax fraud and we work with the IRS. And giving those deposits more slowly and more thoughtfully is a big way to protect the government from tax fraud. And so as you may know, the PATH Act, P-A-T-H, PATH Act last year was enacted, which delays deposits to refund filers so we can make sure that they're good filers and some other things. So some of that money and refund money and then revenue that generates from spend and ATM usage and so forth will slip into Q2. And we'll have to see how that does. We can't give you an early read on the quarter. But we would expect, to the extent that there's tax revenue in Q2, that it'll do better than it would have in previous years.

Understood. That helps. And then, I guess, on the second quarter, just the EBITDA margin. Is there anything in there in terms of incremental investments that you're making relative to the initial plan? Just curious if there's anything incremental versus just the mix shift towards the newer programs that come in at a lower contribution margin.

Mark, you want to take that?

Yes, it's really around the mix shift and it's pretty much consistent with what we were expecting to see in Q2.

Got it. And then, I guess, just one last question, more strategic. The SimplyPaid platform, it seems pretty compelling. It fills the void from a B2B, B2C payments perspective. Can you just talk about the strategy in terms of rolling that out to businesses? And I guess, just your experience so far with the adoption of the product.

So when you think about adoption in the sales cycle, it's a longer sales cycle, frankly, than I would want. And we have a wonderful sales division and a great revenue division headed by a fellow named Brett Narlinger. And Brett -- what I love about Brett is he actually makes me look Type B. That's how Type A Brett is. If you know me, that's saying something maybe. But Brett's fabulous and his team is fabulous. But it's a longer sales cycle because we only pitch, as a general rule, big, large, beefy opportunities because it takes as long to roll out a small client as a big client so you want to get that volume there. But we're working on it and we have a very nice pipeline with SimplyPaid. And I think adoption will ultimately come along. It's done very, very well for us. We're up massively year-over-year with it but would like a lot more activity in the pipeline. Now once it rolls out, the adoption from the end users' point of view, the consumer's point of view or the worker's point of view is tremendous. I was in a funny meeting where the -- or the funny question in a meeting where it was like, well, Steve, do low-income people like their money sooner and faster? And I said, I think everyone likes their money sooner or faster. I don't care if you're Warren Buffett. Who would want their money -- no, no, delay it, keep it for another week, I like that. So the proposition of simply getting your wages instantly or far quicker than you'd normally get is just very compelling. And it's a very easy proposition for the worker to sign up for. So once you [Indiscernible] that, it has tremendous adoption and is very well received. But it's like any enterprise level sale, there's a lot of integration and work that goes into it.

And then, I guess, my last question. Organic card growth for the year. Given the strong start to the year, is -- have your expectations changed at all in terms of just thinking for the year? And I guess correlated to that, just thoughts around converting -- or I guess, efforts around converting the traditional sort of one-and-done tax customers to direct deposit customers? Because I know that's a function of active -- that will be an active function of active card growth for the year.

So I think we gave in the guidance call last quarter -- this is just from memory, I could be wrong -- that mid-single digits is what we'd expect active card growth to be. And we'll certainly -- we certainly feel good about achieving at least that. Now the question is, how do we make the most out of all of our tax depositors and make sure that they're not just disbursement customers, that they adopt the product and use it more than that. And we'll have to see how that goes. It's too early. We don't know yet. But early indications are good and we want to retain as many of those customers as we can, and that's why we have features that are good for that. The mobile app, which has been heavily downloaded, you heard me say in the prepared remarks, 1.5 million mobile app downloads for accounts just in Q1 for a company that I don't think four years ago had a mobile bank account that -- that was an app-based bank account like that. So pretty impressive numbers. And so the more folks use the mobile app and deposit checks and use the ATM networks and the hope is that people say, this is actually a really easy account to use and there's no overdraft fees and no bounced check fees. Gosh, I'll use this more and more. And that's how we continue to build our active account base. So as an acquisition portfolio tool, if you will, we think the tax business will generate some good customers for us. What that means numerically, I can't tell you at this point, but we have good hopes for it.

