Q2 2020 MoneyGram International Inc Earnings Call

You are currently on hold for the Moneygram International incorporated second quarter 2020 earnings release Conference call. At this time, we're assembling today's oregons I'm pleased to be other we shortly we appreciate your patience and please remain on the line.

[music].

Good day and welcome to the Moneygram International incorporated second quarter 2020, <unk> earnings release Conference call Today's conference is being recorded.

I'm all participants have been placed in the listen only mode and the food will be opened for your questions. Following the presentation.

It is now my pleasure to turn the flow over to your host Mr. Stephen Wright.

Strategy can communications. Please go ahead Sir.

Good morning, Thank you for joining us today on the call with me are Alex Holmes, Chairman and Chief Executive Officer, Larry Angelilli, Chief Financial Officer.

<unk> military <unk>, Chief operating officer, and leader of the company's digital business.

On the Moneygram Investor Relations website, you can find earnings press release, the presentation, which is intended to supplement our prepared remarks during today's call and to provide the reconciliations between GAAP non-GAAP financial measures.

I will refer to non-GAAP metrics on the call. The non-GAAP financial measures provide it should not be considered as they substitute for or superior to those prepared in accordance with.

Yeah, good and additional clarifying items eight investors and further understanding that companies for blocks. In addition to the impact that these items.

Financial results.

Please note that today's call is being recorded during the call. During this call we will be making forward looking statements, which our predictions projections or other statements about future events.

These statements are based on current expectations and assumptions that are subject to risks and uncertainties actual results could materially differ because the factors discussed in todays earnings press release.

Made during the conference call and the risk factor section of our form 10-K forms 10-Q.

There are reports and filings with the Securities and Exchange Commission, we do not undertake any duty to update any forward looking statement that would that I'll turn the call over it Alex great. Thank you Stephen.

Good morning. Thank you all for joining us today I certainly hope you are all well and safe.

First and foremost their health safety and livelihoods and our customers employees and partners remains our top priority at the Cobot 19 pandemic continues to evolve with nearly 80% of all global remittances sense in developing countries demand for our affordable services has never been greater as people know developing world increasingly rely on this critical.

Income stream.

Every day I'm humbled to hear a powerful customer stores and trials in science at Moneygram plays a central role in their lives letters to health care executive sending money to an aging parents in India or younger reset helping to support our grandparents in eastern Europe, we have a unique lens into how global macro economic factors impact everyday lives.

Im extremely proud of how we've come together as a company over these last few months to serve our diverse customer base of tens of millions of people rely on our central services for life daily needs.

Well here throughout the call today, it's a very exciting time to be at Moneygram and I'm incredibly thankful to our global team members, who worked so tightly to execute our strategy. During these difficult times and help enable the company to deliver very strong results for the second quarter.

Importantly, we returned to year over year revenue growth in June led by strong 10% money transfer transaction growth and this momentum on momentum has not only continued but also strengthened in July in fact July is now our largest july ever for money transfer transactions and also the single largest transaction month that way.

We reported in over two and a half years and that's with one day left to go.

This return to revenue growth has been driven by the phenomenal expansion of our digital business as was the continued improvement of our retail walk in business in many markets around the world.

I'm also extremely pleased that we reported year over year constant currency adjusted EBITDA growth of 5% for the quarter continuing the momentum from the first quarter. This growth was driven by the resurgence of our money transfer business. The annual management of our operations throughout the crisis and the ongoing operational efficiencies. They continue to be delivered from our.

Digital transformation.

As a result of our strong adjusted EBITDA. Our credit profile has also significantly improves we achieved a better than expected quarter in cash position of over $130 million and fully paid down our revolving credit facility.

Overall, despite the terrible ongoing covert 19 crisis I'm very pleased that we were able to deliver exceptional financial results for the quarter.

So taking a further look at our performance during the quarter. When we last spoke we reported that we had delivered a much stronger back half of April then what we saw from mid March submitted for all that momentum continued to accelerate into may and further strengthened in June.

The turnaround in trends has been incredible increasing from a decline of 17% in April to a positive 10% year over year growth rate in June and as I mentioned earlier that has continued to accelerate in July clearly digital has been an amazing success driving phenomenal results, including 106% digital.

For the quarter. In addition, the more recent recovery many parts of our walk in business has been an important contribute to the turnaround as well.

We were pleased to see increased strength from our U.S., Canada and European outbound send markets, while strong received in countries, such as Pakistan and Bangladesh helped drive an excellent quarter. Since I'm. You asked are driven by a return to growth for sends to Latin America, and the Caribbean, which was also great to see.

Over the last few months a number of headlines have suggested that the current of ours pandemic has transformed the company and the industry.

Although the pandemic has clearly accelerated the changing consumer behavior. This is much more than an overnight success story for US we began to thoughtfully lay the foundations of our digital transformation four years ago and have focused on three areas first we invested to deliver the industry best customer experience and build a direct to consumer digits.

No business for the startup agility powered by our leading global brand and network.

As a result of these efforts even prior to Kevin Knight team, our intuitively design product and growing customer awareness was already driving extremely strong digital growth rates than as a crisis arose our quick action to further shifts or operational resources toward digital business led to a rapid acceleration of digital growth.

And the third major action that has led to our turnaround has been our efforts to overhaul major send and receive markets, particularly with new wallet and account deposit partnerships.

These three overarching actions and put us into an extraordinary and unique position to seize the moment and ensure consumers are able to transfer money from the comfort of their own homes.

Diving into the details of each of these three major actions you can see here on slide six some of the primary drivers behind our consumer and customer experience improvements that have been critical to our turnaround.

Our focus has been on design and personalization.

We incorporated the best in class examples from other leading consumer brands and then adapted does proven technique for our customers by soliciting their feedback at every step in the process. As a result, our unique loyalty program continues to experience rapid growth as we expand to more markets and also seamlessly integrates a program with our.

Cities.

