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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
			Form			10-Q

(Mark One)
☑			Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the Quarterly Period Ended September 30, 2021.
☐			Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from                    to                    .

Commission File Number: 001-31950

MONEYGRAM INTERNATIONAL, INC.

(Exact name of registrant as specified in its charter)

Delaware						16-1690064
(State or other jurisdiction of						(I.R.S. Employer
incorporation or organization)						Identification No.)
2828 N. Harwood St., 15th Floor Dallas, Texas						75201 (Zip Code)
(Address of principal executive offices)

(214) 999-7552

Registrant’s telephone number, including area code

Not applicable

(Former name, former address and former fiscal year, if changed since last report)

___________________________________

Securities Registered pursuant to Section 12(b) of the Act:

Title of each class			Trading Symbol(s)			Name of each exchange on which registered
Common stock, $0.01 par value			MGI			The NASDAQ Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☑        No  ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit files).    Yes  ☑        No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.:

Large accelerated filer

☐

Accelerated filer

☑

Non-accelerated filer

☐

Smaller reporting company

☑

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☐        No  ☑

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. As of October 27, 2021, 91,688,411 shares of common stock, $0.01 par value, were outstanding.

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TABLE OF CONTENTS

			PART I. FINANCIAL INFORMATION
						Page
Item 1. Financial Statements (Unaudited)						1
Condensed Consolidated Balance Sheets						1
Condensed Consolidated Statements of Operations						2
Condensed Consolidated Statements of Comprehensive (Loss) Income						3
Condensed Consolidated Statements of Cash Flows						4
Condensed Consolidated Statement of Stockholders’ Deficit						5
Notes to the Unaudited Condensed Consolidated Financial Statements						6
Note 1 — Description of the Business and Basis of Presentation						6
Note 2 — Reorganization Costs						8
Note 3 — Settlement Assets and Payment Service Obligations						9
Note 4 — Fair Value Measurement						9
Note 5 — Investment Portfolio						11
Note 6 — Derivative Financial Instruments						12
Note 7 — Debt						13
Note 8 — Pension and Other Benefits						14
Note 9 — Stockholders' Deficit						14
Note 10 — Stock-Based Compensation						16
Note 11 — Income Taxes						17
Note 12 — Commitments and Contingencies						18
Note 13 — (Loss) Earnings per Common Share						20
Note 14 — Segment Information						21
Note 15 — Revenue Recognition						22
Note 16 — Related Parties						22
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations						23
Item 3. Quantitative and Qualitative Disclosures About Market Risk						33
Item 4. Controls and Procedures						33
PART II. OTHER INFORMATION
Item 1. Legal Proceedings						34
Item 1A. Risk Factors						34
Item 6. Exhibits						35
Signatures						36

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GLOSSARY OF TERMS

This glossary highlights some of the terms used in the Quarterly Report on Form 10-Q and is not a complete list of all the defined terms used herein.

Abbreviation						Term
Amended DPA						Amendment to and Extension of Deferred Prosecution Agreement
ATM Program						At-the-market equity offering program
CID						Civil Investigative Demand
Consent Order						Stipulated Order for Compensatory Relief and Modified Order for Permanent Injunction
Corridor						With regard to a money transfer transaction, the originating "send" location and the designated "receive" location are referred to as a corridor
COVID-19						Coronavirus disease
Digital Channel						Transactions in which either the send transaction, receive transaction or both occur through the Company's direct-to-consumer digital business, MoneyGram Online, through digital partnerships, or end in an account deposit, wallet or card solution such as the Visa Direct program
DPA						Deferred Prosecution Agreement
GFT						Global Funds Transfer
Fitch						Fitch Ratings, Inc.
FPP						Financial Paper Products
FTC						Federal Trade Commission
IRS						Internal Revenue Service
LIBOR						London Interbank Offered Rate
MDPA						U.S. Attorney's Office for the Middle District of Pennsylvania
MGO						MoneyGram Online (our direct-to-consumer business)
Moody's						Moody's Investor Service
Non-U.S. dollar						The impact of non-U.S. dollar exchange rate fluctuations on the Company's financial results is typically calculated as the difference between current period activity translated using the current period's exchange rates and the comparable prior-year period's exchange rates; this method is used to calculate the impact of changes in non-U.S. dollar exchange rates on revenues, commissions and other operating expenses for all countries where the functional currency is not the U.S. dollar.
NYDFS						New York Department of Financial Services
OFAC						U.S. Treasury Department's Office of Foreign Assets Control
Pension						The Company’s Pension Plan and SERPs
Pension Plan						Defined benefit pension plan
Postretirement Benefits						Defined benefit postretirement plan
P2P						Peer-to-peer
Retail Channel						Transactions in which both the send transaction and receive transaction occur at one of the Company's physical agent locations
ROE						Report of Examination
SERPs						Supplemental executive retirement plans
S&P						Standard & Poor's
SEC						U.S. Securities and Exchange Commission
USDC						USD Coin
U.S. DOJ						U.S. Department of Justice, Criminal Division, Money Laundering and Asset Recovery Section
U.S. GAAP						Accounting principles generally accepted in the United States of America
U.S. Judge						United States Judge for the Middle District of Pennsylvania

