Q1 2020 Earnings Call
Ladies and gentlemen.
For today's Moneygram internationally.
Well, that's 2020 earnings release conference call.
Yes, committing additional participants and well begin shortly thank you for your patience someplace kitchenaid to stay on the line.
[music].
Good morning, Moneygram International Inc. first quarter 2020 earnings release Conference call Today's conference is being recorded.
All participants happens based in listen only mode and before we open for your questions. Following the presentation.
My pleasure to turn the floor over to your host Steven Rice.
Corporate Communications. Please go ahead Sir.
Good morning, and thank you for joining us today on the call with me are Alex Holmes, Chairman and Chief Executive Officer, and Larry Angela Chief Financial Officer on.
On the Moneygram Investor Relations website, you can find earnings press release and presentation, which is intended to supplement our prepared remarks during today's call and to provide the reconciliations between GAAP and non-GAAP financial measures, we will refer to non-GAAP metrics on the call non-GAAP financial measures provided should not be considered as a substitute for or superior to.
That was prepared in accordance with yeah.
They are included as additional clarifying items eight investors and further understanding the company's performance. In addition to the impact that these items and at that time on the financial results.
Please note that today's call is being recorded during this call, we'll be making forward looking statements, which aren't predictions projections or other statements about future that.
These statements are based on current expectations and assumptions that are subject to risks and uncertainties.
Actual results could materially differ because it factors discussed in todays earnings press release in my comments made during this conference call and the risk factor section of our form 10-K, Thank you and other reports and filings with the Securities and Exchange Commission.
But do not undertake any duty to update any forward looking statement that I'll turn the call over to Alex great. Thanks, Steven.
Good morning, and thank you for Germany or.
First off for my sincere appreciation to all of our employees and partners around the world, whose tireless efforts combined with our leading digital capabilities have unable to provide uninterrupted service to our customers.
And these unprecedented times. Thank you for all that you do.
It depends I recall sudden and significant global disruption, we had a solid quarter delivering 2% global transaction growth constant currency adjusted EBITDA growth of 4%.
We had a very strong started a year with transaction growth rates in all channels accelerating from the fourth quarter.
Prior to the impacted Cobiz 19, global transaction growth of 6% with once again driven by robust international market performance together would strengthen demand for digital offerings.
Notable performance during the first 75 days of the quarter included improving transaction growth in Europe and are you went down quarter horse robust growth from the Middle East Africa increase received in Latin America, and impressive growth across Asia, including Pakistan in the Philippines.
That's a pandemic spread and government issued shelter in place orders or walk in business Das button and abrupt impact beginning with many European markets around March 16th.
The U.S. walk in business and the rest of World began to see significant slowdown several days later.
At the worst pointed the crisis, thus far we were touching year over year transaction decline of about 40% with several countries reported declines of as much as 100% as government. If you stay home waters inhibited business in those markets.
Oh, that's occurred as a direct result of consumers being unable to get to locations and in some cases, even leave at home.
In response to these orders we worked with our agents in government agency emphasize critical importance of remittances and to ensure that business is being an essential service.
In many cases are efforts led to positive results, however, with unemployment, increasing and the timing of shelter in place orders lifting still largely I'm certain business continues to be impacted.
The decline or walk in business is most prominent from mid March through mid April since mid April we've seen the flight recovery wouldn't transaction trends improving the most notable recovery has been in the U.S. market following the Easter holiday.
It does seem that the stimulus checks like a considerable amount of money into the market as we actually saw returned to transaction growth and you adopt them business for a period of time.
Additionally, Europe has also seen from improvements in countries like Germany begin to reopen their economies.
In contrast to the pressures placed on the walk in business. Our digital business has continued to perform extremely well throughout moneygram online the largest component of digital delivered an impressive 60% transaction growth rate for the quarter.
Yeah. This third even further towards the end of March and April.
As of April 27, Moneygram online transaction growth has accelerated to an incredible 88% growth rate.
I'm countries, you're now seeing growth rate exceeding 1000% with many key markets delivering growth of over 200%.
The Peter and warm remarkable about this is that these growth rates continued to be primarily driven by the addition of new customers in total across all channels global transaction volumes are down 19% through the first 27 days, but April.
At the crisis unfolded, we acted quickly to support employees customers and partners on March six reasonable to covert 19 task force to actively managed to developing situation and we started daily leadership calls to execute our business continuity plans and it's your employee health and safety across our global offices.
As a result of around going digital transformation and investments in our cloud based infrastructure our employees in over 30 offices around the world as well as our global call Center operations were able to seamlessly transition to a work from home environment with no impact or ongoing operations or the customer experience.
For our customers, we shifted marketing and operational focus to our leading digital capabilities that enable customers to send and receive money from the safety of their own homes and over 70 countries and the result of this has been phenomenal.
Like most companies, we recognize that our customers are facing extreme hardship the needs of the family friends abroad has only increased and remittances remain vital to developing countries as people send money [laughter] home for life, there, we need such as food and health care.
As a border customers and I kind of need while encouraging shelter in place policy, we've been offering account to account transfers for free and for customers, who may not have access to digital channels. We've been working with the world Bank and governments to ensure money transfer locations are considered to be an essential services remained open.
From an internal expense perspective, we also took brick and proactive action to reduce our expenses and enhance our cash position to ensure financial stability and flexibility over the long term.
Larry will go into more detail, but it's important to note that despite these actions we're not taking our foot off of the accelerator rather we continue to execute our long term digital transformation growth strategy, including delivering a differentiated customer experience accelerating digital growth aggressively signed a new partnerships and developing new revenue streams.