Excitingly loyalty members are accounting for an increasing percentage of our overall business.

Another critical component of our customer experience enhancements has been the user design and the simplicity of our App.

Proud of our product team and their relentless pursuit of customer feedback to make this the best user experience in the industry.

As evidence of this success, we recently surpassed 100000 reviews with incredible 4.8 star rating on the Apple App store.

And finally, whether through outlet vacations, personalize birthday email text and forming other completed transfer or live chat support we've invested to enhance and personalized our customer communications.

These consumer focused product enhancements are having a positive impact on the entire business and our some of the top drivers of our fantastic digital growth.

No as I mentioned, our digital businesses had an incredible quarter, posting a 106% digital transaction growth up from 57% in the first quarter.

Our digital revenue growth increased to 64% from 17% in the first quarter and we anticipate that revenue growth will continue to accelerate in the third quarter.

So let's take a look at a component of our digital business first Moneygram online our consumer direct channel.

Comprising over 65% of our digital business delivered incredible year over year transaction growth of 104% for the quarter accelerating from a growth rate of 60% in the first quarter and importantly cross border year over year transaction growth month to date through July 29.

Exceptional 205%. This is an acceleration from 185% that we just on June.

As Bill discussed on the next slide this profitable growth engine is driven by our uncompromising focus on delivering the best product offering to our customers.

Expanding digital partnerships remains a critical component of our strategy and our efforts here have also been producing great results.

Transaction growth from our digital partnership improved to an astounding, 97%. This nearly triple digit growth rate marks a rapid acceleration from the 25% growth rate, we reported in the first quarter.

The third component is our account deposit mobile wallet receive side services. These partnership integrations with companies like visa and our related fast and products have been major strategic initiatives part of our digital transformation. These past few years in fact, our average daily visa direct transaction volume in July has more than doubled since the first quarter.

When global shelter in place policies implemented earlier this year awareness for our capabilities in this channel rapidly accelerate once again, our prior investments enable us to help capitalize on the opportunity and see the moment.

Now the result growth incensed to accounts and Wallace accelerated to 148% in the second quarter compared to compare to the same period last year.

But the ended the quarter digital transactions represented 27% of our money transfer transactions a significant increase in an 18% reported at the end of the first quarter.

It's important to reemphasize that our digital business has become a significant portion of our business and is contributing meaningfully to both the top and bottom line.

Larry will go into a bit more detail shortly but in the second quarter, our digital business surpass the margins that we see in the retail walk in business.

Unpacking this a bit further the digital business is simply very different from the walk in space. This business is not about revenue per transaction, nor does about fighting for the share of wallet at the point of sale, it's about creating a frictionless customer experience and the digital business. We're measuring success in a similar manner to the way in which many other leading.

Our company's measure their success total customers monthly active users transaction frequency and customer retention.

And in contrast to many startups that haven't achieved profitability. We're also focused on the gross margin of this business because profitability matters, especially as our transformation accelerate.

Because our relationship is established directly with the consumer we have less commissions less support costs and less infrastructure costs in essence, we can charge less because it costs us less.

Hi, customer acquisition retention rates are really the best metrics to underscore the strong return on investment that we are achieving from our focused on delivering industries best customer experience.

Consumer direct channel has nearly 50% higher customer retention rates and our walk in business and these customers also complete 34% more transactions per month than the average walk in customer.

Our digital business as quickly gaining more customers, who are staying with the brand and transacting with us more often.

As you can also see our customer centric happened has been critical to our growth with a 220% year over year increase in customers transacting through the app in the month of June.

Over 80% of Moneygram online transactions are done on mobile device and this consumer direct channels is tracking a new younger segment of customers to our brand.

Once individuals' try moneygram online they keep coming back given the simplicity of experienced the affordable prices and unparalleled receive options for family and friends.

As a digital business grows our third over arching action to return to growth has been to further enhance our leading distribution network in expense partnerships in major markets.

We have overhaul major receive markets by integrating new Washington agents, along with important account deposit and while that partnerships in markets, such as India, Philippines, Pakistan, Bangladesh in Egypt.

Enabling consumers to receive fund digitally has any major component of our strategy to accelerate digital growth.

On the Cobot 19 shelf in place policies arose we were once again able to capitalize on our prior investments in these markets.

To sum side, we focused on expanding both digital and physical partnerships in many parts of the world in the Middle East, we've expanded with leading companies such as digital financial services and Eddie for a lot Karachi Bank and Lou Financial group.

Partnership the leading Fintech players and Asia, such as non paying GMI also highlight another critical component of our strategy as we seek to integrate with high growth companies to quickly and affordably acquire new customers.

Amidst this incredibly productive year, new signings integrations. We've also renewed a number of our major contracts with partners such as the UK post and we continue to partner very closely with visa to expand visa direct capabilities to additional corridors.

These new digital and physical integration signings and renewals on both the send and receive side complement each other in are clearly contributing to our success in scaling major quarter horse end markets.

Excited about how to focus execution of our strategy in close partnership with leading companies around the world continues to drive results and collectively helped to enable our return to revenue growth in June and further carrier momentum into July.

Ill turn the call over to Larry now to walk you through the financials. Thanks Alex.

Alex described moneygram experienced a significant turnaround in revenue.

Operating income and EBITDA over the course with second quarter.

Each month in the quarter, we saw improving trends in revenue to the point where in June the company had year over year growth in almost every major money transfer categories.

While reported revenue of 280 million for the second quarter, appointing 20 was down 14% on a year over year basis.

It was almost all related to the negative impact to cope with 19 in April and lower interest rates on investments in June and continuing in July the company has accelerated from the growth rates is achieving even before the pandemic.

In addition, moneygram is not growing and boardwalk and digital markets.

As well as among existing agents and new relationships.

While triple digit growth rates in digital are continuing there'll be augmented with increases in same store sales and the walk in business.

The exception to this is the U.S. do us market with continues to decline, but is now trending lower than 4% of our total money transfer revenue.