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CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q and certain documents incorporated by reference herein may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 (the "Reform Act"), including statements with respect to, among other things, the financial condition, results of operations, plans, objectives, future performance and business of MoneyGram and its subsidiaries. Statements preceded by, followed by or that include words such as “believes,” “estimates,” “expects,” “projects,” “plans,” “anticipates,” “intends,” “continues,” “will,” “should,” “could,” “may,” “might,” “would,” “goals,” “predicts,” “potential,” “target,” “forecast,” “outlook,” “currently,” and other similar expressions are intended to identify some of the forward-looking statements within the meaning of the Reform Act and are included, along with this statement, for purposes of complying with the safe harbor provisions of the Reform Act. These forward-looking statements are based on management’s current expectations, beliefs and assumptions as of the date of this report, are not historical facts or guarantees of future performance, and are subject to certain risks, uncertainties and changes in circumstances that are difficult to predict and many of which are outside of our control due to a number of factors. These factors include, but are not limited to:

•the impact of the COVID-19 pandemic or future pandemics on our business, including the potential for work stoppages, lockdowns, shelter-in-place or restricted movement guidelines, service delays and lower consumer and commercial activity;

•our ability to compete effectively;

•our ability to maintain key agent or biller relationships, or a reduction in business or transaction volume from these relationships, including with our largest agent, Walmart, through its introduction of additional competing white-label money transfer products or otherwise;

•our ability to continue to grow our Digital Channel, including through our direct-to-consumer digital business, MoneyGram Online;

•a security or privacy breach in systems, networks or databases on which we rely;

•current and proposed regulations addressing consumer privacy and data use and security;

•our ability to manage fraud risks from consumers or agents;

•the ability of us and our agents to comply with U.S. and international laws and regulations;

•litigation and regulatory proceedings involving us or our agents and other commercial relationships, which could result in material settlements, fines or penalties, revocation of required licenses or registrations, termination of contracts, other administrative actions or lawsuits and negative publicity;

•disruptions to our computer systems and data centers and our ability to effectively operate and adapt our technology;

•the ability of us and our agents to maintain adequate banking relationships;

•our ability to successfully develop and timely introduce new and enhanced products and services and our investments in new products, services or infrastructure changes;

•our high degree of leverage and substantial debt service obligations, and our ability to comply with the requirements under our debt agreements;

•our below investment-grade credit rating;

•our ability to maintain sufficient capital;

•weakness in economic conditions, in both the U.S. and global markets;

•the financial health of certain European countries or the secession of a country from the European Union;

•a significant change, material slow down or complete disruption of international migration patterns;

•our ability to manage risks associated with our international sales and operations, including exchange rates among currencies;

•our offering of money transfer services through agents in regions that are politically volatile or, in a limited number of cases, that may be subject to certain OFAC restrictions;

•major bank failure or sustained financial market illiquidity, or illiquidity at our clearing, cash management and custodial financial institutions;

•changes in tax laws or unfavorable outcomes of tax positions we take, or a failure by us to establish adequate reserves for tax events;

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•our ability to manage credit risks from our agents and official check financial institution customers;

•our ability to adequately protect our brand and intellectual property rights and to avoid infringing on the rights of others;

•our ability to manage risks related to the operation of retail locations and the acquisition or start-up of businesses;

•any restructuring actions and cost reduction initiatives that we undertake may not deliver the expected results and these actions may adversely affect our business;

•our capital structure; and

•the risks and uncertainties described in the Risk Factors and Management's Discussion and Analysis of Financial Condition and Results of Operations sections of our 2020 Form 10-K, as well as any additional risk factors that may be described in our other filings with the SEC from time to time.

These forward-looking statements speak only as of the date they are made, and MoneyGram undertakes no obligation to publicly update or revise any forward-looking statements for any reason, whether as a result of new information, future events or otherwise, except as required by federal securities law.

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PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

MONEYGRAM INTERNATIONAL, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

UNAUDITED

 

(Amounts in millions, except share data)						September 30, 2021						December 31, 2020
ASSETS
Cash and cash equivalents						$	152.6					$	196.1
Settlement assets						3,606.0						3,702.9
Property and equipment, net						134.8						148.1
Goodwill						442.2						442.2
Right-of-use assets						52.7						55.1
Other assets						95.6						129.7
Total assets						$	4,483.9					$	4,674.1
LIABILITIES
Payment service obligations						$	3,606.0					$	3,702.9
Debt, net						801.9						857.8
Pension and other postretirement benefits						71.0						74.5
Lease liabilities						56.6						59.1
Accounts payable and other liabilities						134.3						216.8
Total liabilities						4,669.8						4,911.1
COMMITMENTS AND CONTINGENCIES (NOTE 12)
STOCKHOLDERS' DEFICIT
Common stock, $0.01 par value, 162,500,000 shares authorized, 92,209,763 and 72,530,770 shares issued, 91,664,034 and 72,517,539 shares outstanding at September 30, 2021 and December 31, 2020, respectively						0.9						0.7
Additional paid-in capital						1,398.0						1,296.0
Retained loss						(1,517.5)						(1,475.3)
Accumulated other comprehensive loss						(63.6)						(58.4)
Treasury stock: 545,729 and 13,231 shares at September 30, 2021 and December 31, 2020, respectively						(3.7)						—
Total stockholders' deficit						(185.9)						(237.0)
Total liabilities and stockholders' deficit						$	4,483.9					$	4,674.1

