MoneyGram International Announces Third Quarter 2007 Results
Money Transfer Volume Up 25 Percent;
Retains JP Morgan For Strategic Review of Payment Systems Business
MINNEAPOLIS--(BUSINESS WIRE)--Oct. 17, 2007--MoneyGram
International, Inc. (NYSE:MGI):
($ in millions) except per share data Q3 Q3 %
2007 2006 Change
Revenue $341.6 $296.4 15.2%
Commissions Expense 170.4 146.7 16.2%
Net Revenue 171.2 149.8 14.3%
Expenses 122.0 107.8 13.1%
Net Income $ 34.3 $ 30.0 14.2%
Earnings per diluted share $ 0.41 $ 0.35 17.1%
Operating Margin 14.4% 14.2%
MoneyGram International, Inc. (NYSE:MGI), today announced third
quarter 2007 net income of $34.3 million, or $0.41 per diluted share,
compared to $30.0 million, or $0.35 per diluted share in the third
quarter of 2006.
Third quarter 2007 results reflect:
-- Global Funds Transfer segment revenue growth of 21 percent
compared to the third quarter of 2006. The growth was driven
by money transfer transaction volume growth of 25 percent and
money transfer revenue growth of 25 percent.
-- Net investment margin of 2.33 percent, as shown in Table One.
-- Fee and other revenue of $242.7 million, up 21 percent from
the third quarter of 2006, driven primarily by continued
growth of money transfer transaction volume.
-- Expenses increase of 13 percent, driven by increased
headcount, depreciation and amortization, transaction and
operations, and infrastructure costs supporting the growth in
money transfer.
Philip Milne, president and chief executive officer said, "Our
money transfer business continues to generate a robust growth rate and
we continue to make investments to strengthen our global brand,
presence and infrastructure. We believe these investments position us
well to drive future transaction growth and continue to capitalize on
the growth trends in the global money transfer market."
MoneyGram International also announced that it has retained JP
Morgan to complete a strategic review of its Payment Systems business.
Any material developments related to this review will be reported in a
future press release or SEC filing.
Segment Highlights
MoneyGram operates in two reportable business segments, Global
Funds Transfer and Payment Systems.
Global Funds Transfer
($ in millions)
Q3 Q3 %
2007 2006 Change
----------------------
Revenue $257.5 $213.5 20.6%
Commissions Expense 110.4 87.9 25.6%
Net Revenue 147.0 125.5 17.1%
Operating Income $ 45.8 $ 38.6 18.7%
Operating Margin 17.8% 18.1%
For the Global Funds Transfer segment, which consists of money
transfer (including urgent bill payment) and retail money orders,
revenue increased 21 percent to $257.5 million. Revenue improved as a
result of growth in money transfer transaction volume. Operating
income increased 19 percent to $45.8 million in the third quarter of
2007 compared to the third quarter 2006. Operating margin decreased
slightly to 17.8 percent in the third quarter of 2007 from 18.1
percent in the third quarter of 2006.
Money transfer transaction volume grew 25 percent and money
transfer revenue (see Table Four) grew 25 percent to $220.6 million
compared to the third quarter of 2006. The money transfer agent
network grew 33 percent to approximately 138,000 agent locations from
the third quarter of 2006. As expected, money order transaction volume
was down five percent.
Payment Systems
($ in millions)
Q3 Q3 %
2007 2006 Change
- ----------------------------------------------------------------------
Revenue $83.8 $82.5 1.6%
Commissions Expense 59.9 58.7 2.1%
Net Revenue 23.8 23.8 0.3%
Operating Income $ 6.6 $ 7.5 (12.2%)
Operating Margin 7.9% 9.1%
The Payment Systems segment includes PrimeLink/Official Check
outsourcing services, financial money orders and controlled
disbursement processing services. Payment Systems revenue increased
slightly to $83.8 million in the third quarter of 2007 from $82.5
million in the third quarter of 2006. Operating income for the segment
was $6.6 million and operating margin 7.9 percent in the third quarter
of 2007, compared to $7.5 million and 9.1 percent in the third quarter
of 2006.
Balance Sheet Items and Share Repurchase
At the end of the third quarter of 2007, MoneyGram International
borrowed an additional $197.0 million under its credit facilities. The
proceeds were invested in cash equivalents to supplement the company's
unrestricted assets, as well as to fund the acquisition of
PropertyBridge. The company has unrestricted assets (see Table Five)
of cash and cash equivalents, receivables and investments to the
extent those assets exceed all payment service obligations. These
amounts are generally available; however, management considers these
amounts as providing additional assurance that regulatory and other
requirements are met during fluctuations in the value of investments.
