Green Dot Corporation Class A Stock

Good day, and welcome to the Green Dot Commerce One Smith Ventures Transaction Conference Call. [Operator Instructions]

Please note this event is being recorded. I would now like to turn the conference over to Tim Willi, Senior Vice President, Finance and Corporate Development. Please go ahead.

Before we begin, please note that certain statements made during this call may be forward-looking and are subject to risks and uncertainties. These forward-looking statements are made in reliance on the safe harbor provisions of the federal securities laws and are subject to known and unknown risks, uncertainties and other factors that may cause Green Dot's Commerce One's or the combined company's actual operating results, financial position or performance to be materially different from those expressed or implied in forward-looking statements.

You are cautioned not to place undue reliance on such forward-looking statements. Green Dot Commerce One and Smith Ventures disclaim any obligation to update such forward-looking statements. For additional information concerning factors that could affect Green Dot's financial results or cause actual results to differ materially from these forward-looking statements, please refer to Green Dot's filings with the SEC, including the Risk Factors section of Green Dot's Form 10-K and most recent 10-Q filed with the SEC as well as the forward-looking statements section of the press release and investor presentation.

In addition, please note that on today's call and in the press release and investor presentation issued this morning, Green Dot may refer to certain non-GAAP financial measures. While the company believes these non-GAAP financial measures provide useful information for investors, the presentation of this information is not intended to be considered in isolation or as a substitute for the financial information presented in accordance with GAAP.

Now I'd like to turn the call over to Bill Jacobs. Bill?

Good morning, and thank you, everyone, for joining our call on short notice. It is an exciting day for Green Dot, its shareholders, employees and all of its stakeholders as we enter a new and exciting area with Smith Ventures and Commerce One Bank. Over the last 8 months, the Board and its advisers worked through a robust, pragmatic and thoughtful process to evaluate our strategic alternatives with the goal of unlocking and maximizing shareholder value while also providing opportunities for our employees, partners and all stakeholders to benefit from a bright and exciting future for our business.

Both I and the Board believe that this proposed transaction accomplishes all of these goals. In this transaction, the nonbank embedded finance business of Green Dot that you are familiar with, our consumer, B2B and money movement segments will be acquired by Smith Ventures LLC. Bill Smith will provide more details on his plans for the payments company to continue the work that has been done and to build on the momentum in the embedded finance sector.

At the same time, Commerce One will acquire Green Dot Bank and become a publicly traded bank holding company. Green Dot shareholders will receive $8.11 in cash plus 0.2215 shares of the new Commerce One per Green Dot share. Commerce One will enter into a 7-year commercial agreement to be the exclusive provider of bank sponsorship services to the embedded finance platform, enabling shareholders to participate in the growth of embedded finance as it will be a significant customer and partner of the combined banking institution.

Now let me turn it over to Jess to briefly discuss the terms of the transaction before handing it over to Bill Smith and the Commerce One team to expand on the potential opportunities and synergies of the transactions. Jess?

Thank you, Bill, and good morning, everybody. To echo Bill's comments, we believe that after diligently working through our review of strategic alternatives, we have found the right partners to unlock shareholder value while providing opportunities for all of our stakeholders to continue to benefit from the hard work and the foundation that has been built to position Green Dot as a leader in embedded finance.

Now let me walk you through the major points of the proposed transaction. I will refer you to the deck on our Investor Relations page for more details. As Bill mentioned that this is a transaction in which Green Dot shareholders will receive cash and shares of Commerce One, which will become a public traded bank holding company. Commerce One will acquire Green Dot and shareholders will receive cash merger consideration of $8.11 per share and equity in a newly publicly traded bank holding company that will own Commerce One's existing business, including Commerce One Bank as well as Green Dot Bank. That entity is expected to have pro forma tangible book value of approximately $490 million.

Green Dot shareholders will own approximately 72% of the pro forma Commerce One, equating to approximately $355 million of the tangible book value, which equates to approximately $6.12 per share. Smith Ventures will acquire Green Dot's embedded finance business, which consists of the major operating segments that we report externally, consumer, B2B and money movement and a substantial amount of the infrastructure to support those businesses.

Smith Ventures will pay $690 million in cash for this platform. Approximately $155 million will be retained by Green Dot Bank, approximately $65 million will be used to pay off indebtedness and the remaining $470 million will be used to pay the cash merger consideration. On this basis, Green Dot shareholders are receiving value of approximately $14.23 per share. Should the publicly traded entity trade at a premium to tangible book value like its peers, it would imply even greater value.

Smith Ventures has in place committed financing. The deal is expected to close in the second quarter of 2026, subject to the satisfaction of customary closing conditions, including required shareholder and regulatory approvals. Until the completion of the transactions, Green Dot remains a separate and independent company operating business as usual.

With that, let me turn it over to Bill Smith of Smith Ventures and Kenneth Till of Commerce One to discuss their vision of this transaction and the creation for all stakeholders.

Thank you, Jeff, and good morning, everyone. While I may be a new name and face to Green Dot shareholders, Green Dot is not new to me. Back in 2014, I had the pleasure of selling one of the first companies I built, Insight Card Services to Green Dot. Over the years, I continue to follow the Green Dot story and was always impressed with the vision and the business that the team has built. I'm excited about the opportunity to work with this team to build upon all of the work they have done over the last several years.

