MGI

Moneygram International, Inc. (MGI)

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MoneyGram International, Inc (MGI)

Credit Suisse Global Services Conference Call

March 11, 2013 11:30 PM ET

Executives

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

Analysts

Georgios Mihalos - Credit Suisse

Presentation

Georgios Mihalos - Credit Suisse

Okay great, so I think we are ready to begin. My name is George Mihalos, I cover Services stocks here at Credit Suisse. Want to welcome you all to the 15th Annual Credit Suisse Services Conference. Thank you for being here, and we are going to kick off today's event on the processor side with MoneyGram. I have with me, CFO, Alex Holmes. Alex, thank you for being here.

W. Alexander Holmes

Absolutely.

Georgios Mihalos - Credit Suisse

So, I wanted to start off with the growth profile for MoneyGram. Clearly, your money transfer growth is outpacing the overall industry, somewhere 13% to 14%. Maybe kind of talk about, walk us through some of the factors that are driving that outsized growth, relative to the competition in the industry?

W. Alexander Holmes

Sure, absolutely. Thank you and thank you all for being here, the early morning slot as always, an entertaining one. So, certainly happy to do it. I think you know, if you look back at MoneyGram, we are a very different company today than we were 3.5, four years ago. We are focused, basically, 100% on growing the global money transfer business, and supporting that with some ancillary products in terms of bill pay, money orders and these sorts of things.

As you look at our growth profile, we have been focused on double digit transaction growth, double digit revenue growth and double digit location growth, and I think we have been able to achieve those for the past couple of years. A lot of it has to do I think, number one, with kind of our refocus on the brand, investments in brand that we have been making over the past couple of years, really reinvigorating signage, marketing campaigns, refreshing the brand, focusing on consumer outreach. And then the second thing I think has been a little bit of our approach to the market, we have been going to the market with a very open attitude, a very, I would say friendly approach to what I would argue some people might call coopetition in terms of partnerships in the market, not being afraid to do things different and approaching the market with a very open attitude towards, and I think it has been paying back tremendously well.

Georgios Mihalos - Credit Suisse

How big of a factor has the shift in some quarters to non-exclusivity been for MoneyGram, and how do you think about that going forward? Is that going to continue to be a driver, or has that pretty much played out?

W. Alexander Holmes

No, I think -- you know, listen, I mean, I think if you look at the money transfer business today, or actually maybe more importantly, if you look at the state of the market from a remittance factor. In World Bank, something we track very carefully, estimates said over $550 billion were moved last year. An interesting corollary statistic is that, official estimates are that there was about $114 billion in aid moved to developing countries in 2012. Remittances from expatriate workers alone in 2012 exceeded $406 billion. So, I think when you step back and take a look at the market dynamics that are helping drive some of the growth and sort of the systemic movement around the world of money, I think it leads a lot to that direction, and to kind of how things are playing out a little bit, as you look at growth and development statistics.

And I think, even if economies have slowed and people have -- governments and others have slowed that funding, actually the remittance business has been accelerating since 2009, much I think has led to a lot of that tieback. Specific to your question, you know, I think it's a little bit of everything.

Georgios Mihalos - Credit Suisse

Got you, that's helpful. Maybe, just kind of moving on to pricing, which is one of the focal areas for the industry. Obviously, your largest competitor made some news a couple of months ago, passing through some higher price adjustments for 2013. I think you guys on your last earnings call mentioned you are observing the environment, you want to see what happens with your volumes, and then you will make a decision whether or not you will somewhat match the lower pricing. Any update you can provide to us there, how does it look?

W. Alexander Holmes

Yeah, I mean, first of all, I think you know, our approach to pricing has been one of extreme focus on revenue. I mean, obviously we want to generate transaction growth; but there certainly has to be revenue and profitability associated with their growth. I think there is a bit of a misnomer that, at least one of our competitors like to say they make investments in pricing. I don't really understand how that can be viewed as an investment per se, as much as it's reduction in price to remain competitive.

So I think from where we have been, we took an approach to the market many years ago. Probably back as far as '03, '04, that we were going to be kind of the value player in the market, and that lined up pretty well at the time, with a new super large agent of ours at the time, which was Walmart, and I think it sort of played through kind of the focus of the company over the past five years, just in terms of paying a little bit higher commission to the agent, little bit lower fee to the consumer, finding our niche in there, finding agents who are able to play through, and take a chance with MoneyGram many years ago, and I think it has played out to today's performance.

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