MoneyGram International Reports First Quarter 2014 Financial Results
12th Consecutive Quarter of Double-Digit Money Transfer Constant Currency Revenue Growth
-
Total revenue was
$374.9 million , an increase over the prior year of 10 percent on a reported basis and 9 percent in constant currency. -
Money transfer revenue increased to
$326.1 million , representing growth of 11 percent over the prior year on a reported basis and 10 percent in constant currency. -
Money transfer transactions increased 12 percent over the prior year,
led by:
-
18 percent growth in U.S. outbound sends, including 31 percent
growth in U.S. to
Mexico - 11 percent growth in sends originated outside of the U.S.
- 7 percent growth in U.S.-to-U.S. sends.
-
18 percent growth in U.S. outbound sends, including 31 percent
growth in U.S. to
- Global agent locations increased 6 percent over the prior year to 339,000.
- Self-service money transfer revenue grew 35 percent in the quarter and represented 7 percent of money transfer revenue.
- MoneyGram Online money transfer and bill payment transaction volume increased 36 percent and revenue was up 26 percent over the prior year.
-
The Company reported EBITDA of
$61.9 million , and pre-tax income of$27.3 million which were impacted by:-
$7.1 million of expenses related to the compliance enhancement program -
$3.5 million of stock-based and contingent performance compensation expense -
$3.1 million of expenses related to reorganization and restructuring costs -
$1.1 million of expenses related to capital transaction costs -
$0.8 million of expenses related to direct monitor costs -
$0.4 million of legal expenses related to certain matters.
-
-
Adjusted EBITDA for the first quarter was
$77.9 million , up 8 percent on a reported basis and 6 percent on a constant currency basis. In the quarter, adjusted EBITDA margin was 20.8 percent, down from 21.2 percent in the prior year. -
Diluted earnings per common share was
$0.54 . Adjusted diluted earnings per share was$0.37 . -
Adjusted free cash flow for the quarter was
$46.7 million , up 42 percent from$32.8 million in the prior year.
"We had another great quarter, posting our twelfth consecutive quarter
of double-digit money transfer constant currency revenue growth and 42
percent growth in adjusted free cash flow. Money transfer transaction
growth was impressive at 12% as U.S. outbound transactions continued
their rapid pace and sends outside of the U.S. growth accelerated
sequentially. I am also proud of the consistently robust self-service
business with 54% transaction growth and 35% revenue growth in the
quarter," said
Balance Sheet Items and Adjusted Free Cash Flow Items
Quarterly Highlights
-
Extended
MoneyGram's exclusive relationship with Post Office Limited in the UK. The Post Office, which serves about 18 million people per week through more than 11,500 locations, has been a MoneyGram agent since 1997. -
Renewed the Company's agreement with Banco de Oro, the largest bank in
the Philippines . The contract includes 1,200 agent locations and account deposit services in a$25 billion remittance receive market. -
Signed Bank of Africa Group as a new agent offering money transfer services in 250 locations across 8 countries. -
Launched service in two new countries, Slovakia and
Montenegro , expandingMoneyGram's presence in the important and growingEastern Europe region. -
Initiated money transfer services at over 150 locations with Serpost
in
Peru , a postal network and first-time global remittance provider. The new service supports Serpost's goal of fostering financial inclusion to all Peruvians. -
Expanded our relationship with Banco de
Guayaquil, Ecuador's second largest bank, to offer money transfer products at Banco del Barrio's 1,000 correspondent locations. -
Announced an agreement with PicomoPay to allow consumers to initiate a
MoneyGram transfer funded from their PicomoPay Digital Wallets on Facebook. -
Signed an agreement to connect the
MoneyGram network to HomeSend, a global technology hub service operating in more than 50 countries. This offering will allow rapid integration into mobile wallets. -
Promoted our brand at top-tier sporting events, with the most notable
being the Cricket T-20
World Cup inBangladesh . Sponsorships also included theCONCACAF Champions League ,Paris St Germain and FC Dallas Soccer.
