Moneygram International, Inc.

Good morning, and welcome to the MoneyGram International second quarter 2021 earnings release conference 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 open for your questions following the presentation. It is now my pleasure to turn the floor over to your host, Stephen Reif, Head of Corporate Communications. Please go ahead.

Great, thank you. Good morning. Thank you for joining us. On the call with me, you have Alex Holmes, MoneyGram Chairman and Chief Executive Officer, and Larry Angiolilli, 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 GAAP and non-GAAP financial measures. We will refer to non-GAAP metrics on the call. The 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 in further understanding the company's performance, in addition to the impact that these items and events had 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 risk and uncertainty. Actual results could materially differ because of factors discussed in today's earnings press release, in the comments made during this conference call, and the risk factors section of our Form 10-K, Form 10-Q, and other reports and filings with the SEC. We do not undertake any duty to update any forward-looking statement. And with that, I'll turn the call over to you, Alex.

All right, great. Thank you, Stephen. Good morning, everyone, and thank you all for joining us today. It's hard to imagine a more impactful quarter as we not only delivered strong financial results, but also successfully closed out two of our largest legacy challenges by exiting our GPA and overhauling our capital structure. So let's get to it. Business performance in the second quarter exceeded expectations as we delivered revenue growth of 18% on the strength of a record number of digital customers, a 20% increase in both money transfer revenue and transactions, and a 41% increase in cross-border volumes. Total money transfer transactions and volume both represented record numbers for the company, and perhaps equally impressive to note, when comparing this quarter's money transfer numbers to the second quarter of 2019, prior to COVID, we delivered strong transaction growth of 17% and revenue growth of 8%. Growth this quarter was once again driven by the incredible performance of our digital business led by the largest component, MoneyGram Online. In the quarter, MoneyGram Online delivered record highs for customers, transactions, volume, and revenue. Now, a fun fact to note here, if you aggregate our top 10 MoneyGram Online markets, MoneyGram Online has grown to account for 29% of all transactions in those markets. This is up approximately three times from just two years ago and demonstrates a significant diversification of our business in these markets that collectively represent over 75% of our total sends. In the second quarter, digital partnerships also continued to accelerate and transactions received digitally reached record highs. Total digital transactions now account for 33% of all money transfer transactions. This is up sequentially from the first quarter 31% and up 13% from just two years ago. Our strong financial results were also driven by the continued stabilization and recovery of our retail business in markets around the world. though much of the world is still reporting softness due to renewed lockdowns and the continued impacts from the ongoing COVID-19 pandemic, such as those situations that we see in Asia Pacific. In other areas, we continue to see some improvement. Emerging markets such as Central America and many countries in Africa are now beginning to show signs of turning the corner. In Europe, we saw strong growth across both digital and retail, with our retail channel reporting transaction growth of 25% year-over-year, and 14% when compared to the second quarter of 2019. In the Middle East, total transactions increased 26% year-over-year and 41% when compared to 2019. In the U.S., we reported double-digit U.S. outbound growth and successfully managed the initial impact of the Walmart marketplace expansion in the quarter. New competition entered the marketplace with some extremely aggressive price points, which, among others, includes a $6 fee and a zero FX rate to Mexico. Against that backdrop, our focus has been on positioning our offering to ensure we retain our customers and transactions. While we were quite successful on this point and materially outperformed against our worst case projections, given our need to match the aggressive competitive pricing, we did incur about a 65 basis point headwind on money transfer revenue growth in the quarter, of which the vast majority directly impacts EBITDA. Assuming competitor prices remain the same, and considering a full quarter of impact, we anticipate about a 250 basis point impact on money transfer revenue from competitive Walmart pricing in the third quarter. We continue to actively manage this business and are actually pleased with our performance thus far. And since I know some of you will probably ask me later anyway, Walmart represented about 8% of revenue in the month of June. On June 10th, as we reported, we were notified by the court of our official exit from our DPA, This was a huge milestone for our company, and with that matter closed out, we began the process of significantly improving our capital structure, which Larry will discuss in more detail in just a minute. Thanks to the success of our refinancing, our cost of funds is now the lowest it's been in years, and we plan to use the cash savings to invest in key growth initiatives and support further improvements to our capital structure in the months and years ahead. I've never been more excited about the business, particularly now as we enter a new era of improved cash flow and growth. So turning to slide four, the entire company remains focused on executing our growth strategy, which is positioning the company to win with consumers and capture market share. To maintain our leadership position and offering the best customer experience in the industry, we continue to invest in our loyalty program, personalized communications, and the streamlining of transaction flows on both our app and for retail partners at the point of sale. Customers also report that they value our instant transfers and real-time payout capabilities, which remains