MoneyGram Reports Money transfer revenue growth of 5% led by 10% transaction growth year-over-year

MoneyGram International, Inc. today reported financial results for its third quarter ended September 30, 2020.

Third Quarter 2020 Business Highlights

“The amazing performance of our digital business drove yet another impressive quarter as the Company continues to build upon its financial growth trajectory,” said Alex Holmes, MoneyGram Chairman and CEO. “Our customer-centric strategy and growing active customer base helped deliver year-over-year money transfer revenue growth for the quarter, while the strength of our Adjusted EBITDA and cash flow demonstrates how our investments to build a scalable infrastructure are paying off. It’s exciting to see the successful execution of our digital transformation be a catalyst for sustainable and profitable growth.”

• Digital Performance in the quarter was led by MoneyGram’s online direct-to-consumer channel (MGO):
  • MGO delivered 111% year-over-year transaction growth and 114% revenue growth driven by strong consumer demand for the MoneyGram app, high customer retention rates, and increased productivity rates
  • Cross-border online transactions and revenue grew an impressive 176% and 174%, respectively, year-over-year for the third quarter
  • MGO, the Company’s largest generator of money transfer transactions, now has 3 of its individual country sites on the Company’s top 10 list of money transfer transaction generating sources
• Total digital, which includes MGO, had year-over-year transaction growth of 106% in the third quarter
  • Digital revenue accelerated from the second quarter to $53.2 million representing a 95% year-over-year revenue growth rate for the third quarter
  • Digital partnerships delivered transaction growth of 79% in the third quarter
  • Account deposit and mobile wallet transactions increased 157% in the third quarter
• Digital transactions accounted for 27% of all money transfer transactions in the third quarter
• The Company remains focused on executing its long-term strategy while managing through the crisis. During the quarter, the Company achieved a number of important milestones:
  • Expanded global account deposit and wallet presence while enhancing the speed of delivery and customer experience
  • Launched new partnerships with telecom and fintech providers in Africa, one of the fastest-growing markets for mobile money transactions
  • Solidified key existing relationships including a three-year renewal with Walmart

Third Quarter 2020 Financial Results, Year-Over-Year

• Total revenue was $323.2 million, representing a slight increase on a reported basis or -1% on a constant currency basis
  • Money transfer revenue was $297.6 million, up 5%, or 4% on a constant currency basis, driven by the strength of our digital business
  • Investment revenue was $3.0 million for the quarter representing a decline of $10.4 million due to lower prevailing interest rates
• Total operating expenses of $286.6 million, improved $19.2 million or 6%
  • Transaction and Operations Support expenses decreased $31.5 million or 56% which included:
    • Agile management of expenses through the pandemic as the Company continues to benefit from its Digital Transformation
    • $8.9 million net benefits from Ripple market development fees of $9.3 million, partially offset by related transaction and trading expenses of $0.4 million
    • The Company recorded $6.3 million in foreign exchange gains primarily related to currency movements during the pandemic

• MoneyGram’s operating Income was $36.6 million, an increase of 123% year-over-year
  • Operating Income margin expanded from 5.1% to 11.3% year-over-year
• Net Income was $10.9 million for the quarter representing a return to positive net income for the Company and an increase of $18.6 million
• Diluted earnings per share were $0.12 and diluted adjusted earnings per share was $0.16
• Adjusted EBITDA increased 33% to $68.8 million, or 29% on a constant currency basis
  • Adjusted EBITDA margin improved 530 basis points to 21%
• Adjusted Free Cash Flow was $25.4 million, an increase of 173%

Holmes concluded: “Amidst the ongoing global pandemic we have been able to consistently deliver strong results. The focused execution of our strategy and agile management of the business will continue to enable the Company to successfully navigate this uncertain environment.”

Balance Sheet Highlights

Cash and cash equivalents on hand at quarter-end was $162.9 million compared to $130.6 million at the end of the second quarter of 2020. Third-quarter interest expense was $23.0 million and capital expenditures were $10.7 million.

Fourth Quarter 2020 Outlook Update

While the strength of the Company’s digital business is driving improved performance, the global pandemic continues to create economic uncertainty throughout the world. Most countries continue to maintain restrictions on travel and over the last few days, several major countries have reinstituted lockdowns.  Given how recent these new restrictions are, it’s difficult to predict their duration and the resulting impact on our business.

However, assuming the global economic environment was to remain consistent with the third quarter the Company is providing the following outlook:

For the fourth quarter, MoneyGram anticipates reporting total revenue growth of approximately one percent on the continued strength of the money transfer business, offset by lower investment income.  Based on these revenue trends coupled with the continued expense benefit from its Digital Transformation, the Company anticipates reporting Adjusted EBITDA growth of approximately 10 percent.