Q4 2020 MoneyGram International Inc Earnings Call

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Good morning, and welcome to the Moneygram International Inc. Fourth quarter, 'twenty and 'twenty earnings release Conference call Today's conference is being recorded.

At this time, all participants have been placed in a listen only.

And the floor will be opened for your questions. Following the presentation. It is now my pleasure to turn the floor over to your host Steven Life's head of corporate Communications. Please go ahead Sir.

Good morning, and thank you for joining US we also and I appreciate your patience and flexibility to reschedule. This call today, given the unprecedented winter storm that caused power.

Only months and disrupted our internet last week.

And on the call with me and Alex Holmes, Moneygram, Chairman and Chief Executive Officer, Larry Angelilli, Chief Financial Officer, and can those it'll chief operating officer and leader of the company's digital businesses.

On the Moneygram Investor Relations website, and you can find our earnings press release and presentation, which.

And our Avnet to supplement our prepared remarks during today's call and provide the reconciliations between GAAP and non-GAAP financial measures.

We will refer to non-GAAP metrics on the call and non-GAAP financial measures provided should not be considered as a substitute for or superior to those provided in accordance with GAAP.

They are included as additional clarification.

As in terms to aid investors and further understanding and the company's performance and in addition to the impact that these items and events had on financial results.

Please note that today's call is being recorded during this call we will be making forward looking statements, which are predictions projections or other statements about future events. These statements are based on current expectations and assumptions that.

And the risks and uncertainties.

Actual results could materially differ because of factors discussed in today's earnings press release and the comments made during this conference call and in the risk factors section of our form 10-K forms. Thank you and the other reports and filings with the SEC.

And we do not undertake any duty to provide any to.

And to provide an update there.

And are subject and statement and with that I'll turn the call over to <unk>, great. Thanks, Steven and good morning, everyone.

And in 'twenty was truly a remarkable year amidst the historic backdrop of this terrible ongoing global pandemic.

Looking back to March the results were about to discussing the almost impossible to imagine but are inspiring.

Any forward and 1 billion and customers combined with the tireless dedication of our employees to help moneygram deliver fourth quarter and full year results demonstrate the sustained strength of our digital transformation.

When government shutdowns went into effect and the first quarter of 2020, and we still have much of our business has come to a halt, but we were able to turn things around by shifting our.

Barring original focus to our digital business nimbly, managing our expenses and creatively working to support our retail partners and locations around the world.

Quite remarkably despite concerns a forecasted drop off and remittances by the World Bank and despite the many hardships caused by the pandemic, we found that our customers actually spent more money home and 2020.

'twenty than ever before this is truly a testament to their dedication to their families friends and loved ones.

Throughout the year, we continued to gain momentum delivering double digit money transfer transaction growth in both the third and fourth quarters and also achieving a record breaking and December reporting the largest number of digital customers and transaction.

Outrage and ever any given month.

Our full year results also exceeded expectations, and we were able to post 5% year over year money transfer growth, despite the sharp declines and a spray and from the onset and.

Moving.

Full year transaction growth is driven by year over year, Moneygram online and cross border digital transaction growth of 100.

Transact, 52% along with the recovery of our retail business and many markets.

I'm also extremely pleased and we delivered four consecutive quarters of adjusted EBITDA growth, culminating in full year adjusted EBITDA growth of 13%. This impressive growth was driven by a return to money transfer revenue growth strong margins and our.

Net business and our ongoing efficiency and cost reduction initiatives.

Turning to slide four I can confidently say that the continued execution of our strategy along with the strength of our digital transformation and put the company and are positioned to win.

Our financial results strongly correlated to the successful execution of our strategy.

Our digital as we strive to deliver a differentiated customer experience.

Gail the digital business and be the preferred partner for cross border payments.

Some incredible highlights really helped to illustrate our success. These include over 80% Moneygram online customer retention rates of 152% year over year increase.

<unk> Cross border Moneygram online transactions, along with a 27% year over year increase and total cross border principal sent per our money transfer rails in the fourth quarter.

Yes.

On slide five our strong financial results were also supported by the continued stabilization of our retail business.

And even against the backdrop of the COVID-19, pandemic and shelter and place policies. Our sales force continued to win the team did a great job and 2020 managing through the crisis to drive productivity and same store sales growth and majors and markets. In addition, as you know over the past several years, we focused on overhauling major receive.

Business and improving corresponding corridor through the expansion of both digital and retail partnerships and through these combined efforts that we're able to pivot quickly and return to revenue growth.

Does that day and I continue to be pleased with our execution around the world while the impact from the pandemic continues to be felt in many markets and others.

Marketing and returned to growth and the fourth quarter, our U S business reported double digit growth rates for sends to Mexico, and and northern triangle and Europe, our retail business continued to excel posting year over year double digit percentage growth rates and and parts of the middle East and Asia. We also saw a strong recovery and a return to growth for key markets.

We have over the past year. Our team has also made excellent progress by signing and renewing our top 20 priority partnerships and major market. This enabled the company to strengthen its position in North America, and the Asia Pacific region with long term renewals with Canada post SDI, and Japan, as well as Walmart here and the United States.

While Walmart recently.

And the plans to further expand their marketplace. We continue to be pleased with our performance and service at Walmart, We had an excellent 2020 and feel uniquely positioned to continue to compete.

We have worked tirelessly over the past few years to execute our digital transformation and build and agile organization that is ready to scale, we have a unique high quality.

