Q1 2021 MoneyGram International Inc Earnings Call
Good morning, and welcome to the Moneygram International Q1, 2021 earnings release call.
Today's conference is being recorded at this time, all participants have been placed in a listen only mode 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 Stephen Rice.
Corporate Communications. Please go ahead Sir.
Good morning, and happy Friday, Thank you for joining us on the call with me, yet Alex Holmes, Moneygram, Chairman and Chief Executive Officer, and Larry Angelilli, Chief Financial Officer on the Moneygram Investor Relations website, you can find our earnings press release and presentation, which is intended to supplement our prepared remarks during today's call and provide the reconciliations between.
And 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 prepared in accordance with GAAP. They are included as additional clarification items to aid investors and further understanding the company's performance and addition to the impact that these items and events.
So Pat on financial results.
Please note that today's call is being recorded during the 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 are subject to risks and uncertainties actual results could materially differ because of factors discussed on today's earnings press release and the comments made during this conference call.
And and the risk factors section of our form 10-K forms 10-Q, and other reports and filings with the SEC, we do not undertake any duty to update any forward looking statement and now with that.
And I'll turn the call for <unk>. Thank.
Thank you Steven.
Everyone and thank you for joining us today we.
We had a very strong first quarter and the company is off to a great start for the year on the strength of our digital transformation.
And the continued execution of our strategy and the first quarter revenue exceeded expectations driven by double digit money transfer revenue growth of 12% and money transfer transaction growth of 14%.
Growth was again led by our amazing digital performance with Moneygram online soaring to a record breaking quarter for both customers revenue and transactions Excitingly. We also reported a monster April delivering a year over year money transfer transaction growth rate of 46% and reporting the largest number of transactions ever for that month money.
Grandma on line also achieved an all time high for transactions and face value scent and the month.
And across every region, our digital business continues to outperform its hard to believe that and just over two short years. Since we launched our new App. We felt the digital business that has rapidly grown to reach $60 million this quarter.
This growth trajectory rivals out of any other fintech across the entire financial services industry, and we could not be more excited.
At the end of March digital transactions accounted for 32% of all money transfer transactions approximately double the percentage at the start of 2020.
This is fundamentally a new company and new Moneygram, we've worked hard over the last few years to build a customer centric modern mobile API driven organization ready for scale and today, we are delivering on that vision and.
And our current trajectory, we expect the digital business to cross 50% of all money transfer transactions in 2020 for the momentum and our business has never been stronger and we are creating tremendous value for customers partners and shareholders.
Importantly, as we announced Tuesday, and as you saw on our earnings release. This morning, we announced very positive development as we near the end of our deferred prosecution agreement, we have satisfied our financial obligations under the DPA and have received the final report of the independent compliance monitor which has certified the company's compliance program. We're extremely pleased to be on the on <unk>.
Drag for a timely termination of the DPA and monitor ship on May 10, and I'm proud of and industry, leading compliance program that we've built.
We've implemented the highest consumer data collection capabilities and the industry and our customer I'd verification standards technology platforms and data driven controls have helped to bring consumer fraud rates to all time lows and.
Accordingly. These capabilities have also helped to bring our ability to understand and communicate with our customers to an all time high the quality of our service has never been better and our business has returned to growth.
All of this undoubtedly insurers, we will continue to expand our business while building upon our leading position and protecting consumers.
Now turning to slide four.
You can see here, how the continued execution of our customer centric strategy along with the strength of our digital transformation have enabled the company to win with consumers and capture market share.
And these pillars, delivering a differentiated customer experience scaling our digital business being the preferred partner for cross border and capturing new revenue by monetizing capabilities are collectively the backbone of our 2021 corporate strategy. They are positioning the company for sustainable profitable growth and our financial results strongly correlate to the successful execution.
And all of our strategy.
Following highlights help to illustrate the success, we delivered another quarter of strong mgo customer retention rates of 80% and March we reported a milestone reaching our 15th consecutive month of Triple digit cross border Mgo transaction growth, which led to a 131% year over year increase and revenue for the quarter.
And total company cross border money transfer principal sent increased 36% and the first quarter, a meaningful acceleration compared to the fourth quarter.
Additionally, as a result of increasing market demand and our thoughtfully executed digital transformation.
And now launching new initiatives to monetize our cross border capabilities by opening our platform can your customers and use cases and the past we've talked about our strategy to diversify our revenue streams and the launch of our new business line Moneygram as a service is the next evolution of this strategy the details of which I'll talk about and a few minutes.
Now on slide five you see the highlights for the growth drivers surrounding our strategy to scale the digital business.
These include the largest component of digital business mgo, delivering 130% year over year cross border transaction growth.
Transactions received digitally via bank accounts mobile wallets are debit cards grew and amazing, 128% and transactions through our digital partners reported a 47% growth compared to the prior year.
Taken together each component and helped drive total digital transaction growth of 86% and record digital revenue of over $60 million at the end of March the digital business accounted for 32% of all money transfer transactions and increase of more than 50% compared to the prior year.
Our work and retail business reported growth in the quarter with strong growth in March and April led by solid cross border performance out of the U S and Europe.
But again, even as the retail business stabilize this digital continues to grow as a percentage of overall transactions, thereby expanding the size of the pie and the amount of volume going through our business.
