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MoneyGram International, Inc. (NASDAQ:MGI)

Q4 2012 Earnings Call

February 06, 2013 09:00 am ET

Executives

Eric Dutcher – VP, Investor Relations

Pam Patsley – Chairman, Chief Executive Officer

Alex Holmes – Chief Financial Officer

Analysts

David Chu – Bank of America Merrill Lynch

Tim Willi – Wells Fargo

Tien-tsin Huang – JP Morgan

Julio Quinteros – Goldman Sachs

David Scharf – JMP Securities

Bob Napoli – William Blair

Mike Grondahl – Piper Jaffray

Glenn Fodor – Autonomous Research

George Mihalos – Credit Suisse

Brett Horn – Morningstar

Operator

Please standby, we are about to begin. Good morning, and welcome to the MoneyGram International Fourth Quarter 2012 Earnings 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 opened for your questions following the presentation.

It is now my pleasure to turn the floor over to your host, Eric Dutcher, Vice President of Investor Relations. Please go ahead, sir.

Eric Dutcher

Thank you, Jessica. Good morning, everyone, and welcome to our fourth quarter and fiscal year 2012 earnings call. With me today are Pam Patsley, Chairman and Chief Executive Officer; and Alex Holmes, Executive Vice President and Chief Financial Officer. Our earnings release and accompanying slides are available on our website at moneygram.com.

I must remind you today that today’s call is being recorded and that the various remarks we make about future expectations, plans and prospects constitute forward-looking statements for the purposes of the Safe Harbor provisions under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from expectations, plans and prospects contemplated in any forward-looking statements as a result of various factors, including those discussed in our filings with the SEC. I encourage everyone on this call to read our SEC filings, including our 10-K for the year ended December 2011, and our 10-Q for the quarter ended September 2012. Our 10-K for the year ended December 2012 will be filed prior to March 18.

Additionally, please note that today’s remarks include certain non-GAAP financial measures, including EBITDA, adjusted EBITDA, adjusted EBITDA margin and free cash flow. Our earnings release includes a full reconciliation of these non-GAAP financial measures to the related GAAP financial measures.

Now I’ll turn the call over to Pam.

Pam Patsley

Great. Thanks, Eric. Good morning, everyone. We are extremely pleased with our accomplishments in 2012. In spite of a weak global economy and a highly competitive environment, we continue to excel, achieving double-digit growth in money transfer transaction volume, constant currency revenue and agent locations. MoneyGram is well positioned in a dynamic growing industry, one that provides a valuable service to billions of unbanked and underbanked consumers each year.

As the populations in the largest global economies continue to age and the birth rates remain low, the demand for guest workers to grow GDP will continue to increase. Our business is resilient and we have a talented team committed to ensuring that MoneyGram remains a leader in the global financial services industry.

We are the company for anyone to send funds from almost anywhere by means of cash, bank account, online or mobile. We bring people closer by providing them the flexibility to choose how they want to move money. Our extensive global network has more than doubled since 2007 and we have now surpassed 310,000 agent locations around the world. Our agents are retailers, banks, financial institutions and post offices.

In the quarter we had particular success worldwide in the retail sector. As I think everyone knows by now, we extended our contract with Walmart into 2016, securing this valuable relationship for three more years. And since this will be asked Walmart represented 27% of our revenue in the quarter. We then added to our retail agent strength by signing a five-year exclusive contract with Tesco Bank to provide money transfer services in up to 800 Tesco store locations across the UK and the Republic of Ireland. Finally, in the U.S. we signed Dollar General to provide our in-line services in their more than 10,000 plus locations across the country. This brings our U.S. network to approximately 50,000 locations.

Further, we’re broadening our service offerings by increasing the ability to top up international phone plans and load prepaid cards or mobile wallets. The breadth of our network is attracting leading companies to partner with us, such as Pfizer, PayPal, Gemalto, Qtel and Telefonica.

For the year in the quarter, our money transfer transaction growth of 14% was well above the mid-single-digit industry growth, and this is our ninth consecutive quarter of double-digit money transfer transaction growth. We are pleased that constant currency revenue growth was 13%. This was especially impressive when one considers the amount of competitive discount pricing, which was implemented mid-2012 in online space and the price discounting made through a competitor later in November.

We adjusted our online prices in August, and then matched competitor prices only through our Walmart channel just after Thanksgiving. We have not implemented price reductions at our other agents. We have a close relationship with our agents and at this point, we are comfortable with our position. However, as you saw in our outlook and Alex will speak more to this later, we are prepared to adjust prices if necessary.

We’re proud that our brand continues to attract a loyal customer base. In 2012 we rolled out a new loyalty program and have grown our active Rewards customers. In fact about a third of our U.S. originated transactions are sent by MoneyGram Rewards members. These loyalty members send on average seven transactions per year, more than double the number of our non-loyalty senders.

Beyond just our loyalty members MoneyGram consumers are recognizing the value of our services. In 2012 over 80% of our sent transactions globally came from customers who did more than one transaction in the year.

On the bottom line we delivered strong free cash flow of $115 million, a 9% increase over last year, and ended the year with assets in excess of payments service obligations of $227.9 million. Given the challenges of the past year, we are especially pleased with these results.

Our goal is to continue to generate superior free cash flow that can be reinvested in the business or used to pay down debt, all toward maximizing shareholder value. And with that as a backdrop, let’s discuss some of the detail behind our great fourth quarter money transfer results.

U.S. to U.S. sends represented 30% of money transfer transactions, and 25% of revenue in the quarter. Transaction growth of 9% was consistent with third quarter levels. U.S. to U.S. revenue growth was 8% also consistent with third quarter and in line with transaction growth. An increase in lower band transactions in the online channel as well as lower prices accounted for the 1% differential between transaction growth and revenue growth. Our MoneyGram online service helps drive the business in that this self-service send option provides easy access to our extensive U.S. network for cash payoff.

U.S. consumer spending continues to be dampened by the weak economy as GDP growth in the fourth quarter declined. However, business investment increased, which is a positive macro trend for 2013. In almost every state we grew both transactions and revenue. We continue to benefit from consumers moving within the U.S. for work and transferring funds to family members back home.

Now U.S. outbound, U.S. outbound transfers in the quarter represented 34% of total money transfer transactions, and 28% of money transfer revenue. Both transaction and revenue growth were strong at 15% and 19%, respectively. Transaction growth accelerated more than 200 basis points and revenue growth accelerated almost 400 basis points as compared to the third quarter. This is especially significant given that competitor discounting was the largest in U.S. outbound send.