And efficient network with real time money transfer capability, we have over 410000 retail locations across 200 countries and territories with almost half of those countries now digitized, providing consumers unmatched ability to send and receive money.

This is an incredibly valuable asset and one that third parties around the world are increasingly seeking to.

As we look to expand our offering and entered the fast growing payment as a service market are modern API driven infrastructure can now be more easily monetize we think this is a great opportunity and in the coming months, we will have some exciting announcements to share and this area.

And with that I'll turn the call over to <unk> to provide additional details on the company's significant digi.

<unk> progress.

Thanks, Alex and the importance that feel like rang and differentiated customer experience is so critical in today's world where companies are increasingly interacting directly with consumers and consumers can easily share their experiences with others and then any fintech and there was a tremendous value and our large.

Large and growing customer base, and we believe that our unique customer experience is key to driving net scrap.

One of the key metrics, we focus on as an organization as customer retention rate. We believe this is the best indicator of our overall customer experience and Moneygram online now and has an impressive customer retention rate of.

Over 80%.

Our leading loyalty program is also a significant contributor to high customer retention rates enrollment grew this past aircraft, both digital and retail customers and loyal team members had a 30% higher productivity rate and the average non member.

Our four eight star operating with.

160000 reviews and.

And another great data points, highlighting the strength of our customer experience contributing to both customer acquisition and retention.

I'll talk about more shortly but it's also important to highlight the strength of our experience is driving and extremely high customer lifetime value in fact, the average fee.

And he for and App customer is about three times as high as the average retail walk and customer.

And finally, it's also important to note that we're focused on customer experience improvements across every customer touch points and every part of our business, including retail.

We continue to roll out enhanced software, which improved both the agents.

<unk> experience and our personalized communications and self service capability, such as and AI Chatbot also helped support our leading customer experience, while driving savings, but have a positive impact on EBITDA in.

In 2020, we captured market share because of our outstanding user experience and we believe that as we enhance.

Our digital marketing capabilities to introduce new customers to our brand we will continue to capture share in this large and 620 billion remittance industry.

On slide seven and Youll see a familiar view of how we're driving growth across each components of our digital business, which now accounts for 28% of all money transfer.

And transactions up from 16% just fee or a GAAP and the fourth quarter. We drove total digital transaction growth of 94% and reported record digital revenue of $57 4 million, let's now puts us on an annual revenue run rate over 200 million. This was led by Moneygram online with revenue.

Transfer outpacing transaction growth, which is notable and our industry and a sharp contrast to our competitors.

Digital partnerships are also a key component of that growth, we partner with leading from text to offer either a white label or branded solution, where companies leverage our rails and global platform to instantly add services and scale.

<unk> growth with our existing offerings partners around the world are increasingly seeking access to our network and we expect this will continue to be a powerful growth engine for the company. Our fourth quarter results are the perfect example of debt transactions for our digital partnerships increased an impressive 77% compared to the prior year the second.

Net of our digital business sense to bank accounts and mobile wallets has also seen tremendous growth with past year as we've rapidly expanded expanded to new markets through direct connection visa direct and other aggregators.

As you've seen from our recent press release visa remains an incredible partner for our continued expansion.

Can power recently announced partnership with visa and checkout Dot com, which expands our visa debit card deposit service across Europe. As another example of how we have been the first and the industry. The pioneer many of these real time connection that consumers are increasingly demanding.

Our continued expansion visa utilizing visa direct.

And critical component of our efforts to improve customer experience by providing a frictionless customer journey and real time transfer capability debit cards are simple reliable and billions of consumers have them at their fingertips consumers and used to buying things online using their card. So we leverage that same very.

And as their experience when they opened their moneygram app to send money from the visa card as opposed to having to dig up a bank account information to complete the transaction.

Much as it's a win for consumers, it's a win from Moneygram as a company as well and addition to driving higher retention rates each transaction has a low cost basis.

So and turn its leading to higher margins and our money transfer business importantly, we delivered record numbers of transactions using the visa direct rail, which grew more than 650% year over year, and our fourth quarter and.

I'm also proud to share that we started the year at 67 digitally enabled country.

And we now have a digital presence and 90 countries.

Given the rapid expansion of our account deposit and mobile wallet network that channel increased over 140% and the fourth quarter and and some market that growth rate is even higher and India. For example, a year ago sensitive accounts only.

They made up 16% up all money transfers and and the fourth quarter of 2020 and amazing 40% of transfers are sent directly to win accounts, that's a 287% year over year increase frankly, we've just cutoff and many markets and we have significant runway to grow and surpass competitors as we remained.

On the high margin channel going into 'twenty and 'twenty one.

And finally, the largest component of our digital business Moneygram online or MTO, our direct to consumer digital channel delivered 143% year over year Cross border transaction growth and the fourth quarter largely due to demand for our leading app.

And we turn to the next slide I'll provide a deeper dive of this channel.

Turning to slide eight we delivered an impressive 215% year over year increase and transaction through our leading App and 2020, our app is helping to acquire and retain customers and it continues to drive a significant increase and cross.

Florida, NGL customers and 2020, we saw 122% increase and the monthly average number of customers using either our app or our website. This growth rate is over triple the growth rate from 2019, we are closing the gap and downloads and even our largest competitor is not far ahead.

For example in December we either we were either the first or second company and App downloads and most of the largest digital spend market going into 'twenty and 'twenty. One we are enhancing our digital marketing effectiveness to further scale the business by efficiently targeting the right person with the right message at the right time Simon.

