Earnings

MoneyGram Sees US Headwinds, Eyes Growth With Ripple And Digital Biz

MoneyGram

MoneyGram International posted results Friday (Nov. 1) that missed expectations and sent the stock tumbling, but the firm noted that progress is being made in its digital transformation.

Revenues of $324.5 million were off by 6.5 percent year on year, and missed expectations by $9.8 million. Adjusted losses of 3 cents a share were 6 pennies worse than expected. Shares were down nearly 15 percent on the day to $3.38.

The company noted that results were weak within the domestic United States (though that business improved sequentially), but said growth was significant in international markets.

A majority of transactions, at 60 percent, came from international markets, according to MoneyGram.

Non-U.S. money transactions saw a 7 percent year-over-year growth rate, and that helped revenues derived from non-U.S. activity grow as well.

CEO Alex Holmes said on the conference call with analysts that digital payments stood at 20 percent of total money transfers.

Breaking down the digital side of the business a bit, MoneyGram Online is offered through 25 countries. He added that a number of partnerships in place allow customers to send or receive money in 60 countries.

The overall online business was up 109 percent, with 42 percent revenue growth, according to commentary on the call. About 80 percent of total online transactions are done on mobile devices.

In further evidence of digital transformation, Holmes said, “We’re now sending over 100 transaction notifications per minute to our customers. They no longer need to call MoneyGram to check on their transactions, and as a result calls to our call center have been cut in half.”

Visa Direct and Ripple

Management also spotlighted its pact with Visa Direct, which allows MoneyGram to push payments to more than a billion cards worldwide. The partnership should expand to new corridors in the fourth quarter, said Holmes.

“We’re using it domestically and you can go online and send money directly to … Visa Debit Cards in the United States,” he said. He said that the Visa Direct business logs lower revenue per transaction, but the profitability of those transactions “is great,” he said.

Loyalty members are 27 percent of total transactions, up from 21 percent at the beginning of the year.

The partnership with Ripple focused on foreign currency trades has gained traction, according to management. Holmes said in response to analyst questions that Ripple will be a larger revenue-generating opportunity in the future.

The U.S. Business

CFO Larry Angelilli said the U.S. market is becoming increasingly competitive.

“The competition, large and small, is not only pricing aggressively to consumers, but also importantly, increasing agent commissions and their attempt to buy growth. We believe that buying growth is a short-sighted strategy,” said the CFO. “Profitable growth will be harder to come by, not just for us, but for all those who are targeting the U.S. walk-in remittance market.” He said, too, that commissions may be lowered in some markets.

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