NetSpend Holdings, Inc. - FORM 8-K - EX-99.1

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8-K - CURRENT REPORT OF MATERIAL EVENTS OR CORPORATE CHANGES - NetSpend Holdings, Inc.	a11-6791_18k.htm

Exhibit 99.1

NetSpend Holdings, Inc.

Quarterly Consolidated Balance Sheets

	As of			As of			As of			As of			As of			As of			As of			As of			As of			As of			As of			As of
	March 31,			June 30,			September 30,			December 31,			March 31,			June 30,			September 30,			December 31,			March 31,			June 30,			September 30,			December 31,
(in thousands of dollars)	2008			2008			2008			2008			2009			2009			2009			2009			2010			2010			2010			2010
	(unaudited)			(unaudited)			(unaudited)						(unaudited)			(unaudited)			(unaudited)						(unaudited)			(unaudited)			(unaudited)
Assets
Current assets
Cash and cash equivalents	$	37,110		$	35,779		$	22,436		$	21,490		$	15,943		$	27,056		$	14,831		$	21,154		$	13,790		$	15,384		$	27,077		$	67,501
Accounts receivable, net	6,311			5,515			6,652			5,550			6,795			3,607			3,526			4,513			4,557			5,001			5,601			5,441
Prepaid card supply	2,020			2,000			2,003			2,179			2,133			2,192			1,850			1,783			1,536			1,423			1,471			1,605
Prepaid expenses	520			806			1,342			1,703			1,612			2,743			2,893			2,357			1,767			2,701			2,388			2,380
Other current assets	510			1,994			1,283			1,019			1,557			1,819			2,106			1,845			1,530			1,717			2,824			1,007
Income tax receivable	—			684			3,345			2,172			835			—			—			2,375			—			—			—			—
Deferred tax assets	4,541			4,264			7,148			6,713			5,231			5,562			5,003			2,872			3,660			4,579			5,121			3,916
Total current assets	51,012			51,042			44,209			40,826			34,106			42,979			30,209			36,899			26,840			30,805			44,482			81,850

Property and equipment, net	6,289			8,449			11,772			13,224			15,168			20,448			22,156			24,441			24,381			24,212			22,589			21,007
Goodwill	52,085			52,085			151,293			128,567			128,567			128,567			128,567			128,567			128,567			128,567			128,567			128,567
Intangible assets	6,413			5,817			36,437			32,372			31,307			30,428			29,643			28,981			28,192			27,404			26,616			25,739
Long-term investment	—			—			—			—			—			—			—			—			3,788			4,500			4,800			2,067
Other assets	753			694			1,531			1,758			2,891			3,078			3,659			3,397			3,377			3,149			4,420			4,673
Total assets	$	116,552		$	118,087		$	245,242		$	216,747		$	212,039		$	225,500		$	214,234		$	222,285		$	215,145		$	218,637		$	231,474		$	263,903

Liabilities & Stockholders’ Equity
Current liabilities
Accounts payable	$	5,080		$	7,588		$	7,091		$	5,351		$	6,453		$	4,944		$	3,746		$	3,444		$	4,588		$	2,470		$	2,264		$	2,850
Accrued expenses	13,164			14,582			21,281			22,181			14,708			16,340			18,435			21,531			23,143			24,729			26,332			25,067
Income tax payable	1,436			—			—			—			—			4,298			808			—			1,808			1,169			107			332
Cardholders’ reserve	1,322			1,495			2,039			1,319			1,133			1,146			1,347			1,620			1,921			1,862			2,813			4,789
Deferred revenue	4,576			2,935			2,716			1,946			2,092			2,411			2,385			2,158			1,857			1,576			1,274			1,333
Long-term debt, current portion	7,000			8,000			13,438			9,375			10,313			12,639			12,494			21,513			12,532			12,551			1,676			1,354
Total current liabilities	32,578			34,600			46,565			40,172			34,699			41,778			39,215			50,266			45,849			44,357			34,466			35,725

