MoneyGram International, Inc. (MGI), a leading global payment services company, reported financial results for the first quarter, which ended March 31, 2013. Total revenue of $340.5 million increased 7 percent on both a reported and constant currency basis.
Money transfer revenue increased 10 percent over the prior year on both a reported and constant currency basis.
Money transfer transaction volume increased 11 percent over the prior year, led by:
13 percent growth in U.S. outbound sends on the strength of U.S.-to-Mexico sends, which grew 23 percent
13 percent growth in sends originated outside of the U.S.
7 percent growth in U.S.-to-U.S. transactions.
Global agent locations increased 17 percent over the prior year to 321,000.
Self-service and new channel money transfer revenue grew 31 percent in the quarter, representing 6 percent of money transfer revenue.
MoneyGram Online money transfer and bill payment transaction volume was up 50 percent and revenue increased 23 percent over the prior year.
The Company reported EBITDA of $19.6 million, which was impacted by:
$3.2 million of reorganization and restructuring costs
$3.1 million of stock-based and contingent performance compensation
$1.1 million of legal expenses related to certain ongoing matters.
Adjusted EBITDA for the first quarter increased 6 percent to $72.3 million from $68.4 million in the prior year. In the quarter, adjusted EBITDA margin was 21.2 percent, down from 21.5 percent compared to the same period last year due to a decline in the Financial Paper Products business and lower investment revenue.
The Company retired its 13.25% second lien Goldman Sachs notes and refinanced its credit facility during the quarter. As a result, the Company incurred a pre-tax debt extinguishment charge of $45.3 million, which resulted in a net loss of $12.6 million. The Company expects to realize annual cash interest savings of approximately $28 million as a result of the refinancing.
Diluted loss per common share was $(0.18), including a negative $0.39 per share impact from the recent debt refinancing, a negative $0.03 per share impact from reorganization and restructuring costs, and a negative $0.03 per share impact rom reorganization a.03 per share impact rom reorganization and restructuring costs, and a negative $0.03 per share impact from stock-based and contingent performance compensation.
"We are proud to have achieved our tenth consecutive quarter of double-digit money transfer transaction growth and eighth consecutive quarter of double-digit money transfer constant currency revenue growth. The completion of our debt refinancing in the quarter was a true milestone strengthening our balance sheet and significantly improving our free cash flow," said Pamela H. Patsley, chairman and chief executive officer. "Our value proposition to both consumers and agents combined with our growing brand recognition and expanding network enabled us to again increase our market share. The year is off to a strong start and we are well positioned in the growing global remittance industry."
Balance Sheet and Free Cash Flow Items
MoneyGram ended the quarter with assets in excess of payment service obligations of $219.7 million, and outstanding debt principal of $850.0 million. Interest expense was $17.4 million in the quarter, down $0.5 million from the prior year as a result of refinancing activities. The Company reported an income tax benefit of $5.8 million, due to the recent debt refinancing, with approximately $0.1 million in cash tax expenses. Free cash flow for the quarter was $32.8 million, up 16 percent from $28.3 million in the prior year quarter due to revenue growth, lower interest payments and lower capital expenditures partially offset by higher agent signing bonuses.
Market Developments
Expanded an agreement with Northgate Gonzalez Markets, a 36-location supermarket that serves the Hispanic community in southern California, displacing a niche brand with MoneyGram.
Signed a strategic partnership with Ukash, a UK-based e-payments company formed in 2001, enabling customers to initiate MoneyGram money transfers from their websites. Today, Ukash operates across more than 55 countries.
Renewed and expanded the Company's relationship with India Post, the largest postal network in the world.
Signed Correos Chile, MoneyGram's first post office in the Latin America region.
Added money transfer and bill payment services and extended the long-term relationship with Circle K, the nation's second-largest convenience store chain with 2,900 company-owned stores.
Launched mobile and ATM money transfer services with First National Bank (FNB), one of the largest banks in South Africa, giving FNB account holders the convenient option of sending and receiving money transfers through their mobile devices and the bank's vast ATM network.
Network expansion activities during the quarter:
Continued to expand network locations in the Dominican Republic with the signing of Banco Leon, increasing MoneyGram's network to over 850 locations in the country.
Activated nearly 6,000 locations with Payment Center, further expanding into the Russian retail sector.
Entered into an agreement with ITG, a well-established exchange company in Kuwait.
Signed Autotrans Andesmar, one of the leading bus companies in Argentina with 120 locations.
Activated approximately 1,100 locations in the Indian Subcontinent with Supreme Securities and UAE Exchange.
Opened the first MoneyGram-owned store in Sweden.
Expanded the Company's relationship with SM Supermalls in the Philippines by adding send capabilities to the receive services previously provided.
Global Funds Transfer Segment Results
Total revenue for the Global Funds Transfer segment was $320.4 million, up 8 percent from $296.1 million in the first quarter of 2012. The segment reported operating income of $41.4 million and operating margin of 12.9 percent. Adjusted operating margin was 14.5 percent in the quarter, up from 14.1 percent in the prior year as a result of increased revenue growth and tight expense management.
During the quarter, money transfer transaction volume increased 11 percent, continuing the Company's double-digit growth trend. Money Transfer revenue increased to $294.4 million, compared with $268.5 million in the first quarter of 2012, an increase of 10 percent on a reported and constant currency basis.
Money transfer transactions originating outside of the U.S. increased a robust 13 percent over the prior year. U.S.-to-U.S. money transfer transaction volume increased 7 percent over the prior year, and U.S. Outbound transaction volume growth was 13 percent for the quarter led by U.S.-to-Mexico growth of 23 percent.
Bill payment transaction volume decreased 3 percent, while revenue decreased 6 percent to $26.0 million from the first quarter of 2012.
Financial Paper Products Segment Results
Total revenue in the Financial Paper Products segment decreased 8 percent to $19.9 million in the quarter, down from $21.7 million in the prior year quarter. Operating income was $6.9 million, down from $9.0 million in the first quarter of 2012. Operating margin was 34.7 percent. Adjusted operating margin was 37.7 percent in the quarter, down from 45.6 percent in the same period last year.
Outlook
For fiscal year 2013, management continues to estimate constant currency revenue growth of 6 percent to 9 percent and constant currency adjusted EBITDA growth of 3 percent to 6 percent.