U.S. to Mexico continued its fast pace with 24% year-over-year transaction growth, and revenue growth was nearly the same rate. We are nearing 10% market share in this important corridor, which is a great milestone, yet also illustrates there is still much opportunity for more growth.

Looking ahead, while we expect continued strength in sends to Mexico, we do anticipate growth to be somewhat muted as we anniversary the rollout of Elektra mid-first quarter.

In addition, we have been very proactive in implementing compliance controls for sends to Mexico as part of our ongoing effort to prevent consumer fraud in the industry. While these controls should not impact transaction growth, we do anticipate a minor impact on revenue as some of the controls place limits on the amount of money that can be sent.

Our U.S. to LAC excluding Mexico, that business accelerated from the third quarter as well. Sends to Honduras were especially robust, benefiting from the competitive takeaway of Banco de Occidente last quarter.

Additionally, we had strong revenue and transaction growth from several other Central American countries, with this being one of our strongest quarters for the region in the company’s recent history. We added new solutions to some unique country needs as well. For example, we launched home delivery with Banco Union in the Dominican Republic.

U.S. sends to Africa continued to be strong, but slowed slightly, primarily due to headwinds from the anniversary of large network gains last year. But we’re increasing our focus on this important U.S. to Africa quarter.

All-in-all, we’re extremely pleased with the U.S. outbound growth in the quarter and we’re encouraged to see this category strengthen during the year.

Sends originated outside of the U.S. had another phenomenal year, posting 18% transaction growth both for the quarter and full year, the highest transaction growth of our money transfer category. In the fourth quarter, this category represented 47% of total revenue and 45% of full year revenue. Revenue growth was lower than transaction growth primarily due to the negative impact of the lower euro against the U.S. dollar, and of course, quarter mix. While most European economies continue to be weak we, however, grew. We continue to open new PSD opportunities with smaller retailers.

One area where we’ve expanded is with telecom outlets. For example, in Spain, we signed Redcom, one of the largest Vodafone dealers, and we signed Orange in Romania to provide money transfer services.

Also in Europe, we’ve expanded on our mobile relationships with Movistar and Telefónica. We extended our telecom strategy to Russia by signing a large mobile chain there as well.

Now France continues to be a strong area for international sends. We grew our French network in excess of 50% during 2012.

Our agent network in Africa also grew significantly during the year, and we now have over 20,000 locations on the African continent. This is a great market with both send and receive countries performing well, including an emerging opportunity for intra-Africa sends.

Traditionally, our largest senders to Africa are the U.S., France, and Italy. If measured as a country, our intra-Africa sends would represent a top three send country to Africa. Based on this significant growth opportunity, we recently moved to a new corporate office in Morocco to better support the continent.

Growth in the Middle East continues at a fast pace. Across the GPC, we invested marketing funds to support promotional giveaways related to our Philippines campaign, which generated excellent growth. Transaction growth to the Indian subcontinent was robust. Given the importance of Saudi Arabia to the Indian subcontinent, we conducted promotions in conjunction with the holiday celebration of Diwali. We remain very focused on ensuring our market share growth in the number two send country of Saudi.

In Southeast Asia, we capitalized on our recent agent expansions in Malaysia and Japan, delivering triple digit transaction growth in both countries. We see tremendous opportunity to grow in the region given that most of our network in these countries is relatively new.

In Australia, we’ve diversified our agent base to offset some declines in transfers due to fewer students from India attending school in the country. During the quarter, we signed PFG Money and the Live Group, a retailer who provides access to 25% of the taxi driver population.

Our teams worldwide have done a fantastic job of meeting consumer needs around the world by focusing on the particular service elements required in each country versus adopting a one-size-fits-all approach. This has yielded phenomenal gains in sends originating outside of the United States and we remain squarely focused on growing this category.

I think it merits repeating that our money transfer business, which is 86% of our revenue now, delivered its ninth consecutive quarter of double-digit money transfer transaction growth, and its seventh consecutive quarter of double-digit constant currency revenue growth. And I can tell you, we have the appetite for more of the same.

Now let’s look at the bill payment business. For the fourth quarter and excluding the prior year divestiture, transactions grew 3% with a 2% revenue decline. On a reported basis, bill payment transaction volume increased 1% and fee and other revenue decreased 3%. During the quarter, we added more than 600 billers to the network including Ford Credit. We’re replicating some of the success we have had in the U.S. collection payments business by rolling out a new collections payment service in Canada. Urgent bill payment online continues to be robust, both through MoneyGram online and through our strategic relationship with Fiserv.

For the year, self-service and new channel revenue grew 50% and represented 5% of total money transfer revenue. We had strong performance from our online kiosk and mobile partners.

MoneyGram online transaction growth was 58% with revenue growth of 23%, both of which accelerated greatly from the third quarter. Our largest received carders are the U.S. and the Philippines, and India is increasing rapidly as well.

While we offer our consumers ACH and bank transfer services, the vast majority of consumers choose to use a debit or credit card, and our 10-minute cash pick-up service.

Also importantly we launched online sends from Germany during the quarter. Early results show good demand for this service, whether it’s by MoneyGram online, Internet bank agent, or website affiliate agents like walmart.com, our online send business is growing fast.

As we continue to partner with our agents, we are constantly seeking ways to speed transactions at the point of sale for our agent. One recent signing with Dollar General and the rollout of Circle K are two relationships, which are powered by our send only in line solutions, which simplify and shortens the transaction time for agents. We’re innovating for both the end consumer and our valued agents to ensure that we are the preferred way to send and receive money transfers.

And before I turn it over to Alex, I want to update you on actions since our settlement with the DOJ in November. We formed our new board committee, the compliance and ethics committee. They’ve met and they’ve approved our first quarterly report, which we are submitting today to the Department of Justice. We had a comprehensive process to identify and interview individuals to be our monitor, and we submitted our recommendations in December. We’re now waiting to learn who has been selected.

With that I’ll turn it over to Alex who will walk you through the financials.

Alex Holmes

All right. Thanks, Pam. For the full year, total revenue increased a healthy 7% to $1.3 billion, in line with our guidance. Money transfer fee and other revenue increased an impressive 13% on a constant currency basis. The lower euro valuation against the U.S. dollar negatively impacted revenue by about $21.9 million during the year. Investment revenue was $12.6 million, down from $16.9 million in 2011. Revenue in the fourth quarter was driven by the strength of our core money transfer business, which also posted strong 13% constant currency revenue growth.

