MoneyGram International Inc.
) reported fourth-quarter 2012 earnings per share of 27 cents, a
penny higher than the Zacks Consensus Estimate. However, the
reported earnings soared from the year-ago quarter's earnings of
4 cents a share.
Operating net income in the reported quarter excluded negative
impacts of certain accruals and legal expenses of 3 cents per
share, restructuring and reorganization costs of 4 cents per
share and stock-based compensation of 1 cent a share. These were
partially offset by gains on the sales of previously written down
securities of 9 cents a share.
Including these adjustments, reported net income surged to
$20.2 million or 28 cents per share against $3.1 million or 4
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 and free cash flow. However, lower
investment income along with higher operating and commission
expenses deteriorated the margins.
Total operating expenses climbed 9.8% year over year to $313.7
million, whereas total commission expense increased 11.5% year
over year to $158.3 million. Subsequently, operating income
increased to $40.7 million from $36.2 million in the year-ago
quarter. However, interest expense decreased by 13.2% from the
prior year to $17.7 million.
MoneyGram's total revenue for the quarter was $354.4 million,
up 10.1% from the year-ago period. However, it lagged the Zacks
Consensus Estimate of $346 million. While fee and other revenue
increased 10.2% year over year to $351.3 million, investment
revenue stood at $3.1 million, at par with the year-ago
Global Funds Transfer
segment, MoneyGram's revenue grew 10.9% year over year to $332.9
million. Money transfer transaction volume increased 14%, while
money transfer fee and other revenue grew 12.3% year over year to
$306.9 million and 13% on a constant currency basis, showcasing
double-digit growth for the 7
Further, global agent locations increased 16% over the
prior-year quarter to 310,000, primarily driven by growth in
Russia, Africa and Portugal, among others. Bill payment
transaction volume improved 1% year over year, whereas, fee and
other revenue declined 3% to $26.0 million from the prior-year
However, excluding the effect of divestiture in the fourth
quarter of 2011, bill payment transaction volumes improved by 3%
year over year, while fee and other revenue decreased 2%. As a
result, operating margin improved to 11.5% from 11.1% in the
year-ago quarter, while adjusted operating margin dipped to 13.6%
from 14.0% 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 24% year over year, significantly improving for
consecutive quarter. Additionally, MoneyGram's transactions
originating in the U.S. increased 9% year over year, while U.S.
outbound transaction growth increased 15% over the prior-year
Financial Paper Products
segment, MoneyGram's total revenue edged down 1.4% year over year
to $21.0 million, reflecting reduced fee and other revenue.
Conversely, operating margin improved to 38.6% from 27.7% in the
year-ago quarter, as commission expenses remained flat.
Additionally, adjusted operating margin escalated to 40.5% from
33.3% in the year-ago quarter.
Highlights of Full-Year 2012
For full-year 2012, MoneyGram reported operating earnings of
$1.05 per share against a loss of $1.51 per share in 2011, also
beating the Zacks Consensus Estimate of 99 cents a share.
Operating earnings in 2012 excluded negative impacts of certain
accruals and legal expenses of $1.58 per share, restructuring and
reorganization costs of 17 cents per share and stock-based
compensation of 8 cents a share. These were partially offset by
gains on the sales of previously written down securities of 9
cents a share.
Including these adjustments, reported net loss surged to $49.3
million or 69 cents per share as against income of $59.4 million
or $1.22 per share in 2011, which was based on low share count.
Total operating expenses jumped 16.6% year over year to $1.10
billion, whereas total commission expense escalated 9.4% year
over year to $599.5 million.
Total revenue increased 7.5% to $1.34 billion in 2012, and was
almost in line with the Zacks Consensus Estimate. MoneyGram has
been gaining traction with the raised momentum in self-service
and new channel revenue that jumped 50% in 2012 and represented
5% of money transfer revenue.
As of Dec 31, 2012, MoneyGram had cash and cash equivalents of
$2.68 billion (up from $2.57 billion at 2011-end), net
receivables of $1.21 billion (down from $1.22 billion) and
available-for-sale investments of $63.5 million (down from $102.8
The company exited 2012 with $809.9 million of outstanding
debt (marginally down from $810.9 million at 2011-end), and
assets in excess of payment service obligations of $227.9 million
(up from $211.7 million).
Free cash flow increased 16% to $23.4 million from $36.4
million in the year-ago quarter, while it grew 9% over 2011 to
$115.0 million in 2012. The upside was primarily driven by strong
money transfer results and lower interest payments, partially
offset by higher capital expenditures and signing bonuses.
Management provided 2013 guidance and expects total revenue to
grow 6%-9%, on constant currency basis, while adjusted EBITDA
growth is forecasted in the band of 3%-6%. Meanwhile, MoneyGram
aims to continue achieving double-digit growth in money transfer
transactions and increasing free cash flow.
MoneyGram carries a Zacks Rank #3 (Hold). Other strong
performers in the financial sector include
Selective Insurance Group Inc.
HCC Insurance Holdings Inc.
), all of which carry a Zacks Rank #1 (Strong Buy).
HCC INS HLDGS (HCC): Free Stock Analysis
MOODYS CORP (MCO): Free Stock Analysis Report
MONEYGRAM INTL (MGI): Free Stock Analysis
SELECT INS GRP (SIGI): Free Stock Analysis
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