MoneyGram International Reports First Quarter 2018 Financial Results
First Quarter Financial Results
- Total revenue of
$380.0 million declined 2% on a reported basis and 5% on a constant currency basis compared to first quarter 2017. - Money transfer revenue was
$336.6 million , representing a decrease of 1% on a reported basis and a decrease of 6% on a constant currency basis as compared to first quarter 2017. - Revenue results were in-line with the company's expectations and reflect the impact of newly implemented, industry-leading compliance standards, along with ongoing geopolitical challenges in certain markets.
- Moneygram.com revenue grew 21% primarily from new customer acquisitions. Digital revenue represented 16% of total money transfer revenue.
- Net income was
$7.1 million compared to$8.8 million for first quarter 2017. EBITDA was$66.3 million , an increase of$12.9 million as compared to the year-ago period. - Net income and EBITDA results included:
- Other income of
$30.0 million related to the terminated merger with Ant Financial. - An additional accrual of
$10.0 million in connection with a possible resolution of the company's deferred prosecution agreement (the "DPA"), which is based on the facts and circumstances known at the present time. In the fourth quarter of 2017, the company accrued$85.0 million related to the same matter. $7.3 million of restructuring and reorganization costs.- Income tax expense of
$14.8 million compared to$2.5 million in the year-ago period. The increase was primarily due to the negative impact of certain provisions in the US tax reform legislation enacted inDecember 2017 and the non-deductability of certain expenses. - Adjusted EBITDA was
$66.6 million and remained relatively flat compared to first quarter 2017. Adjusted EBITDA margin was 17.5% as compared to 17.2% for first quarter 2017. - Diluted earnings per share was
$0.11 compared to diluted earnings per share of$0.13 in the first quarter 2017. Adjusted diluted earnings per share was$0.15 . - Adjusted Free Cash Flow was
$29.4 million for the quarter, an increase of$2.6 million compared to first quarter 2017.
"2018 will be a transition year for
Restructuring and Reorganization
In the first quarter of 2018, the company initiated a restructuring and reorganization program as part of its Digital Transformation initiative. The company incurred
Full Year 2018 Outlook
Including the company's first quarter results along with the expected impact of its new compliance standards and recently announced Walmart2World service, the company estimates full year 2018 constant currency revenue to decline between 4% and 6%. Adjusted EBITDA on a constant currency basis is expected to decline between 8% and 10%.
Forward-Looking Statements
This communication contains forward-looking statements which are protected as forward-looking statements under the Private Securities Litigation Reform Act of 1995 that are not limited to historical facts, but reflect
Additional information concerning factors that could cause actual results to differ materially from those in the forward-looking statements is contained from time to time in
Non-GAAP Measures
In addition to results presented in accordance with accounting principles generally accepted in
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. These calculations are commonly used as a basis for investors, analysts and other interested parties 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 and performance measures used by management in reviewing results of operations, forecasting, allocating resources or establishing employee incentive programs. Although
Description of Tables
Table One |
- |
Condensed 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 |
- |
Adjusted Net Income and Adjusted Diluted EPS |
Table Six |
- |
Condensed Consolidated Balance Sheets |
Table Seven |
- |
Condensed Consolidated Statements of Cash Flows |
Table Eight |
- |
Income Statement Presentation Change and Correction of Prior Period Results |
Conference Call
Participant Dial-In Numbers: | |
U.S.: |
1-888-394-8218 |
International: |
+1-323-701-0225 |
Replay: |
1-844-512-2921 or 1-412-317-6671 |
Replay ID |
3322067 |
Replay is available through |
About
MoneyGram is a global provider of innovative money transfer services and is recognized worldwide as a financial connection to friends and family. Whether online, or through a mobile device, at a kiosk or in a local store, we connect consumers any way that is convenient for them. We also provide bill payment services, issue money orders and process official checks in select markets. More information about MoneyGram International, Inc. is available at moneygram.com.
