updated 11/10/2010 7:46:24 AM ET 2010-11-10T12:46:24

AUSTIN, Texas, Nov. 10, 2010 (GLOBE NEWSWIRE) -- NetSpend Holdings, Inc. ("NetSpend") (Nasdaq:NTSP) today announced financial results for the quarter ended September 30, 2010.

Q3 2010 Highlights:

  • Revenues up 22% to $68.2 million in Q3 2010 as compared to $56.0 million in Q3 2009
  • Net income up 78% to $6.4 million in Q3 2010 as compared to $3.6 million in Q3 2009
  • Fully Diluted Earnings Per Share up 75% in Q3 2010 to $0.07 as compared to Q3 2009 earnings per share of $0.04
  • Adjusted EBITDA1 up 51% in Q3 2010 of $16.0 million as compared to $10.6 in Q3 2009
  • Adjusted Net Income1 up 73% in Q3 2010 of $8.3 million as compared to $4.8 million in Q3 2009

Key Business Metrics for the Quarter Ended September 30, 2010:

  • Number of active cards of 2.1 million as of September 30, 2010 as compared to 1.7 million active cards as of September 30, 2009
  • Percentage of active cards with direct deposit of 31.7% as of September 30, 2010 as compared to 25.9% as of September 30, 2009
  • Gross Dollar Volume (GDV) of $2.4 billion during Q3 2010 as compared to $1.8 billion during Q3 2009

Refer to our Quarterly Report on Form 10-Q for a description of these key business metrics.

"We're very pleased to be announcing strong business results in our first quarter as a publicly-traded company," said Dan Henry, chief executive officer at NetSpend. "These results are a product of the focus, discipline and dedication that all of my teammates have in serving the underbanked population in this country." 

Fiscal Third Quarter 2010 Results

Revenues were $68.2 million for the quarter ended September 30, 2010, an increase of approximately 22% over the $56.0 million of revenues recorded in the same quarter of 2009. This increase was due primarily to the increase in the average number of active cards of approximately 24.6%, offset in part by the decline in gift card related revenue due to our decision in 2008 to cease marketing gift cards.

Net income was $6.4 million, an increase of 78% over net income of $3.6 million for the quarter ended September 30, 2009. Our net income for the quarter ended September 30, 2010 includes an aggregate amount of $7.4 million of net interest expense, income tax expense, and depreciation and amortization. Our net income for the quarter ended September 30, 2010 also includes approximately $1.4 million in stock-based compensation expense and approximately $0.7 million of debt extinguishment costs. The debt extinguishment costs were incurred in conjunction with repaying the outstanding balances under our prior credit facility with borrowings under our new credit facility that was closed in September 2010. For the quarter ended September 30, 2009, the comparable amount of net interest expense, income tax expense, and depreciation and amortization was $5.9 million, and we incurred approximately $1.1 million in stock-based compensation.

Investor Conference Call and Webcast

NetSpend will host an investor conference call to discuss its third quarter 2010 results today at 8:00 a.m. ET. The conference call can be accessed live over the phone by dialing (877) 853-5634 or for international callers (707) 287-9375. A replay will be available two hours after the call and can be accessed by dialing (800) 642-1687 or (706) 645-9291 for international callers; the conference ID is 22354505. The call will be webcast live from NetSpend's website at http://investor.netspend.com.

Non-GAAP Financial Information

To supplement our 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 our 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 may be deemed to contain forward-looking statements, which are subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. 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. The potential risks and uncertainties that could cause actual results to differ from those projected are discussed in greater detail in our filings with the Securities and Exchange Commission, including our quarterly report on Form 10-Q, 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 November 10, 2010, and we assume no obligation to update this information as a result of future events or developments.

About NetSpend

NetSpend Holdings, Inc., based in Austin, Texas, is a leading provider of general-purpose reloadable prepaid debit cards to underbanked consumers in the United States. NetSpend is one of the largest dedicated providers of GPR cards in the U.S., focused on providing the estimated 60 million underbanked U.S. consumers with innovative and affordable financial products. More information about the company can be found at http://www.netspend.com .

The NetSpend Corporation logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=8154

1 Reconciliations of Adjusted EBITDA and Adjusted Net Income to net income are provided in the tables immediately following the consolidated statements of cash flows. Additional information about the Company's non-GAAP financial measures can be found under the caption "About Non-GAAP Financial Measures."

