MoneyGram International, Inc. Q4 2009 Earnings Call Transcript

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MoneyGram International, Inc. (MGI)

Q4 2009 Earnings Call

February 4, 2010 09:00 am ET

Executives

Alex Holmes - SVP, IR

Pam Patsley - Executive Chairman & CEO

Jean Benson - SVP, Controller

Analysts

Josh Elving - Feltl Investments

Frank Mcevoy - Craig Hallum

Bo Ladyman - Morgan Keegan

Josh Elving - Feltl Investments

Presentation

Operator

Good morning and welcome to the MoneyGram International fourth quarter 2009 earnings conference call. At this time, all participants have been placed in a listen-only mode and the floor will be open for your questions following the presentation. It is now my pleasure to turn the floor over to your host, Alex Holmes.

Alex Holmes

Thank you very much. Good morning everyone. My name is Alex Holmes, Senior Vice President of Investor Relations and Corporate strategy here at MoneyGram, and I'd like to welcome you all to our fourth quarter and full year 2009 conference call. With me today are Pam Patsley, Chairman and Chief Executive Officer and Jean Benson, Senior Vice President and Corporate Controller.

If you've not yet seen our earnings release, you can find it on our website at www.MoneyGram.com. I must remind you that today's call is being recorded and that the various remarks we make about future expectations, plans and prospects constitute of forward-looking statements for purposes of the Safe Harbor provisions 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 end on December 31, 2009 which is expected to be filed with the SEC on Monday, March 1.

Additionally, I want to note that today's remarks include certain non-GAAP financial measures including a presentation of EBITDA and adjusted EBITDA. Our earnings release includes a full reconciliation of these non-GAAP financial measures to the related GAAP financial measures.

As you may have read in our earnings release and we'll see in our 10-K, we revised our segment reporting in the fourth quarter to reflect changes and how we review our operating performance and allocate recourses. Primarily, we have moved the retail money order business out of the Global Funds Transfer segment and into a segment now called financial paper products where will be included along with our financial institution money order and official check businesses.

Our Global Funds Transfer segment now only includes our money transfer and bill payment businesses. In addition, net securities gains and losses will no longer be allocated to the segments as the investment is generating those gains, relates to MoneyGram's historical investment portfolio. Our reporting for historical results in about today's earnings release as well is in the 10-K have been adjusted to reflect these changes.

In addition, later today on our website you'll find a table that shows a revised segment information for the past eight quarters.

Finally we've also included slides in our website highlighting our key metrics for the quarter in full year. We hope you find them useful.

And now that's highlights and I can turn the rest of the call over to Pam Patsley.

Pam Patsley

Thanks Alex, good morning everyone. 2009 was a year of improvement and stabilization for MoneyGram and despite the challenging economic environment; we were able to deliver solid financial results in the quarter and for the full year in our core money transfer business. Money transfer quarterly transaction growth improved from 4% in the second quarter to 7% in the fourth quarter.

Global agent locations increased 8% from 176,000 at the end of 2008 to more than 190,000 at the end of 2009. During the quarter we also expanded the reach of our bill payment business signing new billers and diversifying our product offering which led to improved performance in the fourth quarter. We also focused diligently on our financial paper products segments to stabilize both our money order and official check businesses. The net of these activities help to increase MoneyGram's full year 2009 revenue to $1.17 billion from $927 million in 2008.

Adjusted EBITDA for 2009 was a solid $247 million. From a liquidity perspective we utilized our excess cash and free cash flow to pay down $187 million of our total outstanding debt, a reduction of 19% from 2008.

In summary, while we have many things left to do, we accomplished quite a bit in 2009 and I'm pleased with our progress and most importantly excited about our future. In the fourth quarter, our money transfer business continued to show improvement. In the quarter, transactions originating outside the US increased 13%. Spain while still weak saw improvement in the fourth quarter. Excluding Spain, transactions originating outside of the US increased a very strong 20%. Transactions originating outside of the US accounted for 32% of our money transfer volume in the quarter up from 30% in the fourth quarter of 2008. I like the direction this has met and we should continue to grow our non-US business at faster rate particularly, as we capture more of the big spend markets. Broadly this is the middle and specifically Saudi Arabia, at Russia and collectively Western Europe.

Looking at our EMEAAP business, that's Europe, Middle East, Africa, Asia Pac, the fastest growing regions during the quarter were South Eastern Central Africa, the Philippines and South Asia. Transactions then to these regions all grew at double digit rates. We are focused on Asia and it's a strong growth region for us. During the month of December India became our largest received network outside of the Americas. With locations across India reaching 22,000, the Philippines continue to perform well for us assisted by strong [send] volume from the US. During the quarter we also announced a new service in the Philippines that allows customers to deposit their MoneyGram money transfer on to a (inaudible) issued prepaid card, the benefits of which Alex is going to discuss in a bit more detail later.

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