See Notes to the Unaudited Condensed Consolidated Financial Statements

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MONEYGRAM INTERNATIONAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

UNAUDITED

 

						Three Months Ended September 30,												Nine Months Ended September 30,
(Amounts in millions, except per share data)						2021						2020						2021						2020
REVENUE
Fee and other revenue						$	317.7					$	320.2					$	953.1					$	876.5
Investment revenue						1.9						3.0						5.9						17.4
Total revenue						319.6						323.2						959.0						893.9
COST OF REVENUE
Commissions and other fee expense						154.6						161.3						465.8						445.9
Investment commissions expense						0.3						0.2						0.7						3.4
Direct transaction expense						15.6						13.0						47.0						32.5
Total cost of revenue						170.5						174.5						513.5						481.8
GROSS PROFIT						149.1						148.7						445.5						412.1
OPERATING EXPENSES
Compensation and benefits						53.8						56.3						175.0						162.9
Transaction and operations support						39.1						24.3						122.8						83.6
Occupancy, equipment and supplies						15.3						15.6						47.1						44.7
Depreciation and amortization						14.1						15.9						43.5						49.2
Total operating expenses						122.3						112.1						388.4						340.4
OPERATING INCOME						26.8						36.6						57.1						71.7
Other expenses
Interest expense						13.0						23.0						57.8						69.5
Loss on early extinguishment of debt						33.6						—						43.9						—
Other non-operating expense						1.0						1.1						2.8						3.4
Total other expenses						47.6						24.1						104.5						72.9
(Loss) income before income taxes						(20.8)						12.5						(47.4)						(1.2)
Income tax (benefit) expense						(5.2)						1.6						(5.3)						14.0
NET (LOSS) INCOME						$	(15.6)					$	10.9					$	(42.1)					$	(15.2)
(LOSS) EARNINGS PER COMMON SHARE
Basic						$	(0.16)					$	0.14					$	(0.48)					$	(0.20)
Diluted						$	(0.16)					$	0.12					$	(0.48)					$	(0.20)
Weighted-average outstanding common shares and equivalents used in computing (loss) earnings per common share
Basic						96.0						77.9						87.7						77.7
Diluted						96.0						88.7						87.7						77.7

See Notes to the Unaudited Condensed Consolidated Financial Statements

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MONEYGRAM INTERNATIONAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

UNAUDITED

 

						Three Months Ended September 30,												Nine Months Ended September 30,
(Amounts in millions)						2021						2020						2021						2020
NET (LOSS) INCOME						$	(15.6)					$	10.9					$	(42.1)					$	(15.2)
OTHER COMPREHENSIVE (LOSS) INCOME
Net change in unrealized holding (loss) gain on available-for-sale securities arising during the period						(0.1)						—						0.3						(0.3)
Net change in pension liability due to amortization of prior service credit and net actuarial loss, net of tax benefit of $0.1 and $0.1 for the three months ended September 30, 2021 and 2020, respectively, and $0.4 and $0.4 for the nine months ended September 30, 2021 and 2020, respectively						0.4						0.4						1.4						1.3
Valuation adjustment for pension and postretirement benefits, net of tax (benefit) expense of $0.0 and $0.0 for the three and nine months ended September 30, 2021, and 2020, respectively						—						0.1						—						0.1
Unrealized non-U.S. dollar translation adjustments, net of tax benefit of $0.0 and $0.4 for the three months ended September 30, 2021 and 2020, respectively, and $0.0 and $0.2 for the nine months ended September 30, 2021 and 2020, respectively						(3.7)						6.3						(6.9)						1.2
Other comprehensive (loss) income						(3.4)						6.8						(5.2)						2.3
COMPREHENSIVE (LOSS) INCOME						$	(19.0)					$	17.7					$	(47.3)					$	(12.9)

See Notes to the Unaudited Condensed Consolidated Financial Statements

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MONEYGRAM INTERNATIONAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

UNAUDITED

 

						Nine Months Ended September 30,
(Amounts in millions)						2021						2020
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss						$	(42.1)					$	(15.2)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Depreciation and amortization						43.5						49.2
Signing bonus amortization						42.8						39.7
Change in right-of-use assets						9.9						7.4
Amortization of debt discount and debt issuance costs						6.8						8.7
Loss on early extinguishment of debt						43.9						—
Non-cash compensation and pension expense						7.7						8.5
Signing bonus payments						(26.2)						(45.0)
Change in other assets						(3.8)						(7.1)
Change in lease liabilities						(10.7)						(11.6)
Change in accounts payable and other liabilities						(72.7)						18.7
Other non-cash items, net						0.3						(1.1)
Net cash (used in) provided by operating activities						(0.6)						52.2
CASH FLOWS FROM INVESTING ACTIVITIES:
Payments for capital expenditures						(31.4)						(30.6)
Net cash used in investing activities						(31.4)						(30.6)
CASH FLOWS FROM FINANCING ACTIVITIES:
Transaction costs for issuance and amendment of debt						(6.5)						—
Proceeds from issuance of debt						807.8						—
Principal payments on debt						(889.9)						(4.8)
Prepayment call premium						(16.5)						—
Proceeds from revolving credit facility						—						23.0
Payments on revolving credit facility						—						(23.0)
Net proceeds from stock issuance						97.3						—
Payments to tax authorities for stock-based compensation						(3.7)						(0.7)
Net cash used in financing activities						(11.5)						(5.5)
NET CHANGE IN CASH AND CASH EQUIVALENTS						(43.5)						16.1
CASH AND CASH EQUIVALENTS—Beginning of year						196.1						146.8
CASH AND CASH EQUIVALENTS—End of period						$	152.6					$	162.9
Supplemental cash flow information:
Cash payments for interest						$	46.6					$	57.6

