What changed in this filing

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Item 1A. Risk Factors

2021-08-06 compared with 2021-05-10 · 25 added, 29 removed, 356 unchanged (13% of the section changed)

3 unchanged sentences

As a result of the COVID-19 pandemic, we have shifted to a fully remote workforce strategy for our employees in the U.S.

and we have commenced closure of most of our leased office locations in the U.S., which has resulted in us recording impairment charges and could result in a less effective workforce.

and we are in the process of closing most of our leased office locations in the U.S., which has resulted in us recording impairment charges and could result in a less effective workforce.

In addition, many of the third-party call centers we rely on to provide customer support were closed during portions of the first half of 2020 due to the pandemic, which resulted in delayed responses to customers and a higher usage of automated services, and contributed to higher transaction losses compared to prior periods.

13 unchanged sentences

A significant portion of our operating revenues are derived from the products and services sold at our four largest retail distributors.

As a percentage of total operating revenues, operating revenues derived from products and services sold at the store locations of Walmart was approximately 24.0% for the three months ended March 31, 2021.

As a percentage of total operating revenues, operating revenues derived from products and services sold at the store locations of Walmart was approximately 23.0% and 24.0% for the three and six months ended June 30, 2021, respectively.

We expect that Walmart will continue to have a significant impact on our operating revenues in future periods, particularly in our Consumer Services segment.

53 unchanged sentences

To the extent these new entrants continue to take market share at our expense, we expect that the purchase and use of our products and services would decline.

In response to such challenger banks, we recently launched GO2bank, a new mobile bank account aimed at serving the low-and moderate-income market with tools that help address common financial challenges and opportunities to improve long-term financial health.

In response to such challenger banks, we launched GO2bank, a new mobile bank account aimed at serving the low-and moderate-income market with tools that help address common financial challenges and opportunities to improve long-term financial health.

If GO2bank is not successful or our competitive position deteriorates further, we may have to increase the incentives that we offer to our retail distributors and our tax preparation partners, or directly to consumers, and decrease the prices of our products and services, any of which would likely adversely affect our results of operations.

10 unchanged sentences

Illegal activities involving our products and services often include malicious social engineering schemes.

Further, in connection with the COVID-19 pandemic, there has been and may continue to be a significant amount of transaction fraud with respect to prepaid cards used to deliver stimulus and unemployment benefits, which has negatively impacted many financial services companies.

Illegal activities may also include fraudulent payment or refund schemes and identity theft.

5 unchanged sentences

We believe it is likely that our risk control mechanisms may continue to adversely affect our new card activations for the foreseeable future and that our operating revenues will be negatively impacted as a result.

Further, implementing such risk control mechanisms can be costly and has and may continue to negatively impact our operating margins.

We are exposed to losses from customer accounts.

6 unchanged sentences

Our remaining overdraft exposure arises primarily from late-posting.

A late-post occurs when a merchant posts a transaction within a payment network-permitted timeframe,but subsequent to our release of the authorization for that transaction, as permitted by card association rules.

Under card association rules, we may be

liable for the transaction amount even if the cardholder has made additional purchases in the intervening period and funds are no longer available on the card at the time the transaction is posted.

A late-post occurs when a merchant posts a transaction within a payment network-permitted time frame, but subsequent to our release of the authorization for that transaction, as permitted by card association rules.

Under card association rules, we may be liable for the transaction amount even if the cardholder has made additional purchases in the intervening period and funds are no longer available on the card at the time the transaction is posted.

We consider overdrawn account balances to be our receivables due from cardholders.

6 unchanged sentences

If a retail distributor becomes insolvent, files for bankruptcy, commits fraud or otherwise fails to remit proceeds to our card issuing bank from the sales of our products and services, we are liable for any amounts owed to our customers.

As of March 31, 2021, we had assets subject to settlement risk of $416.8 million.

As of June 30, 2021, we had assets subject to settlement risk of $384.2 million.

Given the possibility of recurring volatility in global financial markets, the approaches we use to assess and monitor the creditworthiness of our retail distributors may be inadequate, and we may be unable to detect and take steps to mitigate an increased credit risk in a timely manner.

16 unchanged sentences

Any projected growth for the industry may not occur or may occur more slowly than estimated.

If consumer acceptance of prepaid financial services does not continue to develop or develops more slowly than expected or if there is a shift in the mix of payment forms, such as cash, credit cards, traditional debit cards and prepaid cards, away from our products and services, it could have a material adverse effect on our financial position and results of operations.

If consumer acceptance of prepaid financial services does not continue to develop or develops

more slowly than expected or if there is a shift in the mix of payment forms, such as cash, credit cards, traditional debit cards and prepaid cards, away from our products and services, it could have a material adverse effect on our financial position and results of operations.

RISKS RELATED TO OUR OPERATIONS

23 unchanged sentences

A data security breach of the systems on which sensitive cardholder or other customer or end-customer data and account information are stored could lead to fraudulent activity involving our products and services, reputational damage and claims or regulatory actions against us.

If we are sued in connection with any data security breach, we

could be involved in protracted and costly litigation.

If we are sued in connection with any data security breach, we could be involved in protracted and costly litigation.

If unsuccessful in defending that litigation, we might be forced to pay damages and/or change our business practices, any of which could have a material adverse effect on our operating revenues and profitability.

49 unchanged sentences

Failure by us and our business partners to comply with applicable laws and regulations could have an adverse effect on our business, financial position and results of operations.

The banking, financial technology, transaction processing and tax refund processing services industries are highly regulated, and failure by us, the banks that issue our cards or the businesses that participate in our reload network or other business partners to comply with the laws and regulations to which we are subject could negatively impact our business.

impact our business.

