MoneyGram International (NYSE:MGI), a leading global payment services company, today reported financial results for the fourth quarter and full-year 2010.
* Money transfer transaction volume increased 12 percent driven by 18 percent growth in non-U.S. sends in the current quarter versus prior year.
* Money transfer fee and other revenue increased 7 percent in the fourth quarter of 2010 versus prior year. On a constant currency basis, money transfer fee and other revenue increased 9 percent versus prior year. The difference between transaction growth and constant currency revenue growth is due to lower revenue per transaction primarily related to the $50 price band in the United States.
* Global agent locations increased 19 percent over the prior year end to 227,000.
* Total revenue in the fourth quarter increased 3 percent to $303.4 million, compared with $295.6 million in the fourth quarter of 2009. Total fee and other revenue increased 3.1 percent to $298.3 million, from $289.4 million in the fourth quarter of 2009. Total revenue in the fourth quarter reflects investment revenue that was $1.2 million less than fourth quarter 2009.
* Full-year total revenue in 2010 was $1,166.7 million, up from $1,161.7 million in 2009. Total revenue in 2010 reflects investment revenue that was $11.9 million less than in 2009.
* Net income for the quarter was $16.2 million and EBITDA was $67.8 million. Both net income and EBITDA were impacted by $5.9 million of stock-based compensation, $16.4 million of a reversal of a patent lawsuit accrual and $2.3 million of restructuring and reorganization costs. Net income was also impacted by a $3.6 million write-off of deferred financing costs and debt discount related to a $75.0 million debt prepayment in the quarter.
* Adjusted EBITDA for the quarter was $59.8 million versus $57.4 million in the prior year. Fourth quarter 2010 Adjusted EBITDA reflects lower net investment revenue of $1.2 million compared with the same period in 2009. Adjusted EBITDA margin was 19.7 percent in the fourth quarter of 2010, compared with 19.4 percent in the same period last year.
"We are pleased with MoneyGram's fourth-quarter financial performance, and we are excited with our position exiting 2010," said Pamela H. Patsley, chairman and chief executive officer. "We're a stronger company than a year ago, more focused on our strategies and better positioned for growth. We are strengthening our core business, increasing money transfer transactions, taking out costs and continuing to see general economic improvements in many markets."
Balance Sheet Items
During the quarter, MoneyGram prepaid $75 million on its Senior Tranche B Loan under its Senior Facility. Including this latest payment, MoneyGram has paid $165 million toward its outstanding debt obligation in 2010 and a total of $352 million since Jan. 1, 2009. This represents a 35 percent decrease in the Company's total outstanding debt since Jan. 1, 2009. The Company ended the quarter with $641.3 million in outstanding debt principal and assets in excess of payment service obligations of $230.2 million.
The Company continued its focus on enhancing its product offerings and expanding its agent network. MoneyGram recently:
* Announced the expansion into Mexico of our successful cash-to-Visa account program. Beginning this month, consumers can visit any of the 35,000 MoneyGram locations in the U.S. to send funds directly to the Visa accounts of recipients in Mexico.
* Launched our service with Sberbank, Russia's largest and oldest bank, where MoneyGram's valued money transfer system is now available for consumers to send and receive money at 8,000 branch locations across the world's third-largest remittance market.
* Created a partnership with Valora of Switzerland, the country's largest retailer, significantly expanding MoneyGram's presence in this important send market. The service will initially be offered in more than 500 kiosk locations this year and a total of 1,000 in 2012, making MoneyGram the leading provider of international money transfer services in Switzerland.
* Entered into an agreement with Movistar Remeses, a division of Spanish telecommunications giant Telefonica. Through the strategic agreement, Movistar Remeses now offers its 1,500 independently owned retail locations the opportunity to provide MoneyGram's services to its consumers across Spain.
* Strengthened our partnership with Societe Generale through an expanded agreement that offers MoneyGram services through Societe Generale's international retail banking network in 37 countries. The global agreement is an extension of the two companies' successful partnership in Albania, Ghana, Russia, Mayotte and Reunion.