And our cross border Mgo growth has been nothing short of spectacular, but as we've discussed keep in mind as the business gets larger we expect these growth rates to normalize on the coming months, particularly as we begin to lap last year's incredible growth rates.
Now I'll spend some time discussing each component of our digital business and more detail beginning with Mgo MGM is the largest component of our digital business and as I mentioned delivered record highs for customers' transactions and revenue in the first quarter with revenue growth outpacing transaction growth.
And I also mentioned March was our 15th consecutive month of Triple digit cross border growth and that was driven by a 106% year over year increase and active mgo cross border customers.
Now looking at some of the customer data behind this performance.
85% of all Monday, Moneygram online transactions and the month were done by repeat customers with more than 80% of our first time customers being new to the brand.
From a transaction perspective, 86% of all Mgo transactions are done on a mobile device with the app being the largest component.
Within the App or growth rate of monthly active users is accelerating and outpacing the competition and the quarter, we delivered a 155% transaction growth rate for transactions on the App.
From a demographic perspective, Gen Z and millennials make up about two thirds of our app users and the average customer lifetime value or CMV for and App user remains three times the size the average retail walk in and customer.
Our digital marketing spend is becoming increasingly efficient and we're driving down our customer acquisition costs as we optimize spend on in App actions the point being tracking app downloads is important and and many large markets, where and either the number one or number two spot for downloads, but to deliver the highest ROI.
And we need more than just downloads, we need customers, who are actually going to register and transact on the app.
So that and we've also enhanced our SCO and ASO tactics to drive more clicks to our App and more transacting customers as a result in some areas, we've driven a 10 X increase and transactions while the cost per transaction has decreased by over half.
These strong results help highlight what we're doing to increasingly get on the offense and push our digital customer acquisition strategies to help scale, the digital business to new Heights.
Now turning to slide seven you can see the explosive growth and customers receiving money digitally so.
And so whether to and account mobile wallet or directly to a card consumers are increasingly choosing to receive money digitally from the comfort of their own Holmes.
In fact in markets, such as India, and Indonesia, well over 40% of all of our transactions are now received digitally with these numbers increasing and April.
Since Q1, and 2018 transactions received digitally have grown at an incredibly strong, 68% CAGR and compared to last year alone and transactions have more than doubled.
Visa direct is once again, a strong growth driver delivering 525% year over year transaction growth and the quarter and the largest quarter ever for transactions.
Digitize and the receive side not only meet increasing customer demand, but also saves us time and money digital received expand our global network without needing to add physical locations, which are increasingly more expensive to maintain it.
It also enables a more streamlined and simplified customer experience.
Going forward continued growth and digitally received will remain a top strategic priority as consumers continue to prefer this channel and value of our leading network.
Now, let's discuss the third component of our digital business as shown on slide eight our digital partnerships and the quarter. They delivered 47% growth with strong growth volume and cross border activity, but again. This was partially offset by declines in U S to U S volume that trend, which remains consistent.
As a reminder, digital partners as we define them are essentially agents that are either pure digital companies or the digital side of our physical agents that also have a digital presence.
And typically digital partners, our Fintech banks, telcos and ecommerce sites and large send markets that bring us customers, who are looking to utilize moneygram services and global network.
This partnership model has been effective for many years and as consumers increasingly migrate to digital we expect to see strong growth from our current partners, whose customers also have strong retention rates.
We have a solid pipeline of new digital partners that will further support growth for this channel and I look forward to providing updates on these signings as the year progresses.
Turning now to slide nine Moneygram is increasingly being recognized as the leader for progressive innovation and the industry were receiving numerous inbound calls each week from new potential partners, who want to access our global platform for various purposes.
To that and as I mentioned, we've launched a processing model to open our business and new customers and new use cases moneygram as a service over the last few years, we've built and API driven infrastructure that enables us to seamlessly scale volume through our global network and we're optimistic that this strategic growth opportunity will further help to monetize our capabilities and new way.
The new business volume represents significant growth opportunity for Moneygram as we enter a market estimated to be worth $17 billion and 2024.
As you can see here there are a number of different components to this offering and the first quarter, we announced our first partnership to enable the funding and disbursement of digital currency with G. Coin. The partnership provides an easy way to access blockchain based digital gold assets by providing consumers with expanded access to <unk> and tokens at thousands of new point of sale locations <unk>.
Digital innovation combined with Moneygram and unique global platform will make digital assets more accessible to millions of consumers.
As crypto and digital currencies rise and prominence of core barrier to further growth as the on and off ramps to local Fiat currencies Moneygram is extremely well positioned to help companies solve these challenges given our expertise and compliance our understanding of blockchain or API, driven infrastructure, which enables instant access to 125 different currencies and of course.
And our global cash network and the coming weeks, we will announce and exciting partnership and this vertical.
And the quarter, we also launched and as a service partnership with Seagate original money transfer company here and the U S with a meaningful retail presence across the country.
[noise] approach us about accessing our payout network.
And we've opened our global platform to them.
Opening our global platform to companies like Sigue enables us to access new customers and locations, we otherwise wouldn't have access to and it also enables us to increase payment volumes through our network and process additive transactions.
And our scalable infrastructure and kind of absorbed significant volume at very low marginal cost.