Total revenue for the quarter increased 10% to $354.4 million. The lower euro valuation against the U.S. dollar negatively impacted revenue by approximately $1.8 million as compared to the fourth quarter of last year. Investment revenue was $3.1 million, flat compared to the prior year on an average investable balance of $3 billion. I remain encouraged by the stability of our investable balances and we are still yielding modest revenue in this low interest rate environment.

For the full year, adjusted EBITDA was $278.9 million, up 6% on a reported basis and up a solid 8% on a constant currency basis versus the prior-year. While this growth was slightly below our guidance, we are pleased with our results particularly given the challenges we faced in late 2012.

Full-year adjusted EBITDA margin was 20.8%, down about 30 basis points compared to the prior year as a result of lower investment revenue and higher compliance related investments. Importantly full-year adjusted EBITDA margin excluding investment revenue was flat compared to 2011 at 20%.

For the quarter adjusted EBITDA was $71.7 million, up 7% on a reported basis and 8% on a constant currency basis. Adjusted EBITDA margin was 20.2% down about 70 basis points compared to the prior year. The decline in margin was primarily related to higher compensation and benefits expense during the quarter along with a few of the items that impacted the full year.

During the quarter total reported operating expense increased 10% over the prior year as a result of increased commission expense, increased legal expense and increased restructuring and reorganization cost. For the full-year, total reported operating expense increased 17% over the prior year, primarily related to the MDPA settlement along with higher compliance related investments.

Total commission expense for the full-year was $599.5 million or 44.7% of revenue compared to 43.9% in the prior year. Money transfer as a percentage of total revenue increased to 86% from 83% in 2011, which shows the tremendous growth in this core business.

Global Funds Transfer commission expense as a percent of segment revenue increased to 47.6% compared to 47.3% in the prior year. Commission expense as a percentage of revenue will continue to increase as money transfer becomes a greater portion of our overall business.

Compensation and benefits expense increased 3% for the full year on a reported basis. Compensation costs in the quarter increased 19% as a result of increased head count and the achievement of higher performance incentive compensation metrics.

Transaction and operation support increased a mere 4% in the quarter, an impressive number considering we supported transaction growth of 14% and agent location growth of 16%.

Marketing expense for the full year as a percentage of total revenue was 4.4%. For 2013 we anticipate marketing expense as a percentage of total revenue to be between 4% and 4.5%.

Depreciation and amortization expense in the quarter was unfavorable by about $600,000, whereas for full year depreciation and amortization was favorable $1.7 million, as we benefited from prudent capital deployment throughout the year.

Income tax expense for the year was $40.4 million and cash taxes were about $2.9 million.

We continue to make great progress on our restructuring and reorganization activities. Restructuring and reorganization costs in the quarter were $5.1 million composed of $2.3 million of transaction and op support cost, $2.7 million of severance and about $100,000 of occupancy, equipment and supplies.

While we wrapped up most of our restructuring activities in 2012, we do anticipate some activities, particularly our European retail integration, extending into 2013 to the tune of about $3 million.

Our diluted income per common share was $0.28 in the quarter on diluted shares of 71.6 million. This included a $0.09 per share benefit from gains on the sales of securities previously written down, a negative $0.03 per share impact due to legal expenses, a negative $0.04 per share impact from restructuring and reorganization costs, and a negative $0.01 per share impact from stock-based compensation.

For the year our diluted loss per share was $0.69 on diluted shares of 71.5 million. This included a negative $1.58% – per share impact due to the legal expenses. A negative 17% – excuse me, a negative $0.17 per share impact from restructuring reorganization costs, a negative $0.08 per share impact from stock-based compensation, which was partially offset by a $0.09 per share benefit from gains on the sales of securities previously written down.

Looking at free cash flow, for the quarter free cash flow was up 16% to $23.4 million and represented 6.6% of revenue. On a full year basis, free cash flow was up 9% to $115 million or 8.6% of revenue. This was driven by strong money transfer results and lower interest payments, partially offset by higher CapEx and signing bonuses. We are very proud of our free cash flow generation.

Capital expenditures were $16.4 million in the quarter and $59.6 million for the full year, supporting investments in systems, regulatory matters like Dodd-Frank, along with ongoing investments in our products and of course the continued rollout of signage around the world. For 2013 we anticipate CapEx to be in the range of $55 million to $60 million.

Signing bonus payments were $13.6 million in the quarter and $36.2 million for the year. We expect this number to be approximately $50 million in 2013, but we will continue to be opportunistic and flexible to renew and expand our agent base.

For the full year interest expense was favorable by $15.3 million on a year-over-year basis. As you know, we are preparing to refinance the remaining $325 million of our 13.25% second lien Goldman Sachs notes.

Debt markets remain favorable and we anticipate accessing the high yield or term loan market or some combination thereof toward the end of the first quarter. While we have not yet settled on a final structure for the transaction, we do believe we will be able to achieve more than $20 million in annualized interest expense savings following the refinancing. Given that interest expense exceeded $100 million in 2009, we have truly made amazing strides in reducing this expense.

We ended the year with assets in excess of payment service obligations of $227.9 million, down from the third quarter of this year as a result of increased CapEx spend, signing bonus payments, and the settlement with the MDPA. As a reminder, the payment to the MDPA DOJ was in two tranches, we made the first $65 million payment in November and the second payment of $35 million two weeks ago.

Turing to the segments for the quarter, total revenue for the Global Funds Transfer segment increased 11% to $332.9 million led by strong money transfer constant currency revenue growth of 13%. The segment reported operating income of $38.4 million and an operating margin of 11.5%, which was up from 11.1% in the fourth quarter of last year.

On an adjusted basis, operating margin was 13.6% in the quarter, slightly down from 14% in the prior year due to higher compensation and benefits expense, higher commissions expense, and slightly lower revenue per transaction.

For the year total revenue for the Global Funds Transfer segment increased 9% to $1.2 billion, led by strong money transfer constant currency growth of 13%. The segment reported operating income of $149.6 million and an operating margin of 11.9%, which is up from 10.8% in the prior year. On an adjusted basis, operating margin increased to 14% from 13.7% in the prior year due to greater operating leverage.

In the Financial Paper Products segment total revenue in the quarter was $21 million down 1% compared to the prior year. Operating income was $8.1 million up from $5.9 million in the fourth quarter of 2011. Operating margin was 38.6%. Adjusted operating margin was 40.5% in the quarter up from 33.3% in the same period last year.