Long-term debt, net of current portion	40,000			38,000			74,688			76,875			74,063			73,244			60,114			51,979			48,839			45,694			58,500			58,500
Deferred tax liabilities	2,062			2,248			12,813			11,058			10,290			9,970			9,592			10,318			10,021			9,574			11,159			9,855
Other non-current liabilities	160			259			289			297			333			355			396			370			371			383			405			3,007
Total liabilities	74,800			75,107			134,355			128,402			119,385			125,347			109,317			112,933			105,080			100,008			104,530			107,087

Stockholders’ equity
Series A convertible preferred stock	45			45			—			—			—			—			—			—			—			—			—			—
Common stock	8			8			77			77			77			77			77			77			77			77			77			92
Class B common stock	6			6			10			10			10			10			10			10			11			11			11			—
Treasury stock at cost	(1,116		)	(4,293		)	(4,293		)	(4,293		)	(4,512		)	(5,704		)	(5,704		)	(5,704		)	(11,374		)	(11,374		)	(11,374		)	(11,374		)
Additional paid-in capital	36,840			37,740			113,721			115,027			116,169			117,381			118,565			119,484			121,056			122,719			124,463			150,183
Accumulated other comprehensive income (loss)	—			—			—			—			—			—			—			—			368			823			1,014			(1,142		)
Retained earnings (accumulated deficit)	5,969			9,474			1,372			(22,476		)	(19,090		)	(11,611		)	(8,031		)	(4,515		)	(73		)	6,373			12,753			19,057
Total stockholders’ equity	41,752			42,980			110,887			88,345			92,654			100,153			104,917			109,352			110,065			118,629			126,944			156,816

Total liabilities & stockholders’ equity	$	116,552		$	118,087		$	245,242		$	216,747		$	212,039		$	225,500		$	214,234		$	222,285		$	215,145		$	218,637		$	231,474		$	263,903

NetSpend Holdings, Inc.

Unaudited Quarterly Condensed Consolidated Statements of Operations

	Three months ended			Three months ended			Three months ended			Three months ended			Three months ended			Three months ended			Three months ended			Three months ended			Three months ended			Three months ended			Three months ended			Three months ended
(in thousands of dollars, except per-share data)	March 31, 2008			June 30, 2008			September 30, 2008			December 31, 2008			March 31, 2009			June 30, 2009			September 30, 2009			December 31, 2009			March 31, 2010			June 30, 2010			September 30, 2010			December 31, 2010

Operating Revenues	$	45,439		$	41,858		$	46,732		$	49,141		$	54,738		$	54,898		$	55,962		$	59,402		$	69,520		$	67,447		$	68,208		$	70,212

Operating Expenses
Direct operating costs	20,503			17,806			19,205			22,702			26,594			25,232			25,754			28,992			32,713			30,304			32,364			35,402
Salaries, benefits, and other personnel costs	6,701			8,833			9,846			9,654			10,683			12,874			11,862			11,249			13,079			13,504			13,149			14,300
Advertising, marketing, and promotion costs	2,707			3,000			3,150			3,142			2,467			3,706			3,617			4,013			3,841			3,528			3,369			3,300
Other general and administrative costs	3,701			4,138			6,055			7,157			6,009			5,966			5,234			4,865			4,212			4,876			4,777			4,369
Depreciation and amortization	1,618			1,610			2,695			2,976			2,800			2,344			2,537			2,616			2,779			3,296			3,223			3,427
Goodwill and acquired intangible asset impairment	—			—			—			26,285			—			—			—			—			—			—			—			—
Settlement (gains) and other losses	—			—			—			—			(1,068		)	(9,161		)	—			—			4,000			300			—			—
Total operating expenses	35,230			35,387			40,951			71,916			47,485			40,961			49,004			51,735			60,624			55,808			56,882			60,798

Operating income (loss)	10,209			6,471			5,781			(22,775		)	7,253			13,937			6,958			7,667			8,896			11,639			11,326			9,414