We are subject to state money transmission licensing requirements and a wide range of federal and other state laws and regulations.

In particular, our products and services are subject to an increasingly

strict set of legal and regulatory requirements intended to protect consumers and to help detect and prevent money laundering, terrorist financing and other illicit activities.

In particular, our products and services are subject to an increasingly strict set of legal and regulatory requirements intended to protect consumers and to help detect and prevent money laundering, terrorist financing and other illicit activities.

For example, we are subject to the anti-money laundering reporting and recordkeeping requirements of the Bank Secrecy Act (“BSA”), as amended by the PATRIOT Act.

16 unchanged sentences

Furthermore, a substantial portion of our operating revenues is derived from interchange fees.

For the three months ended March 31, 2021, interchange revenues represented 28% of our total operating revenues, and we expect interchange revenues to continue to represent a significant percentage of our total operating revenues.

For the three months ended June 30, 2021, interchange revenues represented 27% of our total operating revenues, and we expect interchange revenues to continue to represent a significant percentage of our total operating revenues.

The amount of interchange revenues that we earn is highly dependent on the interchange rates that the payment networks set and adjust from time to time.

51 unchanged sentences

The phaseout of the London Interbank Offered Rate (LIBOR), or the replacement of LIBOR with a different reference rate, may have an adverse effect on our business.

Certain of our indebtedness is made at variable interest rates that use the London Interbank Offered Rate, or LIBOR (or metrics derived from or related to LIBOR), as a benchmark for establishing the interest rate.

On March 5, 2021, the ICE Benchmark Administration, the administrator of LIBOR, announced that it will stop publishing certain LIBOR rates after December 31, 2021 and all of these widely used reference rates will no longer be available after June 30, 2023.

On March 5, 2021, the ICE Benchmark Administration, the administrator of the London Interbank Offered Rate, or LIBOR, announced that it will stop publishing certain LIBOR rates after December 31, 2021 and all of these widely used reference rates will no longer be available after June 30, 2023.

Consequently, we may need to renegotiate our debt arrangements that extend beyond 2021, such as our credit agreement, which provides for our revolving facility, that utilize LIBOR as a factor in determining the interest rate, which may negatively impact the terms of such indebtedness.

Although Secured Overnight Financing Rate appears to be the preferred replacement rate for U.S.

Dollar LIBOR, it is unclear if other benchmarks may emerge or if other rates will be adopted outside of the U.S.

Any such alternative reference rate may increase the interest expense associated with our existing or future indebtedness.

Any alternative reference rate may increase the interest expense associated with our existing or future indebtedness.

Changes in market interest rates may influence our financing costs, returns on financial investments and the valuation of derivative contracts and could reduce our earnings and cash flows.

3 unchanged sentences

Our operating results may fluctuate in the future, which could cause our stock price to decline.

If our quarterly and annual results of operations fall below the expectations of investors or any securities analysts who follow our Class A common stock, the trading price of our Class A common stock could decline

substantially.

Fluctuations in our quarterly or annual results of operations might result from a number of factors, many of which are outside of our control, including, but not limited to:

24 unchanged sentences

• changes in the political or regulatory environment affecting the banking, electronic payments or tax refund processing industries;

• economic recessions or uncertainty in financial markets, including those recently caused by the COVID-19 pandemic;

• the impact of the new incoming U.S.

• economic recessions or uncertainty in financial markets, including those recently caused by the COVID-19 pandemic, and the impact of inflation;

• the impact of the U.S.

presidential administration on, among other things, the regulation of financial institutions and corporate tax rates;

26 unchanged sentences

If we are unable to successfully integrate an acquired business or technology or otherwise address these special risks and challenges or other problems encountered in connection with an acquisition, we might not realize the anticipated benefits of that acquisition, we might incur unanticipated liabilities, or we might otherwise suffer harm to our business generally.

Furthermore, acquisitions and investments are often speculative in nature and the actual

benefits we derive from them could be lower or take longer to materialize than we expect.

In addition, to the extent we pay the consideration for any future acquisitions or investments in cash, it would reduce the amount of cash available to us for other purposes.

Furthermore, acquisitions and investments are often speculative in nature and the actual benefits we derive from them could be lower or take longer to materialize than we expect.

In addition, to the extent we pay the consideration for any future acquisitions or investments in cash, it would reduce the amount of cash

available to us for other purposes.

Future acquisitions or investments could also result in dilutive issuances of our equity securities or the incurrence of debt, contingent liabilities, amortization expenses, or goodwill impairment charges, any of which could harm our financial condition and negatively impact our stockholders.

1 unchanged sentence

Because we have grown in part through acquisitions, our net goodwill and intangible assets represent a significant portion of our consolidated assets.

Our net goodwill and intangible assets were $484.3 million as of March 31, 2021.

Our net goodwill and intangible assets were $476.9 million as of June 30, 2021.

Under accounting principles generally accepted in the United States, or U.S.

GAAP, we are required to test the carrying value of goodwill and intangible assets at least annually or sooner if events occur that indicate impairment could exist.

These events or circumstances could include a significant change in the business climate, including a significant sustained decline in a reporting unit’s fair value, legal and regulatory factors, operating performance indicators, competition and other factors.

GAAP, we are required to test the carrying value of goodwill and intangible assets at least annually or sooner if events occur that indicate impairment could exist, such as a significant change in the business climate, including a significant sustained decline in a reporting unit’s fair value, legal and regulatory factors, operating performance indicators, competition and other factors.

The amount of any impairment charge could be significant and could have a material adverse impact on our financial condition and results of operations for the period in which the charge is taken.

16 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1A. Risk Factors