And finally to support our communities around the World Moneygram Foundation partner the nonprofit save the children to support their Terabit 19 relief efforts.
It has certainly been a busy in challenging times, but I'm proud of the team for their hard work and thoughtful actions have enabled us to do there for our customers and our community.
We're certainly hopeful to return to normal life as soon as possible.
No as I mentioned at the start we began the year with incredible momentum and so really has been a tale of two quarters.
Prior to March 15, when curve at 19 really began to impact the business. We were on track to deliver results for the quarter. They were inline with what you see here on the left hand side of the slide improving growth across the business with global money transfer transaction growth of 6% international growth of 11% and.
And digital growth nearing 60%.
We also posted strong sequential growth in the U.S. outbound business improving from a year over year decline in the fourth quarter, 2019% to 5% year over year growth for the quarter through March 15.
I just returned to growth with results of our continued focus on improving U.S. market investments in key receive markets better than anticipated performance at Walmart as well as an ever increasing demand for digital capabilities in the U.S., but the popularity of our app.
And that brings it to the second calendar quarter dramatic shift in the business after code at 19.
At the onset of covered 19 or digital channel continued its strong momentum as moneygram online accelerated the 66% growth. While in contrast, our walk in business experienced a significant downturn due to global shelter in place policies.
Washington customer shifted from smaller stores, the big box retailers and post offices.
Walmart continued its better than anticipated performance through March 15th Walmart the world powered by Moneygram showing transaction growth over the prior year and finished the quarter flat as compared to the same period.
The prior year.
Despite the current impacts from Kevin 19, we remain bullish on the walk in business overall and continue to invest in its growth as an example, during the quarter, we partnered with Ebix to expand our retail distribution coverage in India.
We also see a significant opportunity into growing middle East market was for digital and physical partnership.
Recently launching services that any slot E wallet and Uri.
Lulu financial holdings across key markets in the Middle East in Asia.
Actually bank in Saudi Arabia to strengthen our leading position in that market.
Our digital business had an amazing first quarter and the delivering even better April we're proud of how we go into high growth Finpac startup powered by our leading brand here on slide eight you can see the three components of our digital business Moneygram online digital partnerships and transaction sent directly into bank accounts and mobile wallets.
At quarter end, 18% of all money transfer transactions were conducted through a digital channel.
Even more impressively this percentage has grown significantly to 28% to the first 27 days in April more than doubling the percentage from a year ago.
This amazing growth has been driven by investments in market expansion to now reach over 70 countries digitally. The addition of new digital partnerships in a number of markets.
I guess on new customer acquisition and retention efforts and the strong demand for our leading path.
For the quarter, our digital business reported 57% transaction growth and 17% revenue growth marketing continued acceleration from the fourth quarter of 2019.
Then as we shifted marketing and operational focus toward digital channel as a result that because of 19 crisis overall digital transaction growth further accelerated.
Through April 27th we have posted 75% digital transaction growth with very strong 25% revenue growth.
Moneygram online as our consumer direct channel comprises over 70% of our digital business during the quarter. It remains the most significant driver of digital growth with transaction growth of 60% for the quarter accelerating through an incredible 88% growth rate for the first 27 days in April.
During the quarter, we launched our online capabilities in eight new countries, including Singapore, what are the largest end markets in southeast Asia or aggressive rollout of digital capabilities to new markets has enabled us to provide coverage in all key markets with our online experience resonating with consumers consistently across geographies.
With triple digit growth from both U.S. outbound and international markets, we are extremely well positioned moving forward.
Digital partnerships or another important component of our overall digital strategy and growth story in many markets, we partner with Fintechs mobile wallets telcos and banks to enable their customers to send money cross border from their mobile and online platforms. These partner utilize our leading a seamlessly connect to our customer centric platform and.
Network growth in these channels has been significant as well improving from 25% direct transaction growth in the quarter to 59% transaction growth through April 27.
The third component as our account deposit and mobile wallet receive side services, which are especially important given the current global crisis.
Over the quarter, we continued our efforts to expand or account deposit walk capabilities to more countries and to improve the quality of the service.
Its expansion includes the recent addition of 11 countries would be the direct.
The result during the quarter since two accounting was increased 80% year over year with growth further accelerating into the triple digits in April.
Moneygram has clearly well positioned to continue to capture the high growth Cross border mobile beat the market as you can see on the next slide the underlying trends have been especially strong.
Consumer absolutely love, our digital capabilities, and especially our App, which continues to exceed expectations and deliver strong return on investment.
Mobile app downloads increased 46% in the quarter with transactions through the app, increasing more than 200% year over year.
With 83% of transactions conducted a mobile device. These results are simply incredible the app is reaching a new younger customer segment, as especially encouraging to see the data that clearly shows at once these new customers try to.
Keep coming back because of our streamlined user experience.
Being the best in the industry.
Moneygram online customer retention rate there already much higher than the walk in business and despite a high base retention rates continue to improve for the quarter customer retention rates are up 23%, while monthly active users increased 40%.
This strong growth in customers and transactions further accelerated following the onset of pivot 19 as more customers adopted digital channels.
A question that I've received quite a bit. These past few weeks. It has there been a shift from walk into online from a customer perspective, and the answer is yes, well sort of.
Our analysis of our business indicates that the number of customers moving from walk into online has nearly doubled now that being said that number still only represent about 6% of our entire online customer base.