Global Funds Transfer Segment Results
For the quarter, total revenue for the Global Funds Transfer segment was
During the quarter, the segment reported operating income of
Financial Paper Products Segment Results
For the quarter, total revenue in the Financial Paper Products segment
increased 17 percent to
Global Transformation Program
In the first quarter, the Company incurred total cash outlays of
As previously announced, the Company anticipates incurring
Outlook
While first quarter results were strong and in line with its full-year forecast, the Company is revising its 2014 outlook due to the recently introduced Walmart-to-Walmart white-label product. In the first quarter, the Company earned 12 percent of total company revenue and 9 percent of total company revenue less commissions from its U.S.-to-U.S., Walmart-to-Walmart transactions. Due to the limited time the competing product has been in the market, it is uncertain what the cannibalization effect or competitive price environment will be for the U.S.-to-U.S. business. In an effort to mitigate any potential negative impact, management has initiated an accelerated cost-reduction program along with a strengthened emphasis on growing its U.S. outbound sends as well as sends originated outside of the U.S. Considering these factors, the Company now estimates full-year constant currency revenue growth to be in the range of 1 to 3 percent and estimates full-year constant currency Adjusted EBITDA growth to be in the range of 0 to 2 percent.
"Over the past five years we have diversified our business and grown
rapidly in new markets and channels. Today
Non-GAAP Measures
In addition to results presented in accordance with GAAP, this press release and related tables include certain non-GAAP financial measures, including a presentation of EBITDA (earnings before interest, taxes, depreciation and amortization, including agent signing bonus amortization), adjusted EBITDA (EBITDA adjusted for significant items), adjusted EBITDA margin and adjusted free cash flow (adjusted EBITDA less cash interest expense, cash tax expense, cash payments for capital expenditures and agent signing bonuses), constant currency measures, adjusted diluted earnings per share and adjusted net income. In addition, we also present adjusted operating income and adjusted operating margin for our two reporting segments. The following tables include a full reconciliation of actual non-GAAP financial measures to the related GAAP financial measures. The equivalent GAAP financial measures for projected results are not provided as we are not able to predict results inclusive of currency changes.
We believe that these non-GAAP financial measures provide useful
information to investors because they are an indicator of the strength
and performance of ongoing business operations, including our ability to
service debt and fund capital expenditures, acquisitions and operations.
These calculations are commonly used as a basis for investors, analysts
and credit rating agencies to evaluate and compare the operating
performance and value of companies within our industry. Finally, EBITDA,
adjusted EBITDA, adjusted EBITDA margin, adjusted free cash flow,
constant currency, adjusted diluted earnings per share and adjusted net
income figures are financial measures used by management in reviewing
results of operations, forecasting, assessing cash flow and capital,
allocating resources or establishing employee incentive programs.
Although
Description of Tables
