MoneyGram International Inc.
) reported third-quarter 2012 earnings per share of 28 cents, a
penny higher than the Zacks Consensus Estimate. However, the
reported earnings soared from year-ago quarter's earnings of 3
cents a share.
Operating net income in the reported quarter excluded negative
impacts of certain accruals and legal expenses of $72.2 million
or $1.00 per share, restructuring and reorganization costs of
$3.9 million or 3 cents per share and stock-based compensation of
$2.4 million or 2 cents a share.
Including these expenses, reported net loss available to
common shareholders surged to $54.8 million or 77 cents per share
against a net income of $15.8 million or 22 cents per share in
the year-ago quarter.
Higher money transfer transaction volumes and higher fee and
other revenue drove the top line, while lower interest expenses
helped the bottom line. However, lower investment income along
with higher operating, commissions and tax expenses deteriorated
the margins and cash flow.
Total operating expenses escalated 29.9% year over year to
$365.9 million, whereas total commission expense climbed 8.1%
year over year to $152.5 million. Subsequently, operating loss
widened to $27.4 million from an income of $40.3 million in the
year-ago quarter. However, interest expense decreased by 20.3%
from the prior year to $17.7 million as a result of continued
delevering activities and the refinancing initiated in May
MoneyGram's total revenue for the quarter was $338.6 million,
up 5.2% from the year-ago period but lagged the Zacks Consensus
Estimate of $343 million. While fee and other revenue increased
5.5% year over year to $335.6 million, investment revenue plunged
25.6% to $2.9 million. MoneyGram has been gaining traction with
the raised momentum in self-service and new channel revenue that
jumped 40% during the reported quarter and represented 5% of
money transfer revenue.
Global Funds Transfer
segment, MoneyGram's revenue climbed 6.4% year over year to
$317.9 million. Money transfer transaction volume increased 13%,
while money transfer fee and other revenue grew 8%year over year
to $291.3 million and 11% on a constant currency basis,
showcasing double-digit growth for the sixth consecutive
Further, global agent locations increased 15% over the
prior-year quarter to 293,000, primarily driven by growth in
India, Africa and Mexico. Bill payment transaction volume dipped
4% year over year, whereas, fee and other revenue declined 7% to
$26.4 million from the prior-year quarter.
However, excluding the effect of divestiture in the fourth
quarter of 2011, bill payment transaction volumes improved by 5%
year over year, while fee and other revenue decreased
As a result, operating margin deteriorated to 12.4% from 13.1%
in the year-ago quarter, while adjusted operating margin also
dipped to 14.2% from 16.4% in the year-ago quarter.
Total money transfer transactions originating outside the U.S.
escalated 18% from the prior-year quarter. Transaction volume to
Mexico increased 19% year over year, significantly improving for
the eleventh-consecutive quarter. Additionally, MoneyGram's
transactions originating in the U.S. increased 9% year over year,
while U.S. outbound transaction growth increased 13% over the
Financial Paper Products
segment, MoneyGram's total revenue declined 9.8% year over year
to $20.3 million, reflecting reduced investment, money order and
official check revenues. Conversely, operating margin improved to
37.3% from 24.6% in the year-ago quarter, although commission
expenses remained high. As well, adjusted operating margin
escalated to 39.7% from 30.5% in the year-ago quarter.
As of September 30, 2012, MoneyGram had cash and cash
equivalents of $2.54 billion (down from $2.57 billion at
2011-end), net receivables of $1.33 billion (up from $1.22
billion) and available-for-sale investments of $79.9 million
(down from $102.8 million).
The company ended the reported quarter with $810.1 million of
outstanding debt (marginally down from $814.6 million at
2011-end), and assets in excess of payment service obligations of
$266.1 million (up from $211.7 million). Free cash flow slipped
to $24.6 million from $36.4 million in the year-ago quarter,
primarily driven by higher signing bonuses and capital
expenditures that were partly offset by lower interest
Management reiterated its 2012 guidance and expects total
revenue to grow 7-9%, while adjusted EBITDA growth is forecasted
in the band of 9-11%. Including the impact of declining euro
against the U.S. dollar, reported EBITDA is projected within
7-9%. This is consistent with the company's long-term goals.
Total marketing spend is anticipated to be about 4.5% of total
Last week, MoneyGram's peer
Western Union Co.
) reported third quarter operating earnings of 45 cents per
share, in line with the Zacks Consensus Estimate. Earnings
compared favorably with 40 cents reported in the year-ago
quarter. While consumer-to-consumer revenue segment declined due
to weak economic conditions in Southern Europe and the US, all
other business segment witnessed noticeable growth
MoneyGram carries a Zacks #3 Rank, which translates into a
Hold rating over the short term. Additionally, we maintain a
Neutral recommendation over the long term.
MONEYGRAM INTL (MGI): Free Stock Analysis
WESTERN UNION (WU): Free Stock Analysis
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