And the second quarter. We also began to ramp up revenue from some of the new agent signings such as those with Alex just discussed.

All against the backdrop of a broad range of geographies.

As a result of the nearly 29% decline in revenue up from corporate banking in April total revenue for the quarter on a constant currency basis was down 13%.

Last year and as I mentioned, another byproduct recovered 19 was the significant decline and interest rates, which caused a reduction in investment revenue of approximately 70% for the second quarter.

And especially encouraging aspect of the company's broad based growth as a digital properties are achieving scale.

And they also generated profit margins that are better than the average margins in the traditional walk in business.

So while digital pricing tends to be lower than walk in pricing to the consumer Moneygram is currently able to maintain or increased profit margins and its newest and fastest growing business.

As we stated in the past let me Graham is designed this digital offerings with a lower cost structure based on our acknowledgment that future opportunities in this market would go out of those with competitive prices.

And while in the short term lower pricing tomorrow or the growth rate to total revenue.

Hi, Graham has been offsetting this impact with rapid transduction growth well in excess of growth rate.

All of our walk in markets.

So this resulted in an increasingly significant contribution to earnings.

And cash flow for the second quarter, and we expect us to continue.

The trends are also encouraging in Walmart sport inspired of new competition from the Walmart marketplace, our volume of US up on transaction was actually higher in June than last year.

Developing into a trend as July is even stronger than June at Walmart.

And as we've described in the past the Walmart marketplace is designed to keep fees the same among competitors but offers.

Open competition in foreign exchange.

We did that have lower foreign exchange revenue in the second quarter, two were lower effect spreads at Walmart anti infective covered 90 in April however, by the end of the second quarter or customer town at Walmart was virtually unchanged.

Before we are from before the marketplace was even started.

In fact, we continue to see our product at Walmart overwhelmingly preferred by customers and associates, providing the basis for continuing growth in transaction.

The strength and over Walmart volume provided the partial offset to lower FX reps in the quarter.

Was noteworthy about this quarter is that moneygram.

They transfer business was experienced a broad based recovery of across both its product offerings and its geography. This will be increasingly important in the face of future challenges from economic impact it's over 19 and continued low interest rates.

When we discussed our strategy for navigate and cover the bank team last quarter. We described the cost reduction program the totaled almost $100 million in savings over the last three quarters of this year.

As the business showed steady signs of recovery and ultimately return to growth in June we realize that this amount of savings we might be required to preserve our targeted performance for the year.

As we announced in June we restored salaries were 100% of our employees effective at the end of the second quarter.

Also crude for a special compensation plan that could potentially restore a retroactive compensation for all employees.

Withheld during the quarter.

As a result compensation and benefits were flat to the first quarter and down less than 1% on a year over year basis.

Even after this reinstitution of expenses Moneygram reported adjusted EBITDA of 56 point, Fourmillion and an adjusted EBITDA margin of 20.2%.

This was an increase of 4% from the second quarter end up 10% sequentially from the first quarter this year.

Not only where these results achieved without any reduction in comp and benefits expenses will be included an 11 million reduction in have been investment revenue on a year over year basis.

This is another indication that not only of Moneygram returned to growth.

Marketable growth.

And is producing increase quality of earnings.

Constant currency basis, adjusted EBITDA was up 5% from last year.

Transactions that operating expenses were lower by more than 60% when compared to the second quarter last year, while we expect that some of these expenses will be gradually restored this year, if and when conditions warrant.

We've also learned more about our expense base, we've discovered new efficiencies.

Eminent.

And they can be a permanent component of our margin expansion strategy.

Our experience this quarter also confirmed our prediction that we were building a scalable cost structure and that a return to revenue growth would provide for higher EBITDA margin and improved earnings and cash flow.

That scalability supported the company's pre tax operating income of $42 million, a 54% increase over last year.

Reported EBITDA for the quarter was 50 million, which is up 23% from last year after adding back last year special pension charge of 31 million adults.

The company generated $25 million, an adjusted free cash flow in the quarter, an increase of 24% from last year.

We use that cash to pay off our revolving credit, though during the quarter. This reducing interest interest expense as well as reducing our leverage. In addition, the company did not elect to pay interest in kind this quarter, adding additional support to meeting our financial covenants.

Another result wasn't Alex mentioned that the company's cash position remained unchanged at March 30, Onest of approximately $130 million even after all these principal reductions.

We announced this week department of Justice was deferred our final forfeiture payment to may 9th of 2021.

This provides us additional confidence that we can maintain our normal levels liquidity in the next year and can buffer volatility that may still arises because it was 19 crisis continues.

Ultimately moneygram through its performance in the quarter significantly improved its ability to withstand future challenges that may arise from recorded 19 pandemic.

With continue with add to a management of our expense base to support unexpected decrease in revenues I mean, we've improved our credit profile to comply with our financial covenants.

Well, we believe that our current level of performance are sustainable for the remainder of this year. We also acknowledged that the crisis is far from over.

And the economic impact is still developing.

As a result, we will not be providing a specific outlook for next quarter or for the fiscal year. However, if revenue trends in the business remain at their current range.

Then we anticipate sustained adjusted EBITDA growth in the third quarter.

And now I'll turn the call back to Alex.

Great. Thank you.

I'm thrilled with how the new Moneygram is continuing to resonate so positively with consumers around the world in summary, as I reflect on our incredibly strong quarter. The state of our business is strong we returned to overall revenue growth in June and July is already a record setting month for US we reported adjusted EBITDA growth for the quarter and delivered improved.

EBITDA margins regenerator higher cash flows and began to de lever and our direct to consumer digital businesses, delivering consistent triple digit growth rates.

If you look at our digital business as a standalone entity with 106% digital transaction growth, 220% app customer growth high customer retention rates and strong profit margins and then simply compare those metrics in our business to those of other digital players in the industry and their company valuations our digital business alone should be.