The embedded finance sector is a vast and growing sector, and I see tremendous opportunity for Green Dot Bank and Green Dot's embedded finance business and look forward to working with this team and continuing to invest in the platform to capitalize on this opportunity. While Smith Ventures will be acquiring Green Dot's embedded finance business, existing Green Dot shareholders will continue to benefit from the exposure to the embedded finance business' success due to the new Commerce One relationships under a 7-year commercial agreement, pursuant to which new Commerce One will serve as the exclusive bank sponsor for the finance businesses digital banking platform. I've been able to work closely with Kenneth Till, the CEO and Co-Founder of Commerce One for the past 8 years and couldn't be more excited for him and the Commerce One team. Kenneth has a deep understanding of how to create sustainable shareholder value by building a strong credit culture, being relentlessly responsive to customer needs and ultimately leading to consistent EPS and tangible book value per share growth.

With that, let me turn it over to Ken to discuss the transaction from the bank perspective and his vision for the combined entity.

Thank you, Bill, and good morning, everyone. This is an exciting day and opportunity for Green Dot and Commerce One. As we spent more time getting to know Green Dot and Green Dot Bank. The synergies and opportunities for value creation became readily apparent. I see this as a combination of a proven loan generation platform with an exciting deposit-generating engine and new growth opportunity. The combination of Green Dot Bank and Commerce One's operations and the commercial agreement with Green Dot's former embedded finance business should position the new Commerce One to become a diversified bank with multiple growth drivers, top-tier profitability and substantial capital generation, all of which should benefit our shareholders, employees and stakeholders.

Many of you on this call may not know Commerce One, so let me provide you with a bit of background that will help you understand why I think this combination is very compelling. We started Commerce One Bank in 2018. Our mission was to be the premier business-focused bank in the Southeast. Our expertise is serving sophisticated small- and medium-sized operating companies with highly focused team of bankers, enabling us to deliver growth by delivering the nimble, true relationship banking that they desire and require.

We are not branch bankers. We have one branch with over $700 million of deposits. We leverage technology to drive efficiency and enhance service and let our bankers focus on being in the businesses of their customers. That strategy has resulted in top quartile financial performance as the average quarterly ROA over the past 4 years has been 1.44%, pristine credit quality, a strong capital position and excellent relationship with our regulators.

When assessing the opportunity with Green Dot Bank, I see 3 front and center opportunities to increase shareholder value. The first is improving the asset mix in the near term. The second is leveraging the deposit capabilities of Green Dot Bank with the third being positioning Commerce One as a leading banking partner to the embedded finance sector.

First, let me address the opportunity to improve the asset mix and leverage the deposit capabilities of Green Dot Bank. In the near term, there is an attractive opportunity to reposition the asset side of the Green Dot balance sheet and elevate the yields that it currently earns. Green Dot had begun to do that work, and we will continue to execute on that strategy. We believe that we can elevate the earnings power meaningfully when this exercise is complete. More important is that these deposits and the ongoing growth in deposits from our partnership with the embedded finance platform provide our loan generation engine plenty of liquidity to grow. This deposit generation capability provides a perfect complement to the lending business that we've built and continue to invest in.

Over time, as we deploy those deposits into loans, not just securities, we expect that to represent additional upside to our shareholders. Having this deposit generation platform is not just about providing a tremendous amount of liquidity right out of the gates. As many of you on this call can attest, the banking industry is going through tremendous structural change.

New nonbank competitors have emerged that are now serving the next generation of businesses and consumers outside the traditional banking system. This is placing pressure on traditional banks and the ability to grow low-cost deposits. With Green Dot Bank, we are now well positioned to generate deposits and ensure that we do not fall behind in the evolution of banking. There is significant human capital in both of these organizations that will work together to make that a reality.

And finally, the third aspect of this combination that I'm excited about is the opportunity to grow with the embedded finance sector. As the Green Dot embedded finance business grows, Green Dot Bank and Commerce One collectively grow. But beyond that, I see additional avenues for growth. The first opportunity I see is for us to invest and position Commerce One to serve other customers beyond just Green Dot. Green Dot Bank has a tremendous amount of infrastructure and experience in supporting the embedded finance sector.

We are confident that other embedded finance companies would welcome the opportunity to leverage this platform. We intend to begin immediately to invest further building out industry-leading compliance and risk management infrastructure to support that growth. Investments in these areas will ultimately become a competitive advantage.

The second opportunity for growth that I see in this new sector opportunity is to bring additional products and features that can be levered by our future partners in the embedded finance business. Currently, Green Dot provides its partners with an industry-leading account platform and payment solutions via its ARC platform. I believe we can build upon that success and leverage our experience as lenders to build out lending platforms and capabilities to support embedded finance partners with loan origination platforms or lending as a service. And ultimately, I believe there's an opportunity to selectively create direct-to-consumer lending products for those partners.

In conversations with Green Dot management, they were firm believers that this is an attractive opportunity and one that the industry will welcome. With this new attractive opportunity to build out capabilities to serve the embedded finance sector, it will also provide us with the opportunity to increasingly diversify our revenue base. Prior to this transaction, our revenue base was tied predominantly to traditional margin business.

Now we have an attractive fee-based revenue stream to complement that and build out a more diversified, durable and higher absolute level of earnings. The result is that with this merger, we are positioning Commerce One as a bank for the next generation of banking. We will have a banking company that marries a strong and growing loan origination capability with an efficient next-generation deposit gathering platform. This core banking franchise is then enhanced by building out an established embedded finance operation.

