NetSpend Holdings, Inc. Reports Fourth Quarter Financial Results

  NetSpend Holdings, Inc. Reports Fourth Quarter Financial Results

                            Revenues Up 17 Percent

               Active Accounts On Direct Deposit Up 25 Percent

Business Wire

AUSTIN, Texas -- February 13, 2013

NetSpend Holdings, Inc. (NASDAQ:NTSP), a leading provider of general-purpose
reloadable prepaid debit cards and related financial services, today announced
financial results for the fourth quarter and year ended December 31, 2012.

“We ended the fourth quarter hitting all of our targets and delivered strong
financial results for 2012,” said Dan Henry, chief executive officer of
NetSpend. “We had a banner year in terms of signing up new partners, executing
our retail expansion efforts and growing our business in every channel. From
the momentum we created last year, we expect a continued fast pace of growth
in all areas of our business.”

Full Year 2012 Highlights:

  *Revenues up 15% to $351.3 million 2012 as compared to $306.3 million in
    2011
  *Adjusted earnings per share up 23% to $0.58 as compared to $0.47 in 2011
  *Number of active cards with direct deposit up 25% to 1,082,000 as of
    December 31, 2012 as compared to 865,000 as of December 31, 2011
  *Percentage of active cards^1 with direct deposit was approximately 46% as
    of December 31, 2012 as compared to approximately 42% as of December 31,
    2011
  *Gross Dollar Volume (GDV), also known in the industry as purchase volume,
    of $13.2 billion as compared to $11.2 billion as of December 31, 2011

Q4 2012 Highlights:

  *Revenues up 17% to $89.7 million in Q4 2012 as compared to $76.8 million
    in Q4 2011
  *GAAP net income up 5% to $10.1 million in Q4 2012 as compared to $9.6
    million in Q4 2011
  *Diluted Earnings Per Share up 18% in Q4 2012 to $0.13 as compared to $0.11
    in Q4 2011
  *Adjusted EBITDA^2  up 3% in Q4 2012 to $23.9 million as compared to $23.2
    million in Q4 2011
  *Adjusted Diluted Net Income  Per Share^2 up 15% in Q4 2012 to $0.15 as
    compared to $0.13 in Q4 2011
  *GDV, also known in the industry as purchase volume, of $3.3 billion during
    Q4 2012 as compared to $2.8 billion during Q4 2011

Our Annual Report on Form 10-K for the year ended December 31, 2012 will
contain a further description of our key business metrics.

Fiscal Fourth Quarter 2012 Results

Revenues were $89.7 million for the quarter ended December 31, 2012, an
increase of approximately 17% over the $76.8 million of revenues recorded in
the same quarter of 2011. This increase was substantially driven by the
increase in direct deposit accounts, and to a lesser extent, the expansion of
product features across NetSpend’s direct deposit customer base. Interchange
revenue represented approximately 22% of total revenue during the three months
ended December 31, 2012.

Net income was $10.1 million for the quarter ended December 31, 2012, an
increase of 5% over the net income of $9.6 million recorded in the quarter
ended December 31, 2011. NetSpend’s net income for the quarter ended December
31, 2012 includes an aggregate of $10.8 million of net interest expense,
income tax expense, depreciation and amortization and settlement gains and
other losses. Net income for the quarter ended December 31, 2012 also includes
approximately $3.0 million in stock-based compensation expense. For the
quarter ended December 31, 2011, the comparable amount of net interest
expense, income tax expense, depreciation and amortization and settlement
gains and other losses was $11.2 million. Net income for the quarter ended
December31, 2011 also includes approximately $2.4million in stock-based
compensation expense.

2013 Outlook

NetSpend reported that it expects full year 2013 revenue to be between $414
and $424 million, its adjusted EBITDA to fall between $119 and $125 million
and its adjusted net income per fully diluted share to be between $0.76 and
$0.81.