TABLE ONE | ||||||||||||
| ||||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||||||
(Unaudited) | ||||||||||||
(Amounts in millions, except percentages and per share data) |
Three Months |
2018 vs | ||||||||||
2018 |
2017 |
2017 | ||||||||||
REVENUE |
||||||||||||
Fee and other revenue |
$ |
370.1 |
$ |
380.3 |
$ |
(10.2) |
||||||
Investment revenue |
9.9 |
5.8 |
4.1 |
|||||||||
Total revenue |
380.0 |
386.1 |
(6.1) |
|||||||||
Total revenue growth, as reported |
(2) |
% |
— |
% |
||||||||
Total revenue growth, constant currency |
(5) |
% |
1 |
% |
||||||||
OPERATING EXPENSES |
||||||||||||
Total commissions and direct transaction expenses (1) |
185.5 |
192.4 |
(6.9) |
|||||||||
Compensation and benefits (2) |
79.3 |
70.2 |
9.1 |
|||||||||
Transaction and operations support (1) |
74.8 |
66.5 |
8.3 |
|||||||||
Occupancy, equipment and supplies |
16.6 |
15.3 |
1.3 |
|||||||||
Depreciation and amortization |
18.1 |
18.3 |
(0.2) |
|||||||||
Total operating expenses (2) |
374.3 |
362.7 |
11.6 |
|||||||||
OPERATING INCOME (2) |
5.7 |
23.4 |
(17.7) |
|||||||||
Other (income) expenses |
||||||||||||
Interest expense |
12.3 |
10.8 |
1.5 |
|||||||||
Other non-operating (income) expense (2) |
(28.5) |
1.3 |
(29.8) |
|||||||||
Total other (income) expenses (2) |
(16.2) |
12.1 |
(28.3) |
|||||||||
Income before income taxes |
21.9 |
11.3 |
10.6 |
|||||||||
Income tax expense |
14.8 |
2.5 |
12.3 |
|||||||||
NET INCOME |
$ |
7.1 |
$ |
8.8 |
$ |
(1.7) |
||||||
EARNINGS PER COMMON SHARE |
||||||||||||
Basic |
$ |
0.11 |
$ |
0.14 |
$ |
(0.03) |
||||||
Diluted |
$ |
0.11 |
$ |
0.13 |
$ |
(0.02) |
||||||
Weighted-average outstanding common shares and equivalents used in computing earnings per share |
||||||||||||
Basic |
63.8 |
62.1 |
1.7 |
|||||||||
Diluted |
66.2 |
66.1 |
0.1 |
(1) 2017 financial information reflects income statement presentation change outlined in Table 8. | ||||||||||||
(2) 2017 financial information reflects the adoption of ASU 2017-07. |
TABLE TWO | ||||||||||||
| ||||||||||||
SEGMENT RESULTS | ||||||||||||
(Unaudited) | ||||||||||||
Global Funds Transfer |
||||||||||||
(Amounts in millions, except percentages) |
Three Months |
2018 vs | ||||||||||
2018 |
2017 |
2017 | ||||||||||
Money transfer revenue |
$ |
336.6 |
$ |
341.7 |
$ |
(5.1) |
||||||
Bill payment revenue |
20.8 |
25.1 |
(4.3) |
|||||||||
Total revenue |
$ |
357.4 |
$ |
366.8 |
$ |
(9.4) |
||||||
Commissions and direct transaction expenses (1) |
$ |
181.7 |
$ |
190.7 |
$ |
(9.0) |
||||||
Operating income (2) |
$ |
1.4 |
$ |
25.2 |
$ |
(23.8) |
||||||
Operating margin (2) |
0.4 |
% |
6.9 |
% |
||||||||
Money transfer revenue growth, as reported |
(1) |
% |
(1) |
% |
||||||||
Money transfer revenue growth, constant currency |
(6) |
% |
1 |
% |
||||||||
Financial Paper Products |
||||||||||||
(Amounts in millions, except percentages) |
Three Months |
2018 vs | ||||||||||
2018 |
2017 |
2017 | ||||||||||
Money order revenue |
$ |
13.4 |
$ |
12.5 |
$ |
0.9 |
||||||
Official check revenue |
9.2 |
6.8 |
2.4 |
|||||||||
Total revenue |
$ |
22.6 |
$ |
19.3 |
$ |
3.3 |
||||||
Total commissions expense |
$ |
3.8 |
$ |
1.7 |
$ |
2.1 |
||||||
Operating income (2) |
$ |
5.6 |
$ |
4.7 |
$ |
0.9 |
||||||
Operating margin (2) |
24.8 |
% |
24.4 |
% |
(1) 2017 financial information reflects income statement presentation change outlined in Table 8. | ||||||||||||
(2) 2017 financial information reflects the immaterial correction outlined in Table 8. |
TABLE THREE | ||||||||||||
| ||||||||||||