The end result is a bank that is diversified earnings base, increased scale and attractive predictable returns that will generate substantial excess capital to support growth and create value for shareholders. As a shareholder, that's the kind of company I want to be invested in. For the many very talented people in both organizations, that's a vision that I want to be a part of.

Now let me turn it back to Bill Jacobs for some closing comments before we take your questions.

Thank you, Ken. In closing, I am thrilled with the agreement that we have come to with Smith Ventures and Commerce One as this combination of transactions provides a clear path to value creation for our shareholders, employees and all of our stakeholders. I would personally like to thank all of the employees of Green Dot. Over the years, you have worked hard to build a tremendous company. Both I and the Board are grateful for your hard work and commitment. With that, we are happy to take your questions.

[Operator Instructions]

The first question today comes from George F. Sutton with Craig-Hallum.

Congratulations to everyone on the transaction. So I wondered if we could talk about the tangible book value multiple anticipated in the range that we're thinking of here, 1x to 1.8x. Can you talk about what sorts of comps you're using to generate that sense? Yes.

No, go ahead, Ken.

This is Jess. I appreciate the question. And as you can imagine, the newly formed public bank company will be competing in the partner bank business. And so all the comps are the existing public partner banks, as you can imagine, Pathward, others, et cetera. So looking at the mix across, I think, 5 or 6 comps, all competing in the partner bank business.

And just a follow-up for Ken. So it sounds like you're traditionally focused on the business banking market, now bringing on more of a consumer bank-focused business. Can you talk about bringing those 2 together, where the key focuses will be?

Sure. Thanks for the question. I view this as very complementary lines of business. As we talked about, one being this asset production engine that we have that's in the commercial space. We've invested in that, continue to invest in that, feel really good about what we can continue to generate in that area, but have now more funding diversification as we're able to, again, diversify the funding perspective. So we view that as complementary lines of business between the two.

The next question comes from Cris Kennedy with William Blair.

Congrats on the transaction. Ken, you mentioned about -- you talked about building out the functionality of the platform. Are you thinking about that doing through additional M&A or building it organically as you talk -- move into LOS systems, what have you?

I think we would be open to either. I think that there's a lot of work to be done in the interim to build the infrastructure from not just operational, but from a compliance perspective. We have to get that right. We have to do that right the first time every time. And so that's our primary focus upfront. But beyond that, I think we're open to opportunities as they present themselves on -- from either perspective.

Got it. And then just talk about kind of what you've seen in the partner bank environment over the years and kind of why this is the right time to do this transaction?

Sure. I think as I alluded to, the world is changing. How we fund our balance sheets are changing. We continue to have competition from nonbanks. And so I think we just have to view the world differently and recognize that funding doesn't look like and will not look like it has in years gone by. And so this complementary line of business makes a lot of sense from our perspective, and we feel like it does from the Green Dot side as well to combine this earning asset engine with this unique deposit function.

[Operator Instructions]

The next question comes from Mike Grondahl with Northland Securities.

Congratulations on getting this done. Maybe for Jess. Jess, could you kind of walk us through which of the Green Dot businesses go to Smith Ventures and which ones are going to stay at Green Dot/Commerce One?

Sure. Thanks, Mike. Appreciate the question. So the way to think about it in terms of our sort of existing public filings would be that the consumer business, so our retail and direct channels, those programs move over to the payments business.

Our B2B segment, so both our VaaS and Employer Services business. And then lastly, our Money Movement segment, which includes our tax processing business and our money movement business and all the technological infrastructure that supports those programs as well as the operations move to the payments business. And then what's truly moving into the remaining sort of new public company will be the bank as it exists today. So think of the call report, for example, that piece will be moving over. And then certainly, there will be a new MSA structure between the two entities.

Got it. And do we know anything about that MSA structure, that 7-year agreement, what that's worth? Or how should we think about that?

Yes. I mean I think it is tied to sort of market rates, market terms. For many years, Green Dot Bank has been a captive. And so we wanted to make sure that when we're pricing the MSA between the two entities, it is consistent with the broader market terms. And so think about the bank earning a portion of some of the revenue streams, et cetera. So not unlike what you might find in some of the other public fintechs and some of their disclosures about how they compensate their partner banks. This would not be wildly different than that.

[Operator Instructions]

The next question comes from George F. Sutton with Craig-Hallum.

Can you just give us a little bit more detail on the risks to the transaction close? So we have a committed financing, if I understand correctly, if you can go into that in a little more detail. We have a shareholder vote that will need to occur, and then we have regulatory approvals. My assumption is the way this is being structured will fit the regulatory requirements. But can you just walk through some of those risks?

Kenneth, do you want to take? we've got a commitment letter for the financing. Maybe, Ken, if you want to talk about regulatory, give your thoughts there?

Yes. No, from a regulatory perspective, it's not unlike any other transaction. Obviously, we have had preliminary conversations with the Fed, but we will put together application, identify our business plan as we've talked about it, identify the risk and then the mitigation of the risk there, our approach from a compliance perspective. As I shared earlier, we have to do that right the first time every time and demonstrate to the Fed that we're in a position to execute and do it the right way.

So from a compliance standpoint, that's, I think, where we'll be focusing a lot of time over the next few weeks. Shareholder approval, obviously, is needed from both groups. But I'll let the rest of the panel talk about any of the committed financing or anything on that front.