See Notes to the Unaudited Condensed Consolidated Financial Statements

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MONEYGRAM INTERNATIONAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT

UNAUDITED

(Amounts in millions)												Common Stock						Additional Paid-In Capital						Retained Loss						Accumulated Other Comprehensive Loss						Treasury Stock						Total
January 1, 2021												$	0.7					$	1,296.0					$	(1,475.3)					$	(58.4)					$	—					$	(237.0)
Net loss												—						—						(15.4)						—						—						(15.4)
Stock-based compensation activity												—						1.9						(0.1)						—						(3.6)						(1.8)
Exercise of Ripple Warrants												0.1						(0.1)						—						—						—						—
Other comprehensive loss												—						—						—						(5.0)						—						(5.0)
March 31, 2021												0.8						1,297.8						(1,490.8)						(63.4)						(3.6)						(259.2)
Net loss												—						—						(11.1)						—						—						(11.1)
Stock-based compensation activity												—						1.4						—						—						(0.1)						1.3
ATM equity offering												0.1						97.5						—						—						—						97.6
Other comprehensive income												—						—						—						3.2						—						3.2
June 30, 2021												0.9						1,396.7						(1,501.9)						(60.2)						(3.7)						(168.2)
Net loss												—						—						(15.6)						—						—						(15.6)
Stock-based compensation activity												—						1.6						—						—						—						1.6
ATM equity offering												—						(0.3)						—						—						—						(0.3)
Other comprehensive loss												—						—						—						(3.4)						—						(3.4)
September 30, 2021												$	0.9					$	1,398.0					$	(1,517.5)					$	(63.6)					$	(3.7)					$	(185.9)

(Amounts in millions)						Preferred Stock						Common Stock						Additional Paid-In Capital						Retained Loss						Accumulated Other Comprehensive Loss						Treasury Stock						Total
January 1, 2020						$	183.9					$	0.7					$	1,116.9					$	(1,460.1)					$	(63.5)					$	(18.3)					$	(240.4)
Net loss						—						—						—						(21.5)						—						—						(21.5)
Stock-based compensation activity						—						—						1.9						(6.9)						—						6.0						1.0
Other comprehensive loss						—						—						—						—						(6.8)						—						(6.8)
March 31, 2020						183.9						0.7						1,118.8						(1,488.5)						(70.3)						(12.3)						(267.7)
Net loss						—						—						—						(4.6)						—						—						(4.6)
Stock-based compensation activity						—						—						1.5						(1.0)						—						1.0						1.5
Other comprehensive income						—						—						—						—						2.3						—						2.3
June 30, 2020						183.9						0.7						1,120.3						(1,494.1)						(68.0)						(11.3)						(268.5)
Net income						—						—						—						10.9						—						—						10.9
Stock-based compensation activity						—						—						1.5						0.1						—						—						1.6
Other comprehensive income						—						—						—						—						6.8						—						6.8
Preferred stock - series D conversion						(146.5)						—						135.3						—						—						11.3						0.1
September 30, 2020						$	37.4					$	0.7					$	1,257.1					$	(1,483.1)					$	(61.2)					$	—					$	(249.1)

See Notes to the Unaudited Condensed Consolidated Financial Statements

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MONEYGRAM INTERNATIONAL, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1 — Description of the Business and Basis of Presentation

References to "MoneyGram," the "Company," "we," "us" and "our" are to MoneyGram International, Inc. and its subsidiaries.

Nature of Operations — MoneyGram offers products and services under its two reporting segments: GFT and FPP. The GFT segment provides global money transfer services and bill payment services to consumers through two primary distribution channels: retail and digital. Through our Retail Channel, we offer services through third-party agents, including retail chains, independent retailers, post offices and other financial institutions. Additionally, we have limited Company-operated retail locations. We offer services through MGO, digital partnerships, direct transfers to bank accounts, mobile wallets and card solutions such as Visa Direct, as part of our Digital Channel. The Financial Paper Products segment provides official check outsourcing services and money orders through financial institutions and agent locations.

Basis of Presentation — The accompanying unaudited condensed consolidated financial statements of MoneyGram are prepared in conformity with U.S. GAAP for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by U.S. GAAP for complete financial statements. The Condensed Consolidated Balance Sheets are unclassified due to the timing uncertainty surrounding the payment of settlement obligations. The condensed consolidated financial statements include all adjustments of a normal recurring nature that, in the opinion of management, are necessary in order to make the financial statements not misleading.