Valued in the billions, which easily highlights the significant delta to our current company valuation.

This strong momentum combined with our continued execution suggests to me that higher valuation for Moneygram is more than warranted and with that I'll turn the call every operator, and we are ready for your questions. Thank you.

Absolutely Sir.

If you would like to ask a question. Please signal by pressing Star Wars on your telephone keypad, if you're using a speakerphone. Please make sure. Your mute function is turned off to allow your signal to lead our equipment.

That's star one to ask a question.

We'll take our first question for Mr., David Scharf JMP Securities. Please go ahead Sir.

Hi, Good morning, good morning, everybody. Thanks for taking my questions.

Okay, everybody, saying well unsafe.

First off.

Just just as a.

Maybe a little little more background and kind of the.

Digital use or I know in the last couple of quarters I think you had mentioned Alex that.

Sort of upwards of 70%.

Of the users for new to brand.

It wasn't necessarily cannibalizing.

Listing walking customers.

I would imagine those percentages, maybe shifting around quite a bit when you're dealing with this type of growth, but but can you provide more of an update on.

You know both.

Who is using this they are they new or more of them coming from walking.

You know covert.

Exactly this shift in secondly, SEC.

A little more color on App.

What types of core doors.

Or dominance and or receive markets.

Might be behind a lot of the gross or whether it's just broad based.

Thank you.

Sure. Thanks, David.

Yes, I'll go into.

Some detail on all those component and then I think it really is.

Consistent with what we described in the first quarter, if anything actually interestingly enough I'd say the cannibalization rate as we've moved through the quarter and then into July has actually gone down a little bit.

From where it was trending.

When we last spoke kind of at the at the end of at the end of April there. So.

It's really interesting from that perspective, because it really is a broad based.

Growth trend that we see and I would argue that the quarters.

For the most part really do reflect in kind of mirror, what you see in the walk in space made your consistently seen European outbound trends U.S. outbound trends you can add on trends middle east et cetera through any of the digital channels really mirroring and kind of.

Looking a lot like what you see nutritional walk in space. So there's not really a lot of variation of differentiation. There obviously the growth rates are significantly different and the customers that.

That we're acquiring seem to be coming from pretty much every every walk of life and sort of every.

Geography.

Migration trend pattern that you'd probably.

I want to financing in the business right. So you know the U.S. is online is definitely going to Latin American Mexico, intending to India Pakistan.

You know parts of Africa, Europe, et cetera, I mean kind of a normal Asian markets.

And that's just kind of overlays throughout so these customers definitely are.

I think coming from a lot of the.

Smaller niche brands in the walk in space a lot of them are probably also shifting from.

Some of the bank.

The bank.

Online apps and some of the other places that have been seen before.

I really think that the product the pricing and kind of the acquisition strategy. We have around I don't have resonating extremely well. So it really just kind of a broad based shift and I don't think that theres really any.

Anything unique, but I would call out that would sort of say that.

It somehow.

And one off type thing.

Got it doesn't know the that's helpful and maybe as a follow up.

On the customer acquisition strategy.

Thank you had mentioned two thirds of to transactions in digital our direct to consumer.

Can you expand on the partnership side and whether that's going to actually increase I'm trying to understand because I haven't seen I seem to ads.

For for Moneygram walk in.

Services I haven't seen anywhere on the digital side and maybe if you can expand a little.

On the customer acquisition strategy in sort of sure sure sure absolutely when you ask you asked.

Maybe essentially it or not and you sort of at two different questions. There, they're both sort of deeply unique I'll take part of that and then I'll actually let Camilla talk a little bit about the other part so.

When it was with respect to digital partnerships I think as you're probably more than where.

Licensing in this industry is a critical aspect of.

Operations in any country and so when you're in a lot of foreign jurisdictions and market. There are lot of restrictions on has allowed to.

Actually be the license holder in those countries and so right. We've tried to place our Moneygram online platform to go directing market anywhere that as possible to do that but obviously, there's a number of jurisdictions, where that's just going to be extremely difficult to do and so finding a partner typically and hopefully right one with a very strong platform with a customer base related.

Two.

A corresponding product.

But not necessarily money transfer product. So they have a a set of consumers and then adding our service.

As a as a platform inside of the upper inside of the web page to enable those customers to send money.

It's really kind of what that digital partnership piece is all about and I would say that has.

We've improved our service the quality of the product in the integrations and really improved our focus on that we've been coming up with.

Number of partners across.

And just increasing the amount of markets.

We expect to that that trend to continue.

And that's actually an interesting segway, because you get the opportunity to not only.

Kind of leverage and promote to that customer base, which can also do that in a very direct way.

Now when you're in your Moneygram online platforms, and you're all over the world and you got to attract customers. That's obviously, a very different approach and I'll, let Tom ill talk about that a little bit because I think weve shifted from probably what people would traditionally think you need to do in that space to really when share of mine from from a customer.

Thanks, Alex Yes, definitely David I'm I'm glad you mentioned, the AD, which has a brand relevance better than that and the walk in and the digital space, but acquisition and marketing, it's really very different digital.

Hi, Thanks for example on a global send money our money transfer our sites shows up in a very high organic acquisition right consumers clinical path ahead.

Perhaps other smaller competitors our site as always first second or third possession.

It's actually ranks much higher than set apart more analog in terms of culture, and perhaps offerings more analog competitors. So we're using pandemic has taught us a lot when you've been very grassroots type marketing activity were very strong in social media right now we just introduced the loyalty.

Refresh.

Referral program. So we feel very good about the type of acquisition.

We are seeing and the return rate really to the fact that these customers continue to pick our grand opening up again.

Thank you.

Thanks.

Hi, good folks if you would like to ask a question. Please press star one if you find your question has been answered you may remove your so from the Q by pressing star too.

We will take our next question from Kartik Mehta with Northcoast Research. Please go ahead.

Thanks.