a competitive advantage. Additionally, recent surveys highlight that our customers are switching from our competitors because we're more convenient and more affordable. In fact, I'm quite proud to report that our average cost to consumers, or our take rate, is about 2.9%, which is significantly lower than the industry average reported by the World Bank and in line with the targets set by the UN Sustainable Development Goals. We're able to offer these rates to our customers as a result of the competitive advantages provided by our lower cost structure. Taken together, consumers recognize that we offer affordable prices and a differentiated experience across each step of the customer journey and remain remarkably loyal to MoneyGram. We also continue to execute our strategy to scale the digital business by investing in our app, expanding our digital receive market presence, and targeted efforts to appeal to broader consumer segments, the specifics of which I'll discuss in more detail shortly. And third, our global partnership network, with our brand recognition and our ability to transfer over 120 currencies real-time to both account and to cash, remains a core focus and an extremely valuable asset. Now I'll spend some time discussing some of the drivers behind our incredible digital growth, which reached a record of $68 million in the second quarter. So on slide five. The largest component of our digital business, MoneyGram Online, again, delivered all-time highs in customer transactions, volume, and revenue. I'm excited to report that MGO delivered money transfer revenue of $47 million in the quarter, with cross-border transactions through this consumer direct channel growing an impressive 62% and revenue growth exceeding transaction growth. Within MGO, our leading app continues to drive amazing growth with a 92% year-over-year increase in cross-border transactions in the second quarter. As you can see from the chart on the right, our customer acquisition initiatives are driving strong growth in monthly active cross-border customers, which grew 54% in the second quarter compared to the same period last year. Turning to slide six, these growth rates are especially remarkable when you consider the record transactions that we delivered last year. With 85% of new MoneyGram Online customers new to the brand, Our digital marketing initiatives are enabling us to reach a new and younger consumer segment. With over 80% customer retention rates and approximately a 3x customer lifetime value compared to the retail channel, we're excited about the value we're creating and the ability to deliver sustained profitable growth. It's also noteworthy that our growth rates meet or exceed even the rates of other fintechs, which currently have much higher valuations. a message that I will continue to reiterate given our outstanding performance and the comparable competitive data. On slide seven, you can once again see the strong growth rates in transactions received digitally with 78% year-over-year growth in the quarter and a CAGR of 121% over the last two years. Even though we continue to report strong growth over record transactions from last year, we expect to continue to report double-digit growth rates through this channel as customers in specific markets continue to shift towards the convenience of receiving money directly to an account. This point is highlighted by our customers in India, where this evolution has happened even faster. There, transactions received digitally represent nearly 50% of all transactions received. This is an incredible shift, with the number of transactions sent to account up about six times from just under 10% two short years ago. We have a strong roadmap in the second half of the year to launch new wallet partners and enable over 20 new countries with the capability to send directly to a recipient's bank account through their debit card. Visa and their Visa Direct product remain a strong partner across these initiatives as we focus on country expansion and informing consumers about our real-time capabilities. In the quarter, our Visa Direct transactions hit new highs and also delivered over 230% year-over-year growth. Now, before handing the call over to Larry, I'd like to take a minute to highlight a couple of key points on slide eight with respect to our network and our business model as both continue to evolve. So as we highlighted on Q1, we believe we can achieve 50% of our business coming from digital transactions in 2024. This is extremely exciting, obviously, for a variety of reasons. When we look at the data of our senders, we continue to see very little overlap between new digital senders and our traditional retail customers, again, 85% of all new online customers are new to the brand. They are also younger and bring a higher CLV, all of which highlight that there is very little cannibalization between our walk-in and our online businesses. These are truly very different customers with different preferences. On the receive side of the transaction, things are even more interesting. As we discussed, our digital receive business has shown incredible growth, almost doubling in the past year. At the same time, however, the value and convenience of our cash receive network really can't be understated. Even more importantly, the demand for each of these services continues to be a market-specific story. So let's take two of our largest received markets, India and Mexico. As I mentioned, today in India, about 50% of our transactions are received digitally. However, when I compare that to Mexico, the difference is staggering. In Mexico, about 95% of transactions are still picked up in cash. This remains the case, despite the fact that both markets have incredible real-time digital and incredible cash payout options available for our customers. Thus, while digital receives are critical in some markets, our global retail network provides a tremendous amount of value in others. In the end, consumers choose the option that best meets their unique needs. So, when you put it all together, we are excited to have two very different customer groups and business offerings that are both unique and extremely valuable in their own ways. And with that, I'll turn the call over to Larry to discuss our very strong financial results for the quarter.