Table One - Consolidated Statements of Operations
Table Two - Segment Results
Table Three - Segment Reconciliations
Table Four - EBITDA, Adjusted EBITDA, Adjusted EBITDA Margin and Adjusted Free Cash Flow
Table Five - Consolidated Balance Sheets
Table Six - Assets in Excess of Payment Service Obligations
Table Seven - Constant Currency Measures
Table Eight - Adjusted Net Income, Adjusted Diluted EPS and Pro Forma Adjusted Diluted EPS
Conference Call
About
Forward Looking Statements
This release may contain forward-looking statements within the meaning
of the Private Securities Litigation Reform Act of 1995, including
statements with respect to, among other things, the financial condition,
results of operations, plans, objectives, future performance and
business of
TABLE ONE | ||||||||||||
|
||||||||||||
CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||||||
(Unaudited) | ||||||||||||
Three Months Ended
|
2014 vs | |||||||||||
(Amounts in millions, except per share data) | 2014 | 2013 | 2013 | |||||||||
REVENUE | ||||||||||||
Fee and other revenue | $ | 367.7 | $ | 337.7 | $ | 30.0 | ||||||
Investment revenue | 7.2 | 2.8 | 4.4 | |||||||||
Total revenue | 374.9 | 340.5 | 34.4 | |||||||||
OPERATING EXPENSES | ||||||||||||
Fee and other commissions expense | 170.9 | 154.3 | 16.6 | |||||||||
Investment commissions expense | 0.1 | 0.1 | — | |||||||||
Total commissions expense | 171.0 | 154.4 | 16.6 | |||||||||
Compensation and benefits | 69.7 | 65.5 | 4.2 | |||||||||
Transaction and operations support | 71.3 | 51.5 | 19.8 | |||||||||
Occupancy, equipment and supplies | 12.8 | 13.0 | (0.2 | ) | ||||||||
Depreciation and amortization | 13.1 | 11.8 | 1.3 | |||||||||
Total operating expenses | 337.9 | 296.2 | 41.7 | |||||||||
OPERATING INCOME | 37.0 | 44.3 | (7.3 | ) | ||||||||
Other expense | ||||||||||||
Interest expense | 9.7 | 17.4 | (7.7 | ) | ||||||||
Debt extinguishment costs | — | 45.3 | (45.3 | ) | ||||||||
Total other expense | 9.7 | 62.7 | (53.0 | ) | ||||||||
Income (loss) before income taxes | 27.3 | (18.4 | ) | 45.7 | ||||||||
Income tax benefit | (11.7 | ) | (5.8 | ) | (5.9 | ) | ||||||
NET INCOME (LOSS) | $ | 39.0 | $ | (12.6 | ) | $ | 51.6 | |||||
Earnings (loss) per common share: | ||||||||||||
Basic | $ | 0.54 | $ | (0.18 | ) | $ | 0.72 | |||||
Diluted | $ | 0.54 | $ | (0.18 | ) | $ | 0.72 | |||||
Weighted-average outstanding common shares and equivalents used in computing earnings (loss) per share: | ||||||||||||
Basic (1) |
71.6 | 71.5 | 0.1 | |||||||||
Diluted (1) | 71.9 | 71.5 | 0.4 | |||||||||
(1) Includes common stock equivalents of 13.7 million for
the three months ended |
||||||||||||
Shares related to stock options | 3.5 | 4.6 | ||||||||||
Shares related to restricted stock and restricted stock units | 1.2 | 0.8 |
TABLE TWO | ||||||||||||
|
||||||||||||
SEGMENT RESULTS | ||||||||||||
(Unaudited) | ||||||||||||
Global Funds Transfer | ||||||||||||
Three Months Ended
|
2014 vs | |||||||||||
(Amounts in millions) | 2014 | 2013 | 2013 | |||||||||
Money transfer revenue: | ||||||||||||
Fee and other revenue | $ | 326.1 | $ | 294.3 | $ | 31.8 | ||||||
Investment revenue | — | 0.1 | (0.1 | ) | ||||||||
Bill payment revenue: | ||||||||||||
Fee and other revenue | 25.6 | 26.0 | (0.4 | ) | ||||||||
Investment revenue | — | — | — | |||||||||
Total revenue | $ | 351.7 | $ | 320.4 | $ | 31.3 | ||||||
Total commissions expense | $ | 170.7 | $ | 153.9 | $ | 16.8 | ||||||
Operating income | $ | 31.5 | $ | 41.4 | $ | (9.9 | ) | |||||
Operating margin | 9.0 | % | 12.9 | % | ||||||||