For the full year total revenue was $84.5 million down 9% compared to prior year. Operating income was $32.7 million, up from $29.2 million in the prior year. Operating margin was 38.7% and adjusted operating margin was 41.4%, up from 36.3% in the prior year. Segment margins in the quarter and the full year benefited from a lower rate of decline in investable balances.

Now looking ahead to the rest of 2013, we remain very optimistic. For the full year, we are estimating total constant currency revenue growth of 6% to 9% and constant currency adjusted EBITDA growth of 3% to 6%.

Our outlook for 2013 keep us on track to continue to make investments in our products, systems and services for the long-term while providing the necessary flexibility to absorb short-term pricing moves in the industry. That said, we are very pleased with our money transfer results since the pricing environment change in November.

Therefore, it is important to note that we have not yet implemented many of the pricing changes contemplated in our outlook to the extent that we are able to generally sustain our current price position, there should be upside to our outlook.

And with that I’ll turn it back to Pam.

Pam Patsley

Thanks, Alex. As I consider our outlook and I think of the future of MoneyGram, there is much to be excited about. We have mentioned a few headwinds we will face in 2013, but when I compare those to all the positive things on the horizon, I am optimistic about 2013. We provide services in an exciting industry that addresses the needs of billions of consumers. We offer a product set that includes cash remittances as well as forges a link through other electronic methods such as mobile, online, prepaid and bank account. We’re growing self-service revenues 50%, we have a robust agent network that is growing rapidly with 25% of our network locations with us for less than 18 months.

We will expand both agent and consumer productivity through a laser-like focus on initiatives for activation and for retention. Our fantastic brand resonates with consumers globally. In 2012 we cleared many of the issues that were distracting to the company and as Alex talked about we will soon refinance our high cost debt, which will free up cash flow for more productive endeavors.

We have a broad reach around the world and are not limited to a few markets. We have history of partnering with both our agents and leading companies to bring innovation to the industry. We’re a company with a targeted growth strategy that has consistently outgrown an enormous remittance market, which has expanded almost every year for a decade. We have a talented team in place and we’re committed to continue to be a leader in this industry for the long-term.

Now before we turn to questions, why don’t I answer what’s likely to be the first question. How is January? We’re off to a good start, but it’s only one month, so I want to emphasize that. But with that said, I’ll share that January money transfer transaction growth was 14%, and money transfer constant currency revenue grew 12% January 2013 over January 2012.

And now as always, thank you so much for your time and for your interest today. And operator, please open the line for questions.

Question-and-Answer Session

Operator

Thank you. (Operator Instructions) And we’ll go first to Sara Gubins with Bank of America Merrill Lynch.

David Chu – Bank of America Merrill Lynch

Hi. This is David Chu for Sara Gubins. So what are you modeling for pricing in your guidance currently?

Pam Patsley

We have provided a slightly wider range, stating the obvious. And as we said, we have – that guidance allows for us to make further pricing moves beyond just the price moves we made right after Thanksgiving with Walmart, and so it would generally encompass moving our network if we needed to move the whole network.

Alex Holmes

Yeah. I mean I think what you’ve seen, David, is obviously quite a bit of price changes in the U.S. to Latin America corridor – region if you will. We’ve seen quite a bit of online discounting and then – and we’ve seen a little bit of price changes in Europe and a smattering in several countries around Asia.

And so we are tracking those very carefully, we’re well aware of what those changes are. And relative to our position in those markets and that is effectively all baked into our guidance, due to the extent that we feel it’s prudent to make changes throughout the year.

David Chu – Bank of America Merrill Lynch

Okay. Sorry I’m not sure if I completely understand. So are you essentially saying that you are going to be matching price in those regions to where WU is or other competitors?

Pam Patsley

No. I think what I hope – and let me reemphasize that, we have been very pleased with our results. We were very pleased with fourth quarter results, which included the month of December and the month of November following competitive price moves. We’re very pleased with what we saw in January. But we are focused on maintaining our ability to grow our share, and we wanted to provide guidance that gives us the flexibility to respond if we see the market dynamics changing.

David Chu – Bank of America Merrill Lynch

Okay. And so that – yeah that’s my follow-up question. So Pam, earlier you said that you would like possibly change price according to market dynamics. And I mean if you can just give us a little bit more color on what it would take for you guys to make these changes or what are you looking for?

Pam Patsley

Well, if we thought – it’s a little bit a multivariable equation, so it’s about transaction growth rate and revenue growth rate. And we’re watching that very closely. So we’re not going to just say we’ll never lower prices other places to match competitive pricing environment, because if we would see our growth significantly slow or our inability to continue to gain market share, those would all be things that would factor in. How much would we move it, through which agents, which markets, which quarters?

But again, I want to emphasize, I think the power of our brand has come through thus far, and we just need to build in the flexibility and be honest with everyone that that’s the new reality of the industry. But we liked our results so far.

David Chu – Bank of America Merrill Lynch

Okay. And just one last question, if I may. Is that compensation and benefits in 4Q kind of an appropriate run rate to think about going forward?

Pam Patsley

I would say it’s higher than a run rate. And quite honestly, different incentive compensation plans hit higher payout hurdles in the fourth quarter. So the fourth quarter bears a – if you had full hindsight, it would lay out across the quarters. But so the fourth quarter bore more of the brunt of the expense as incentive hurdles were hit. We had some great signings, some great performance.

David Chu – Bank of America Merrill Lynch

Okay. Thank you very much.

Pam Patsley

Thanks.

Alex Holmes

Thanks.

Operator

And we’ll go next to Tim Willi with Wells Fargo.

Tim Willi – Wells Fargo

Thank you and good morning. A couple questions, one is just going back to some of the growth of the agent network. Did you give – you mentioned about 25% of your agents are, I think you said, less than 18 months old. Could you maybe frame for us any way to think about the productivity ramp of an agent that’s at 12 months versus maybe those that are on the platform for two to three years, now that you’ve been several years into this network expansion? Just sort of trying to understand what the lift could look like?

Pam Patsley

I wish there were an easier way to answer that because some of other variables that go into that are, of course, category of agent across a large network, where you’re adding 8,900 locations with just one agent or you’re signing large posts. Some are going to be more remote, some are going to be in more metropolitan areas. So you have all kinds of impact on that. But it clearly takes kind of across the board for a network relationship, and then that will vary by the locations within that relationship, to take 12 to 18 months to fully ramp up.

Another variable is going to be this flat foot standing start. It’s the first time the network – like some of our telecom shops and other things we’ve signed as we’ve been expanding, particularly across Russia and other parts of Europe, have they been a seller or a participant in the money transfer remittance market? So that’s going to have a longer ramp, it’s obviously going to have a longer and a slower ramp. So those are some of the different variables.