Again these offerings are new and they will take time to ramp, but we've set ourselves up for success and we have the opportunity to generate meaningful processing revenue streams and the years ahead, our strategy to capture new revenue by monetizing our capabilities and our men's differentiator and an important component of digital transformation, which is driving value for consumers and partners and importantly shareholder.
And with that I'll turn the call over to Larry to discuss our strong financial results in the quarter.
So as Alex described the company returned to double digit growth and both transactions and revenue and the global money transfer business and the first quarter.
On the transfer revenue was up 12% with transactions up 14% year over year on a reported basis.
Total cross border principal increased 36% as we've seen our customers sending larger amounts and addition to sending more frequently.
This was largely driven by the continued triple digit growth of Moneygram online.
Moneygram is total revenue of $310 million for the first quarter was up over 19 million from four 7% from last year.
This more than offset the declines and our bill payment business and financial paper products and.
And also we continue to experience lower investment income, which was down approximately 80% from last year due to the zero interest rate environment.
As a result with the continued rapid growth of Mgo, our revenues within the core money transfer segment have never been this diversified agent concentrations are now at their lowest point and addition to the Walmart marketplace, reaching its lowest proportion and money transfer revenues.
And from a geographic perspective international sends now represent 61% of money transfer revenues and U S. Outbound sends represent 34%.
These trends all point to a future with continuing growth on.
Unburdened by the concentrations of the past, which in turn have substantially lowered the company's risk profile.
The chart on slide 12, as an illustration of the significantly improved quality of the company's adjusted EBITDA.
As we've been discussing there had been also material changes to the company's expenses and improving the quality of EBITDA and adjusted EBITDA and the quarter.
By far the largest of these changes was not reporting any ripple incentive payments, which were $12 million and the first quarter of last year and as a reminder, ripple incentives were recorded as a negative or contra expenses.
During the quarter transactions and operating expense was higher than last year, but.
But excluding the ripple benefit Tino would have been $6 7 million favorable year over year, driven by our continued operational efficiencies.
Compensation and benefits were higher primarily due to $6 million and employee severance expense.
Which was related to the restructuring that we've previously announced.
Also shown on slide 12, adjusted EBITDA on an as reported basis was $50 million versus $51 million from the first quarter of last year. This is also an illustration of the value of our digital transformation and its impact on the turnaround of the core business, which is driving and materially higher quality.
<unk> of EBITDA.
Following the end of the DPA, we're anticipating significant conversion.
Between EBITDA and adjusted EBITDA on the second half of the year. However, we will still have the EPA related expenses and the second quarter.
It's notable that we were able to accomplish these fundamental improvements to our revenues and EBITDA during the seasonally low quarter of the year for volume and revenue.
The company had $153 million and cash and cash equivalents at March 31.
This reduction from the December 31 balance is normal for the first quarter, primarily due to employee bonuses and incentive payments that are made in February and March.
The first quarter also tends to be a seasonal high point for sign on bonuses as well.
Company is continuing to pay cash interest and instead of payment and kind.
On our subordinated debt, which also had an additional impact on cash.
As we reported Moneygram paid the final amount due to the department of Justice and April.
Following this payment we remained within our targets for normal levels of working capital.
With the continuing momentum, we've seen and the money transfer business so far.
And this quarter, we have begun to rebuild our cash balance.
We would also like to provide our outlook for the second quarter of 2021.
Company anticipates total revenue and the range of $315 million to $325 million based on continuing growth on the money transfer business.
This range includes the potential revenue impact of up to $10 million related to the rollout of the new competition at Walmart and it also recognizes that there are still significant uncertainties around the potential impact on pricing and volume, especially since this rollout is still and it's early stages.
Also included and this outlook is the expectation of declines and investment income for versus last year.
The company anticipates, adjusted EBITDA, and the range of $50 million to $55 million for the.
And quarter. This also reflects the potential impact from Walmart.
And consistent with the first quarter include zero incentive fees from ripple, which were approximately $9 million and last year's second quarter.
And with that I'll turn the call back over to Alex Great. Thanks, Larry.
Our results for the quarter continued to demonstrate the momentum and our digital business and our ability to operate with increased efficiency and the agility to overcome challenges our innovation is winning with consumers and our growing digital channel along with our new business line Moneygram as a service or establish the foundation for Moneygram for long term sustainable growth and profitability.
Looking ahead, we are now increasingly on the offense, we're accelerating out of the past year by investing in strategic growth areas, continuing to innovate and the market and leveraging the strength of our digital transformation and new ways Moneygram is truly leading the evolution of digital PDP payments and with that I'll turn the call over to the operator to take your questions and thank you.
Operator.
Yes. Thank you for you would like to ask a question. Please signal by pressing star one on your telephone keypad.
We are using a speaker phone. Please make sure. Your mute function is turned off and you allow your signal to reach our equipment again press star one to ask a question.
Well take our first question.
Kartik Mehta with Northcoast research.
Good morning, Alex and Larry.
I just wanted to I guess just from a DPA.
<unk>.
And what's left in terms of having to pay the government I think there's a $55 million.
And reserve and I'm just wondering.
When Youll note a final payment for <unk>.
And you already know that was the payment we made and April kartik. So that payment has already been made and all of our financial obligations are concluded.
Despite our best efforts, we did not get any relief on that number so we.
