MoneyGram (NASDAQ:MGI) Outperforms

MoneyGram (NASDAQ:MGI) Outperforms

MoneyGram International, Inc. (NASDAQ:MGI) today reported financial results for its second quarter ending June 30, 2020.

Second Quarter 2020 Business Highlights 

(PRNewsfoto/MoneyGram)
(PRNewsfoto/MoneyGram)

“We had a very strong quarter and materially outperformed on both the top and bottom-line, despite the continued global uncertainty from the COVID-19 pandemic,” said Alex Holmes, MoneyGram Chairman and CEO. “In June we returned to year-over-year revenue growth on strong money transfer transaction growth of 10%. This return to growth was driven by the rapid expansion of our digital business as well as the continued improvement of our walk-in business. Additionally, the resurgence of growth from the money transfer business, along with agile management of the business throughout the crisis enabled us to deliver year-over-year Operating Income and Adjusted EBITDA growth for the quarter.”

Holmes added: “We’re excited about the underlying momentum in our business driven by our digital transformation. The investments that we have made over the past few years have allowed us to build a fast growth digital business which not only has higher customer retention and productivity rates, but also surpassed the walk-in business during the quarter delivering higher margins on average. With digital now representing 27% of money transfer transactions, the business is providing a significant contribution to our bottom-line results.”

  • MoneyGram achieved 106% year-over-year digital transaction growth in the second quarter – a significant acceleration from the first quarter of 2020 where the company reported 57% growth. Overall digital growth was driven by the following components:
    • MoneyGram Online, the Company’s direct-to-consumer channel, delivered 104% year-over-year transaction growth driven by strong consumer demand for the MoneyGram app, high customer retention rates, and increasing productivity rates
    • Digital partnerships, driven by key partners in the Middle East and Asia Pacific, accelerated from 25% year-over-year transaction growth in the first quarter to 97% growth in the second quarter
    • Account deposit and mobile wallet transactions increased 148% which is an acceleration from the first quarter where the Company reported 80% year-over-year transaction growth
  • Digital transactions accounted for 27% of all money transfer transactions in the second quarter
  • The Company remains focused on executing the long-term strategy while managing through the crisis. During the quarter, the Company achieved a number of important milestones:
    • Expanded the loyalty program to new markets and launched product enhancements to improve the customer experience
    • Launched new wallet and account deposit partnerships in rapidly growing regions of the world
    • Strengthened the Company’s leading position around the world by signing and expanding partnerships, specifically overhauling key receive markets

Second Quarter 2020 Financial Results, Year-Over-Year

  • Total revenue was $279.8 million, a decline of 14% or 13% on a constant currency basis primarily driven by the impact of COVID-19 on the first part of the quarter as the Company reported positive revenue growth in the month of June
    • Money transfer revenue was $253.1 million, down 10% or 9% on a constant currency basis related to the impact of COVID-19 on the first part of the quarter
      • The Company reported positive money transfer revenue growth in the month of June on the strength of double-digit cross border transaction growth
    • Investment revenue was $4.3 million for the quarter due to lower prevailing interest rates
  • Total operating expenses of $257.8 million, improved $51.7 million or 17%
    • Compensation and Benefits were flat including a $5.9 million special compensation plan accrual to potentially restore compensation withheld during the quarter as part of the Company’s proactive response to the COVID-19 pandemic
    • Transaction and Operations Support expenses were down over 60% primarily driven by efficiencies and operating reductions previously disclosed as part of the Company’s proactive response to the COVID-19 pandemic 
    • Included an $8.8 million net benefit from Ripple market development fees of $15.1 million, partially offset by related transaction and trading expenses of $6.3 million
  • Operating Income was $22.0 million which was an increase of 54%
  • Net loss was $4.6 million for the quarter
  • Diluted loss per share was $0.06 and diluted adjusted income per share was $0.01
  • Adjusted EBITDA increased 4%, or 5% on a constant currency basis, to $56.4 million
    • Adjusted EBITDA margin improved 340 basis points to 20%
  • Adjusted Free Cash Flow was $24.7 million, an increase of 24%

“As the ongoing COVID-19 crisis continues to impact countless lives around the world, the health, safety, and livelihoods of our customers, employees, and partners remain our top priorities. I’m extremely proud of how we’ve come together as a company over these last few months to exceptionally serve our diverse customer base of tens of millions of people who rely on our essential services,” concluded Holmes.