SEGMENT RECONCILIATIONS | ||||||||||||
(Unaudited) | ||||||||||||
Global Funds Transfer |
||||||||||||
(Amounts in millions, except percentages) |
Three Months |
2018 vs | ||||||||||
2018 |
2017 |
2017 | ||||||||||
Revenue (as reported) |
$ |
357.4 |
$ |
366.8 |
$ |
(9.4) |
||||||
Adjusted operating income (1) |
$ |
29.9 |
$ |
33.4 |
$ |
(3.5) |
||||||
Legal and contingent matters |
(11.4) |
— |
(11.4) |
|||||||||
Restructuring and reorganization costs |
(7.3) |
— |
(7.3) |
|||||||||
Compliance enhancement program |
(2.4) |
(1.8) |
(0.6) |
|||||||||
Direct monitor costs |
(3.1) |
(2.8) |
(0.3) |
|||||||||
Stock-based compensation expense |
(4.3) |
(3.6) |
(0.7) |
|||||||||
Total adjustments |
(28.5) |
(8.2) |
(20.3) |
|||||||||
Operating income (as reported) (1) |
$ |
1.4 |
$ |
25.2 |
$ |
(23.8) |
||||||
Adjusted operating margin (1) |
8.4 |
% |
9.1 |
% |
||||||||
Total adjustments |
(8.0) |
% |
(2.2) |
% |
||||||||
Operating margin (as reported) (1) |
0.4 |
% |
6.9 |
% |
||||||||
Financial Paper Products |
||||||||||||
(Amounts in millions, except percentages) |
Three Months |
2018 vs | ||||||||||
2018 |
2017 |
2017 | ||||||||||
Revenue (as reported) |
$ |
22.6 |
$ |
19.3 |
$ |
3.3 |
||||||
Adjusted operating income (1) |
$ |
6.3 |
$ |
5.4 |
$ |
0.9 |
||||||
Compliance enhancement program |
(0.2) |
(0.3) |
0.1 |
|||||||||
Stock-based compensation expense |
(0.5) |
(0.4) |
(0.1) |
|||||||||
Total adjustments |
(0.7) |
(0.7) |
— |
|||||||||
Operating income (as reported) (1) |
$ |
5.6 |
$ |
4.7 |
$ |
0.9 |
||||||
Adjusted operating margin (1) |
27.9 |
% |
28.0 |
% |
||||||||
Total adjustments |
(3.1) |
% |
(3.6) |
% |
||||||||
Operating margin (as reported) (1) |
24.8 |
% |
24.4 |
% |
(1) 2017 financial information reflects the immaterial correction outlined in Table 8. |
TABLE FOUR | ||||||||||||
| ||||||||||||
EBITDA, ADJUSTED EBITDA, ADJUSTED EBITDA MARGIN AND ADJUSTED FREE CASH FLOW | ||||||||||||
(Unaudited) | ||||||||||||
(Amounts in millions, except percentages) |
Three Months |
2018 vs | ||||||||||
2018 |
2017 |
2017 | ||||||||||
Income before income taxes |
$ |
21.9 |
$ |
11.3 |
$ |
10.6 |
||||||
Interest expense |
12.3 |
10.8 |
1.5 |
|||||||||
Depreciation and amortization |
18.1 |
18.3 |
(0.2) |
|||||||||
Signing bonus amortization |
14.0 |
13.0 |
1.0 |
|||||||||
EBITDA |
66.3 |
53.4 |
12.9 |
|||||||||
Significant items impacting EBITDA: |
||||||||||||
(Income) costs related to the terminated merger with Ant Financial (1) |
(29.3) |
2.8 |
(32.1) |
|||||||||
Legal and contingent matters (2) |
11.4 |
1.2 |
10.2 |
|||||||||
Restructuring and reorganization costs |
7.3 |
— |
7.3 |
|||||||||
Stock-based, contingent and incentive compensation |
4.8 |
4.0 |
0.8 |
|||||||||
Direct monitor costs |
3.1 |
2.8 |
0.3 |
|||||||||
Compliance enhancement program |
2.6 |
2.1 |
0.5 |
|||||||||
Severance and related costs |
0.4 |
— |
0.4 |
|||||||||
Adjusted EBITDA |
$ |
66.6 |
$ |
66.3 |
$ |
0.3 |
||||||
Adjusted EBITDA margin (3) |
17.5 |
% |
17.2 |
% |
0.3 |
% | ||||||
Adjusted EBITDA growth, as reported |
— |
% |
||||||||||
Adjusted EBITDA growth, constant currency adjusted |
(4) |
% |
||||||||||
Adjusted EBITDA |
$ |
66.6 |
$ |
66.3 |
$ |
0.3 |
||||||
Cash payments for interest |
(11.5) |
(10.0) |
(1.5) |
|||||||||
Cash payments for taxes, net of refunds |
(1.6) |
(0.7) |
(0.9) |
|||||||||
Cash payments for capital expenditures |
(12.3) |
(18.6) |
6.3 |
|||||||||
Cash payments for agent signing bonuses |
(11.8) |
(10.2) |
(1.6) |
|||||||||