Other Income (Expense)
Interest income	196			71			77			40			17			10			4			1			6			40			20			19
Interest expense	(796		)	(654		)	(1,267		)	(1,691		)	(1,365		)	(1,388		)	(1,312		)	(1,105		)	(1,012		)	(1,045		)	(926		)	(543		)
Loss on extinguishment of debt	—			—			—			—			—			—			—			—			—			—			(734		)	—
Total other expense	(600		)	(583		)	(1,190		)	(1,651		)	(1,348		)	(1,378		)	(1,308		)	(1,104		)	(1,006		)	(1,005		)	(1,640		)	(524		)

Income (loss) before income taxes	9,609			5,888			4,591			(24,426		)	5,905			12,559			5,650			6,563			7,890			10,634			9,686			8,890

Provision for income taxes	3,640			2,383			1,862			(578		)	2,337			5,049			2,070			3,047			3,272			4,188			3,306			2,586

Net income (loss)	$	5,969		$	3,505		$	2,729		$	(23,848	)	$	3,568		$	7,510		$	3,580		$	3,516		$	4,618		$	6,446		$	6,380		$	6,304

Shares used in the computation of earnings per share of common stock:
Basic	13,890			13,449			73,701			85,839			85,896			85,649			85,538			85,416			85,357			84,370			84,485			87,443
Diluted	60,389			59,978			82,311			86,960			86,985			86,633			86,573			86,361			86,391			86,438			88,726			93,353

Net income (loss) per share of common stock:
Basic	$	0.43		$	0.26		$	(0.27	)	$	(0.28	)	$	0.04		$	0.09		$	0.04		$	0.04		$	0.05		$	0.08		$	0.07		$	0.07
Diluted	$	0.10		$	0.06		$	(0.27	)	$	(0.28	)	$	0.04		$	0.09		$	0.04		$	0.04		$	0.05		$	0.08		$	0.07		$	0.07

NetSpend Holdings, Inc.

Unaudited Consolidated Quarterly Statements of Cash Flows

	Three months ended			Three months ended			Three months ended			Three months ended			Three months ended			Three months ended			Three months ended			Three months ended			Three months ended			Three months ended			Three months ended			Three months ended
	March 31,			June 30,			September 30,			December 31,			March 31,			June 30,			September 30,			December 31,			March 31,			June 30,			September 30,			December 31,
(in thousands of dollars)	2008			2008			2008			2008			2009			2009			2009			2009			2010			2010			2010			2010
Cash flows from operating activities
Net income (loss)	$	5,969		$	3,505		$	2,729		$	(23,848	)	$	3,568		$	7,510		$	3,580		$	3,516		$	4,618		$	6,446		$	6,380		$	6,304
Adjustments to reconcile net income (loss) to net cash provided by operating activities
Depreciation and amortization	1,618			1,610			2,695			2,976			2,800			2,344			2,537			2,616			2,779			3,296			3,223			3,427
Goodwill and acquired intangible asset impairment	—			—			—			26,285			—			—			—			—			—			—			—			—
Amortization of debt issuance costs	67			67			249			248			110			108			118			140			134			131			78			81
Loss on extinguishment of debt	—			—			—			—			—			—			—			—			—			—			734			—
Gain on settlement	—			—			—			—			—			(1,192		)	—			—			—			—			—			—
Stock-based compensation	232			458			815			968			1,134			1,203			1,070			1,077			1,503			1,507			1,404			2,854
Tax benefit associated with stock options	—			(25		)	(12		)	—			—			—			(18		)	—			—			(44		)	(2		)	(1,474		)
Provision for cardholder losses	734			617			1,023			(12		)	1,374			914			1,338			1,304			1,613			1,786			2,532			4,323
Deferred income taxes	955			463			2,517			(1,470		)	714			(651		)	181			2,857			(1,295		)	(1,623		)	934			479
Changes in operating assets and liabilities
Accounts receivable	(1,684		)	796			329			1,102			(1,245		)	3,188			81			(987		)	(44		)	(444		)	(600		)	160
Income tax receivable or payable	2,307			(2,120		)	(2,661		)	1,173			1,337			5,133			(3,490		)	(3,183		)	4,183			(595		)	(1,060		)	1,699
Prepaid card supply	(364		)	20			(3		)	(176		)	46			(59		)	342			67			247			113			(48		)	(134		)
Prepaid expenses	(76		)	(286		)	(112		)	(361		)	91			(1,131		)	(150		)	536			590			(934		)	313			8
Other current assets	(97		)	(1,484		)	711			264			(538		)	(262		)	(287		)	261			315			(187		)	(1,107		)	1,817
Other long-term assets	148			(8		)	197			(471		)	(1,243		)	(295		)	(338		)	122			(114		)	98			(622		)	(334		)
Accounts payable and accrued expenses	1,346			3,951			(1,773		)	(690		)	(1,371		)	123			915			2,624			2,756			(532		)	1,397			(679		)
Cardholders’ reserve	(522		)	(444		)	(629		)	(708		)	(1,560		)	(901		)	(1,137		)	(1,031		)	(1,312		)	(1,845		)	(1,581		)	(2,347		)
Other liabilities	(1,595		)	(1,541		)	(189		)	(763		)	182			341			15			(253		)	(299		)	(270		)	(280		)	2,661
Net cash provided by operating activities	9,038			5,579			5,886			4,517			5,399			16,373			4,757			9,666			15,674			6,903			11,695			18,845