Alex you talked about June being good in July obviously, continuing that trend I'm wondering are there specific quarters, where you're seeing strength and are there any core doors, where.

Maybe might might still be weak because of the crisis.

Yeah.

I think that.

Without going into a lot of specifics.

Just generally speaking us outbound as a great example has been extremely strong European outbound has been really really good I would say perhaps in contrast.

We've seen.

Some goods recoveries and.

Some aspects and parts of the middle east, but not nearly.

Back to the strength that I would like to see.

From that region I think Asia is probably the same theres some mixed results there.

Some countries have that's kind of recovered and returned to growth and others are still really not back where we want to be.

And that's a little bit different across channels as well in some in some instances the walk in spaces is still really down a lot of countries that have had.

Significant shelters in place orders have been challenging good example that might be Oman.

On was.

Closed for very long time, it reopened and then closed again for a couple of weeks as governments kind of battle with.

The process to eradicate.

Kobin or eliminated from from their borders as possible. So.

I think its examples.

I like that that tend to be spotty over the world and so you've got the digital properties in those countries, you're seeing strong growth and a lot of a digital properties, but the walk in space can be.

A little bit challenged steel I'd say the same is really true for a lot of the receive markets as well are you know if you look at parts of Africa Latin America.

India is another good example, whereas the walk in space, which has been really challenge from a cash pickup and pay off perspective, because of the rules associated with shelter in place policies from the governments, but we're seeing a surge in.

Account deposit and wallet type transfers into those markets and I think that Thats also.

Potentially in my mind anyway, driving some of the online since I behavior as well as.

Little bit more intuitive I think in many cases to send online to account.

Even though you know cash to account is pretty prominent but when consumers are struggling to get to some locations in the long end space as well.

Kind of a natural when when that everything sort of migrates that digital to digital and I think that that's what we're seeing.

Generally around the world I highlighted a couple of key markets that have just been exceptional for us, Pakistan and Bangladesh and have been huge call out I'd say very.

Very strong return to growth in the Philippines, Mexico has done extremely well for us and these are obviously significantly large market for all very competitive mind you. So by no means suggesting that were unique in that but I think that at the end of the day.

When you are larger markets are.

We are seeing recovery and sustained growth and whether that's from.

In the traditional cash pick up or whether that's continuing to that and momentum in the digital side.

It's good to see.

Just just across the board and I think as I mentioned in July.

Literally the single largest July we've ever had for money transfer transactions and we still don't even have today done yet so.

It's really pretty pretty remarkable and I think reflective of all the hard work we've put in place and then also recovery in a number of these these markets.

And Alex what when you look at your digital transactions, how many what percentage would you call completely digital by that that where it is not truncated at a physical location because I know having your physical location is a big advantage for you, but I'm wondering if you're seeing and changes in consumer behavior, where.

The transaction is.

Hundred percent digital.

Yeah, it's a little so little difficult to answer that question because of just kind of the diversity of the send and receive markets and I think we're also seeing in the walk in send locations. We're also seeing a larger shift to.

To digital receives the receive side right. So.

It's a really kind of an amalgamation of all those I would just I would say that digital to digital is definitely increasing.

Digital the cash is probably.

As strong as has been and then I would argue that cash to digital is on an increase as well.

Hey, Thank you very much appreciate it.

Thank you cards.

We will take our next question from Pinsent, playing with JP Morgan.

Please go ahead.

I can't say operators Kinda Clay radio voice.

I want to [laughter] guys the.

I'm really happy to hear a lot of these trends just trying to understand it a little bit better based on everything you guys talked about we've seen visa Mastercard with.

Very strong debit trends improving going starting in mid April as well when PPP kicked in.

It sounds like you're not cannibalizing your walk in a lot of your peers wells. If you all digital improved so just trying to understand how much of it is you taking share from traditional channels for bank channels structures.

Stimulus impacting some of this.

Well I don't know if you've been able to study that but just just I guess the sticking there so.

Annuity question, how does that make sense.

It sounds like a lot of sense and I do I do think one of the most difficult things in that industry always is a is figuring out where you're at where your customer came from obviously I think we touched on this a little bit on the last quarter call that we have phenomenal insights into our own customers and their customer demographics and everything about them and if we have.

Probably.

The leading.

Data quality on customers.

And for US, it's really easy to tell if a customer was with us before if they were they came and went and came back if there were walking which locations. They went to and then if they've gone to the online space are they toggle back and forth.

And you know and for US those trends have been been consistent we obviously saw at the beginning of year in into.

Further into the year and acceleration of that conversion, but again as I mentioned to David earlier that acceleration actually slowed a little bit and we're seeing actual did have a less conversion of walking customers I think thats, probably reflective of the fact that a lot of walking location did did reopen and so I think if consumers were were switching.

Perhaps that slowed a little bit but.

Remarkable and really interesting is that our digital business, while that occurred our digital business in the slowdown and actually has accelerated and continue to push forward. So I think we're capturing new customers I think we're taking share from.

A lot of the other traditional players that are out there I think we're actually competing extremely well with some of the pure play digital guys and from what I've heard a numbers that have been.

Mumbled around I actually think we're probably outperforming in number of materially digital partners as well and so I think that.

Having the global brand name, having the payout capabilities not only the vastness of our cash capabilities, but also the increasingly.

Uniqueness of our digital path capabilities I think is really resonating.

Extraordinarily well across the industry in its NFV.

Some massive.

Value increase in play on any of the pure play digital but just to have limited networks are really haven't built out that robustness that we were able to capitalize on so.

I think.

Our our position and what I have such conviction effect because.

That's the way, we're seeing even sort of last last year right last October last November as our digital business was accelerating.

Who is it was remarkably similar trends and so I think what's happened.

With the coded pandemic is that's just increase the size of the funnel on is pushing more people.

To us and I think it is coming from new customers customers. It was other brands customers that were with other banks, rather digital partners or our financing our brand and its resonating and there are coming in to use our serves.