Time, and time again with proven debt once customers try our service they do not leave we're winning with customers and we're excited about the growth opportunities, we felt from enhancing our tactics to acquire even more customers and the year ahead.

So in summary, as I look back and how far we've come in the last few years I'm amazed and so proud of everything.

We've accomplished we are now and a digital annual revenue run rate of $200 million with incredible growth rates. As a result, we're one of the biggest fastest growing fintech and the world we.

And we have built an incredible team that continues to exceed expectations and I couldn't be more confident that we have the right structure in place to continue.

Continue to grow the business.

I wanted to take a minute and express my gratitude for all of the opportunities that have had at Moneygram as I move on from the payments industry I will definitely Miss this brilliant group of ambitious people and we'll be cheering them on from the sidelines, we have changed so much together at this company and I.

I know you will continue to win.

Thank you for everything.

I will now turn the call over to Larry to walk through our financials and outlook.

Thanks Camilo.

On the surface total revenue of $323 million for the fourth quarter.

Virtually flat to last year's fourth quarter.

And with the remedy contrast, when events that shaped out after him.

First we have the negative impact of the Walmart marketplace, which as we've discussed in prior quarters reduced foreign exchange income.

This was despite our overwhelming dominance of that marketplace without Walmart U S store network.

Second.

Investment revenue for the quarter was down 79% on a year over year basis to $2 6 million, which was entirely due to the zero interest rate environment brought on by the economic impact of COVID-19.

We offset these impacts however, with triple digit growth of our digital business and its.

Alex.

And Camilla discuss digital transactions now make up 28% of our money transfer volume and.

<unk> by itself now represents over 21%.

Even more important the mgo side, just for the United States.

Became our largest single source of generating money transfer transactions and.

And the world during the month of December.

<unk> rapid growth has continued to improve the diversification of our revenues from both an agent and a geographic concentration and perspectives significantly enhancing ers and activity overall.

When a grandma line has reached the size where its contribution to growth.

As a material impact on total revenues, resulting in 4% money transfer growth for the quarter. In addition, we have also reached the point where transaction growth and revenue growth are closely aligned.

And as Alex discussed, we have stabilized revenues and our retail business, providing further support for the money transfer business going into.

And the new year.

So taken as a whole through rapid digital growth and the stabilization of our global walk in business. The company's core businesses were able to completely offset the significant headwinds from Walmart and investment income in the fourth quarter of 2020.

As shown on slide.

<unk> 11, adjusted EBITDA on an as reported basis was $64 6 million and increase of $7 million or over 12% from the fourth quarter of last year.

As with the third quarter, a lower U S dollar versus major currencies impacted adjusted EBITDA such other translated into a year.

Year over year increase of 8% on a constant currency basis.

More importantly, adjusted EBITDA margin was 20% for Q4.

And from approximately 18% a year ago, EBITDA was $60 2 million for the quarter up 44% from the fourth quarter of last year, which highlights.

The conversion of EBITDA, and adjusted EBITDA and this quarter.

These improvements and the quality of earnings were achieved due to continued active management of overhead expenses.

Digital transformation efficiencies that we've discussed and margin accretive digital transaction growth.

The pandemic.

And it created the opportunity to rapidly test and learn new approaches to running the business more efficiently and these learnings are created savings that will be relevant long after the pandemic subsides.

As part of these adjustments, we also proactively implemented a restructuring initiative and the first quarter of 2021.

One, which should generate annual run rate savings of approximately $8 million $18 million.

Additionally, the impact on EBITDA from a ripple incentives was flat for the fourth quarter last year. So it was not a factor and reducing expenses and the fourth quarter of 2020.

Free cash.

Approximately $19 million was roughly flat to the fourth quarter last year, primarily due to the cyclical increase and signing bonus payments, which reflected certain key agent renewals as well as the success that Alex described and the revival of our traditional retail business throughout the world.

The ultimate impact from the earnings.

And cash flow and the fourth quarter was a continuation of moneygram, improving credit metrics and improving liquidity the company reported $196 million and cash and cash equivalents at December 31 up from $163 million at the quarter ended September 30th.

We are continuing to build.

Our cash balance and anticipation of the final payment due to the department of Justice upon exiting the DPA and May of 2021.

We also completed another quarter, where we elected not to defer interest expense under payment and kind of provisions of our credit agreement and we continue to strength to strength and the.

Cushion on our financial covenants on all tranches of our debt.

Moneygram finished the year and substantially better health and when it started despite the challenges of Covid and increasingly competitive marketplace higher interest expenses and the impact of a week and global economy.

And finally.

Finally, we are providing our outlook for the first quarter of 2021.

We expect that many other factors influencing our fourth quarter will remain in place.

The first quarter, we expect interest rates on our invested cash to remain at their current low levels, and therefore anticipate $2 3 million and investment revenue versus.

It was $10 million for the first quarter last year.

So last year, Walmart was still and the launch phase of their marketplace.

And in 'twenty, one, we'll see the full impact.

Our outlook also takes into consideration that the first quarter is usually our lowest quarter of the year for revenue and EBITDA.

In addition.

And we are not planning for any ripple incentives and the first quarter.

We continue to monitor the FCC case closely and due to the uncertainties that have arisen since the filing of that suite, we have suspended trading and the referral platform and.

As we've stated in the past with says and no impact on our customers nor on our ongoing.

Growing cross border transaction capabilities.

However, it will be a significant difference when compared to the first quarter of 2021 and.

