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| MoneyGram International Announces First Quarter 2007 Results |
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($ in millions) except per share data Q1 Q1 %
2007 2006 Change
Revenue $310.1 $263.7 17.6%
Commissions Expense 152.3 126.3 20.6%
Net Revenue 157.8 137.4 14.8%
Expenses 113.7 91.7 24.0%
Net Income $29.8 $30.9 (3.5%)
Earnings per diluted share $0.35 $0.36 (2.8%)
Operating Margin 14.2% 17.3%
MoneyGram International, Inc. (NYSE:MGI), today announced first quarter 2007 net income of $29.8 million, or $0.35 per diluted share, compared to $30.9 million, or $0.36 per diluted share in the first quarter of 2006. The company's first quarter 2006 results include $3.8 million of pretax cash flow recoveries (or $2.4 million after tax) on previously impaired investments and income from limited partnership interests, which amounted to $0.03 per diluted share and a 1.2 percentage point impact on the operating margin. First quarter 2007 results reflect: -- Global Funds Transfer segment revenue growth of 24 percent compared to the first quarter of 2006. The growth was driven by money transfer transaction volume growth of 30 percent and money transfer revenue growth of 31 percent. -- Net investment margin of 2.21 percent, as shown in Table One. -- Fee and other revenue of $213 million, up 26 percent from the first quarter of 2006, driven primarily by growth in money transfer transaction volume. -- Expenses increase of 24 percent, driven by increased headcount, higher advertising and marketing investments, infrastructure costs supporting the growth in money transfer, and the incremental expenses attributable to the acquisition of our super agent in Italy, Money Express S.r.l., which we acquired in the second quarter of 2006. Philip Milne, president and chief executive officer said, "We successfully continued our sales momentum into the first quarter of 2007 and I'd like to thank the entire MoneyGram team for their outstanding effort. We are very pleased with the performance of our money transfer business, which experienced transaction growth rates of 30 percent compared to a very strong first quarter last year. We also continued to invest in our brand and infrastructure in addition to expanding our retail presence in France and Germany." Segment Highlights MoneyGram operates in two reportable business segments, Global Funds Transfer and Payment Systems. Global Funds Transfer ($ in millions)
Q1 Q1 %
2007 2006 Change
--------------------------------------
Revenue $226.6 $183.0 23.9%
Commissions Expense 95.0 72.1 31.7%
Net Revenue 131.6 110.8 18.7%
Operating Income $37.6 $39.9 (5.9%)
Operating Margin 16.6% 21.8%
For the Global Funds Transfer segment, which consists of money transfer (including urgent bill payment) and retail money orders, revenue increased 24 percent to $226.6 million. Revenue improved as a result of growth in money transfer transaction volume. Operating income decreased 6 percent to $37.6 million in the first quarter of 2007 compared to the first quarter 2006. The decrease is due to increased money transfer commissions, compensation and benefits expense, advertising and marketing expense to support the brand, as well as other transaction and infrastructure costs related to the growth of the business and the global network, including the build out of the company's retail operations in Europe. The increased expenses caused a 520 basis points decrease in the operating margin from the first quarter of 2006. Money transfer transaction volume grew 30 percent and money transfer revenue (see Table Four) grew 31 percent to $190.1 million compared to the first quarter of 2006. The money transfer agent network grew 24 percent to 114,000 agent locations from the first quarter of 2006, with the addition of 4,000 locations in the first quarter of 2007. Money order transaction volume was down 4 percent, following a trend of declining use of paper-based payment instruments. Payment Systems ($ in millions)
Q1 Q1 %
2007 2006 Change
----------------------------------------------------------------------
Revenue $83.2 $80.7 3.1%
Commissions Expense 57.2 54.1 5.7%
Net Revenue 26.0 26.6 (2.2%)
Operating Income $9.6 $10.3 (7.3%)
Operating Margin 11.5% 12.8%
The Payment Systems segment includes PrimeLink/Official Check outsourcing services, financial money orders and controlled disbursement processing services. Payment Systems revenue increased 3 percent to $83.2 million in the first quarter of 2007 from $80.7 million in the first quarter of 2006 due to higher investment yields partially offset by slightly lower balances. Operating income for the segment was $9.6 million in the first quarter of 2007, compared to $10.3 million in the first quarter of 2006, which benefited from $2.9 million pretax of income from limited partnership interests and cash flows from previously impaired securities. Operating margin for the first quarter of 2007 was 11.5 percent compared to 12.8 percent in the first quarter of 2006. Income from limited partnership interests and cash flows from previously impaired securities added 320 basis points to the operating margin in the first quarter of 2006. Share Repurchase During the first quarter of 2007, MoneyGram International bought back 500,000 shares at an average price of $29.47 per share. The company has 1.3 million shares remaining under its current share buyback authorization. 2007 Outlook The company expects the following financial results in the full year 2007: -- Net revenue (total revenue less total commissions) is expected to be in the range of $665 million to $690 million. -- Net investment margin is expected to be in the range of 180 to 195 basis points up from previous guidance of 175 to 190 basis points. Average portfolio balances are expected to be in the range of $6.0 - $6.3 billion for the year. -- Income from continuing operations before taxes is expected to be in the range of $183 million to $195 million up from previous guidance of $180 million to $192 million. -- Additional tax expense of $0.02 per share, due to the adoption of FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes. -- Earnings per diluted share is expected to be in the range of $1.47 to $1.55 unchanged from previous guidance. 