NetSpend Holdings, Inc. Reports Fourth Quarter Financial Results
NetSpend Holdings, Inc. Reports Fourth Quarter Financial Results
Revenues Up 17 Percent
Active Accounts On Direct Deposit Up 25 Percent
AUSTIN, Texas--(BUSINESS WIRE)-- NetSpend Holdings, Inc. (NAS: NTSP) , a leading provider of general-purpose reloadable prepaid debit cards and related financial services, today announced financial results for the fourth quarter and year ended December 31, 2012.
"We ended the fourth quarter hitting all of our targets and delivered strong financial results for 2012," said Dan Henry, chief executive officer of NetSpend. "We had a banner year in terms of signing up new partners, executing our retail expansion efforts and growing our business in every channel. From the momentum we created last year, we expect a continued fast pace of growth in all areas of our business."
Full Year 2012 Highlights:
Revenues up 15% to $351.3 million 2012 as compared to $306.3 million in 2011
Adjusted earnings per share up 23% to $0.58 as compared to $0.47 in 2011
Number of active cards with direct deposit up 25% to 1,082,000 as of December 31, 2012 as compared to 865,000 as of December 31, 2011
Percentage of active cards1 with direct deposit was approximately 46% as of December 31, 2012 as compared to approximately 42% as of December 31, 2011
Gross Dollar Volume (GDV), also known in the industry as purchase volume, of $13.2 billion as compared to $11.2 billion as of December 31, 2011
Q4 2012 Highlights:
Revenues up 17% to $89.7 million in Q4 2012 as compared to $76.8 million in Q4 2011
GAAP net income up 5% to $10.1 million in Q4 2012 as compared to $9.6 million in Q4 2011
Diluted Earnings Per Share up 18% in Q4 2012 to $0.13 as compared to $0.11 in Q4 2011
Adjusted EBITDA2up 3% in Q4 2012 to $23.9 million as compared to $23.2 million in Q4 2011
Adjusted Diluted Net IncomePer Share2 up 15% in Q4 2012 to $0.15 as compared to $0.13 in Q4 2011
GDV, also known in the industry as purchase volume, of $3.3 billion during Q4 2012 as compared to $2.8 billion during Q4 2011
Our Annual Report on Form 10-K for the year ended December 31, 2012 will contain a further description of our key business metrics.
Fiscal Fourth Quarter 2012 Results
Revenues were $89.7 million for the quarter ended December 31, 2012, an increase of approximately 17% over the $76.8 million of revenues recorded in the same quarter of 2011. This increase was substantially driven by the increase in direct deposit accounts, and to a lesser extent, the expansion of product features across NetSpend's direct deposit customer base. Interchange revenue represented approximately 22% of total revenue during the three months ended December 31, 2012.
Net income was $10.1 million for the quarter ended December 31, 2012, an increase of 5% over the net income of $9.6 million recorded in the quarter ended December 31, 2011. NetSpend's net income for the quarter ended December 31, 2012 includes an aggregate of $10.8 million of net interest expense, income tax expense, depreciation and amortization and settlement gains and other losses. Net income for the quarter ended December 31, 2012 also includes approximately $3.0 million in stock-based compensation expense. For the quarter ended December 31, 2011, the comparable amount of net interest expense, income tax expense, depreciation and amortization and settlement gains and other losses was $11.2 million. Net income for the quarter ended December 31, 2011 also includes approximately $2.4 million in stock-based compensation expense.
2013 Outlook
NetSpend reported that it expects full year 2013 revenue to be between $414 and $424 million, its adjusted EBITDA to fall between $119 and $125 million and its adjusted net income per fully diluted share to be between $0.76 and $0.81.
The foregoing expectations reflect the following assumptions:
An effective tax rate of approximately 40%;
Non-cash equity compensation of between approximately $14 and $16 million;
Cash outlays for capital expenditures for the full year of between approximately $10 and $12 million;
An effective cost of debt capital of approximately 3.0%; and
Fully diluted shares outstanding for the full year of approximately 84 million.
Investor Conference Call and Webcast
NetSpend will host an investor conference call to discuss its fourth quarter and fiscal year 2012 results today, February 13, 2013, at 5:00 p.m. EDT. The conference call can be accessed live over the phone by dialing (877) 288-1043 or (970) 315-0267 for international callers. A replay will be available until February 20, 2013 at (855) 859-2056 or (404) 537-3406 for international callers; the conference ID is 96037708. The call will be webcast live from NetSpend's website at http://investor.netspend.com.
Non-GAAP Financial Information
To supplement NetSpend's consolidated financial statements presented in accordance with United States Generally Accepted Accounting Principles ("GAAP"), this press release includes EBITDA, Adjusted EBITDA and Adjusted Net Income. EBITDA, Adjusted EBITDA and Adjusted Net Income are not measures of financial performance under GAAP. Accordingly, they should not be considered a substitute for net income, operating income or other income or cash flow data prepared in accordance with GAAP. These non-GAAP financial measures may be different from similarly-titled non-GAAP financial measures used by other companies. We believe that the presentation of these non-GAAP financial measures provides useful information to management and investors regarding underlying trends in NetSpend's business and provides improved comparability between periods in different years. Reconciliations between GAAP measures and non-GAAP measures and between actual results and adjusted results are provided at the end of this press release.