And at less than 1% of our entire walking customer base. So while we are seeing a shift it is still a relatively small number.
Well, it's too early to determine what the lasting implications from the crisis will be.
We will continue to actively analyze changes in customer behavior and will be responses to their needs. In addition, we have a strong roadmap of digital initiatives, new partnership and country expansion that we believe will be transform into for the industry and our company all of which will enable us to continue to lead and the evolution of good to help you to fee payments with that I'll turn it over.
Larry.
Thanks, Alex.
The table two quarters that Alex described also impacted our revenue prior to the covert 19 crisis or total revenue was trending ahead of expectations, primarily from a continuing strength of or national business.
In fact international revenue was positive on a year over year basis through March 15th and ended just.
Down 1% for the quarter.
Moneygrams total revenue for the first quarter was 291 million down 8% from last year on a constant currency basis total revenue was down 7% from last year.
Another byproduct of this momentum within our international business also continued to grow as a percentage of our total revenue when compared to the full year two back 2019 with us to us business decreasing to less than 5% of our total revenue as of the end of the first quarter.
We also expect that trend to continue.
Lower interest rates have also start to have an impact on revenue as investment income was down 4.3 million from the first quarter last year.
The impact of lower rates on our investment portfolio was Christian.
Factor, we share that revenue in the form of commissions to our official trucks banking partners.
With this quarter did not include however was any meaningful impact from the new business that we have spot.
The new walk in agent to the Alex discussed will help US later this year, but had limited impact on first quarter revenue.
Another major impact on the first quarter worked at Walmart marketplace been went live in January.
Alex mentioned, we showed positive year over year transaction growth through the 15th the March where the Walmart to world product and flat for the quarter, but as we described last quarter. We did see your revenue declined due to lower foreign exchange spreads on this business.
We're very encouraged that we continue to see strong customer preference for our products at Walmart.
Adjusted EBITDA was 51.5 million on a reported basis for the quarter of 3% from 50.1 million last year.
On a constant currency basis, adjusted EBITDA was up 4% from last year.
We improved adjusted EBITDA margin by 180 basis points to 17.7%.
I was 15.9% last year.
What's important about this is that while we had a significant impact on revenue from corporate 19 in the quarter. There was no material impact from any other cost reduction measures that we implemented in fact, none of the covert 19 compensation and benefits changes that we made effective in March and other cost reductions that we made were only up.
Active for a brief portion of the month of Mark.
We took a very proactive stance as soon as the Coke 19 impact so reprioritize preserving cash and lowering fixed cost as quickly as possible because we didn't know how deep the revenue declines would be for how long the impact of the crisis would be felt.
We also wanted to create a significant blocker that could absorbed the impact of this crisis for the remainder of the year.
In fact, we now have the ability to reduce after $100 million in expenses.
Operating expenses if necessary in 2020.
We've also taken steps to bolster our cash position, so just drawing our revolving credit and implementing cash preservation opportunities enabled by the carriers.
Even before the crisis, we continued to see achieve efficiencies.
As Katherine benefit were down 6 million for year over year basis, and transactions and operating support was down 14 million from a year ago.
As a reminder, we booked referral fees as a negative to you know expense. So even without the 12.1 million then Rick will benefit look to expense, we still improved piano by $2 million for about 4%.
While we should see significant cost reductions picking hold in the second quarter, we're still uncertain about where the Twelveth 19 crisis goes from here.
As a result, we're not we will not be read providing an outlook for next quarter.
We remain confident in our ability to ramp up new business and our ability to comparing far off.
What we can't predict as the public health actions around the world and the future economic fallout from those actions.
But as I described the steps that we've taken so far have provider cushion in the future revenue on liquidity should this crisis continue.
The reduction in interest expense in the United States from school revenue impact on reducing its interest expense in the company's bristling credit facility and revolving credit for the remainder of the year, but will have no impact on our second lien facility due to its fixed rate nature.
As I mentioned, our investment portfolio will be impacted by the low interest rate environment and will offset any interest expense benefit from lower interest costs.
The company finished the quarter with a $131 million in cash and cash equivalent as of March 31st.
Under our revolving credit agreement, we must use cash in excess of $130 million to reduce our revolving credit balance in the following month as a result repaid $1 million of our revolving credit down in April. We currently have a balance of 22 more than on our $35 million credit facility.
Also regarding our balance sheet, we have maintained very high credit quality in our age of receivables. Both retail large agents continue to have historically low. This boy would say this is the direct result of our efforts over the last three years.
Proved the credit quality and productivity of arrangement portfolio.
In the quarter, we recorded a valuation allowance of $10.1 billion against our deferred tax asset.
In accordance with debt.
Income statement reflects the valuation allowance of an increase in our tax expense.
This allowance does not however have any impact on our cash position our liquidity for our future tax returns, we will continue to offset future taxable income with loss carry forwards in future periods and now I'll turn the call back over to Alex Thanks, Larry.
As their digital performance indicates consumers around the world are seeing and experiencing the new moneygram modern mobile any driven.
Strategy remains intact, and we're committed to executing as we move from agile management through the crisis into regaining momentum we established to start the year.
No one knows the duration of the pandemic or the shelter in place orders or what the future may bring as a result, we continue to have concerns about unemployment low oil prices and a protracted recovery and or even a resurgence of the virus at a future date.
However, I remain very bullish on our business and on the industry, we've been executing against our digital transformation for a number of years now and have a significant competitive advantage along with an incredible amount of underlying momentum in the business all of which was evidenced by the company's performance for the first 75 days of the quarter and by our amazing ongoing digital performance.
