MGI

Moneygram International, Inc. (MGI)

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Moneygram International Inc (MGI)

Goldman Sachs Technology & Internet Conference Call

February 13, 2013 17:40 ET

Executives

Pam Patsley - Chairman and Chief Executive Officer

W. Alexander Holmes - Executive Vice President and Chief Financial Officer

Presentation

Unidentified Analyst

Here we’re going to go in here on the IT services track. My name is (indiscernible). I am the analyst responsible for the IT services coverage. Joining us this afternoon we have Pam from MoneyGram and Alex as well, these guys run the operations, they basically are running the whole business over there. So, thank you guys for joining us today. Maybe just by way of level setting and thinking about all the different companies that we’ve seen today, just give us a little bit of background on MoneyGram, talk about kind of your core operating and then jump into some of the questions here.

Pam Patsley - Chairman and Chief Executive Officer

Sure. It’s nice to be here and thanks for the opportunity whoever is here. So MoneyGram is the second largest global provider of remittance services or money transfer services that’s the lion’s share of our business that’s really the growth engine, we also offer urgent bill pay solution here in the U.S. and in Canada and then we have in the U.S. our second reporting segment is FPP or Financial Paper Products and that’s official check for banks and money orders across the U.S. The industry we participate in a very attractive and exciting industry, the industry has been growing mid single digits and MoneyGram fortunately is growing double-digits and generally around double the industry growth. The industry is measured by the World Bank.

We think about our money transfer business in three primary categories, U.S.-to-U.S., U.S. outbound and then sends that originated outside the U.S. that could be Russia, Saudi, UK, Australia, I think you get the point. So our fastest growing of those categories is sends originated outside the U.S., for the fourth quarter those grew 18% in transactions and that has the highest RPT for us so that’s also kind of if you will double exciting and that the fastest growing category also has the highest RPT.

U.S.-to-U.S. is the lowest RPT and the flowage growing category and so U.S. outbound sits right in between and that had 15% growth for the fourth quarter and embedded in that included 24% growth U.S.-to-Mexico which beyond or the second to U.S.-to-U.S., U.S.-to-Mexico is our second largest category. So coming back to just kind of the big same points exciting and growing industry, we are growing much faster than the industry, we continue to invest in the products and services we’d like to say anyway a consumer wants to send money to anyway a consumer wants to receive money that’s the solution we’d like to have. We are in 197 countries, our network grew 16% last year, we ended the year at right at 310,000 locations around the world, a very powerful brand, very recognized among a growing population in the world which is that on and under bank.

And from a balance sheet or capital perspective lots of positive upside there in that, in third week of March we will reach the first call date on our 13.25% subordinated notes issued by that fabulous company Goldman Sachs that we are looking forward to get rid of and paying something more like 6% or under which will yield about $20 million in annual interest cost savings. It makes, how is that for some more thumbnails.

Unidentified Analyst

That’s good to know that, that’s good, that’s good. I mean I think one other thing is that, that would be helpful and you touched on it a little bit in terms of addressable market, the growth rate and maybe just total growth size I think relative to your biggest competitor your own market share just to kind of provide some perspective and this is a pretty large market result so kind of…

Pam Patsley - Chairman and Chief Executive Officer

Yep, you are right, so I looked out so as the second largest provider we have a 5% market share than the largest money transfer company has 17% market share. So, when you have number one, number two still under a quarter lots of white space, lots for both of us to grow in different quarters around the world, our businesses generally 16,000 or plus quarters when you think of all the different send and receive combinations around the world. I should also callout because you’re probably going to go there sometimes soon in your questions that within our business 5% of our money transfer revenue business is derived from what we call our self-service channels and we are really excited about that thinking about anyway a consumer wants to send money. So this is our Dotcom or our MoneyGram Online business that’s the single largest part of our self-service business.

For the fourth quarter that grew 58% in transactions and 23% in revenue growth. So if you are kind of enamored with some of the current talk and those that play in the Dotcom money transfer space maybe you could kind of turn our business a little on and have and think of us as a 50ish million dollar Dotcom business that’s going to bring with it about $1.3 billion free cash flow, positive bottom-line business and growing double-digit.

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