And we ended up weighted to pay that in April.
And at this point and time, Andy and I have responsibility to provide a certification on may 10th to the government and then they take that to court and file it for dismissal.
We are definitely on our way out.
And then just from a Walmart standpoint, I know it's early.
What kind of expectations have you built in for second quarter and have you seen any change in transactions.
And I know, it's early but just any.
And kind of experience.
Seen there.
Yes, sure happy to take the question.
So far it looks like.
Western Union's rolled out to about.
The third of the stores.
The <unk>.
Pricing on the Walmart to world looks to be consistent with.
The prices that have been there for quite a while which is the four eight and 16.
On the branded product that they put in kind of either matches, what our prices were or undercut us a little on some of the upper brand.
Upper bands.
And there seems to be some promotional FX rates going on at least I think their promotional a couple of them are our zero, Mexico being an example, so.
<unk>.
We've pivoted a little bit.
<unk>.
<unk> done a few different things with our branded product matched a couple of price this year and made some changes.
And to cover that so far we've seen very little impact if any at all on the business and we continue to perform extremely well.
I think we're very well positioned going forward.
From a uncertainty perspective, we built and about $10 million of revenue impact into the guidance that we gave you.
At this point really don't know if thats.
On the right number, but we feel we feel really good about our position to continue to compete and we have.
And of all hands on deck on that so.
I think the I think this will be a bit of a telling quarter they've finished their rollout.
And.
Kind of move through the mother's day and eat holidays.
And then just one last question Alex.
From a pricing perspective, I know and.
Transaction growth and revenue growth were only 2% of part and I'm wondering.
And what Youre seeing in terms of pricing.
And the business.
Yes, I mean pricing continues to be pretty aggressive.
On our part we continue to try to match and cover whatever we're seeing in the marketplace and obviously as we've talked about.
Lead to the extent possible and the online world, we are seeing and a lot of the retail competition.
Lot of.
What we kind of refer to as negative FX rates or you can actually get more money on the receive side and the.
And then the market rate would otherwise indicate.
And that.
<unk> tends to be something that we see more broadly here and the U S.
Some of the smaller.
And on some larger competitors.
Beginning to play and that game a little bit.
Globally speaking I think from a.
From a pure fee perspective, it's been it's been consistent but there has been I would say arguably some more aggressive stances on FX rates lately.
Perfect. Thank you very much I appreciate it.
Of course.
And we'll go to our next question from Ramsey El <unk> with Barclays.
Hey, guys. This is Ben on for Ramsey. Thanks, So much for taking my question on.
Wanted to just fall back on and on the April performance.
And I apologize if I missed it can you can you kind of recap what you're seeing through April and terms I would like digital versus retail transaction growth and perhaps it might be helpful. If you could give us a sense of like what that looks like on a on a two year CAGR kind of yes.
So moving over for the impact of COVID-19 last year.
Yes, it's smoothing out COVID-19 is always a little bit of a tricky exercise.
And then go ahead and pass on your offer to actually do that math for you but.
Net.
The growth, we've put up transaction growth of 46%, we had the largest number of transactions and the month of April that we've ever had in the month of April. So I think that kind of gives you. Some idea of the fact that not was it just the strong grow over of last year, but also we put through a materially larger amount of transactions.
And then we ever have so it was it was strong growth, but is also pure transaction numbers as well and the online space and this sort of reflects more broadly digital we had an all time high for transactions.
And the amount of principal that went through the online business as well so.
Collectively extremely strong April and.
And Larry will probably punch me, but through six days of May. We're we're cranking about similar rates. So it's been a very strong start to may as well, so very exciting for us and thats really across.
On a significant number of our of our markets and we are seeing.
Good strong growth and the walk in world at least in March and April.
Which were accelerated out of kind of a January February which were a little softer the walk and business. So generally speaking very very good to see across the board in terms of.
General and generally speaking money transfer.
Growth.
Okay great.
Kind of along the same lines and just kind of curious.
And in quarters, where you've seen like.
Cross border travel kind of resuming are you seeing any like change and transaction volumes I think investors and we always kind of wonder about and formal channels, which are.
And <unk>.
For the kind of quantified, but where borders and kind of open back up are you seeing any kind of are people, putting cash in their pockets and getting on airplanes again and is that impacting transaction volumes are for things kind of continuing uninterrupted.
No I really I really couldnt say honestly that anywhere.
Where we have employees and people watching the business really believed that there is any increase and cross border travel of any significant.
Amount that's helping.
And we're changing the business flow at all and Pat I think with principal up as much as it's been in the fourth and the first quarter. I think is reflected on the fact that people are still not traveling and staying home.
And and sending more money and to your point I think oftentimes people do travel with the money they bring guests they buy things right and they take it with them and in this case.
And they continue to send more we recently and did a survey talked to a number of consumers and the online world and talked about them, sending more principal and they continue to believe that or feel very strongly that loved ones around the world and the receive side are in need of more and more money than they've had before.
And we definitely saw on the days, where stimulus payments at bank accounts, we definitely saw surges and online sends and those respective days right. After so.
I think most people are not traveling at this point and time.
Okay, Alright thats helpful. Thanks, so much for taking the questions.
Thank you our next question from Janssen Wang with <unk>.