Impact of COVID-19 Pandemic On Our Financial Statements — The global spread of COVID-19 and the unprecedented impact of the COVID-19 pandemic is complex and ever-evolving. In March 2020, the World Health Organization declared COVID-19 a global pandemic and recommended extensive containment and mitigation measures worldwide. The outbreak reached all regions in which we do business, and governmental authorities around the world implemented numerous measures attempting to contain and mitigate the effects of the virus, including travel bans and restrictions, border closings, quarantines, shelter-in-place orders, shutdowns, limitations or closures of non-essential businesses, school closures and social distancing requirements. The global spread of COVID-19 and resulting government actions taken in response to the virus have caused, and may continue to cause, significant economic and business disruption, volatility, financial uncertainty and a continued significant global economic downturn. This has had, and may continue to have, a negative impact on our workforce, agents, customers, financial markets, consumer spending and credit markets. Even after the COVID-19 pandemic has subsided, we may continue to experience adverse impacts to our business as a result of an economic recession or depression. Therefore, the Company cannot reasonably estimate the future impact at this time.

There were no other material impacts to our unaudited condensed consolidated financial statements as of and for the periods ended September 30, 2021, based on the Company's assessment of its estimates. As additional information becomes available to us, our future assessment of these estimates, including our expectations at the time regarding the duration, scope and severity of the pandemic, as well as other factors, could materially and adversely impact our unaudited condensed consolidated financial statements in future reporting periods.

Use of Estimates — The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. These estimates and assumptions are based on historical experience, future expectations, impact of the COVID-19 pandemic and other factors and assumptions the Company believes to be reasonable under the circumstances. These estimates and assumptions are reviewed on an ongoing basis and are revised when necessary. Changes in estimates are recorded in the period of change. Actual amounts may differ from these estimates.

Principles of Consolidation — The condensed consolidated financial statements include the accounts of MoneyGram International, Inc. and its subsidiaries. Intercompany profits, transactions and account balances have been eliminated in consolidation.

Presentation — During the first quarter of 2021, the Company changed its presentation to disclose "Gross profit" in the Condensed Consolidated Statements of Operations. The presentation of gross profit is intended to supplement investors with an understanding of our operating performance. Gross profit is calculated as total revenue less commissions and direct transaction expenses. These expenses were previously included within "Operating expenses" and are now presented within "Cost of revenue" in the Condensed Consolidated Statements of Operations. The change in presentation was applied retrospectively to all periods presented in the Condensed Consolidated Statements of Operations and it had no effect on Operating income, Net loss or Loss per share. The Condensed Consolidated Balance Sheets, Condensed Consolidated Statements of Comprehensive Loss, Condensed Consolidated Statements of Stockholders' Deficit and Condensed Consolidated Statements of Cash Flows are not affected by this change in presentation.

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Recently Issued Accounting Standards and Related Developments Not Yet Adopted — In May 2021, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2021-04, Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options (a consensus of the FASB Emerging Issues Task Force). The ASU clarifies and reduces diversity in an issuer’s accounting for modifications or exchanges of freestanding equity-classified written call options, warrants for instance, that remain equity classified after modification or exchange. The ASU provides guidance that will clarify whether an issuer should account for a modification or an exchange of a freestanding equity-classified written call option that remains equity classified after modification or exchange as (1) an adjustment to equity and, if so, the related earnings per share effects, if any, or (2) an expense and, if so, the manner and pattern of recognition. The new guidance is effective for annual and interim periods beginning after December 15, 2021, and early adoption is permitted, including adoption in an interim period. The adoption of ASU 2021-04 is not expected to have a material impact on our condensed consolidated financial statements.

In August 2020, the FASB issued ASU 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity's Own Equity. This ASU changes how entities account for convertible instruments and contracts in an entity's own equity and simplifies the accounting for convertible instruments by removing certain separation models for convertible instruments. This ASU also modifies the guidance on diluted earnings per share calculations. The amendments are effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. We are currently evaluating the impact of this standard on our condensed consolidated financial statements.

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The amendments in this ASU provide, if certain criteria are met, optional expedients and exceptions for applying the U.S. GAAP requirements for contract modifications, hedging relationships and sales or transfers of debt securities that reference the London Interbank Offered Rate ("LIBOR") or another reference rate expected to be discontinued because of reference rate reform through December 31, 2022. The adoption of this ASU is optional and the election can be made anytime during the effective period. The amendments in this ASU are effective as of March 12, 2020 through December 31, 2022. MoneyGram is currently evaluating the impact of this standard and has not yet determined whether we will elect the optional expedients.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The new credit impairment standard changes the impairment model for most financial assets and certain other instruments. For trade and other receivables, held-to-maturity debt securities, loans and other instruments, entities will be required to use a new forward-looking expected loss model that generally will result in the earlier recognition of allowances for credit losses. For available-for-sale debt securities with unrealized losses, entities will measure credit losses in a manner similar to what they do today, except that the losses will be recognized as allowances rather than as reductions in the amortized cost of the securities. To further assist with adoption and implementation of ASU 2016-13, the FASB issued the following ASUs:

•ASU 2018-19 (Issued November 2018) — Codification Improvements to Topic 326, Financial Instruments - Credit Losses

•ASU 2019-04 (Issued April 2019) — Codification Improvements to Topic 326, Financial Instruments - Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments

•ASU 2019-05 (Issued May 2019) — Financial Instruments - Credit Losses (Topic 326): Targeted Transition Relief

•ASU 2019-10 (Issued November 2019) — Financial Instruments - Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842): Effective Dates