Cautionary Note Regarding Forward-Looking Statements
This press release contains forward-looking statements, which are subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, as amended, and Rule 3(b)-6 under the Securities Exchange Act of 1934, as amended. These statements include, among other things, statements regarding future events that involve risks and uncertainties. Actual results may differ materially from those contained in the forward-looking statements contained in this release, and reported results should not be considered as an indication of future performance. Reliance on any forward-looking statement involves risks and uncertainties and although NetSpend believes that the assumptions on which the forward-looking statements are based are reasonable, any of those assumptions could prove to be inaccurate, and, as a result, the forward-looking statements based on those assumptions could be materially incorrect. These factors include but are not limited to:
NetSpend's dependence on a limited number of retail distributors of its products;
increasing competition in the prepaid card industry;
exposure to cardholder fraud and other losses;
NetSpend's reliance on its relationships with its issuing banks;
regulatory, legislative and judicial developments;
changes in card association or network organization rules;
NetSpend's ability to protect against unauthorized disclosure of cardholder data;
NetSpend's ability to promote its brand;
NetSpend's reliance on outsourced customer service providers;
NetSpend's ability to protect its intellectual property rights and defend itself against claims of patent infringement.
The potential risks and uncertainties that could cause actual results to differ from those projected are discussed in greater detail in NetSpend's filings with the Securities Exchange Commission ("SEC"), which are available on NetSpend's website at www.netspend.com and on the SEC website at www.sec.gov. All information provided in this release and in the attachments is as of February 13, 2013, and, except as required by law, NetSpend does not intend to update this information as a result of future events or developments.
About NetSpend
NetSpend is a leading provider of general-purpose reloadable (GPR) prepaid debit cards and related financial services to the estimated 68 million underbanked consumers in the United States who do not have a traditional bank account or who rely on alternative financial services. The Company's mission is to develop products and services that empower underbanked consumers with the convenience, security and freedom to be self-banked. Headquartered in Austin, TX, NetSpend is traded on the NASDAQ stock exchange under the symbol NTSP. Please visit http://www.netspend.com for more information.
Follow NetSpend on Twitter: http://twitter.com/netspend or Facebook: http://www.facebook.com/netspend
___________________________ |
1 The number of active cards as of December 31, 2012 was approximately 2,352,000 and as of December 31, 2011 was approximately 2,063,000. |
2 Reconciliations of Adjusted EBITDA and Adjusted Net Income to net income are provided in the tables immediately following the condensed consolidated statements of cash flows. Additional information about the Company's non-GAAP financial measures can be found under the caption "Non-GAAP Financial Information." |
NetSpend Holdings, Inc. | |||||||||||||||||
Consolidated Statements of Operations | |||||||||||||||||
For the Three and Twelve Months Ended December 31, 2012 and 2011 | |||||||||||||||||
Three Months Ended | Twelve Months Ended | ||||||||||||||||
December 31, | December 31, | ||||||||||||||||
2012 | 2011 | 2012 | 2011 | ||||||||||||||
(Unaudited) | (Unaudited) | (Unaudited) | |||||||||||||||
(in thousands, except per share data) | |||||||||||||||||
Operating Revenues | $ | 89,712 | $ | 76,762 | $ | 351,332 | $ | 306,255 | |||||||||
Operating Expenses | |||||||||||||||||
Direct operating costs | 42,643 | 36,094 | 169,066 | 146,199 | |||||||||||||
Salaries, benefits and other personnel costs | 14,597 | 12,157 | 56,328 | 52,736 | |||||||||||||
Advertising, marketing and promotion costs | 6,504 | 3,237 | 20,127 | 14,230 | |||||||||||||
Other general and administrative costs | 5,045 | 4,512 | 21,116 | 20,135 | |||||||||||||
Depreciation and amortization | 3,489 | 3,797 | 13,778 | 15,031 | |||||||||||||
Settlement (gains) and other losses | (160 | ) | 191 | 36,988 | 515 | ||||||||||||
Total operating expenses | 72,118 | 59,988 | 317,403 | 248,846 | |||||||||||||
Operating income | 17,594 | 16,774 | 33,929 | 57,409 | |||||||||||||
