MoneyGram’s first-quarter revenue and earnings missed Wall Street expectations on Tuesday (May 8), but the company is reporting early benefits from a new money transfer deal with Walmart and detailed how it plans to do better with digital.
MoneyGram revenue declined 2 percent year over year in the first quarter, to $380 million. That was lower than analyst expectations of about $386 million. Net income declined 19 percent, to $7.1 million, with earnings per share at $0.15 per share — below analyst expectations of $0.26.
Digital, though, provided first-quarter growth. Moneygram.com, the digital business, posted a year-over-year revenue gain of 21 percent in the first quarter, with most credit going to customer acquisitions, the company said in its financial release. Digital revenue accounted for 16 percent of all money transfer revenue in the first quarter.
“We’re positioning the company to better compete in a more digital world,” Alex Holmes, CEO of MoneyGram, said Tuesday during the company’s post-earnings conference call. “This includes simplifying our cash business and optimizing our network, accelerating our investments in digital to deliver more differentiated customer experiences and reducing our cost of distribution to more efficient go-to-market platforms and technologies.”
In the first quarter, MoneyGram racked up $7.3 million in expenses related to its “Digital Transformation” initiative. The company said the full cost of the program will be about $15 million. The “efficiencies” that result will ultimately produce a $30 million expense reduction this year. “Once this program is complete, we expect to achieve cost reductions of $45 million on an annual run rate basis,” Holmes said in the call.
MoneyGram is also looking forward to fuller returns from its decision to work with Walmart on the retailer’s Walmart2World international remittance service. The chain’s recent move in the global money transfer business, announced in early April, has led to more exposure for MoneyGram.
“Since the launch, 15 percent of the customers using this service had not previously used MoneyGram, and this is before our marketing … even started,” Holmes said during the call. “We also extended our agreement with Walmart to provide U.S.-to-U.S. and U.S.-outbound money transfers, along with bill pay and money order services, for another two years.”
Holmes also emphasized that MoneyGram is beefing up its anti-fraud protections — which was one reason for the depressed revenue, he said, a trend that will continue for the rest of the year.
“Earlier this year, we launched new global consumer verification standards for all money transfers sent and received,” he said. “We have also implemented increased data collection standard requirements for higher dollar transactions, including ID verification in many cases.”