Alex Holmes

Yeah. And I think if you look at that mix of agents, that 25%, I think it’s a good mix of both. I think it’s a large mix of some competitive takeaways, it’s a large mix of some non-sellers, and it’s a large mix of other. So I think it’s a good portfolio mix.

Tim Willi – Wells Fargo

On – another question on, related to marketing. So I think you said marketing dollars were expected to be 4% to 4.5% of revenues for 2013. If you said it, I missed it, but could you remind us what is was for 2012?

Alex Holmes

It was about 4.4%.

Tim Willi – Wells Fargo

Okay. So we’re still in the band. How do you feel about some of the markets where you put money, maybe say in 2012 and 2011, and thinking about, I guess for lack of a better term, the operating leverage you’re getting out of your media dollars or your signage? Any way to think about that, whether it would be across the Philippines or India or sort of where you’re investing, accelerating investment in marketing, versus maybe sort of flat lining the investment rate, because you’re sort of getting that productivity out of the media or the signage?

Pam Patsley

We – you should – I think one of your questions in there was how should we think about that? And I would say, you should think very positively about that. I mean not to imply that we don’t see areas where we can improve or we would do something the next time slightly tweaked, but I mean – I feel our marketing team and the regional and channel leaders, we have been executing very well. We see the list.

Tim Willi – Wells Fargo

Okay.

Pam Patsley

And we see, importantly, and I guess I didn’t just really call this out, much better statistics on brand awareness around the world, and that is so important. And everything factors together, it’s what our agents are doing to participate alongside us, it’s signage, and then it’s targeted campaigns.

And for those of you that have followed MoneyGram for years, I think you would have to recognize we have a much more, call it scientific or strategic approach in aligning these marketing initiatives for the quarter. So we’re not just compelling the send without doing things to ignite the catch on the receive side and vice-versa.

Tim Willi – Wells Fargo

Okay. And one last question, then I’ll hop off, I’ll get back into the queue. Alex, on the debt side, again, not asking for any kind of guidance here, because I’m sure there are a lot of variables that determine the action. But how would we think about deleveraging the balance sheet once you put the new debt structure into place? Would you be more inclined to let the levels sit, but have a lower interest rate? Or are you inclined to try to find a facility that’s going to allow you to also take the debt down pretty systematically after you put a new facility in place?

Alex Holmes

Yeah. I mean I think it’s a good question. And I think certainly we’ll remain the – we’ll maintain the flexibility to delever going forward. The amount of delevering we’re able to do in 2013 will obviously be a factor of cash flow generation and other needs. But certainly yeah, we’re not planning to put in any sort of fixed capital structure that wouldn’t allow us to continue to do that going forward.

I think flexibility in the capital structure is very important for us. At the same time, obviously reduce interest expense is also important. But I think if you look at the term loan market today versus the high yield market, rates are not materially different, particularly if you compare it to the 13.25% we’re paying on that $325 million today.

And so again, as we talked about I think on the last quarter, clearly payments to the government and a few other things that we had to go through last year sort of took us off of our delevering path to some extent, and obviously we’d like to get back on that going forward.

Tim Willi – Wells Fargo

Great. Thanks very much for the time.

Operator

And we’ll go next to Tien-tsin Huang of JP Morgan.

Tien-tsin Huang – JP Morgan

Great. Good morning. Thanks. Good to hear that you’re holding your own on the – in the volume and revenues. I’m just trying to dig into that a little bit. So I’m trying to think, in Mexico, how much of the – of I guess Western Union’s lost agent network and the volumes tied to that, were you able to pick up, in your estimation? I’m trying to think maybe that could have helped you absorb some of the – or deflect some of the price changes that they put into place?

Alex Holmes

Yeah, I don’t – off the top of my head, I don’t know that we have an exact percentage on that. I don’t think our pickup in the fourth quarter on Mexico was really any different than it’d been in kind of the first, second, or third quarter. Obviously Elektra has made a large difference to us.

And the – but I do think you have to go back and sort of net it out. I think if you looked at our growth rates from Mexico over the last couple of years, sort of prior to the slowdown, I think we were kind of one of the first companies – the last companies to go in to the slowdown in the Mexico sends, and probably one of the first ones to kind of come out of it.

I think we’ve done a tremendous job in Mexico, competition aside. We have 15,000 locations there now, and then that’s tremendous upside from where we’d been. And certainly we’ll take advantage of any opportunities given to us in that market, but we did not see a material change in that Mexico business in the fourth quarter one way or the other that would really give us any thought that that had anything to do with the results.

Tien-tsin Huang – JP Morgan

Okay, no, that’s great. That sounds great. So maybe just digging in on Walmart then, it sounds like – we don’t have the exact numbers, but it sounds like revenues were down a little bit there, I know the price change was put into place. But what’s the – sort of what’s the strategy to get growth back at this important agent? Any changes in thinking around marketing or other things that you could do?

Pam Patsley

Yeah, we are very excited about some of the new initiatives that we’re working on with Walmart, so from a product perspective and marketing perspective. We’ve also kind of a new contract, new beginnings, we’ve made some changes in our support for them, and brought in someone else, kind of rotating people around and added to our team, so we’re really encouraged and excited about that. And I think, for Walmart, the things that we see for all agents, speed at the point of sale is all very, very important to them.

Alex Holmes

Yeah and I think to add to that, the Walmart business itself did very, very well.

Tien-tsin Huang – JP Morgan

Yeah.

Alex Holmes

Obviously, it’s a very large agent. I think it – proportionally you could probably say grew slower than, for example, our non-U.S. sends.

Tien-tsin Huang – JP Morgan

Right.

Alex Holmes

And I think that’s okay. So we didn’t really have any concerns about their performance in the quarter. I think we had an excellent holiday season with them, and we’re certainly looking forward to tax season, which is always great for both companies, and the tax refunds in particular that come out of that, and so it should be a good year.

Tien-tsin Huang – JP Morgan

All right, good to know, good to know. Last one, just on the compliance stuff, I know there’s a lot of changes there. What changed exactly for you in Mexico, and what are you contemplating in your outlook on any other kind of potential compliance changes that might come about both on – both as it relates to revenue and expenses? Thanks.

Pam Patsley

Yeah, I don’t think, just the latter part of your question, it would be hard to know, because we have to be just responsive to what we see in the marketplace.

Tien-tsin Huang – JP Morgan

Right.