Net unrealized investment portfolio losses during the third quarter
increased by approximately $230.0 million, a result of the illiquidity
in the market for subprime asset backed securities and CDO's. The
increase in net unrealized losses reduced unrestricted assets;
however, this was partially offset by the additional borrowing.
Unrestricted assets were $285.7 million at the end of the third
quarter.
In September, MoneyGram International announced it reached an
agreement to acquire PropertyBridge, Inc., a leading provider of
electronic payment processing services for the real estate management
industry. MoneyGram International completed the acquisition on October
1.
MoneyGram International bought back 470,000 shares at an average
price of $26.56 per share in the third quarter. The Company has 5.2
million shares remaining under its current share buyback
authorization.
2007 Outlook
The company expects the following financial results in the full
year 2007 and specifically excludes any impact from the current
strategic review of the Payment Systems business and the
PropertyBridge acquisition:
-- Net revenue (total revenue less total commissions) is expected
to be in the range of $670 million to $685 million a slight
change from previous guidance of $665 million to $690 million.
-- Net investment margin is expected to be in the range of 220 to
230 basis points, up from previous guidance of 200 to 215
basis points. Average portfolio balances are expected to be in
the range of $6.2 - $6.3 billion for the year, unchanged from
previous guidance.
-- Income from continuing operations before taxes is expected to
be in the range of $184 million to $188 million from previous
guidance of $185 million to $190 million.
-- Earnings per diluted share is expected to be in the range of
$1.50 to $1.54, narrowing the range from previous guidance of
$1.49 - $1.55.
This guidance is dependent on a variety of factors, including
those listed below under Cautionary Information Regarding
Forward-Looking Statements. From time to time, events may occur which
can result in unanticipated income or losses. The outlook does not
reflect such events.
Description of Tables
Table One - Net Investment Revenue Analysis
Table Two - Consolidated Statements of Income
Table Three - Segment Information
Table Four - Money Transfer Revenue
Table Five - Unrestricted Assets
Conference Call and Webcast
MoneyGram International will have a conference call today at 5:00
p.m. EDT, 4:00 p.m. CDT to discuss the third quarter of 2007. Phil
Milne, chief executive officer, and Dave Parrin, chief financial
officer, will speak on the call. The conference call can be accessed
by calling 888-680-0869 in the U.S. The participant passcode is
72747736. The conference call will also be webcast through the
company's website at www.moneygram.com. A replay of the conference
call and webcast will be available one hour after the call concludes
through 5:00 p.m. EDT on October 31, 2007. The replay of the call is
available at 888-286-8010 for U.S. callers or 617-801-6888 for
international callers, passcode 73436523. The Internet audio cast
replay will be available at www.moneygram.com.
About MoneyGram International, Inc.
MoneyGram International, Inc. is a leading global payment services
company and S&P MidCap 400 company. The company's major product and
services include global money transfers, money orders and payment
processing solutions for financial institutions and retail customers.
MoneyGram is a New York Stock Exchange listed company, with $1.16
billion in revenue in 2006 and approximately 138,000 global money
transfer locations in 170 countries and territories. For more
information, visit the company's website at www.moneygram.com.