The next question comes from Bob Napoli with William Blair.

Just a -- on the mobile apps, what programs are driving that? I just -- that number jumped out at me. I don't remember hearing that type of a number out of you for the mobile. Are there certain -- is it tied to the TurboTax or the Intuit program or which --

Yes, it's broad-based. It's Uber, it's Walmart MoneyCard because you need the mobile app to track your cash back. It's the Green Dot 5% Cash Back Visa. Here it gives you a sense of the -- what do I want to call it -- the evolutionary change or the transformational change we're seeing in the company, part because we're driving it, part because sometimes consumers pull you and you learn things of what consumers are doing that even you didn't anticipate. But it used to be, you get the card, you call the call center, you register the card. Maybe if we're lucky, you service your needs on our website as opposed to calling an operator and that kind of thing. But now, people start with the mobile app. And you see the commercial on TV for the Green Dot 5% Visa, whatever it might be, or you get the card from your employer if you're a Rapid! Pay customer or you get it from TurboTax or TaxHawk, whatever it might be. And you just instinctively go to the App Store, you search for the app and you download it. It's just how the world works. So part of it is, yes, we're trying to incite that evolution. Part of it is it's just the behavior and we need to make sure our products easily work in that way. But it's a great sign or a great illustrative data point, which is why I included it in the prepared remarks because those are the kinds of customers you want, that are engaged in the product and more likely to take advantage of the features that we have to offer.

Great. Are you seeing anything new competitively? I guess, are you noticing Square Cash as a competitor? I mean, obviously, you have some -- the landscape's changed quite a bit over the last few years as you pointed out with Amex.

Yes. No, not in particular. But look, if you think about the landscape of bank accounts, Green Dot, while it's grown very, very nicely, and we have 6 million active customers on the card side of the business, would still be no match for a Chase or a Bank of America or a Wells Fargo or something of that nature. And so to the extent that you have new competitors on the market, I'm sure Green Dot feels some pressure but not to the extent the larger banks would. And it's a very, very big market. So we're not seeing any competitive pressure, and you can see the growth is pretty robust. And we like the fact that there's more and more digital offerings because customers don't see the world as a net zero-sum game. You just become more aware of certain products and a friend has this and another friend has that and the family member has this. And it takes your product category and just makes it feel more mainstream. So the answer is no, we're not feeling competitive pressure from any of those, and Green Dot, I think, would be the king of this kind of disruptive, digitally acquired, in-the-flow bank account. But to the extent there's people out there and if they're beating the drum and advertising, we think that's good for the market in general. But nothing we could point to as a concern at this stage.

The last question. You guys have continued to generate a lot of cash. You don't have any buybacks or M&A in your outlook. But how aggressively are you looking at M&A opportunities? What type of things would you look to add? And if you don't do M&A, will you plan on buying back stock?

Well, so the answer is we talk about the right deployment of capital, and we meet for board meetings and Mark and I talk about it and everything from should we pay down debt in advance? Should we keep the money on reserve as the bank grows? We have to have a certain amount of capital in the bank to offset deposits. And different things of that nature, and we don't have a ton of cash in the balance sheet right now relative to our history, although we'll accrue a lot more throughout the year. So I don't think it's any one thing, Bob. We look at M&A. We get a lot of calls, as you can imagine, from bankers. Mark fields those, we talk about them. Some you dismiss out of hand, it's not our cup of tea. Others, you'll investigate further. And if we saw something really exciting, we take a deeper look and maybe seek to engage. But the really good acquisitions, at least in our immediate world, we think we've made and we've done a very good job, I think, fair to say on the integrations and getting a lot of value out of those acquisitions and there's a lot more to go. And we deployed about $300 million between UniRush and share buybacks just in the past 2.5, 3 years. That's a lot of cash relative to our size. So it may just be my conservative nature or Mark's nature that we want to take a breather, and let's stockpile some more cash. We have a lot of programs that are growing. We have a lot of new initiatives, many of them organic, the best kind you can have. And so I don't think I would look any time soon for anything dramatic. But we're not against it or anything like that and over time, we'll continue to look at the right ways to deploy capital.