Pam Patsley

And so to the part of what specific things in our guidance, it would be just contemplating our continued increased investment in enhancing our systems and programs broadly in the compliance area.

To the first part of your question, specific to consumer fraud and what the industry was seeing in Mexico, it really is more tied to limiting higher dollar send transactions into Mexico, looking at aggregation tools and other things to try and help stem the tide where people get duped into sending money to someone they don’t know.

Tien-tsin Huang – JP Morgan

Got it. Understood. All right, good. Thanks for all the stuff – good stuff.

Pam Patsley

Yeah. Thank you.

Operator

And we will go next to Julio Quinteros with Goldman Sachs.

Julio Quinteros – Goldman Sachs

Hi, guys. Good morning. One quick one on the corridors and thinking about competition. Is there any color that you kind of share in terms of the – some of the largest corridors and how intense the competition is, as it relates to pricing?

Pam Patsley

Well, I think probably some of the most intense pricing you saw was from U.S. outbound, which was announced by some of the competition in mid-November. I think I called out also, mid-year, we saw a lot of price initiatives in the online send volume. So that, I would have to say, if you’re asking, Julio, where was it most intense.

Now having said that, there are niche players all around the world, and multiple, multiple corridors. But all in all, we still so far have seen pricing impact us about 1% to 2%.

Julio Quinteros – Goldman Sachs

Okay. Maybe just to sort of pick on three corridors I’m kind thinking about here, India, the Philippines and Mexico. Anything in particular to call out, I mean in terms of pricing and your own expectations going forward for how you have to adjust there or if you would have to adjust for 2013?

Pam Patsley

Yeah. So for Mexico, we had great results, as you could see, and we adjusted only in our Walmart channel on the send side. Philippines and India, we have so many programs and initiatives, particularly those two countries are very different from Mexico in that there is such a concentration of a singular send country on Mexico. Whereas for Philippines and India, the Diaspora in so many of the largest – so the Saudi and broadly the GCC to those two countries, it’s very, very important. And that’s really a different profile even of a worker than kind of U.S. or UK to India.

So we’re really encouraged by our growth, whether it’s from our face-to-face kind of agent locations or from online. We are seeing great activity in online business to both those countries.

Julio Quinteros – Goldman Sachs

Got it. And I guess just on a relative basis thinking about what we had heard from Western Union last year about the initiatives around online, the amount of money that they were going to kind of throw at that channel. Are you guys comfortable with your own sort of position in an online, kind of throwing in mobile in there as well, as I thought? Any initiatives in particular that you guys need to sort of focus on going on forward? Or are you comfortable with the positioning that you have today?

Pam Patsley

We like our position. We would love to accelerate our investment in those channels. And as I called out in 2013 – I mean in 2012, we added the UK, we added Germany, and we want to roll out our dotcom to more countries.

We think on the mobile side, we are doing great things. We have partnerships in many countries around the world and our partnerships working with some of the largest telcos and some of the key online providers has been very helpful.

We continue to expand our – what we call our affiliate program to our online business. So parts of the world, most of our business is just through online or self-service models like in Japan and Saudi. So we like our position, I think we’d like to find money to continue to ramp up that investment.

Julio Quinteros – Goldman Sachs

Got it. And Pam, just stepping back a little bit and thinking about global labor and kind of what we’re seeing with housing as sort of a cross current there. How much is housing helping or hurting at this point in terms of the improvements in kind of the housing backdrop in the U.S., and maybe even more broadly, especially in like Saudi Arabia and some of those parts of the world where there was a lot of construction going on for while there. Are you seeing that kind of coming back and how is that sort of helping the backdrop for you guys?

Pam Patsley

Yeah. So I was recently in the Middle East, so I’ll take that part first. I mean the building is coming back over there, and I would say, I don’t think about that as housing so much per se.

Julio Quinteros – Goldman Sachs

Sure, sure.

Pam Patsley

It’s just building, infrastructure building, all categories of builds and services. And with what the kind of native or indigenous population is, I mean the guest-worker program continues to grow there and largely from Southeast Asia. So really excited about that and I would say that has come back and continues to grow.

In the U.S., I think we are seeing a benefit there, but I wouldn’t say, by any means, we see that we’re hitting on all cylinders here in the U.S. for the construction industry or otherwise. So I think there’s still room for improvement, which we’ll just – we’ll be standing there ready to get more than our fair share.

Julio Quinteros – Goldman Sachs

Got it. Great. Thanks, guys. Good luck.

Pam Patsley

Thanks.

Eric Dutcher

Okay. And just as a reminder, out of courtesy, we do have several analysts still on the call. So if we could kind of limit our number of questions, that’d be great.

Operator

And we’ll go next to David Scharf with JMP Securities.

David Scharf – JMP Securities

All right. Thanks for taking my questions, just a couple here. Relating to kind of the agent outlook this year, it seems like 2012 was a particularly kind of banner year for picking up a lot of relationships that had formerly been exclusive to competitors, I mean Elektra is obviously a unique case. But as we think about opportunities this year, have most of those big opportunities kind of run their course? Or based on just industry chatter, what you know about contracts up for renewal? Do you think there’s as much opportunity this year to pick up what had previously been exclusives?

Pam Patsley

I don’t think – we do not have any sense that we are near end of job on agent network growth opportunities, be they picking up or changes in exclusivity initiatives, or just adding more to our network that have not been sellers. So like we’ve called out in Russia. Like we’ve called across Europe with the PSD initiative.

And technology interestingly, particularly as we focus on our self-service model, continues to open up the category for us. So we find that there are prospects that have not previously been interested in our service, because of whatever time at the – they don’t want to dedicate teller or clerks to it. The self-service model continues to broaden the category and open up opportunities for new agents, 7-Eleven in Australia, Dollar General with just the self-service model here in the U.S. So the range is wide.

David Scharf – JMP Securities

Got it, that’s helpful. Secondly Alex just – can you just help us a little bit on – just want to remind us about sort of the commission structure and specifically, as we sort of contemplate what future price cuts mean to margins. How – when – every market’s different, but in the aggregate generally what percentage of your commission expense is a – sort of a fixed dollar amount versus how much is variable to high to the remittance size?

Alex Holmes

It’s primarily variable to the commission, it’s in the commission percentage as a percent of face, and that hasn’t really changed a lot. There’s on occasion with certain agents, we can do a dollar limit or a dollar per transaction for certain sizes, but I’d say that’s kind of the odd case. And I’d say most of it is a variable commission rate – or rather it’s a fixed commission rate that obviously varies, depending on the amount sent and the band chosen by the consumer.