J P Morgan.
Hey, Thanks, so much guys. Good day, great results here I think just on the build on that just I know I asked last time, but just thinking about stimulus and reopening and.
And how to disaggregate.
Stimulus piece thinking about trends is there a weighted to do that Alex I know, we've been asking this for a lot of our companies just to better model trends I know, there's a lot of momentum with digital as well so is that something that you've considered or looked at deeper.
Yeah, a little bit.
It was interesting I can't remember the exact day, whether it was like March 10th or 15th or whatever it was but the.
Those first round of.
But the latest first round of stimulus checks that hit.
Literally the next two days online, we just saw transactions boom.
So those are kind of 112 day scenario. So it was hard to see.
Other fluctuations I think when that second round hit like a week or two later, we saw similar reaction, but it's a very short time period. So we almost literally see money hit bank accounts, and then and and go forward.
Interesting was our survey that we did so it's sort of a bit contrary to that and I think only about 10% 20% of people said that they actually sent their stimulus checks, but I would say that.
I guess, we surveyed the wrong people because our results would say differently.
I do think it has made a big difference.
So that I could say it necessarily correlated to.
The strength and growth and the.
And the walk and space in particular, it's hard to see is it kind of gets more spread out and disbursed, but.
And it certainly makes a big difference that you see the opposite trend as well and places.
Like for like France, Germany, and others. When they went back into Lockdown and you can definitely see that walk in business completely slow and then the online business.
Surge a little bit, but we're on the margin here at this point and time I think a lot of other shifts that we've seen has been relatively permanent shift and so.
I think the stimulus checks definitely.
Helped in terms of amount of principal being sent in the quarter, but I don't think it was the only on the driver.
Yes, no I agree and either way it drives engagement so.
And for sure debt fantastic, just trying to understand that and a lot of your and your digital statistics prove that out so thanks for.
<unk> share on it.
Follow up just on the walk in peace.
If you were to index it to 2019 sort of building on what you said before.
How do you see that.
Trending for the rest of the year I know Walmart complicates it a little bit but.
Big picture, how do you think the walk in business will.
Look here and the second quarter or maybe better going into the second half of the year.
Yes, I think.
Your point is a good one on Walmart I think we have to hold that a little bit a little bit neutral I would say all things being equal.
If you normalize for Walmart or just take it out on the question I would say that.
I would anticipate kind of what we what we're looking at.
Which would be kind of mid single digits I think the question is.
And what happens with it.
Lockdowns and I think there is there is talk that Europe is going to reopen and kind of June July and some borders will start to open and maybe the summer but.
And until that comes I think it's still a little bit of an open question, but.
Just kind of based on trend and that's the bit of our expectation.
Theres been a little bit of.
Trash-talk swinging around just in terms of.
Our view of Hawk and business and actually.
Our team around the World has done amazing job with it our retail business is probably.
And as strong if not stronger than it's than it's been and a number of years and again all of that against the backdrop of.
What I consider to be the best compliance standards out there and so to get growth off of that.
And with consumers coming in particularly and sends to Latin America, and the Caribbean and out of Europe to two <unk>.
And is down to Africa, and eastern Europe, continuing to to build and strengthen and grow I think is indicative of where the market.
Has kind of transform two and the fact that.
Our.
Compliance standards again, which also we're kind of used against us by other competition actually are beneficial to us and are helping customers and theyre not really hurting our business anymore. So very proud of that and something that we'll continue to do so.
And again I think the digital side is so strong.
With the <unk> three times you want to put your focus there on on on.
On the online growth and the business and you want to continue to put the investments go.
Going forward into strengthening that position and consumers are stickier and youre getting more adoption to it and and especially as you trend downward pointed out two thirds of our customers are millennials and Gen Z and.
With that sort of and direction and the strength of digital it's just intuitive to me that Thats, where the businesses is pivoting to and not to say that the walk in business is going to.
Collapse or go away. Its just I think the momentum is just continuing to shift towards digital properties and assets around the world and I think that's just going to be the trend that we'll see permanently going forward. So.
Look I'm extremely pleased with where we are as a company we've got kind of one one big challenge here.
With Walmart, but it's not something we're not used to and it's something that we're prepared to address and outside of that I think.
We look forward to.
Two a good a good year holistically.
Yeah no. Thanks for that you guys are definitely.
And a lot of these challenges and so and.
I'm sure you're looking forward and may 10th to make sure you keep that Penn after you sign it.
And to you later, if they're happy happy happy signing day. Thanks.
Sure.
And <unk>.
Take our next question from Mike Grondahl with Northland Securities.
Hey, Thanks, guys.
Hey, first off on the DPA could you kind of remind us.
Getting that listed what you think debt does for the business overall.
If you could kind of talk through that a little bit and then kind of where your head is on the on the debt refi and what you think you can accomplish there.
Yeah, I'll take I'll take the first one and then I'll leave the hard one for Larry.
And <unk>.
It's a really great question.
I don't think a lot of people really unless you have sort of lived through and it's hard to get perspective on it.
But.
Yeah.
One other things I can say about about having the DPA and and monitor ship is certainly it forces you to think differently and completely and our case anyway reinvent ourselves.
We've talked a lot about just kind of basically saying look the old models the old model and we're switching to a consumer first data driven decision based organization.