Balance Sheet Highlights

Cash and cash equivalents on hand at quarter end were $130.6 million compared to $146.8 million at the end of 2019. As of June 30, 2020, the Company had repaid all outstanding borrowings under its revolving credit facility. Second quarter interest expense was $22.7 million and capital expenditures were $9.8 million. 

As announced earlier this week, MoneyGram has signed an amendment with the DOJ to defer the final $55 million payment to the end of the DPA in May 2021. The Government has agreed to extend the $55 million payment to provide additional time to consider the basis for potentially reducing the final payment amount. The recent amendment also reduced the frequency of MoneyGram’s DOJ reporting from a monthly to a quarterly reporting cycle.

Third Quarter 2020 Outlook Update

As a result of continuing economic uncertainty created by the COVID-19 pandemic, the Company is not providing a specific third quarter outlook. However, if revenue trends remain in their current range, then the Company would anticipate sustained Adjusted EBITDA growth in the third quarter.

Conference Call

MoneyGram International will host a conference call on July 31, at 9:00 a.m. ET, to discuss its results. Alex Holmes, Chairman and CEO, and Larry Angelilli, CFO, will host the call.

Participant Dial-In Numbers:
U.S.:1-800-479-1004
International:1-929-477-0324
Webcast:public.viavid.com/index.php?id=140819
Replay:U.S 1-844-512-2921 or International 1-412-317-6671
Replay ID:6178495
Replay is available through August 7, 2020, 11:59 p.m. ET

About MoneyGram International, Inc.

MoneyGram is a global leader in cross-border P2P payments and money transfers. Its consumer-centric capabilities enable family and friends to quickly and affordably send money in more than 200 countries and territories, with over 70 countries now digitally enabled.

MoneyGram leverages its modern, mobile, and API-driven platform and collaborates with the world’s leading brands to serve millions of people each year through both its walk-in business and its direct-to-consumer digital business.

With a strong culture of innovation and a relentless focus on utilizing technology to deliver the world’s best customer experience, MoneyGram is leading the evolution of digital P2P payments.

For more information, please visit MoneyGram.com and follow @MoneyGram.

Forward-Looking Statements

This communication contains forward-looking statements which are protected as forward-looking statements under the Private Securities Litigation Reform Act of 1995 that are not limited to historical facts, but reflect MoneyGram’s current beliefs, expectations or intentions regarding future events. Words such as “may,” “will,” “could,” “should,” “expect,” “plan,” “project,” “intend,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “pursuant,” “target,” “continue,” and similar expressions are intended to identify such forward-looking statements. The statements in this communication that are not historical statements are forward-looking statements within the meaning of the federal securities laws. Specific forward-looking statements include, among others, statements regarding the Company’s projected results of operations, specific factors expected to impact the Company’s results of operations, and the expected restructuring and reorganization program results. Forward-looking statements are subject to numerous risks and uncertainties, many of which are beyond MoneyGram’s control, which could cause actual results to differ materially from the results expressed or implied by the statements.

The following two tabs change content below.
S. Jack Heffernan Ph.D. Funds Manager at HEFFX holds a Ph.D. in Economics and brings with him over 25 years of trading experience in Asia and hands on experience in Venture Capital, he has been involved in several start ups that have seen market capitalization over $500m and 1 that reach a peak market cap of $15b. He has managed and overseen start ups in Mining, Shipping, Technology and Financial Services.

Latest posts by S. Jack Heffernan Ph.D (see all)