MGI

Moneygram International, Inc. (MGI)

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MoneyGram International, Inc. (MGI)

Q1 2013 Earnings Call

May, 02, 2013, 09:00 am ET

Executives

Eric Dutcher - VP, Investor Relations

Pam Patsley - Chairman & CEO

Alex Holmes - EVP & CFO

Analysts

Bob Napoli – William Blair

George Mihalos - Credit Suisse

Mike Grondahl - Piper Jaffray

David Scharf - JMP Securities

Kevin McVeigh - Macquarie

Glenn Fodor - Autonomous Research

Wayne Johnson - Raymond James

Presentation

Operator

Good morning, and welcome to the MoneyGram International First Quarter 2013 Earnings Release Conference Call. Today’s conference is being recorded. At this time, all participants have been placed in a listen-only mode and the floor will be opened for your questions following the presentation.

It is now my pleasure to turn the floor over to your host, Eric Dutcher, Vice President of Investor Relations. Please go ahead, sir.

Eric Dutcher

Thank you. Good morning, everyone, and welcome to our first quarter fiscal year 2013 earnings call. With me today are Pam Patsley, Chairman and Chief Executive Officer and Alex Holmes, Executive Vice President and Chief Financial Officer. Our earnings release and accompanying slides are on our website at moneygram.com.

I must remind you today that today’s call is being recorded and that the various remarks we make about future expectations, plans and prospects constitute forward-looking statements for the purpose of the Safe Harbor provision under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from expectations, plans and prospects contemplated in any forward-looking statements as a result of various factors, including those discussed in our filings with the SEC. I encourage everyone on this call to read our SEC filings, including our 10-K for the year ended December, 31, 2012, and our soon to be filed 10-Q for the quarter.

Please note that today’s remarks include certain non-GAAP financial measures, including EBITDA, adjusted EBITDA, adjusted EBITDA margin, free cash flow and constant currency. Our earnings release includes a full reconciliation of these non-GAAP financial measures to the related GAAP financial measures.

Before I turn the call over to Pam I would like to inform everyone of the upcoming Investor Conferences that we will attend in May. We will be at the JMP Securities Conference in San Francisco on May 13th. The JPMorgan TMT Conference in Boston on May 14th. The Macquarie Extreme Services Conference in New York on May 15th and the Bank of America-Merrill Lynch Services Conference in New York on May 21st. The presentations will be available via webcast for these events on our website at moneygram.com.

Now I'll turn the call over to Pam.

Pam Patsley

Thanks, Eric. Good morning, everyone. We are very proud that we achieved our 10th consecutive quarter of double digit money transfer transaction growth and our 8th consecutive quarter of double digit constant currency revenue growth. I am also pleased to announce that our global agent locations increased to 321,000, a 17% increase over the prior year. Over the last 12 months, we've added more than 45,000 locations and MoneyGram services now are available in 198 countries and territories with our addition of Liechtenstein this past quarter. We are executing well on our strategy and our results reflect that.

We will discuss our success in growing the business in a few minutes. I first want to update you on several key initiatives. During the quarter, we successfully purchased and retired all $325 million of our 13.25% Goldman Sachs second lien notes. We also repaid our $488 million of first lien notes at par. We now have a new $850 million seven-year covenant light note along with an undrawn $125 million revolving credit facility. This action generates annual cash interest savings of $28 million. I can’t over emphasize how pleased we all are at this result and finally ridding MoneyGram of its high cost debt.

Also in the first quarter, our compliance monitor was selected. Aaron Marcu is the litigation partner with Freshfields Bruckhaus Deringer LLP in New York and head’s their Global Financial Institutions Litigation Group. Aaron Marcu was among the original list of potential monitors that we submitted to the government. We’ve held our first set of meetings with Aaron and his team. We're pleased to get this relationship started.

Recently, we announced we will join the world’s most innovative companies by listing on the NASDAQ effective May, 13th. NASDAQ is a global leader in advanced trading technologies providing our shareholders with cost efficient trading opportunities and improved services to the company. We are focused on tight expense management and to that end we will benefit from reduced listing fees, marketing incentives and corporate service fee savings. We are excited to be part of the NASDAQ and on May 22nd, we will celebrate the news by leading the Opening Bell ceremony.

Finally, a few comments on pricing, which has certainly been a hot industry topic. As you all know, our largest competitor had deeply discounted prices in the U.S. to Latin America and the Caribbean, France to Africa, transfers to and from certain countries in Southeast Asia and in various online quarters. As mentioned last quarter, we changed prices at Wal-Mart U.S. in late November to match the competitor cuts. Broadly speaking, we have performed very well and are keeping with our strategy of responding in a smart and measured manner.

Our goal is to maximize revenue while continuing to gain market share, while we did feel some impact from these price cuts in various quarters around the world, in total the effect had a relatively minor impact on our overall business. As a result, during the quarter, we made no other pricing changes that were in response to this competitor. Separately, we continued an initiative we began late last year by making price adjustments on quarters and bands where we repriced at two grade discount to the market.

As a result, we were generally able to mitigate the impact of the competitive price action. We estimate that the net impact of our matched pricing at Wal-Mart and lower volumes in affected quarters was about one point to revenue growth. Considering the breadth of the changes we are very pleased with our constant currency money transfer revenue growth of 10% which more importantly was very tied to our transaction growth of 11%.

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