And the amazing part of that as painful as it was to get there.
We now know everything we could possibly know about our customers right, where they are transacting time of day, who they are sending to halfway I mean, just anything you can possibly imagine about the customer including right down to their down to their age.
Their propensity to.
And the different currency rates et cetera, So it's pretty amazing what we've been able to build on the back of that but it all sort of began but with the idea of you have to know who your customers are on both the send and receive side.
And you've got to push that forward I guess from from a contextual perspective, we've spent an extraordinary amount of money fighting.
Fighting this thing over and over the past eight or nine years.
I think I've joked at one point that our Chief compliance Officer, Andy started in 2015, and he has never known a world where someone didn't question every decision he has ever made.
And.
And again, it's really hard to and part upon people who haven't been there.
To explain what that really feels like that every single.
Decision you've made questions.
And and not necessarily a question for the wrong reason, but.
And its forces you to explain every decision to ever made and that's a lot of wear and tear on an organization thats a lot of burden and.
And it's pretty amazing to be able to wake up on may 11th and <unk>.
We're able to drive decisions without some on double checking those decisions and so and in some respects.
I'm coming up on on May 12th year here and.
75% of that time has been under a monitor ship and so to be able to come into work and actually drive the business and make decisions and.
And kind of that's a bad word but to say kind of be free to sort of drive that decisioning. Without question is is a pretty freeing feeling and I think it's going to have a tremendous morale impact on the business and I've also joked over the years about.
No.
Being sales sold against I mean, whether it's in western Union and Ria or Intermix, Dave told every agent that we are going out of business. They've told every part and around the world debt.
Our compliance is terrible and were the worst company ever and.
So it was for all a bunch of nonsense, but they use it to sell against you. So they're not have that anymore.
And is also a tremendous feeling as well and I think we've built.
And incredible consumer data collection capability and to be able to kind of lead with that now.
And drive the business is extremely exciting and and I'm very proud of that and I'm proud of the whole team that helped us get here and everyone that set apart and that along the way and it's been a long road, but.
We're ready to we're ready to go so it's exciting and and.
And I feel like I'm on packed and ready to go to college so it's.
And saying by the mom and dad.
Hard to follow that.
Well listen and fees right.
And actually Mike It feeds right into the answer to the next question because it's been a hand caf on the gate I was just going to say I mean this was a gate two are.
And being able to address our capital structure and that's the first gate valve.
Okay.
And the timing, we still have call protection on both tranches of the debt those call protections.
Come down.
And of the second quarter.
So we're in a process now where we're evaluating the market reception to different ideas that we have.
And we need to make sure that the credit story.
Dresses.
For the release of the DPA and then also the improvement for the company.
And I think some of the momentum that we've got going and this quarter is also helpful. So.
And on schedule right now to start addressing the credit issues and our business.
Gain is open and.
And we'll be targeting.
Something that can.
Adjusted capital structure, when the call protection.
Steps down.
And in July So I think were and kind of on schedule right now for <unk>.
Something of that order.
Got it and maybe one more Alex if I could.
Moneygram is a service.
Pretty interesting you mentioned G coin.
As the first customer.
And you said, another one might be coming or another exciting one might be coming soon can you just I.
I guess highlight again or remind us how Jay Cohen is using moneygram and maybe the other types of customers and you're talking to.
Yes, absolutely.
And the case of G coin and actually the customer will be announcing hopefully next week.
Effectively they've built.
Like all other people have these days they built online platforms that allow.
Consumers too and the case of G coin by gold as a digitized token.
And in the case and the other one it's going to be actually.
Buying crypto and.
And so consumers have various entry points into these and to these wallets and these capabilities, but oftentimes requires.
Linking your bank account or debit card or credit card, which obviously.
And is increasingly on the rise but not necessarily.
And that everyone has access to and particularly as you go downstream.
On the demographics scale. So when you think about.
Kind of the rise of crypto, the interest and the demand and and whether those are sort of.
Your general Bitcoin type things are digitized gold and the KCG coin or whether it's something is as new as kind of a USB C or a stable coin.
Getting cash in and cash out of that wallet is really an important focus of many of these.
New platforms as they seek to give customers flexibility one of the easiest things to do I think is.
Link a bank account and buy some by some crypto.
Well, maybe but.
Selling it and getting your cash bag is a whole different question and so.
The ability for anyone to walk in to a moneygram location and load that wallet or unload that wallet.
Is it pretty exciting.
This opportunity and there is other.
I guess dimensions of that as you as you kind of think about it going forward, but that's it and it's simple simple as form is really kind of bringing a lot of that.
Digital world, a little bit more mainstream through the cash and cash out rails that we operate.
Got it thanks, a lot guys.
Thank you Mike.
We will take our next question from David Scharf with JMP Securities.
Hey, good morning, Thanks for.
And taking my questions.
Hey, Alex I, just have one kind of more.
High level or I guess strategic I'm not sure.
How much you want to spec.
Speculate on this but.
Reflecting on <unk>.
Opening up the payer network to seagate or part of it.
And as well as conversation and just to add on Moneygram as a service.
And then and the broader context of.
What may have been the Guinness book of World Records for the number of times digital and 20 minutes.
Thank you.
And it wasn't it certainly and I will go.
And part and I'll have to let them know the validated.