When things returned to normal I'm confident we have the right formula to recover quickly and return moneygram to growth.
Core assets and strength combined with our growth strategy will enable us to seamlessly serve consumers lead the evolution of digital PDP payments and delivered strong results in the years to come in with that.
Turn it over the operator and open it up for questions.
Thank you, ladies and gentlemen, if you'd like to signal for question. Please do so by pressing star Keith I'll, let Brian just wondering your touched on telephone.
Using a speakerphone. Please make sure that your mute function is turned off to allow your signals from return equipment.
Once again.
Our one just a question and we'll pause for just a moment.
Our first question will come from Kartik Mehta of Northcoast research.
Hey, good morning, Larry and Alex.
Hey, Alex I think you said during your prepared remarks that April transactions were down about 19% eight did I hear that played in second half.
How how is volume trending is similar to what you're transactions are trending.
Yes, it's interesting. It's good question, yes, I did say that for.
For all channels through the first 27 days of April collectively transactions were down 19%.
And thats going to obviously be very different by market and by channel.
We've seen a variety of different things obviously in the early stages of the onset here back in March we saw a lot of volatility in a number of different.
Currencies.
And we saw.
Lots of depreciation.
Against the dollar in a variety of other things in many markets and so thats influence.
A variety of shifts we have seen the principal per transaction the size of transactions increase in a number of markets.
At least early on in some cases that has been sustained in other cases.
It's dropped back down again I think it's you know it's interesting to you.
To kind of see how different markets have whether through.
This crisis and.
With a different impacts so.
In general I would say that in areas, where we've seen.
Increased or or.
Continued momentum in transaction growth, we have seemed a little bit.
Uptick in me the amount of money being spent.
And then.
The growth in digital.
I'm sure everybody all the money transfer companies are witnessing that does that resulted in any more pricing competition.
For a change in behavior.
From your competitors.
For from our perspective, we think we have a great.
Pricing formula Good marketing Formula We've entered all these markets with I think an incredible value proposition and one that.
Has been very successful for us and been very profitable for us as well.
We feel very very good about the way that we've positioned the business I think the various components of it and have all been successful in a variety of different ways.
And in general, it's just been absolutely phenomenal performance, both pre and post the because of the crisis I think that the from a competitive perspective.
Really havent felt any impact at all from any shifts and what the competition is doing and.
From all the data that we've we've dug through it looked at most of our growth is being driven by.
New customers coming in and then repeat customers once a month it come onboard so for US it's just market share gains across the board and we feel really excited about what we've done and where it's going.
And then just one last question, maybe Larry with the revenues in April trend in line with transaction.
I'm, just trying to get field floor.
Understanding maybe what the revenue trends Paul that you're witnessing typically spend the money transfer business.
I think with the.
Increasingly.
Growth rate of digital which carries a lower price point.
You are going to see some lag between revenues and transaction growth I think that was also evident in the first quarter and I think.
That relationship will probably continue.
We've been able to compete.
More effectively on price given some of it.
Streamlining we've done and then also the digital business growing so rapidly.
There is also going to move that number so I would say.
Revenue growth.
Lag transaction growth.
Okay. Thank you very much.
The shaded.
Hi start.
Our next question will come from Janssen.
Of JP Morgan.
Thanks, So much hope you guys are all safe and well hey.
Good statistics here I'm just thinking about.
Going into mid March did you see any pull forward of both in anticipation of.
Thanksgiving shut down did you see a little bit of the surge and maybe as a result, but that it pulled forward. Some some impact is trying to better understand some other dynamics as well as I'll have to here with some of your agents being in the dark do you know what percentage of your locations were actually shut down here.
Yes, good question, well actually all other questions.
Happy to try to provide a little more insight into that I mean, we saw some interesting things I don't know that there was sort of a.
Hey, a preparation in terms of consumers sending more money in advance of potential closures of locations I mean, maybe that occurred for a couple of days, we definitely saw.
Third and sends to Mexico and.
There are countries.
As the.
The peso fell quite rapidly.
The.
The result of that was it we did see.
Some increases in volume.
To certain markets in some of the years now back orders in kind of early mid March which continue which continue for for a period of time, but.
Generally speaking I think the.
The markets.
Slowed pretty much overnight and it was kind of a remarkable.
What ones for example in France once they put in the Hilton Please stay home orders.
Business really.
So now that the next day.
I'd say shutdowns of then.
Got it got all over the place I'd say in general maybe 60% of the network is kind of remained open in any given market and that's I think started off a little more harshly than we saw some.
Some reopenings theres always a balance between how many locations and network are active in any period of time in the first place, but clearly there was a variety of locations that were.
That were closed we had we did have a few countries that work just completely flows.
Some some island nations in a few other places where the government is basically shut.
One of the country doubtful embodies day home, but those are mostly short term and temporary.
For the most part.
Governments responded when they realized that close to many locations and kind of inhibited remittances to retail channels and other things those debt.
Reopen to some degree but a lot of it also becomes a little bit of a balance on the.
The agent side as well in terms of whether it's it's worth it from them from a profitability perspectives remain open for a limited amount of services. So it's definitely been.
That extremely challenging then of course.
Other location was open or not.
It was other rules put in place in many many countries where consumers were still very restricted by their ability to even get out and move about which which of course, there sort of just compound the issues. What the location was opened or not that cases that.
They are relevant.
The movement of consumers.
It was felt pretty pretty pretty sharply.
Good of color on that.
January February were really strong so it wasn't like we saw those burst of activity yeah.