Financial Paper Products | ||||||||||||
Three Months Ended
|
2014 vs | |||||||||||
(Amounts in millions) | 2014 | 2013 | 2013 | |||||||||
Money order revenue: | ||||||||||||
Fee and other revenue | $ | 12.3 | $ | 13.2 | $ | (0.9 | ) | |||||
Investment revenue | 2.1 | 0.5 | 1.6 | |||||||||
Official check revenue: | ||||||||||||
Fee and other revenue | 3.7 | 4.1 | (0.4 | ) | ||||||||
Investment revenue | 5.1 | 2.1 | 3.0 | |||||||||
Total revenue | $ | 23.2 | $ | 19.9 | $ | 3.3 | ||||||
Total commissions expense | $ | 0.3 | $ | 0.5 | $ | (0.2 | ) | |||||
Operating income | $ | 9.8 | $ | 6.9 | $ | 2.9 | ||||||
Operating margin | 42.2 | % | 34.7 | % |
TABLE THREE | ||||||||||||
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||||||||||||
SEGMENT RECONCILIATIONS | ||||||||||||
(Unaudited) | ||||||||||||
Global Funds Transfer | ||||||||||||
Three Months Ended
|
2014 vs | |||||||||||
(Amounts in millions) | 2014 | 2013 | 2013 | |||||||||
Revenue (as reported) | $ | 351.7 | $ | 320.4 | $ | 31.3 | ||||||
Adjusted operating income | $ | 44.4 | $ | 46.6 | $ | (2.2 | ) | |||||
Reorganization and restructuring costs | (2.7 | ) | (3.0 | ) | 0.3 | |||||||
Compliance enhancement program | (6.6 | ) | — | (6.6 | ) | |||||||
Direct monitor costs | (0.8 | ) | — | (0.8 | ) | |||||||
Stock-based compensation expense | (2.8 | ) | (2.2 | ) | (0.6 | ) | ||||||
Total adjustments | (12.9 | ) | (5.2 | ) | (7.7 | ) | ||||||
Operating income (as reported) | $ | 31.5 | $ | 41.4 | $ | (9.9 | ) | |||||
Adjusted operating margin | 12.6 | % | 14.5 | % | ||||||||
Total adjustments | (3.7 | )% | (1.6 | )% | ||||||||
Operating margin (as reported) | 9.0 | % | 12.9 | % | ||||||||
Financial Paper Products | ||||||||||||
Three Months Ended
|
2014 vs | |||||||||||
(Amounts in millions) | 2014 | 2013 | 2013 | |||||||||
Revenue (as reported) | $ | 23.2 | $ | 19.9 | $ | 3.3 | ||||||
Adjusted operating income | $ | 10.8 | $ | 7.5 | $ | 3.3 | ||||||
Reorganization and restructuring costs | (0.3 | ) | (0.3 | ) | — | |||||||
Compliance enhancement program | (0.4 | ) | — | (0.4 | ) | |||||||
Stock-based compensation expense | (0.3 | ) | (0.3 | ) | — | |||||||
Total adjustments | (1.0 | ) | (0.6 | ) | (0.4 | ) | ||||||
Operating income (as reported) | $ | 9.8 | $ | 6.9 | $ | 2.9 | ||||||
Adjusted operating margin | 46.6 | % | 37.7 | % | ||||||||
Total adjustments | (4.3 | )% | (3.0 | )% | ||||||||
Operating margin (as reported) | 42.2 | % | 34.7 | % |
TABLE FOUR | |||||||||||||||
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EBITDA, ADJUSTED EBITDA, ADJUSTED EBITDA MARGIN AND ADJUSTED FREE
|
|||||||||||||||
(Unaudited) | |||||||||||||||
Three Months Ended
|
2014 vs | ||||||||||||||
(Amounts in millions) | 2014 | 2013 | 2013 | ||||||||||||
Income (loss) before income taxes | $ | 27.3 | $ | (18.4 | ) | $ | 45.7 | ||||||||
Interest expense | 9.7 | 17.4 | (7.7 | ) | |||||||||||
Depreciation and amortization | 13.1 | 11.8 | 1.3 | ||||||||||||
Amortization of agent signing bonuses | 11.8 | 8.8 | 3.0 | ||||||||||||
EBITDA | 61.9 | 19.6 | 42.3 | ||||||||||||
Significant items impacting EBITDA: | |||||||||||||||
Compliance enhancement program (1) | 7.1 | — | 7.1 | ||||||||||||
Stock-based and contingent performance compensation (2) | 3.5 | 3.1 | 0.4 | ||||||||||||
Reorganization and restructuring costs (3) | 3.1 | 3.2 | (0.1 | ) | |||||||||||
Capital transaction costs (4) | 1.1 | — |
1.1 |
|
|||||||||||
Direct monitor costs (5) | 0.8 | — | 0.8 | ||||||||||||
Legal expenses (6) | 0.4 | 1.1 | (0.7 | ) | |||||||||||
