Green Dot late Monday announced a five-year renewal of a prepaid card contract with Walmart, though the retail giant will get a larger share of revenue.
Financial terms of the contract renewal were not disclosed, but executives of Pasadena, Calif.-based Green Dot acknowledged during a conference call that Walmart will get a larger share of revenue from the MoneyCard suite of products. Analysts had correctly anticipated that any new contract would shift more revenue to Walmart.
Ashish Sabadra, an analyst at Deutsche Bank, calculated that under the new contract, Walmart will receive about a 6% greater share of revenue. During the conference call, he asked Green Dot Chief Executive Officer Steven Streit if that's an accurate figure.
"Based on our public disclosures, that's a fair piece of math," Streit responded.
The new contract runs until May 1, 2020, and replaces an agreement that would have expired at the end of this year.
Green Dot and Walmart have been partners on the MoneyCard program since 2007.
Investors in Green Dot have been closely monitoring the progress of the contract renewal talks because the prepaid card company relies heavily on revenue from the retail behemoth. In the first quarter, MoneyCard products accounted for 29% of Green Dot's revenue, Chief Financial Officer Mark Shifke said during a May 7 conference call.
Green Dot used to have an exclusive deal with Walmart, but it currently faces competition in the retailer's aisles from American Express and NetSpend, which is a division of Total System Services. Walmart has also made a number of other recent moves in financial services.
Under Green Dot's new share repurchase plan, which is subject to regulatory approval, the company is authorized to buy back up to $150 million of its common stock.
Streit on Monday described Green Dot, following the Walmart contract renewal, as having emerged from a period of great uncertainty. Increased competition in the prepaid card market and questions about the Walmart relationship have weighed on the company's stock price in recent months.
"I think what you're seeing is that the waters have calmed," Streit told analysts.
Shares in Green Dot surged more than 30% after the firm announced the contract renewal and the share-buyback program. In after-hours trading Monday, shares in Green Dot rose to $20, rebounding from the hit that the stock price took in late January after the company recorded a fourth-quarter loss.