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Director Michael Moritz Issues Letter to Green Dot Shareholders

PASADENA, Calif., May 16, 2016 (BUSINESS WIRE) -- Green Dot Corporation GDOT, +2.41% (the “Company”) Board member, Michael Moritz, issues the following letter to Green Dot shareholders:

Green Dot Stockholders:

Green Dot is a financial services company in which Sequoia Capital has been an investor since its days as a small, unknown private business. I am a director of Green Dot and also the Chairman of Sequoia Capital where I have worked since 1986. Since 1972, Sequoia has partnered with the founders of companies that now have an aggregate, public market value of over $1.4 trillion [1] . I have served on the public boards of, among others, Google, Yahoo!, PayPal, LinkedIn, Kayak and Flextronics. This is the first time I, or anyone else from Sequoia, have written to the shareholders of a public company in our forty-year history.

The reason for this letter is to address a proxy fight brought by one shareholder, Harvest Capital Strategies, a subsidiary of JMP Group LLC JMP, +0.77% a micro-cap finserv company, that seeks to oust three board members, including the founder of the Company and largest individual shareholder.

A brief history: Green Dot, whose mission is to provide a full range of affordable and accessible financial services to underbanked Americans, was founded by Steve Streit in 1999. Green Dot created the pre-paid card industry and became a public company in July 2010. Green Dot’s rapid growth attracted significant competitors - American Express, JP Morgan Chase and dozens of others to enter the business. This was followed by a period of ferocious competition, exacerbated by severe pricing pressures and other challenges including the mitigation of an outbreak of fraud that bedeviled the segment. The management and Board of Green Dot acknowledge that the period between 2012 and 2015 was tough and the company’s financial results were unsatisfactory. Management and the Board instituted a long-term turnaround plan that has allowed the Company to withstand these threats by introducing new products and diversify its business.

In my opinion, Green Dot’s CEO and management team have done a valiant job - in a highly regulated and carefully monitored industry serving millions of unbanked consumers with a trusted service - for which they have been given no credit by the dissident shareholder. Management has also refused to use predatory practices, like high over-draft fees, that some of their competitors have used to drive short-term profitability, which are highly unfair to underbanked consumers and are at risk of being banned by pending regulations. At the same time, like any company, we have made mistakes and don’t pretend to be perfect.

Consider this: between 2013 and 2015 revenue from sources others than Green Dot’s largest customer grew from $210 million to $378 million while overall non-GAAP total operating revenues grew from $582 million to $699 million. Adjusted EBITDA, which troughed at $103 million in 2013, grew to $132 million and $152 million in 2014 and 2015, respectively. At the same time, Green Dot has triumphed over some of the largest financial institutions in the U.S., including American Express, JP Morgan Chase and others, to remain the market leader in the prepaid category, while capitalizing on additional growth opportunities.

Green Dot’s management and Board have listened carefully to the arguments of the dissident, and all shareholders, since we are eager to improve the business as best we can. Management’s Six-Step Plan has been underway for a considerable period of time with the results quite encouraging thus far.

I support management’s plan and the promise of Green Dot’s CEO, Steve Streit, to hit at least $1.75 per share in non-GAAP diluted EPS in 2017 (compared to $1.35 per share in 2015). Should Mr. Streit fall short, the Board will hold him accountable. Assuming Green Dot achieves these goals, we all win. If it doesn’t, we will organize orderly changes at that point.

You will obviously need to do what you consider in your best interests, but I would ask you to contemplate the message you want to send to every CEO and Board that has stayed true to the long-term, and has the grit and resilience to turnaround its business, as well as every Founder and entrepreneur in America contemplating the prospect of running a public company.

Sincerely yours,

Michael Moritz

About Green Dot

Green Dot Corporation, along with its wholly owned subsidiaries, is a pro-consumer financial technology innovator with a mission to provide a full range of affordable and accessible financial services to the masses. Green Dot is the largest provider of reloadable prepaid debit cards and cash reload processing services in the United States. Green Dot is also a leader in mobile technology and mobile banking with its award-winning GoBank mobile checking account and a top 20 debit card issuer among all banks and credit unions in the country. Through its wholly owned subsidiary, TPG, Green Dot is additionally the largest processor of tax refund disbursements in the U.S. Green Dot's products and services are available to consumers through a large-scale "branchless bank" distribution network of more than 100,000 U.S. locations, including retailers, neighborhood financial service center locations, and tax preparation offices, as well as online, in the leading app stores and through leading online tax preparation providers. Green Dot Corporation is headquartered in Pasadena, Calif., with additional facilities throughout the United States and in Shanghai, China.

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. Actual results may differ materially from those contained in the forward-looking statements contained in this press release. The potential risks and uncertainties that could cause actual results to differ from those projected include, among other things, the timing and impact of revenue growth activities, the Company’s dependence on revenues derived from Walmart and three other retail distributors, impact of competition, the Company’s reliance on retail distributors for the promotion of its products and services, demand for the Company’s new and existing products and services, continued and improving returns from the Company’s investments in new growth initiatives, potential difficulties in integrating operations of acquired entities and acquired technologies, the Company’s ability to operate in a highly regulated environment, changes to existing laws or regulations affecting the Company’s operating methods or economics, the Company’s reliance on third-party vendors, changes in credit card association or other network rules or standards, changes in card association and debit network fees or products or interchange rates, instances of fraud developments in the prepaid financial services industry that impact prepaid debit card usage generally, business interruption or systems failure, and the...


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