 

(1) We use a non-GAAP financial metric that we label "Adjusted EBITDA" to evaluate our financial performance. We compute Adjusted EBITDA by adjusting net income or net loss to remove the effect of income and expenses related to interest, taxes, depreciation and amortization, or EBITDA, and then adjusting for stock-based compensation, and other non-recurring gains and losses. We believe that Adjusted EBITDA is an important metric for the following reasons:

  • It provides a meaningful comparison of our operating results over several periods because it removes the impact of income and expense items that are not a direct result of our core operations, such as goodwill and intangible impairments, legal settlements and one-time settlement gains and losses on the early extinguishment of long-term debt;
  • We use it as a tool to assist in our planning for the effect of strategic operating decisions and for the prediction of future operating results;
  • It functions as a threshold target for our company-wide employee bonus compensation; and,
  • We use it to evaluate our capacity to incur and service debt, fund capital expenditures and expand our business.

Settlement (gains) and other losses during the nine months ended September 30, 2009 relate to $9.0 million of recoveries of excess funds from our issuing banks for fee and chargeback recoveries and $1.2 million resulting from the settlement of certain litigation. Settlement (gains) and other losses during the nine months ended September 30, 2010 relate to a $3.5 million loss related to a patent infringement dispute and a $0.8 million contingent loss related to a contractual dispute with a vendor.

The loss on extinguishment of debt during the three and nine months ended September 30, 2010 relates to the $0.7 million write-off of remaining capitalized debt issuance costs associated with our prior credit facility.

(2) In addition to Adjusted EBITDA, we use a second non-GAAP financial metric that we label "Adjusted Net Income" to evaluate our financial performance. We compute Adjusted Net Income by adjusting net income or net loss to remove tax-effected amortization expense, stock-based compensation and other non-recurring gains and losses and we believe it is an important metric that is useful to our board of directors, management and investors for the following reasons:

  • Assets being depreciated will often have to be replaced in the future and Adjusted EBITDA does not reflect any expenditure for these items;
  • Adjusted EBITDA does not reflect the significant interest expense, or the payments necessary to service interest payments on our debt;
  • Adjusted Net Income provides a meaningful comparison of our operating results over several periods because it removes the impact of income and expense items that are not a direct result of our core operations, such as goodwill and intangible impairments, legal settlements, one-time settlement gains and losses on the early extinguishment of long-term debt; and
  • We believe Adjusted Net Income measurements are used by investors as a supplemental measure to evaluate the overall operating performance of companies in our industry. 

By providing this non-GAAP financial measure, together with the above reconciliation, we believe we are enhancing investors' understanding of our business and our results of operations, as well as assisting investors in evaluating how well we are executing strategic initiatives. Our Adjusted EBITDA is not necessarily comparable to what other companies define as Adjusted EBITDA. In addition, Adjusted EBITDA is not a measure defined by U.S. GAAP and should not be considered as a substitute for or alternative to net income, operating income, cash flows from operating activities or other financial information as determined by U.S. GAAP. Our presentation of Adjusted EBITDA should not be construed as an implication that our future results will be unaffected by unusual or non-recurring items.

Settlement (gains) and other losses during the nine months ended September 30, 2009 relate to $9.0 million of recoveries of excess funds from our issuing banks for fee and chargeback recoveries and $1.2 million resulting from the settlement of certain litigation. Settlement (gains) and other losses during the nine months ended September 30, 2010 relate to a $3.5 million loss related to a patent infringement dispute and a $0.8 million contingent loss related to a contractual dispute with a vendor.

The loss on extinguishment of debt during the three and nine months ended September 30, 2010 relates to the $0.7 million write-off of remaining capitalized debt issuance costs associated with our prior credit facility.

(3) Our Adjusted EBITDA and Adjusted Net Income are not necessarily comparable to what other companies define as Adjusted EBITDA and Adjusted Net Income. In addition, Adjusted EBITDA and Adjusted Net Income are not measures defined by U.S. GAAP and should not be considered as substitutes for or alternatives to net income, operating income, cash flows from operating activities or other financial information as determined by U.S. GAAP. Our presentation of Adjusted EBITDA and Adjusted Net Income should not be construed as an implication that our future results will be unaffected by unusual or non-recurring items.
 

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