Cash flows from investing activities
Purchase of property and equipment	(1,076		)	(3,175		)	(3,224		)	(3,240		)	(3,678		)	(3,363		)	(3,460		)	(4,115		)	(1,930		)	(2,339		)	(812		)	(964		)
Purchase of intangible assets	—			—			—			—			—			—			—			(125		)	—			—			—			(4		)
Long-term investment	—			—			—			—			—			—			—			—			(3,210		)	—			—			—
Net cash acquired from the acquisition of Skylight	—			—			6,986			—			—			—			—			—			—			—			—			—
Net cash paid for the acquisition of Procesa	—			—			—			(386		)	—			—			—			—			—			—			—			—
Net cash provided by (used in) investing activities	(1,076		)	(3,175		)	3,762			(3,626		)	(3,678		)	(3,363		)	(3,460		)	(4,240		)	(5,140		)	(2,339		)	(812		)	(968		)

Cash flows from financing activities
Dividends paid	—			—			(25,000		)	—			(5,000		)	—			—			—			—			—			—			—
Dividend equivalents paid	—			—			—			—			(182		)	(31		)	—			—			(176		)	—			—			—
Proceeds from the exercise of common stock options	7			417			765			38			8			9			96			12			69			112			313			357
Proceeds from the exercise of common stock warrants	—			—			37			—			—			—			—			—			—			—			26			57
Tax benefit associated with stock options	—			25			12			—			—			—			18			—			—			44			2			1,474
Net cash proceeds from initial public offering	—			—			—			—			—			—			—			—			—			—			—			20,981
Proceeds from issuance of long-term debt	—			—			90,000			—			—			—			—			9,000			—			—			58,500			—
Issuance costs of long-term debt	—			—			(1,230		)	—			—			—			(361		)	—			—			—			(1,462		)	—
Principal payments on debt	(1,000		)	(1,000		)	(87,575		)	(1,875		)	(1,875		)	(1,875		)	(13,275		)	(8,115		)	(12,121		)	(3,126		)	(56,569		)	(322		)
Treasury stock purchases	—			(3,177		)	—			—			(219		)	—			—			—			(5,670		)	—			—			—
Net cash provided by (used in) financing activities	(993		)	(3,735		)	(22,991		)	(1,837		)	(7,268		)	(1,897		)	(13,522		)	897			(17,898		)	(2,970		)	810			22,547

Net change in cash and cash equivalents	6,969			(1,331		)	(13,343		)	(946		)	(5,547		)	11,113			(12,225		)	6,323			(7,364		)	1,594			11,693			40,424

Cash and cash equivalents at beginning of period	30,141			37,110			35,779			22,436			21,490			15,943			27,056			14,831			21,154			13,790			15,384			27,077
Cash and cash equivalents at end of period	$	37,110		$	35,779		$	22,436		$	21,490		$	15,943		$	27,056		$	14,831		$	21,154		$	13,790		$	15,384		$	27,077		$	67,501