Adjusted Free Cash Flow |
$ |
29.4 |
$ |
26.8 |
$ |
2.6 |
(1) Income includes the | ||||||||||||
(2) 2018 primarily consists of an additional | ||||||||||||
(3) Adjusted EBITDA margin is calculated as Adjusted EBITDA divided by total revenue. |
TABLE FIVE | ||||||||
| ||||||||
ADJUSTED NET INCOME AND ADJUSTED DILUTED EPS | ||||||||
(Unaudited) | ||||||||
Three Months | ||||||||
(Amounts in millions, except per share data) |
2018 |
2017 | ||||||
Net income |
$ |
7.1 |
$ |
8.8 |
||||
Total adjustments (1) |
0.3 |
12.9 |
||||||
Tax impacts of adjustments (2) |
2.7 |
(4.7) |
||||||
Adjusted net income |
$ |
10.1 |
$ |
17.0 |
||||
Diluted earnings per common share |
$ |
0.11 |
$ |
0.13 |
||||
Diluted adjustments per common share |
0.04 |
0.13 |
||||||
Diluted adjusted earnings per common share |
$ |
0.15 |
$ |
0.26 |
||||
Diluted weighted-average outstanding common shares and equivalents |
66.2 |
66.1 |
||||||
(1) See summary of adjustments in Table Four - EBITDA, Adjusted EBITDA, Adjusted EBITDA Margin and Adjusted Free Cash Flow. | ||||||||
(2) Tax rates used to calculate the tax expense impact are based on the nature of each adjustment. |
TABLE SIX | ||||||||
| ||||||||
CONDENSED CONSOLIDATED BALANCE SHEETS | ||||||||
(Unaudited) | ||||||||
(Amounts in millions, except share data) |
|
| ||||||
ASSETS |
||||||||
Cash and cash equivalents |
$ |
199.7 |
$ |
190.0 |
||||
Settlement assets |
3,483.3 |
3,756.9 |
||||||
Property and equipment, net |
206.3 |
214.9 |
||||||
|
442.2 |
442.2 |
||||||
Other assets |
177.7 |
168.5 |
||||||
Total assets |
$ |
4,509.2 |
$ |
4,772.5 |
||||
LIABILITIES |
||||||||
Payment service obligations |
$ |
3,483.3 |
$ |
3,756.9 |
||||
Debt, net |
906.3 |
908.1 |
||||||
Pension and other postretirement benefits |
94.3 |
97.3 |
||||||
Accounts payable and other liabilities |
258.0 |
255.5 |
||||||
Total liabilities |
4,741.9 |
5,017.8 |
||||||
STOCKHOLDERS' DEFICIT |
||||||||
Participating convertible preferred stock - series D, |
183.9 |
183.9 |
||||||
Common stock, |
0.6 |
0.6 |
||||||
Additional paid-in capital |
1,039.6 |
1,034.8 |
||||||
Retained loss |
(1,367.8) |
(1,336.1) |
||||||
Accumulated other comprehensive loss |
(59.6) |
(63.0) |
||||||
|
(29.4) |
(65.5) |
||||||
Total stockholders' deficit |
(232.7) |
(245.3) |
||||||
Total liabilities and stockholders' deficit |
$ |
4,509.2 |
$ |
4,772.5 |
||||
TABLE SEVEN | ||||||||
| ||||||||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||
(Unaudited) | ||||||||
Three Months Ended March 31, | ||||||||
(Amounts in millions) |
2018 |
2017 | ||||||
CASH FLOWS FROM OPERATING ACTIVITIES |
||||||||
Net income |
$ |
7.1 |
$ |
8.8 |
||||
Adjustments to reconcile net income to net cash provided by (used in) operating activities |
23.4 |
(18.4) |
||||||
Net cash provided by (used in) operating activities |
30.5 |
(9.6) |
||||||
CASH FLOWS FROM INVESTING ACTIVITIES |
||||||||
Purchases of property and equipment |
(12.3) |
(18.6) |
||||||
Net cash used in investing activities |
(12.3) |
(18.6) |
||||||
CASH FLOWS FROM FINANCING ACTIVITIES |
||||||||
Principal payments on debt |
(2.4) |
(2.5) |
||||||
Proceeds from exercise of stock options and other |
— |
0.9 |
||||||
Payments to tax authorities for stock-based compensation |
(6.1) |
— |
||||||
Net cash used in financing activities |
(8.5) |
(1.6) |
||||||
NET CHANGE IN CASH AND CASH EQUIVALENTS |
9.7 |
(29.8) |
||||||
CASH AND CASH EQUIVALENTS—Beginning of period |
190.0 |
157.2 |
||||||
CASH AND CASH EQUIVALENTS—End of period |
$ |