The next question comes from Brad Berning with Craig-Hallum.

I want to know if I could follow up a little bit further on the app downloads, and maybe you can talk about cost of acquisition for that -- those kind of initiatives. Is that something that you said is just automatically accounts are doing? Are you pushing that from an expense standpoint? And can you talk about how that's impacting cost of acquisitions for the overall kind of mix of business that you're getting now that you're getting more people doing automated downloads to the accounts?

Right. Well, the answer is we don't pay any kind of incentives or do any kind of marketing or financial prizes or anything to get people to download the app or, for that matter, even to get them to use the account. We don't like price promotions. We used to do them in the old days. I just hate them, and for lots of different reasons we can go into later. But we don't do price off or discounts or get this free or get that free. Either people like and see value in the product or they don't. And if they don't, shaving $1.00 off something isn't going to change their mind for it. So we focus on the value of it. And so we don't market the app in that way. It's just a natural behavior. And so in that regard, it's been a cost savings for us because to the extent we can have somebody register their account on the website, which does a lot -- have a lot of heavy registration or they can self-service on the website or the mobile app, it's the same effect. Then they're not calling an operator at some amount of money that we have to pay per minute and not generating a lot of follow-up work that is more expensive in the call center. So it's been an overall transition that's helped us become more efficient. But we have a long way to go there in terms of making our customer service empire more efficient and evolving with new tools and chat and all the kinds of things that we need to continue to do to service modern customers who don't want to talk to people. In the old days, people used automation and you were viewed as cheap. "Oh, they're a cheap airline. They made me get my ticket from the kiosk." Now the answer is, "No." You go to check in at Southwest here at Burbank airport. There may be 3 open employees behind the counter, but you just don't even want to make eye contact. You go right to the automated attendant. It's just the modern way, for better or for worse, that people like to conduct their business. So we just want to make sure we have all the automated tools. And the fact that more people are just habitually using the app, just as consumers behave whether with us or any other kind of company, has been a real advantage for the cost base, and we hope that will continue and we'll certainly do our best to drive it, but we don't pay incentives or cost per acquisition for it.

And the follow-up kind of correlated to this is the margin expansion in the second half that you're talking about. And this just despite the seasonality of some of the revenues. So should we think about that as kind of the new core base to build off of going forward? Or is there like we're going to have chunky investment periods over time? Or should we just be continuing to kind of build off of that second half base? Obviously, there's seasonality of revenues and margins that go [indiscernible] impact businesses, et cetera. But from a core standpoint, should we think about that as the building place to go from?

Well, it's really a revenue mix issue, so I'd be careful about thinking it's a platform, good or bad. So every quarter has its unique mix of revenue. Remember, we have over 30 products in the company, 6 divisions plus our bank. Some are very, very high-margin, like interest income at the bank, for example, would be almost all margin, or other kinds of revenue on our legacy accounts. We have customers who have been here five, six, seven years. To the extent they're on direct deposits, those are very, very high margin accounts. We have sort of a mix issue. If you have a whole lot of new customers coming into the company as we did in Q1 in one period, all that cost is up front. It's all loaded up front. So you have almost all cost, no revenue. Then as they age, that'll get a little bit better. So I think it's really a question of revenue mix and the underlying margins on our established product lines continue to grow really, really well. If you think of the second half, the mathematically implied basis point expansion is about 360 basis points year-over-year, in other words, second half of last year compared to second half of this year. And you say, "Well, gosh, what do you have to do to get there?" Well, it's what we're doing already. We already have that on established product lines, it's just that the revenue mix in second half is much more established product lines and much lower -- new product lines because we're not in tax season. So it's really the nature of how you sign up those new programs and as you go. And so I think to the extent we have this margin expansion and the company's been generally expanding if you take, all things being equal, 100 or 150 basis points a year, that's about where we are. We will be again this year. And I think that's probably a better way to think of it. Is that helpful, the way I explained that?