Let me just add from the Green Dot standpoint in looking at potential transactions, the closability of the transaction as well as the committed financing was a significant part of our Board's interest in looking at various bidders to the company. So we spent a lot of time understanding the financing that the Smith Group has put together to purchase the embedded finance business, their equity commitments. We spent with the attorneys for Commerce One. We spend time with regulators to make sure we understood what issues may or may not come up, and we came to the conclusion that this was an eminently closable and approvable transaction.

This concludes our question-and-answer session. I would like to turn the conference back over to Bill Jacobs for any closing remarks.

Thank you, and thanks for joining us this morning. This has been an exciting 8-month process at Green Dot, and we were overwhelmed with interest from people who wanted to partner with Green Dot during this process. We ultimately chose the Smith Commerce One Group because we felt that they had the perfect combination of expertise and knowledge to make the future of Green Dot a successful organization. So thank you for being on the call, and you'll be hearing more in the future.

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

Good day, and welcome to the Green Dot Corporation Third Quarter 2025 Conference Call. [Operator Instructions] Please note this event is being recorded.

I would now like to turn the conference over to Timothy Willi of Investor Relations. Please go ahead.

Thank you, and good afternoon, everyone. Today, we are discussing Green Dot's third quarter 2025 financial and operating results. Following our remarks, we'll open the call for your questions. Our most recent earnings release that accompanies this call and webcast can be found at ir.greendot.com.

As a reminder, our comments may include forward-looking statements and 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 refer to our financial measures that do not conform with generally accepted accounting principles. For the sake of clarity, unless otherwise noted, all numbers we talk about today will be on a non-GAAP basis. Information may be calculated differently than similar non-GAAP data presented by other companies. Quantitative reconciliation 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 property of the Green Dot Corporation and is subject to copyright protection.

Now I'll turn it over to Bill. Bill?

Good afternoon, and thank you for joining our third quarter 2025 earnings call. Today, I will start with some comments on the quarter and then turn it over to Chris for an update on our business development and go-to-market efforts. Jess will then discuss our financials in more detail, and I will conclude with some final comments and observations before taking your questions. First, regarding the strategic review, we continue to make progress, and we will provide updates when appropriate.

Now let's turn to the quarter. It was a strong third quarter with results continuing to outpace our expectations. Adjusted revenue was up 21% and while adjusted EBITDA declined 17% and while a decline was expected, our EBITDA in the quarter was substantially better than our internal projections. Jess will provide more detail on our financial results shortly.

The team remains focused on strengthening our revenue engine by signing and launching new partners in the quarter, driving scale and savings in our operations and investing in our infrastructure to support customers and partners while ensuring that we position the company for sustainable long-term growth.

As part of these efforts, we moved to cease operations in Shanghai in support of our business needs and growth strategy, including our goals to optimize our platforms and processes and reduce operational and geopolitical risks. We are pleased with the progress we've made on these initiatives thus far and with the transition our teams have delivered on behalf of our partners and customers.

We are seeing continued momentum and increasing demand in embedded finance, including the broad range of Banking-as-a-Service and money processing tools and features offered from our end-to-end configurable embedded finance platform, Arc.

During the quarter, we announced the launch of Crypto.com's cash earn products feature, launched real-time payments with Dayforce and announced a new partnership with Stripe as well as new signings with Workday for EWA and Amscot in the FSC channel. We are preparing for product launches with DolFinTech, Credit Sesame and other partners across the franchise, and we continued building a strong, healthy pipeline to fuel future growth.

On our last call, I discussed our focus on the importance of improving the profitability of our balance sheet. We are making progress in those efforts with a growing list of customers, particularly on our Arc platform, we view balance sheet growth, not just transactions and account growth as another growth driver in the company. The balance sheet is an important component of our growth and earnings story, and we intend to continue to invest in our ability to manage that growth and improve its profitability.

Now let me turn it over to Chris to provide an update on our business development and our go-to-market efforts. Chris?

Thank you, Bill, and good afternoon, everyone. As Bill mentioned, we're continuing to build on the momentum we saw in the first half of the year. The third quarter was busy with new business wins, partner launches and collaborating with our BaaS, retail and GDN partners on new initiatives to deliver growth both for us and our partners.

Let me touch on several of the more noteworthy developments since our last earnings call. In October, we announced the launch of Crypto.com's cash earn feature, a high-yield savings feature added to Crypto.com's seamless embedded banking experience, and the initial results are encouraging.

We are continuing to explore additional products and features we can bring to Crypto.com's platform in the future. Our financial service center channel is also presenting exciting possibilities and growth opportunity.

As Bill mentioned, we are very pleased to announce we have signed a new agreement with Amscot, a financial service center leader and is a valued money processing partner on our Green Dot network. And as part of the new agreement, we'll expand our relationship to include a demand deposit account offered at Amscot's 235 locations.

Additionally, we are excited about the expected launch of DolFinTech's banking product in retail locations across the country in December. With approximately 5,500 agent locations, DolFinTech will build on our momentum in the FSC market. This launch, coupled with our relationship with PLS and another recently signed FSC partner, including Amscot, are expected to drive new account growth in a relatively new market for Green Dot, that is expected to help offset the declines that we have seen in our retail channel in recent years. We continue to see the FSC channel as an attractive opportunity.

These partners are more engaged with their customers, and we believe will view our products as top-of-wallet offerings with higher engagement than our traditional retail business.