* Expanded MoneyGram's presence in Japan, another very important send market, through a new agreement with SBI Remit Co. Ltd. This service, launched in December, enables SBI customers to send and receive funds online, by depositing money into customer's account with SBI Remit via ATMs, and through kiosks in convenience stores.
* Initiated the roll out of a unique self-service money transfer solution through kiosks in Australia. This service will be available in 400 7-Eleven convenience stores in Victoria, New South Wales and Queensland, tripling MoneyGram's network in Australia when fully rolled out.
* Signed an agreement with Online Resources Corporation, a leading provider of online banking technology, to offer same-day cash payment services from any MoneyGram location in the U.S. to Online Resources biller clients in the financial services, utility, health care, insurance and other industries.
"In the fourth quarter of 2010, we renewed our focus on improving the customer experience and saw a return to accelerated revenue growth in our core money transfer business. We built consumer excitement around our ICC cricket sponsorship, the global expansion of our Rewards program and expanded our service with new partners in new markets," said Patsley. "As we enter 2011, we remain keenly focused on continuing to grow our market share, delivering improved financial results and building on the success we achieved in 2010. At the same time, we remain disciplined in our deployment of capital, prudent in our investment decisions, and committed to improving our capital structure to create long-term shareholder value."
Global Funds Transfer Segment Results
Total revenue for the Global Funds Transfer segment increased 5 percent to $276.7 million in the fourth quarter of 2010 compared with $263.8 million in the fourth quarter of 2009. The segment reported operating income of $44.2 million and an operating margin of 16.0 percent in the fourth quarter of 2010. Adjusted operating margin improved to 11.9 percent in the quarter from 11.4 percent in the prior year.
Money transfer transaction volume increased 12 percent, with fee and other revenue increasing 7 percent to $246.2 million in the fourth quarter of 2010 compared with $230.6 million in the fourth quarter of 2009. On a constant currency basis, money transfer fee and other revenue improved 9 percent. The difference between transaction growth and constant currency revenue growth is due to lower revenue per transaction primarily related to the continuation of the $50 price band in the U.S. In the fourth quarter, money transfer transactions originating outside of the U.S. increased 18 percent over the prior year. Excluding Spain, transactions originating outside of the U.S. increased a very strong 21 percent over the prior year. Transactions sent from Spain increased 2 percent compared with the same period last year. Money transfer transactions originating in the U.S., excluding transactions sent to Mexico, increased 11 percent. Transaction volume to Mexico increased a healthy 6 percent in the quarter, while intra-U.S. transaction growth was a solid 13 percent in the fourth quarter.
Bill payment transaction volume decreased 3 percent, while fee and other revenue decreased 8 percent to $30.4 million in the fourth quarter of 2010 from $33.1 million in the fourth quarter of 2009. The difference between transaction growth 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 our traditional auto and mortgage verticals which continue to struggle in the U.S. economy.
Financial Paper Products Segment Results
Total revenue in the Financial Paper Products segment declined 14 percent to $26.0 million in the fourth quarter of 2010 from $30.1 million in the fourth quarter of 2009. Operating income increased to $8.6 million in the fourth quarter of 2010 from $1.4 million in the fourth quarter of 2009. Operating margin in the fourth quarter of 2010 was 32.9 percent. Adjusted operating margin was 36.1 percent in the quarter.
Revision to Financial Presentation
During the fourth quarter of 2010, the Company revised the presentation of its Consolidated Statements of Income (Loss) as a result of an internal review to enhance management and external reporting. As a result of this review, the Company will no longer present net revenue, previously measured as total revenue less total commissions expense, as this measure was not found to be a meaningful metric internally or to our external users. The Company will continue to separately disclose "Commissions expense." In addition, the Company has also created an operating income measure consistent with management reporting. Finally, $2.4 million of gains related to historical cash flow hedges for the year ended Dec. 31, 2009 were reclassified from "Fee and other revenue" to "Other" expense in the non-operating section based on the Company's purpose for entering into the derivatives. All prior periods have been reclassified to conform to this new presentation.