Yes, it's very helpful actually. And then on the secured card, can you give an update on the status of that and your expectations going forward?

Yes, it's going very well. We always thought secured card would be a natural extension for our company because you have so many millennials, now 60% of our customer base, using our products. A part of those millennials, by definition, are lower income because young people don't -- unless you're graduating from Harward with a law degree or something, you're not leaving college and making $100,000 a year. So low and moderate income Americans are disproportionately occupied by lower -- by younger people. And so -- I forgot the question. Where was I going with that?

Secured card.

Yes, secured card. So the opportunity to build a credit file that's good is very popular with our customer base because you have all these young people who want to build a credit file for the future or people who may be in their 40s or 50s but have had a rough time with credit earlier in their life and who want to repair it. So it's just a great line extension for us and it's done very, very well and continues to do well. And the revenue and ultimately, EBIT on that program will build over time. So we feel good about it.

[Operator Instructions] The next question comes from Joseph Vafi with Loop Capital.

I think it was PayPal was pretty active here in their commentary here recently, talking about the underbanked as a new segment. I think it's a testament to them, perhaps seeing your business model working well. But just wondering if you have any comments on PayPal, perhaps, looking to get into a business that's a little bit closer than yours. And then secondly, if we look for margins to rebound in some of the new product lines, which cost lines do you think there will be the most leverage on as we look towards the end of this year?

You bet. So I'll let Mark take the question about which cost, if you can answer it, [with sort of the] most leverage. And I'll take -- do you want me to do the PayPal question first?

Yes.

Okay. So look, we know that all kinds of companies will do all kinds of things and I think the PayPal you mentioned, they talked about doing the pilot with a number of small banks as their partner to see if they could pilot an account. And -- but again, much like the question I had from, I think it was Bob Napoli on Square Cash, Green Dot is a franchise. People do best what they do most. It's just the way it works. And our franchise is pretty big and getting bigger. And the customer just doesn't look at the world that way of zero-sum game. So the more people who are providing digital accounts, the better, as far as I'm concerned. We saw this in the prepaid side of our business. If you remember, there's a big hurrah going back, oh, 2012, maybe -- where you had American Express and you had Western Union and you had MoneyGram, and you had -- I can't remember them all, a whole bunch of -- Chase with Chase Liquid. You had a whole bunch of companies out there competing in the prepaid field, and the question was would that hurt Green Dot? At the time, we didn't know. But the answer is it helped Green Dot because it made the product category feel more mainstream. And admittedly, the PayPal thing is not a big rollout and they've talked about it being an experiment or a pilot. But we think our franchise is quite strong, getting stronger clearly and would only be stronger yet if we had other technology companies issuing digital accounts. And frankly, with our BaaS Platform, we would hope that we're the partner that some of these companies use to get that product to market. So that -- anyway that's, I guess, the best I can say about PayPal. Great company, and of course, they're a good partner of ours on the Processing and Settlement segment of our company as well. And then, Mark, you want to talk about the cost thing, anything you can reveal of great interest?

Not really.

How about bad interest?

Yes. We'll go there. So look, I think in general, at a high level, you'll see in the second half of the year just a higher contribution margin because of the mix shift. And SG&A being -- declining as a percentage of revenue. If you dig down a little bit deeper, I think you'll see it in the comp and bens line. We should be getting some more efficiencies to our call center, people who have had the card, as we said in our prepared remarks. You're not getting as many people calling in, in the second half of the year for people who are already established customers as you do during first half of the year, particularly during tax season. Probably in the sales and marketing line, we'll probably see some pickup relative to supply chain and rev share. I think that's -- those are the main drivers.