The foregoing expectations reflect the following assumptions:

  *An effective tax rate of approximately 40%;
  *Non-cash equity compensation of between approximately $14 and $16 million;
  *Cash outlays for capital expenditures for the full year of between
    approximately $10 and $12 million;
  *An effective cost of debt capital of approximately 3.0%; and
  *Fully diluted shares outstanding for the full year of approximately 84
    million.

Investor Conference Call and Webcast

NetSpend will host an investor conference call to discuss its fourth quarter
and fiscal year 2012 results today, February 13, 2013, at 5:00p.m. EDT. The
conference call can be accessed live over the phone by dialing (877) 288-1043
or (970) 315-0267 for international callers. A replay will be available until
February 20, 2013 at (855) 859-2056 or (404) 537-3406 for international
callers; the conference ID is 96037708. The call will be webcast live from
NetSpend’s website at http://investor.netspend.com.

Non-GAAP Financial Information

To supplement NetSpend’s consolidated financial statements presented in
accordance with United States Generally Accepted Accounting Principles
(“GAAP”), this press release includes EBITDA, Adjusted EBITDA and Adjusted Net
Income. EBITDA, Adjusted EBITDA and Adjusted Net Income are not measures of
financial performance under GAAP. Accordingly, they should not be considered a
substitute for net income, operating income or other income or cash flow data
prepared in accordance with GAAP. These non-GAAP financial measures may be
different from similarly-titled non-GAAP financial measures used by other
companies. We believe that the presentation of these non-GAAP financial
measures provides useful information to management and investors regarding
underlying trends in NetSpend’s business and provides improved comparability
between periods in different years. Reconciliations between GAAP measures and
non-GAAP measures and between actual results and adjusted results are provided
at the end of this press release.

Cautionary Note Regarding Forward-Looking Statements

This press release contains forward-looking statements, which are subject to
the safe harbor provisions of the Private Securities Litigation Reform Act of
1995, as amended, and Rule3(b)-6 under the Securities Exchange Act of 1934,
as amended. These statements include, among other things, statements regarding
future events that involve risks and uncertainties. Actual results may differ
materially from those contained in the forward-looking statements contained in
this release, and reported results should not be considered as an indication
of future performance. Reliance on any forward-looking statement involves
risks and uncertainties and although NetSpend believes that the assumptions on
which the forward-looking statements are based are reasonable, any of those
assumptions could prove to be inaccurate, and, as a result, the
forward-looking statements based on those assumptions could be materially
incorrect. These factors include but are not limited to:

  *NetSpend’s dependence on a limited number of retail distributors of its
    products;
  *increasing competition in the prepaid card industry;
  *exposure to cardholder fraud and other losses;
  *NetSpend’s reliance on its relationships with its issuing banks;
  *regulatory, legislative and judicial developments;
  *changes in card association or network organization rules;
  *NetSpend’s ability to protect against unauthorized disclosure of
    cardholder data;
  *NetSpend’s ability to promote its brand;
  *NetSpend’s reliance on outsourced customer service providers;
  *NetSpend’s ability to protect its intellectual property rights and defend
    itself against claims of patent infringement.

The potential risks and uncertainties that could cause actual results to
differ from those projected are discussed in greater detail in NetSpend’s
filings with the Securities Exchange Commission (“SEC”), which are available
on NetSpend’s website at www.netspend.com and on the SEC website at
www.sec.gov. All information provided in this release and in the attachments
is as of February 13, 2013, and, except as required by law, NetSpend does not
intend to update this information as a result of future events or
developments.

About NetSpend

NetSpend is a leading provider of general-purpose reloadable (GPR) prepaid
debit cards and related financial services to the estimated 68 million
underbanked consumers in the United States who do not have a traditional bank
account or who rely on alternative financial services. The Company's mission
is to develop products and services that empower underbanked consumers with
the convenience, security and freedom to be self-banked. Headquartered in
Austin, TX, NetSpend is traded on the NASDAQ stock exchange under the symbol
NTSP. Please visit http://www.netspend.com for more information.