Debt extinguishment (7) | — | 45.3 | (45.3 | ) | |||||||||||
Adjusted EBITDA | $ | 77.9 | $ | 72.3 | $ | 5.6 | |||||||||
Adjusted EBITDA margin (8) | 20.8 | % | 21.2 | % | (0.4 | )% | |||||||||
Foreign currency impact | (1.2 | ) | |||||||||||||
Adjusted EBITDA, constant currency adjusted | $ | 76.7 | |||||||||||||
Adjusted EBITDA growth, as reported | 8 | % | |||||||||||||
Adjusted EBITDA growth, constant currency adjusted | 6 | % | |||||||||||||
Adjusted EBITDA | $ | 77.9 | $ | 72.3 | $ | 5.6 | |||||||||
Cash interest expense | (9.1 | ) | (15.6 | ) | 6.5 | ||||||||||
Cash tax expense | (0.1 | ) | (0.1 | ) | — | ||||||||||
Cash payments for capital expenditures | (17.1 | ) | (15.2 | ) | (1.9 | ) | |||||||||
Cash payments for agent signing bonuses | (4.9 | ) | (8.6 | ) | 3.7 | ||||||||||
Adjusted Free Cash Flow | $ | 46.7 | $ | 32.8 | $ | 13.9 | |||||||||
(1) Costs relate to the 2013 compliance enhancement program. | |||||||||||||||
(2) Stock-based compensation and one-time contingent performance award payable after three years based on achievement of certain performance targets. | |||||||||||||||
(3) Reorganization and restructuring costs in 2014 relate to the 2014 Global Transformation Program whereas costs in 2013 relate to the 2010 Global Transformation Initiative. | |||||||||||||||
(4) Professional and legal fees incurred for the |
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(5) Direct compliance monitor expenses were not an adjusted item in 2013 but are adjusted in 2014 going forward. | |||||||||||||||
(6) Legal expenses are primarily in connection with the
settlement related to the |
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(7) Debt extinguishment costs upon the termination of the Note Repurchase in connection with the 2013 Credit Agreement. | |||||||||||||||
(8) Adjusted EBITDA margin is calculated as Adjusted EBITDA divided by total revenue. |
TABLE FIVE | ||||||||||
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CONSOLIDATED BALANCE SHEETS | ||||||||||
(Unaudited) | ||||||||||
(Amounts in millions, except share data) |
|
|
||||||||
ASSETS | ||||||||||
Cash and cash equivalents | $ | — | $ | — | ||||||
Cash and cash equivalents (substantially restricted) | 2,153.9 | 2,228.5 | ||||||||
Receivables, net (substantially restricted) | 890.0 | 767.7 | ||||||||
Interest-bearing investments (substantially restricted) | 935.8 | 1,011.6 | ||||||||
Available-for-sale investments (substantially restricted) | 41.6 | 48.1 | ||||||||
Property and equipment, net | 133.6 | 134.8 | ||||||||
Goodwill | 434.9 | 435.2 | ||||||||
Other assets | 171.6 | 161.0 | ||||||||
Total assets | $ | 4,761.4 | $ | 4,786.9 | ||||||
LIABILITIES | ||||||||||
Payment service obligations | $ | 3,691.7 | $ | 3,737.1 | ||||||
Debt | 840.8 | 842.9 | ||||||||
Pension and other postretirement benefits | 96.3 | 98.4 | ||||||||
Accounts payable and other liabilities | 172.1 | 185.5 | ||||||||
Total liabilities | 4,800.9 | 4,863.9 | ||||||||
STOCKHOLDERS' DEFICIT | ||||||||||
Participating Convertible Preferred Stock - Series D, |
281.9 | 281.9 | ||||||||
Common Stock, |
0.6 | 0.6 | ||||||||
Additional paid-in capital | 1,014.8 | 1,011.8 | ||||||||
Retained loss | (1,177.2 | ) | (1,214.4 | ) | ||||||
Accumulated other comprehensive loss | (37.4 | ) | (33.0 | ) | ||||||
Treasury stock: 4,241,725 and 4,300,782 shares at |
(122.2 | ) | (123.9 | ) | ||||||
Total stockholders' deficit | (39.5 | ) | (77.0 | ) | ||||||
Total liabilities and stockholders' deficit | $ | 4,761.4 | $ | 4,786.9 |