That was a lot -- it's pretty good. That's a lot more detailed than I thought you'd be.

I hate giving details, but I'm tired.

I'm just watching you, thinking that was very impressive. Very impressive. Okay, we're already at the hour mark but we have more questions, and I'm okay to go forward if you guys are. You guys good? You want to go another 15 minutes?

Yes, sure.

Let's go to Tien-tsin over at JP Morgan.

Good revenue growth. I just wanted to test your conservatism on revenue in the second half. So correct me if I'm wrong, but the tax refund costs are funded, then it will be either spent or withdrawn, which will influence your economics. So when will you have a good sense of the performance of the new programs? Do you think you'll have that by the time you report second quarter earnings?

First of all, we're never conservative, only prudent and thoughtful.

There you go.

So the answer is -- look, we -- the company is doing very well. The momentum is undeniably strong. The numbers are what they are and you can track the trends as well as we can, maybe better given how good you and Reggie are at that stuff. But when we prepare guidance, and as Mark mentioned, the second half implies only about a 7% revenue increase, which is quite a bit below where we have been in reality. But it's only Q1, and we always want to be thoughtful about the fact that we have three quarters to go, and we want to guide a number that we know, come hell or high water, we can hit. And we don't want to guide something that's speculative, and that's been part of the charm of Green Dot, so we don't want to get ahead of ourselves, and we don't want Wall Street to get ahead of us. So it is a prudent guide, but I wouldn't say that the guide is a reflection of any concern in the momentum. And to your point, Tien-tsin, things look very good.

Good. That's good to know. And I'll be really quick on the follow-up. Just the pipeline maybe for new Banking as a Service partners. Any change there?

It's strong. There's a lot of opportunity there and we're in a very fortunate position. And the revenue team is just so awesome. I mean, so improved over what it was several years ago. We really can pick and choose our partners because it's hard to roll these things out. And so while the partner, in many ways, is interviewing Green Dot, we're interviewing the partner because there's a lot of regulatory diligence that goes into running these programs, a lot of vendor management, a lot of load on the system. And we think we've become really, really good at being the backbone for these large meaty enterprise-level programs. And there's a lot of folks out there who want to do things. And if we're lucky, we'll want to do business with the people who want to do business with us and we'll continue to roll out cool programs but nothing certainly to announce today.

The next question comes from Vasu Govil with Morgan Stanley. Please go ahead.

Quickly, I first wanted to follow up on some other tax-related questions that you guys got before. Is there a good rule of thumb to use for distribution of tax revenue through the year?

You mean like how does, for example, if you issue X hundred thousand accounts in Q1, how the revenue from those cards pay off over the quarters?

Right, right, exactly.

Oh gosh. Good rule of thumb. Should I take a swag at it or not answer? I'm looking at our Chief Accounting Officer.

I think it's a really tough question. And in part, our tax season this year is dramatically different than it was last year. In addition to all the core growth we have, we've added some new partners and new programs. So I would say it's hard to draw any firm conclusions our first year out of the gate.

Let me say this, Vasu, to help you out a little bit on your modeling. I think it's pretty obvious, or should be obvious, that all the revenue doesn't come in Q1. And that we expect there to be revenue throughout the year. And so if you think about how a load is received, let's say, you got a $3,000 tax refund and you got it in March or April and how you'd take it off at ATMs and spend it over time, you could probably come up with some spending curve and how that generates revenue over the remaining months of the year. So that may give you some indication as you just think about what would you do with a $3,000 or a $4,000 tax refund if you had it. And how do you think people might spend that over time. You probably wouldn't be far from what it is in reality.

Got it. And then just to follow up on, I think you guys have talked about piloting a prefund tax prefund program under the [indiscernible] last year. Was that something that was rolled out more broadly this year? And did that contribute to some of the trends that you saw in active card growth this quarter?