•ASU 2019-11 (Issued November 2019) — Codification Improvements to Topic 326, Financial Instruments - Credit Losses

•ASU 2020-02 (Issued February 2020) — Financial Instruments - Credit Losses (Topic 326) and Leases (Topic 842): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 119 and Update to SEC Section on Effective Date Related to Accounting Standards Update No. 2016-02, Leases (Topic 842) (SEC Update)

•ASU 2020-03 (Issued March 2020) — Codification Improvements to Financial Instruments

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ASU 2019-10 changed the effective date of ASU 2016-13 for public business entities that meet the definition of a U.S. Securities and Exchange Commission ("SEC") filer but that are eligible to be a smaller reporting company to fiscal years beginning after December 15, 2022. As of November 15, 2019, which is the determination date for ASU 2016-13, MoneyGram was a smaller reporting company and, as such, has elected to adopt the amendments in these standards in 2023. We are still evaluating these ASUs, but we do not believe the adoption will have a material impact on our condensed consolidated financial statements.

The Company has determined that there have been no other recently adopted or issued accounting standards that had, or will have, a material impact on its condensed consolidated financial statements.

Note 2 — Reorganization Costs

In the first quarter of 2021, the Company committed to an operational plan to reduce overall operating expenses, including the elimination of approximately 110 positions across the Company and certain actions to reduce other ongoing operating expenses, including real estate-related expenses (the “2021 Organizational Realignment”). The actions are designed to streamline operations and structure the Company in a way that will be more agile and aligned around its plan to execute digital and market-specific strategies. The initial total expected cost of the 2021 Organizational Realignment was approximately $9.7 million. In the third quarter of 2021, we revised the total expected cost of the 2021 Organizational Realignment to $9.0 million.The Company anticipates related cash expenditures to be substantially paid out by the first quarter of 2022. Costs consisted primarily of one-time termination benefits for employee severance and related costs, which are recorded in "Compensation and benefits" on the Condensed Consolidated Statements of Operations.

The following table is a roll-forward of the reorganization costs accrual as of September 30, 2021:

(Amounts in millions)						2021 Organizational Realignment
Balance at December 31, 2020						$	—
Expenses						8.3
Cash payments						(7.4)
Balance at September 30, 2021						$	0.9

The following table is a summary of the cumulative reorganization costs incurred to date in operating expenses and the estimated remaining reorganization costs to be incurred as of September 30, 2021:

(Amounts in millions)			2021 Organizational Realignment
Cumulative reorganization costs incurred to date in operating expenses			$	8.3
Estimated additional reorganization costs to be incurred			0.7
Total reorganization costs incurred and to be incurred			$	9.0

The following table is a summary of the total cumulative reorganization costs incurred to date in operating expenses:

(Amounts in millions)																		Total
Balance at December 31, 2020																		$	—
First quarter 2021																		5.9
Second quarter 2021																		2.1
Third quarter 2021																		0.3
Total cumulative reorganization costs incurred to date																		$	8.3

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Note 3 — Settlement Assets and Payment Service Obligations

The Company records payment service obligations relating to amounts payable under money transfers, money orders and consumer payment service arrangements. These obligations are recognized by the Company at the time the underlying transaction occurs. The Company records corresponding settlement assets, which represent funds received or to be received for unsettled money transfers, money orders and consumer payments.

The following table summarizes the amount of settlement assets and payment service obligations:

(Amounts in millions)						September 30, 2021						December 31, 2020
Settlement assets:
Settlement cash and cash equivalents						$	1,799.6					$	1,883.2
Receivables, net						810.7						825.0
Interest-bearing investments						992.6						991.2
Available-for-sale investments						3.1						3.5
Total settlement assets						$	3,606.0					$	3,702.9
Payment service obligations						$	(3,606.0)					$	(3,702.9)

Note 4 — Fair Value Measurement

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability, or the exit price, in an orderly transaction between market participants on the measurement date.

Assets and liabilities that are measured at fair value on a recurring basis:

•Available-for-sale investments — For residential mortgage-backed securities issued by U.S. government agencies, fair value measures are obtained from an independent pricing service. As market quotes are generally not readily available or accessible for these specific securities, the pricing service measures fair value through the use of pricing models utilizing reported market quotes adjusted for observable inputs, such as market prices for comparable securities, spreads, prepayment speeds, yield curves and delinquency rates. Accordingly, these securities are classified as Level 2 financial instruments.

For asset-backed and other securities, which include investments in limited partnerships, market quotes are generally not available. The Company utilizes broker quotes to measure market value, if available. Because the inputs and assumptions that brokers use to develop prices are unobservable, valuations that are based on brokers' quotes are classified as Level 3. Also, the Company uses pricing services that utilize pricing models based on market observable and unobservable data. The observable inputs include quotes for comparable securities, yield curves, default indices, interest rates, historical prepayment speeds and delinquency rates. These pricing models also apply an inactive market adjustment as a significant unobservable input. Accordingly, asset-backed and other securities valued using third-party pricing models are classified as Level 3.

•Derivative financial instruments — Derivatives consist of forward contracts to manage income statement exposure to non-U.S. dollar exchange risk arising from the Company's assets and liabilities denominated in non-U.S. dollar currencies. The Company's forward contracts are well-established products, allowing the use of standardized models with market-based inputs. These models do not contain a high level of subjectivity, and the inputs are readily observable. Accordingly, the Company has classified its forward contracts as Level 2 financial instruments. See Note 6 — Derivative Financial Instruments for additional disclosure on the Company's forward contracts.

