Green Dot also announced the approval of a $150 million share repurchase program in the same 8-K filing.
Wal-Mart is Green Dot's largest retail distributor and one of its most important partners. Green Dot's annual report for 2014 discloses that the Wal-Mart MoneyCard agreement was responsible for 38% of operating revenue. Across all its products, Green Dot's relationship with the retailer produced 54% of its operating revenue.
The terms of the agreement call for Green Dot to pay Wal-Mart based on a revenue-sharing structure, wherein Green Dot will pay the retailer a portion of revenue generated from each customer. Specific terms aren't available, as Green Dot noted that it would file the agreement with its next quarterly report and seek confidential treatment for some of the terms and conditions.
But what is clear is that the renewed agreement may not be as lucrative as it once was. On a conference call, one analyst suggested that Wal-Mart would receive about a 6% greater share of revenue. GreenDot CEO Steven Streit admitted that it was "a fair piece of math" based on the company's public disclosures.
Green Dot can breathe easy for the next five years, as this program won't be up for renewal until May 1, 2020. In addition, it includes an automatic renewal that can extend the agreement for another two years thereafter.
Shareholders see the increased revenue share for Wal-Mart as a small price to pay to keep a significant customer on Green Dot's banking and card platform. It's certainly better than losing this major revenue-driver to a competing card company.
The new $150 million repurchase program could add more lift to the company's share price and greatly reduce its share count, driving earnings per share higher. At the current price of roughly $20.60 per share, the company could repurchase as many as 7.3 million shares, or more than 14% of its shares outstanding as of April 30, 2015.
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