Yes, well listen at the end of the day the message is loud and clear and it's what's prompting this question is it I mean, what are what are the structural.
And any other barrier.
Two all intimately.
Whether it's spinning out or any other kind of structure.
And just making money.
And Graham on line, a separate business from the walk in business.
I think that there is.
Structurally I would I would say and it's <unk>.
<unk> farm, it's really probably a year.
What you want to do from a partnership perspective, with the core Moneygram business and I would argue today that.
A lot of digital is interoperable Walt.
And while digital is is pretty exciting.
In terms of growth and where it's going a lot of digital sends.
And our paid out and cash and a lot of actual cash sends are sent into.
Into accounts right. So.
There's a little bit of a.
Symbiotic relationship there as oppose and at the end of the day.
And Theres a lot of share.
Sharing of <unk>.
Technology and then there is a considerable amount of overlap, obviously with licensing and bank accounts and and all those pieces. So.
Could you separate it out absolutely.
Is it easy to do probably not easy, but it is probably doable I think the question becomes.
How do you.
How do you operate it going forward and then sort of what does that what does that look like from a from a short term long term relationship with with effectively the end of the day, you payer network, but it's a good point right because if you think about.
Moneygram online and interestingly enough and you could probably care less about this but the way, it's actually sort of system.
Utilize today from how we sort of.
Operated and the cloud is it's actually Moneygram online and all of its websites around the world are all sort of agents and that sense right. So they are kind of and that way doing what you are saying right, which is which is basically utilizing the moneygram rails to push and pull transactions.
And so in that respect it.
It's definitely something that could be could be separated.
I think it really becomes a question.
Oh Im sorry, yeah long term value I mean, it was just.
Sorry day I, just finished and just say, we're projecting right now and I have a couple of years for 50% of the business to be to be digital and at which point and time.
You could argue that the business is as much digital as it is cash and so is it is there a point and separating at that point so.
Well and that was the metric that sort of caught my eye, and and gummy thinking and and I guess.
And your comment about C J.
I think really.
Sort of brings to the forefront I mean isn't that a test case for.
How effectively transfer pricing would work between and independent Moneygram online and the Moneygram Payor network.
And it's sort of because I would imagine the network as a stand alone business would have to open up its.
Payout capabilities to other remittance providers.
I think yes, I mean, I guess I look at it maybe a little bit differently, which is today.
Online and retail walk in at Moneygram don't have a choice, but to work together I would say sigue has a choice right which is to.
Try to build its own network or and countries that they don't operate and today, where they can partner with us and so on those transactions through so I think and that census.
It's a test case for.
And what you would argue probably historically is more of a competitor and a subset of what we do.
And yet it's actually a big opportunity for both parties to benefit from from that relationship, which again coming full circle is a little bit how we look at the online business today, which is it's an agent and the countries sending transactions and so.
Where do those transactions need to go and Thats debt, yes, that's kind of the same thing I think from a transfer pricing perspective, and how we sort of look at separating assets and pulling those apart I think thats just thats more of a financial question. It comes back to regulatory and banking and all sorts of other comply.
Compliance oversight and things that get a little bit complicated.
From.
Initial blush I suppose but.
Yes, no I mean, nothing nothing to say you Couldnt do it.
But I think I think we will see how the business evolves and then we can always make decisions as we go forward just depending on how things.
Actually play out over the <unk>.
Short to midterm.
Got it now it's going to be a bad thing and see how it unfolds and ultimately I think that's probably the answer to the question of when.
And when does digital actually become digital and.
Right.
Yes, it's probably like everything in life, it probably digital becomes.
Becomes less of a channel and more of.
Habit, right and it's sort of inter operates with everything that you do today I mean, it's ironic right.
As a global chip shortage right at the time for where everything is becoming.
Digitized.
Even down to cars and washing machines and other and everything else. So it's definitely a fascinating time to say the least right.
Alright, great and let me just add my congrats on wrapping up the DPA and it's been out for a long long haul.
Thank you I am sure you are almost tired of asking me about it. So you can focus on other stuff now so thanks for that I appreciate it.
Okay.
We will go to our next question from Reena Kumar with.
Evercore ISI.
Good morning, Alex and Larry Thanks for taking my questions and congratulations on the EPS.
Okay.
You just mentioned digital over the next few years can be 50%.
Overall bucket for Moneygram and that's a big number can you talk a little bit about Lucky and investments you think you need and make take yes.
That level of digital top line, what other key markets do you think you would need to add and as well as what cases and <unk> would you like to.
And the digital experience.
Sure No it's a great question.
I think there is a variety of factors at play.
I think the.
The most exciting pieces of it are really around.
Capabilities and online focus.
With respect to the customer experience and the App and how you really begin to drive.
More adoption and more markets and countries around the world where experience experimenting I should say with things today like receiver apps, we're pushing.
And our low bandwidth apps as well into into various markets as well to sort of test and pilot.
And how they work.
Sirius investment into.
And look to field. The design is something that'll be at the forefront as we go forward, but beyond that there's also what other capabilities. You can you can drive on to the App as well and ancillary services and that's something that we'll probably be talking about a little bit more.
Down the road and maybe in the second half of the year in terms of other ideas too.
Two to change that clearly.
On the.