Cautionary Information Regarding Forward-Looking Statements
The statements contained in this press release regarding the
business of MoneyGram International, Inc. that are not historical
facts are forward-looking statements and are made under the Safe
Harbor provisions of the Private Securities Litigation Reform Act of
1995. These statements are based on management's current expectations
and are subject to uncertainty and changes in circumstances due to a
number of factors, including, but not limited to: (a) loss of a key
customer or inability to maintain our network in our Global Funds
Transfer segment; (b) additional material changes in the market value
of securities we hold and/or permanent impairments of portfolio
securities; (c) outcome of the strategic review of the Payment Systems
segment and the ability to continue to effectively operate the segment
pending the outcome of the review; (d) risk of downgrade in our credit
ratings which could affect our cost of funds and/or liquidity; (e)
ability to manage credit risk related to our investment portfolio and
our use of derivatives; (f) unexpected liquidity or capital needs and
our ability to secure additional sources of capital; (g) ability to
successfully develop and timely introduce new and enhanced products
and services; (h) ability to protect and defend the intellectual
property rights related to our existing and any new or enhanced
products and services; (i) failure to continue to compete effectively;
(j) our and our agents' ability to comply with U.S and International
regulatory requirements; (k) conducting money transfer transactions
through agents in regions that are politically volatile and/or in a
limited number of cases, subject to certain OFAC restrictions; (l)
ability to manage security risks related to our electronic processing
and transmission of confidential customer information; (m) ability to
process and settle transactions accurately and the efficient and
uninterrupted operation of our computer network systems and data
centers; (n) ability to manage credit and fraud risks from our retail
agents; (o) ability to manage reputational damage to our brand due to
fraudulent or other unintended use of our services; (p) litigation or
investigations of us or our agents that could result in material
settlements, fines or penalties; (q) fluctuations in interest rates;
(r) ability to manage risks related to opening of new retail locations
and acquisition of businesses; (s) material slow down or complete
disruption in international migration patterns; (t) ability for us or
our agents to maintain adequate banking relationships; (u) ability to
manage risks associated with our international sales and operations;
(v) ability to maintain effective internal controls; (w) possible
delay or prevention of an acquisition of our company which could
inhibit a stockholder's ability to receive a premium on their
investment from a possible sale of our company due to provisions
contained in our charter documents, our rights plan and Delaware law;
and (x) other factors more fully discussed in MoneyGram's filings with
the Securities and Exchange Commission. Actual results may differ
materially from historical and anticipated results. These
forward-looking statements speak only as of the date on which such
statements are made, and MoneyGram undertakes no obligation to update
such statements to reflect events or circumstances arising after such
date.
TABLE ONE
MONEYGRAM INTERNATIONAL, INC. AND SUBSIDIARIES
NET INVESTMENT REVENUE ANALYSIS
(Unaudited)
Three months ended
September 30 2007 vs
2007 2006 2006
-------------------------------
(Dollars in thousands)
Components of net investment revenue:
Investment revenue $ 102,000 $ 96,406 $ 5,594
Investment commissions expense (1) (64,899) (63,520) (1,379)
-------------------------------
Net investment revenue $ 37,101 $ 32,886 $ 4,215
===============================
Average balances:
Cash equivalents and investments $6,304,433 $6,297,739 $ 6,694
Payment service obligations (2) 4,788,379 4,743,030 45,349
Average yields earned and rates paid
(3):
Investment yield 6.42% 6.07% 0.35%
Investment commission rate 5.38% 5.31% 0.07%
Net investment margin 2.33% 2.07% 0.26%
Nine months ended
September 30 2007 vs
2007 2006 2006
--------------------------------
(Dollars in thousands)
Components of net investment
revenue:
Investment revenue $ 299,161 $ 297,882 $ 1,279
Investment commissions expense
(1) (192,467) (185,346) (7,121)
--------------------------------
Net investment revenue $ 106,694 $ 112,536 $ (5,842)
================================
Average balances:
Cash equivalents and investments $6,265,515 $6,357,165 ($91,650)
Payment service obligations (2) 4,747,844 4,813,544 (65,700)
Average yields earned and rates paid
(3):
Investment yield 6.38% 6.26% 0.12%
Investment commission rate 5.42% 5.15% 0.27%
Net investment margin 2.28% 2.37% -0.09%
(1) Investment commissions expense reported includes payments made to
financial institution customers based on short-term interest rate
indices on outstanding balances of official checks sold by that
financial institution, as well as costs associated with swaps and the
sale of receivables program.
(2) Commissions are paid to financial institution customers based upon
average outstanding balances generated by the sale of official checks
only. The average balance in the table reflects only the payment
service obligations for which commissions are paid and does not
include the average balance of the sold receivables ($356.3 million
and $390.0 million for the third quarter of 2007 and 2006,
respectively, and $365.3 million and $385.9 million for the nine
months ended September 30, 2007 and 2006, respectively) as these are
not recorded in the Consolidated Balance Sheets.
(3) Average yields/rates are calculated by dividing the applicable
amount shown in the "Components of net investment revenue" section by
the applicable amount shown in the "Average balances" section divided
by the number of days in the period presented and multiplied by the
number of days in the year. The "Net investment margin" is calculated
by dividing "Net investment revenue" by the "Cash Equivalents and
investments" average balance divided by the number of days in the
period presented and multiplied by the number of days in the year.
