MoneyGram Q3 net income jumps

On a constant currency basis, money transfer fee and other revenue continued to accelerate, increasing 12 percent in the third quarter of 2011 over the third quarter of 2010. On a reported basis money transfer fee and other revenue increased 15 percent versus prior year.

Money transfer transaction volume increased 13 percent in the third quarter of 2011, led by 16 percent volume growth from money transfer transactions originated outside of the U.S., U.S.-to-U.S. transaction volume growth of 16 percent and U.S. outbound transaction volume growth of 9 percent.

Global agent locations increased a strong 24 percent to 256,000, over the third quarter of 2010.

Total revenue in the third quarter increased 10 percent to $321.9 million, compared with $292.9 million in the third quarter of 2010. Total fee and other revenue increased 10 percent to $318.0 million, from $288.5 million, in the third quarter of 2010.

Net income for the quarter increased to $15.8 million from $10.0 million in the prior year's quarter. EBITDA was $59.1 million, up from $57.3 million, in the third quarter of last year. Both net income and EBITDA were impacted in the third quarter of 2011 by:

• $6.4 million of restructuring and reorganization costs;
• $4.4 million of stock-based compensation;
• $1.3 million for certain legal accruals; and
• $0.9 million of asset impairment charges.

Adjusted EBITDA for the third quarter increased 6 percent to $72.0 million from $68.0 million in the prior year. Adjusted EBITDA margin was 22.4 percent in the third quarter of 2011, compared with 23.2 percent in the same period last year. Adjusted EBITDA and Adjusted EBITDA margin were negatively impacted by increased marketing spend of $1.1 million, lower net investment revenue and lower operating income from the bill payment business as compared to the same period last year.

Diluted income per common share was $0.03.

"Across the board, we had a great third quarter. In spite of continued global economic challenges we delivered market-leading transaction and revenue growth," said Pamela H. Patsley, MoneyGram chairman and chief executive officer. "MoneyGram is a powerful brand, and through our focus on consumers, agents and partners we are intent on creating better value for our shareholders. The turn-around of MoneyGram is well on its way."

Balance Sheet Items

MoneyGram ended the third quarter of 2011 with assets in excess of payment service obligations of $249.4 million, and outstanding debt principal of $840.0 million. Interest expense for the quarter decreased $2.5 million from prior year as result of continued delevering activities and the refinancing in May of 2011. Diluted weighted-average outstanding common shares, including common stock equivalents, for the quarter was 577.4 million.

Market Developments

Throughout the quarter MoneyGram expanded its base of revenue opportunities. A few key accomplishments include:

Increasing the convenience to consumers by adding five national postal networks:

• India Post, the world's largest distribution postal network in the world's largest remittance receive market;
• Liban Post in Lebanon, the company's first postal service agent in the Middle East;
• Post NL in the Netherlands and Iceland Post, establishing MoneyGram as the largest money transfer network in these countries; and
• Togo Post Office, a key agent for serving this rural West African nation.

Developing new relationships enhancing its services and offerings with:

• SWIFT, an industry-owned co-operative that supplies secure messaging services and interface software to financial institutions. MoneyGram is the first global money transfer company to receive worker's remittance member status;
• CashEdge Inc., the leading provider of Intelligent Money Movement™ services. This relationship adds MoneyGram's money transfer services to CashEdge's menu of options it provides to banks and other financial service companies.
• Cumberland Farms, the first agent to launch the MoneyGram® Xpress service and allow customers to purchase pre-packaged money transfers and redeem online or by telephone to complete the transaction; and
• AccountNow, becoming the first U.S.-based prepaid card program to provide MoneyGram's money transfer products as an online agent beginning November 2011.

Adding several new banks and retail locations, including:

• Three large banks in Uzbekistan --National Bank of Uzbekistan, Halq Bank (Peoples Bank of Uzbekistan) and Alokabank - adding 200 locations
• Oschad Bank in the Ukraine, adding 1,700 locations through a five-year agreement.
• Tameer Bank in Pakistan, increasing our agents in Pakistan to over 2,100
• CI Banco in Mexico expanding MoneyGram's presence in Mexico City and key resort and port areas; and
• QC Holdings, a Kansas City-based payday loan company will offer MoneyGram money transfer, bill payments and money orders in over 300 locations

Global Funds Transfer Segment Results

Total revenue for the Global Funds Transfer segment increased 12 percent to $298.9 million in the third quarter of 2011 from $266.2 million in the third quarter of 2010. The segment reported operating income of $39.1 million and an operating margin of 13.1 percent in the third quarter of 2011. Adjusted operating margin was 16.4 percent in the quarter, up from 16.0 percent in the prior year's quarter. Segment margin was negatively impacted by increased marketing spend and lower operating income from the bill payment business.

During the third quarter of 2011, money transfer transaction volume increased 13 percent. Money transfer fee and other revenue increased 15 percent to $270.4 million compared with $235.0 million in the third quarter of 2010. On a constant currency basis, money transfer fee and other revenue improved a very strong 12 percent. The difference between transaction growth and constant currency revenue growth is primarily due to corridor mix.

Money transfer transactions originating outside of the U.S. increased an impressive 16 percent over the prior year. U.S.-to-U.S money transfer transaction volume continued its strong growth, increasing 16 percent. U.S. outbound transaction volume growth was 9 percent for the quarter. U.S. to Mexico transaction volume increased an impressive 13 percent.

Bill payment transaction volume decreased 5 percent, while fee and other revenue decreased 9 percent to $28.3 million in the third quarter of 2011 from $31.2 million in the third quarter of 2010. While down from prior year, MoneyGram's bill payment business improved compared to the second quarter of 2011.

Financial Paper Products Segment Results

Total revenue in the Financial Paper Products segment declined 13 percent to $22.5 million in the third quarter of 2011, from $26.0 million in the third quarter of 2010. Operating income was $5.5 million in the third quarter of 2011 down from $7.5 million in the third quarter of 2010. Operating margin in the third quarter of 2011 was 24.6 percent. Adjusted operating margin was 30.5 percent in the quarter down from 32.8 percent in the same period last year. Segment margin continues to be negatively impacted by declining investment revenue.