And the investments that we've been making and marketing I'd say are kind of.
Critical to continue as we as we go forward.
When you start talking about SCO, and ASO optimization, and really think about in app.
Activity, it's pretty critical.
That you are not just out there getting downloads, but youre actually out there getting active users and transaction growth off of that and how do you continue to increase active users. The other investments we're going to be making are really into.
A lot of things, which.
May seem pretty pretty normal or kind of mainstream but definitely new for us. So we want to put a lot more activity into.
And the actual direct to consumer we've talked so much about that yet.
We don't necessarily lead today with with controls and rules and.
The way that our system really operates with that customer information first right and we still do a lot of things based on core doors and countries and there is an opportunity to kind of reverse engineer that and important part of that is that.
You need to begin to treat those customers very differently and distinctly depending on who they are and kind of how they score so creating.
And more dynamic.
Scoring and on boarding.
Euro is et cetera for consumers and various markets.
We will be a big big component of that going forward and then using <unk>.
Pricing tools.
Much more dynamically and then looking at things like high dollar senders and.
And how they kind of fit into into the mix and begin to sort of scale up is really an important aspect of.
And where we want to go and then lastly, there is a limitation on expansion of the direct consumer.
Because of license limitations and countries.
Today, right, so getting either getting licenses are getting partners and markets that we don't have them today trying to figure out how to open business lines and countries that are a bit far afield.
And is something that we're very much interested in exploring we've had great success with partnerships and those markets, but to go directly into those markets would be.
It would be a big opportunity for us as well and we're kind of lane.
Groundwork for that today.
Great Thats really helpful on and if I can on.
Second question so.
And what kind of business trends are you seeing and MBS given the severe COVID-19 pandemic and the country. If you can comment.
A positive or negative impact.
And as we're now in May and.
Yeah, absolutely yeah and.
First and foremost.
Our thoughts and and.
And Hearts go out to everyone and India, We obviously have.
A large number of staff and that have family and friends or actually live there today, we actually and <unk>.
And India, but we had.
Employee pass away and Indonesia, So obviously, just very recently and <unk>.
Obviously devastating and so many ways and so to keep the business going.
And is critically important I think for India for us we've been very very fortunate too.
Have a wonderful account deposit.
Network, and we've actually continued to see growth and India accelerate and is probably reaching our surpassing sort of all time highs in terms of volume into the into the country. Despite.
Despite what's happened with COVID-19, obviously, the walk in business has become a much smaller portion of what we do I think and at the end of was at end of March and into April we hit almost 50% of the volume in the country was digital so at the end of April so.
And that continues to surge with what's really amazing is it's hard to find a receive country.
And our network right now that isn't growing at an extraordinary rate despite.
And kind of the Lockdowns and the challenges with COVID-19, but again a lot of that has been that shift to the digital receive side. So India for us at the moment is extremely strong and the amount.
Face.
And Indian rupee denominated payments that were sending there if something that we have.
Never seen before.
Our trading and our currency is the highest.
I mean since I've worked here.
So that money has to go into accounts and Theres a tremendous inflow.
Rupees go into India right now.
And just to clarify was that in the March quarter or is that more into April and may.
And Bill it's been yes, it's been building its kind of been and consistent month over month trend.
Okay, great. Thank you.
Thanks Ryan.
Thank you our next question from Chris Kennedy with William Blair.
Hey, guys. Thanks for taking the question.
Just following up on that investment answer should we think about the current margin profile being sustainable or would you invest more reduced margins to capture that growth.
No I don't think I think I think margins are and really good shape right. Now in fact, we have a lot of initiatives to try to continue to.
To push them and actually as we achieve scale and actually should improve.
And improved margin, yes, so no the investments.
Lot of them have been built in I think we've done a.
Really nice job on that and we've kind of shifted.
A lot of that focus and emphasis across right. So we have a couple of big projects going on right now.
And one is our cloud migration, which is going to give us a lot of enhanced ability.
And over the next really 18 months as we kind of.
And deliver that and the rest is really been investments into.
And either the.
Consumer direct side online.
And expansion of products and services and investments and innovation and then we continue to enhance.
Our point of sale systems for agents as well as that environment continues to get.
A little more competitive but those are really the three main buckets and.
We're on.
I'd say generally speaking behind all of that has been large investments as well into <unk>.
Debt analytics and capabilities around <unk>.
And everything customer and as we referred to it as customer 360, so really exciting stuff and nothing that I think you would see a significant.
Increase and for sure it's sort of built into the run rate and the numbers and I think we're in good shape. Good teams there and they are building.
Every day, and delivering more and more and getting.
And I'd say more efficient as we go which is great.
Great and then.
And just quickly follow up on the digital business are you still planning to provide segment information for that going forward.
Yes, yes.
Expand the.
Disclosure on.
Digital and NGL, yes, yes, and Moneygram online in particular, and Thats kind of in the works and running some learning some things and shadow and making sure that we have.
We've got it the way we want it but.
But yes, that's still on the roadmap.
Fantastic Thanks, guys.
Thank you. Thank you very much operator, I think were.
We hit the top of the hour. So again, thank you everybody for all your questions and your time and participation. This morning, and look forward to following up with you and the next couple of day. Thanks.
This concludes today's call. Thank you for your participation you may now disconnect.
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