Follow NetSpend on Twitter: http://twitter.com/netspend or Facebook:
http://www.facebook.com/netspend

___________________________
^1 The number of active cards as of December 31, 2012 was approximately
2,352,000 and as of December 31, 2011 was approximately 2,063,000.

^2 Reconciliations of Adjusted EBITDA and Adjusted Net Income to net income
are provided in the tables immediately following the condensed consolidated
statements of cash flows. Additional information about the Company’s non-GAAP
financial measures can be found under the caption “Non-GAAP Financial
Information.”



NetSpend Holdings, Inc.
Consolidated Statements of Operations
For the Three and Twelve Months Ended December 31, 2012 and 2011
                                                             
                    Three Months Ended               Twelve Months Ended
                    December 31,                     December 31,
                    2012             2011            2012          2011
                    (Unaudited)      (Unaudited)     (Unaudited)
                    (in thousands, except per share data)
                                                                   
Operating           $  89,712        $  76,762       $ 351,332     $ 306,255
Revenues
                                                                   
Operating
Expenses
Direct operating       42,643           36,094         169,066       146,199
costs
Salaries,
benefits and           14,597           12,157         56,328        52,736
other personnel
costs
Advertising,
marketing and          6,504            3,237          20,127        14,230
promotion costs
Other general
and                    5,045            4,512          21,116        20,135
administrative
costs
Depreciation and       3,489            3,797          13,778        15,031
amortization
Settlement
(gains) and           (160    )       191          36,988      515     
other losses
Total operating        72,118           59,988         317,403       248,846
expenses
                                                                
Operating income       17,594           16,774         33,929        57,409
                                                                   
Other Income
(Expense)
Interest income        30               30             139           108
Interest expense      (771    )       (963   )      (2,598  )    (2,457  )
Total other            (741    )        (933   )       (2,459  )     (2,349  )
expense
                                                                
Income before          16,853           15,841         31,470        55,060
income taxes
                                                                   
Provision for          6,757            6,264          12,603        21,814
income taxes
                                                                   
                                                                
Net income          $  10,096       $  9,577       $ 18,867     $ 33,246  
                                                                   
Net income per
share of common
stock:
Basic (1)           $  0.13          $  0.11         $ 0.23        $ 0.37
Diluted             $  0.13          $  0.11         $ 0.22        $ 0.36
                                                                   
Shares used in
the computation
of earnings per
common share:
Basic                  68,931           78,489         73,251        84,504
Diluted                80,183           88,560         84,321        91,284
                                                                   
                                                                   
(1) - Net income used in the calculation of basic earnings per share is
adjusted for amounts unavailable to common stockholders. Our Annual Report on
Form 10-K for the year ended December 31, 2012 will contain a further
reconciliation of this number for the twelve months ended December 31, 2012
and 2011.



NetSpend Holdings, Inc.
Consolidated Balance Sheets
As of December 31, 2012 and 2011
                                                                  
                                                     2012            2011
                                                     (Unaudited)
                                                     (in thousands of dollars)
                                                                     
Assets
Current assets
Cash and cash equivalents                            $    30,619     $ 72,076
Accounts receivable, net of allowance for doubtful
accounts of $518 as of December 31, 2012 and $581         10,622       7,552
as of December 31, 2011
Prepaid card supply                                       3,535        2,000
Prepaid expenses                                          4,007        3,326
Other current assets                                      1,360        2,179
Income tax receivable                                     59           -
Deferred tax assets                                      7,620       4,138
Total current assets                                      57,822       91,271
                                                                     
Property, equipment and software, net                     23,743       20,631
Goodwill                                                  128,567      128,567
Intangible assets                                         20,246       22,227
Long-term investment                                      4,560        2,497
Other assets                                             17,655      7,549
Total assets                                         $    252,593    $ 272,742
                                                                     