We are also working diligently to prepare the launch of Credit Sesame, which we announced as a new customer on our last earnings call and are targeting a launch early next year. Credit Sesame is a leading tech-driven personal finance platform that has served 18 million consumers since its founding in 2010. Both Green Dot and Credit Sesame are aligned in our respective missions to improve the financial lives of moderate and low-income customers. And this partnership to power their Credit Sesame account is a key business win and partnership for Green Dot.

As Bill mentioned, you may have also seen our announcement about our new partnership with Workday, offering our EWA platform in their marketplace. EWA is a product offering that we believe has broad applicability to the U.S. economy, particularly middle and lower-income workers. Our go-to-market strategy includes aligning with platform partners as a key part of that effort, and I'm thrilled to have a leading platform like Workday choose to partner with us.

In our money processing division, we recently announced a new partnership with Stripe. For those that are not familiar with Stripe, they are a global industry-leading payment and financial infrastructure platform viewed as a pioneer in the next generation of financial services and payments. We will partner with Stripe to enable the SMB customers on their platform to leverage our Green Dot network and make cash deposits at more than 50,000 locations with additional enhancements and capabilities possible in the future.

In my opinion, this partnership is noteworthy from 2 perspectives: First, being chosen by a leading global embedded finance pioneer speaks to the strength of Green Dot, our capabilities and the unique position of the Green Dot network; second, combined with our partnership with Clip Money, I believe, validates the opportunity in the SMB market, which is a new area of focus for us and a market that is sizable.

Last, in our tax business, we expect to finalize a partnership with a leading franchise platform that has chosen us for technology, stability and growing array of products and services. This is the first sizable partner in the franchise area of tax services in many years, and we expect to launch on our platform for the '26 tax season.

In the earnings call last quarter, I talked about our increased focus on working with existing partners to deliver value, expand our relationships to drive growth for our partners and Green Dot. We continue to see success in these efforts. I specifically referenced an embedded finance partner where we have seen revenue and contribution that is approximately 55% higher than what we had expected when we signed that customer. Building on that success, we will be launching a new payment product with them that should further drive growth above our initial expectations.

In our rapid! employer services division, we have renewed one of our largest channel partners, bringing more of the customer experience and operational support under Green Dot's control and improving our economics. Lastly, in our BaaS division, we renewed another large partner with improved economics and a path to a deeper, more robust partnership. I think these all demonstrate the value we are able to bring to customers after the initial signing and launch.

Lastly, I'd like to touch on a bit on the outlook for the embedded finance market. I recently joined the team at Money20/20, one of the largest fintech and payments conferences in the U.S. And I can tell you that based on the volume of meetings, interest in our platform and a variety of companies and executives we met with, that the embedded finance market is not only robust, but accelerating. This belief is supported by a recent study we conducted with payments.com, which we released 2 weeks ago and is featured on our website.

Based on over 500 respondents, the survey clearly points to companies prioritizing embedded finance as a revenue growth and value driver. Approximately 94% of respondents reported that they plan to increase spending on the embedded finance, with 76% saying they'll increase investments in the next 12 months. The overarching catalyst for their spending plans is to improve financial outcomes by deepening relationships with their customers and employees and differentiating their brands.

So in summary, we continue to work on signing new partners, launching new partners and growing in a market where companies are increasingly prioritizing embedded finance as a way to differentiate and drive deeper relationships with our customers and employees.

With that, let me turn it over to Jess to discuss our third quarter results. Jess?

Thank you, Chris, and good afternoon, everyone. In the third quarter, our non-GAAP revenue grew 21% year-over-year, while adjusted EBITDA declined 17%. Our top line growth was primarily driven by the performance of our B2B segment and interest income, though this was partially offset by ongoing trends in our Consumer segment. Although adjusted EBITDA declined, the reduction was substantially less than anticipated, largely due to high-margin revenue growth, continued expense management efforts and certain favorable timing factors.

Now let me touch on the factors that influence the performance of our segments. Refer to our press release and quarterly slide deck for segment results and key metrics. First up is our B2B segment, which is comprised of our BaaS channel, powered by our Arc platform and our rapid! employer services division.

Revenue growth of just over 30% continues to be driven by a significant BaaS partner, along with growth in the rest of the BaaS portfolio. Key operating metrics within the BaaS channel, such as active accounts and purchase volume continue to show solid increases as we collaborate to drive growth with existing partners and launch new ones.

We're doing a great job helping our partners grow their programs and find new ways to offer more products and services to their customers. At the same time, we're focused on the partnerships we've just rolled out and busy working on new integrations. Thanks to what we've achieved so far and the strong pipeline of upcoming launches and opportunities, I feel really good about the BaaS channel keeping up its positive momentum.

Our rapid! employer services channel continues to show the challenges faced by our partners in the staffing industry. Similar to previous quarters, revenue declined because there were fewer active accounts and less transaction activity. Although the staffing sector has yet to recover, the new leadership team has achieved strong year-to-date sales of new employer partnerships. They have also shifted more sales support towards earned wage access and continue to integrate with new payroll platforms such as Workday to pursue new market opportunities.

Despite being an early stage part of our offering, we remain optimistic about EWA due to its larger potential market and stronger profit margins. Overall, the B2B segment profit grew year-over-year, driven by an increase in our BaaS channel, although BaaS margin slightly declined due to revenue composition, particularly from the growth of a significant BaaS partner.

Margins in our rapid! employer services channel decreased compared to last year, primarily because Q3 2024 benefited from onetime cost reductions. Absent the onetime cost reductions last year, this quarter's margin for the employer services group grew year-over-year from a continued focus on expense management and operational improvements.

