MoneyGram International Inc. (MGI) reported second quarter loss per share of 31 cents, modestly ahead of the Zacks Consensus Estimate of a loss of 28 cents but substantially lower than the loss of 40 cents reported in the year-ago quarter. Results included stock-based compensation costs of $6.0 million, $1.9 million of restructuring and reorganization costs, $1.5 million of asset impairment charges and $3.5 million write off of deferred financing and debt discount. Reported net loss was $25.8 million as compared to net loss of $33.0 million in the year-ago quarter.
Total expenses decreased 10.7% to $154.1 million against $172.7 million in the year-ago quarter. Higher money transfer transaction volumes and decreased operating expenses were offset by decreased top line on lower revenue per transaction and continued weakness in Mexico and Spain.
The company’s total revenue for the quarter was $283.6 million, down 2.6% from $291.2 million in the year-ago period. Fee and other revenue were almost flat at $277.6 million, while investment revenue decreased to $6.3 million as compared with $8.5 million in the prior year period. Net securities loss was recorded at $0.3 million against net securities gains of $4.2 million in the year-ago quarter.
Segment Results
In the Global Funds Transfer segment, MoneyGram’s revenue rose by 1% to $253.7 million versus $251.5 million in the year-ago period. Money transfer transaction volume excluding bill payment increased 7%, while money transfer fee and other revenue increased 2% to $222.6 million versus $219.2 million in the prior-year period. On a constant currency basis, money transfer fee and other revenue excluding bill payment increased 3% on a year-over-year basis. Bill payment transaction volume remained flattish with a 0.4% increase, whereas, fee and other revenue declined 3% to $31.0 million from $32.1 million in the prior-year quarter. Operating margin increased to 12.2% from 3.0% in the year-ago quarter. Global agent locations reached 203,000, an increase of 13% over the prior-year quarter.
Total money transfer transactions originating outside the U.S. increased 12% from the prior year. However, the economic downturn in Spain continues to impact MoneyGram’s non-U.S. transaction growth. Excluding Spain, transactions originating outside US saw a healthy growth of 16% from the prior year. Transaction volume to Mexico decreased 4% year over year in the reported quarter. However, excluding transactions sent to Mexico, MoneyGram’s transactions originating in the U.S. increased 7% year over year.
In the Financial Paper Products segment, MoneyGram’s total revenue declined 7.2% to $29.2 million from $30.6 million in the prior-year quarter. However, operating margin grew to 39.7% from 32.2% in the year-ago quarter.
Liquidity
As on June 30, 2010, MoneyGram had cash and cash equivalents of $3.49 billion, net receivables of $1.05 billion and investments of $216.9 million.
MoneyGram ended the quarter with $746.3 million in outstanding debt and assets in excess of payment service obligations of $284.1 million. MoneyGram made an optional prepayment of $30 million, each in April and June 2010, on its tranche B term loan under the senior secured credit facility, thereby lowering its total outstanding debt by 25% to $247 million (repaying $187 million in 2009) ever since January 2009.
Restructuring Update
During the reported quarter, MoneyGram executed the first phase of its global initiative program in order to streamline its operations to increase efficiency and promote a scalable cost structure. The company recorded $1.9 million of costs in the first phase. Based upon initial projections, MoneyGram anticipates to incur $45-$50 million of cash outlays in future phases to generate annual pre-tax cost savings of $25-$30 million, once this program is fully implemented in 2012.
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