Yeah, and then on the stimulus point, then Alex Yes, sorry, and then I guess.

During the last night.

Thats helpful. My your interest.

I think the stimulus is obviously, helping I mean, you're handing five $600 to to consumers right I mean, thats, a significant amount of money sustainability of that.

He is a good question and I, certainly think that there's a large responsibility on the parts of governments around the world to figure out how to sustain economies and consumer spending.

When it's the government shelter in place policies that are obviously impacting employment. So I think there is a responsibility there I think the stimulus needs to continue to come.

Chipper over government spending or anything like that but I do think in a time of crisis when the government is actually.

Asking you to stay on the not work in Charleston place and closing location.

And retail outlets and everything else you have to find a way to supplement income for people and I think.

Our business the average transfers $350, so when you're talking about giving someone $600 or 500 or whatever the amount maybe in a corresponding contributes a significant amount of money for the.

The vast majority of our consumer base and I think that.

Finally, he is helping.

I currently I can't tell you is it.

Additive to or supplemental to normal income that someone would have made I mean, thats, where our United I don't have that relevant amount of de Silva definitely all the stimulus stuff is clearly helping.

No it's tough it's stuff I give a.

Appreciate your answer I don't want to have the call. Let me ask one more if you don't might just be given whats given all of that and I get that you're going to change or your cost cutting strategy given the momentum, but how hard are you going to lean and on marketing or you're driving more customer acquisition some of the loyalty and restaurants et cetera, how high.

They are you going to push that here versus what you thought in March here I'm, just trying to understand how much of its permanent versus opportunistic.

No. It's a great. That's a great question and one that I think.

Reflective I guess of what's going on in the marketplace regimen.

So back.

To the start of all of this we definitely hunker down and rolled back or a number of investments and things. If we were planning to do as an organization.

Simply because we knew what was going to happen and a lot of what happened.

We're going to happen was not within our control so.

I think we did absolutely the right thing we took the exact right measures as an organization that you're on the entire team as completely supportive.

And it's really been kind of a coming together opportunity as we've seen revenue continued to surge in June and July.

We're certainly going to be opportunistic about that and take advantage of of that growth and the cash coming in associated with add to reinvest in the business and continue to push.

Hi, there so no we intend to be.

We intend to be.

As aggressive or we can be but again also I think you know prudence that suggests that this crisis as far from over and again the uncertainties around on an economic fall out of a lot of things.

Yet to be seen so we'll do it.

As we need but I think as Larry pointed out I think we've discovered a number of unique ways too.

To reflect the expenses kind of on as needed basis, and I think as karla pointed out we're doing some really different and unique things in marketing that don't.

That don't take nearly the.

The upfront effort and costs that I would think you would traditionally see in an industry like ours and that's that's all very positive when you wrap it together. So yeah, we're definitely going to are going to push.

Yes, I will then take it.

Thanks.

And we will take our next question from range legal awful with Barclays. Please go ahead.

Hi, guys. So thanks for taking my question today.

A follow up on tendons first question Im just kind of get a sense or the.

The degree to which you guys have any visibility to see whether that performance certainly as you progress in the second quarter into July is sustainable in the context sort of pull forwards or bounce backs or any kind of shifting and in your customers' behavior. As you can see these consumer behaviors in the context of it.

We weren't able to.

Transaction and then.

They were give any visibility I guess the broader question it to the sustainability of the trends you're sort of seeing the call here that the shift to digital and at some of permanent are you expecting kind of that a leveling off at some of these trends I know, it's a tough question, but just sort of their shopping.

No. It's a great question and it's absolutely I would argue extraordinarily fascinating to break down and analyze we have a.

There's a couple deploys answer that question.

Ill do my best here, and then learn come out and keeping on the rails, if I, if I forget something but.

Going back a little bit when we saw the original stimulus dexcom up we saw a huge surge and then that surge came back down.

But at a plateau level way above where we work. So we retained a significant amount of those customers that we saw as as that stimulus went out and then those customers have stayed with us and continue to to transact and move forward I think that you know as.

Shelter in place policies relieves you can clearly see the momentum in the business.

Coming back. So the question I think that continues to be asked as a pent up demand and as a catch up.

And you do see that a little bit because some of the principal per transaction in certain quarters have increased and.

And you do obviously see some timing with the stimulus, but every time.

Something reopens every time stimulus flows through you see a bit of a spike and then a step back down, but it's a nice staircase because we keep stepping up and then flattening stepping up the flattening and you don't you're not really seem that that pullback. There is a couple of examples in.

Some some markets.

I won't give specific names.

To protect the units in here, but in the middle East.

And then.

Kind of here in the Americas.

Theres, a couple of market, but I would call out that.

We saw incredible surges in the online business plan.

In the digital properties when the shelf in place orders came in in the Middle East example, the country's effectively shutdown except for a couple of online properties and the growth rates. We saw obviously were extraordinarily phenomenal.

That had slowed.

Yeah.

After the walk in space reopened, but the growth rates that were sustaining in that market are still.

3456 times higher than they were prior to everything that occurred so I think theres a lot of.

As a lot of.

Increases and again as it to me is like sort of looks like hysterical. So you're sort of seeing these ups and then flattening and that's obviously coming off of a big drop of if they drop was long ago. At this point I mean that was mid March to mid April so to think that people are still catching up on sensing.

A little bit exaggerated to me. So I think the net of my answer to your question would be where our anticipation.

Is that we're in a position given all of the changes made to our business. All the investments. We've made in this end markets all the investments and receive market all the digital changes that we've made our anticipation at that we're going to continue to grow.

A question becomes at which.

Which rate can you sustain the growth and I think the only thing that would be in inhibitor that would be if every country around the world decided to do what happened back in March which is again shutdown for several months, but that seems to be.

You know.

A little bit against.

What what governments are interested at this point right. They all want to find a way to sustain open and keep things moving forward and I think the other aspect of what's been happening too is that this crisis has forced a lot of change in the industry as well I mean there are.

