MoneyGram International (NYSE:MGI), a leading global payment services company, today reported financial results for the second quarter of 2010.
* Money transfer transaction volume increased 7 percent and money transfer fee and other revenue increased 2 percent in the second quarter of 2010 versus prior year. On a constant currency basis, money transfer fee and other revenue increased 3 percent versus prior year. The primary difference between transaction growth and constant currency revenue growth is related to lower revenue per transaction due to the introduction of the $50 price band in the United States.
* Global agent locations increased 13 percent over prior year to 203,000.
* Total revenue in the second quarter declined 3 percent to $283.6 million, compared with $291.2 million in the same period last year. Total fee and other revenue declined slightly to $277.6 million, from $278.5 million in the same period last year. Total revenue in 2010 reflects investment revenue and net securities gains that were $6.7 million less than second quarter 2009.
* Net income for the quarter was $6.8 million and EBITDA was $55.4 million. Both net income and EBITDA were impacted by $6.0 million of stock-based compensation, $1.9 million of restructuring and reorganization costs, and $1.5 million of asset impairment charges. Net income was also impacted by a $3.5 million write off of deferred financing and debt discount related to the early debt paydown.
* Adjusted EBITDA for the quarter was $65.0 million versus $57.3 million in the prior year. Second quarter 2010 adjusted EBITDA reflects lower net investment revenue of $2.1 million compared with the same period in 2009. Second quarter 2009 adjusted EBITDA was negatively impacted by a $9 million provision for loss.
"In the second quarter of 2010, MoneyGram made significant progress on positioning the company for long-term profitable growth. We launched our 200,000th agent location, solidified our management team with the addition of James Shields as our chief financial officer, and despite a challenging economic environment and increased price pressure in our domestic U.S. market, we delivered positive money transfer transaction, revenue and network growth," said Pamela H. Patsley, MoneyGram chairman and chief executive officer.
Restructuring and Reorganization Activities
In the second quarter, MoneyGram implemented the first phase of a global initiative to realign its management and operations with the changing global market and streamline operations to promote a more efficient and scalable cost structure. The Company recorded $1.9 million of costs in the second quarter of 2010 related to this first phase. Based upon preliminary estimates, the Company anticipates incurring $45 million to $50 million of cash outlays in future phases to generate annual pre-tax cost savings of $25 million to $30 million when fully implemented in 2012.
Balance Sheet Items
During the quarter, MoneyGram prepaid $60 million on its Senior Tranche B Loan under its Senior Facility through a $30 million prepayment in April and another $30 million prepayment in June. Including these two prepayments, the Company has paid down $247 million, or 25 percent, of its debt since Jan. 1, 2009. The Company ended the quarter with $746.3 million in outstanding debt principal and assets in excess of payment service obligations of $284.1 million.
"To further strengthen our business we continued to de-lever by paying down $60 million of debt in the quarter. We also continued to enhance our competitive posture through the formal launch of our restructuring initiative that will accelerate our cost reduction efforts, better positioning us for enhanced productivity and customer focus," said Patsley. "The actions we are taking will allow us to expand rapidly and profitably into new markets and corridors, invest in innovative product offerings, and focus on growth in our core money transfer business."
The Company continued its focus on enhancing its product offerings and expanding its agent network. MoneyGram recently:
* Signed State Savings Bank of the Russian Federation (Sberbank), the oldest and largest bank in Russia and Eastern Europe, introducing MoneyGram services initially in more than 7,000 locations with plans to expand to all 10,000 bank branches beginning in the fourth quarter.
* Added First Bank of Nigeria Plc, Nigeria's oldest bank and one of the largest in terms of network size, to provide money transfer services in its more than 500 locations across the nation.
* Signed SRD MP and its partner Bimedia, a value-added services provider for tobacco and news retailers throughout France, to bring MoneyGram money transfer services to 2,500 tobacco shops across the country.
* Added Credit Immobilier et Hotelier, MEA Finance / Canal M and WafaCash, bringing MoneyGram services to 1,450 locations in Morocco.
* Expanded MoneyGram's presence in Kazakhstan through a new agent agreement that brings MoneyGram's services to 800 Kazakhstan Post offices located across the country.
* Partnered with National Bank of Abu Dhabi to offer MoneyGram money transfer services via mobile phones to the bank's customers all over the UAE.
* Launched Visa Cash to Card money transfer services through a global partnership agreement with Visa and Banco Industrial, a leading Visa bank and MoneyGram agent in Guatemala.
Global Funds Transfer Segment Results
Total revenue for the Global Funds Transfer segment increased 1 percent to $253.7 million in the second quarter of 2010 from $251.5 million in the second quarter of 2009. The segment reported operating income of $30.9 million and an operating margin of 12.2 percent in the second quarter of 2010. Adjusted operating margin was 14.2 percent in the quarter.
Money transfer transaction volume increased 7 percent, with fee and other revenue increasing 2 percent to $222.6 million in the second quarter of 2010 from $219.2 million in the same period last year. On a constant currency basis, money transfer fee and other revenue improved 3 percent. The primary difference between transaction growth and constant currency revenue growth is related to lower revenue per transaction due to the introduction of the $50 price band in the United States.
In the second quarter, money transfer transactions originating in the United States, excluding transactions sent to Mexico, increased 7 percent, led by strong double-digit intra-U.S. transaction growth. Second quarter transaction volume to Mexico decreased 4 percent. Money transfer transactions originating outside of the United States increased 12 percent from the prior year. Excluding Spain, transactions originating outside of the United States increased a solid 16 percent from the prior year.
Bill payment transaction volume was roughly flat, increasing 0.4 percent, while fee and other revenue decreased 3 percent to $31.0 million in the second quarter of 2010 from $32.1 million in the second quarter of 2009. The difference between transaction and revenue growth is primarily related to transaction mix as we continue to grow in new emerging verticals that generate lower revenue per transaction compared with the traditional business.
Financial Paper Products Segment Results
Total revenue in the Financial Paper Products segment declined 7 percent to $29.2 million in the second quarter of 2010 from $31.4 million in the second quarter of 2009. Operating income increased 14 percent to $11.6 million in the second quarter of 2010, from $10.1 million in the second quarter of 2009. Operating margin in the second quarter of 2010 was 39.7 percent. Adjusted margin was 42.7 percent in the quarter.