199.7 |
$ |
127.4 |
||||
TABLE EIGHT | ||||||||||||||||||||
| ||||||||||||||||||||
INCOME STATEMENT PRESENTATION CHANGE AND CORRECTION OF PRIOR PERIOD RESULTS | ||||||||||||||||||||
(Unaudited) | ||||||||||||||||||||
2017 CONSOLIDATED RESULTS | ||||||||||||||||||||
Three Months Ended |
Twelve | |||||||||||||||||||
(Amounts in millions) |
|
|
|
|
||||||||||||||||
Total commissions expense (as reported) |
$ |
187.3 |
$ |
196.2 |
$ |
192.7 |
$ |
196.0 |
$ |
772.2 |
||||||||||
Direct transaction expenses (1) |
5.1 |
4.8 |
5.8 |
6.1 |
21.8 |
|||||||||||||||
Commissions and direct transaction expenses |
$ |
192.4 |
$ |
201.0 |
$ |
198.5 |
$ |
202.1 |
$ |
794.0 |
||||||||||
Transaction and operations support (as reported) |
$ |
71.6 |
$ |
90.3 |
$ |
78.3 |
$ |
162.1 |
$ |
402.3 |
||||||||||
Direct transaction expenses (1) |
(5.1) |
(4.8) |
(5.8) |
(6.1) |
(21.8) |
|||||||||||||||
Transaction and operations support |
$ |
66.5 |
$ |
85.5 |
$ |
72.5 |
$ |
156.0 |
$ |
380.5 |
||||||||||
2017 SEGMENT RESULTS | ||||||||||||||||||||
Three Months Ended |
Twelve | |||||||||||||||||||
(Amounts in millions) |
|
|
|
|
||||||||||||||||
Global Funds Transfer |
||||||||||||||||||||
Total commissions expense (as reported) |
$ |
185.6 |
$ |
193.9 |
$ |
189.8 |
$ |
192.9 |
$ |
762.2 |
||||||||||
Direct transaction expenses (1) |
5.1 |
4.8 |
5.8 |
6.1 |
21.8 |
|||||||||||||||
Commissions and direct transaction expenses |
$ |
190.7 |
$ |
198.7 |
$ |
195.6 |
$ |
199.0 |
$ |
784.0 |
||||||||||
Operating income (loss) (as reported) |
$ |
26.1 |
$ |
14.7 |
$ |
29.6 |
$ |
(56.1) |
$ |
4.9 |
||||||||||
Correction(2) |
(0.9) |
(2.4) |
(6.1) |
— |
— |
|||||||||||||||
Operating income (loss) (as corrected) |
$ |
25.2 |
$ |
12.3 |
$ |
23.5 |
$ |
(56.1) |
$ |
4.9 |
||||||||||
Financial Paper Products |
||||||||||||||||||||
Operating income (as reported) |
$ |
4.8 |
$ |
17.2 |
$ |
4.6 |
$ |
5.0 |
$ |
31.8 |
||||||||||
Correction(2) |
(0.1) |
0.2 |
0.1 |
— |
— |
|||||||||||||||
Operating income (as corrected) |
$ |
4.7 |
$ |
17.4 |
$ |
4.7 |
$ |
5.0 |
$ |
31.8 |
||||||||||
Other operating loss |
||||||||||||||||||||
Operating loss (as reported) |
$ |
(7.5) |
$ |
(10.7) |
$ |
(9.2) |
$ |
(3.9) |
$ |
(22.1) |
||||||||||
Correction(2) |
1.0 |
2.2 |
6.0 |
— |
— |
|||||||||||||||
Operating loss (as corrected) |
$ |
(6.5) |
$ |
(8.5) |
$ |
(3.2) |
$ |
(3.9) |
$ |
(22.1) |
(1) In the first quarter of 2018, the Company changed the presentation of certain operating expenses. Prior period amounts have been updated to reflect the change in presentation, which had no impact on operating income, net income, earnings per share, or segments operating results. | ||||||||||||||||||||
(2) In the fourth quarter of 2017, the Company's management determined that there was an immaterial error with respect to the allocation of certain expenses between the reporting segments in the first three quarters of 2017. The Company assessed the materiality of the misstatement both quantitatively and qualitatively and determined that the error was immaterial to all prior consolidated financial statements, taken as a whole. Accordingly, prior period amounts have been adjusted to reflect the correction of the immaterial error. This correction resulted in a decrease to Global Funds Transfer and Financial Paper Products operating income, and a decrease to Other operating loss. There was no impact on total operating income or other financial statement amounts reported. |
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