And the first quarter of last year Moneygram generated a net EBITDA benefit of $12 1 million from the ripple market development fees to.

The combined impact of ripple and lower investment returns.

Create a 17 million EBITDA headwind, which should be offset by our digital business with continuing triple digit growth rates and the improved diversification and growth prospects of the money transfer business overall.

Offsetting factors as illustrated on slide 12 support our outlook for total revenue of approximately.

$300 million and adjusted EBITDA of approximately $50 million for the first quarter of 2021.

Looking forward to 2021, we also anticipate improving the disclosure regarding moneygram online our Mg up.

Given its continuing rapid growth, it's increasing prominence.

And the financial metrics and Moneygram where day.

<unk> the.

And the capability to report Mgo as its own segment and our quarterly FCC disclosure.

We expect to have this completed and the first half of 2021.

And with that I'll turn the call back over and out alright. Thanks, Larry.

And before closing I would also like to Echo my thanks to Camilla. She has been an amazing leader here at Moneygram from six years and has made an indelible mark on our organization. While you will certainly be missed I'm thankful for the liabilities that you built and I know that they are all as excited for 2021 and I am we wish you all the success and the world.

Now speaking of 'twenty, one it will certainly be another year.

Change and our money transfer business.

But one that we think will be great. As we continue on our digital transformation journey, we built a customer centric tech driven organization that has positioned us to more quickly adapt to the changing dynamics of this ever evolving landscape.

As evidenced by our impressive results our transformation has enabled us to become monumentally more efficient and become more customer focused and less reliant on large agent partners as we diversify our revenue streams, we've built a strong compliance organization as well and even as our DTA comes down and in May we will maintain and strongest standards in the industry and ensure we.

We continue to protect our customers.

The pandemic is far from over our core business is sound every day, we see our online business and accelerate while we continue to negotiate new and exciting opportunities that will enable us to keep pushing the boundaries of the cross border payments market.

At 21 begins we're already off to a strong start in.

In January and we posted a 137% cross border growth for Moneygram online driving total money transfer transaction growth of 11%.

While this growth has been somewhat temporary and February particularly by last face winter storms were certainly pleased with and continued progress.

As Larry highlighted 'twenty, one will not be without.

However, we will continue to leverage the momentum and our business and pushed to overcome these obstacles. We're confident we'll emerge from this pandemic and this year and stronger than ever and.

I'd like to conclude by once again thanking our incredible customers and of course, our wonderful dedicated and loyal employees and with that I'll turn the call over to the operator and.

And its channel for your questions. Thank you.

Thank you, ladies and gentlemen, if you would like to ask a question today. Please press star and then one on your Touchtone phone.

And we will take our first question from Ramsey El <unk> from Barclays.

Great.

I wanted to ask for the debt.

And some thoughts on ripple and how you kind of came now to make the decision to move off the platform and also any thoughts on how permanent that move would be should we get sort of presume. It's most likely that that will not flow back into later quarters or is it are you.

Wait and see phase and any color around that topic would be helpful.

Yes, sure. Thanks, Aaron's Inc. For the question.

Yes.

It had been doing obviously quite a lot with triple on the audio platform really over the past.

18 months.

And it's sort of a leading into December and December from us.

<unk> kind of gotten to early December we re pause.

Our activities on the audio platform and really just have not.

<unk> found a way to to get back.

Into that yet.

Given.

They have different factors and what has been some of the changes and and decisions at the exchanges have made and the.

U S and others, obviously concern.

The question that continues to be opening around debt that case and I certainly hope it there.

Successful and their efforts.

With the SEC and things.

And a variety of one bill and the direction that they want and I would say that right now we're we're pausing those activities.

And just more for I think with the abundance of caution really done.

And with any other concerns about it at the moment and.

That's.

Pretty much where we are I don't think that we're saying that.

And.

It's a permanent decision I think that'll take some time to sort through and it's just one of those interesting situations, I think which and <unk>.

Presented itself and.

And made it very difficult to to continue on at this point and time.

Okay and.

And I also.

Ask about Camilla had some interesting comments on just digital partnerships and just could you give us a little color on the pipeline there and the types of partners that you're evaluating.

Evaluating and and what we should sort of expect the degree which you can share kind of going forward at least this year from from that to that effort.

I wanted to share. Thanks, Thanks, Ramsey, it's definitely a focus of all of our sales and the areas around the world and digital partnerships are an excellent opportunity for Moneygram, but also an excellent opportunity and a fintech that we're engaging with and in line actually control and customer acquisition and.

Experienced a combination of other things that they may be offering through their app and they can really focus all other resources on both activity and instead of having to worry about building out our regulatory Lee.

Compliance network, all around the world with cash out wallet and accounts deposits capability. So it.

Yeah.

And a great and symbiotic relationship for both of that so our sales force is focused on primarily from check around the world.

Also bank and are looking kidney.

Our digital and offer cross border.

And to their customers.

And that looks pretty much.

And that's a category that works I think Todd.

Got it okay, great and best of luck to you.

Okay.

And then we will take our next question from Jensen Huang from Jpmorgan.

Morgan.

Thanks, So much open and I hope everything is getting a little more.

Back to normal here and in Dallas, and Camilla Best of luck to you definitely other mid seven year round.

Since we have you on this call and I thought I'd ask just thinking about what your comment your comments around users and record additions in December and I'm curious, if there's any change and the type of user.

Getting and the different or have any change and the channels.