It did, yes. So in tax, we had several new programs. We have, of course, Intuit's TurboTax, which is a great program. We have TaxHawk, which is a good program. We sold Walmart MoneyCard, our Walmart product through TPG Pro Channel customers, which was a meaningful add. And then, of course, you have tax promotions just with Green Dot where people buy Green Dot off the shelf as a direct deposit vehicle to receive their tax refund. So all of them were added. The TPG program was not a pilot last year. We had it but it did grow year-over-year.

The next question comes from Jeff Cantwell with Guggenheim Securities.

Most of my questions have already been answered, but mine was just a follow-up on your commentary on SimplyPaid. My question is, away from Uber, where are you seeing that product expand the quickest? Is there any sort of color you can give us there? Because we hear a lot about adoption by 1099 workers and from the gig economy very generally but it's always helpful just to be able to think through the various verticals that are seeing adoption of the product. [indiscernible].

Yes. What's interesting is that our early belief was that it would be all gig economy, and that's turned out not to be the case. There's probably more interest, believe it or not, from regular W-2 employees who are finding -- trying to find ways to keep their W-2 low income wage workers, minimum wage workers, more engaged, showing up to work more often, not calling out sick and paying them daily really helps people to be more engaged with their job. And then a lot of these traditional W-2 workers, retailers and others, have a component of their workforce which is part-time, or it could be 1099, whether it's factory workers, delivery people, that kind of thing. So I would actually say that more traction has come from the more traditional employers side of the aisle than actually the gig side. And I think that just may be because there are not really that many gigantic gig employers. There are several, clearly, but there's a lot more W-2 employers. So we're getting lots of interest from both but maybe more from traditional employers than I would have first thought.

Appreciate that. And then just the last one. On Apple Pay Cash, you've spent time on this but I just want to ask. Is there something in the data that you're seeing that's either making it more optimistic or less optimistic? And what can you kind of point us to in terms of what you're seeing as a value proposition about free cash relative to maybe some of the other P2P platforms?

Well, I think yes, you bet, thank you for the question. I think the answer is we love the partnership with Apple because, look, it's Apple. And what a fabulous company to be a technology and banking partner to. It makes us a better company. People underestimate this. Whether you're me, a CEO, or any of our product team members, our legal team, government relations, our great banking team at Green Dot Bank, when you're matched up with partners like Apple and Walmart and Intuit and so forth, it makes you a better company because you have to play at their level and it matures the company and we love that partnership. And so we feel blessed and optimistic every day to work with companies like that. It helps make Green Dot better at these enterprise-level programs. And the value proposition for the customer is pretty clear if you just check out the social media. People believe it's easy and well put together and seamless. And as soon as you get the money, you can spend it. You can also sweep it out to another checking account. You can do the Venmo thing if you want. But you can also just spend it right away with your -- tapping and paying your phone or paying at a taxicab. So I think people enjoy the service and Apple, of course, as you would expect, does a great job in making the screens look good and making the user experience very, very strong. So that's that. And we like the program and the partnership. Mobile payments are early in their macro, as you know, but we love the fact that we have our foot in all these really positive wells of opportunity. Is that the right analogy? To foot, your well -- what do you draw well -- money out of -- water out from the well? Are pumps -- anyhow, we have a lot of good opportunity.

Buckets.

Buckets, yes. We have a lot of buckets and a lot of wells.

The next question comes from Mike Grondahl with Northland Securities.

Steve and Mark, your 1 million new active accounts was a really good number, and I don't know whether to be more excited about the 500,000 roughly legacy Green Dot accounts or the 500,000 sort of new platform cards. But my two questions are the TAM that you're going after on those new platforms, how penetrated do you think you were? And do those cards have the ability, over time, to kind of generate the same fees or economics of your legacy cards?