Liabilities & Stockholders' Equity
Current liabilities
Accounts payable                                     $    4,908      $ 3,183
Accrued expenses                                          26,362       20,937
Income tax payable                                        -            1,733
Cardholders' reserve                                      3,633        3,892
Deferred revenue                                          1,765        1,585
Current litigation contingencies                          10,900       -
Long-term debt, current portion                          10,000      -
Total current liabilities                                 57,568       31,330
                                                                     
Long-term debt, net of current portion                    70,000       58,500
Deferred tax liabilities                                  4,224        7,431
Other non-current liabilities                            3,155       4,628
Total liabilities                                        134,947     101,889
                                                                     
Total stockholders' equity                                117,646      170,853
                                                                    
Total liabilities & stockholders' equity             $    252,593    $ 272,742
                                                                       


NetSpend Holdings, Inc.
Consolidated Statements of Cash Flows
Years Ended December 31, 2012 and 2011

                                                    2012         2011
                                                     (Unaudited)
                                                     (in thousands of dollars)
                                                                   
Cash flows from operating activities
Net income                                           $ 18,867      $ 33,246
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation and amortization                          13,778        15,031
Amortization of debt issuance costs                    326           326
Stock-based compensation                               11,464        11,242
Tax benefit associated with stock options              (2,741  )     (1,541  )
Provision for cardholder losses                        18,741        14,441
Deferred income taxes                                  (6,785  )     (2,646  )
Change in cash surrender value of life insurance       (159    )     8
policies
Litigation contingencies, current                      10,900        -
Changes in operating assets and liabilities
Accounts receivable                                    (3,070  )     (2,111  )
Income tax receivable or payable                       949           2,942
Prepaid card supply                                    (1,535  )     (395    )
Prepaid expenses                                       (681    )     (946    )
Other current assets                                   819           (1,172  )
Other long-term assets                                 (9,752  )     (2,316  )
Accounts payable and accrued expenses                  7,150         (3,797  )
Cardholders' reserve                                   (19,000 )     (15,338 )
Deferred revenue                                       180           252
Other liabilities                                     (1,473  )    1,621   
Net cash provided by operating activities             37,978      48,847  
                                                                   
Cash flows from investing activities
Purchases of property, equipment and software          (14,595 )     (9,182  )
Purchase of intangible assets                          (314    )     (12     )
Long-term investment                                   (1,095  )     -
Premiums paid on cash surrender value life            (521    )    (894    )
insurance policies
Net cash used in investing activities                 (16,525 )    (10,088 )
                                                                   
Cash flows from financing activities
Dividend equivalents paid                              -             (353    )
Proceeds from the exercise of common stock options     5,318         1,405
Proceeds from the re-issuance of treasury stock        441           -
under employee stock purchase plan
Tax benefit associated with stock options              2,741         1,541
Net cash proceeds (disbursements) from initial         -             (95     )
public offering
Proceeds from issuance of long-term debt               90,000        -
Principal payments on debt                             (68,500 )     (3,303  )
Treasury stock purchase                                (92,559 )     (32,718 )
Tax withholding on restricted stock                   (351    )    (661    )
Net cash used in financing activities                  (62,910 )     (34,184 )
                                                                  
Net change in cash and cash equivalents                (41,457 )     4,575
                                                                   
Cash and cash equivalents at beginning of period      72,076      67,501  
Cash and cash equivalents at end of period           $ 30,619     $ 72,076  
                                                                   
Supplemental disclosure of cash flow information
Cash paid for interest                               $ 2,330       $ 2,591
Cash paid for income taxes                             18,403        21,432
                                                                   
Non-cash investing activities
Capital lease entered into for the license of        $ -             1,949
software
                                                                             


NetSpend Holdings, Inc.
Reconciliation of Adjusted EBITDA to Net Income
For the Three and Twelve Months Ended December 31, 2012 and 2011
(Unaudited)