TABLE SIX | ||||||||||||||||
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ASSETS IN EXCESS OF PAYMENT SERVICE OBLIGATIONS | ||||||||||||||||
(Unaudited) | ||||||||||||||||
(Amounts in millions) |
2014 |
2013 |
2013 |
2013 |
||||||||||||
Cash and cash equivalents (1) | $ | 2,153.9 | $ | 2,228.5 | $ | 2,222.4 | $ | 2,202.4 | ||||||||
Receivables, net (1) | 890.0 | 767.7 | 959.7 | 1,178.5 | ||||||||||||
Interest-bearing investments (1) | 935.8 | 1,011.6 | 941.8 | 902.3 | ||||||||||||
Available-for-sale investments (1) | 41.6 | 48.1 | 50.7 | 50.5 | ||||||||||||
4,021.3 | 4,055.9 | 4,174.6 | 4,333.7 | |||||||||||||
Payment service obligations | (3,691.7 | ) | (3,737.1 | ) | (3,864.9 | ) | (4,076.4 | ) | ||||||||
Assets in excess of payment service obligations | $ | 329.6 | $ | 318.8 | $ | 309.7 | $ | 257.3 | ||||||||
(1) Substantially restricted |
TABLE SEVEN | |||||
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CONSTANT CURRENCY MEASURES | |||||
(Unaudited) | |||||
(Amounts in millions) |
Three Months Ended
|
||||
Total revenue, as reported (GAAP) | $ | 374.9 | |||
Foreign currency impact | (2.1 | ) | |||
Total revenue, constant currency adjusted | $ | 372.8 | |||
Prior year total revenue, as reported (GAAP) | $ | 340.5 | |||
Revenue change, as reported (GAAP) | 10 | % | |||
Total revenue growth, constant currency adjusted | 9 | % | |||
(Amounts in millions) |
Three Months Ended
|
||||
Money transfer revenue, as reported (GAAP) | $ | 326.1 | |||
Foreign currency impact | (2.1 | ) | |||
Money transfer revenue, constant currency adjusted | $ | 324.0 | |||
Prior year money transfer revenues, as reported (GAAP) | $ | 294.4 | |||
Revenue change, as reported (GAAP) | 11 | % | |||
Money transfer revenue growth, constant currency adjusted | 10 | % |
TABLE EIGHT | |||||||||
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ADJUSTED NET INCOME, ADJUSTED DILUTED EPS and PRO FORMA ADJUSTED DILUTED EPS | |||||||||
(Unaudited) | |||||||||
Three Months Ended
|
|||||||||
(Amounts in millions, except per share data) | Dollars | EPS Impact (1) | |||||||
Net income | $ | 39.0 | $ | 0.54 | |||||
Total adjustments (2) | 16.0 | 0.22 | |||||||
Tax expense of adjustments (3) | (5.8 | ) | (0.08 | ) | |||||
Tax benefit from change to uncertain tax positions | (22.9 | ) | (0.31 | ) | |||||
Adjusted net income | $ | 26.3 | $ | 0.37 | |||||
Pro forma Adjusted Diluted EPS as if the |
$ | 0.41 | |||||||
Diluted weighted-average outstanding common shares and equivalents | 71.9 | ||||||||
Pro forma diluted weighted-average outstanding common shares and equivalents(5) | 63.7 | ||||||||
(1) EPS impact is calculated as total dollars divided by weighted-average diluted outstanding common shares and equivalents for the period. | |||||||||
(2) See summary of adjustments in Table Four - EBITDA, Adjusted EBITDA, Adjusted EBITDA Margin and Adjusted Free Cash Flow. | |||||||||
(3) Tax rates used to calculate the tax expense impact are based on the nature of each adjustment. | |||||||||
(4) Pro forma Adjusted Diluted EPS is calculated as adjusted net income divided by weighted-average diluted pro forma outstanding common shares and equivalents for the period. | |||||||||
(5) Pro forma diluted weighted-average outstanding common
shares and equivalents for the period is calculated by taking
diluted weighted-average outstanding common shares and equivalents
for the period less 8,195,092 shares repurchased in connection with
the share repurchase completed |
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