David Scharf – JMP Securities

Got it. So there’s no change in that obviously it sounds like?

Alex Holmes

No, not really.

David Scharf – JMP Securities

Okay. And lastly, I apologize for this last question. I just wanted to kind of circle back to the very first question on the call just to clarify. Regarding the guidance, Pam is it – this may be syntax, but is it fair to characterize the guidance as less guidance and more sort of a down case, worst case scenario analysis of what could happen if in fact you implement further cuts, but at this time expectations are north of that?

Pam Patsley

Well hindsight will be the only way I can answer that accurately. And so I think we were clear that that guidance we believe allows us to make and have the flexibility to make price moves beyond what we’ve done, should we decide that’s best for our business and our long-term growth position. And that’s how we will evaluate things.

David Scharf – JMP Securities

Got it, got it. Thanks so much.

Pam Patsley

Thank you.

Operator

And we’ll go next to Bob Napoli with William Blair.

Bob Napoli – William Blair

Thank you. Nice job on the business, on the trends. But question on the – I’m not sure I heard this clearly, you are required to bring in a monitor, is that monitor onboard? And in the – when we had one of your competitors had a lot of regulatory oversight, obviously things didn’t turn out as well. And what are risks there and please give a little color on that?

Pam Patsley

Sure. We are required as per the settlement with the DOJ that we will have a monitor. We – as required, we submitted three names. We did an extensive interview process, I, along with our General Counsel and our Head of Compliance, we interviewed a number of candidates after we had culled the list. And that was done the last part of November, 1 of December. And we submitted our names to the DOJ.

And so it is their job, we – and we were required to submit three choices. We know that they have interviewed those that we submitted, but we have not heard their selection yet. So we are though – that is not stopping us from fully embracing our obligations as stipulated in the settlement agreement. And so we have taken those fully on board, everything is either done or in-train, and we are providing a full report on everything we’re required to report on, and that report is getting submitted today.

So we think the reasons for the monitor between us, and I think what you’re referring to in a competitor, are very different reasons, very different kind of initiatives. And I think the monitor will be someone that hopefully will bring something to the table, to continue to improve our efforts to stem consumer fraud for the industry. And until the fraudsters get arrested, punished, right?

Bob Napoli – William Blair

Yeah.

Pam Patsley

This is just kind of the world we live.

Bob Napoli – William Blair

Thank you, Pam.

Pam Patsley

Thanks.

Operator

And we’ll go next to Glenn Fodor with Autonomous Research – I apologize, that’s Mike Grondahl with Piper Jaffray.

Mike Grondahl – Piper Jaffray

Yeah. Thanks for taking my questions. The first one just to clarify, so Mexico transactions accelerated from 18% in the third quarter to 24% in the fourth quarter? And Alex, you didn’t really attribute that to anything. What do you think drove that? I mean there’s got to be something that drove that increased growth?

Alex Holmes

Yeah. I mean I really think it’s – I mean I guess the answer to my question was from a – outside of, as we said, outside of Walmart, we didn’t really change prices in the fourth quarter. We didn’t really make any particular adjustment to that. Obviously the fourth quarter is an important time for the Hispanic consumer to send money home.

It’s obviously a focal point for us from an advertising and marketing perspective, and so I don’t think that we really took that from a perspective that something materially changed that kind of drove that volume increase. I think we had maybe some slightly better comps on December over December. We had a really good October, November was okay, and kind of December was really pretty good for us.

So that’s what I meant by the answer to that question. I don’t think that anything particularly changed in the industry in the quarter. Obviously you know, I mean our business did accelerate. It’s doing extremely well to Mexico, and I think that’s really hats off to what the team has done on both the U.S. side and the Mexico side over the past couple of years so.

Mike Grondahl – Piper Jaffray

Okay. And then for Pam, I think you’re ready to make price cuts in certain corridors if you need to and I think you’ve pointed to the trigger being transaction growth and revenue growth, but so far you haven’t had to make those. Is that more driven by the macroenvironment is lifting transactions for everyone? Or is it more because what MoneyGram is just doing in its position is holding up in the market vis-à-vis competitor price cuts?

Pam Patsley

I’m not sure I understood – say what’s your core layer there, is it because of which or which?

Mike Grondahl – Piper Jaffray

Sure.

Pam Patsley

Is it – I understood that part. Is it because of what we’re doing or...

Mike Grondahl – Piper Jaffray

Is it – obviously your transaction growth or revenue growth hasn’t dropped yet in response to a competitor’s price cuts. And is it – one, it is more because of there’s just more transactions, so a bigger pie in the market for everybody? Or are you doing – is MoneyGram doing something unique in the market in terms of branding or marketing, and it’s just not seeing loss of transactions because somebody else has cut price?

Pam Patsley

Well I think it’s probably both. I mean I think there are good macro trends in the industry. Industry continues to grow mid-single digits. We want to always outgrow that. We like that we’ve been outgrowing it by more than 2X on transactions and revenue, or generally more than that. We think our brand strength continues to improve. We think the engagement of our agents – I think the whole consumer experience is good, it’s the strength of our network, the growing network, particularly in Mexico and working with our agents that are focused on that corridor. So I can’t really pinpoint it to one, and quite honestly I would think that should make you feel even better, because it’s more foundational.

Mike Grondahl – Piper Jaffray

Got you. And then just a quick one, in terms of 6% to 9% revenue growth and 3% to 6% adjusted EBITDA growth. What’s the number one challenge in getting that incremental margin? Is it price? Is it just your cost structure?

Alex Holmes

Yeah it’s interesting and I’m glad you asked that question, because obviously when you look at the face of our income statement, there’s a lot of moving parts. And so certainly as Pam alluded to, getting some of the legacy stuff behind us is important as we go forward, so that I think the underlying results are a little bit clearer.

If you apply the adjustments we apply to EBITDA to our non-commission operating expense, I think you clearly see that the non-commission operating expenses as a percentage of revenue are decreasing and that’s exactly what we want. And we’re reducing our costs, improving processes and systems and focusing on efficiencies.

I think a couple areas aside, sales force we continue to invest in, and obviously we continue to invest in compliance as well, or maybe the two offsets to that. But even with that included, I think you see that expense going down.

The improvements are being slightly offset then by commission expense, which we’ve talked about, which one is getting little more expensive as money transfer becomes a higher percentage of revenue and that’s just a factor of business mix. And then the money transfer commission rate itself is up a bit, and that’s primarily from contractual commitment to a large agent that we’ve talked about.

