MGI

Moneygram International, Inc. (MGI)

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MoneyGram International, Inc. (MGI)

Q4 2011 Earnings Call

February 03, 2012 9:00 AM ET

Executives

Alex Holmes – SVP, Corporate Strategy and IR

Pamela Patsley – Chairman and CEO

Jim Shields – EVP and CFO

Analysts

Sara Gubins – Bank of America Merrill Lynch

Glenn Fodor – Morgan Stanley

Roman Leal – Goldman Sachs

Robert Napoli - William Blair

Jim Kissane – Credit Suisse

Tim Willi – Wells Fargo

Tien-Tsin Huang – J.P Morgan

Presentation

Operator

Good day ladies and gentlemen. Welcome to today’s MoneyGram International Fourth Quarter 2011 Earnings 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 open for your questions following the presentation.

It is now my pleasure to turn the floor over to your host, Alex Holmes, Senior Vice President of Investor Relations and Strategic Development. Please go ahead, sir.

Alex Holmes

Thank you. Good morning, everyone. And welcome to our fourth quarter 2011 earnings call. With me today are Pam Patsley, Chairman and Chief Executive Officer; and Jim Shields, Executive Vice President and Chief Financial Officer.

If you've not yet seen our earnings release, you can find it on our website at moneygram.com along with accompanying slides for the quarter. 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 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 ended December 31, 2011, which is expected to be filed with the SEC in early March.

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

And with that, I'll turn the call over to Pam.

Pamela H. Patsley

Thanks Alex. Good morning everyone. We are very pleased with our accomplishments in 2011. For the year we achieved double-digit growth in money transfer transactions, constant currency revenue and agent locations. Our impressive performance was achieved while we recapitalized our preferred shares, nearly doubled our public float and reduced our second lien debt by $175 million.

We are also pleased to have finished 2011 with such a great fourth quarter. We delivered solid financial performance, met our management targets and ended the quarter with strong momentum.

For the quarter we increased total revenue by 6% led by constant currency money transfer fee and other revenue growth of 11% and money transfer transaction growth of 13%.

We increased adjusted EBITDA by 12%, our strongest quarterly growth of the year and we improved adjusted EBITDA margin by 120-basis points over the prior year fourth quarter.

Before getting into the details of the money transfer business, I want to take a minute to thank the entire MoneyGram team on our performance this past year. It was a tremendous effort and it is appreciated.

The performance for the quarter was fantastic and while we executed on our plans, we also addressed corporate initiatives and legacy matters. During the quarter, we completed a secondary public offering for 10.2 million shares, nearly doubling our float, greatly improving our liquidity and adding valuable new shareholders.

In conjunction with the offering, we also made $175 million partial redemption on our 13.25% Goldman notes and de-levered an additional $25 million. With the partial redemption behind us, our focus will be on de-levering further in 2012 and accessing the right timing for refinancing the remaining $325 million of our expenses second lien notes.

This morning, we filed an 8-K that updates our disclosures following January meetings on the matter involving the US District Court for the Middle District of Pennsylvania. While there is not a lot that I can add to what the disclosure says, as I told you in July, we are making every effort to resolve this matter as soon as possible. I believe a full range of outcomes is on the table and it is my focus to ensure we achieve the best outcome. The investigation is ongoing, we continue to cooperate fully. We have achieved very positive feedback from the government and law enforcement regarding our anti-fraud efforts the past couple of years. We will certainly keep you apprised of any material updates to this legacy matter.

I also want to mention that recently, we commenced actions against several banks related to investments. Namely CDOs and RMBS that MoneyGram made prior to 2008. These actions seek to recover a portion of significant losses that MoneyGram incurred related to these investments. Our claims are outlined in the complaints for these matters and while we don’t take lightly and commence action lightly against any entity, we do feel that these actions are necessary in order to help realize our goal of consistently protecting and bringing value to our shareholders.

Now before we go through the great performance in the money transfer business and since it’s so current, as many of you know the consumer financial protection bureau or the CFPB issued its final remittance rule on January 20. While we are still reviewing the final rule to determine the steps we will need to take to comply, we think that the rule will not fundamentally change what we already do for consumers today. However, we will have to make changes to comply. MoneyGram currently provides information, multiple languages to consumers about fees, exchange rates, payout amounts and dates of availability of transaction in compliance with all our applicable law. We’ll have a year from the date the final rule is published in the Federal register to comply. We believe the new rule essentially standardizes across the industry, our existing high level of disclosure.

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