March as the spring started the like people start to worry about it I mean actually it was funny it was just or just kind.
Kind of starting off the good quarter run out of the box and it just continued and then.
Kind of fell off so I don't think consumers were getting ahead of us at all.
Yes, no it sounds like it's a shame that that.
Obviously they'll have if everyone.
Yes, Thats why wasn't that much push outs could you more if maybe we'd there's a little bit of pent up demand here at some point or people or smart enough to anticipate thats, what I was thinking thats all helpful.
Alex you mentioned that digital partnerships and whatnot Im curious the pipeline there.
And your ability to.
To get to work and make those happen I'm, assuming that you're seeing some activity there any comments on that and one more question from me Yeah, absolutely I mean, I think is I think as you know, but that did bridal color obviously.
We're trying to.
Diversify the portfolio, obviously as much as possible, where we can we receive side, we're adding as many into account deposit options and while it often visa direct type options.
To give customers that that choice and convenience.
Just into account.
Where where necessary and obviously if you take it out to location.
No money in your bank account or in your mobile wallet can be extremely helpful. And so we're clearly promoting those in a big way and we had a lot of success. The last couple of years in terms of expansion of those capabilities, improving the quality of service and pushing that forward.
We've also obviously expanded moneygram online in many countries as possible from a sense perspective, where we're license than we have fee.
Capability from a consumer funding and authentication perspective to to operate that business, but obviously in a number of markets getting those licenses.
And or.
Permissions to run that business can be complicated and so it's a lot easier sometimes to go straight into.
Market with a fintech or with a telco or bank or any retailer that has an online web site and the platform and the customer base is looking to.
To send money in utilized the moneygram rails, and we've actually seen.
But that's something we've been working on for number of years ahead.
Quite a few success stories out in the market.
And what we're seeing now is an expansion of those.
Either through partnership we currently have moving into into more markets or seeing.
A an influx of requests from providers in various countries looking too.
At our service and and gift going.
To to improve their business, though a lot of it has been.
Sales sales teams proactive outreach.
And pushing for these and at the same time, we're also seeing him a large number of inbound requests as well so.
It's a it's a wonderful way to do it.
Digital partnerships really positioned the brand.
Differently, there value add to send capabilities and just sort of an expansion of the of the servicing capability in market. So yes, we have.
Variety.
That are absolutely booming right now and then we have a whole pipeline of new ones.
That should be coming on board.
All right. Good forgive me for asking one third question, but last one I promise just on the expense. After you Larry just can you give us a little bit of healthcare and thinking.
What your fixed expense base might Amish flux did you have there too to bring costs down I'm sure you doing some marketing for the mother's day and others, but just trying to better sense of.
The leaves you have any expense side. Thank you.
Yeah, what we did whereas we.
We took everything.
To kind of a base level or April so that we could then decide how long we wanted to hold.
<unk> expense rigs so.
We really addressed most of our fixed costs et cetera could I know I don't think I can go through them one by one but I'll just tell you that what we did once we have the ability to flex back up.
If we see a returning to more normal C or we could hold them at their current levels and Thats, where the the 100 million dollar.
That would be as if we felt that.
The remainder of the year.
Yes.
Due to that just from an internal perspective, you know the team here at employees have stepped up in a huge way submitting ideas and thoughts on.
Constantly looking at how do we operate the business more effectively what can we hold back on what do we really need to keep moving forward with them.
Balancing that and it's been.
No just an incredible team effort I'm, so proud of what everybody's been able to to do anytime to know that one stepped up and it's just that have been a really great.
Experience from a leadership perspective to see that and feel is supportive of.
All the employees around the world and all of our partners as well.
So I think it's a big thank you for them for for that so that we can continue to provide a great service. During these very strange times.
We'll hear next from Ramsey El Assal of Barclays.
Okay. Thanks, so much for taking my question today.
Following up on Finjans question on Fintech partnerships is one that you could give us some commentary some color on the referral relationship.
Came in a bit ahead of our model quite a bit ahead of our model due to greater revenues and yes, Mexico quarter that I think you're working with them then or is it will be used.
To process greater percentage of total revenues, just trying to get to the expectation going forward for rental.
Yes, I know we continued to be extremely.
Please with the Revel partnership and all of the.
All the things that we're doing I would say from a.
From a new service I would say was it was a little bit of a relatively quiet quarter.
In the sense of really pushing anything, particularly new into the market or expanding of the service. We did a lot of that in the back half of last year.
And really got going on a number of new quarter horse.
With that service, we also have a a variety of.
Of.
New services in the pipeline and things that we'll be rolling out and.
Your next expanding with later this year.
But from a from a capability perspective from.
From a service quality and from a performance it's been it's been a really good.
No really good quarter, and obviously, a very successful partnership.
Thus far I think.
We continue to flex.
With them as they continue to.
Expand the service and move some things around.
And in really figure out what they want the product to look and feel like and how they want to take that too to various markets. So I think it'll change.
Overtime I think.
The results of.
What we're doing will will will vary by quarter and by month and I also think that overtime.
Where they where the revenue.
[laughter] Contra expense I apologize.
The sort of come from I think it will be generated from different areas as we.
As we experimented and move into.
Two new services and Nucor doors, but yes.
Good partnership and definitely pleased with what we've been doing we had five currency's going in the quarter.
And so there was some growth in trading activity in all five of those currencies will.
Part of it.
But I think will.
We expect that we'll be adding a lot a new currencies in the near term.
Okay.