Supplemental disclosure of cash flow information
Cash paid for interest	$	829		$	663		$	112		$	2,465		$	1,298		$	1,299		$	1,228		$	1,068		$	954		$	919		$	826		$	65
Cash paid for income taxes	18			4,047			1,808			253			337			818			5,412			3,473			189			7,046			3,431			16

Non-cash investing activities
Capital lease entered into for purchase of software	$	—		$	—		$	—		$	—		$	—		$	3,383		$	—		$	—		$	—		$	—		$	—		$	—
Stock issued for the acquisition of Skylight	—			—			93,549			—			—			—			—			—			—			—			—			—
Stock issued for the acquisition of Procesa	—			—			—			300			—			—			—			—			—			—			—			—

NetSpend Holdings, Inc.

Reconciliation of Adjusted EBITDA to Net Income

(Unaudited)


(in thousands of dollars)	Three months ended March 31, 2008			Three months ended June 30, 2008			Three months ended September 30, 2008			Three months ended December 31, 2008			Three months ended March 31, 2009			Three months ended June 30, 2009			Three months ended September 30, 2009			Three months ended December 31, 2009			Three months ended March 31, 2010			Three months ended June 30, 2010			Three months ended September 30, 2010			Three months ended December 31, 2010

Net income (loss)	$	5,969		$	3,505		$	2,729		$	(23,848	)	$	3,568		$	7,510		$	3,580		$	3,516		$	4,618		$	6,446		$	6,380		$	6,304

Interest income	(196		)	(71		)	(77		)	(40		)	(17		)	(10		)	(4		)	(1		)	(6		)	(40		)	(20		)	(19		)
Interest expense	796			654			1,267			1,691			1,365			1,388			1,312			1,105			1,012			1,045			926			543
Income tax expense	3,640			2,383			1,862			(578		)	2,337			5,049			2,070			3,047			3,272			4,188			3,306			2,586
Depreciation and amortization	1,618			1,610			2,695			2,976			2,800			2,344			2,537			2,616			2,779			3,296			3,223			3,427
EBITDA	$	11,827		$	8,081		$	8,476		$	(19,799	)	$	10,053		$	16,281		$	9,495		$	10,283		$	11,675		$	14,935		$	13,815		$	12,841

Stock-based compensation expense	232			458			815			968			1,134			1,203			1,070			1,077			1,503			1,507			1,404			2,854
Goodwill and acquired intangible asset impairment	—			—			—			26,285			—			—			—			—			—			—			—			—
Settlement (gains) and other losses	—			—			—			—			(1,068		)	(9,161		)	—			—			4,000			300			—			—
Loss on extinguishment of debt	—			—			—			—			—			—			—			—			—			—			734			—
Adjusted EBITDA (1) (3)	$	12,059		$	8,539		$	9,291		$	7,454		$	10,119		$	8,323		$	10,565		$	11,360		$	17,178		$	16,742		$	15,953		$	15,695

NetSpend Holdings, Inc.

Reconciliation of Adjusted Net Income to Net Income

(Unaudited)


(in thousands, except per-share data)	Three months ended March 31, 2008			Three months ended June 30, 2008			Three months ended September 30, 2008			Three months ended December 31, 2008			Three months ended March 31, 2009			Three months ended June 30, 2009			Three months ended September 30, 2009			Three months ended December 31, 2009			Three months ended March 31, 2010			Three months ended June 30, 2010			Three months ended September 30, 2010			Three months ended December 31, 2010

Net income (loss)	$	5,969		$	3,505		$	2,729		$	(23,848	)	$	3,568		$	7,510		$	3,580		$	3,516		$	4,618		$	6,446		$	6,380		$	6,304

Stock-based compensation expense	232			458			815			968			1,134			1,203			1,070			1,077			1,503			1,507			1,404			2,854
Goodwill and acquired intangible asset impairment	—			—			—			26,285			—			—			—			—			—			—			—			—
Amortization of intangibles	591			596			980			1,057			1,066			878			786			786			788			788			788			881
Settlement (gains) and other losses	—			—			—			—			(1,068		)	(9,161		)	—			—			4,000			300			—			—
Loss on extinguishment of debt	—			—			—			—			—			—			—			—			—			—			734			—
Total pre-tax adjustments	823			1,054			1,795			28,310			1,132			(7,080		)	1,856			1,863			6,291			2,595			2,926			3,735