Similar to last quarter, our Corporate segment revenues, consisting primarily of interest income net of partner interest sharing, grew sharply year-over-year. We benefited from rate cuts in the second half of last year that improved the balance between what we earn on cash and investments and what we share with partners.

We've also been focused on optimizing our balance sheet. This year, we've already repositioned a portion of our securities portfolio, and we've been investing more cash in high-grade floating rate securities that bring in better yield. Because we're improving our asset mix and growing deposits in our BaaS business, we expect interest income to play a more prominent role in our results moving forward. I'd also like to highlight that this top line growth comes with little to no incremental costs.

Expenses in the Corporate segment were up due to higher bonus accruals with our improved earnings performance and year-over-year timing of investments in our regulatory infrastructure.

Next is our Money Movement segment, which includes our Tax Processing business and our Money Processing business. While Q3 is generally a seasonally slow quarter for our tax business, we grew revenue and profit year-over-year. Our margin in this channel expanded considerably from a better-than-expected loss rate on our taxpayer advance program. We are working on building out numerous new products and services and adding new partnerships that broaden our product set for the 2026 tax season to help build on the momentum in 2025. We're excited about a new partner in the franchise market that will contribute to growth in the coming years.

Revenue in our Money Processing business, driven mainly by cash transfer volumes on the Green Dot network, declined consistent with the decrease in transactions, driven by softness in both our Consumer segment's active base and third-party programs. While active accounts in our Consumer segment have continued to stabilize because of a ramp in new financial service center partners, these programs, at least for time being, generate fewer reloads per active account than our branded programs in retail, which continue to experience consistent mid-teens percentage declines.

Third-party cash transfers were down 5% year-over-year, largely because of lower volume from 2 partners whose activity yields lower revenue per transaction. If we exclude those 2 partners, third-party transactions were up in the low to mid-single digits in the quarter. This shift away from low revenue transactions led to an increase in our average revenue per transaction compared to last year, helping to partially offset the overall revenue impact from lower transaction volume.

With Money Processing operations more closely integrated with the BaaS business under the Arc brand, we expect to keep a healthy and active pipeline of potential partners. This, together with recent launches of new cash transfer and digital disbursement partnerships such as Stripe and others, a solid schedule of additional launch is anticipated in the coming months and continued moderation in the rate of decline in our Consumer business give us confidence that we are well positioned to reaccelerate momentum from previous quarters. Profitability in the segment remained strong with margins up approximately 300 basis points. Margin improvement in tax offset some modest pressure in our Money Processing business with the decline in revenue.

Now I'll turn to our Consumer Services segment, which is comprised of our retail and direct channels. While the Consumer segment continues to face challenges from ongoing trends in the retail channel and pressures in the direct channel, declines in segment revenue and active accounts have moderated compared to previous years. However, this third quarter did see a slight increase in the rate of decline, though this remains significantly lower than rates observed in prior years as retail declines have also shown signs of moderation.

In the retail channel, active accounts were down only 4% from the prior year, and this notable moderation in decline is largely due to our partnership with PLS and efforts to enhance customer experience, functionality and retention. Year-to-date, we continue to see growth in metrics like purchase volume and revenue per customer.

Given our ongoing efforts to enhance customer retention, the upcoming launch of DolFinTech and another recently signed FSC partner as well as the renewal of key agreements with Walmart, I'm optimistic that the decline in retail will be more moderate than prior years. The decrease in active accounts continued to stabilize, and I'm confident in our strategy to strengthen customer engagement through new products and features. Additionally, by expanding into new markets such as the FSC channel, we anticipate onboarding new partners and increasing our market share.

Our efforts to reposition the direct channel continue. Due to reduced marketing spend over the last year, revenue and actives have remained under pressure, more so than in the prior 2 years. We remain focused on developing a more robust product and enhancing the customer interface to drive improved customer acquisition and retention. We remain committed to investing in the platform and balancing investment in growth with profitability.

We are progressing with platform feature enhancements and user experience improvements, while new smaller channel partnerships present incremental growth opportunities and support our goal to return this division to positive revenue growth. Overall, segment margins were down over 400 basis points from last year due primarily to the declines in revenue, revenue mix, and we had some high-margin revenue last year related to a program and runoff that is no longer contributing to our results.

Before turning to our expectations for the rest of the year, I want to point out the new restructuring line item on the face of our GAAP P&L. That line item represents the costs associated with the exit of our Shanghai operation and primarily consists of severance expenses. Although a tough decision, exiting our overseas operation was best for productivity and overall expense management long term.

Now let me provide you with updated guidance for 2025. Provided the current volatility in the economy does not significantly impact customers' behavior or our business in general, we are adjusting our guidance as follows: we continue to expect non-GAAP revenue of $2 billion to $2.1 billion, consistent with our prior guidance. We now expect adjusted EBITDA of $165 million to $175 million, up from the previous guidance of $160 million to $170 million. And we now expect non-GAAP EPS of $1.31 to $1.44 as compared to our prior guidance of $1.28 to $1.42.

As implied by our guidance, we expect consolidated revenue growth in Q4 to be in the upper single digits with adjusted EBITDA margin down roughly 700 basis points from last year due to some tough comparisons in the consumer channel and some incremental spending that we planned for the quarter.