A number of competitors that have.

Shifted their focus or have actually closed or they're struggling from a liquidity perspective.

And I think that our flexibility diversity is organization has allowed us to take advantage of that are really take.

A good portion of that customer share as well so.

Net net it it's been very positive.

A major in July for Us and we're anticipating that that'll continue moving forward.

Okay.

And then last fall a quick to part of your follow up which is more relevant to your EBITDA performance.

Hello, good cutting the transaction in operation support.

And the cost cutting in that line was a significant this quarter and then you also mentioned that again and then thats in terms of how much could this how much of this could you sort of permanent in nature can you give us more color on that helped us dimensionalize, how much of that might might stick around versus slung backend.

It's a pretty big driver and then just the second part of it is also on on ripple.

Given that kind of a new line.

Also contributing to EBITDA could you just help us kind of including that sort of run rate is that as outlined in the back half as possible.

Sure.

So.

One of those things I think we kind of touched on tangentially was marketing I think that we.

When we shifted from.

So the brand recognition strategy to a digital strategy. It also had a room.

Third significant impact on the amount of money it takes to market and then.

I think some of those changes are permanent that we we have a different marketing focus this as a different expense base and it's really focused on the digital properties. So I think some of that I think is permanent some of that is going to come back we are going to become a little more aggressive.

And I think some of that expense will come back, but not to the level that it was.

The other aspect of it is I think it's a longer term trend were as we've upgraded our systems capabilities, which has caused us to make changes into keep up with things of our entire backbone is monitored now and we can change things on the fly that used to take one maybe years.

And so that's a significant cost savings as well.

And and so some of the permanent but I think we're being judicious about.

We use the word agile I think we're watching.

On a week to week day to day month to month basis in terms of these trends and I. Thank you.

And we also have the ability to ascertain whether it's being effective or not as if the marketing isn't working we can stop it.

So I think that's a that's a permanent change as well.

Regarding ripple you know I think we've told people and I don't know.

You know how many people, but I think they've told us about everybody. The group will peak in the first quarter.

It was significantly lower this quarter than last quarter I think it's in a run rate now.

Fairly consistent flow it represents a lower percentage of our EBITDA represents a lower percentage of our.

This is classified as a negative expense with what were percentage of our expense reductions.

It actually we're looking at that as sort of the quality of earnings metrics that the.

We've become.

Less relying on it in terms of.

Its impact on our EBITDA.

And then you know the other aspect here.

Beyond our control.

Is our investment.

So.

And I think that's that is a permanent headwinds that we're going to deal with we don't see interest rates.

Moving to Echo billion anytime soon so.

That's a that's going to be a governor in terms of above on controlling our expenses I think that we we acknowledge that that's.

Probably a permanent aspect for the rest of the year.

Have a negative in terms of headwinds.

Our expense base will continue to reflect that you know what I think at the end of the very weak.

We turned in these numbers.

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With these expense cuts and it started to show that there was some of that.

Didnt have revenue impact and I think that's the that's the rule that we're going to be using is that.

If it has a potential upside to revenue will spend.

That doesn't we're going to look at it very carefully.

Thanks, so much that banks goodwill.

Well take our next question from Bob Napoli with William Blair. Please go ahead.

Hi, Thank you.

Maybe following up on that question, just so the 56 million and even adjusted EBITDA. It's the understanding you're not giving guidance on things can change in this crazy world but.

Can you have in July I ask you had kind of the trends continue to hold.

We should see.

Year over year revenue growth in the third quarter again, the money transfer business all.

And we should see EBIT, Bob the higher than the second quarter.

Adjusted EBITDA I think yeah, I think were were feel good about if trends continue we definitely feel good that we'll see.

Adjusted EBITDA growth for the third quarter over over 2019.

And then I think yeah money transfer growth will obviously have to drive that and then where total revenue comes and really the derivation of all those factors.

Okay, I'm, sorry, but why wasn't.

EBITDA.

Growth quarter over quarter.

Revenue was going to be up materially and your cost base.

Reported bottom.

Well I think we said it is there it is an aggregate everywhere and guiding specifically to it and I think that yeah. I mean, I think if you're just trending out kind of whats currently happening then probably agreeing with you but.

Again, a lot of what can change the trajectory is not within our control that I think thats, probably the biggest hedge and all of this is that.

Most of the impact on our on our business in the second quarter really had absolutely nothing to do with US we've executed extremely well I think we've outperformed given.

Kind of what we were handed we had really strong momentum as we talked about.

In January February into the first half of Martian and that re accelerated through May and now we're seeing a June and July and I think it's not just what's happening in the global economy, but I think it's also all the actions and activities and specific things that we had in our plan including.

Doing an excellent job that at Walmart and getting all the new business partners around the world and an acceleration of our digital business and so you know if if economic impact and government decision around killed it don't.

Come into the fold into material way and impact our business like it did sort of at the end of March.

Yes, we should have a we should have a good quarter and I only thing I would add business. One of the uncertainties is that there's a lag there is if we make a decision to reinstate some expenses today and minimal we find that we're having a relapse of.

So the covert.

Shutdowns and.

It's pretty tough for us to control, so I think thats where were.

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You know uncertain around this is that right.

We're going to tiptoe back, but we just want to make sure that and we know that we can't match expenses and revenues simultaneously.

I guess, what's the revenue from digital I think in the Q look at 33 million into first quarter connecting from the digital business.

I don't think we I don't think really.

When we give that number I mean, I think we give a percentage of money transfer.

I think this Ah I don't have enough of in front of me, but its Lynn you can follow up with you on that it's approaching 20% of total revenue I think yes.

20% of money transfer revenue.

No total total revenue.

Total revenue okay. Okay. That's helpful.

And then just last question.

So and I think Alex you kind of hit on this a little bit in your comments, but a big picture question. Yet. So you have we mainly that wages 85 million at 1.5 billion valuation you compare your business to using them as a highly regarded.