Tax rate	37.9		%	40.5		%	40.6		%	39.1		%	34.8		%	40.2		%	36.6		%	46.4		%	39.6		%	39.4		%	34.1		%	29.0		%
Tax adjustment	312			427			729			11,069			394			(2,846		)	679			864			2,492			1,022			998			1,083

Adjusted net income (loss) (2) (3)	$	6,480		$	4,132		$	3,795		$	(6,607	)	$	4,306		$	3,276		$	4,757		$	4,515		$	8,417		$	8,019		$	8,308		$	8,956

Shares used in the computation of earnings per share of common stock:
Basic	13,890			13,449			73,701			85,839			85,896			85,649			85,538			85,416			85,357			84,370			84,485			87,443
Diluted	60,389			59,978			82,311			86,960			86,985			86,633			86,573			86,361			86,391			86,438			88,726			93,353

Adjusted net income (loss) per share of common stock:
Basic	$	0.47		$	0.31		$	0.05		$	(0.08	)	$	0.05		$	0.04		$	0.06		$	0.05		$	0.10		$	0.10		$	0.10		$	0.10
Diluted	$	0.11		$	0.07		$	0.05		$	(0.08	)	$	0.05		$	0.04		$	0.05		$	0.05		$	0.10		$	0.09		$	0.09		$	0.10

NetSpend Holdings, Inc.

Other Operating Metrics

(Unaudited)

(in millions)	March 31, 2008			June 30, 2008			September 30, 2008			December 31, 2008			March 31, 2009			June 30, 2009			September 30, 2009			December 31, 2009			March 31, 2010			June 30, 2010			September 30, 2010			December 31, 2010
Number of active cards (at period end) (4)	1.3			1.3			1.5			1.6			1.7			1.6			1.7			1.9			2.1			2.0			2.1			2.1
Gross dollar volume (5)	$	1,334		$	1,256		$	1,479		$	1,622		$	1,940		$	1,763		$	1,830		$	2,037		$	2,625		$	2,290		$	2,422		$	2,474
Percentage of active card accounts with direct deposit (6)	15.6		%	16.3		%	21.2		%	22.9		%	25.2		%	24.1		%	25.9		%	27.6		%	29.4		%	30.2		%	31.7		%	34.2		%

(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;

· 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 three months ended June 30, 2009 relate to $1.1 million of recoveries of excess funds from our issuing banks for fee and chargeback recoveries. Settlement (gains) and other losses during the three months ended September 30, 2009 relate to $8.0 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 three months ended June 30, 2010 relate to a $4.0 million loss related to a patent infringement dispute. Settlement (gains) and other losses during the three months ended September 30, 2010 relate to a $0.8 million contingent loss for a contractual dispute with a vendor and a $0.5 million reversal of prior recognized expense related to a patent infringement dispute during the three months ended June 30, 2010.

The loss on extinguishment of debt during the three 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 and one-time settlement gains and losses; 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.

The tax rate for the three months ended December 31, 2008 was adjusted to remove the impact of the goodwill impairment charge recorded during 2008 in order to establish the rate used to book taxes in the absence of this impairment charge consistent with the pre-tax adjustments used to calculate net income.

(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.

(4) Number of active cards represents the total number of our GPR cards that have had a PIN- or signature-based purchase transaction, a load transaction at a retailer location or an ATM withdrawal within the previous 90 days.

(5) Gross dollar volume represents the total volume of debit transactions and cash withdrawals made using our GPR cards.

(6) Percentage of active cards with direct deposit represents the percentage of our active cards that have had a direct deposit load within the previous 90 days.

NetSpend Holdings, Inc. - FORM 8-K - EX-99.1 - March 2, 2011

Attached files

NetSpend Holdings, Inc. Reports