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The following table summarizes the Company's financial assets and liabilities measured at fair value by hierarchy level on a recurring basis:

(Amounts in millions)												Level 2						Level 3						Total
September 30, 2021
Financial assets:
Available-for-sale investments:
Residential mortgage-backed securities												$	2.5					$	—					$	2.5
Asset-backed and other securities												—						0.6						0.6
Forward contracts												4.1						—						4.1
Total financial assets												$	6.6					$	0.6					$	7.2
Financial liabilities:
Forward contracts												$	0.8					$	—					$	0.8
December 31, 2020
Financial assets:
Available-for-sale investments:
Residential mortgage-backed securities												$	3.0					$	—					$	3.0
Asset-backed and other securities												—						0.5						0.5
Forward contracts												0.1						—						0.1
Total financial assets												$	3.1					$	0.5					$	3.6
Financial liabilities:
Forward contracts												$	2.2					$	—					$	2.2

Assets and liabilities that are disclosed at fair value — Debt and interest-bearing investments are carried at amortized cost; however, the Company estimates the fair value of debt for disclosure purposes. The fair values of the Term Loan, Senior Secured Notes and First Lien Credit Facility are estimated using an observable market quotation (Level 2). The fair value of the second lien credit facility is estimated using unobservable market inputs (Level 3), including broker quotes for comparable traded securities and yield curves.

The following table provides the carrying value and fair value for the credit facilities and the senior secured notes:

(Amounts in millions)						September 30, 2021												December 31, 2020
						Carrying value						Fair value						Carrying value						Fair value
Term Loan						$	400.0					$	400.0					$	—					$	—
Senior Secured Notes						$	415.0					$	419.2					$	—					$	—
First Lien Credit Facility						$	—					$	—					$	635.3					$	635.3
Second Lien Credit Facility						$	—					$	—					$	254.6					$	254.3

The carrying amounts for the Company's cash and cash equivalents, settlement cash and cash equivalents, receivables, interest-bearing investments and payment service obligations approximate fair value as of September 30, 2021 and December 31, 2020.

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Note 5 — Investment Portfolio

The following table shows the components of the investment portfolio:

(Amounts in millions)						September 30, 2021						December 31, 2020
Cash						$	1,952.2					$	2,076.8
Money market securities						—						2.5
Cash and cash equivalents (1)						1,952.2						2,079.3
Interest-bearing investments						992.6						991.2
Available-for-sale investments						3.1						3.5
Total investment portfolio						$	2,947.9					$	3,074.0

(1) For purposes of the disclosure of the investment portfolio as a whole, the cash and cash equivalents balance includes settlement cash and cash equivalents.

The following table is a summary of the amortized cost and fair value of available-for-sale investments:

(Amounts in millions)						Amortized Cost						Gross Unrealized Gains						Gross Unrealized Losses						Fair Value
September 30, 2021
Residential mortgage-backed securities						$	2.2					$	0.3					$	—					$	2.5
Asset-backed and other securities						—						0.6						—						0.6
Total						$	2.2					$	0.9					$	—					$	3.1
December 31, 2020
Residential mortgage-backed securities						$	2.6					$	0.4					$	—					$	3.0
Asset-backed and other securities						0.2						0.5						(0.2)						0.5
Total						$	2.8					$	0.9					$	(0.2)					$	3.5

As of September 30, 2021 and December 31, 2020, 81% and 86%, respectively, of the fair value of the available-for-sale portfolio were invested in residential mortgage-backed securities issued by U.S. government agencies. These securities have the implicit backing of the U.S. government, and the Company expects to receive full par value upon maturity or pay-down, as well as all interest payments.

Gains and Losses — For the three and nine months ended September 30, 2021 and 2020, the Company had no realized gains or losses.

Contractual Maturities — Actual maturities may differ from contractual maturities as borrowers may have the right to call or prepay obligations, sometimes without call or prepayment penalties. Maturities of residential mortgage-backed and asset-backed and other securities depend on the repayment characteristics and experience of the underlying obligations. 

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Note 6 — Derivative Financial Instruments

The Company uses forward contracts to manage its non-U.S. dollar needs and non-U.S. dollar exchange risk arising from its assets and liabilities denominated in non-U.S. dollars. While these contracts may mitigate certain non-U.S. dollar risk, they are not designated as hedges for accounting purposes and will result in gains and losses in the Condensed Consolidated Statements of Operations. The Company also reports gains and losses from the spread differential between the rate set for its transactions and the actual cost of currency at the time the Company buys or sells in the open market.

The following net gains (losses) related to assets and liabilities denominated in non-U.S. dollar are included in "Transaction and operations support" in the Condensed Consolidated Statements of Operations and in the "Net cash (used in) provided by operating activities" line in the Condensed Consolidated Statements of Cash Flows:

						Three Months Ended September 30,												Nine Months Ended September 30,
(Amounts in millions)						2021						2020						2021						2020
Net realized non-U.S. dollar (loss) gain						$	(7.0)					$	12.0					$	(13.3)					$	15.2
Net gain (loss) from the related forward contracts						6.0						(5.5)						11.4						(3.8)
Net (loss) gain from non-U.S. dollar transactions and related forward contracts						$	(1.0)					$	6.5					$	(1.9)					$	11.4

As of September 30, 2021 and December 31, 2020, the Company had $631.4 million and $643.8 million, respectively, of outstanding notional amounts relating to its non-U.S. dollar forward contracts.