And being successful and get a lot of questions about you know what.

What type of users are coming on especially in the U S. But maybe the focus should be more outside the U S. So any additional debt.

And interestingly there to share.

Alright, thank that and Jim the users continue to be slightly different and our digital.

And all channels and our walk in and thank you and they are a little bit younger and they're obviously bank because the only way to fund and money transfer for MTO is via debit and.

Credit or bank accounts. So it is fundamentally a pretty different demographic and the one and I think he would've traditionally associated with the.

And money transfer and demographics on a cross border standpoint, but other than that.

And one difference I love highlighting is just how much more of a prolific spender. They are and that really has to do with the stickiness I think Barry and so.

And once they trust us and gets to their.

The registration process. Thank you.

And you use moneygram more than other providers, we know that they have other app.

And they're found there's a theory that services that allows you to monitor what other competitive apps are installed and whenever we do that we do notice that they pretty much have up from all the major providers, but.

Yes, thank you and moneygram and more than they choose and others and it has to do with convenience and obviously pricing and then most importantly experience.

I would say in summary, the demographic is slightly different but its really their behavior, that's different because they chose that time and time again.

Got it.

So my quick follow up just thinking about expenses for 'twenty, one and understand the ripple comment there on pause but.

A lot of commentary on visa direct which I think has an advantage on and funding cost it sounds like retail.

And April.

And anything to comment.

Don with with.

On the expense side that could that could be needle moving and would it be and the marketing side or is this funding cost advantage with visa direct and could that be a much more meaningful.

Peter as we look to 'twenty one.

Yes, and Thats a good question, we are definitely from a cost increase perspective, we are definitely.

Reinvesting back and a lot of marketing and.

And putting a lot more into the consumer direct channel.

And then sort of a you know a lot of the.

And the social posts and other areas that are in essence, a lot more efficient, but also more targeted towards each.

Consumer I think it goes without saying that the the.

And the work and space is becoming increasingly.

Non exclusive.

You know, even seeing our largest partner and now going around and trying to sign up with the smaller players agents.

Which I think says a lot about where non exclusivity is gone and sort of.

And every day it means on a go forward basis and so.

And I think the brand recognition continues to be important, but I think the value creation opportunity within individual consumer and the stickiness that Cumulus highlight it is much more important than.

Branding for brand's sake, and sort of the old traditional marketing.

And so we're putting some.

A lot of effort and for that we're also going through.

The cloud transformation.

<unk> and continue to add so we're ramping up our efforts there which is definitely a bit of a cost increase but both of those are really critical to through.

And through our future success.

And we certainly are getting efficiencies out of all the changes that we made and then.

And yes, the more that we continue to shift.

And the business digital and the more that the business shifts to account deposit and wallet and real time transfers.

Definitely theres more and more and more savings there and one of the things that.

We know highlighted but I don't think we really completed the connection there and what's your thought about the consumer the other thing you see in the online space has a higher propensity to stay all digital rights. So when you've got repeat customers who've already gone through the authentication process on the send side sending into bank accounts and wallets and there's tremendous amount of savings coming through on those.

And your interactions as you would otherwise compare as opposed to.

Traditional walk in cash business so.

The other important thing I guess to keep in mind just on the expense front is that because of the day goofy accounting treatment as I like to say associated with with ripple, which was treated as debt.

What do we call it a negative accounts.

Try and answer your transparency, that's very formal.

And so that will obviously.

To the extent there isn't any of that flowing through that'll be obviously it looked like the.

The <unk> line is artificially shifting the other direction, but.

I'd say outside of that I feel like you know the cost plans we.

And kind of IC efficiencies that we're getting are going to continue to benefit us as we go and go forward through the year.

Alright.

Thank you Bob.

Thank you.

Okay.

And we'll take our next question from David Scharf from JMP Securities.

Alright.

Good morning, everybody and.

Hope hope.

I hope you're recovering over there and it looks like at least from what I hear the weather at least is back to normal in terms of temperature and Dallas.

Hum.

Hmm.

There's always going to be a ton of questions on the digital transformation.

And ask about.

Thank you something I, probably haven't asked.

And a decade, which is the official check business investment revenue.

Given there is effectively.

Barely any revenue and this rate environment and while the rate environment and may not last forever.

Find us.

Much of a fixed cost structure, it is associated with maintaining that business and weather.

Even at a slightly higher run rate of revenue.

If there's any.

Thought perhaps discontinuing that.

Well.

And it's a question we haven't had in a long time.

Okay.

And because the overheads are really low and that business.

And.

We also the.

The commission structure on it also.

And as variable when interest rates are extremely low and.

And they become.

Even lower proportionately so.

It doesn't lose money and it doesn't require much capital.

And.

It really is a it's luc contributing it's just.

And at a significantly lower rate.

So it's not something that.

And would benefit the company and the short run in terms of.

Disposing of it I think it is.

And it's an interesting business and you don't have and it really any meaningful competition.

Low capital requirements and it's accretive.

So that's why we keep them and that's why.

And we like it.

But I think you know any kind of rising rates should.

Start to normalize the income from that.

But I think that's that is the way we're looking at it.

Got it got it no no. It's just been a long time since really any of us and kind of paid much attention to it but it's yeah.

And ironically.

Radically grade crude rising at this time last year right before COVID-19.

Rates are increasing so we you know the comps are tough too.

Got it.

Yeah.

Okay. A couple of quick follow ups from one.

Just curious when the DPA.