For the year, I expect our segment results to play out as follows: B2B segment revenue is expected to grow in the low 30% range, with 50 to 100 basis points of margin decline, driven largely by revenue mix due to strong growth in our BaaS division. Money Movement segment revenue is now expected to see flattish revenue growth with margins up 450 to 500 basis points given the strength of the Tax Processing business, the favorable mix shift in Money Processing and continued vigilance on expense across the segment.

Consumer segment revenue is projected to decline in the low double digits. Overall, we expect Consumer segment margins to be down 450 to 500 basis points and at a level comparable to 2023. Excluding the benefits of the non-core revenue in 2024 that I just mentioned, I estimate that margins will be down approximately 250 basis points.

Last, I would like to briefly touch on our ongoing efforts to drive operational efficiency and productivity. For some time now, we have been intently focused on managing costs, streamlining our organization and driving efficiency. We recently made the decision to exit our Shanghai operation. While this was not an easy decision, this effort will result in some modest cost savings while also improving our ability to deliver on our investment priorities more efficiently and with greater speed and agility.

Looking at all that we have done over the years to reduce costs and drive efficiency, I believe it's important to point out that the momentum that we are seeing in launching products, building pipelines and signing and launching new partners is occurring even though Green Dot has a smaller employee base than we did 3 years ago. I believe that this validates our success in creating a more streamlined, productive company.

In summary, I remain encouraged by our outlook for growth in the B2B segment, where we have a backlog of partners to launch in our BaaS business. The growth of BaaS is expected to drive deposit growth, and we will continue to work to optimize the net yields on our balance sheet.

While rapid! employer services still faces headwinds, we have a new leader at the top of the organization who is aggressively rightsizing that business and putting more focus on EWA where there is a large opportunity, and I'm confident we can see success with our Workday partnership serving as initial success.

In the Money Movement segment, we still have several new partners to launch this year with a robust pipeline of business opportunities to drive the third-party business and partnering with an industry leader, Stripe, will help us open up the SMB market, which we believe is an exciting new opportunity.

We also expect to announce a large franchise platform in our tax business. Our continued success in signing new partners across our B2B and Money Processing businesses reinforces my confidence that our investments in these areas are enabling us to capitalize on the vast opportunity within those markets. Though we still anticipate declines in our Consumer segment, we are preparing to launch DolFinTech, which has approximately 5,500 locations. We signed an additional partner and are confident in our ability to win more market share in this channel, which should help moderate the overall declines of that channel.

With that, let me turn it back over to Bill for some closing comments.

Thank you, Jess. It was another solid quarter, and we are pleased with the progress we are making as we sign, launch and expand our partnerships. At the same time, we are working to improve the profitability of our balance sheet and continue executing on our operational imperatives, including realigning our resources to support our core priorities and growth strategy.

We launched Crypto.com in the quarter, and we are preparing to launch Credit Sesame and other recently signed BaaS partners as well as 2 new FSC partners and Stripe as a Money Processing partner, helping us capture the opportunities in the SMB market.

Just as important, those customers that we have worked with for many years continue to place their trust in us to help them deliver on their own aspirations for embedded finance, and we are thrilled that they recognize the value of partnering with us with numerous renewals and product launches.

While it is still early to provide guidance for 2026, let me provide you with my perspective as we begin to exit 2025 and think more intently about 2026. Over the last several years, Green Dot has navigated a variety of challenges and headwinds. This put pressure on our bottom line results as we choose to simultaneously invest in the future of Green Dot. Based on our results this year and our updated outlook, I believe we have stabilized and helped to position the company for sustainable growth.

As I think about 2026, I believe that we have a solid stepping off point to work with based on our 2025 performance. There are still many things to take into consideration. We continue to face some headwinds in our Consumer business, and we have investments we would like to make that got shelved in prior years. But unlike prior years, I believe we can absorb those and continue to move forward.

With a growing list of partners and launches and our focus to improve the profitability of the balance sheet, we have been dealt a better hand to deal with as we think about the upcoming year. We have worked to reposition the growth drivers of the company around our B2B division and our money movement operations that are benefiting from the tailwinds and the rising tide of our embedded finance marketplace. As a result, I am increasingly confident in our outlook, and I look to build off the stability and progress that have emerged this year and deliver better bottom line results next year.

The last several years, the company has undertaken numerous initiatives and made substantial investments to position Green Dot to return to sustainable, predictable growth. We have seen improved momentum with signings and launches despite the fact that the organization is smaller now than it was 3 years ago, which I believe validates we have made the right decisions and we're successful in executing on those initiatives.

Most important is that the team at Green Dot has risen to the challenge and embraced change as they executed on our internal strategy and remain focused. They should be commended for their efforts, and I am truly grateful and thank the team for their hard work and continued commitment, which I expect will pay off. It is because of their efforts that I remain confident we are positioned to win in the embedded finance market for years to come.

With that, we are happy to take your questions.

[Operator Instructions] And our first question for today will come from Cris Kennedy with William Blair.

You talked about the strong demand for embedded finance and the rising tide. Can you just talk about what's driving that? Is it improved regulatory environment? Or what else are you seeing out there in the market?

Cris, thank you for your question. This is Chris Ruppel. I want -- I think it's -- we've talked in the past about our -- the pipeline that we're building in our business development efforts. And I think when we talk about rising tide, that's both through surveys, we see companies that are interested in bringing embedded finance solutions into their customer ecosystems through their mobile apps or other environments to help deepen those relationships, monetize those relationships in different ways and provide greater utility to their customers. And so that's generating demand. We see that increasingly being accepted as a strategic imperative for those companies. And so that, coupled within our business development efforts and our sort of rising appreciation of our value in that marketplace and prominence in that marketplace, is allowing us to grow our business development pipeline and give us confidence in our ability to grow the B2B and embedded finance segment on a go-forward basis.