And then some slightly higher commissions that we’re paying to some key new agents around the world, and we love that because the market position has strengthened, transactions are growing, top-line revenue is performing well, and over time managing commissions is a much more focal point. Something the guys in the field can actually interact within and change over time and so, I think that’s good. So I’d rather deal with that issue than kind of increasing operating expenses, and so that makes me – makes us feel really good.

I think going forward, we can improve margin, I think if you look at adjusted EBITDA margin without investment revenue, it was flat, and given increased compliance costs, competitive pricing, I think that’s really, really good. You balance the operating expenses and commission expense, and we can find leverage there.

In 2013 if we implement a lot of the pricing, I certainly don’t think we’re going to see margin improving. We’ve also baked in increased cost for compliance in 2013, and Pam just talked about some of that. And I think it’s an appropriate amount to cover our needs in that area. But I think when you net that all out longer-term, our goal is to improve margin and certainly in 2013, if we don’t feel the effects of pricing. I think there’s some opportunity there as well.

Mike Grondahl – Piper Jaffray

Okay. Thank you.

Operator

We’ll take our next question from Glenn Fodor of Autonomous Research.

Glenn Fodor – Autonomous Research

Hi good morning. Just within Latin America and Mexico segment, could you give us a sense of what percent of your volume you would consider directly head to head against – up against Western Union’s pricing actions, and where you are head to head, what – how would you characterize the discount? I think we calculated it as around 20% or so?

Pam Patsley

Well I mean I guess we’re in all the markets of Central and South America. So and certainly our presence is kind of head to head in the U.S., which is the biggest send to those biggest receive countries there. So I think we line up...

Glenn Fodor – Autonomous Research

So it’s all your volume...

Pam Patsley

Back up, whatever. Pardon me?

Glenn Fodor – Autonomous Research

So it’s all your volume basically, you just...

Alex Holmes

Yeah. I think the one area that – maybe to answer your question more around mix of agents is I think certainly when you’re in kind of the large stores, chains, grocery stores, whatever. You’re really looking there at kind of that’s definitely head to head pricing and so obviously, that’s an important area to look at and you say, Western Union, big brand name in a lot of those locations. We’re a big brand name in a lot of those locations, particularly in the United States.

When you get down to the retail level, the mom and pops, I mean then you’re dealing with a lot of corridor competition, a lot of smaller one-off players. And I think that competitive market is very different. And in the U.S. I would think that’s probably one third to half of our business and it’s sort of a different competitive environment down at that level.

And so if that’s kind of the question you’re looking for, I think that as we look at the U.S. and think about what pricing impact could be, it could be 100% of business. I think it’s more likely to be probably more in that 50% category and then there will be a bit of mix and then part of that’s I don’t think we’ll have to adjust unless we start seeing a lot of those niche and corridor guys doing something different.

Glenn Fodor – Autonomous Research

Alex, that’s great, that’s exactly what I was looking for. And then on – just on digital, you have an online competitor prepping to go public. You have your physical competitor making a lot of investments in 2013 in digital. You mentioned your own efforts that you want to expand.

I mean how much of all what you might need to do there is baked into the forecast, so we don’t get any surprises? And are you comfortable where you need to be from a platform perspective, based on the products and services you want to roll out over the next year or so?

Pam Patsley

Yes I think we have a list of investment initiatives. And I would say I think – I don’t know that there has been a company I’ve been in that the list isn’t greater than what – everyone wants to do more. And that’s good, that’s enthusiasm for the possibilities. And I think it would be kind of a downer if it were the other way. But I think we bring a good balance in our plan of what really focusing on doing things that moves the needle, and that’s the discipline that we’re going to continue to bring.

Glenn Fodor – Autonomous Research

Okay, very good. Thank you so much.

Alex Holmes

Thanks, Glenn.

Operator

And we’ll go next to George Mihalos with Credit Suisse.

George Mihalos – Credit Suisse

Hey guys congrats on the quarter. Just going back to the growth in Mexico, do you attribute some of that strength just to some improvement in U.S. residential housing, did you see anything there in the quarter?

Pam Patsley

I think the improvement in U.S. employment, modest that it’s been, is all helpful. And so to the extent the housing has improved more than others on a percentage, I think it’s additive, it’s helpful. We cannot and we do not see a way to attribute the strength of our growth to the housing market.

George Mihalos – Credit Suisse

Okay. And then just kind of going back again to the guidance just to make sure I understand that the 6% to 9% range that you’re talking about with revenue, is the 6% just assuming more discounting than where the 9% would be, or is there something else there?

Pam Patsley

That – certainly the bottom end of those ranges assumes more pricing initiatives than the top end.

George Mihalos – Credit Suisse

Okay. Thank you.

Operator

And we’ll go last to Brett Horn with Morningstar.

Brett Horn – Morningstar

Yes hi. I just wanted to ask a question on mobile, you kind of made a comment about adding your mobile capabilities in the quarter. Do you see demand for mobile picking up materially recently?

Pam Patsley

It is still – so when we talk about our self-service offerings and our new initiatives that total is 5% of our revenue. It’s growing aggressively. But within that, online is the largest single element of those self-service offerings. So you start getting kind of small.

However, we’re very encouraged. Our partnerships with folks like Qtel or – in Qatar with a telco partner and the National Bank of Abu Dhabi in the UAE, SMART in the Philippines, Movistar in Spain, PosteMobile in Italy. All those are yielding good results, and they’re seeing growth. It is just the industry is so big, the math is the numbers, it’s largely the cash is still a real important part of our business.

Brett Horn – Morningstar

Okay. So as you just – would it be fair to say that mobile is just still not a material driver at this point?

Pam Patsley

No, no. It is not material.

Brett Horn – Morningstar

Okay. Thank you.

Pam Patsley

But we like it and we like that we have it in our product set, and we like that that is an alternative.

Brett Horn – Morningstar

Okay.

Pam Patsley

And it’s also kind of growing the category if you will, because it’s introducing the notion of remittances or person to person payments to a broader audience.

Brett Horn – Morningstar

Okay. Great. Thank you.

Pam Patsley

Thanks.

Alex Holmes

Thanks.

Operator

That concludes today’s question...

Pam Patsley

I think that’s it. Isn’t it, operator?

Operator

Yes. That concludes today’s question-and-answer session. Ms. Patsley, at this time I will turn the conference back to you for any additional closing remarks.

Pam Patsley

I think that’s it. And thank you. We really appreciate everyone’s time.

Operator

Ladies and gentlemen that concludes today’s conference. Thank you for your participation.

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