A follow up I had was about kind of thinking how you guys your position before.
<unk> recovery here from.
That could related impacts and the question is really.
The good sense of how much of the impact you've seen as from kind of quarantine and limited in restricted mobility customers versus sort of a broader macro economic impacts on things like unemployment.
And.
Just trying to understand whether there will be kind of more bounce back when the world turns back line or whether there is sort of a more lingering unemployment driven or macro driven sort of headwind as time passes here and I know that's a secrets of question to answer but that kind of best regards.
Yes, it's a really good question I think the.
What was then I think.
Compounding sort of the analysis has also been what's happened at the almost simultaneously right with with oil prices and sort of.
You know capacity.
Around the world and utilization so.
I think.
Those two issues in a number of market trend across Middle East Africa, even here in the us what what what happens with.
With oil prices and production and other things.
The.
We'll have a lot of influence on a longer term on.
On what happened to that industry I think also when you when you add in.
You know hospitality.
I think and entertainment and then when you add and travel.
Those those are ones that I think are going to be.
I am extremely.
Interesting to see how they do respond and so the backup a little bit answer the question directly thus far I would argue that the vast majority of the slowdown has literally been related to.
Shelter in place and then temporary unemployment.
And.
Literally as shelter in place rules and stay home orders were put in by governments in markets you can see those markets just slowdown.
Basically overnight and so clearly that was not a result of unemployment that was a result, I simply can't go out and transfer.
Money I also think the fact that digital business has sustained its momentum we continue to accelerate shows that.
Consumers by and large do you have the ability to continue to send in other is there is money there.
For that purpose I think longer term you start to get more more serious.
And concerning about unemployment and what that impact will be.
Great example, cruise industry, right and just to pick a nation Filipinos.
Dominate Indonesians and Filipinos there on cruise ships all over the world. Those don't go back to work that unemployment level will sustain itself for.
Okay very long.
Period of time same thing with hotels and and other things the hospitality space right. So when when I look at it Holistically I would say padgett than most part construction as sustain itself and the most part.
A variety of industries have have sustained I think there is.
Set of that will eventually be.
Long term unemployment so shorter be shutdowns are the sooner people can get back to work I think obviously the faster that Ken that can recover but if travel and entertainment a few others don't ever come back I think it will be some subset of.
Kind of what we said getting back to 100% of capacity I think we'll be inhibited by those by those issues and right now I think it's a little bit too too soon to tell.
But I think when they show up in place orders lifts when the locations begin to reopen that'll give us a better idea.
What that what that balance looks like and then what people.
That are unemployed begin to begin to do.
That's really helpful. Thanks.
Our next question will come from David Scharf.
MP Securities.
Hi, good morning, and.
Thanks for taking my question it sounds like everybody's.
Safe over there so.
Hey, Alex.
This isn't much the disclosure in Investor Relations question as it is a fundamental one.
And it relates to some of the characteristics using highlighting and digital and I'm, probably well not in the last three weeks one of those people that attached to overtime.
About where these customers are coming from from digital whether they're from walking cannibalization or new and.
To be accepted.
If I heard you correctly, 94% of you'll get a little users.
New customers new acquisitions.
And then on top of that you're seeing higher retention rates.
It feels like that business, while it's the same brand, it's just an entirely different business.
Then you're walking.
And I'm wondering.
You know at what point.
Because I think it's relevant information they have such different cuts you have to raise.
Is there a scenario in which you can see.
Which are committed to report.
Profitability by channel.
On top of just these transactional metrics.
Because it is a minimum it seems like digital tours.
Actual checking and money order business.
From the standpoint segment reporting.
And.
Maybe any thoughts on that because while the color.
On transaction.
Metrics is certainly helpful.
It feels like the future. This business is more than just a mile channel shift.
Like your catering to an entirely different user base.
Yes.
I think that.
Absolutely the right way look at just just a couple of comments on some of the stats just to maybe provide a little more.
Clarity or some thought on it yes. So what we see is about 6% of the new customers are from what we call the.
Maybe just walk in business and we know that their moneygram customers and they are now the now online.
There is also a subset.
So you say, 94% does that so we say about 70% to 80% any market or kind of knew the moneygram. So theres a theres a blend in the middle which we call toddlers, which of these customers that do both walk in and.
And online transactions kind of regularly. So there is there is a subset in there as well that sort of do both but yes, we about 70, 80% depending on what mortgage you're in.
Our really new to our brand we've never seen these customers before and then I think it's also important to recognize to that.
There is also tends to be a younger demographic as well. So I think when you. When you begin to think about the channel itself in the profitability of the channel.
Getting into the profitability generally start to think about do these customers are with this business is really all about.
I think it was very very long time sort of a concern of ours that you turn on and online business and you just cannibalize your entire space and Thats clearly not the case.
Now how many how many walk in customers we pull from competitors.
X percent of ours are transitioning up to digital how many from other walk in competitors are transitioning up as well that's something that we don't really know that takes a lot of surveys and customer.
Discussions, it's a really flesh out but.
So that'll come longer term as we begin to have some of those those more deeper.
Interviews in conversations but.
When you're seeing.
The incredible growth of the business with 70, 80% of investment thing just new to Moneygram never seen before I think if it does say a lot about the fact that this is a very different channel, it's a very different consumer that.
Is interested in this channel unwilling to sort of utilize it for for the value that it brings and so.
The net of that is that yes, I think over time.
You can begin to look at it.