                            Three Months Ended       Twelve Months Ended
                             December 31,              December 31,
                             2012        2011         2012        2011
                             (in thousands of dollars)
Net income                   $ 10,096     $ 9,577      $ 18,867     $ 33,246
                                                                    
Interest income                (30    )     (30    )     (139   )     (108   )
Interest expense               771          963          2,598        2,457
Income tax expense             6,757        6,264        12,603       21,814
Depreciation and              3,489      3,797      13,778     15,031 
amortization
EBITDA                         21,083       20,571       47,707       72,440
                                                                    
Stock-based compensation       2,993        2,410        11,464       11,242
expense
Settlement (gains) and        (160   )    191        36,988     515    
other losses
Adjusted EBITDA (1)(3)       $ 23,916    $ 23,172    $ 96,159    $ 84,197 
                                                                             


NetSpend Holdings, Inc.
Reconciliation of Adjusted Net Income to Net Income
For the Three and Twelve Months Ended December 31, 2012 and 2011
(Unaudited)

                Three Months Ended               Twelve Months Ended
                 December 31,                      December 31,
                 2012            2011             2012            2011
                 (in thousands of dollars, except percentages and per share
                 data)
Net income       $  10,096        $  9,577         $  18,867        $ 33,246
                                                                    
Stock-based
compensation        2,993            2,410            11,464          11,242
expense
Amortization        434              881              2,295           3,524
of intangibles
Settlement
(gains) and        (160    )       191            36,988        515    
other losses
Total pre-tax       3,267            3,482            50,747          15,281
adjustments
                                                                    
Tax rate            40.1    %        39.5    %        40.0    %       39.6   %
Tax adjustment     1,310          1,375          20,299        6,051  
                                                                    
Adjusted net     $  12,053       $  11,684       $  49,315       $ 42,476 
income (2)(3)
                                                                    
Adjusted net
income per
share of
common stock
Basic            $  0.17          $  0.15          $  0.67          $ 0.50
Diluted          $  0.15          $  0.13          $  0.58          $ 0.47
                                                                             

      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
(1)  expenses related to interest, taxes, depreciation and amortization, or
      EBITDA, and then adjusting for stock-based compensation, and
      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,
    losses on the early extinguishment of long-term debt and other infrequent
    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;
    and
  *We use it to evaluate our capacity to incur and service debt, fund capital
    expenditures and expand our business.

      Settlement gains of $0.2 million during the three months ended December
      31, 2012 and other losses of $37.0 million during the twelve months
      ended December 31, 2012 primarily relate to accruals for legal
     contingencies and settlements. Other losses of $0.2 million during the
      three months ended December 31, 2011 and $0.5 million in the twelve
      months ended December 30, 2011 primarily relate to severance costs
      incurred in connection with the consolidation of some of our processing
      platforms and call center activities.

      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
(2)   net loss to remove tax-effected amortization expense, stock-based
      compensation and other non-recurring gains and losses. We believe that
      Adjusted Net Income 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 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, losses on the early extinguishment of long-term debt and
    other infrequent losses;
  *Adjusted Net Income per share on a diluted basis functions as a threshold
    target for our company-wide employee bonus compensation; 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.

      Settlement gains of $0.2 million during the three months ended December
      31, 2012 and other losses of $37.0 million during the twelve months
      ended December 31, 2012 primarily relate to accruals for legal
     contingencies and settlements. Other losses of $0.2 million during the
      three months ended December 31, 2011 and $0.5 million in the twelve
      months ended December 30, 2011 primarily relate to severance costs
      incurred in connection with the consolidation of some of our processing
      platforms and call center activities.

      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.
      Our Adjusted EBITDA and Adjusted Net Income are not necessarily
      comparable to what other companies define as Adjusted EBITDA and
(3)   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.

Contact:

NetSpend Holdings, Inc.
Investors:
George Gresham, 866-979-1996
Chief Financial Officer
investor@netspend.com
or
Media:
Krista Shepard, 512-531-8732
kshepard@netspend.com