MoneyGram's Q1 Slide Overshadows Digital Growth

MoneyGram shares were pummeled in intraday trading on the heels of reporting results that lagged expectations and showed the lingering impact of an ongoing restructuring plan aimed at improving compliance efforts and boosting digital transactions.

In terms of headline numbers, the company’s adjusted earnings of 21 cents a share were 12 cents below estimates, while revenues were down 17 percent year over year and were below the Street by nearly $17.6 million, coming in at $315 million.

Following those numbers, the stock was down 22 percent to $2.56.

Drilling down into the data, the company said that seasonality impacted the first quarter but that the results were in line with expectations, as the de-risking initiatives that began in 2018 continued to have impact. As was reported, and as seen in past quarters, MoneyGram has been putting new compliance rules in place to stop fraudulent transactions, which in past quarters has hurt momentum. In one example, late last year the company agreed to pay $125 million to the Federal Trade Commission and the Justice Department to settle fraud allegations.

This time around, money transfer revenues slipped 16 percent as measured in constant currency to $273.3 million. Bill payment revenues were $15.9 million, down from $20.8 million a year ago. Management noted on the conference call with analysts that the U.S. business remains a “challenge.”

During the conference call with analysts, CEO Alex Holmes said “there is much work to do, but we have done a lot,” and that with compliance efforts established across several corridors, the focus has shifted to acquiring and retaining customers. Among those efforts has been an emphasis on digital transactions. MoneyGram pointed to an online market total of 24 (up from three in the past year), and said that apps are available in 17 markets, with a total availability of 26 slated for this summer. A newly designed website will go live this summer, according to presentation materials.

In tandem with its latest announcement of results, MoneyGram also said that Bank of America, N.A. has arranged a $245 million senior secured second lien term facility for MoneyGram, led by an affiliate of Beach Point Capital Management.

Management said online transactions were up 107 percent outside the United States, noting that 50 million customers use MoneyGram on an annual basis. In tandem with that growth, MoneyGram online revenues outside the U.S. – defined as excluding U.S.-outbound and U.S.-U.S. business – grew by 32 percent. Digital now accounts for about 16 percent of money transfer revenues, said the firm.



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