Other Income (Expense) | |||||||||||||||||
Interest income | 30 | 30 | 139 | 108 | |||||||||||||
Interest expense | (771 | ) | (963 | ) | (2,598 | ) | (2,457 | ) | |||||||||
Total other expense | (741 | ) | (933 | ) | (2,459 | ) | (2,349 | ) | |||||||||
Income before income taxes | 16,853 | 15,841 | 31,470 | 55,060 | |||||||||||||
Provision for income taxes | 6,757 | 6,264 | 12,603 | 21,814 | |||||||||||||
Net income | $ | 10,096 | $ | 9,577 | $ | 18,867 | $ | 33,246 | |||||||||
Net income per share of common stock: | |||||||||||||||||
Basic (1) | $ | 0.13 | $ | 0.11 | $ | 0.23 | $ | 0.37 | |||||||||
Diluted | $ | 0.13 | $ | 0.11 | $ | 0.22 | $ | 0.36 | |||||||||
Shares used in the computation of earnings per common share: | |||||||||||||||||
Basic | 68,931 | 78,489 | 73,251 | 84,504 | |||||||||||||
Diluted | 80,183 | 88,560 | 84,321 | 91,284 | |||||||||||||
(1) - Net income used in the calculation of basic earnings per share is adjusted for amounts unavailable to common stockholders. Our Annual Report on Form 10-K for the year ended December 31, 2012 will contain a further reconciliation of this number for the twelve months ended December 31, 2012 and 2011. | |||||||||||||||||
NetSpend Holdings, Inc. | ||||||
Consolidated Balance Sheets | ||||||
As of December 31, 2012 and 2011 | ||||||
2012 | 2011 | |||||
(Unaudited) | ||||||
(in thousands of dollars) | ||||||
Assets | ||||||
Current assets | ||||||
Cash and cash equivalents | $ | 30,619 | $ | 72,076 | ||
Accounts receivable, net of allowance for doubtful accounts of $518 as of December 31, 2012 and $581 as of December 31, 2011 | 10,622 | 7,552 | ||||
Prepaid card supply | 3,535 | 2,000 | ||||
Prepaid expenses | 4,007 | 3,326 | ||||
Other current assets | 1,360 | 2,179 | ||||
Income tax receivable | 59 | - | ||||
Deferred tax assets | 7,620 | 4,138 | ||||
Total current assets | 57,822 | 91,271 | ||||
Property, equipment and software, net | 23,743 | 20,631 | ||||
Goodwill | 128,567 | 128,567 | ||||
Intangible assets | 20,246 | 22,227 | ||||
Long-term investment | 4,560 | 2,497 | ||||
Other assets | 17,655 | 7,549 | ||||
Total assets | $ | 252,593 | $ | 272,742 | ||
Liabilities & Stockholders' Equity | ||||||
Current liabilities | ||||||
Accounts payable | $ | 4,908 | $ | 3,183 | ||
Accrued expenses | 26,362 | 20,937 | ||||
Income tax payable | - | 1,733 | ||||
Cardholders' reserve | 3,633 | 3,892 | ||||
Deferred revenue | 1,765 | 1,585 | ||||
Current litigation contingencies | 10,900 | - | ||||
Long-term debt, current portion | 10,000 | - | ||||
Total current liabilities | 57,568 | 31,330 | ||||
Long-term debt, net of current portion | 70,000 | 58,500 | ||||
Deferred tax liabilities | 4,224 | 7,431 | ||||
Other non-current liabilities | 3,155 | 4,628 | ||||
Total liabilities | 134,947 | 101,889 | ||||
Total stockholders' equity | 117,646 | 170,853 | ||||
Total liabilities & stockholders' equity | $ | 252,593 | $ | 272,742 | ||
NetSpend Holdings, Inc. | ||||||||
Consolidated Statements of Cash Flows | ||||||||
Years Ended December 31, 2012 and 2011 | ||||||||
2012 | 2011 | |||||||
(Unaudited) | ||||||||
(in thousands of dollars) | ||||||||
Cash flows from operating activities | ||||||||
Net income | $ | 18,867 | $ | 33,246 | ||||
Adjustments to reconcile net income to net cash provided by operating activities | ||||||||
Depreciation and amortization | 13,778 | 15,031 | ||||||
Amortization of debt issuance costs | 326 | 326 | ||||||
Stock-based compensation | 11,464 | 11,242 | ||||||
Tax benefit associated with stock options | (2,741 | ) | (1,541 | ) | ||||
Provision for cardholder losses | 18,741 | 14,441 | ||||||
Deferred income taxes | (6,785 | ) | (2,646 | ) | ||||
Change in cash surrender value of life insurance policies | (159 | ) | 8 | |||||
Litigation contingencies, current | 10,900 | - | ||||||
Changes in operating assets and liabilities | ||||||||
Accounts receivable | (3,070 | ) | (2,111 | ) | ||||
Income tax receivable or payable | 949 | 2,942 | ||||||
Prepaid card supply | (1,535 | ) | (395 | ) | ||||
Prepaid expenses | (681 | ) | (946 | ) | ||||
Other current assets | 819 | (1,172 | ) | |||||
Other long-term assets | (9,752 | ) | (2,316 | ) | ||||
Accounts payable and accrued expenses | 7,150 | (3,797 | ) | |||||
Cardholders' reserve | (19,000 | ) | (15,338 | ) | ||||
Deferred revenue | 180 | 252 | ||||||
Other liabilities | (1,473 | ) | 1,621 | |||||
Net cash provided by operating activities | 37,978 | 48,847 | ||||||
Cash flows from investing activities | ||||||||
Purchases of property, equipment and software | ||||||||