Digital only player in the private markets.

Getting how do you compare.

Your business in your technology to somebody to somebody like that.

And your performance I mean your comment one.

The bath potential valuation of Moneygram relative to somebody like the like have recently I guess.

Sure, Yeah, and I don't I'm, not going to I'm not going to single out.

Gently, but if you take the of the vast.

Bucket of what I would argue would be your your your swath of digital competition with these incredibly high.

Valuations I would put our digital business up against them as a second to none and I would say that in many cases.

We have a superior products.

I think that the user experience and we put forward the quality of the App the quality of the service the consistency of the of the messaging the safety and security of it with respect to fraud related type activity.

I would say to be the number quarter or is that we can sense, you and receive into the FX rates.

And just generally at the end of the day to consumer experience associated with it.

Really is is you know on Unmatchable at the end of the day when you when you when you take a look at what you get from for our service in any market. When you try to use it and they can find us anybody else, it's it's really extraordinary and.

You know and importantly did generates significant on a problem. We when we talk about a digital platform and business across.

75 markets that has margin.

Basically on average and obviously like anything in this phase it varies by quarter or but higher margins on average in the walk in space.

How can you look at that business and say that it's not worth.

At least what.

Relations those guys are getting if not you know even bigger than that because it comes with.

The backing of very very large organization that is obviously.

Credibly, well known with a massive global brands so.

It's it's fascinating to me to look at.

Our valuation I get it I mean, it's been.

A long time coming back, but I think that we've been doing exactly what we said we're going to do.

We've been investing return to growth, we're returning to growth, we're putting a phenomenal numbers, we built an incredible platform.

We've taken out an extraordinary amount of costs and we're managing our way through.

This this crisis I think it extremely well so you know when I looked at I think the company is just you know and obviously chubb to believe that and put forward. The best performance, we can but I think the company's metairie undervalued and.

I think we've addressed and continuing to address those challenges that.

The give it that discount and I think it's time to remove that there is down and push the company up.

Thank you appreciate it.

Thank you.

And we.

Oh, you squeeze in one more if we can.

Absolutely sure we will take our final question from Rayna Kumar with Evercore. Please go ahead.

Good morning, Allison Larry.

In light of question slowing it goes I think when I come from a buyer lock in business.

Isn't location.

Now you had a competitor there this quarter that added a material amount of locations that you can talk where you stand where they've been less opportunity.

Yes, Thanks for the question Arena and.

I think we've been.

In a position for for a long while now.

That you know we've been able to really take a hard look at all of our markets around the world and really think through what we need to serve each individual market and we're really taking it that that approach in terms of they vary market by market.

Kind of view and we're not in a situation, where we feel that we need to add locations.

Before.

For any reason other than we think that adding a location is going to be helpful. Because it's a partner that we want to partner with them, we think it's going to be.

Additive.

To our growth with the way in which ex exclusivity has shifted to non exclusivity I think the ubiquity of networks and certain markets.

It's it's rather I would say irrelevant.

And it's only relevant to the individual consumer spending and their ability to pick up money. I also think too that our network continues to be wholly unique in the idea that when you send to a country you can pick up at any location.

And you're not restricted deteriorated one of these very limited point to point network through kind of picking out an agent.

And then having to send their and typically you're doing that because.

The company are using it promoting the one it's going to give them the lowest commission.

Probably.

Arguably I'm trying to promote and FX rate or something like that so our network is ubiquitous in that sense, it's very flexible for for customers and so we want to have a strong network I think the size of the network is completely irrelevant I.

I think that.

The other thing too is that governments around the world are increasingly focused on.

Okay way in of agents and agent oversight responsibilities such that the more agents you add the more cost there is to maintain that network and looked at it and thats not something that we think there's really value add going forward, but we have some amazing partners and we'll continue to add.

During partners and we've also made some decisions lately to cut ties with with agent partners, where you know they want large signing bonuses they want investments and signage and we're just not going to play in the infrastructure investment game anymore, and that's just I think the right thing to do from a financial perspective and.

The returns we get reinvesting in our own consumer direct channels.

You know is exponentially more valuable than you know, giving out kind of money to somebody to pay for signage.

So we're just you know what kind of shifting away from that a little bit, but we're going to maintain our network and we're going to partner with partners that want to partner with us that want to invest with us they want to build businesses in their markets and that had a reputable brands and strong network. So.

You know if someone wants to tell me tomorrow morning, they have a million locations and.

I will send them, a bottle champagne and make and celebrate with it but I don't think it means much.

Got it very helpful. You last week, you announced the tax.

Got it that's fine maybe just discussed the rationale behind that and what benefits.

Yes.

Oh the.

Hello.

Correct. So.

The if you're talking a good shareholder rights plan.

I am.

Okay.

So what happened is that there's a section of the U.S. tax code called 382, and what it does.

Is it.

Very strict and it can cause a companies to lose all ascena well carry forwards and it's.

Credits and the.

Motivation behind it as if the IRS doesn't want people to traffic in their tax benefits or.

And their tax.

Efficiencies so.

What they've done as it created a situation where it's possible that even normal trading activity can trigger the IRS definition of a change of control, which is much more complicated than what you would normally expect.

Given our market cap and given the fact that we no longer have control stock.

We thought it was prudent to protect those benefits then really just to protected against someone just inadvertently taking.

So I would.

It was really preventative measure just to make sure that through some mistakes we didnt.

We didnt move to our tax.

Attributes.

The board can withdraw this at any time.

Not intended to be anything more them.

I preventative measure to prevent them in Burton.

Shareholder position that could cause us that was or benefits.

Got it is very helpful. Thank you.

Yes.

Excellent okay, well. Thank you all very very much certainly appreciate your time and attention as always and we look forward to catching up with you will individually for the coming weeks. Thanks very much appreciate it.

Yes.

This concludes todays call. Thank you for your participation you may now disconnect.

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