And kind of expire as you sort of exit that and may.

And.

Or any.

Do you anticipate any kind of practices changing or.

I mean, you've already Anniversaried, obviously, the initial headwinds from you know when you have to engage and certain.

Practices.

It seemed to be more restrictive than some other competitors, but when may rolls along is it pretty much business as usual going forward.

Oh, yes.

It's a great question and I was sector and reflecting back on just kind of a remarkable and impactful all of the DPA active.

And he has been I mean, it's gonna be eight and a half plus years and I was thinking that the vast majority of our employees here and I have never known and sort of life with other monitor.

The a and.

Randy our Chief compliance Officer, I think that's one of the toughest jobs and the industry and it's not in any industry and he's never been able to operate and organization.

But out someone asking you know every 10 minutes why do you make that decision sort of thing so it'll be very different from and operational perspective, I would say from a <unk>.

Compliance perspective.

It's gonna be business as usual I think we have actually.

Tremendously benefitted from all the efforts and put in place, but I think.

As you know the leading compliance program and.

And the industry for a variety of reasons, I mean, and and that's kind of you know doesn't directly correlate those flow a little bit into all the online authentication and all the risk management procedures and everything else that we have to take on as an organization. So.

The world of regulatory compliance.

Not getting any easier the risk to consumers from from fraud and scam and any.

And any form has definitely increased and I would say that the impact on our particular industry and all.

Our business and our company in particular.

Has lessened and.

And come due.

Down I mean, I think our I D standards lead.

Anybody else's I think our customer data collection standard bleed anybody else right now and we know exactly what's going on with their business and we're going to continue to leverage that one of the big big questions from.

Calls like this a number of years.

Years ago. As you know are you going to grow against the backdrop of higher compliance standards and I think our two largest competitors basically said that we couldn't and then we were done and finish and I think we've proven that to be wrong and that.

You know those compliance standards really need to be out there and we're going to continue to push for them. So you know look I don't anticipate.

Our cash flow cost run rate for.

DPA oversight and monitor expenses.

And we'll drop obviously the investments that we've made have enabled us to kind of catch up and and push forward and put us in a very strong position and so the need to perpetually.

Hey, invest excess amount into that area can come down and put us on a more normalized run rate of standard investment and continuing to maintain so no I feel very good about that and.

And it'll be it'll.

It'll be good and and exciting for the organization to be.

And in a different position operational.

And that should benefit us as we continue to grow and expand around the world.

Got it got it.

One just quick clarification and rich.

Hum.

And you and your comments when discussing the temporary halting of trading and their platform.

And.

<unk> share.

Liberals got a separate investigation.

I thought you would you would reference something about.

Some changes by exchanges and the U S debt that were also limiting activity can.

Can you just clarify that I may have just typed it.

You know.

In addition correctly.

That's correct I mean I think.

One of the one day exchanges for example, coinbase right you can't trade extra fee on the exchange anymore and one other things that you have to do.

To make the audio flows work is actually put you know your your Fiat currency.

And crew and exchange rate and then you have to be able to exchange them.

Now the extra and P Cohen.

Back into Fiat on one day into the other so it's not I mean, it's non every exchange. It's not you know it's not a complete.

You know withdrawal, but you know and a couple of places where we had those relationships.

And they've changed their their policies around it and then and it's really for the same thing right. I mean, no one wants to and your burden and they get caught up and and the question that the FCC has raised around is it and security or not I don't have an answer to that question.

And they know that they being the government and we will see where this plays out but.

It's.

And they apparently a a difficult.

Area.

And when you start getting into the questions of what can and can't you do.

And when there's opening questions right that right I mean the day.

The FCC has has their allegations.

They've yet to be prudent and and I think you know ruble is.

And they've stated publicly they believe there are strong arguments there right. So.

You know.

That being said you know we've had a great relationship with ripple and it'd be great to continue to partner with them I think what they're trying to do.

It definitely unique I think they have.

A good team over there and they are definitely pushing for.

Changing the payment landscape, which is which as you know extremely admirable and and something that would be exciting to participate in but you.

You know.

And certainly had.

But along with everyone around this table you know, we've certainly had our share of.

Challenges with government regulators and number of countries.

These around the world and when that and when that stuff happens, it's not any funds and stuff.

We're definitely.

Supportive of vehicles efforts, but you know at the same time, we have to do what's right for the organization.

Okay. Thanks for clarifying.

Yeah.

Okay, we'll take our next question from Kartik Mehta.

And from Northcoast research.

Hey, good morning.

Maybe commitment and Alex.

64000 dollar question is how much or what percentage of your debt transactions that have gone digital will remain digital first we'd go back to retail.

And I know this is a difficult question, but.

Any perspective, you might have today versus when COVID-19 kind of started and this trend started and so what you think will remain digital versus going back to retail.

Yes.

I'll go out on a limit I think 100 percentage.

And we'll remain digital.

And I'm I'm, not really concerned about being.

Off on that on that prediction.

By very much because I mean, if it's 95% and I mean, it's close enough that it's gonna be the vast majority for sure.

And the customer base and I am just.

And just continues to be very different.

None of them repeat customer utilization is very different and the crossover is is minimal so I think the.

I think that the growth and the online space is definitely reflective of a different consumer and.

And different demographic and I think we're seeing that that shift.

The digital and a variety of industries and ours being one of them and I think that's going to.

Definitely continue and continue at pace and so we're excited about that.

And yeah, I support Alex with you and it's pretty evident and the data and Kurt.