Almost as a almost as it's ever business I don't think were quite there yet because the vast amount of overlap in the business a lot of that sends do get picked up in cash a lot of our cash then you go through account right. So there's always this ongoing blend, but do you sort of need those channels overlapping to really have the most.
I think dynamic.
Network available.
In any given market, but all that being said we've done a lot over the last several years to push the profitability of of this business I think we've done a really nice.
Cost.
Variable cost structure for it at this point in time, and I think profitability continues to improve.
As we continue to scale return and repeat customers.
Number of transactions by customer improving all of those things drive the profitability. The real cost is on the initial registration and authentication of the user once you have that information.
It's all its a lot more straightforward and obviously we can drive.
Cost down from that perspective segment profitability perspective.
We feel very very good about what we've done with the digital platform and the profitability that is generating.
And there are no thats helpful. I guess, just reflecting on.
Slide that had digital representing 18% of transactions and accelerating the 28 in April.
It's certainly seems like.
In a lot of respects kind of merits, a little bit of more standalone disclosure because it seems like it's really were all of the growth is coming from are you able to.
Give us some sort of ballpark sense for.
The percentage.
Operating income.
By channel.
Not at this time.
Not at this time, I mean, I think that from a marginal perspective, we feel very very good about where that business currently as but you know in terms of contribution or break out of that.
And that we're positioned to do this time.
Understood I appreciate you mentioned under I understand why you're asking the question I appreciate and totally got it.
Yes, no no I mean, let's say I think.
It's really just kind of following the positive narrative that you provided on that.
Yes.
Lastly, I realize with so much.
Global dislocation associated with the pandemic in such an uncertain employment outlook in terms of in employment for plays out.
The oil wars.
You know what from front page news bad news within a matter of days.
Is there too much other noise with with.
Impacting coded to discern whether or not.
The price wars has impacted the middle East in Russian business is even more.
Sure.
Do you have any outlook on that and maybe if you can also.
Remind us what percentage of transactions tend to originate from what you would deem to be.
You know petrol based economies.
Yes, I know that it's a little.
Hello, tricky to break out the second part of your your your question, obviously, there's a lot of sort of oil based economies spread across the middle East.
And.
Parts of Asia Africa, Latin America.
So as to some degree I mean, I wouldn't call an oil based economies and there's a lot of employment.
So it's hard to break that out, but obviously in any given market, particularly the middle east and in many parts of Africa, obviously, there's a there's quite a reliance on that.
And and in some cases right it's not necessarily.
It was African countries, where it's not necessarily driver of GDP, but it is a driver of government revenues. So it's a little bit of a unique.
And maybe that's true for middle East and Russia, as well to some extent, but.
So it's not necessarily.
You know the driver of employment per se, but it is a driver of income for for government institution. So it does have an impact on those markets and that does have an impact on construction projects in further expansion of of industries and kind of how.
Decisions are made.
In our design levels I do think it is a little bit early too.
To think.
Two broadly about.
About that longer term impacts what I can say right now is that I would say going into the crisis and.
And throughout I have not really seen or heard either through central banks are agent partners or others that.
There is any indication that.
That those economies anticipate having a slowdown or making that changes to what their plans have been because of the current price of oil, but at some point on that may be an inevitable decision.
Yeah, I mean, I I would say a lot of those countries had already taken steps because when oil went from 140.
We did see massive changes in employment.
I did see it happen in fact the business but.
Going from 40 to where it is now we don't really see an impact either.
In the the kind of level of activity or the ability of us to actually source of those currencies either I think.
It's holding in there, but I think it was because they had already.
Taking a pretty dramatic steps because getting things down.
Got it okay. Thanks, very much guys.
Our next question will come from Bob Napoli of William Blair.
Good morning, everybody congrats.
Question on Dave just on liquidity and capital that you would I think I mean, you have a payment team to the government or 55 million in November and assets.
That was picked back before but maybe just some commentary on.
How you're going to ride this out.
From a balance sheet perspective.
Yeah, we don't have a lot of ability to.
Talked about that actually what we are engaged with them almost spot on.
Weekly basis, they are going through process.
The government the government yeah.
But there's nothing new for us to report.
Since our last disclosure last quarter.
Our work we're doing agreement were.
We're lining up liquidity.
But.
We ultimate disposition of that is still too early to tell.
When you say lining up to liquidity I mean, what do you need.
For the company to Phil.
Like it has.
Staying power unit.
Do you need to rated this means additional capital.
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In order to ride this out or do you mean, how how else would you manage through.
Yes, I say diseconomies stays pretty well for the next.
Year or so.
Yes, I mean.
I think a couple of things first of all.
We have.
I think we brought into them.
Some new investors in the past year that I think continue to be very supportive and bullish on the story we've had great support.
From our new.
Debt holders as well continuing ongoing dialogue with them and look I mean, everybody is aware that this is a this is a global pandemic crisis. This is not a reflection in any way at all of.
Moneygram the company the organization or anything that we've done in particular too.
And to end up.
In the position that we are with respect to decoded 19 crisis I think everybody is more than aware of it everybody is.
Very supportive and I think we've had nothing but positive.
Log.
Thus far obviously the government payment is the government payment. It's obviously a large number it's something we've talked about before we've had the dialogue with the government.
At this point.
They've been willing to push the payment of down the road to continue discussions and we continue to be in those discussions and we will have.
We will get into a conclusion on that when we get to the conclusion on in the meantime.
We continue to operate the business and I think they've done a really good job of that.
Okay, and just I was just a follow up on.
Digital business, if I put in the revenue growth in the transaction guys down 19%.