I don't know. The answer is if a lot of them turn into heavy direct deposit users over the long term, the answer is it could be. But to the extent that the more legacy products have monthly maintenance fees and so forth, they have higher revenue. So in order for the TAM card -- I'm sorry, for the BaaS cards to equal in revenue they'd have to be mostly direct deposit, which so far, they've been. So it could be, Mike, but they're very different fee schedules and different kinds of products. And I don't know that we have an expectation that margins, because of that revenue, will ever be as rich as our legacy products, but they're all additive and they all do a good job. And over time, to the extent there are heavy deposits and heavy usage, they certainly could be. It's very early to know. And then in terms of the TAM and how penetrated we are, we don't think a whole lot. Look, when we first launched the company, if you think back to the IPO in 2010, we thought the TAM, we described as under-banked and unbanked American families. We said they were 60 million adults, I think is what the quote was, or the number was at that time, and we got that number from one of the federal agencies. And that was the number that was used by a lot of companies, not just ours. But now, the TAM really isn't that. In other words, that TAM has nothing to do with an Apple program or an Intuit program or, for that matter, our Green Dot 5% card. When you see us on MTV or Comedy Central, when you see a Green Dot ad, it has nothing to do with prepaid.…

Just to follow on what Steve said, I think in the sort of the 18- to 44-year-old market, there's about 110 million people that could be part of the target audience. And in terms of margins, one of the things that we need to think about on a go-forward basis is we are accumulating large amounts of deposits. And we have an opportunity, particularly in a rising interest rate environment, to generate higher returns on those deposits. So we think there's great opportunity for that as well.

And we have one left, Steven Kwok of KBW.

Just one follow-up around the EBITDA margin. Do we know how much of the drag this quarter was related to the newer branded product lines and Banking as a Service? And then how fast can the margins there ramp up? What's a good long-term profile for them?

Yes, I mean, it's a good question. I think we've done our best to cover it but the reality is at all. I don't even want to call it a margin drag. That sounds so negative. It's just a natural mathematical component of launching a new product. So it kind of it is what it is. But the established side of our business, expanded in margins and you can see that expansion by looking at the second half forecast that shows 360 basis points of expansion, not because we're doing anything to make that happen as much as it's just that the revenue mix is more weighted towards established cards. So that kind of gives you a sense of how that's been expanding. So I think the margin compression of 240 basis points in Q1 is a result of all these new fabulous customers we've acquired. But we've paid all those costs without the benefit yet of the majority of that revenue. Does that answer the question?

And then as we think about for next year, would these onetime costs reappear or is this just for the first quarter? And so we shouldn't see that impact anymore?

Well, it's hard to forecast future years. I mean, it depends on how many new programs we have and how many new customers we're getting. But our goal is, as we've been able to achieve year-over-year margin expansion, which is always a mix of lower-margin programs coming into the fold and then maturing over time with our established programs that have matured, and you always have that revenue mix that's keeping you expanded, if we do our jobs properly, at about 100 basis points. But every year is different, and in theory, if you signed a ton of new programs and we're really growing like a weed, it could be maybe margins didn't expand as much. It could be in years where you were more weighted towards established programs, you could expand massively. It just depends on mix of the year and it would be a little bit early probably to guide '19.

Yes. It is a little early to guide that. But look, I think it's -- in short, it's a really high-class problem. We're investing in great new programs that are clearly paying off. And if we have the opportunity to continue to grow new programs, we'll certainly do so.

Listen, we are done. We went a little bit long but we appreciate you hanging on and hope we were able to provide you with good information. We have a investor conference tomorrow in Beverly Hills, somewhat local, although in L.A. from Pasadena to Beverly Hills, it's like a 3-hour drive, so 20 miles in 3 hours. We'll do that tomorrow. And then we're in Boston with JP Morgan the following week, right? So we'll see some of you there. Thank you all for listening, and have a great day. Bye-bye.

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