Because the retention rate is so strong with Moneygram online.

And if it does continue it.

Increases in transactions are driven by repeat customers.

Many of those repeat customers, obviously were acquired in 2020 because of fee shutdowns of cash and it's one of those things that perhaps they didnt have the motivation to transition.

Transition to online and the path.

And once they had to they are certainly going to remove pricing is better and our digital day experience is better and then obviously you have that convenience and the fact that you can do one click transfers and repeat transaction once you've actually if I can start with that so it really would be and unusual scenario for somebody.

But abandon that and go back to standing in line to send a transfer because remember they receive method doesn't change so even if they want to expense and cash as they have and the path. They can still do that and continue to do that through the digital app experience. So it really would be and.

Channel circumstance for somebody to go back to the physical space. Good question.

And then just on pricing both on the retail side and the digital side, obviously, we've seen a couple of quarters here, where pricing recently has gotten very aggressive.

And Alex your perspective on what you think.

Unusually seeing from your expectations for pricing or for 2021.

Yes.

I mean, I think we've we've had some discussions on this over the years got it.

And my perspective continues to be the same.

It's been a long while since.

And I had a conversation with anyone.

And our sales team anywhere then.

And with me and said Hey, we can raise prices because competition is bringing their price is up.

In fact, I think against the backdrop of comments about a stable pricing environment and all of these types of things I still continue to not understand.

What that really means I would say it continues to be an aggressive price.

Anyone environment I mean, when you start talking about.

Walk and agents going non exclusive.

And just continues to drive.

Pricing changes when you talked about new competitors and the online space and growing competitive.

Dynamic.

Generally is about leading leading with price and people are doing a.

And very differently, Ryan and I think you've got.

Companies like transfer wise.

Which I guess now changed your name.

But.

Basically, saying that theyre cheaper, because they're not charging effects, where they're very expensive on on fee.

But that's not kind of what they lead with and other places youre seeing low prices.

On fee, but then FX rates, which are competitive and now we're kind of thing and the online space in particular low fees and low FX points.

And then the walk and retail space when Youre talking about sends to Mexico, and northern triangle, and we see a lot of our competitors.

Particularly the more niche oriented ones going with negative FX rates.

<unk> and other things as well so it's very competitive.

I think means competitive pricing as well.

And and.

And the flip side and it doesn't really bother me I mean, it's not and.

It's not like we're building and like massive reductions in and.

And revenue our concerns about that because of the competitive.

Nature of and I think it is in that sense just.

It is shifting around and it sort of just different corridors and in different areas, but.

I think it's just the competitive nature of our business is more how I look at it and I think it's just something that you know.

And we need to anticipate and hopefully the message that we've tried to resonate around this idea.

Here that we need to continue to look at efficiencies and.

And how do you drive.

More throughput and you.

Network, and particularly in the online space, where you can scale, so much quicker and easier.

Because.

You take down the incremental cost then.

And then it's easier to do that.

Net from a competitive standpoint.

And that lower price environment, which is really the way we designed our entire online platform, which is why I think margins are so strong despite how competitive it is so thats pretty exciting and we've taken that methodology and really pushed it down into the sort of work and space as well and we continue to I think benefit from that.

And we'll benefit from that as we go forward.

So I guess the bottom line.

Oh I'm sorry go ahead.

Oh I was I was just going to say take a look at any other company that competes on customer experience right. I mean pricing is certainly a factor, but it's not the only factor many things on Amazon are much more expensive and they are and to walk.

And state, but yet people choose the convenience and the asphalt.

First user experience, so again pricing like in any industry is absolutely key and important but it's not the only factor and people well focused on what is the most convenient for them at the end of the day.

Thank you very much I appreciate.

Appreciate it.

And we have a question from Rob Napoli from William Blair.

Got it thank you and good morning.

And I guess.

And they look good luck team I didn't realize that you where do you think you are kind of leaving and the middle of the movie.

Got it.

It seems I guess.

Alex.

Can always been important and driving this digital business what are the.

The operational.

What adjustments are you making to us.

And theyre, taking with some of those responsibilities.

Yes, and that's a great question Bob.

I'm, sorry, you missed and we put a few.

A few number of weeks back right now.

And I guess mid January or something so basketball.

Net debt.

But yes, no look I mean I think.

We've been fortunate that we've been able to consolidate some of our operational efforts under it was already strong.

Strong from.

Hello, and I think that it's really the combination of those that have created a uniqueness around that but when you Peel back the.

The layers, we've got very strong.

Operational oriented folks, we've got very strong marketing and consumer oriented.

Leadership.

And as well and we've got released from Nike and products.

Performers as well, so I'm not really concerned about.

The ongoing.

Operational aspect of the business there's definitely.

A different and better decisions need to be made and yet the.

Transition and pivot where were currently searching to see.

If there's a replacement or do we bring it from different talent for different reasons.

And focus on the business a little bit differently, So and I think it does create a little bit of and opportunity to think about how do we want to be organized which is which is always good to be able to do as well.

At the end of the day.

Maybe a little known secret but.

Much of our digital success has really been because we run it as.

A group effort, it's really kind of what we call. This task force oriented mentality around it and we don't have one individual person and that's really making every decision about the digital business. The world is too big and I think there's too many factors that go into it.

And whether that's the.

And the people looking at the experience side of.

The interaction, whether that's things happening in foreign markets pricing and all of that needs to rollout from from all over the organization and it's very dynamic and so I would say it is one of the.