Understood. And then just as a follow-up, can you just talk about the time line to revenue from all the new signings and onboardings that you have this year and kind of how you think that will impact the income statement as we look into 2026?

So I'll speak generally about the -- Sure. So from a time line perspective, it varies based on the type of solution that we're supporting. And so they -- our money movement solutions generally have a lower time line for implementation. But generally, our current structure is that for closing an account, a new partner this year, often then they're launching in a 6- to 8-month time frame. We're bringing that back. So it's been closer to 6 months.

And then there's a revenue ramp with the new customers as they come on board, and that depends on the specifics of their particular solution and whether they have an existing program that were replacing or if it's a de novo embedded finance solution. And so those things generally tend to cause the revenue ramp to move from sort of anywhere from 6 months to a year. So I mean that's a general time frame based on implementation and then on revenue ramp. So it is an extended ramp as you kind of look out over time, but one that we walked through with many of the customers and are active in working with those customers to shorten the ramp times within each of those organizations. Jess, I don't know if you have anything else you'd like to add to that.

No, I think that was all.

To reduce the time to onboard, I think that's helpful to investors.

Sure. Yes. Thank you, Bill. So we have an internal project called Project 30. I think we may have discussed this in prior earnings calls. That's an internal project to move our implementation time down. Our goal for this year was to reduce implementation from a go-live perspective by 60 days. Our ultimate goal is 30 days for technical implementation, recognizing that there are other nontechnical factors in the program launches and coordination with customers that often take longer than that.

But to the degree that we can reduce the time and effort required for launching new customers, we want to drive that to 30 days and then working on the rest to promotion of the program and roll out of the program with our partners. So that's -- as we think about the business on a go forward, the time lines I gave are sort of current and where we have been historically, but we intend to reduce those times significantly on a go forward and are actively pursuing a path of work to get there.

The next question will come from George Sutton with Craig-Hallum.

Pushing a little more on the embedded finance acceleration that you're seeing in the pipeline in the broader market. I'm just curious, how are you focusing your efforts? Is it high-quality adds? Is it -- are there limitations to your ability in terms of the number of folks that you can add at any one time? Just curious how you're thinking about that.

George, thank you so much for your question, and I appreciate diving into this. So I think in the -- we've talked about in the past that our main focus has always been on helping the world's leading brands, power their embedded finance solutions. And so we have been purposefully targeting customers that have either large customer bases that they're able to leverage embedded finance solution into. And so that's been -- or have an existing program that they're converting to us. Either way that we know the program has the possibility to -- for significant scale. And so as we're looking at those programs, we're looking at those partners.

Part of the benefit of our program, the Project 30 initiative is that as we reduce the onboarding time, we do have the -- it will help our -- sort of the internal ability for us to go down market into what I would say is mid-market customers that we might not take the risk on today, but are -- will be worth pursuing when we have a more streamlined onboarding process and a reduced technical build and that there, we can, in essence, invest in companies of smaller size that may grow to have scale and to be worthwhile programs where today, we wouldn't take the risk on those programs because of our limitations. And so that's where the Project 30 comes into play. But today, we are specifically targeting larger marquee brands that have large installed customer bases that they can leverage the opportunity into.

Well, speaking of large brands, obviously, Workday in the EWA space is an enormous win and Stripe on the Green Dot network side. Can you just give us a sense of the impacts that you could ultimately see once these are both rolled out?

So within Workday, we have -- we achieved an integration for our EWA platform with them. And ultimately, it will come down to our ability to close partners in that space, but Workday is a great platform and sort of an indication of the integrations that we're doing with similar systems to allow us to leverage into a greater number of employers across the country to sell either in partnership with those partners or directly into employers that are on various platforms. So we've been working over a multiyear period to create integrations to cover the majority of the market, and we believe we're reaching maturity in that. And Workday is a great example of that, which we're very excited about that partnership and the possibility to service Workday customers with our -- and their employees with our Engaged Wage Access solution.

So I think there's potential scale and it will take time for us to work through from a sales and marketing perspective, but the technical integration is done, and we can support employers that are engaged and using the Workday platform today and very, very excited about that possibility and continue to grow our customer base into the Workday platform.

As it relates to Stripe, I think, which on the Money Movement space, particularly for business cash depositing into the Stripe ecosystem. We're working with them with Stripe on the marketing and promotion of the service inside of their ecosystem. And we have -- we're very excited about that partnership and having success in this first phase that -- but I think it will take some time for us to develop and understand the customer need within their platform as they continue to look for and promote into the platform for the use of the cash depositing. But where we see in the rest of our business, the need for cash, the use of cash in the overall economy is still very, very high. So we're bullish on the opportunity. And of course, the scale that Stripe has in the market would lend to even with modest -- in modest adoption inside of their platform will be a significant piece of business for us.

This concludes our question-and-answer session. I would like to turn the conference back over to Mr. Bill Jacobs for any closing remarks.

Thank you. Well, I'd like to thank everybody for joining us on our call today. We're pleased with the position that Green Dot's in, and we think the future is bright for us. I'd like to thank my associates, Jess and Chris, who did a great job today talking to investors. So thank you very much for joining us, and we look forward to talking to you again. Bye.

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