As of September 30, 2021 and December 31, 2020, the Company reflects the following fair values of derivative forward contract instruments in its Condensed Consolidated Balance Sheets: 

												Gross Amount of Recognized Assets												Gross Amount of Offset												Net Amount of Assets Presented in the Condensed Consolidated Balance Sheets
(Amounts in millions)						Balance Sheet Location						September 30, 2021						December 31, 2020						September 30, 2021						December 31, 2020						September 30, 2021						December 31, 2020
Forward contracts						"Other assets"						$	5.5					$	1.0					$	(1.4)					$	(0.9)					$	4.1					$	0.1

												Gross Amount of Recognized Liabilities												Gross Amount of Offset												Net Amount of Liabilities Presented in the Condensed Consolidated Balance Sheets
(Amounts in millions)						Balance Sheet Location						September 30, 2021						December 31, 2020						September 30, 2021						December 31, 2020						September 30, 2021						December 31, 2020
Forward contracts						"Accounts payable and other liabilities"						$	2.2					$	3.1					$	(1.4)					$	(0.9)					$	0.8					$	2.2

The Company's forward contracts are primarily executed with counterparties governed by International Swaps and Derivatives Association agreements that generally include standard netting arrangements. Asset and liability positions from forward contracts and all other non-U.S. dollar exchange transactions with the same counterparty are net settled upon maturity.

The Company is exposed to credit loss in the event of non-performance by counterparties to its derivative contracts. The Company actively monitors its exposure to credit risk through the use of credit approvals and credit limits and by selecting major international banks and financial institutions as counterparties. Collateral generally is not required of the counterparties or of the Company. In the unlikely event the counterparty fails to meet the contractual terms of the derivative contract, the Company's risk is limited to the fair value of the instrument. The Company has not had any historical instances of non-performance by any counterparties, nor does it anticipate any future instances of non-performance.

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Note 7 — Debt

The following is a summary of the Company's outstanding debt:

(Amounts in millions, except percentages)						September 30, 2021						December 31, 2020
5.00% Term Loan due 2026						$	400.0					$	—
5.38% Senior Secured Notes due 2026						415.0						—
7.00% First Lien Credit Facility due 2023						—						635.3
13.00% Second Lien Credit Facility due 2024						—						254.6
Total debt at face value						815.0						889.9
Unamortized debt issuance costs and debt discounts						(13.1)						(32.1)
Total debt, net						$	801.9					$	857.8

Indenture and New Credit Agreement — On July 21, 2021, the Company entered into a new credit agreement (the “New Credit Agreement”) with the lenders from time to time party thereto, and Bank of America, N.A., as administrative agent, and completed its previously announced private offering of $415.0 million aggregate principal amount of 5.375% senior secured notes due 2026 (the “Senior Secured Notes” or "Notes" and such offering, the "Notes Offering") and related guarantees. The New Credit Agreement provides for (i) a senior secured five-year term loan in an aggregate principal amount of $400.0 million (the “Term Loan”) and (ii) a senior secured four-year revolving credit facility that may be used for revolving credit loans, swingline loans and letters of credit up to an initial aggregate principal amount of $32.5 million (the “Revolving Credit Facility” and, together with the Term Loan, the “New Credit Facilities”).

As of September 30, 2021, the Company had no borrowings and no outstanding letters of credit under its Revolving Credit Facility.

The New Credit Facilities were secured by substantially all of the Company's assets and its material domestic subsidiaries that guarantee the payment and performance of the Company's obligations under the Credit Facilities.

Prepayment — On June 28, 2021, the Company prepaid $100.0 million of principal balance under its Second Lien Credit Agreement utilizing the proceeds under the ATM Program plus cash on hand as defined and further discussed in Note 9 — Stockholders' Deficit. On July 21, 2021, the proceeds from the notes offering, together with borrowings under the Term Loan, were used to prepay the full amount of outstanding indebtedness under the Existing Credit Facilities and to pay related accrued interest, fees and expenses. Simultaneous with the prepayment, the Existing Credit Facilities, as defined below, were terminated.

During the nine months ended September 30, 2021, the Company recorded a loss on early extinguishment of debt of $43.9 million which included $16.5 million of prepayment call premium and $27.4 million associated with the write-off of debt issuance costs and debt discounts. The Company also paid accrued interest of $7.0 million.

First Lien Credit Agreement and Revolving Credit Facility — The Company's prior First Lien Credit Agreement, which was in effect during the first half of 2021, provided for (a) a senior secured three-year revolving credit facility available for revolving credit loans, swingline loans and letters of credit up to an aggregate principal amount of $32.5 million, and was scheduled to mature on September 30, 2022 (the "First Lien Revolving Credit Facility") and (b) a senior secured four-year term loan facility in an aggregate principal amount of $645.0 million (the "First Lien Term Credit Facility" and together with the First Lien Revolving Credit Facility, the "First Lien Credit Facility").

Second Lien Credit Agreeme