Best things that <unk> actually did was put together a.

Task force mentality around that and an organization that's really built on a group of individuals getting together frequently to help drive that decision, making process and so.

And as she steps away that that process will continue and others will pick up.

And where she left off so I feel very very good about that and don't really feel like we're in a position where we are.

One one mastermind behind digital and we need to replace that person. So we don't have that issue and that's exciting for us.

At the same time.

And I'd like to lose you know really good people, but then again I think really good people are often destined to go do.

More and.

Different.

And exciting things and opportunities price. So we're happy for him about that but.

Yeah, So anyway, we're searching.

For various people to think that it gives us an opportunity to.

And in some some new talent and different ways and.

We'll go from there.

Growth.

79% in the fourth quarter and I think you said.

And said Alex debt.

Total money transfer business grew 11% in January.

And what is the right.

Growth rates for the digital business over the next three to five years. So obviously you had some tough comps.

And.

And in 'twenty, one, but at least a 30%.

Plus growth business over the next three to five years.

On the digital side, Yeah, I would think so yes.

Yes.

Yes, Sir Okay and wheat.

<unk> thought about.

Retail I don't think it's rather we're talking.

Yeah look I mean, I think that theres challenges and the and the block and space and I think they've already and continue to see those challenges and a number of markets, but we do have some some opportunity.

Two to change and pivot that debt.

Market orientation, and a little bit and think about how we utilize the network a little bit differently as well. So we're looking at them as a service capabilities, some white labeling capabilities and some other things that will enable us to <unk>.

And to utilize the network and a variety of ways and I think the balancing act is going to be around.

What's.

What's the propensity of consumers to continue to want to walk into locations and cash.

Cash on the counter.

And it was the sort of digital Revolution, and I guess evolution of just general and marketplaces around the world anyway, and particularly in.

Large and regions right and if you think about the orientation of the <unk> business.

I mean, a lot of it is North America based a lot of it is Europe a lot of its middle East and then you've got.

Several areas across.

You know Asia, where even down in Australia, right, which is becoming very digitize and very bank oriented very payments oriented landscapes and so.

That.

Drive toward spending originating from digital platforms and I think it's just going to continue to to grow cash on the receive side is a very different conversation.

And one that needs to be there. So I think that the walk in business is.

Or retail or whatever you want to call it I.

I think we will be there for a very very long time I do think the growth rates are going to fluctuate.

By region, and I think most of the regulatory landscape I'd say most of the cost and the expense around that as you know.

Cushing.

And even those classes of trade towards you know, how do I sort of compete and the future.

Future and what is the future look like from a digital.

Perspective, and that's a lot of what we're seeing as well and.

So I think that will continue and so it really is hard to sort of I guess.

Prognosticate exactly with that.

And what that will look like three to five years from now, but certainly in the near future.

We're expecting you know.

Flat to positive growth and Milwaukee and space and then you know the digital business driving the bulk of the bulk of the opportunity.

Thank you I appreciate it.

Thanks, Bob.

And our last question comes from Mike Grondahl from Northland Securities.

Excellent.

Yes, thanks, guys and Glenn it's warm and up a little bit for you. So two questions for me.

The first on ripple.

And I kind of thought that was a multiyear contract.

And the development fees were sort of earned over those years and whatnot.

Not necessarily tied to volume.

So by pausing and the first quarter with ripple.

Do you lose some of the finite development fees and more kind of do or are they just delayed.

One if you could clarify that.

And then second.

<unk>.

If the DPA gets lifted and may like I think most thinks it will be because of how strong the complaint gotten and how low the fraud has gotten.

And what is your head on and we find the debt. These days and kind of how are you thinking about that.

Okay.

Yeah. Thanks, Mike good both good questions back on ripple.

No it was and is.

You know effectively and contract oriented with with growth. It is a multiyear contracts and there is time left on that contract.

And it really is around.

Partnership right. So it's based on countries and markets and volume and a variety of things that drive those incentives. So no. There is no loss of those incentives.

And.

Those still exists and so it's really just more of a delay and.

And if it.

If and when.

We were able to.

Re engage then they are there to do and and obviously.

There is ongoing dialogue with ripple.

And just in terms of is there something we can do and what is it and where and how do we do those types of things so.

Those conversations will continue and again just ramped.

Emphasizing the point, we're talking about not planning for anything and the first quarter, we really haven't.

Commented beyond that at this point in time as well.

And then on debt.

Debt refi.

Yeah, I mean, there's always a cost benefit analysis associated with that and then I'll, let Larry opine on what the opportunity could be there but.

Certainly anything that could lower interest expenses generally positive and as far as I am.

Definitely.

And of our strategy for this year.

We are.

Wanted to get through the year and have those results.

And we also have.

The PPA.

No.

Firing and May and I think those two things combined should put us in a position to begin.

Again, our refinancing, but I don't think it'll happen.

Before me, but definitely a high priority.

Considering where the cost.

And especially.

So it's.

But on the agenda for this year.

Yeah.

And we have no further questions in the queue at the time and I would like to turn the conference back over to our speakers for any.

Cost of flow remarks.

Oh, great. Thank you it's been a.

It's been a good call. It did start to the year appreciate everyone's time and interest and that and look forward to catching up with everyone and them coming days and weeks. Thanks.

Yeah.

Once again, ladies and gentlemen that concludes today's conference. We appreciate your participation.

Patient today, you may now disconnect.

[music].

Okay.

Yes.