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 first 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 800-299-0433 in the U.S. The participant passcode is 37860563. 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 May 2, 2007. The replay of the call is available at 888-286-8010 for U.S. callers or 617-801-6888 for international callers, passcode 91907574. 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 products 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 114,000 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 key retail agents or inability to maintain our network in our Global Funds Transfer segment; (b) loss of large financial institution customers in our Payment Systems segment; (c) ability to successfully develop and timely introduce new and enhanced products and services; (d) ability to protect the intellectual property rights related to our existing and any new or enhanced products and services; (e) failure to continue to compete effectively; (f) ability of us or our agents to comply with U.S and International regulatory requirements; (g) 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; (h) ability to manage security risks related to our electronic processing and transmission of confidential customer information; (i) ability to process and settle transactions accurately and on the efficient and uninterrupted operation of our computer network systems and data centers; (j) ability to manage credit and fraud risks from our retail agents; (k) ability to manage reputational damage to our brand due to fraudulent use of our services; (l) litigation or investigations of us or our agents that could result in material settlements, fines or penalties; (m) ability to manage credit risk related to our investment portfolio and our use of derivatives; (n) fluctuations in interest rates; (o) material changes in the market value of securities we hold; (p) ability to manage risks related to opening of new retail locations and acquisition of businesses; (q) material slow down or complete disruption in international migration patterns; (r) unexpected liquidity needs; (s) ability for us or our agents to maintain adequate banking relationships (t) ability to manage risks associated with our international sales and operations; (u) ability to maintain effective internal controls; and (v) 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 (w) 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
March 31 2007 vs
2007 2006 2006
--------------------------------
(Dollars in thousands)
Components of net investment revenue:
Investment revenue $96,054 $94,960 $1,094
Investment commissions expense (1) (62,248) (58,789) (3,459)
--------------------------------
Net investment revenue $33,806 $36,171 $(2,365)
================================
Average balances:
Cash equivalents and investments $6,193,230 $6,343,281 ($150,051)
Payment service obligations (2) 4,662,777 4,792,925 (130,148)
Average yields earned and rates paid
(3):
Investment yield 6.29% 6.07% 0.22%
Investment commission rate 5.41% 4.97% 0.44%
Net investment margin 2.21% 2.31% -0.10%
(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 ($370.1
million and $393.0 million for the first quarter of 2007 and 2006)
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
mulitplied 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
March 31
2007 2006
----------------- ----------------
(Dollars and shares in thousands,
except per share data)
REVENUE:
Fee and other revenue $213,133 $169,132
Investment revenue 96,054 94,960
Net securities gains (losses) 864 (420)
----------------- ----------------
Total revenue 310,051 263,672
Fee commissions expense 90,012 67,484
Investment commissions expense 62,248 58,789
----------------- ----------------
Total commissions expense 152,260 126,273
----------------- ----------------
Net revenue 157,791 137,399
EXPENSES:
Compensation and benefits 50,031 40,627
Transaction and operations
support 39,614 32,087
Depreciation and amortization 11,680 8,432
Occupancy, equipment and supplies 10,417 8,618
Interest expense 1,958 1,947
----------------- ----------------
Total expenses 113,700 91,711
----------------- ----------------
Income before income taxes 44,091 45,688
Income tax expense 14,252 14,753
----------------- ----------------
NET INCOME $29,839 $30,935
================= ================
Basic earnings per share
----------------- ----------------
Earnings per common share $0.36 $0.37
================= ================
Average outstanding common shares 83,469 84,369
================= ================
Diluted earnings per share
----------------- ----------------
Earnings per common share $0.35 $0.36
================= ================
Average outstanding and potentially
dilutive common shares 84,792 85,958
================= ================
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
Payment Systems 83,197
Operating income:
Global Funds Transfer 37,551
Payment Systems 9,566
Operating Margin:
Global Funds Transfer 16.6%
Payment Systems 11.5%
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
TABLE FIVE
MONEYGRAM INTERNATIONAL, INC. AND SUBSIDIARIES
UNRESTRICTED ASSETS
(Unaudited)
March 31 December 31
2007 2006
------------- ------------
(Dollars in thousands)
Payment service assets $8,471,563 $8,568,713
Amounts restricted to cover payment service
obligations (8,129,757) (8,209,789)
------------- ------------
Unrestricted assets (1) $341,806 $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 requirements are maintained during the
normal fluctuations in the value of investments.
SOURCE: MoneyGram International, Inc. MoneyGram International, Inc. Tim Gallaher, 952-591-3840 (Investor Relations) ir@moneygram.com |