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Green Dot (GDOT) Stock Up on Q3 Earnings & Revenue Beat

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Green Dot Corporation (GDOT - Free Report) reported strong third-quarter 2018 results wherein both earnings and revenues surpassed the Zacks Consensus Estimate. In response to the better-than-expected results, shares climbed 5.3% in after-hours trading yesterday.

Adjusted earnings per share (EPS) of 59 cents beat the consensus mark by 15 cents and increased 73.5% year over year, indicating the ninth consecutive quarter of double-digit growth. The bottom line was driven by strong adjusted EBITDA growth, interest income from the investment of cash deposits held at Green Dot Bank and lower year-over-year effective tax rate. The reported figure also exceeded the company guidance of 41 cents.

Total operating revenues of $230.6 million outpaced the consensus estimate by $7.3 million and increased 14.4% year over year on the back of 100% organic growth. This marked the sixth consecutive quarter of double-digit year-over-year organic revenue growth. The reported figure also exceeded the guidance of $222 million.

So far this year, shares of Green Dot have gained 42.7%, outperforming the 16.6% rise of the industry it belongs to.

 

Key Operational Metrics

Gross dollar volume grew 18.3% year over year to $9.09 billion. Purchase volume increased 13% from the prior-year quarter to $5.92 billion. The reported quarter ended with 5.43 million active accounts (up 3% y/y) and 10.68 million cash transfers (up 8.9% y/y). The number of tax refunds processed were 0.10 million, flat with the year-ago quarter.

Segmental Revenues

Accounts Services revenues came in at $193.76 million, up 13.9% from the year-ago quarter. The segment benefited from strong organic momentum across all areas of revenue divisions and product lines, with GDV and purchase volume registering growth of 18% and 13%, respectively.

Processing and Settlement Services revenues of $44.15 million, grew 12.9% from the year-ago quarter on the back of organic growth in each of the segment's various product lines, including cash transfers and SimplyPaid worker disbursements and increasing transaction counts.

Green Dot Corporation Revenue (TTM)

Adjusted EBITDA of $45.1 million increased 32.9% on a year-over-year basis. Adjusted EBITDA margin of 19.6% increased from 16.8% in the year-ago quarter.

Balance Sheet & Cash Flow

Green Dot exited third-quarter 2018 with cash, cash equivalents and restricted cash balance of $1.04 billion compared with $1.12 billion at the end of the prior quarter. The company has no long-term debt.

The company generated $46.65 million of cash from operating activities in the reported quarter.

2018 Guidance

Green Dot raised its full-year guidance. The company now expects revenues in the range of $1.038-$1.042 billion compared with the previously guided range of $1.022-$1.032 billion. The Zacks Consensus Estimate of $1.03 billion lags the midpoint of the currently guided range by a penny.

Adjusted earnings are anticipated to be between $3.18 and $3.22 compared with the previously guided range of $3.03-$3.08. The Zacks Consensus Estimate of $3.09 is well below the current guidance.

Adjusted EBITDA is expected to be in the band of $247-$251 million compared with the earlier guidance of $244-$248 million.

Zacks Rank & Stocks to Consider

Green Dot currently carries a Zacks Rank #3 (Hold).

A few better-ranked stocks in the broader Business Services sector include Broadridge Financial Solutions, Inc. (BR - Free Report) , Genpact Limited (G - Free Report) and WEX Inc. (WEX - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The long-term expected EPS (three to five years) growth rate for Broadridge, Genpact and WEX is 10%, 10% and 15%, respectively.

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