TABLE TWO
MONEYGRAM INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended Nine Months Ended
September 30 September 30
2007 2006 2007 2006
--------- --------- --------- ---------
(Dollars and shares in thousands,
except per share data)
REVENUE:
Fee and other revenue $242,743 $200,894 $688,409 $556,862
Investment revenue 102,000 96,406 299,161 297,882
Net securities losses (3,162) (869) (2,679) (1,728)
--------- --------- --------- ---------
Total revenue 341,581 296,431 984,891 853,016
Fee commissions expense 105,453 83,144 295,744 226,246
Investment commissions
expense 64,899 63,520 192,467 185,346
--------- --------- --------- ---------
Total commissions
expense 170,352 146,664 488,211 411,592
--------- --------- --------- ---------
Net revenue 171,229 149,767 496,680 441,424
EXPENSES:
Compensation and benefits 49,572 44,753 149,966 128,473
Transaction and operations
support 44,277 41,318 128,129 112,615
Depreciation and
amortization 13,944 10,419 37,835 28,197
Occupancy, equipment and
supplies 11,975 9,314 33,377 26,748
Interest expense 2,202 2,003 6,143 5,925
--------- --------- --------- ---------
Total expenses 121,970 107,807 355,450 301,958
--------- --------- --------- ---------
Income before income taxes 49,259 41,960 141,230 139,466
Income tax expense 14,967 11,922 44,740 41,787
--------- --------- --------- ---------
NET INCOME $ 34,292 $ 30,038 $ 96,490 $ 97,679
========= ========= ========= =========
Basic earnings per share
--------- --------- --------- ---------
Earnings per common share $ 0.42 $ 0.36 $ 1.16 $ 1.16
========= ========= ========= =========
Average outstanding common
shares 82,488 84,298 82,956 84,468
========= ========= ========= =========
Diluted earnings per share
--------- --------- --------- ---------
Earnings per common share $ 0.41 $ 0.35 $ 1.15 $ 1.13
========= ========= ========= =========
Average outstanding and
potentially dilutive common
shares 83,451 85,799 84,139 86,152
========= ========= ========= =========
TABLE THREE
MONEYGRAM INTERNATIONAL, INC. AND SUBSIDIARIES
SEGMENT INFORMATION
(Unaudited)
2007
---------------------------------------------
First Second Third Fourth Full
Quarter Quarter Quarter Quarter Year
---------------------------------------------
(Dollars in thousands)
Revenue:
Global Funds Transfer $226,636 $247,090 $257,453
Payment Systems 83,197 86,092 83,759
Operating income:
Global Funds Transfer 37,551 40,792 45,798
Payment Systems 9,566 9,898 6,618
Operating Margin:
Global Funds Transfer 16.6% 16.5% 17.8%
Payment Systems 11.5% 11.5% 7.9%
2006
---------------------------------------------
First Second Third Fourth Full
Quarter Quarter Quarter Quarter Year
---------------------------------------------
(Dollars in thousands)
Revenue:
Global Funds Transfer $182,987 $202,038 $213,451 $223,270 $821,746
Payment Systems 80,685 90,875 82,468 83,069 337,097
Operating income:
Global Funds Transfer 39,907 40,801 38,566 33,305 152,579
Payment Systems 10,323 16,207 7,539 7,550 41,619
Operating Margin:
Global Funds Transfer 21.8% 20.2% 18.1% 14.9% 18.6%
Payment Systems 12.8% 17.8% 9.1% 9.1% 12.3%
TABLE FOUR
MONEYGRAM INTERNATIONAL, INC. AND SUBSIDIARIES
MONEY TRANSFER REVENUE
(Unaudited)
Money Transfer Revenue (including Urgent Bill Payment)
---------------------------------------------------------------
Quarter Ended
March 31 June 30 September 30 December 31 Total Year
---------------------------------------------------------------
(Dollars in thousands)
2004 86,198 95,174 102,764 111,234 395,370
2005 111,296 124,545 132,802 139,083 507,726
2006 144,987 161,917 176,220 186,728 669,852
2007 190,104 209,190 220,582
TABLE FIVE
MONEYGRAM INTERNATIONAL, INC. AND SUBSIDIARIES
UNRESTRICTED ASSETS
(Unaudited)
September 30 December 31
2007 2006
------------ ------------
(Dollars in thousands)
Payment service assets $ 8,193,053 $ 8,568,713
Amounts restricted to cover payment service
obligations (7,907,393) (8,209,789)
------------ ------------
Unrestricted assets (1) $ 285,660 $ 358,924
============ ============
(1) We have unrestricted cash and cash equivalents, receivables and
investments to the extent those assets exceed all payment service
obligations. These amounts are generally available; however,
management considers these amounts as providing additional assurance
that regulatory and other requirements are met during the normal
fluctuations in the value of investments.
CONTACT: MoneyGram International, Inc.
Investor Relations
Tim Gallaher, 952-591-3840
ir@moneygram.com