Shared that she can give some more assuming you get a little more.
Q1 metrics on that business it would be.
Helpful, But I mean, its revenue transactions are down 19 with somewhere in that 30% range, 30% to 35% range for.
Revenue declined a reasonable.
And the run rate basis.
I'd say, that's I don't I can guide you to that but I would say.
Thats, probably too big a number.
Okay.
And have you seen.
Any signs of.
That revenue number.
Bottoming out in any signs doubled.
On a weekly basis, the bid and improving wall.
Yes, I think.
Yeah, I might you know I I went through that a bit in my prepared remarks, I mean, I think it is important we were.
We have time.
40% declines and that was kind of early days on the first few days.
And Mark the first couple of weeks March early April yes, the business has performed actually considerably better it really since mid April.
And we do have.
Ramadan began and then we have mother's day is coming up and Easter holidays that we've been through as well always has a little bit of.
Variety and also a little bit of volatility and the results on kind of any given day.
As you kind of grow through the different time periods, but the business has been stronger.
Considerably stronger and I'd say.
19%.
Through April 27.
It's actually really really good if you consider the first part of April was was.
Very similar to mid March, which was down and kind of the 40% so.
It definitely has recovered and I would anticipate that.
It will continue to do so provided that these shelter in place orders lift in that things go smoothly around the world as as.
Things begin to open back up and then I think as when the world slowly open back up it can only be positive for business trends on the flip side right and if those don't go well or there is a surge in the virus or there is other issues that come up and we may see when they see it pull back down but at this point.
And this is not a this is not a forward looking statement, but at this point, we've seen no we have path towards the.
But that's not to say that it couldn't get worse going forward, but at this point we have.
Of course.
Hi, Thanks, I don't think I appreciate it.
Yes.
Our next question will come from Rayna Kumar of Evercore ISI.
Good morning, Thanks for taking my question I several weeks ago, the World Bank capital employed estimating that global them, having said that down 20%.
He is one JV that as a good indicator of how your business could perform this yes.
I would.
I would argue that.
That.
A projection from from the Royal Bank I think we've been on.
A number roll down calls in fact, Larry has been on several amendments speaking directly so I'll, let him comment more broadly.
Listen I think if if the market continued for the rest of year. The way. It has an april than I think thats a property in pretty good number of things recover I think that that's way too pessimistic, but.
I think again I think they're trying to give us some perspective, obviously the Royal Bank is very very concerned about the wellbeing of of.
The underprivileged all around the world and but the number of people that rely on remittances and the GDP the number of economy because it remains the so.
Money isn't moving there is cause for alarm and a lot of concern so I think that.
The World Bank as always focused on that but.
You can kind of more directly on the calls you've been on the way. They do that calculation has a lot to do with face value sense and.
That's not really the primary driver of revenue in most cases.
So people are spending less but theres still spending it affects.
It's companies PML select differently than its too and I think what they're really referring to is more of a reduction in the funds available to send their also using models that were.
Based on the great recession.
And this is going to play out differently because it's very.
Different regionally.
So there is hard to its hard to argue that because we're seeing.
Sort of it but you know at that level now, but I would just tell you that.
As to be improving so.
Early indications would suggest that that's going to be.
A bigger impact than than what we would see.
Even if it doesn't get to normal that seems a bit severe.
Got it very helpful. Can you provide a quick update on your compliance.
Anything else.
Sites will be in compliance with noble hard prosecution agreement with the department of Justice.
That's a.
The broad question I would say from a you know a level of activity I think that there are a number of.
Adam.
A number of ongoing discussions with the monitor across a.
Wide variety of.
Okay areas.
That sort of all fall under the global compliance program I would say first and foremost are our performance against global fraud has been absolutely.
Phenomenal we have great results.
From the financial truck program, which is kind of the heart of the matter.
I think that that is.
It's really exciting to see we have about a year left with.
With that EPA in them on or at this point timing a variety of different areas of working on I would say that theres no single large projects underway. It as a variety of small ones and some ongoing system changes ongoing process.
Improvements and structural changes and then ongoing monitoring and feedback from the monitor.
But nothing that sort of stands out as a as high risk at this point as far as I'm concerned.
That's very helpful. With one final question from me could you remind us.
Patients on your desktop and then.
Like mobile.
Right now you know.
One of our.
If we continue along this path.
Our our covenants seem adequate for the remainder of the year.
I think you know we went into this with.
Adequate cushion so it really will be a.
The function of the duration of this when at this point.
We don't perceive a.
A bridge.
Thank you.
Our next question will come from Mike Grondahl of Northland Securities.
Yeah. Good morning, guys, Hey, sorry, if this has been asked but.
Uh huh.
So to retail agent customer.
In Europe, where we'd be willing 20 twond.
I think there.
One at the moment that's.
Yes, what our one or two maybe that I would say our.
Sorry, I'm pausing on the question, because there's always ongoing contract renegotiations and discussions and extensions and all sorts of things happening in kind of think of actually.
Which contracts are definitively.
Expiring and if there's there's maybe one or two.
Yes, the normal kind of normal nothing nothing unusual.
Got it similar for 2021.
I'm sorry.
2021 of only answer 2021.
Yes, I'd say, yes.
Okay, Hey, thanks, guys.
Yeah Okay.
I think were overtime here, so, we'll probably wrap up with that one operator. So thank you for your time everybody appreciate all the questions and.
Everybody stay safe and and healthy thank you.
That does conclude today's teleconference. Thank you all for your participation you may now disconnect.
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Oh.